NZ house prices look to have peaked, Joyce says as Treasury warns borrowers on rising interest rates; Greens eye BC-style stamp duty

NZ house prices look to have peaked, Joyce says as Treasury warns borrowers on rising interest rates; Greens eye BC-style stamp duty

New Zealand house prices look to be peaking, according to Finance Minister Steven Joyce, while he's also warning home buyers to consider whether they can afford higher mortgage rates in coming years.

Speaking to Parliament’s Finance and Expenditure Select Committee Wednesday, Joyce said his view is there is “not much upside” in house prices as the supply of new builds increases and as interest rates are forecast to rise.

Treasury Secretary Gabriel Makhlouf echoed Joyce’s comments.

There has been a moderation in house prices recently in Auckland as the Reserve Bank’s loan-to-value ratios and government tax changes took hold, he noted.

Makhlouf also warned home buyers: “People who want to purchase property should think about being able to afford paying higher mortgage rates [in coming years].”

Most economists expect the Reserve Bank of New Zealand to start raising the Official Cash Rate during 2018. However, New Zealand banks’ partial reliance on offshore funding could mean rates begin to rise while the OCR is on hold if that funding becomes more expensive, Makhlouf told the committee.

New Zealand house prices have been driven up by three factors, Joyce said: Historically low interest rates, a strong economy and a shortage of supply. He later said prices were predominantly high due to the supply side factor.

However, the supply gap has started to close, he said, adding there is “no argument that New Zealand is in the middle of its biggest ever construction boom”. He cited Auckland building consents being at 12-year highs.

Green Party co-leader James Shaw raised the impact of foreign capital inflows to New Zealand on house prices. He asked Joyce whether he thought a stamp duty, like the one imposed in British Columbia last year, could help alleviate pressure on the housing market. In mid-2016 British Columbia imposed a 15% stamp duty on foreign house buyers in Vancouver.

Joyce responded that high house prices were “predominantly” a supply side problem, adding that capital inflows created opportunities for the New Zealand economy. The response needs to be to ensure there is sufficient land to build houses on, he said.

Meanwhile, the debate on house prices spilled over into Parliament’s Question Time on Wednesday afternoon, with Labour Party leader Andrew Little quizzing Prime Minister Bill English. Little cited the latest Demographia survey showing Auckland’s housing market is the world’s fourth most unaffordable, asking English to accept New Zealand is facing a housing crisis.

English responded that the reason for Auckland’s problems was 20-30 years of misguided planning in the city, “designed to stop the city growing”. He cited the new Auckland Unitary Plan and Housing New Zealand developments in Hobsonville, Tamaki and Northcote as evidence supply would loosen.

“The problem has been constrained planning that stopped the supply of housing when it was needed,” he said. It will take a number of years with house building of more than 10,000 per year to alleviate Auckland’s supply problem, he said.

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28
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Guess who's responsible for 30 years of misguided planning - Successive NZ governments that put the legislation in place and didn't make sure it worked properly.

"Joyce responded that high house prices were “predominantly” a supply side problem," - No, it's supply, demand, interest rates & planning regulations. Set the migration rate to zero and hold everything else constant and then tell me its a supply problem. If you cant tell the truth you shouldn't be finance minister.

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It just shows there is little if no difference between the spin and an absolute lie.
If we elect those who cannot accept their responsibilities, then we deserve everything we get.
Having recently got rid of the ultimate master of spin those following on who do not have his mastery should avoid being caught out. Regrettably Joyce is too big headed to realise.

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The ministry of alternative truths - responsible for propaganda

Sort of 95% of "immigration" are returning kiwis or Australians. You want to ban those?

Oh you mean the kiwis that Australia's sending back because of criminal activity or those that went over for the wrong reasons, and now they can't get the benefits they expected are coming back to a 'safe haven'?

Your number sounds dubious. Could you please post a link to the source of this claim. This Statistics NZ page I found certainly doesn't seem to support this claim.

See here. We got 125,000 people arriving. 29% were returning New Zealanders and Australian citizens, 22% student visas, 31% work visas and 5% on visitor visas. So that leaves about 12% remaining, i.e. 15,000 people who came here in residence visas and are not Australian/Kiwis/students/visitors. I think my 95% guess was pretty close :-)

"Sort of 95% of "immigration" are returning kiwis or Australians."

