Demand continues to outstrip supply
As more and more buyers find it hard to afford a home amid the COVID-19 pandemic, the industry is calling for the government and the Reserve Bank of New Zealand (RBNZ) to take control of the skyrocketing house prices.
Economists previously predicted double-digit drops in house prices – but now, it's quite the opposite as demand outstrips supply, thanks to low-interest rates.
“It's very, very busy – there's not much stock on the market and a lot of buyers,” said Ray White Real Estate salesperson Mark Prunty, as reported by TVNZ.
The RBNZ is considering a funding-for-lending programme to help make it cheaper for banks to borrow money. It also removed loan-to-value ratio (LVR) restrictions in April to help first-home buyers enter the property market.
Some experts in the industry suggested putting back limits on high-value lending and reforming planning laws completely to free up land and increase housing supply, according to TVNZ.
Infometrics senior economist Brad Olsen said the RBNZ could also consider debt-to-income ratio limits “just to make sure the heat from investors doesn't get so hot in the market that we do see house prices roar away.”
He added that tax might be another way to control the skyrocketing house prices: “Capital gains, especially from property, are one of the only income sources that aren't treated in a similar way to other sorts of income.”
“What I do wonder about is whether the government would look at another form of tax, possibly a land tax,” Olsen concluded.
