You have to take your hat off to National’s spin doctors, coming up with the plausible-sounding nonsense line that low interest rates mean affordable housing isn’t needed. But it led to this on RNZ this morning (no links yet)- Phil Heatley: “we’re pleased that we’re managing the economy such that interest rates are so low”. Ten minutes earlier, Tony Alexander: “lower interest rates reflect the weakness of the economic outlook”.
For quite some time, National has beem trying to claim credit for low interest rates but, of course, it is the weak economy causing them as central banks and governments desperately try to lift business investment (btw, economists, is it correct that real return on capital must align with real growth in the long-run?). National can take a lot of blame for the poor performance of the NZ economy – but not all of it.
And, of course, low interest rates don’t make buying a house more affordable.
They actually hinder people trying to save up a deposit because their savings get lower returns.
And they lead to higher house prices. The market for housing will always be shaped by the size of mortgage payments people can afford to service – if interest rates fall, then new buyers will be able to pay more up front and housing remains just as unaffordable to those on low and middle incomes.
That’s precisely what we’re seeing in Auckland, where National says affordable housing isn’t needed.