Property situation likely to become an election issue

Housing construction, lending and affordability appear set to become a polarising election issue this year, following a slew of data released last week which fuelled heated debate.

The hot real estate market and the likelihood of the interest-driving official cash rate (OCR) being raised repeatedly by the Reserve Bank during the coming year, will refocus attention on the housing issue.

While the 21,300 new dwelling consents issued during 2013 was a six-year high, underpinned by Auckland construction and Canterbury's rebuild, the national median prices are mirroring those last seen at the market's height in 2007 and hit a national median high in December of $427,000.

Minister of Housing Dr Nick Smith claimed the increased consenting as a win, by delivering Government policy, while Labour's housing spokesman Phil Twyford contended Auckland's house prices were ''out of control''.

The average price of $A648,176 ($NZ696,963) there is now higher than in Melbourne.

Green Party co-leader Dr Russel Norman accused the Government of failing to fix Auckland's housing crisis, which would result in interest rate hikes hurting the whole economy.

''A possible 1% hike in the OCR (official cash rate) will raise the average homeowner's interest payments by $70 a fortnight,'' Dr Norman said.

Housing remains the focus of the Reserve Bank, which last October introduced loan to value ratio (LVR) restrictions on the percentage of their total money banks could lend to people with less than 20% deposit.

Those striving to attain the minimum 20% deposit appear set to be doubly hit by the Reserve Bank raising the official cash rate in March.

Locking out first-home buyers from building new homes enraged franchise home-builders and the Master Builders Federation, and the Reserve Bank back-tracked and issued an exemption on new homes.

The interest-driving official cash rate was held at 2.5% last week but appears certain to be raised in March, three years after the record low 2.5% was set.

Dr Smith said the issues with housing supply and affordability were not unique to Auckland.

''The Government is also in talks with the councils for Wellington, Christchurch and the Bay of Plenty, to investigate setting up regional Housing Accords,'' he said in a statement.

The Government was committed to ''tackling the root causes of housing affordability'', which included freeing up land supply, reducing building material costs, reining in development contributions and cutting compliance costs.

It would invest in skills and productivity in the construction sector, and support first-home buyers through the Welcome Home loan and KiwiSaver first home deposit subsidy schemes.

Labour leader David Cunliffe said apart from rising interest rates hitting all home owners and raising rents, they would strengthen the New Zealand dollar, which would dampen business expansion and slow job creation.

Labour intends to exempt first-home buyers from the LVR restrictions, implement a capital gains tax on second homes and ramp up its KiwiBuild programme of 10,000 affordable starter homes per year.

Dr Norman has said the Greens would introduce a capital gains tax, restrictions on foreign investment in housing and a government-led programme of affordable house building.

The party's ''progressive ownership'', a rent-to-buy programme for first-home buyers, would offer repayments on a $300,000 house at more than $100 per week below mortgage rates, and would also stabilise house prices.

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