Dunedin’s unwelcome status as a city where housing is “severely unaffordable” has wide-ranging implications for both private home buyers and investors.
The release of the annual Demographia International Housing Affordability study this week showed that the cost of buying a house in Dunedin was now 6.1 times the average annual household income – earning it the severely unaffordable classification.
Housing affordability is a nationwide problem, Tauranga being the most unaffordable, at 9.1 times, followed by Auckland, at 9 times.
Otago Property Investors Association president Cliff Seque told The Star that there were many factors contributing to the high cost of housing, but that it was definitely having an impact on property investors and landlords.
A veteran campus landlord of 45 years, Mr Seque said he and other investors were taking a very cautious approach.
“As an investor, you do the sums and if it is not going to show you an adequate return, you don’t buy it.”
“Personally, I haven’t bought anything in five years, because I can’t make the figures stack up,” he said.
He was also seeing more long-term investors, who were finding the new regulatory environment difficult, selling off their properties, mainly to first-home buyers.
The rising cost of housing was a complex one, involving land, compliance costs, the time factors around consents, and also prohibitive construction costs.
“Fifteen years ago, I was building for about $500 per square metre and now the same thing costs nearly $2000,” Mr Seque said.
In addition, Dunedin had gone from a “no-growth” area to a medium growth area in recent years, putting extra pressure on existing housing.
Dunedin’s challenging housing needs, from the 650 families in need of social housing to the impact of real estate costs, are top-of-mind for the Mayor’s Taskforce for Housing.
In an interim report released in November, the taskforce acknowledged the “scale and complexity” of the issue and the need for local leadership and advocacy to central government.
Contacted by The Star and speaking as an individual, Mayor Taskforce for Housing chairman Cr Aaron Hawkins said housing affordability was “really important in terms of the wellbeing of our community, and in particular people’s ability to live full and active lives.”
“The relatively low cost of living was always one of Dunedin’s big drawcards, and so it should be of interest to us at a civic level if that is changing too rapidly,” Cr Hawkins said.
However, the price of things was only one half of the affordability question.
“What we don’t often talk about is people not having enough money, whether they’re working or not, and as a society we need to have a serious conversation about that side of the ledger,” he said.
The affordability of houses was measured by the council on an annual basis, as part of its reporting to the Ministry of the Environment on urban development capacity.
If there was not enough capacity to meet projected demand plus 20% in the medium term, council was required to lead on making more available, Cr Hawkins said.
He felt that the focus on land supply as being the answer could be “hugely inefficient” in terms of infrastructure.
The 2GP plan, both in terms of zoning and strategic directions, encouraged greater density in areas where there was adequate infrastructure, access to suburban centres and regular public transport.
“It’s more than having enough houses, though. It’s having the right kinds of houses, and making sure they’re affordable,” Cr Hawkins said.
“We know there’s going to be growing demand for one- and two-bedroom units, and if the market isn’t delivering that, we need to know why, so that can be addressed.
“Likewise, if the market can’t deliver more affordable options, then government needs to work with both public and private partners to develop local models that can.”