Finance Minister Grant Robertson wants to see house prices continue rising, but at a slower rate than at present.
“I have no desire to crash the housing market,” Robertson told interest.co.nz, clarifying making prices fall wasn’t a policy target either.
“What I do have a desire for is more sustainable house prices…
“I’m not setting a percentage on that, because there are a number of different influences on the housing market - some of which are outside of the control of government. But it certainly is my view that prices remain unsustainable, so there is further cooling to be done in the market.”
According to the Corelogic House Price Index, the average house value increased by almost $15,000 in August. In the year to August, the average value rose by 27%.
Robertson believed the tax policy changes he announced in March, as well as the restrictions the Reserve Bank (RBNZ) is continuing to impose on banks’ mortgage lending for financial stability purposes, were starting to take effect - albeit gradually.
Investors who sell residential property within 10 years of buying it, now have to pay income tax on any gains made.
Investors will progressively also no longer be able to write off interest as an expense when paying tax. Robertson said more details on exemptions around new builds, etc would be unveiled before October 1. He couldn’t say exactly when.
What’s more, the RBNZ has proposed requiring banks to meet new debt serviceability rules. It has also proposed making it harder for owner-occupiers to get mortgages by tightening loan-to-value ratio (LVR) restrictions, which were reimposed in March.
Put to him that the public policy response to the Covid-19 crisis - particularly the RBNZ’s decision to keep monetary policy very loose - had made the wealthy wealthier, Robertson said: “At this point I’m not seeing anything that indicates we’re likely to a see a further exacerbation of that [inequality] in light of the policy changes.”
Robertson maintained his thinking around how low interest rates, which boost consumer and house price inflation, can affect the poorest in society had evolved since the onset of the pandemic.
As well as trying to reduce demand for housing, the Government has allocated $3.8 billion towards increasing housing supply - partially by offering local councils grants to use for infrastructure required to build more houses.
The Government also increased benefits in 2020 and April 2021, and plans to do so again in April 2022.
However, the uptick in people requiring emergency support for food suggests there are a lot of people living hand-to-mouth.
The number of emergency food grants distributed by the Ministry of Social Development (MSD) increased by 64% to nearly 36,800 in the week ended August 20.
So within the first few days of lockdown, an additional 14,400 people rushed out to get food grants.
In the week ended August 27, MSD issued more than 40,000 grants - 80% more than in the week before lockdown, according to the latest available data.
Robertson said the most vulnerable wouldn’t receive more Covid-related government support above what’s already available.
“In an emergency situation, the work that MSD is doing is exactly the work that needs to be done. Longer term, we’re trying to boost those incomes and improve the financial security of those people,” he said.
The Green Party is urging the Government to do more.
It wants the April 2022 benefit increase to be brought forward immediately, housing hardship grants to be more easily available, rent freezes to be introduced and migrant workers to have access to the emergency benefit.
The first half of the video interview covers the contents in this article. The second half is more business-focussed and looks at contactless payment fees, re-opening New Zealand, small businesses struggling to pay rent, and a RBNZ proposal to introduce an insurance policyholder protection scheme. See this story for a summary of this latter part of the interview.
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So Robertson wants house prices to be "sustainable". Does he think they are sustainable now? Apparently, yes. This word "sustainable" is an interesting one. It entered everyday popular language in connection to renewable energy. It has since been used so much and so widely by politicians and university professors that it has become a hackneyed phrase.
So, what exactly does he mean when he says house prices are "sustainable"? Maybe, he considers that generally salaries are high enough across the board to service million-dollar mortgage repayments without adverse risk. And, maybe he hopes people will "sustain" prices themselves by simply continuing to pay whatever ridiculous sums the bank is willing to get them on the hook for. And....he doesn't want to carry the responsibility for prices crashing on his watch. So let the game continue.
he simply does not know the definition of that word. Don't worry , this is new normal now for NZ (and not only) leadership just to use buzz words and sound professional without being one. Do you want proofs ? - just listen carefully to what your boss says at your job (it applies pretty much anywhere now)
So disingenuous and so annoying that governments misappropriate the word. As one Auckland planning academic said;
“… sustainability has largely been captured and deployed under a narrative of sustainable development in a manner that stifles the potential for substantive social and environmental change…
The dominant institutional interpretation is often employed as justification for policies that are “not necessarily sustainable or
even socially just…… sustainability’s underlying message that we must change our consumptive behaviour to be consistent with the carrying capacities of the planet largely are overlooked, if not outright negated.”
