Housing Affordibility
It’s good to see some serious action on the home front, the housing market, that is.
The Government has finally noticed that Auckland house affordability is increasingly slipping out of our grasps.
Put simply: house prices in Auckland are just too expensive.
Owning a home is such a great part of the Kiwi psyche, and increasingly, for all who have dreams of property ownership in Auckland, a vibrant city of more than one million people, including more than 100,000 Indians.
Finance Minister Bill English gave local authorities an ultimatum this week: free up enough land to allow the construction of more affordable homes or the Government will force them to do it through legislation.
Increasing, the supply of land for building was one of the key planks in the Government's response into the Productivity Commission's inquiry into home affordability.
The package includes significant changes to the Resource Management Act which will have effects well beyond the housing market.
Mr English said the Government had no control over the housing market where rising prices had helped fuel household debt and contributed to damaging imbalances in the economy.
But local authorities could exert considerable influence on the market with planning decisions and the consent process.
While it may start off as a political minefield which could blow up every now and then right up to the next general election, it could also prove to be a political game-changer.
The issue was complex, and, as Mr English said, there was no quick fix for spiraling house prices.
The situation is indicative of a market where demand is outstripping supply. Our children should have access to affordable housing, but the affordability issue will not be tackled effectively until the Government also looks at reducing demand, which is being driven by investors in rental properties.
Investors, in turn, are driven by a tax system that declares that borrowing and buying houses is the most sensible form of investment.
If property was placed on the same tax footing as other investments through the introduction of a capital gains tax, as some media commentators have suggested, demand from that quarter would drop, there would be less money driving up the price, and the supply of houses would increase.
Last year, an OECD review report tied the absence of a capital gains tax to the country's poor savings performance. The commission's focus on the need to free more land on city fringes for home-building is certainly more politically palatable.
Likewise, there will be only limited opposition to the decision to place a six-month limit on council processing of medium-sized projects, including housing developments. Is the Government keeping its hands off the capital gains tax because it was a key election issue for Labour at the last election?
ASB Bank economists expect the Reserve Bank to keep interest rates on hold until September 2013, before starting what they say will be a gradual tightening cycle that will see the official cash rate peak at 4 per cent by mid-2015.
The economists said their prediction was against a backdrop of ongoing global uncertainty, offset by a gradual recovery in New Zealand economic growth which was underscored by earthquake reconstruction activity and a firmer housing market.
Majority of the reaction to the Government initiative has been fairly sceptical as to whether house prices would really be reduced. Is the initiative too little, too late? Whatever the case, there is no silver bullet in sight.
It’s good to see some serious action on the home front, the housing market, that is.
The Government has finally noticed that Auckland house affordability is increasingly slipping out of our grasps.
Put simply: house prices in Auckland are just too expensive.
Owning a home is such a great part...
It’s good to see some serious action on the home front, the housing market, that is.
The Government has finally noticed that Auckland house affordability is increasingly slipping out of our grasps.
Put simply: house prices in Auckland are just too expensive.
Owning a home is such a great part of the Kiwi psyche, and increasingly, for all who have dreams of property ownership in Auckland, a vibrant city of more than one million people, including more than 100,000 Indians.
Finance Minister Bill English gave local authorities an ultimatum this week: free up enough land to allow the construction of more affordable homes or the Government will force them to do it through legislation.
Increasing, the supply of land for building was one of the key planks in the Government's response into the Productivity Commission's inquiry into home affordability.
The package includes significant changes to the Resource Management Act which will have effects well beyond the housing market.
Mr English said the Government had no control over the housing market where rising prices had helped fuel household debt and contributed to damaging imbalances in the economy.
But local authorities could exert considerable influence on the market with planning decisions and the consent process.
While it may start off as a political minefield which could blow up every now and then right up to the next general election, it could also prove to be a political game-changer.
The issue was complex, and, as Mr English said, there was no quick fix for spiraling house prices.
The situation is indicative of a market where demand is outstripping supply. Our children should have access to affordable housing, but the affordability issue will not be tackled effectively until the Government also looks at reducing demand, which is being driven by investors in rental properties.
Investors, in turn, are driven by a tax system that declares that borrowing and buying houses is the most sensible form of investment.
If property was placed on the same tax footing as other investments through the introduction of a capital gains tax, as some media commentators have suggested, demand from that quarter would drop, there would be less money driving up the price, and the supply of houses would increase.
Last year, an OECD review report tied the absence of a capital gains tax to the country's poor savings performance. The commission's focus on the need to free more land on city fringes for home-building is certainly more politically palatable.
Likewise, there will be only limited opposition to the decision to place a six-month limit on council processing of medium-sized projects, including housing developments. Is the Government keeping its hands off the capital gains tax because it was a key election issue for Labour at the last election?
ASB Bank economists expect the Reserve Bank to keep interest rates on hold until September 2013, before starting what they say will be a gradual tightening cycle that will see the official cash rate peak at 4 per cent by mid-2015.
The economists said their prediction was against a backdrop of ongoing global uncertainty, offset by a gradual recovery in New Zealand economic growth which was underscored by earthquake reconstruction activity and a firmer housing market.
Majority of the reaction to the Government initiative has been fairly sceptical as to whether house prices would really be reduced. Is the initiative too little, too late? Whatever the case, there is no silver bullet in sight.
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