Home thoughts - an election issue

Housing has emerged as the largest issue to date in the election, which is still five months away. Housing Minister Nick Smith was in Christchurch this week with further announcements for the earthquake-damaged city. Business editor Dene Mackenzie reviews the announcements so far.

Housing Minister Nick Smith says it could take up to 20 years to address the imbalance between incomes and house prices.

Speaking recently on TVNZ's Q+A programme, Dr Smith said the target he had given his ministry went back to long-term affordability measures - which was the ratio of incomes to house prices.

''That's what really matters. Historically, that number's been about four for New Zealand. Currently in Auckland, it's seven. I've set that long-term objective of getting it back to four.

"That means incomes are growing faster than house prices and you need that repeatedly over a period of a decade or two to get those ratios down.''

Housing ownership had gone backwards each year since 1987, he said. A fall in home ownership from about 75% in New Zealand to the present about 65% had occurred over that period.

There was no instant magic bullet the Government could use to

change those 20-year trends, Dr Smith said.

Labour has proposed a capital gains tax, which leader David Cunliffe said would stop the tax subsidies to speculators who were locking young New Zealanders out of their first homes.

But Dr Smith said a capital gains tax would make no difference to the housing market.

The Productivity Commission did not mention foreign buyers in its 200-page report.

''They did a comprehensive look at this debate around capital gains tax and said no, it won't make a difference. So look across the Tasman to Australia. They've got restrictions on farm buyers. They've got a capital gains tax of sorts and their house prices have gone up by more than New Zealand in the last 12 months.''

Mr Cunliffe said the problem in Australia would be much worse if the tax policies were not in place.

''We're not talking about crashing house prices. There is no way that house prices are going to crash. Middle New Zealand does not have to worry about that.

"But what we don't want - what I don't want - I've got one home [and] I don't want to see the value of it crash. But I don't want my two sons locked out of the market when they come to need a home.''

Housing was one of the crucial issues in this year's election, he said.

Dr Smith was in Christchurch again on Wednesday announcing more help for the housing issues in the city.

The Government would invest $75 million through a new Christchurch Housing Accord Fund and the Christchurch City Council would invest $50 million in a new housing entity.

Two villages totalling 180 homes would be developed by the Government on council-owned land in Colombo St and Welles St.

Those would expand the homes available for temporary accommodation while families rebuilt their homes. The units would be sold later as affordable homes on the open market.

The council and the Government would continue working together to encourage private sector residential development, particularly in encouraging more affordable housing, Dr Smith said.

Earlier in the week, Social Development Minister Paula Bennett and Dr Smith visited new community housing provider Vision West to view one of the West Auckland homes to be rented with an income-related rent subsidy.

Mrs Bennett said there were more than 5500 people on the state house waiting list nationwide, nearly 1200 of whom were in West Auckland.

While Housing New Zealand had more than 4000 properties in the area, new community housing was needed to meet the growing demand.

The Government is targeting housing issues in Auckland and Christchurch because of the number of votes those two cities hold.

Without winning the party votes in the country's two main cities, National will find it hard to hold power after the September 20 election.

The Reserve Bank introduced loan-to-value ratios to try to restrict house prices by requiring purchasers to have at least a 20% deposit, in most cases. One of the country's largest real estate companies has called the LVRs a failed experiment.

Dunedin North MP David Clark said Dunedin home buyers were being punished, despite city housing value increases being below the rate of inflation.

LVRs were shutting first-home buyers out of the market.

''In Dunedin, first-home buyers are down 2.8% since LVR speed limits were introduced in October 2013. Yet, housing prices are hardly on a runaway track. Young Dunedin couples dreaming of a first home are finding it a nightmare to get on the housing ladder.''

And yet LVRs did not seem to be having a large impact in Auckland, where house prices had risen at an average of 14% over the past year, he said.

Instead, in places such as Hamilton, the West Coast, Dunedin and Invercargill first-home buyers were being hardest hit - even though house prices in those centres were not out of control.

Regional New Zealand, which had mostly static or falling house prices, was ''taking a hit'' when 95% of house price inflation was coming out of Auckland and Christchurch, Dr Clark said.

''LVRs should be targeted at areas where house price inflation is rampant. A house buyer in Dunedin shouldn't be punished because the Government can't get Auckland's housing market under control.

''The Reserve Bank was forced into a corner by the failure of the Government to get a grip on the housing crisis.''

Labour would exempt regional first-home buyers from LVRs, applying the ratios only in Auckland and Christchurch, he said.

New Zealand First leader Winston Peters said his party would stop non-residents who were not New Zealand citizens from buying houses.

''This is plain common sense. In a housing crisis it is bizarre to allow foreigners to grab a significant portion of the housing stock. Yet, the National Government has turned a blind eye to foreign buyers, repeatedly dismissing NZ First's warnings as `alarmist'. That was until April 2014.''

It had been now revealed Finance Minister Bill English was briefed in July last year by Treasury on restricting overseas buyers and was assured it was feasible, Mr Peters said.

Suddenly, it was confirmed NZ First was right all along. Prime Minister John Key was conceding a rethink on foreign home-buying was due and there was merit in gathering more data on foreign ownership.

NZ First would also create a land bank to expand the supply of affordable sections that could be financed by first home buyers at ''reasonable'' rates of interest, he said.

Other policies included smaller and more affordable houses on smaller sections and measures requiring better building quality and sustainable housing.

''The National Government has made a hash of housing and New Zealanders are suffering from it,'' Mr Peters said.

- dene.mackenzie@odt.co.nz


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