Bourassa, S. C., & Shi, S.
Demography Economic
Housing Studies, 32(5), 693-710
2017
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This paper investigates the critical issue of declining homeownership rates in New Zealand, a trend that significantly impacts the nation's social and economic fabric.
The authors employ a decomposition technique, commonly used in other studies, to analyse and explain the factors contributing to this decline. The paper identifies borrowing constraints and ethnicity as key factors influencing the decrease in homeownership rates. It argues that the rapid escalation in house prices has been a major barrier, as incomes have not proportionately increased, thereby intensifying the effects of borrowing constraints. As the authors outline, the analysis shows that a number of factors have contributed to the decline in the ownership rate, while some have offset that decline. The changes in household endowments that contributed the most to New Zealand’s declining ownership rate were: an increase in the Other ethnic category relative to Pakeha; an increase in borrowing constraints; increases in the proportion of immigrants; and reductions in the proportions of households with reference persons in the 25–29 and 30–34 age categories. Changes in the ethnic make-up of the population and increased immigration all contributed to the decline. On the other hand, the ageing of the population offset the ownership rate decline. The study also examines the role of policy changes, specifically the increased down payment requirements implemented by the Reserve Bank of New Zealand in 2013. The authors conclude that these changes have had a negligible impact on the overall homeownership rate.
