By Jenée Tibshraeny
Having spent a week submerged in a sea of words by policymakers on improving housing affordability, I remain of the mind a 1960s ‘brick and tile’ on a nice piece of land is a prime investment.
Yes, I called a human right to access shelter an investment, because that's how it continues to be treated in New Zealand.
Finance Minister Grant Robertson has directed the Reserve Bank (RBNZ) to consider the Government’s housing policy in the way it regulates banks, and required it to assess the impact its monetary policy has on the Government's housing policy.
The Government’s housing policy is to "support more sustainable house prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers”.
But in the absence of a coherent government plan on tackling housing affordability - at least until mid-March when an announcement is expected - there's more politicking than action.
Monetary policy won’t change
Changing the Monetary Policy Committee's (MPC) remit won't make much difference, as it’s only being asked to “assess” the impacts of its actions on house prices.
Targeting inflation and employment remain the Committee’s objectives. Governor Adrian Orr explicitly said the MPC is “only focussed” on these objectives.
The horse has bolted
Secondly, it was unlikely the RBNZ was going to do more to loosen monetary policy anyway.
The RBNZ wasn’t expected to cut the Official Cash Rate further nor deploy new tools to lower interest rates.
Rather it wants its existing Large-Scale Asset Purchase Programme and Funding for Lending Programme to keep downward pressure on interest rates. The RBNZ plans to stop buying government bonds on the secondary market and stop offering banks cheap loans via these schemes in June 2022.
Changing the remit a year ago would've been good in raising public awareness around the fact having more money and cheaper money in the financial system risks seeing house and share prices balloon.
This wouldn't provoked more scrutiny of monetary policy and the Government's response to its distributional effects.
Policy confusion
Robertson being seen to clip the RBNZ’s wings in the current environment has prompted investors to bet on interest rates rising sooner than before.
It’s too early to know the extent to which this is just a knee-jerk reaction - keeping in mind the fact optimism around the economic recovery is pushing bond yields up worldwide.
But this is where the confusion sets in. One would imagine the Government wants interest rates to remain low, as it plans to keep issuing a lot of debt to fund infrastructure projects and bolster the health system for example.
What’s more, if interest rates rise, the $47 billion of bonds the RBNZ has bought via the LSAP to date lose some of their value.
One would also imagine the Government wouldn’t want to put upward pressure on the dollar, as this makes New Zealand exports more expensive.
Even if the tightening of financial conditions due to the remit change are temporary, being seen to play politics with the RBNZ causes confusion and erodes confidence.
Ways of restricting bank lending TBC
On the financial stability side, Robertson hasn’t yet given the RBNZ new tools to adhere to its directive to have regard for the Government’s housing policy.
The RBNZ has already decided to reinstate loan-to-value ratio (LVR) rules to limit bank lending to borrowers with small deposits. It’s put even more onerous restrictions on investors than were in place before the restrictions were removed in April last year.
Robertson is consulting with the RBNZ on whether he could enable the central bank to make it harder for investors to get interest-only mortgages and require investors to have set amounts of income relative to the debt they take out.
The Government and RBNZ might like to see the effect of new LVR restrictions, coupled with whatever new policies the Government is going to release, before applying new restrictions.
The hope, of course, is that the Government doesn’t load the RBNZ up with targets and tools to avoid taking responsibility itself.
Ironically, overactive central banks and timid governments over the past decade are partly what got us in this mess to begin with.
179 Comments
The government must level the playing field, banning the use of interest-only and top-up loans to fund additional properties. If someone wishes to purchase an additional property, they should save for a deposit and apply for a standard home loan. Until we treat first home buyers and property investors equally, first home buyers will be at a disadvantage, and due in part to the ease at which property investors can access funding, property prices could continue to rise. Interest-only loans have been banned in Singapore since 2009. Their government realised this type of mortgage encouraged property speculation. It’s time our government did the same. At the end of the day, what do New Zealanders want? A land of plenty, or a landed gentry.
now, now.. you've got to think with the dis-jointed logic of a gas-lighting, Labour, Cabinet Minister:
Exhibit A:
House prices are UNaffordable because they are Affordable. To make houses Affordable would be to make them UNaffordable. Therefore houses prices need to increase, it's what Kiwis expect.
Not just interest only mortgages, the government needs to remove/limit the deductibility of interest from all buy-to-let mortgages held against existing residential property. This was implemented by the conservative British government so I'm not sure why property investors are a sacred cow for the NZ Labour government.
