Yesterday’s release by the Government on residential housing is important as it tries to wean New Zealanders’ off their reliance on property. This reliance has seen residential housing related borrowings by individuals in this country more than double in 10 years to $177 billion. It has also seen house prices and rentals relative to disposable incomes double in the past 30 years. This means less disposable income available for other purposes by New Zealanders who live, by developed world standards, on already low incomes.
It also means that personal debt levels related to housing make us vulnerable to a fall in house prices. The current very low interest rates are masking this but one can imagine the significant issues that could arise if interest rates rose significantly from here (for whatever reason).
The Productivity Commission’s excellent report on Housing Affordability, which was released in March, came up with 33 recommendations to help solve this issue.
It is disappointing to see that it has taken the Government seven months to respond and part of their response is to form another inquiry as part of the solution and for officials to do more work in other areas. This partly reflects some Government sensitivity about working with Councils, in particular the Auckland Council which clearly has a very different view on the solutions to housing affordability than the Productivity Commission.
It is a real pity that more concrete recommendations weren’t released by the Government yesterday with there seeming to be only one real tangible item that is to be implemented immediately (the six month time limit on council processing of medium sized consents).
This raises concerns about the speed of decision making out of Government. One of our country’s competitive advantages over other larger countries has to be an ability to move quickly (just as small companies have this advantage over larger ones). Unfortunately there is little evidence of this attribute here.
Perhaps this is due to political considerations as the Government may be happy to delay any meaningful changes to this area to ensure no material drop in Auckland house prices occurs prior to the next election. In the mean time both housing affordability and our housing related debt mountain are not likely to improve.