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Quick action needed to curb rising house prices

by Craig Palmer
Quick and incisive action is urgently needed if the incoming government is to curb rising house prices, particularly in Wellington.

Under the intended “Funding for Lending Programme”, the Reserve Bank needs to ring fence the lending of the trading banks (as recently advocated by the financial columnist Janine Starks).

Only businesses and first home buyers should benefit.

Further preference should be given to business owners aged 35 or younger. When in this age group we generate the most energy and creativity. It is in this ambitious, innovative phase of life that we are most likely to generate new wealth.

Furthermore, closed tenders must be outlawed by emergency legislation. It is a pernicious practice causing desperate buyers to bid blindly, stabbing at prices beyond their means. It engenders mortgage slavery that favours only the banks and the real estate industry.

The consequent stress within households is immense.

The incoming government must do everything in its power to ensure young New Zealanders can have a home of their own. Not to do so risks social and political upheaval.

Craig Palmer is a resident of Mt Victoria.

14 comments:

  1. Morris Oxford, 1. November 2020, 13:10

    Thank goodness the Greens have got the Associate Housing Minister. No more excuses please!

     
  2. Claire, 1. November 2020, 15:51

    Hutt City Council-owned developers Urban Plus sold out when they offered ten houses to first home buyers at $550,000. This looks like the way to do it. Controls over developers and houses set aside for people who need them. Sort of like Kiwibuild! It has to be either Government or Council led, otherwise it will not be affordable.

     
  3. TrevorH, 1. November 2020, 20:15

    House prices must be included in the CPI so the Reserve Bank is forced through its inflation targeting to confront the consequences of its reckless money printing which is feeding an enormous asset bubble. Land must be released for housing and the RMA thrown on the dung heap. Local government must be reformed or abolished and consents must be centralised and available online. Government must invest in roading and sewerage/ water infrastructure rather than imposing a hurdle for developers. Prefabrication must be encouraged with factories near all the main centres. Separately the government must invest in social housing on a large scale, while capping immigration to more manageable levels. Etc.

     
  4. Julienz, 1. November 2020, 22:19

    @Trevor H – Couldn’t agree more. Covid has offered the perfect opportunity to review and reset immigration numbers. I would add to the list a review of the Accommodation Supplement currently said to amount to $2billion per annum straight into the pockets of landlords who are already pocketing tax free capital gains. It may need a rent freeze or rent increases limited to CPI until such time as the subsidy can be phased out.

     
  5. Dan, 2. November 2020, 9:19

    “Further preference should be given to business owners aged 35 or younger. When in this age group we generate the most energy and creativity. It is in this ambitious, innovative phase of life that we are most likely to generate new wealth.” I would appreciate a source for this or is it pure assumption based on your personal experience? Else, I’d like to suggest this is false.

     
  6. K, 2. November 2020, 9:34

    Limiting the money to only new business loans for those aged under 35 years is a very bizarre thing to propose.

     
  7. Traveller, 2. November 2020, 9:48

    Excellent recommendation to ban closed tenders. They are indeed pernicious.

     
  8. Ms Green, 2. November 2020, 14:21

    Agree! I cannot understand how closed tenders can be allowed. What other consumer item is sold like this … where the seller (and agent) can secretly push up the price, and the purchaser has to blind try to buy it paying lawyers, surveyors, builders for a report, etc. All (most?) other items we buy are an open fixed price. We just buy them knowing what it cost (or decide not to), and they are not million dollar purchases!

     
  9. Conor, 3. November 2020, 14:31

    Obviously need to make it easy to build houses in more places too. Instead of the ridiculous rules Wellington currently has.

     
  10. Local, 3. November 2020, 15:35

    Conor why? There are hundreds of homes called apartments being built already. With the ouncil numbers all wrong, there might be enough soon?

     
  11. Patrick McCombs, 3. November 2020, 17:19

    Well said Craig! What gets me is sentencing the next generation to a treadmill just to paid their enormous mortgages. Imagine how much better society would be if young families had another $200 each week to spend on life.

    Alan Bollard recently observed that houses used to be something we lived in, now they’re a vehicle to invest in. The problem is that there are no other places to invest not just for individuals but the banks too.

    So where has the money gone that was paid for all the pricey houses? Partly to farmers selling land but mostly to oldies moving on and leaving the money to their lucky children. Little is going into productive investment.

    Westpac CEO David McLean has a contribution to this in today’s NZ Herald. He says house prices in New Zealand are out of whack with incomes and are the highest in the world in relation to income. As well as increasing inequality he worries that a lot of NZ’s capital is tied up in housing “which is a deadweight asset. If people weren’t investing in houses they might be investing in funds or equity markets where that money could get recycled into businesses who want capital for investment.”

     
  12. Dave B, 3. November 2020, 20:18

    How do we bring house prices down without their owners feeling that they are losing-out? How do we persuade vendors not always to sell to the highest-bidder? How do we stop the real-estate industry always talking-up sale-price expectations? How do we stop buyers of greater means always outbidding those of lesser means? How do we limit the options of those with money and boost the options of those without?
    The only answer I can see is to build lots and lots of state houses and offer them at affordable rentals for those who need them and qualify for them, until the housing shortage eases. That way the less-well-off don’t have to compete in an impossible market for something as essential as housing.

    And if these state housing schemes are being planned for green-field sites, how about also planning a rail-connection to service them as was successfully done with the Hutt Valley developments in the 1950s. This has given us the rail-served suburbs of Naenae and Taita and the Hutt Valley Line as we know it today.

     
  13. Heather-Marion Smith, 3. November 2020, 22:30

    The “funding-to-lend” programme is specifically designed to increase the wealth of those in the top deciles of income distribution. With the LVR shelved, banks lend to the most risk-free borrowers – the ones already well-endowed. Bernard Hickey pointed this out on National Radio last Sunday morning.

    Now that the RBNZ is unashamedly using its sovereign right to “print” money, ‘twould be far more sensible and equitable for funding to be allocated directly to DHBs and local councils for essential amenities, saving tax and ratepayers millions in debt-servicing, hence more disposable income for households. Sounds like Social Credit policy? Sure does. Any objections?

     
  14. Patrick, 4. November 2020, 15:23

    Heather: It sure does. Social Credit is definitely the way of the future!