New housing legislation has just come into effect in New Zealand, with the recently passed Housing Accord and Special Housing Areas Bill. Auckland in particular has been experiencing a long-term housing shortage, with this legislation designed to fast-track new developments and get more people into new homes. With tight supply in Auckland and Canterbury continuing to drive prices higher, however, it may be some time before the effects of the new legislation are felt on the ground.
While it has much wider implications, the initial focus of the new law will be to enact the Auckland Housing Accord. The council are keen to get the ball rolling, with a promise of 5000 new house approvals by Christmas and an overall target of 39,000 new homes in the next three years. The Housing Accord allows council to prioritise parts of the city as Special Housing Areas (SHAs), which will be identified for both existing urban areas (brownfields) and greenfields inside the proposed Rural Urban Boundary.
According to Housing Minister Dr Nick Smith, the new legislation is a game changer for Auckland: “This new law will deliver tens of thousands of new homes. The increased land supply will help take the pressure off the over-heated Auckland housing market and help the economic recovery. It will enable tens of thousands of kiwi families to realise the dream of owning their own home... It will over-ride Auckland’s Metropolitan Urban Limit. It will enable low-rise greenfield developments to be consented in six months, when they previously took three years, and low-rise brownfield developments to be consented in three months, when they previously took a year."
Auckland house prices have been rising fast in the last year, with overall values up 13.1 percent from a year ago according to Quotable Value. It's not just the inner-city that is increasing in value either, with values also on the rise in Waitakere, on the North Shore, and in Manukau, all of which are up between 3.3 to 3.6 percent over the past three months. Values in the Onewa area were up 5.1 percent over the past three months, with the eastern area of the former Auckland City Council boundaries also up 5 percent.
The new Housing Accord is a measured attempt to improve home affordability through increasing supply levels in key areas. However, the sharp rise in house prices in Auckland and Canterbury is due to many factors, with increased demand driving price rises along with lack of supply. While new housing legislation is one part of the solution, loan-to-value (LTV) ratio limits by the Reserve Bank are also being changed in an effort to dampen values by decreasing demand.
The Reserve Bank's LTV changes come into effect next month, basically restricting high-risk, low-deposit mortgage lending to 12 percent of all new loans. With high LTV loans currently accounting for up to 30 percent of new mortgages, these measures may make it difficult for home buyers initially by restricting the number of loans available. However, these restrictions are designed to improve the overall level of financial stability in New Zealand, and together with the Housing Accord, are designed to improve housing affordability over time.