By Bernard Hickey
The Government is sticking to its current supply-led strategy for dealing with Auckland's housing unaffordability problems, despite yesterday's REINZ data showing a surprisingly strong bounce-back in prices and volumes in March after just 6 months of a slowdown from previous Government measures.
Prime Minister John Key and Finance Minister Bill English said in their first comments after the REINZ surprise that they would continue on with their push to increase housing supply, rather than take fresh demand-side efforts similar to those adopted in last year's Budget.
The measures developed in less than six weeks and announced in May last year included the two year bright line test to ensure property speculators paid tax on their capital gains and new disclosure rules for local and overseas rental property investors. They started from October 1 and were quickly followed up by the Reserve Bank's new rules limiting Auckland investors to 70% loan to value ratios from November 1. The announcements in May last year slowed the Auckland market from September to February, but the problems with housing supply being insufficient to match demand have fired up the market again.
Key said he believed the Government's strategy of building supply would work, "but you are battling the fact that Auckland is a very attractive place to live in."
"I think the strategy in the end will prove to be right," he told reporters in Wellington, pointing to a 'lag effect' from recent additions to supply.
Asked if it might constrain the Reserve Bank from lowering interest rates again, Key said: "That's not the indications from the Reserve Bank. He's (Graeme Wheeler) been aware of what's happening with house prices and he's lowered interest rates recently."
'Pressure on Auckland Council'
English also tried to highlight the positives, but also noted the Government's expectations of the Auckland Council on the Unitary Plan.
"We've got a lot of migration with Kiwis coming home and economic opportunity in Auckland, so it's good to see the demand," English said.
"We've been working with the Council, putting some pressure on to encourage them to expand supply faster and clearly we are still not going fast enough," he said.
"The demand measures were always going to have some impact. It's a bit hard to tell exactly how much, but we've always said the main issue here is getting more supply faster - so that means more consents faster, more building consents faster, getting new developments like Three Kings through the process and the Environment Court faster so we can get houses people can afford."
Asked if the Government needed to adopt more demand-side measures, he said: "I think we need more speed on supply. The government's cranking up its own supply, particularly through Crown land. The Council's made extensive efforts, it's still got more to do both for infrastructure and housing."
"We are working as hard as we can on the supply side and the primary responsibility for that lies with Auckland Council. We are very keen to see them understand and state clearly that they are going to accommodate as much supply as is required to eventually stabilise those prices," he said.
Slow start to Crown land programme
Labour Housing spokesman Phil Twyford said the REINZ figures showed the Government's bright line test had failed and he called on the Government to take more meaningful action.
"The Government must embark on a massive state-backed building programme to flood the market with affordable homes, ban offshore speculators from pushing prices beyond reach of Kiwi families, and genuinely reform restrictive planning rules," he said.
He followed up by releasing documents obtained under the OIA showing a list of Crown land sites for house building, some of which included cemeteries, power substations and Government House that can't be built on. One of the centre-pieces of last year's Budget was a plan to spend NZ$54 million to free up 500 ha of Crown land for house building.
Housing and Building Minister Nick Smith told One News' Katie Bradford he had not seen the list, which was from 2007.
However, Smith did say that all of the NZ$54 million had been allocated and just 25 ha of the land had been secured, raising fresh concerns about the speed of the supply response from Government.
A net 3,890 people migrated to Auckland in February and Auckland's natural population is currently growing at a rate of around 1,200 a month, which means Auckland needed to build 1,700 houses at a rate of three people per house to keep up with the population growth. Auckland consented 787 new dwellings in February, less than half that number.
Even accounting for February being a naturally slower month, the trend for new consents in recent months has been around 800 a month and falling. That's well below the 1,100 seen as needed to cope with ongoing regular population growth, let alone eat into the existing shortage of at least 25,000 houses.
65 Comments
You're never going to see property hoarding MP's from ANY party deal with this. Total self serving interests along with pure conflict of interest=corruption by default
Some proof out today:
http://www.stuff.co.nz/national/politics/78875326/our-121-mps-have-inte…
Such a cynic.
National have been in power for nearly a decade and have powerful levers over both supply and demand - and they use them - can't you tell???
