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Last week Chris Bishop said out loud what no politician ever wants to be heard, by anyone, but especially home owners. He said he wanted house prices to drop significantly. Matthew Hooton writes about that in his weekly column at the NZ Herald:
Bishop is obsessed about massively increasing the supply of cheap new houses to reduce average prices.
“I wake up every day,” he says, “determined to improve housing affordability in this country.”
It is, he says, his “driving mission in politics”.
NZ Herald
Hmm…like someone else who said their driving mission was “child poverty”?
But I’m not sure why you’d tell homeowning voters that you want to see their main asset drop in value, maybe exposing them to negative equity?
Bishop even argues, unconventionally, that if house prices fall, productivity will rise. The more mainstream view is that if productivity rises, houses become more affordable.
Despite being National’s campaign strategist, Bishop is impressively stolid about the political consequences of falling house prices. The majority of New Zealand homes are owner-occupied, but Bishop says owners’ losses would be first-time buyers’ gains.
He says it’s a moral issue.
NZ Herald
Mmmmm…Okay.
So, let’s get this straight, Bishop is prepared to throw home owners under the bus in order to attract first home buyer’s votes? Did I get that right?
No wonder National’s poll numbers are mired in the 30s.
The minister is true to his words.
In February, he announced he would “flood urban housing markets” by redesignating rural land adjacent to Auckland, Hamilton, Tauranga, Wellington, Christchurch, Whangarei, Rotorua, New Plymouth, Napier, Hastings, Palmerston North, Nelson, Queenstown and Dunedin for urban development.
He won praise from millennials and left-wing commentators.
His fast-track legislation will give him, Shane Jones and Simeon Brown the power to so act.
For example, Bishop has long advocated for Winton Land’s Sunfield development to house 15,000 people in cheap homes on the edge of South Auckland.
But that’s only the start.
Bishop said this week he would use “every option available” to build more cheap houses, including his new build-to-rent scheme for foreigners.
NZ Herald
Tucker Carlson talked about politicians like him, preferring to look after foreigners rather than Kiwis.
If a National Party politician is winning praise from left-wing commentators, then he’s in the wrong party.
Hooton then highlights the travesty of Chris Bishop’s drive for newer, cheaper housing, imperilling the investments of existing home owners.
The only reason we need new houses – and the only reason we’ve ever needed them this century – is to accommodate new immigrants. Without them, the population would have fallen.
That means, when you see a new house being built, it’s not for the young couple and their cute new baby renting next door. It’s for the young couple and their baby queuing up – or paying an agent to queue up – outside Immigration NZ offices in India, the Philippines, China, Fiji, the UK, South Africa and the US, which together provided over half our new immigrants in 2023.
The Government’s policy is to maintain high immigration for the foreseeable future, to replace citizens leaving and to generate at least headline GDP growth. It needs high headline GDP growth for Finance Minister Nicola Willis to have a chance of eventually delivering a surplus. For that goal, it doesn’t so much matter if per-capita GDP keeps falling.
The Prime Minister argues, probably naively, that under his leadership Immigration NZ will do better at attracting well-educated entrepreneurs to New Zealand rather than Uber drivers.
My money remains on immigration consultants in Mumbai, Manila, Shanghai, Suva and London having it over any Wellington bureaucrat.
NZ Herald
National, same as Labour, but less shit.
In reality, house prices are almost entirely a function of interest rates.
Whatever hard-hat photo opportunities and bold new policies successive housing ministers have generated over the decades, when the official cash rate (OCR) goes down, house prices soon go up. When the OCR increases, house prices soon fall.
That was never more obvious than when Adrian Orr was printing money and Grant Robertson borrowing it. Despite a global pandemic and lockdowns forcing tradies to stay home, house prices soared more than ever before, increasing the paper wealth of Kiwi homeowners by around $1 trillion.
Once Orr belatedly raised rates, house prices fell back again, evaporating around half of the trillion paper dollars, despite record net immigration.
Bishop can claim that house prices are already falling under his watch, but that’s mostly because Willis is borrowing so much that the OCR risks staying higher for longer.
When interest rates finally start falling, Willis will claim victory. But poor Bishop will be defeated as house prices rise again.
NZ Herald
And if Bishop gets his wish – bringing house prices down – then the impact on the economy, which is already on its knees, will be dire.
New Zealand’s small and medium-sized enterprises (SMEs) are primarily backed by our $350 billion of home mortgages.
If house prices fall, banks won’t lend to SMEs to help them grow.
The Government itself is exposed, given Kiwibank’s $25b home-loan portfolio and Kainga Ora properties being worth $40b.
All three of Standard & Poor’s, Moody’s and Fitch identify falling house prices as a major risk to the Government’s credit rating, in significant part because that would destabilise the banking sector.
Higher interest rates would thus be both a cause and consequence of falling house prices. The good news is that house prices should start rising again next year.
NZ Herald
This is what happens when you elect school and university debating champs rather than people who understand basic economics.
Chris Bishop won’t be fazed by this at all. He will just think to himself that if he spends just 15 minutes more haranguing Hooton then Hooton will see the merits of Bishop’s brilliant (in his own mind) rationale for dropping house prices.
Matthew Hooton needs to understand that if you debate issues with an idiot, then you become an idiot too.
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