We're going to need just about every one of the housing policies being thrown around at the moment because any big fix is going to be down to lots of small change... and it's going nuts out there
Forget love, real estate is the new battlefield. And now just between the main political parties. The stories from the Auckland warzone are enough to leave you shell-shocked, and I've got two stories from this weekend as evidence.
The house next door to ours has just gone on the market and had its first open home on Saturday. Naturally, we popped over for a gander. We're on an almost-full site, they're on a half site. And our square metreage is half theirs again, though we have the same number of bedrooms. Then again, the house next door is much newer and in better nick than ours. Both back onto a park which is, officially, in Remuera but in reality is in St John's.
The agent could have knocked me over with a flyer when he told me the owners had turned down an offer of $1.1 million last week. If our house is now worth something similar, I would have made significantly more in capital gain in the three years we've been there than I have by going to work every day.
That is just wrong.
Some friends went with a young couple to an auction for a 2.5 bedroom house in Waterview, which not that long ago was a starter suburb. With a GV of $510,000, it sold for $910,000. A baby-boomer couple blew the Gen-Xers out of the water.
So when the economists talk about another "Auckland bubble", they've got a point.
With these kind of prices being paid on the eastern and western fringes of central Auckland, it's hardly surprising that people are turning to our political leaders to see what they might do about it. And this weekend National answered the critics who have been saying they're not doing enough with some new housing policy.
The household income cap on KiwiSaver's first home deposit scheme has been lifted from $100,000 p.a. to $120,000 p.a. and the house price cap has risen from $400,000 to $485,000 in Auckland, and by smaller amounts in some other centres. National hopes that will help roughly a further 6500 first-time buyers into homes each year.
Meh. It's hardly a silver bullet, but then Bill English has been saying for years that "there is no silver bullet". At least, he says that when he takes his politics hat off.
Just two weeks ago Bill English told TVNZ Labour's promise to ban non-residents buying houses here was:
"Messing around with tiny groups of buyers won’t make any difference to the bubble..."
Well, if Labour's ban is messing round with tiny groups of buyers (and it essentially is), then National's KiwiSaver and Welcome Home package is just focusing on another small group. Both got the headlines, but they're bit parts in a big and complex production.
Labour's policy takes maybe four percent of the buyers out of the market. Which ain't nothin', but ain't much either. The under-played part of the policy is that non-residents who like our capital gains can build houses here -- and building more houses is a much bigger part of the solution.
Problem: It's all based on anecdotal evidence (from the BNZ-REINZ report) and reeks of the race card.
National's policy, by contrast, adds demand to the property market when there's already too much and makes it easier for young people to take on debt when borrowing is cheap and house prices high - super risky. At least it now requires them to have a deposit though!
The good part is that it targets first-home buyers and encourages builders to construct smaller homes in the under-$500,000 range. But is that just a pipe dream? Developers have told me that most of the interest remains in building 200 sqm McMansions - there's still plenty of demand for them, the work suits our small scale building firms, the margins are better, and it's easier to get a consent for one or two of those than it is for the volume of more affordable houses needed to make as much money.
The most serious downside of National's policy is that it undermines the point of both KiwiSaver and English's efforts since the recession to get our household debt down. He used to pride himself on encouraging more household saving and driving more funds into the productive sector. KiwiSaver, remember, was a way to create a separate saving pool that wasn't tied up in property; retirement savings that could boost the rest of the economy. Now he's telling young couples to just pour their savings into bricks and mortar again. Plus ca change etc.
Yet while the parties attack each other, the dirty secret is that everyone agrees a whole bunch of stuff has to be done on both the demand and supply side. The truth is that this is an "all of the above" problem, including a capital gains tax, more land and lots more houses.
But there are a few other policy ideas that seem to me worthy of discussion, and I'd like your thoughts because I don't know nearly enough to pass judgment.
One is the return of the post-war low interest loans that stimulated so much home building -- and ownership. Sure, they created urban sprawl and cost the government a fair whack. But they got a huge number of people into their own home. What's more, one of the biggest threats today is that those buying over-priced homes at a stretch -- when interests rates are at long-term lows and due to start rising in the next 12 months -- will start falling over in serious numbers. Would a government-guaranteed loan for low income buyers help boost home ownership or just bankrupt the government?
The other idea is to do something about the tax incentives around rental properties. English gave a nod in that direction in National's first term, but didn't go nearly far enough. Isn't it time to cut right into all the tax advantages that make rental properties such a great investment? Not just the lack of a capital gains tax, but all the other bits as well?
The third stems from the likes of Gareth Morgan, who says the Reserve Bank encourages banks to prefer home lending over all other kinds of lending. Should we be allowing people to borrow more to invest in the productive sector, rather than just bricks and mortar?
Let me know what you think.