'Can you help me?': The quiet desperation of New Zealand's housing crisis
On finding herself shut out of the property market, Nicole Thorburn looked for a side door.
At 29, Thorburn had been living with her parents for seven years to save for a deposit on her first home in Thames, a small town on the Coromandel Peninsula north of Auckland – but the pandemic has sent already buoyant prices skyrocketing.
In December, the average house value in the Thames-Coromandel district was over $800,000. “There was just nothing on the market that was even in the ballpark,” she says.
Thorburn decided to try a long shot. She designed flyers in baby pink and navy blue, introducing herself as an aspiring homeowner beneath hand-drawn hearts and a banner: “Can you help me buy my first home?”
Thorburn had only distributed about a dozen flyers, on community noticeboards and through letterboxes, when she heard from a woman in her wider acquaintance who wanted to sell privately. And so she was given a hand up on to the property ladder, just as it was receding from reach.
Stories like this one, of unexpected windfalls and mysterious benefactors, get shared around widely among aspiring homeowners in New Zealand – both as potential strategies, and reasons to persevere despite overwhelming odds.
But Thorburn is adamant: far from a resourceful millennial, outsmarting the market – “for me, it was entirely just good luck,” she says.
She likens her flyer success to a lottery draw: you have to buy a ticket to be in with a chance, but it is no strategy. “I definitely tell other people to try it, but it was completely down to all these factors lining up … It felt like a win at the time, but it’s kind of sad that it has to come to that.”
A crisis dividing generations
New Zealand’s 10-year housing crisis has worsened dramatically since the pandemic, with ultra-low interest rates and a faster-than-anticipated economic recovery compounding preexisting issues of affordability and supply.
In Auckland and Wellington, the median price is now $1,100,000 – for the capital city, a 35% increase on year. But even small towns are feeling the heat. Last month, the national median house price rose by nearly 23% on year to $780,000.
Bindi Norwell, chief executive of the Real Estate Institute New Zealand (REINZ), says there are fewer houses on the market, selling for higher sums – fuelling investors’ fears of missing out, and ironically driving prices higher.
The zeal for real estate has created a catch-22 where you need property to get property, lifting first homes out of reach even for those people (on high incomes, in couples, receiving parental help, looking to buy outside of cities) for whom it would have previously been possible.
Last month housing affordability in New Zealand, as determined by the average price to household income ratio, was found to have reached its worst point in at least 17 years. The crisis is already dividing generations, and risks defining them.
Many people have given up hope of ever being able to buy. Others are prepared to try anything that might give them an edge.
The overheated market is driving people to try “more ‘creative’ means to buying property,” says Norwell. “For some it’s writing letters … to pull at the heart strings, for others it’s going door to door and trying to reach the owner directly, or reaching out to agents to see properties before they’re even listed for sale.”
This tends to be more common in areas where the housing shortage is especially acute, such as Wellington, Hawke’s Bay and Manawatu – but there have been anecdotal reports of it from all over the country, says Norwell.
“Much of it seems to be born out of pure frustration, with not enough housing to meet demand and … missing out on properties.”
Luke*, a 29-year-old Wellingtonian, has a sizeable deposit saved as well as mortgage pre-approval, amounting to a budget of about $1m – but even those “relatively exceptional” circumstances has not made up for the lack of suitable properties on the market, he says.
In search of a central home that is neither earthquake-prone nor leaky, Luke has resorted to “basically internet sleuthing”: contacting the owners of townhouses and apartments to inquire about their potential willingness to sell, so far without success.
“It’s this real feeling of hoping for a miracle … You hear these stories of light filtering through the cracks, and you’re like, ‘Maybe it will be me as well’ – but it’s not the case.”
Nicki Cruickshank, an agent with Thommy’s Real Estate in Wellington, says some tactics verge on predatory. She has heard of would-buy buyers searching the streets for skip bins, house painters and other telltale signs of a looming sale, hoping to strike before it is listed.
“Obviously, when it’s so competitive, everyone is trying to get in the back door,” says Cruickshank. But with houses routinely selling for tens, even hundreds of thousands above their market value – “you’d be mad to sell privately.”
In sales by tender, more than half the offers are typically accompanied by a heartfelt letter and sometimes family photos in the hopes of it trumping a higher sum, says Cruickshank.
She had only once seen it make an impact, when the seller chose a first-time buyer over a property developer – but, Cruickshank adds, there was only $1000 between them. “That’s nothing in the big picture, when it was a $1m sale. The letters are nice … but ultimately it comes down to the highest offer.”
With such a slim chance of success, these attempts to sneak an advantage or appeal to sellers’ common humanity are less a strategy than a Hail Mary: testament to buyers’ desperation and the widening, and seemingly unbridgeable, gap between the haves and have-nots.
Rachel* received 20 letters, all handwritten, with offers on her house in Wellington last year. She could not bring herself to read them all, she says: “It was actually too sad … about how they’d been looking for a long time for a house and tried and tried, and just wanted to enter the market.”
Worried by increasing inequality in New Zealand, Rachel says she had wanted to make an “ethical” decision: she would never have sold to a developer, for instance. Even so – the gap between the lowest offer she received, and the highest, was about $300,000.
