Ardern hurls first home buyers into collapsing New Zealand housing market

With New Zealand’s house prices falling 5% since November, and Westpac tipping a peak-to-trough decline in values of 15%, the Ardern Government’s latest Budget has summoned the first home buyer patsies.

House price caps will be removed for First Home Loans, and will be lifted on First Home Grants, in a desperate bid to juice demand and stem price falls:

“We are increasing the house price caps for the First Home Grant to align with lower quartile market values for new and existing properties. This recognises the changes in house prices over the past year,” [Housing Minister] Megan Woods said.

“We are also removing house price caps entirely from the First Home Loan, to provide a greater choice of homes for prospective first home buyers. Income caps and lender requirements are sufficient to ensure that the First Home Loan is used by buyers who need support for a first home”.

“We estimate that these changes, along with other changes to the eligibility criteria, will help thousands more first home buyers, with funding available for approximately 7,000 extra First Home Grants and 2,500 extra First Home Loans available every year”.

New Zealand first home buyer scheme caps

Deputy Leader and Housing spokesperson for opposition party ACT, Brooke van Velden, quickly condemned the Ardern Government for throwing more fuel on the housing bonfire:

“The Government hasn’t finished increasing the cost of living for New Zealanders. Now the Government is pumping an extra $148 million into an already inflated housing market”.

“This is especially true now that the maximum house price to be eligible in Auckland for the grant no longer distinguishes between old and new housing, removing any incentive to grow supply”.

Too right. History shows that these types of demand-side measures are always capitalised into higher home values, thereby making housing affordability worse.

Encouraging first home buyers into an inflated housing market is a bad idea at the best of times. It is even worse when interest rates are rising sharply and house prices are about to fall off a cliff.

Unconventional Economist

Comments

  1. I am now old and as impotent as the LNP model for the Federal Corruption Commission, but if I were you I would borrow as much as the Bank allowed and make a generous offer to secure your dream place. It doesn’t matter what you pay today, it won’t make a difference in a decade or two.

    • Yep, when you are out on the street begging for food you won’t give a care what you paid for it.

    • kiwikarynMEMBER

      Presumably you are also working in an occupation that will guarantee that you never lose your job, and in a marriage that guarantees you will never get divorced, and in such robust good health that you will never become unwell or disabled. Because if for some reason you are forced to sell your home (default, foreclosure, matrimonial property settlement) you will find that you do very much care how much you paid for. Like my US friend who had to pay her ex-partner $45k to agree to KEEP the house rather than sell it (because if it were sold she would be liable to the bank for far more than the $45k thanks to negative equity).

  2. Hugh PavletichMEMBER

    New Zealand urban development reality of increasingly affordable decentralization and dispersal …

    … Just further evidence … new commercial consenting trends …

    Warning bells ringing for commercial building work as new commercial building consents drop to an almost 30 year low … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/115955/warning-bells-ringing-commercial-building-work-new-commercial-building-consents

    (New Zealand) ‘20% occupied:’ Huge drop in use of office space nationwide … Miriam Bell … Stuff New Zealand

    https://www.stuff.co.nz/business/property/128545446/20-occupied-huge-drop-in-use-of-office-space-nationwide

    … with the influence of the internet … Professor Niall Ferguson explains …

    Historian Niall Ferguson on the roots of today’s political polarization … Long Now Foundation … Youtube

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

    … Professor David Levinson of Transport Studies at the University of Sydney explains this reality very well …

    David Levinson … The New New Normal … The Transportist

    https://transportist.org/2020/11/03/the-new-new-normal-mobility-and-activity-in-the-after-times/

    • Hugh PavletichMEMBER

      … helped by Malcom McLean dropping the price of moving product from $100 a ton to $2.85 in creating the modern container industry during the 1950‘s … Malcolm Gladwell explains …

      Malcolm Gladwell at 2014 TIBCO Conference … Lessons from container industry creator Malcom McLean

      https://www.youtube.com/watch?v=zIfdIJR309c&t=85s

      … and soon after World War 11, Bill Levitt created the modern residential production construction industry … supplying new standalone homes to young families for about 2.5 times SINGLE EARNER family income … as the Smithsonian Institution explains …

      This Man Is the Father of Modern American Suburbia … VIDEO (2.36 min) … The Smithsonian Channel

      https://www.si.edu/object/yt_ksmH5OcLQFw

      Expanding the American Dream … Barbara Kelly … Amazon Books

      https://www.amazon.com/Expanding-American-Dream-Rebuilding-Levittown/dp/0791412881

      • This guy Hugh – ?????

