Property Institute applauds $1 Billion Infrastructure fund

Property Institute of New Zealand Chief Executive, Ashley Church, is applauding the Government's decision to establish a $1 billion infrastructure fund to help Councils to pay for roading and water infrastructure and says that the move will go a long way toward overcoming Auckland Councils major objections to opening up residential land on the fringes of the city.

The Infrastructure fund, which was announced by Prime Minister John Key earlier today, will be available to Councils in high growth centres in the form of interest free loans which will be required to be repaid over 10 years. It follows a recent directive, from Housing Minister Nick Smith, which required councils to open up enough land to cater for the growth in our fastest growing centres.

Mr Church says that, taken in tandem, the two measures have stripped Auckland Council of most of its excuses for inaction. But he has also repeated a warning that 'nothing short of a clear and unequivocal signal to the private sector will bring about the scale of new home construction that will be required to slow down house price inflation'.

"Council and Government housing initiatives are a useful demonstration of leadership - but neither the Government, or the Auckland Council can, or should, build the volume of new dwellings that will be required to address the extreme shortage currently facing Auckland city".

Mr Church says the Government now needs to announce a series of initiatives designed to encourage the private sector to step up to the plate and do the 'heavy lifting'. He says that such measures could include a return of the ability to claim depreciation on dwellings constructed from now; removal of all LVR restrictions on the construction of new dwellings; and an exemption from the 'bright line' test where the seller had built a home, rather than purchased an existing home.

"Moves such as these would very quickly create private and investor activity in new home construction and would lead to a focus on the construction end of the market - which has got to be preferable to the current situation where 42% of all purchases in Auckland are made by Investors selling existing homes to each other".

Mr Church acknowledged that the high cost of land, particularly in Auckland, meant that these measures would not lead to a reduction in housing prices - but said that they would 'very definitely' contribute to slowing down the growth in those prices.

"Talk of moves to 'crash the market' or bring down house prices are naïve - that simply isn't going to happen. Instead, we should be focusing on using the private sector to end this boom by building thousands of new dwellings as quickly as possible".

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