By Gareth Vaughan
The ANZ Banking Group is keen to finance some of the housing required to help Auckland overcome its shortage, CEO Shayne Elliott says.
Speaking to interest.co.nz in a Double Shot interview Elliott said ANZ and other banks are in the business of helping the communities they are part of transition by building the likes of new infrastructure.
"So when Auckland will grow through a change, around infrastructure, housing etc, we've a role to play in that. Our role is to make sure it's done responsibly, with thought, it's affordable, all of that. So we'll have an opinion on all of those things, [but] we won't always be right. And we absolutely have an interest in helping finance some of that. That's our job," Elliott said.
His comments follow concerns raised by S&P Global Ratings about where the funding required to tackle Auckland's housing shortage, with densification encouraged under the city's Unitary Plan, will come from. The credit rating agency estimates a housing supply shortage of between 30,000 and 40,000 dwellings in Auckland.
"With banks reporting a tightening in lending standards for property development, it's conceivable that new construction will slow, despite the rollout of the Auckland Unitary Plan, applying further upward pressure on house prices," S&P said in February.
'David didn't ask for, or seek, our approval for that'
Last June ANZ NZ, the country's biggest bank, tightened its lending criteria for rental property investors and owner-occupier borrowers by reducing loan-to-value limits, and by stopping lending to investors wanting to buy sections and apartments off the plan. This saw other banks follow suit, and tighten their lending standards too as demonstrated in the S&P chart below.
Then in July last year ANZ NZ's CEO David Hisco publicly aired concerns about the Auckland property market being overheated and potentially running out of steam.
Elliott says ANZ Group head office in Melbourne had no input into Hisco airing those concerns.
"In that particular case that was completely a New Zealand decision. David didn't ask for, or seek, our approval for that. Those were the views of the New Zealand business and that's exactly as it should be. So we had no involvement in that from a group perspective," Elliott says.
"The role of Australia [the group] is really around strategy. So we set some guidelines, some boundaries as shareholder and say; 'look, in running a bank in New Zealand we'd like you to keep within these parameters in terms of size and scale and risk appetite'."
"But other than that we don't really get involved in the day-to-day decisions. So whether the team here [in NZ] decide to grow or shrink a business, or add more branches or invest in new technology, those are decisions that get made here as long as they're within those pretty broad boundaries," Elliott says.
"I've been on the board here [ANZ NZ] since I joined ANZ in 2009, [and] really the [NZ] business runs almost completely independently."
'House prices have grown extraordinarily'
In terms of the Auckland housing market Elliott says the city is suffering from the same issues as Sydney and Melbourne.
"There are some supply challenges, there are some infrastructure challenges. House prices have grown extraordinarily over the last decade in particular. So we watch that really very, very closely. On some measures Auckland's even more extreme than Melbourne and Sydney. So yes, it is a concern because when we lend money to people to buy homes we want to make sure that they can afford that debt, that it's a responsible amount for them to borrow and that they can comfortably repay it," says Elliott.
"And obviously with house prices growing at a much faster rate than household income, sometimes that ability to repay is getting stretched."
"The regulatory changes that have been made on both sides of the Tasman recently have actually been good things. And while they may not have taken all the heat out of the market, I think they have been positive developments for everybody," says Elliott.
*This article was first published in our email for paying subscribers early on Thursday morning. See here for more details and how to subscribe.
62 Comments
It's complete stupidity that people are going on about how to solve the 'housing shortage' there but ignore the fluorescent painted elephant in the room wearing a HiVis vest (high and unsustainable population growth). How about the Gubmint cuts the immigration rate down to 10,000 a year and only allows a certain percentage of them to settle in Auckland?
The credit rating agency estimates a housing supply shortage of between 30,000 and 40,000 dwellings in Auckland.
Arent they 470,000 to 460,000 houses short of what the real shortage is ? From the economist of the years research ? Surely the S&P cant have it that wrong can they ?
The idea of a 500,000 shortage is just plain wrong. It is based on the build rate in the 1950s and early 1960s. That is an unusual period, boosted by post-WWII activity, which was a response to an extreme deficit that existed in the previous 25 years. That build rate fell when the demand was satisfied. And a balance existed from the mid 1960s to the early 2000s. This is the base Shamubeel should have used.
I agree we are short houses now, mainly as a consequence of the lid the 1993 RMA reforms put on building, and the additional costs imposed.
Commonsense should tell you that if you could add 500,000 more houses now, that would be far more than we would ever need. We have 1.8 miln households. Having 2.3 mln houses for them makes no sense whatever.
I think S&P have it about right.
