Former Reserve Bank chief economist: Crash Auckland house prices by 40 percent


A call by a former Reserve Bank chief economist to flood Auckland with new houses to crash house prices by 40 per cent is “crazy”, Prime Minister John Key says.

[…] Arthur Grimes, who is now senior fellow at Motu Research and an associate professor at Victoria University, said drastic action was needed.

REINZ data shows Auckland’s median house price reached $820,000 in March this year – a 66 per cent increase in only four years, Mr Grimes noted.

The Government should try and cause a 40 per cent crash in house prices to bring Auckland’s median back to about $500,000.

Mr Grimes, who was Reserve Bank chairman from 2003-2013, said one way to bring down prices would be to build an extra 150,000 houses over six years.

Mr Key was asked about the proposal at his weekly post-Cabinet press conference today.

“I think it is crazy. Go and ask the average Aucklander who has got a mortgage with a bank if they want to see 40 per cent of their equity disappear,” he said.

The left are absolutely baying for a crash in house prices. It would take National down overnight. It would cause a huge glut leading to lower rents. And then Labour get to hang it all on National.

The fact that the “housing crisis” is seen as a negative is because the Media party and the left are working hand-in-hand on the narrative that a strong housing market is a negative thing. They continue to run stories about people in the provinces being ‘priced out of their own town’ by Aucklanders.

But you never get to hear about the people in the regions who have cashed up very nicely because of it.

Auckland isn’t a mirage. Houses are for sale, and they are being bought. It is just fine. People want to build houses, and they build them. It is just fine.

National’s major objective behind the essentially unrestrained migration is to make absolutely sure that the demand doesn’t dry up overnight. It would cause a crash that would take at least a decade to recover from. And here’s something for free: if a left government comes in after the 2017 elections, they will only fiddle around the edges of immigration, but they won’t have the guts to turn it down either.


– NZ Herald

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