The TLDR is that it's small potatoes in the big picture of Auckland prices, right? I mean what have we got for a small house? Something in the range of 50-100K in total? That's currently how much my place has been appreciating per annum.
I have to say that it’s pretty amusing that in economics, “stress testing” doesn’t involve actually putting anything under stress. Their “stress testing” is modelling the scenario with a spreadsheet. If only I could do that for software I wrote, I’d pass every stress test ever. Of course it would fall over in practice.
Well....yeah. But you can also do stress testing in architectural and engineering design using simulated computer models. Sure, materials are stress tested (whew).
Keep in mind Ben that the housing bubble is pretty much confined to Auckland. When (not if) that bubble bursts, the damage will most likely be confined to Akl. The housing market in the South Island – except in ChCh, cos earthquakes – is relatively stable and tends not to suffer the up/down cycles of more volatile markets.
You probably want to consider the relationship between house prices and consumer spending. Using the extreme case of Japan, the impacts on the hinterland were devastating, including 2nd-tier cities.
Yes, I don’t think the other regions would be unaffected by a financial catastrophe in Auckland.
But you can also do stress testing in architectural and engineering design using simulated computer models. Sure, materials are stress tested (whew).
Yup. Then the thing is actually built and used, which is the final and decisive stress test. But you can easily miss something, like what might happen to the superstructure when it’s subjected to being heated with burning aviation fuel from a full plane. Or the O-rings might just not be as robust as what the group determined to get the shuttle on schedule might talk each other into thinking. So you over-engineer it massively because the 10 or 10,000 people affected may have their lives depending on it. But when it’s a million people depending on it, we can happily say it’s a wash so long as unspecified financial measures could keep the banking industry afloat long enough to ride out the storm that could wreck the entire nation.
ETA: Hopefully it was clear that last sentence was sarcasm. I know full well that what would happen is that the banking sector would be bailed out by the taxpayer, because that's one of the only two scenarios that ever do happen. Either that, or the whole system shits itself big time. Both can and have happened.
The TLDR is that it’s small potatoes in the big picture of Auckland prices, right? I mean what have we got for a small house? Something in the range of 50-100K in total? That’s currently how much my place has been appreciating per annum.
If you're around the median house price, it's now more like $150k.
Yes, I don’t think the other regions would be unaffected by a financial catastrophe in Auckland
I think not, stinky puppy. Quite a lot of flow on would occur.
The cats and dogs could end up feeding us!
Gah! Now I'm thinking you were quoting Orphan Black..All I'm channelling here is a psychopathic Russian accent, but I'm getting memory interference.
I know full well that what would happen is that the banking sector would be bailed out by the taxpayer,
No, they would be bailed out by the depositors being 'bailed in' - see RBNZ for details on the OBR (Open Bank Resolution).
More on that wall of Chinese capital;
Due to the bubble in Canadian house prices and ensuing concerns over social dislocation, Canada's government shut down its investor visa program last year. Some 40,000 Chinese visa applicants with a minimum loan to governments of $C800,000 were handed back their capital.
"That's roughly $32 billion," says Tee. "The Canadian government said: 'We don't want your money anymore' and that capital is now hitting the Sydney market."
"There is a mountain of liquidity. China is bursting with flight capital. They can't go to the US, they can't get it into Singapore anymore, or Hong Kong."
red herring territory, yes.
Greek/EU deal plays out
Guardian notes China's current impact on residential real estate in UK. Canada and Australia.
Ben, we are talking about a specific situation where a house price bubble is effectively exogenously imposed on the domestic economy. You ask me to give you an example of a housing bubble bursting not being an issue, but I could equally ask you to find a situation where house price declines have caused issues without strong credit growth beforehand.
Regarding the transport blog link, the cited studies do not actually look at the effects of planning restrictions on house prices. Motu and Grimes don't at all, they are only looking at other secondary requirements e.g. Balcony sizes. They don't look at urban limits. The NZIER study looks at externalities for everyone in the city. The author of the post has equated this to house prices, but it is a totally different measure. The planning restrictions in Auckland are an absolute scandal.
Crikey writer Bernard Keane last year exposed the relationship between Chinese foreign investment and housing affordability for the farce that it really is. Citing the Foreign Investment Review Board's 2012-13 Annual Report, he stated the bulk of Chinese foreign investors were purchasing new dwellings, a fact that's unlikely to impact the property bubble, and that investors from the US and Canada were only slightly behind. "Hard to get a good anecdote about white people showing up to an auction and bidding successfully for a property. "Chinese" buyers, even if their families have lived in Australia for a century, are easier to spot and complain about," he wrote.
