Wednesday, July 27, 2016

The unpalatable truth

The Greens' Metiria Turei said the politically unspeakable today: that she wants house prices to drop:

Auckland housing is unaffordable and a responsible Government would have a sensible plan to reduce house prices over time, while protecting families with mortgages, the Green Party said today.

“The simple fact is that housing in Auckland is totally unaffordable and if we don’t take action to bring house prices down, we will have a whole generation of people locked out of ever owning their own home,” said Green Party Co-leader Metiria Turei.

“In around 10 to 15 years’ time, we’d like to see families on the median household income buying their first home for about three to four times that income – not 10 times like it costs now.

Note the time-frame. This isn't about suddenly bursting the bubble, crashing house prices, burning the boomers' "wealth" and blowing up the banks. Instead, it is about avoiding that. Because on current policy settings of pandering to speculators, a burst and crash is exactly what is going to happen.

The problem is that the policy window to do this is very narrow. Infometrics expects the bubble to burst in December 2017 - just a few months after the next election. If the government wants to stop this, it needs to act now. But when they're in thrall to selfish landed boomers and so many of them own Auckland investment properties, that just doesn't seem likely.