"29% were returning New Zealanders and Australian citizens"

Pretty close is stretching it a little bit...

mfd -quote of the week

1. I'm surprised we have a finance minister who does not grasp the concept of supply AND demand.

2. National have been in power for almost 9 of those years. How many years do they need before they'll actually do something? (No doubt it's "One more term")

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“The problem has been constrained planning that stopped the supply of housing when it was needed,” he said. It will take a number of years with house building of more than 10,000 per year to alleviate Auckland’s supply problem, he said.

Hahahahahahaha! Not one peep regarding rampant immigration, a lack of a comprehensive capital gains tax or foreign buyers as being sources of the stupidly high Auckland house prices. "Yup," says Billy Boy, "it's that darn lack of houses in Orkland that's the problem." Pathetic.

Auckland builds homes at only about half the rate of any other large city. Auckland Council is pathetically useless. Everywhere is having a construction boom apart from Auckland.

But look over there, that person, I think she looks foreign...

There's been a capitol gains tax stamp duty in oz for years.has that stopped house price appreciating?

Your first problem is "Capital Gains Tax" in OZ does not apply to properties that are the principal place of residence, Not many people are into investment properties.

Second problem is that, instead, what people do is: They buy a house and then pour enormous amounts of further capital into renovating, or, restoration or extending or upgrading or modernising their houses which naturally substantially increases the value of the house and thus the asking prices, which in turn avoids CGT and Stamp Duties

There's plenty of property investors in oz two other guys

Also when they are pouring money into their principal residence they are creating huge amounts of work.creating jobs for thousands of workers

There has always been a Capital Gains Tax in NZ. It has always been the case that when a property has been bought for the purpose of capital gain, tax is payable on the profit made from the sale. Personally I believe any investment property falls into this category, but I understand that A) IRD are not rigorous in enforcing this rule, and B) there are too many loophole for investors to get out of paying this tax.

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Beyond the obvious, why are these policy leaders not discussing the impact of negative gearing and the jaw dropping flaws which exist and have existed for a very long time in this countries taxation structure? Captial gains anyone?

... absolutely ! ,,, and I'd throw into the mix the thorny issue of who's responsible for funding the infrastructure for greenfields sites , and for upgrading the old infrastructure for inner city re-developments ...

As long as central government leave it to the local councils , it just acts as a handbrake on construction .... there's only just so much extra rates that councils can foist upon ratepayers , before the revolts begin ....

... we need the government to fork over tens of $ billions ( not just a miserable single $ billion ) to get things really rolling ... Only they have the size and the muscle to infuse the large sums required .

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Why should the ratepayers or the taxpayers pay for the infrastructure. Just stop the immigration yesterday.
Why should immigrants step off the plane and get NZs infrastructure for free?
Unless they are young, healthy, educated and have needed skills we don't need them. We can be selfish with what we have to offer and who we offer it to.
Lets start making sure immigrants are going to be useful and have plenty of tax paying years left in them.

... it's got very little to do with immigrants ... We've not constructed enough housing for at least 3 decades now .... this is an ongoing failure of policy by successive governments ...

We need immigrants , well educated young people , entrepreneurs ... immigrants are making NZ a more vibrant and exciting place to be ... and creating networks to their home lands ...

... NZ is one of the most underpopulated countries on the planet ... what we have , is a failure to communicate ... our government is not listening to us , the great unwashed public , nor to the construction industry itself ...

Meanwhile $ billions flood in from Australia , the UK , USA & China ... hoovering up our houses at ever rising prices , pushing them further from the reach of the actual citizens of this fine land , girt by sea ... See ?

If you are not prepared for the immigrants in terms of housing and infrastructure then, indeed, immigrants DO become the problem

Gummy Bear your previous comment was wanting the govt to front the money for the infrastructure that all these people need. The govt gets their money from tax or borrows it. Either way we tax payers cop the bill and I don't want it.
I do agree with your second post when you don't want foreign investment buying housing. This policy would have to be this countries most stupid. Letting anyone anywhere in the world buy up to 5ha with or without housing, we are fast becoming tenants in our own land. Working class NZers can't compete on NZ wages.

