By Neville Bennett
Robert Shiller says US home prices have fallen 34% from their peak in Q1 2006. This means that US houses have fallen more recently than they did in the Great Depression.
This is one of the greatest bubbles in history, with millions of people wagering large sums on the proposition that property would always appreciate.
I think it worthwhile to look at the bubble mentality as an important phenomenon in its own right.
It is also interesting to ask how Americans are reacting to the searing experience of a property slump. They have seen a multitude of foreclosures, and a huge number are underwater with the mortgages. Do they still think houses are a good investment? Do they think that home ownership is an ideal?
Home ownership is really important to American even after the slump in prices. A recent NY Times/CBS poll reveals that almost 90% say it is a vital part in the American Dream.
When a Kiwi studies the poll, it is clear that the US culture is different. The US culture expects the state to be very active in the housing market on the side of the consumer, while the Kiwi thinks the state should be hands off, and neutral to markets forces. The only issue that I am aware of is that a large number of NZ people think housing is not a level-playing field, and many believe there should be capital gains tax on non-family homes.
Americans support helping people in financial distress over housing, but Kiwis are merely sympathetic. Support for people in housing-distress is greater than support for people in unemployment.
An extraordinary 53% say that government should give direct financial assistance to those having trouble paying their mortgages, and 45% say the government should be doing more to improve the housing market.
This is eye-rubbing stuff!
Surely one would expect more libertarian, free-market ideology in the US? Well, only 16% said the government should be doing less.
One wonders if the recession is making the Americans more receptive to the state looking after its citizen’s welfare after the recession. There was loud opposition to the extension of health benefits but that could have been from a noisy, well-funded minority funded by insurance lobbies. I hear little about the shame of 44 million people on food stamps; this is 1 in 7 nationally, but over 20% in Oregon and Mississippi.
In the poll almost no-one opposed tax relief on mortgages. This is usually regarded as a boon for the middle class. This kind of tax relief pertains elsewhere, notably the UK which has long espoused the ideal of a 'property-owning democracy'. My memory is a little suspect now, but did New Zealand have this concession before the Roger Douglas bonfire?
The US Federal Government did intervene in the property market by giving tax credits too on the purchase of new houses. This has now lapsed, and President Obama’s housing record meets with 45% disapproval and a lukewarm 36% approval rating.
Who to blame for the crash? I may be wrong but Kiwi’s tend to think that individuals should take responsibility for their actions. So if a person has to sell because they could not service their mortgage, Kiwi’s will generally say “Bad Luck!’ they bought at the top of the boom” etc and they might say the bank’s have a share of the responsibility because they offered 100% mortgages.
The American’s extremely rarely blame people for taking on too much, even the sub-prime borrowers. Readers may not know that the US government, Federal and State actually pressed financial institutions to widen home ownership with extremely liberal loans. In 1999, Fannie Mae came under pressure from the Clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas. The US somehow thought home ownership could somehow be engineered, even for those who could not service a prime mortgage. The US public are now hot against both regulators and lenders.
Americans still want to buy houses, but only 49% think it is a safe investment. 45% think it is risky.
This is a massive change, previously generations though housing was the safest investment (as Kiwi’s still tend to do?). Like Kiwis, American generally dismiss the stock exchange as a vehicle for saving. Their preference is a 401k (retirement account, some similarities to KiwiSaver) (41%), a house (26%) and savings account (22%).
[The Greek crisis may come closer to average Americans than they think: very large numbers have money market accounts, the managers of which naturally chase yield. This yield has taken them to Europe, and a Lehman-like moment could see these funds in difficulty.]
The size of the deposit is vigorously debated in the US. Lenders have now opted for 20% deposit on a house (which was the standard for decades). 58% support this but 36% say it keeps too many people from being housed.
Robert Shiller researches expectations. In 2005 he interviewed a large group of homebuyers and asked how much houses would appreciate by in the next decade. The median expectation was 7% p.a. That meant that house prices would double by 2015.
This is fascinating as it reveals a huge group of people were making the biggest investment of their lives in the expectation that it would be money for jam. This was not seen as unreasonable at the time as house prices increased at almost 10% p.a. 1997-2006. So ever increasing house prices seemed normal.
