Hard News by Russell Brown

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Hard News: How the years flew by ...

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  • Rich of Observationz, in reply to Australopithecus,

    Something like that, with ordinary account holders and (former) home owners bailing out the rich.

    An alternative would look something like:
    - nationalise and consolidate the failed banks
    - raise emergency public funds with a one-shot tax on property worth over say $1mln
    - offer home occupiers in negative equity the ability to swap to a lifetime tenancy and be protected from recourse over their uncovered debt
    - introduce broad based, collectable taxes on wealthy individuals and corporates

    In other words, take the money back from those who stole it

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

  • Jim Cathcart,

    Unfortunately the debt overhang from the pre-GFC period was never allowed to be resolved globally, particularly the purging of the financial sector. In the case of Australia and NZ, it seems as equally as bad as it ever was. The general understanding was that the Australian banks were prudent, yet most people are unaware that the banks in Australia were bailed out by the Federal Reserve.

    http://www.moneymorning.com.au/20101203/nab-and-westpacs-secret-bailout-revealed.html

    And no, this is not conspiracytheory.com If you download the spreadsheet from the Federal Reserve.

    Also, most NZers are unaware that in the event of a financial collapse, deposit holders are the first to go under our law (there are no deposit guarantees). Savers foot the bill before shareholder. Wholesale funding has primed this bubble. Nobody in the mainstream media has addressed this.

    Since Nov 2006 • 228 posts Report Reply

  • Kurt Mastrovich, in reply to Rich of Observationz,

    To an extent. What struck me and we have had similar experiences in other cities we have done it is that these apartments are in places where there aren't necessarily hotels or backpackers, so quiet neighbourhoods. But you can head the roller suitcases in the halls and then there are all the issues with confusing access and rubbish etc.

    Hotels and Backpackers tend to be a concentrated facility and are at least a known quantity, Airbnb as good as it is, can be very random for all who experience its effects.

    Auckland • Since Aug 2010 • 13 posts Report Reply

  • Kurt Mastrovich, in reply to Jim Cathcart,

    Also, most NZers are unaware that in the event of a financial collapse, deposit holders are the first to go under our law (there are no deposit guarantees). Savers foot the bill before shareholder. Wholesale funding has primed this bubble. Nobody in the mainstream media has addressed this.

    Count me in that group, good lord! Even Indonesia has deposit guarantees.

    But then it does seem like a somewhat even pro/con argument for or against.

    Auckland • Since Aug 2010 • 13 posts Report Reply

  • Russell Brown, in reply to Jim Cathcart,

    In the case of Australia and NZ, it seems as equally as bad as it ever was. The general understanding was that the Australian banks were prudent, yet most people are unaware that the banks in Australia were bailed out by the Federal Reserve.

    That's fascinating. I'm not so bothered by two banks seeking temporary credit during the worst of the crunch – that's what lenders of last resort are for – but the fact that the media narrative was so different is quite unnerving.

    Auckland • Since Nov 2006 • 22830 posts Report Reply

  • Andre,

    The Hanover collapse was openly talked about by business journalists and insiders for six months before it was mentioned in the press here. If anyone had done so they would have been sued for all they were worth.

    New Zealand • Since May 2009 • 365 posts Report Reply

  • Mikaere Curtis, in reply to Russell Brown,

    This might be me in, say, seven years’ time. But I’m happy to argue against my own interest in this case.

    Me too, I've owned in Morningside since '98. This time last week I was commenting on a GenY friend's FB post in which she was lamenting that she was realistic about her chance of owning a house in Auckland was pretty much zero.

    National keep saying it's a supply issue. I say FUCK THAT, it's a demand issue, Auckland is full, nobody should be let in who isn't a citizen. After 10 years, and lots research and evidence then I'd be happy to reconsider.

    Tamaki Makaurau • Since Nov 2006 • 528 posts Report Reply

  • tussock,

    There's a book somewhere about how if you hold inflation under 4% for long enough, no one can afford houses any more. That it's true in every part of the world for every part of history. It has always been fixed by deliberate redistribution, or revolution and murder, or a giant bunch of wage inflation (often following said revolution and murder).

