Opinion

Prospect of Govt meddling in market alarming

Imagine you’ve worked hard all your life to build up your business.

Wednesday, October 31st 2012

When others have been having overseas holidays or buying new cars, you’ve been focusing on paying the bills.

But when the time comes to retire and you decide to put your business up for sale, the Government tells you that it’s now worth too much and something must be done to make it cheaper.

It sounds ridiculous but this isn’t very far from what some are suggesting for property investors.

There’s a willingness to meddle in the real estate market in New Zealand to an extent that is not seen in any other sector.

The Government this week announced its proposals to deal with the housing affordability crisis identified by the Productivity Commission.

Some of the ideas are welcome – less money and time spent on red tape has to be a good thing – and there is nothing that looks to be aiming to take the property market out at the knees yet.

But the implicit desire to alter the course of a free market is alarming.

Anyone who has bought or sold a property knows that the price is what is agreed upon by a willing buyer and a willing seller. Houses won’t sell for these exorbitant prices if there aren’t people there to buy them.

There are a host of young buyers and investors in particular who bought at the peak of the market, have struggled through the past few years waiting for the market to eventually do what it has been doing for centuries – cycle – and make their investments worthwhile.

It’s not the place of central or local Government to devalue their investments.

As NZPIF president Andrew King says, the first thing we need to do is work out whether there is a housing crisis, and who it’s affecting.

If the problem is just that first-home buyers can’t afford to buy in central Auckland, most people would probably agree no Government intervention at all is required.

If there truly is an affordability crisis, and young people will soon not be able to afford to buy houses at all, still no intervention is required.

All that needs to be done is to wait for the market to sort the situation out.

A lack of demand is far and away the best damper for heated property prices.

Westpac move lacks goodwill

Comments

On Wednesday, October 31st 2012 1:04 pm SMiles said:

The article states: 'But the implicit desire to alter the course of a free market is alarming.' The fundamental issue is that it is not a free market. Land and building is highly regulated. Zoning denies free right to sell. Building rules deny free right to build. This highly regulated environment increases prices dramatically beyond what a free market would deliver. The basic rule needs to be to government: get out of the free markets so they can deliver cost effective housing. That for god's sake is how economically efficient free markets work. It is government interference that is totally to blame, as usual.

On Wednesday, October 31st 2012 3:57 pm Reg Gunn said:

Free markets, what a wonderful idea! Sorry but most are manipulated.Don't forget when the natural level of interest rates are adjusted/influenced by govt,especially down,that's not a free market either.Do we keep quiet then because it suits us? Low rates are great for property values!Supposedly! In a free and healthy market the interest rates would be a lot higher! The market is rising on a false premise,it will correct that.

On Thursday, November 01st 2012 8:30 am Allan said:

The term "crisis" is used far too freely. While in some cases (eg central city locations) it may be expensive to buy relative to income, in my experience there are still properties out there that are cheap by international standards. However, I feel that one of the issues is that the generation coming through are not prepared to start at the bottom with a "doer upper" & work up the ladder. This is also becoming apparent in rental properties where it's about having at least the same level of comfort as their parents' house rather than roughing it a bit to save money. I don't blame them & maybe that's the way life should be but you can't have it both ways. Either you start at the bottom & work up, or you accept that it will be a long time before you can afford the "dream home" (or you win lotto). As the article states, it is critical that there is proper identification of whether this crisis actually exists or if it's just a case of refusing to buy a Morris Minor because buyers want to own Ferraris... Disclaimer: although writing this makes me feel old, I'm only early 40's & bought my first house when I was 20 & spent a lot of time renovating on a shoestring budget.

SBS FirstHome Combo	4.29
Unity First Home Buyer special	4.29
Co-operative Bank - First Home Special	4.85
China Construction Bank	4.85
ICBC	4.85
TSB Special	4.89
Kiwibank Special	4.89
ASB Bank	4.89
Westpac Special	4.89
BNZ - Std	4.89
AIA - Go Home Loans	4.89

Nelson Building Society	4.93
ICBC	4.95
SBS Bank Special	4.95
China Construction Bank	4.95
Wairarapa Building Society	4.95
TSB Special	4.95
ANZ Special	4.95
ASB Bank	4.95
Kainga Ora	4.95
Westpac Special	4.95
AIA - Go Home Loans	4.95

SBS Bank Special	5.39
Westpac Special	5.39
ICBC	5.39
Co-operative Bank - Owner Occ	5.59
BNZ - Std	5.59
BNZ - Classic	5.59
AIA - Go Home Loans	5.59
ASB Bank	5.59
Kainga Ora	5.69
Kiwibank Special	5.79
ANZ	5.79

SBS Construction lending for FHB	3.94
AIA - Back My Build	4.44
CFML 321 Loans	4.99
Co-operative Bank - Owner Occ	5.95
Co-operative Bank - Standard	5.95
Heartland Bank - Online	5.99
Pepper Money Prime	6.29
Kiwibank - Offset	6.35
Kiwibank	6.35
TSB Special	6.39
ASB Bank	6.44

Opinion

Prospect of Govt meddling in market alarming

Next Article

Comments

Most Read

Top Mortgage Rates

More Stories

Four decades of 6-7% yearly house price growth ending

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

Leaving last year's stumbling housing market behind

Don’t bet on house prices rising faster than incomes