Ashley Church: Who The should fuse has you been believe lit in on the housing housing bomb debate

It’s not often you find property investors, commentators and economists in agreement.

Quite the opposite. On any given property issue they’ll usually hold a mixture of broadranging, often conflicting views and – if I can paraphrase an old saying, “if you have four different property commentators in a room, you’ll get 5 different opinions.”

All of which makes last week’s almost unanimous response to the government’s housing moves extremely unusual. In fact, this unanimity was so overwhelmingly apparent that Radio New Zealand – unable to accept that this agreement might actually be the result of universal recognition of a common truth – attempted to explain it away as an “investor-economist alliance” in which these parties had conspired to close out opinions which were in conflict with their collective view. Nice try, but wrong.

The commonality of opinion was testament to the fact that the consequences of these moves are so blindingly obvious that even tenant groups came out against them, recognising that they are directly in the line of fire.

Obvious, that is, to everyone except the government, which doubled down over the weekend, desperately trying to bat off the criticisms with outrageous claims and, unbelievably, threatening even more legislation if these changes backfire on them. Who should you believe? Here’s my take on what will actually happen:

1. After a short two or threemonth hiatus, in which prices flatten or even lose a little of their recent gains, they’ll take off again in Auckland and continue to climb for several years. Most of the rest of the country will flatten off for a while. This will have nothing to do with the government’s moves, which will fail to make any difference to house price inflation whatsoever.

2. First-home buyers will continue to be shut out of the market because the issue for them isn’t house prices – it’s the ridiculous deposits they’re required to put together to get into a home.

3. Few property investors will rush to build new rentals because none of the issues which would make that economically viable have been addressed – and to the extent that some do, they’ll simply be in competition with first-home buyers.

4. The removal of the ability to deduct interest expenses will have an immediate effect on the supply of rentals in the market as many investors and potential investors defer buying.

5. This stagnation or reduction in the supply of rental properties will push up rents beyond the levels already caused by the policies of this government.

As a result of all of this - whether you’re a home owner, a first-home buyer, and investor or a tenant - the property market will be in a significantly worse state by 2024.