Bill English cautions first-home buyers away from Auckland market

Finance Minister Bill English thinks that Auckland house prices will flatten or drop back in some places. Photo / File

Bill English is cautioning first-home buyers about committing themselves in the current Auckland market, saying if they are patient, prices might fall soon.

He also indicated that if the Auckland Council does not accept a Unitary Plan that allows supply to meet demand, the Government could force it to do so by law.

The Finance Minister said there were risks in taking out a mortgage right now that stretched a two-income household.

"I'd just counsel patience, because you can see the supply picking up fast," he said on TVNZ's Q+A today.

"The supply is coming. Even if the demand stays pretty strong, it's likely that prices are going to flatten out, and some parts of the market might drop back a bit."

That had happened in Christchurch.

"There's a belief that Auckland house prices will go up fast forever. That is not the case."

He blamed house price inflation on two decades of Auckland planning rules which prevented the city from growing out.

The Unitary Plan, which is about to be presented to the Auckland Council by an independent panel for approval, needed to allow Auckland to grow "faster for longer".

If the council turned down the plan, he said, the Government "would consider whether there is some kind of persuasive or legislative process to ensure that if the plan is sound, that the council adopts it".

Data from the Real Estate Institute shows that Auckland's median house price in March was $820,000, an increase of 66 per cent in four years.

Labour leader Andrew Little has said he wants policies that will reduce the increase to just 2 or 3 per cent a year.

But Don Brash, a former National Party leader and former Reserve Bank governor, has said it would be impossible to reduce the ratio between house prices and income without a fall in house prices.

He said politicians were terrified of saying house prices needed to fall.

Former Reserve Bank economist Arthur Grimes has said house prices in Auckland need to fall by 40 per cent.