The government must ensure there is enough new land supplied in Christchurch to meet demand from red-zone residents displaced by the earthquakes who are facing higher prices for new properties than the 2007 value of their destroyed homes, Labour Party leader Phil Goff says.
Prime Minister John Key responded by saying the government was dealing with the issue well, and that it had the power to push things through faster if it needed to under new laws giving the government and the Canterbury Earthquake Recovery Authority (CERA) vast power to deal with issues such as the release of land, development costs and Resource Management Act compliance.
Red-zone residents protested in Christchurch yesterday that insurance companies were in some cases not meeting obligations for full replacement costs for properties, while others said they would need to borrow money further on top of a government 2007 valuation payout offer because properties available for sale were priced above what they would receive from the payout.
There have been calls for government to free up land in Christchurch in order to provide cheaper section prices for residents being forced to move from the red-zoned areas of the city.
Speaking to media at his regular Monday afternoon press conference, Goff said the government needed to look at how it could help on the insurance issue, and that it needed to ensure there was enough land supply to meet demand from displaced residents.
Later on Monday at his post Cabinet press conference, Key said the Christchurch City Council had assured the government there was a range of new sections becoming available, and that the government had held discussions with land owners such as Ngai Tahu over the development of new sections. The government itself had also become the owner of a number of vacant sections through developments it inherited from the collapse of South Canterbury Finance.
Key said the issue of insurance companies not writing new policies was a difficult one, and that he knew of one insurance company trying to reduce its Christchurch book by cashing people out, often with payments "above rate".
Growing frustration
There was mounting frustration in Christchurch from homeowners facing huge losses of equity, despite being promised by the government no one would emerge worse-off from the bailout package, Goff said.
“They’re caught in the situation where they have to accept the government offer, they’ll lose their equity when they sell, and they’ll pay inflated prices because of the huge demand on the new properties that they’ll be competing to buy,” he said.
When asked what the answer to that problem would be, Goff pointed the finger at the insurance industry.
“The government’s got to come in and knock the insurance companies’ heads together on this one,” Goff said.
'Can't allow land prices to inflate'
Asked whether it was an insurance issue, or whether it was in fact an issue of people having to pay more for a replacement property, Goff said:
“The government’s got to make sure the market works, and if it doesn’t work, they’ve got to do something about it. What we’re going to have is a huge amount of demand on a limited resource – on the sections, on the building materials, and on skilled labour. The government needs to prepare for that, and so far they haven’t.”
“The government’s got to make sure that the development land available, and being developed, is enough to stop huge inflation in land prices,” Goff said.
“Otherwise, those families that have lost tens of thousands of dollars in equity – sometimes hundreds of thousands – will lose out again when they have to buy a much more expensive [property],” he said.
'Supply must meet demand'
There was therefore a mixture of problems.
“The insurance companies of course are holding things up because they’re not insuring on new houses - and they should be [insuring new houses] in the green zone. There’s no reason why they can’t be doing that, and the government should make sure it happens,” Goff said.
“If we get those and that land developed now, rather than waiting for another year, that’s going to put less pressure on development,” he said.
Asked whether he would therefore back the release of more land supply around the fringes of the city in order to help make sections cheaper, Goff said:
“The government’s got to make sure that the resource management process does not hold the process up in a way that it shouldn’t be held up, and they’ve got to make sure that there is a supply that will meet the demand.”
'There's enough land there'
Prime Minister John Key said he thought the government was doing enough to deal with the land supply issue, with Cabinet last week having a number of discussions on it when meeting in Christchurch for the one-year anniversary of the September 4 quake.
“The council’s assured us there’s a range of sections becoming available, and we have the capacity under CERA to fast-track that if we need to,” Key told media at his post Cabinet press conference on Monday afternoon.
It was difficult to determine though whether the prices of spare properties would be in line with home-owners’ red-zone payouts.
“It depends on where they are, what they own, what they want to buy. There’s a range of different circumstances," Key said.
“One thing I do know is that Christchurch is blessed as a city that it has a lot of available land. That is the one difference say, between Christchurch, and say Wellington or Auckland. So yes, we need to speed that process up potentially. If we do, we can step in and we have the legislation to do it. But the assurances we’ve had from Christchurch is that that flow is happening quite rapidly. It’s a combination of making sure we work with those developers and get that right,” he said.
The government raised the land supply issue with Ngai Tahu, while the government itself, through its ownership of South Canterbury Finance, had effectively ended up owning a number of sections as well.
“There’s quite a number of subdivisions that are actually available there. If anything, the flow [of sections onto the market] might be so great later on that prices more reflect that," Key said.
"But there’s two things that are happening: Anyone in the red zone knows that they have an absolute categorical assurance from the government that they’ll buy their property at rateable value, and the second thing is the banks have indicated that they’ll lend against that," he said.
'Insurance issue more difficult'
The issue surrounding insurance companies not writing new policies was a more difficult one.
“Some of them are trying to deal with the risks there and what’s happening in terms of seismic activity and their reinsurers. But I think things are progressing reasonably well with the reinsurers in terms of the visit Gerry Brownlee’s having," Key said.
“It’s patchy, actually, when it comes to reinsurance – it’s not completely clear in terms of people getting insurance. Some people can get insurance on their property, they buy another property; other people are experiencing some difficulties,” he said.
One insurance company was trying to cash out some of its customers – trying to reduce its Christchurch business - sometimes at “above rates” to get them to cash out, Key said. When asked he would not name the company, but said it was not AMI, which has a government backstop.
