House ownership in New Zealand has always been a “Kiwi dream”, and a goal for most, but the rising cost of living and soaring house prices make it nearly impossible for more Kiwis to achieve their house-and-yard dreams.
The situation instead is creating alternative living arrangements for people to call home.
According to Stat NZ, the country’s homeownership rate was the lowest in 70 years in 2018, and it is becoming much less common among younger people.
How perceptions of house ownership have changed over time New Zealand
The result of the survey of 1,128 Kiwis on the Kiwi Housing Trends Report 2022 shows that 90% of first-home buyers feel locked out of the property market. As many as 77% think home ownership is financially out of reach, and 90% of first-home buyers admit that soaring house prices, particularly in Auckland’s urban areas where median house prices have hit the millions. As a result, many have delayed buying their first home. And despite government policies designed to encourage more first-home buyers to get on the property market, 61% still feel that housing affordability will only worsen in the future (The Kiwi Housing, 2022).’
The near impossibility of buying a house for many, particularly those in the younger age bracket, those in their 20s and 30s, has strengthened the rental market. Those lacking the capacity to buy a house have taken this option but are not necessarily satisfied with their decision. Two-thirds, or 67%, of renters are unhappy with their housing situation and would rather buy, while 76% say they don’t have a choice but to rent.
Renting is not necessarily a cheap option. House rentals have hit an average of $1,405 per month and could reach between $2,300 and $2,500 per month, fuelling more discontent among renters who feel they are paying an overpriced rate.
High housing prices in New Zealand and rental costs create demand for the long-term rental market. Unlike traditional rental properties, where landlords have the option to change their minds or sell the property, for instance, at the detriment of renters, properties that are build-to-rent are designed for long-term rentals with the idea that tenants can stay for decades or for as long as they want.
Long-term rentals are common in European countries like Switzerland, Germany, Denmark, the UK, France, and the Netherlands, as well as Asian countries like Japan, Hong Kong, and South Korea, where more than 30% of their population rents.
Build-to-rent (BTR) is a new concept in New Zealand but is starting to grow. Stuff reports that the country’s Super Fund is keen to invest in. Its investment head, Will Goodwin, says BTR is “an underdeveloped asset class in New Zealand and an area of interest for the fund” (Strecker, 2021).
Property Council New Zealand, the leading advocate for the country’s largest industry, property, says that with the right signals and support, especially from the government, developers could commit to building 20,000 new BTR within the decade, Stuff reports.
Property Council believes that BTR is an effective way to alleviate the country’s housing shortage and has been working with the government for many years to unlock its potential.
Local demands for affordable housing alternatives combined with the continuous flow of migrants, with December 2023 seeing a record net migration of 125,000, will cause the housing shortage to grow.
Build-to-rent properties are already emerging in urban and high-growth areas, such as Auckland and Queenstown. BTR developers are grabbing the opportunity created by the housing shortage and are starting to fill the demand for affordable and long-term housing.
According to Better Things Are Possible, developers are investing in BTR across Auckland’s growth areas and have plans to build thousands of apartments, ranging from one- to three-bedroom units designed as long-term rentals.
The article outlines the advantages of investing in BTR: Investors are adding new housing, unlike when investors buy existing homes to rent out. According to 26 Aroha, they are new builds, made to the latest standards and sometimes above, which can save renters on heating bills.
There is one landlord who has an interest in maintaining the building as a whole, rather than body corporates, who are reluctant to fund needed maintenance and improvements, support housing built around shared communal facilities, car-share vehicles, and extra investment in sustainability initiatives, and single ownership over a long period offers greater security. Renters can live where everything is accessible – rapid or public transit, close to jobs, amenities, social/entertainment opportunities.
Although home ownership is a common Kiwi aspiration and goal, a portion of the market is always unable to own a home, does not want to own it, or is still saving for a deposit. These people want a safe and warm place to live in a reasonably priced area.
The growth of BTR assets in New Zealand will make the application of asset management crucial to ensure that this new class of assets continue to provide the expected level of service at an affordable cost to tenants yet remain profitable to the landlords responsible for ensuring that these dwellings remain to be warm, clean, functional, and comfortable throughout its expected life and even beyond.
Source:
Homeownership rate lowest in almost 70 year. (2020 December 8). Stats NZ. Retrieved from https://www.stats.govt.nz/news/homeownership-rate-lowest-in-almost-70-years
Wanza, S. (2018, May 14). Countries Where People Rent Their Homes. World Atlas. Retrieved from https://www.worldatlas.com/articles/countries-where-people-rent-their-homes.html
The Kiwi Housing Trends Report 2022. (2022, June 29). One Choice. Retrieved from https://www.onechoice.co.nz/news-vault/kiwi-housing-trends-report
Stecker, T. (2021, July 12). Let’s not snuff out European-style rental options just as they’re getting going. Stuff. Retrieved from https://www.stuff.co.nz/business/125697464/lets-not-snuff-out-europeanstyle-rental-options-just-as-theyre-getting-going
Build-to-Rent. (2022, June). Property Council New Zealand. Retrieved from https://www.propertynz.co.nz/build-to-rent
McCracken, M. (2023, October 10). The New Zealand Build to Rent housing sector continues to grow. Better things are possible. Retrieved from https://betterthingsarepossible.substack.com/p/the-new-zealand-build-to-rent-housing
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