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The housing market, along with the rest of the economy, is on tenterhooks to find out who will lead the next Government and what sort of policy changes can be extracted by ‘Kingmaker’ Winston Peters.
Home buyers and borrowers will need to keep an eye on whether those policy extractions include; sharply lower migration, a foreign buyers’ ban or stamp duty, massive new house building programmes, new subsidies for first home buyers, and a banking inquiry – all of which Peters has proposed.
Peters began preliminary negotiations to form a Government this week, speaking first to Bill English and his team for just 30 minutes on Thursday, before having an afternoon chat with Jacinda Ardern. The talks will begin in earnest on Saturday afternoon once the results of 322,697 special votes lodged in New Zealand are counted. These includes votes from young unenrolled voters who enrolled and voted at polling booths before election day. Over 1.2 million people voted early, almost double that seen in the last election.
Home buyers and borrowers will need to keep an eye on whether those policy extractions include; sharply lower migration, a foreign buyers’ ban or stamp duty, massive new house building programmes, new subsidies for first home buyers, and a banking inquiry – all of which Peters has proposed.
Peters began preliminary negotiations to form a Government this week, speaking first to Bill English and his team for just 30 minutes on Thursday, before having an afternoon chat with Jacinda Ardern. The talks will begin in earnest on Saturday afternoon once the results of 322,697 special votes lodged in New Zealand are counted. These includes votes from young unenrolled voters who enrolled and voted at polling booths before election day. Over 1.2 million people voted early, almost double that seen in the last election.
The potential for a higher-than-expected youth turnout and the usual bias of special votes to the Greens means National is expected to lose at least one seat to the Labour-Green bloc. That would change the balance National on 58 to Labour-Green on 52 currently to a 57 to 53 split. That would give a Labour-Green-New Zealand First grouping a buffer of one seat above the current minimum to form a Government of 61 seats, given New Zealand First is on nine seats.
Some analysts see the potential for National to lose one more to Labour once the specials are counted, which tips the balance even more towards an even split that would make Peters more comfortable about backing a full change.
Either way, Peters will be able to consider concessions from Labour or National, particularly around foreign buying, migration and regional development. Whether he joins any Government in a full coalition or simply gives it backing on ‘supply and confidence’ is anyone’s guess.
Labour and New Zealand First both campaigned on reducing net migration, albeit by different amounts. Labour proposed changes to rules for international students and lower skilled temporary workers that would cut net migration by 20,000 to 30,000 a year. New Zealand First promised to reduce net migration to around 10,000 from over 70,000 currently, without being specific about exactly how that was done. New Zealand First also emphasised reducing migration of lower skilled workers, but has shied away from changes that would affect regional employers, particularly in horticulture and agriculture.
Two years ago, National cut its permanent residency target for each two-year period by 5,000 to between 85,000 to 95,000 and earlier this year it tightened rules for temporary workers wanting permanent residency, but has not sought to cut current migration levels.
Lower migration levels, if achieved, would take some pressure off house prices, as would a successful massive house building programme that was sponsored or paid for by the Government. Labour campaigned on building 100,000 affordable homes over 10 years, while New Zealand First has promised to offer first home buyers low interest sale and purchase agreements for sections lasting 25 years. National also promised to build around 26,000 new houses in Auckland on Government land, although only around 7,000 would be sold for less than $650,000 each.
New Zealand First is also determined to introduce a ban on foreign buying of land for housing and farming, while Labour and the Greens want a ban on foreigners buying existing housing. National has argued such a ban would contravene New Zealand’s Free Trade Agreements already agreed and signed with Korea and Taiwan, so they would have to be renegotiated. National has previously suggested that a stamp duty or land tax on foreign buyers would be one way to get around this restriction in the FTAs.
Winston Peters also campaigned on the need for an inquiry into bank profits, which may or may not happen and may or may not change the banks’ appetites for profits. Higher capital requirements are likely to keep nudging up profit margins regardless. A Labour-New Zealand First deal may also see a more dovish central bank Governor appointed, which could see interest rates fall, but the Reserve Bank would also be careful about not wanting to fire up the housing market again.