On the supply side just look at how they've reformed the RMA. And rather than spend 7 years threatening to take power from Auckland council they did it! and weeded out NIMBYISM and got Auckland building again. And how they took no regard to allowing intensification in their very own neighborhood - so selfless. And their crack down on land bankers with a land tax oh josh it was just so swift.
And on demand look how they addressed the deep taxation drivers that make NZ a property investors dream. And how they promoted a steady level of net migration instead of an unprecedented boom. And how they gave regard to the consequences of letting in China's top 1% of the 1% and how that might influence and set houses prices to unrealistic levels - thank GOSH they didn't let that happen!. and how government stopped overseas property investment as a funnel of corrupt money.
But it's the way they got on with the RBNZ who also tried their best and most especially the empathy and compassion they showed to first home buyers that really got me. Tears to my eyes I am so proud to have a prime minister that is so in touch with the working class.
I mean they have just done SO much in their 7 or 8 years in Government. I am just overwhelmed.
Way to go John Key yeah!!! I just heart him.
So, not only paid by Taxpayers, but also heavily subsidised by said Taxpayer as part of the 2 Billion excessive rort in rental housing, supporting Tenants.
And said Taxpayer is also, possibly, I say possibly, also keeping said tenant in the style, they have become accustomed to.
Seems a fine rort they have worked, against said Taxpayer, who is paying his taxes to maintain the elite in the style they have become accustomed to....a Non-Taxable, Non Capital Gains tax benefit scheme for the ungodly.
And they say, corruption is not rife in New Zealand and it is not a tax haven, whatsoever.....but in my eyes, and to my simple way of seeing the truth..it is.
About time we had a change of MP's.......most of em.
About time we had a fair and simple tax system, so all is equitable, and reasonable, not just for some, but for all.
And this was one from one simple S.O.B ....who thinks it is more than time enough for a change...
And I do not mean a Swiss Cheese Trust Fund mentality, full of holes, from those I definitely do not trust, one iota.
Democratically elected yes, mainly due to greed and not wanting to stop the out of control gains on their assets. Which is fine on a personal level, until you look at a generation of people locked out of living in New Zealands largest city.
We're seeing price rises across the country now because of the inability to curb Aucklands house prices. This is all fine and dandy until you look two generations down the line and see that the only places work is available in NZ is where no-one can afford to live - That's not such a great economic outlook.
The Governments job is to look after the long term ability of this country to sustain itself, and on the housing front, that appears to be failing.
Can anyone tell me why any property developer operating in this extremely heated market would of their own volition price their "supply side" additions in such a way that would drop the prices that they are clearly benefiting from? These are houses not pork bellies, this is economic dogma at its worst.
New houses will never be cheap. Unless they are really tiny and have no view and no winter sun. I don't know why the politicians keep implying that a flood of new homes will eventually be cheap.
What will become cheap will be the run down crappo boxs in less desirable suburbs.
The "affordable" homes in the special housing zones which are in desirable areas will be sold to the developers collaborators, families and friends. Who will sell them after 2 yrs for a huge profit. And after voila, these homes will no longer be affordable (As if by magic).
when shonkey came into power he said he had heard muldoon say he hoped that he did not leave the country in a worse state that he inherited it and he thought that was a bad aspiration to have
well he has done a lot lot more than muldoon to sell out our young ones and leave the country indebted and sold to the higher bidder.
i am sure than in ten to twenty years once he has left the same deciples that think the sun shimes out his a,,, will be looking back when there grandkids can not buy a house and saying why did we ever listen to this guy
I know one of the big costs for new builds is the "contribution" cost to the council for each new section (approx. $100k). What if instead of an upfront cost to the developer / subdivider, this was instead added onto rates (i.e. the council essentially borrows the money that it would have received from the contribution, then will receive it back in the future through higher rates). This will significantly reduce the barriers for new sections coming onto the markets, and will significantly reduce the upfront cost of the property.
I know that this will work out to cost the same in the end, but it is the upfront cost that is stopping a lot of FHB getting into the market (saving enough of for a deposit is the problem, rather than the income to service the interest/principal repayments/rates/service).
