What's an affordable house worth in Auckland these days? The Prime Minister reckons 'it depends', but actually it doesn't. Plus, his Trade Me slip up

What's affordable? Usually that's entirely dependent on your circumstances. My six year-old's concept of what's "a lot" – the lego he wants or how much we just spent on groceries – is very different from mine. Yet I had a very wealthy friend who used to say that in his pomp he could hardly go through an international airport without spending thousands on a new watch.

And of course it's the same when you're trying to buy a house in Auckland.

John Key tried to make that point on The Nation on the weekend, when asked what now constitutes an affordable house in our biggest city. The Prime Minister replied:

"That depends enormously on whether you’re a two-income household. It depends whether you’ve got much equity in savings, but what we know is through the government’s KiwiSaver HomeStart scheme..."

Pressed again if he could name a number, he tried the same line of argument:

"Well, it just varies, doesn’t it? I mean, what I might be able to afford or what you might be able to afford could be very different to a first-home buyer".

Except it doesn't vary, as he knows. Under the new Special Housing Area guidelines created in 2013 by the government and Auckland Council to speed up house construction, a definition of affordable housing was agreed. You see, the government and council expected anyone given the opportunity of rushing through the consenting process to build at least some affordable houses, so they had to spell out what that meant.

There are two criteria you can meet to be affordable, but for our purposes we're just interested in the first one:

A dwelling is classed as relative affordable if it will be sold for no more than 75 per cent of the Auckland region median house price. The median house price is that published by the Real Estate Institute of New Zealand for the most recent full month of September, in relation to the relevant date.

So when you're talking about affordable housing in Auckland, you're talking about new builds. And you're talking about a set criteria. It does not, as Key tried to argue, depend. Presumably the Prime Minister knows that, but didn't know the amount or want to acknowledge what "affordable" means these days.

Because here's the rather dire fact. In 2013 when those Special Housing Areas were first created to start reining in rampant Auckland price rises, "affordable" – 75 percent of the media price across the region – was defined as $436,000.

Today, two and a half years later, it has climbed to $578,000. Yep 5-7-8. Thousand.

And the housing shortage in the city has grown, not shrunk. From being 20,000 houses short of population growth, Auckland is now anywhere between 30-50,000 short, depending on whose figures you go by.

While the rate of house building has grown, it's not been enough to match the growing population and thereby stabilise prices.

Key wouldn't say whether he thought $578,000 was a reasonable definition of affordable. Really, no-one can claim it is, but equally he can hardly say that everything that his government has tried – and it has tried quite a bit – is failing.

Key tried to change the question and said, 'hey, look on Trade Me for houses under $550,000'. That is, roughly affordable houses. He said there were "thousands" for sale.

So on Saturday afternoon I went on Trade Me and had a look. There were 1741. If you go on again today, it's down to 1688. And that's across the entire region, up to Rodney and down to Franklin, and so includes some far flung areas.

So that's not really "thousands" as the Prime Minister claimed.

If you drop the search price down to $450,000, near where the affordable price was in 2013, you are limited to smaller apartments or you're mostly heading well out of the city, to Pukekohe, Clendon Park, or Te Hana. Or you could get a bit of bush-clad land with no house on Great Barrier island.

The honest answer is that despite efforts by National, and the council for that matter, the idea of an affordable home is getting more and more farcical, even by the government's own definition.

Comments (17)

by Fentex on March 23, 2016
Fentex

So when you're talking about affordable housing in Auckland, you're talking about new builds. And you're talking about a set criteria. It does not, as Key tried to argue, depend

I don't like the way this question was first put to Key. If you've a strong definition that delivers a precise number (this Special Housing Area definition) then you know what the number is and there's no point at all asking anyone for it. If that's your definition, that's the number, you can simply state it if it's a point of topic.

Asking Mr Key what HE thinks an affordable number is is not using that definition, it's clearly using the vernacular meaning of the language for his opinion of what constitutes affordable. And for his opinion he can waffle quite a lot and you really have no basis to diss him for it.

It wasn't until after he answered the question about his opinion that he was asked about the specific number. 

And then he said two things I think vastly more important than whether or not $587,000 was affordable/

He said low interest rates made them more affordable and that prices won't go down.

If that's our governments thinking then they're lunatics. We are not going to have low interest rates and high prices for ever. Planning for that would be insane.

by Lee Churchman on March 23, 2016
Lee Churchman

The honest answer is that despite efforts by National, and the council for that matter, the idea of an affordable home is getting more and more farcical, even by the government's own definition.

