Property Institute slams idea to ‘crash’ market

Tuesday, 5 July 2016

Property Institute slams idea to ‘crash’ market by 40 percent

Property Institute of New Zealand Chief Executive, Ashley Church, has slammed a proposal calling on the Government to take measures to deliberately ‘crash’ the Auckland Housing market by 40% – warning that such an outcome would be ‘economically catastrophic’.

The proposal was made by former Reserve Bank Chairman, Arthur Grimes, in a speech to an Auckland audience last week. Mr Grimes, who is now a senior fellow at Motu Research and an associate professor at Victoria University, has subsequently repeated them on a public website drawing fire from the Prime Minister who, yesterday, described the suggestion as ‘crazy’.

Agreeing with Mr Key, Mr Church described the various consequences of deliberately crashing the market as ‘predictable and dire’:

“Mums and Dads who have been paying off mortgages for decades, and who are in no way responsible for house price inflation, would see the value of their major retirement asset decimated”.

“Thousands (possibly tens of thousands) of small businesses which rely on the equity in their owner’s homes to maintain bank funding would come under intense bank scrutiny – with some being forced to close and sell up”.

“Property Investors would see the value of their assets plunge – potentially kicking off a banking sector crisis as banks moved to foreclose on assets worth less than the mortgages they held”.

“The rental market would quickly reach crisis point as a result of Property Investors leaving the market and their rental properties being sold off by banks seeking to recover their funds”.

“Any Property developer who is already in the market and building homes would lose his or her shirt – meaning that new developers would need to emerge. That would probably set the clock back on the construction of much needed homes, in Auckland, by years”.

“Billions of dollars of the collective wealth of the nation would be wiped out overnight – extending the wealth gap between New Zealanders and Australians and reversing two decades of hard work by kiwis”.

Mr Church said that Mr Grimes proposal would destroy, rather than fix, the market and described it as a ‘suicide pact’.

“I think we all broadly agree on the need to do something to bring down house price inflation and tackle affordability – but this is just cloud-cuckoo stuff. By the time we emerged from the carnage there would be nothing left”.

Ends

© Scoop Media