Michael Gunder, 2006
Kate, perhaps he's referring to the 'sustainability' of the financial system. For ex, is it 'sustainable" for the NZ economy to keep funneling all of its credit creation for non-productive purposes? Because if the answer is 'yes', then there is no need to change the status quo.
The fact that he refuses to define his own terms is annoying and frustrating. Or even worse, he's making it up on the fly.
Actually, there was one of his pony tricks: moving away from GDP measures to those of "wellbeing". The framework has yet to see light of day.
Much of credit creation in NZ is not directly applicable to GDP. It's for bidding on house prices. They don't say it but the house prices are reflected in GDP through greater spending. The wealth effect.
There's no such thing as the wealth effect is there? That's a term used by neoclassical economists who believe in the loanable funds model. The real reason for the correlation between economic activity and house prices is the "credit effect". ie. That house price rises are caused by rising mortgage debt, and GDP = income + the change in debt. As per Steve Keen's analysis
That is not a description of the 'wealth effect' as it relates to behavioral economics.
The "wealth effect" is the notion that when households become richer as a result of a rise in asset values, such as corporate stock prices or home values, they spend more and stimulate the broader economy. While well-grounded in theory, it has always been difficult to estimate the magnitude of the wealth effect, because changes in asset prices rarely occur without other macroeconomic changes.
https://www.nber.org/digest/aug19/new-estimates-stock-market-wealth-eff…
Good point "becoming richer" and "feeling richer" are quite different. The crux is still the same though, that the "wealth effect" could really be described as a "credit effect". Aggregate demand equals income plus the change in debt. You could make a similar argument with the stock market ie change in martet_wealth = (investment_per_year -drawdown_per_year) + change in margin debt. Isnt that so much more elegant that using Keynesian multipliers and marginal propensity to consume.
No one in the major parties can say they want house prices to fall, at least not yet. There are too many homeowners with a vested interest in houses staying stable or going up, plus if house prices do fall significantly and crash the economy, they don't want to cop the blame for causing it.
For all we know he does want them to fall, and is willing to enact policies to make that happen (e.g. interest deductibility rule change), but he cannot say that. Or perhaps he honestly thinks it's fine.
So if we manage 10% growth prices from now to the end of the coming summer, and then we average that out with the last 18 months, we could get an annualized growth of about 20% which is less than 30% and therefore a successful / sustainable result for the leaders of NZ to report.
Thats not really a prediction, its pretty much set in concrete. If the OCR doesn't take a rise or even if it has a small jump in February it will be to late for any impact on summer. I'm still getting updates from the likes of one roof with gains of 2 to 3% per month so you could have another 10% even before Christmas, let alone "Summer"
Coming from horses mouth....want house price to grow, so it will and this is the reason that Robertson and Orr not taking any action to control.
Average Kiwis are struggling to buy a Home and this shameless creatures wants house price to go up - last month went too up by $4000 per week.
Average Kiwis looking at them to help and this B#@$% come out to rub salt to the wound - This democratic Dictators are worse than dictators, as with dictator atleast can see their end that they deserve unlike democratic dictator who in worst scenario will lose but still get plump jobs.
In such situation can only look at Karma to.........
....and she is empathy queen to the world......
https://www.nzherald.co.nz/nz/opinion-government-has-caused-housing-cri…
(this was the article I wanted to see comments on, ha).
Based on the video... with Jenee's questioning we are so close to getting a real discussion on house prices and inequality and the future outlook for NZ.
But then: "Why don't you target a small decrease in house prices?"
The response was pure guarded government cookie cutter speech. Sorry but "Sustainable" has no meaning any more.
Is the sustainable future of NZ going to be centered around ever-increasing welfare for all those who haven't bought or inherited property?
Or, one day just maybe someone will pose the suggestion that asset prices should fall and they won't receive the automatic snide laugh response from the standard entrenched politician.
House Price up 30% to 100% in a year.....still this B@!#$ want house price to rise.
Sorry for using the language but here we are just using words but this B#$%@ have and are killing the aspiration and dreams of many, for which they deserve to be paraded n...........and.......
