The government had already signalled in advance of the budget’s announcement that there would be no quick fixes to the shortage of affordable homes in Auckland. This suggests there will still be strong tenant demand for Auckland rental properties into the foreseeable future.

Likewise, the Government’s $5,000 incentive payment for state housing tenants and homeless people to move out of Auckland is unlikely to have much impact on the continuing need for rental accommodation.

The Government is optimistic, however, the extra $100 million it set aside for freeing up more surplus Crown land in Auckland where new housing can be built, will translate into many more affordable homes.

“This capital funding will add momentum to the programme of using public land for increasing the supply of housing,” Building and Housing Minister Dr Nick Smith said. “The programme’s goal is to increase the pace of housing development and to put a greater focus on bringing more affordable housing to the market.”

In reality, the programme could eventually deliver several hundred new homes in a few years’ time, which will not greatly alter the balance of supply and demand in Auckland.

Indeed, given the shortages of builders available, and the length of time required to obtain resource and building consents, even if the Government had announced an immediate programme of constructing thousands of publicly funded houses throughout Auckland, it would still take time.

Urban Development Policy

Of greater note, the Government has issued a draft National Policy Statement on Urban Development Capacity, potentially compelling councils to link their planning decisions to metrics such as projected urban growth, local incomes and housing affordability.

A policy of this sort could force Auckland Council to rezone more land around the presently planned margins of the urban boundary for residential purposes in the drive to increase affordable housing supply.

Once more, this approach would still run into the shortages and delays already referred to, but it would dovetail in with the Reserve Bank’s suggestion that banks could possibly be restricted in their mortgage lending by having to link borrowers’ household incomes to the amount of debt permitted.

Through all the debate about affordable housing and the need to reduce residential property prices, investors have tended to cop the blame for pushing up property values in Auckland.

If house prices were to fall as some commentators expect, then it would be all property owners, including investors, who would stand to lose. Yet building more affordable housing out on the city fringe does not necessarily mean that houses in desirable areas within Auckland will fall or even stop rising in price.

Local factors influencing supply and demand will have more bearing than what is happening miles out in the sticks. Additionally, affordable housing offers investment opportunities for landlords seeking to maximise numbers of properties owned and cash flow/yield received within their portfolios.

Tailwind Price Increases

Some basic trends outside of government housing policy still provide a strong tailwind to property price increases in Auckland.

Net migration into the area remains historically high, and in response, the Government, as part of the budget, announced that $153 million had been committed to building five more schools in Auckland, some as public/private partnerships.

The plan is to deliver over 17,000 more student places by 2019.

That sort of advance commitment indicates that demand for Auckland property will not ebb any time soon and policies to contain or deflate house prices will struggle to be effective.

Property investors are likely to remain bullish on Auckland, notwithstanding the latest budget announcements.