Ardern v English: Leaders' house price claims face credibility claims

Can Bill English and Jacinda Ardern solve the housing crisis without prices dropping? Both aspire to.
MICHAEL BRADLEY/ STUFF

Can Bill English and Jacinda Ardern solve the housing crisis without prices dropping? Both aspire to.

When challenged by Patrick Gower during the second leaders' debate on whether they wanted house prices to fall, prime minister Bill English said: "I want them to stay flat while incomes rise."

His rival for power Jacinda Arden said: "For homeowners, the ones who currently have their homes.

We don't want them to lose their value, but we want more affordable housing in the market as well, and that is what is missing."

Experts doubt that either party's policies will achieve their leader's hopes.

READ MORE:
* Truth or fable? Fact-checking the second leaders debate

* Recap: English, Ardern face off in Stuff Leaders Debate
* Stuff leaders debate: Ardern won with our pundits

VERDICT ON ENGLISH

Hugh Pavletich says house prices should be at a level of three times income.
ROBYN EDIE/SUPPLIED

Hugh Pavletich says house prices should be at a level of three times income.

English's answer may provide comfort for homeowners enriched as a result of a failure to build enough homes to meet demand, but it offers none to a generation of people left renting from astronomically high house prices.

Hugh Pavletich, who describes himself as "somewhere to the right of Genghis Khan", said: "There has already been a generation that's been severely mistreated because of this housing issue, and what Mr English is saying is another generation should miss out. That is grossly irresponsible."

Pavletich said prices must fall, gradually, until they are around three times median income.

English's vision of prices staying level, but falling in real terms as wages rise, wouldn't achieve that.

Auckland needed only look to Christchurch for its housing solution, Pavletich said. Spread out. Free up land supply. Let people build.

Pavletich does not believe National has the policies to keep prices flat as incomes rise.

Leonie Freeman says the extra houses won't have much of an impact on prices.
SUPPLIED

Leonie Freeman says the extra houses won't have much of an impact on prices.

"We will get to Sydney levels and beyond if we leave the current government in place," said Pavletich.

When National came to office under John key the median house in Auckland cost 6.4 times median household income, he said. "It's now a "stratospheric" ten times."

"After nearly a decade of inaction from this government, we have really had enough."

Housing strategist Leonie Freeman, founder of Realestate.co.nz, who has just released a report on how to restore housing affordability, can't see National's policies achieving English's hopes.

The Government's philosophy was to sort out land supply and infrastructure and that the market would do the rest.

"The market hasn't done that," she said.

Pamela Bell from PrefabNZ said: "It's highly unlikely that our incomes will rise to meet house prices. It's a lovely idea, but I can't see how it could work."

Property Council chief executive Connal Townsend says National and Labour have work to do on infrastructure funding.
STUFF

Property Council chief executive Connal Townsend says National and Labour have work to do on infrastructure funding.

Freeman's report shows how far incomes have to catch up.

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"Median house prices have doubled since 2011 to approximately $1 million, yet average earnings have increased by only 20 per cent," it said.

Under increasing pressure in the polls, National has announced an overhaul of urban planning to make it easier, and faster, to build homes.

National says it is making "good progress" in getting houses built with its Comprehensive Housing Plan, though, Statistics NZ released data earlier this month showing building actually fell in the three months to the end of June. House building also fell in the previous quarter.

VERDICT ON ARDERN

Labour's fighting the election on widespread unhappiness caused by the housing crisis, and concern over inequality.

Housing is the first policy on its policy homepage.

Pavletich doubts Labour's policy could create a market where existing house prices remain where they are, while a supply of affordable housing comes on line.

"No, it could not. That's simply a fantasy," Pavletich said. "You can't have an affordable market and an unaffordable market sitting alongside of each other."

Labour stands for higher density, freeing up land on the edge of the city, and using government muscle to build and sell 100,000 homes to first time home buyers, half in Auckland.

But it also plans to remove tax breaks for property investors, ban foreign "speculators" from buying existing homes, and increase renters' rights, including bringing in warrant of fitness on homes.

Labour won't rule out a capital gains tax on rental properties and second homes, which English said would kill house building.

Many of Labour's policies could affect the prices people were willing to pay for houses, and take some buyers out of the market.

But, Freeman said Ardern may be proved right, as demand for homes was so far outstripping supply.

"We have still got big demand for new housing. If they could focus supply on $500,000-$600,000 houses, then that's going to fulfil a whole lot of demand and give people an opportunity to get a leg up. Would that have a flow on effect to the whole housing market? I suspect not."

English and Ardern's hopes for house prices may be subject to forces more powerful than their policy platforms.

Connal Townsend from the Property Council says neither party's policies are credible unless they can deal with three key areas.

These are completely overhauling the planning and consenting of properties, introducing funding mechanisms to pay for the infrastructure to bring land into use for housing, and solving the construction industry quality and productivity crisis.

"If they do that, then their policies are credible. If they do not they are in-credible," he said.

English and Ardern's house price hopes are subject to more than just the effectiveness of their policies.

Freeman said high house prices, and the massive private debt that helped create them, left New Zealand open to a financial crisis sparked by some external event like an overseas economic crisis.

* Comments on this article have been closed.

 - Stuff

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