Here is Key saying there are options open for elderly home owners in Christchurch who are not in the position to secure a loan to help them buy a new property. He also comments on the insurer cashing out customers, and says he has not had any update on the possible NZ$1 billion price tag from the EQC's High Court case against insurance companies a week ago:
Meanwhile, the ACT Party issued comments from leader Don Brash on the issue on Tuesday afternoon. See their release below:
Sensible New Zealanders will be hopeful that recent comments by Labour leader Phil Goff about the availability of new sections in earthquake-ravaged Christchurch herald the end of his latter-day lurch leftward, says ACT New Zealand leader Dr Don Brash.
"Mr Goff has expressed fears of a likely sky-rocketing of house prices in Christchurch as home-owners unable to rebuild on their existing properties seek out new sections," Dr Brash notes.
"He observed that one of the solutions was to ensure the resource consent process didn't unduly restrict the availability of new sections.
"I applaud that observation. I have been arguing for some time that consent procedures and zoning constraints under the RMA are distorting residential land prices all around the country. In Christchurch the situation is hugely exacerbated by the surge in demand for new sections in the wake of the earthquakes.
"Unfortunately the wisdom of Mr Goff's remarks is subverted by his talk about knocking the heads of insurers together. He is blaming them in part for the upsurge in demand because of their reluctance to insure rebuilt homes on existing sections. Is he saying they should be bullied or coerced by law into doing so? Does he want in effect to nationalise the insurance industry? That would indicate a serious relapse in his recovery from Kremlinomics.
"The willingness or otherwise of insurers to insure is a key signal of the viability of any project in an open market - and as Mr Goff himself acknowledged, the market should be allowed to work.
"The only heads that should be knocked together are those of government, the Canterbury Earthquake Recovery Authority and the Christchurch City Council. Among them they must make sure that zoning restrictions do not needlessly limit the availability of new sections and drive prices up artificially. Red Zone home-owners who've already lost huge amounts of equity don't deserve such a double-whammy," Dr Brash concludes.
(Updates with ACT comments, videos, comments from Key, quotes from Goff)
54 Comments
Watch the video. When first asked what the answer is to the problems, Goff says it lays at the feet of the insurance industry.
It's only when asked whether it's in fact a land supply issue that he acknowledges that.
It's easy to beat up on insurance companies. Is it less easy to talk about supply and demand?
"Is it less easy to talk about supply and demand?"
You sure said it.
Alan W Evans was for years the Director of the Centre for Spatial and Real Estate Economics at the University of Reading in the UK. He had 2 books published in 2004 which should have made him famous: "Economics, Real Estate and the Supply of Land" and "Economics and Land Use Planning".
I quote:
"....the planning system has had a significant economic impact on the UK economy since it came into effect 50 years ago, and that as a result the British GNP per capita is lower than it would otherwise have been......This negative impact is not usually noted by economists seeking reasons for the low rate of growth of the British economy, but that is because few economists have any interest whatsoever in planning. Their whole training leads them to ignore matters related to land and location, so they tend to consider only those factors conventionally considered "economic" - investment, training, labour relations, management, etc. But since the planning system is designed to restrain physical development, it would be strange indeed if it did not restrain economic development as well...."
Evans' conclusion at the end of "Economics and Land Use Planning", is that "....though welfare economics can justify intervention, the intervention that does occur is not of the kind justifiable in this way. Therefore, an altogether more difficult problem faces the economist analysing planning - to indicate the way in which the intervention that does take place, actually REDUCES welfare. It is a more difficult task since, however correct may be the arguments marshalled by the economist, the intervention that does occur is electorally popular and for that reason, unlikely to be changed. To point out the costs of the policies pursued, and that they benefit the vocal few at the cost of the many, is therefore an unpopular course for an economist but one which is very necessary, in the hope, but not the expectation, that some improvement can be made".Interloan them - or request Akl library buy them.
These books absolutely should be the required text books for any degree course involving urban economics and/or urban planning. And that should mean, every economics degree course and every urban planning degree course.
Not learning urban economics properly, and then embarking on a career that intersects with urban economies socio-economic outcomes, is like becoming a scientist without learning the periodic table of elements. Yes, it really is this stupid. The mess our economies are in today, and the utter lack of any coherent explanation or remedial advice, is the evidence.
Muddled thinking here. Current section prices are already too high for people whose LVs are as low as $68000. The Government has had months to consider this problem and come up with a solution, which to me seems fairly straightforward. CERA has the power to find good land close to the city, pay its owners good compensation for land currently with a rural zoning, develop it for housing, install services, pay $0 to the inept CCC, offer sections by ballots to red zoners, winners to take up at the cost of their LVs. Can relocate their repairable houses there if they wish, Conditions: Properties Cannot be resold to anyone other than the Crown for 10-15 years, must be owner-occupied. Also permits for relocations free from CCC.
Why not. Oh yes, ideology, can't take land off farmers, but it ok to grab off the eastsiders of Chch.Anyone spot the double standard? Gee, they might even find a couple of landowners willing to sell given the situation. Have they even been asked, one wonders?
Feel free to pick holes in this idea. To my mind it would resolve a lot of the inequities of the current "offers" (under duress).
I'm not that clever. I'm familiar with your arguments, but even if your ideas were implemented (too many vested interests for that to happen in any time frame that will help Redzoners) it would still lead to the bulldozing of thousands of repairable houses in Red (and soon to be Red) Zones. Privately developed subdivisions around this city do not allow relocatables. Why do people have to leave their homes when it would be economic to take them with them?
I am not a wholesale advocate of Government intervention, but they are already intervening in the property market in Chch, Government decisions are a major reason for a distorting property market. I believe you have a genuine concern for people but the barrow you push won't get anywhere fast enough for people who have to get off their land by 30 April 2013.
