“It’s called running the country”, said a sulking Paul Henry on television one morning many years ago. He was defending one of the seemingly endless set of proposed Auckland renovations(highways, light rail, take your pick) that Central government was being forced to consider forking out for. He made this statement, of course, at a time before he fled Auckland because it didn’t pay him enough, and then subsequently fled back again after realising that Auckland doesn’t really prepare you all that well for broadcasting in the rest of the world(even if that world is Australia).
I thought about Henry’s little rant a couple of days ago when I took a peek at New Zealand’s largest toilet cubicle wall(more commonly referred to as the ‘New Zealand Herald‘). Seriously, if you want to get an idea of what people are graffiting on the inside walls of the nation’s public toilets this morning, just buy a copy. And that morning it appeared that as people were taking their morning ablutions, they were getting really really angry about house prices.
Having gotten bored (temporarily, I assure you) with the idea of begging for a light rail system, the Herald seems to have found out that the same arguments for light rail also apply to a need for cheaper housing. More houses were needed, as the vital next step in Auckland’s Icarus-like quest to become ‘world class’. Gone are all the NZ Herald stories about how there are hardly any train stations in Kingsland, in its place are a whole lot of stories about how anonymous young couple XYZ can’t buy a house in Kingsland despite being white and reasonably good looking. The most amusing of which was one non-story about how international students are buying apartments, headlined ‘Foreign buyers snap up Auckland flats‘ the story really should have been titled: ‘Chinese student buys flat in the CBD and decides to study accounting’.
Well, here’s the rub: why should I care? In fact, why should anyone else in the country care? Sure, house prices are going up everywhere, and especially in Auckland, but surely the Auckland situation is largely Auckland’s fault. And if we shouldn’t care, then this is surely a bit of a ridiculous thing to fill your national broadsheet with.
I say it’s Auckland’s fault because a lot of these house prices don’t actually seem that bad. Considering that a large city is supposed to have high-density housing, the fact that a lot of very ordinary people are still able to buy three-four bedroom houses in the central Auckland area, is surely a sign that Auckland’s property prices aren’t all that bad compared to other large cities around the world. And if these people could be satisfied with one or two-bedroom apartments – like others elsewhere around the world – then they’d find prices even more reasonable still.
Of course, that doesn’t tell the whole story. Auckland’s average house prices are massively out-of-kilter with peoples incomes. This is a problem, but there is surely only one thing for that: restrict banks from making loans to people buying property in Auckland(and in other overheated regional property markets). The only reason people can afford house prices far above their income levels is because banks are willing to lend these amounts to them. Tighten the deposit:loan ratio and prices will drop overnight. This is effectively what happened – albeit in a less than voluntary way – in the overheated property markets of Spain and Britain during the financial crisis. People couldn’t borrow to pay for the inflated costs of property, so those property prices dropped.
Ah, but what about the Chinese you say? Won’t these dreaded quasi-communists continue their Cold War revenge by buying up property at over-inflated prices? Well, for starters, international property investors may be more likely to pay above-market prices, but they are unlikely to be the entire property market. They might be able to nudge property prices higher, but the biggest market for sellers will still remain permanent New Zealand residents for the foreseeable future.
And yes, I’m sure disregarding the RMA, buying up every rural area around Auckland, then building several hundred thousand four-bedroom houses would also be a solution. But it would also be another set of resource-draining housing developments, another sprawling of Auckland’s urban sprawl, not to mention the fact that every other New Zealand taxpayer would have to pay for it(at least initially). And if it happened, then I can almost guarantee you that in ten years we’d be seeing a geriatric Paul Henry on television screens again, defending the construction of a set of highways and rail stations in the Auckland suburb of Huntly as just another cost of Auckland running the country.