Forget the taxes, There are more solutions than tax. eg. A simple law that only NZ citizens can buy New Zealand land.

I understand that Vancouver at 15% SD only just matches Hong Kong and Singapore.
To have a useful result NZ would need 20% and for it to apply to arms length transfers as well even when the ownership transfer is only partial.

Available Auckland listings on Trade Me ratcheting quickly towards the 10000 mark . Interestingly , available rentals have barely altered in number . With international students falling , it would be unsurprising to see rents dropping in central Auckland .

Being a renter, I keep an eye on whats going on with rents in central Aucks. Since about November last year, the number of 1000 a week plus rentals have skyrocketed, and the ones I have checked have generally changed hands in the last 12 - 18 months.
Im pretty sure that there are some specuvestor mum and pop's out there that are starting to feel it, and ratcheting rents to try and cover a bit more of the interest only mortgage. House of cards.

One can but hope

So how is stamp duty going to help ?

Firstly , there are very few foreign buyers
Secondly , they are able to get locals to front for them
Thirdly, they can register an onshore Company , so the buyer then is domiciled in NZ
Lastly , how are you going to distinguish between citizens and foreigners with a right o live here/?

Then you need to consider that a foreign buyer is actually supplying rental stock ............... if you stop them , who is going to house everyone ................ Housing New Zealand ?

Get real the Stamp duty idea is never going to fly here

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I guess tenants in our own land became kosher once John Key, proud defender of our right not to be, scurried off, stage left.

Agree with some of what you say and it would be a nightmare to regulate, but supply rental stock? Don't you mean hold a vacant house and wait for capital appreciation?

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Here's a little something I missed about this comment earlier on
"Firstly , there are very few foreign buyers"
then after barely having drawn breath
"you need to consider that a foreign buyer is actually supplying rental stock"

when I was reading that I saw a pig fly past my third story window.
it is amazing how some people do not question but believe what they are told by people whos jobs are to twist the facts to suit there own agendas

Perfect solution fallacy: Why bother doing anything to solve a problem, as it will only fail anyhow.

I assume you wear a lifejacket and take some safety equipment when you go boating?

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John Key should come back and deny that there's a property bubble. That was the party line for a long time. You'll notice the statements from the Government are only made grudgingly.

Auckland trademe listed have increased by about 500 from the same time last week. There's still only a bit over 300 motivated and 90 urgent sellers. There just isn't enough desperation to buy a house at a good price in this market.

Commonwealth Bank of Australia, ( that's ASB's parent and primary funder? here) the nation's biggest property lender, is set to announce that it will be indefinitely suspend new finance applications for some investment home loans, in a move that could send shockwaves through the nation's hot property markets.

http://www.afr.com/business/banking-and-finance/cba-stops-some-property-...

Glad that Labour and the Greens recognize that having a substantial effect on the NZ property market, that a Foreign Buyers Tax for Auckland would be a good move to ease house prices and generate revenue, similar to the other major cities around the world. That would certainly get my vote!

Hark... I hear Auckland Estate Agents screaming like Banshees!

The Govt have to say property prices are peaking or else they won't get re-elected!
I see the the amount of negative equity in Aus is rising sharply.

Forget the tax. A few days ago some common taters here were expressing surprise that non citizens were allowed to vote. I was surprised, apparently it's uncommon around the world. I believe votes belong to citizens only, and along with that only citizens of New Zealand should be able to buy New Zealand land. Who needs those silly one issue taxes.

Yes, you're right, who needs "silly one issue taxes". While we're at it, we should get rid of those other silly single issue taxes - eg company tax, PAYE, GST, petrol tax.

Some fools would suggest that they are part of a broad-based taxation system. And they suggest that a property tax would be the final element of that, as in every other developed country. Ridiculous.

Property market will never be the same again, you can cover from the rain but you can't stop it

I don't know why people consider this as a crisis, but as an opportunity for growth. It expands the city, advancing public transport and lesson C02 emissions. We shouldn't restrict foreign investment but redirect their money flow in businesses and create more jobs for us. The government should look into a policy where NZ born citizens have priority in the property marketplace.

