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Housing policy won't halt bubble - experts

Monday 12 Aug 2013 8:41 a.m.

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Changes to schemes aimed at helping Kiwis buy their first home won't do anything to solve the affordability crisis, according to property experts.

The Government yesterday unveiled changes to the Welcome Home and Kiwisaver schemes it said would help more Kiwis get onto the property ladder.

Notably absent however were any policies aimed at halting the seemingly inexorable rise in property prices – in fact, by increasing demand at the lower end, there are fears the changes could actually push prices higher.

"We are in a bit of a boom – the issue is whether or not it does become a bit more of a bubble," ASB economist Nick Tuffley said on Firstline this morning.

"That does add a bit more on the demand side."

Home Owners and Buyers Association chief executive Roger Levie said it would have a "small impact", but amounted to little more than "tweaking around the edges".

"These amounts of money are not going to… give people access to a market where house prices are increasing greatly, and the access to homes in this sort of cost range are really minimal," he says.

Housing Minister Nick Smith says the latest changes aren't aimed at bringing house prices down – that would only happen with an increase in supply.

"Inevitably people will say it's not as much as they would like, and the Government is not saying this is the primary solution to the housing affordability issues; that rests with the [Auckland] Housing Accord where we are going to build an extra 39,000 homes, the changes that we're making to the RMA to free up land supply and the other initiatives around getting the costs of building materials [down]."

Mr Levie agrees that housing supply is key, but he also thinks the Government needs to look at introducing a capital gains tax.

"We have to think about various ways to provide better access for people getting into the market and controlling the market, and I think the time is coming when serious thought has to be given to serious control factors like a capital gains tax."

Dr Smith however says people who buy and sell houses for profit are already taxed.

"If you buy and sell properties and make capital gain from that, and you have not lived in those homes, then that is absolutely a taxable income," he says. "The Government has boosted up the amount of funding provided to Inland Revenue to ensure that is enforced."

Mr Levie also backs Labour's moves to block sales to foreigners, saying accusations of anti-Asian xenophobia have been taken "out of context".

"The focus has to be on looking at getting people into houses in New Zealand who want to be in New Zealand, living in New Zealand. We certainly support restrictions that ensure that houses are available to Kiwis.. The premise behind that sort of policy is a good premise – that we want people here in New Zealand [being able to] buy their own homes."

But the one thing Mr Levie, economists, and the Government all agree on is that increasing supply is the best way to create a serious dent in housing prices.

"We consent one house for every seven people the population increases by, in Auckland, and that's not really sustainable," says Mr Tuffley.

"The most important thing we need to do to make housing affordable for Kiwi families is actually to build – increase supply by a whole lot more houses," says Dr Smith.

"We're going backwards every day around supply, so work has to be done in order to bring more lower-cost properties to market," says Mr Levie.

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