End of the quarter-acre paradise

By ANNE GIBSON property reporter


New Zealanders are becoming a nation of big-spenders caught in a rental trap and doomed to never become homeowners, warns a report released yesterday.

People in their 20s and 30s are spending their money on domestic goods, putting off having children and shifting about the country to chase career opportunities.

That, combined with rapidly rising house prices, easier access to money and the advent of revolving credit, means that many young people cannot get together enough cash for a house deposit, says the report from the Centre for Housing Research.

It commissioned a study from property consultants DTZ to examine the housing sector and changes in the past two decades.

The study follows a stern warning issued this week by Deutsche Bank chief economist Ulf Schoefisch about a looming debt crisis, based on households piling up debt at nearly three times the pace of a few years ago.

Ian Mitchell of DTZ said there was a new mindset of "consume today rather than wait until the money comes in tomorrow". A desire for cars, holidays and items such as fridges and lounge suites attracted money which previous generations had saved for their house deposits.

Fewer of us aspired to home ownership and many of us were consciously delaying our entry into the market.

From the early 1990s, home ownership rates in New Zealand - traditionally high for the Western world - declined by 5.9 per cent to 68 per cent of all homes.

Among homeowners, the biggest falls were among 25-29-year-olds (12.7 per cent decline), 30-34-year-olds (12.5) and 35-39-year-olds (10.4).

Traditionally, most New Zealanders expected to own a house, but Mr Mitchell found it an increasingly remote ambition.

He has warned against this culture, in one of the most comprehensive studies conducted into the housing market.

"Higher consumption expectations coupled with the need for greater employment mobility, combined with delays in family formation may mean that regardless of entry level cost, home ownership is pushed out for this younger group," he wrote.

Renters are also caught in a trap which is tightening.

Since 1987, total housing costs for renters increased by 166 per cent, but their incomes rose only 59 per cent, meaning their incomes are not keeping pace with rising costs. The proportion of household income paid out as rent doubled between 1981 and 2001. Auckland is the single least affordable area in New Zealand in which to buy a house, followed closely by Wellington.

Feeding into this debt and rental spiral is a change in the structure of mortgages.

"Twenty years ago, people would take out a table mortgage for 15 years and pay it all off. Now, what's happening is people are getting revolving credit mortgages which they are topping up on," he said. The result was that they never made much financial headway.

But many people were happy to continue renting because it gave them the flexibility to move when and if they wanted, he said.

Auckland Property Investors Association president Andrew King said that although landlords were doing well out of the changing trend, people should aim to own a property.

"I believe everyone should own their own homes for financial security but there are lifestyle choices that people make and that's always going to be the case."

Charnz

* A ROOF OVER OUR HEADS

* We have between $450 billion and $500 billion invested in housing, making this sector by far the largest investment asset class in the country.

* Europeans have the highest rates of home ownership at 74 per cent, followed by Asians at 64 per cent, Maori 47 per cent and Pacific people 39 per cent.


* In 2001, we had 1.1 million houses. Now we have 1.5 million.

* We had 142,068 privately rented houses in 1981 but by the 2001 Census this had risen to 264,501.

* Auckland houses tend to be in the worst condition in the country, followed by those in Wellington. Canterbury has the best houses, of a higher standard and better condition than anywhere else.

* Booms and busts occur on average every seven to eight years.