The Registered Master Builders Federation has cautiously welcomed the Government's signalled plans to ease pressure on the housing market but says local government will need to speed up the release of land for the plan to work.

Registered Master Builders Federation chief executive Warwick Quinn said residential home construction in New Zealand had fallen well behind the necessary activity to keep the market on an even keel.

New Zealand was seeing the lowest level of building activity in living memory according to new building consents, with 13,662 new dwellings for 2011, the lowest since records began in 1965.

The fall off was mainly a result of the global economic downturn.In the first eight months of 2012, there had been 10,731 consents, which should lead to a 16,000 annualised figure for 2012.

The Government is due today to unveil its response to a Productivity Commission report released in April.

That report warned the young, single and low-income earners were being priced out of the market.

Land prices aside, it can cost up to 30 per cent more to build a house in Auckland than it does to build a similar house in Australian cities, the commission said.

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. Quinn said one of the biggest issues for property prices was the cost of land.

If a piece of land cost $250,000 then it only made economic sense to build a house of similar value, leading to a $500,000 property.

''You have basically put a home of equal value to justify it, to capitalise it properly ... otherwise you are undercapitalising.''

If land could be sourced more cheaply, then developers and owners could afford to put cheaper houses on that land.

Also if land could be released at a faster rate, particularly if demand was picking up, that demand could be met sooner helping avoid a spike in demand forcing up prices.

The Government's plan would depend on the approach of local authorities in terms of releasing land around their rural/urban limits and boundary issues.

''If you can release the land fast enough and build them fast enough, you can take that massive capital growth off it, that makes houses less affordable for people trying to step in."

- © Fairfax NZ News

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