The Prime Minister and REINZ Chief Executive, Helen O'Sullivan, were on 3 News talking sense on housing affordability. It is an excellent video to watch.
Ms O'Sullivan said "investors don't drive up prices because they are "rational" about how much they're prepared to pay, unlike people buying a home to live in. If the maths doesn't stack up, then they'll stop… where perhaps people who have fallen in love with a property, or who become what we call 'the nutter in the room' because they've been outbid for so many properties, they will go a long way to secure a property,"
An OECD report on NZ Housing claimed that housing was unaffordable because of the ratio of rental prices to house prices. But the link between rental and housing markets is tenuous, so that they operate quite separately.
Ms O'Sullivan says the discrepancy between house prices (which have risen more than 8% a year) and rents (which have only risen around 2.5%) is because people are choosing to live together in flatting situations or staying at home with their parents, rather than putting pressure on limited rental stock.
Prime Minister John Key agreed with this view and pointed to other studies that show housing affordability in NZ is not at crises levels. "There's lots and lots of ways you can cut and paste the data and measure whether your house prices are unaffordable or becoming less affordable or less unaffordable, whatever way you want to measure it," he said
The Prime Minister correctly states that "other indexes show that for first-time buyers, housing is 30 percent more affordable than it was in 2007".
The news article also covers Capital Gains Tax, which neither of them think will work.
"All that will happen is rents will go up," says Mr Key. "About a third of the population rent, for a variety of different reasons. If a capital gains tax was a magic bullet that worked, we'd support it."
You can see the full video at http://www.3news.co.nz/Desperation-pushing-up-prices-not-investors---REINZ/tabid/1607/articleID/344933/Default.aspx
The Prime Ministers interview starts at 4.40 on the video time bar.