Goff is as un-cranially-grasping-grasping, when it comes to 'growth' , as the above pair of one-shotters always are.
He's a waste of political ttime and space, not that he's alone in that.
Parker - who I regard as a whole lot smarter, said to me the other day "I can't believe we're running out of energy". Reminded me of the religious one here, it did.
As I've pointed out before, this isn't an issue of 'development', it's one of displacement. Cows can presumably handle a bit of occasional silt.
Whether there's the energy-available time to do it is another matter - Brent Crude seems to be seeing $100 in the rear-view mirror.
http://www.nbr.co.nz/article/raw-data-dr-alan-bollards-full-speech-nk-84687
HP- deep and meaningful as usual.
Robby - even if you removed the RMA entirely, and all the DoC zoning likewise, you wouldn't get another 'doubling', from here. Sorry if youy believed the horseshit about unlimited growth, but when it's reliant on the physical (which your comment seen to suggest!) then it's absolutely unsustainable.
Let's imagine there's one doubling left in the system. At 3%, you've got 24 years left. At 10%, you've got 7 years left. etc. One wee problem, though - growth stops at the beginning of the last one, meaning you can double from 1/4 to 1/2 of your physical whatever-it-was, but the next (last) half, actually has a few problems. The fact that the first half was cherry-picked for starters. Leaves you the worst oil and/or the crappiest land; not exactly 'half'. It's got further problems if the finance system set up thus far, requires a growing 'return' too.
Have a look around the globe - it's happening now, and has been since 2005. Don't blame the RMA, it was an attempt to 'save something', from folk (llike the two monocultural posters above) who don't think there's anything being trashed.
Caygill - a Goff contemporary and growthophile, points out this phenomenon unwittingly when he speaks of rising electricity charges, citing rising generation costs with each new plant...... He doesn't understand he's describing the post-peak world, yet I'd rank his intellect above Goffs.
It may be that we're just not a smart enough species to survive........
Hugh, with all due respect, your nonsense is campervan and temporary village fiascos all over again.
At least 35,000 people have left Christchurch (electoral roll plus lower school enrollments). Probably closer to 45,000 if truth be told.
That's 10 to 15,000 houses available instantly.
Very few will rebuild. We have 12 rentals that are write offs. All but 2 are on green zoned land. We likely won't rebuild as the insurer is finally talking about settlements for replacement (with existing property) NOT rebuild.
We are in the business of developing property, but won't be rebuilding. Homeowners in the ChCh in general won't bother with the hassle and will in the end take cash or replacement settlements.
New building is likely only to proceed at levels similar to pre-quake numbers. There is no rush to purchase sections. Indeed many are sitting on the market just as they did pre-quake.
Pegasus has hundreds for re-sale (incl some mortgagees). A whole development in Linwood is for mortgagee sale.
Just because a couple of 5 year old developments finally sold their last lots, doesn't mean that there is any great land rush.
There are sites available right now for less than they have been available for at anytime in the past five years.
And anyway $50,000 sections is just nonsense. The average new development costs close to that just for the infrastructure, before any levies, fees or development contributions.
There will be thousands of sites becoming available soon as insurance issues get sorted. Many of those site are large and can accommodate multiple dwellings.
The issues the government needs to resolve are:
1. Get insurers to hurry up with settlements so green zoned brownfield sites become available.
2. Cut development contributions so that those brownfield sites can be economically subdivided.
3. Work to rezone sensible amounts of greenfields land in appropriate locations.
Note that there is still large tracts of residential zoned land which has not been developed despite being zoned for development for many years.
Yes Chris, $50k sections is pie in the sky stuff. It s funny how people think they can just slap a quick sub division up and shall be right mate, with new regulations in Canterbury the section price will only go up, or do we want to put cheap land development in that will fail at the next earthquake, and you wont get insurance on it? You cant have it both ways
The focus has to be on rebuilding commerical , cafe's, hotels, no jobs then there will be no need for large scale developments.
It's not denial Hugh, is about being realistic, $50k sectionsI really do not think is realistic. I said before that there are affordable houses out at areas like Southbridge, Oxford etc...areas close to the city will never have $50k sections, perhapes public transport to these areas needs looking at. Even Birdlings flat are selling sections at $75k
Too funny Hugh, I could invest the time and take this to another level but as a starter... why don't you answer the questions Chris_J has put forward on countless threads wrt construction cost and land value. In addition, he has suggested why don't you show us how it can be done...again silence???
MAAATE, this site is SLOOOOW to load ANYTHING.
I just wanted to comment on Hugh's point about up-front charges for "infrastructure" versus long term financing. Up front charges force the price of all urban land UP; long term financing, with an ongoing liability against the property owner, tends to keep urban land values lower.
Anyone who understands the different effects on the urban economy, of high land prices versus low land prices, would very enthusiastically opt for the latter. But of course, none of our politicians national or local, fall into that category - or anyone in bureacracy and advocacy whose mental faculty defaults in favour of restrictive, proscriptive "planning".
Hugh, raw land values are nowhere near $500-700k/ha except perhaps in the most desirable locations.
In Rolleston, recent sales have been $100-200k/ha (for land already zoned residential) and at that price the sales which were both small 4ha blocks both included houses.
Even in Harewood, rural land immediately adjacent residential even at the market peak was only $300k per ha. Now probably $150-200k max for a 4ha block.
As I've said before even if land values for residential were $50k per ha (ie $5k per family sized lot raw, as opposed to a current $20-30k max) there is no way sites would be available at $50k.
