NZ PM spins housing failure. Promises first home buyer bribe

By Leith van Onselen

With the New Zealand National Government’s single-minded focus on solving Auckland’s housing crisis by boosting supply failing dismally, and it facing possible election defeat as the nation hits the polls on 23 September, Prime Minister Bill English has promised to boost first home buyer (FHB) subsidies and resorted to spin about the Government’s record on housing supply. From Interest.co.nz:

[National’s] Amy Adams and Nick Smith were wheeled out to announce a boost to the government’s HomeStart deposit subsidy. Also announced is that banks will be allowed to approve 10% government guaranteed Welcome Home Loans on the spot to first home buyers on low incomes, without having to jump through the current checks and balances.

Bill English on Monday morning defended the need to boost the subsidy…

“And the drive in Auckland, as in the rest of the country, is getting more houses on the ground, faster.” This was well under way, English said.

“Prices are flat-to-falling, so that indicates there’s progress. But we do need four or five years of the kind of building boom we have now, where across the country there’s around about 30,000 houses a year going to be built.”

Asked whether that meant there weren’t enough houses to meet current demand, English replied: “Well, there’s people who want to get into houses at the moment who can’t get in. As of today, a number of the first home buyers will be pricking up their ears, because there’s now – we reckon about 80,000 more will be able to get into the market, where in the last two-or-three years 30,000 have already used the HomeStart scheme.

“It’s also going to be clearer to them what they can get. Because the Welcome Home Loan, which is a guarantee for those who have a 10% deposit instead of a 20% deposit – government backed guarantee – they have to go through a separate process with [Housing NZ], and we want to bundle that together so when they go to the bank, they can see that they can get the HomeStart grant – $20-30,000 if they’re a couple; $10-15,000 if they’re on their own – and get the Welcome Home Loan if it’s a 10% deposit,” he said…

He disagreed that the move would fuel house price rises, saying government would ensure this didn’t happen “by continuing to pursue all the projects with Councils that are getting more houses built faster.”

Economics 101 tells you that you don’t solve a housing affordability problem by further pumping demand via FHB subsidies.

English’s comments about succeeding in boosting supply also don’t hold much water given the circa 30,000 consents issued across New Zealand (circa 10,000 in Auckland) is running well below the nation’s immigration-fueled population growth of roughly 100,000 people (44,500 in Auckland):

The situation is probably even worse than suggested above, with CoreLogic in August estimating that “while Auckland consents increased by almost 10,000 in the past year, the housing stock increased by less than 6000 dwellings”. Moreover, “less than half the number of new homes that Auckland needed last year were actually built”, and “the housing gap is bigger than is being talked about”.

Sadly for FHBs, the housing shortfall continues to worsen, and will likely continue to do so under current settings.

Recent population projections from Statistics New Zealand estimated that Auckland’s population will rise between 56% (medium growth scenario) and 75% (high growth scenario) between 2013 and 2043:

Driven by mass immigration:

Auckland will continue to be New Zealand’s fastest growing region. Among regions, Auckland is projected to receive over half New Zealand’s net migration, and account for over half the country’s growth in the period to 2043…

ScreenHunter_17595 Feb. 22 08.53

With at least 14,000 new homes needing to be built (not consented) in the city each year – more than double the current build rate – it is obvious that the housing situation in Auckland will continue to worsen as dwelling supply falls well short of rapid immigration-fueled population growth.

New Zealand needs genuine action on both the demand and supply-sides. And only Labour seems to have comprehensive policies (see here and here).

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Comments

  1. How many people turn 18 each year? How many immigrants arrive each year? Could it be that many of the FHBs in NZ (like in AU) are in fact migrants? That would explain be why the govt has to be seen to care about FHBs but doesn’t really.

  2. john.denticeMEMBER

    .. and this is why, IMO, Labour has a real shot of winning this election under their new leadership who, like John Key for National, has a cult-of-personality. Her new policies are appealing to voters who, after 9 years of a National Government are cynical about any “new initiatives” to solve problems that haven’t been remedied during the 3 terms of a National Government.

    The weekend’s policy release from Labour to BAN foreign investment in NZ houses will be a major event in this election and will pull a material number of voters from both NZ First and National.

    Whilst a Labour win would be financially costly for me (more taxes) if their policies are good for NZers and assist in reversing the trend in inequality then so be it.

    Cheers
    John

    • John, what do they mean by “BAN foreign investment in NZ houses”? I think foreigners – even if they reside in NZ or pretend to reside in NZ – should be banned from owning land in NZ. That would surely cut the price of land.

      I do not mind if foreigners own apartments with elevators. After all, apartments take up hardly any land. The bubble = the artificially high price of land.

  3. Ardern v English: Leaders’ house price claims face credibility claims | Rob Stock | Stuff.co.nz

    https://i.stuff.co.nz/business/money/96556989/arden-v-english-house-price-claims-face-credibility-claims

    … extract …

    … VERDICT ON ENGLISH

    English’s answer may provide comfort for homeowners enriched as a result of a failure to build enough homes to meet demand, but it offers none to a generation of people left renting from astronomically high house prices.

    Hugh Pavletich, who describes himself as “somewhere to the right of Genghis Khan”, said: “There has already been a generation that’s been severely mistreated because of this housing issue, and what Mr English is saying is another generation should miss out. That is grossly irresponsible.”

    Pavletich said prices must fall, gradually, until they are around three times median income.

    English’s vision of prices staying level, but falling in real terms as wages rise, wouldn’t achieve that.

    Auckland needed only look to Christchurch for its housing solution, Pavletich said. Spread out. Free up land supply. Let people build.

    Pavletich does not believe National has the policies to keep prices flat as incomes rise.

    “We will get to Sydney levels and beyond if we leave the current government in place,” said Pavletich.

    When National came to office under John key the median house in Auckland cost 6.4 times median household income, he said. “It’s now a “stratospheric” ten times.”

    “After nearly a decade of inaction from this government, we have really had enough.” … read more via hyperlink above …

    … EVEN LOCAL GOVERNMENT IS WAKING UP … BELATEDLY ASKING THE RIGHT QUESTIONS …

    Waipa mayor: Affordable housing problem remains unless attitudes change | Stuff.co.nz

    https://i.stuff.co.nz/waikato-times/life-style/96484661/waipa-mayor-affordable-housing-problem-remains-unless-attitudes-change

    … extract …

    … “Doing the math, the base price for farmland sold originally for $600,000 to $70,000 a hectare, divide that with a low cluster development of 10 houses, take into account up-front costings of $100,000, I fail to understand why we still end up with sections on the market for $300,000.” … read more via hyperlink above …

    … Check out the simple structural DEFINITION OF AN AFFORDABLE HOUSING MARKET at http://www.PerformanceUrbanPlanning.org … google search ‘New Homes … North American City of your choice’ … refer Demographia Survey for guidance.

    Ask too … why we currently have not got this pricing in New Zealand … Pulte Homes Phoenix Arizona example …

    https://pulte.com/homes/arizona/phoenix/florence/parkside-at-anthem-at-merrill-ranch-7739#CommunityDetailsView

  4. An Auckland real estate agent has slashed his commission by 50% to try and drum up new business | interest.co.nz

    https://i.stuff.co.nz/national/politics/96739673/jacinda-ardern-says-neoliberalism-has-failed

    After years of hands-off tactics from central government, whatever hue of administration takes over after September 23 is likely to be more interventionist in the housing market | interest.co.nz

    http://www.interest.co.nz/opinion/89765/after-years-hands-tactics-central-government-whatever-hue-administration-takes-over

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