Auckland housing crisis costs families and distorts economy

The National Government’s failure to fix the Auckland housing crisis has cost a family with a $500,000 mortgage at least $4000 in extra interest, as the Reserve Bank was forced not to cut interest rates today because the Auckland housing market is a ‘financial stability risk’, the Green Party said.

“The Reserve Bank is clearly worried that property investors borrowed a new record amount of $2.239 billion in September, and so they haven’t lowered interest rates,” Green Party finance spokesperson Julie Anne Genter said.

“A family with a 25-year $500,000 floating mortgage will have paid at least $4000 extra in interest since January 2014 when the Reserve Bank decided to raise interest rates. This compares to what they likely would have paid if the Bank had not raised the OCR in 2014.*

“The National Government’s band-aid attempts to slow down property speculators in Auckland have failed, and families and small businesses are paying the price through unnecessarily high interest rates as the Reserve Bank steps in to cover the Government’s failures.

“Our economy is way off balance with too much capital tied up in the unsustainable Auckland housing market and not enough invested in our productive sector.

“As a country we spent $1.22 billion more on imports than we earned on exports in September alone, which shows how unbalanced our economy is because investors are buying up houses instead of backing our export businesses.

“National’s failure to fix the Auckland housing crisis is weighing on Kiwi businesses, who could otherwise be taking advantage of lower interest rates to hire more people and grow their exports.

“To fix the Auckland housing crisis and get the economy back on track we need strong demand-side initiatives like a proper capital gains tax (excluding the family home) and restrictions on land sales to overseas investors, as well as smarter housing supply policies like high-quality, medium-density housing along key transport routes,” said Ms Genter.

*Calculated based on the average monthly floating mortgage rate since January 2014, compared to the average January 2014 rate, with a $500,000 mortgage with fortnightly repayments spread over 25 years.