NZ housing market, particularly Auckland, set to take off again, PM Key says

NZ housing market, particularly Auckland, set to take off again, PM Key says

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)

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39 Comments

What is Key concerned about?
He is much more concerned with keeping existing owners insulated and prosperous than helping aspiring owners on to the first step.
 

He's doing what the banks are telling him he has to do...to protect their bubble profits.

...... why should he care a dingoe's bum about those Ozzie banks ?

And thanks to Key's tax changes that were plain and simple Party Policy, we have GST thieving $45000 on a plain 3br new house...no wonder people have stopped all plans to build....their jobs are at risk and the costs are up....
I think John Key doesn't get it..

No matter how much these talking heads are coached, the subliminally-held though often surfaces involuntarily. 
 
"Bubbling to the surface".
 
I'm with Hugh here as to what IS -- this is a slow-motion train-wreckwhich hasn't played out.
 
Where I'm not with Hugh , is that for reasons well known to posters, I suggest incomes will plummet in relative terms. Many of those wide-eyed believers who put their foot into their leveraged doors, will see them slam shut, after the banking system has vacuumed up their liquidity.

If a CEO and the CFO of a company were speaking at cross purposes in this way - as a shareholder I would be rather concerned.

yes Key says housing is about to "take off" (indicating if not a boom then certainly strong increases) and English talks of general flatness
pretty contradictory
Great to see the PM and FInance Minister are talking from the same sheet!
I haven't watched the video - did Key say what he'll do to speed up the slow planning processes?
He's useless. They only tinkered with the RMA. He is not serious about housing, only wants it to bubble again to suit him and his fat cats -

Either these guys are totally clueless about the issues facing NZ - or so lazy they can't even
be bothered to get their story straight before going on national TV.
There is obviously no plan - because they are making things up on the spot when asked.
Upshot is that the status quo will prevail - many more Aucklanders will become property millionaires this year.

Yes it's a good thing, especially if you own more than a handful of properties. I really like John Key, he is a man of no bullshit and honest about his own view, nothing to hide.  I'd be surprised to find a house under 1M in most of the top 10 Auckland suburbs: Herne Bay, St Marys Bay, Parnell, Takapuna, Stanley Point, Epsom, Remuera, Mission Bay, Devonport and Ponsonby.  NZ is now perceived to be a country with "high end" living and alot more global. 
Congrats to us!!

its also quite interesting how 2 camps are developing in the govt - with steven joyce versus bill english, and john key is quite happy to undermine bill english whenever it suits him.....

JK must be barking mad. building at the moment makes no sense unless you are in commercial development. GST is a killer. My wife and I have been looking to upscale for the past 4 years. There is nothing around and building is not attractive

GST is a scam for mugs.  Create a business, build the house, claim back GST, then rent the house from the company.  Even better, all repairs and maintenance are done by the company, GST exclusive, and before tax.

= Tax avoidance... 

No , = Tax minimisation ........ if you can afford a clever accountant .....

GST was brought in to increase the tax burden on the poor, not to harm developers.

No = how MPs do it - only their company rents it to the taxpayers.

And sell the house and pay GST on it (mayat a higher rate than what was claimed back) and as a GST registered activity you will probably be liable for any profits made on the sale price as well.
If it was as easy as you say everyone would be doing it (and doubt IRD would allow your GST registration it the scenerio was as simple as you say).

change of use provisons cover this, they an't entirely stupid.  Funny no actual building developers on this forum to correct this

Erm, the English one is still on the hp snippy

Lord help me, but I agree fully with PDK!!
Incomes are essentially static or falling in real terms. 
House build prices - When you consider that a Lockwood kit, ex Rotorua factory, but complete with appliances and roof, can be had for around $70K.
Yes, it's around 80 squares.
Yes, it's a box.
Yes, there will be delivery and foundation costs on top.
But this shows up the sad facts:
- the Development Contribution demanded by the Coucnil on the section is likely to be a large fraction of the cost of this dwelling.
- the section price (which, guess what, includes the DC plus accrued interest)  is likely to be twice or more than the house price
- that section may demand a lengthy commute, so factor in increased transport costs (whatever mode...)
 
