This is the third & final blog on our housing poll, and looks at what people think is causing the housing crisis. For the numbers who think that there is a housing crisis and exactly what they're worried about, check out Part 1 and Part 2.
All numbers are again from a UMR SAYit poll of n=1000 New Zealanders conducted between October 29th and November 19th 2014. The margin of error is +/- 3.1%.
The main question covered in this blog asks people: 'how much do you think the following have contributed to the lack of affordable housing?' - using a 1 to 5 scale from 1 = 'a lot' to 5 = 'not at all'. Taking the total who chose '1' or '2' as the number who think each is an important cause, we get:
- 'House prices rising faster than incomes': 85%
- 'Property investors buying up houses': 69%
- 'Overseas buyers driving up prices': 59%
- 'Red tape driving up the cost of land development': 55%
- 'The requirement to have a larger mortgage deposit than before': 53%
- 'Too few houses being built': 50%
Remember that people could choose as many or few of those as they wanted - what this measures is how many thought each factor contributed to a lack of housing affordability, not necessarily whether they blamed one factor more than others.
I interpret that to mean that people recognise it's a complex problem with multiple causes, and that it's also inextricably linked with dissatisfaction with pay rises and with the broader issue of inequality. I've written before about our poll that shows the vast majority of New Zealanders believing that prices are rising faster than incomes (here), and I think the fact that 85% attribute the lack of affordable housing at least in part to 'house prices rising faster than incomes' reflects that. Indeed, 64% of New Zealanders think that this has contributed a lot to lack of housing affordability (including 69% of Aucklanders)
To some extent 'house prices rising faster than incomes' though is a symptom rather than a cause. To clarify - incomes that don't increase or increase only very strongly are a cause, but the rate house prices and rents have been rising recently, in Auckland & Christchurch especially, would require incomes to increase at a rate seldom if ever seen in our history. REINZ statistics (here) show the median house price across NZ as a whole increased by 7.2% in the year to November, whereas Statistics NZ's New Zealand Income Survey (here) showed median wages increased by 4.3% in the year to June (sorry - I can't match the dates up but those are the most recent updates available). The median house price in Auckland according to Barfoot & Thompson's statistics (discussed here) rose by 10.6% in the year to November. My point is that house prices and rents have been increasing so fast that it would probably require an unprecedented jump in incomes to keep up - and even then increasing incomes could be inflationary in itself because people would have more money to compete with each other for houses.
We therefore also need to pay attention to the reasons price are rising too, and four of the other causes tested in the survey could be divided into 'supply' and 'demand'.
- 'Property investors buying up houses' and 'overseas investors driving up prices' both relate to demand.
- 'Red tape' and 'too few houses being built' both relate to supply.
I think it's fair to say from these numbers that New Zealanders recognise both lack of supply and too much demand have contributed, but that they are more inclined to blame demand. That in turn suggests that New Zealanders want solutions that address both supply (e.g. building more houses) and demand (e.g. a capital gains tax or bans on overseas investors), but that there should be more focus on demand.
The 'requirement to have a larger mortgage deposit than before' refers to the Loan Value Ratio policy (LVR) introduced by the Reserve Bank last year. It's seen as a problem, but again I think these numbers suggest it's one of a range of causes rather than the 'be all and end all' in itself.
The 'overseas investor' number is interesting for its regional variations:
- In Auckland, 65% say that it is an important cause.
- In Wellington, it's just 45%.
- Christchurch is around the nationwide average on 54%.
Of those who are renting and looking to buy:
- 84% attribute lack of housing affordability to prices rising faster than incomes (89% of renters share this view)
- 82% say it's due to too many property investors
- 69% blame too many overseas buyers
- 52% blame higher LVRs
- 51% think it's about not enough houses being built.
- 48% attribute it to too much red tape.
That's based on a small sample of n=85, but I think it's an important enough group to have a look at specifically - they're the ones who are actually experiencing the market at the moment, and they are more likely to blame property investors and overseas buyers.
I've heard many respondents in focus groups argue that concerns about housing affordability are overstated, because young people have unrealistic expectations and should just settle for less attractive properties. Usually this comes from older respondents, who argue that they settled for a cheaper property when they were younger and that young people today don't seem to want to do the same. We thought we'd test out how widespread that view was through a survey question, with respondents asked to select one of two options.
- 39% chose 'Owning a home has always required sacrifices and saving hard; young families these days just expect too much'
- 57% chose instead 'The dream of home ownership is slipping out of reach for too many people through no fault of their own'.
51% of over 60 year olds chose the first option, as did 41% of 45-59 year olds but only 34% of 30-44 year olds. 64% of National voters chose this option.
63% of Aucklanders said that 'the dream of home ownership is slipping out of reach for too many people through no fault of their own', as did 81% of those renting looking to buy, 78% of those renting and not looking to buy, 79% of Labour voters and 73% of Green voters.