Friday 27th of January 2012

So how unaffordable are houses in New Zealand at the moment? If you are like me you will have seen and read heaps about how steep house prices are in New Zealand.

At the end of last year we had The Economist on the topic, since then there have been reports from Massey University and Demographia.

It's hard to argue with the results of these surveys. But it is much harder to find a solution.

Earlier this week Radio New Zealand invited me onto The Panel , Jim Mora's afternoon show on National Radio to talk about the subject.

Panellist Gary McCormack was particularly hot on the subject suggesting if we can't bring house prices down then democracy is stuffed. One answer , he suggested, was to make land more readily available for building on.

If it was only so easy.

What people seem to forget about this argument is that house prices are governed by many factors. Home loan rates, immigration, building costs, land cost, supply and demand and so the list goes on. While there are all these factors their interaction with each other is complex.

Really there is neither a simple answer nor a straightforward solution to this problem.

You can't, and no government would dare, make a bunch of changes which would drive house prices down just so they were affordable for the small group of people (relatively) wanting to get onto the property ladder.

Housing still remains our biggest financial asset. To make changes like that would wipe billions of dollars off the wealth of New Zealanders.

When you look at the housing market it is clear the bottom of the cycle has been reached. That means there is only one direction that it is likely to head. Upwards.

The reality is that property isn't going to get more "affordable".

Instead of looking at all these surveys and complaining that you can't afford a house. Look at it like this.

Houses are now more affordable than they were in the past four years.