The income argument is the telling one (we all already know how, when and why the stoopid Councils foobarred the land supply).  A recent Atlantic article doesn't hold out much hope on job supply, either.
It's gonna get worse before it gets better, hey...

Ha...70K and the rest plus gst on top.
Plus now we have the red tape goons keen on bashing the first person to employ a builder who lacks the special bit of paper to say they are legal to build....
 

yep, the councils have much to answer for the long planning process.  A close friend had their house built last year, the consent took almost 3 months, way way out of the complusory 20 days.   Same thing on my carport - took 32 days instead of 10..  One excuse after the other.. 
Auckland Council is a big mess! Well, I blame both Labour and National for the super thingie..  labour planned it, national (badly) executed it!

... "macroprudentials controls or some other way ...."
 
Cough, splutter, err, err, "Which means what, sorry?" (Huh, wot, what planet Bernard, am gobsmacked, you mean credit controls, are you kidding, but we'll be back to Muldoonism, cough, splutter.)
 
at 4.18.
 
You frightened her Bernard, stop it.

The best investments are the ones no one talks about or knows about. If everyone is talking about a particular investment, its not worth getting in to it. I think pretty much everyone here knows about J.P Morgan and his shoeshine boy.

Yes, once everybody talked about it, it's too late to be a good buy..

If you want value for money... Go West.. no not Waitakere...!
http://www.irishtimes.com/newspaper/breaking/2012/0301/breaking39.html
(or head East and you'll get there too...)

Key smugly knows that Bollard will keep interest rates at ultra-stimulatory levels, to keep the property bubble perking away.
 
Anything to feed Kiwis' visceral need for ever-increasing property values.
 
Even if the result is for ever-more foreign capital and therefore debt for the country overall. 
 
Just so long as the govt gets re-elected, and the banks can keep earning ever-greater profits to send off to Oz
 
Cheers
 

Dont encourage them you fecking muppet.

and internal migration forces up rents and prices, Prime Minister John Key says
.....
but not external migration [80% of population growth is from outside NZ]:
The Govt accepts these findings

In a statement to the Sunday Star-Times, Coleman said: "Department of Labour research shows there is no strong link between immigration and house prices and migrants provide a net gain to the New Zealand economy of around $1.9 billion a year. If migration stopped today, the economy would contract by 10% over 10 years."
 
 
If we separate population growth into the four sources
described above (new immigrants, previous immigrants,
returning New Zealanders, and local New Zealanders), a
more interesting picture emerges. Population increases
from three of these groups, including both immigrant
groups, again show no significant link with house price
increases – and some appear to be slightly negatively
correlated. However, population increases attributed
to returning New Zealanders are strongly correlated
with house prices: a 1 percent population increase from
returning New Zealanders is associated with a 9.1 percent
increase in house prices. (This figure drops slightly to 7.6
percent if we control for demographic changes as before.)
 
"Alternative explanations
If immigration does not cause rising house prices, how
else can we explain the clear correlation between the
two factors at a national level? As introduced above, one
explanation is to attribute both immigration and house
price increases to unspecified ‘business cycle effects’. In
this scenario, immigrants are more likely to come to New

Zealand when the country’s economy is doing well and
overall house prices are increasing.
Another possibility is that house prices adjust quickly
across local areas even where immigrants are unevenly
distributed. The five-yearly census data is a reasonable
time period for this to occur. We hope to explore this
possibility further in future work.
http://www.motu.org.nz/files/docs/MEL0395_immigration_housing.pdf
Analyst Owen McShane quoted a 1960s report, on the relationship between house construction and employment, that concluded that every 1000 houses would generate a total of 40,000 contracts and jobs over 15 to 20 years. (3) He showed that reducing the residential construction rate from 26,000 a year to a no more than 16,000 a year, and probably much fewer, is cutting 400,000 contracts and jobs over 15 to 20 years. Is this the legacy that the Key-led government wants to leave?

