Twyford Phil: Questions for Oral Answer — Questions to MinistersText is subject to correctionTwyford Phil: Questions for Oral Answer — Questions to Ministers[Sitting date: 07 November 2013. Volume:694;Page:14489. Text is subject to correction.]7.PHIL TWYFORD (Labour—Te Atatū) to theMinister of Housing: What reports has he received on the effect of loan-to-value restrictions on the housing market?Hon Dr NICK SMITH (Minister of Housing): I have not received any formal reports and the advice from my officials is that after just 1 month it is too early to draw firm conclusions on the effect of the loan-to-value ratio restrictions on the housing market. I have noted three reports from other sources. The first is from Statistics New Zealand on building consents. It showed a 22 percent increase in new dwelling consents as compared with the same month last year; the highest build rate in Canterbury in 37 years; and the highest build rate for New Zealand in 5 years. I also note the latest real estate figures on house prices which show a slowing in house price increases and a report from the ASB showing a dip in house price expectations. The final report I note states: “We do support Loan to Value Ratios…we’ve been calling for them for ages”. This report was from Mr Phil Twyford.Phil Twyford: Is he concerned that Master Builders said that inquiries for new builds have dropped off by 30 percent since loan-to-value ratios were introduced and that because of the time lag it will not be until next year that we see the drop-off in new builds; if so is this not just more evidence that the Government’s housing policy has collapsed?Hon Dr NICK SMITH: It is hard to say that it has collapsed when we have got the highest rate of new building consents in 5 years when we have got the highest rate of building in Canterbury in 37 years and when this Government has got work under way on materials on land supply and on infrastructure costs—all opposed by members opposite who somehow pretend that they want to help New Zealanders to get access to affordable houses.Phil Twyford: Has he seen the comments by Quotable Value research director Jonno Ingerson who said today that loan-to-value ratios may have more impact in provincial areas outside of Auckland and Canterbury; and given that 95 percent of house price inflation is taking place in Auckland and Canterbury and that in a number of parts of provincial New Zealand house prices are either static or declining will he concede that the Government really did not think through the implications of loan-to-value ratios before it signed off the agreement with the Reserve Bank?Mr SPEAKER: The Hon Dr Nick Smith in so far as he has ministerial responsibility.Hon Dr NICK SMITH: The first point is that the loan-to-value ratio policy has been implemented by an independent Reserve Bank under legislation that members opposite actually support I thought—an independent Reserve Bank. The part that makes the member’s question even more stupid is that he has said on the public record that he has been calling for loan-to-value ratios for years and welcomed them when they were introduced.Louise Upston: What has been the average house price increase over the past 5 years and how did it compare with the increase over the previous 5 years?Hon Dr NICK SMITH: The average price increase in New Zealand over the last 5 years has been 3.6 percent per year or 20 percent over those 5 years. It is interesting to note that in the previous 5 years it increased by an average of 12 percent per yearor 76 percent in just 5 years and I note that during the previous 5 years the Labour Government did absolutely diddly-squat about house price affordability. In contrast we are making great progress in all the areas like land supply infrastructure costs and materials and ironically members opposite are opposing every one of those measures.Phil Twyford: When he compared our mortgage market with that of the United States which saw “millions of Americans left with mortgages in excess of the value of their properties.” what advice has he had to back up his claim that Auckland is in a housing price bubble and that it is in danger of bursting wiping out the equity built up by homeowners?Hon Dr NICK SMITH: I do think that this country needs to learn the lessons from both North America and Europe where for all the enthusiasm there may have been from the building industries those house price bubbles did enormous damage to those economies. I cannot believe the attitude of members opposite which is to completely ignore the lessons of history and not want to take a cautious view around financial stability in the way in which our Reserve Bank is administering those responsibilities.Phil Twyford: I raise a point of order Mr Speaker. I referred the Minister to a direct quote from his own statement and I asked him what advice he has received on that matter. He did not address that.Mr SPEAKER: To make progress I am going to invite the member to ask his question again.Phil Twyford: When he compared our mortgage market with that of the United States which saw “millions of Americans left with mortgages in excess of the value of their properties.” what advice has he had to back up the claim that Auckland is in a housing price bubble and that it is in danger of bursting wiping out the equity built up by homeowners?Hon Dr NICK SMITH: It is an absolute matter of public record with numerous reports that New Zealand’s house prices are grossly out of step with incomes. The most recent report was yesterday from the OECD. We could look at the reports from Labour’s period in Government when house prices more than doubled—grew by over 100 percent—at the same time as incomes went up by only 30 percent. We could look at the report of the Productivity Commission which was comprehensive in its advice around the concern about ongoing house price increases and that is why this Government is addressing the fundamentals of land supply infrastructure costs and materials costs to make sure that New Zealanders get access to more affordable housing.Brendan Horan: Is the Minister aware of a collapse in the number of first-home buyer inquiries in Tauranga and Nelson since the loan-to-value restrictions came into force; and did he foresee this or is it an unintended consequence?Hon Dr NICK SMITH: On 1 October this Government actually increased the support for first-home buyers. We did that by expanding the KiwiSaver scheme which was particularly advantageous for people in Nelson and Tauranga where the house price limit was lifted by over $50000. We have trebled the number of Welcome Home Loans which are limited to first-home buyers and provide them with an exemption from those loan-to-value limits from the Reserve Bank and those changes to Welcome Home Loans are particularly helpful for communities like Tauranga and Nelson because the previous limits meant that very few families had access to those Welcome Home Loans.Phil Twyford: Does he have the same attitude to the plight of first-home buyers shut out of the Kiwi dream by high loan-to-value restrictions as that of the PrimeMinister who told them in theNew Zealand Herald today: “ ‘yeah okay well fine’. That’s the way it goes.”?Hon Dr NICK SMITH: The Prime Minister has been absolutely committed to first-home buyers. That is why this Government as I have just said trebled the number of Welcome Home Loans and doubled the number of people who will be eligible for the KiwiSaver first-home deposit subsidy and it is why the Prime Minister is such a strong supporter of this Government’s very ambitious agenda to get house prices under control after a period of Government under Labour where those house prices more than doubled.