Tax ideas will create rental inflation crisis

24 June 2007

"Cullen and Bollard tax ideas will create additional rental inflation crisis"

New Zealand has a housing affordability crisis, where housing prices have doubled over the past five years. During this period rentals have increased by 14%, slightly lower than general inflation (refer attached Westpac March Bulletin).

"Why Finance Minister Cullen and Reserve Bank Governor Bollard are suggesting we create two crises, with both rental and housing affordability when we have one to deal with, is odd" said Hugh Pavletich, co author of the Annual Demographia Survey adding "The evidence is clear that the core problem is insufficient supply."

Australia currently has two major crises to deal with - with both a lack of rental stock and new housing stock. Rental vacancy rates are as low as 1.2% in many Australian cities. Rental vacancy rates should not fall below 5%, to ensure inflation is subdued in this sector.

According to Demographia, New Zealand is currently under building by approximately 10,000 residential units per annum. Most people prefer to live in stand alone housing, whilst less desirable apartment construction has fallen over recent years.

"Reputable New Zealand and international research is clear in that the three key issues that need to be dealt with, are land supply, infrastructure charging and consent processing times" said Mr Pavletich.

ENDS

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