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Housing prices spark crisis fears

Published: 6:37PM Friday January 18, 2013 Source: ONE News

Record house prices, particularly in Auckland and Christchurch, are prompting warnings of a crisis.

With houses moving like hotcakes, the median national price has risen to $389,000, up almost 10% in a year.

And economist Gareth Morgan told ONE News he understands why people are clamouring to buy.

"I would, it's the best way to make money. And so would you. And so would your neighbour. And so it goes on," he says.

Reserve Bank numbers show mortgage approvals reached a three year high just before Christmas, with more than 8000 loans worth more than $1.3 billion rubber-stamped in just one week.

But some say it's pumping up a property bubble that has got to burst.

"On most fundamental measures, New Zealand house prices, say compared to income, are the highest in the world and that can't continue," said Morgan.

And prices aren't the only thing going up with rents rising nearly 10% across the country in the past four years.

In Auckland they have gone up around 14%, with the median rental on a three bedroom home reaching $500 a week.

The Salvation Army says recent governments have failed in terms of housing.

"They've failed to realise the urgency of it and they've failed to realise the extent of it. Their solutions have all been too small and too late," spokesman Campbell Roberts told ONE News.

The Government says it is trying to take the heat out of the market by encouraging councils to make building easier.

"At a time like this with record low interest rates and strong demand for housing, they need to relax their rules a bit so more houses can be built and more families can afford houses," Finance Minister Bill English said.

English said the Government is also working to make sure its state houses reach those most in need.