Why are house prices rising at the same time as mortgagee sales are hitting record highs?
More people than ever are unable to meet their mortgage, and a growing proportion of them owned only a single home. It’s not just speculators losing their shirts. With so many people losing their jobs and few people getting payrises on top of all these mortgagee sales, you would expect houses prices to be falling. Yet, at the same time, there’s another group of people buying in sufficient numbers that they’re pushing prices up. They must have money and income security; that’s not ordinary people, it’s the wealthy elite.
A similar process is happening in the rural sector. Small farmers are going under due to the crash in dairy prices (just as small beef and sheep farmers have gone under over the last few years), while the big farming businesses with wealthy urban owners have the cash not only to survive but to buy up farms coming on the market.
The ordinary people are being squeezed out of the market, and a small group is taking over more and more land. The scary thing is that just as the housing bubble shut ordinary Kiwis out of owning property, so is the recession partially caused by that bubble. We’re becoming more and more a nation of renters, with a small, wealthy and powerful land-owning class. It’s not that the people in this class are ‘bad’, they’re just behaving rationally, but it’s an undesirable trend for property to be concentrated in ever fewer hands. That’s not the ideal this country was built on.
As we’ve discussed before, there are a number of sensible steps the government should take to discourage this overinvestment by a narrow group to the exclusion of everyone else, which threatens to cause another housing bubble.A capital gains tax and tightening the rules on tax write-offs on investment properties would help to keep prices down and favour people buying their own home over investors (not the mad idea of putting GST on housing, which would just be a gift to property investors).
Bill English is going to find he faces a lot of opposition from within the National caucus if he tries to push anything that depresses house prices- at least 27 of the 58 have investment properties or interests in property/farming investment businesses. Worried about a landowner class buying up property and keeping you from the chance of owning your own home? Well, their party is in power.
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