By Bernard Hickey
Housing and Building Minister Nick Smith has denied New Zealand faces a housing crisis, describing media reports of a crisis as a beatup and instead insisting the situation was a "challenge" where a supply response was needed to meet strong demand, which was a "sign of success."
Prime Minister John Key later also told a business audience on Thursday that Auckland's house prices and congestion issues were a "sign of success".
Smith was asked in Parliament by Labour Housing Spokesman Phil Twyford if he stood by previous statements that reports of a crisis were a "media beat up."
"The Government’s position is that it is not a crisis, but that there is a challenge. New Zealand is doing so well that it is attracting New Zealanders home and an increasing number of people want to live in New Zealand, and as a consequence of that good-news story, we need to make sure that we build more houses," Smith said.
He was then asked about an IMF report that showed New Zealand had the second-fastest real house price growth in the world in the last year (behind Qatar) and the fastest house price to income multiple growth in the last four years. The report also showed New Zealand's house price to income ratio had grown the second fastest in the world in the last five years behind Turkey.
"I would note on the IMF chart—if that was to be the test—that the most affordable houses and the best places to live are Syria, Greece, and Spain. Actually, this Government’s ambition is not to be like any of those three countries," Smith said.
Prime Minister John Key then intervened to question Smith about the difference between the Government's policies and Labour's while in Government from 1999 to 2008.
"The first step this Government took was to remove depreciation for buildings, which affects the demand side of investment housing. The second step the Government took was the first phase of Resource Management Act reforms. The Government then introduced the HomeStart scheme—that is a $420 million investment. The Government has provided for increased housing standards, with 290,000 houses insulated," Smith said.
Claiming credit for lower interest rates
Shortly afterwards, ACT Leader and Epsom MP David Seymour then challenged Nick Smith's comments that housing affordability had improved under National. Smith agreed that higher interest rates would stress home owners, given prices were now substantially higher than in 2008.
"If interest rates return to 2008 levels of over 9 percent, it would put families with a mortgage under extreme pressure. That is why good economic management that keeps interest rates low for longer is absolutely critical for families and home ownership," Smith said.
He then agreed that he did not have much influence over interest rates, but that they would be higher if the Government had been profligate. National MP then asked Smith about the AMP 360 Housing Affordability reports produced by Interest.co.nz.
Smith said these reports showed housing was 24% more affordable now than in 2008.
"Why was the Minister prepared to take the credit for falling interest rates, which he has conceded he cannot control, when the factors, such as supply, which he says he can control, have deteriorated over the period referred to in his quote?" Seymour asked.
"I do accept the key element of housing that I do have responsibility for is supply. I note in the period that I have been the Minister house construction has gone from 13,000 a year to 27,000 a year. In fact, the housing build rate has increased more in the last 3 years than it has at any time in New Zealand history," Smith responded.
Key also sees success
Key told an Employers and Manufacturers Association event that Auckland's problems were a good problem to have.
"If you look at the challenges Auckland has at the moment - and you know, they're well documented from housing to transport - they are in a funny kind of way a quality problem to have because what they reflect is that Auckland is doing well," Key said, as seen in this NZ Herald video.
"You've got net migration not just strong from India, China and Australia but actually net migration from around the country," Key said.
"If you look at cities that are doing badly, yip, they may not have issues on their housing and may not have as much traffic jams - although I will point out last Thursday I was in Te Kuiti in a traffic jam - but the point being, in a way what would we rather have?" Key asked.
"And the truth is we would rather be having to deal with the challenges of growth and say 'OK we've got to deal with those issues but gosh they're signs that as a city we're doing incredibly well and actually as a country we're doing incredibly well'."
(Updated with comments from John Key)