Greens want 50% house price drop

On RNZ this morning Metiria Turei said she supported up to a 50% drop in house prices.

Auckland house prices need to drop 50 percent – Greens

Auckland house prices should be deliberately reduced by up to 50 percent over a period of time to make the market affordable again, Greens co-leader Metiria Turei says.

Ms Turei said the only way to reverse that was to slowly bring prices back down to three or four times the median household income.

She told Morning Report the Green Party was considering what timeframe would work without crashing the market and hurting people who already owned homes.

“The only way to prevent a bust, and to protect families in the short and long term is to lay out a comprehensive plan, which means using every comprehensive tool that we’ve got so that we can slowly bring down house prices so that they’re reasonable.”

She backed this up (without the numbers) with this:

Responsible house price reduction needed to avoid bubble bursting

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.

“I want to be very clear that we are talking about a responsible, carefully managed reduction in house prices over a period of time like 10 to 15 years.

“The Green Party is putting together a plan for how to reduce house prices responsibly and gradually, and that will include making sure people who’ve recently taken out big mortgages to buy a home are safe and secure.

“We know housing isn’t affordable for families now, so the only way to protect people from market instability is to lay out a plan using every tool we’ve got to slowly bring down house prices to a reasonable level.

“Nobody, including the Green Party, wants to see the housing market crash and equally nobody thinks the current situation can go on like this.

“It’s a fundamental part of Kiwi values that people who work hard should be able to afford their own home.

“Our plan for more affordable housing will include building more houses, a capital gains tax (excluding the family home), and restricting non-resident foreign buyers,” Mrs Turei said.

Back to RNZ with Labour’s reaction:

The Auckland Council’s chief economist had suggested bringing prices down to five times the median household income by 2030, she said.

Labour leader Andrew Little said Ms Turei’s declaration that Auckland house prices should be deliberately reduced was irresponsible.

There was no way a Labour-led government would consider the idea, he said.

“We have a very clear plan. It’s not about crashing house prices. It’s about stabilising prices.

“We don’t want to cause undue economic harm to those who – in good faith – have bought homes, entered into mortgages. That’s not a responsible approach.”

Labour and the Greens recently struck a co-operation agreement, including a no-surprises policy.

This seems like a planned announcement by the Greens, and they are likely to have known it would be a bit of a surprise to Labour.

So who is right?

I don’t think a 50% reduction in values is a sound target. Too many risks.

For a start it’s probably impossible to plan house prices over the short term let alone over a decade or two. There are too many factors that are hard to control, and major ones of those are international.

I think if house prices drop by more than  20% it  starts to put recent purchasers at risk of going into negative equity, so dropping much more than that must be highly questionable.

Perhaps there needs to be some middle ground – some drop in values, limiting increases in values by ensuring adequate land supply, and and working more towards raising wages to meet somewhere in the middle.

Ideally. If that were at all possible.

 

Leave a comment

36 Comments

  1. Blazer

     /  27th July 2016

    Someone had to say it.Labour and the Nats never would,the repercussions for those who bought an actual home to live in..would be minimal.

    Reply
    • Kitty Catkin

       /  28th July 2016

      No, they wouldn’t. They’d be paying the same mortgage for a house that’s worth half what they paid for it-how to lose Green votes. The renters would be paying the same, nobody would reduce the rent because the house was worth less. The mortgage still has to be paid.

      Reply
      • Blazer

         /  28th July 2016

        it would be a home they are living in…thats the point fgs!

        Reply
        • Kitty Catkin

           /  28th July 2016

          Someone’s house is now worth half what they paid for it.

          They are still paying the mortgage on twice that amount.

          They have to sell for some reason.

          The buyer pays them half what they paid for it.

          They buy another house.

          They are more or less paying for two houses.

          They are not very much enamoured of Ms Turei.

          Work it out for for yourself.

          Reply
          • Blazer

             /  28th July 2016

            ‘They have to sell for some reason.’….this is the only pertinent factor in your analysis.Otherwise it matters not whether the house halves in market price.

            Reply
            • Kitty Catkin

               /  28th July 2016

              Well, it might not matter to you that you have paid for two houses (so to speak) and only acquired one. It would to me and I suspect that it would to most people.

              It matters a great deal if someone’s investment halves in value while they are still paying for it ! They could have been investing that money elsewhere, but the government has just robbed them of that option and they are paying a mortgage that they will never recoup,

              No sane government would do this deliberately to people.

          • Blazer

             /  28th July 2016

            you can’t distinguish between buying a family home=long term,vs treating the purchase as a short term investment.If you know about property you would realise that holding long term balances out any intermittant dips in prices.What sane govt locks the next generations out of owning a home?

            Reply
            • Kitty Catkin

               /  28th July 2016

              I am aware that prices fluctuate, but that isn’t government policy. This is making the price plummet and punishing people for owning a house. Most people don’t regard buying their house as a short-term thing; for most of us, it’s a one-off. My house will never be worth much, but I would be furious if the government deliberately halved its value.

              The government can’t stop people asking what they like for their houses-or stop other people paying it. If I put my house on the market for $1,000,000 (I wish) and someone paid me that for it (I wish), lucky me.

              If you can’t see why this would be a terrible idea, I can’t be bothered explaining it over and over.

  2. Zedd

     /  27th July 2016

    “Go Metiria !”.. thats one way to get the speculators out of the market !!

    BUT its about as likely as NZ being ‘Pest/RAT-free by 2050’ 😀

    Reply
    • Kitty Catkin

       /  28th July 2016

      I doubt it. It’s the stupidest policy I have ever heard. Who wants their house to lose half its value ? The banks won’t reduce the mortgage by 50%.

