Provincial New Zealand paying for Auckland housing problems?
4 December 2013
Provincial New Zealand paying for Auckland’s housing problems?
There are signs that first home buyers outside Auckland are becoming unwitting sufferers of the Reserve Banks 20% deposit rule.
The Auckland housing market has been overheated for some time, and this should be the target market for the Reserve Bank’s loan to value ratio (LVR) policy, suggests Auckland Chamber of Commerce head, Michael Barnett.
While he appreciated the intention of the Reserve Bank policy was to cool the house price market, he questioned its fairness and whether it would make a real difference.
First, the big housing problems are in Auckland, not across the rest of New Zealand. This is reinforced in the NZIER’s recent release showing Auckland’s real house prices are up 15% on 2007 while for the rest of NZ they are down by 25%.
Second, by pricing first home buyers out of the market, there are real risks that developers may focus on higher end products; especially in Auckland where there is a continuing demand for higher priced housing.
Acknowledging it is early days for the new policy, the Chamber’s initial impression suggests an impact which is incentivizing property developers to continue to focus on the top end of the market, and therefore long-term the Reserve Bank could end up penalizing the need to increase first home buyer housing stock. Despite the relative real house drop outside Auckland, first home buyers face a tough challenge to meet the 20% LVR policy.
“With Auckland 35% of the New Zealand economy and the dominant player, it is time that policy designers and decision-makers in Wellington took a more innovative and realistic stance in their approach to addressing issues. Auckland is different to the rest of New Zealand and this should be acknowledged and recognized.
“It is unfair to keep penalizing the rest of New Zealand for Auckland problems,” suggested Mr Barnett.