What’s new in Housing: the hot topic of 2016

What’s new in Housing: the hot topic of 2016

We’re seeing the Government take an increasingly ‘hands-on’ approach to the housing market.

1000

Contact us

Partner - Deal Advisory, Head of Infrastructure

KPMG in New Zealand

Contact

Also on KPMG.com

House in Wellington hill

The take-out:

We’re seeing the Government take an increasingly ‘hands-on’ approach to the housing market – with an active mix of regulatory measures, forthcoming changes to policy and possibly legislative settings, as well as funding for new housing development. While stopping short of building houses itself, the Government has fired a clear shot across the bows of councils in areas of housing shortage, particularly Auckland, by announcing that it will direct councils to allow more urban development where necessary.

The key Budget measures:

Increasing supply
Last year the Government signalled it would look for more Crown-land for housing developments, and increase supply through the Tamaki Redevelopment Company. Today it has announced it is injecting a further $100m to secure surplus Crown land in Auckland for housing developments (on top of the $52.6m from Budget 2015).

The Government has also hinted at the upcoming consultation on new measures that will allow it to direct councils to allow more development. This will include a requirement for councils to publish metrics on the impact their policies and regulations have on house prices.
 

Support for emergency and social housing
As previously announced, Budget 2016 provides $42m to support providers of emergency housing.

The Government is also driving forward its Social Housing Reform Programme and providing the Ministry of Social Development (MSD) with $200m to purchase more social housing places from Housing New Zealand and Community Housing Providers.

What’s driving this:

Housing affordability remains a hot topic for New Zealanders – with the conversation moving beyond Auckland and into Hamilton, Tauranga, Wellington, Queenstown and other centres.

The Government stands firm on its view that increasing supply, particularly in Auckland, is the key to solving New Zealand’s housing constraints. That’s why it wants to take an active role in ramping up new housing developments – which includes putting pressure on councils to change planning and consenting practices.

There are two sides to this, though. The Government wants to strike a balance between making it easier to build affordable high-density housing on surplus land – while also ensuring new communities are well-planned and have appropriate infrastructure.

What this means for home-buyers and property investors:

Wait and see – the land purchases will still need to be identified, negotiated and then turned into residential developments. The Government hopes that the $100m announced today will translate into around 200 new houses in Auckland.

The back-story:

New Zealand’s housing affordability issues are well documented. Over recent years the Government has tried to facilitate new housing developments in Auckland, and this Budget’s announcements are a continuation of this.

The Government has said that Auckland needs 13,000 additional houses a year for the next 30 years - Auckland is currently building at a rate of 9,500 houses a year, so more is clearly needed.

The Government has also dabbled in the demand side. This includes last year’s tax changes to discourage speculators and the Memorandum of Understanding (MOU) with the Reserve Bank to allow different regulatory mechanisms to be used.

The Reserve Bank had some short-term success through these mechanisms – Auckland house sales fell by 19% between November 2015 and February 2016, which was further than the Reserve Bank expected. However recent months have shown signs that sales are now starting to pick up again. [source: RBNZ Financial Stability Report, May 2016]

On social housing, the Government has established a purchasing function in MSD and is in the process of transferring some Housing New Zealand properties to Community Housing Providers – the first projects are currently in train in Tauranga and Invercargill. Through the reform programme the Government intends to better target its housing support to those that need it, at the time of need and for the duration of need.

The KPMG view:

The Government’s supply-side measures will need to get some real traction in the coming months if they’re going to deliver real change for home-buyers by next year’s election.

The measures announced today show the Government is prepared to play its part. There’s a fairly busy mix of policy, regulations and funding measures mostly directed at increasing housing supply– it’s a case of ‘all hands to the pump’ when it comes to the housing market. We need to pull several levers at once, and keep doing so at a sustained pace.

However central Government’s efforts won’t be enough on their own – councils, particularly Auckland Council, need to step up. Success or failure will ultimately depend on how well those two parties agree on both the problem and the solutions.

New Zealand Budget 2016

New Zealand Budget 2016

Budget 2016 is continuing the trend of recent budgets and preparing the ground for 2017.

© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Connect with us

 

Request for proposal

 

Submit

KPMG’s new-look website

KPMG has launched a state of the art digital platform that enhances your experience and provides improved access to our content and our people, whatever device you are on.

 
Read more