The housing crisis plagues the Government’s ability to clock up wins, with prices sky-rocketing and the Reserve Bank today implementing tighter loan-to-value ratio restrictions.
At a BNZ business breakfast today Finance Minister Grant Robertson promised about 100 guests and media that the Government would deliver “bold” housing action in the coming months.
His speech came at the same time the Reserve Bank announced loan-to-value ratio (LVR) tightening amid concerns for a potential “sharp correction in the housing market’’.
The restrictions will be reintroduced on March 1 and will require property investors to produce a 30 percent deposit for a house, while first-home buyers will need 20 percent. That will increase to 40 percent for investors from May 1.
LVR restrictions were removed in April last year to avoid interfering with Covid-19 policy responses aimed at boosting cash flow and confidence.
“We are now concerned about the risk a sharp correction in the housing market poses for financial stability. There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged,” says Reserve Bank deputy governor Geoff Bascand.
The reach of the housing crisis is significant, though Robertson reinforced today that there’s no one easy fix for the embedded supply and demand issues the country faces.
“Anyone who tries to tell you that there is a single silver bullet for addressing the housing crisis is not facing reality – or is speaking from the safety of Opposition.”
“I don’t underestimate the significance of the situation that’s facing New Zealand, and therefore bold action is required.”
– Grant Robertson
In January Robertson had hinted the Government would announce new measures over the course of the year to try take the heat out of the housing market.
“The first of those will be on the demand side measures which will come in late February. We all know that building more houses, particularly affordable houses, is critical. But we also can do more to manage demand, particularly from those who are speculating.”
But it will be the Budget in May where the real grunt work will be announced, with Robertson saying it will provide a chance to “take stock of how New Zealand and New Zealanders have come through Covid-19”.
“We now have an opportunity, through our better than expected recovery and fiscal position, to address some of our long-standing challenges,” he said.
“At Budget 2021 I will continue my focus on making sure spending is targeted at the areas and people that need it the most. We will manage the books carefully including ensuring we are getting value for money in all areas of Government spending and reprioritising spending where appropriate.
“We will also continue the balanced approach to invest in strong public services and addressing issues like housing, while keeping a lid on debt.”
“It shouldn’t be about personalities, it should be about getting the job done.”
– Judith Collins
New numbers from Treasury’s Fiscal Strategy model show the better than expected recovery means net debt is now forecast to reduce to 36.5% of GDP by 2034/35.
A number of proposals to address housing will be going to Cabinet shortly, although Robertson wouldn’t give any further indication as to which specific areas will be looked at, including an extension of the bright-line test.
“The supply side measures will be mostly linked to the Budget and will come out as we finalise that. The demand side measures will be based on the advice we’ve received and it’s important that Cabinet looks closely at those,” he said.
“I don’t underestimate the significance of the situation that’s facing New Zealand, and therefore bold action is required.”
Eventually the changes will lead to moderation of house prices and take heat out of the market to tilt the balance back toward first-home buyers, Robertson says.
Prime Minister Jacinda Ardern says no stone will be left unturned, and the focus will be making it easier for first-home buyers to get in the door by the end of this parliamentary term.
“We’ve got some levers we can pull and we’re looking at every single one of them – we’re not the only ones in the mix though,’’ she says.
So has Labour done enough or has its leadership contributed to the crisis?
“What we’ve seen in house price increases has happened rapidly over a short space of time,’’ Ardern says.
“We’ve immediately responded to look at demand and supply side pressures, because we’re constantly wanting to make sure we’re doing all we can.’’
But National Party leader Judith Collins says Ardern’s unwillingness to work with the Opposition to find cross-party consensus will only further hinder any progress.
Collins says she’s written to Ardern and extended an olive branch to work on legislation together to make it easier for property developers to build, but she’s heard nothing back.
Following the Christchurch earthquakes there was cross-party consensus that got legislation through under urgency to speed up the rebuild process.
Collins has been asking to work with David Parker (the lead minister on Resource Management Act reform) for more than two years.
She thinks he’s getting “personal’’ not wanting to work with her, and she suggests he puts his lawyer hat on.
“If he doesn’t want to work with me he can go work with Scott Simpson or Nicola Willis.
“But it shouldn’t be about personalities, it should be about getting the job done,’’ Collins says.
Parker is expected to make announcements tomorrow about next steps for RMA reform and the timeline for it.
He told Newsroom he is intending to reach out to the National Party and he had early discussions with Scott Simpson at Waitangi last week, and he’ll be contacting him again this week.
Asked why he hadn’t taken up Collins’ offer sooner, he replied, “they’re not the government”.