It also was the way to riches. It was easy to do too, as the US had lots of financial institutions offering 30-year mortgages at about 6.8%.
Shiller repeated the survey this year and the median expectation was that house prices would increase by 3% p.a. This is lower than the prevailing 30-year mortgage interest rate (4.5%-5%) so housing is no longer viewed as the path to riches. But Shiller seems confused because he also says the expectation in 2011 is for 1%p.a. This lower expectation means that demand for housing will be very flat and be a brake on the economy for some time to come.
Americans are undergoing great misery in this recession.
High unemployment means even those in employment must have anxiety about redundancy, about a quarter of mortgages are underwater. Many people wonder how they are going to put food on the table but many politicians are more concerned with tax cuts for the rich and are holding out for them by stalling other legislation. They are also bewildered.
A house had always seemed to be a most desirable asset. They still want them, but for many they are a liability at present.
--------------------------------
* Neville Bennett was a long-time Senior Lecturer in History at the University of Canterbury, where he taught since 1971. His focus is economic history and markets. He is also a columnist for the NBR.
nevillebennett@clear.net.nz
www.bennetteconomics.com
65 Comments
twice in two days Muzza... no I'm not stalking you, but I do agree... again!
Just interest.co.nz spruiking up the masses of the 'woe is NZ property market' whingers. The market is never going to drop out in NZ, no matter how much Wolly and the others shout it down. Ok there has been a 5% fall, but so what, there was a 150% gain before that! The 30% crash never happened, the 20% crash never happened, the 10% did then recovered 5%. The market has adjusted and the influx of overseas buyers is just going to pick up, particularly in the Big Smoke!
Now is the best time to buy... it's only going to tick upwards, cos it aint the cash strapped Kiwi buying it and the Chinese and Indian rich are very very rich and they'll keep buying it!
Only 5% drop my ass! In Nelson where I formally lived the drops were and ARE still taking place. When you price future first home buyers out of the market then you get priced stagflation like what occurred in the early 90's and is still occurring now. Not to mention the cost of living going through the roof for many, and the lack of future job security. Yeah, overpriced property is a very attractive concept in NZ
Meanwhile, here in the US we are looking into buying a 4 hectare property at the foot of the Sierra's with house and two story barn all for $160,000! USD
Cheap as chips and no mortgage
and of course that's going to happen here... nonsense! We have things the yanks don't have, clean air, high commodity prices and water... lots of fresh water. It's not oil that will start wars in the second quarter of this century but water. So yeah, like Vancouver our prices will just keep ticking up and you wishing otherwise aint going to make it change!
First home buyers are priced out of the market here and it is highly unlikely, that unless they are earning 70k plus a year in places like Rotorua or Kaitaia they'll never afford to buy a place.
Now is the best time to buy... it's only going to tick upwards, cos it aint the cash strapped Kiwi buying it and the Chinese and Indian rich are very very rich and they'll keep buying it!
........................
Lobbying by the realestate industry or sound economic policy?
I'm not in property and have no agenda... just ask estate agents who is buying Auckland property... they don't care who they sell it to and so have no reason to lie... First time home owners in Auckland, unless on a whacking double income have no chance of buying in a half decent suburb... yet those houses are still being sold and I doubt very much they're being bought by PIs when their returns are supposedly so shocking...
When I lived in the US, none of the Americans I knew thought that owning a house was a path to riches??? They just thought that owning a house was a place to live. It was New Zealanders and in particular the tea lady, the taxi driver and the hairdresser who have had this gold-rush obsession with buying 'rental properties' at any cost as an investment to generate personal wealth.
And partly I blame the Bernard Hickey’s of this world for that. With their incessant harping on that we cannot afford National Superannuation and that it should largely be viciously cut back immediately or else it will bankrupt the nation so frightened many Kiwi tea-ladies, taxi drivers and plumbers into thinking that there would be no old age pension left for them by the time they retired, or they would have to work until they were 80, that they had better make provision to support themselves. Otherwise they will live in poverty once old and have no way of escaping it. And for many, what is more safe an investment than owing property?
