By Bernard Hickey

Prime Minister John Key says changing societal norms towards having families later and more people wanting to rent are more responsible for falling home ownership rates than the rise of rental property investors.

Key's comments came as concerns grow about a spike in rental investors buying houses in Auckland and beyond in recent months that has grabbed the Reserve Bank's attention and is sparking talk of a speculative frenzy and a bubble in Auckland.

Key said in an interview on RNZ this morning that falling home ownership rates were a result of changing societal norms, rather than necessarily a failure of Government policy around taxation.

He also said the issue of dealing with property investor lending was more one for the Reserve Bank than the Government.

Key denied that Core Logic's estimate of 46% of Auckland properties selling to investors (see more below on that) and the falling home ownership rate marked the end of a property owning democracy.

"It's true that home ownership rates have been falling since the mid-1980s and they've slowly come down a bit," Key said.

"It partly reflects a number of societal changes. People buying houses later, getting married later, having children later. Also, when you buy a place in a retirement village under the home ownership stats it doesn't show up because it's a license to occupy," he said.

Key said the investor buying was not new, and he suggested this was because people wanted to rent, rather than investors wanting to buy.

"It might be slightly higher than it was a wee while ago and that partly reflects the fact that there is a cohort of people for a variety of reasons that either wants to or does rent. I accept those numbers are a little bit higher," he said.

'Something for the Reserve Bank to look at'

Asked if was worried about the rise of the rental property investor share of buying, Key started talking about the prospects for Reserve Bank action.

"I think it's one of the issues that the Reserve Bank can give consideration to because they can target groups, just like they did with their LVR ratios, and they're looking at income ratios. They have the capacity to look at that," Key said.

Asked if the Reserve Bank could do more, Key said: "Potentially."

"One of the points the Reserve Bank has made to me around the LVR ratios is it's reduced in terms of bank balance sheets the number of loans that they have at the very high end. That's important if the system comes under a bit of stress that the bank balance sheets are in stronger shape. All I'm saying is that the bank has options available to it and it can consider those options," he said.

Asked again if the bank would do more, he said: "It is certainly on their radar screen. They are looking at it as well."

Key said the two year bright line test brought in last October may not be deterring some speculators, but they should be aware that the tax applies beyond two years if the IRD can prove intent to trade rather than hold.

"If your intent is to buy the property for a capital gain then you're subject to the tax. Even though they're being stung, it's not stopping them necessarily," Key said.

"I know people are sick of it, but all roads lead back to supply of housing. If you want to do more around borrowing in that area and the capacity for those people to access that market, the easiest road home there is through the Reserve Bank's actions."

'I won't use the bubble or crisis words'

Key declined to say if the Auckland market was a bubble or crisis.

"Prices are over-heated. I get really reluctant to put certain terms around things. I'm not going to spend this interview or any other interview to go into characterisations of it," he said. When people say the Government should do more, there is a long list of things we've done -- much longer than any other Government," he said.

"People had screamed at me to put on tax impacts because they said it would fix the market. We put on those tax rules around bright line test, more investigators, more people looking at transactions and you're now telling us that investors are in the market and others aren't," he said.

"My point is you've got to do a lot of things and our Government is doing a tremendous number of things. We might need to do more and we'll constantly consider doing that, and it's not like we've sat on our hands for the last few years and done nothing. It's everything from bright line test right through to Special Housing Areas, through to reform in so many other areas."

Speculative activity 'scary', says Core Logic

Meanwhile the share of property sales going to investors in Auckland rose again from 40% to 46% between January and May this year, Core Logic has said.

Core Logic's Jonno Ingerson told Q+A on Sunday that the speculative activity in the Auckland market was now looking 'scary' and that the most common length of time for Aucklanders to hold a property was less than a year. The two-year bright line test was obviously not enough of a disincentive, given the scale of the profits on offer allowed tax to be paid and still have plenty left over, he said.

He wouldn't call Auckland a 'bubble', but "bubbles are also characterised by the behaviour of the people in the system."

"And if you look at Auckland, the most common length of time for an Aucklander to hold their property for is less than one year, followed by two to three years, followed by one to two years, and then eight years, which is kind of normal in a market. Eight years is a distant fourth," he said.

"So you’ve got this activity happening in Auckland of people buying and selling property really quickly. Why? Well, it’s not just investors. There’s all sorts of people that go, ‘Because the market is increasing, I can make some money off it. I can move around in it.’ It becomes self-perpetuating. That’s the bit that as an economist looking at this you’d say, ‘That’s the bit I’m worried about, that speculation.’"

Ingerson said he would personally be nervous about investing at these levels in Auckland.

"Can it keep going like this? I don’t think so. Do I think it will calamitously collapse? No, but probably more likely we’re going to see a period in the future of there might be a short dip and a period of flat growth. It’s a risky time, I think, to be looking at getting into the Auckland market. There’s so much attention on it, so much intention to try and slow it down. Be careful," he said.