NZ leaders’ phony war on house affordability

By Leith van Onselen

In the lead-up to last year’s Australian federal election and since, we have witnessed politicians from both sides feign concern over Australia’s poor housing affordability while at the same time soothing concerns that house prices would necessarily fall.

It seems New Zealand’s politicians have followed the same script in this week’s leaders debate. From Mike Reddell:

There was the sight of both party leaders falling over themselves to disavow any notion that house prices should fall.  Apparently, a $1 million average house price (or the less headline-grabbing but still obscene median price of $800000+) in Auckland is just fine.  I suppose we should be grateful that on the one hand the National Party has moved on from the nauseating talk of how these house prices were a “sign of success” or a “quality problem”, and on the other hand that Labour’s housing spokesman will openly talk of an aspiration to having house prices averaging perhaps 3 to 4 times income.    Perhaps both party leaders really would prefer that Auckland house prices hadn’t increased very substantially in the last five years, but now they both seem content to simply treat it as a bygone –  as if we should simply live with $1 million house prices indefinitely until, some decades hence, a combination of inflation (mostly) and real income growth, might render home-owning in our largest city once again affordable to new entrants.

A couple of weeks ago I showed this chart.  Starting from a price to income ratio of 10 –  roughly that in Auckland now –  it traces out how house price to income ratios would evolve if nominal house prices were unchanged from here on (something both party leaders now appear regard as a good outcome).

Just focus on the green line.  If we have inflation averaging two per cent, and productivity growth matching the performance of the last 30 years (quite a step up from where we are now) it would take almost 25 years to get price to income ratios down to even around five times income.

The Prime Minister talked of this being an issue for his kids.  The solution, to the extent there is one, seems to be aimed at his grandchildren.

[Labour’s] Ardern seemed to try to have it both ways with the talk of “we just need to build more affordable houses”.   Lay members of my household responded “well, wouldn’t building more houses lower prices, which she just said she didn’t want?”.

Actually, it is unlikely to make very much difference, unless she is serious about freeing up land supply.  Without that, the overall affordability of the housing stock won’t change much, and any new houses built by or for the state will largely displace others that would have been built by the private sector.  And yet, although on paper Labour’s policy on improving land supply looks promising, the current Leader of the Opposition continues in path trod by her predecessor and simply never mentions the land issue –  even though everyone recognises that in Auckland in particular, the price of land is the largest component of a house+land…

Sadly, I suspect there is an element of dishonesty about both party leaders’ responses…

Much like in Australia, Labour’s housing policies targeting both demand-side and supply-side factors are far superior to those of the conservative National Government. Labour has also pledged to lower net migration by some 20,000 to 30,000 people per year, thereby reducing housing demand by up to 10,000 homes annually.

Even so, it would be nice if both sides engaged honestly in the housing debate.

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Comments

  1. New Zealand politicians talking eyewash on housing issues has gone on for a very long time indeed !

    Here is former New Zealand Prime Minister John Key in 2007 …

    PM John Key on Housing Reform 2007 – YouTube

    https://www.youtube.com/watch?v=cWPgoAI1cLE

    Indeed Key was remarkably honest back in 2007 … within the above video !

    He changed immediately after assuming office in late 2008 … inflicting the public with a constant flow of deceit and incompetence ever since.

    Check out the GONE GONE GOING section at my archival website PERFORMANCE URBAN PLANNING (click on my name above).

    Check out in particular the 28 May 2016 Newshub Reid Research Poll within the above … the beginning of the downfall of this current Government.

    Captain ‘Costa Concordia’ Key deserted the ship 5 December … leaving English to lead the sinking.

    At the time of the release of this year’s Demographia International Housing Affordability Survey, I walked through the issue within NEW ZEALANDS HOUSING CONSENSUS: WHERE IS THE POLITICAL LEADERSHIP ? …

    http://pc.blogspot.co.nz/2017/01/auckland-worlds-fourth-hardest-to-buy.html

    Two years ago Reserve Bank Governor Graeme Wheeler spelt it out to politicians when Auckland housing was 9 times household incomes. It is now 10 times …

    Auckland market in danger zone – RBNZ Governor Wheeler | Radio New Zealand News

    http://www.radionz.co.nz/news/business/283784/auckland-market-in-danger-zone-rb

    … extract …

    … But Mr Wheeler this afternoon told MPs the faster house prices rose in Auckland, the greater the likelihood of a steep price reversal.

    He (Reserve Bank of New Zealand Governor Graeme Wheeler) said Auckland house prices were not sustainable.

    “The house price to income ratio for Auckland is at nine. It’s twice that for the rest of the country,” he said.

    “A ratio of nine puts you, according to Demographia figures, in the top 10 most expensive cities in the world.

    “This is just dangerous territory.” … read more via hyperlink above …

  2. Buyer demand for Auckland properties is lower than in any other region in the country and new listings and prices have also tumbled, says realestate.co.nz | interest.co.nz

    http://www.interest.co.nz/property/89688/buyer-demand-auckland-properties-lower-any-other-region-country-and-new-listings-and

    Buyer interest is lower for residential properties in Auckland than for any other region of the country, according to realestate.co.nz.

    The residential property market finished winter on a particularly slow note in most parts of the country, but Auckland has been especially badly affected, according to the latest figures from the property website.

