Lower standards to boost affordability: Alexander

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It needs to become cheaper to build houses if New Zealand is to avoid a situation where lower income families have nowhere to live, says BNZ chief economist Tony Alexander.

Thursday, October 25th 2012, 12:00AM 2 Comments

by The Landlord

He said a housing shortage was a serious social problem and could result in overcrowding and people forced to live in substandard conditions. "The bigger issue is the worsening problem for people at the lower end of the socio-economic spectrum who will not just be 'priced ' out of the market like middle-income families not wanting to move to the city fringes but will also find the physical unavailability of accommodation means they don't have a house at all."

In his latest market update, he says housing affordability solutions need to increase supply. Options such as making lending easier or cheaper are likely to simply fire demand.

“We need to seriously start giving thought to reducing building costs by cutting standards of construction for cheap housing.  Rock-solid well-insulated houses are wonderful. But if for the same price you can build twice as many less sturdy houses, then go for it.”

Alexander said if the Government were to widen the Reserve Bank mandate to things such as the exchange rate, not just keeping inflation between 1% and 3%, that would also boost investment in property – pushing up prices.

He said migration stats showed that house prices had risen over the past year, despite a net migration loss of 3000 people. “Now imagine what will happen when those flows turn, as I believe we are on the cusp of seeing?”

He recommended borrowers look out for low long-term rates as banks fought for customers.

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