Shamubeel Eaqub on NZ's Housing Economy

Shamubeel Eaqub delivered a cogent and informed presentation at an NZPI planning conference plenary session. Hard to do justice to it here- but I've done my best with notes taken at the time - and try to tell his story to the conference. I begin with his summary of the problem:

He was at pains to emphasise that the housing problem NZ now has, has been building for the past 30 years.

This graphic is his version of what has been regularly communicated - the ratio between house price and hosuehold income. 

This is his version of the boomer/millenial generational gap that has opened up in the ability to buy a house. He characterises it as a landed gentry/mortgage slavery divide similar to Victorian times.

One of his main points is the fact that we - as a society - don't want to create housing supply for the "poor" - the bottom half of society. He notes that the number of state houses/1000 head of the population now is back to what it was in 1941.

Another of his concerns is the amount of bank loans now tied up in house mortgages compared to previous periods, and how this is potentially restricting other parts of the economy from expanding - starved of investment capital.

Eaqub also focuses attention on the demand side of the equation. Many commentators have argued that a major driver for demand has been natural population growth - but this data demonstrates that the ntural growth demand has remained reasonably stable since the 1950's, while the demand from migration has sharply increased. 

The economics of rental housing - particularly in Auckland - is highlighted in ths graph. Return on housing investment in Auckland is about 3%, while in the rest of New Zealand it is between 5% and 6% - above the cost of borrowing.  

Eaqub's assessment of the cumulative housing shortage is dramatic - and is based on the rate of house or home construction that occurred post way, up to the period of reform in the mid 1980's.  

His final slides explored what was happening now to the broader economy in NZ - by examining house sales, and the availability of loan capital. The above graph is used to suggest that the peak in the house market has turned.... 

...and that new loans are reducing. This particular indicator was also picked up by Chris Aitken (Hobsonville Land Company).Shamubeel suggests there will be a bust in the construction economy, even though the country desperately needs more homses.

He ended his presentation by suggesting that "planners will be vilified" because they will be exposed as the villains, blamed for pushing new unitary plans enabling intensification ("unilateral plan" - my thought here), and pushing, driving change to enable urban renewal through compliance with new requirements and provisions coming down the line including NPS Urban Development Capacity obligations and duties.