Housing: Grant Robertson's housing plans 'populist nonsense' - commentator

The AM Show 09/02/2021

This article was written by Newshub reporter Dan Satherley

There was nothing in Grant Robertson's latest speech on housing and the economy that will make it easier for first-home buyers to get on the property ladder, a property commentator has claimed.

The Finance Minister on Tuesday gave a sneak peek of what to expect from the Government this year when it comes to the economy. A big part of his speech focused on the housing crisis - skyrocketing prices in the past year making it increasingly difficult for people to cobble together the massive deposits required to secure lending. 

"There is a crisis when it comes to the housing situation right now in New Zealand," Robertson said at a breakfast hosted by BNZ. "In a sign of how economic forecasts have swung wildly during COVID, mid-way through last year, economists were lock-step in predicting that house prices were going to fall 5 to 10 percent over the next year due to the COVID-19 downturn.

"We've seen how the effects of rising demand for property by speculators and investors has blown those mid-year projections for prices to fall out of the water."

Recent Real Estate Institute of New Zealand (REINZ) figures had the nationwide median price up 19 percent in 2021 - 13 times faster than inflation, most of that coming between June and December. Rent also increased faster than inflation, but by nowhere near as much. Both increases came as the country experienced its deepest recession in decades. 

Robertson said the Government would soon "announce a rolling series of measures to build on what we did last term to address the crisis in housing", starting with moves to dampen demand from speculators later this month.

"New Zealanders are seeing family members being crowded out of the opportunity to purchase a home of their own by speculators and investors."

Robertson said proposals, based on advice from Treasury and the Reserve Bank, will be in front of Cabinet soon.

Grant Robertson via Getty
Grant Robertson via Getty

But Ashley Church, former of head the Property Institute of New Zealand, says he shouldn't bother. 

"They've created this strawman," he told The AM Show on Tuesday. "Speculators are a tiny, tiny proportion of the market - they're a very small number. At their extreme they are blight on the market, but they just don't impact on prices - there's not enough of them. 

By indicating they're going to solve the problem by focusing on speculators, essentially they're abdicating the problem.

Church, who has in recent months claimed housing is more affordable than ever, rising prices are good and there's nothing the Government can do to stop the surge, called Robertson's targeting of speculators "populist nonsense... flavoured heavily by ideology". 

"When they talk about speculators, that stuff's not about fixing the market. It's about assuaging the concerns of a section of Labour's electorate. It's about saying, 'Look, we've hammered these speculators.'" 

Ashley Church. Photo credit: The AM Show
Ashley Church. Photo credit: The AM Show

Robertson also outlined plans to address the supply side in May's Budget, which would "build on the Government's housing programme that has seen us build more houses than any Government since the 1970s".

While Church said it was great the Government is focusing on building more state homes after the KiwiBuild "disaster", that wouldn't do anything to improve affordability in the private market, which he says has plenty of homes for everyone - they're just not on sale.

"I'm in the camp we've actually built more homes than we actually required... If you've got 1000 homes in a community and only 10 people of those 1000 are listing those homes, you've got a supply problem. That's what we've got right now - we haven't got enough people putting homes on the market."

Quotable Value's report released on Tuesday morning noted there was more demand than supply in most regions. 

Church says the real fix would be to "make it easier for first-home buyers to get into the market, and I saw nothing in this morning's speech that alludes to that". 

Robertson did say the Government wants to "tilt the balance more towards first home buyers, while also incentivising more investment in the construction of homes". 

Church's comments are at odds with many economists, who've blamed record-low interest rates making property an attractive investment to speculators and the Government for signalling it wouldn't try to bring prices down, just slow their growth.

"With consistent messages regarding the need to protect that wealth coming from both the Government and the Reserve Bank (RBNZ)... the risk factor of property investment has, on the face of it, reduced, which only encourages greater investment," property analysts at CoreLogic said in January.

"We've got this huge ponzi scheme that is being enabled and encouraged by the Reserve Bank," economist Shamubeel Eaqub told Newshub Nation in November. "We can't afford for this to continue."

Some banks have moved to restrict lending to investors, requiring as much as a 40 percent deposit. ASB last week said it was "concerned the continued high levels of investor demand are unsustainable". And in December ANZ said a "balanced and sustainable housing market is in the best interests of all New Zealanders" when it became the first to move to 40 percent deposits for investors.

While economist Cameron Bagrie agrees with Church that no crash is imminent, if the Reserve Bank changes course on interest rates that could quickly change.

"The market is still off to the races, and that's a pretty critical part of keeping the economy going and firing us up as we're battling COVID-related challenges," he told The AM Show.

"The property market is a trillion-dollar asset class, it's three or four times GDP - so if you want to get the economy fired up, you've got to get the property market firing...

"[But] the bigger the boom, the bigger the potential adjustment on the other side. But the market's in a sweet spot at the moment... if interest rates remain low, the property market is not going to have a problem. It will have a problem if that scenario changes.... People need to be aware of the interest rate risks that are starting to build in the system."  

This article was written by Newshub reporter Dan Satherley