Building more will stop runaway house prices, not 'crazy and wacky ideas' - Sir John Key

The AM Show 23/11/2020

This article is courtesy of Newshub reporter Mark Quinlivan

Building more houses and ramping up supply is needed to help fix New Zealand's housing crisis, according to former Prime Minister Sir John Key.

Last week, Auckland's median house price reached $1 million, and median prices across New Zealand have spiked by nearly 20 percent since the same time last year.

ANZ chairman Sir John, a former National Party Prime Minister who also presided over rapidly growing house prices and resisted calling Auckland's housing situation a "crisis", believes building more is the best way to solve the crisis.

"After the Christchurch earthquakes, we released the equivalent of, I think, about 20 years' land supply - house prices didn't move in Christchurch for a very long period of time - so you can come up with all sorts of crazy and wacky ideas but, in the end, houses don't largely sit around dormant," he told The AM Show. "If you build enough of them and you have a council that'll approve that process - if you actually have builders out there building, eventually you fix the issue far more than anything else."

The current Government points to the fact house prices started escalating under Sir John's leadership. Prime Minister Jacinda Ardern told The AM Show "we are not alone in this current situation" - saying COVID-19 is impacting economies and house prices around the world.

The Reserve Bank (RBNZ) is looking to pull the handbrake up on some borrowers, saying it might reintroduce loan-to-value restrictions (LVR). 

Sir John said that could become an issue if LVRs impact investors developing land and increasing supply.

"To be fair to the Reserve Bank, it's actually quite difficult for [RBNZ Governor] Adrian Orr because, on the one hand, he wants the lower interest rates, [to] put money into the banks and make sure that they lend - but the trouble is, he's in a world where all interest rates are low."

Green Party co-leader Marama Davidson believes COVID-19 and "extra-cheap money" have helped cause runaway house prices.

"I don't think any of us before the election knew that we were going to be looking down the barrel of runaway house prices," she told Newshub Nation on Saturday. "I do think there is an opportunity - and the Prime Minister has shown that she can listen and review the situation - to reflect on all the tools, all the tools in the toolbox that is available to us."

Sir John Key
Sir John Key. Photo credit: Getty/The AM Show

Ardern said there's "work to be done".

"I do not think it's sustainable to continue to have these huge increases."

Jacinda Ardern
Jacinda Ardern. Photo credit: The AM Show

Westpac chief economist Dominick Stephens believes a capital gains tax is the best way to solve the housing problem but that's been ruled out by the Government.

"We've tried three times now and we couldn't get New Zealanders on board," Ardern said of the capital gains tax. "That is not going to stop us looking for ways to encourage and support first home buyers and trying to encourage people to invest in productive parts of the economy, and that's what we're really appealing to the banks - to support us with those efforts."   

This article is courtesy of Newshub reporter Mark Quinlivan