Govt must ask Reserve Bank hard questions on housing

Today’s announcement of a Funding for Lending scheme without any requirement for the new lending to be targeted at productive investment will add even more pressure to an already stretched housing market, National Party Shadow Treasurer Andrew Bayly says.

“Rapidly rising house prices are a serious concern for families struggling to buy their first home.

“New Zealand’s planning rules are in serious need of reform – house prices rising at such rapid rates during a recession is simply the latest consequence of a broken planning system.

“House prices have increased 29 per cent over the last three years while the social housing waiting list has increased more than three-fold.

“Low interest rates and the Reserve Bank’s money printing are simply adding fuel to the fire of New Zealand’s broken housing market.

“Since March, housing lending has increased by $8.7 billion while business lending has fallen by $6.1 billion. More concerning is the fact that in the housing sector there is growing difficulty in attaining property development funding.  

“What’s more, the Reserve Bank’s policies are becoming highly contradictory.

“On one hand, the Reserve Bank is adding fuel to the fire of the housing market with its accommodating monetary policy. And on the other hand the Reserve Bank is trying to cool the housing market down by announcing Loan to Value ratios will come into force early next year.

“The Government must ask serious questions of the Reserve Bank and the coherence of their approach.

“In announcing the Funding for Lending scheme we are surprised the Reserve Bank has chosen not to target the lending to more productive areas of the economy.

“The Government must also look to fix the fundamental problems of the housing market, which is a lack of supply. The Government must do everything it takes to enable new housing development, including replacing the RMA immediately.”