Captain Waffle at it again this morning:
https://www.newshub.co.nz/home/politics/2021/02/property-investors-maki…
Amazed. Every idea put forth she vetoes in case investors might find a way around it, so won't even bother trying. Heaven forbid this woman ever tried playing some sort of competitive sport she'd probably shoot for the other team cos they might win anyway so why try? Pathetic
Brock landers,
Fine, vent your spleen by all means. I am sure that you could run the government like a well-oiled machine. I am sure you could solve the housing issue immediately, eliminate poverty, deal flawlessly with Covid and so on.
remind me again just what National did for housing in 9 years? Nothing is the correct answer.
‘ACT's housing spokesperson Brooke van Velden says it's "astonishing" what the Government is resorting to.
"After the median house price rose $200,000 and with no reason to believe the rise will stop, the Government has resorted to asking people not to invest in housing."
Van Veldon says "having to beg people not to invest in housing is an admission of failure".
"The Government was elected to make housing affordable but after three-and-a-half years, the median house price has risen 38 percent from $530,000 to $730,000. The Prime Minister has to beg people not to invest because the Government has no other plan."
Beginning to sense ACT are fast becoming an effective strike force. That is good, in fact excellent if it develops further. Labour against Key & Co were useless, ditto for National last three years. NZ, our democracy in fact, is crying out for some hard hitting parliamentary opposition. And I would say this too, against my usual grain, some of younger ladies in the Greens are carrying the flame pretty damn well too.
TV think back. “beg people not to invest” comment has heritage. During his time of power one august Dr Cullen was on record bemoaning NZr’s penchant for investing in property, rather than equities, shares etc. Only a few days later his protégée, one David Cunliffe, released the lever that collapsed the then Telecom share price, thereby writing off millions of dollars of mum and dad investment into what was a yforemost blue chip share in any portfolio. And they wonder why NZrs seek surety by investing in property! For heaven’s sake, what plonkers thst government and this one, without even thinking about what was in between.
We have had in governments before, Labour’s Clark and Cullen academically conceited and cynical respectively. And then National, Key conceited certainly. But in this government, Robertson in my opinion, is pure and unadulterated smug and of the utmost flabby and simpering kind.
Zach Brando
Your newshub link quotes Jacinda Ardern as saying property investors should put their money into "productive ventures".
Does she mean the share market? She must do because there is nothing else. But everyone tells us the sharemarket is already over-priced so therein lies a paradox.
@streetwsie
H G Wells, The Time Machine.. let's go back to fundamentals: 'The Wealth of Nations' is NOT found in money printing or price growth through speculation - it's found in culture and useful goods-&-services.
The banks of a river control the flow of water. So too financial 'banks' control the flow of capital/liquidity. It seems speculative, dam-building beavers are in control atm.
Yes, but don’t forget the landed gentry ended up giving away most of their properties due to death taxes. In the US there are plenty of empty properties that owners have walked away from and left to rot. In the UK the National Trust has taken over running many houses as they simply became too much for the owners when the land didn’t generate the property income needed to support the household.
Economy (meaning)
An economy is an area of the production, distribution and trade, as well as consumption of goods and services by different agents. In general, it is defined 'as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources'.
Well that's obviously totally wrong! An economy is "an area consisting of the maintenance and stability of asset prices"
Can't we see how backwards we have everything at the moment, and how trying to "maintain what we have" is going to lead to us losing everything that we have?
I wonder if we could get rid of RBNZ?
Just hand over a few admin things they do to, say, The Treasury, and then just stop doing the rest. Perhaps a few could keep their jobs doing little admin things like printing bank notes (until they are gone).
How would the rest of the system adapt? Could we just keep the NZD already out there and let it wander around between pockets, Govt, banks, overseas, finding it's own price based on supply and demand?
Well, a good start would be to get rid of that dangerous clown at its helm - Orr.
If we did get rid of the RBNZ altogether (which is not a completely wrong idea), I think that we would still need some public entity invested with the overall responsibility of ensuring the financial stability of the private banking system.
One of the lessons of the 2008's GFC was that banks can simply not be left to themselves, without any external supervision, given that short-term profit considerations can often be at significant variance with overall structural long term resilience. Buffers are expensive to maintain.
I agree - sooner or later market forces will re-assert themselves.
Orr reminds me so much of King Cnut, or more recently of Brezhnev when he was trying to keep artificially afloat the late Soviet Union economic model by artificially and desperately pushing on all economic levers against the unstoppable tide of economic reality. There is only so much and for so long that you can cheat the system.
Jacinda Arden and Mr Robertson have no intention in controlling the multiplying house price growth in double digit, if not on a weekly basis than definitely on a monthly basis, so are just playing with the time as now, been cornered cannot afford to seem that they are not doing anything so playing with time with hope that will be able to hide behind panademic.
