Hard News by Russell Brown


How the years flew by ...

Four or five years ago, there was a reliable social media set-piece associated with newspaper stories about couples struggling to buy in the Auckland housing market. A typical example was this 2012 story about buyers getting innovative to try and get the attention of vendors.

These twerps needed to lower their sights, said some people (who generally didn't live in Auckland). Well, no, said other people (who generally did live in Auckland), there's something worrying going on with house prices. These spoilt professionals needed to pick a cheaper suburb, said the doubters. But that just forces up prices and and displaces aspiring homeowners on lower incomes, said the worriers.

David Farrar at Kiwiblog had a different response to the story linked above in a post headed Herald omits key facts:

On a minor note, they are economically illiterate. There are some sounds reasons to have a capital gains tax. But reducing house prices is not one of them. A tax on housing will increase house prices, not decrease them.

But is it a coincidence that this random couple said that the solution is capital gains tax – the key tax proposal by the Labour Party?

Either the reporter was unaware that Kate has been the Womens vice president of the Labour Party for the last six years, or they decided not to tell the public this.

Kate was also a candidate for Labour in 2008 and 2011. The failure to disclose this in the article is appalling. Even worse it is their lead story online with the headline “Buyers begging for home”.

I presume – well, actually, I'd hope – that Farrar knows very well a capital gains tax isn't "a tax on housing". But his principal concern at the time wasn't the substance of the story, but in deflecting criticism of his party's studied inaction on the developing housing crunch. (Whaleoil wrote much the same post about the same couple, only nastier.)

The median house price in Auckland at the time the story was published in November 2012 was $530,000. In April 2016, the media house price in Auckland is nearly $1 million. And John Key, the Prime Minister and leader of the National Party, is proposing – sort of – a tax on housing.

Relatively wealthier buyers have been, predictably, displacing the relatively less wealthy in the interim. But it's actually worse than that. Duncan Garner justifiably rages about what's happening in Auckland's southern working-class suburbs:

If you want to know what's wrong with Auckland's housing market, then Otara is a poster-child for failure.

Auckland's 'working poor' - the hard working, taxpaying, minimum wage cleaners and factory workers - can no longer afford to live in the working class suburbs set-up to house them.

It's a bloody disgrace and it's wrong, wrong, wrong and wrong. We need to rally against this.

Houses are now selling for $600,000. This one in Otara is for sale right now and it's attracting attention from investors only. One investor has shown interest from Portugal!

Garner's column follows the publication of a University of Auckland study indicating that 80% of freestanding houses in Otara are now owned by investors, rather than the people who occupy them. (The figure for Papatoetoe West is 63%, a staggering 38-point increase since 2010.)

There's something stomach-churning about this. When we were a young family of renters in Grey Lynn in the 1990s, the funny old Tongan bloke next door got what was – then – a good price for his house on the Richmond Road ridge. He bought two adjacent houses in South Auckland  so his family could live together, with a bit of money left over, and he was happy about that.

That way exists no more. The Pasifika who once called Grey Lynn home are mostly long gone and the chance to benefit from the inner suburbs' gentrification was a generational one-off.

We do need property investors, large and small, because we need landlords prepared to rent property. But with the lamentable protections for tenants under New Zealand law, the near-wholesale transition of the city's most vulnerable populations to a lifetime of renting is deeply troubling.

We have relied more than we care to confess on capital gain on property in New Zealand. It was an important underlying factor in the relatively bountiful years of the last Labour government. Capital gain has sustained farming more than most people realise. But the current government has consistently opted for a minimal response to what has now clearly become an irreversible wealth transfer, a situation where investors benefit from leaving their residential properties empty in a city that desperately needs available dwellings.

The Prime Minister and his Finance minister are now basically sending up trial balloons on the problem. Perhaps we wouldn't be quite where we are if they and their  internet helpers had been more focused on the substantive issue than the politics these past five years.

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