“We got a really good price, beyond what we were expecting, just because of the nature of the market – but I actually felt really guilty, like I couldn’t really celebrate,” she says. “Yes, it was good for us, but I was like: my kids are never going to be able to buy a house … It’s intergenerational theft, essentially.”
‘People are desperate’
The future repercussions of the housing crisis, if left unchecked, could certainly be huge. Renting in older age has been found to be related to economic disadvantage, and poorer mental and physical health. The higher rates of renting among Māori and Pacific people and older women leaves these groups particularly vulnerable.
But with home ownership now at its lowest rate in nearly 70 years, many of the consequences are already at hand. Unaffordable housing was singled out as a factor in New Zealand’s birthrate dropping to its lowest-ever level last month; it has also long been linked to persistently high poverty.
“This is not just young New Zealanders,” says Luke. His father, a self-employed carpenter, also does not own his own home, meaning rising prices in Wellington threaten his financial stability and decades-long tie to the city.
“The property crisis has implications right across the generation spectrum,” says Luke. “… Under the current model, a lot of people are losing out and a select few are winning.”
Perhaps as a result, concerns are mounting.
The Ipsos New Zealand Issues Monitor, released this week, found that housing was thought to be the most important issue facing the country by far, with 60% of New Zealanders ranking it number one – the most ever. The question is whether they are prepared to put themselves at a disadvantage to address it.
The majority of voters (and policymakers) own their homes and so support prices rising, meaning there has been little political will to act. It is telling that prime minister, Jacinda Ardern, said last November, that prices “cannot keep increasing” – then stood by as they did just that.
The government tends to downplay its ability to influence housing supply and demand in New Zealand – but the property bubble has now ballooned to a point where even owner-occupiers are in danger of being priced out, while the associated rise in private debt poses a risk to the national economy.
The International Monetary Fund warned last week that price rises were unsustainable and – with a tightening of credit standards, or sharp rise in mortgage rates – “could trigger an eventual, pronounced correction”.
The Reserve Bank of New Zealand has already reinstated loan-to-value (LVR) restrictions on mortgages, while housing minister Megan Woods has said that the government is reviewing how to dampen speculative demand. An announcement expected by the end of this month.
What is needed is more housing. A planned reform of the Resource Management Act may help to unlock supply in years to come, but the government has not yet made moves to make up for walking away from its 2018 election promise to build 100,000 first homes.
But even a “comprehensive policy response” addressing supply and demand, as recommended by the IMF, may not be enough to tackle the crisis when housing is so central to the national psyche.
Home ownership is a cultural value in New Zealand, integral to its self-image as a stable and egalitarian society; while the view of property investment as a route to individual wealth is an underpinning of the economy.
Even apartment living is still widely seen as second-rate to the traditional quarter-acre section. The result is that long-term renting, or other paths to financial security, have not been meaningfully developed. For example, rented homes are more likely to be smaller, older and in need of major repair than owned homes, and less likely to have double glazing.
It means the increasing numbers who cannot afford to buy are backed into a corner.
“It still is very much the New Zealand dream,” says Kim Tairi, a 55-year-old crafter and librarian. Born in Invercargill, she moved to Auckland from Melbourne five years ago and has been looking to buy in the region of $800,000. “I’m a very happy renter – but I’ve got money sitting in the bank.”
But Tairi’s options, as she sees them, are to borrow more than she will be able to ever pay off – or buy what she can afford, at the expense of her quality of life. Even the shabbiest apartment in her building recently sold for $800,000. “I don’t think it’s worth it.”
She has already seen others upend their lives, even moving to the opposite end of the country, simply for a shot at their first home: “People are desperate.”
Even in the short time she has been looking at the market, Tairi – of Ngāti Korokī Kahukura iwi – has noticed the impact on her mood. “For the first time, I felt really resentful … My family had so much land, we were really wealthy – and it was all confiscated by settlers!”
Yet six months ago, home ownership had not been on her radar, says Tairi: “It’s really hard to switch off now.”
It reflects the national obsession with housing – what you can afford to buy, what you are prepared to give up to do so – being as much a part of the problem as structural shortages. The first step towards solving New Zealand’s crisis of home ownership may be accepting that it will not be possible for everyone, and providing alternatives.
Even Thorburn, a rare success story, says she felt like she had “no back-up plan” to home ownership. “The system’s not really set up to support people renting into their 30s, 40s, 50s. There’s this feeling of failure, almost, if you can’t save up your deposit and get a house – but there’s no support.
“There isn’t really another thing you can put your money into as an investment for your future, for your retirement. There’s no backstop, almost.”
If prices do not fall soon, says Tairi, the government needs to prioritise tenant rights and other approaches to housing, such as long-term leases and co-operative models. “People who are already in the market can buy, they can flip their houses and go onto something else. But so many of us will never get there.
“People will still want to own a house, because that’s the way they feel most secure, but there should be other options for people who don’t have that opportunity.”
For now, Tairi has decided to give herself a break from the market. It was focusing her mind on what she was lacking, she says: “I have a nice life now, I can afford my rent, I live in the place I want to live in.”
But she did leave the door slightly ajar. The other day, Tairi saw her neighbours from across the hall, moving out of their apartment. “I said, if you’re thinking of selling – keep me in mind.”
* Names have been changed