Housing unaffordability no measure of success

Reports many are struggling to buy into Dunedin’s hotter-than-hot housing market are all too easily dismissed as outliers by those used to living in a city long considered an affordable metropolitan paradise.

It seems not that long ago that most entry-level houses were sold for six-figure prices that started with a 2 or a 3, and some sat for months on end waiting for a brave, DIY-minded buyer.

But as Dunedinites shook their heads at high prices in the likes of Auckland and Christchurch — and in Queenstown and Central Otago — an ever-increasing price creep began as their city’s population grew to 130,000 and the demand for homes grew.

This newspaper has carried innumerable reports on the city’s steady economy, and how the property market continues to ride a wave whereby supply is consistently outstripped by insatiable buyer demand.

Dunedin has risen from the Global Financial Crisis to become the best-performing major metropolitan property market in the country. According to Core Logic, property values grew 18% over the year to December, pushing the median price past that of Christchurch.

It all means those who bought even just a few years ago are sitting on nest eggs whose market value may surprise them. Others have already converted their equity into mortgage-fed renovations, nice new cars and well-earned holidays.

But while the incremental rise in property values is outstanding news for many thousands of owners, it is less than welcome for those who need to buy in the city in which they want to work, contribute and raise a family.

It is an uncomfortable fact that many of the people the city needs to help drive its economy — the young who are born and bred here, the migrants who are attracted here — face an increasingly difficult task in financing the act of settling here.

The Demographia International Housing Affordability Survey released this week shows it cost 6.9 times the median wage to buy in Dunedin. Wellington, Palmerston North and Christchurch — and Brisbane, Seattle and Montreal — were more affordable.

Dunedin was ranked fourth of eight New Zealand cities for affordability, and 276th of 301 in the international survey covering Australia, Canada, Hong Kong, Ireland, Japan, Singapore, the United Kingdom and the United States.

Its authors note the need to open up land for growing populations. This reflects what some Dunedin realtors have noted: that demand will beat supply in a hilly, geographically hamstrung city that lacks significant land ready for development.

Some realtors said they started the new year with fewer new listings than usual, and that it was common for multiple offers to push prices past what they and their vendors expected when the house was put on the market.

Many frustrated would-be buyers are making offers on multiple properties, but still miss out. Many others — often the well-trained, middle income-earning people city businesses need — cannot see how they can buy in such a buoyant market.

The Salvation Army says unaffordable housing is causing hardship for households that
do not yet own their home, especially where rents are rising and the prospect of buying is diminishing. Meanwhile, budget advisers continue to see people who are either trying to save for their ever-increasing mortgage deposit or who need help covering escalating rental costs.

As the report notes, increasing unaffordability means property snaffles resources that could have been used in the wider economy. In 2017, it noted high prices were not a sign of a city’s success but a sign of failure to deliver the housing its citizens need.

The blame for this, if indeed there is any to apportion, cannot be laid at the feet of any one group, especially given no manner of regulation will open up land in a city where there is little land to use. Buyers and investors are just as culpable in a city where large-scale investment in apartment living is not the norm, and where many buyers aspire to own large homes with a decent plot of land just far enough away from their neighbours.

There is nothing wrong with exercising such preferences. But, as prices climb, fewer of the people the city needs to keep growing its economy may be able to buy into Dunedin’s success.

Comments

'Outliers'. Postilions struck by lightning. Jack, in his quiet fastness, is alright.