A majority of business leaders have labelled the current residential property cycle a bubble, as the average valuation of a house in the Auckland region soared past $850,000. The valuation is some $320,000 above the national average.
Of 97 respondents, 50 per cent indicated that 'bubble' was an apt description, 40 per cent disagreed and 10 per cent were unsure.
Kiwirail's Peter Reidy and Hawkins Group's Geoff Hunt said the bubble only applied to Auckland.
The QV figures for the month ending July showed the average current value of houses in the Auckland region reached $855,672 -- the fastest rate of growth since 2003 and reflecting the supply and demand imbalance in Auckland.
For the year ending July, values leaped 18.8 per cent, and 5.7 per cent over the past three months in Auckland.
Only the Queenstown Lakes region is keeping pace, with the average house valuation there hitting $717,021 -- though it only had a 6 per cent increase over the past 12 months.
Tauranga has the third highest valuation at $489,734, up 7.7 per cent and the national average is $527,760, an increase of 10 per cent over the past 12 months.
Something should be done to ensure that value is kept in New Zealand, for example the purchaser must live here, be raising children here, run a business where they employ New Zealand residents.
Craig Stobo of the Local Government Funding Agency said ratios such as house price to income or historical rental yields might suggest it is a bubble "but what if we used a ratio of New Zealand house prices to recent immigrant incomes?
"Auckland can't strive to be both the world's most liveable city and the cheapest city to live in," he said.
A real estate chief said many people think we are in a bubble "but Auckland is now a major city of the world and our prices are similar to those like Melbourne, Sydney, Toronto, London meeting the demand of migration."
A manufacturing boss said rapid house price appreciation made the situation look like a bubble "but when you dig into the primary reasons, I don't believe we are [in a bubble]."
Oliver Hartwich of The New Zealand Initiative said it was too early to say: "You only know whether it has been a bubble once it's burst. The only thing we know for sure is that we are seeing a housing market that has become severely unaffordable in parts of the country."
Deloitte's Thomas Pippos encouraged calm: "Recognising that the issue is quarantined rather than a national one, bubble is still probably too emotive a description as it connotes that the market would 'burst' rather than just ease or soften."
A healthcare boss predicted a housing market correction "but timing of this will be after the next election."
Beca's Greg Lowe is optimistic that new Auckland building will resolve issues. "House prices in Christchurch are starting to modify as more supply becomes available. Housing in Auckland continues to rise but the same moderation will likely happen as more supply becomes available, either by urban densification of more development on the fringes."
The Government has formed a housing accord with Auckland Council to streamline resource consent and plan change approvals in special housing areas. It is expected that 39,000 new homes and sections will be consented in a three-year period.
Lowe said the Government should allow more private sector involvement in social housing redevelopment to speed up this process. "Social housing providers do not have access to sufficient capital or the necessary experience to do this alone."
Dealing with foreign buyers
On the thorny issue of overseas property buyers, the CEOs agreed they should be able to purchase new homes but existing residential housing was more sacrosanct.
Asked if the Government should apply a ban on foreign residents investing in existing Auckland residential property, 35 per cent of the respondents agreed, 51 per cent disagreed and 14 per cent were unsure. For new dwellings, 81 per cent disagreed with a ban, 7 per cent agreed and 12 per cent were unsure.
Nearly 20 per cent agreed that a ban should be subject to the sunset clause, 46 per cent disagreed and 34 per cent were unsure.
Chris Gudgeon, head of the biggest listed New Zealand property investor, wants the government to slap a 20 per cent stamp duty on foreign investors buying Auckland houses.
"Demand from non-resident investors is fuelling price escalation and the government should stop being so naive. Implement a 20 per cent stamp duty on all non-resident residential property transactions immediately," said Gudgeon, who oversees Kiwi Property's $2.2 billion portfolio including Vero office block in Shortland St, Sylvia Park and ASB North Wharf.
South Pacific Pictures' John Barnett said a ban on investment in existing stock seems to work in Australia. "The four major cities there are undergoing enormous residential housing expansion. A decision like this does need a review process which may not be a fixed term sunset," Barnett said.
Vector's Dame Alison Paterson also expressed concern about the existing situation: "I am by nature 'free market' but I have had anecdotal stories of purchasing by Asians which is purely opportunistic and simply for the purpose of subdivision and redevelopment.
"The prices paid have been so high that local purchasers could not compete. This activity is only supported by the speculation in the Auckland housing sector," she said.
Employers and Manufacturers Association chief executive Kim Campbell called for speedy action: "Immediate intervention is necessary for a period while the necessary reform can be developed."
But Barfoot & Thompson managing director Peter Thompson had reservations: "Other countries like Australia have tried this type of ban as well as capital gains tax, higher interest rates for investors and even sales tax, but prices are still going up. The same can be said in the United States, Canada and United Kingdom where house prices in their major cities are also climbing at unprecedented rates," he said.
But a healthcare executive backed change due to an unfortunate experience:
"Offshore purchases are so dangerous. Having lived for 16 years in the UK, we were really excited about bringing our children home to be New Zealanders and grow up in our wonderful country.
"We missed out on numerous auctions to people living in China and India who were not even in the country when they placed their bid -- they clearly had an unlimited amount of money to spend and every time the property sold for far more than it was actually worth."
By the end of March this year, 16,734 sections and dwellings had been consented in the first 18 months of the Auckland Housing Accord, not 14,300 as stated in the original version of this story.