For long all politicians when in power have no intention to act on housing ponzi so hide behind the supply farce. Supply though important is not the only issue as housing supply can never be matched specially in NZ over next few decade and while trying to address supply side should look at controlling the demand specially speculative demand - is it that hard to controll speculative but government is more worried about speculators losing money than FHB, which has been made clear by Jacinda Arden.
It is government and RBNZ that have made it clear that they will never allow economic to play and house price to fall, come what may and who can fight the RBNZ and Government. Are they not responsible to create FOMO.
Jacinda is totally wrong, in fact dumb when she says that even few percentage fall in house price will affect FHB more as it is speculators who are gambling with high leverage will be affected and not able to sustain but for FHB who are buying home for long term does not matter if house price falls by 5% or 10% (though may feel bad but as not selling and able to serve mortage will be fine as in for long term).
Jenee have you pondered why all politicians when in power speaks the same language :
Jacinda too is talking the same language of John Key is may be as are run but bureaucrats who have vested biased interest as themselves are highly involved in property market and they play with the fear that all politicians have of losing votes and advise them on how controlling the ponzi will make them lose power.
Think
""bureaucrats who have vested biased interest as themselves are highly involved in property market "" I think this is true and the politicians and bureaucrats with zero or one child are motivated to keep house prices crazily high. However with more than a couple of children you would want prices to go down. For PM we need Bill English with his six kids and have them living in Auckland.
Neither Labour nor RBNZ have much incentive to cool the housing market.
Being cyclical, the housing market will cool down eventually. But don't expect much in the way of policy/regulation to hasten things along. (If that was going to happen, it would have done so by now.)
In any case, there are plenty of voters who are happy with the status quo.
TTP
Plenty of voters who are happy with the status quo - middle class with 1 or 2 houses are effectively being bribed with a house price increase to look the other way and keep voting Labour.. Meanwhile their taxes will go up to support accom supplements and other welfare to offset impact of the mega-landlords rent-hikes
I don’t think their taxes will be going up. The system is being looted and the bill - in the form of massive borrowings - is being forwarded to future generations to pay. This is an unprecedented orgy of greed facilitated by interest rate suppression & money ‘printing’.
mmm . . . "I remain of the mind a 1960s ‘brick and tile’ on a nice piece of land is a prime investment"
That 1960s "brick and tile" most probably originally sold for around $25,000 . . . today, depending on location, maybe $1,000,000.
Not sure about the future, but $975,000 tax free return on $25,000 certainly suggests that it has been a prime investment to date.
Just musing out loud.
ICYMI
MBIE rental bond data shows the number of landlords who lodged four to 10 bonds was 5037, the number who lodged 11 to 20 was 698, the number who lodged 21 to 50 was 458, the number who lodged 51 to 200 was 561, and the number who lodged over 200 was 346.
https://www.stuff.co.nz/life-style/homed/real-estate/124320645/nearly-8…
If you own more than 10 investment properties you are in business
They should be paying business rates of interest of 8%
That would fix it pronto
The banks can differentiate between business loans and non-business loans
So your employer doesn't provide you with an income because he doesn't print the money, supermarkets don't provide you with food because they don't grow the food, shops don't provide you with clothes, phones, computers, furniture etc because they don't make them. You probably don't provide anything to your customers because you don't make it.
You misunderstand. If I start a dry cleaning business, I provide a dry cleaning service. If I buy out an existing dry cleaning service and leave the existing staff and management in place, I've added nothing and just profit from the existing business.
The houses were already doing a perfectly good job of providing a home for someone before these investors bought them.
The supermarket provides me with access to food. It provides a lot of things I couldn't easily provide myself - sourcing and transporting food, storing it safely, etc. So there is a value-add. If all the people who ran the supermarkets dropped dead tomorrow, there would be an immediate and very inconvenient disruption to everybody's life. Conversely, if all the landlords dropped dead tomorrow, then nothing much changes. The houses are all still there. There is no real value add in terms of services that landlords provide that the people living in those houses couldn't replicate themselves with relative ease.
Landlords die all the time, almost like normal humans. The houses carry on as they are with the family or whoever else is named in the will taking them on. Maybe they get sold after a suitable notice period and someone else moves in or rents it out. Landlords are nothing special, and I speak as a landlord myself.
Ironcast
Great reference.
There is urgent need to correct house prices for sake of FHB and I have often posted that a lack of a CGT on rentals is immoral.
However it also concerns me that LVRs, DTI and the like will have no effect on those numerous large investors with 10 plus properties.