        Levitt refused to integrate his developments. The Jewish Levitt barred Jews from Strathmore, his first pre-Levittown development on Long Island in New York, and he refused to sell his homes to African Americans. His sales contracts also forbade the resale of properties to blacks through restrictive covenants, although in 1957 a Jewish couple resold their house to the first black family to live in a Levitt home.[11] Levitt’s all-white policies also led to civil rights protests in Bowie, Maryland in 1963.[10][12] The National Association for the Advancement of Colored People and the American Civil Liberties Union opposed Levitt’s racist policies, and the Federal Housing Administration prepared to refuse mortgages on his next Levittown. Nevertheless, Levitt would not back down and continued planning another whites-only Levittown in Willingboro Township, New Jersey. He fought legal challenges in New Jersey courts until the United States Supreme Court refused to hear his case.[13]

        The 2003 PBS series Race: The Power of an Illusion, by California Newsreel, features Levittown and nearby Roosevelt in documenting systemic racism in the development of the early suburbs.

        Levitt has been criticized for his racially discriminatory policies when providing housing, which were especially discriminatory to African Americans, Asian Americans, Hispanic Americans and Native Americans. – snip

      • He was not who you think he was Hugh unless your like that to and how that reflects on yourself. Information in mod but till then see – The 2003 PBS series Race: The Power of an Illusion, by California Newsreel, features Levittown and nearby Roosevelt in documenting systemic racism in the development of the early suburbs.

        Then your lot has dramas with migration arguments e.g. self inflicted IMO

        PS wiki has a good bio on it.

        • Hugh PavletichMEMBER

          Skippy … Bill Levitt was very clear on this issue … stating he could solve the housing problem but not the culture problem.

          Note too, the Levitts are Jewish … and knew a thing or twenty about discrimination.

          You forgot to mention the vested interests of the construction industry … the cottage builders in the main via their industry body the National Association of Homebuilders, detested the Levitts.

          Lower cost and more efficient competition terrified them.

          So the National Association of HomeBuilders conspired with the local politicians and planners in a vain endeavor to shut out the Levitt production systems … with this community planning garbage …

          1959 Film from ULI and National Association of Homebuilders Warns of Urban Sprawl

          https://www.youtube.com/watch?v=c1W3onge7BY

          Preference always trumps policy … as you would well know Skippy.

          Lets see what happens in NZ as the bubble bursts.

          Its a long drop from 9.0 Multiple to 3.0.

          What happened to Ireland in 07 when it went from 4.7 to 2.8 MM ? …

          Median Multiples | interest.co.nz

          https://www.interest.co.nz/property/house-price-income-multiples#:~:text=Based on this official work,on the US housing market.

          • Levitt had no idea of what he was talking about with regards to social issues and lets not be cute about his driving incentives e.g. make lots of money for himself i.e. the idea that he was on some grand mission for the well being of citizens is a joke.

            The argument you make about cottage builders is the same one used by monopolists Hugh, the same thing happens but on a much larger scale and with it the political power to influence the state in its legislative policy e.g. Walmart, Amazon, Swift, and then all the BSD financial concerns with a side of PE treatment. Not to mention the crapification of quality in materials and construction let alone the use of land in environmentally compromised locations subject to floods or land subsidence et al.

            All the while cramming down labours share of productivity whilst primary RE was turned into a RMBS investor plaything which 30ish years of risk was created for a payday today and the risk hived off to other investors for an income stream. Now whack unregulated derivatives on it to buff credit scores and then act dumb when epic corruption and fraud manifests in credit risk implosion aka the GFC.

            Per se a family friends kid who is studying architecture, won a state award for a design submitted for a Olympics facility, and works at a architecture firm, just bought an Apt in St Lucia. Funny thing though, would not buy anything post mid 80s due to build/construction concerns, family is also close to Wiley&Co, let alone my connections in the U.S. and Oz over some decades so I know the industry.

            The problem with people like you Hugh is you have zero experience in this industry, save spouting ideological dogma, no different than your Sunshine Coast back filled mangrove swamp RE spruking days. Further more it did not take long post GFC in America for prices to just go right back up and in many cases surpass previous marks e.g. my sister in Arizona just bought a few year old property in north east maracopia county and prices were going up tens of thousands of dollars a month without any improvements, her words was it was a stampede to buy now ….

          • Hugh PavletichMEMBER

            Skippy … With all due respect, your response above is incoherent drivel.

            Are you an academic ?

            Levitt is in fact one of the few true greats of the residential development and construction industry.

            To restore housing affordability with housing at or below 3.0 times annual household incomes, it is of critical importance Levitt style production builders are able to operate.