Jenny, will appreciate if someone reads comment and highlight it to empathy queen and her knights - not that they care but still......
To quote Robertson - 'there are a number of different influences on the housing market - some of which are outside of the control of the government.'
We are not asking for you to control the things you can't control but for you to control the things you can, like removing restrictions that cause supply and demand imbalances and rising house prices.
And to offer this 'some things are out of our control' then means that the present increases are either a Govt. not in control, or this increase is because of what they are controlling. Neither of which is a Govt. fit for office.
So tell us Minister, which is it? These runaway prices, are they due to you being in control or not?
These morally poor leaders want general voters to believe the rhetoric that if 'you keep us in government, we'll keep making you feel richer via the wealth effect of increasing house prices'.
Yet they were elected on the promise of reducing house prices (the opposite rhetoric). So if they fail on the promise of making house prices fall, how the hell are they going to stay true to a promise to make house prices rise? They want to have it both ways...its really quite pathetic if you dwell upon it. Worse than John Key and Bill English now when they said along the lines of having some of the worlds most expensive houses is worthy of celebration.
Would be interested to see the views of people as to whether property can provide real return over the long term from here (i.e. above the general level of inflation).
If so, what are the mechanics of this? From my perspective it would appear that we've maximised the utility of debt creation and lower interest rates, allowing asset prices to rise above the rate of general consumer inflation. So in the future, how to we create property (and share price) rises above that measured rate of inflation if not via expanding debt at a rate higher than the inflation benchmark (CPI)?
I have said before that average house price increases will continue, at least in part because of huge zoning changes coming in 2022.
Average prices are being pushed up in Auckland in part because of developers scrambling over properties. A property in Manurewa sold for a silly price last week, $1.6 million, 25 developers bid against each other and pushed the price higher and higher.
We will get more and more of this when zone changes occur next year.
Based on this, and barring a financial crisis, I expect median prices to be at least 30% higher in Auckland in 1.5 years time. But the HPI to be up circa 15%. Large volumes of transactions on development sites will push median values well above HPI values.
Are there more zoning changes coming? I’m currently in a single housing zone (it’s our family home) but a bit of an anomaly as reasonably close to a train station.
The thought of slum boxes going up all around us doesn’t appeal, but I know people need houses. Is it set in stone?
Very nice interview there are direct questions & I believe the answers are pretty clear and loud, no house price fall and sustainable increase.
Next time think 100 times before voting for these cheats, they forget there promise on housing affordability completely & accepting 30% increase in a year without blink of an eye amazing to see.
“I’m not setting a percentage on that, because there are a number of different influences on the housing market - some of which are outside of the control of government. But it certainly is my view that prices remain unsustainable, so there is further cooling to be done in the market.”
What the hell does that mean? On the one hand he's saying there's nothing he can do, or really wants to do. But on the other hand he's saying "there's further cooling to be done in the market". How? By whom?
Even the Greens have it all wrong - we don't need a "rent freeze" as rents are already unaffordable! If they weren't unaffordable in comparison to incomes - we wouldn't be subsidizing them via the accommodation supplement and we wouldn't have as many people on the social housing wait list and in emergency accommodation.
It’s a shambles Kate but everyone from your average voter to your average politician to your average landlord are interested only in what’s best for them in the short term, not a longer term utilitarian view for the collective.
Labour have been fortunate that COVID is here to distract people from the issue.
Perhaps their aim is to prolong the COVID crisis for as long as possible so that they don’t need to deal with the housing crisis before the next election. It’s a blessing in disguise for them.
Yes, a shambles. And it need not be. There is this thing called regulation - hence we need to regulate the rental market because it's dysfunctional and the growing, growing, growing subsidies needed to house people, prove that. Regulate the rental market and sit back and watch house prices come down - naturally (i.e., in accordance with a properly functioning willing buyer/willing seller local/NZ marketplace).
120 mps. Out of this current lot name one that you would like to employ, be employed by, or employed with? I can’t. In fact hard pressed to come up with more than a couple of names to fit this century. MMP has diluted not strengthened the calibre of our parliament. We have not got either the professional or workforce qualified and experienced mps of yesterday. Nowadays they are academics who have little more thought other than a mp is career opportunity.
“What I do have a desire for is more sustainable house prices…"
Seriously???
House prices are already unsustainable.
