Budget 2020: Relief, disappointments and hints of more to come

Extensions to the Government’s state house programme have been welcomed but there are also disappointments about what was left out of the Budget.

The Budget’s housing measures were largely aimed at low income families with the announcement of 8000 additional public and transitional homes, costing $5 billion over the next four to five years.

The insulation of 9000 older homes is also to get a $56 million boost.

Finance Minister Grant Robertson hinted more would be to come in terms of housing, saying: “Further support for housing development and construction, including the private residential market, will be a critical element of our recovery from Covid-19 and it is my intention that this will be the subject of further investment in the next phases of the fund.”

Nothing for first time buyers

Leslie Harris, from the First Home Buyers Club, says there was nothing in the Budget for first home buyers and that’s a shame.

“I would have really liked to have seen the Home Start grant become more relevant to today’s market.

“That would be my grumble if I had one. It would have been a very opportune time to do it, to make that a bit more inclusive and relevant because, and I suppose I’m thinking a little bit Auckland-centrically, but what can you buy under $650,000 in Auckland?

“It cuts out a huge amount of people that could really, really do with that grant.”

The positives are the “goodies” we have already had – the lowering of interest rates to the lowest we have seen, and the releasing of the LVR for a period of time.

“There seems to be a bit of a flurry with first home buyers at the moment going ‘this could be a really good time for us’ if they’ve retained their jobs and in terms of the softening of the housing market.

“But there’s nothing in the Budget that I can see that’s more than what we had a couple of days ago.”

And we are yet to see how the removal of the LVR plays out in real life, she says.

“Just because there’s no LVR doesn’t mean banks are going to go ‘I’m going to give you money.’ If the credit criteria doesn’t stack up you’re not going to get money.”

The wage subsidy extension and employment-related measures are good, Harris says, and in a roundabout way supports first home buyers.

Small dent

Economist Tony Alexander says an expanded state house building campaign is a good idea from the point of view of boosting employment and providing better housing outcomes for many people.

But he warns the extra 8000 houses spread over four to five years will only make a small dent in the decline in house construction likely to occur as a result of banks pulling finance for new property developments and investors generally backing away amidst doubt about end-demand in a high unemployment environment.

“So, the house price implications are minor and lost in the existing high uncertainty surrounding the developing changes in housing demand and supply.”

Ray White NZ chief executive Carey Smith said it was clear the Budget was focused on the short- and medium-term challenges New Zealand faced in regards to the economy and jobs.

"While the real estate market in isolation did not factor into the budget there were considerations given to new and transitional public housing which will evolve over the next period of time.

"We expect that the Government's response to the economic recovery plan and at the centre of that plan being the security of jobs then as part of that response we believe this will assist the real estate market to remain positive and to give confidence to those who are in the process or looking to buy and sell property."

Bindi Norwell, chief executive of the Real Estate Institute of New Zealand (REINZ), will be watching the key indicators of the unemployment rate and confidence levels over the coming months as her organisation looks for the housing market to recover.

“The eight-week extension of the wage subsidy scheme will be central to these two indicators as it will mean people will be able to continue employing staff, and individuals will have a greater ability to continue paying their rent or mortgage over the next two months.

“Additionally, the $3 billion announced to fund infrastructure projects, on top of the $12 billion announced prior to Covid-19 will help deliver important infrastructure projects across the country and bolster employment opportunities in the regions, further adding to local confidence levels.”

Missed opportunity

REINZ also welcomed the 6,000 state and 2000 transitional houses to be built in partnership with housing providers over the next four to five years.

“Not only will this add to local employment opportunities, it will also help ease some of the housing supply shortage,” she says.

And REINZ welcomed the $56 million allocated to insulate 9000 older homes, with Norwell saying the organisation has been advocating for warmer, drier homes over the past few years.

“Today’s announcement increases the grant available from 67 percent to 90 percent which will go a long way to ensuring that people have a warmer home this winter and one that is more cost-effective to heat – especially as people are already facing additional financial pressures as a result of Covid-19,” she says.

Andrew Eagles, chief executive of the New Zealand Green Building Council, however, sees the Budget as a missed opportunity.

While expanding the Warmer Kiwi Homes programme is great, there are many other issues homes need, such as ventilation and drainage, and there are many more homes in need of insulation.

The Warmer Kiwi Homes programme was originally targeting just over 50,000 homes over four years but there are half a million private homes which are damp and cold in New Zealand, he says.

Health issue

“If we’re only improving 50,000 to 60,000 homes every four years it’s going to take us 40 years to fix all of those really poor quality homes and that’s way off where we need to be to make New Zealanders healthier.

“It’s also really far off the pace to meet the Zero Carbon Act, so we would improve all those homes to a fairly low standard and we would do it by 2060.”

Other elements homes need aren’t all that expensive and it would have been great if the Budget had looked at allocating the same amount as it was allocating to infrastructure, he says.

That’s because damp and cold homes are the biggest health issue we face and with an expected 100,000 to 200,000 households facing unemployment going into winter they will be vulnerable to flu and Covid-19.

“We published a report on Monday which showed that improving 120,000 homes boosted New Zealand by $3.1 billion to $1.6 billion. It creates 1300 jobs, it reduces stays in hospital by 40 per cent, reduces time off work by 40 per cent, creates jobs really, really quickly and I would challenge any infrastructure project to show such benefits to us.”

Eagles hopes the $20 billion left aside in the Budget will be an opportunity “to really shift this”.