I know this would have a once off effect on all current properties, having higher rates but they still had to pay the upfront contribution to the council. But the effect this should have is to decrease house prices - surely not a bad thing at the moment.
Good luck trying to convince every ratepayer to give you a cheap house. I like the idea of the developer paying that fee. Why am I subsidising you again? Did you not see the hu-ha when rates went up a tiny % last year? , let alone huge jumps to pay to subsidise FTB and developers! I can see this problem getting like the UK soon. Interest free FTB loans for 80% of your deposit requirement. They will also give delelopers tax breaks too. I know it sucks but thats the only option the Govt will take.
Key says, "you are battling the fact that Auckland is a very attractive place to live in." So is his adored Switzerland. Other places too. How many of these 'attractive places to live in' have - in effect - thrown the doors open to all-comers? How attractive does he suppose Auckland is going to be in a few years? How likely is it that any of the next generation of New Zealanders will be able to buy there?
This is a strategy, in short, to exploit a city until it collapses. But this appears to be government philosophy as it's applied in every other national direction. Live for today. Blow your inheritance. Steal from your children. Ignore the future. Just take the money.
Auckland is an attractive place to live, if you're from the developing or developed world. The reality is that our economy is dependent on immigration, and most migrants are relatively ambitious. They don't want to live in Whangarei as they cannot realize their ambitions in a city like that. In Auckland, they believe they can. I'm imagine that they see Sydney, Melbourne, Vancouver in the same light. Also, you need to consider that if you moved to China, you would want a balance of cultural familiarity and liberal democratic life (shopping malls, golf courses, knock off work at 5 pm). Sorry, but that is associated with Auckland, not provincial NZ.
I understand the frustration of younger NZers but I don't think that the situation is going to improve. The world has the technology and advancement in construction materials to build high density apartments that are wonderful places to live. And I'm not talking rabbit hutches. If I were the govt, I would be taking a strong-arm approach and building these places and cutting down council and NIMBYs in an autocratic manner. That would be the brave choice. Also, I think Takapuna would be the ideal place for this.
I'm not sure why they say auckland is such an attractive place to live. I've lived in a few different cities around the world and Auckland is OK but certainly has a lot of negatives too. I don't buy the argument that auckland is some kind of paradise. (having grown up there too).
Price of everything is ridiculous. I've been bouncing around Japan, S;pore, and SEA for my career and going back to NZ is a novelty, but the reality hits home as soon as you buy a SIM card, pop into a supermarket, go to a dry cleaner, or drive into Auckland City and park a car.
The traffic absolutely sh1ts me. Not being able to ride a push bike across the harbour bridge is another bug bear. From my place on the north shore I could cycle to the city in rush hour in about 35 mins. In a car its more like 1.5 hours. Public transport is a joke too. The weekly food shop is triple the cost on London. How does that work?
My predictions on National response to the housing issue over next 15 years. In 2017 median prices hit $1m, John Key announces first home buyers in Auckland will be given a $50,000 subsidy which will be paid for by selling the great walks of NZ to Berkshire Hathaway. in 2020 when median prices edge up to $2m John Key defends his response to the housing issue by stating on National TV that there are plenty of homes on trademe for under 1.5 million dollars. 2025 will see National launch with its banking partners, the government guaranteed trans generational serf loan. First home buyers will be lent the NPV of their (and any blood descendants) future income streams, which are novated to the bank, less an allowance for bread and water. Pure artesian NZ water, sold to you direct by Shanghai Pengxin.
they can require the banks to hold more capital for loans and restricted their ability to lend under certain criteria.
that will only hurt locals looking to buy and as we are open to the world will only slow it for a short time.
the government has all the power to restrict demand until supply can catch up
with banning non resident buying of houses, refuses to do
slowing immigation, refuses to do
changing the tax system so buying an investor house is not attractive, refuses to do
The Unitary Plan will never get approved this side of the council elections. The councillors want to keep their jobs and they are highly conscious of the NIMBYS. Even if the Unitary Plan were passed into law it now takes at least 18 months to obtain consent for a simple one lot backyard subdivision from the day the surveyor arrives on site then another few months for the title to issue.