Please give me detailed information (a link will do but not just a link to the rhetoric on your website) of how this can be done. That is, show me the costings, show me what changes to the development levies and charges need made, show me how the infrastructure is funded.
Obviously if the section buyer is getting $50,000 of value "funded" through municpal bonds, they eventually have to pay for it. If that is via an extra $1500 or $2000 a year in property taxes (perhaps in perpetuity) in addition to normal rates, I think may would just prefer the upfront cost, in the knowledge that they aren't being stung by bureaucrats for the rest of their lives.
Agree with you FCM that new subdivisions MUST be on good ground, or,as in the case of Pegasus, the local bodies insists on whatever earthworks are necessary to create good building platforms. But this is only half of the equation, the way in which the buildings are constructed is just as important, if not more so. Provided both aspects are properly addressed, insurance in the longer term shouldn't be a major impediment to development.
However one important aspect of the liquefaction problem needs a serious rethink in the context of the future location of Chch (does the whole city shift west to higher ground?). That is, the height of the water table. Not an easy fix in sight there - even allowing for growth in red zones, there will still be huge tracts of the city that, if I was an insurer, I wouldn't be offering cover for earthquake damage. The Tonkin and Taylor "Observed Liquefaction Map 22 February" is quite sobering. It also makes one wonder whether the mantra not to relocate the Central City is wise.
On the point of moving to higher ground.
Remember in 1888 the Hamner basin was covered in sand boils and liquifaction. In Muchison 1929 huge sand boils and liquifaction occured in high river valleys.
Nearly everywhere there is flat land (river or coastal silts) there is the potential for liquifaction.
Unless you are sited on well graded gravels with a water table many metres down, flat land cannot have zero risk of liquifaction.
Thanks for the history. I'm not so old that I experienced these events. But, as Santayana said, "those who don't learn the lessons of history are condemned to repeat it" (or some such like).NZ has been taught an expensive lesson. How expensive will be determined by how well we learn from it. Some signs are positive, others less so. I hope your insurance issues are, in time, resolved so that you can recover and move on with your life.
If you are still reading this thread Chris, can I ask you, if your insurer is now offering cash settlement of rebuild costs (so is ours interestingly, even though it is not an option mentioned in our policy document), and you will use this money to buy other existing properties, what are you going to do with the 12 soon to be vacant sections? Presumably potential purchasers of these sections will have to negotiate their way through insurers to get new cover, this could dampen interest, especially when they factor in that the last house on the site "didn't make it". One wonders how interested the insurers will be?
One of the few comforts of being in the red zone is that at least we know someone (the Crown) will buy our liquefaction-prone land. Your mention of the plots in Linwood (mortgagee sale) - huge areas of Linwood suffered liquefaction in February, you would be a brave or desperate soul to invest in dirt there. Potential insurance problems again.
Crooked Thumb, I'm not sure if our insurer will be offering straight out cash at this stage. My understanding is that they may insist on replacement (ie we have to buy another property). Personally I think that it would be very strange to require that (and unnecessary) but it may be required to fulfill policy details as the maximum "cash" settlement is normally limited to indemnity value. But I will wait and see what happens.
Are you saying that your insurer has made a cash offer for full replacement value? Who is it?
It is certainly going to be interesting times. Today someone I know in the red zone received a settlement offer from there insurer.
Market value pre quake was around $400k. GV was just short of $500k with LV of $250k. With the private insurers offer of full replacement based on the size of the 1970s house they will get close to $450k in insurance plus the land leaving them just shy of $700k or over $300k up on the deal!
That sounds too good to be true, so many will take and run, however others like yourself may want to take the insurance payout and stay living in their quake damaged homes.
Now, in regards our properties. Some of those 12 are still totally liveable or cheaply fixable (leaving the uneven floors, not rebuilding fireplaces and the like), so we will probably try to take payout and leave the house on those. On the others, none of the sites are actually that bad. Sure they had liquifaction, but so did two thirds of Christchurch. At worst we'll sit on the land for a while, I don't think that there is any sites we would rush to sell.
You have to remember we have owned some of these properties for a long time and that for instance on a large property (330m2 building) we paid $110k for 13 years ago that had full replacement insurance if we get a $500 or 600k full replacement settlement then everything will be rosy.
So things may well turn out ok personally for me. But I still don't know at this stage. And when EQC inspectors come round to wrecked houses with uneven floors and try and tell you that it's all prexisting and you have $15k in damage only then it can be very disheartening.
Honestly, I looked at one of our properties today that I'd put in the modest damage category. But the floors are all over the place and a sand boil forced up the rear of the house and the concrete patio with a pergola over it at the back door, the pergola is about 150mm higher at one end than the other, with all the internal damage too, I was looking at it and wondering how EQC could possibly fix all this for anything like a reasonable price?
At another property I noticed a 1m2 area had just in the last few weeks sunk down a foot undermining a concrete path. There was quite a lot of liquifaction on that site but this was about 5m from where any sand came up over 6 months ago. I wonder how many sinkholes are ready to open up around the town? (I see a new large whole opened up on Kilmore outside the Convention Centre after recent snow)
Sorry I probably didn't express myself very clearly. The "cash settlement of rebuild costs" I refer to is able to be put towards buying an existing property, instead of (for redzoners) rebuilding on a different section. or (for greenzoners) rebulding on the same site. I am not aware of an insurer giving out a cheque for rebuild costs with no strings attached i.e. spend it how you like.
We are rebuilding on the west side of town regardless of what our insurer does, but are pretty determined to get them to stump up. Will let you know - news on that is not far away.
