Cunliffe David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeCunliffe David: Questions for Oral Answer — Questions to Ministers[Sitting date: 24 September 2013. Volume:693;Page:13593. Text is incorporated into the Bound Volume.]1.Hon DAVID CUNLIFFE (Leader of the Opposition) to thePrime Minister: Does he stand by his statement regarding first-home buyers “I don’t want to see tools implemented that lock them out of the market”?Hon BILL ENGLISH (Acting Prime Minister): Yes. The sorts of policies that lock first-home buyers out of the market are planning regulations that restrict the supply of new housing to the market and I am pleased that everyone now except the Labour Opposition agrees—Rt Hon Winston Peters: I raise a point of order Mr Speaker. [Interruption]Mr SPEAKER: Order! I have a point of order from the Rt Hon Winston Peters.Rt Hon Winston Peters: The Minister is on his feet and taking up Parliament’s time with a statement that has nothing to do with the question. I want you to bring him to order. He gave his answer as being yes—so that is it and he should stop wasting Parliament’s time.Mr SPEAKER: Order! [Interruption] Order! If members want to stay for the balance of question time I suggest they behave themselves. The question was asked. The response was in order and was being given by the Minister before he was interrupted by the point of order. The Hon Bill English can continue with his answer.Hon BILL ENGLISH: The second policy that locks first-home buyers out of the market is very high interest rates such as first mortgage rates of over 10 percent when Labour left office. Today they are 5 percent.Hon David Cunliffe: Did the Prime Minister say in June regarding first-home buyers and loan-to-value ratio restrictions that “I’m pretty confident between the commercial incentives of the banks and the judgment of the Reserve Bank and the influence of the Government we’ll be able to navigate a way where they stay in the game.”?Hon BILL ENGLISH: Yes and the Reserve Bank consulted the Government regarding its loan-to-value ratio restrictions. The Government made its view clear. The Government also changed the policies in respect of Welcome Home Loans and KiwiSaver subsidies to ensure that within whatever restrictions the Reserve Bank put in place first-home buyers got a reasonable go. But the Government’s position has always been that the supply of new housing is much more significant in influencing house prices than the loan-to-value ratio restrictions put on by the Reserve Bank.Hon David Cunliffe: Given the Prime Minister’s confidence did the Minister of Finance in fact sign a memorandum with the Reserve Bank that contained no provisions to protect first-home buyers?Hon BILL ENGLISH: Yes and the memorandum would be quite an inappropriate vehicle for that kind of policy. It is a memorandum that sets out the macro-prudential tool kit available to the central bank it is a memorandum that sets out the independence of the Reserve Bank in using that tool kit and it requires the Reserve Bank to consult the Government. In fact it is one of the world’s most developed macro-prudential frameworks and it is up to the Reserve Bank to independently exercise its choices. In respect of house prices we are focusing on increasing the supply; unfortunately the Opposition is not supporting us on that.Louise Upston: What progress is the Government making to assist first-home buyers in the housing market? [Interruption]Mr SPEAKER: Order! The level of interjection is now unreasonable from this side of the House.Hon BILL ENGLISH: First of all by doing everything we can to help keep interest rates low as long as possible so that they remain closer to 5 percent rather than 10 percent as they were under the previous Government. Secondly we have reached agreement with the Auckland Council to bring 39000 houses into the market over the next 3 years. We have passed legislation that sets up special housing areas which will enable the Government to provide a fast track to councils that want to consent more houses more quickly and we have changed the policy with Welcome Home Loans and KiwiSaver to ensure that first-home buyers get priority from banks.Hon David Cunliffe: Does the Prime Minister agree with the current Minister of Finance’s statement that New Zealand’s monetary policy is the best in the world and requires no change; if so can he explain why his solution to the housing crisis is to have such low growth that interest rates stay low?Hon BILL ENGLISH: I do agree with the Minister of Finance. I have to say that is not always the case but in this instance it is. As for the member’s assertion about low growth New Zealand’s current growth rate is in the top five or six in the developed world. The answer to housing affordability is not low growth; the answer to housing affordability is a faster supply of more houses on the ground. After 2 years of intensive work the Government has now secured an agreement with Auckland City and has in place the legislation that will enable that process to get under way as soon as possible.Hon David Cunliffe: Did he his existing Minister of Finance or Treasury ever propose to the Reserve Bank that loan-to-value ratio restrictions not apply to regions with low or no house price inflation?Hon BILL ENGLISH: I think probably every possible variation of loan-to-value ratio restrictions was discussed among the Prime Minister the Minister of Finance Treasury and the Reserve Bank as part of the consultation process. However we kept in mind through those discussions first the independence of the Reserve Bank and secondly that it is supply of more houses on the ground that will make the biggest difference. It is pretty clear that some of the reasons for the doubling house prices between 2000 and 2008 were planning regulations that restricted supply and bad Government policy that drove interest rates to 10 percent.Hon David Parker: I raise a point of order Mr Speaker. The question was not a general one that asked about every possible permutation; it asked about one permutation and that was not addressed by the Minister.Mr SPEAKER: The question was adequately addressed. The question was—[Interruption] Order! I am just ruling on that point of order. The question was veryadequately addressed. I invite the member to go back and look at the substance of the question and the substance of the answer to satisfy himself.Louise Upston: Has he received any reports of support for loan-to-value ratios?Hon BILL ENGLISH: In so far as by the expression “loan-to-value ratios” we mean restrictions on particular loan-to-value ratios yes I have seen two reports. One says that “We support loan-to-value ratios. We have been calling for them for ages” and the second from another person: “you’re wishing to explore the use of a package of macro-prudential measures. … And you’ll get no argument … from the Labour Party on that.” The first was Phil Twyford and the second was David Cunliffe and I think he put