David Cohen

Could New Zealand’s property bubble bring down Jacinda Ardern?

Could New Zealand's property bubble bring down Jacinda Ardern?
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The news this week that the price of an average UK home has hit £260,000 came as a bit of a jolt for New Zealanders. Kiwis who obsessively follow such matters were left wondering how even property in London can be cheaper than buying a house over here. The average home in New Zealand costs £520,000, and significantly more again in either of our two major cities, Auckland and Wellington.

When Jacinda Ardern became prime minister she promised to address our unsustainable property market which has locked out all but the most privileged youngsters from getting on the ladder. The continued spike in prices shows how little Ardern has delivered.

New Zealand’s housing market has gone stark raving bonkers in recent years, leaving pretty much every other comparable country in the shade. Economists, of course, put it slightly differently: relative to incomes, this island nation now ranks as the sixth-least affordable place on the planet to buy a home. The last year alone has seen a further ‘solid decline’ in affordability across all of the country’s sixteen regions, according to a Massey university study.

Even what used to be the simple ritual of first-buyers saving for a deposit now takes nearly twelve years on average. Such are the wages of a decade of low interest rates, cheap credit, no capital gains taxes and far too few places for way too many people. And if it all were to crash tomorrow, if house prices tumbled by an unimaginable thirty per cent, that would only take the Kiwi market back to where it was just twelve months ago. In the meantime, residential construction here remains at its slowest in nearly a century and the waiting list for state-supported housing recently hit 25,000.

Talk about a land of the houses and house-nots. Idyllic little New Zealand, so far from the rest of the world, now exists even further still from the egalitarian dreams of its modern founders. When the first four passenger ships bulging with English labourers and agriculturalists ‘of reputable morals’ dropped anchor here in December 1850, the prospect of cut-price homes was a big part of the reason why the sojourners permanently disembarked to make a new home for themselves alongside the native Maori populace. For much of the former colony’s history, the promise has remained.

More than one in twenty New Zealanders are British-born. In per capita terms, it’s the biggest such expat community anywhere in the world this side of Ireland. And many of them drawn here by a tantalising retirement proposition. Instead of spending one’s autumn years in Eastbourne or Swansea, why not shell out half the price for a similar place in the Antipodes and trouser all that additional loot?

No more. Today, the same calculation could just as easily be made in the other direction. The relatively modest family dwelling in which these words are being tapped out here in the political capital, Wellington, for instance, would currently fetch around four times the British average on the local market.

Across town, the New Zealand PM knows a thing or two about these shifting residential calculations. Overseas, Jacinda Ardern may be better recognised for her toothily telegenic smile and syrupy bromides, but closer to home her reputation was forged around bricks and mortar. Aghast at a decade-long run on the housing market, she first led her Labour party-controlled government to electoral victory in 2017 on a promise to construct thousands of new homes. It was touted as a way of cooling the market and providing practical support for the homeless or those in sub-standard, usually state-sponsored accommodation. This is an economically hapless group in which Maoris have long disproportionately figured.

‘We believe things can be better,’ Ardern declared, ‘and under Labour they will be better. We can make home ownership possible again by building homes.’

Well, sort of. A centrepiece of her campaign, KiwiBuild, was to have seen the construction of at least 100,000 new houses by 2027. For a country of just five million, that ought to have put paid to any supply and demand problem. In the event, only forty-seven new houses were built during Ardern’s first year as national leader. Nearly five years on, just one per cent of the earlier target number has been reached.

The pandemic offered an unintentionally welcome political diversion from those houses Jacinda never built. But the last couple of years also produced another signature policy for which Ardern has been widely lauded (and almost as widely condemned) and which has only made a bad situation worse on the residential front. Until this past month, New Zealand has padlocked its doors; relatively few people have been able to travel in or out of the country. Thousands of Kiwis who might otherwise have gone somewhere else have stayed put and joined the local property scramble.

Ardern could be forgiven for not giving the subject her fullest attention over recent weeks. The parliamentary grounds underneath her ninth-floor Beehive window have only just been cleared of thousands of demonstrators protesting against these and other pandemic-related policies. Upstairs, the PM has been reduced to issuing rather unconvincing communiqués calling on her seething critics to ‘go home’.

This is unconvincing because, as Ardern of all leaders well knows, it’s rather hard to go home when you can’t possibly afford to own one. Perhaps she might have done better to urge the rest of us to look at picking up one of those cut-price places apparently going for a song in Muswell Hill?

Written byDavid Cohen

David Cohen is a New Zealand-based journalist and author.

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