As far as I am aware, you can get two types of payout - replacement (must be spent as described above, insurer gets to "own" the written off building) or indemnity/present value (you get to keep building, and in your case, if liveable, you can still rent it out).
However, if you want to partially "cash up" you can use replacement payout to buy an exixting property, then sell it a short while later. More than one way to skin a cat.
Just curious, what was m2 of house that got $450k as replacement cost? Someone I know across the river was offered $1100 per m2 by their insurer as replacement cost on an old house. I don't know the house but if it had stuff like t&g floors etc that figure looks very low ball and he ain't having a bar of it.
We don't have your stress levels I think but regarding EQC, if you can get independent costings of damage being over their cap then at least insurance company might be a bit more consistent to deal with. One of reasons we are rebuilding (most people think we're mad) is that we didn't want to buy a house with an ongoing EQC claim. Had enough of them already for one lifetime.
Crooked Thumb, if your still reading, the house with $450k replacement (including chattels) was 180m2 plus 40m2 garage. Two storey 1970s. The replacement value seems very high to me at close to $2000/m2 (through IAG).
An old character place would have a much higher replacement cost than a modern one so I think an offer of $1100/m2 is ridiculously low.
Too small a'thinking, Hugh - probably induced by the pre-wished outcome.
This is a global village now. You get what you get at the price you get it, via the cost of labour in China, and via the price of energy. Comparing geographical percentages becomes invalid when food production, urban usage, infrastructure maintenance and degradation/depletion are taken into account.
Only vast usage of energy (one-off stored fossil, thus far) has kept the system going, the system being urbanisation, an unsustainable thing as it currently presents.
Those overpopulated areas you compare, are the ones more in the shyte when the screws come on.
There is a construcive role for the likes of yourself to play, in addressing what has to be done. Orienting developments so they capture solar gain, so they can be serviced post fossil-fuels, so they can function as interactive communities beyond that point, and arguing for that kind of 'development' (and it's greater desirability than the nonsense of intensive, fossil-fuel-based dairy farming) would be a valuable contribution.
Working out how it will be 'financed', post growth, is a bit of a head-scratcher too. Maybe just hope the banking system implodes, and takes the debt with it.....
I'd have thought you'd be 'in' with those folk. Why not?
PDK the thermal performance and sustainability of housing is even lost on a lot of Architects, including those giving the training.
With the exception of a few lectureres that do understand, most of them don't care when critiqueing work.
This guy here gives the thermal performance lectures at unitec, and despite English being his second language he is fascinating to listen to. It all starts on a macro level, siting housing at mid elevation on north facing slopes, while taking prevailing winds into account.
I have bound and will treasure his comprehensive manual.
The funny thing is that he consults on a private basis, but most of that work is to China. We are all to stupid here to used a resource like him.
Powerdownkiwi,
For once and for all, would you kindly tell us where you stand on the utopian nonsense that "high density" is the solution to the problems you allege civilisation to be facing.
Your logic is all over the map.
You tell Hugh he should be playing a constructive role in the development of "post fossil fuel" urban form. Solar friendly, self sustaining, etc.
Why do you always jump in in these arguments, on the side of the "urban growth constraint" idiots? I see no logic in your arguments unless you also support LARGER sections for homes - which means no urban growth boundaries, and low cost land. This is precisely what Hugh IS arguing for - and myself.
I have also been consistently arguing that "dispersed employment" is the natural free market response to these problems, and it so happens that there is a high correlation between dispersion of employment, and the productivity of urban economies. The economically most productive urban economies also happen to have by far the highest resilience in the face of the resource shocks that you allege to be coming.
I simply do not see advocates as having any credibility, when they use Malthusian doomsaying as an excuse for social engineering via urban form policy, that will decrease our resilience to the alleged future shocks and worsen the collapse and starvation in the event that it occurs. Meanwhile, it will be the "most sprawling" cities in the world, especially in Southern USA, that will survive - while idiot utopian "smart growth" cities will have collapsed in chaos.
The economic outcomes of urban growth constraint are self fulfilling prophecies anyway. These cause economic collapse by themselves, regardless what happens to resources. One glaringly obvious factor, is that people in low cost land cities, have far more disposable income. IF resources start to run out, guess which people in which cities will still be able to afford to feed and clothe themselves and still be mobile to some extent?
"Solving" the alleged problems via urban growth constraint, is like "solving" someone's poor health and weak heart, by putting even more constrictions in their arteries instead of opening them up. The argument would be something like - "we can't rely on the bloodstream for much longer, therefore we'd better force the organs to do with less blood immediately".
But I know PDK does not have a single brain cell that can grasp any single principle of economics and its real life implications. Whereas I do understand the implications of resource runout, contrary to his accusations. I just say that the best course of action does not involve policies that make the outcome worse. The best course of action, and in fact the most moral one, is to let the free market and technology do their best. In the event one day, of famine and death due to resource scarcity, the suffering and loss will be the least possible under this scenario.
It is always the same when utopians want to "play God". The Bolsheviks, the Maoists, the Khmer Rouge, etc. The outcomes are always worse than the ills the utopians were allegedly addressing. Malthusian doomsaying and the associated utopian policies today, are just as ignorant and destructive, and if their political trajectory is not reversed, once great "enlightened" western civilisation will eventually be in for the next round of "great terror"/Bolshevism - probably much worse than ever before.
Goff really is just a screaming noise. He wants the govt to make the land cheap. This sounds bloody great to those who want the land to be cheap...these are Goff's target voters...they vote before they think...or are unable to think.
