New Zealand's government wants to trim "super profits" from land banking which it says is the biggest impediment to housing affordability in Auckland.
New Zealand's Reserve Bank is concerned rising house prices where supply is failing to meet demand, particularly in Auckland, is threatening financial stability.
Housing Minister Nick Smith is relying on an accord with Auckland Council to free up the consenting of land and housing development to remove the incentive for investors to hold land for appreciation.
He was speaking to the parliament's social services select committee, which is considering the Housing Accords and Special Housing Areas Bill aimed at spurring property development and even giving the government the power to override the wishes of local councils.
"The biggest problem in Auckland is the issue around land banking," Smith told the committee today. "The best solution to land banking is making real progress on land regulatory tools through the accord and through special housing legislation that is going to remove some of the monopoly profits that people are able to get from land banking."
Smith told the committee it was "offensive" that an investor could buy a block of dirt for $890,000 in 1995 and put it on the market today for $112 million.
"The most important change that I want to see in the commercial behaviour of some of those landowners is recognising and then believing that both government and council are serious about changing the regulatory environment and that they cannot expect those super profits on into the future," Smith said. "We want to change their behaviour."
Over the past decade, the number of vacant sections in Auckland has plummeted to just 1,400 from 4,000 and at the same time prices have soared, he said.
Auckland house prices were approaching seven times the average income, compared with the ideal of not more than four times income, Smith said.
"This issue of land costs in Auckland is absolutely central to the issue of housing affordability" with land now accounting for about 60 per cent of the cost of a house in Auckland, Smith said.
A report released today showed Auckland posted a new record median house price of $565,000 in May. Auckland's median price recorded the largest regional increase of 13 per cent over May last year, according to Real Estate Institute figures.
The government's accord with Auckland council proposes the consent of 9,000 new homes in its first year, rising to 13,000 consents in year two and 17,000 consents the following year.