House prices in Sydney and Melbourne are slumping, and some economists have said the same could happen in New Zealand. But Jacinda Ardern says she's confident we aren't on the same path as Australia.
"That’s certainly not what it looks like we’re experiencing now here in New Zealand," the Prime Minister told TVNZ1’s Breakfast today.
"If you look to Auckland, there is a cooling there (but) that doesn’t mean that properties are losing their value. It just means that essentially they’re not escalating at the rate we’ve seen in the past."
House prices across Australia have dropped for the first time in six years, dragged down, economists there say, by big drops in the nation's two biggest cities. Sydney housing prices have plummeted by about 5 per cent.
But KiwiBuild could make the difference for New Zealand, Ms Ardern suggested.
"First homebuyers are looking for a particular kind of house…but those affordable homes aren’t being built," she said. 'They make a very small percentage of our new builds, which is why we’ve developed KiwiBuild.
"It’s about bringing in supply to the end of the market where we just don’t have it. That allows us to retain the value of our existing homes, whilst we also stop seeing that massive escalation on price."
But the plan isn’t fool proof, Reserve Bank Governor Adrian Orr has suggested. Like Sydney and Melbourne, Auckland home prices have benefited from global investment trends in recent years, he told Q+A on Sunday.
"You could see a similar fall – that's not in our projections, but it's in the realm of possibility," he said. "Likewise, you could see a rise."
In a forecast last week, the Reserve Bank predicted house prices across the country to stay positive at around two to three per cent per year for the next few years. But even if that prediction doesn’t materialise, it’s a far cry from a "housing market crisis", Mr Orr said.
Ms Ardern declined to say today whether the Government would consider easing the loan-to-value ratio if growth in housing did go into the negative territory, deferring the decision to the Reserve Bank. But she did point to KiwiBuild’s recent announcement that it would accept 10 per cent deposits.
"And that’s of course because these are new builds – adding to supply rather than putting pressure on the housing market, which is what the Reserve Bank was trying to address," she said.
While business confidence is currently low, Ardern said she remains upbeat that our nation’s surplus, the low unemployment rate and Government keeping the debt down will eventually sway the sector.
And the Government also is formulating plans to respond to specific business challenges like the skills gap and productivity, she said, adding that we can’t stay with the status quo.
"I don’t think New Zealand wants an economy that’s built solely on housing speculation and migration," she said. "Those are not good, solid foundations.
"Our future lies in being innovated, being more productive, making sure we add value to our exports and have export-led growth. That’s a solid, resilient economy, and that’s what we as a government are working towards."
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