As Auckland housing hysteria gets more, well, hysterical, there seem to be a few people worried that investors are leaving homes vacant rather than bothering to rent them out – preferring to rely on capital gains as a source of income instead.
Leaving aside the obvious question of why you wouldn’t rent them out as well as getting capital gains (after all, this can be made pretty hassle-free with a property manager, and helps to cover the ongoing costs of the property), there is some concern that this is a widespread phenomenon and contributes to a housing shortage in Auckland.
I’m assuming from Peter’s post the other day that we’re now happy to broaden our readers’ musical education as well as providing commentary and encouraging intelligent debate about transport issues (although my “Transport-Related Song of the Week” post series never really panned out), so here’s a topical song:
North and South recently ran an article on the apparent phenomenon, called “Running on Empty” (which is also a catchy number by NZ band The D4). It does suggest that much of the issue is at the suburb level, which I’ll leave for another post. It also notes that some vacancies will be due to Kiwis now living overseas, or splitting their time between multiple homes:
Keith Rankin, who teaches economics at Unitec, has been noticing this “hollowing out” of the city with concern. He says housing patterns are changing radically on the Auckland isthmus, with young homebuyers pushed to the fringes – priced out of the market by speculators playing for capital gains.
“What is happening in places like Mt Albert and Mt Eden, Grey Lynn and Herne Bay?” he wrote in a blog post. “These are places where houses are being bought at very high prices, by people who themselves do not plan to occupy them” – and want to buy and sell as if tenants are incidental.
[Andrew King, executive officer of the New Zealand Property Investors Federation] reckons a lot of empty houses are owned by executives who’ve been seconded overseas and don’t want to lose their foothold in the market or have strangers living in their home
[Mike Atkinson, managing director of Aspire Property Management]’s take on Auckland’s “ghost” properties? Wealthy owners who split their time between multiple homes. The father of one of his friends lives on a boat but keeps a two-bedroom apartment in the Viaduct as a city crash pad. Another businessman he knows owns five houses, including property in Auckland, Wanaka and Mangawhai Heads.
The most easily accessible source of data on vacant homes comes from the census. The 2013 census shows that, on census night, there were 33,360 unoccupied homes across Auckland. That sounds like a lot. Out of the 500,000-odd homes in Auckland, it’s 6.6%, which might still sound like a lot.
However, it’s almost unchanged from 2006, when there were 33,330 unoccupied homes, 7.0% of the total. And not much up from the 29,586 recorded in 2001, also 7.0% of the total. When I first saw these stats, I thought of them more as something indicating the current shortage of homes – i.e. housing is tighter, so more homes are being occupied.
When you look at these stats on a regional level, you see that Auckland has a smaller percentage of vacancies than any other region except Nelson:
Again, this made me wonder if Auckland’s low vacancy rate suggested a persistently tight housing market. But then I looked at the stats for New Zealand’s cities, leaving aside the more rural districts:
This suggests that Auckland is actually in a similar range to most NZ cities – but no one is suggesting that there’s a spate of Invercargill investors leaving homes vacant just so they can enjoy the capital gain. It’d be interesting to look at this data more closely: I’d like to look at different Auckland suburbs in another post, and maybe there is some truth to the claim that it’s a problem in some areas – then again, maybe Herne Bay homeowners are simply more likely to be away on holiday, or overseas contracts and so on.
At a city-wide level, though, I don’t think there’s much we can take out of this. I think it’s a myth that there are large numbers of people leaving homes vacant for speculative reasons, and I think the data in this post goes a long way to busting it. I also don’t see support for my original hypothesis that low vacancies in Auckland suggest a housing shortage. That doesn’t mean we don’t have a shortage, but the vacancy data doesn’t really tell us. Of course, since the census we’ve had two years of strong population growth and not built enough homes for all the new Aucklanders…