    NZ has held inflation low since the neo-liberal reforms of the 80's, over 30 years, and that's long enough that no one can afford houses any more.

    Quite simply, wages follow inflation, but asset prices don't. Low inflation means low wages compared to asset values, and an ever smaller clique of asset owners who lord it over the rest of the country and use their position to decide how everyone has to live.


    We have an additional bubble on top of that because "everyone knows" house prices are going up so "everyone" is borrowing to put them up even further. Pyramid schemes are good like that, though eventually all the banks collapse and everyone loses their jobs all at once. Meanwhile the state keeps roofs over the heads of the workers by paying most of their rent for them, allowing even rents to rise out of ordinary people's reach and push house prices even higher.


    But in Holland after WWII, they had not enough houses and a bunch owned by too few people who felt no great need to fill them, so they just made a law that if your house had more bedrooms than you should use (according to the state inspectors and law) then you had to either find renters to fill the extra or be forced to sell it at short notice to someone with a big enough family to fill it at auction, and go move into something smaller. The forced sales of most of the housing stock to large families made prices realign to their contemporary wages rather quickly, and obviously no one paid more than that for the smaller ones.

    Or in NZ, in the 1880's, where the big landholdings of wannabe lords were broken up by the state by virtue of charging a vastly higher %ge rates on larger holdings, making them nonviable until split to whatever size the state approved of. Which is why our farms since have always been limited in size to that manageable by a single family, even though that law is long gone and a few people are trying to accumulate vast estates run by poorly paid laborers again.


    So, yeh, redistribute the wealth (as in, property), face revolution, or get some very serious wage inflation going. The plan seems to be to keep the bubble going a bit longer yet and leave a bigger problem for the next government. Deckchairs on the Titanic and all that.

    Since Nov 2006 • 610 posts Report Reply

  • Zach Bagnall, in reply to tussock,

    Deckchairs on the Titanic and all that.

    The iceberg is 20 years away but it's going to be ugly.

    Returns of 3% instead of historic 7-8% (NZ Superfund underfunded)
    + a generation reaching retirement with a mortgage, or worse, still renting
    + being told to work longer while opportunities for anyone over 50 rapidly evaporate.

    Is that too pessimistic? At least one of those factors can be addressed by govt if they choose to.

    Colorado • Since Nov 2006 • 120 posts Report Reply

  • Worik Stanton, in reply to Mikaere Curtis,

    National keep saying it's a supply issue. I say FUCK THAT, it's a demand issue, Auckland is full, nobody should be let in who isn't a citizen. After 10 years, and lots research and evidence then I'd be happy to reconsider.

    It is patently a supply issue and a demand issue. How are you going to keep people out of Auckland? Dawn raids? Internal passports?

    Otepoti • Since Nov 2007 • 41 posts Report Reply

  • Joe Wylie, in reply to Worik Stanton,

    flat earth • Since Jan 2007 • 4593 posts Report Reply

  • BenWilson, in reply to Glenn Pearce,

    I wouldn't say I'm stoked about the thought of both of my parents needing to die before I can take full advantage of Auckland property prices. I want them to live forever.

    No but the family home, an investment property or 2 and the bach on waiheke might.

    You've got my number there, precisely. But I'd still vote for measures I thought were realistic to control runaway prices.

    Auckland • Since Nov 2006 • 10650 posts Report Reply

  • BenWilson, in reply to Tom Semmens,

    In the end, probably the only economically sane solution is policies designed to halt the upward price spiral without an actual downward correction, and some mild inflation combined with a wages policy that encourages actual wage growth.

    I almost totally agree. I'd just say that earnings targeted should not be limited only to wages. We should also be encouraging salary, small business, and benefit growth.

    It's another place where a UBI rears its head. Long touted as insane because it could be inflationary, it could now be seen as a good solution because it could be inflationary. It would inflate what matters, people's buying power.

