Restraints on housing market demand ‘not going to solve the problem’ – economist

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A leading economist says increasing housing supply is the only way to fix the housing crisis and anything else is merely tinkering around the edges.

Houses around Lyttelton area in Christchurch

Photo: RNZ / Nate McKinnon

Amid a politically damaging housing crisis, the finance minister is promising “bold” action to dampen house price inflation.

Yesterday, the Reserve Bank reintroduced lending restrictions for first home buyers and investors, but there is disagreement about how much of an impact this will have.

Finance minister Grant Robertson said he intends to announce new measures to reduce demand, alongside continued efforts to boost supply.

He said the proposals will go to Cabinet “very soon”.

“We’ll see what happens once we make the announcement but the point we’re making today is that we do want to tilt the balance in favour of first home buyers. We actually had increasing and improving numbers for first home buyers through the early part of our term in government, clearly that turned around in the second half of last year.”

Kiwibank chief economist Jarrod Kerr told Morning Report restraints on demand will only cool the market and will not fix the problem.

“The restraints on demand will cool, the housing market will take some of the heat out of it but it’s not going to solve the problem. We have a shortage and when you have a shortage of something the price keeps rising.

“If we want to make housing affordable, if we want to beat this crisis, this chronic shortage that we have, we need more supply, we need the government to come in and, with the help of councils, make it easier to build more higher-density affordable dwellings.”

Development to meet the shortage needs to be encouraged, he said.

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