Hard News by Russell Brown

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Hard News: Behind those Herald home-buying stories

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  • Matthew Poole, in reply to Ian Tinkler,

    That one stinks like fortnight-old fish. Too good to be true.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Mikaere Curtis, in reply to Matthew Poole,

    The first step would be to stem the record numbers of people arriving, full stop. The floodgates have been open too long, Auckland has been full for more than 20 years IMO. I agree that simply moving the record numbers of immigrants to the regions is a non-starter.

    One way would be to change the point system so that hardly anybody can get in, and then get the regions to bid for the numbers they want; this way immigration applicants get points for moving (and staying) in the region. Moving to Auckland (or other designated over-populated locations such as Queenstown) will reduce your ability to become a permanent resident/citizen.

    This approach will give the likes of Auckland some breathing room and we can start doing stuff like replacing non-character buildings with higher-density dwellings (apartments, terraces etc).

    This approach is a quick win, and if it turns out you got the settings wrong (i.e. start detecting unintended consequences), then it's also quick to adjust the policy settings.

    Of course, immigration is a major driver of GDP growth when you have a government of incompetent group-thinkers. National loves the "free" GDP growth plus IIRC each National MP owns 2.3 houses so they quite like the current settings because of the tax-free capital gains. And it's not their friends and whanau who are living in overcrowded houses, garages etc.Win/win for them, methinks.

    Tamaki Makaurau • Since Nov 2006 • 528 posts Report Reply

  • Moz, in reply to Matthew Poole,

    massively reduce the number of people moving to Auckland. ... How, exactly, would you do that

    I'd say via most immigrants live in Auckland, we want fewer immigrants in Auckland, we don't have the means to stop them moving where they like once they're here... ergo, we need to permit fewer immigrants.

    I don't think that would make anywhere near as much difference as the next suggestion: stop non-citizens or non-residents buying real estate. I'm not sure that that would be easy, and it might crash the market (especially if existing non-resident owners were required to divest)

    Sydney, West Island • Since Nov 2006 • 1193 posts Report Reply

  • Mikaere Curtis, in reply to Moz,

    I’m not sure that that would be easy, and it might make housing affordable again

    FTFY

    Tamaki Makaurau • Since Nov 2006 • 528 posts Report Reply

  • BenWilson,

    Limiting ownership to residents might help or it might not. Whether you are a resident or not you still need somewhere to live, so the presence of large numbers of people is going to drive up prices whether they can own property or not. Property becomes even more compelling as an investment when you can extract higher rents.

    That said I'm not against trying many of the things Mikaere says. I just don't expect the results to be seen rapidly. This problem is enormous and multifaceted. It's not just about whether people can afford to own property, it's gone on to whether they can even have a roof at all, at which point seriously perverse effects of all sorts of options have to be weighed up. You probably don't want to move people out of garages if the other option is the street. Putting up LVRs seemed like such a good idea, but it locked pretty much only less wealthy people out of the market.

    The movement of interest rates influences, as Matthew says above, 77% of the economy's capital, so it's no wonder they basically just don't. It would be too big a call for any bureaucrat to go making a settings change that stuffed around with billions of dollars.

    I don't think our political system can cope with this problem, TBH. I expect it to get worse and worse. Our way of running things is incremental and is thus incapable of systematic and major change involving several steps at once. So it's spiralling in on this very poor situation.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • llew40,

    Our way of running things is incremental and is thus incapable of systematic and major change involving several steps at once.

    Interesting and terrifying thought. Certainly the Government of the last decade has been in thrall to the notion of incrementalism as a virtue (with the successful navigation of things like the GFC regarded as evidence of the success of this step-by-step approach as a political philosophy).

    And it drives me insane - cos while I'm sure such a balanced, controlled inertia-promoting view of the world avoids nasty short-term shocks, it also clearly helps with the avoidance of dealing with 'big' issues. And our political system's long-term failure to deal with macro trends in housing, wealth inequality, media, environment, health, education, skills shortages, globalisation, an ageing population (basically you name it) is the biggest indictment of our legacy for future generations.

