TThe only thing more predictable than rising house prices is the tenor of the stories as monthly data is reported from governments or the real estate sector. Record highs in particular places, trend predictions from economists. Or, the young couple who managed to “climb the ladder of the house”, but when reading realizes that it was with the financial help of the parents.
However, behind these articles a much broader housing story has gradually developed. A tale of enormous and growing inequality. The way that a government policy designed to respond to the global pandemic and fear of economic recession has not only created significant wealth, but has distributed it in such a concentrated way that it will change the nature of Aotearoa New Zealand for generations. to come.
Our story begins in January 2020 when coronavirus fears began to surface. Political attention quickly turned to the deteriorating economic outlook and cheap money was pumped into the economy through lower interest rates and quantitative easing. At the time, the Reserve Bank warned Grant Robertson, the finance minister, that this policy may increase wealth inequality by increasing asset prices. And, when uncertainty scoffed at many predictions, that particular advice turned out to be spot on, if more than a little understated.
At the end of January 2020 Median house price in New Zealand was $ 612,000. By August 2021 it was $ 850,000. Prices have risen 25% in the last 12 months alone. All during a pandemic that disrupted economic activity and confidence. And all consolidated on top of recent record price increases.
Figures from the Banco de Reserva del total value of the housing stock help translate this gain into a national image of wealth. In December 2019, the total value of the home stock was $ 1.188 billion. The most recent figures are from March 2021, revealing that since the pandemic struck, total home values had risen by $ 324 billion. For the frequently mentioned “5 million team” alongside Covid-19, this equates to about $ 65,000 each. But that windfall is not shared equally among players, and to understand its effect on inequality, we need to look at who owns those assets.
People of European ethnicity are much more likely (58%) to be owner of his own house or keep it in a family trust than ethnic Maori (31%) or peaceful (21%). This figure is also influenced by demographics, since the average age of those who identify with the European ethnic group is 41 years, while the Maori and the Pacific peoples are 25 and 23 years old respectively. Unsurprisingly, homeownership rates tend to increase with age. For instance, about 78% of those between 70 and 74 years old own their own home, while around 21% of those between 25 and 29 years old do. People with a partner are also much more likely (68%) to own their own home than those without a partner (29%).
Inequality also includes how housing provides capital for future speculative investments. The number of properties held by investors. almost tripled between 1986 and 2018 and the share of equity in owner-occupied homes and land is at its highest point. The median value of the property is now 7.9 times the average annual household income, the largest disparity on record, and more evidence of how wages have very little to do with house prices, which has become more related to assets owned and access to finance.
As expected, with the financialization of housing we have also seen an increase in tenants. In 1991, 23% of rented homesIn 2018, more than a third of households did not own their home. But again, this large number masks a significant difference. For example, the proportion of Increase in Maori living in rental accommodation from 41% to 77% between 1986 and 2013.
While government policy has been valuable in maintaining employment and avoiding a recession, an added boost for homeowners is that it also ensures that tenants have the income to help pay off their investment asset loans. But like rental homes too pay a higher proportion of their income on housing than owner-occupants, and median income increased 8% in the last year alone, they are further away from homeownership than ever.
It should be noted that there are regional variations and nuances in this data that are difficult to discuss in a short article. For example, home ownership peaked in the 1990s and has consistently fallen since then. for all age groups and all ethnicities. But it has fallen much less for some than for others. While the issues can be explained by the increase in investor ownership and properties held in family trusts, it opens up more questions about who is most likely to speculate on the home or have interests in those trusts.
The response to the pandemic created national wealth and national debt. But it exacerbated inequality by giving the first to homeowners, older generations and home investors, and sharing the second with everyone. The situation becomes even more remarkable as it happened under a Labor government with a leader who has campaigned for justice and fairness. For the “5 million team,” it is clear that some players have been rewarded very differently than others.
This distribution is a particular problem in a country with a legacy of settler colonialism. One of the questions for economic historians is whether, hidden behind the masking language of “averages,” “medians,” and “percentages,” we may have quietly witnessed one of the largest increases in inequality for indigenous populations in generations.
To compound this situation, just before the pandemic hit Prime Minister Jacinda Ardern. discarded a capital gains tax under his leadership. Therefore, this wealth, and the unequal opportunities and inequalities it brings, will be embedded in asset inheritances for decades to come.
So what happens now with a Labor government that speaks frequently about social justice? Housing supply is part of the answer, as is increased rights for tenants, but how can you even come close to tackling inequality based on inflated financial assets without reopening a debate on land-related taxes, wealth or capital gains?
While we can now begin to piece together the story of how responding to one crisis has helped create another, the key question is whether this rapidly increasing inequality will become an equally worthy of urgent political attention.