Are NZ home-ownership rates really dropping?

OPINION: A recent report from Statistics New Zealand blew the whistle on declining rates of home-ownership in New Zealand.

The report, Housing in Aotearoa, revealed that the number of New Zealanders who own their own home has dropped to its lowest level in 70 years and that home-ownership rates have fallen in every region since 1991, with the largest decline being in Auckland where the median property value has topped $1 million. The drop in home-ownership rates has been particularly hard on those aged in their 20s and 30s, and that Pasifika and Maori peoples are less likely to own their own home than others.

Not surprisingly, the report was has been variously described as "grim reading" and a "grim portrait".

So, clearly this is a trend which has become much worse in recent years as a result of the last property boom in which we saw a rapid escalation in house prices – right?

Well, actually no. In fact, the report acknowledged that home-ownership since 2013 has been stable at around 64.5 percent of the population and the decline which it refers to actually relates to a drop in home-ownership levels since the 1990s and early 2000s.

In other words, the breathless coverage of "a worrying trend in ownership rates" selectively cherry picks a period which makes the situation look much worse than it is.

To understand what has happened to home-ownership in New Zealand you need to go right back to when we first started collecting data. And when you do that a fascinating picture emerges.

In 1916, 52 percent of Kiwi homes were owned by the occupier. Ten years later, in 1926, that figure had increased to 61.5 percent - and there it stayed for 25 years, until 1951. From there, it progressively increased between 1951 and 1991 until it reached 73.8 percent, the highest level in our history.

By 2013 home ownership had dropped back to 64.5 percent, and now sits at around 64.8 percent, about 3 percent ahead of where it was in 1951.

This means that we currently rank No.44 of 50 nations with the highest rates of home-ownership, well behind the top of the list, Romania (96.4 percent) and Singapore (90.7 percent), but in the same ballpark as Australia (65.5 percent), the United States (64.5 percent) and the United Kingdom (63.5 percent).

But what about that big spike between the 60s and the early 90s when home-ownership got as high as 73.8 percent?

This coincides with an interesting mix of trends and policies, some of which we would do well to learn from today. These included the height of the post war baby boom during which tens of thousands of Kiwis built new homes to house growing families, Government backed Home Ownership Accounts which provided specific support for those wanting to buy their first home, and a twenty-year period during which Kiwis could capitalise the Family Benefit ($6 per week, per child, capitalised over 16 years) to use as a deposit for a first home.

So, does the data really paint a grim picture of home-ownership in New Zealand?

Not at all. Rather, it tells us that despite at least four property cycles since 1980 – each broadly leading to a doubling of house prices over the previous cycle – the current rate of 64.5 percent home ownership almost exactly matches our 94-year home ownership average of around 65 percent. This remarkably consistent figure tells us that successive generations of Kiwis appear to have adapted to, and overcome, the reality of higher house prices.

So, does this mean that we can sit back and do nothing?

Not at all! While our long-run average of home-ownership has held up well over the past 100 years we should always be aspiring to increase that percentage. As I mentioned in last week's column - Swiss-based Research Institute, Credit Suisse, has ranked New Zealand as the world’s fifth richest country and puts most of that down to steady growth in the value of our homes.

That tradition of home-ownership has enabled us to fund travel or major purchases, buy businesses, pay for our kids’ education, and support ourselves in retirement. It’s a reality we should want for every Kiwi and, in my opinion, getting increasing numbers of Kiwis into their own home should be the number one priority for every Government that we elect.

The extent to which home-ownership underpins and fuels the New Zealand economy cannot be underestimated – and protecting this relationship should be a primary consideration for policy makers regardless of political ideology.

The good news is that our rate of home-ownership has stayed remarkably stable for almost 100 years – let’s not now do anything to mess that up.

- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]