It seems, sadly, that there is an acceptable that long term renting will be increasing a norm for many as it is currently in many European countries.
High LVRs and low DTI will shut out many of the small mum and dad investors.
A rental market increasingly dominated by faceless impersonal property companies is not in the best interest of most Kiwis - renters and landlords.
Yes, we need to address housing affordability but we need to be careful that simplistic knee jerk reactions don’t create other undesirable issues.
A CGT would be my clear first priority as I not only see it as being fair, it will cut out speculators (who are the true parasites), will likely slow the property market at least some, but not cut out the small long term investor.
Second on my list would be an investor rate - yes a slight premium but still at a level reflecting lender risk.
Business lending tens to be at a higher rate due to higher risk (what 25%+ of new businesses don’t survive two years). Many new businesses currently leverage of the home so other than those businesses already highly leveraged or considered high risk are able to access the lower rate, lower risk housing rate.
Someone with more up to date knowledge of IRD practice may put me straight, but I understood if your intention was to make a capital gain then it is taxable income. Also, the IRD is in the unique position where they don't have to prove their position on what is taxable, the onus is on the taxpayer to prove it is not taxable.
So the IRD could tomorrow take the position that all purchases of rental properties are bought for capital gains (which blind freddy knows is the fact) and those gains are therefore taxable. The owners would then need to show why it is not, which would be a hard thing to do given the low yields and negative cashflows. There would be an uproar though.
Yes, the old onus game. In correspondence to your bank, accountant, etc. say that you are building the house to upsize/downsize/long-term rental, etc. Say anything except you are building to sell immediately.
Then when you put it on the market say in correspondence, your circumstances have changed and you are an unwilling seller.
You have to be sincere of course. And the sooner you can learn to fake sincerity the better.
Who should set rents? If the owner of the property or his chosen property agency do not set the rent then who does? Church eaders? Heads of trade unions? If the IRD or WINZ which officials will do it? Maybe virtuous academics will take on the task. The only guide we have is the govt's accommodation allowance which is remarkably arbitrary (don't save over $7999, four arbitrary areas leaving almost identical properties with wildly disparate rent support levels, one child or a dozen makes no difference to the allowance).
The main problem with high rents is for families. Let single people struggle - they can share and save but families need child support not accommodation allowance that just help prop up rents and therefore house prices.
Not surprising. And the thing that really gets me is that there is a solution that would be better for everyone. Bringing house prices back to affordable levels would be great for families AND single people. Letting house prices stay high, and then taxing more to provide subsidies for those with children, just ends up doubly shafting single people. They just end up paying more so others can have what they can't.
Incomes would be the basis for setting the rent maximum formula. A weekly rent maxima would be set based on median household income for an area using a formula based on [(CV/1000) +/-x%]. The variable 'x' would be determined by bringing rent on a median value house in line with 30% of median household income (before tax).
So if the median household income for an area is $80,000 ($1540/week) and a median priced property has a CV = $500,000, then your target to determine 'x' seeks to set median rent at $460/week (30% of $1540). In this case, 'x' would need to be (-7%) and the weekly rent maxima would therefore work out at $465/week.
The same variable would apply to a property in that area with a CV of $1M. i.e., rent maxima = [(1,000,000/1000) - 7%] = $930/week.
by Nzdan | 5th Feb 21, 6:47pm
Maybe remove interest only mortgages for investment purposes as well, if your investment stacks up you shouldn't need to take out non-performing loans. Hell, if it's a business then why not take out business loans like every other company does? Then I'm happy to see residential property investment see tax incentives like other businesses enjoy.
Nzdan
Other than deprecation on the house (but including chattels) residential property already is taxed the same as a business including both allowing for the cost of interest.
Yes there is a bright line (CGT) on property but it simply reflects intent, and ownership of any property or investment with the intent of a capital gain is subject to tax.
Bright lines/cgts will do Jack to address affordability.
But they are still right, and provide much needed government revenue.
Btw, I would REALLY appreciate an article that looks into how the IRD monitor and ensure they capture revenue on the brightline test. I want assurance that they are resourcing and enforcing this appropriately.
Any chance Jenee???
The data in the stuff article is questionable
According to NZ stats there are 440,000 rental properties, yet
The total number of active landlords with bonds lodged, as of February 9, 2021, was 120,330, the ministry said.
Of those landlords, the number who lodged just one bond, which would generally but not always be for one property, is 93,706.
