British style houses

December 10, 2013
A visit with a former resident

Economists Selena and Shamubeel Eaqub, renters and authors of Generation Rent.Economists Selena and Shamubeel Eaqub, renters and authors of Generation Rent.

High house prices are creating a class system in New Zealand that's frighteningly similar to that of Britain, economist couple Shamubeel and Selena Eaqub claim in their new book Generation Rent.

In fact, the pair dub property-owners as this country's "modern landed gentry" whose fortune in owning homes will be passed on to their children.

Though they don't use the term, in a country with property landed gentry, those unable to afford houses are clearly property peasants forever paying rents to the gentry, dependant on their goodwill not to be evicted.

Shamubeel has long been the lone voice of choosing to rent rather than buy high-priced housing, but in he and Selena seek to describe how house prices got so high, and the changes the country needs to make to create an adequate supply of new, fairly-priced housing.

"The trend since the early 1990s has increasingly pushed New Zealand towards a new class system, with house owners- a kind of modern-day landed gentry- at the apex, " they write.

"This is a serious and persistent attack on New Zealand's identity as an egalitarian society where social and economic success are open to all.

"In the future, it may be that only the children of home owners will be able to own homes, because few will otherwise have sufficient incomes to buy on their own.

"Such an inheritance-based class system goes against the grain of what New Zealand is supposed to aspire to: an equitable and egalitarian society."

If that sounds dramatic, it's meant to be, with the Eaqubs seeking to capture public attention in a similar way that happened when he dubbed some of our rural towns "zombie towns" to focus the spotlight on failing rural centres.

The yields being accepted by property investors indicate they expect house prices to rise at around 8 per cent a year forever, the pair write.

If that were to happen, the effects on home ownership levels would be devastating.

"If household incomes continue to rise at their historical rate of 3.5 per cent per year and house prices rise at the 8 per cent a year that investors expect, mortgage payments will be a staggering 80 per cent of a young couple's income by 2020 - and more than their annual income by 2031, " they say.

High house prices in cities are a result of many factors including banking regulations that have favoured mortgage lending and restricting the land on which homes may be built, but the housing problem was "eminently solvable", Shamubeel said.

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British style Garden Park in Tokyo
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