PM denies Auckland housing crisis or bubble; Not planning to reduce migration; says doing enough on supply; says 'many, many, many' affordable homes for sale

PM denies Auckland housing crisis or bubble; Not planning to reduce migration; says doing enough on supply; says 'many, many, many' affordable homes for sale
Prime Minister John Key. Photo by Lynn Grieveson for Hive News.

By Bernard Hickey

Prime Minister John Key has again denied there is a housing crisis or bubble developing in Auckland, despite figures from Barfoot and Thompson last week showing average prices hitting record highs of over NZ$1 million in the old Auckland Council area of the isthmus and the Government itself seeing a supply shortage in Auckland of more than 20,000 dwellings.

Key told Morning Report the current double-digit price rises were not sustainable, but the Government had already taken action to free up land supply in Auckland and that restricting migration would frustrate employers looking for skilled staff.

"In the end, it's not sustainable for house prices to rise 10-12-13% per year. The only answer to that is to do what what we're doing, which is allocate new land and build more houses," he said, adding continued inflation "forever" at that level would lead to a "bubble", although he denied it was currently a bubble.

He said the Government's moves to introduce Special Housing Areas to circumvent the Metropolitan Urban Limit would add new housing supply to the market and slow that double-digit house price inflation, although this would take time while the necessary infrastructure and housing was built.

He would not give a time-frame for the supply-driven slowdown in Auckland house price inflation, but "sooner as opposed to later is my guess."

Key referred to the recent supply-driven slowdown in Christchurch house price inflation and downplayed suggestions of tightening migration rules, saying the Government would have to reduce the numbers coming in for skilled occupations and for construction if it was to use the migration lever.

"Do we stop a small IT company in Auckland, for instance, being able to hire people it needs because the housing market is going up a bit too quickly?"

Key said he had not personally been consulted by Graeme Wheeler about the Reserve Bank's proposals to increase capital requirements for property investor mortgages, but they were "not imminent."

Asked if he personally supported such measures, he said: "It might be an idea."

"Those alternative tools in the tool box are much better than wholesale rises of interest rates, which wouldn't be justifiable, given where inflation is at the moment," he said.

Key also said there were no tax measures planned in Budget 2015 to discourage property investing.

He said there were still "many, many, many homes" for sale in Auckland at between NZ$300,000 and NZ$500,000.

The average 3 bedroom house sale price in March was over NZ$1 million for the first time as record sales of over NZ$1.24 billion meant Barfoot and Thompson collected more than NZ$1 million a day in commissions. See more in my weekend column here.

Cross-Party accord proposed, and rejected

Auckland Deputy Mayor Penny Hulse called in this Lisa Owen interview on The Nation for a cross-party accord to deal with Auckland's housing shortage, which is forecast to be 25,000 dwellings by the end of the year.

Hulse did not give a detailed list of what the accord could include, but referred to the Government using its levers around migration, regional development and infrastructure spending.

"We need to work with the Government and all parts of government to say: ‘Can we just have a cross-party accord to move the issue of housing in Auckland forward?’ so that we’ve got the levers that Government has around population, around growth and around helping out with some financing of infrastructure, which again will unlock the ability for us to develop other areas," Hulse said.

Hulse described the Auckland housing problem as a two-fold issue.

"Number one, over the last four years, we’ve absorbed a city the size of Tauranga in the Auckland region, and that’s creating the problem," she said.

"And the other issue is we are all nervous about being more interventionist, and I think we need to be a more honest about what the problem is, move past numbers and get down to the real heart and the meat of the issue."

Phil Twyford rejected the idea, saying Labour was being asked to step in to save the Government, which had none of its own solutions.

Housing and Construction Minister Nick Smith said he was unconvinced by the "idealised view" that the political parties in Parliament would "get the real things done" with a talkfest.

