House prices rising faster than incomes, finance minister admits

MICHAEL FOX
Last updated 05:00 31/05/2014

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Finance Bill English has admitted inequality is growing on the back of soaring house prices.

He told a Local Government New Zealand conference this week that income inequality had not widened but house price increases had seen more wealth concentrated in the hands of the rich, making efforts to address price inflation more urgent.

House prices were "building massively, massively, much faster than changes in incomes, building inequality", he said.

"One of the features of New Zealand is that income inequality hasn't increased much, hasn't changed actually in about the last 15 years. It's simply not correct that the rich are getting richer and the poor poorer," he said.

But the fact that housing was driving inequality was another reason to be concerned about that market.

"If we're worried about it, the single most important thing we can do actually is get our housing market operating more efficiently. Good straightforward economic efficiency in the housing market, regulatory efficiency, will bring about a fairer community particularly in allowing more low and middle income people in."

English said the Government was working to address housing affordability by removing barriers to new-builds and boosting supply.

NZIER economist Shamubeel Eaqub said while there was a lack of data on the distribution of wealth, house prices were the likely cause for increasing inequality.

"If you are already in the housing market then you've captured the benefit of the housing boom we've had over the past 10 or 15 years, but if you weren't in the market you missed out."

House price inflation had outstripped income growth, while home ownership was becoming increasingly concentrated.

Labour's finance spokesman David Parker said inequality - income and wealth - was increasing.

"Every year that you have this level of income inequality and you have the wealthiest people in society having a lot of untaxed income, you have rising inequality."

The decreasing rate of home ownership was an outcome of that inequality piling up year on year.

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- The Dominion Post

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