Don Brash praises Phil Twyford's housing speech

News 28/03/2019

Don Brash says house price falls "can't come soon enough" after being shocked at how much his own property has increased in value since he bought it.

The former Reserve Bank Governor told The AM Show on Thursday house prices are "still outrageously high" and "wildly excessive", despite the Auckland market stalling in recent months.

"You can't make them less excessive or more affordable without prices coming down."

He even revealed his own financial windfall from the relentless rise in prices since the global financial crisis a decade ago.

"My apartment, I paid $280,000 for it eight years ago. It's now, I'm told, worth $500-and-something thousand. Crazy."

Dr Brash, a former National Party leader, also had some rare praise for Housing Minister Phil Twyford.

"Phil Twyford gave a very interesting speech last week to the New Zealand Initiative annual dinner, which was a very important speech. Phil Twyford actually understands this issue."

In the speech, delivered on Friday, Twyford outlined three "big challenges" the Government was looking to address, including "a broken system for financing infrastructure", "a planning system based on urban containment" and "the failure of Governments until now, both local and central, to actively work with the private sector to enable urban growth and expansion".

In the 2500-word speech, Twyford only mentioned KiwiBuild once, and only in passing. Dr Brash said that's because KiwiBuild isn't the answer to bringing down prices - only a small part of it.

"The key issue is the price of land. If you pay $600,000 for 400 square metres of land in Flatbush - land - you cannot build an affordable house on it," said Dr Brash.

The Reserve Bank has indicated it is likely to drop the official cash rate soon. It's currently at a near-record low of 1.75 percent, making it easier to service a mortgage.

"Most global economies are now in a bit of what we call an easing bias - more likely to cut rates than raise rates," Frances Sweetman, senior analyst at Milford Asset Management, told The AM Show.

She said when house prices fell in Australia recently, it hurt the economy - but New Zealand isn't yet in that danger zone, so the Reserve Bank's indication it's likely to cut rates came as a surprise. 

"Car sales have dropped right off and spending's been really week. We are at risk of that if our housing market gets a lot softer over the next year.

"But look - it actually seems okay to us. Retail spending in the last couple of months has been a little bit better. So the housing market's weak - particularly in Auckland, where it's really weak - but the rest of the country is seeing house prices still grow. But it seems to be relatively rational still at the moment."

Dr Brash predicts house prices will drop, but not by enough to reverse a three-decade drop in home ownership rates.

"How are your children going to afford houses? We have very unaffordable housing in New Zealand."