"I don't think by bringing in other political parties, we'll actually get the practical results for families in a city like Auckland," Smith said.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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The emperor has no clothes. He isn't an economic genius. He has no plan. It is all spin and BS...... JK pretends he is fully clothed when in fact he is walking around naked

I think has has given up trying to be popular, hes only got a few state houses left to sell, then he is out of here.  Mentally he has already moved on. 

Ten years is clearly too long for anyone in office , they lose touch .
Maybe they go insane doing the same thing over and over again
 
Here are the stats
 
New Migrrants per annum                         55,000
Number staying in Auckland                     50,000
Number of additional houses needed        20,000
Number of houses built  in Auckland          5,000
 
Go figure

Too long for some, how long has Winnie P been in politics?

But he has never done anything or had to come up with any ideas. It's like retirement when you are still young. Lucky bastard.

you forget the gold card!

And free doctors visits for under-5's. But from memory they were policy concessions he got but he didn't have to oversee their implementation hinself (i.e do the hard yurds).

Meh, you look at trademe and it's a bit deceptive because the vast majority of properties for sale in the 300-500k bracket are either to be auctioned or by negotiation.  AKA no actual asking price.  Then when you look at auction results, number of homes sold for under 500k is zero. 

Nothing to see here folks, move along, National voters collect your $200 as you go past go.

Key can't say its a bubble anyway, that would be admitting defeat (and scaring the horses)

"Those alternative tools in the tool box are much better than wholesale rises of interest rates, which wouldn't be justifiable, given where inflation is at the moment," he said.
 
The PM prefers not to notice the evident dislocation between low inflation and asset price bubbles in a world awash in central bank ZIRP fabricated money. The symptomatic collapse in dairy milksolid prices caused by an oversupply glut must have also passed without his notice. How much longer must we endure prolonged credit bubbles and attendant resource misallocation, mal-investment, maladjustment and wealth redistribution?  Read more

however low interest rates are just about the only medicine for avoiding a recession, so we have a side effect which is asset bubbles.  yet surely logically ppl should be able to see investing in such over-valued assets is a bad idea? yet they do it anyway?  with others money? and when the music stops and the tide goes out who pays?
So really for me the very ppl blaming the Fed seem by and large the financial types whos actions have led to this mess  in the first place.  What are the options BTW? let it pop and cause a Greter Depression like the 1930s?  that is a pretty awful wish IMHO. Yet I am sure there will be hedge funds / investors aiming to profit and even cause just that misery.
good luck, eh.....

We are boxed into a corner, Steven.
"Today’s clueless Keynesian central bankers essentially believe that they can keep the pedal-to-the-metal until a 1970’s style inflationary spiral arises. But none is coming because  the worldwide central bank money printing spree of the last two decades has generated massive excessive capacity and malinvestment all around the planet. What is coming, therefore, is not their father’s inflationary spiral, but an unprecedented and epochal global deflation.
So the central banks just keep printing, thereby inflating the asset bubbles world-wide. What ultimately stops today’s new style central bank credit cycle, therefore, is bursting financial bubbles.
That has already happened twice this century. A third proof of the case looks to be just around the corner."
David Stockman with a masterful run down of the Macro economy since the 60's and where we are today.
http://davidstockmanscontracorner.com/meet-the-new-recession-cycle-its-t...

As I have said before.  If there is no problem then he will not mind all the homeless families living in their cars and vans, parking outside his mansion in St Stephens Ave, Parnell.  (107 I think)

strange way to announce your retirement from politics, bascially saying aucklanders vote for me and your kids and grandchildren have no hope in hell of ever buying their first home unless they have rich parents

""Do we stop a small IT company in Auckland, for instance, being able to hire people it needs because the housing market is going up a bit too quickly?"  Um, so rather than pay a decent wage to attract a NZer or train un-employed NZers up we'll let ppl in on a lower wage who will need housing which drives up everyone's living costs. How the heck does that compute?  Some years ago I talked to ppl in the UK, put off by high house prices in NZ v wages, this makes it no better. 