Why take Key seriously? His utterances appear to be placeholder speech since actually doing something about house prices would be politically toxic to him. Better to look like you are doing/saying something.

by LionKing on March 23, 2016
LionKing

One part of this housing problem must be incomes, or the lack of.

This National Govt has made it a mission to drive down wages over its time in office which has made housing affordability near impossible in Auckland, as well as creating a huge pool of unemployment in the process.

And by any measurement , the economy has not benefited from the above.

Key and English are doing more harm than good.

 

 

 

by Geoff Fischer on March 23, 2016
Geoff Fischer

The problem is that the term "affordable housing" and its definition are a mis-match.

The definition is something like "lower quartile hose prices" while the term "affordable houses" suggests "houses which people on median incomes with median savings can afford to buy given current lending rates"

But we all know it is madness.   I grew up during the Cold War when we were taught to pity the poor Russians who had to send their wives out to work and their children to daycare, who had no possibility of owning their own homes let alone a farm, and were continuously spied on by their own government.   Well, we have all that here now, and the question "Who won the cold war?" no longer admits of a simple answer.

by Tim Watkin on March 23, 2016
Tim Watkin

Fentex, I hardly ever ask a host to go on screen to ask a question they don't know the answer to. Part of the art of a broadcast interview is to research the subject in-depth, look for areas where those in power can be tested and anticipate where their answers might take them. So I'm sorry you didn't like the way the questions were asked, but it's run of the mill for me.

It's not a matter of whether the interviewer knows, the whole conversation is for the edification of the audience, not the host. The test for the PM is whether he knows and/or is willing to say.

As for the two answers you thought more important, I've heard him and his minister say the same thing for years now. No politician will say prices will go down. Metiria Turei did on The Vote in 2013, was pounced on by Peter Dunne on telly and withdrew and apologised on breakfast telly the next morning. To say house prices will fall - rather than stall or plateau - is to suggest the economy could fail and is political suicide. What's more, we've never had a full on house price crash in NZ.

As for low interest rates, to be fair to the PM he's simply stating the obvious. They are at record lows and show no sign of going up in the short to medium term. The indication is clearly that if they are one of the few good things that are advantageous for house buyers now compared to any other time in history.

by Tim Watkin on March 23, 2016
Tim Watkin

LionKing, wages certainly aren't anywhere near to keeping up with house price inflation. But I'd need you to supply some facts to back up your other claims. National has been regular and consistent in raising the minimum wage and unemployment is actually lower than forecast and low by current OECD standards.

by Tim Watkin on March 23, 2016
Tim Watkin

Geoff, that's a bleak comparison!

by Geoff Fischer on March 24, 2016
Geoff Fischer

It is a comparison which could be extended further into the conduct of foreign relations, the balancing of global and national interests, maintaining (or re-constructing) family and social values, use of the mass media, and relations between church and state.

But is it bleak?  Not if the state can popularize a new set of social aspirations which are plausible, achievable and congruent with innate human desires.  Of course the Marxists tried to do that and by and large they failed.  

Can the current rulers of the Western world succeed where the Marxists failed?  The signs are not good.   All they have come up with so far is a hedonism reminiscent of the last epoch of the Roman empire.

by KJT on March 24, 2016
KJT

Unemployment is low, if you count, as National does, every person who works more than an hour a week and all those in zero or minimal hour Mcjobs.

Not to mention those who are couch surfing, after giving up in despair of the mental torture and useless courses from WINZ.

by KJT on March 24, 2016
KJT

A rise in median incomes, and lowering of house prices, has to await the reduction of immigration until infrastructure can catch up, Capital gains tax and the building of enough State houses.

All of which are anathema to Nationals bribers/sorry, funders, who are making their fortunes out of the current arrangements.

by Fentex on March 24, 2016
Fentex

 the whole conversation is for the edification of the audience, not the host. The test for the PM is whether he knows and/or is willing to say.

I watched that interview, I was the audience, and I did not know that when first put the question the term "affordable" referred to a specific number according to a precise definition. It is not edifying to an audience to watch people use unexplained jargon confrontationally.

Argument relies on postulates that must be understood by parties to the argument, the audience of a confrontational interview is a party to an argument.

I contend it is more likely an audience will be confused by references they do not understand and that in the example before us the interviewer, if interested in edifying their audience, ought begin by stating, "Your governments Special Housing Area definition defines affordable homes as the median price of last Septembers sales, which in Auckland was $587, 000." and the audience would know what the number is, where it comes from, who defined it. And then the question "Is $587,000 really affordable to people seeking their first home?" is much more restricted, the opportunity to elide the context reduced.