But, don’t have enough money to buy a rental? No worries; borrow it and let the tenants pay one off for you. Then let the capital gains do the rest. It’s easy peasy, right!
And partly I blame the Bernard Hickey’s of this world for that. With their incessant harping
Come again?? I do believe you have the wrong end of the stick here.
The likes of BH have been harping on about those who abuse the family trust laws to gain tax advantages so that they could also claim the working for families benefits.
He has also been harping on how they are using existing properties as collateral to buy up more properties (which is forcing the first home buyer out and turning them into perpetual renters) while having no fear of a capital gains tax being brought in as the short sighted governments don't want to be hit themselves or lose out on another precious 3 years of benefits.
Not to mention how the BH's of this world have also been going on and on about how this fascination with investment in property has been to the detriment of investment in business.
We need to take note of the harping coming from the likes of these doom and gloom BH's because if you were say a property investor in ChCh you are now finding out how unpleasant Mother Nature can be with an investment in bricks and mortar.
AIR, what I said was I blame the Bernard Hickey's of this world for their incessant harping on about National Superannuation not being affordable. That’s what I said, which is very different from what you wrote.
And I stand by what I said. This thoughtless approach has frightened a lot of ordinary salary and wage earners who don’t have much money, and has falsely lead them to believe that there will be no old age pension for them when they retire. This in turn has provided a massive incentive for these people to spend on rental properties in a desperate attempt to provide for themselves and their families in their old age. I have had countless discussions with people just like that who have borrowed money (because they don’t have any) and speculated on property over the last 5 or so years and this is THE most common reason that has emerged as to what motivated them to do it. There will be no National Super when they retire, so they say, so they had better do something for themselves now because no-one else will.
Property is attractive because they understand it. It’s easy, they own it, they can see it, they control it, or at least they think they do. They are not financial sophisticates; many of them probably don’t fully understand the risks. They are deeply mistrustful of other types of investments in New Zealand and after all the recent finance company failures and the share market crash of 87, who can blame them? Corporate New Zealand and its overpaid and underperforming management is so third rate you’d be a mug to put a dollar into it.
So what do you expect people to do when you frighten them into believing there will be no State support for them in old age and at the same time you provide no alternative strategy to support them?
David B: says "I have had countless discussions with people just like that who have borrowed money (because they don’t have any) and speculated on property over the last 5 or so years and this is THE most common reason that has emerged as to what motivated them to do it."
In the interests of clarity could you "broadly" categorise those people you have had "countless discussions" with into groupings of BB, GenX and GenY
I don't believe in those artificial constructs, iconoclast, they are at the end of the day little more than marketing terms and about as meaningful. What I am talking about are people largely in their 30s and 40s. I can think of very few people in their 50s that I know of or have associated with who were interested in property speculation. Of course if you actually lived in New Zealand, iconoclast, I have no doubt you would have had 'countless discussions' on the matter too.
Tonight, a pumped de Roos tells his audience that he wants people to invest in property and write to him 12 months down the track and tell him they’ve “made one million or three million, or you’ve got 16 properties, or we’re taking six months off because our cash flow now exceeds our outflow!” He says, “I don’t know any other activity where the rewards are so huge. If you want to invest a million dollars in the sharemarket, you need a million dollars. If you want to invest a million in real estate, you only need $100,000.”
You can buy one property, get it revalued, use the equity to buy another property and then buy another and another. “And you do it all with OPM. Other people’s money. OPM. It’s like being high on drugs!” What’s more, the wonder of depreciation claims on the building and contents means “the government subsidises your investment! It’s delightful!”
http://www.listener.co.nz/uncategorized/house-of-the-rising-sum/
The article ( and awesomely funny stuff , might I say ....de Roos utilises every spruik and twist of a fact known to mankind ) said that property had risen 16 % in the last year ..
.. Which year was that ?
..... but it's good to know that " I am a money magnet " , easily worth the $ 2695 to learn more of these gems ,
........ " I am a money magnet " ...... crikey this is powerful stuff
Oarsome with a capital " O " ....... !!!