the second one in his CV.Hon David Cunliffe: Did his current Minister of Finance ever propose to the Reserve Bank amongst the many tools that he talked about that loan-to-value ratio restrictions would not apply to regions with low or no house price inflation; if so why was he ignored?Hon BILL ENGLISH: The answer to the first question is I understand yes and the answer to the second question is that the Reserve Bank Governor is independent. His independence has been a pillar of New Zealand’s economic policy for 30 years and in the end he made the decision about the loan-to-value ratio restrictions.Hon David Cunliffe: Why does the Prime Minister blame the Reserve Bank the retail banks the Opposition and the general public—everybody else other than his own Government—for his 5 years of failure on housing?Hon BILL ENGLISH: I simply do not accept the member’s assertion. Interest rates are at a 50-year low which has given the elevated prices in New Zealand made housing at those prices more affordable than it would have been. Secondly we have worked intensively particularly with Auckland Council but also with Local Government New Zealand to implement a framework that allows for local decision-making in planning at the same time as a recognition of the wider economic impacts of runaway house prices. I accept that that has taken 2 or 3 years but that is because of the participative and consultative nature of this Government and now we are ready to bring thousands—literally thousands—of extra houses to the market.Mr SPEAKER: Order! That is a long enough answer to that question.Metiria Turei:Tēnā koe Mr Speaker.Tēnā koutou e te Whare. Will the Prime Minister commit to a large-scale affordable home building programme in order to meet what he calls a faster supply of mixed houses on the ground given that for young families in Auckland house prices have now risen at three times the rate of wages in the past 4 years?Hon BILL ENGLISH: The answer is yes and in two ways. The first is through reconfiguration of the Government’s State housing stock. The Government is an owner of $15 billion worth of houses—70000 of them. Not only are many of them inappropriate for housing people in serious housing need; many of them are appropriate for more development and densification. We will be a direct provider of medium-density housing to urban markets around New Zealand under that development strategy. Secondly we are implementing through legislation and local body accords supply measures that will enable something to happen in Auckland that did not happen under the previous Government and that is the building of affordable housing. For a decade in Auckland no affordable housing was built. In the next 5 years thousands of affordable houses will be built.Metiria Turei: If his Government refuses to commit to a large-scale affordable home building programme what comfort can he then give the typical first-home buyer who now needs to spend two-thirds of their take-home pay to service a mortgage on a start home in Auckland?Hon BILL ENGLISH: In case the member was not listening I said yes to her question not no. This Government is more committed to housing affordability than the last Government which achieved nothing. As I outlined to the member it is in two ways: one through the Government’s own direct building and development through its own portfolio and second through the agreements we have with councils which are now going to enable thousands of affordable homes that are funded by first-home buyers and others and built by builders not by Government departments.Metiria Turei: Why does his Government continue to allow housing property speculators to make tax-free income on their capital gains in housing investments which forces up prices and locks young families out of homeownership?Hon BILL ENGLISH: First of all people who trade in houses pay tax on the earnings. If they buy a house for the purpose of sale and they sell it at a profit they pay the income tax rate on the gains on that house. I think that is a pretty important point. Secondly a few years ago the Government did adjust the taxation regime as it applies to investment property. We are collecting hundreds of millions more in tax from that sector; I think it is as high as $700 million or $800 million more in tax. Thirdly the most important influence on house prices is not conspiracies of speculators; it is conspiracies of planners who prevent the building of new houses in sufficient quantity to meet the growing demand in a growing economy.Hon Peter Dunne: Is the Minister aware of comments during a recent television debate that one of the ways of making first homes more accessible was to reduce the value of everyone’s home; if so what is the Government’s reaction to this inane proposal?Hon BILL ENGLISH: It is the kind of chip-on-the-shoulder vindictive stuff we can now expect from the Greens and we are seeing more of it.Metiria Turei: When will the Government give young families a genuine pathway to homeownership by leveraging the Crown’s low cost of borrowing and by using a modern version of the State Advances loan such as the Greens’ Home for Life progressive ownership scheme?Hon BILL ENGLISH: Although there is some scope for supporting first-home buyers for instance through the Welcome Home Loan and KiwiSaver subsidies we also should avoid the problems created in other housing markets by large-scale first-home buyer grants which are shown inevitably and always to pump up house prices—therefore making it even harder for first-home buyers—because the Government simply subsidises the proceeds of a sale for the seller. We are not here to subsidise sellers and pump up what they get. The primary benefit for first-home buyers is to increase the supply of housing in a way that matches demand so prices do not race away at 15 percent per annum. We want to reduce rising prices not subsidise them.Metiria Turei: Given that house prices have risen at three times the rate of wages in the past 4 years and that the typical first-home buyer needs to spend two-thirds of their take-home pay to service a mortgage will the Government simply concede now that its approach to housing has failed to stabilise housing prices and it is time now for the Government to discourage speculation lead a building programme for affordable housing and give young families a genuine pathway to homeownership for them and their children?Hon BILL ENGLISH: The member is using measures of housing affordability that are not actually relevant to first-home buyers. For instance the Roost Mortgage Brokers affordability index shows that although house prices have gone up—and that is true and that is something we certainly want to slow down—interest rates have been so low compared with what they were when her party was in Government that housingaffordability is roughly the same as it was 6 years ago. The risk many homebuyers face is that interest rates will at some stage rise and they should keep that in mind.