Prime Minister John Key was questioned about housing affordability in question time last Tuesday by Greens co-leader Russel Norman.
The full video of the exchange is on youtube.
In the exchange, Key denies any market failure causing a housing affordability problem for New Zealanders and denies any housing bubble similar to anything seen during the last Labour government from 2005 to 2008.
He also said young New Zealanders thinking of leaving for Australia should realise houses were more expensive in Sydney and Melbourne than in many parts of New Zealand and that younger generations should be grateful for the National government's economic leadership and low interest rates.
See the full exchange below:
Dr RUSSEL NORMAN (Co-Leader—Green) to the Prime Minister: Does he stand by his statement of 19 March this year that the housing market is “going to take off”?
Rt Hon JOHN KEY (Prime Minister) : Yes, in the context in which it was made. The housing market had been pretty flat for some time, and I was expressing my opinion that things would pick up. In fact, we are already starting to see that. Quotable Value reports that sales activity has been significantly higher in the last few months than has been the case for several years, especially in Auckland. For the member’s benefit, I was not talking about a housing boom of the sort of the price bubble that we saw in the mid-2000s, though.
Dr Russel Norman: Given that we have a situation where house prices are rising at four times the rate of inflation and twice as fast as wages, according to official data, are we facing a situation of market failure that is seeing homeownership become impossible for more and more Kiwi families?
Rt Hon JOHN KEY: No. I mean, one thing I think we can rejoice in is that interest rates are at a 50-year low, and that is one of the big factors that assist people in terms of their homeownership. But there are recommendations from the Productivity Commission, in relation to its most recent report on housing, that I think would be worthy of Government attention.
Dr Russel Norman: Is it not the case that house prices are out of reach for typical New Zealand families on typical New Zealand wages, and that this is a major factor that is driving people overseas and forcing a generation of New Zealanders to watch their grandchildren grow up on Skype?
Rt Hon JOHN KEY: No, and if the member wants to visit Sydney or Melbourne he will come to realise that house prices are significantly cheaper in most parts of New Zealand than in Australia.
Dr Russel Norman: Why is the Government not taking measures to increase the supply of new, affordable, well-insulated housing to address the market failure to provide enough housing that ordinary Kiwi families can afford to buy?
Rt Hon JOHN KEY: There is absolutely no market failure when it comes to insulating housing, and I am surprised the member raised that, because we happened to work together as political parties to see more homes insulated in the last 3 or 4 years of a National-led Government than had been for decades, virtually, I would suggest, under previous Governments. In terms of making houses more affordable and attainable to New Zealanders, one way not to do that would be to put a capital gains tax on them, as the member wants to do. But if the member wants to support us in reform of the Resource Management Act so that we can— Mr SPEAKER: Order! I think the Prime Minister has gone on sufficiently there.
Dr Russel Norman: Did the Prime Minister hear the remarks from Fran O’Sullivan at the Local Government New Zealand conference, where Ms O’Sullivan particularly referred to the market failure around housing supply being a major intergenerational issue, whereby older New Zealanders have seen their house prices go up very considerably, but a younger generation of New Zealanders are struggling to be able to afford to buy their first home?
Rt Hon JOHN KEY: I think if you went and spoke to any generation of New Zealanders, they would say that it is always quite difficult to purchase one’s first home. That is the case for most New Zealanders. They struggle and they save. But fortunately this generation of New Zealanders has the economic leadership of a National Government that is ensuring that interest rates are on their lows, that there has been a reform of the Resource Management Act, and that Maurice Williamson’s great work around licensed building practitioners, etc., etc, are all making the Kiwi dream of buying a home possible.
Dr Russel Norman: Does the Prime Minister honestly believe that housing affordability has not changed over the last 10 to 15 years, and that it is much harder for younger New Zealand families to get on to the housing ownership ladder than it was 10 to 15 years ago and the Government has a responsibility to address that problem.?
Rt Hon JOHN KEY: No, I think it got a lot worse under Labour. That is because it just did not know how to do anything else than spend taxpayers’ money, force up inflation, and drive up interest rates, and it failed to respond to adjust the bits of the economy that would make housing more affordable, outside of interest rates, like the Resource Management Act. And that member, every time this Government wants to reform the Resource Management Act and make it...
Dr Russel Norman: When will the Prime Minister stop blaming the last Government and accept that we have a housing affordability crisis right now in this country, that young people are struggling to buy their first house and are leaving the country to get better opportunities somewhere else, and that his Government has a responsibility to do something about it, rather than just blame the Labour Party?
Rt Hon JOHN KEY: If that member really thinks that we have a housing bubble at the moment in the way that we had under the previous Labour Government, then, firstly, he is deluded and, secondly, he might want to ask the then Labour Government why it bothered to commission a whole report on housing affordability, of which it followed very little.