    “Nationally, there has been a fall in new listings, static asking prices and muted demand,” Realestate.co.nz said in its August report. … read more via hyperlink above …

  3. … SADLY … A HOUSING MARKET IN CHAOS …

    PM Bill English says Govt spends billions propping up the private rental market … video … Fairfax NZ

    https://www.stuff.co.nz/business/property/96523625/PM-Bill-English-says-Govt-spends-billions-propping-up-the-private-rental-market?cid=app-iPad

    The Government spends up to $6 million a day propping up New Zealand’s private rental market.

    The $2.3 billion annual spend supports 60 per cent of the country’s private renters, and is helping to keep a vast number of Kiwis out of poverty.

    Those figures were revealed by Prime Minister Bill English at the leaders debate on Three on Monday night as an example of how the Government cared for Kiwis in financial difficulty. … view and read more via hyperlink above …

    … Mid – August report …

    Govt buys another two motels to put up homeless, denies link to fall in state housing … NZ Herald

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11905468

    Social Housing Minister Amy Adams says the Government plans to buy another two motels to put up homeless people.

    The new purchases come on top of the four motels already bought by the Ministry of Social Development for emergency housing, at a cost of $4 million.

    The Government began funding emergency housing for the first time in late 2015 because of drastic housing shortages and rising costs, and its role in the sector continues to expand.

    In all, it has now spent $350 million on emergency housing, creating around 8600 places. … read more via hyperlink above …

  4. Seriously, anyone who believes that the Kiwis are moral superiors in any way are completely delusional. They are the same as Aussies in terms of greed, etc. They are the Canadians of the South Pacific. THeir geography is the source of their “moral superiority”. Just like the Canadians. Fucking idiots, the lot.

  5. Posted at Kiwiblog … where the ‘all talk’ Kiwi Tories hang out …
    http://www.kiwiblog.co.nz/2017/09/campaign_countdown_-_16_days_to_go.html/comment-page-1#comment-2014720

    Hugh Pavletich

    Margaret Thatcher Quotes (Author of The Downing Street Years)

    https://www.goodreads.com/author/quotes/198468.Margaret_Thatcher

    I’m taking Maggie Thatcher’s advice and voting for Jacinda on the 23rd …

    “In politics, If you want anything said, ask a man. If you want anything done, ask a woman.”
    ― Margaret Thatcher

    This was John Key a decade ago … 2007 …

    PM John Key on Housing Reform 2007 – YouTube

    https://www.youtube.com/watch?v=cWPgoAI1cLE

    • … and Nick Smith was John Key’s ‘action man’ when appointed Housing Minister early 2013 … refer GONE GONE GOING section http://www.PerformanceUrbanPlanning.org .

      Hasn’t the talk gone on long enough ?

      Time for action …

      Housing – New Zealand Labour Party

      http://www.labour.org.nz/housing

      … extract …

      Remove barriers that are stopping Auckland growing up and out

      Labour will remove the Auckland urban growth boundary and free up density controls. This will give Auckland more options to grow, as well as stopping landbankers profiteering and holding up development. New developments, both in Auckland and the rest of New Zealand, will be funded through innovative infrastructure bonds.

  6. As obscene as all of this is, you can’t tell punters that their house price is going to go down. That is not a sensible political strategy.

    NZ labor’s policy and messaging is about as sensible and practical as it gets

  7. Shut down the NZ back door racket.
    That will instantly solve NZ Migrant intake impacts and also assist Australia.
    NZ is just a transit camp for the Chinese, Indians & third world on very easy entry / gain NZ residency and then over to Australia on a special category visa.
    Almost a third of nz migrants having gained residency then exit to Australia immediately (31%), and over half longer term (nz dept statistics).
    These migrants are even lower quality than what sneaks in here on pretext visas, due to nz being the overflow of what can’t get into Australia directly or visa churn and extension by those exited from Australia.
    (Eg Indians fake papers or Chinese expelled on a TR from Australia will then go to NZ as the back door to get back into Australia).
    The Australian New Zealand SCV special category visa should be restricted to only Australia or NZ born citizens.
    That will help NZ in taking the sugar off the table foror the migrant trafficking trade.

    And prevent what is now a pool of over 200,000 third world unskilled migrants backed up in NZ going they the motions of pretending to be an ‘international student or ‘sponsored skill’ or ‘spousal’ or other pretexts then being able to enter Australia.
    Winston Peters “NZ only sells two things, milk powder to the Asians and NZ residency stamps to get into Australia”.

    And if anyone thinks this isn’t happening / ask yourself – how many NZ special category visa holders in Australia now and what was their country of origin ?
    650,000 ! And nearly 300,000 are non nz born.
    Genuine NZ born coming in are rare now, and the NZ born here who didn’t take up Australian citizenship are actually going back.

    The trans/ Tasman people trafficking racket needs to be shut down.

    ABF Temporary entrants in Australia
    NZ special category visa 646,830
    ‘International Students’ primary 565,760
    Students / other secondary 355,760
    Backpacker 150,220
    Temp skilled (457) 148,500
    Working holiday 127,110
    Bridging 60,090
    Other 37,240
    Sub total 2,091,490
    Overstayer 60,000 (ABF estimate)
    Illegally working tourist (ABF estimate) 400,000
    Total 2,651,490
    2.6 million !!

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