Houses are now less affordable to buy in the Queenstown Lakes district than in most of Auckland, and only a whisker more affordable than in the country’s most unaffordable area — North Shore. As the number of million-dollar house sales in Queenstown Lakes spirals, Tracey Roxburgh asks what ordinary folk are to do.
But, at present interest rates, in many cases it is now cheaper to own a home in Queenstown than rent one.
The latest median multiples, the marker of housing affordability which works out the ratio between the median house price and median annual income in an area, show Queenstown Lakes is even less affordable now than Auckland.
The only place less affordable, according to interest.co.nz website is the Auckland region of North Shore.
As a whole, housing in metropolitan Auckland, with a multiple of 9.45, is more affordable than in Queenstown, at 10.18.A multiple of 3.0 or less is seen as a good marker of housing affordability.
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Invercargill is the only affordable place in New Zealand, based on its median multiple of 2.73. Dunedin is slightly less affordable, at 4.47.
Harcourts’ latest Queenstown Lakes market report shows there were 130 property sales over $1million in the area in the six months to June, compared with 55 in the corresponding period last year.
The Queenstown Lakes’ median household income for August was $78,219, compared with the median house price of $796,000.The situation is a seller’s dream, and a first home buyer’s worst nightmare.
Many may be forced to pay more in rent than they would a mortgage, had they bought a section and built at home at, for example, Shotover Country, within the last two years.
Mortgage advisers suggest that means many first-home buyers have essentially been locked out of the market in Queenstown.
Roost mortgage adviser Toby Stanley said a variety of approaches had been suggested but all had issues. Introducing a debt-to-income ratio, for example, had been flagged as a possible measure to help with the rapidly rising prices, but it could disproportionately impact first-home buyers.
It was already used in the United Kingdom, where most buyers were unable to get a mortgage higher than 4.5 times their annual earnings.
In Queenstown, based on the district’s median income of $78,219 in August, potential lending would be $351,985.
"That rules them out," Mr Stanley said.
"That same family then has to rent a property in Shotover Country for $750 or $800 a week, which is going to be one full-time income for one of those partners.
"Suddenly, houses become less affordable and, on the flip side, you’ve got investors that may not be affected to the same degree because they have more capacity and they are able to keep buying these investment properties, so it is this vicious cycle."
Anecdotally, the majority of buyers are investors from elsewhere in New Zealand or overseas, keen to capitalise on the high rental returns in the district.
"I suggest it’s probably Auckland investors coming down and picking up investments with their 20% deposits when they need 30% in Auckland."
When it comes to rental properties, particularly those that are affordable, they are few and far between.
Housemart director Hayley Stevenson, who has worked in rental property in Queenstown for more than 20 years, said it was not the first time the resort had faced high property prices and a lack of affordable rental properties, but she
saw no end to this cycle on the immediate horizon.
"There’s so much growth out there at the moment with development that I can see the demand’s going to be there for quite a while."
That could lead to residents relocating.
"People start to drop away. Companies can’t get staff, so they start to scale back."
Investors might then look at Queenstown as a less attractive destination and, ultimately, that had the potential of impacting the rental market again.
"Some people actually do need to make that choice [to leave] but, this is the catch-22.
"We need all walks of life to keep this town running and they are the reason why the town’s got a bit of life and soul, because we wander down the street and it is clean and you can get great service at the cafes and hotel rooms are clean and it’s a very, very important part of keeping Queenstown ticking over."
For a couple, both working full-time, rent of up to $760 a week for a four-bedroom house is possibly achievable.But there are others for whom the need is great and the options few.
Couples on low wages were paying more than $600 rent in Queenstown a week, Happiness House co-ordinator Niki Mason said.
"The only way they’re managing is to rent out a room, which is probably not on their rent agreement, but it’s just having to manage ... having other people in your house, too, that causes stress and anxiety."
Some Queenstown parents were working two jobs to make ends meet, covering basic expenses like rent, groceries and petrol.
The money was not there for unexpected expenses, such as medical bills, car repairs or school trips, she said.
"That’s what I feel really sad about."
She had noticed an increase in housing-related anxiety over the last year.
Renters, especially, worried about the long-term security, as landlords returned to Queenstown or spruced up their houses to enable them to hike rents.
"There’s a lot of relationship breakdown and anxiety — and that anxiety goes down to the kids and the school system and their learning. It’s a bit of a vicious circle, really."
What is the answer?
Ms Mason suggests the owners of empty houses should pay for that privilege — "I think it should be a lot more than $2000 a year" — and the money be funnelled to the local housing trust.
"We all have to look after the community we live in. It does feel like we’re going down that Aspen path, where we have a soulless community."
The trickle-down effect of the investment boom particularly concerns employers.
According to a recent Queenstown of Chamber Commerce survey, 59% of respondents said a shortage of affordable accommodation was one of the major issues they faced when employing people and it meant, for some, hiring New Zealanders was "not ... a viable solution".
Chamber chief executive Ann Lockhart said employers were as keen as anyone to ease the pressure on Queenstown’s rental market.
The chamber had been helping some of the town’s larger employers get together with developers over the past few months to try to work out a way forward.
"About three" accommodation projects were progressing, including the Queenstown Lakes District Council’s apartment blocks in Gorge Rd, and it was hoped they would free up some properties for longer-term, more affordable rentals for families and permanent staff.
The impact of spiralling house prices on the resort’s economy, specifically its ability to retain qualified, experienced staff, for any reason related to accommodation, was a serious concern for a town where a ‘‘large majority’’ of the Chamber’s 640 members were paying "well above minimum wage" she said.
— Additional reporting David Williams
