BNZ chief economist Tony Alexander has proposed some radical solutions to the housing affordability problems but says the likelihood of them being implemented is not strong.
He said the optimal solution to affordability, increasing bank exposure to debt, a strong NZ dollar and a lack of accommodation for low-income families was a quick jump in house supply combined with a drop in the cost of building materials.
He says minimum deposit rules will just make it harder for first-home buyers and other lenders will crop up to get around rules on bank lending. He says construction inflation will continue to push up the dollar and the lack of affordable housing will push middle-income earners into traditionally low-income areas, and push the poorest families out.
The only solution, he says, is to:
In order, he says the chance of the policies being implemented is: Low, zero, zero, mild, mild, zero, low, zero.
“Some land will be freed up but it will little affect section prices, construction will soar and rising costs will force higher interest rates and a higher NZD. The Reserve Bank will tighten high loan to value lending but the impact will be minimal and mainly encourage young buyers to raise more expensive finance elsewhere (a big business opportunity looms there) or to leave the country to make a purchase overseas.”
He says freeing up more land shouldn’t be thought of as the definitive answer. “I spoke with a real estate agent today who noted that a project they had sold units in has just been canned because the developer cannot find anyone to build the complex. Or more accurately, he got some quotes but not many for the 32 unit development and the cost would have made it unprofitable given the prices which buyers had signed up and paid deposits for. Those deposits are now on their way back to the hopeful buyers.”
Source: Landlords.co.nzcomments powered by Disqus