'Knee-jerk' reaction to Auckland housing problem could topple economy: Property Institute boss
The Property Institute's boss says reducing Auckland home values would be devastating for the economy, which could collapse "like a house of cards".
Instead, Ashley Church proposed a broad range of measures to slow the rate of house price growth while growing wages.
Church was responding to a survey which found Auckland now has the fifth least affordable houses in the world.
The annual survey by housing thinktank Demographia found Auckland homes cost 9.7 times the median household income — or $748,700 on a median income of $77,500.
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Affordable housing was considered to be two to three times a household's income, while anything over 5 was "severely unaffordable".
House prices in the country's biggest city are now less affordable than London, New York or even Tokyo.
Church said there was no quick fix to a trend that had been developing over decades, and a "knee-jerk" response could do more harm than good.
Around 65 per cent of Kiwis owned homes, many of whom used the equity to buy businesses or invest in other assets.
"So reducing the value of their home could have a devastating effect on the economy and could bring the whole thing down like a house of cards."
Church said tackling the problem would require a whole suite of measures, including an increase in land available for development and a commitment to targeted intensification.
He also suggested further development of Auckland's metropolitan suburbs, and a cultural change to encourage first home purchases outside Auckland.
Church said such policies would need to survive successive Governments, and would require a high degree of consensus between the major political parties and Auckland Council.
Hugh Pavletich, the New Zealand-based co-author of the report, said there had been a "massive erosion of affordability" in the last year.
Auckland previously had a median of 8, and was at just 6.4 when the current Government came to power in late 2008.
But Auckland was still eclipsed by the most expensive city, Hong Kong which had a multiple of 19, followed by Sydney (12.2) and Vancouver (10.8).
Melbourne and San Jose tied for fourth, while London (8.5) and New York (5.9) were lower and Tokyo-Yokohama was a comparably affordable 4.3.
When it came to cities with more than a million people, Auckland pushed New Zealand into second place, pipped only by Hong Kong.
By comparison Australia's were 6.4 times. Singapore (5), the United Kingdom (4.6), Ireland (4.5), and Canada (4.2) were all classed "seriously unaffordable".
Labour's housing spokesman Phil Twyford said the report confirmed Auckland's status as "a housing basket case".
The Government had been blaming the Resource Management Act for a decade, but a crackdown on property speculation and a state-backed housing programme was what was needed.
"The truth is, they are paralysed with fear that the bubble will burst on their watch, so don't want to tackle the causes of the crisis."
The report said historically New Zealand's "median multiple" had been at affordable levels and so had Australia, Canada, Ireland, the United Kingdom and the US.
"However, in recent decades, house prices have been decoupled from this relationship in a number of markets, such as Vancouver, Sydney, San Francisco, London, Auckland and others."
Strict city limits seemed to be the cause.
"Without exception, these markets have severe land use restrictions, typically "urban containment" policies that severely ration land for development on the urban periphery."
However, there were "encouraging developments" at higher levels of government in New Zealand and the US state of Florida.
Demographia said high house prices had profound economic consequences, with those who were younger or on lower incomes at greater risk.
Pavletich blamed public policy for Auckland's soaring housing market but there was growing political consensus that tight land supply and inadequate financing for infrastructure were the keys to address.
"The problems and solutions have been well known for a long time. The only ingredient missing is political action at the local and central areas of Government," Pavletich said.
Housing Minister Nick Smith pointed to the overall cost of housing affordability in New Zealand which Demographia had found had improved, falling to 5.2 in 2016 from 6.3 in 2008.
Another factor which had to be taken into account was the historic low level of interest rates, he said.
"When interest rates are included, home ownership is significantly more affordable now than when National came to office."
Smith also pointed to two other housing affordability surveys which showed that housing had peaked several years ago.
The AMP 360 Home Loan Affordability Series had the mortgage on an average-priced house in 2008 at 83.4 per cent of an average income. It was now 58.4 per cent, Smith said.
The Massey University Housing Affordability Index showed affordability was at its worst seven years ago, when it was at 33.9 per cent. It is now at 22.8 per cent.
However, Smith said it was encouraging that Demographia had made specific mention of the Government's progress in tackling severe land use restrictions, "which it singles out as a common factor in high house prices internationally".
The next step after reforming the RMA was to consult on a new "urban development national policy statement."
The Productivity Commission is currently doing a major piece of research on the impact of planning on New Zealand's housing shortages.
Five other New Zealand cities were mentioned when the survey included cities with populations below a million:
* Christchurch (6.1)
* Wellington and Dunedin (5.2)
* Hamilton (5.1)
* Napier-Hastings (5)
* Palmerston North (4.1)