Hard News: How the years flew by ...
101 Responses
First ←Older Page 1 2 3 4 5 Newer→ Last
-
Mark Foster, in reply to
The Labour Party I love(d) and have voted for all my life are terrified of putting up any policy that might offend Auckland homeowners because it might make them unelectable.
This terrifies me.
I'm in the center-left and I watched the results of the last General Election with trepidation, and then despair.I will freely admit that a large reason that I recently moved to Wellington area was that Auckland was becoming non-viable due to cost-of-living (chiefly rent). (That and the Job I wanted was in Wellington). I'm earning a decent wage but i'm not in a DINKy household and I am instead supporting my wife and two children on my own - it's only recently i've had sufficient income to even opt-in to Kiwisaver. So i'm very much part of 'Generation Rent', it could be 5-10 years or more before I may even have a deposit and then I may be looking at being mortgaged beyond retirement age.
It's gotten to the stage where I avoid media coverage of the housing situation in Auckland because it's all negative, it's all depressing, and no-one in a position to effect change seems to care. I am an Aucklander, friends and family are there and I would like to be able to go home at some point in the future, but this seems impossible, at least until my children are supporting themselves.
'Majority Rules' seems farcical when that majority is crazy-slim (or non existent except for confidence-and-supply) and you have a large minority being disadvantaged severely, but no-one who sees it for what it is, has the critical mass to effect change. And when a large enough portion of the electorate find the current situation to their advantage, nothing will change?
I don't know how to fix it. And I can't just go to another country, because that's expensive and because i'll wind up moving somewhere with another set of problems, different, but just as bad. It makes me even sadder that NZ has just become the lesser-of-all-the-evils now, instead of a place where I truly see a prosperous future.
-
More suggested actions from a funds manager.
-
Sacha, in reply to
No housing, no healthcare
No housing, nobody to clean the loos.
-
BenWilson, in reply to
which just as the Reserve Bank is mandated to control general inflation, is expected to manage house prices: for instance to target a 1% annual drop for the next 10 years.
That would never happen!! No way would that get voted in by anyone who already owns a house. But it could be mandated to keep the inflation down, just like with all other inflation. Hell even if it the rules just changed so that it was counted as inflation, that would do the job. Because it bloody well is inflation, and it's extremely important inflation because it's on something that everyone needs, and forms the biggest part of their life's expenses, by far.
-
llew40, in reply to
It came about from the accident of history that was the 1987 Crash which turned a lot of people off shares for life.
This.
And the later myriad of finance company collapses where hundreds of thousands of kiwis lost their life-savings to sharks like Hotchin.
But I think more particularly we have had a taxation system that has for well over a decade now had a deeply entrenched bias towards property investment (Australia is in a similar situation) rather than other forms of saving. This has led to all sorts of perverse outcomes - many of them only now coming home to roost.
To be fair to investors (and I am not someone with multiple houses), should we actually blame them for putting their money where there is a demonstrable higher return, and low (ish) risk, when their experience of other forms of investment was so poor?. Capital flows to where there is least resistance.
-
It came about from the accident of history that was the 1987 Crash which turned a lot of people off shares for life.
I don't think so, have you ever tried borrowing money from the bank to buy shares like you can property?
This property bubble won't burst until interest rates go up.
While baby boomers with enough equity in their own homes can borrow $1million at a cost of ~$40k per annum it will continue.
While the Reserve Bank has a target inflation range between 1-3% set by the government you will continue to see low interest rates for the foreseeable future.
-
Bart Janssen, in reply to
That would never happen!! No way would that get voted in by anyone who already owns a house.
Which of course is the problem because any action that genuinely seeks to fix the housing problem WILL result in a drop in current house prices.
But I own my house and I would vote for policies that would drop the dollar value of my house. The real value would of course remain exactly the same. The reason isn't altruism at all it's the knowledge that this inflated house price market is damaging New Zealand - possibly irrevocably.
-
I don’t think so, have you ever tried borrowing money from the bank to buy shares like you can property?
Not quite true - funnily enough banks were more than happy to lend people vast sums of money to buy shares in the mid-80's
Now they are happy lending easy money for property (at least until if/when the bubble bursts) because risk is low, returns are predictable, the system allows investment capital from anyone (including non-residents) and the macro trends in Auckland suggest demand will continue to outstrip supply for many years ......
-
Hugh Wilson, in reply to
Glenn - my limited understanding (as I was 12 at the time) was that many people had increased their mortgages and put the $ into shares, and were thus really caught out when the market crashed .. this in turn perpetuated the glum economic times
Certainly nowadays banks would be unlikely to lend for the purposes of share purchases, but things were perhaps a bit looser 28 odd years ago (as they were in many spheres) - indeed, perhaps people didn't have to disclose their intentions, as the money was secured against the house in question
-
Paul Campbell, in reply to
This property bubble won’t burst until interest rates go up.
Yes this - what's really scary is that there are people buying into this bubble who don't have any experience of paying 10% interest rates .... and don't have a plan for what they'll do when they come back
-
Rob Stowell, in reply to
we have had a taxation system that has for well over a decade now had a deeply entrenched bias towards property investment
Yes. It's ridiculous we don't tax capital gains just like other income. And it will take all the remedies we can throw at it - not any one on its own - to turn things around.
But there's another wheel to the cycle - how in NZ it's both an effect and a major cause of wealth inequality.
"Investors" are the wealthy. Leveraging other property, or simply looking for a place to park excess money, property offers more security, and higher returns than anything else. And you don't need a dodgy law-firm and a office-full of tax accountants to discover a safe, legal tax haven.