    And yet, and yet - we know it can be done. For all their faults, the 1984 Government took bold action to course-correct from the cul-de-sac of Muldoonism. We've seen our Government's make progressive law changes that reflect changing mores and modern contemporary social views. We've seen the emergence of young engaged politicians. So I'm hopeful things can change.

    Not for the first time in the last couple of days, I'm reminded of a John Clarke line, "if we don't know what we want, we'll get what we're given."

    Since Nov 2012 • 140 posts Report Reply

  • Kumara Republic, in reply to Matthew Poole,

    You ain't kidding. Nearly 77% of the national wealth is tied up in residential property (scroll down for the pretty horizontal bar graph titled "New Zealand Asset Classes").

    Does anyone have similar stats for the rest of the OECD? Google seems to be a bit scattershot right now. In any case, the following quote is far too true for the NZ housing bubble: "If it's too big to fail, then it's too big to exist."

    The southernmost capital … • Since Nov 2006 • 5415 posts Report Reply

  • Rich of Observationz,

    It's nothing to do with immigration.

    It's not a supply and demand thing. If it were, then at some point (as with out of season tomatoes or imported Japanese cars) a price level would have been reached where people weren't prepared to buy Auckland properties any more. By any rational standard, a shack in Avondale is not worth over a million dollars.

    It's a bubble, pure and simple. If you bought a house in Auckland on a mortgage at any point in the last 15 years, you've gained a flow of tax free money, often in excess of what you could earn by actually working. It's got politicians re-elected (first Clark and then, when it slowed a bit, Key) and distracted people from the increasingly precarious nature of their actual earnings from work. It's unsurprising that half the world wants to join in - the demand to actually live in shacks in Avondale might be limited, the demand for free money is infinite.

    And a crash *will* help. Prices will re-align with earnings as speculators are forced to bail. Hopefully, a government will be forced to implement radical policies to reboot the economy (e.g. building a bunch of high-density housing, a la Hong Kong). Either that or we'll get a Trump (one way to avoid that is to ensure National is in power when it all goes pear shaped).

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Kumara Republic, in reply to BenWilson,

    I don't think our political system can cope with this problem, TBH. I expect it to get worse and worse. Our way of running things is incremental and is thus incapable of systematic and major change involving several steps at once. So it's spiralling in on this very poor situation.

    Yep, landlords are powerful enough to basically be NZ's unelected upper house - a House of Landlords if you might put it. There's bound to be a weak spot somewhere, and it doesn't necessarily have to be a Great Depression-grade act of Murphy's Law.

    The southernmost capital … • Since Nov 2006 • 5415 posts Report Reply

  • Rich of Observationz, in reply to llew40,

    the 1984 Government took bold action to course-correct from the cul-de-sac of Muldoonism

    How many people were sleeping on the street in the Muldoon era - my partner remembers very few, but not sure whether than was because they had state houses and jobs sweeping railway platforms, or were locked in some dank institution?

    In general, I'd argue the post-1980's realignment of capitalism, here and elsewhere, has been fairly disastrous. It destroyed semi-productive work and created a bunch of useless jobs (e.g. selling electricity) that frittered away all the benefits of the technological improvements of the past 40 years.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Kumara Republic, in reply to Rich of Observationz,

    And a crash *will* help. Prices will re-align with earnings as speculators are forced to bail. Hopefully, a government will be forced to implement radical policies to reboot the economy (e.g. building a bunch of high-density housing, a la Hong Kong). Either that or we'll get a Trump (one way to avoid that is to ensure National is in power when it all goes pear shaped).

    Again, both sides of the House are playing chicken and secretly hoping it's not their side that's holding the bomb when it goes off.

