Housing Shortage

Housing Shortage

The Big Shortage: all about housing stock

It’s a basic rule of economics. Price is a matter of supply and demand. It’s no wonder first home buyers have been watching the housing shortage with increasing angst.

The good news is there’s increasing evidence that the shortage isn’t as stark as it might feel. The ratio of homes to the overall population is actually pretty close to where it was in the 1990s. So what gives?

Populations are skyrocketing in certain high-demand areas, like Auckland, Wellington and Tauranga. We’re just not building houses fast enough to keep up. What’s that tired real estate saying about location again?

Ask anyone house-hunting in these hotspots and they’ll probably complain of property viewings overrun with dozens of people all vying for the same house, or settling on a far longer commute than they ever expected.

House prices even felt the effects of the Canterbury earthquakes, reflecting the homes that were taken off the market due to earthquake damage. In short, there’s probably little way out of this than increasing housing stock.

What’s holding up the new homes? For a start, it’s expensive. In this country it’s estimated we’re paying up to 30% more for building materials than our counterparts across the Tasman.

As a small country, we’re completely at the mercy of supply hiccups and changing regulations in other countries, with lockdowns and labour shortages caused by the pandemic wreaking havoc on shipping times.

For obvious reasons, the pandemic has also stemmed the supply of skilled workers on the jobsite without an international community of permanent and temporary professionals to draw from. All of this not only slows down the building process but makes it difficult to predict.

And that’s bad news for building companies. The longer they hold onto a contract, the longer they’re exposed to market fluctuations. As a result we might see off-plan prices rise and some companies might reduce or stop operations.

Depending on how flexible your career is, you might be able to get your family to an area immune to the angst and competition of the big centres. One great thing that’s come out of the pandemic is many companies are much more open to employees working from home.

But no matter where you’re based, none of this means you should give up your dream of buying your own home. Prices are the result of a balancing act. As long as demand outstrips supply, prices will remain high, but population growth can’t continue at the current rate forever, and new homes are appearing on the market, however slowly.

Plus, there’s a long list of tactics you might not have thought of to get yourself into your home sooner rather than later.

Eventually, it will come into an equilibrium and prices will reflect it. In the meantime, talk to us and see what strategies the Lending Room can put in place for you.

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