The relationship between spending and house prices is pretty tenuous. More likely there is a common driver rather than causality between the two.
Sacha doesn't Australia have a law that prohibits foreign house purchasers from buying existing dwellings? .... the only way they CAN buy one is by building a new one.
Mind you they also charge foreign real estate investors 30-45% capital gains tax
I know full well that what would happen is that the banking sector would be bailed out by the taxpayer, because that’s one of the only two scenarios that ever do happen. Either that, or the whole system shits itself big time. Both can and have happened.
Yes, there is an implicit guarantee. Much like SCF. We know that banks won't suffer in the slightest, which I think is appalling.
And the Japanese probably need it, but there are far more sensitive issues to consider there.
Now I’m thinking you were quoting Orphan Black
No, it was Cats and Dogs. Great film.
You ask me to give you an example of a housing bubble bursting not being an issue, but I could equally ask you to find a situation where house price declines have caused issues without strong credit growth beforehand.
I guess there's a first time for everything. Maybe there could be a giant correction one day that doesn't screw the economy in which it happens causing untold misery to the locals. But I wouldn't bank on this being that time, on effectively no evidence of it ever happening anywhere before. Nothing but the Reserve Bank's assurances that at least the banking sector would come through OK isn't really something I want to bet the whole country on.
“2. NO ONE is saying that collecting demographic data about this issue is a Bad Thing, per se.”
So how is that “demographic data” then supposed to look like? Maybe not even the Real Estate agencies have data on persons’ residency status? There have been ample comments by many people going to auctions, even by some working as real estate agents, that there is a large number of persons belonging to one demographic group. As that is so, how would you describe such a group then, by not naming it?
“3. What people who object to this move by Labour ARE saying is that:
a) The data is suggestive but inconclusive, particularly as the government isn’t really doing diddly to collect *actual* data;
b) Labour has framed the suggestive data in a really racist dogwhistley way. Not the Nats. Not the Crazed Social Justice Warriors of the Left. Not the sheeple. LABOUR.”
How are we supposed to get better than “suggestive” data, when the government does not even want to gather data, has no reliable data, when even the IRD has inconclusive data on the wider situation?
While I would have preferred a different way for the problem with Auckland house price inflation, with speculation and with buyer groups from off-shore to be presented, yes, Labour’s Phil Twyford did this, after receiving lists of data from an apparently leading Auckland real estate firm.
The person who leaked it will have risked her or his job doing this, and if we had not got it, we would never get any suggested idea about who the likely off-shore buyers may be, apart from anecdotal evidence.
And we know that the government and vested interest parties rubbish anecdotal evidence. Phil Twyford has in my view not put all Chinese into the same drawer, he merely pointed out, that it appears to be mainly Chinese buyers from off-shore who help push up prices for real estate here in Auckland. He further clarified this with comments on Monday.
I am afraid that your over-reaction just shows your own personal oversensitivity, which is fair enough, and thus a warning voice, but I still do not get it, why people cannot accept that it seems quite logical, that of the many new rich Mainland Chinese, and some perhaps from Hong Kong, Singapore and other places, take opportunities to invest in Auckland housing, some simply to make gains, even leaving homes stand empty for periods.
Sadly the truly “racist” will try to exploit the information that was presented, but I do not believe that Phil Twyford is one into “dog-whistle” politics, he has never given me nor many others I know that impression.
As the government does all to keep true figures away from the public, does not even make any effort to bring in a buyers’ register, there is NO other way to get and present some indicative data, than to do it as Phil Twyford did.
If you have any better ideas and solutions, perhaps present them to us.
That’s the weak part of his post, for sure. Attributing the problem to consents and zoning is pretty much an unsupported assertion.
Bureaucracy gone mad? Or NIMBYs, especially the 'Epsom property rights' kind?
Sacha doesn’t Australia have a law that prohibits foreign house purchasers from buying existing dwellings? …. the only way they CAN buy one is by building a new one.
Mind you they also charge foreign real estate investors 30-45% capital gains tax
Andrew Little just mentioned on Morning Report that those of Chinese ethnicity in Auckland have lower than average household incomes - so are unlikely to be buying up the Auckland real estate. There is another issue there - of ethnicity and poverty. Also indicates large inequality within the Chinese community - I wonder whether the margin between the very poor and the very rich is wider than for other ethnic groups?