High interest rates no bar to building level

Press, 5 December 1985, Page 71

High interest rates no bar to building level

PA Wellington High interest rates have not had a marked effect on the level of building activity, says the Minister of Housing, Mr Goff. While he acknowledged the higher rates had caused difficulties for some facilities, they had restrained house price inflation, he said.

In the past building booms had been accompanied by spiralling house prices. In 1973 house prices rose 42 per cent in a year and 35 per cent in 1981-82, he said. This year, however, the comparable figure was 13.3 per cent less than the overall rate of inflation.

“First-home with the higher costs of

servicing a loan have at least been spared the rapid increase in capital value of houses, which would have dramatically increased the amount of capital they would have needed to borrow,” he told a housing seminar at Upper Hutt. Interest rates were, however, too high and needed to come down. Mr Goff said, however, that the Government would not intervene to regulate those rates down. Suppressing the symptoms of the problem rather than addressing- the causes had been grossly counter-pro-ductive, he said. It was the Government’s aim to reduce those rates in a sustainable and permanent way. A dramatic reduc-

tion in the deficit by the end of the financial year would contribute to that result, he said.

Mr Goff also said there was a housing boom throughout New Zealand with more than 24,000 building permits issued in the year to October 31. That was 10,000 more than the comparable period five years ago and 7000 more than the same period two years ago.

He did not expect, however, that permits would continue at their present level. There should be an easing in demand early next year, although the introduction of the goods and services tax in October might keep building levels up for a •longer period, he said.