Tauranga the hardest place to buy a home

Tauranga is heading for a shortage of more affordable housing to accommodate families on lower incomes, a new council report has revealed.
The Tauranga City Council staff report, entitled Housing Stock and Housing Demand, also concluded that new homes did not reflect the changing (demographic) profile of the city.
There was an insufficient supply of new one- and two-bedroom homes, even though the property market had sufficient zoned and serviced residential land.
The result is declining affordability caused by less housing stock priced in the $400,000 and under bracket.
A 181 per cent rise in land values since 1997 has helped create this situation - because developers have built larger, more expensive homes to maximise the section value and profit.
A recent International Housing Affordability survey, covering Australia, Canada, Ireland, Britain and New Zealand, said Tauranga was "severely unaffordable". It was the least affordable New Zealand city surveyed - including Auckland, Hamilton, Napier/Hastings, Palmerston North, Wellington, Christchurch and Dunedin.
The council's staff report, debated by the council's strategy and policy committee,  pointed the finger at local developers, saying they were delivering a narrow product range because of perceived risks.
Developers tended to focus on the short term and on market segments that were profitable within the life of their proposed development.
The effect, according to the report, is more three- and four-bedroom houses and  fewer two-bedroom homes, despite a significant increase in one- and two-person households. These one- and two-person households are projected to significantly increase over the next 50 years as the population grows.
Based on SmartGrowth predictions, another 38,000 people will need to be housed within the city boundaries by 2021, and another 60,000 by 2051.
The city councillors were asked whether they wanted to take a leadership role in encouraging more medium to high density, and therefore more affordable, housing; or leave it solely to the market (which operates on supply and demand).
The report pointed out that affordability would likely continue to deteriorate, with financial implications for council, if the provision of housing stock was left "solely to the market".
The report revealed that 63 per cent of existing residential properties in Tauranga had a capital value of less than $400,000 but 66 per cent of the new houses built over the past five years were valued at more than $400,000.
Some of the $400,000 and under stock is even being removed for re-development.
The percentage of new houses built for less than $400,000 has decreased by 20 per cent compared with the previous five-year period. And 66 per cent of sales in the last three years were houses more than nine years old.
Thirty per cent of section sizes were now less than 400 sq m, and the bigger properties had higher capital values.
The land component in capital values in 1997 was 41 per cent; and in 2009 it made up 58 per cent.
Nowadays, a person or family with annual gross income of $70,000 would need a $132,000 deposit to buy a $400,000 home based on the affordability benchmark of 30-35 per cent of income going into the mortgage.
The council report said 64 per cent of households in Tauranga had incomes of $70,000 or less.
Two award-winning builders suggested the market could take care of the housing stock.
Conrad Kuriger, of Kuriger Builders, said there would be a mind change about intensive housing, created by the changing family dynamics.
"But you won't eliminate the standalone home that is still the pride and joy of families. I favour putting one through to four-bedroom houses together into a more intensive development, with good outdoor spaces," he said.
"I've seen them overseas and they work. It gives people a choice and it blends social and financial fabrics. But we do have to be careful about building lower cost houses on tight sections, with very little outdoor spaces," said Mr Kuriger.
David Harwood, of Harwood Homes NZ, said New Zealanders liked to have their little bit of land.
"Ringfencing the [present] city boundary for more intensive housing could increase the demand for land and force the values up. Why can't they stretch the boundaries a little more," he said.
"We are talking about principles that have been used for housing 10 million people in a city, and we may be operating too many years ahead of ourselves.
"If people build bigger and more expensive homes and they don't sell, then they won't build any more. Developers and builders meet the market, and they will move quickly if the market returns to the single garage, two bedroom, one bathroom home," said Mr Harwood.
He believed homeowners' expectations led to bigger and more expensive house - and this expectation could change.
Mr Harwood said it was now difficult to buy sections of about 700 sq m in the established residential areas and subdivide them for infill development.
"There just isn't many of those sections available on the market."