Turns out that home owners have to sink to their knees and thank Labour

Mathew Hooton explains why:

For five years, Labour has been talking, with ever rising concern, about Auckland house prices. At its annual conference back in November 2012, the party declared a “home affordability crisis”. Leader David Shearer spoke of young people looking at the cost of housing in despair. For tens of thousands, home ownership “is a dream that’s out of reach.”Mr Shearer announced KiwiBuild, a 10-year policy for the state to build 10,000 new homes a year, two-thirds of them in Auckland. These would be sold to first-home buyers for between $350,000 and $450,000. Where demand exceeded supply, Mr Shearer said buyers would go into a ballot. To stop people flipping them, buyers could not sell the new homes for a certain period without penalty.

Fast-forward nearly four years since Mr Shearer’s speech and houses in Auckland have gone up an average of 64%, from $595,000 to $975,000. Cries of a housing crisis, under David Cunliffe and now under Mr Little, have only become fiercer.

There is no housing crisis.  There i,s on the other hand, a huge boom that Labour have been fueling with their fear campaign.

At his party conference in July 2014, Mr Cunliffe linked rising house prices to the hospitalisation of 40,000 children and failure at school. His solution was a capital gains tax to add to Mr Shearer’s 100,000 new homes.

Inevitably, Mr Little has spoken most angrily of all. At the Green Party conference last month, he fumed about 40,000 people “sleeping in cars, in garages, in severely overcrowded houses [and] sleeping on the street.”

In South Auckland, he reported, “children as young as 11 [are] living under bushes.” A Labour-Green government, he promised, would “end our housing crisis.” Word was put about that, to coincide with Labour’s 100th anniversary party, comprehensive solutions would be announced.  [..]

A bit of maths is in order. Let us assume Mr Little believes Auckland house price inflation will remain at 16% under National in 2016/17. Let us charitably say it will fall to 15% in Mr Little’s first year as prime minister, 10% in his second and 5% in his third, before reaching his target of 2% early, in 2020/21 as he seeks re-election.Even under such assumptions, which are far more heroic than Mr Little’s own words, the average house price in Auckland would increase by another half million dollars to $1,500,000 in 2019/20 before his 2% steady-state arrived. The income-to-value ratio would worsen from about 1:10 now to 1:15, just as Mr Little was making his case for a second term. Of course, the market may well have corrected itself before any of Mr Little’s policies had any effect. They risk being procyclical not counter-cyclical as intended.

This is all good news for homeowners who can safely book another overseas holiday. But it’s not so good for the 40,000 homeless, the children living rough or the young couple unable to buy a home that Mr Little has claimed, wholly disingenuously, that he plans to help. So sorry about last week’s column. I won’t take his words seriously again.



– Matthew Hooton, NBR

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