STILL MORE TO DO TO ADDRESS THE LONG-RUN ISSUES
Today’s announcements will help take some of the wind out of the housing market’s sails, but the solution to the housing market needs to be considered from two angles: leaning against the price cycle when it gets out of hand; and addressing the fundamental problem of a lack of supply.
Tax tweaks and macroprudential policies can be affective at addressing the former, but they do nothing towards lifting supply.
There’s no quick fix there, but the Housing Acceleration Fund of $3.8bn is at least a step towards rectifying the fact that local government is not able nor incentivised to provide the investment that enables large-scale green-fields or densification development in a timely manner.
As long as the projects are carefully chosen to provide maximum bang for buck, it should make a meaningful difference in pockets over the next few years, and provide a case study for a desperately needed new approach to providing housing infrastructure.
And unlike home-builders, there is actually some spare capacity in the infrastructure sector at present, so stuff may actually get done.
There’s still more that could be done on the housing supply side. It’s not easy, given so many vested interests and genuine trade-offs, but well thought-out supply-side reforms have the potential to make the New Zealand housing market a lot less susceptible to such dramatic house price cycles.
Importantly, the Government is not done; let’s hope the focus pivots further towards supply from here.
It’s not just people’s inability to put together a deposit that’s the problem. In many cities, rents are way out of line with incomes as well, and New Zealand faces a rapidly increasing homelessness problem as a result.