Something is missing
Firstly there is no human right to be able to buy a house, not if your expecting someone else to pay for it. It all comes back to the numbers again and what, still at least 60% own their own homes and as pretty much 100% of homes are owned then that equates to quite a few of those owning more than one house. The resulting government response is predictable while the majority of people are home owners, don't rock the boat because we want your vote. The horse already bolted years ago, even if house prices stopped going up right now it would take decades to get back to that mythical housing affordability figure that has never existed in my lifetime anyway.
Affordability is a relative term though. What we can say is that house prices are many multiples of the average yearly household income, and currently this ratio is at the worst you would have seen in your lifetime. We can also clearly see that the mortgage debt load is only manageable (some would say ‘affordable’) due to central bank suppression of interest rates. Interest rates are lower than they have ever been before in your lifetime.
New Demographia 2021 report now avaialble http://demographia.com/dhi.pdf
Auckland disappointed with just missing out on a medal coming in at only fourth-worst in the world at 10x median income, and worse still, the Aussies pipped us for the third spot with Sydney coming in at 11.8 x median income.
Govt. policy states that we should be number 1 in the world even if it means we are the worst of something, and failing to be number 1, then we have to at least beat the Aussies.
Can't this Govt. do anything right?
Dale , a question, having read the report and taking the median price of Sydney and Auckland dwellings ( which are for the September quarter), Corelogic provides a recent median dwelling price for Sydney as of February 2021 of $871741, yet Auckland's median dwelling price is considerably higher, in excess of 1 million. I don't believe the cities median income is sufficient to offset the difference. Auckland deserves the bronze, or am I missing something.
Great point. The Demographia survey notes this:
'Because median income indicators are generally unavailable for the pandemic year (2020), 2019
income estimates are used in Demographia International Housing Affordability. It seems clear that
median incomes will show declines from 2019, so even that is likely to understate the seriousness
of emerging housing unaffordability trends on middle-income households. More reliable data should
be available over the next year.'
And as we know, Auckland (and NZ) have gotten worse over the last 6 months in particular, so YES I'm sure we have moved up the rankings to third place in housing unaffordability.
A medal and beating the Aussies, what more could we ask for.
Australian data often refers to its median as the house price as opposed to the median dwelling price which includes units. Auckland /New Zealand data invariably captures both house and flats/units as a median without separation. What is the median value of a standalone Auckland house. ?
Yes, there is always a difference between how different countries record data. NZ is poor at doing this which suits the Govt. to hide behind a veil of ignorance.
But if you remove the flats/units and/or apartments you would expect the standalone house price to be higher. Maybe enough for a silver medal?
Moderate bank lending preferences to stop the residential property bubble:
Banks extend 60 % of their lending to one third of already wealthy households to speculate in the residential property market because the RBNZ offers them an RWA capital reduction incentive, to do so.
‘It wants its existing Large-Scale Asset Purchase Programme and Funding for Lending Programme to keep downward pressure on interest rates. The RBNZ plans to stop buying government bonds on the secondary market and stop offering banks cheap loans via these schemes in June 2022.’
GR can say what he likes. Orr is playing wack-a-mole with interest rates & and he won’t put away his hammer until the mole is lying comatose face down on the ground. I would hate to think where house prices could be by June 2022.
Even some of those on the other side have certain pondering consciousness:
https://www.stuff.co.nz/opinion/124358100/the-myth-of-the-ethical-prope…
Govt, clearly only in the 'stage of PR', even on DTI words? still want to 'seek information' whilst the many of expert of RBNZ in the past already asking for it - Hence, you can see the shake hands, but most of us that do think can clearly read Mr.Orr body sign, he will do the opposite in order to rebuild NZ. Bit like the Chch after math of E/Quake, tinkering won't work a complete brought down crash, reset is the only way to reboot the PC
Jacinda Arden admits that has no idea, how to resolve the housing ponzi though knowing that so called investors are on rampage :
https://www.newshub.co.nz/home/politics/2021/02/property-investors-maki…
Why blame investors as it is politicians like you, who have made housing market the only economy in NZ to get fast tax free money. Where else will you get 100% return in few months - person paying 20% deposit on a million dollar house sells it after few months fot 1.2 or even 1.4 million theryby making $200000 to $400000 on deposit of $200000.
Encouraging everyone to go for the housing bonanza instead of other business or investment so why blame, when knowing the problem and still taking no action.
How many weeks or months required to get advise even if you are dumb, could get in a week and act.
Wild how in 2017 everyone gave her a very strong platform to attack the Government for not doing extremely specific things that they were definitely going to do should they be elected. Also wild how the same media has no interest in holding her to account for her own specific promises that have been eroded through town hall resets or years of delivery or whatever garbage PR dross got trotted out.
