It’s a ludicrous situation when houses are “earning” more than people. Warnings about the (largely Auckland based) property bubble are coming thick and fast now. This week the Reserve Bank waded in with some sensible advice:
Reserve Bank calls on Govt to rethink housing tax
The Reserve Bank has urged the government to take another look at a capital gains tax on investment in housing, allow increased high-density development and cut red tape for planning consents to address an over-heated Auckland property market.
Deputy governor Grant Spencer said in a speech to the Rotorua Chamber of Commerce that housing market imbalances “are presenting an increasing risk to financial and economic stability” in New Zealand, one of the few advanced economies that hasn’t had a major house price correction in the past 45 years.
(The quoted version is as per 1:30 PM Wednesday Apr 15, 2015, but by 5:00 PM it was retitled and edited so that the new / current version makes it all look like Andrew Little’s idea – hmmmmm).
That’s the Reserve Bank calling for a CGT – which happened to be Labour’s policy at the last election (and clearly should be again at the next one, the Greens are well on board). According to an anonymous editorial in The Herald these are…
Blunt words Government can’t ignore
Reserve Bank deputy governor Grant Spencer could hardly have been blunter in taking the Government to task over its response to Auckland’s overheated housing market. Much of what he said was not new, but there was a heightened degree of alarm about a level of house-price inflation which, he said, meant “an eventual market correction is likely to be disruptive to financial stability and the economy”.
Mr Spencer spoke damningly of the Government’s almost exclusive focus on the supply side of the equation. He argued convincingly that much more needs to be done to reduce demand.
So what is National’s response? In his train wreck interview with Mary Kim Hill, Nick Smith tired to claim that the RB advice was unclear (no it wasn’t, see above). Then it was “Be realistic, first-home buyers told” – that’s really going to help. How about “PM says no housing crisis in Auckland; says Govt ‘getting on top of it’ despite MBIE analysis showing measures not improving 20k shortage“. So – as usual, deny dither deny. Leading people to ask “Will John Key’s legacy be a housing meltdown?“. Yes, yes it will.
In amongst all the noise it is up to Don Brash, of all people, to state the obvious:
Property bubble keeping Govt afloat
Former Reserve Bank Governor Don Brash says the Government won’t be looking to bring down house prices too quickly because it would see them voted out of office.
…
“The one sure thing is if house prices do return to their normal relationship with incomes, the Government’s gone because a whole lot of property owners will be badly hurt by that process. But who knows? We don’t know how it will end, but we do know that we can’t keep on going as we are now.”
Quite.
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