By Bernard Hickey
Prime Minister John Key has rejected suggestions that housing is much less affordable for first home buyers in Auckland than when he bought his first home, saying interest rates were over 20% when he bought and it was much harder to get a big loan.
Key told reporters before a National caucus meeting first home buyers in Auckland should look on Trade Me, where he said there were more than 2,000 homes on sale for less than NZ$400,000.
"Pepole always, from my experience, struggle when they buy their first home. You typically pay a bit more and you typically have to borrow a lot more than you would want to do. If you go on Trade Me to look for Auckland housing under NZ$400,000 there are over 2,000 properties listed. So there are properties for sale, and for some people that will be a pretty big stretch, and affordability is an issue that the Government is very focused on," he said.
"It's why we've been taking all those steps on Special Housing Areas and the likes, and we've been following, not in totality, but in part, the recommendations from the Productivity Commission," he said.
"But at least we are doing something about it because Labour didn't do anything about it. and house prices doubled on their watch," he said.
"If you look at the Roost Index, which is a pretty good measure of things, we (New Zealanders) were more unaffordable under Labour than under us. That doesn't mean there's not a problem for a particular home buyer, but it does say that this has been a long-running problem which the Government is addressing with lots of its measures."
He rejected questions about whether affordability would worsen as interest rates rose, and in particular whether a Treasury forecast of a rise in annual net migration over 41,500 later this year would push mortgage rates up to 9% by the end of next year.
"Lots of things might happen. The Blues might beat the Sharks on Friday night," Key said.
"That's the reality that lots of things might change. All of those things are estimates and guesstimates and we don't know all of those facts. They're talking a long way into the future that that might happen and it's subject to lots of different factors that might take place." he said.
"Obviously, rising interest rates have an impact on affordability, arguably the biggest impact, which is one of the reasons why the Government has been very focused on the kind of policies to help the Reserve Bank keep interest rates as low as they can."
Asked if it was harder for first home buyers in Auckland to buy a home than when he bought, he said: "I don't know. The first house we bought was in Wellington. Interest rates then were 22% so if you actually had a look at it, I suspect you've got better access to leverage than you did back then. The fact that you've got LVR (limits) doesn't stop the bank from making 95% or 100% loans and lots of people have done that."
Key later said he and his wife Bronagh Key had bought a house in Hataitai in Wellington for NZ$260,000 in 1986 or 1987.
"The baseline underlying interest rates would have been about 13 - 14% probably. Second mortgages and things were much higher back then. It's all relative to income and everything else. All I am saying is we've had periods in our history when interest rates have been much higher and accesibility to capital have been much lower," he said.
Turei questions Key in Parliament
Later in Parliament, Green Co-Leader Metiria Turei challenged Key on housing affordability.
Turei said there were only 11 three bedroom homes being advertised in Auckland on Trade Me for less than NZ$300,000, and only 36 below NZ$400,000, once relocatables, apartments and two bedroom houses were taken out of the searches. A full video of the exchange in Parliament is above.
Elsewhere, Labour Leader David Cunliffe proposed to support the part of RMA reforms relating to speeding up building consents. See my article here. Key later said the reforms could not be split up in that way and described as a "hollow promise."
(Updated with more detail, link to video)