Auckland rental demand grows as dreams of home ownership fades

By NZPA

Monday 23rd April 2007

Auckland home ownership rates are significantly below the national average and declining, increasing pressure on the region's rental properties, according to research released today.

To house the growing numbers unable to own their own home, an extra 56,000 rental units would be required over the next decade, most provided by small, private investors, Motu Economic and Public Policy Research said in a report for the Centre for Housing Research.

That was because the residential housing market lacked institutional investment, and the Government's housing policy was focused on the demand side of private housing, via income supplementation.

However, moderate house price growth of between 5% and 8% forecast over the long-term could slow down investment in the private rental market, increasing rental competition and lifting rents.

The difficulty Auckland households faced in buying a house was likely to increase the gap between socioeconomic groups, and had implications for community stability and wealth accumulation, the report's authors said.

New Zealand home ownership peaked at 73.8% in 1991, but has since fallen to 65% and was expected to sink to 61.8% by 2016.

In Auckland, home ownership was expected to decline to 58.3%.

"Home ownership is assuming a more polarised social character. While some households are choosing to rent in areas where they could not afford to buy, there are still strong aspirations towards home ownership," the report said.

Such a large decline was unique among countries with mature home ownership markets, possibly reflecting limited government intervention, and the outlook was grim.

Working households who could not afford to buy at the lower quartile house price increased to 54,900 in 2006 from 20,400 a decade earlier.

Increasing numbers of households were paying over 30 percent of gross income on housing costs, particularly among young home owners and households earning between $50,000 and $70,000.

However, housing stress was higher for renters, with around 33 percent of renter households hurting compared with 21 percent of owner-occupiers.

The report's authors recommended a change in government focus from the demand side -- improving households' access to housing -- to the supply side, where a shortage of affordable and secure accommodation for poorer households was a problem.

"Urban planning policies that emphasise containment and increased density also tend to reduce supply and increase prices."

Factors responsible for the decline in home ownership in Auckland included a reduction in affordability, demographic changes, cultural and lifestyle changes, and government policy changes. Housing Minister Chris Carter said the Government was working on measures to increase housing supply, but they would require "compromise and new thinking".

The measures would form the basis of a consultation document that would be circulated this year. Legislation would follow next year if it was deemed necessary.

Issues to be examined included ensuring property speculators did not sit on land; ensuring a mix of different sized properties in new developments, so at least some were affordable to first-home buyers; and improving consent processing by local councils.

Green Party co-leader Russel Norman said the answer was not to release more land, which would create urban sprawl, but to upgrade Auckland's rail network, which would encourage greater "urban density".

"A much better answer is the electrification of the Auckland rail network which will create the opportunity to increase urban densities along the rail routes because the electric rail units will be cleaner, quieter and more frequent than the current diesel units."

Greater urban sprawl would lower quality of living as it would force more people into long daily commutes in their cars, Dr Norman said.

Compare the latest housing and rental stats online today at www.landlords.co.nz

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