Yesterday, Key was wringing his hands, saying that the Reserve bank is likely to bring in loan to value ratio requirements without an exception for first home buyers but claiming that first home buyers were still his priority. If that were true, he would have done his part to tackle the real problems in the housing market: speculators, foreign buyers, and lack of affordable home building.
It’s all quite easy. The opposition parties have been talking about it for years (although the media coverage seems to be conveniently blind to that fact):
Remove the tax advantages that draw savings away from productive enterprise and into housing, and also let speculators outbid genuine home buyers. Capital gains tax is the main one. Removing tax deductability of mortgage payments for landlords is a further option.
Block foreign investors who aren’t citizens or residents of this country from buying existing housing stock. This is common practice abroad. In Australia, overseas money can be used to grow the housing stock, but not merely to pour fuel on the fire of house prices by increasing demand for the existing stock.
Build some affordable homes and give people a path to owning them. Labour’s got its plan to build 100,000 affordable homes. The Greens have their revamped State Advances/rent-to-own, which they call Progressive Ownership, to pass on the Crown’s low cost of borrowing to first home buyers. Together, that will make homeownership a reality for tens of thousands of families who are currently locked out.
Add that together, and chuck in LVRs with a first home buyer exemption, and you will take the fire out of the property market, turn investment towards the productive economy, and give young families a real shot at buying their own place.
But Key’s refused to do all of those things. His inaction has allowed a housing bubble to form. He’s left the real trouble makers – the speculators and the overseas buyers – alone. And, now, he’s going to cry crocodile tears while the Reserve Bank punishes first home buyers for his folly.