Smith defends Government spending NZ$29 million on subsidies for Weymouth housing project when speculators pocketed big gains by selling houses within five weeks; New buyers have to hold for 3 years

Smith defends Government spending NZ$29 million on subsidies for Weymouth housing project when speculators pocketed big gains by selling houses within five weeks; New buyers have to hold for 3 years

By Bernard Hickey

The Government was forced today to defend its spending of NZ$29 million to help build 295 new homes on a Special Housing Area at Weymouth in South Auckland, some of which were flicked on by speculators within weeks of being built for hundreds in thousands of dollars in tax-free capital gains.

Simon Collins reported that one couple had bought a house at the Weymouth sub-division off the plan in July last year and sold it in September this year, pocketing a profit of NZ$130,000 in just five weeks after settling. As many as three of the houses had been flicked on for a quick profit, it was reported, forcing the sub-division's developers to write into sales agreements from the middle of this year that buyers could not sell within three years. The project is run by Tamaki Makaurau Community Housing, which is owned by the Tamaki Collective, the Maori Trustee, the Community of Refuge Trust and the NZ Housing Foundation.

Labour Housing Spokesman Phil Twyford attacked Building and Housing Minister Nick Smith in Parliament for not ensuring the protections against quick-flick sales were not included from the start.

Smith said 20% or 59 of the 295 new homes remained with social housing providers and the rest of the development was being partially funded by the sale of 105 private market sales.

"The first 20 of these were sold off the plans and had no conditions, so they could secure the bank finance for the community organisations to be able to fund the infrastructure and get on with the project," he said in Parliament.

"I am not surprised that some of those homes have subsequently been bought and sold at some increase in price, given what has occurred to Auckland house prices over the last year and a half," he said.

Twyford then asked: "Was the $29 million grant at Weymouth, which amounts to NZ$100,000 per house on average, meant to enable speculators to make NZ$130,000 in 5 weeks on the back of a Government subsidy?"

Smith said the homes that had recently been sold on had been bought off the plan in August last year after being on the open market for 10 weeks. He  said the NZ$29 million had been used to help buy the land and develop roading and other infrastructure for the development, rather than build the actual houses.

"More than a year later when the house was completed, that purchaser who bought it at the free-market price decided to resell it. That is no different from what has occurred in Hobsonville," Smith said.

He noted that the overall size of the project had increased by 21 houses to 295 between planning and development because of the good price the developers had secured on the private sales.

'Clawback provision?'

Twyford then asked why the Government had not included a clawback provision that would have seen capital gain from the sale of affordable homes within a certain period repaid to the taxpayer as a way of deterring speculation.

Smith denied the Government was doing the development, saying it had only helped with infrastructure to ensure the provision of 59 social homes and help support the development of 295 houses in total.

"If the member opposite wants to regulate the price of every house that is bought and sold in New Zealand, that is the sort of socialism he might stand for; it is not what we do," Smith said.

"People’s circumstances change. What you need to realise is that this project could be funded only by some of the houses being at private market value. It is a $120 million development. The infrastructure and other components required private sales to fund it," he said.

"The only way we could have a country where nobody was able to profit from houses would be to have the Government controlling the sale price of every house in New Zealand, and that is not this Government’s policy."

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""If the member opposite wants to regulate the price of every house that is bought and sold in New Zealand, that is the sort of socialism he might stand for; it is not what we do," Smith said." classic pollie obfuscation of charges from the opposition, but the question has been placed on the table. What does the Government stand for? Currently the evidence is rampant, unrestrained, greed. There is the classification that his Government is centre right, but IMHO that it is actually further right than centre in most areas and hasn't dismantled some of the social policies simply because they are afraid of public lynching's. A true centre Government would regulate to protect the public and a cap in rents doesn't stop the free market it just slows it down so the average kiwi can keep up with it.

Gordon Gecko hasn't left the building. "Greed is good" Michael Douglas (Wall St ) c 1988.

