Island Life: Dick Headley: noun or adverb?
29 Responses
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Let's run a sweep: how many more news stories will we get this year about the unaffordability of houses without hearing the dreaded words Capital Gains Tax?
We'll never hear it from these sources, because fundamentally they don't give a monkey's about whether Joe and Jill Middle-Income can afford their first home. Hugh Pavletich and his buddies at "Demographia" are lobbyists for suburban property developers who are keen to make profits as quickly and easily as possible by turning rural land into a sea of McMansions, without having to pay for all that pesky infrastructure. They were at it exactly a year ago, and they're at it again.
I see some momentum gathering for the argument that the solution might be to stop the artificial land-rationing imposed by planners in cities such as Auckland. "Look at Houston," they say "It just keeps expanding outwards, without limitation, and houses are much more affordable there."
Oh God, I hope not! Just how "affordable" will it be to live on the outskirts of Houston (or north Auckland, or the Kapiti Coast) when petrol prices start going up for good? Whether or not practical and geographic limitations (such as water) make it harder here is beside the point: sprawl is unsustainable.
And I wonder whether the reason that Houston is apparently so affordable is that all that mind-numbing placeless suburbia has turned it into a soulless shithole that no-one wants to live in?
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I don't know how Sydney fares in terms of sprawling, but I am curious as to why house prices there are dropping while in Auckland (and presumably the reset of the country too) are rocketing.
Auckland has plenty of sprawl already, I'd have thought. Not much smaller than LA, area-wise, and it'll only take a trip up to Albany, Glenfield or the Eastern Bays to realise that that's not desirable development. The Botany area's a shocker too.
That said, people have to have roof over their heads, and ideally, not be forced to live in illegally converted pig sties in the Waitakeres.
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I'll tell how affordable Houston's urban sprawl is: Around 3050 American soldiers and half a million Iraqi's and climbing.
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How can anyone's Top Ten Bush Moments be missing can't find the door?
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that said, people have to have roof over their heads
Absolutely, and I agree that we need many more homes. They just don't need to be spread out on quarter acre sections for as far as the eye can see (and the SUV can travel).
It's a pity that NZ doesn't have much of a tradition of urban (as opposed to suburban) living. Most of the recent medium- and high-density developments are developer-driven rather than design-driven, so they don't exactly set a good example either.
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Regarding the reason Sydney prices are dropping, they aren't. The rate of increase is slowing down slightly. A lot of the more rednecky variety are also moving to peripheral suburbs and places like Newcastle, where there is more industrialised work and fewer "Lebs" to deal with.And it must be said the traffic in Sydney is a bitch.
Anyway, if you check the study, the price of housing in Sydney is still way more per median wage than the prices in Auckland - 8.5 times the median income, compared to 6.9 times in Auckland.
I'm totally with Tom in that there needs to be more design-led and sustainable dense urban housing going on. Why on earth build a dozen leaky townhouses on a couple of acres, when if you built up a bit and exercised some creativity, you could house as many if not more, and still have some green space for landscaping.
How's that "eco-village" in Henderson going these days? There's a model of medium-density housing that's a lot nicer than yer typical townhouse battery-farm.
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And while we are at it - the media in both parts of Australasia - having gone after town planners and immigrants - have conspicously failed to discuss the role of lenders in generating the housing price boom.
Obviously, money has become easier to come by (for some) for property investment but I also would be interested to see an analysis of the growth of advertising done by lenders and other property industry players over the last ten or so years. Sure it has always existed, but my hunch is that it has really got more intense of late...
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Are there any stats that measure something like the number of bedrooms or the square metres of space available per head of population?
I'd be very intererested to know that, because it would help tease apart the extent to what price is being driven up by actual shortage vs speculators.
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Certainly there has been talk in Australia of the strategic delaying of the release of developments by their developers to maintain price levels...
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Are there any stats that measure something like the number of bedrooms or the square metres of space available per head of population?
