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: 26 September 2013. Volume:693;Page:13781. Text is incorporated into the Bound Volume.]6.Hon DAVID PARKER (Deputy Leader—Labour) to theMinister of Finance: What is the range of estimates if any of the number of first home buyers in Aucklandwho will be excluded from the housing market due to the new Loan to Value ratio restrictions?Hon BILL ENGLISH (Minister of Finance): No estimates have been provided on people excluded from Auckland or any other market. We need to keep in mind here that the measures taken by the Reserve Bank have been described by the bank as temporary measures in order to preserve stability in the financial system. What I can say to the member though is that in consultation with the Government the Reserve Bank advised that on average 30 percent of new lending by value is highloan-to-value ratio and it was estimated that around 40 percent of high loan-to-value ratio lending is to first-home buyers. The bank also advised that of the 20000 to 30000 first-home buyers each year nationwide—and it is apparently difficult to identify all first-home buyers—13000 to 19000 would obtain a high loan-to-value ratio loan and of those up to 12000 will get a loan. The remaining 6000 to 8000 will make the choice of either looking at a cheaper property or delaying their purchase while they save a higher deposit. As the Reserve Bank noted at the time these numbers are difficult to estimate and as important they do not take account of the Government’s policy changes in support of first-home buyers.Hon David Parker: Given that answer is he joining Sam Lotu-Iiga in asserting that there are more cheap houses available to buy in Auckland that these first-home buyers just are not clever enough to find?Hon BILL ENGLISH: I am simply outlining for him the choices that first-home buyers will be making.Hon David Parker: There are no affordable homes in Auckland.Hon BILL ENGLISH: Well if there are no affordable houses in Auckland it is because under Labour none got built whereas under this Government they are starting to get built. That is really good news. The fact is that first-home buyers—Hon Member: Five long years.Hon BILL ENGLISH: Well we welcome Labour’s support for our announcements of more houses on the ground sooner over the next few months.Hon David Parker: How many affordable homes have been built in Auckland over the last 5 years?Hon BILL ENGLISH: Until we got agreement with Auckland Council that its planning rules were preventing the building of affordable homes the answer is not many. Now that we have agreement from Auckland Council to change its plan to allow more affordable homes we will be able to get on with building them. Secondly the Government has been working through the Housing New Zealand Corporation to get into the provision of medium-density affordable homes and I have to say that that has proven—Hon Dr Nick Smith: They voted against it.Hon BILL ENGLISH: Against? Those members voted against that but we are continuing anyway.Hon David Parker: Has he been advised by the Prime Minister why the Prime Minister claimed in June that there would be an exemption fromloan-to-value ratio restrictions for first-home buyers?Hon BILL ENGLISH: The Prime Minister did not claim that. What he said was that he gave his view to the Reserve Bank as part of the consultation. On this side of the House though old-fashioned as it may sound we respect the independence of the Reserve Bank because we know what a mess this economy got into when politicians were setting interest rates and running monetary policy and now the Opposition wants to also run the housing market. The Reserve Bank’s independence is there in order to avoid a repetition of the dangerous situation of 2008 with which that Labour Party isfamiliar and in order to secure financial stability and lower interest rates. The Prime Minister gave his view. The Governor of the Reserve Bank made his decision.Paul Goldsmith: What steps is the Government taking to support first-home buyers and improve access to affordable housing?Hon BILL ENGLISH: First of all I say to that member and to the Parliament that the housing market in New Zealand faces two significant risks. One is that it becomes a source of the kind of financial instability we saw as recently as 2008 when this Parliament supported the Government writing a sovereign guarantee for over $100 billion of banking assets to make sure our economy did not go down the toilet. Whatever cheap politics there might be in part of the housing market that is a fundamental responsibility of the Parliament and the Reserve Bank and we are honouring that responsibility. Within the scope of that job the Government has moved to pass legislation to ensure that we can get more houses on the ground sooner. We passed that legislation against the opposition of the Labour Party just as it opposed the Auckland Housing Accord.Mr SPEAKER: Order! The answer has gone on quite long enough.Hon David Parker: Does he agree that the harshness of the Reserve Bank’s loan-to-value ratio restrictions is due to National’s 5 years of failure on housing and tax policy; if not why is the OECD concerned both about New Zealand house prices especially in Auckland and the tax biases that favour speculators over first-home buyers?Hon BILL ENGLISH: No; and the OECD has not made that point either. In fact—Hon David Parker: Yes they have.Hon BILL ENGLISH: —it has not. If we think of the last 5 years house prices actually dropped by about 10 percent for a couple of those years. During those years the Government started the process of creating the policy to ensure that we have more houses on the ground. Labour has opposed—Mr SPEAKER: Order! [Interruption] Order! Again that is a satisfactory answer.Paul Goldsmith: What reports has he seen on alternative policies for first-home buyers?Hon BILL ENGLISH: I have seen a report just this morning that says: “… his utterances could be damaging to long-term confidence in the economy … It is hard to believe he would carry out the promise to over-ride the Reserve Bank’s independence to exempt first-home seekers if only because of the obvious risk to their equity.”—that is getting first home buyers into houses that turn out to be worth less than what they paid—“… it would be easy to weaken the bank’s legislated jurisdiction and do untold damage to our economy. MrCunliffe’s stance is a worry.” That is today’sNew Zealand Heraldeditorial.Hon David Parker: Is the reason the Minister of Finance refuses to reform what is amongst the most favourable and distortionary tax laws for rental property investment in the world and refuses to take practical steps to improve housing affordability by building affordable homes that his party favours property speculators over first-home buyers or is it just incompetence?Hon BILL ENGLISH: No the member is wrong about that. We made changes to the taxation of property investment in the 2010 tax package which is collecting over half a billion dollars of extra tax. It is much more effective than a capital gains tax which the member said would come into practice over 15 years. It is also very clear that a capital gains tax that does not cover all property is ineffective. They have got one in Australia and it has made no difference whatsoever.