Were there missed opportunities to address supply issues?
Budget 2021 was announced yesterday, and was noticeably light in detail in the area of housing - something CoreLogic senior property economist Kelvin Davidson said may have been a “missed opportunity” to address some of the bigger issues facing the property market.
Davidson said it is clear that the government is pinning its hopes on the changes announced in March, though there was still room to potentially address things like new build costs, RMA reform, and incentives to invest in assets other than property.
“I think the Budget did meet expectations, and the expectation was for not much,” Davidson said.
Read more: Budget 2021 revealed: where is the money going?
“From a big picture housing market and supply-demand perspective, it was a bit of a non-event for the property market. It had some specific measures for that social side around help for different communities, but not a lot for that bigger picture.”
“It’s something of a missed opportunity to address housing supply,” he continued.
“The cost growth for building a new home looks likely to accelerate further, so could this have been a chance to look at reducing the costs to build a new house? Things like pre-fabricated housing, for example, might help bring down those costs, and removing some of the red tape around the planning process might have been a good start.”
Davidson noted that although some Resource Management Act reform is underway, this will likely take some time to be fully worked through. In the meantime, he said there is an opportunity for the government to adopt a more friendly approach to investment incentives.
“This could have been a good opportunity to increase incentives to invest in assets other than property,” Davidson said.
“Could there have been tax breaks for KiwiSaver to encourage people to put their money there? It’s about having more of a carrot rather than a stick approach.”
Read more: Government announces new public housing plan
“I think the government is pinning their hopes on the measures they announced in March, that’s what they imagine will be enough to change the housing market outlook,” he added.
“The treasury forecasts to have a sharp slowdown in price growth, but that’s not a house price fall either. That’s what most commentators are envisaging anyway, so I wouldn’t say there were many surprises in there.
“Overall, it delivered on what most people expected from a housing perspective, which is that there probably wasn’t much coming.”