Butterfly wings .. so it is better to have a program that brings in a few IT people, who can theoretically pay higher prices and/or higher rents, the result of which shifts 100's of stugglers on struggle street out into the boondocks, or into cars and garages, yes the butterfly is flapping its wings

That's a laugh .. IT company training locals .. harhar - hardy harhar ... my son has been working for IBM for 10 years as a project manager on a major client system. IBM has been bringing in IT Indian nationals under the skilled shortage visa program to take over the management of the system, which will then be outsourced back to India. My son was made redundant 2 weeks ago. The whole team of 50 people were made redundant.

Welcome to the global world. Where being born somewhere longer gives you the underserved right to consider yourself superior to other people. Now the competition is real as your son and his colleagues just found out.

Yes it is global competition, and it's also global exploitation, and it's also abuse of the local processes which facilitate it. And it didn't start yesterday or last week, or even last year. IBM is one of the largest multi-nationals in the world. You can't assume the team of 50 were locals who were trained locally by IBM. They were imports brought in on an earlier wave under skills-shortage visa programs, who are being replaced under the same skill-shortage visa programs. They leave behind 50 families (not just 50 employees) who are now abandoned to the whims of somebody else. And for the local society to now pick up the social costs
 
and the consequences
 
extract from Michael Connelly's book the Burning Room, about the effects of latino illegals pouring over the mexican border into america
 
and so, like many others with his beliefs and practices he moved 80 miles away from the city and into a desert town because he wanted to get away from all that he felt was wrong with society and its large urban centres. In his estimation the problems came down to things like immigration and crowding from growing populations of minorities who sapped the infrastructure and lived off the government dole.

So what? The struggle has always been between labour and capital. Global labour is getting its ar*e kicked all around the planet. IT 'prosfessionals' are not immune to this kicking.

Can any bubble boy please prove to me that Auckland is experiencing a property bubble? What is a bubble anyway? Surely it's more to do with how much the average house loan in Auckland is. How many of these million dollars homes are selling for cash and no mortgage? Bubble? nope.

If you look at the rises NZ wide excl Auckland and then at the rises in some suburbs of Auckland I think its hard to say the bubble is already here and in the order of x2 maybe even x2.5.  Now in a free market there is always a buyer who thinks prices will rise and a seller who thinks they will drop, fill your socks as they say.
Also where do we see the growth in the underlying economy underwriting the prices?  I dont see great wage growth, in fact JK wants cheap labour to keep coming.

speaking with my workmate (who is chinese)this morning she says no problem prices will keep rising because more chinese and indians on the way and for them NZ prices are cheap so its good buying.
she says on the chinese websites its all about the good buying here and no restrictions
i ask so what hapens when you have to service the mortgage on NZ wages  once here and the interest rate rises, and she says no problem interest rates wont go up.
that to me was a huge huge red flag 
strange to say this but winston peters said this would happen ten years ago if we opened our borders to everyone with no controls  and everyone called him a racist.
 

A bubble is caused when speculators notice an increase in the price of an asset and buy with the anticipation of further gains.  Generally it is only aknowleged to be a bubble after it has crashed, though there are still those who believe that the tulip mania was not a bubble or the dot com bubble was not actually a bubble. 
 
I'll give you an example of how it works, rental properties in Auckland have had negative cashflow since before the GFC.  At current prices, even if you go interest only you can't get free cashflow from a rental, you have to top it up every week.  So the fundamentals of pricing dictate a lower price.  First home buyers can't afford the mortgage repayments, or the deposits. The demand for housing comes from four groups, speculators, investors, home-owners and first home buyers.  Investors are out, FHB are out, home owners are in but create no new demand as they merely upgrade/downgrade.  What you have left are speculators, anticipating more gains in the future.

Don't feed the trolls.

Well said. But don't forget the fifth group: overseas buyers. They are a huge player in both commercial and residential real estate. How about getting 7 CASH offers, all from Asians, for a lifestyle property in Auckland, after the first open home. It's happening, and is all this lovely cash from bonafide residents? Not likely.  
 

You know it. Everybody here knows it. Even the drover's dogs know it.
 
