How Budget 2020 supports the housing market
Thursday 14 May 2020
REINZ chief executive Bindi Norwell
Was Budget 2020 transformational? Experts are debating that now but, whether or not it turns out to be, it does provide some support for the residential property market going forward.
By Miriam Bell
That’s because - while there was nothing specific for landlords in Budget 2020 – it did carry through with the Government’s much vaunted focus on jobs.
Finance Minister Grant Robertson says it is all “about creating new jobs, training people to have the skills they need for the jobs we have, and supporting people to keep their jobs or get into work, while strengthening our local communities and regions”.
To that end, Budget 2020 extends the wage subsidy scheme for an additional eight weeks and introduces a free trades and apprenticeships training package.
It also provides for an additional $3 billion of infrastructure spending, including the construction of 8,000 social housing homes.
Further, Budget 2020 allots $570 million in income related rent subsidy funding to tenants.
All of these initiatives are intended to try and counteract the coming rise in unemployment and maintain economic activity – and they should also help to support the housing market.
REINZ chief executive Bindi Norwell says the unemployment rate and confidence levels are some of the key indicators they’ll be watching over the coming months as they look for the housing market to recover.
“The extension of the wage subsidy scheme will be central to these two indicators as it will mean people will be able to continue employing staff, and individuals will have a greater ability to continue paying their rent or mortgage over the next two months.”
Additionally, the $3 billion for infrastructure projects, on top of the $12 billion announced prior to Covid-19, will help deliver important infrastructure projects across the country and bolster employment opportunities in the regions, further adding to local confidence levels, she says.
“We also welcome the 6,000 state and 2,000 transitional houses that will be built in partnership with housing providers over the next four to five years. Not only will this add to local employment opportunities, it will also help ease some of the housing supply shortage.”
But ASB chief economist Nick Tuffley sounds a note of caution over the planned social housing building programme.
He says the direct connection to Covid-19 is loose and that they favour putting the money directly in the hands of households or businesses if the main objective is to make work.
“Moreover, as we know from the KiwiBuild experience that the pace at which housing construction projects are put in place is often slow and may just be a substitute for private activity.
“In other words, the risk is the house-building programme funding doesn’t get spent, the jobs aren’t created nor the houses built quickly enough to fill the Covid-19 hole.”
Likewise, BNZ head of research Stephen Toplis says that while infrastructure and construction activity plays its part in the recovery process, the construction sector can’t be expected to carry the economy on its shoulders.
“Even with the extra state houses being built, we think new house construction will roughly halve, as population growth slows and the unemployment rate rises. Non-residential construction will be similarly constrained.”
However, there is no doubt the unemployment rate will be much lower than would have otherwise been the case given the policies that have been announced both in Budget 2020 and previously, he adds.
Meanwhile, CoreLogic senior property economist Kelvin Davidson says the extra $16 billion of spending announced (on top of the $14 billion already spent, with another $20 billion in the coffers but not yet allocated) will support the economy and hence the property market.
"But recession and a degree of pain in the property market are nevertheless still looking unavoidable."
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