The Minister of Housing says his new rules around opening extensive land areas for development and mandating city councils expand urban limits will lower New Zealand’s property prices.
Interest.co.nz asked Chris Bishop at a media conference on Thursday following the announcement of his new housing rules if the Government’s new housing plans would push property prices downwards.
“Yes, absolutely,” Bishop said but he wouldn’t put a number on it because there were “too many variables at play.”
“My aim is that we make housing more affordable. We don't see an immediate plunge in house prices, but as I’ve said publicly many times, houses are too expensive in New Zealand and we want housing to be more affordable,” he said.
“There's not something that's going to happen next year or the year after, but it is something that we want to happen in the medium to long term,” he added.
Bishop told a packed audience at the Real Estate Institute of New Zealand (REINZ) of his new housing plans on Thursday.
The biggest items in his announcement were the expansion of urban limits, a lot more land being immediately available for development and the option for councils to opt out of the controversial Medium Density Residential Standards (MDRS).
However, city councils will only be allowed to opt out of the MDRS if they zone for 30 years of housing growth.
The MDRS becoming optional for councils was an agreement made between National and ACT in their coalition agreement.
According to Bishop’s speech, councils zoning for 30 years of housing growth could “flood the market with opportunities for development” that would be driven by economics rather than planning rules.
In total there are the six elements to Bishop’s plan: set 30-year growth targets, relax city limits, define transport corridors, require mixed-use zoning, get rid of size and balcony rules, and make the MDRS optional.
All of these elements will help solve the country’s housing crisis according to Bishop.
“Something has gone very wrong when home ownership is at record lows in a country that used to pride itself on being a property-owning democracy,” he told the room.
Bishop said New Zealand’ housing market once met the international standard of affordability, with house prices at a 3:1 ratio to wages. Today, house prices are nearly 7 times higher than wages.
“Fundamentally this is an issue of intergenerational equity,” he said.
Shoeboxes
As part of the new housing rules, Bishop said the Government was going to abolish minimum floor area and balcony requirements as they could “significantly increase” the cost of new apartments – and limit the supply of lower cost apartments.
“In some cases, this can make development uneconomic, or push the cost of housing outside of the reach of first homebuyers,” he said in his REINZ speech.
After being questioned by media about the potential rise in small apartments from his new housing rules, Bishop said the Government was “liberalising the rules” and if there wasn’t a demand for smaller apartments, they wouldn’t be built.
“Some people are happy with a smaller place if it means they get onto the housing ladder or it means that they get an affordable apartment that they can afford and pay rent on,” he said.
Conversations with banks
Interest.co.nz asked Bishop if he had held any discussions with banks around relaxing lending policies on small apartments as banks have historically been more reluctant to lend on smaller units.
Bishop said he had had some conversations with banks and received their advice, but ultimately, it was up to the banks to “make their own decisions” on lending on smaller apartments.
“What we can do, though, is remove the regulatory requirements,” he said. “Sometimes what we can do is do what's within our control, which is separate.”
ANZ confirmed to interest.co.nz on Thursday its customers need a 20% deposit for freehold, standard apartments that are 38 square metres or larger. Before 2021, any apartments smaller than 45 square metres meant ANZ required a 50% deposit from customers. The smallest apartments ANZ, the country's biggest mortgage lender, will currently lend on are 38 square metres.
ASB and BNZ are yet to respond to questions on their current apartment lending rules.
75 Comments
House prices will get cheaper if interest rates stay at current levels because private debt at 140% of GDP and borrowing rates of 7% are completely incompatible. Remember private debt at 140% of GDP x 7% interest rate = interest on private debt of 10% of GDP per year (that's $40bn or one-quarter of total NZ wages). Have a look at the history.
The problem of course is that cheaper house prices and higher interest rates make development of housing unviable. Bish can scrap rules and persuade councils to upzone to his heart's content, but Govt will need to provide subsidies of some kind to get house building moving.
"cheaper house prices and higher interest rates make development of housing unviable"
Not if a core component, the price of the land anything is built on, gets much, much cheaper. Build a $400k house on a $50k block that would have previously gone for $500k, and what does that do to the incentive to build? Encourages it. Sure, current landbankers will take a haircut, but something was always going to have to give.
The organic NZ population growth is actually slowing.
The only need for new housing is coming from immigration.