What has happened is everybody has become completely desensitised to it, along with what's happening to society and the kiwi way of life
 
it is now so ho hum, so what, nothing has been done about it, nothing is being done about it, nothing is going to be done about, and even Winston has gone quiet about it, so moving right along, they've won
 
so, give up, nothing you can do

OnwardsUpwards, my challenge from last week still stands without an answer - show me a recognised metric (any of the metrics out there - you choose) that show Auckland house prices are not ovepriced.

Key must wake up sweating at the prospect of restrictions being placed on immigration and housing purchases by foreigners. Even as we wallow in the glow of owning an even higher priced house most even minded people should be able to recognize the damage it is doing to the future of young kiwis. When the market turns it could be spectacular and regardless of all the good Key has done his legacy will be severely tarnished by his inaction regarding his Asian mates.

FHB's, RBNZ, Barefoot and Tonsils:
'it's big, grey, and has a trunk.  And it's in your living room.'
Key:
'What elephant?'

FHB's , RBNZ , Barefoot and Tonsils : " It's big , grey , and has a trunk . And it's in your living room ."
 
... Little Johnny : " Oh goody , the Louis Vuitton luggage set has arrived .... BRONAGH !!!! .... get packing , time for Hawaii .... "

funny that most of "the Government's moves to introduce Special Housing Areas to circumvent the Metropolitan Urban Limit " are actually inside the MUL.

How about restricting foreign ownership like Australia, Canada, Singapore and most other intelligent countries have done? *deathly silence*
Perhaps the small I.T. shop in Auckland wouldn't need to pay such high salaries or use foreign sweatshop labour if their employees didn't have to spend so much money on housing. 
Hell, if Auckland wasnt such a self-inflicted cluster**** you might even get your highly skilled native kiwi I.T. professionals like myself to work there.  Imagine that.

Maybe outsourcing wouldn't be necessary if our country didn't have labour rules which makes it very difficult to get rid of an unproductive employee. You know the type - labour supporting give me everything for free on a plate types. 

I can't speak for other industries, but in my fifteen years of working as a software professional I've never really encountered anybody like that.

Dunning-Kruger effect bias your perception perhaps?

Oh yeah that must be it.  Well done!

You must still be living in the 1960s orsomething. Such rules are long gone and in general do not apply to highly skilled professionals in IT etc IMHO.   Of course on the otherhand the manager / employer did employ the person so just who is the failure?  
 

NZ is one of the easiest places in the OECD for firing staff.  I think we are about 4th.

The trueism is that political careers always end in failure. I listened to that interview this morning and failure was what I was hearing.These guys arn't hearing it. They are not responding to clear crisis, issues citizens have, and they are smooth in their dismissal of need to change.The Northland by-election result was not a story about Winstone. It was a classic protest vote.I predict the sand will disappear from under their feet at a rate that will surprise us all.When you are out of touch, you aren't in government for long.

There is no bubble. 

Until it pops...

or when it forms...

Looking forward to June when the FED raises interest rates..ripples will be felt down here no doubt...as the hot money starts to head back home. 

What 'hot' money? By how much will the FED raise interest rates?

QE..I am sure you have heard of it Onwards

To carry out QE central banks create money by buying securities, such as government bonds, from banks, with electronic cash that did not exist before. The new money swells the size of bank reserves in the economy by the quantity of assets purchased—hence "quantitative" easing.

 

I will believe the Fed raisiing when I see it. 

When you employ a Banker to plug a hole in a system so full of holes, that they helped produced, it is no surprise to me that imported gains are produced to keep the goodship lolly-pop afloat.

The immigration policy works for National It.
1. Generates 'good' GDP number
2. Lowers wages- more workers from 3rd world willing to work for less
3. Increases AKL Land values more people chasing restricted urban land/homes
This is the policy. This is the plan.
With this sort of plan National does not have to do any heavy lifting. It plays to its core vote who look at House prices seemingly to the exclusion of everything else.
 

