What should be done to ease pressure on the property market?
Prime Minister John Key says the Government's plans to ease pressure on the housing market won't bring down prices overnight but gradual change is better for the economy.
The Government will today unveil its response to a Productivity Commission report in April which warned the young, single and low-income earners were being priced out of the market.
However, Key was this morning forced to defend the proposals before they were even signed off by Cabinet after Labour accused the Government of "tinkering".
Finance Minister Bill English has indicated the reforms will force councils to open up more urban land to be redeveloped and allow more sites on the outskirts of cities to be zoned for housing. The Government also wants to speed up and simplify planning processes.
Key today said there would also be no first home-owner schemes, despite him being in favour of them, because the Government didn't want to boost demand for houses before addressing supply issues.
The Government has long rejected calls by Opposition parties and some economists for a capital gains tax which they claim will take the heat out of the housing market.
"Capital gains taxes do not work," he told TVNZ's Breakfast programme, adding the scheme proposed by Labour excluded three-quarters of all housing.
"So what it encourages people to do is buy big houses in Parnell and Remuera and ditch their beach house because the beach house would be included and the home in Parnell would be excluded."
Labour's housing spokeswoman Annette King said the Government's plans were "token tinkering" in the face of a housing crisis.
"The Government clearly doesn't realise that the main problem is affordable housing for low and moderate income earners, who just can't find houses.
"Nearly half our young people are now in rental accommodation compared to 20 per cent in the late 1980s. Another reason so many are leaving the country for good."
There needed to be more houses in the $350,000 to $450,000 bracket, as well as quality and efficiency standards in rentals and more social housing, she said.
Key some of the Government's proposals could be "quite bold" such as fast-tracking land to be redeveloped quickly.
It also wanted to ensure infrastructure around new developments was funded so they weren't held back and wanted to work more with building companies, he said.
"There's no one silver bullet. We're not arguing that house prices will fall over night as a result of what we are doing. In fact slow appreciation of houses is quite a good thing. It's when you get these rapid booms up that you then get a credit boom which we had in 2008."
- Fairfax Media