Housing loan limits

Press, Volume CXI, Issue 32525, 8 February 1971, Page 12

Housing loan limits

The plea by Mr W. A. Fraser, M.P., for an adjustment to State Advances Corporation loan limits to accommodate recent rises in the cost of building houses is bound to have appealed to many persons who have been seeking or are about to seek finance for housing. Among all the price increases of the last year the cumulative effect of higher wage rates and material costs on the price of housing has been dramatic—and to many people who have been caught up in the spiral during construction it will have been an embarrassing strain on their funds and budgets. There is, obviously, an argument in favour of reviewing loan limits as they apply to special rates of interest and to income levels. But it is doubtful whether this is an appropriate time to inject more money at relatively low interest rates into the economy; for the certain effect of this today would be to put more pressure on the resources of the building industry and to encourage prices to run even higher. The result would affect all borrowers and all who are investing in new houses; it would hurt the very people the review was intended to help. One odd item of possible policy has come from Mr Fraser’s comments on behalf of the Labour Party’s caucus committee on housing. This is the suggestion that, as building costs vary from district to district, loan limits should vary also. There are many reasons for the unevenness of costs; differences in terrain and the movement towards marginally more difficult building sites in some areas are among these. Mr Fraser is not the first to speak of differential loan limits; similar propositions have been made by spokesmen for the building industry. The idea comes oddly from the Labour Party only because it seems so inconsistent with the party’s thoughts on regional development. In general, Mr Fraser’s suggestion would encourage growth where growth is already strong. The cost of building houses already seems to be highest in those places whefe commercial and iiftlustrial building is most active. If it were the policy of the Labour Party to encourage growth in, say, Auckland and Wellington, the differential limit would be an appropriate suggestion. In spite of rising costs house and flat building has been holding a remarkably high level—at least until recently. While central and local government building has dwindled, private building in the last two years has been steady or has expanded. The latest figures show that the number of building permits issued for dwellings throughout the country has been increasing since 1968. The trend continued throughout the first half of the present financial year. Some cities reported small declines in the issue of permits; nationally the picture was one of steady recovery towards the level—perhaps. too high a level for comfort—that prevailed in 1966. Price rises in recent months might well have discouraged house-builders and the trend might have reversed. If this is failing to meet the requirements of the community, prospective house-builders will not be helped by any scheme that would encourage further price rises. A first step must be to steady the growth of prices throughout the economy.