30 September 2013
Low pay makes home lending restrictions worse
New loan to value ratios coming into effect tomorrow will hit hard at those on low incomes says the Council of Trade Unions Secretary, Peter Conway.
Peter Conway says "house prices in many parts of New Zealand are five to seven times annual household income and it is just getting too hard for many New Zealanders to own a home.”
"Not only have house prices been rising significantly for many years, but low rates of pay, insecure work, and minimal pay rises have made it harder for people to save for a deposit and service a mortgage."
“Home ownership in Auckland for instance has fallen from 74 percent in 1986 to 58 percent today.”
“What we need is an increase in the supply of affordable homes, and decent pay rises so that household incomes are boosted. That is how we can improve home affordability. A capital gains tax would help too.”
The CTU supports the greater use of macro-prudential tools by the Reserve Bank but believes that they should be used more surgically. “First-home buyers should be exempt from the new home-to-value restrictions, and the restrictions could be limited to Auckland where prices are increasing most rapidly. We also want to see more emphasis on other tools identified by the Reserve Bank (such as sectoral capital requirements) and consideration of a greater variety of tools to target different sources of inflation and risks to the financial system.”
"But the Reserve Bank should not be left to act on its own, it needs supporting policies from the government that make sure affordable homes are available, and that people have good quality housing whether or not they can afford to buy," says Peter Conway.