Renters Are Feeling Richer

Finding a private rental property these days is very difficult. Landlords can pick and choose their tenants, and if you don’t have perfect references, a perfect credit history and a healthy bank balance, you may struggle to find anywhere to live. If you are prepared to live in a substandard house, you are probably also out of luck, because it is now illegal for a landlord to rent out a substandard house. If you are looking for a state house, good luck with that. There are approximately 12,000 applicants on the waiting list for state housing these days. The government has created an almost perfect situation… for landlords with good quality rentals, who can charge record rents.

I have heard stories of rental properties in Blenheim with 80 applicants… and even in the small town on the West Coast where I am at the moment, there are 3 rentals available. All carry very high rents, and one is only available for a few months, until the Air BnB season starts.

Things are just peachy for renters, eh?

New data from the Government showing it’s becoming more affordable to rent and buy houses has met with incredulity from economists.

The Government’s Housing Affordability Measure (HAM) was released on Wednesday.

It includes two measures.

The first is the proportion of renting households who would have to spend more than 30 per cent of their income on housing costs if they bought a lower-quartile home in their area.

HAM… ha ha ha… well, they have made a right pig’s ear of this.

A lower-quartile home is one that is cheaper than 75 per cent of other properties in that region.

The second measure looks at the proportion of renting households who spend more than 30 per cent of their income on housing costs, based on their income and the rent in their current home.
Income is based on a 2013 Household Economic Survey, but adjusted for inflation over time. Data from Inland Revenue and the Ministry of Social Development is used.
Its conclusions may be a surprise for some with first-hand experience in the market.

Stats NZ data released in June showed rents rising at twice the rate of general inflation and lifting 3.4 per cent in the year to May.  The cost of new rental properties was up 3.9 per cent.
Meanwhile, wage inflation is running at a rate of 2 per cent. Ouch, right?
HAM says not.
Its index shows renting affordability improving by 4.2 per cent in the year to December 2018 – and, in fact, being the most affordable it had been at any point since the start of the data in 2003.

So I was chatting with someone in this West Coast town the other day, whose rented home is up for sale, and she expects her rents will almost double… that is, if she can find somewhere to live at all.

Yep. Rents are the most affordable they have been since 2003.

Infometrics chief forecaster Gareth Kiernan said the suggestion that nationwide rental affordability was the best it had been in 16 years was “implausible”.
“I find that hard to believe given what we know about rental inflation and incomes.”
Economist Shamubeel Eaqub agreed.


“It’s getting harder. For the typical household, they are spending more of their income on rent. I don’t understand how their figures match up with the other data we are seeing. For example their median income estimate for renters increased by 10 per cent in 2017 and 5.4 per cent in 2018. I don’t know the data sources and doesn’t seem to reflect what we are seeing in wages.”

The thing that this HAM fisted report does not take into account is demand and supply. What they are saying is that rentals SHOULD be getting cheaper now, but they are not. There are many reasons for that, but the main one is that government policy is driving landlords out of the market in droves. First time buyers are taking up the slack, which is a really good thing, but that doesn’t mean the housing crisis is at an end. The continued high levels of immigration stop that from happening.

“The HAM is an experimental Tier 1 statistic which is still under development and subject to change, so we’re mindful about the results. This data may not reflect what different people are experiencing in the housing and rental markets. We’ve still more work to do to improve and understand what it tells us. The measure does confirm what most New Zealanders already know, housing is unaffordable.”

RNZ.


It’s great though, isn’t it? They used to say there are lies, damned lies and statistics. Now there are lies, damned lies, statistics and government statistics… with a little bit of pork scratchings thrown in.

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