Positive Pacific developments: Papua New Guinea’s housing appetite

Good news can be difficult to find in Papua New Guinea. Since independence from Australia in 1975, reports of crime, corruption and poverty now seemingly tumble out of the South Pacific nation on a daily basis.

But a trickle of good news has emerged from a recent housing survey. With 2000 respondents, and considered the most comprehensive ever undertaken in PNG, the survey highlights positive trends for a growing economy – rental demand is high but demand to buy is higher; many Papua New Guineans are keen to put down deposits; the capital Port Moresby and other regional centres are the most popular places to buy; and purchasing power and financial literacy “are rapidly improving.”

Amid PNG’s positive appetite for housing, however, lingers the ongoing concern about housing costs and affordability. As anyone visiting PNG can attest, finding a place to stay or live at a reasonable price is near impossible. A few years ago, for example, I can recall two Australian volunteers in Port Moresby paying rent of $AUD1500 per week, which was considered ‘well below’ market rates.

What is driving such high costs? As the survey respondents correctly point out, the trend stems from “land tenure and the availability [of] freehold land.” Supply and demand, while not always clearly understood, is the iron law of economics in both the developed and developing world. When supply is constrained, costs increase, and when supply is relaxed, costs decrease.

The same principles apply in PNG, however as the respondents point out, the supply of land is limited by the country’s weak and confused property rights regime. Granted, on paper PNG’s legal system looks decent. The nation enjoys a broad institutional inheritance – a Westminster system of government – from former colonial administrator Australia. The formal legacy has been a system of ‘courts, clerks and contracts’ but, over the years, it has fused onto a brittle administrative regime and the ever-contested foundations of customary land tenure.

What is the issue with customary land? In broad terms, it muddies the waters on who owns what. I have heard accounts from my PNG family members, for example, of people purchasing property with a certificate of title, only to have a fellow countryman produce a competing and almost identical certificate a week later. Unsurprisingly, accounts like these provide little confidence to those wishing to purchase property.

PNG is not alone in having higher property prices. In economies around the world ‘freeing up’ housing supply is seen as the antidote to high real estate prices. In fact, it’s interesting to note that PNG’s current woes mimic the United States’ own housing shortage during and after World War Two. “Many Americans looking for an apartment,” as one account of this period reads, “had to spend weeks or months in an often vain search for a place to live, or else resorted to bribes to get landlords to move them to the top of waiting lists. Meanwhile, they doubled up with relatives, slept in garages or used other makeshift living arrangements.” Indeed, these circumstances strongly reflect contemporary life in Port Moresby and wider PNG.

Ultimately, these trends are positive for PNG. Increased demand for housing is what happens when more and more people have money in their pockets. Not only does wealth bring about a desire for property but it also has other beneficial outcomes, such as driving accountability of the political regime – the antioxidant to corruption. Certainly, good news is hard to find in PNG. But the housing survey is a promising place to start.

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