Which Way Now For the Market? (column)

Olly Newland’s June 2011 Column

I have in several previous articles and columns predicted the rise in rentals, starting in Auckland and spreading like ripples in a pond throughout the country.

Having just been to Australia and with the benefit of my own investments there, I have always looked at the Aussie property market to pick trends at home. House prices in Aussie are sky high and $1million buys you little. Now rentals are moving as their market cools.

The natural disasters that have swept Australia have knocked The Lucky Country around. I predict before long the exodus of Kiwis will slow, stall and then reverse.

See The Age: Softening property market, new home sales slow

New Zealand

With regard to the local market, it remains (as I predicted two years ago) more or less flat with very little new building coupled by little demand. Why is this? Why are new houses, especially modest new houses, so hard to build?

The answers are simple.

(1) New houses carry a GST component of 15% on every door knob, piece of timber and blade of grass — this makes them immediately uncompetitive with second hand houses — which may only be across the road.

If the Government wants to revive the building industry then this is an area that should be looked at carefully. Some of the actions that could be taken to help first home buyers include a serious effort to provide grants towards the purchase of first homes up to a certain price limit (which would vary from area to area).

There is a ‘Welcome Home’ grant supposedly available from Housing Corporation but it appears not to be actively promoted. I haven’t ever come across one single person who has received one of these grants. It seems likely it was created as a mere political stunt to anaesthetise the masses rather than a genuine attempt to help. (Call me cynical.)

  • A cash grant of up to 5% of the purchase up to a certain price limit (which would vary from area to area)
  • A subsidised interest rate for the first 5 years.
  • The ability to capitalise all or part of the Working For Families benefit to create a deposit. (http://www.workingforfamilies.govt.nz/)
  • Making interest payments for first home buyers tax deductible
  • Waiving or substantially reducing the GST content on new home …

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