Probably bedrooms per head: it's possible to derive overcrowding indices from census stats, so when the detailed 2006 data is released (in a month or so) it'll be possible to analyse where the overcrowding is. It's important to differentiate "overcrowding" from density: the former (as you say) is a measure of people per bedroom or per interior square metre; the latter is a measure of people per hectare of land. Some of the most overcrowded areas are in places with very low population density by international standards: the problem isn't high density housing but a lack of it.
I'd be very intererested to know that, because it would help tease apart the extent to what price is being driven up by actual shortage vs speculators.
One thing that should help tell you that is the ratio of house prices to rentals. When house prices go up faster than rents, it's a fair bet that they're not being driven by demand for a place to live, but by an expectation of capital gains.
It always seems silly to me that the cost of paying off a mortgage is included in the CPI: that's not the cost of living but the cost of investing. When the Reserve Bank puts up interest rates in an attempt to slow down inflation, it's immediately feeding into one of the components of inflation itself!
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Point 1,
I think adverb becausethey are just playing into the hands of the beaurocrats. Shouldn't it be about what is best for the child not mums dads or anyone elses ego. Here's that website that the state is trying to shut down, some horror stories both against the agencies and their functionaries and some of the poor unfortunates who just cant articulate themselves to properly tell their story and come off sounding... well judge for yourself.http://cyfswatch.blogspot.com/
Point 2,
none because it already is being mentioned herehttp://www.nzherald.co.nz/feature/story.cfm?c_id=1501154&objectid=10420280
Point 3,
Telecom are a monopoly they can and will do as they please, although if you call and rant a bit you can get them to do some stuff they said they would albeit grudgingly, with a pseudo telling off from the one human that works there.
Point 4,
Almost every night they have a segment called great moments in presidential speeches, it opens with JFK and FDR then cut to furious george, hilarious.
Point 5,
You're not really going to complain about pollies scoring cheap points off the back of something they take completely out of context are you? That's their stock in trade. Where would winston, jim, gerry trevor and co get their material from?
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A lot of the outer Sydney suburbs are close to being slums - being too far to commute to get to decent jobs in the city.
There are not many fewer houses in Greater Auckland than people wanting to live in the area - lack of properties isn't what causes house price inflation, it's more a classic speculative boom as people pile in in the expectation of returns.
To me the solution to house price inflation is to start with a target (say a 2% real decrease each year until affordability is regained). Then, there should be a self-regulating mechanism of CGT, GST on mortgage interest and a stamp duty or similar on house sales to bring prices down - the longer they keep going up the bigger the tax disincentive until the market tips.
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Tracy, I'm confused now, having read this SMH piece.
Seems prices are going up in some areas - a great deal too - and falling in other parts of Sydney.
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When house prices go up faster than rents, it's a fair bet that they're not being driven by demand for a place to live, but by an expectation of capital gains.
Quite. Or you look at the yield on rental properties. I can't see any around where I live where the return on your capital would as good as a high-interest savings account, unless you were heavily geared.
A few months ago, I visited an Auckland accountant, to see whether he would be a good person to help manage my affairs.
One of his suggestions was that I should buy rental property.
"But why would I do that?" I asked. "Isn't the yield on rental properties less than I would get from the bank?"
"Oh, nobody buys for the yield - you buy for the capital gain! Why, houses double in value every 10 years!"
He did not get my business, of course. But it's conversations like that which make me think we are in a spec bubble with a hard landing ahead.
(And of course if house prices were guaranteed to double every 10 years, that's only about 7% or 8% per year, hardly a stellar return. They don't of course.)
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Tom Beard,
Thanks for the post at the top. Couldn't agree more. People didn't seem to like petrol creeping towards $2.00/litre last year. I wonder how are they going to deal with $6.00/litre petrol within five years?
It's a pity that NZ doesn't have much of a tradition of urban (as opposed to suburban) living.