I think you onto something there. 50k "sounds" like a manageable problem even if its not. Half a million sounds like a true crisis. The other problem we have is that the data is so bad we have a difference of opinion of 450,000 houses. We're basically guessing about a small city.
A bit of exaggeration
In the period 1950 through 1975 a very large majority of houses being built were in the 80 sqm through 110 sqm range. After the State Advances finished their State House Build the Group Builders took over, building 110 sqm standard cookie cutter houses along similar lines of Henry Ford's Model T choice, you can have any colour you like so long as its black
It was noted a couple of weeks ago a comment about AV Jennings who own Universal Homes who were one of those 1970's mass produced house and land package outfits. Jennings are busy working in Hobsonville but Universal Homes is non-operational - they don't build homes anymore?
This is why it angers young Kiwis when boomer-age Kiwis insist they did it all on their own and pulled themselves up by their own bootstraps, and they have no obligation to manage housing outcomes effectively for upcoming generations. It's simply untrue, and boomers are showing a remarkable lack of gratitude for the work preceding generations put in.
They received the benefit of these builds (not to mention other government initiatives aimed at increasing affordability, e.g. cheap govt. leasehold land, housing corp loans etc.).
If policies hadn't changed away from the affordability-focused home-oriented ilk, houses would still be about homes and would still be affordable for NZers.
Boomer stood on the shoulders of giants, but young Kiwis today are perching precariously on the shoulders of dwarfs.
Listen the banks have a crisis at the moment.... debt is only growing by a measely 8.8% p.a
Ban foreign buyers. Only allow citizens and permanent residents to buy existing homes.apply to companies and trusts.
15% stamp duty on investors buying existing
Loan to income ratio 4 to 1
Tax land bankers who sit on land. Use or lose any planning approvals after a specific time.
Then lets see the demand problem dissapear.
You sound like the I want my cake and eat it too kind of guy.
What it sounds like you're saying is that hey, we've got a bunch of people that have speculated on housing and pushed up the value waaaaay beyond it's intrinsic value. If someone does something that might return these values back to normal levels, we're going to punish those who haven't been greedy (renters). Why punish the renters - we should punish the speculators (ie the greedy).
What doesn't work is turning private property into a capitalist market asset. Do that with commercial or industrial property. Having policies that encourage that in private housing markets are morally and ethically wrong. It's plainly and simply not going to work in the long run. We can't be far away from significant parts of society deciding that they no longer want to be a part of this society - stop paying rent to 'landlords', live on the streets, start getting involved in crime. Why would you want to be a part of this society if you keep getting punished by the authorities?
At what point do we turn food and water (the other basic necessities of life) into one sided capitalist markets? Ie limit supply so everyone starts going hungry and thirsty, artificially push up prices so people can no longer afford it, then provide tax breaks so that it continues to encourage capitalists to continue the behavior. The whole system is floored and morally/ethically unacceptable. Why we allow it in private property is beyond me.
But the solution is so simple - open up land around Auckland City.
Price of land falls - speculators are punished. We build more - poor people get more jobs with better pay. More buildings are created - rent falls. We'll stop forcing people to commute from Warkworth or Pokeno - pollution decreases.
Of course it will never happen, because a mediocre level of competence at Auckland Transport is vastly beyond their capabilities.
... yes ; a simple to apply land-tax ( at say , 0.5 % ) on the unimproved value of all land across NZ would raise $ billions for the government ( allowing it to reduce PAYE and company tax considerably ) ...
And it would stick it to the land-bankers and the so called " landed gentry " ... who currently garner massive tax write-offs and tax-free capital gains ...
... if only .... SIGH !
I wonder why the councils don't do this, for areas that are marked for future residential development. It would certainly bring the price of land down almost overnight, as developers will want to offload that expense. Lack of land, and thus high land prices for housing, is seen by some experts, as the main reason we have to pay so much for houses in NZ.
Cheers NorthernLights...Best thing I have read all day :)
A lot of it seems like common sense however common sense doesn't pay the bills to the people/firms that are currently being paid to keep this fiasco going.
NZ is ignoring what the rest of the world are doing to try and contain house price appreciation. Like NZ property is any different to theirs. Like Kiwis love property more than any other nation. I have heard it all.....
Kiwi Economists/Politicians/Journalists think they know better for some strange reason....Letting Demand run its course and just Harping on about Supply is getting us no where... well actually it is getting us into a bucket load of DEBT... growing at 8.8% pa from 230BN.....
NZ property is for sale on the world stage and while that is the case there will always be more demand than supply. At the moment we need foreign governments to curb how much is spent on NZ property. Why isn't our own government doing this ?