    On another note: can Auckland's housing bubble be described as stagflationary, particularly when it causes skill shortages because people can't afford to live where the jobs are?

    The southernmost capital … • Since Nov 2006 • 5415 posts Report Reply

  • Kumara Republic, in reply to llew40,

    And yet, and yet - we know it can be done. For all their faults, the 1984 Government took bold action to course-correct from the cul-de-sac of Muldoonism. We've seen our Government's make progressive law changes that reflect changing mores and modern contemporary social views. We've seen the emergence of young engaged politicians. So I'm hopeful things can change.

    Regarding Muldoonism and Think Big, Muldoon's single biggest mistake was scrapping the Kirk Super Fund. One major thing that got thrown out with the bathwater by the Rogernomics reforms that followed, was the training programmes by the Ministry of Works and other defunct entities. The lack of such programmes has been cited as a partial enabler of Trump.

    The southernmost capital … • Since Nov 2006 • 5415 posts Report Reply

  • llew40, in reply to Rich of Observationz,

    Different argument, and one that would take a different thread (and one I essentially don't disagree with you on) but I was making the point that - for good or ill - our political system is capable of systemic/structural change - and that was an example.

    Since Nov 2012 • 140 posts Report Reply

  • william blake,

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11836445

    This short piece in the herald makes the point that the national party endorses the idea that not being able to buy a house in Auckland is a moral failure for the individual. Whereas 10% of the population owning 50% of the wealth is the real failure.

    Since Mar 2010 • 378 posts Report Reply

  • Russell Brown, in reply to Rich of Observationz,

    It’s not a supply and demand thing. If it were, then at some point (as with out of season tomatoes or imported Japanese cars) a price level would have been reached where people weren’t prepared to buy Auckland properties any more. By any rational standard, a shack in Avondale is not worth over a million dollars.

    It’s a bubble, pure and simple.

    It can be (and, I think, is) more than one thing. Rents haven’t followed the steep trajectory of house prices, which suggests that it’s not solely demand-driven.

    But they have gone up, and there are houses in South Auckland where 20 people live, and barely-habitable garages being rented out for top-dollar. And for years, Auckland’s population has grown faster than the housing supply. We’re starting to see strains on infrastructure too – traffic issues seem markedly worse lately.

    A fair proportion of that is internal migration to Auckland, which we can’t control. But we can control external migration – and with net migration at levels not seen before, it does seem there’s a case for adjusting the settings of immigration policy. Governments have done that periodically for a very long long time.

    I really do get weary of the Twitter scolds (mostly people who don’t live in Auckland) who instantly equate any suggestion of adjusting targets with outright racism. What they don’t seem to realise is that it’s the newest Aucklanders who suffer most from housing shortages. It’s not me. I’ve got a house and its value is only pumped up further by extra housing demand.

    Auckland • Since Nov 2006 • 22747 posts Report Reply

  • Russell Brown, in reply to Mikaere Curtis,

    Of course, immigration is a major driver of GDP growth when you have a government of incompetent group-thinkers. National loves the “free” GDP growth plus IIRC each National MP owns 2.3 houses so they quite like the current settings because of the tax-free capital gains. And it’s not their friends and whanau who are living in overcrowded houses, garages etc.Win/win for them, methinks.

    To be fair, The Clark government's economy did quite well out of immigration-fuelled GDP growth. But, yeah.

    Auckland • Since Nov 2006 • 22747 posts Report Reply

  • WH, in reply to Moz,

    I don’t think that would make anywhere near as much difference as the next suggestion: stop non-citizens or non-residents buying real estate.

    A friend of a relative recently showed a group of non-resident investors 32 residential properties in and around Hamilton.

    The group purchased 28 of the properties before flying home.

    Since Nov 2006 • 782 posts Report Reply

  • Mikaere Curtis, in reply to Russell Brown,

    True, but National are such wankers about it. Simon Bridges is on record saying this Auckland's housing affordability issues are only in the "top tier". And John Key's housing crisis of 2007 evaporated as soon as he took the reigns.