Plan B you missed pt 4.
4. Imports rock solid National voters anxious for the status quo to remain so ol mum and dad with no English, no pension, never paid a cent of NZ tax and four bad hips can come on over as well to take care of the grandchildren while they head back to China to continue the family business there.

This post would be funny if it wasn't true.

It doesn't take much to turn a bubble

UK Housing Bubble Bursts: Sales Of Luxury Homes Crash By 80% As "Waves Of Wealthy People Are Leaving"
 
http://www.zerohedge.com/news/2015-04-12/uk-housing-bubble-bursts-sales-luxury-homes-crash-80-waves-wealthy-people-are-leavin 

good read .. wonder where they are going .. oh yeah .. they're heading for places where there is no "capital gains taxes"
 
Johnson will set up a welcoming tent at Auckland International Airport - personal attendance to collect any "gracias" in brown paper bags

Thanks, maybe the link of the day for me.   "the new swiss bankaccount"  Doesnt it sound so familiar.....somewhere in a city in NZ maybe?  and the solution it seems looks simple "when we warned that "Foreign UK Homebuyers To Be Subject To Capital Gains Tax" in which we said that "we would not be surprised if the ultra-luxury segment ... becomes just a tad wobbly as foreigners seek to quietly but promptly sell now and avoid capital gains."
 

To have more people moving cross the ditch is more important. Check the data the immigration issue is caused by people stopped moving to Ausi.

You are all very naughty people.
Todd Barclay (who?) will be calling you all Labour plants.
Soften up a bit.
JK is having  a difficult week.

"Thank You, Comrade Stalin!: Soviet Public Culture from Revolution to Cold War"

 
"Life has become better, comrades. Life has become merrier. And when life is merry, work goes quickly! "
Stalin's uplifting message to the peasantry and workers! Delivered November 17, 1935 

and if you are not happy the beatings will continue until you are....

"Do we stop a small IT company in Auckland, for instance, being able to hire people it needs because the housing market is going up a bit too quickly?"
Are there 55,000 additional skilled migrants in New Zealant now John Key?
Is Aucklands housing market only going up a 'bit' too quickly?
To build your new houses I guess we need more immigrants to help with that? Where are they going to live mate?
How about enforcing income tax laws on people that are using property to make money John Key?  Aren't all incomes currently supposed to be taxed? Real estate agents no longer talk about what a great place to live they talk about what it will be worth in a year. Property investors are a major influence on property prices and you know it.

John Key's legacy - an Auckland housing bubble and unsustainable superannuation i.e. nine years of 'head in the sand.'

Anecdotal but hot off the press. Someone in my circlesbought a house in an Auckland periphery suburb that you wouldn't really want to live in. Both the suburb and house that is. Purchased 2 years ago for $380, pre auction offer yesterday of $630K. Expectation is for $650, but who knows in this silly market.

Otahuhu?

No, but I won't say and cause any risk to their privacy.

They spend much on the house doing it up or is it a like-for-like comparison?

Yes a coat of paint inside and out but it probably wasn't that bad. Slapped a few tiles in the kitchen and bathroom. Maybe $20-30K in improvements. I will report the final sale price when that happens.

http://www.interest.co.nz/opinion/64724/lowell-manning-says-problem-hous...
Money supply growth... current Account deficit.... Foriegn investment....   I agree with what Lowell Manning wrote 2 yrs ago...      That these are all reasons for house price growth, over tthe yrs.  ..
These are the main reason that the locational value of land keeps going up...and up.  ( I suppose demand determines where values increase the most )

I would not be surprised if New Zealand's future is to become a vassal state of China. In fact, I'd probably put money on it.

Some people have already been bought and paid for already.
Some people will do almost anything .
Some people call it TPPP.
Some people call it Free Trade.
Some people call it QE.
Some People call it corruption.
Some people call it a Tax Free Haven.
Some people in power call it as they want to see it. Through a  one eyed approach.
What bubble, what Sub Prime???
I could not possibly comment.