By David Hargreaves
The confirmation in the latest Real Estate Institute sales figures that the New Zealand housing market was generally subdued through March makes it likely now that things will stay quiet up till the September 23 election.
In 2014, even though there were fairly clear signs from early in the election campaign that a National-led Government would be the outcome, there was a very substantial pause in house market activity in the election run-up. Then after a National-led Government was indeed confirmed, things went nuts again.
This year there's no John Key (sorry Bill, but that's going to make a huge difference) and therefore a far more inconclusive election outcome with Winston Peters featuring prominently (and the lighted match near fireworks-type unpredictability that promises) is entirely possible.
Combine such possibilities with the fact that winter's approaching and with it the natural time for the housing market to take something of a breather (though not always in recent years) and house prices are likely to somewhat mark time.
The Reserve Bank, which for a while last year was looking short of ammunition to fire against the housing market after the failure of its Auckland-specific LVR measures, will be relieved. Notably though the RBNZ has not been declaring any sort of triumph.
The new REINZ House Price Index (HPI) formulated in conjunction with the RBNZ showed national house prices exactly flat between February and March.
This suggests to me a market entering a period of lull rather than one that's set to start heading backwards.
As I said, for the RBNZ, which looked almost a bit desperate when clamping 40% deposit limits on investors, this will be a relief. But it will be a relief I suspect tinged with realisation that the 40% deposit rules have been far from the only influence on the market in the past few months.
The banks have been happy to some extent to hide behind the RBNZ's new rules while implementing their own tightening of lending criteria - 'credit rationing' as they have styled it. And then there's the difficult to quantify impact of a pullback in offshore buying.
So, the RBNZ's 40% deposit rule has definitely had a helping hand in terms of a cooling of the housing market.
What about the politicians?
What then does the prospect of a cooler housing market in the run-up to the election campaign mean for what the political parties say about housing and the types of policies they outline?
Politicians will always gravitate at great speed toward 'hot' issues. I don't think it's unfair to describe New Zealand as a housing-fixated country, so in a sense, housing will always be an issue of some magnitude.
It is, however, an issue that doesn't have easy political solutions and perhaps more to the point doesn't tend to have solutions that are popular with the electorate.
By getting rid of the title of Housing Minister altogether Bill English telegraphed that he was very keen to play down housing as an issue in the run up to the election campaign. That's understandable. This Government made much of the housing issue being all about supply - particularly in Auckland, but now the efforts to ramp up supply in the largest city are flagging.
In recent months the annualised number of consents for new dwelling construction has stuck at around 10,000. Now, that is quite high by Auckland's historical standards - but so's the growth rate of Auckland's population at the moment. Between immigration and births the Auckland population may have grown by something in the order of 55,000 in the past year. That 10,000 new homes is a drop in the bucket next to what's needed.
Perhaps not surprisingly therefore the Government's not quite as vocal these days about its efforts to fix supply.
The Government's gamble
As for demand, well, it has never been keen on tackling that hot political potato. The Government took a calculated risk by shutting down the RBNZ's efforts to have debt-to-income ratios installed in the 'macro-prudential toolkit' this year (albeit with a promise not to use them at the moment).
So, the Government will be mightily relieved the housing market is behaving itself and will presumably continue to do so till the election.
I reckon that the Government will have had further measures ready to go this year, or at least announce in the run-up to the election, if the housing market continued to overheat. But, I think now that it's all gone quieter on that score maybe those measures - whatever they might have been - will be put on ice.
So, what about the efforts of the other political parties to make housing THE election issue. Well, Labour's certainly been making a lot of noise, but I wonder if it too will be lured into focusing on other areas if there's no housing measures announced by the Government and the housing market itself stays relatively quiet.
People are fickle. And if their trousers are not on fire they will be less interested in hearing about increased staffing levels for the Fire Service. A slightly tortured analogy there, but hopefully you get the point; if house prices are not rising every five minutes this year people may become somewhat less concerned about it - particularly if the Government can keep pushing a 'move on, nothing to see here' housing stance.
A waste of breathing space
All of which moves me to say that, worryingly, if we do go through an election campaign without concrete policies from the major parties to tackle the structural housing problems in this country the current 'pause' in the housing market may be a wasted bit of breathing space - with consequences down the line.
Come the dawning of 2018 as things stand right now Auckland will still have new residents pouring in (though whatever changes the Government makes to immigration settings will be watched with interest), Auckland won't be building enough houses and our young people will still be taking on eye-watering amounts of debt - with no controls on debt-to-income ratios in sight. In terms of the more nationwide picture housing as an asset class is still going to enjoy taxation advantages over other asset classes - so, will continue to be the preferred option.
The banks are 'rationing credit' at the moment but, frankly, nobody should ever depend on the banks to keep doing the 'right' thing. If they had been doing the 'right' thing all along then we wouldn't be looking at a situation where reportedly 51% of household income is getting sucked up by the mortgage payments on an average new purchase in Auckland - at a time of historically low interest rates.
So, in short, the 'pause' of the housing market may just make this a 'do nothing' election as far as housing initiatives are concerned.
And that could be a very bad thing indeed.