Growing calls for action on house prices

There’s no end in sight to the relentless rise of house prices, with new CoreLogic data showing near-record growth nationwide in December – and that’s prompted renewed calls for action.

CoreLogic released the latest instalment of its House Price Index yesterday and it revealed that property values around the country rose by 2.6 per cent in the last month of 2020.

This took growth in the final quarter of the year to 6.1 per cent, which is a rate not seen since the three months ending February 2004 when it hit 6.6 per cent, and it left the average national value at $788,967 in December.

Of the main centres, it was Tauranga which turned in the highest quarterly rate of growth with 10.2 per cent, which left the city’s average property value at $876,122 in December.

However, the strongest annual growth was in Wellington. Values were up by 15.4 per cent on December 2019, leaving the region’s average value at $861,794 at the end of 2020.

Hamilton was up by 11.7 per cent (to $674,562) and Dunedin 13.1 per cent (to $582,269).

The powerhouse Auckland market continued to rise, with 6 per cent quarterly growth and 9.1 per cent year-on-year growth, which put the region’s average value at $1,142,700 in December.

Value growth soared in most provincial centres. Masterton recorded the highest quarterly increase at 17.4 per cent (to $519,437) and Gisborne the biggest annual rise of 30.4 per cent (to $514,212).

CoreLogic head of research Nick Goodall said that without any major policy change on property, strong price growth would this year result in outright unaffordability, reducing the pool of buyers able to borrow enough to participate in the market.

Goodall said the situation was leading to a property ownership divide, and that made for growing pressure on the Government to act on excessive demand.

An extension of the brightline test to 10 years and the return of the LVRs in March were the two most likely options. But in the short term, more properties on the market were needed.

Independent economist Cameron Bagrie says another year of double-digit house prices would have serious social ramifications.

‘‘The Government has to step up to the plate, it can’t just point its finger at the Reserve Bank.’’

To that end, the Government should ditch KiwiBuild and plough money into social housing, but it should also reintroduce a housing remit for the Reserve Bank and grant the bank’s request to include debt-to-income restrictions in its tool kit, he said.

It also needed to give the IRD the resources to identify people who have failed to pay tax on property when they should have ‘‘and to make examples of them’’.