Isaac Davison is a NZ Herald political reporter.

Labour and Greens at odds over fifty per cent house price drop

Political allies Labour and Greens are at odds over whether house prices should be deliberately reduced to help more families get into homes.

Labour leader Andrew Little said today that he disagreed with the Green Party's proposal to gradually cut prices by 50 per cent.

"It won't be happening under a Labour Government," he said.

Labour leader Andrew Little says his party would aim to stabilise, but not cut house prices. Photo / Peter Meecham
Labour leader Andrew Little says his party would aim to stabilise, but not cut house prices. Photo / Peter Meecham

If in power, Labour would aim to stabilise, but not cut house prices, he said.
This would be achieved by building 100,000 affordable homes at a fixed price, and by banning non-resident purchases.

"We think those measures would stabilise house prices and we don't think there's any such thing as a managed reduction over 10 to 15 years," Little said.

"There are plenty of people who have entered into mortgages and a house price crash is going to destroy them. And we're simply not going to do that."

Little said there was "no conceivable mechanism" to reduce house prices as the Greens had proposed.

Labour and the Greens have signed a formal deal to work together until the election.

Little denied that the issue would strain their relationship. The Memorandum of Understanding between the two parties allowed for disagreements, he said.

Earlier, Green Party co-leader Metiria Turei was the first party leader to explicitly call for a fall in house prices, saying she wants to see house prices fall by 50 per cent over 10 to 15 years.

Green Party co-leader Metiria Turei: 'Do prices need to come down? The answer is obviously yes.' Photo / Dean Purcell
Green Party co-leader Metiria Turei: 'Do prices need to come down? The answer is obviously yes.' Photo / Dean Purcell

"We are the only ones prepared to say it out loud," Turei said today.

The Greens are developing a policy which would aim to cause house prices drop to between three and five times the median income if the party was in Government. It would involve a capital gains tax, restricting non-resident, foreign purchases, and removing tax exemptions for property investors.

"Do prices need to come down? The answer is obviously yes," Turei said.

"The next question becomes 'What's reasonable?' And reasonable is three, four, five times the median household income."

"If we don't have a plan for bringing down house prices then we are going to have a crash. And nobody wants a crash."

New Zealand's median household income is $85,745, and the median house price is $500,000 - a ratio of 5.83. In Auckland, the ratio is 9.1.

Turei acknowledged the political risk in wanting house prices to fall.

"But frankly, everybody is thinking this. It's just that somebody's got to be brave enough to put it out there so we can have a rational conversation about what the plan looks like."

Turei said cutting house price prices was now a "common conversation".

The Reserve Bank's former governor Don Brash has called for prices to be cut by 60 per cent and former chairman Arthur Grimes said they should fall by 40 per cent.

- NZ Herald

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