Now that the market dream of home ownership has been torn to shreds and proved to be a bloody risky and in many cases utterly dumb thing to do...it stands to reason the X&Y mob will avoid it and concentrate on keeping a job, enjoying their lives and staying well away from mortgage hell.
So the future promises landlord domination of the housing market which will invite some serious red tape as soon as the socialists return to power...rents will be locked in place and the rights of landlords swept away. Who the hell could they sell to in such a market!
Labour will take many more months before they wake up to the voting power waiting to be scooped up by a party prepared to promise rent controls...and lower rents ! Don't for one minute think they couldn't do it.
I am not saying this would be good. I am saying this is likely to happen as private ownership continues to decline. The Olly's of this world won't see the boot in the bum coming, but they will feel it.
Wolly, that's all gen x's and yers can think about, buying a home. They know they're screwed on their future super and kiwisaver has already been stolen from them from the little despots in blue! So they'er desperately trying to do something that will work for them in their retirement... like having a roof over their head...
Where is this housing crash you've been predicting? I used to follow your rants and tirades and honestly believed them to be true...
there are now in places like the North Shore of Auckland, more buyers than sellers... clearly sellers know something. House prices on the Shore have just kept ticking up and it's just days between the FOR SALE sign going up and the SOLD sticker being stuck on.
Landlords even by your own admition will dominate the housing market... I realise you hate OllyN, but you've got to give it to the guy, he knows what he knows... and the big "what if" , in your argument is, what happens if Labour does protect you Boomers and subsidises rents or just leaves the market to the market? Yip, you got it, Olly and his PIs will be a whole bunch richer!
So odds are, property is a safe bet for the future...
the saying is still strue..."safe as houses!"
Labour won't use rent controls they'll use rent/mortgage subsidies to make sure property 'investment' still looks good and so they (and the other BB's) don't take a hit on their personal 'property portfolios' (aka ' but it's my retirement'). A bit of pork for the landlords as well as the renters. Two birds with one stone kind of thinking, that's what they need Wolly.
They'll call it something like working for other peoples rent/mortgage (WFOPRM?) and it will come out of contributions of the last remaining taxpayers not gaming the system or on some kind of rort just before they leave for Aus. Actually come to think of it, isn't this already how it works?
As for owning, who of the X and Y gens in their right mind would want to anchor themselves to a life crippling debt on an overpriced rotting liability in the shakey isles while facing an uncertain future of economic decline and evisceration?
Any X or Y taking on a mortgage would be a dam fool...unless they have bloody high salaries and jobs for life..like at Treasury or Winz.
The socialists will weigh up the pros and cons on rent controls...and then they will promise to impose them anyway...!
Whatever rings the voters bell Nopro....
Give Labour their due , they do have a slick PR team , compared to National's . And a message from Goofy or Cunny , condemning those greedy rich landlords , using LAQC's to avoid tax for all these years ...... well it's high time that they were pressed upon to put something back into NZ society ...... these rent controls will benefit the poor and needy , all Kiwis on an averge income .......
.... yadda yadda , all over red rover for Uncle Ollie and his ilk .....
.... the voters would lap it up ! .......
Surprised that Winnie hasn't jumped into this space , for the benefit and security of affordable rental homes for the elderly ......
The number of mortgagee sales continues to rise......Auckland Property Investors Association president David Whitburn was unsure why the number of sales had spiked in the past six months when interest rates were so stable........
"I think it may be the banks changing their credit criteria. They have a truckload of people that are really struggling........"I think they've taken a look back at the economy and decided this market isn't going to recover as quickly as they thought"
http://www.stuff.co.nz/sunday-star-times/business/5221155/Mystery-spike-in-mortgagee-sales
Hmm I would have said they have relaxed their criteria, ...the "steep" interest rate rises they seemed to think were coming have evapourated.....but looking at Labour's straw polls many ppl seem to be complaining on the cost of living, so more mortgagee sales dont surprise me. Whether its PIs being forced to sell? or home owners whould interest me?. Probably they have a backlog of sales but dont want to flood the market (its been rumoured)...and the market is dropping if slowly, makes sense to clear as many as you can. Also the banks seem convinced interest rates are going to rise....ditto inflation so I can guess it makes sense to sell out as many as you dare.
regards
Runs contrary to their "confidence survey" blather...backs up the decision made by govt to borrow as much as possible before the piigs bladder bursts....and points to Bollard being forced to end his near zirp game...
