Walker Holly: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeWalker Holly: Questions for Oral Answer — Questions to Ministers[Sitting date: 19 March 2014. Volume:697;Page:16811. Text is incorporated into the Bound Volume.]9.HOLLY WALKER (Green)to the Minister of Housing: When was the last time that the homeownership rate was as low or lower than it is now?Hon Dr NICK SMITH (Minister of Housing):The long-term history of homeownership rates is that they improved during the 1950s the 1960s and 1970s and that the decline began in the mid-1980s. The homeownership rate is currently at the lowest point since the 1950s and that is why this Government is putting so much work into freeing up land supply reducing infrastructure costs getting greater competition in the building materials market and reducing compliance costs as well as the new programmes that we have announced in respect of Welcome Home Loans and the KiwiSaver first-home deposit subsidy scheme which we have expanded.Holly Walker: Does he agree that the reason homeownership rates were so high in the past was that families had access to low-interest mortgages through State advances and that it was the end of this policy and the rapid rise in house prices that have made homeownership an unaffordable dream for many young families?Hon Dr NICK SMITH: The part where I would agree with the member is that if you look at those long-term trends on homeownership homeownership went down in periods where interest rates were high and went up in periods when interest rates were low. So the periods where homeownership rates deteriorated the most were between 1984 and 1990 when interest rates went over 20 percent and when they sharply declined last decade when the previous Government had very high interest rates. That is why this Government puts huge importance on keeping interest rates low for longer.Holly Walker: Given that answer what realistic hope does a young family on a modest income have of owning their own home in 2014 when under his Government house prices have surged by 26 percent—and by 50 percent in Auckland—new loan-to-value ratio restrictions have made it impossible for many to get mortgages and now interest rates are rising?Hon Dr NICK SMITH: It is true that interest rates increased last week by 0.25 percent above 40-year lows. All of the data shows that the sort of big-spending big-borrowing policies that the party that the member represents advocates would push interest rates up higher; as well as that its restrictive land policies would make homeownership harder. I am proud of this Government’s record because according to the independent Roost housing affordability study over the last 5 years since we have been the Government housing affordability has actually improved by 32 percent.Holly Walker: Would a rent-to-own policy for Government-built homes make it easier for young families to own their own homes; if so will he support such a plan to stabilise house prices and give families an affordable pathway to homeownership once again?Hon Dr NICK SMITH: This Government is supporting some well-finessed rent-to-buy schemes and I give the example of South Auckland where we have partnered with community housing organisations to do so. But the idea that if the Government embarks on a massive State housing building programme it can somehow do that more efficiently than the private sector—that is dreamer country. We know from the record of other countries that have gone down that path that it involves massive Government spending—tens of billions of dollars. That spending of tens of billions of dollars is exactly what will drive interest rates up and make homeownership further from the reach of average Kiwi families.Phil Twyford: Is he comfortable that the Government’s loan-to-value ratio policy signed off with the Reserve Bank is now according to the BNZ seeing 6.4 percent of houses being sold to offshore speculators and how does he think ordinary Kiwi first-home buyers facing a 20 percent minimum deposit and interest rates heading north of 8 percent will be able to compete with cashed-up overseas buyers or is building a generation of renters part of his failed housing policy?Hon Dr NICK SMITH: The first point I would make is that when we came to Government interest rates were 11 percent. They have actually consistently come down. If you look at the long-term history of interest rates they have been consistently lower under National Governments which constrain fiscal spending and make sure there are well-balanced economic policies than Governments of the left. In respect of house building rates I would point out that in the Productivity Commission study there was not any mention in terms of improving housing affordability that foreign buyers played any significant part. I point to the fact that across the Tasman in Australia housing affordability has deteriorated by a greater amount despite such restrictions showing that such restrictions are just political mirrors and will make no real difference to housing affordability.