I don't think that is actually true if you look back to before the "car is king" era. The older areas of central Auckland didn't have large sections. They had modest front and back gardens and the houses were close together. In Ponsonby there are still lots of pre-villa era two-story cottages.
Until 1959, Auckland had an excellent tram network. Then they scrapped it, built the harbour bridge and started the cult of the motorway. Imagine if all that land in Grafton and Newton gullies had been used for medium-density housing, parks and light rail corridors? Instead, we have an eysore, permanent gridlock and enough pollution to put us up there with the worst cities in the world. Clean, green AKL. Yeah, right.
I highly recommend this report:
Backtracking Auckland: Bureaucratic rationality and public preferences in transport planning
Paul Mees and Jago Dodson
April 2006New Zealand's largest city is also one of the world's most car-dependent; conversely, public transport usage rates are among the lowest in the world. These trends were reflected in, and we argue caused by, one of the most extreme automobile oriented transport policies pursued by any major city between the 1950s and 1980s...
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I don't think that is actually true if you look back to before the "car is king" era. The older areas of central Auckland didn't have large sections. They had modest front and back gardens and the houses were close together. In Ponsonby there are still lots of pre-villa era two-story cottages.
True: that's why I said we don't have "much" tradition, rather than none. There are some good city-fringe neighbourhoods in Wellington too (Mt Vic, The Terrace, Mt Cook) with decent density, but I'm not sure they count as "urban living" compared to inner residential parts of London, Paris or Barcelona. Tall, narrow detached houses, with small gardens, can produce quite reasonable densities while still appealing to families (as I wrote about last year). When I talk about "urban living", though, I'm thinking more about terraced or multi-family dwellings.
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BTW,
this press release masquerading as a news article in the Herald makes me wonder if the Herald editors are stupid or just morons. So, when did "the world" get reduced to just six countries--all English-speaking, of course. I must have missed that news.
The survey found Australians had the world's most pervasive housing affordability crisis
Canadians have the world's most affordable houses
The survey found many people living in North America were much better off than New Zealanders. Their housing markets are the world's more affordable.
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It always seems silly to me that the cost of paying off a mortgage is included in the CPI: that's not the cost of living but the cost of investing. When the Reserve Bank puts up interest rates in an attempt to slow down inflation, it's immediately feeding into one of the components of inflation itself!
Tom, I think you will find that interest costs for residential owner occupied housing have *not* been included in the CPI since 1999. I know that section costs are definately not included, as the land is not "consumed", and I am fairly sure interest is also excluded, only the actual cost of the dwelling being purchased is included,
The fact mortgage costs used to be in the CPI, was reason the reserve bank used something called CPIX as its inflation gauge in the 90s, to excluded such feedback
according to Stats NZ in 2001
The CPI was last rebased for the publication of the September 1999 quarter. Additionally, there was also a change in the goods and services included in the CPI. Interest costs and housing section prices were excluded, as an index excluding these items was deemed to be more consistent with the aim of measuring inflation, which is now recognised as the principal purpose of the New Zealand CPI. Information about the scope of this work can be obtained from the Statistics New Zealand website.
from stats NZ developments in Price indices
This followed the 1997 review,(in which there was alot of gnashing of teeth over this issue) another review happened in 2004 but I am fairly sure it did not change the treatment of this item
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The boomers have got us into a nice little hole. Residential property is seen as safe only because they all want to buy it. All these people with 3 or 4 properties gaining in value only because everyone else is being equally bloody minded about it.
If they'd put their money into something that actually produced (ie, companies, stocks, funds, anything!!) then we'd have a big fat cash injection to our 'real' economy. There would be higher returns for them and cheaper housing for those of us starting out.
So - once enough of those boomers have died off, a political party can introduce a capital gains tax without committing political suicide... because you know it's going to be murderous to the market when that happens.