Labour seem like the only party willing to make a stand on foreign demand :
"Under our policy only citizens and permanent residents will be able to buy existing homes. Removing this speculative demand from the market will help stabilise prices and give Kiwi families a fair shot at buying a place of their own."
Auckland Melbourne yawn !
Toronto is so hot Ca finance minister Morneau has called for a summit on the ponzi housing which just yesterday showed a 33% increase on Toronto homes over the march to march year alone ! Homes selling within 2 hours of being listed !
Ca government now worried ! Same type of land development artificial restrictions are hurting developments by taking too long from approval of land for residential use to permits to build starts All too ponderously slow.
There is no shortage of excellent builders but there's no shortage of leaky condo buildings either !
So Auckland shouldn't feel so bad
Simple
Ontario didn't want to stop their GTA Ponzi scheme just like National did not wish to stop the foreign investment coming into NZ.
There's a lot of elites making a buck and they want to keep the game going
Really it just shows how our societies have not progressed
There was no plan Is no plan Now they call for a summit to decide what to do !
Just saying that Auckland is far from alone
Then there's Australia ! Oh boy that RE is due a big crash too
Spruikers of course will mock me !
I wonder how much of Toronto's boom is due to the fact that foreign buyers pay 15% stamp duty in Vancouver so have bought in toronto instead... the pain has spread by the sounds of things....
Crazy they should follow Vancouver's lead...
This from one online paper "Foreign buyers: Ontario Finance Minister Charles Sousa has floated the idea of implementing a tax on foreign buyers similar to the one implemented in Vancouver last year. But whether or not foreign money is playing a significant role in Toronto remains a point of contention. "We don't have the data to determine the volume of foreign buyers," says Usher. The influx of foreign cash into the Toronto market may have increased says Tal, as some investors who were eyeing Vancouver may have opted to avoid the 15 per cent tax."
Dont have the data ... got to laugh. In an age where data is more valuable than ever. We cant even get basic data
It is expensive to build in Auckland, because Auckland City is restricted to a minute area of land and land price is extremely uncompetitive.
It is expensive to build in Auckland, because the vast areas of land opened at Warkworth/Orewa/Kumeu/Clarks Beach/Pukekohe/Beachlands lack economies of scale to be competitive.
Auckland is expensive to build, because we have the worlds worst planners.
Why do people continually go on and on about introducing taxes on housing.
Housing is already heavily taxed!
Taxing anything never reduces prices of anything, it only increases them.
Let's put increased taxes on the people who keep suggesting introducing more taxes if they are so keen on taxes!!!!!!!
tony alexander talks about an equilibrium in Auckland being reached now, let's hope so. As I keep saying homes are cheap in Auckland. try buying a 3 bedroom free standing home 2 kilometers from central London for anything less than 10 million dollars, the only reason house prices are not higher is we pay about 3 to 4 times more than Western Europe on interest rates, something no one really mentions here.
Auckland is in league 6 of global cities https://en.wikipedia.org/wiki/Global_city
It sits with this esteemed company:
Beta cities: Ho Chi Minh City, Bogotá, Auckland, Montevideo, Caracas, Riyadh, Vancouver, Chennai, Manchester, Oslo, Brisbane, Helsinki, Karachi, Doha, Casablanca, Stuttgart, Rio de Janeiro, Geneva
It's main attraction is an Anglo-Saxon legal system and direct flights from China
Yeah but it is actually in the league of world cities. Alpha cities are cities that link major economic regions into the world economy so it would be daft to expect Auckland to be in that league. An Anglo-Saxon legal system and direct flights from China are factors that I was highlighting the other day. However Auckland is classified as a Beta World City because of its importance in finance, commerce, media, entertainment, arts, education and tourism.
Of those 69 cities only four are truly culturally British World cities, a key attraction for many property buyers.
*To buy a place in Mumbai with the same quality and safety as anywhere in Auckland will cost you an absolute fortune. Forget the 10:1 ratio how about 500:1?? I think this is a key aspect that people are missing.
Auckland may not be for long...
It's also been an attractive global investment because it lacks some of the taxes found elsewhere. A foreign purchase stamp duty would help, to start - and even were it to fail it would provide a useful injection to assist with the growing infrastructure needs to support all the folk being imported from around the world.
You conveniently left out the house price to income ratio which is upwards of 10 if you're earning the NZ median fulltime salary, and upwards of 15 if you're a recent graduate. Auckland's housing stock is also sub-par compared to countries like Denmark or Germany, so you end up paying more for a lower quality product.
"...it's just a few of us realised this 4 years ago and made a move." By "us" I assume you mean Boomers, foreign buyers, the wealthy, trust fund babies, FHBs with equity from their parents and those born at the right time?