Since 17th Jan in Auckland 8 x Mortgagee auctions listed on realestate.co.nz; 69 x "reduced" listings

are there stats keep on mortgagee sales, that would give an interesting insight into how the interest rate rises are affecting the market

I don't know about a collection of stats but there were few or no mortgagee sales in Auckland towards the end of last year. The numbers seem to be picking up. The total listings is rather interesting as the slow down in sales is becoming obvious.

I've been watching as in the market for a new house and running a spreadsheet since Nov 16

Trademe listing for houses for sale on Akl's North Shore went up by 98 houses... yesterday, yes in one day a 10% increase.

Total now at 1152 and growing daily.

Interesting...

Hamilton Trademe for sale.
7/11/16 580
20/12/17 576
5/1/17 529
Today 598 (up 11 overnight).

Renatls dropped overnight from 563 to 526, was 557 on 7/11. Students.

Cool, thanks for that I'd love to see that graph with interest rates shown as well so we can see what the lag time between an interest rate rise and an increase in mortgagee sales is.

Thanks for that link roelof, didn't know it was there.
However looks to be oudated, appears to have stopped in Feb 2014?
Any comment on that David Chaston?

English responded that the reason for Auckland’s problems was 20-30 years of misguided planning in the city, “designed to stop the city growing”.

No, that is complete BS.

For 40 years, until the reforms carried out by this National Government (and Rodney Hide), Auckland was the fastest growing city in NZ. In the decade immediately preceding the reforms of this National Government Auckland was one of the fastest growing cities in all of Australasia.

Then along came John Key, who stuffed it all up.

Now Auckland is just about the slowest building.

Massive build up of high rise apartments, as in Singapore is the only way to sort out the supply issue in Auckland. If we are not willing to alter our skyline/landscape to accommodate that, we should change the policy so migrants should be directed to other areas. And a bit of social engineering like they do constantly in Singapore is required to make sure we get the type of people we are comfortable with longer term, not students and such. Not sure anything will change in the next few years though. Rising interest rates and a drop in migration may bring down the prices somewhat, but the damage to Auckland has been done.

I don't get the issue Auckland seems to have with high rise apartments (setting aside issues with Body Corporates and so on). More people living closer to work and leisure activities adds a lot of life to the area around the apartments and can keep living costs down.

Seems to me young Kiwis coming up are caught in a bind of others' selfishness.

They're told they need to forgo the Kiwi tradition of a quarter acre section in favour of apartments, townhouses etc. - more intensity - but then those wagging the finger at them squeal like stuck pigs whenever the subject of allowing increased density in their neighbourhood comes up.

Don't the oldies realise they need to practice what they preach?

You work, and you pay taxes. It takes time.
And with that comes the right to do what you like, within reason.
Not the 'oldies' job to worry about other peoples houses.

Not the oldies job to worry about the other people....Spoken like a true boomer? Imagine if the generation before had that attitude - you'd be speaking Japanese...

Smokey I would argue we could also model off Japan/Tokyo which is more about widespread low rise intensification as decided by thousands and thousands of private property owners rather than high rise apartment building in a few government decided locations. Although maybe a hybrid/combination approach would work best. Read more about this idea here.
https://medium.com/@brendon_harre/what-is-the-secret-to-tokyos-affordable-housing-266283531012#.c5gvbh1og

Unfortunately no one wants to fix the problem... as it suits councils (higher rates), Insurance companies (higher insurance) and banks (bigger mortgages).

It is too late to fix it and noone will do anything to fix it.

A simple solution:
- only NZ residents can buy
- Capital Gain tax if family home sold within 2 years, 100% CGT on anything else
- 20% minimum deposit
- 60% deposit on non-primary residence properties
- higher rates on investment properties

Apply that and show me the 'supply side issue...'

No, but doing that you'll see house prices plummet and watch all the poor souls default because their mortgages eclipse their capital

And not doing it will see all those poor souls destined to rent for life and enter their old age with nothing. Six of one as they say

So what would the money raised from the "Vancouver" tax be used for?