Copeland Gordon: General Debates 
Copeland Gordon: General Debates 
[Volume:611;Page:8352] 
GORDON COPELAND (United Future) 
: 
 I want to take the opportunity afforded to me by this debate to talk about an emerging issue of great significance to the future prosperity of New Zealand families. I am referring to the reality that first-home buyers are increasingly being shut out of the New Zealand housing market. Almost daily at the moment our newspapers are filled with news of the housing boom and the press writes it up as though it were some kind of magical road to wealth for all New Zealanders. Yesterday for example we were advised that the average Kiwi household is now $13400 richer than it was a year ago because of the booming house prices but we are yet to see any in-depth analysis of the negative consequences—the flipside if one likes—of that reality. 
Statements that average household wealth is increasing overlook the reality that when it comes to homeownership we are now seeing our nation divided between the haves and the have-nots on an intergenerational basis. I can give members a figure just released. In the 10 years between 1991 and 2001 the number of homes owned and occupied in New Zealand increased by 20000 but the number of rented homes in New Zealand during the same 10-year period increased by 111000. That bears out my contention that an increasing number of New Zealanders are being consigned to the long-term rental of properties. On the one hand we have people in their 50s and 60s buying up their third or fourth investment properties whilst on the other hand an increasing number of first-home buyers are being shut out and consigned to long-term rental of homes owned by other people. 
I want to spend a moment looking at what that means for those young first-home buyers on whom the future of our society so fundamentally depends. A recent ASB Bank survey showed that at existing housing prices a 20 percent deposit which is normally required for a new home is now equal on average to two and a half times the average annual salary of New Zealanders. This is but one indicator that more and more New Zealanders are finding homeownership completely beyond their reach. Those young families who are able to scrape together a deposit for their first home are then faced with the stress of endeavouring to service a huge mortgage which greatly reduces their ability to meet their day-to-day living costs and to raise the kids. Never before during my lifetime have I seen so many young couples so heavily indebted. It concerns me that this is putting an intolerable financial stress on the very group in our society who most need our support—if only because they are doing the most important work that any of us can do; namely raising the beautiful children of our next generation. Faced with those realities Governments should not stand idly by. 
A Labour-led Government with its traditions of opting to offer a helping hand to the have-nots rather than to the haves should be prepared to grapple with this issue. We need to begin with some rigorous analysis concerning the factors that have led to this situation. I can identify a number of those factors. Firstly New Zealand interest rates are presently the highest in the developed world at about 5.25 percent but they are low in relation to the rates that New Zealanders have become used to paying since the reforms of the 1980s. This combination of circumstances readily enables banks to attract a flood of funds from overseas sources for on-lending to Kiwis. Banks make money only if they can lend and therefore have the strongest possible incentives to go right on making money while the opportunity exists to do so. They used to lend up to 80 percent of the amount for a house but now the banks are prepared to go up to 95 percent and sometimes higher placing the borrowers in a vulnerable position. It then only takes a redundancy or a job loss to mean that many of those households will be unable to keep up with the servicing of their debts. It places real stress on marriages even leading in some circumstances to separation. 
Secondly investment in residential rental property has never been more popular. I have already told members that it increased by 111000 in the 10-year period to 2001 and it is continuing to increase to this day. That is because of the favourable tax treatment that applies to those investments. However the popularity such investments enjoyed during the 1980s and 1990s has now been influenced by a new factor. I refer to the fact that company equities and fixed interest returns have dropped markedly in the last couple of years.