Project Auckland: Labour - Take offshore buyers out of the property equation

Phil Twyford, Labour. Photo / Glenn Taylor

If we talk about what's happening now, there's no doubt the housing market is a mess. It's essentially a failed market which is certainly not delivering what we want - affordable, decent-quality housing - and that's apparent right through the market.

Auckland is basically a speculators' paradise, so buying and selling property for capital gains is one of the major, if not the defining feature of its real estate market.

There are lots of causes, the chief one of which is the tax treatment that essentially encourages speculation. You end up with a fire hose of credit from the banking system pouring into property speculation.

Added to that is the growing interest by international investors in New Zealand property and the lack of any kind of restrictions and controls means that the effect of offshore speculators buying our houses is a contributory factor, particularly in Auckland.

Labour doesn't think there's any advantage for New Zealanders to have our little residential property market as part of the international market, where cashed-up speculators with access to cheaper finance can buy and sell our properties for capital gain.

Overseas buyers are not the biggest influence on our market, with estimates that 8 per cent of houses are being bought by offshore speculators, but it's the quantum of demand over supply that is the important thing.

We know that demand outstrips supply in Auckland already, so when you add 8 per cent of purchases that wouldn't be there if adequate controls existed, it becomes a significant increase to the excess of demand over supply.

What we're left with is a situation where the only people doing well are speculators and the well-off -- people who are mortgage-free homeowners. Everybody else is hurting -- first-home buyers have been locked out of the market by these escalating prices, renters are finding it increasingly difficult and people at the bottom end are really struggling.

We're just not building enough, and the houses which are being built are at the top end of the market. Thirty years ago, roughly one third of our houses were at the affordable end of the market, now it's more like 5 per cent.

Because of Auckland's very high increases in residential land price, builders have been basically choosing to only build high-end houses -- and you can't blame them. That's a commercial decision and it's just not profitable for them to build cheap houses on expensive land.

Trying to understand how we got ourselves into this mess, one of the key things is the planning roles and system.

There's no doubt in my mind that the effect of the old Auckland Regional Council's metro-urban limit around the city -- which was designed to limit urban sprawl -- combined with a whole lot of rules that restrict density and intensification, had the effect of stopping the city from growing out and up. Effectively, that's created a pressure cooker system which has driven land prices through the roof.

The effect of the Auckland Unitary Plan, which creates and replaces the old fixed metro-urban limits with a rural-urban boundary will help. The new system progressively brings out new land, and combined with the effect of Special Housing Areas has brought a lot of land into the system.

There is quite a large area of agreement between Labour and National on this issue.

We need fundamental reform of our resource management and planning rules in order to ensure that we don't get into the situation again. The Government is saying they want to reform the RMA, so it's going to be very interesting to see how willing it is to confront the issues, and whether it can spur real reform of the system.

Phil Twyford is Labour's spokesperson for Housing and Auckland Issues.