Builders gold rush? Not likely

The NZ Herald has a contradictory article on homes and building in today’s edition.

Builders expect a rush of first-home buyers planning to build new houses following the Reserve Bank’s announcement they will be exempt from new mortgage lending rules.

Two months after the limits were introduced, the bank said yesterday it would exempt new home building from them after consulting groups such as the Registered Master Builders Federation and the banks.

The building association said that the rules, which restrict lending to borrowers with less than a 20 per cent deposit to 10 per cent of a bank’s total, had resulted in cancelled orders for new homes and a 30 per cent drop-off in inquiries.

The change is likely to push more new homeowners to the city fringes where more land is available for building. Construction companies were yesterday predicting a surge in activity levels.

Reading this it strikes me as truly odd that the Herald would publish contradictory information only days apart.

Yesterday Brian Fallow says that the housing shortfall is only 5000 dwellings, not 90,000 (former ARC’s position in 2009), 30,000 (Auckland Council) or 20,000, just 5000.  

Back earlier this year the on this blog raised the possibility of there being no housing crisis or shortfall based on immigration figures.

Now today – after Reserve Bank Governor Graeme Wheeler reduces LVR restrictions on new build house mortgages – builders are crowing that sales will expand significantly.

But will they?

If there is no shortfall – meaning that the perception of demand is not aligned with the actual demand – then not much of anything will happen?

New houses are not cheap and not affordable. At Hobsonville Point most houses are priced over $700,000 – hardly an affordable solution for low equity buyers unless they earn massive income.

Some developers around Auckland are citing dramatic drops in sales enquiry since the LVR restrictions were implemented. From hero to zero over night.

Perhaps in the cold light of day it is obvious that the hype wasn’t built off demand or shortfalls at all. It was built of nothing.

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