By David Hargreaves
The new Government has certainly been true to its word when it comes to attacking various aspects of the housing market.
Already it's moved to extend the bright-line test (the Capital Gains Tax that dare not speak its name) from two to five years, it has legislation before select committee aimed at banning offshore buying of existing houses, and it's advancing plans to 'ring fence' rental losses on investor's residential properties.
That's actually an impressive flurry of activity on the demand side of the equation - and it is the demand side that remember the previous government generally had to be dragged kicking and screaming to do anything about.
On the supply side the much-trumpeted Kiwibuild initiative is more noise than action at this point, though the Government can point to the big announcement of up to 4000 new homes on the Unitec Mt Albert site.
In the meantime the housing market itself - certainly in the previously problematic Auckland area - is much quieter.
What do we want?
And there is where I have a perhaps silly sounding question, namely: What would the 'right' sort of housing market be for the Government?
Is it happy with it now for example, bearing in mind that Auckland houses prices relative to wages are still incredibly stretched by world standards? Well, presumably not - hence all the activity.
If we talk about the current market though, presumably it would take a fair time even with only very small house price appreciation for wages to anything like catch up.
And presumably also, the Government would not ever want to say it was actually seeking for prices to come down. Because that way leads to electoral disaster.
Is there an internal target then for the Government that it doesn't want to share with us? Would it like to see house prices actually decrease? Or does it believe that over time it can get 'affordability' by the market remaining fairly flat.
How happy homeowners would be if they were still seeing their house having the same value in five years time as it has now is an interesting point though.
On the one hand you might say that such matters of how the housing market might look in a few years time are of no concern when we have a housing shortage in Auckland now and when we've just come off the back of a raging bull house market.
Focus on activity
It does concern me though that too often governments and government departments become 'activity focused'. The achieving of numbers of a specific type of activity (for example building houses) become the means to an end without ever actually pausing to say: "What is it we actually want to achieve at the end of this? What is the desired outcome?"
And does anybody really know at this point what the 'desired outcome' is of all the measures - both supply and demand side - that the Government has unwrapped or talked about unwrapping so far?
Is there a point at which the Government can say, 'okay, houses are now affordable'. For such a proclamation to be made, I would suppose you might need to be able to say that every young person who wants to buy a house in New Zealand can. But in reality, would you ever achieve that?
If we go back and look at the previous National Government, it basically refused (for as long as it could) to get its hands dirty in trying to dampen demand in the housing market. That was largely left to the Reserve Bank and its loan to value restrictions, implemented from 2013 onward.
What the National Government did do was make a lot of noise about supply. There was a huge flurry of activity around the 'Special Housing Areas' and the Auckland Housing Accord. All that these measures basically showed was that you could at a pinch increase the speed at which new sections were approved - but you couldn't force people to go ahead and build on them.
Now this Government of course is going the more direct route and will oversee building houses itself.
Playing catch-up
Auckland had building consents for the construction of 11,000 dwelling units in the 12 months to February. Historically, that's quite high, comparing favourably with the 12,000+ figures seen in the early 2000s. But of course the population's been growing real quick and arguably something closer to 20,000 a year would be needed right now to play catch up.
The Government's promising 100,000 Kiwibuild homes across 10 years, with half of those in Auckland - so that's 5000 a year. We still at this stage don't know to what extent the Government activity will just simply replace building activity that would have come previously from the private sector. We will have to find out. The suspicion is that Kiwibuild will just largely replace other activity from the private sector.
What sort of measurements will be undertaken as we go along on this process though?
Do we just blindly go ahead and bang those 100,000 houses up and not take into account what's happening in the market?
That's the point that concerns me.
Offshore ban
To take the offshore buying ban as the classic example, we have a Government that's moving to put a ban in place when it does not, hand on heart, know exactly what the extent of the activity really was. That's because no data at all was kept on this and then the data that has been very latterly collected is in large part meaningless and not reliable.
So, the offshore buyer ban is tackling a large perceived, but not quantified problem.
The housing shortage itself, while it looks a real enough problem, may become less so if the outbound migration tap turns on and if the inbound migration flow does slow to a trickle from the cascade we've seen in recent years.
The Government is to be congratulated for rolling up its sleeves and 'getting on with things'. But activity for activity's sake may not ultimately serve the country well.
I seriously hope that the state of the housing market is constantly monitored so that targets both on the demand and the supply side can be adjusted if necessary.
And it does all come back to that basic question: What does this Government consider would be a 'normal' housing market? Is it prepared to tell us? How can we measure the success or failure of its policies otherwise?
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