ANDREW LITTLE (Leader—Labour) to the Prime Minister: Does he stand by his statement that he doesn’t accept the average Auckland house, costing $992,000, is out of reach for most families?
Rt Hon JOHN KEY (Prime Minister): I stand by my full statement in the House yesterday, which was: “If you look at the year to 31 March 2016 in Auckland there were 31,963 sales. Sales in the under $600,000 category of … homes were over 30 percent of that—9,638 sales. For … houses under $650,000 there were 11,842—37 percent of sales.” My point was that there is a significant number of Auckland houses selling for well under the reported average price. In addition, on the back of the Government’s housing plan, we are on track to build 85,000 new houses across New Zealand in this term of Parliament alone…
Andrew Little: I am obliged to Mr Speaker. Does he agree with the Minister for Building and Housing, Nick Smith, that houses are getting more affordable, despite prices rising by half a million dollars under his Government?
Rt Hon JOHN KEY: I think the point that the Minister was making was that there are a number of different factors, and one of them includes very low interest rates and high levels of economic growth. I think it is probably worth injecting just a few facts into this debate. If one looks at the 2009 to 2016 level, national house prices across the country in that period of time grew 43 percent. Interestingly enough, as a comparator, between 2000 and 2008 national house prices grew by 102 percent. If one looks at Auckland over the period 2009 to 2016, house prices grew 82 percent. But, interestingly enough, if one looks at Auckland house prices between the period of 2000 to 2008, they grew 87 percent. So it is pretty simple. When they go up by a smaller amount under a National-led Government it is a crisis, but when they go up faster under Labour it is not.
Andrew Little: In light of that answer, and moving to the present, if housing is getting more affordable, why is homeownership falling and why are record numbers now living in cars and garages?
Rt Hon JOHN KEY: There are many reasons why homeownership rates have been declining over the last 30 years, but I go back to my point. Opposition members seem to care about this issue today but did not care about it when they were in Government…
Andrew Little: Does he seriously think most families have a $200,000 deposit and can afford the $1,000 a week mortgage needed for the average Auckland house?
Rt Hon JOHN KEY: There will be a great range, of course, of different financial circumstances of New Zealanders. But as I said yesterday, interestingly enough, in the under $600,000 category—30 percent of all sales took place at that level, and at the new $650,000 category, where people can get access to the KiwiSaver HomeStart programme in Auckland, 37 percent of sales took place. Interestingly enough, just to take, for instance, Hamilton, 75 percent of all sales that took place over the last 12 months were under $500,000. In Tauranga, for houses under $500,000, it was 54 percent. It is quite wrong to say there are no sales that take place at more affordable levels, and a lot of New Zealanders are very realistic and they do match their income and their deposits with the houses that are there.
Andrew Little: When Auckland’s population grew by 43,000 last year but, according to Bill English, only 500 affordable houses were built, how can he possibly deny there is a shortage of affordable housing?
Rt Hon JOHN KEY: The Government is working on the issue of making sure that there are more affordable houses. But I actually do stand proudly by the fact that there are Kiwis returning from overseas. There are New Zealanders not going because they see opportunities, rising wages, a stronger economy here in New Zealand. The Labour Party thinks success is when everybody leaves and you have got to go to the departure lounge to see your grandkids. Well, if that is success, you have got a pretty warped view of what a good New Zealand is like…
Andrew Little: Can he just tell me straight when homeownership rates will start to rise again in New Zealand and restore the Kiwi Dream of homeownership once more?
Rt Hon JOHN KEY: I cannot tell the member when that side of the trends will change, but what I can say is that under a National-led Government there is a very comprehensive plan of ensuring that there is both increasing supply and support. Interestingly enough, we saw the Real Estate Institute of New Zealand data that came out today and indicated Auckland is the slowest-increasing region in the country for house prices. I say to the Nick Leggett hater: why does he not just understand the data?
Andrew Little: In light of the fact that 75 percent of New Zealanders do not believe him when he says that he has got the housing crisis under control, when will he finally step up and take responsibility?
Rt Hon JOHN KEY: I go back to the interesting facts, which are that there are more houses being constructed than ever before. There is a housing boom taking place in New Zealand. There are more people working in the construction sector than we have ever seen before. Under a National-led Government national house prices have gone up at under half the rate that they did under the previous Labour Government. It is very easy in Opposition to make these claims, but, in Government, Labour was a complete and utter failure…
Then the Greens had their turn to hammer the affordability issue:
Metiria Turei (Co-Leader—Green): Does the Prime Minister agree with the World Bank, the United Nations, and Demographia that the price to income ratio of three times the median household income is the standard measure for an affordable home?
Rt Hon JOHN KEY: I do not think that in international cities there would be the case anywhere that, I think, the member could quote. So I think what is realistic, though, when looking at affordability for homes, is: do people have a job to support the mortgage; are interest rates at an affordable rate for them; is the prospect if they lose their job or want further overtime likely to be there; is there, in some cases, assistance from the Government, as there is under the National-led Government through KiwiSaver HomeStart; and, most importantly, what is the pipeline of development of housing in the case of New Zealand? Under this Government, it is extremely significant. That is why we are seeing a record number of houses being built.
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Clearly, the New Zealand Government is currently failing on housing affordability. As noted in last month’s speech by Reserve Bank of New Zealand Deputy Governor, Grant Spencer:
Overall, New Zealand house prices relative to incomes are 32 percent above their long run average, and the second highest in the OECD. The IMF estimates that New Zealand house prices are around 20-40 percent overvalued based on long run affordability metrics.
As shown above, the only market where homes are truly “affordable” is Invercargill.
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Nevertheless, at the least the issue of housing affordability is being vigorously debated in New Zealand, which is the first step to achieving a solution.
Now compare this to Australia, where housing affordability barely ever gets a mention.
The kiwis are so far ahead of us on housing (not to mention debating immigration) it is laughable.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
