Buying off the plans driving down KiwiBuild cost to govt

Buying off the plans driving down KiwiBuild cost to govt: HYEFU

By Pattrick Smellie

Dec. 13 (BusinessDesk) - Government capital spending on the KiwiBuild programme will be lower than anticipated as more of the affordable homes are expected to be provided through buying and selling privately developed houses.

The changed expectation will contribute to an improvement in the government’s cash position by about $1 billion against previous forecasts, the Treasury’s half-year fiscal and economic update, published today, says.

“A larger portion of the houses to be delivered under the KiwiBuild programme during the forecast period are expected to be funded from the sales proceeds of houses rather than contributions from the Crown.

“This has resulted in an increase in both operating receipts and payments, but a reduction in capital payments. Overall, the impact of this change has improved residual cash by around $1 billion” compared to forecasts in the Budget forecasts published last May.

The ‘specific fiscal risks’ section of the HYEFU also reports a changed outlook for risks to KiwiBuild, noting that “if house prices fall, Crown underwrites may be called and the value of land and buildings held by the Crown might fall”.

That possibility has been the focus of attacks on the ‘buying-off-the-plans’ aspect of the KiwiBuild initiative from the National Party’s shadow housing minister, Judith Collins.

“To achieve programme goals, there may be a need to change policy parameters or provide support to developers and/or homebuyers, especially if house prices rise.”

Meanwhile, the economic forecasts in today’s half-year economic and fiscal update note that house price inflation has been easing, reversing the strong growth in household net wealth rates.

In the three years to March 2017, house price inflation drove a 10 percent increase in national household net wealth. However, in the year to March 2018, net household wealth grew at 4 percent less than the rate of income growth.

“House prices, which are of particular importance for the net wealth position of a large number of New Zealand households, increased a little over 5 percent over the past year, well below the rate of increase experienced over the past three years,” the Treasury says.

However, slower migration, regulatory and tax changes have affected Auckland house prices more than other regions, where house price inflation continues to exceed income growth.

House price inflation is assumed to ease a little over the year ahead, and to grow at a similar pace to household income thereafter,” the Treasury says

(BusinessDesk)

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