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Moz,
Same nonsense from the developers in Sydney and Australia generally. The cause is fairly widely acknowledged to be a rush of cheap lending when finance was deregulated and the generous subsidies from Howard (capital gains tax is at half the normal rate on your primary dwelling, but the tax is not enforced so lots of people evade it).
What Sydney does have is really good PT in places, and Auckland-grade PT in the rest. If you live near a rail line then by and large you're whisked into the central city to work with great speed and convenience. Buses still suck somewhat, of course, but nothing sucks as badly as driving into the city. For the other 2 million people who work in Sydney... better hope it's near a train line. The govt keep trying to increase driving and starve PT, because privitising PT works even worse than private roads (and given the fiasco of the Cross City Tunnel that's saying something).
The endemic corruption in Australian govenrment makes it unlikely that anything will be done to change things. Developers fund state and local govt, many councils are composed of developers, federal govt cannot see past dollars and votes. Just like the other trashers... who will keep voting themselves bread and circuses and screwing their kids until they die, whining all the time about how hard their lives have been.
What I'd like to see is a focus on higher-density living via triple bottom line housing requirements, specifically focussed on a mix of pricing (social bottom line) energy and water efficiency (environmental bottom line) and let the other bottom line look after itself. Instead we have huge pressure to reduce or ignore the first two and focus entirely on the latter.
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Tom, I think you will find that interest costs for residential owner occupied housing have *not* been included in the CPI since 1999
Mea culpa: blame it on me extrapolating half-heard radio reports about "house prices driving up the cost of living". Personally, since I've never owned property and have no intention to do so, I always thought it odd that they considered it part of "the cost of living", but if it's not actually part of the CPI then that makes sense.
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Seems prices are going up in some areas - a great deal too - and falling in other parts of Sydney.
Juha, that's what makes it confusing. I think the average, Sydney-wide, is a slow-down in the rate of increase overall. But you're absolutely right in that the central areas, and those on the train routes, are rocketing up in price. It's just being somewhat "balanced" by those horrible sprawling shit suburbs that the less well-off are being pushed out to.
And it's an excellent lesson that quality dense housing utterly relies on decent public transport. Look at Canberra, where I live. There are a few burbs which are undergoing a dense housing boom, all on bus routes that take 20 minutes to the CBD/government sector. With the outlying and sprawling suburbs - which are sprawling by the minute - bus services, if they exist, commonly finish at times like 8pm. If you want to get cross-town in less than a couple of hours out of rush hour (when more buses are run), driving is the only way.
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When the "investors" are removed from the market, headlines will look like this Existing Home Sales Plummet in 2006
And yes there is immigration, and population growth still in the US. -
New Zealand already has CGT, in the form of the rating system.
In our area of Wellington, the rumour is that the council will raise the rates by double the CPI, due to the capital gains in the neighborhood. This will be charged irrespective of whether the ratepayers have the income to pay the increased costs - the tax is levied on the capital value of the house.
So the retired bloke down the road from me will be paying around $6,100 per annum, despite the fact that he's on National Super. (it would be $6,600 per annum but he gets $500 back in rates rebates. Woo hoo.) So that's something around $120 per week to live in his own place.
If that's not a capital gains tax, I don't know what is.
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"If that's not a capital gains tax, I don't know what is."
No, its a capital tax, not a capital gain tax.
Proof.... if it has a zero rise in value next year, does he pay no rates? I doubt it....
Lack of capital gains tax IS the reason property investment is so popular... so assuming it continues to "double every ten years" (not a safe assumption by any means).... its not the ~8% it appears to be, but more like 11or12% in real terms.Then you add in the fact that as the yeild is indeed negative (ie, the interest on the loan cost you more than than the rent you receive) it can actually reduce the tax you pay on your take-home income from your day-job.
Is it ethical? Is it sustainable long term? I dont know.... its certainly popular, and its certainly working (so far) for many of my friends...
Personally, I think a capitil gains tax on any property you dont personally live in would go a long way to easing the situation.
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