Progressing Planning recently had the privilege of hosting a seminar on the intricate dynamics of housing financialisation, a topic of increasing relevance in today’s global economy. Chaired by Alan Mace (LSE), the event featured Professor Christine Whitehead (LSE London), who provided an enlightening overview of this complex issue. She introduced a groundbreaking report by LSE London that delves into the financialisation of housing across 13 diverse cities—from Canada and the United States to Europe and Asia-Pacific. Professor Laurence Murphy of the University of Auckland, presented one of these case studies that covered the New Zealand context. The insights shared offered a nuanced understanding of how financialisation is shaping housing markets globally and what this means for future policy interventions.
Financialisation of Housing in New Zealand: Understanding Policies, Banks, and Affordability
The financialisation of housing in New Zealand has become a subject of increasing concern, particularly as it intersects with issues of social justice and affordability. This phenomenon is not isolated to New Zealand; it is a global trend where housing has been increasingly viewed as a lucrative investment rather than a social good. However, the New Zealand case offers unique insights into how government policies, banking practices, and market forces converge to shape the housing landscape.
Government Policies and Affordability
New Zealand’s government has made several attempts to address housing affordability, including recent zoning reforms aimed at stimulating housing construction. These reforms have had bipartisan support, lending credibility to their potential effectiveness. However, while these policies may have increased housing construction, they have not yet significantly impacted on house prices, which rose by approximately 130% between 2011 and 2021. The former government also extended the bright-line property test to tax shorter term property speculation to 10 years. However the efficacy of this measure remains to be seen and it is likely that the new centre right government elected this month will unwind this policy.
The Role of Banks
Banks in New Zealand have liberal lending policies that make investment in rental housing attractive for wealthy individuals. This has encouraged more property investors to enter the rental market, further driving up prices.
The banking sector’s role in the financialisation of housing is complex; while it enables homeowners to attain mortgages, their practices also contribute to increasing house prices, making affordability a distant dream for many. The growth of indebtedness has also significantly increased risk for individuals but also potentially for the whole banking system.
Market Forces and Demand Factors
New Zealand’s housing market is also influenced by strong demand and speculation. The country’s well developed banking sector helped it escape the worst aspects of the Global Financial Crisis, but it has not been immune to the global trends affecting housing affordability. Auckland, the largest city, has experienced significant demand pressures resulting from historically low mortgage rates (during Covid) a housing market failure due to various factors, including sluggish housing production and labour shortages. These market forces have made homes in New Zealand among the least affordable in the world.
The Social Dimension
The financialisation of housing in New Zealand has social implications as well. It exacerbates inequality between renters and homeowners and affects all segments of the population. The UN Special Rapporteur on the right to adequate housing has paid particular attention to the challenges faced by Maori, people of Pacific descent, persons with disabilities, and other marginalized groups in New Zealand. The government’s policies need to be more inclusive to ensure that the right to adequate housing is realized for all.
In conclusion, the financialisation of housing in New Zealand is a multifaceted issue that requires a nuanced approach for resolution. While government policies and banking practices play a significant role, international market forces and social factors cannot be ignored. A balanced and comprehensive strategy that addresses these various components is essential for tackling the housing affordability crisis in New Zealand.