            The Metricon difficulties should be a serious concern …

            ‘A very major correction’ under way as building industry faces crisis … Josh Gordon, Jackson Graham, Tawar Razaghi and Elizabeth Redman … The Sydney Morning Herald

            https://www.smh.com.au/national/a-very-major-correction-under-way-as-building-industry-faces-crisis-20220519-p5amtj.html

            KEY POINTS

            • Westpac chief economist Bill Evans said “a very major correction” is under way in the building sector.

            • ABS figures show nationally, there were about 15,000 dwelling approvals issued in March 2022, down from 23,600 in March 2021.

            • For the first time in the past five years, construction made up the most insolvencies of any sector in Victoria.

            Australia’s construction sector is bracing for a major slump over the next year as builders struggle with surging costs for raw materials, worker shortages, supply chain delays and looming interest rate rises. … read more via hyperlink above …

            Email to spooked Metricon customers reveals extent of collapse worries … Alexis Carey … News com au

            https://www.news.com.au/finance/business/other-industries/email-to-spooked-metricon-customers-reveals-extent-of-collapse-worries/news-story/f8ccddfdb104529c54baea4689d618df

            Metricon: The Tip Of The Property Storm Iceberg? … Martin North … Digital Finance Analytics

            https://digitalfinanceanalytics.com/blog/metricon-the-tip-of-the-property-storm-iceberg/

            Metricon

            https://www.metricon.com.au/

            Thanks to the dumb politicization of the industry, the production builders were wiped out of New Zealand and Tasmania decades ago. It is hoped this doesn’t happen on mainland Australia.

  3. Let’s keep in mind what this is:

    If you buy an existing home, you can get $1,000 for each of the 3 (or more) years you’ve paid into the (Kiwisaver – Superannuation Scheme). The most you can get is $5,000 for 5 or more years. If you buy a new home or land to build on, you can get $2,000 for each of the 3 (or more) years you’ve paid into the scheme. The most you can get is $10,000 for 5 or more years.

    So, sure, any additional ‘incentive’ is to be criticised, but in the grand scheme of things – it doesn’t matter, because:
    The Banks still aren’t lending as they did even 6 months ago. So unless you get a mortgage, you can’t get the additional Government payment.

  4. I stopped believing in evil after philosophy classes in university, but I’m starting to question that now.

    These people need to burn.

    • Incentives and a side of capital not having the same rules as the rest of the unwashed … Dimon got WH cuff links and no consequences after a 13 billion fine for just about every law was broken … plus the JPM stock went whoosh up after the fine was settled …. oops all fines were written off or crammed on share holders[tm] …

      Do you need another list of what corporatism is and does – ?????

      • As you know:

        JPMorgan Chase received a copy of a U.S. attorney’s draft complaint documenting its alleged role in underwriting fraudulent securities in the years leading up to the 2008 financial crisis. Following the bank’s $13 billion financial agreement, the draft complaint was never filed. Then the bank paid another settlement to prevent a separate legal case from potentially unearthing it.

        • Ditto for Eric Holder Ag publicly stating on TV that no strategically important corp would be charged under the pretense of national security … yet here we are blinking at the events in the Ukraine after 2014 if not back to Gorbies day …

  5. It’s likely a lot less than what National will be prepared to do to keep the bubble inflating. When they were last in power the official position was that there was no problem with housing affordability. Any noise they make about it in opposition is as meaningful as the LNP’s debt and deficit screeching in 2013 before they increased Australia’s debt by $600 billion or so.

    That said – it’s not good policy, not defending it and I don’t like this Labour govt. They are incompetent and ineffective and they have not delivered on a lot of good policy ideas that they campaigned on.

  6. Hugh PavletichMEMBER

    NZ Reserve Bank tipped to raise official cash rate to highest level since 2016 … Tom Pullar-Strecker … Stuff NZ

    https://www.stuff.co.nz/business/128683248/nz-reserve-bank-tipped-to-raise-official-cash-rate-to-highest-level-since-2016

    Latest figures show that having stretched themselves further and further in recent times new borrowers are now markedly stepping back from super-high borrowing levels … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/property/115710/latest-figures-show-having-stretched-themselves-further-and-further-recent-times

    QV says upmarket homes in central Auckland have declined in value by 3.4% since January but the decline in values at the bottom of the market has been greater … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/116008/qv-says-upmarket-homes-central-auckland-have-declined-value-34-january-decline

    RBNZ Survey: 64% Of Experts Say Rising Inflation Will Push More Kiwis Into Debt … Finder / Scoop Business

    https://www.scoop.co.nz/stories/BU2205/S00401/rbnz-survey-64-of-experts-say-rising-inflation-will-push-more-kiwis-into-debt.htm