Young people looking to buy their first home in Auckland have to choose between a very small apartment in the city or a long commute, the Housing Minister says.
Housing Minister Nick Smith told Checkpoint with John Campbell that if he was in the position of a 30-something couple on a $120,000 household income, he would be "cautious" about buying in Auckland.
With the average house price in Auckland surpassing $1 million for the first time, it would be tough for first-home buyers, he said.
"Because I think there is a risk that the market is overheated - but I wouldn't rule it out completely," he said.
"Yes, there is that choice that that young couple is going to need to make as to whether their first home is in a smaller apartment in the city or whether they're making a choice [to live in] Takanini in the south or some of the suburbs up in the north of which people then have the difficulty in lifestyle of a rather long commute," he said.
He said there were some new housing developments in the central city that could be a good deal, but acknowledged that such houses tended to be very small.
"There was an excessive number of those super-small 40sqm apartments that were built back in 2004, the new rules do set some sensible rules there.
"Although, the new Unitary Plan [will] put some limits on that."
He said he would be putting new legislation through Parliament under urgency, focused on ensuring a smooth transition from Auckland's current special housing mechanism to the new Unitary Plan.
"The Unitary Plan coming into effect next week is a huge step forward for Auckland, I've got further legislation that i'm putting through Parliament today to make sure that that momentum and supply continues.
"If we did not put that law through that I'm proposing to take through all stages under urgency today it would mean that development - particularly involving about 8000 homes across Auckland - would stall," he said.
"I've continually said I won't rest until such time as we're getting that house price rise into the single digits."
However, he said it was impossible to say when that would be.
"If we look at that average house price it's comparable to what's in Sydney and Melbourne as an average."
Those places had higher average incomes, however.
"And it does make it big stretch for the average family to be able to afford to get into a home.
"And that is why the government's programmes, whether it be HomeStart and assisting people to get a deposit, [or] whether it be in terms of changing the mode of construction, so there are more apartments that central city people are able to get into under $650,000 where that HomeStart cap is."
He said there would be a difficulty in trying to lift wages in the city to keep up with the rising house prices to match.
"I think the difficulty with that is that you prevent a natural correction," he said.
"So there are some regions that I was visiting last week for instance in Whakatane, Ōpōtiki, who were just delighted by the fact that their house prices had lifted by 10 percent in the sense that it was now at a point where you're getting the first new houses built and redeveloping in communities like that.
"And so I think the government would be cautious of simply feeding the monster in Auckland by raising wages artificially just for that market, when to some degree some pressure can be taken off that market, whether it be in terms of housing, or others where some people for lifestyle regions are choosing to move to centres further afield.
"That is something that we shouldn't necessarily discourage.
"But nobody's questioning that a price at an average at a million dollars is a big stretch, although again I point out that 34 percent of house sales in Auckland in the last month were under that $650k mark and as a consequence were able to get a foothold into the market."