As long as we import the right (high skill) high earners who contribute to the NZ economy they will (should) contribute more than they cost over their lifetime (for infrastructure and public services)
The problem is that we are sustaining our gdp growth by importing people who can't cover their cost to society. And no amount of tweaking zoning or land use rules is gonna help.
Until NZ gets serious about a sustainable long term economy we will keep tweaking rules to try to maintain an unsustainable economy.
These changes won't help. Only when strong enough central and local governments get in power with proper strategy will things start to change
I believe the nats have an understanding of what's needed .. but don't quite have the strength of character or majority to get it done.
The Nats certainly understand the politics of it, and Im sure some understand the economics (only some mind) however their actions show they are unwilling to do what they are claiming (making housing affordable) as it undermines their economic model and so we have the ongoing obfuscation (previous gov were as guilty).
Until NZ gets serious about a sustainable long term economy we will keep tweaking rules to try to maintain an unsustainable economy.
If we rejigged superannuation and threw out the infinite growth mantra then we wouldn't need immigration to prop up super, and could progress from there. Sadly the world is ensconced in the infinite growth idea and we would seem a less attractive place to come to for skilled workers if our currency drops due to having low growth numbers and getting our currency rating decreased as a result of not adhering to the status quo, thus further reducing our skill base and purchasing power. Quite the conundrum.
They don't have too any more than they did when you built your property.
Councils need to just ringfence their own mess and let other developments, independent of the council other than some paperwork, go about development on their growth playing for their growth basis.
Precisely what is the sub-set of infrastructure you have in mind being provided by the developer? Does it include reserves and other well-designed public spaces, good rail and public transport connectivity to major (employment centres), libraries, schools, medical centres and hospitals?
Why would land get much, much cheaper and that flow through to house prices? There are a few hands out on the way through to grab the windfall gains of rural land becoming urbanised.
Developers are still going to limit the amount of housing being released to the market each year to keep their profits up.
The actions of Mr Bishop still do not get around the basic fact that if we want wide-spread good quality affordable housing we need to have a massive state house building programme.
So what does this genius Bishop do - kills off state builds.
Throw in:
"The Treasury is currently advocating for the Government to consolidate its spending and consider broadening the tax base – by introducing a capital gains tax, for example – to make the country’s finances more resilient and help fund looming costs associated with an ageing population."
And, finally, we look like we are headed in the right direction.
yes, at Aro hills you buy with an agreement that you pay 2.5% of sale price back to the developer..... that covers the continued mowing of berms, landscaping and beer on Fridays (maybe champs at the barrier on game boats too), many of these houses at 2mil, so thats 50k....
Buyers will only ever pay what they can afford. CGT works well for all comparable oecd nations and has repeatedly been recommended for NZ to adopt as not having it holds our economy bavk and further hold back productive business as we favor property investments and keep getting asset bubbles.
"By the time you're old you'll be SHARING tiny apartments with 3 others."
Like this? 3 people of one family living in 40 sq ft (3.7 sq m).
https://youtu.be/tr5GGcmEk7w?t=734
This Coalition is morphing into quite the Trojan Horse for some. The ground is certainly shifting quite quickly now. Houses are for living in, raising families, not the traditional speculating on quick gains that over time distorted many measures from historic norms.
It's years away...if it happens at all. Farming in NZ? No thanks.
https://www.interest.co.nz/rural-news/128020/real-estate-institute-nz-s…
Land has always been sought.
Bishop is on record saying he wants a ' big nz' i.e. a much bigger population. Unless people here, who still share some sense of collective identity, start humping with no contraception, think about what that means for land, housing, quality of life, culture.
Look at the UK and France with their high immigration numbers. It’s a hot mess. I’d rather face the reality that we need to live within our means right here right now than have the temporary sugar hit of low skilled, high immigration numbers to prop up GDP for another decade.
The problem is the quality of politicians. Elections are now a bidding war, rather than gathering facts and basing best policy to be put to voters for a mandate. Instead we have ideologues and their lobbyists sucking all remaining life out of what should be a sustainable, resilient society.
Minister Bishop almost has it right, when he says:
“flood the market with opportunities for development” that would be driven by economics rather than planning rules,’
For all those who say existing ratepayers will have to foot the bill for any new infrastructure., this is not true and I know as someone involved in new and existing city developments.
The best the critics can claim is YES under the present status quo, it might if they do it, but it needn’t be so.
And that is the whole point of these changes, which should also include not using people that can only delivery bad outcomes of unaffordable housing.