"Miss miss you said we should save our pocketmoney for a rainy day"
"Yes I did dear"
"But miss...if I spend it today, it's worth more than it will be worth tomorrow"
"Oh but you can earn interest dear"
"But miss...I'm not interested in waiting until it's worth less tomorrow...I'm spending it when I get it."
I have been saying for months that there are home owners and investors out there who had too much mortgage debt in the first place and when you combine that with the rising cost of living of late in such basics as food,petrol and power there has to be consequences. First of all house prices have to come under pressure as is happening. Vendors have to meet the market. The odd one might get lucky and sell to someone with too much money and stupid enough to not do adequate due diligence. Those with too much debt have to sell or just simply give up and walk away. The trouble is that agents are not discrete. Buyers always find out about the vendors relationship breaking up or about the vendors financial problems. It might not be an official mortgagee sale but all parties involved know what is going on and the purchase price reflects the circumstances. Agents themselves are also struggling. With the drop in sale volumes many have left the industry and there are those now with a part time on the side supplementing the household income as commissions dry up. We need this important market in New Zealand to pick up.
The new banknotes will be smaller in size to reflect the decline in the buying power of the paper...by 2050 the ten dollar note will have been phased out and the twenty will be the size of a postage stamp. Round about then the average 3br dunga will cost you just under 5 million.
I find the junk coins make good washers when drilled to fit. Cheaper too.
You're doing a great job Bill..John and Alan...debasement charging along at a steady clip.
Tell you what , Wolly , I'll do a deal for you ..... a win/win for both of us . The Philippines is changing to new banknote designs soon , and rather than scrap all the old notes , we'll re-issue them as Kiwi currency , at last the NZ peso will become a reality , after years of politicians debasing the " Edmund Hillary Dollar " .....
...... your " new " bills will be denominated as 20 / 50 / 100 / 200 / 500 / & 1000 pesos ...
We just gotta over-print the front lettering... " Republika ng Pilipinas "... with " Republic of Hickey " ....
.. the " Kiwi Peso " , I like the sound of that !
That way we could really be a part of the Asian century Gummy!
Are you applying for a rent subsidy Gummy...all the rage in NZ....300,000 have it...500,000 citizens benefit from it...3,800,000 are paying for it....as well as an unknown number paying higher rent because of it...and countless civil servants are paid to administer it...and the govt thinks it's great policy...how to waste $1.1billion every bloody year plus the admin costs.....go figure!
Those are the un-intended consequences of well meaning , yet basically incompetent , politicians .....
..... but doesn't it cheer you up , to think that the Ollie Newlands of NZ are cashing in on all the LAQC and capital-gains-free goodies going , courtesy of the tax-payers , ... plus higher rental incomes from the rental assistance rort !
NZ is screwed , unless someone with guts gets into power and cuts all this entitlement crap out of the system ...... no tweaks & fiddles , just 100 % expunge the seriously dopey policies .........
Another reason it's not a prized asset..... http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10735939.....all you need to do is ask for a state house...get on the list...Labour will help organise it for you...
"The Productivity Commission has been tasked with addressing housing affordability, a thankless pursuit. They should find unblocking the barriers to new housing development is the answer, not State ownership of the existing housing stock.
Housing New Zealand appears to be an effective and well-run organisation but the premise of its existence is flawed. Its assets should be sold and the market left to regulate the rental market. Isolated cases of real hardship can then be transparently addressed."
Then close down Housing NZ..save heaps...
And get rid of the support payments...
Then landlords will either have to drop rents or sell up....
Watch now as Goofy hides under the desk on this issue and cunny remains in the shadows.
"On top of this, the Ministry of Social Development pays $1.1 billion in housing allowances to more than 300,000 individuals, which means 500,000 citizens are receiving accommodation assistance."