Try telling them the cheap land they might get if Goff were in power to make it cheap would always remain bloody cheap....doh....that sort of takes away the idiot belief some of them might have that Goff's cheap land would instantly become valuable once they had built on it....or is that also a promise from labour...."we will make the land cheap for you to build on and then we will make the land normal again"....!
What a bloody load of BS.
Wolly, depends on "cheap", for instance if land is outside the building zone then I see nothng wrong with the Govn purchasing it at market value for agricultural land and re-zoning for residential and swapping land for land with house owners and insurance companies....Otherwise if re-zoning occrs first the agricultural land owners get a huge windfall for no work....that to me is wrong.
regards
Of course you see nothing wrong with that steven..you are at heart a socialist with marxist leanings and for you, using the Law the steal property to distribute to those who would support such blatant theft...is an ok thing to do.
You even fail to understand what the consequences are, of such blatant theft. It is bad enough that local govt has the legal right to steal any part of your property they bloodywell want for whatever reason they can come up with and that you receive NO payment. But for central govt to start forcing the sale to the Crown of farmland on the fringes of a city at values set by the govt for residential sections to be sold to peasants cheaply......you are stark raving mad!
Wolly, what you say, is the classic perversion of the concept of "property rights", utilised to defend blatant rent-seeking, pork-barrel politics, and corruption.
There wouldn't be a fat capital gain for fringe property owners in the first place, if it was not for the urban planners. That fat capital gain is not a "property right", it is economic "rent" that has been accurately described by some of the few enlightened economists in the world today, as "quasi monopoly" rent.
http://www.jstor.org/pss/3146282
In the absence of regulatory urban growth boundaries, no land owner near the urban fringe is in a position of quasi monopoly power, because there will always be land for sale at the original "agricultural" prices that is located somewhere that is developable for urban use.
It is perfectly fair, however, for a land owner in a free market (as in many US cities still) to hold his land as the city develops around and beyond him, in the expectation of sale at a higher price later. This does not reap anything like the quick, large gains that being especially favoured by "The Regional Plan" creates for a property owner.
The Netherlands uses compulsory acquisition all the time, to keep urban land prices low in the face of their practice of urban growth constraint. They seem to be intelligent enough to have worked out the consequences of just letting prices inflate. Fringe prices and new development prices set the level for the entire urban economy, affecting international competitiveness, productivity, discretionary incomes, and a whole host of other things. It is economic stupidity of the highest order, to enact urban growth constraints without also being prepared to compulsorily acquire land. It is also economic stupidity of the highest order, to expect "high density redevelopment" to provide "affordable housing" without compulsorily taking the land for next to nothing, over-riding NIMBYism and democratic objections, and selling the "homes" developed, "at cost".
Whether people "demand" higher density, inner city living, or are forced into it by proscription of the normal alternatives; the result with real estate markets and property rights intact, has to be rising prices, with the most "priced out" once the first few have "bought in".
Most people simply have never thought this through. The vocal minority proponents of continued "anti sprawl" regulations, and the ones who get to the politicians behind the scenes and cause them to lose their honesty, are the ones who are making the biggest rake-offs from the market distortions. This is not "property rights, or "the free market" or even "capitalism", it is "crony capitalism", "statist capitalism" or "parasite capitalism". Ayn Rand said that "capitalists" of this kind should be hung.
People on this forum frequently accuse Hugh Pavletich of representing the interests of "big property developers". This is utter balls. Hugh represents free markets and genuine competition between developers of all sizes, and fair prices for first home buyers. Hugh's opponents are the ones who represent gouging, corrupt, fat-cat, pocket-lining "capitalism", with potential competitors locked out of markets by "useful idiot" regulators.
" Hugh represents free markets and genuine competition between developers of all sizes, and fair prices for first home buyers"
Yet Hugh time and time again fails to mention how the land will be priced (or did I miss that?).....if its left to the present owners there is nothing to guarantee its price will drop to its "free-market" value......
regards
Steven, you really are the most infuriating wilfully slow learner. Every city in the world with no urban growth constraints, has fringe developments for which the price is set by "agricultural rent", plus cost of development, plus a fair and modest commercial profit. This equates virtually anywhere, to quarter acre sections for $30,000 to $60,000 NZ equivalent.
It is simply commercially impossible, when there are no boundaries, for an oligopoly to "corner" enough land to be able to lock competitors out, force prices up, and "make it pay". This is because urban areas already have such lengthy perimeters, and "twenty years growth" would actually be quite a narrow strip if completely contiguous. Say "twenty years growth" is a 1 km wide strip - if anyone can simply buy a farm 1.2 kms out , or 1.4 kms out, or whatever, and turn it into a subdivision, no oligopoly is even going to bother to corner the "20 years supply".
LSE economists have calculated that Green Belts in Britain, which contain more land than the cities inside them, could keep urban land prices affordable for a century before they were built out enough for prices to rise again. And that is just the Green Belts - not the agricultural land beyond the developed areas that are already "across the Green Belt".
If "supply chain dynamics" were as serious an issue as you make out, everything would cost a lot more in NZ, not just houses.
Stringent regulations and "planning" actually stifle innovation and the adoption of international "best practices" to such an extent that national economic productivity is undermined.
http://www.mckinsey.com/mgi/reports/pdfs/ukprod/ukprod.pdf
Read the Summary ("introduction") that starts on Page 2 (Page 9 of the PDF).
Failure to adopt international "best practices", low capital investment, low skills and sub-scale operations are among the consequences of restrictions on urban land markets, as well as being factors often blamed in their own right, for low productivity.
