Michael Wilson was hopeful when he put his three-bedroom home up for sale. At the first preview, he had more than 10 prospective buyers.
However, about a year later, the property is still for sale. One offer after another failed because the prospective buyer was unable to sell the house.
Welcome to New Zealand, one of the world’s most troubled housing markets. Homeowners and investors have lost billions of dollars in wealth over the past 18 months as home prices, which soared during the coronavirus pandemic, began to plummet as mortgage rates soared. Lost.
“If I put it up for sale two months before I put it up for sale, it would have sold literally the next day,” Wilson said. He and his wife Jade may have finally found a buyer for his three-bedroom home in Te Awamutu, a beautiful North Island town of 13,000. But if you’re lucky, you’ll be paid about 15 percent less than you originally wanted.
The pandemic’s disruption to jobs, wages and living conditions has created a yo-yo effect on housing markets in many countries, including Sweden, the UK, Canada and Australia. Few countries have experienced tremors as violent as New Zealand. New Zealand was in turmoil last week. recession.
New Zealand real estate is traditionally expensive and in short supply. Now, with a combination of more soaring prices, poor housing construction, and the devastating effects of rising interest rates, the housing crisis is at the top of the agenda ahead of this year’s national elections.
House prices rose almost 50% during the pandemic as people took advantage of lower mortgage rates and loosened lending regulations. Prices have plunged 17.5% and interest rates have been eradicated since November 2021 after New Zealand’s hawkish central bank embarked on the world’s most aggressive rate hike cycle to combat rising inflation. over $6 billion Among household wealth, according to Statistics New Zealand estimates.
Home sales fell to a record low Homes are now on the market for an average of 47 days, and some have been abandoned for months.
Thousands of North Island homes were damaged, some beyond repair, in February by a once-in-a-generation storm and floods, further urging the government to address the housing shortage. rice field. And in May, a huge fire at a hostel in the capital Wellington, mostly homeless men, killed five people.
Despite relatively low wages and plentiful land, New Zealand, with a population of five million people on an area the size of Colorado, has long been a stumbling block to buyers due to a shortage of buildings and low borrowing costs. I’ve been willing to pay for old houses. Poor construction and insulation.
“Rather than worrying about the quality of the shelters, we are just lucky to have them,” said Shambir Ekub, an independent economist in Auckland.
New Zealand property values are also highly susceptible to rising and falling interest rates. Unlike US mortgages, which are effectively backed by the government and often set for up to 30 years, mortgages rarely have fixed interest rates for more than a few years. Mortgage buyers and homeowners now face interest rates on new loans of at least 6.5%, up from about 2% in 2020.
The housing problem is about people on painfully long waiting lists for public housing, underserved tenants who may find property ownership out of reach, and spending big on real estate to see their investments fall in value. It affects virtually every corner of the population, including the wealthy who live in the country.
House is one of the most affordable in the worldwith a median price of $780,000 NZD, or about $480,000, and about $407,000 in the US. According to Redfin.
Chris Bishop, a member of parliament for the Center, said: “Hundreds of millions of people living paycheck to paycheck see their outrageous amounts of take-home income eaten up by housing costs. I have,” he said. Right-wing National Party. “It is a major driver of inequality and poverty in general.”
The issue has defied policy changes by successive governments, and politicians know New Zealanders have many crises on the issue. Most New Zealanders own a home and 57 per cent of household wealth consists of land and homes. According to the Reserve Bank of New Zealand. One reason is that there is no capital gains tax, meaning that the money you make from a sale is generally tax-free.
“Property investing is a great New Zealand hobby,” says Max Rushbrook, who studies economic inequality in New Zealand.
Adding to the depression: A rare moment of bipartisanship in housing policy seems to have hit a dead end.
In late 2021, New Zealand’s two major political parties co-signed a bill to make it easier to build three-story buildings in city and town centers to avoid massive suburban sprawl. But National Party leader Christopher Luxon said last month that he would backtrack on that promise and return to a model of many new homes being built on former farmland on the outskirts of cities.
Prime Minister Chris Hipkins said he called on opposition parties to propose changes rather than repeal the law.
The confrontational approach of the two parties will be tested in October’s national elections.
Meanwhile, homeowners are doing everything they can to cope with the troubling combination of rising mortgage prices and falling prices.
Lisa Lamberton recently sold her home in Whanganui City and is moving further north to be closer to her family. She is philosophical about paying high fees. “If she’s a homeowner, at some point her interest rate may not be in her favor,” said Lamberton, 42, she said. “From my point of view, it always happened.”
James Faber, a warehouse owner and part-time real estate investor in Palmerston North, spent months trying to sell properties as the market fell. It ended up selling for around NZ$360,000, NZ$130,000 less than expected.
Last month, in an attempt to avoid a similar wait, Ms Faber, 38, auctioned off another property with a starting price of NZ$1, against the advice of her lawyers and real estate agents. The house ultimately sold for NZ$400,000, higher than other similar recent sales, but well below the city council’s estimate of NZ$570,000 18 months ago. he said.
Still, he said he was shocked by the lack of interest in the auction. “This is crazy dollar reserves,” he said. “I still can’t believe half the city didn’t come to Open Homes.”
