Trends and developments in the building and housing sector
Introduction
All New Zealanders have a stake in the building and housing sector as consumers, users or investors. All are concerned about access to housing. Shelter is recognised internationally as a basic human right. The quality of housing, other buildings and the built environment generally affects all other aspects of community life.
Sustainable development
The Government's commitment to sustainable development has implications for the Department of Building and Housing (the Department). In regulating the building and construction industry, the Department takes into account social, economic, environmental and cultural concerns. Regulations must be consistent with the expectations and plans of the Government and wider society. The Building Act 2004 requires the Department to consider sustainable development and improving energy efficiency in housing and buildings.
Social factors
Demographic changes
Good-quality housing contributes positively to New Zealanders' health, educational and social development, and sense of wellbeing. Good-quality, secure housing provides a stable base for beneficial community engagement, and offers opportunities for people to develop community links and networks. Well-built commercial buildings provide workplaces that are safe, healthy and encourage productivity, as well as spaces for recreation that meet the needs of the community.
According to the 2006 Census, New Zealand's normal resident population on census night was 4.028 million - an increase of 7.8 percent from 3.737 million in 2001. Auckland, in particular, has grown considerably, and now has a population of 1.303 million. Permanent and long-term net migration in the country has fallen from a peak of 41,590 in the March 2003 year to 9,740 in the March 2006 year.
Statistics New Zealand projects that by 2051 New Zealand's population will have reached 5.05 million. Auckland is expected to continue to grow at a greater rate than the rest of New Zealand, reaching a population of 1.77 million people by 2026. This will increase Auckland's share of New Zealand's population from 31 percent in 2001 to 37 percent in 2026.
As New Zealand's population expands and becomes more urbanised, some demographic changes are predicted.
- Ageing of the population: the median age of New Zealanders was 34.7 in 2001, and 35.9 in 2006. By 2051, half of New Zealand's population will be aged 46 or older, and one in four will be over 65 years old. The average age in New Zealand will be mid- to late 40s.
- Increasing ethnic diversity: between 2001 and 2006 the Asian population grew by almost 50 percent, the Pacific population by 14.7 percent and the Māori population by 7.4 percent, while the European population declined by 9.1 percent. Projections indicate that between 2001 and 2021 the Asian population will increase by 145 percent, Pacific by 59 percent, Māori by 29 percent, and European by 5 percent.
- Changing family structures: the general ageing of the population and the blending of families through divorce, separation and re-marriage means that more families are non-traditional. Smaller households of single people and couple-only households are also becoming more common. In 2001 the average household size was 2.6 people. By 2021 this will have dropped to 2.4 people. Couple-only households are now the most common family type, and one-person households are expected to increase by 46 percent between 2001 and 2021.
- Increasing urbanisation: New Zealanders are more likely to live in the cities than in rural areas. The population in cities increased by 9.8 percent from 2.247 million in the 2001 census to 2.467 million in the 2006 census. The 2006 census data showed 31.9 percent of New Zealanders live in the Auckland region. Projections are for two-thirds of New Zealand's population growth between 2001 and 2026 to be in the Auckland region, which will be home to 37 percent of New Zealand's population in 2026.
Homeownership and affordability
New Zealand has a strong tradition of homeownership and investment in the housing sector. The value of New Zealand's housing stock has doubled between 2002 and 2006. The housing stock was worth $538 billion in September 2006. This increase in value is due to additions to the housing stock and, to a larger extent, increases in house prices in the last 4 years. Many of the housing trends, characteristics and policy issues experienced in New Zealand are common in western democracies. However, when compared to the G7 countries, New Zealanders' household wealth is heavily concentrated in housing. It is estimated that approximately 90 percent of New Zealand households' net assets are held in housing. Despite the increase in the value of housing stock, New Zealand households' debt servicing ratios, relative to disposable income, are also at unprecedented high levels, making household wealth in New Zealand vulnerable to movement in house prices.
