Budget 2021 receives mixed industry feedback

by Roxanne Libatique21 May 2021

Finance Minister Grant Robertson announced Budget 2021 this week, aiming to reduce inequality, continue New Zealand’s post-COVID-19 recovery, support economic growth, and help deliver more housing supply with a focus on lifting Maori homeownership rates. However, not everyone in the industry was satisfied.

Century 21 New Zealand owner Derryn Mayne welcomed the government’s funding of its housing initiatives. However, she claimed that the budget would make little difference for first-home buyers (FHBs).

“It brings to life measures the government has already announced in recent months. However, it does little to help young Kiwis pull together a deposit or secure a mortgage – both of which are increasingly difficult,” Mayne said.

“Homeownership rates for Maori have always been much lower than the rest of the population, so this is really positive. I was also hoping to see more for first-home buyers generally, with some bold moves to actually get them on the property ladder. Sure, the government’s already tinkered with the likes of HomeStart Grants and First Home Loans, but in this market, much more is required.”

Mayne said the government has long promised to “tilt the balance more towards FHBs,” but Budget 2021 failed to achieve it.

“[Robertson] could’ve announced partnership models such as ‘rent to buy’ schemes or that the government would act as loan guarantor for eligible first-home buyers. Another initiative could’ve been interest-free government loans for deposits on first homes – like student loans in tertiary education. It’s those kinds of things that would’ve made a real difference,” she added.

The Real Estate Institute of New Zealand (REINZ) also welcomed the Budget 2021 announcement, particularly the Maori housing solutions focusing on building new homes in areas with high rates of Maori housing deprivation, repairs for existing housing, and increasing capacity and capability for iwi, hapu, and other Maori housing providers.

“Māori appear to be underrepresented in homeownership in New Zealand, with Stats NZ outlining late last year that Māori are less likely to own their home or to hold it in a family trust than any other ethnic group, with homeownership rates in 2018 at 31% for Māori, whereas homeownership rates for the total population were at 52%,” said REINZ acting chief executive Wendy Alexander.

In the Budget 2021 announcement, Robertson stated that the government forecasts a significant slowing in house price growth in the coming years.

Quotable Value (QV) general manager David Nagel agreed that New Zealand house prices would likely cool over the second half of 2021. However, he warned about the “little to no sign of that occurring at the time of writing, with the market hitting a new high again last month.”

“The average home value increased 8.9% nationally over the past three-month period. While I expect that figure to start to drop, anecdotal evidence suggests it mightn’t be a sudden one,” Nagel said.

“The underlying cause of our housing crisis has always been supply. Until we sort that out, we’ll continue to have upward pressure on prices as first-home buyers and investors compete for the limited available stock. Though I expect to see less of the latter active in the market now, there’s more than enough of the former to maintain that pressure in the short-to-medium term.”

Meanwhile, Deloitte chief executive Thomas Pippos said Budget 2021 suggested house prices have peaked. However, he emphasised that the market has not followed traditional thinking to date, in part because of a drop in interest rates and comparable yields.

“But it’s inevitable that gravity will halt pricing at some stage,” Pippos continued. “What’s also inevitable, is that barring the asset bubble popping, future investment gains will be anticipated to be lower over this next period than they have been in the past, given gains already baked into asset values.”

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