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Polity: Key deluded on housing progress

Written By: - Date published: 1:29 pm, January 28th, 2015 - 28 comments
Categories: housing, john key - Tags: , , ,

From Rob Salmond at Polity:


Key deluded on housing progress

I’m not sure, actually. Is he deluded, or is he being deliberately misleading? Here’s the part of John Key’s State of the Nation speech where he reports back on progress in housing affordability, with my commentary:

Already you can see signs that our approach is working.

You mean signs like Auckland being one of the most unaffordable cities in the world for housing, or the rapidly falling home ownership rate in New Zealand? Those kinds of signs?

Residential construction increased 21 per cent last year and more than 24,000 building consents were issued – the highest number since 2008.

People don’t live in consents. Residential construction in Auckland is not running anywhere near fast enough to meet the increasing demand as more people move there.

This growth in construction is set to continue as special housing areas accelerate land availability and consenting.

How much? So far the government has had about 15 months and built only 350 houses. Not exactly inspiring when the net influx into Auckland is around 20,000 people each year.

That will help to ease the pressure on house prices.

I did the numbers on this last week, and the decrease he is talking about through their RMA reforms is, at a fantastical maximum, $10,000 one-off. Which would make Auckland’s “severe unaffordable, 9th worst city in the world” 8.2 score on the Demographia survey a “severe unaffordable, still 9th worst city in the world” 8.03 score. Wood-de-do.

But we should also recognise that housing affordability includes more than just prices.

Incomes have been rising faster than inflation and people are feeling confident about the future.

Note here Key doesn’t say income are rising faster that house prices which you would think is there relevant comparison for, you know, affording a house. He avoids that with good reason, because house prices have risen much faster than incomes while Key has been in government, and in the next couple of years Treasury forecasts (p6) it will get worse again, with house prices rising roughly twice as fast as wages this year.

Claiming that incomes are rising fast enough to help with house affordability is completely delusional.

Interest rates are low, which makes servicing a mortgage easier.

These factors are actually supporting the growth in house prices in some areas. People are assessing their own ability to pay and are bidding on that basis, as they’ve always done.

Key is right that people are “assessing their own ability to pay and bidding on that basis.” I’ll give him that. But the result of those bids is a rapidly declining rate of home ownership as first home buyers get consistently outbid by speculators.

It’s often hard, though, to save for your first house.

And getting harder by the year under this government…

That’s where the Government’s new HomeStart programme for first home buyers comes in.

It begins in April this year and we estimate it will help 90,000 people into their first home over the next five years.

This policy is a complete clanger, which is why it has got “also special guest” status since the election. Key wants to take a situation of excess demand relative to supply, and give those excess demanders more money. That creates even more excess demand, pushing prices up still further, not just for the people with the government handout, but for everyone else, too. He’s trying to put out a fire with a can of petrol.

28 comments on “Polity: Key deluded on housing progress ”

  1. Tom Gould 1

    Key knows precisely what he is doing, and so do his fat-cat backers and cronies. More ‘trickle up’ anyone?

  2. Sacha 2

    Govt’s biggest maths problem seems they’re getting rid of 8000 state houses but only adding 3000 more NGO rent subsidies. How does that work?

  3. BLiP 3

    . . . Is he deluded, or is he being deliberately misleading? . . .

    Both. John Key is deluded by his ideology AND is being deliberately misleading. Its how he rolls.

    • Peter 3.1

      Yes, and he will always present a story that he knows the majority will accept. You can run any hidden agenda you like if you do enough to keep the majority onside. Key and his backers are not deluded, rather they are genius! Facts and the truth are irrelevant to these guys!

    • thechangeling 3.2

      I’m assuming Crosby Textor wrote his speech in its’ entirety.

      • les 3.2.1

        absolutely…they must be getting paid some…but they’re good.

        • adam 3.2.1.1

          Propaganda is what propaganda is. I say they are not that good. This is a speech which reeks of desperation, and a desperation, did I mention desperation. This style, whilst very productive as a one off – fails when repeated too often. We now have seen this style of speech from Key often. I for one was surprised, as now more are seeing this propaganda for what it is, propaganda.

  4. tracey 4

    “Residential construction increased 21 per cent last year and more than 24,000 building consents were issued – the highest number since 2008.”

    He would have access to the value of the work included in those consents (which can be indicatve of the selling price upon completion – but need to be careful with this one cos I think fees are based on the value of the work being done so it is sometimes written down – vto or someone else will know that better than me)

    He would have access to the areas where those consents are issued which can give an indication of resale price

    He would have access to how many of those consents are for new properties and how many are for work requiring a consent for an existing property

    He would have access to how many consents have been issued to developers (because most developers get a streamlined process compared to owner-consenters)

    Mind you, so do the journalists who would have known in general terms that both leaders would speak to affordability in auckland today and could have therefore deconstructed any claims each made.

  5. Foreign waka 5

    With the increase in private ownership of governmental social responsibility the only outcome will be slums. A Government that washes its hands of the poor, it stands to reason that they will be blaming the private owners and those in turn will point the finger at funding shortfalls towards the government.
    We have already proof with the housing of the elderly and the minimum wage paid to the people suppose to look after them. Same pattern, different group of people in need.
    Its all for the profit and this means that the government will allocate a budget sum that most likely will not cover the need. Lets see what will be on the cards in 3 -5 years time. I wish politicians could be held accountable for undue suffering inflicted on the poor.

    • tracey 5.1

      private run (instead of public run), while it works is a great run and working is open to interpretation, any problems they liquidate or look to government to bail them out… or just walk away after years of taking their profit and then when it gets too hard…

      There is a reason NGO’s are being looked to, cos private enterprise sees no profit in affordable housing.

      • ghostwhowalksnz 5.1.1

        I think we can look at the process used for aged care- not for profit at first then private profit makers come in

  6. b waghorn 6

    If developers passed on the savings from the reduced costs of the RMA (yeah right) how long would it take for the house price inflation to gobble it up any way.

  7. Neil 7

    Keys speech should’ve been titled “How I’m going to pull the ladder up behind me, so nobody else can get the help I had.”

  8. Macro 8

    No he’s not deluded. Just, as always, deliberately misleading.
    But don’t worry folks – he and his mates are making a killing!
    Pity that it’s a killing made at the expense of the poor – but then they deserve it.
    They could be like Key (couldn’t they??)

    ok its USA but were getting there!

    • Paul 8.1

      Yes he and the media are being misleading.
      This is part of the plan.
      More for the super wealthy and less for everyone else.

    • Paul 8.2

      Yes he and the media are being misleading.
      This is part of the plan.
      More for the super wealthy and less for everyone else.

  9. linda 9

    house prices have already gone past the point of no return and no amount of policy tweak is going to fix the situation indebtedness has gone past the point of no return with the housing market new Zealand looks a bleak place for gen x and y. the cure will be a reset or major correction sad part all of new Zealand montages are recourse mortgages
    unlike the us most are none recourse mortgages.

  10. Lloyd 10

    I am awaiting further logical announcements from the donkey such as:

    “Air New Zealand will sell one-third of its planes so it can carry more passengers”

    “Spark will pull up half of its fibre-optic cabling so that it can carry more internet traffic”

    “The rail network will be shut down completely so that it can carry more freight”

    and

    “Half the government fleet of BMW limousines will be sold so they can concentrate on carrying Gerry Brownlee around”

    I am sure at least one-third of the electorate will believe these are completely logical if the donkey says them.

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