The steep increase in New Zealand property prices has led to a housing crisis. Market figures indicate prices have risen by about 30% over the last year due to record-low interest rates and cheap access to capital thanks to the government’s stimulus spending. With more Kiwis returning home due to the pandemic and choosing to invest in real estate, it is no surprise that property prices were driven even higher.
The skyrocketing prices have made the NZ housing market the least affordable of all the 36 Organisation for Economic Cooperation and Development (OECD) nations. In response, the government instituted several cooling measures on the red-hot property market early this year, including an increase on income caps for First Home Grants and extending the bright-line test to 10 years.
These efforts have however not yielded the desired results. Investor buyers are the major property buyers, accounting for 40% of housing sales in the final quarter of 2020. These investors already own other properties and have made it harder for first-time homebuyers to join the property ladder.
The Reserve Bank of New Zealand (RBNZ) is looking to tighten lending measures in the coming months by lowering the high loan-to-value ratio (LVR) and boosting debt-to-income restrictions or interest rate floors. This will ensure that no more than 10% of new loan disbursements will go towards mortgages being financed above 80%. DTI restrictions will be consulted on from October.
According to the NZ Human Rights Commission, the housing crisis has resulted in a growth of the homeless community and pressures on marginalised communities. He noted the government’s policies that have made it easier for affluent Kiwis to access cheap mortgages, upsize their homes, and add to already bulging property portfolios.
The resulting soaring housing prices and rents have pushed more people into emergency housing as they await public housing. And the problem is not just affecting first home buyers. Seniors are also increasingly becoming renters in their advanced years due to various factors including poor financial investments, divorce, and job loss.
Research published in the New Zealand Population Review journal found that older people were experiencing increased hardship as their homeownership numbers fell. An estimated 20% of Kiwis aged over 65 years are now renters. Many that lose their homes in their senior years were found to likely become homeless and in need of emergency housing.
This problem has been compounded by changing attitudes of landlords who now find younger renters to be a better prospect than seniors. Younger renters are considered a better choice as they are likely to have growing incomes that will keep up with regular rent increases. Seniors who were previously considered more careful in maintaining properties are now facing a tougher challenge finding affordable rentals that are built to the safety standards they require.
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