The final quarter of 2019 in review

Forecasting errors put housing shortfall far below expectations

Calculations based on the latest census results released by Stats NZ in September 2019 suggest that New Zealand’s housing shortfall is far smaller than expected.

Stats NZ had previously forecast that New Zealand’s population would grow by 643,500 between 2013 and 2018. The actual increase was only 457,500, or 186,000 fewer than forecast.

Assuming an average of 2.7 people per dwelling, the forecast and actual population increases translate into demand for 238,000 and 169,000 homes respectively.

Over the 5 years to June 2018, the Government issued 120,000 consents. Based on the latest population figures, this puts New Zealand’s housing shortfall at just 49,000 homes, or 41.5% of the original estimate of 118,000 homes.

In Auckland, the country’s most populous city, the actual population was 1,571,718, or 124,000 fewer than forecast. Assuming an average of 2.9 people per dwelling, housing demand was 54,000 homes. Auckland issued 41,000 consents over the 5 years to June 2018, bringing the actual housing shortfall down from the previously forecast 56,000 homes to 13,000: a sudden reduction of nearly 8 tenths.

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New Zealand ranks as the world’s fifth-wealthiest country

Credit Suisse’s latest Global Wealth Report shows, New Zealand has become the world’s fifth-wealthiest country.

Over the 12 months to mid-2019, New Zealand’s total wealth increased by 4.2%, average wealth per adult rose by 3.1%, reaching NZ$304,120.

New Zealand ranks fifth globally for wealth per person, behind only Switzerland, Hong Kong, the United States and Australia. The report says, partly because of rising house prices, New Zealand households’ property assets grew faster than their financial assets.

Over the 12 months to mid-2019, property accounted for 47% of total household wealth. Meanwhile, since 2008, New Zealand household debt has declined in relative terms, now averaging US$43,240, equivalent to 12.4% of total wealth.

Compared with other high-income countries, New Zealand’s wealth is also distributed relatively equitably, with below-average wealth inequality. Globally,1% of people hold 45% of the world’s wealth; the wealthiest 1% of New Zealanders hold 19% of the country’s wealth.

New Zealand ranks as the world’s fifth-wealthiest country

Credit Suisse’s latest Global Wealth Report shows, New Zealand has become the world’s fifth-wealthiest country.

Over the 12 months to mid-2019, New Zealand’s total wealth increased by 4.2%, average wealth per adult rose by 3.1%, reaching NZ$304,120.

New Zealand ranks fifth globally for wealth per person, behind only Switzerland, Hong Kong, the United States and Australia.

The report says, partly because of rising house prices, New Zealand households’ property assets grew faster than their financial assets.

Over the 12 months to mid-2019, property accounted for 47% of total household wealth.

Meanwhile, since 2008, New Zealand household debt has declined in relative terms, now averaging US$43,240, equivalent to 12.4% of total wealth.

Compared with other high-income countries, New Zealand’s wealth is also distributed relatively equitably, with below-average wealth inequality. Globally,1% of people hold 45% of the world’s wealth; the wealthiest 1% of New Zealanders hold 19% of the country’s wealth.

Over the next 10 years, urban infrastructure budget rises to 138,000,000,000

The latest Infometrics Infrastructure Pipeline Profile, released in November 2019, shows, New Zealand plans to invest NZ$138,000,000,000 in infrastructure over the next 10 years.

This budget is approximately NZ$9,000,000,000 higher than the estimate made in September 2018.

The report shows, the main reason for the increase in the national urban infrastructure budget is a substantial rise in planned rail infrastructure spending.

KiwiRail’s funding budget indicates, that between 2020 and 2023 alone, rail infrastructure spending is expected to reach NZ$2,300,000,000.

Over the full decade from 2019 to 2028, total rail spending will reach NZ$7,400,000,000.

This makes it clear, that prioritising rail transport, and improving overall urban transport capacity will be the Government’s foremost urban infrastructure priorities over the coming years.

Further changes to the Residential Tenancies Act

On 17 November 2019, Associate Housing Minister Kris Faafoi announced further changes to the Residential Tenancies Act (RTA), saying they were intended to make New Zealand’s rental market fairer and more secure.
The changes include limiting rent increases to once every 12 months.

Rental bidding will be banned, preventing landlords from selecting tenants through competitive rent bidding.

Landlords’ right to end fixed-term tenancy agreements without a reason will be removed, if a property is to be sold, tenants must receive 90 days’ notice, if the landlord or a relative intends to move in, 63 days’ notice will be required.

Tenants will be allowed to install minor fixtures in their rental homes: they may add small fittings, such as brackets securing furniture against earthquakes, visual fire alarms and doorbells, to make rental properties safer and more liveable.

Stronger penalties: exemplary damages for existing offences under the Residential Tenancies Act may increase by up to 80%, for cases heard by the Tenancy Tribunal, the maximum award will rise from NZ$50,000 to NZ$100,000.

If a complainant successfully brings a case before the Tenancy Tribunal, their identity will be suppressed by default. Kris Faafoi said, as more people rent their homes, the law should give responsible tenants greater security of tenure and less frequent rent increases, helping them put down roots in their communities.

It is understood, the bill will be introduced to Parliament in the first half of 2020.

Could nearly nine in ten apartment and office buildings have quality problems?

Wellington concrete testing company Concrete Structure Investigations claims that over the past three or four years, it has inspected more than 1200 buildings in Auckland, Wellington, Hamilton and other locations, finding defects or problems in critical structural components in more than nine in ten, or about 1100 buildings.

It is understood, most of the affected buildings were constructed in the 80s of the last century, although a small number are still under construction, spanning apartments, offices and public buildings.

