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New Zealand's property boom has at least another three years to go and there is little the Government can do to stop it, experts say.
While the Government is also promising to boost supply to ease pressure, market watchers say New Zealand does not have the building capacity to meet the demand, with the construction industry out of sync with the peaks and troughs of property cycles.
The Government recently announced measures to help first-home buyers by increasing the availability of subsidies as well as changes to the Resource Management Act, which it says will make homes more affordable and lead to more being built more quickly.
The policies have been criticised by Opposition parties and UnitedFuture leader Peter Dunne as tinkering, and industry experts are unconvinced that the measures will have an impact.
Auckland University real estate research unit director James Young, who argues New Zealand houses are not unaffordable because people are still buying, goes as far as saying state policies never work.
"I haven't seen any that really worked in the long run . . . In the long run they create more problems than they solve."
BNZ chief economist Tony Alexander believes house prices will climb for at least another three years, and that price pressure is still to hit areas beyond Auckland and Christchurch.
The market is still catching up from 2008 when fears that house prices could correct about 40 per cent resulted in first-home buyers and investors pulling out of the market, and builders downing tools from the lack of demand.
Central and local government regulators sat back thinking the market would correct itself, he said.
"Now all these chooks are coming home to roost and there's nothing you can do about it in the short term."
Investors and first-home buyers have been "rushing into the markets" since early last year but there was not enough supply to meet that demand, made worse by the Christchurch earthquake.
"The rises in Auckland and Christchurch [will] spread to the rest of the country, that's hardly even started yet, that's why I say this cycle is actually very, very early . . . you've got three years of that to come through."
Massey University real estate analysis unit director Bob Hargreaves agrees that there is little the Government can do.
"It's a big political issue but in the short run politicians can't actually do a heck of a lot about it . . . The market will do what it's going to do."
"Although we were starting to increase supply there was also a lag effect - many builders had been so badly burned by what happened in 2007 that they left the country, failed or stopped building
"When the demand's come back as it has right now they're not really geared up to cope with it. In the past booms it's always been the same. The time the builders are building the maximum number of new houses is about 18 months after the market peaked in terms of prices so builders are never in sync in terms of what's happening with market demand."
Mr Alexander said there was was nothing that could be done to smooth out those cycles.
Prime Minister John Key said supply was the big issue and the Government was addressing that.
Housing was not an issue early in his term because the financial crisis and struggling economy put people off buying houses, and there were also fewer being built. Low interest rates and a buoyant economy have been driving the issue for the past year.
Mr Key said government measures to help first-home buyers by increasing the availability of KiwiSaver subsidies would not lead to more buyers and pressure on house prices as some have argued. The measures increased deposits and skewed incentives for banks to fill that demand because it was lower risk, he said.
"I think if you look at our policies along with everything else we've been doing . . . it's a coherent set of policies that will work."
The Reserve Bank was comfortable with the Government's measures, Mr Key said.
- © Fairfax NZ News