You are using an older browser version. Please use a supported version for the best MSN experience.

Metiria Turei makes a risky call

NZ NewswireNZ Newswire 29/07/2016 Peter Wilson, Political Writer

Is she brave or foolish? Metiria Turei's call for house prices to fall by 50 per cent is going to cause ongoing strife for the Greens, says NZ Newswire's poitical writer Peter Wilson.

She first mentioned it on RNZ's Morning Report on Wednesday, in response to a question, and swiftly backed it with a media statement.

Turei has announced a doomed policy.

Labour won't have a bar of it, so it won't go anywhere even if there's a change of government next year and the Greens are a coalition partner.

No government has ever controlled house prices and, as Labour leader Andrew Little says, there's no mechanism for doing it.

Turei seems to believe there is.

"The Greens are developing a policy which would aim to cause house prices to drop to between three and five times the median income if the party was in government," she said in her statement.

"It would involve a capital gains tax, restricting non-resident foreign purchases, and removing tax exemptions for property investors."

It would have to involve a lot more than that, and Labour doesn't support a capital gains tax anyway.

Turei was careful to say the aim is to gradually cut prices over a 10 to 15 year period.

"I want to be very clear that we are talking about a responsible, carefully managed reduction."

The Greens are going where no other political party dares to tread.

Telling everyone who owns a home that in 10 or 15 years it's going to be worth half what it is now isn't exactly a vote winner.

Little knows this, which is why he was forthright in his response.

Labour usually tries to walk around Green Party policies it doesn't like, but not this time.

"It won't be happening under a Labour government," said Little.

"We don't think there's any such thing as a managed reduction ... there are plenty of people who have entered into mortgages and a house price crash is going to destroy them."

Turei insists there's a way to protect mortgage holders when the price of their house falls, which would push them into negative equity.

"The Green Party is putting together a plan for how to reduce house prices responsibly and gradually, and that will include making sure people who've recently taken out big mortgages to buy a home are safe and secure," she said.

That will be interesting.

Another reason Little was quick to denounce the policy was that he knew how Labour's opponents would use it.

He didn't have to wait long for that to be confirmed.

"This is a future government policy to reduce your house value by 50 per cent," said Prime Minister John Key.

"Personally, I think it's barking mad."

Key claimed the co-operation agreement Labour and the Greens have signed means Green Party policy is Labour Party policy, which it doesn't, but that's what the government is going to continue to say.

One of the odd things about this is that it isn't the first time Turei has said house prices must fall.

She said it in 2013, got into trouble, and retracted it.

Now for the brave part, and Turei explained that herself: "We are the only ones prepared to say it out loud."

She's right. No other party will say house prices must fall, particularly in Auckland, if they are to be considered affordable.

That means being in the range of three to five times the average income. In Auckland, the ratio is nearly 10.

Turei isn't alone when she says prices must fall.

Don Brash, former Reserve Bank governor and former leader of the National Party, said exactly the same thing in an interview with the New Zealand Herald earlier this month.

"I cannot see how indefinitely we can continue in cloud cuckoo land. That's where we are now," he said.

"If you could hold house prices static for half a century and have nominal incomes growing at say three per cent, you might get back to a reasonable relationship over half a century."

Brash said politicians were terrified of talking about the implications of that.

All except Metiria Turei.

image beaconimage beaconimage beacon