Heated housing market 'risk to country'
Calls for the Government to rethink housing policies are growing as house prices and rents keep rising.
The heated housing markets in Auckland and Christchurch have been labelled a risk to the economy and to Kiwis' chances of affording a home.
Local Government New Zealand president Lawrence Yule yesterday called for "a bigger conversation" on New Zealand's housing affordability, jobs and demographic changes. This would prevent moves aimed at cooling Auckland and Christchurch markets, including the clampdown on low-deposit mortgages, from harming the whole country.
Yule said local councils bore some responsibility for housing supply, but said the Government had "unfairly blamed" them for the affordability problem.
"The Government's been forced to do something about it and it is, but actually the bigger, long-term, joined-up thinking . . . probably should have happened about 10 years ago."
He urged the Government to bring councils and the private sector together to discuss a "grand plan" for where housing and regional economies should be heading.
Statistics New Zealand data shows house building has not kept pace with a rising population. A sharp drop-off in nationwide house construction preceded the loss of homes from the Canterbury earthquakes. New Zealand has had a net gain of 34,400 migrants in the past year, with numbers for April the second highest on record.
Shamubeel Eaqub, principal economist for the New Zealand Institute of Economic Research (NZIER), warned of the social harm if people could never afford to buy a house. Renting was "not always a nice option", leaving tenants feeling insecure, and unable to settle down and alter their home or have pets.
Eaqub said that with Christchurch's shortage pushing up prices and rents, building more homes would only change this slowly. Construction had a natural cycle, but a "fundamental fix" was needed for the housing market to respond more smoothly to demand.
"There are these itsy bitsy policies, but we need to take an overall look. We are incredibly expensive. New Zealand is a large place with a small population - houses shouldn't be this costly.
A new NZIER forecast said if Reserve Bank intervention in housing markets caused a sales slump, this could pose a "significant risk to the optimistic outlook for the economy".
Pushing interest rates up could spark a "bust" in housing markets outside Auckland and Christchurch, the forecast said.
In an investor-driven market, sales and prices could "turn rapidly," and a sudden stop in house sales could make banks more careful in lending.
BNZ bank economist Tony Alexander said the housing market was "not a bubble". He expected pressure in both the Christchurch and Auckland housing markets to continue. The shortage would then spread to the smaller centres as people spread out.
Alexander said there were multiple causes of high house prices. "Just because it's overvalued, that doesn't mean it's going to crash."