    Auckland • Since Nov 2006 • 10650 posts Report Reply

  • Lucy Telfar Barnard,

    OK, I have thought this through at great length (the length of my shower just now), and here's my proposal.
    1. Ban foreign ownership of residential property
    2. Ban company ownership of residential property (so no more shell companies or LAQCs or any other entity other than a human or humans owning a property)
    3. As per some other country (Korea?) that someone else on here mentioned, increasing LVR restrictions depending on the number of properties owned or part-owned. So 10% for one property, 35% for two, 66% for three, 100% (i.e. no loan) for four or more.
    4. Broad changes to tenancy rights and protections (a different, but connected issue).

    By the way, if central government won't act, there are things councils could do round the edges
    - Councils could also charge a land tax, since that's more or less what rates are already.
    - to address the unknown-anecdotal-sized problem of houses sitting empty, Councils could increase rates massively, but simultaneously provide massive discounts (ie. back to current cost) for property owners who can show that the property is occupied.

    Wellington • Since Nov 2006 • 585 posts Report Reply

  • David Hood,

    I just want to go on record I grow increasingly of the opinion it is primarily a financial bubble not a population pressure issue.

    While it is true (I assume) that Auckland needs to build 75000 extra homes to have the same kind of people per household as the rest of the country, it is also true that Auckland needs to build about zero extra homes to have the same kind of people per household as Auckland did in 2001 (approximately zero, there are a few small changes in household composition over the period). For decades the provinces have been getting older and emptying out, so comparing the household sizes of the places people are moving from as the reference point does not give the whole picture.

    Looking at it as a financial bubble, the issues become things like who has access to what financial resources and how attractive tulip bulbs are as a store of money.

    Dunedin • Since May 2007 • 1445 posts Report Reply

  • Ian Dalziel,

    ...and then there's chaps like this real estate agent tosser who don't help the equation...

    A real estate agent helping two pensioners sell their home has been sacked after buying the property for $530,000 and selling it less than four months later for $1.255 million - a profit of $725,000.
    South Auckland Barfoot & Thompson agent Aaron Hughes is now under investigation by the industry watchdog and could face a legal claim.

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11627304

    Christchurch • Since Dec 2006 • 7943 posts Report Reply

  • Alfie,

    Steve Braunias' Secret Diary of Auckland housing boom. I love his characterisation of John Key.

    Dunedin • Since May 2014 • 1435 posts Report Reply

  • Jim Cathcart,

    Good article about taxation policy and paying rent to toddlers in Australia.

    http://www.abc.net.au/news/2016-04-29/knight-game-of-homes/7369312

    Since Nov 2006 • 228 posts Report Reply

  • Jim Cathcart,

    "Global recessions tend to begin when newly popular narratives reduce individuals’ motivation to spend money."- Robert Schiller

    http://www.nytimes.com/2016/05/01/upshot/listen-carefully-for-signs-of-the-next-global-recession.html?_r=1

    I would say that someone in the govt understands very well the impacts that house prices have on consumer spending. That is not to say that Auckland house prices are driving the consumer economy in Auckland, but to understand the impact on spending if people "feel" that the value of their house has decreased by $1K is extremely important. And this is the big grey area. I don't know of anyone in NZ who is doing qualitative and quantitative research into this (unlike the wonderful Digital Finance Analytics in Australia http://www.digitalfinanceanalytics.com/)

    Since Nov 2006 • 228 posts Report Reply

  • David Hood, in reply to Jim Cathcart,

    And this is the big grey area.

    You could get a quick sense of it by inventing a measure like median house price to electronic card spending (the later is on Infoshare on StatsNZ).

    Dunedin • Since May 2007 • 1445 posts Report Reply

  • Kumara Republic, in reply to David Hood,

    I just want to go on record I grow increasingly of the opinion it is primarily a financial bubble not a population pressure issue.

    While it is true (I assume) that Auckland needs to build 75000 extra homes to have the same kind of people per household as the rest of the country, it is also true that Auckland needs to build about zero extra homes to have the same kind of people per household as Auckland did in 2001 (approximately zero, there are a few small changes in household composition over the period). For decades the provinces have been getting older and emptying out, so comparing the household sizes of the places people are moving from as the reference point does not give the whole picture.

