Jonathan Milne: There's only one answer to the housing bubble – gently deflate it

Real estate agent Steve Koerber has closed 48 sales on the Remuera street he lives on – including one $2 million ...
JASON DORDAY / FAIRFAX NZ

Real estate agent Steve Koerber has closed 48 sales on the Remuera street he lives on – including one $2 million property he's sold five times.

OPINION: What does a millionaire look like? Dome-headed Daddy Warbucks? The top-hatted Monopoly man?

Now, a millionaire looks like the average Auckland home-owner. 2.5 kids. Stuck in traffic. Working too many hours to pay the mortgage. Frazzled.

Because the median house price in Auckland has finally hit $1 million, and we may not feel like Daddy Warbucks but (secretly and shamefully) home-owners feel like they're coining it. 

My wife and I bought our little Onehunga cottage before our first son was born. I built white picket gates – they were the best things I'd ever made with my own two hands, and I'm still proud of them.

READ MORE:
Average Auckland house passes $1m mark
Auckland real estate agent Steve Koerber sells same house five times
Green Party calling for house prices to be cut in half over time – Labour says, no way

I can't help feeling as if the house's rising CV is just recognition of my gate-building prowess.

It's not, of course. It's because housing demand is completely outstripping supply in a global economy.

Only the most laissez faire of free-marketeers still believe that this housing market is working as it should, as increasing numbers of families are forced to sleep in their cars and young Kiwis give up any hope of owning their own home.

Much time on our talk radio airwaves, much talk across back-fences, has been devoted to the blame game. 

Is it the profiteering real estate agents? Today, we meet Steve Koerber, who has closed 48 sales on one Remuera street. There's one run-down villa he's sold five times, starting with a $447,500 sale price in 2001 and working his way up to $2.31 million in April last year. It hasn't even been done up in all that time – the increase simply reflects the rising land values. "And I don't see any falls coming," he tells us gleefully.

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But no, it's not his fault.

Or is it a flood of cashed-up Asians stepping off the plane at Auckland International Airport? No, they're barely making a dent in the market.

Is it the Reserve Bank for dropping interest rates? Is it the council – Auckland, Tauranga, Christchurch – for being too slow to free up greenfields land? Or is it the Government for failing to support intensification and invest in social housing?

No, none of these can carry the blame alone.

Ultimately, responsibility must sit with all who prefer to delude ourselves that we're getting wealthier, that this is real money.

Far more important than the blame game, though, is finding a solution.

And as the big old parties encourage their middle New Zealand voters to roll about like Scrooge McDuck in their delusional wealth, there are voices on the fringes of politics that are starting to speak in unison.

Former National and Act leader Don Brash. Former Reserve Bank chairman Arthur Grimes. Auckland Council chief economist Chris Parker. Green Party co-leader Metiria Turei.

They are proposing pulling some very big levers to make housing affordable again. In Auckland, a house costs 12 years' earnings, making it one of the least affordable cities in the world. Christchurch, too, ranks high.

They say we need to get that ratio down fo four or five years' earnings in the next 10 or so years – and that won't be achieved just by raising wages. The prices have to drop.

Turei is looking at several levers: the Government supporting more state, iwi and third sector home-building; removing tax breaks for speculators; setting in place a capital gains tax; restricting ownership to New Zealand citizens and permanent residents; and building both up and out in the bigger cities.

"We've got to avoid a crash, and that means planning for a managed correction," she told me this weekend. "We owe it to the country."

It's not just the country we owe it to.

Since moving into our little cottage, my wife and I now have three sons. I'm a whole lot prouder of them than of our house with its picket gates.

The challenge, for homeowners like me, is to put the interests of our kids ahead of the selfish short-term buzz of our Daddy Warbucks delusion.

 - Sunday Star Times

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