In New Zealand property news, Finance Minister Bill English warned that the housing market in Auckland, where the median house price is now about nine times the average income, remains a risk to the country's economy. "The longer it goes on rising at 20 to 25 per cent a year, the more of a risk it becomes," he said.
He also said the government would come under huge political pressure to provide assistance to middle-income families if interest rates rose. "As households get a bit stretched in meeting the rising cost of housing, it inevitably creates pressure for governments to lift the cash transfer programs."
He mentioned that in the mid-2000s, interest rates of 8 to 9 per cent meant the government had to compensate by making big increases in Working for Families subsidies and by introducing interest-free student loans. Mr English said the Government would rather "get the market right" than have to provide more assistance to families and that it was introducing new rules to increase the supply of housing over the next few months.