    Looking at it as a financial bubble, the issues become things like who has access to what financial resources and how attractive tulip bulbs are as a store of money.

    Yep, in any case, fiscal bubbles are a common symptom of rentierisation or market-cornering.

    The southernmost capital … • Since Nov 2006 • 5429 posts Report Reply

  • Kurt Mastrovich, in reply to Lucy Telfar Barnard,

    2. Ban company ownership of residential property (so no more shell companies or LAQCs or any other entity other than a human or humans owning a property)

    I agree with a lot of your points but despite obvious abuses of the LTC (the new name for LAQC) regime does have its merits and with the name change there was some tightening up.

    I'm obviously biased as it's what I use for rental property outside of Auckland. For 8 years I have lived overses and for 7 years I was working a relatively dangerous job that didn't come with a retirement plan. I wanted bricks and mortar as a psyhcological security. Being overseas I didn't want to deal with property managers as past experience taught me they cared neither for the tenants nor the owners. My Father is my property manager and I am actively involved making sure my tenant is happy and actively improving the place over time.

    For a number of very legitimate reasons a LTC made sense for me. Perhaps there can be more tweaking but it is so much more than a zombie robot vehicle. :)

    Auckland • Since Aug 2010 • 13 posts Report Reply

  • Lucy Telfar Barnard, in reply to Kurt Mastrovich,

    My reason for banning LAQCs/LTCs/company ownership of property is only because if you don't, people can get round my proposed LVR restrictions by setting up a portfolio of shell companies each owning one property. It's not the vehicle themselves I have an issue with.

    Wellington • Since Nov 2006 • 585 posts Report Reply

  • Moz, in reply to Lucy Telfar Barnard,

    people can get round my proposed LVR restrictions by setting up a portfolio of shell companies

    It might be simpler to require that beneficial owners be identified. I suspect that alone would collapse many of the problems.

    It would probably involve punitive taxation of money moving to or from vehicles with no identified beneficial owner and quite probably a wealth tax. That way at the end of every financial year NZ taxpayers would have the choice: claim their assets in vehicles here and overseas and pay tax accordingly, or get taxed vigorously when they move money in or out of said vehicles. The sequence I see is: send money overseas to tax haven = 20% tax payable; bring that money back = 20% tax payable; bring asset purchased overseas with unverifiable funds back = 25% tax (so you bought if after paying 20% tax on the funds).

    But the huge advantage of that for the honest citizens is that there would be no change. Kurt would be like "dat, dat my house", John Key would be all "who? No, no, nothing to do with me" but then when he goes overseas and someone gives him an expensive "gift"... he pays 25% of the value as tax, or he doesn't bring it back. Actually, that would also help with corruption :)

    Sydney, West Island • Since Nov 2006 • 1229 posts Report Reply

  • Paul Campbell,

    I sort of like that - but it does screw me over - in a bunch of ways:

    I worked overseas for 20 years and saved a lot for my retirement (and paid my taxes rigorously in both countries), when I bring that money back to NZ I don't particularly want to lose 20% of it.

    Equally I run a small company, it mostly earns overseas currency, most of which comes into NZ, is paid to me and I pay tax on, however a small amount is kept in overseas funds (to avoid changing currencies twice) and is used to purchase supplies or capital equipment for the company (and show up on the balance sheet for tax purposes) - that equipment is equivalent to Key's "gift" above ... it does show up on my (corporate) taxes, but at the end of the financial year.

    I manufacture in China - that essentially involves sending money overseas to a random entity, often in Hong Kong (nominally another tax haven), I'm not sure how this looks different (to say the Reserve Bank) from someone trying to hide money from the IRD.

    Really I simply think that the all the countries need to get their act together, and change their laws so that money stored in a tax haven is still taxable - that means agreeing on a common, fair tax regime that applies to all - Apple gets taxed on its NZ profits in NZ, US profits in the US, etc exporting profits to avoid tax is simply made illegal.

    Dunedin • Since Nov 2006 • 2620 posts Report Reply

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