    I truly hope that Labour's time in the wilderness has sharpened their appetite to actually fix these issues; somebody has to do it and it may as well be Labour and the Greens who bite the bullet.

    Tamaki Makaurau • Since Nov 2006 • 528 posts Report Reply

  • Ian Dalziel,

    Moving 1000 social housing renters into home ownership could produce a net fiscal saving of $11.1 million over 15 years, BERL's data shows.

    http://www.stuff.co.nz/business/property/91450578/everyone-wins-when-lowerincome-families-own-their-own-homes-says-study

    Christchurch • Since Dec 2006 • 7886 posts Report Reply

  • Joe Wylie, in reply to Ian Dalziel,

    Moving 1000 social housing renters into home ownership could produce a net fiscal saving of $11.1 million over 15 years, BERL's data shows.

    This seems to have been conventional wisdom until well within living memory. Once the property market overheated it all appears to have evaporated as if it had never been. I recall two cases of domestic purposes beneficiaries who, thanks to low-cost loans specifically for people in their circumstances, were paying off their own flats.

    I don't know who administered these things, but they were definitely around in the pre-WINZ era. They didn't always succeed. One bit the dust in a forced mid-90s mortgagee sale after the unfortunate borrower took to feeding her repayments to the pokies. In the other case I recall, from the previous decade, a young mother diagnosed with an intellectual disability seemed to have sufficient supervision to be able to meet her commitments.

    flat earth • Since Jan 2007 • 4591 posts Report Reply

  • Sacha,

    Noted writes that foreign financing changes are having an impact.

    The Auckland property market is a giant Ponzi scheme that is kept alive by new entrants — domestic and foreign — piling in. As soon as that tapers off, the Ponzi is in deep trouble. The Herald is very interested for that reason in pulling in more punters and maintaining its property advertising revenue just as the government continues to bring in record numbers of migrants to goose GDP figures and prevent the housing market from collapsing.

    Ak • Since May 2008 • 19680 posts Report Reply

  • Matthew Poole, in reply to Moz,

    stop non-citizens or non-residents buying real estate.

    Or, at the very least, do what the Australians do and prohibit them from buying existing housing stock. If their money is welcome in the housing cycle it should be right at the genesis of a property.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Bart Janssen,

    What pisses me off about all of this, the articles, the banks, the real estate agents and of course the governments, is that it is all short term thinking.

    Nobody is willing to plan for the long term. Somehow we've come to accept that it's Ok for our governments to abandon the future as someone else's problem. That applies to both Labour and National. It essentially is our fault.

    Auckland • Since Nov 2006 • 4450 posts Report Reply

  • Rich of Observationz,

    Moving 1000 social housing renters into home ownership could produce a net fiscal saving of $11.1 million over 15 years, BERL's data shows.

    Why? On a narrow definition, sure, if the renters aren't paying the full costs of their accommodation, then getting them to move into houses that they fully pay for will remove the cost of that subsidy,

    But in Real World Economics, they're still living in a house, it still needs work to maintain it, there's the depreciation and the sunk cost of building. Having the house owned by the government or an individual doesn't change that - in fact, it probably means more work is being done to maintain them in the house (no economy of scale, unwork like real estate agency and insurance, higher financing costs through credit risk).

    All that's really happening is that the subsidies gone, so the renters get poorer and some non-socially housed rate taxpayers get richer.

    (There is of course the popular Thatcherite social engineering concept that making people buy houses transforms them into middle class families with a correct work ethic).

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Ian Dalziel,

    ...and then there's this...
    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11836313

    A grand mansion of almost hotel-like proportions is rising on Auckland's northern outskirts in job so big that a commercial-grade tower crane is swinging above the site.

    Christchurch • Since Dec 2006 • 7886 posts Report Reply

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