Probably only one number is needed to explain the current housing crisis.
In today’s NZ Herald there is a graphic that shows that in the year to January, 2021, the banks increased their loans for home mortgages by 35% to $6.36 billion. The previous year they increased loans by 16.4%. That is a 57% increase in just two years.
Most of the new lending went to speculators rather than new home buyers.
This is all a direct consequence of government policies that give almost complete free reign to banks to create and allocate debt without almost any control. This has been compounded by Reserve Bank printing money to buy bonds and drive down interest rates the offer banks virtually free money to lend to whoever they want.
It has created an extraordinary feeding frenzy by the property speculators.
Prices as a direct consequence went up 12.3% in 2019 and 19.3% in 2020 and have continued to surge in the first few months of 2021.
The recently announced measures by the government to tweak this system by capturing some of the capital gain of some of these speculators with the changes to the so-called “brightline” test for tax liability, and reducing the ability to deduct interest off their loans against rental income over the next four years, while welcome will only marginally impact the extraordinarily inflated market.
Other measures included a few billion dollars more to help open up new land for private housing but this was described as so small it was almost a rounding error. And of course, any new private housing just becomes part of the market for future speculation. The “market” broken and can’t be fixed.
The only solution is to massively expand the building of qualily public, cooperatative and iwi housing until everyone one who wants a healthy home at an affordable rent with security of tenure can have one. Rent controls would be imposed on private landlords and high standards imposed. Then the private rent racketeers are driven out of business.
Housing would cease to be a thing for speculation.
New Zealand has now entered an economic recession. Recovery must be led by the government putting people and the planet before the pursuit of private profit. Public ownership and control of banking is the only way we can guarantee that the desperate search for profit by the criminals who own and control banking in New Zealand is ended and we can direct investments away from property speculation towards the social and environmental needs of people.