The percentage of private dwellings owned by residents has declined from 73.8 percent in 1991 to 67.8 percent in 2001 and 66.9 percent in 20067. The decline in homeownership rates is occurring even though the total number of householders owning property has risen since 1991. Accompanying the fall in ownership rates has been a redistribution of homeownership away from younger to older households.
Median incomes in New Zealand rose 6.6 percent between 2000 and 2004, but median house prices rose 48 percent during that period.
The Centre for Housing Research, Aotearoa New Zealand (CHRANZ) has produced research on housing tenure, which shows that:
- homeownership aspirations remain strong among New Zealanders
- consumerism and high levels of personal debt are barriers to homeownership
- structural change is occurring in the housing market, with increasing reliance on rental accommodation
- the current trends in homeownership rates, combined with our ageing population, will have a maximum impact in 2050
- both the absolute number of houses required and the proportion of rental houses to owner-occupied houses will increase.
Homeownership and affordable rental housing are important public policy issues. The Department is building its understanding of the homeownership market. It will continue to work with other government agencies on ways to remove barriers to homeownership, and to make housing more affordable for households on modest incomes.
The forecast decline in homeownership and changes in ownership mean policies and strategies may have to be more adaptable. There are certain common factors affecting households' aspirations to homeownership and their ability to realise these aspirations that may need to be considered in future policies. These include:
- budget constraints
- mortgage servicing ability
- employment
- income
- relationship status
- number of dependants
- likelihood of moving
- leisure and recreation needs.
Trends in rental housing
The percentage of New Zealand households living in rental housing has increased from 32.2 percent in the 2001 census to 33.1 percent in the 2006 census. The number of rental dwellings, at 461,440 in 2001, is projected to grow by 206,490 units to reach 667,930 by 2016. Rental price inflation has been lower than house price inflation, and the rental population is expected to increase as the affordability of homeownership continues to decline.
Auckland, as the country's biggest city, is expected to dominate the growth in both owned and rented households.
Approximately 80 percent of the renting households in New Zealand are living in dwellings owned by a private landlord or trust. The remaining 20 percent rent from a public landlord such as Housing New Zealand Corporation or a local government agency. Private-sector investment in new housing stock is critical to ensuring availability of rental properties to meet the anticipated increase in demand.
The individual and family circumstances of those renting are diverse and changing over time. The main trends in the characteristics of people renting across different censuses reveal changes in the age, household structure and ethnicity of renters.
People renting in 2001 were more likely to be:
- older than those renting in 1991, with a sharp increase in the proportion aged over 29, and especially in those aged over 40
- sole-parent families and couples with children than those renting in 1991
- from a wider range of ethnic and cultural backgrounds than those renting in 1991.
Those renting in 2001 were also less likely to be traditional 'flatters' sharing a house.
Many landlords entering the market do so primarily because they see residential rental property as a good investment, rather than seeing themselves as in the business of providing people with homes. As a result, there is often a mismatch between the needs of the landlord as an investor and the needs of tenants who want a stable home.
The anticipated increase in rental housing demand makes it particularly important that rental law represents a balance between the rights of property investors/landlords and renters. This is a nationwide need, but is particularly significant in the Auckland region where most growth is forecast to occur.
There will always be new tenants and landlords entering the market who are not aware of their rights and obligations. All parties need appropriate protection, and ensuring good-quality property management practices and meeting the needs of an increasingly diverse population within the rental market will provide challenges.
The mismatch between landlord and tenant expectations is an ongoing issue. Private-sector investment - including institutional investment in new housing stock - is going to be critical to ensuring availability of rental properties to meet the anticipated increase in demand.
The Department needs to examine regulatory and supply aspects of the rental market to better understand and respond to drivers of, and barriers to, the supply of rental accommodation. Developing an understanding of affordable housing and the housing needs of an ageing population will be particularly important.
The review of the Residential Tenancies Act 1986 is a major priority in the Department's work plan to attain balanced rental market legislation. The Government's aim for the review is to ensure the Act strikes the right balance between tenants' need for affordable and stable rental housing and landlords' need to manage their properties efficiently and effectively.