The BulletinNovember 13, 2023

First home purchasers rushing back as door closes again on foreign buyers

Contributing writer

Rich foreigners looking for a NZ bolthole and young couples looking for their first home could both see their hopes dashed in 2024, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.

Door to NZ housing market slams shut to prospective foreign buyers

In another weekend of tight-lipped public appearances by the coalition talks’ key players, what wasn’t said became a news story in itself. Asked three times whether he stood by his campaign promise to reverse the foreign buyers’ ban on certain high-priced houses, incoming PM Chris Luxon refused to comment – suggesting to many that the policy is dead in the water. NZ First leader Winston Peters was a vocal supporter of the ban at the time of its introduction and it’s “inconceivable” that he’ll let foreign buyers back in, says Council of Trade Unions economist Craig Renney. He made the comment in a Twitter/X thread accompanying his Herald column (paywalled) on the many challenges to Luxon’s tax plan posed by NZ First and Act. The loss of the 15% foreign buyers tax will “put a $3bn hole” in the tax plan, says Renney, who suggests it could be filled by cancelling the promised landlord tax breaks – namely reinstating mortgage interest deductibility and reducing the bright line test to two years. “These cost at least $2.3bn & offer little in economic benefit or value to the taxpayer,” he adds.

First home buyers back in force

At the other end of the property market, competition is heating up. First home buyers now account for 27% of the market, a record high, CoreLogic reports. High interest rates and cost of living pressures have been offset slightly by the nationwide downturn in property values, with the median price paid by first home buyers falling from $720,000 in 2022 to $690,000 in 2023 to date. Those lower prices won’t be around for long, according to the latest Reserve Bank survey of expectations. On average, the 37 business leaders and economic forecasters surveyed predicted overall house prices would rise 4.84% by this time next year, and 6.22% in two years’ time. Newsroom’s Jonathan Milne spoke to some of the Reserve Bank’s panel, who agree that high migration and the more favourable tax treatment promised to landlords are driving prices higher. But it may only be a blip. Debt-servicing costs, low yields for investors relative to interest rates and a likely fall-off in migration could all lead to a steep fall in the market in 2025, Gareth Kienan of Infometrics tells Milne.

A new approach to increasing housing supply?

Speaking to Q&A, economist Shane Martin said he doesn’t expect many changes to housing policy under the incoming government. Martin, who specialises in urban planning and housing issues, says National’s approach to housing is “80% the same plan as Labour’s”, despite National’s u-turn on Medium Density Residential Standards, which allow for higher density housing in most urban areas without resource consent. More important, says Martin, is that National still supports the National Policy Statement on Urban Development (NPS-UD) which requires councils to zone for housing density along rapid transit stops. Increasing supply is the key to solving the housing crisis, agrees Matthew Birchall, a research fellow at the NZ Initiative. Writing in the NZ Herald, he calls for local councils to be incentivised to support development with a cut of the tax revenue that comes with population growth. “National’s build-for-growth incentive payments and Act’s GST-sharing scheme will be steps in the right direction,” he says.

Economists sharply divided on OCR moves

What about interest rates? Like almost every other mortgage-holder, I’m bewildered about which direction they’ll move next year. That’s because the experts have split into two opposing camps, says Dan Brunskill of interest.co.nz. “Hawkish forecasters believe inflation has become embedded in the New Zealand economy and the central bank will have to lift the [official cash rate] further and hold it higher for longer. Dovish forecasters think the meteoric monetary policy tightening will be more than enough to quell inflation and interest rates will have to be cut as economic activity buckles.” One of the most prominent hawks is Westpac economist Kelly Eckhold, who thinks RBNZ will likely raise the OCR again in February, and hold it there until the end of 2025. Kiwibank’s Jarrod Kerr is predicting the opposite. He thinks the first rate cut will occur in May 2024 and the OCR will gradually be reduced to 3% over the following two years. Me? I’m confused as ever.

Keep going!

Wellington’s City to Sea Bridge

The BulletinNovember 10, 2023

Will the City to Sea Bridge survive Wellington’s cost-cutting spree?

Catherine McGregor

Contributing writer

Wellington’s City to Sea Bridge

The infrastructure icon could be demolished after the council decided against funding the full cost of Civic Square repairs, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.

A Wellington infrastructure icon faces the threat of demolition

I have a Polaroid photo of my sister and me sitting on the steps of the City to Sea Bridge. It was taken in 1995, just a year after the opening of the bridge decorated with steampunk-ish sculptures inspired by Māori legend and the ocean it overlooks. Almost 30 years on, the bridge remains a vital connection between the CBD and harbour, but its future looks shaky. While the bridge is not an earthquake risk, it suffers from serious structural issues – specifically, its piles do not extend fully into bedrock – and the council has decided not to fund repairs, instead earmarking a smaller sum to “investigate other options including demolition”. The vote was taken at yesterday’s meeting on the council’s long term plan, during which councillors made all sorts of funding decisions (though not final, binding votes) that will shape the future of Wellington.

Cycleway plans scaled back, airport shares may go up for sale

The Spinoff’s Wellington editor, Joel MacManus, was at the meeting and liveblogged the whole thing. Wellington Council is trying to cut hundreds of millions from its budget, jeopardising the transformative agenda that mayor Tory Whanau campaigned on last year. Along with the bridge decision – which also turns off the tap on funding for repairs to the Civic Square basement and the former Capital E building – cuts agreed to yesterday include $25m that would have switched swimming pool heaters from gas to electricity, and $71 to go from the citywide cycleway budget. Subject to public consultation period, the latter would “still mean the full rollout of all the planned cycleways, but the lanes would be of lower quality, with less physical separation between bikes and cars,” writes MacManus. The council also voted to explore selling its 34% stake in Wellington International Airport.

Water companies jostle to be first in line for Three Waters replacement

One issue that didn’t get much play at the meeting was the state of the water supply, the council apparently pinning its hopes on the new government to solve the city’s multi-billion-dollar pipes problem. This morning the NZ Herald’s Thomas Coughlan (paywalled) reports that Wellington Water wants to be a test case for a new system that National says will restore “local control” – minus Three Waters’ controversial co-governance requirement. Hutt City mayor Campbell Barry, who chairs the Wellington Water Committee, says Wellington has a “head start” because councils have already partly amalgamated water management, and he’s preparing a request to be first through the doors. However he remains worried that National hasn’t committed to giving the new water entities balance-sheet separation from councils, which would allow them to take on more debt to tackle their enormous repair-and-renewal backlog. Up in Auckland, Watercare has warned that it may have to introduce large price hikes from next July if balance-sheet separation doesn’t happen, BusinessDesk’s Oliver Lewis reports (paywalled).

Parking to stay on K’ Road for now

Staying with Auckland local government, Auckland Transport has backed down on plans to remove car parks on Karangahape Road after an intervention from Mayor Wayne Brown. At present parking is allowed during off-peak hours, but AT had planned to remove all on-street parking from next week, citing the “need to make way for 100 additional bus services, including the new Western Express”, Newshub’s Zane Small reports. With many K’ Road businesses up in arms, Brown stepped in and AT now says the car parks will stay – for now at least. “Sooner or later there’s going to be more buses going through K’ Road and you have to come up with some sort of result that allows for that,” Brown told RNZ. The delay will give AT time to readjust its approach, he said.