Hive News Wednesday: Smith pulls UDA trigger; English's low housing shortage estimate challenged; Auckland house prices down 6-9%

Unrenovated houses in Arch Hill, Auckland. Copyright Lynn Grieveson / Hive News

Bill English's downplaying of the scale of the national housing shortage was challenged yesterday in another sign that housing will be the major topic of debate in the election, alongside migration. He also opened himself up to accusations of going soft on the drive for extra housing supply when he pointed to prices having stopped rising in Auckland -- a tactic John Key used to take the focus off housing supply from 2009 to 2012.

The Opposition accused English of fudging the numbers about the supply shortage in Auckland and of being in denial on the scale of the crisis in Auckland.

English was sceptical on Monday of ANZ's "erroneous" estimate of a national housing shortage of 60,000 and the Auckland Unitary Plan Panel's estimate of a shortfall of 40,000 homes, instead saying he thought the national shortfall was around 10,000 to 20,000.

He doubled down on the scepticism in an interview with RNZ on Tuesday by saying he was watching prices as an indication of shortages.

"There'll be some estimates in the official papers, I've always been a bit sceptical about the value of them," English said.

"We're not trying to run a policy on the estimate of a shortage, we're just looking at the prices," he said.

English risks falling into the same trap that John Key did through 2009 to 2012 when the Government stepped back from its concerns about Auckland housing supply because house prices temporarily fell in 2008 and 2009. See more here from Hive News on July 7 in which Key defended the Government's decision not to focus on housing supply while prices were falling.

Nick Smith also appeared to suggest the Auckland supply issue was less urgent in Parliament when he pointed to falling prices in an exchange with Phil Twyford. Earlier Smith said he was also sceptical of officials' estimates, which he said could vary by as much as 50,000, depending on assumptions about occupancy rates for homes.

"The most reliable indicator of supply and demand being in balance is stable prices. I am encouraged by the fact that over the last 6 months in Auckland, house prices have actually dropped by 2.4 percent," he said.

In response, Twyford asked: " Is it not strange, in a Government that professes to be interested in evidence-based policy making, that the Minister whose job it is to increase the supply of affordable housing does not even want to know how much the shortage of houses is after 8 years in Government and 4 years as the housing Minister?"

Metiria Turei accused the Government of "fudging the numbers to create headlines they can’t back up."

"Today’s house price data from REINZ shows the housing affordability crisis is still in full swing, while National’s still sitting on the sidelines bickering about the numbers," she said.

“It looks like the Government is going to continue relying on the private market to fix the housing crisis, which hasn’t worked and won’t suddenly start working."

The short term price-focused comments by English and Smith came as the Real Estate Institute reported the raw median price for houses sold in Auckland in January fell to NZ$805,000 from NZ$840,000.

Auckland prices down 6-9%

REINZ does not publically report the more accurate stratified measure, but economists said the stratified measure for Auckland fell 8.8% in the month and was down around 6-7% on a seasonally adjusted basis in January. Economists were sceptical about whether January's figures could be relied on as indicator of a more permanent trend. They estimated prices had fallen 5.8% over the last three months in Auckland, although they remained 6.6% up on a year ago.

"January figures always need to be treated with more caution given seasonal patterns are relatively unstable at this time of year. Our own anecdotes, as well as comments from the REINZ, suggest market activity has picked up more recently," ANZ's Phil Borkin said.

Prices continued to roar ahead elsewhere. The stratified measure in Wellington, seen as the tightest housing market in the country with the lowest inventory, was up 22% in January from a year ago and rose 1.2% in January.

UDA trigger pulled

Meanwhile, Nick Smith opened public consultation on legislation to allow Councils and the Government to create Urban Development Authorities with the power to compulsorily acquire land, borrow money and charge fees and rates to land owners.

He told me before Question Time that UDAs would not have the beefed up compulsory acquisition powers recommended by the Productivity Commission, but would have the same powers currently available to the Government.

He said an UDA could be created for projects such as Fletcher Building's controversial Three Kings development in Auckland, and could accelerate the process of development by 3-5 years.

The full discussion document and Regulatory Impact Statement is here.

While you were sleeping...

Michael Flynn's resignation as US National Security Advisor for misleading his bosses threw Donald Trump's administration into yet more turmoil and raised questions about when Trump knew there was a problem. The Washington Post reported yesterday that Trump was advised a month ago that Flynn's actions opened him up to being blackmailed by the Russians.

The focus is also on whether Trump approved of Flynn's reassurances to Russia's ambassador over sanctions. Trump may have thrown Flynn under the bus, but the President's own actions and views on Russia are facing more intense scrutiny. Some senior Republicans are calling for a full probe into Trump's links to Russia. Sean Spicer said this morning that Trump had asked Flynn to resign over "eroding levels of trust." (WaPo)

Meanwhile, the New York Times reported Russia had deployed a new type of cruise missile in breach of a landmark arms control treaty, potentially setting up a new test of Trump's approach to Russia.

Russia isn't Trump's only foreign policy challenge. Just days after North Korea test-fired a short-range ballistic missile, Reuters reported US officials believe North Korean agents murdered Kim Jong Nam, the estranged older half brother of Kim Jong Un, possibly using a poison pen device.

In economic and financial news overnight, US Federal Reserve Chair Janet Yellen said in more-hawkish-than-expected Congressional testimony overnight that the Fed would likely have to increase its key interest rate at either its March, May or June meetings. The Fed indicated in December it was likely to raise US interest rates three times in 2017. Any less than that would weaken the US dollar (and therefore strengthen the NZ dollar), while more than three hikes would make the US dollar more attractive. The Reserve Bank here will be hoping the Fed can carry out these planned hikes to help take some upward pressure off the New Zealand dollar and add a bit more inflationary pressure into our economy. The NZ dollar fell around half a cent to a three-week low of 71.6 USc overnight. (Reuters)

Inflation is also on the move in Asia. China reported overnight that producer price inflation rose to a six year high and consumer price inflation was higher than expected. The People's Bank of China has raised short term interest rates in recent weeks. (Reuters) India's wholesale inflation rate surged to its highest level since July 2014, supporting the Reserve Bank of India's move on February 8 to move from an easing to a neutral stance. (Bloomberg)

In Europe, German economic confidence slumped more than expected and Peugeot said it was in talks to buy Germany's Opel off GM.

Have a great day

cheers

Bernard