The Minister of Housing says his new rules around opening extensive land areas for development and mandating city councils expand urban limits will lower New Zealand’s property prices.
Interest.co.nz asked Chris Bishop at a media conference on Thursday following the announcement of his new housing rules if the Government’s new housing plans would push property prices downwards.
“Yes, absolutely,” Bishop said but he wouldn’t put a number on it because there were “too many variables at play.”
“My aim is that we make housing more affordable. We don't see an immediate plunge in house prices, but as I’ve said publicly many times, houses are too expensive in New Zealand and we want housing to be more affordable,” he said.
“There's not something that's going to happen next year or the year after, but it is something that we want to happen in the medium to long term,” he added.
Bishop told a packed audience at the Real Estate Institute of New Zealand (REINZ) of his new housing plans on Thursday.
The biggest items in his announcement were the expansion of urban limits, a lot more land being immediately available for development and the option for councils to opt out of the controversial Medium Density Residential Standards (MDRS).
However, city councils will only be allowed to opt out of the MDRS if they zone for 30 years of housing growth.
The MDRS becoming optional for councils was an agreement made between National and ACT in their coalition agreement.
According to Bishop’s speech, councils zoning for 30 years of housing growth could “flood the market with opportunities for development” that would be driven by economics rather than planning rules.
In total there are the six elements to Bishop’s plan: set 30-year growth targets, relax city limits, define transport corridors, require mixed-use zoning, get rid of size and balcony rules, and make the MDRS optional.
All of these elements will help solve the country’s housing crisis according to Bishop.
“Something has gone very wrong when home ownership is at record lows in a country that used to pride itself on being a property-owning democracy,” he told the room.
Bishop said New Zealand’ housing market once met the international standard of affordability, with house prices at a 3:1 ratio to wages. Today, house prices are nearly 7 times higher than wages.
“Fundamentally this is an issue of intergenerational equity,” he said.
Shoeboxes
As part of the new housing rules, Bishop said the Government was going to abolish minimum floor area and balcony requirements as they could “significantly increase” the cost of new apartments – and limit the supply of lower cost apartments.
“In some cases, this can make development uneconomic, or push the cost of housing outside of the reach of first homebuyers,” he said in his REINZ speech.
After being questioned by media about the potential rise in small apartments from his new housing rules, Bishop said the Government was “liberalising the rules” and if there wasn’t a demand for smaller apartments, they wouldn’t be built.
“Some people are happy with a smaller place if it means they get onto the housing ladder or it means that they get an affordable apartment that they can afford and pay rent on,” he said.
Conversations with banks
Interest.co.nz asked Bishop if he had held any discussions with banks around relaxing lending policies on small apartments as banks have historically been more reluctant to lend on smaller units.
Bishop said he had had some conversations with banks and received their advice, but ultimately, it was up to the banks to “make their own decisions” on lending on smaller apartments.
“What we can do, though, is remove the regulatory requirements,” he said. “Sometimes what we can do is do what's within our control, which is separate.”
ANZ confirmed to interest.co.nz on Thursday its customers need a 20% deposit for freehold, standard apartments that are 38 square metres or larger. Before 2021, any apartments smaller than 45 square metres meant ANZ required a 50% deposit from customers. The smallest apartments ANZ, the country's biggest mortgage lender, will currently lend on are 38 square metres.
ASB and BNZ are yet to respond to questions on their current apartment lending rules.
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