From Rob Salmond at Polity:
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.