Govt plans to pump up housing market

The government made two big housing announcements today – one about housing affordability and the other about a shared-equity scheme for wannabe home-owners.

Clearly the ideas are aimed at winning votes as they are aimed at helping Kiwi’s achieve that great New Zealand dream of becoming homeowners.

However, the ideas are full of interesting ideas and irony.

Firstly, it’s very curious that the central bank is trying to slow the housing market down, yet the government is doing things which most people seem to see as being stimulatory to the market.

One point I struggle with is what is this affordability issue about? As mentioned before it is about how much people earn, what mortgage rates are and house prices.

Whichever way you look at this issue it is absolutely clear that incomes aren’t sufficient to pay the mortgage on a house with prices where they are.

Yet we keep hearing the answer is things like making more land available, or changing things like the Resource Management and Building Acts.

While they may have some impact, they are not the crux of the matter.

So the PM’s announcement that more land will be made available seems like a sop to the very vocal lobbyists.

At least property investors can see some benefit in the idea.

The other initiative from the government is a shared equity scheme, where the state helps people into houses by sharing the equity.

This idea has lots of merit, as well as a touch of irony because the government will now be far more involved as a property investor.

As an investor, no doubt it wants to see house prices rising, just like other landlords!