New Zealand's fixation with home ownership is causing
social inequity and despair, NZIER principal economist
Shamubeel Eaqub said yesterday.
If New Zealanders were not cured of their housing fixation,
the nation's financial and economic stability would continue
to be put at risk every time there was a recession.
People feared being locked out of a traditional route to
financial security as nearly 70% of New Zealand's household
net worth was stored in housing, he said.
Mr Eaqub released the latest New Zealand Institute of
Economic Research report, ''The home affordability
challenge'', which said the country's crippling home
affordability rates could not be fixed by a single solution,
such as changing immigration policy or urban planning rules.
He also ruled out implementing a capital gains tax as a
single solution to fix housing affordability. A capital gains
tax is a main election policy for both Labour and the Greens.
''There is no one fix. It's not just Chinese investors, it's
not just a lack of an effective capital gains tax, it's not
just councils' planning rules or cheap credit.''
With so many variables in the mix, the solutions would be
complex and perhaps the most effective measures could come
from unexpected quarters, such as rental market reform.
Mr Eaqub has often been quoted as someone who prefers to rent
than to buy. He said New Zealand had one of the least
renter-friendly regimes in the OECD.
Renting was not seen by many as a viable long-term housing
option. If tenants were offered better security of tenure and
were able to treat their rental like their own home, many
could be willing to forgo home ownership, he said.
The report explained New Zealand's obsession with home
ownership was one of the key reasons it took so long for New
Zealand's economy to recover after the 2008 global financial
''Our reliance on future capital gains to pay for debt-funded
spending caused a long hangover when households realised they
needed to pay off the mortgage.''
Home ownership rates were at their lowest since 1951 and
rather than bleating about that, New Zealanders should
embrace that trend, Mr Eaqub said.
Economies prospered when people invested in business, not
''We need to create level playing fields for different types
of investment and parity between renting and owning to
support a much needed cultural change around housing.''
• Make renting more attractive: Tenancy policy and agreements
provide a lot of flexibility but this is a barrier to
regarding renting as a substitute for owning.
• Make land and house supply more responsive: Regulations and
local politics mean greenfield development and
intensification is not as responsive to demand as it could
• Eliminate the property investment bias in banking: Current
banking regulation does not fully recognise the systemic
risk, and a higher capital requirement may be
• Clarify the tax rules: New Zealand already has taxes
applying to investment property but their application is
unclear and inconsistent.
• Improve the data: Experimental title transactions data
suggests much of the turnover in the housing market is driven
by investors and movers, not first-home buyers or new
entrants to the New Zealand market.