Industry calls for changes to fix the housing-building crisis
Residential property development loans have dropped by 18% year-on-year, according to the Reserve Bank of New Zealand (RBNZ) – compelling the industry to call for changes to fix the house-building crisis.
The RBNZ's latest data revealed that residential property loans dropped from $3.3 billion in October 2019 to only $2.77 billion in October 2020, which comes as the industry calls for the government to build more houses to satisfy nationwide demand.
However, Housing Minister Megan Woods has delayed a plan to establish a $250 million Residential Development Response Fund due to less urgency following the solid COVID-19 recovery.
The RBNZ pointed out that the flow of money from the quantitative easing programme has not flowed through to development projects.
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Ian Webb, the managing director of NewBuild Home Finance Limited, suggested less emphasis on tax and demand-side measures to cool the housing market.
“The government has almost entirely missed the opportunity to balance supply with demand and seem determined only to dampen demand. But supply is the best way to rebalance prices,” Webb said, as reported by Good Returns.
“The NZ government and the RBNZ have almost entirely ignored how to free up land through regulatory easing and to reduce costs of new homes, which some builders estimate may cost upward of 30%+ in some form of tax or regulatory costs from GST to consents to compliance.”
He added that the country needs more measures to fix the house-building crisis in the country.
“The council contributions and other costs to subdivide are far too high to make subdivision viable in many areas. Small subdivisions are very [hard] to fund; banks loathe them. While the RBNZ has exempted construction, banks, for the most part, have not,” he continued.
“Land is expensive to develop, and it takes too long, so developers reduce their exposure to market forces, economic and bank contractions, and bank and regulatory restraints. They ration their release and almost always miss the market.”
