More apartment blocks would ease house prices - expert

ASB economist Nick Tuffley said that index suggested annual house price inflation peaked at just over 10 per cent in the December quarter last year. Photo / Brett Phibbs

The cost of properties with over-inflated price tags can be brought down with a rapid increase of high rise apartment blocks and granny flats, according to an expert speaking at a property seminar in Wellington tonight.

Local Government New Zealand president Lawrence Yule will lead a panel discussion on housing affordability with Finance Minister Bill English, Auckland Council Deputy Mayor Penny Hulse, economist Arthur Grimes and New Zealand Council for Infrastructure Development chairman John Rae.

A new OECD report shows homes in New Zealand are the second most expensive in the developed world, based on the ratio of price-to-income, and the most-overvalued relative to rents.

Dr Grimes, a senior fellow at Motu Economic and Public Policy Research, said popular cities and towns could bring down house prices by rapidly expanding the number of properties for people who were not just there at the moment, but also those who wanted to come in the future.

If the rate of houses being built was not meeting those numbers then, "it's going to be expensive", he said.

If local governments were resistant to more houses being built in their towns and cities, they needed to be explicit with their communities by saying they had decided to be smaller but expensive, Dr Grimes said.

Councils that wanted to increase housing quickly should allow for more apartment buildings and granny flats, he said.

"For instance in Christchurch you can't (build) a granny flat and keep it there, you have to remove it even though they're short on houses.

"If you want to allow more people in, you've got to allow some of these things to happen."

Auckland Deputy Mayor Penny Hulse said there was high interest in residents and migrants looking for apartment life in the city.

The council's proposed Unitary Plan allowed for intensification of housing, such as splitting one house into two, and building granny flats and apartment buildings.

There was demand for new apartment blocks, in areas such as New Lynn, Ms Hulse said.

Migrants and residents aged over 50 were looking for those smaller homes in good areas, she said.

There were some ways other councils around the country could provide "stepping-stone" properties for first-time buyers, she said.

"There aren't enough choices for first home buyers by the way of good choices in apartments or terraced housing or otherwise houses that allow them to build equity in them themselves."

Local Government New Zealand president Lawrence Yule said there was an "overheated" housing problem in Auckland, Christchurch, Queenstown and parts of Tauranga.

There needed to be better cooperation between central and local government to accommodate the housing shortage in those areas, he said.

If housing "sprawls out" too much, the cost of the extra infrastructure was not worth it for councils, he said.

"We don't support a cart blanche expansion."

Plans to tackle housing problems in cities such as Auckland should have been happening 10 years ago, Mr Yule said.

"But it's better late than never."

There needed to be a "proper plan for New Zealand's growth", he said.

"The demographic changes in New Zealand are significant; not only the aging population, but in the drift towards urban centres and the northern drift.

"And a balanced growth across New Zealand is probably the most efficient way for the country."