Homes for $200,000? Winston Peters hopes so.

Acting Prime Minister Winston Peters has spoken of his desire for housing that costs not more than $200,000. The New Zealand First leader, speaking of a time when a person on a then living wage could afford a property relatively easily, was speaking of the aspirations of the Government – of a time and housing framework that allowed new families with relatively small discretionary money to be able to buy their first property.

There are a number of factors to consider in the likely price of affordable properties built from bare ground:

  1. Due to the relatively small pool of tradespeople that New Zealand has, skilled labour is always going to cost once one has added up ACC cover, Kiwi Saver investments on top of wages.
  2. The cost of obtaining resource consent from the consenting authority and any associated legal proceedings that it may have to go through
  3. Connecting the property to existing infrastructure – it must have water, sewerage, power and a driveway or other vehicle access

These factors might also be influenced by outside forces such as demand at the time for tradespeople on large commercial and industrial projects. Another is the availability of building materials that are not manufactured in New Zealand. A third and more controversial one is the availability of affordable land. A combination of increasingly competitive market forces, urban sprawl encroaching onto good arable land and a tendency towards purchasing big sections that we do not necessarily need raises challenges.

I doubt though that any decent houses will cost less than $300,000 unless there is a change in building attitudes among buyers. Is big and flashy always good? Not necessarily. I am not suggesting that everyone seek out granny flats, but if we want a serious reduction in house prices, we as New Zealanders need to be honest with ourselves: apartments, smaller and better self contained units with small floor space are going to have a much bigger say in the future.

Location. Location. Location (not the programme that used to be on TV1 – though the name certainly gives a good hint about this next talking point). The unequal economic development in New Zealand means that Auckland continues to be more of a magnet than it should be for people and the resulting population pressures are contributing to the sky high costs of renting. Much more effort needs to be made to draw economic development to other parts of New Zealand.

Finally, as I have mentioned before and which has been extensively debated in the media, the large number of migrants entering New Zealand puts further pressure on an already pressurized market. This was the subject of considerable debate at the last election. What numbers could be considered sustainable remain a point of contention and depend on ones point of view. Measures were announced by the new Government shortly after Labour-New Zealand-Greens took office in October 2017, but it is too early to tell what impact they will have.

It was announced for example just yesterday that a 15 story apartment building is proposed for Hobsonville. Few if any apartment blocks in New Zealand are that tall. It also remains to be seen in a country that prefers its housing developments to be lateral rather than vertical how long it will take for the market to cotton on to the idea.

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