New Zealand Homes Need to Become More Affordable
31 August 2011
According to the Reserve Bank in New Zealand, policy makers should focus on housing supply; on making housing more affordable so as to meet demand. All the available information shows that constraints on housing supplies have led to house price booms, which in turn leads to greater corrections.
The central bank had been asked to make a submission to the Productivity Commission investigation into home affordability order by the government, to identify possible ways of increasing affordability.
One of the ways suggested by the report was to reduce the benefits of property investment, which could eliminate reported tax losses on residential rental properties.
Property prices increased by 180% between 1990 and the peak in 2007, while prices in major urban centres and holiday locations increased by more than 200%.
This has taken the average house price from 2.5 times the average salary to five times that amount. Major factors which affect the costs of house building include land costs, materials, project management and labour. Thus, one of the issues raised by the report is the need to make land more available in order to make house building more efficient and affordable.
However residential property insurers pointed out the importance of making sure that property is properly built to resist natural dangers posed by the climate and geography of New Zealand, which has been highlighted by the recent spate of natural disasters such as the earthquake in Christchurch.