Asked if it might constrain the Reserve Bank from lowering interest rates again, Key said: "That's not the indications from the Reserve Bank. He's (Graeme Wheeler) been aware of what's happening with house prices and he's lowered interest rates recently."
Parent bank capital demands will certainly constrain a desire to see NZ domestic sub's NIMs narrow, hence any OCR cuts made by the RBNZ will be passed on to depositors immediately, but not to borrowers so much.
Australian banks may need to sell a lot more longer-dated bonds to get into the kind of shape regulators will be happy with.
The country’s major lenders, fresh from raising A$20 billion ($15.4 billion) in equity capital last year, face the prospect of ramping up their longer-term debt funding to comply with stricter rules under the global Basel III framework. With credit costs already increasing and net interest margins being squeezed, that could add to pressures for National Australia Bank Ltd. and some of its peers.
Lenders are already feeling the pinch from regulations designed to prepare them for a possible downturn and they’ll have to ensure that their balance sheets are adhering to rules on the proposed net stable funding ratio over the next year and a half. While Commonwealth Bank of Australia is poised to meet NSFR requirements, the next three biggest lenders could need to raise a combined A$41 billion in additional term-debt by 2018, according to an estimate from Macquarie Group Ltd. Read more
I am sure the RBNZ will jump at the chance to allow NZ saving citizens to socialise what can rightly be labelled Australian banks' shareholder business costs. It's what they (central banks) do.
As a current resident of Auckland, the only major concern I have with increased intensification is the effect on transport, where the Council does seem to have some plans, but with only government support when they finally are brought to the subject kicking and screaming. There is no roading or bus solution that will fix the inner suburbs; where the Three Kings development is good example of myopic government thinking. Adding 1500 houses at the end of a road that is already at a standstill at peak time, with no medium term transport solutions, is not helpful. Fix the transport and my view would be build to your heart's content.
The Brits show some good boldness in the area that we could learn from.
Their new Cross Rail project in London will add 118km of new rail lines, including 21kms of twin tunnels, to their current underground network of 175kms, which by the by was launched in 1863 when tunnelling was more difficult, and the population was about 3.2 million. If you Google Crossrail, you will find the engineering impressive, but easily enough manageable, and considerably easier in Auckland where there is not an existing network to navigate through and around.
The Auckland City Link- a very useful start- is 3.4km each way. Some quick calculations on Google Maps suggest to me we should be planning the next 60-70kms of tunnels now. Funding will never be cheaper than present.
The Nats have only tinkered with supply side reforms. John Key is the emperor with no clothes.
Since 2007 -even before he was elected, he was promising reforms to make housing affordable. So given he has had nine years to stitch together his reform garments, what does John Key's fine reform wardrobe look like now?
I challenge anyone to name one decent supply side reform this government has provided -SHAs have been too small and too incremental so have been land banked, using crown land might have worked -if Nick Smith could find some.......
What else is there? Even based on their own promised supply side reforms the Nats have failed. All that is left are excuses, diversions and blaming others and this PM is a master at providing us with these.
So much so, that the adoring public do not notice that promised reforms don't exist -the emperor has no clothes......
Regarding reforming the RMA, we need to be focused on easing planning restrictions (up and out) and addressing the infrastructure provision question, so there is genuine competitive urban land markets. But all the Nats have done is spend coming up to ten years saying RMA reform without actually saying specifically what that means for cities. Promised RMA reform from John Key has become another excuse and diversion that moves people focus away from the fact the government could have implemented real reforms to make our cities more affordable but they haven't.
The door needs to be shut on migration for 5 years - it is this current surge of migrants that is the major problem for house prices in Auckland - it's that simple. Interest.co should do an article on how easy it is to get into this country right now and then once in your parents and other family members get in automatically, no questions asked. Then it's straight down to Barfoots auction rooms.
Smugness comes to mind and not one bit of humanity. Born at a lucky time and no sympathy for those born a generation or two behind you who face huge loans when they buy their first home. They had no say as to when they were born. They are not interested in houses that sell for multi millions . They just want a home of their own. Where is your humanity.
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