25 Aug 2014

Land costs could stymie Nat's policy

8:27 pm on 25 August 2014

The price of land may limit the benefits of the National Party's new promise to first-home buyers, the Registered Master Builders Association says.

Under a policy announced yesterday, the amount such buyers can access through the HomeStart government deposit scheme would be doubled, with certain limits on the cost of the houses: under $550,000 in Auckland, $450,000 in Hamilton, Tauranga, Wellington, Christchurch, Queenstown and Nelson and $350,000 in other parts of New Zealand.

It will also raise the price caps which apply to the subsidy and allow first home buyers to withdraw most of the Government contributions to their KiwiSaver.

The policy was unveiled at the National Party's election campaign launch.

The policy was unveiled at the National Party's election campaign launch. Photo: RNZ / Kim Baker Wilson

Registered Master Builders Association acting chief executive Brendon Ward said it was a good way to stimulate the economy but land prices needed to be controlled.

"Land prices, for instance, is one of the ... biggest single costs for building a new home," Mr Ward said.

"There's also regulatory things at councils, red tape getting consents and building inspections done.

"If this policy is to be successful, then those things really need to be kept under tight control."

Prime Minister John Key talks to reporters at the Hobsonville housing development.

Prime Minister John Key talks to reporters at the Hobsonville housing development. Photo: RNZ / Jane Patterson

National Party leader John Key said its policy, which it unveiled at its election campaign launch over the weekend, would help nearly 90,000 low and middle income earners into their first homes as well as sending a signal to the market to build new and affordable homes.

Mr Key said it was designed to help low and middle income earners get over the line and into a house. People aged between 20 to 40 were struggling to save a deposit, he said.

"On a lot of occasions they may come out with a student loan of some sort, other sort of debts that they might have. So they are struggling to build that initial nest-egg that allows them to do this."

Opposition parties have dismissed it as lame, underwhelming, flimsy and a drop in the bucket which will not build a single new house.

Labour leader David Cunliffe said it would instead drive house prices higher.

But Mr Key told Morning Report that was wrong.

"It's the complete opposite. What drives price up is lack of supply," he said.

"What this will do, coupled with the house-land release, and all the rest of it, is (it) will build supply.

"There's a whole lot of builders and developers out there who will say 'I know there's a market for people in this category'."

Mr Key also dismissed the assertion it would push up interest rates.

"Overall, the view of the Reserve Bank is that the way to address this whole issue is supply," he said.

"That's what they're worried about. They're not worried about people getting into homes.

"This is definitely going to add to supply in quite a big way."

However, some believed it was too little, too late.

Hone Harawira

Hone Harawira Photo: RNZ / Chris Bramwell

Mana Party leader Hone Harawira said the National-led government would leave a legacy of homelessness - having sold-off and knocked down state houses and driven out their tenants.

"I've been asked to try and be presidential about politics from now through till September the 20th. But when National talks about putting people in houses - they're full of shit."

Mr Cunliffe was more diplomatic, saying National's policy would drive house prices higher.

He believed National had not addressed the main problem, that housing supply needed to be turbo-charged.

David Cunliffe.

David Cunliffe. Photo: RNZ / Chris Bramwell

"Really, if they want to change, just jacking up prices by giving people an extra $10,000 here or there won't change the answer. We need to build homes, and that's why we (Labour) are building 100,000 new homes with KiwiBuild," Mr Cunliffe said.

New Zealand First leader Winston Peters said the policy was lame, and a belated acknowledgement of the housing problem in Auckland.

"Look if we were describing it as a swimsuit, it would be a bikini. It's that flimsy," he said.

Similarly, Green Party co-leader Russel Norman described National's proposed changes as underwhelming.

"So basically it means that even taking into account this new package - home buyers in Auckland are worse off since National got elected by about $220,000, so while I'm sure the package is welcome, it really is a drop in the bucket."

The National Party said its housing policy would come into effect in April, and would cost about $220 million over five years.

However, Auckland University professor of property Laurence Murphy said although the National policy of providing a higher KiwiSaver grant to a couple buying a new build may support a group of people today, there was no guarantee the next generation would benefit.

He said it did not necessarily address the wider issues of housing affordability.

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