The PM has finally shown signs of being willing to consider the impact that foreign demand is having on housing affordability in New Zealand (Herald: Rethink on foreign home-buying). Until now the Government has focused solely on supply issues. However any market is determined by both demand and supply. Clearly we have issues on both sides that need to be addressed.
Housing Minister Nick Smith has been doing great work on housing supply. He seems to be everywhere. If not standing on a bulldozer in a new subdivision, he is craning in a new state house extension or cutting the ribbon on some new housing development initiative. However his efforts will be simply running to stand still if measures are not also taken to address foreigners speculating in New Zealand housing.
It is often said by those advocating unrestricted access for foreign buyers that their numbers are only small. Even if that is true (and John Key now acknowledges the need for better data) it only takes relatively small proportion of well funded buyers at the margin to propel a market upwards. Everyone else then has to follow the market up.
Housing has been a major policy focus for New Zealand political parties across the spectrum ever since party politics was established in this country. With the Liberals from the late 1800s the focus was on leasehold options. In the early 1900s Reform changed the focus to home ownership via cheap state loans. During their tenure the proportion of wage and salary earners owning their own dwelling rose steeply.
From the 1930s Labour changed direction with a massive state house building programme. However the new National Party reflected their Reform roots in returning to a focus on home ownership. As Bruce Farland notes in his biography of Reform Prime Minister, William Ferguson Massey,
“The National Party rediscovered this truth… It accounted for their belief in a ‘property owning democracy’ associated also with the Joint Family Homes legislation, and for their tenures of office in the period 1949-72” (Farland, 2008, page 521)
A Holland, Holyoake or Muldoon National government would never have sat on their hands while foreign speculators made housing unaffordable for many New Zealand families. Neither should this one.