The likely outcomes from deals with either side would be some form of foreign buyers ban or stamp duty, a big increase in house building and some form of subsidy for new housing for first home buyers. The devil will be in the detail.
Peters has said he wants to make a decision by October 12, which is when the writs are returned to confirm the election results. I will send a fresh Referrer once the shape of the new Government and its policies related to housing and migration are clear later in October.
The bottom line:
By Bernard Hickey
Some analysts see the potential for National to lose one more to Labour once the specials are counted, which tips the balance even more towards an even split that would make Peters more comfortable about backing a full change.
Either way, Peters will be able to consider concessions from Labour or National, particularly around foreign buying, migration and regional development. Whether he joins any Government in a full coalition or simply gives it backing on ‘supply and confidence’ is anyone’s guess.
Labour and New Zealand First both campaigned on reducing net migration, albeit by different amounts. Labour proposed changes to rules for international students and lower skilled temporary workers that would cut net migration by 20,000 to 30,000 a year. New Zealand First promised to reduce net migration to around 10,000 from over 70,000 currently, without being specific about exactly how that was done. New Zealand First also emphasised reducing migration of lower skilled workers, but has shied away from changes that would affect regional employers, particularly in horticulture and agriculture.
Two years ago, National cut its permanent residency target for each two-year period by 5,000 to between 85,000 to 95,000 and earlier this year it tightened rules for temporary workers wanting permanent residency, but has not sought to cut current migration levels.
Lower migration levels, if achieved, would take some pressure off house prices, as would a successful massive house building programme that was sponsored or paid for by the Government. Labour campaigned on building 100,000 affordable homes over 10 years, while New Zealand First has promised to offer first home buyers low interest sale and purchase agreements for sections lasting 25 years. National also promised to build around 26,000 new houses in Auckland on Government land, although only around 7,000 would be sold for less than $650,000 each.
New Zealand First is also determined to introduce a ban on foreign buying of land for housing and farming, while Labour and the Greens want a ban on foreigners buying existing housing. National has argued such a ban would contravene New Zealand’s Free Trade Agreements already agreed and signed with Korea and Taiwan, so they would have to be renegotiated. National has previously suggested that a stamp duty or land tax on foreign buyers would be one way to get around this restriction in the FTAs.
Winston Peters also campaigned on the need for an inquiry into bank profits, which may or may not happen and may or may not change the banks’ appetites for profits. Higher capital requirements are likely to keep nudging up profit margins regardless. A Labour-New Zealand First deal may also see a more dovish central bank Governor appointed, which could see interest rates fall, but the Reserve Bank would also be careful about not wanting to fire up the housing market again.
The likely outcomes from deals with either side would be some form of foreign buyers ban or stamp duty, a big increase in house building and some form of subsidy for new housing for first home buyers. The devil will be in the detail.
Peters has said he wants to make a decision by October 12, which is when the writs are returned to confirm the election results. I will send a fresh Referrer once the shape of the new Government and its policies related to housing and migration are clear later in October.
The bottom line:
- House price inflation has slowed nationally and prices were generally flat in September in the biggest cities. Prices in Auckland and Christchurch were down 3% and 1% respectively from a year ago. Wellington’s annual inflation rate was 10% in September and Napier’s was 18%, while Hamilton was flat and Tauranga was up 6%.
- The Reserve Bank has forecast an unchanged Official Cash Rate through all of 2017 and all of 2018. It does not see the first hike until late 2019.
- Banks have stopped lifting longer term mortgage rates and now also see the OCR on hold until late 2018 after weak inflation and growth figures. Some are tentatively lowering some special mortgage rates and advertising more after the gaps between their lending growth and deposit growth rates narrowed to give them more funding flexibility.
- The Reserve Bank is unlikely to be able to introduce a DTI limit in 2017. It has to do lengthy consultation and it has said it would not use the tool right now even if it had it because of the market’s moderation. National has argued in favour of loosening the LVR restrictions, but that is no sure thing given the Reserve Bank’s independence.
- The key variables to watch in late 2017 are New Zealand’s new governing arrangements, China’s bad debt situation, Europe’s financial and political dramas, global inflation and interest rates, and Donald Trump’s twitter account in that order.
By Bernard Hickey