Interest.co.nz has been a notable point of difference when it comes to housing, monetary policy and light rail, but it shouldn't be.
It's becoming increasingly clear that she doesn't want to fix the problem. Also clear is that she plans to use workers and businesses hard earned tax dollars to try to offset the growing poverty, while she sits there smiling, mulling, weighing up, 'deciding'. I wonder if she really believes her own shtick that the onus is on property magnates to suddenly grow a conscience and do the right thing..? They are making it hard on everyone else, she says. As if she is a schoolteacher of a class that won't quieten down, rather than a Prime Minister?!
Simply start raising interest rates NOW. Not only does it have an immediate effect it also signals more rates rises to come. If the Labour government were serious about reigning in house prices then this is the only way its going to do it. If they think prices will level off next week by themselves because Kiwi's cannot afford to pay more then they are clearly dreaming because someone is there to buy it no matter how crazy the price is. Heaven help us now if the housing market tanks because it has now sucked in so much money it will bring the whole country to its knees.
New Zealand doesn't matter; not to our political class and certainly not to the global Central Banking class. (perhaps they'e the same thing?)
We will be 'allowed' to raise our interest rates when, and not until, other bigger economies have done so first.
Were we the first to succumb to the lunacy of dropping interest rates and multiple attempts at QE on the way down? No. But eventually we did as we were told.
That will apply on the way up. Like the vaccine roll-out - we will take our turn when it's allowed.
The only question to be answered is "What will trigger those larger economies to reverse course?" and that might; just might, be out of their hands now. (eg: If you ask me StockEx's, Bond Markets, Gold, Bitcoin and Oil are all looking a bit iffy right now. If they break then what? Answer: All the safe-haven money stored up in those asset classes will try to head for the exit at the same time)
Agreed and it would also reign in rents. If things keep going the way they are, the median price of an Auck home will be $2m and rents will be nuts. The Govt will then be forced to raise payments to beneficiaries to keep up. Meanwhile the Govt are awaiting advice - what the heck?
In that case they are seriously out of touch. My wife and I are retirees, but are involved in a lot of groups and hobbies. We are both amazed at the number of people we encounter who say they voted Labour, but won't next time around (like myself). Not only are retirees struggling to top up their super due to almost zero TD rates, they are worried about their kids not being able to save to get on the property ladder.
Why did you vote for them in the first place?? A perceived lack of alternatives(?) Personally it would have been better not to vote than to join the ‘thankyou Saint Jacinda!’ dog-pile that the last election turned out to be. It was almost portrayed as an unpatriotic act not to vote Labour. I have quite an independent mind, I don’t like being part of herd behaviour.
I felt like National were a mess, especially around Covid, i.e. some of their MPs were talking about allowing in students from overseas and our borders with OZ (at a time when Covid was just hitting NZ). Around election time, I was thinking Covid, so voted Labour. Big regret as I tealise now that they can only handle one crisis at a time. While they have their eyes on Covid, vaccinations, etc, housing/the economy has become a crisis and they obviously don't know what to do. Having said all that, National need to lift their game.
And thats why I voted Act. With National shooting themselves in the foot, if ever there was going to be a time for the smaller alternatives to Labour to get anywhere, it was that election. And he does a great job opposing Labours shit emotion based policies with some actual logic and reason.
This is starting to get a bit repetitive. We could be in a deep recession right now with unemployment at 15%, it’s quite likely the reason we aren’t is the quick response from Orr. Yes house prices are insane but because interest rates are so low the repayments aren’t much more that when we bought 15 years ago. Yes the deposit is bigger but these day’s KiwiSaver helps out a lot. I think the doom and gloom is a bit OTT - it could be much worse.
They aren’t miracle workers. The reason house prices went up was because of low interest rates. The reason interest rates went down was to stimulate an economy facing a pandemic and lockdown. The easy / popular thing for Orr to do right now would be to increase rates slightly: the fact he isn’t implies he thinks the future won’t be great in that scenario.
I think they should try raising rates slightly, I mean these guys like Orr have been wrong as much as they have been right in the way they "Think" things might happen. Might also put the brakes on the runaway freight train housing market before it gets to a bridge that gets blown up in the not so distant future.
They aren't workers at all.
This housing price increase started nigh on thirty years ago when the RMA was introduced and then gamed by Govts.
The reason prices go up is because supply is not allowed to equal demand. Period. Everything else like interest rate falls is an accelerant to these restrictions.
Other jurisdictions have as low if not lower interest rates and their house prices have remained low and stable.
