Labour’s housing plans in brief

1. Labour’s policy to is ban foreign purchasers from buying existing homes.  This policy aims to stop foreign buyers fuelling the property boom.

Note that Labour’s policy is focused on existing homes. As it is worded, technically foreign purchasers can still buy new properties (either off the plan or a vacant section and develop a house there).

Anyway, who is a foreign buyer? Labour will likely define a foreign buyer as one who does not have a PR or NZ citizenship and a foreign buyer does not include Aussies. Aussies are still allowed to buy existing homes.

2. Labour wants to increase the bright line test from 2 years to 5 years. This again is aimed at discouraging speculators from entering the market.

3. Labour wants to build 100,000 affordable homes across the country. This recognises the problem that the property prices is caused by imbalance between supply and demand. The shortage of supply of housing has led to the rising house prices. It’s called the KiwiBuild policy.It is well intentioned to make affordable housing. It’s good for the country and good for the society. They aim to make houses between the price of $500000 and $600000 and apartments below $500,000. But here’s the contradictory policy: they aim to increase the “living” wages. Now whatever that means. Here’s the problem: the surge in house prices is related to the cost to supply a house. At low prices, the developers have no incentive to build more houses. If costs rise (labour costs will rise if Labour increases the living wage and causes inflation; cost of materials will rise when there is inflation ), it will eat into the developer’s margin. If prices are fixed at $500,000 – $600,000, it may not even cover the developer’s costs  and  no few developers will build houses. So Labour has a bit of a barrier to overcome. Unless the Labour govt supply the land, few developers will be able to build affordable housing in Auckland for around $500,000.

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