Labour's housing ban might make little difference to stratospheric prices in parts of New Zealand. But the move is smart and consolidates the start of the Labour-led Government and Prime Minister Jacinda Ardern.
Much in politics is about appearances and perception. The underlying facts are so often hard to ascertain, particularly behind veils of spin. Often, the public is only concerned with impressions and the big picture. From a political point of view, the housing ban is a winner.
Polls indicate two-thirds of New Zealanders support the ban. And why wouldn’t they?
National unwisely chose to undervalue feelings, whether supported in reality or not, about sovereignty and nationalism. Who wants foreigners buying up homes while New Zealanders are priced out of the market? Who wants overseas residents owning large swathes of the countryside?
Many natural National Party supporters have such sensitivities, let alone those from New Zealand First.
This was one of several policies where the obvious overlaps between NZ First and New Labour prompted them towards coalition.
The experience in Melbourne and Sydney is that Australia’s policy on banning foreign nationals from buying houses abjectly failed. They, like Auckland, are among the most expensive cities in the world for housing.
In New Zealand, banks have already restricted lending based on foreign income, and China is limiting capital outflows.
There are suggestions foreign house buyers have already been selling up. And foreigners connected to established New Zealand communities already have options to use friends and relatives to circumvent rules. Also, it so happens house price rises in Auckland have stalled. Auckland house values have dipped for the first time in six years as the housing market continues to cool nationwide. QV reports this week said residential property values in the Auckland region decreased 0.6% year on year, dropping by 0.5% over the past three months.
Nationally, annual value growth has slowed to 3.9% in the year to the end of October, the lowest rate of growth seen in five years.
There was also a report of an Auckland homeowner losing about $50,000 after reselling a Howick property. Election time uncertainty might partly be blamed. But the loan-to-value ratio requirements have taken the sting from the market.
So far so good.
A gentle easing of prices would be an ideal narrative for Labour. While the average value for the Auckland region is now $1,038,722, and remains impossibly out of reach for most, Labour would be able to point to progress towards affordability, a key part of its sought-after image as a party striving for equality and fairness.
Every politician and political observer, nevertheless, recognises the powder keg that is housing.
Homes are the fundamental asset of the majority of voting New Zealanders.
Should economic circumstances turn, including for immigration numbers, and house prices start falling rapidly, as they threatened to do after the 2007 peak, Labour would be in serious trouble.
Households feeling poorer would spend less, slowing the economy. Some of those who bought near the top of the market could face losing their homes. Downward pressure on prices would intensify.
Prices could also rise again if the forces of supply and demand dominate (as population increases in the likes of Auckland and Queenstown Lakes continue), and if Labour’s ambitious KiwiBuild plans fail to deliver.
Infrastructure and building capacity restraints might prove too much or KiwiBuild might just replace private construction. Labour’s credentials to ameliorate the "housing crisis" would prove hollow. Labour would have let down those who recently voted for it.
As it is, Labour is acting promptly, ahead of TPP discussions. The fact it has found a way to ban foreigners in a way that does not breach the agreement is a boost to it and left National’s earlier claims floundering.
Labour has well and truly won this round.