Also, new soil use classification will help protect elite soils, but councils could have already sorted it voluntarily not rating the rural to future residential, and the farmers themselves covenanting soil protection.
But the weakness in Bishop’s plan is his term ’30 years supply available now.’
This a made-up term by ‘zonists’ to try and describe what presumptive zoning looks like in jurisdictions that have less and restrictions and more affordable housing.’
There is no report anywhere as to how this figure was rationally derived.
The best it can be used as an analogy to describe that, ‘if a developer can show an economic opportunity to develop that does not require ratepayer inputs, or that is already covered by present levies etc., then there is a presumptive right to develop subject to a few qualify matters.
This vague term and others will allow the ideologies to thwart affordability by still putting bureaucratic roadblocks in front of people to 1) make it time-consuming and 2) create another revenue stream to protect any old ones they might lose.
But as it further exposes the bad-faith actors, it can be tweaked as we go.
Yep, although I think tiny one bedroom apartments will be more common than studios.
It’s quite possible, with clever design, to deliver a liveable one bedroom apartment at around 30-35 square metres. Council minimums are usually 45-50 sq m.
One beddies are more desirable than studios.
But I also agree we will see lots of studios. At circa 20-25 sq m (council minimum is 30). And yes an Air B and B option
This is where the more free market kicks in, which many haven't factored in.
That is, if there is more supply, then the rent won't be as high because the present rent is based on scarcity that this is meant to solve.
But with less total build costs, then the yield may still be ok, even if rent is less, and of course with less capital growth.
The market will not decide what it wants, the market will take what its given if there is nothing else.
Does anyone think Japanese actually want to live in 30m² apartments?
and with all the immigrants we have now, some of them are used to much worse.
-News headline in 2 years, "15 immigrants promised fake jobs living in shoebox apartment."
If they want DTI to be 3:1 would give average wage couple the ability to buy a property for 450k including the 20% deposit, so average house price’s will continue to crash and many people who purchased in last six years will be in negative equity some very deeply and anyone over leveraged the crap has hit the fan already this would be why people have finally woken up and are running for exits
So too many go t--ts up, stop what they were doing, Councils cannot get rates out of them, foreclosing doesn't find a buyer
Down and down.
I think housing has been 'too expensive' for 30 years - maybe 40 - but everyone is on the same parachute. Drop equity enough, and the system crashes.
But that has been what you have been saying will happen and worse.
The real question is, we subsidized this on the way up, can we subsidize it on the way down, tax breaks for some losses etc, so a 'crash' does not happen (as bad).
Yes, there's some moral hazard, but any more than on the way up?
"All of these elements will help solve the country’s housing crisis according to Bishop."
The country's housing crisis is one of affordability and there is little in his announcement that will address that....especially when you look at the existing infrastructure deficit and an implicit announcement that net migration is to continue at the highest levels.
Great politics for Bishop, not much for anyone else.
This is not going to happen.
Firstly Banks will not be lending on them as there is more profit in lending on decent landed property and not dog box apartments!
Secondly the current apartments are already too small and to build half the size is a surefire way for a developer to go broke.
Thirdly, there is nothing surer this would only force up the prices of existing family homes as they will become far more popular.
fourthly if you think that mental health is increasing at the moment watch as people who are normally mentally sound grow depression from looking at walls.
Apartments with no balconies is not happening.
I have always thought it ironic that so many urban designers say big balconies are essential yet so many of the European cities they love have beautiful old apartments with no balconies, or only a little Juliet balcony. When younger I lived in many apartments or flats with no balcony and guess what - I didn’t need or want one.
The cost per square metre is going to be very high for dog box studios.
The ones that generally need the cheaper housing tend to have kids and I can not see too many landlords wanting a few in their 30m2 dog box studio!
They might be ok for single people but they are not big enough for a couple that doesnt get on too well.
The biggest infrastructure issues come from intensification not from Greenfields developments. As others have said, the developers pay for the infrastructure through levies and their own works. I think this has a great chance, nothing else anyone came up with will.(Kiwibuild anyone?) The cost of housing is really the cost of land as biggest issue and more land available (for less) I believe will surely lower price/cost. For instance subdivide in Frankton and you have to buy a consent before you even start? Going price $180k I'm told.
How does Mr Bishop reconcile Luxon's claim that they wanted to push decision making down to a regional level but now Bishop is claiming the right - apparently sanctioned by Luxon - to make rules without regard to what the regions may want?
Big brother - in this case Big Chris - knows best, right?
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