16 July 2013

Housing bubble can be controlled without targeting first home buyers

Families do not need to be locked out of buying their first home by the introduction of measures to control house price inflation, Green Party Co-leader Dr Russel Norman said today.

Following the signing of an agreement with the National Government over the use of macro-prudential tools to limit house price inflation, the Reserve Bank looks set to introduce Loan-to-Value Ratio (LVR) restrictions on all loans.

The Green Party’s position is that LVRs should be part of a suite of measures to address home affordability and should be differential, with more lenient ratios for first home buyers than for property investors.

“With smart policy, we can stop the house price bubble without locking Kiwi families out of home ownership,” said Dr Norman.

“LVRs should be more lenient for first home buyers than for property investors. It would be unfair to require large deposits from first home buyers. They’re not the ones forcing up houses prices - speculators are.

“It’s very concerning that John Key doesn’t seem to be fighting for first home buyers and is standing by while the Reserve Bank moves to lock many of them out of buying a home.

“LVRs are a good move but they should be targeted at property investors and speculators, not at families trying to buy a home, and they shouldn’t be the only tool.

“We need a set of measures to ensure that house prices are fair and enough affordable homes are available. These include a capital gains tax (excluding the family home), restrictions on overseas investment in residential property by non-citizen non-residents, a government-led programme of affordable house building, and the Greens’ Progressive Ownership shared equity scheme.

“With practical, smart policies like these we can stop rampant house price inflation, which not only puts home ownership out of reach for many but also increases our international debt and diverts capital investment from the productive economy into housing speculation,” said Dr Norman.

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