We’re now a few weeks post Budget 2018 and our initial analysis focussed on the fact that there wasn’t a great deal to report. We didn’t glean anything new, or particularly disruptive to the current property market. Since that time, we’ve been able to digest the info a little more and perhaps naturally, we start to focus on what wasn’t in there. Much like when an All Blacks squad is named and a lot of coverage centres on who wasn’t picked (how did Ben Lam not make the current squad by the way?!)
So what was conspicuous by its absence on Budget Day 2018?
For me, the big one was the lack of any real detail as to how the Government is looking to embrace prefabrication and modular building to enable faster, affordable residential construction to happen. Of course we have KiwiBuild firmly in mind here. There’s no secret to the fact the Kiwibuild target of 100,000 additional homes being constructed in 10 years is fairly ambitious. And that’s without even putting the word affordable in there.
The challenges the whole industry faces to achieve this target are considerable – I’m talking challenges to the banking industry to fund it, Councils to reduce red tape processes, the Government to ensure skills and build quality are high, builders to embrace these techniques and processes. That’s why I think the Government has missed a trick with the Budget by not providing any further detail as to how the actual building will happen. Even with the ramp up targets being back loaded, we can’t rely on the old way of doing things so it’s important we’re looking outside the box with solutions.
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Westpac have started things going with their dedicated funding for pre-fab so that’s a start. We also know the Government have employment apprentice schemes, but although this is already in place, we don’t know how realistic it is or how well it’ll be taken advantage of.
Maybe the detail will come out from MBIE at some stage – they’re obviously a very busy department – but right now it’s hard not to agree with the cynicism from within the industry about how likely it is that KiwiBuild is going to do enough to really improve our supply and release some of the consistent pressure on values, especially in Auckland.
One thing I can though say, the Budget covered funding for supporting and building public housing, which may actually form part of KiwiBuild itself, but it is unlikely to have any major impact on the private property market.
Which brings me to a few things that will. Perhaps part of the reason the Budget didn’t have much for property is that all these things have already been announced and some implemented. And given the sheer volume of these I thought it’s worth a quick round up:
All of these make it very difficult to accurately predict where the market is likely to go, except to say, expect more intervention. The hope is that there’s less and less required in the future but until the market behaves in a more robust and less volatile way, both the public and private sector will continue to weigh in.
It also cautions us against using the past to predict the future. What affected the market 10 or 20 years ago may not be relevant now, and certainly what’s impacting the market now may not exist much longer.
Nick Goodall is head of research at CoreLogic NZ
