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.