The nominal price would have to stay flat (i.e. falling real prices) for something like 20+ years before we reach sustainable prices again.
NZ is a basket case. Billions of dollars pumped into totally unproductive use inflating land prices since the 1980s & we have to wait another 20+ years?
All mainstream political parties in NZ are adherents of neoliberalism and none would dare implement policies that would go against this economic ideology. So Labour will trot its politicians who will say they’re all for “sustainability”. Discussing affordability, well that is verboten.
I just read an article on the GWRC website - talking about the Regional Climate Change Forum;
https://www.gw.govt.nz/regional-climate-change-forum-unites-leaders-for…
And noted that this talk fest sits under the "30-year Wellington Regional Growth Framework".
N O T A C L U E.
If you get sucked into a large mortgage then you become a tax slave for the next 30 years exactly what the government wants. Putting all these restrictions in place will bite them its only a matter of time. Just remember the government doesnt need to repay its debt because its made up from fake currency , what will happen is they will inflate there debt away keep an eye on inflation.
Absolutely weird, here's our finance minister in all his glory displaying his total incompetence !!
Accepting that 30%/annum gains are ok but not sustainable, introducing the removal of interest from rentals which is forcing up rents and reducing the rental pool, increasing the brightline test 10 years that holds more property off the market and encourages more money to be put into the family home for extra tax free capital gains !!
True to form house price inflation is always higher when Labour are in power !
I have benefited by 4 million dollars in Capital gains that I don't need during this administration, crazy, bazaar, lost for words..
$4million hard earned dollars Shoreman - imagine trying to earn that via wages....what you've gained in a year is far more than what the vast majority of the population will grind out in a lifetime of work.
Your gain must feel very satisfying and well deserved (sarc).
IO - I don't make the rules, sure I have made great gains but only because in the past I have worked my arse off, ignored the DGM's and just got on and invested. The appreciation in housing values in the last 12 months is just madness and it didn't have to happen if the RB and Government had managed this period correctly rather than fight with each other.
FYI whether you have say 10 mil or 16 mil it really doesn't make any difference, just numbers.
I'm not sure some people even understand the very words coming out of their mouths! What he is trying to do is make a shite sandwich sound somewhat palatable but the reality is our housing market has not been "sustainable" for a very long time and if he wants one then we need a 50% drop in house prices.
In other words more verbal toilet to effectively justify doing absolutely nothing.
They extended the brightline test to 10 years, against the recommendation of 20 years. Now new investors will hold onto their houses for longer, at least 10 years, reducing supply even more. Great work at making the housing crisis even worse. Just bring in A CGT on all homes except the family home, it will fix this error.
Moving it to 10 years was a reasonable long term play without rocking the boat too much. Jacinda is too afraid to go back on her "no CGT" declaration but probably also realises that a CGT is ultimately necessary. Moving brightline to 10 years makes it easier for the next gov to either bump it up to 20 years, or convert it to a full CGT.
The only way house prices can be sustainable without falling (if you take sustainable to mean in pure economic terms) is if interest rates never increase at all.
Because when interest rates increase the cost of servicing the debt increases and at some point must become unsustainable which means house prices are no longer sustainable.
So Robertson must be figuring on interest rates staying at near zero for years.
Which means he must be planning on crashing the economy, as otherwise near zero rates are unsustainable. Strange behaviour for a Minister of Finance. He would be better off crashing house prices right now before he mags an even bigger dog's breakfast.
A crash is only 20%, which only rolls back prices to the end of 2020. Very few would be affected, and as long as peyote continue to pay their mortgages banks should stay happy. Even then house prices will be way overpriced. In the last year previously million dollar houses have gone up in price to 1.5million dollars, and land has basically doubled in price in my area.
Robertson’s policies continue to create inequality - some people pay tax on properties, others don’t. That is inequality. Renters face rent increases way above inflation while property owners continue to benefit from ridiculously low interest rates. That continues to increase inequality.
it is unbelievable that rental property supply continues to decrease due to government’s incompetent policies. Rental demand/prices continues to rise out of control as is shown by exponential increasing demand for emergency accommodation which is expected to increase by about 50% in 2022. This situation shows increasing inequality between property owners and renters.
it is unfortunate that journalists employed by mainstream media are afraid to criticise the government about the negative impact this is having as it could impact their jobs -
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