Agree to an extent. But most of those other places are quite different, for example many are on big patches of flat land that can easily expand in every direction. Also I have a feeling that people live in those places because they are cheap, not because they want to. In that case demand will not outpace supply because the demand naturally decreases as prices start to increase. And then there is the fact that endless sprawl is awful, they can keep their 32 lane motorways etc. To me it’s like saying we could have really cheap health care if we removed the regulation and trained doctors in a one year course at the local polytechnic. But I’d rather they didn’t.
Good point so let's clear those myths.
If flat land was a prerequisite to cheap prices then Australia should be giving land away.
If density was a prerequisite to cheap prices then Hong Kong should have the cheapest prices, not the dearest.
Low-interest rates are in cities with high or low median income multiples, and in cities with high density or low density.
To get to 'good ground' on some Christchurch earthquake-prone soils can cost over $140,000. This is before starting foundations.
Your doctor's analogy is more like spending 15 years to get a 5-year degree, and then wondering why the prices are so high.
What we have to do when looking at house prices is split the costs into either value-added or non-value added costs. Value-added are those costs that occur when the components can be bought at true free market value, and non-value added costs are those that occur when the components can only be bought in a restrictive market, ie you pay more for them because of restrictive supply, which is mainly due to monopolies, and/or when market instability caused supply and demand cycles to get out of sync, causing shortages.
1/3 to 1/2 of all NZ housing costs are non-value added, giving Auckland a median income to house price multiple of 10x. Historically, right up until the early 1990's it was 3x income.
It's all about policy and what we want to happen.
agree the RMA does add a lot of cost, but even if there was no planning rules and land was almost free it still costs about $500k to build a house. And that is assuming you have a road and power and 3 waters on the property, if you had to provide those it would be far more. The days of 3x multiple are long gone.
Out of interest who do you think should pay for infrastructure if anyone can build anywhere?
It's easy to build to 3 to 4x median income, I have done real comparisons with NZ subdivisions and once you strip out the non-value added costs, then you are there.
But even if Auckland ONLY got to 5x median, then I think it would be worthwhile, don't you?
And you let the developer pay and develop the infrastructure, not the council.
And the three years of inaction before that? And walking away from their own policies? Or is holding them to their own campaign promise suddenly expecting miracles? The pandemic is early 2020, they were elected, supposedly with a full game plan, in mid-late 2017. Since then, how many ministers has Ardern removed for failing to achieve stated policy goals? I'll give you a hint: None.
Wasn’t Twyford minister of housing before ardern sacked him? I agree that kiwibuild was a flop and they seemed to give up on it way too early (but politically it’s worked for them as most people seemed to have forgotten). They also failed with capital gains tax too. But this last set of price rises that everyone is upset about is purely interest rate driven. A fully functioning kiwibuild or capital gains tax wouldn’t have stopped it.
Of course its doom and gloom, clowns are running our country. Alot of economists are worried about the economy overheating from all the stimulus. Or asset bubbles bursting, which even Orr is terrified of but he keeps applying stimulus nonetheless. So sorry if all this bores you but people have reason to be concerned about the lack of response from govt to at least dampen the house bubble and not just "still pondering"
Another buzz in the housung market is that buy any shit 3 bedroom and rent it to govetnment for social housing and the rent they pay is fantastic along with maintainance and for this government has spend anything between 700 millions to a billion - Hence the rush by investors in areas like Mangere and Otaras where people are buying to rent it to social ministry at premium besides redevelopment.
Imagine being given a job. Your new boss says to you, "The job is simple my old chum... you just need to keep inflation ticking around 2% for the savers, unemployment rates low for the workers (but not too low or we'll end up with the peasants demanding proper pay and conditions), long-term lending rates around 4% for the mortgagees, oh, and just keep those pesky house prices under control too.
"Great", you say, "so where's the control room". You get led down a dusty corridor and into a room. In the middle of the room there is a single lever and a big boss chair. The label on the lever says 'official cash rate'. "Sit yourself down buddy", says the boss, "this is your chair and this is your lever". You are a little shocked... "that's my single lever" you say. "Yes", says the boss, "it's a magic monetary policy lever. You don't get a better lever than that."
So, you do the job for a couple of years, listening to the wise advice of your panel of economic experts before easing your lever into new positions. Some things go well, some things not so well. At the end of your tenure, some workmen arrive to refurb the room. They pick up the chair and the lever and walk out with it. You are amazed to see that the lever isn't actually connected to anything at all. You confront your boss who seems shocked at your lack of knowledge - "The lever doesn't do anything at all you silly old bugger. I keep all the real levers in my control room - the levers, the policy levers, the regulatory buttons, the budget initiatives, you know, all the important stuff. You didn't seriously think that you were in control of anything did you?"
