In the midst of a growing wave of nationalism, how can the issues of affordability, intensification and development abroad stand to impact your property – and our future?
Immigration, interest rates and infrastructure – we are all very familiar with the driving factors holding our housing market for ransom, but in the midst of a growing wave of nationalism, how can the issues of affordability, intensification and development abroad stand to impact your property – and our future?
We are a global community, a planet of borrowers, and while one size doesn’t fit all – there are many applications for the legal concept of precedent. Despite culture, religion and landscape, cities across the globe are all facing the same challenges – the human population is growing, and we’re all just trying to find a way to coexist. Yet it’s our differing approaches to planning and policy which facilitates the rise (and fall) of our housing markets.
“Housing affordability is complex in detail – governments intervene in many ways, but it is conceptually simple. It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks it for development.
“This regulation has made supply more unresponsive to demand” says New Zealand Prime Minister Bill English.
As a country we have been seeking the answers for months on end, how to meet demand, maintain integrity and balance our ever-expanding population – affordably.
With the world’s population presently around eight billion, China is a housing market grappling under unsustainable demand. With her largest city of Hong Kong just a small island with a population of 7.35 million, its little surprise that it was recently voted ‘most expensive housing market’ in Demographia’s International Housing Survey for the seventh year in a row.
The survey calculates affordability by using a mean multiple ratio system which divides the median house price by the gross annual median household income – an equation which gave Hong Kong a score three-times higher than Auckland (which came in at second place in the survey).
Strong immigration underpins this concepts of unaffordability in Auckland as it does in China, a resounding concept which is affecting cities across the globe. In Ontario, Canada, 61 percent of citizens feel as though foreign buyers are driving house prices up towards unattainable levels, and in answer the local government has recently unveiled plans for a housing shake-up known as the ‘Fair Housing Plan.’ This 16-point plan of attack takes aim at issues such as rent control, introducing a 15 percent ‘non-resident speculation tax’, ‘anti-flipping’ regulations, a ‘vacancy tax’ and a new effort to build more housing to meet demand. While only in it’s infancy, The Government of Ontario has already taken many steps in an effort to quell a growing feeling of xenophobia.
In Australia, the reception to change has not been so positive, and the country finds herself in a crisis of sorts, as substantial out-migration is having grave effects on areas dependant on skilled workers now seeking opportunities abroad amidst calls to put an end to foreign buying pricing them out of the market. This having recently resulted in the end of their ‘457’ skilled migrant visa scheme recently announced by Prime Minister Malcolm Turnbull.
To house burgeoning populations, some of the world’s biggest cities also boast the smallest dwellings. The average house size in Britain for instance, is a mere 86 square metres (approximately 40 percent smaller than the average American home), and across Auckland and wider New Zealand, we are taking notice. With nearly 40 percent of all building consents in the last six months attributed to apartments, flats and units – local councils are modelling themselves on the blueprint that we must build up and not necessarily out to sustain growth.
Out of San Francisco, California, ‘Air bnb’ is beginning to revolutionise the way that people buy property, as everyone from families, first-home buyers and investors are demanding optionality and increasing versatility from the properties which they are looking to purchase. This has resulted in a scramble as local bodies hurry to introduce tax legislation and regulations around a growing phenomenon. So far, San Francisco and Barcelona have imposed regulatory controls on the accommodation service, with New Zealand’s own Strata Community Organisation (SCANZ) which represents our nations apartment owners, calling to follow suit amidst growing concerns of damage to neighbourhoods which do not have the systems in place to cope with such an influx of short-term residents.
Labelled by one economist as the ‘most boring housing market in the world’ Germany finds herself in a comparatively stable position, with a housing market which has remained largely unchanged for several decades. This, said to be thanks to the management of development throughout her major centres. In Germany (as in Switzerland) council budgets are ascribed according to the ability to attract new residents and ratepayers, the inference being that when local bodies stand to benefit from development, they will take a much more responsive approach to housing supply.
In America, as in Japan (deemed two of the world’s most affordable housing markets), there has been substantial domestic migration away from more costly housing markets, which has resulted in the changing urban centres we are beginning to see across New Zealand – self-sufficient epi-centres with little dependence upon the central city for everyday life.
Despite extensive coverage of New Zealand’s ‘bursting’ housing market intensified under media scrutiny, when put into global context, our situation is certainly manageable, with many initiatives for control having been implemented or in the pipeline. Global property trends have certainly paved the way for our progress, and it has become increasingly important that we apply lateral thinking when it comes to marketing property offshore in wake of more expatriate New Zealander’s looking to return home than ever before.
Proudly New Zealand owned and operated, Bayleys understands that our domestic buyer pool can have its limitations, which is why this month we will participate in the SMART Expo, designed to target markets in Asia, the United Kingdom and Australia – corners of the market which presently report high numbers of Kiwi residents, all of whom begin their search for property form the privacy of their offshore home.
While it’s clear that times they are a’ changing across the global property landscape, we must remember that change is the catalyst for opportunity. An opportunity to improve policy and infrastructure and for creatives to collaborate with local government to mitigate future risks and create meaningful projects which will endure into our rapidly approaching future.