Housing Unaffordability

Sir Bob Jones

A major issue of the contemporary age, not just in New Zealand but also Australia and Britain, and to varying degrees elsewhere, is today’s unaffordability of house ownership.

To counteract that we’re seeing the creation of appalling Coronation Street-like, high density, small units: each clones of their neighbours.

For reasons unknown to me, my parents obtained one of our first state houses, this in 1938 in a street of mainly state houses, each sitting on a quarter acre section and all significantly different in design from their neighbours.

Today, now all privatised, those three-bedroom homes in a location known as Park Avenue fetch circa a million dollars and more.

So what’s different to explain the current unaffordability?

First are significant social changes. The average New Zealand family, excepting Māori and Islanders and some Asians, are much smaller than yesteryear.

Single occupant households, unknown when I was young, are now common-place. Add to that the world-wide gravitation to city living.

So why then are homes still unaffordable?

There are three basic costs in creating one.

First the land.

As I’ve repeatedly pointed out all property developers, with only one exception, ultimately go broke. The exceptions are development companies which are part of a larger, well-established other commercial activity.

Examples in New Zealand are the Todd family conglomerate and in Australia, MIRVAC, a public company.

Mirvac construct beautiful buildings but this year have incurred a massive loss on their property development division. But as part of a large business-owning conglomerate they can survive the bad years. Todds now apparently want out from this activity.

Our newspapers are constantly filled with stories of property developers going under across the country, as they always have done and always will.

Thus in seeking an explanation for the current home affordability, plainly the land component isn’t a factor as no land developer is getting rich but instead, inevitably is going broke.

The second component in home construction are materials. Thanks to technology and free trade, they’ve never been cheaper as a percentage cost component.

Finally, there’s the most significant cost in house building, specifically labour.

As a proportion of the current cost it’s never been higher, for which there’s a single very good reason, which no one seems to have sussed, so you will read it first here.

My company, with nearly 40 prime location office buildings in Wellington, Auckland and Glasgow (Britain’s largest office city outside of London), spends circa $30 million and more annually with builders, correcting architects’ design faults, tenancy fit-outs and the like.

Because such work can be a huge nuisance to existing tenants we’re sensitive to builders’ presence and have identified the problem. THAT IS THE SO-CALLED SMART PHONE.

Go on any building site anywhere and at best a very small minority of the workers will be actually working. The rest will be leaning against the wall gazing at or jabbing cell-phones.

We recently completed a fit-out for an embassy in one of my Wellington offices buildings. This comprised cutting the floor into about 10 rooms – nothing more. It’s taken longer than it took to build the Empire State building in 1931. In Dubai, it would be done inside two days.

I’ve frequently popped up when in Wellington there to see “progress”. Always, always, I see red-vested “workers” leaning against the wall bawling into or jabbing at cell-phones. This nonsense is not peculiar to the building industry.

In Paris I have a whole floor apartment opposite the prime minister’s palace. For that reason there’s permanently outside in the street, five or six very large, machine-gun toting gendarmes.

I emerge and they never look at me or indeed at anyone who comes along the street. Instead with no exceptions, they’re permanently gazing at their phones, from dawn to dusk.

So too with road-works. When I drive into Wellington I encounter, coming off the motorway along Murphy Street, in a sea of cones, the two lanes merging. There are 10 red-vested road workers to be seen, always all sitting about engaged with their phones. That’s been the case for about six months now.

A few years ago I made significant alterations and additions to my home.

Because it was my home I was anxious for it to be done speedily, so conscious of the key delay factor I made it a condition of no cell-phones on site. Some tenderers dropped out saying their employees would revolt.

The successful contractor however, got stuck in efficiently but while this was happening – one sunny morning about 7am I looked out of the kitchen window and saw emerging from his car an obese fellow who immediately leant against his vehicle and began babbling into his phone. Half an hour later he was still at it.

I found the boss in my library fitting the new bay windows and complained. He apologised and after investigating advised he was a subbie, there to do a particular half-hour job which is why he’d forgotten to tell him about the no-phone proviso.

The next morning the builder sought me out. The subbie experience had been a wake-up call for he advised me that the fellow had remained leaning against his car bawling into and jabbing at the bloody phone until after 3pm before he’d finally set to work.

So if the goal is to reduce new house prices then there’s a simple solution, namely massively reduce the all-important labour costs and ban bloody phones on building sites.

I don’t have a cell-phone as I’ve seen its damaging addiction effect everywhere and don’t wish to succumb.

This article was originally published by No Punches Pulled.