Where does immigration fit into the Key government’s grand scheme? Net migration went from minus 6760 in 2001 to plus 34,580 in 2002, and up to plus 42,090 in 2003, the beginning of the boom. Since more people require more dwellings, the residential property sector keeps a close eye on net migration. Whether the Clark-Cullen government deliberately allowed the influx to pump up the economy or whether it was an administrative cock-up has never been discussed. There are quality migrants around the world who would give anything to be able to live in New Zealand. By world standards, New Zealand is thinly populated. Would it not be worthwhile to investigate a managed increase in immigration?
http://breakingviewsnz.blogspot.com/2010/10/mike-butler-english-banks-and-property.html
 
so immigrants come in response to a building boom but the building boom is due to immigration. House prices stay flat (except when expats move back here)? Development costs are exessive due to council incompetence and greenies holding up developers? etc, etc Infrastructure costs (bridges, turnpikes, schools, tunnels) should be born by local people and if anyone complains it's because Bob Parker bought theEllerslie Flower Show?
 

Hi all (esp. jh after this great comment)
Have updated first par to reflect Key did actually internal and external migration - he said it in the quote further down, but I left the 'and external' bit from first par.
Apols for the mix up
Cheers
Alex

Meebee Jolly Kid has taken to reading Ollie Newland's articles ? ....... smart move , that !

"Net migration went from minus 6760 in 2001 to plus 34,580 in 2002, and up to plus 42,090 in 2003,"
"Whether the Clark-Cullen government deliberately allowed the influx to pump up the economy"
Well beyond their control jh, this was the reason a one off world crisises, least we forgot.
http://en.wikipedia.org/wiki/9/11
 

FYI updated with comments from ANZ and Barfoots on the housing surge
cheers
Bernard

A consequence of Key's thought bubble will be to encourage young (intending) first home buyers to leap now and to heck with the fall-out. More moral hazard. Who is key looking out for? Looks like the banks.

I just sold a house in Epsom, against my wifes wishes, she loved the house. But I think we've made more out of it over that last 6 years, than the new owners will over the next 12. Why?
The Western world is living beyond is means, its not rocket science. Debts are balloing every where. The UK, whos budget is this week, even following so called austerity will have a deficit of around 120billion, there average deficits over the last decade or so were around 30-40 billion. With interest rates at al ltime lows, the UK government cannot get any where near back to so called normality. The total debt of the UK including off ballance sheet liabilities and unfund Promises  take total debt of the UK to 200% of GDP, yet they still have a AAA rating!!!
Western countries maybe fooling the public into thinking the economy is on the mend and it may look like thant in some sectors but remove the outsized borrowing and how would the western world look then or when interest rates for government debt tick up to 4% or so the deficits of these countries will blow through the roof.
Don't be fool, we are in the middle of an economic storm that is only getting started, any rally in house prices is a suckers rally. You must invest in trends that are outside the influence of politicians and you have to buy cheap. http://j.mp/zU2zMG

Um, wasn't there a change to the tax law last year for property investors because they were getting blaimed for the high cost of houses.
Didn't the experts then warn everybody that there would be less houses built creating a shortage of rental propertie which would then cause rental prices to increase which then results in people struggle to get a deposit to purchase a house which is why the tax law was changed.
Twelve months after the change and look whats happened, welcome to the merry go round.
 
 
 

Does the government have any plan to help with the shortage of housing?
How about?
1. Take GST of new build materials
2. Lower consent prices on new builds.
3. Rezone greenfield area's to residential around rail corridors
4. Government finance to developers who can build quality affordable bulk housing. Save costs with bulk buying of raw materials.
5. Tax developers land banking
 
 

What shortage of housing? Anybody who can finance a house has one, ergo there is no shortage of housing.
 

A good number of business owners have moved to Auckland on the sly from Christchurch. Commute down as required. They would prefer their customers were not aware of this fact.
In the price bracket the are buying in it does not take a great deal to nudge the numbers.