16 May 2016
Property Councils warns the Reserve Bank to tread carefully
Property Council believes the Reserve Bank’s loan-to-ratio restrictions to curb soaring house prices is charting into
treacherous waters which it must tread carefully.
Property Council Chief Executive Connal Townsend says imposing further loan-to-value restrictions is likely to worsen
the housing affordability problem.
“Restricting peoples’ borrowing ability further, will exacerbate the growing inequality between homeowners and
‘Generation Rent’.
“We are terribly concerned about the unintended consequences more limitations will have.
Restricting borrowing does not change the value or shortage of land.
“This policy could stop what we need most which is building more houses in Auckland, and offering the housing choices
demanded by the market.
“Auckland is one of the most unaffordable housing markets in the world. Reducing the number of people who earn enough to
be able to borrow for a house will be a severe blow to the construction of more homes.
“We recognise the need to cushion demand in the short term while land supply is beefed up.
However, the LVR restrictions are too heavily focused on a buyer’s ability to purchase a house, and pay little attention
to other market forces.
“Limited land supply and speculation have caused buyers to become price-takers with demand becoming relatively
inelastic. Monetary policy tools should be aimed at changing that, not pricing more people out of the housing market.”
In a traditional well-functioning market, the further away houses are built from the CBD, the lower the price tends to
be. While this is the norm for the rest of New Zealand, it is not the case in Auckland.
Mr Townsend says that is why the Proposed Auckland Unitary Plan has such profound ramifications for housing in Auckland.
“The Government appreciates this imbalance and we are pleased to see efforts to ramp up pressure on Auckland Council to
produce a Unitary Plan that will increase land supply, come August.
“Finance Minister Bill English’s recent comments echo our long-held concerns that the Auckland Unitary Plan must deliver
the results Auckland needs, which is more houses.
“Anything less than that is simply not enough and like us, the Government sees this as a threat to the national
economy’s stability.”
END.