Bernard Hickey: Recipe for a hot time

Auckland needs another 25,000 new houses, and prices are soaring. Photo / Nick Reed

Auckland's property bonfire was the centre of attention - again - this week. As foreshadowed in this column, a land mine went off on Tuesday under the Government's strategy of trying to douse the fire with extra housing.

Deputy Mayor Penny Hulse essentially said no to the Government's drive to set up special housing areas, in particular, on greenfield sites outside the metropolitan urban limit.

Hulse said it was not fair for ratepayers to pay for the extra infrastructure between the new areas, which can't be funded through development contributions and passed on to buyers.

But why should Auckland ratepayers pay a rates hike nine times greater than inflation because the Government could not or would not control an unprecedented net migration surge?

The problem for Auckland ratepayers is that sympathy is wearing very thin north of Orewa and south of the Bombay Hills.

Housing Minister Nick Smith put the counter-argument most aggressively, saying taxpayers in Invercargill would not be keen to pay for Auckland roads and buses when the council was cutting its road transport budget to fund its train project.

Smith went on to warn Hulse the Government had the right to over-ride the council and directly approve these greenfield areas.

The bonfire raged on through the week.

Barfoot & Thompson reported later on Tuesday the median house price in Auckland rose $42,500 in the month of April alone. It was up 21.6 per cent from a year ago.

By the end of the week rental property investors were sitting pretty at the fireside.

They would have smiled on Monday when Prime Minister John Key downplayed again the prospect of any restrictions or taxes on foreign buyers.

They would have grinned as those responsible for encouraging new house building squabbled over how to pay for pipes and roads as the shortage of dwellings grew ever larger.

By the end of Tuesday, landlords would have given a fist pump on hearing Labour Leader Andrew Little give his strongest opposition yet to a capital gains tax.

On Wednesday they basked in the knowledge that, after weak wage inflation data, the Reserve Bank is expected to cut the Official Cash Rate twice this year.

On Thursday and Friday they would have rejoiced in the knowledge that 100 migrants arrived in Auckland on each of those days to rent or buy a house. It was the same on Monday, Tuesday and Wednesday.

Today, those landlords can celebrate the value of their property having risen another $7000 in a week.

Auckland has found a recipe for a bonfire of the properties: add 100 migrants a day to a shortage of 25,000 houses, throw in the prospect of a couple of rate cuts and remove any chance of a capital gains tax or foreign buyer restrictions.

Light the paper and stand well back.

This week everyone heard the whoomph and felt the heat of Auckland's property market going up in flames. Many cheered, but not everyone.

Certainly not the Government, the Reserve Bank or the Auckland's first-home buyers and renters who saw house prices rise 9.7 per cent, or $67,000, in the past three months as their wages rose 0.7 per cent or $7.50 a week.