It is easy for experts and people educated in detail to assume others share their context and sow confusion when they don't. I think the purpose of news services should encourage it's exponents to be very careful about establishing context for viewers.

Language is imprecise and built context on context and discussion about policy fraught enough that in the brief moments people can be held to account for it opportunity to slip and slide because they recognize gaps in context should be denied them.

by Fentex on March 24, 2016
Fentex

No politician will say prices will go down. Metiria Turei did on The Vote in 2013, was pounced on by Peter Dunne on telly and withdrew and apologised on breakfast telly the next morning. To say house prices will fall - rather than stall or plateau - is to suggest the economy could fail and is political suicide. What's more, we've never had a full on house price crash in NZ

I thought her foolish too. But she didn't need to say it to make her point. That was just an error of imagination. IIRC When asked if she sought policy that would lower prices she ought to have realised the danger and answered something like "No, we'd like the rise in price to slow, not reverse."

As for low interest rates, to be fair to the PM he's simply stating the obvious.

Certainly, and I'm fairly confident cheap credit is an important driver of the rise in prices (how else could anyone meet them?) but in response to a question of what to do regarding policy and affordable housing together the two statements sound like a policy of expecting the two to persist indefinitely.

Which I have no doubt is something National would fervently desire - ever continuing capital gains and low interest rates to feed them is a wet dream for many. It just isn't going to persist and can't be a governments rational plan.

by Fentex on March 24, 2016
Fentex

"Who won the cold war?" no longer admits of a simple answer.

This reminds me of the observation; 

In the 1980's Capitalism defeated Communism.

In the 1990's it defeated Democracy.

by LionKing on March 24, 2016
LionKing

Tim Watkins.

LionKing, wages certainly aren't anywhere near to keeping up with house price inflation. But I'd need you to supply some facts to back up your other claims. National has been regular and consistent in raising the minimum wage and unemployment is actually lower than forecast and low by current OECD standards.

What you have stated are not good examples of facts.

Yes, National have raised the minimum wage, but from an abysmal amount anyway and no way would any person on this meagre amount have a show of ever entering the housing market in Auckland.

And the same goes for the unemployed, which hovers between the low 5% to just over the 6%, still a hell of a lot of potential workers, if the jobs can be found.

And if any unemployed are over 50, finding a position that pays a meaningful wage, well I would say good luck to them .

 

 

 

 

.

by DeepRed on March 27, 2016
DeepRed

And so far no one's mentioned the dirty B-word: bubble. I safely predict that both John Key and Andrew Little are privately hoping that the other one will be in charge if or when it bursts.

As for the here and now, NZ's de facto House of (Land)Lords known as Generation Rentier continues to obstruct anything that comes close to creatively disrupting its grip on the housing market.

by Tim Watkin on March 29, 2016
Tim Watkin

LionKing, go back to your original comment. I agree with your second one more, but in that first comment you said National had driven down wages and created a huge pool of unemployment. I'd be very happy to criticise any government if they were true, but I don't know of any evidence to suggest they are. The facts I gave show that.

National certainly hasn't backed a living wage, say, and you can argue there are many things it could have done to help boost wages. But they clearly haven't driven them down, or even left them flat. And despite the GFC, NZ hasn't suffered the level of unemployment seen in many western countries.

I agree no-one on a minimum wage could afford Auckland property, but I suspect that has been the case under numerous governments for a long time. And yes those are a lot of workers unemployed and higher than the previous govt, but as noted, lower than many other countries.

KJT, I think the Nats count unemployment that same way previous govts have. I'd be interested if it has changed.

DeepRed, I agree Auckland has all the signs of a bubble, but it depends whether it ends with a pop or a slow exhale.

by Tim Watkin on March 29, 2016
Tim Watkin

Fentex, there are many, many ways to ask any particular question. You came up with one way, we came up with another. You would not want to stick to a certain formula every time you asked a question, just as you wouldn't want your halfback to do exactly the same thing with the ball each time it came out of the scrum.

And you were one member of an audience; I'm sure many others appreciated the way that was asked and many others didn't. But I've spent a career asking thousands of questions in many different ways, so don't get hung up on one question and or think I don't understand the importance of context or engaging the audience. In this case, the test and reveal was whether the PM knew the answer, rather than giving it to him. But different times, different ways.

 

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