It’s not every day that I agree with Bernard Hickey how ever in his article City house woes jam economy I find myself on the same page and agreeing with his sentiment.
Bernard talks about the “Not in My Backyard” push which is a powerful gravitational force in local politics and states ” That would all be fine if the only parties affected were local residents”.
As he suggests though, this is not the case with Auckland.
Figures recently released by the Real Estate Institute show house-price inflation in Auckland and Christchurch was responsible for more than 75 per cent of the country’s house price inflation in the past year… 75 per cent, that is astronomical and supports the claim we have been making for quite some time, yes things are booming in Auckland and Christchurch but New Zealand is made up of more than just 2 cities.
The annoying result of this very narrow view was that The Reserve Bank imposed its speed limit on high loan-to-value-ratio (LVR) mortgages to reduce some risks to the financial system from an overvalued housing market and as demonstrated this is mostly Auckland in particular.
The IMF’s warning that New Zealand’s house prices are 80 per cent above their long-term averages relative to rents is not because of the prices in Invercargill or Palmerston North and yet the restrictions are imposed across the country.
The Reserve Bank has increased interest rates by 0.75 per cent and is likely to add another hike, in part because of the pressures on inflation from Auckland. First-home buyers and exporters across the nation are paying for the 23 per cent rise in house prices in Auckland.
So now we have First-home buyers from Ponsonby to Palmerston North being shut out of the market in the past year because of the high LVR speed limit. Our exporters are fuming at the strength in the New Zealand dollar despite 20 per cent-plus falls in the prices of milk powder and logs and Reserve Bank Governor Graeme Wheeler yaps on about the currency being unsustainably high, but as he spoke it rose even higher.
Bernard went on to talk about the Government’s frustration with Auckland’s inability to solve its housing problems. He informed us that last week, Environment Minister Amy Adams lodged a submission criticising the Auckland Unitary Plan as inflexible, costly and too restrictive to meet Auckland’s rising population…and I agree, it is remarkable how much it costs in red tape to get a new development underway.
She pointed to forecasts showing its sprawl limits and de-intensified height rules would allow only half the necessary new homes to be built which will still leave us with a serious shortage of dwellings and an ever increasing demand due to migration both from overseas and other centres as people search for work.
We had Finance Minister Bill English telling a select committee it was “ridiculous” that Auckland Council restrictions had in effect made it “illegal to build a house that costs less than $600,000”. He pointed to the residents’ backlash against the rules on intensification in the unitary plan debate . “The Auckland Council got rolled by their ratepayer.”
Bernard finishes off by saying “Which takes us back to the “outrage” from the Grey Lynn Residents Association and that of Keith Milne, the villa owner living next to the proposed seven-storey apartment block.
Understandably, Milne doesn’t want an apartment block in his backyard, even though the developer has reassured the council it would not shade its neighbours or block views.
This dispute on Great North Rd may seem like an intensely local one, but everyone from Invercargill to Kaitaia should know about it because it is symptomatic of a tension between private property rights and the public good that needs to be sorted for the good of the economy.”
And for once in a very long time Bernard and I agree.