By Bernard Hickey
Prime Minister John Key said the government was now doing all it can to help the Reserve Bank avoid having to put up the Official Cash Rate in response to Auckland house price inflation.
Asked if he was comfortable with the Reserve Bank having to hike the OCR in response to a developing Auckland housing bubble, Key told his post-cabinet news conference: "The Reserve Bank has to follow monetary policy as its sees fit. We can't dictate that. The govt is very focused on the issue of house prices going up and is looking to find solutions to those problems."
"We believe there are a number of component parts to that. One is around accessiblity of land supply, which in Auckland we believe is one of the more significant issues and we're working with the council on that," Key said.
The Reserve Bank warned last week it may have to hike the Official Cash Rate to avoid a damaging housing bubble developing in Auckland.
Asked if the Government should have done more in the last four years to help boost housing supply in Auckland and avoid a rate hike, he said: "In fairness, we've got interest rates at 50 years low. Through the government's fiscal policies and other actions we've taken that has at least helped support low interest rates."
Key then said the house price inflation in Auckland, which is now running at an annual rate of 16%, had only recently become a problem.
"In terms of housing price rises in Auckland, for a long period of time that hasn't been an issue, but as confidence returns to the market that's increasingly starting to become in issue, partly driven off very low interest rates," Key said.
"The government wants to assist if it can in the process of making sure land suply is made more readily available and overall the market functions as well as it can, and that's been the basis of some of the RMA (Resource Management Act) reforms, among other things," Key said.
Asked if the government's refusal to immediately approve Auckland's Unitary plan was worsening the situation, he said: "No. Even if the government was to get through legislation have the plan adopted in September, that would not stop the situation where new subdivisions and the likes would be notified and subject to appeal and therefore the process would be a very slow one."
Auckland Mayor Len Brown is pushing for the immediate adoption of the unitary plan, although many in his council want a delay to respond to complaints by those in central suburbs who do not want more intensive development.
28 Comments
I believe it is time for the Govt to act, but how
Here are a few suggestions,
Stop the sale of existing second hand properties to non Kiwi residents
Allow non Kiwi residents to purchase new unlived in dwellings only
Deposits to be 30% inline with the Reserve Bank worst case senarioes
Special provision for first home buyers to buy appartments,or similar, with a lower deposit, to allow them to get on the property ladder
Regards
Kevin
And they could also do this to get some building happening...
Brendon -
"All supply and demand factors need to be considered".
Quite correct; so why do you not do so?
http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html
Lay Hugheys packed, ticky-tacky sprawl over that graph, and weep.
Stop all new development.
Stop population increase.
If you want a new house, you have to knock an old one down.
Don't worry about prices you can't control.
If people can't afford Auckland their lives are not exactly over(ask anybody south of Bombay)
This would take pressure off roading, environment, carbon emissions etc.
Auckland, and NZ will not be "improved" by more population pressure on limited environmental and leisure resources(although big business will benefit by selling more cigarettes hamburgers and smartphones etc to all those sitting in little apartments with nothing else for their kids to do)
Ignore advice from Len Brown, and town planners to live in high density housing, ever see a Mayor or a town planner or politician in a GI high rise??
If a bigger population made everybody better off Africa, England, Japan, etc would be paradise.
Those two stops are right on the money, Kiwichas. Also, high density housing is undesirable. Those who proposed it, are not planning live there!
They have to do something, or at least appear as if... It seems they've just woke up to the fact... Could it be the elections...?
Lack of growth in GDP will soon make the debt to GDP burden unmanagable.
HGW
Is this the sort of stopped new development and population growth you guys are after.
The old European town centres so beloved by our urban planners were built on medieval levels of repression. For instance five hundred Jewish families in Frankfurt were crammed into the Judengasse, the only place in Frankfurt Jews could live. It was a quarter of mile long and no more than 12 feet wide. Every aspect of the residents lives was controlled by regulations dating back to the middle ages, from the sort of business allowed, who could move in, who could get married, curfews etc. (Why Nations Fail, p.289, Darin Acemoglu and James A Robinson).
At it heart this issue is about freedom.
Do we give the young and aspirational the same chances as previous generations?
And economic well being is linked to political freedoms not resources. There are plenty of resource poor yet rich places and vice a versa.
PDK your analysis is based on world wide resource demand and depletion. Yet New Zealand's demand growth is quite quite modest, for instance urban areas only consume 0.7% of our land. And we have huge untapped renewable resources like geothermal energy.
"Only recently become a problem..." really!
The problem was evident years ago...an economy dependent upon banking credit and an endless property inflation that people in the know have been able to milk capital gains at will.
Key et al made no effort to screw the scrum the other way...indeed they set out to boost property inflation and the RBNZ followed along like a good wee Poodle dropping ocr everywhere......it's that stuff which Key has now stepped in.