I am less than convinced that the interest rate does anything at all - apart from perhaps in the short-run by sending signals to people about what the Bank thinks about the state of the economy. Even the US Department of Commerce now consider interest rates be at best a *lagging" indicator of economic growth. As with so many sacred tenets of economic theory - the real world data doesn't fit. Worth a look through these slides... https://citywire.co.uk/Publications/WEB_Resources/Creative/events/2018/…
PM knows and is not acting is worse than being ignorant so not acting - Many politicians play of not knowing - dementia.
In a month or two, she should act, having accepting the fact that so called investors / speculators are major cause of housing crisis and have to be controlled.
https://www.newshub.co.nz/home/politics/2021/02/property-investors-maki…
Jenee, next time when you get an opportunity can you ask her how many months or years, she needs to act. I though in crisis, you have a meeting or two or maybe more with experts and colleagues and decide unless wants to play with the time ( funny what reason her finance minister gives for not announcing any measures in February, which they have been shouting since December/January that will announce in February as wanted to play with time) and now when the time comes hide behind excuse that unable due to corona virus - so postponed till next month.
Mr Robertson is the corona virus the reason that you were not able to announce any measures and postponed for March OR is it, what your boss is saying that have no idea whatsoever so are waiting from advice.
Advice from whom..do you mean Mr Orr, who has said that he cannot do anything as not his responsible (are you able to reign him) , so now what and whom
So many people commenting here about how bad Labour are. Yet so many of you voted for them. Instead of voting for a party that actually wanted to change things as apparently it's a "wasted vote". Suck it up people, you get what you vote for - no meaningful change and making things dramatically worse.
These clowns aren't going to fix the housing crisis, they will do the exact opposite of the fix, as evidenced by their previous 4 years. And YOU voted for it.
https://www.newshub.co.nz/home/politics/2021/02/jacinda-ardern-forced-t…
What the F@×+#. People promoting and supporting the ponzi are crying foul.
Can a Prime Minister of a country is so helpless that knowing the culprit cannot act.
Jacinda Arden and her team exposed.
They are utterly useless, but the blue team are as well. They don't actually want anything to change. Last term they did nothing but made the problem worse and were voted in again for their incompetence. So why should we expect anything different now? If they get voted in for doing nothing, they will damn well keep doing nothing...
Our politicians are all the same. They will not do anything that threatens their reins on power even if it meant they implemented something that helped people at the bottom of the gap. So many people focused on COVID which is what she wanted them to do. The election did not discuss core issues such as poverty and housing. She used COVID to retain power. We are a nation of sheep in so many ways.
That’s just sensible though isn’t it. They will always achieve more from 3 terms of slow progress than from one term of going bananas. And one term of going bananas would likely be reversed by the next government and could also damage your party forever. Elections are won in the centre, and the centre does not want radical change.
Depends on how they deal with housing prices. Remove reserve bank independence and make us a banana republic? Capital gains or land tax after they promised not to? Send all property investors to jail? Those are the only short term options I can see.
Same with poverty. They could eliminate it by imposing a 50% tax on us rich pricks and giving it to the poor, but I doubt they will get back in.
Most of the real fixes are a long game. I’m sure over the long term a lot more of those issues would be addressed under a labour government than a national one. I know someone who works in mental health who says things have improved a lot since labour won, and I am sure they will continue to do so.
An anecdote from today here on homelessness. A drive through the streets of Skid Row in LA:
https://www.youtube.com/watch?v=WjvWdRyUicU
Tents and rubbish everywhere up to 7.20, and then the dudes doing the vid spot Governor Newsom walking on the street to have a look around.
The commentator notes a black SUV on the street, people on radios, and the security guys dressed as homeless people (to blend in I guess) telling people to stay back. Behind them, people are slumped on the pavement, staying well back.
"Walking around here with an army of people. You can't even get near him." (rough place, fer sure)
At 14.15 they go past the LAPD station, which looks like a fortress.
I don't think there is anywhere in NZ that looks like this, yet, is there?
Absolutely appalling by this hopeless, hapless government – it seems impossible to hold them to account – failure after failure after failure.
They simply will not listen – I’m furious and so very tired of their manipulative half-truths.
The only real solution would seem a snap election - Lovell and Ratcliffe, make sure it gets done!
yeah, I got that (!!!!!! usually = /sarc).
I wasn't being sarc tho - I want the climax to be dramatically entertaining and over as quickly as possible.
But as far as I'm concerned real rates are already negative, so -ve OCR would just be a special character in a bunch of fields.
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