So money pours in, and big money is made. A massive amount of that is a paper gain to one-house owner-occupiers. But while they are the majority, they mostly don't realise that gain. Investors tend to - either by selling or leveraging it.
So they become wealthier. And buy more. And wealthier. They can afford to pay more and more for new houses.
Fewer and fewer people on ordinary wages can afford a house; they are stuck renting; wages are stagnant; they have less and less disposable income. Small business suffers. So does the productive economy - as more people have less disposable income- making it even less attractive as an investment for those with money to invest.
More and more of the rent goes back into the property market, pushing prices - and ultimately rent - up further.
No-one in politics seems to be serious about changing the rules and breaking the cycle :(
(As Russell alluded - some of the same effect is seen in farming, with capital gains having been more significant than production in terms of wealth creation.)
Picketty would have a field-day looking at NZ. -
Luke Williamson, in reply to
14.5% when I first took on a mortgage. The house of course only cost $156k.
-
Bart Janssen, in reply to
Which is part of the problem but not the whole problem because the data strongly suggest a lot of money is coming into NZ from overseas as well.
Hence as so many have already pointed out multiple solutions are needed.
But as Ben has rightly noted voting for policies that reduce the value of your home seems silly. And all of those policies WILL reduce the paper value of our homes.
It's almost like we need a government that makes policy that is good for us, not merely popular.
-
Angela Hart, in reply to
It’s almost like we need a government that makes policy that is good for us, not merely popular.
Actual governance, not selfish (ab)use of power
-
But as Ben has rightly noted voting for policies that reduce the value of your home seems silly. And all of those policies WILL reduce the paper value of our homes.
This is only factor if you are planning on moving out of Auckland, as if all prices across Auckland are similarly constrained then if you move to another house in Auckland then you will not be disadvantaged.
Baby boomers planning on moving to a retirement property out of Auckland, for instance, are advantaged by Auckland prices being as high as possible.
-
Glenn Pearce, in reply to
Another factor is that the children of Boomers are quite happy for it to perpetuate because who do you think benefits when their parents eventually pop their clogs?
-
Glenn Pearce, in reply to
But it won't happen while the Reserve Bank Governor is constrained to keeping Inflation within the 1-3% range and the only tool he has is the OCR
-
David Hood, in reply to
But it won’t happen while the Reserve Bank Governor is constrained to keeping Inflation within the 1-3% range and the only tool he has is the OCR
It is not actually the Reserve Banks job- it looks after banking stability (trying to ensure the banks won't crash in the event of a downturn) and given house prices are outside the inflationary measures, it does not form part of the 1-3 range calculation.
The only reason people think the Reserve Bank has anything to do with it is that the government has been so very, very inactive that the Reserve Bank has gone "this could be so destabilising that we will do what we can so long as it does not conflict with our formal objectives".
-
Rich of Observationz, in reply to
perhaps people didn’t have to disclose their intentions, as the money was secured against the house in question
You can still do that - if you have a flex mortgage, then the bank don't know what you're up to with the borrowed capital.
But it doesn't give you any extra leverage, because you're using equity:
- I have a $1mln house with an $800k mortgage - if I up the mortgage to $900k and buy $100k of shares, which then goes up by 10%, I've made $10k = 10% of my investment.- if I put the $100k down as a 20% deposit on a $500k investment property, and that goes up by 10%, I've made $50k = 50% of my investment.
-
Zach Bagnall, in reply to
Another factor is that the children of Boomers are quite happy for it to perpetuate
They're really not. A family home divided 2.4 ways isn't going to save people close to retirement age who were never able to buy on their own while working.
-
llew40, in reply to
Well maybe, but I am kinda reluctant to criticise people for wanting to leave wealth and/or opportunity behind for their children, just because they are (to be honest rationally) using an instrument which is sooooo much more effective than any other means at their disposal at creating that wealth/opportunity. The means for such social equity and inter-generational distortion needs to be taken away.
-
Rich of Observationz, in reply to
The RB *is* expected to control inflation, indeed, that’s it’s #1 job.
However the capital cost of housing isn’t counted in the inflation statistic, so providing house price inflation doesn’t “leak” into general inflation, they currently don’t care from an inflationary, as opposed to banking stability, point of view).
(House price inflation hasn’t leaked much into general inflation because (a) people haven’t been selling their Auckland houses, moving to a rental in Dunedin and giving up work to live on the realized equity and (b) wage earners are sufficiently ground down that wages don’t keep pace with increased living costs).
-
Glenn Pearce, in reply to
ally not. A family home divided 2.4 ways isn’t going to save people close to retirement age who were never able
No but the family home, an investment property or 2 and the bach on waiheke might.
And they're certainly not going to vote for anything that will lower their future inheritance.
-
Glenn Pearce, in reply to
No but the family home, an investment property or 2 and the bach on waiheke might.
x 2 sets of baby boomer parents is some cases also
-
Safe and warm housing for all should be a right,not something that is left to the mercy of the market.My folks were poor, we lived in a State house until they saved a bit of a deposit to build, with the help of a low interest loan fixed for 25years from the government.....somehow we need to change the narrative away from poverty and the gap between the rich and the poor and concentrate on "excessive wealth"....i.e tax these people,make them pay their fair share and use it to build social and low cost housing in Auckland......we spent 2 billion on fast broadband,we spent 1.5 billion on tunnels to Pt Chev,and billions more on roads of" national significance"....if we had spent that on housing maybe 12 kids a year wouldn't be dying in Auckland from illnesses related to crap accomodation.......but hey it must be their fault or their parents fault for making poor choices eh ????
Post your response…
This topic is closed.