7 May 2015

The boiling Auckland property market is attracting all sorts of responses, but very little in the way of practical policies likely to achieve anything. There has been much venting of political spleen for precious little impact to date.

On closer analysis, much of the political rhetoric has been nothing more than a recycling of old arguments. The most obvious example is the attempt to resuscitate the tired old capital gains tax proposal. Somehow, imposing a capital gains tax on non-residential property sales will free up houses for first-time buyers, reduce the cost of houses to Aucklanders, so all will be well.

It is utter nonsense. All a capital gains tax will do is ensure that non-residential properties are not sold, and are either retained as rental properties or shifted within families. And even when it does come time to sell them, sellers will factor the spectre of a capital gains tax into their selling price, so the effect on property prices will at best be neutral. Indeed, arguably it could boost property prices further, proving the whole policy to be pointless. But it will satisfy the envy lust of those who feel property investors deserve to be punished. However, that is no credible basis on which to make policy.

In the same camp is the call to restrict the sale of houses to non-residents. This is actually a code for racial discrimination – remember last election when Labour’s policy proposed this but with a specific exemption for Australians (presumably because they are in the main white like most of us?). The real target here is Asians – although none of the racists (politicians and others) promoting such a policy are brave enough to be that blunt, preferring instead to hide behind hints and innuendo. The Governor of the Reserve Bank has noted recently that around 28% of the Auckland population is already Asian, so it is not unreasonable that they might seek to buy property, and, in any case, the sale of properties to Asians is not manifestly out of line with their proportion in the population. So the Asian invasion argument falls out of the window as well.

Then there is the argument that it is all the fault of the Resource Management Act, which has somehow caused the massive growth of Auckland’s population, and made housing unaffordable. The notion that any single piece of legislation holds the key, and that a few amendments to it can solve the Auckland housing problem is as breathtakingly simplistic as it is fundamentally dishonest.

The actual problem is quite specific – there are simply not enough houses in Auckland to accommodate its burgeoning population. It is estimated that Auckland needs to be adding about 10,000 homes a year to its stock, but is currently falling well short of that, by about 2,500 to 3,000 homes every year.

So the immediate challenge becomes bridging that gap. It is essentially a supply issue and the Government, the Auckland Council and the building industry need to be working together to address it. In the first instance, freeing up more land for development has to be a priority, and that is an Auckland Council responsibility. Then, the various construction companies – who seem to have every second advertisement on television promising to build the home of your dreams – need to be cajoled (by central Government if necessary) into focusing their attention and self-proclaimed reputations on Auckland.

The problem is not insurmountable. The challenge for politicians is to make it work. Unfortunately, grandstanding and the chanting of meaningless old slogans remain far more attractive to too many of them. Yet while they bicker, Auckland continues to need at least 50 more new houses every week.