New Zealand's housing market is set to take off again, particularly in Auckland, as slow planning processes, lack of development finance and
internal migration forces up rents and prices, Prime Minister John Key says.
Speaking on TVOne's Breakfast programme, Key was asked whether he thought New Zealand's housing market looked like it would take off again.
Key said his personal view for some time had been that for a variety of reasons, such as slow planning processes, and the collapse of a large number of finance companies which provided development finance, the housing market was "going to take off".
“All the indications are that in certain parts of the country, particularly Auckland - I think the rent increases you see, and the housing price increases you see - are a function of the fact that there’s a lot of internal and external migration taking place, and not enough supply coming through," Key said.
"And we are starting to see that supply bubbling to the surface, but it’s quite slow, and it normally lags demand," he said.
'No runaway bubble'
Key's comments this morning come after Finance Minister Bill English said on Sunday that, while there was some pressure in the Auckland housing market, there were no signs of some runaway bubble.
"And bear in mind here that neither the banks in New Zealand nor the people who lend to our banks are going to finance some housing bubble right now. So even if there’s a few prices spiking up at the moment, credit growth - the amount of money actually leant for new mortgages - credit growth is actually around zero," English said on TVOne's Q&A programme.
Asked about a rise in 90%-plus loan-to-value mortgage lending, English said if there was a shortage of housing in Auckland, "then you’re going to have a bit more lending in order to enable the construction of more houses to alleviate the shortage."
"So, yes, we would expect a bit more money going into the housing sector. That is how you get more houses that respond to the demand that’s there," English said.
"What we’re saying to banks is they have to comply with the now stricter requirements on their capital arrangements, which will prevent them from financing a runaway housing bubble. But some sign of growth and lending from banks is actually positive for the economy and positive for the Auckland housing market," he said.
ANZ, Barfoots sees strong demand
Meanwhile, ANZ's Managing Director for Retail Kerri Thompson said hundreds of people had attended ANZ's First Home Buyer Seminars, which showed strong demand emerging in the housing market.
Elsewhere, Barfoot and Thompson pointed to a 29% rise in the number of Auckland homes sold for more than NZ$1 million in the 12 months to the end of February.
“You have to go back to the peak selling year of 2007 to find more $1 million homes sold in the first two months of a new year,” Barfoot and Thompson Managing Director Peter Thompson said.
(Updated in the first paragraph to make clear Key was referring to both internal and external migration when referred to migration; also added ANZ and Barfoot and Thompson comments)