Although the company has identified the affected buildings, legal requirements, prevent it from disclosing their names and addresses.

An industry insider said, this situation is actually quite common. Even when testing companies identify problems, the parties involved generally avoid court, resolving matters through negotiation, so cases rarely become public.

An Auckland engineer also confirmed, that among the buildings he had inspected since 2003, more than half had serious problems with structural components, and most had been built by medium-sized or even large construction companies.

New Zealand’s Ministry of Business, Innovation and Employment (MBIE) has received a copy of the testing company’s report, and requested further information, including evidence substantiating its contents.

Surplus turns to deficit, Government plans to borrow for infrastructure

The Treasury’s Half-Yearly Economic and Fiscal Update (HYEFU), released in December 2019, shows, that in the financial year ending June 2020, the Government will face a deficit of NZ$900,000,000, compared with a previously forecast surplus of NZ$1,300,000,000.

The report says New Zealand’s economic growth is slowing,2019/2020 financial year GDP growth has been revised from 3% to 2.2%, also affecting government revenue, therefore, in the financial year ending next June, the Government is expected to face a deficit of NZ$900,000,000.

To stimulate the economy, the Government plans to invest NZ$12,000,000,000 in infrastructure, of which NZ$6,800,000,000 will go towards roads, rail and related construction, although specific investment projects have yet to be announced.

Mortgage rates and the official cash rate (OCR) are currently at record lows, which will stimulate house price growth and household spending; meanwhile, they also make it easier for the Government to borrow heavily for infrastructure investment.

By 2021, economic growth is expected to return to a more stable level, with GDP growth recovering to 2.8%.

The large-scale borrowing plan has slightly breached the Government’s own Budget Responsibility Rules: by 2022, government debt will reach 21.5% of GDP, whereas the previous plan was to keep it below 20%.

However, Prime Minister Jacinda Ardern said, New Zealand’s current debt levels and borrowing costs are both low, making this a good time to borrow to invest in the future.

Regarding the possible deficit next year, she said, it was largely influenced by forecast factors including the global economy and capital contributions to ACC.

Colliers International: housing market optimism to rise sharply in 2020

Global commercial property services firm Colliers International conducted its latest residential property market outlook survey in December 2019, with 4518 participants, the results showed a wave of optimism sweeping New Zealand, with respondents’ expectations for median house prices in 2020 rising substantially.

41% of respondents expected median house prices to rise over the next 12 months, up from 18% in the September quarter survey of 2019.

For the first time since the September quarter of 2017, all 13 regions recorded a net increase.

Queenstown ranked first with a net increase of 63%, followed by Tauranga/Mt Maunganui with 55%.

After a relatively subdued year, respondents were more optimistic about Auckland’s outlook, pushing it into third place.

Expectations for median house prices in Auckland reached a net positive 49%, a substantial increase from the previous quarter’s net positive 6%.

Alongside Auckland’s soaring house prices, since the previous survey, expectations for median house prices in Rotorua, New Plymouth, Palmerston North, Christchurch and Dunedin have almost doubled.

Asked what would have the greatest positive effect on the market in 2020, the most common answer was low interest rates, followed by a change of government.

Asked what would have the greatest negative effect on the market in 2020, the most common answer was election uncertainty, followed by global uncertainty.

Minimum wage to rise again

On 18 December 2019, Workplace Relations and Safety Minister Ian Less-Galloway announced, that from 1 April 2020, New Zealand’s minimum wage would rise to NZ$18.9 an hour, an increase of NZ$1.2 on the previous minimum hourly rate, meaning a full-time employee working 40 hours a week on the minimum wage, would receive an additional NZ$48.

An estimated 250,000 employees will benefit from the increase.

With this announcement, the Labour Government has raised the minimum wage for three consecutive years: on 1 April 2018, it rose from NZ$15.75 to NZ$16.5; on 1 April 2019, it rose to NZ$17.7; on 1 April 2020, it will rise to NZ$18.9.

Less-Galloway said, the Government aimed to achieve a minimum hourly wage of NZ$20 in 2021, and this adjustment was another step towards that goal.

He also predicted, the expected additional 306,000,000 in annual wage spending resulting from the increase would significantly boost consumption, stimulating regional economies.

At the same time, salary thresholds for skilled migration and skilled work visas are adjusted annually against New Zealand’s median wage, so just a day later, Immigration New Zealand announced a 2% increase in salary requirements for skilled work visas and skilled migration, bringing the minimum annual salary to NZ$53040 based on a 40-hour working week.

The new policy will take effect on 24 February 2020, ahead of the minimum wage adjustment.

Is Auckland Airport the ultimate destination for Hamilton’s train service?

Travelling by train between Hamilton and Auckland, two major North Island cities, is finally about to become a reality. Scheduled to begin operating in mid-2020, the commuter train will have 4 carriages, carrying 150 passengers per trip, with two services each morning and afternoon.

It is expected to make commuting between the cities more convenient for residents.

The train is scheduled to stop at Rotokauri station near The Base shopping centre in Hamilton, Huntly station and Papakura station in Auckland.

It is understood, Hamilton City Council is also investigating the feasibility of extending the service to the Puhinui transport interchange under construction in Auckland’s Manukau area, where passengers could connect with local trains or buses to Auckland Airport.

Hamilton councillor Dave Macpherson said: “As well as providing a connection to the airport, Puhinui is 6 stops further into Auckland’s rail network than Papakura.

It would be an interchange, serving not only the airport, but also Manukau shopping centre.

When we surveyed people about rail use, an airport connection was the second most popular request.”