Housing crisis: Investors blamed for worsening housing affordability in small-town NZ

Housing investors unable to afford to buy in markets like Auckland are instead throwing their money into small towns - and making life miserable for locals, according to a new report.

House prices have skyrocketed in recent years, but especially so in small towns, shutting locals out of the market and forcing up rents, a new Salvation Army report has found

"House price increases in urban areas are pushing investors into smaller communities, and that has a social and economic impact on these small communities," Ana Ika, Salvation Army analyst and author of the group's fourth State of Our Communities report, told The AM Show on Wednesday.

"House prices have been rising, and that creates a lot of financial hardship for many of the locals… there are minimal employment opportunities so there's not a lot of space for locals to increase their incomes to match the housing costs."

While house prices in Auckland have gone up about 40 percent in the past five years - almost all of it in the past two - in Carterton it's risen 141 percent, from $280,980 in 2016 to $677,162. Carterton - near Wellington - was one of three small towns looked at in the report, along with Tokoroa in the south Waikato and Invercargill in Southland.

With the average cost of a property in Auckland now over $1 million and Wellington not far behind, it's not just first-home buyers looking outside of the main centres - investors hoping to make a buck are also turning to the provinces. 

Tokoroa's average price has gone up 130 percent in the last five years, and in Invercargill, 112 percent. 

Rents have gone up too. In Carterton they're now "on the edge of completely unaffordable", the report says, Invercargill's are up 50 percent, and in Tokoroa they've gone up so much it's actually cheaper to own a place - provided you can get a deposit together, difficult considering the town has an average household income barely half the national average. 

"Income levels in these small communities are a lot lower than the national average income, but rent is rising a lot faster," said Ika. "The rising levels of rent is really concerning not only across the country, but particularly for these small communities that have limited employment opportunities and lower wages."

The report said despite the rising prices, the homes on offer in Tokoroa are "cold, damp and run-down, with landlords unwilling to spend money upgrading them".

The lack of mental health services was also a common theme amongst locals the researchers spoke to, with growing problems thanks to worsening financial hardship as a result of the housing crisis.  

Locals were asked what they would do if they were Jacinda Ardern. In Tokoroa, the number one thing locals want is more "warm, quality and affordable houses", particularly for the homeless and seniors. 

In Carterton, they wanted more houses, including rentals, and controls on prices. 

Invercargill locals wanted "free and quality mental health/healthcare services" most of all, followed by "affordable, dry and warm" housing. 

"We are urging central Government, local government and local communities to work together to address these big challenges these small towns in New Zealand are facing," said Ika. 

The full report can be read on the Salvation Army's website