House prices sliding - will Government plans to flood the market make it easier to get on the property ladder? - The Front Page

The opening ceremony of the Resido apartment complex in Mt Wellington.From left, Hauauru Rawiri of Ngati Paoa, Housing Minister Chris Bishop, PM Christopher Luxon, Clive Mackenzie from Kiwi Property and Simon Shakesheff from Kiwi Property. Photo / Jason Oxenham

The Government has unveiled grand plans to ‘flood’ the market with more houses, announcing new changes to planning rules that will require councils to plan for 30 years of housing growth.

Housing Minister Chris Bishop’s reforms will remove council powers over urban boundaries and development standards.

It comes at a time when house prices are sliding - to the point that in some of the country’s biggest cities, homeowners are delisting their properties rather than selling them for a discount.

Opes Partners economist Ed McKnight told The Front Page that house prices have been on a slow decline since February.

“So if I take people back a couple of years, we all know that the housing market peaked at the end of 2021, and for 18 months after that house prices fell about 18%. So this big drop, the largest drop we’d actually ever seen in the history since we started tracking house prices back in 1992.

“Then house prices for about nine months crept up just over 5% and now they’ve gone down about 3% in the last couple of months. So, we’ve had this big drop, a little bit of a recovery, and now a bit of a slide,” he said.

Ed McKnight is the resident economist at Opes Partners and the co-host of the Property Academy Podcast. Photo / Supplied

The Government’s new housing growth targets, dubbed the ‘Going for Housing Growth’ policy, will make it easier to expand “up and out”, Bishop said.

“Housing in New Zealand is too expensive because we have made it very difficult for our cities to grow. Fixing our housing crisis will improve our economy, increase productivity, help get the government’s books back in order by reducing the enormous fiscal cost to the government, improve intergenerational equity, and decrease material hardship.”

The changes are:

• The establishment of Housing Growth Targets for Tier 1 and 2 councils
• New rules requiring cities to be allowed to expand outwards at the urban fringe
• A strengthening of the intensification provisions in the National Policy Statement on Urban Development (NPS-UD)
• New rules requiring councils to enable mixed-use developments in our cities.
• The abolition of minimum floor area and balcony requirements
• New provisions making the MDRS optional for councils

McKnight said with some rules gone, we should see some cheaper and smaller apartments coming through at the margin - but, it doesn’t come without risk.

“Ultimately, it comes down to what our home buyers or investors are willing to purchase. And if an investor is buying those kinds of shoebox apartments and saying, yeah, okay, I’ll buy that at whatever price the developer is selling it for, whether people are actually willing to rent those properties.

“I can certainly foresee a future where there are a lot of studio apartments built, investors then purchase them, and then we have new stories about how small these properties are and the rents that people are paying for them.

“But it comes down to what are people willing to build, what are people willing to buy, and what are people willing to rent?”

Listen to the full episode to hear more from McKnight on if these changes could impact house prices, what removing the urban-rural boundaries could mean for houses, and the overall state of the housing market and how easy it is to get on the property ladder.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.

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