      Reply
      • Kitty Catkin

         /  28th July 2016

        If someone believes that the banks will do this….good luck with asking one to do it if the house value drops for any reason.

        Good luck with having the rent reduced because the house value has dropped although the landlord’s paying the same mortgage.

        Reply
      • Blazer

         /  28th July 2016

        you forgot to respond to this…’What sane govt locks the next generations out of owning a home?’….if you buy and sell in the same market you are no worse or better off.You appear to be quite immune to reality.

        Reply
        • Kitty Catkin

           /  28th July 2016

          If the landlord has to sell, the tenant may well be out of a home.

          Don;t be so naive. If someone is living in and paying for $800,000 for a house that the government thinks should be $400,000, they are STILL PAYING $800,000. The only time that your theory would work would be if they’d paid it off many years before it rose to $800,000 so it was only a loss on paper and not a real one. How can you NOT see that ? The market is irrelevant to the person with the $800,000 mortgage, they are PAYING $800,000 not the $400,000 that the house is now worth. Someone who can borrow $800,000 now can buy two houses, but the unlucky person who’s been done over by the government is paying for two-but they own one !

          Mehugenah !

          Reply
          • Blazer

             /  28th July 2016

            I have come to the conclusion that you are thick….$800,000 mortgage at 5% or a $400,000 mortgage @ 10%….its called variable factors….dear.

            Reply
  3. OMG, think of all the Real Estate Agents out of a job …!!!

    Reply
    • Kitty Catkin

       /  28th July 2016

      Think of all the people whose houses have mortgages for twice as much as the house is worth. No sane person would carry out this poicy.

      Reply
      • Kitty Catkin

         /  28th July 2016

        Think of the people working long hours to finance a mortgage that’s twice the amount of the house’s new value.

        Reply
  4. Iceberg

     /  27th July 2016

    Apparently the mountain of regulation, laws, by-laws, thousands of public service workers, planners and govt departments and myriad other bureaucracy all related to property isn’t quite enough.

    If govt isn’t fixing it we should pile some more on top.

    Taxes, I forgot taxes. We need more of those as well.

    Reply
  5. Doesn’t government exist to protect private property? Trouble is, it also has to protect people …

    The Labour-Green ‘Memorandum’ seems to be working well …!!!?

    Ma and Pa property investor ain’t gonna be happy though.
    “It’s our nest-egg” … !!!

    Imagine an economy where domestic wealth and comfortable retirement is pinned directly to a hyper-inflationary, delusion-bubble property [and State-subsidized rental] market? We must be nuts …

    Reply
    • patupaiarehe

       /  27th July 2016

      The Labour-Green ‘Memorandum’ seems to be working well …!!!?

      Working so well, that it appears Little Andy & Mrs Turei are now using the same media consultant, judging by what she is advocating above…. 😉
      I would be VERY interested to hear exactly how they plan to do this.

      Reply
    • Kitty Catkin

       /  28th July 2016

      Mr and Mrs Family-Houseowner won’t be too happy

      Reply
      • Gezza

         /  28th July 2016

        Uptick for that one, but tbh, neither would I be. A surname like theirs would be a helluva problem to fit on any forms that might be involved in pursuing or defending legal proceedings. :/

        Reply
        • Kitty Catkin

           /  28th July 2016

          It could be worse; Cholomondley-Marjoribanks or ffotheringhay-ffeatherstonehaugh.

          How would you like to be called Twitterbottomley, like the Mrs Twitterbottomley whom my grandmother knew ? My mother and her brother and sisters were warned that dire results would follow if any of them called her Mrs Twitter-bottom-ley and not Mrs Twumley (the correct pronunciation) .

          Reply
          • Gezza

             /  28th July 2016

            It’s bad enough that my parents were both hippies who changed their names by Deed Poll as a result of which my full name is Gezza Brotherlovestravellingsalvationshow. >:D

            Reply
            • Kitty Catkin

               /  28th July 2016

              It could have been worse; you could have been called Lovebrotherlove Brotherlovestravellingsalvationshowsalvationshowsalvationshow. They showed great restraint in not using the song’s entire first line.

              Pack up your babies and grab your old ladies
              And everyone go-everyone knows Brother Love’s Show.

              I can’t remember any more than that !

              😀 I found a 1969 Loxene Golden Disc LP in an opshop :D….

  6. Wow just wow I though we were past the extreme left Fiscally irresponsible Green Policy Ideas!

    Reply
    • Blazer

       /  27th July 2016

      can you explain why any of their ideas are fiscally irresponsible or are you parroting a conditioned response?Key said Genters summation of the NZ foreign tax regime was ‘barking mad’…and the Shewan endorsed it almost word for word.

      Reply
      • … Perhaps what appears to be extreme Left-wing fiscally irresponsible policies are preferable to Right-wing socially irresponsible policies?

        Reply
  7. Lets face it, even the drop out MPs from the right are facing it, 50 years of static growth in house prices, or a huge wipe of capital value is required, or a blend of both….. Neither is palatable to home owners, who are well on the way to a privileged minority in Auckland.

    Reply
    • Kitty Catkin

       /  28th July 2016

      Owning a house is not a right.

      Reply
      • Kitty Catkin

         /  28th July 2016

        Who of those here who own houses would drop the price so that someone who couldn’t afford a house could have yours ? Not me. I’m not generous not to sell to the highest bidder.

        Unless I won Lotto. Then I’d sell it to a charity like St John for $1, as I have heard that this is better than donating it for some reason.

        Reply
        • Gezza

           /  28th July 2016

          The builder whose employees built our house won large prizes in Lotto twice! And he was still a bastard!

          Reply
  1. Turei telling the truth as she saw it | Your NZ

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