That's the problem; Auckland property ownership is skewed towards a select group of people. If you're single, a graduate, a young Kiwi or on a low salary then you can't buy a property in Auckland. If you're married/a couple and you divorce/break up and have to sell then you'll never be able to buy a property in Auckland. If you can't afford the mortgage payments and have to sell then you're stuffed. If you're poor you're stuffed.
By us I mean people like me who took huge risks and over capitilzed on residential property in NZ placing an educated Guess that NZ property was far from peak, when most were expecting a fall in 2012, p.s with regards to who I am I am none of the above, I am just a person who works nine to five in a corporate who spent every last dollar in investing rather than buying iMacs and tickets to the big day out...
Land tax is actually one of the few taxes that *reduces* results in the reduction of prices.
This is because land is not produced, it simply exists. So taxing land is not a tax on production, but cost on ownership. When ownership becomes more costly, it also becomes less attractive/desirable and hence the prices drop.
A pretty good piece on land taxes: http://www.economist.com/blogs/economist-explains/2014/11/economist-exp…
Rates are already a form of land tax though. The amount paid has no real relation to the services people get, instead they are more of a wealth tax. If we want a far fairer rates system, we would be better to have a land tax, and also a poll tax on people living in a property.
TheMan
City council rates are a pittance in Auckland compared to proper cities in the world
1.5% land transfer tax on every purchase and a minimum of at least 1% a year property tax assessed.
A home I was looking at was asking 470K but because it was assessed at 522K its yearly property tax was just over $6200:00 . Now where I live everything gets fixed & the roads are cleared of snow The freeways are long smooth & straight & there's no cops pulling you over for doing 130kph
Some people don't pay much in rates, beucase their proeprties aren't as valauble relative to others. But some people have to pay huge amounts of rates. If you have a house worth a million dollars in some towns in NZ, (which is't much compared to prices in Auckland), they could be paying over 10k a year in rates. Rates in small towns are pricey due to the low population. People are often surprised to learn that rates in small towns can be so high,
Rob The Same rules apply in other countries in small towns where there aren't enough revenue sources so they load up the property taxes.
Auckland is what I am talking about and Auckland fails to charge enough property taxation to cover the cities cost of operation and cost to improve itself
Frankly I was paying a quarter in rates of what I pay here in yearly property tax
The flipping of homes doesn't even allow Auckland to collect a land transfer tax either !
The whole paradigm is out of whack
A housing shortage is a myth, only a ‘good’ reason for the banks and investors to earn even more money while the investors themselves have created a shortage of housing of 23000 homes in Auckland (http://www.interest.co.nz/opinion/85236/migration-now-accounts-two-thir…) or now suddenly 30000-40000 (???) houses (good example of talking up the ‘demand’ for new houses. The problem is I guess created by investors (on a large scale) that leave homes empty, 33000 in Auckland alone (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…)! This would solve the problem immediately? Its the same as me buying up all sugar (which is cheap) and sit on it for a while until people become extraordinary desperate and are willing to pay $50 for a single KG. Imagine what happens if say a third of these houses will hit the market anytime soon: the housing supply on trademe will double. A similar scenario as currently happens in Vancouver. And similar to Canada, suddenly Vancouver (Auckland) is no longer hot, but Toronto (wellington) is…
The actual problem that caused the global crisis in 2008 never got resolved. Instead they kept the economies alive through ultra low interest rates so consumers would spend. However this is not sustainable either and the consumer, who got the cheap loans, will suffer when interest rates go up. Worldwide primary goods like food and housing (also now in first world countries) have gone out of reach for normal consumers or will be soon (through rising interest rates) and these are the same consumers keep our economies afloat.
PitU absolutely they kept the game going by bailing out wallst & not bailing out mom & pops with mortgages who suddenly lost their jobs ! The hedge funds like BlacRock swooped in buying up all the millions of foreclosures They rented them out to the poor souls who no longer could afford their own homes and when the
speculation kicked back into housing BlackRock sold out at a profit
It's all about keeping the rich & well connected rich & richer
Read Nomi Prins on the coming GFC2
Northern Lights, I was not talking about rates as being a tax!
Rates are a council charge for services.
I pay tax on rental income from the properties as well as employ numerous people in regards to services etc. in regards to the properties who then pay taxes on the money I pay them.
Rubbish, more and more tax is not the solution. Not only that the money NEVER goes into what its supposed to be spent on. We had plans and discussion years ago on Glenvar road upgrades and its never happened. This is a major access road to Long Bay College and the ever increasing sprawl of multimillion dollar homes now paying rates. The road remains like something you would expect in the far north back blocks to a school with 100 pupils.
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