Phil are you related to Hugh? That isn't even a part answer to the key questions. Implemention is a problem yet you guys have so much invested in your worthly research yet can't face you do not have all the answers..avoiding the key issues does not make them go away.
I'd be proud to have a relative like Hugh, but no I am not related.
My position in all this, is that the younger generations are being ripped off and denied the same opportunities their parents and grandparents had - for the sake of a bunch of malthusian lies.
Have you read much of the summary papers from the NZ Productivity Commission Inquiry into Housing Affordability, and many of the submissions lodged?
You seem to me to be claiming expert knowledge that is little more than excuses for the perpetuation of this racket. What are your speculative property holdings?
There is no-one who insists so loudly that land supply issues are irrelevant, than people who know they are the most relevant point, and have something to lose if the politicians succumb to truth and scruple for once.
"My position in all this, is that the younger generations are being ripped off and denied the same opportunities their parents and grandparents had "
Well we agree on this however at some point this has to be more than a self promotion exercise by some ...it would be nice to see workable solutions. Not just land but construction costs as well.
When did I say land supply issues were irrelevant? What is the point writing when you an't reading. You certainly sound like Hugh, let down by your own assumptions. I challanged Hugh to address some relevant issues Chris has raised a number of times and he avoids it...simply put if he had the answers he would respond.
Wolly you are full of it.
Marxist, no, socialist, yes somewhat as are many NZers if the way they vote are to be believed.
Notice I didnt say take it off the legit owner free of charge....I said pay the going market price for agricultural land as it stands. The land is only worth more if the Govn changes its use, in this case to residential...the agricultural landowner has lost nothing but a gain he didnt earn.
So if the farmer/owner sold the land to a neighbouring farmer owner at $x per hectare the Govn pays that rate for agricultural land....that is actually a pretty fair price..
and actually in the UK for one the council/Govn can make a land owner an offer they cannot refuse...all Im advocating is the owner does in fact get a good/fair price.
regards
Firstly prices were not from 1993 to 2002, they rose sharply in between 1995 and 1997 then slumped in 1998 (due to the Asian Financial Crisis) and remained weak until 2000 when again they fell (in the Clark winter of discontent) then started recovering sharply in 2002.
Secondly, the fact prices in 1993 were similar to those in 2002 had nothing to do with Christchurch land availability.
All NZ towns and cities followed a similar property cycles. Timaru, Oamaru, Dunedin and Invercargill all had vast tracts of undeveloped residential land in 2002 and still do today. That didn't stop prices on average almost tripling in those areas during the the years 2002 to 2007.
You may not have noticed Hugh, but there is still considerable undeveloped residential land around Christchurch, and the council generally has rezoned any decent proposals on the periphery in the past 10 years.
Northwood, Delamain, Belfast Park etc etc were all private plan changes.
One of the things Alan W Evans discusses in his books, is the nonsense that planners can ration "supply" of land in just the right amount and keep prices at the same equilibrium that the free market would have.
He points out that when Portland instituted its Urban Growth Boundary, it had "20 years supply" of land inside it. Just 4 years later, the prices started to inflate.
Evans says that this is because:
1) as many as half the farming landowners within the UGB were emotionally attached to their farms and would not sell under any circumstances
2) developers like to have land secured for their "next project" well before they finish their current one. This is just commercial good sense. As projects frequently take 2 to 4 years, and permission can take a while to get, this means that around 6 to 12 years worth of land is going to be taken up by developers.
So it is not hard to work out why, once the land within the UGB was down to "16 years supply", prices began to inflate. Once the prices start inflating, bidding wars, anti-competitive behaviour, and speculation all kick in.
Of course, a certain small minded attitude will always blame the developers and their alleged "greed", in a case study like this. How dare they actually want to stay in business and keep their staff employed and not have to pay out fat severances? (And how dare they actually build houses that the proles want to live in....)
Hugh, I couldn't see the article you mention on your website, you could give me the article name please.
But I am curious about what you believe it shows, as certainly I believe that the relationship between median price and volumes sold is a fairly straight forward one which has nothing to do with land supply, and very much to do with sentiment and consumer confidence.
That is: when prices are rising vendors become more willing to sell as prices begin to exceed expectations, purchasers are also more willing to buy as they see prices rising so all in all sales volumes rise. Conversely when prices are flat and falling, vendors become more reluctant to take lower prices so withdraw from the market or leave properties on at high prices which don't sell, and buyers become more scarce hence sales volumes decline.
Looking at the numbers for Canterbury according to REINZ:
1993 11,000 sales, rising to 13 to 14,000 through to 1997 as the prices rose from $105k to $140k. Higher (11%) interest rates in 1998 and the Asian Crisis stopped price rises and sales slumped to under 10,000. A prolonged period of flat to falling prices through to 2002 saw sales drop further to 8,500 while prices remained at 1997 levels. From 2002 to 2007 volumes grew to 15,000 while prices rose to $300,000. Prices remained stable through to 2010 as volumes again dropped back to 8,500 pre-quake.
Section sales follow a very similar pattern. 1,000 to 1,200 a year while the market was rising in 1993 to 1997, falling as low as 600 in 1998-2001. Rising to 1800-2400 during the 2002 to 2007 boom before fading to as low as 450 in 2009.
That tells us very little that proves your theory that high supply lowers house prices. As when in 2003/2004 triple the number of sections were being sold compared to 2001, yet house prices still rose 50%+.
Volumes are directly correlated to prices. Low prices = low demand for sections (ie it's uneconomical to build because you can buy an existing house for less).