Another misleading headline - where does 5 weeks come into it? The length of time between settlement and resale is neither here nor there. There's well over a year between initial commitment and resale. Any gains are simply indicative of movements in the wider housing market over that time - hindsight makes great speculators of us all!

Income-petancy.

Can you also tell me why we are also subsidising IBM to fail at delivering a simple Computer system to the tune of 33% over run to date, amounting to many millions and millions of wasted dollars, this to help monitor our influx of undesirables and illegals. I thought graft was working and working well, but the alternative may be true.

If you don't already have a handle on cost over runs and grand theft larceny, by Overseas speculators, then why the hell do you want to import more.

We seem to be at the mercy of all the wastrels in society, starting at the top with huge Corporations and maintaining huge overheads for no real reason, with every move we make.

Apparently it is the economy. But I often wonder.?

Just who are we supporting in this endless stupidity. Overseas interests, or our own incompetent management of our affairs.

Methinks it may be both.

This says it all for me,
that purchaser who bought it at the free-market price decided to resell it. That is no different from what has occurred in Hobsonville," Smith said.
He can not see anything wrong with speculators

Surely this is just indicative of wider house price inflation and not a problem in itself? I think we'd be best addressing the rising tide (tsunami) that's currently floating all boats than trying to micromanage the market - so I don't disagree with the Minister if this is looked at in a vacuum.

if you can not see a problem how are you going to solve it, or maybe someone higher up can see it and has no intention of solving it hence making smith minister in charge

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No Rjn is right, this is a symptom, not the core problem. Any clauses to stop speculators would have just been band aids to cover the underlying problem - rampant house price inflation with a number of causes, none of which the Government wants to acknowledge and actually do something about. Consequently the tax payer has been effectively subsidising the problem. No political party has shown any indication in their developing policies that they are willing to take the hard choices and step on a few moneyed toes.

While I tend to agree the Labour policy last election of 100000 houses in 10 years was a policy however wrongly sold.
My gripe with the National policy is that there isn't one that can be applied and even more importantly, they have had 7 years to make something happen (including the immigration one) and have spent all of that time looking at polls to see if there is anything likely to go wrong next week. Myopia personified by Jonkey.

How much did the developer pay for the land, for developing it, and how much did they make selling the end product? Why did the government subsidise them, and not just stipulate that 20% of the houses had to be a certain standard and price? That some houses have been bought and sold quickly is less of a shock. Did the original landowners also make a windfall gain on rezoning? If so, should that have paid for roading and other infrastructure?

a lot of people have made money of this, thanks taxpayers for lining their pockets

Exactly. How is it that landowners collect all the benefits of rezoning as an untaxed windfall gain when zoning is ostensibly carried out as a public good for the benefit of all. Worse, landbankers also reap the benefit that accrues from the investment in infrastructure by council and developers through no cost to themselves. How is that equitable?

While thinking its a bit off and greed is good mantra, the the thing that really sticks in the craw is the ability to make that profit tax free. That stinks.

How do you get access to other peoples tax records to find out if they have avoided payable tax? Is it on the internet somewhere?

How can the Tax take be down, when speculators should be taxed on their excessive gains as a business venture.??.

They are either a business or not. What is the difference between that and any other form of venture.

If the case is that there is no down side to this, then we might as well all borrow our selves silly and go for broke.

Or are we??.

that seems to be the message this government are sending, its all good dont worry

We have choices allow the market to rule and face a similar crash as we experienced in 2008 or we regulate. .
When the ingrediant is greed there will always be winners and losers .

I bought an affordable house in Hobsonville. It's clear that I must live in the home for 2 years, and if I don't I have to sell the house back to the Hobsonville Land Company for it's purchase price.

I'm greatly surprised that the Weymouth home owners were able to cash-out within 5 months like that.

We are all humans, we have greed!

Does that mean the Hobsonville Land Co is underwriting your risk in the event of a crash within that 2 years? Can you use the clause to force them to buy it back at purchase price, or is it just a first right of refusal at a set value?