Understanding New Zealand’s decline in homeownership

© 2016 Informa UK Limited, trading as Taylor & Francis Group. Homeownership is an important component of the New Zealand lifestyle. In recent decades, however, the ownership rate has been declining and the reasons are poorly understood. This paper explains the decline using a decomposition technique that has been applied in other contexts. We find that borrowing constraints and ethnicity have been particularly important contributors to the decline. Rapidly rising house prices clearly have played a major role in the inability of income to keep up with prices and the increased impact of borrowing constraints. We also show that the increased down payment requirements imposed by the Reserve Bank of New Zealand in 2013 are unlikely to have affected the ownership rate