Howick and Pakuranga Times
Botany and Ormiston Times : Botany and Ormiston Times Thursday June 2 2016
SuperCity house prices aren’t going to drop anytime soon, says Ashley Church, chief executive of the Property Institute of New Zealand. Consequently, he says, a proposed National Policy Statement on urban development directing councils to allow more housing development where necessary won’t achieve what the Government is claiming for it. “Opening up more land is a good thing,” he says. “But any belief that doing so will reduce house prices is naive. We need tens of thousands of new homes in Auckland. So the best that can be hoped for is to reduce that backlog as quickly as possible so as to slow house price inflation down from its current dizzying heights.” He’s given last week’s Budget a qualified pass mark, describing it as “a largely responsible mixture of worthy initiatives and missed opportunities”. The key housing initiatives are $258 million to provide at least 750 more social housing places in Auckland and $100m to free up more Crown land in Auckland for housing. Mr Church says this level of spending is in line with what he would have expected the Government to have done, given its other priorities around health, welfare, education and repayment of debt. “Any Government which touted itself as being able to solve the Auckland housing crisis on its own would need to embark upon a massive State-funded home building programme – and that simply isn’t going to happen while Bill English holds the purse strings”. However, Mr Church says the Government has missed an opportunity to influence the housing market in other ways. “While it is good to see that there has been no repeat of last year’s ill-considered attempts to artificially slow the housing market, and no mention of knee-jerk responses such as land taxes, it’s disappointing that there are no positive initiatives to further encourage the private construction of new homes.” Mr Church says he would have expected further adjustments around the KiwiSaver Home Start grant and some clever uses of taxation, such as the reinstatement of depreciation incentives for property investors who build new dwellings. “Sadly there doesn’t appear to be much imagination in the measures announced.” ➤➤ In the wake of the Reserve Bank’s consideration of new lending control measures, including a new Debt-To-Income (DTI) ratio control, Mr Church has repeated his warning that such a policy would have “serious and unintended consequences” for the Auckland property market. “ These things often sound like good ideas until you start thinking through what would happen if they were actually implemented,” he says. The probable consequences of such a policy would be disastrous, he says. “ The number of new homes being built – the very thing that Auckland needs most – would plunge as the number of people earning enough to buy them would dwindle to a trickle,” he says. “So the policy could very well kill off the one thing that can fix the Auckland housing crisis – the construction of new homes.” Mr Church says the policy would also lead to a dramatic increase in rents over a relatively short space of time as property investors looked for ways to increase income so as to be able to buy more property. “Most landlords are currently showing restraint and choosing to accept lower returns because capital growth is so strong,” he says. “But in an environment where every extra dollar enhances borrowing power, landlords will want to maximise rentals and they’ll be able to do it because the Reserve Bank policy will exacerbate the current housing shortage.” Mr Church says the proposed policy would also fuel an artificial boom in apartment construction, caused primarily by the fact that these would be the only dwellings most people could afford to buy under such a policy. A further barrier to young people looking to buy their first home would be created, “a prospect already made almost impossible by the Reserve Bank clampdown on loan-to-value lending”. Price inflation in Auckland, he says, is the result of strong demand and a severe lack of supply and the Reserve Banks’ attempts to artificially slow down demand are making the situation much worse. 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