Parker David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeParker David: Questions for Oral Answer — Questions to Ministers[Sitting date: 30 July 2013. Volume:692;Page:12023. Text is incorporated into the Bound Volume.]4.Hon DAVID PARKER (Labour)to theMinister of Finance: Does he stand by his statement that “High house prices matter because many New Zealanders spend a large portion of their incomes on housing and that has helped fuel household debt and contribute to damaging imbalances in the economy”?Hon BILL ENGLISH (Minister of Finance):Yes and that is why 3 years ago we initiated as the first inquiry of the Productivity Commission an inquiry into the issue of housing and housing supply in New Zealand because we could see that there were significant problems created under the previous Labour Government when the housing cycle got out of control. As a result of the Productivity Commission’s extensive work with local councils who are the people who make the key decisions in this area the Government is responding with a comprehensive programme including increasing land supply—and we look forward to the Labour Party support for our legislation to achieve this over the next 6 or 8 weeks in this House—reducing the costs of Resource Management Act processes improving the timely provision of infrastructure and lifting productivity in the construction sector. The Government is getting on with the complex and demanding job of improving housing supply when that has not been considered a real issue for the last 20 years in New Zealand.Hon David Parker: Does he agree that a capital gains tax targeting speculators in the property market will improve the affordability of owner-occupied housing; if not why not?Hon BILL ENGLISH: No it probably would not make much difference. First speculators do pay capital gains tax now—the member should look at the tax code—and the Inland Revenue Department is well funded to ensure that they do. At the moment it is getting back about $11 for every extra dollar that it is putting into compliance. Secondly as the Productivity Commission pointed out Australia has had a capital gains tax for quite some time—in fact three different regimes none of which appear to have had any impact on the housing cycle—and its housing is even less affordable than New Zealand’s.Hon David Parker: Well then does he agree that building an additional 100000 affordable homes over 10 years would increase supply and dampen the rampant double-digit house price inflation in Auckland that has been caused by his Government’s inaction?Hon BILL ENGLISH: As the member knows the Government has set a target of 39000 new houses to be built in New Zealand. The difference is that because these will be built by developers and the market people will want to buy them. The 100000 houses built by the Labour Party would make us look like the back end of Moscow.Paul Goldsmith: What measures is the Government taking to make housing more affordable and particularly to prevent the economic imbalances caused by fast-rising house prices in the mid-2000s?Hon BILL ENGLISH: We learnt from a number of the measures that the previous Labour Government actually tried to bring in at a time when it was facing rampant house price increases. Most of its measures though turned out to be ineffective and that is why we are focusing strongly on increasing the supply of housing to the market. We agree with the Productivity Commission which said we need to address the underlying driver which is housing supply. In the Budget we confirmed a housing accord with the Auckland Council. We have introduced and we are in the process of passing legislation that will enable councils to make decisions much more quickly and enable more houses to come into the market in special housing areas. If councils cannot meet the agreed targets the Government retains the ability to issue the consents to build new houses so that we get enough for all New Zealanders to make houses more affordable.Hon David Parker: Does he agree that reducing demand by restricting the purchase of second-hand houses to New Zealand citizens and residents would increase the affordability of housing for New Zealanders?Hon BILL ENGLISH: No we do not. We actually think it is much more important that we spend time getting consents for new houses through the Resource Management Act than spending time checking the passports of the 40 percent of Aucklanders who were born overseas.Paul Goldsmith: What reports has he received confirming political support for the use of macro-prudential tools such as loan-to-value ratio restrictions on bank lending for housing?Hon BILL ENGLISH: I have seen two reports. One was published just before the 2000 election and reads—Hon Members: 2000?Hon BILL ENGLISH: —the 2011 election: “Reduce pressure on the exchange rate and the export sector by empowering the Reserve Bank with more tools to manage monetary and prudential policy beside the official cash rate. This would include among other things loan-to-value ratios.” The second report says: “We do support loan-to-value ratios. We have been calling for them for ages.” The first report is from the Greens’ election manifesto and the second is from Labour’s housing spokesman Phil Twyford. At the time they did not make a lot of mention of first-home buyers. In fact they characterised the Government’s questioning of macro-prudential tools as “old-fashioned and out of touch”. In fact they arrived at loan-to-value ratios before we did.Hon David Parker: Given that he seems to be denying basic economic supply and demand theory does he disagree also with the Australian real estate agent onOne News last night who said that if Australia removed its foreign-buyer restrictions house prices in Australia would go up?Hon BILL ENGLISH: The Australian real estate agent probably should have been asked to explain why in the Australian market with capital gains tax and whatever restrictions he is referring to their houses are more expensive and less affordable than in New Zealand—and that is even with the advantage of much lower construction costs. We are focusing on the single biggest influence which is getting a supply of houses to the market faster. It has turned out to be a difficult task a complex one but one on which our main city councils are now cooperating with the Government. We will put legislation through this House in the next 6 or 8 weeks to enable more New Zealanders to buy houses sooner at lower prices.