Michael Wilson was hopeful when he put his three-bedroom house up for sale: Initial showings drew more than a dozen potential buyers.
But even after almost a year has passed, the property is still available for sale. Offers after offers fell as potential buyers were unable to sell their homes.
Welcome to New Zealand, one of the most troubled housing markets in the world. Over the past 18 months, homeowners and investors have lost billions of dollars in property damage when prices, which began to fall during the COVID pandemic, also soared as mortgage rates soared.
Mr. Wilson said, “If we had listed it, say, two months ago as we originally did, it would have sold literally the next day.” He and his wife Jade may have finally found a buyer for their three-bedroom home in Te Awamutu, a pretty North Island town of 13,000 people. But if they are lucky, they will be paid about 15 per cent less than what they originally asked for.
Housing markets had a yo-yo effect due to the disruption to jobs, wages and living conditions caused by the pandemic in several countries, including Sweden, Britain, Canada and Australia. Some places have experienced wild swings like New Zealand, which last week saw a recession,
Property in New Zealand has traditionally been expensive and in short supply. Now the combination of even higher prices, poorly built housing and the cutting edge effects of interest rate hikes has pushed the housing crisis to the top of the agenda, ahead of this year’s national elections.
During the pandemic, home prices soared by nearly 50 percent as people took advantage of lower mortgage rates and looser lending rules. Since November 2021, New Zealand’s hawkish central bank has embarked on one of the most aggressive rate-hardening cycles in the world to tackle rising inflation, slashing prices by 17.5 per cent, eliminating over $6 billion In household wealth, according to Statistics New Zealand estimates.
falling home sales record low In the three months through December, more houses now remain on the market for an average of 47 days, with some remaining derelict for several months.
The government’s demand to address the housing shortage became all the more urgent in February, when a once-in-a-generation storm and flood damaged thousands of homes on the North Island, some irreparably. Then in May five people died in a devastating fire at a hostel in the capital, Wellington, mostly inhabited by men without stable housing.
Despite relatively low wages and ample land – New Zealand has a population of five million spread over an area the size of Colorado – low borrowing costs as well as building shortages mean buyers have long been unable to pay for older homes. were ready to Poorly built and insulated.
“Rather than worrying about the quality of the shelter, you’re just lucky to have shelter,” said Shamubeel Eakub, an independent economist in Auckland.
Property values in New Zealand are also very susceptible to the rise and fall of interest rates. Unlike US mortgages, which are effectively backed by the government and often fixed for 30 years, home loans rarely have fixed rates for more than a few years. Mortgage buyers and homeowners will now face interest rates of at least 6.5 percent on new loans, up from about 2 percent in 2020.
The housing problem touches virtually every corner of the population, including those on painfully long waiting lists for public housing, underserved renters for whom property ownership seems out of reach, and the more affluent who place big bets on property. And are now watching their investment depreciate in value.
are home among the least affordable in the worldWith an average price of 780,000 New Zealand dollars, or about $480,000, compared to about $407,000 in the United States, according to redfin,
Chris Bishop, Member of Parliament for the Centre, said, “You have a huge number of people who live week to week, paycheck to paycheck, who see an extraordinary amount of their take home pay being wiped out by the cost of housing.” Let’s see it happen.” Right opposition National Party. “It’s a big driver of inequality and poverty in general.”
The problem has defied policy reforms by successive governments, and politicians know New Zealanders have a lot at stake on this issue. Most New Zealanders own a home, and 57 per cent of household assets include land and a house, According to the Reserve Bank of New Zealand, This is partly because there is no capital-gains tax, which means the money made on the sale is generally not taxed.
Max Rushbrook, a researcher on economic inequality in New Zealand, said: “Property investment is a great New Zealand hobby.”
Adding to the gloom: A rare moment of bipartisanship has slipped into housing policy.
In late 2021, New Zealand’s two major political parties co-signed legislation easing the construction of three-storey buildings in central areas of cities and towns to avoid widespread suburban sprawl. But National Party leader Christopher Luxon said last month he wanted to roll back that commitment and return to a model in which many new homes are built on old farmland on the edges of cities.
Prime Minister Chris Hipkins said he had called on the opposition to offer changes to the law rather than scrap it.
The dialectical approach of both the parties will be tested in the country’s elections in October.
Meanwhile, homeowners are doing what they can to manage the troublesome mix of more expensive mortgages and falling prices.
Lisa Lamberton recently sold her home in downtown Wanganui and is moving north to be closer to family. He’s philosophical about paying the high rates. “When you’re a homeowner, at some point the rates are not in your favor,” said Ms. Lamberton, 42. “From my perspective, it was always going to happen.”
James Faber, a warehouse operator and part-time property investor in Palmerston North, tried to sell the property for months as the market slumped. It eventually sold for around NZD 360,000, which was 130,000 less than he expected.
Last month, trying to avoid a similar wait, Faber, 38, listed another property at auction with a starting price of one New Zealand dollar against the advice of his lawyer and his estate agent. The house eventually went for NZD 400,000 – more than other comparable recent sales, he said, but much less than the council’s estimate of NZD 570,000 18 months ago.
Still, he said, he was surprised by the lack of interest in the auction. “It’s a horrendous dollar reserve,” he said. “I still can’t believe half the town didn’t come to the open house.”