Even if Wheeler raised the ocr today back to 5%...it will be two years at least before the bubble is throttled back...
The OCR raise would probably worsen the bubble as the flood of money coming in for our high interest rates would spike the dollar to parity and beyond. Some of that will find a home in housing. But the interest rate would seem irrelevant in the face of the flood of eastern money reaching our shores.
I was talking to someone close to me last night that is actively attending auctions on Aucklands North Shore. Seems like the asians are spreading from the Auckland suburbs. Auctions seem to be composed exclusively of young kiwi couples and asians. But typical scenario is that the bidding gets narrowed down to two asians who want to buy at all cost. Prices are fetching up to 50% more than the pre auction indication. I can only see this ending in ethnic violence down the track.
Some person also has contacts in Invercargill and it seems even the purity :-P of the deep south is being tainted as locals there are complaining of the influx of indians and chinese to the city.
I am astonished at the utter stupidity of some of the suggestions made in this forum. These so called "solutions" will only serve to exacerbate the problem .
Firstly in our Immigration policy we invite and encourage immigrants from Asia to come and live here , now someone is suggesting only Kiwis be allowed to buy houses . How dumb is that ? Where does he / she think these Chinese immigrants are going to live ?
Secondly , someone is suggesting a freeze on development ....quote ".if you want a new house you must knock one down " . We need more houses not a zero sum outcome .
Its apparent this writer also does not realise we have an immigrantion policy that is packing them in here at an astonishing rate ? The idea is so far from sensible its not true .
If we do anything the only things to do are to free up more land ( Increase Supply side) , and cap or decrease the number of new migrants we allow in here ( Decrease demand side )
"Where does he / she think these Chinese immigrants are going to live ?"
They can go back to China.
Kiwis are heading to Aussie to live in the 10000s, annually.
We need to make NZ a great place to live, work and raise a family instead of importing 3rd worlders who think this place is heaven compared to the polluted, overcrowded, corrupt, dictatorships they come from.
"Where does he / she think these Chinese immigrants are going to live ?"
They can go back to China.
Kiwis are heading to Aussie to live in the 10000s, annually.
We need to make NZ a great place to live, work and raise a family instead of importing 3rd worlders who think this place is heaven compared to the polluted, overcrowded, corrupt, dictatorships they come from.
Irony overload!
Aussies are telling 3rd world Kiwis to go back to NZ.
For some reason it's okay for NZers to escape their own go-nowhere homeland and live someplace else, but it's not acceptable for others to do the same. Or is it because they are Asian you don't want them here?
And the first and only answer to NZ's property obsession? "Build more property."
The lie: "There is a housing shortage!"
The truth: "The housing supply has become monopolised by those who got in when the getting in was good."
People who own a dozen investment properties claim that there is a shortage of houses and we must build more, environmental issues and regulations be damned.
What would happen if we reached a point where everyone owned a home and two investment properties? Would they then think they should buy five more?
Maintaining artificially high prices just to keep investors in tenants is not a healthy basis for a national economy, yet that's NZ in a nutshell.
Thank you Boatman for having some common sense. When I commented on increasing supply and decreasing demand for housing. I meant something along the lines you have just commented on. Easing back on immigration, not allowing foreignors to buy property. Central government doing a deal with Auckland and other councils to free up planning restrictions and limit council fees.
But all I got was way way out there wierdness.
Hey Brendon
I think it would be better than that of Comrade Brown.
High density housing has been tried by Stalin, building large complexes next to the tank factories for the shock workers to live in
And Boatman, in the end growth for growth's sake comes to an end,and is not an end in itself; we have to decide when enough is enough, read my post again and think about a sustainable quality society that is in harmony with the environment, free range kids quality of life etc
"only recently became a problem..."????
Where's JK's sixth sense gone?? It was pretty evident to everyone else 12 months ago...
It almost brings me to song...
I am the very model of a modern Pri-Minister, I've information currency, property, nothing sinister, I know the booms and crashes, and I quote the facts historical From gold rushes to cows that moo, in order categorical; I'm very well acquainted, too, with matters finan-ci-al, I understand equations, both the simple and exponen-ti-al, About market equilibrium I'm teeming with a lot o' news, With many cheerful facts about the economic theories we all should use!! repeat With many cheerful facts about the economic theories we all should use!! (from the Pirates of Parnell)
You have to wonder what he means by "we've got interest rates at 50 years low. Through the government's fiscal policies and other actions we've taken that has at least helped support low interest rates". Doesn't he realise that low interest rates are a sign of recession or poor economic growth and shouldn't be bragged about?
I seem to remember Bill English saying that Auckland was overpriced and values could not possibly go up any more so the government didn't have to worry about it.
Congruence for a politician's words and outcomes... Often times people who believed the words are disappointed
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