Call for policy changes to encourage new home building

Property Institute of New Zealand Chief Executive, Ashley Church, has welcomed statements, by the Reserve Bank, acknowledging that more rapid progress in producing new housing is needed in order to get on top of the Auckland housing issue - but says that the measures being implemented by the Bank, to address the issue, continue to be misguided. Earlier this week Reserve Bank Deputy Governor Grant Spencer addressed the Northern Club in Auckland and acknowledged the need for ‘rapid progress’ in the construction of new housing in Auckland - something Mr Church believes represents a change in policy by the Reserve Bank. "As far as I’m aware - this is the first time the Reserve Bank has so clearly endorsed the need for an increase in the Auckland housing supply. Up until now their focus has been almost exclusively on trying to find the magic bullet to kill off house price inflation - but without any recognition of the need to first address market demand". But Mr Church says that, while the acknowledgement of the need for new house construction is welcome, the measures being implemented by the Reserve Bank continue to miss the mark. "If the Reserve Bank now accepts that new home construction is the primary solution to reducing house price inflation- measures which are designed to make it harder for investors to buy property aren’t the answer". "Property investors are the people who are best positioned to get new houses built in large numbers - so instead of trying to curtail their activity the Reserve Bank needs to direct it where it will do the most good - and it could do that by reducing, or completely removing, the Loan-to-value clampdown on property investors who invest in new housing stock". Mr Church says that the response to such a move would be swift and dramatic. "It would send a very clear market signal to investors and you would see a rapid switch to investment in new home construction - measured in months, rather than years". Mr Church says that such a move would also lead to a significant ‘gearing up’ by House Building Companies and the development, by them, of easily accessible new home building packages and products. Mr Church acknowledges that ‘switching’ market investment to new home construction would not immediately curtail house price inflation but says this is because house price increases are a symptom of severe undersupply. "House prices won’t start tapering off until supply catches up with demand - so our first priority is to start making a dent in the number of houses that we need to build. At least, with this solution, that goal will be achievable". Mr Church says that, under current policy settings, little progress is being made and that, if nothing changes, strong house price inflation could be with us for a decade or longer. Mr Church also acknowledges that land supply is an issue, in Auckland, and says that an increase in private sector investment activity in new housing would probably need to be coupled with moves, by Auckland Council, to ‘fast-track’ subdivision applications at both brown-fields and green-fields level. "It’s time to start utilizing Mum and Dad property investors as part of the solution - rather than treating them as the problem".