National’s runaway housing market is hurting rest of economy

House price data released today shows no signs of a slow down to the overheated housing market and overdue cuts to the Official Cash Rate (OCR) tomorrow are likely to add further fuel to the fire, the Green Party said today.

REINZ data released today shows median house prices continue to rise, up 8.6 percent nationally (year on year) and up 12.2 percent in Auckland (year on year). The Reserve Bank will likely announce cuts to the OCR tomorrow, which should help exporters struggling with a high New Zealand dollar but could also add fuel to the already overheated housing market.

“Cuts to the OCR are overdue but risk further fuelling runaway house prices in Auckland and elsewhere,” Green Party finance spokesperson Julie Anne Genter said.

“REINZ data released today shows National has failed to put the brakes on sky high house prices throughout New Zealand, with four regions hitting new record high median sale prices in July.

“National’s failure to stop speculation and deliver enough affordable homes in Auckland has effectively forced the Reserve Bank to keep interest rates higher, hurting ordinary families, exporters, and jobs.

“We have some of the highest interest rates in the developed world and they have kept the New Zealand dollar high, hurting exporters.

“New Zealand households and businesses will benefit from interest rate cuts, but lower rates will mean higher risks of house prices inflating further.

“Unaffordable house prices in Auckland is not a symptom of success. They are a result of National’s poor economic management and risk damaging the real economy — the one that employs people in the productive sectors, producing exports and substitutes for imports.

“One responsible measure to help cool the housing market would be a comprehensive capital gains tax (excluding the family home) to remove the unfair tax incentive to invest in property.

“Restricting land sales to citizens and permanent residents would also help reduce the inflationary impact of foreign capital.

“Finally, if the Government was serious about dealing with Auckland supply constraints, it would be building more homes, especially affordable homes to help first home buyers rather than property investors,” Ms Genter said.

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