Norman Russel: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeNorman Russel: Oral Questions — Questions to Ministers[Sitting date: 01 April 2015. Volume:704;Page:2790. Text is incorporated into the Bound Volume.]4.Dr RUSSEL NORMAN (Co-Leader—Green) to the Minister for Building and Housing: Does he agree with the Reserve Bank Governor’s advice in relation to proposed changes to the Welcome Home Loan Scheme and KiwiSaver Subsidies that “over the longer term subsidies have the potential to add to existing house price pressure in what is a highly overvalued market”; if not why not?Hon Dr NICK SMITH (Minister for Building and Housing): The member overlooks two important facts in the advice from the Reserve Bank Governor. The first is that it was dated 18 June and was directed at an earlier version of the HomeStart package in which it was proposed to increase grants for buying existing homes by 50 percent. The final HomeStart package agreed by Cabinet on 18 August took this advice into account and left the grants for existing homes as is. The second fact is that the member does not include the Reserve Bank Governor’s complete advice in which he said: “The targeting of a higher subsidy for new homes would be expected to have a positive effect on new housing supply.” Consistent with this advice the final package doubled only the subsidies for new housing supply.Dr Russel Norman: With regard to new housing supply does he agree with the Reserve Bank Governor that increasing these subsidies will result in “higher margins for developers and builders”?Hon Dr NICK SMITH: Again the member is being cute with his quotation. He forgot the word “might”—forgot the word “might”. Actually it is our view that by providing a grant to the homeowner we can have confidence that they will shop around and get themselves the very best deal. We do not agree with those members’ policy and that is that they do not trust homeowners and they want the State to build the houses they think homeowners want.Dr Russel Norman: By how much have median house prices risen in Auckland since his Government took office?Hon Dr NICK SMITH: There is new data on house prices out today. It shows that in the course of the 6 years of this Government house prices in Auckland have gone up by an average of 5 percent per year. It is interesting to compare that with what house prices went up by on average under the previous Government where the average was 10 percent per year or double—that is house prices were going up an average of double during the previous Government’s 9 years.Dr Russel Norman: Is the Minister aware that the median house price in Auckland has gone up under his Government by more than $250000 and does he think that is sustainable?Hon Dr NICK SMITH: No I do not think it is sustainable. That is why this Government has passed more legislation in respect of housing than any Government in the last 20 years.Phil Twyford: Tinkering and photo ops.Hon Dr NICK SMITH: The member says that it is tinkering. I would suggest that the special housing areas legislation—which has opened up land for 34000 houses; more land has been opened up in Auckland in the last 12 months than in the last 10 years—is the sort of policy that is required. The biggest cost increase in Auckland has been in the price of the section and it is actually the sort of policy that is advocated around a tight metropolitan urban limit which the Green Party supported that is at the core of Auckland’s house prices.Dr Russel Norman: In light of the fact that this Government has now been in office for more than 6 years what responsibility does he take for the fact that median house prices in Auckland have increased by more than a quarter of a million dollars and how on earth are people supposed to afford those kinds of house price increases?Hon Dr NICK SMITH: The first point I would make is that when we came to Government New Zealand was building 1000 houses per month. The latest figures which came out yesterday show that we are building 2000 houses per month and an increased supply is at the core. I had also missed this: New Zealand is a much more popular country to live in. We do not have 50000 people a year leaving to Australia. As a consequence there is more demand. We on this side of the House welcome that but we also accept the challenge that we have to build a lot more houses given that we are now a much more popular country to live in.Dr Russel Norman: Does he think that giving $10000 or $20000 subsidies to a couple to buy their first home outweighs the $250000 increase in the price of housing in Auckland and is it not only a drop in the bucket compared with that price increase?Hon Dr NICK SMITH: In 2007 the previous Government introduced the subsidies for people to buy a house—at that point $10000. In that year house price increases were faster than they are now. The Green Party is on record in 2007 saying that grants for first home owners were a great thing. It seems the consistency of the Green Party is that when the previous Government provides a grant for first home owners it is a great idea but somehow when we do that it is not a good idea. That does not sound very principled to me.Dr Russel Norman: In light of the $250000 increase in the median price of houses in Auckland under this Government will he reconsider his policies of taking no action to restrict demand from investment buyers through a capital gains tax or from offshore demand through non-resident foreign buyers?Hon Dr NICK SMITH: The evidence is very clear particularly in the Productivity Commission’s comprehensive report that the biggest contributor to increased house prices is sections in Auckland. They have gone from $100000 each in 2000 to $350000. The key driver of that has been the metropolitan urban limit. That is why this Government has made the No. 1 priority breaking that metropolitan urban limit which we have done with our special housing areas. I wish the member would simply accept that link between dumb planning policies and high house prices.