Prospect of Govt meddling in market alarming
Imagine you’ve worked hard all your life to build up your business.
Wednesday, October 31st 2012, 12:00AM 
3 Comments
by The Landlord
When others have been having overseas holidays or buying new cars, you’ve been focusing on paying the bills.
But when the time comes to retire and you decide to put your business up for sale, the Government tells you that it’s now worth too much and something must be done to make it cheaper.
It sounds ridiculous but this isn’t very far from what some are suggesting for property investors.
There’s a willingness to meddle in the real estate market in New Zealand to an extent that is not seen in any other sector.
The Government this week announced its proposals to deal with the housing affordability crisis identified by the Productivity Commission.
Some of the ideas are welcome – less money and time spent on red tape has to be a good thing – and there is nothing that looks to be aiming to take the property market out at the knees yet.
But the implicit desire to alter the course of a free market is alarming.
Anyone who has bought or sold a property knows that the price is what is agreed upon by a willing buyer and a willing seller. Houses won’t sell for these exorbitant prices if there aren’t people there to buy them.
There are a host of young buyers and investors in particular who bought at the peak of the market, have struggled through the past few years waiting for the market to eventually do what it has been doing for centuries – cycle – and make their investments worthwhile.
It’s not the place of central or local Government to devalue their investments.
As NZPIF president Andrew King says, the first thing we need to do is work out whether there is a housing crisis, and who it’s affecting.
If the problem is just that first-home buyers can’t afford to buy in central Auckland, most people would probably agree no Government intervention at all is required.
If there truly is an affordability crisis, and young people will soon not be able to afford to buy houses at all, still no intervention is required.
All that needs to be done is to wait for the market to sort the situation out.
A lack of demand is far and away the best damper for heated property prices.
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Comments from our readers
The market is rising on a false premise,it will correct that.
Disclaimer: although writing this makes me feel old, I'm only early 40's & bought my first house when I was 20 & spent a lot of time renovating on a shoestring budget.
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The fundamental issue is that it is not a free market. Land and building is highly regulated. Zoning denies free right to sell. Building rules deny free right to build. This highly regulated environment increases prices dramatically beyond what a free market would deliver. The basic rule needs to be to government: get out of the free markets so they can deliver cost effective housing. That for god's sake is how economically efficient free markets work. It is government interference that is totally to blame, as usual.