Brash backed by Productivity Commission chairman, who says we don't need a home price crash but more homes built. PLUS: Does a Fletcher Building "monopoly" inflate the price of building a house?
New Zealand doesn't have a house price problem so much as a land supply problem, former Reserve Bank Governor and ACT leader Don Brash says.
On TVNZ's Q+A programme yesterday, host Corin Dann asked Dr Brash if high Auckland house prices were not simply a function of the fact "people just wanna live in Grey Lynn [a trendy central Auckland suberb, where a basic two-room home can sell for close to $1 million]. They want it all right now."
People could get cheaper housing if they were willing to live on the city's outskirts.
Dr Brash replied, "That’s not true.
"I recently saw a subdevelopment just out of Pukekohe [south of Auckland] – $249,000 for a 500sqm section. I mean, that’s a ridiculous price. That’s $4 million a hectare.
"I think the Productivity Commission report had a very good chart in it which compared the price of land just 2km inside the metropolitan urban limit in Auckland with the price 2km outside that limit and the multiple was nine times.
"It’s a question of supply of land."
Local government was blocking access to land, pushing up prices, Dr Brash said.
"The market is stopped from working. It’s local government which has stopped the market from working."
Dr Brash's comments were backed by Canterbury University economist Dr Eric Crampton, who told NBR ONLINE a self-inflicted land supply problem, and restrictive housing policy, was making Christchurch quake problems worse.
On the same Q+A panel, CTU president Helen Kelly suggested a "possible monpoly" on the supply of building materials could be pushing up the price of the average house by 20%.
Dr Brash dismissed the suggestion.
"We don’t have import controls. There’s no reason that we can’t import cheaper building materials," he said.
A third panelist, Otago University political science lecturer Bryce Edwards, jabbed in with "Fletcher has a monopoly, let’s face it."
Dr Brash replied: "You can import any building material, including cement. You can import any building materials. There’s no reason we can’t import.
"[Productivity Commission chairman] Murray Sherwin made the point that at the moment 60% of the price of house in Auckland is land. That’s the core problem."
No price crash needed – just home homes built
Earlier, Mr Sherwin rejected the notion that house prices had to drop sharply.
He was reacting to Bernard Hickey, an Auckland financial journalist, who has variously predicted house prices will plummet between 15% and 30%.
"I don’t think we ever need a big crash," Mr Sherwin said.
"I think what we need right now is a supply response. We need houses to be constructed to meet the demand.
"We have one of the fastest growing populations in the OECD, and a lot of it is concentrated around Auckland, and we just need to recognise that and recognise that the status quo won’t stand.
"There’s a lot of status quo bias in our planning. There’s all the resistance from existing residents who don’t want intensification or new developments, councils who are reluctant to fund the infrastructure and the other things that are required.
"So there’s a lot of status quo bias, but that looks very awkward in the face of rapidly rising population."