This was the situation in Dunedin and Invercargill, and most small centres up until the 2002 boom. Cheap existing houses meant that even if the section was $5,000 (and I know plenty of quite good sites in the south that sold for less than that back then) then it was still a loss making exercise to build as spending $170,000 (at that time) plus section and other costs so say $200,000 all in, was significantly more than the $120,000 same size 15 year old house down the road. Of course those days are gone and prices are more than double, but only now with higher prices is it really economic to build in some of those smaller centres.
Back to previous comments, Hugh you still haven't answered any questions about costings. Surely you have costings to prove your arguments?
Good afternoon, comrades! You are sparring nicely I see. Nothwithstanding the arguements for and against increased land supply at reasonable prices etc., in regard to the idea being discussed here, instead of landowner only scoring the agricultural price for their land, how about they get 50% of the displaced Red Zoner's land RV; govt. keep the other 50% and the new 'eq resilient' fringe section is fully owned by the displaced Red Zoner, with maybe some kind of time restriction for onward sale? (ish ....) Ag. landowner is doing better than just ag. price; govt. aren't forking out the full Red Zoner's RV and the Red Zoner gets a workable solution - all for the price of a pen stroke and a rubber stamp, maybe.
Glad to see you have principles Wolly. I take it then you will be joining me on the barricades on 1 April 2013 when the Crown's proxy (CERA) will attempt to remove me from my land by force. All in the national (or should that be National?) interest, of course. Or is it only wealthy landowners that need their property rights protected?
The flooding in the Lockyer valley west of Brisbane occurred on 13 Jan this year. In the week of the 6 June, I watched television coverage showing the start of the development of the new town on land that had been acquired by the authorities. This was being made available for flood affected residents in the old unsafely located town. Such a striking comparison with the slow, muddled performance in Christchurch. The government has given itself unlimited powers in Christchurch so they could have easily compulsorily acquired bare land at Government valuation plus some small compensation. (Govt valuation alone is good enough for those who have lost their homes!) By now they could be well down the track of developing very affordable replacement residential land. I suspect that the Ch-Ch old boy network is is carefully looking after the interests of it's property developers. When I lived in Ch-Ch many years ago my local friends told me that all the perimeter land was owned by a handful of families and the supply of residential land was carefully regulated to suit their interests. I doubt that much has changed. For once you would have thought that they would have put these selfish (in this case short term) considerations aside in an effort to retrain the population who have an obvious and understandable tendancy to want to get the hell away from it all. There are more reasons why people emigrate to Australia than just higher pay and more work prospects. Generally the average familly gets a more fair deal as the Lockyer example shows.
There is an absolutely classic essay written in 1964 by the Libertarian economist Mason Gaffney; he was a Professor at the University of Missouri at the time:
http://www.masongaffney.org/publications/E3Containment_policies.CV.pdf
".....There are several legitimate objections to negative urban containment policies. Some are of a distributive nature. Containment, which grants high-density to some and denies it to others, is discriminatory. A favored area selected by the planner for a new shopping center would become worth some $100,000 an acre, while land reserved for open space or five-acre lots won't be worth a twentieth part of that. That may please half the owners, who are not interested in early resale, but only in low taxes. But the other half will wax full wroth. When the planning commission and the Zoning board flit about sprinkling little golden showers here rather than there, they make millionaires of some and social reformers of others. How anyone could ever expect the losers to accept their fate philosophically is something that occasionally makes me wonder—even though some of my best friends are planners—if they have any idea what they are doing.....
".....Economists discovered monopoly, it seems, about thirty years ago, or resurrected it and went on a marathon kick. Under Chamberlain they found it in every hitherto innocent jar and tube on our shelves, and nowadays it is even becoming safe to whisper that labor unions and organized farmers might warrant the pejorative term. Yet, somehow amid this universal' imputation of sin, no one has impugned the city fathers, that community of interest of important urban landowners known as municipal government, organized as a cartel in broad daylight and with the force of law at its disposal. No Gary Dinners are needed to administer this cartel, no clandestine machinations, no secret files concealed from the Federal Trade Commission and the Anti-Trust Division. The city fathers are simply engaged in protecting property values and promoting sound planning, which everyone has always known are good and desirable things.
The German Historical School of economic thought was not so obtuse on this matter. Their observations of the Hanseatic city-states exploiting their hinterlands afford us great insight into the motivations of city fathers, and every city planner should study Schmoller on Mercantilism before he goes forth to offer himself as the mercenary of modem municipal mercantilism. As the German historians relate, the monopolistic city can exploit its customers. The city exploits its customers by stunting its own development, limiting the number of creaking doors and sagging gates through which its customers may go for supplies and services.
There is also exploitation within the city. Employers, merchants, and assorted rent-collectors are generally happy with policies that keep out untrained interlopers who might have alien ideas about competing for labor, tenants, and customers, and in general keeping the natives restful in their compounds. Negative containment policies have an instinctive fascination for anyone whose interest is to limit competition. There are many groups which would like to limit competition, of course. But cities tend to fall most strongly under the sway of those who stand to gain or lose most by municipal decisions, and those whose assets are irrevocably committed to the city, that is, the landowners. The rest of the citizens are 'by comparison mere transients, outsiders and climbers whose organization and influence is seldom commensurate with their numbers.
To the dominant landowning oligarchy, few limitations on competition commend themselves with quite the same force of logic as limitations on the entry of new lands into urban use. It is therefore no accident that negative containment is the most respectable and salable kind of planning in many quarters. It harmonizes all too mellifluously with the interest of a dominant class. But from the viewpoint of social economy, of other interest groups, of the general welfare, of the region, state, and nation, and even of most urban landowners in their roles as workers and capitalists, negative containment is an instrument of monopoly exploitation...."
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