This brainless piece of vote buying has to be up there with all the other acts of serious idiocy.
300,ooo individuals are being subsidised by taxpayers, some of whom are paying rents that are bloated because of the subsidy....remove the subsidy and rents will fall...lower rents means people have more disposable income...to spend or to save.
$1.1 billion would be cut from the budget splurge.
A possy of bureaucrats would not be needed...saving millions more.
But wait....most landlords are National Party voters.......................
Increase the rent subsidy ....quick...and employ more bureaucrats....give the boss a raise and a bonus...lifetime membership to the wgtn old boys club....
She'll be right , mate ..... until such time as the bond vigilantes realise that NZ is not at all alike Australia .....
.... a little investigative work on their part , and the game is up for cheap munny flowing effortlessly into the " NZ-Debtanic " .......
....... as interest rates spiral upwards , out of control , the " S.O.S. " will be heard far and wide ...... hope the IMF are listening out for it ......
Then , and only then , will there be a very rapid sobering up of the politicians in New Zealand , who are still spending alike drunken sailors on shore-leave .
What " coming tax increases " are these , you speak of ?
==================================================================
....... Gummy is an international citizen , I am a wobbly-gooey child of every country , I live everywhere .......
... checked out the new bamboo hut in your back garden ? .... bring a cup of tea & 2 cookies , please , I'm famished !
==================================================================
regards
Never said nought about cutting " essential " services , steven !
...... WFF , a $ 3 billion , " entitlement "
Rental assistance ...... $ 1 billion ! ...... do you really want to make Ollie Newland richer , by artificially stimulating rental demand ..... seriously dopey , that one .
..... we could go on & on , for all the non-productive areas where the government steps in to provide assistance , and utterly buggers things up .... And then bills the tax-payer for it !
We are living beyond our means , steven , we do not earn enough to pay for first world health care & pensions . ..... Unless we cut somewhere ..... and Gummy reckons superfluous shite 'like WFF is ripe for 100 % cutting .
If memory serves me correctly, Gummy, (and I do stand to be corrected on this one) the accommodation supplement for non-beneficiaries was first brought into being by the Labour Govt. of the Buffoon in Chief, the Right Hon. I’m A Big Fatso, David Lange, darling of the left and hand wringing hippies who care. I guess at the time he must have being drunk on the fumes of all that uranium he got rid of, not.
Looks like those Labour Party lefties just can't help themselves with buying elections. Nothing’s changed.
Wolly, that's all gen x's and yers can think about, buying a home. They know they're screwed on their future super and kiwisaver has already been stolen from them from the little despots in blue! So they'er desperately trying to do something that will work for them in their retirement... like having a roof over their head...
Where is this housing crash you've been predicting? I used to follow your rants and tirades and honestly believed them to be true...
there are now in places like the North Shore of Auckland, more buyers than sellers... clearly sellers know something. House prices on the Shore have just kept ticking up and it's just days between the FOR SALE sign going up and the SOLD sticker being stuck on.
Landlords even by your own admition will dominate the housing market... I realise you hate OllyN, but you've got to give it to the guy, he knows what he knows... and the big "what if" , in your argument is, what happens if Labour does protect you Boomers and subsidises rents or just leaves the market to the market? Yip, you got it, Olly and his PIs will be a whole bunch richer!
So odds are, property is a safe bet for the future...
the saying is still true..."safe as houses!"
Those "For Sale" signs. Why are they, or the financiers, selling now? Because the vendors see price rises coming? I doubt it! In fact, I'd suggest that the "Sold" sign is more an indictaion of "Take the first offer that comes along and let's get outta here before things get worse"
yeah right... there is no glut of houses on the market, inventories are short... they're selling quickly cos people are buying them. A friend of mine who bought her North Shore house at the so called peak, sold last week. There were 10 excellent offers within 2 days of it going on the market.. sold for 10% above 'peak'...
Inventory size in itself, has little to do with sales, mandalay. Only one thing does ~ the ability to pay for what one wants. It doesn't matter if there is 1 house or a thousand to choose from if you cant afford any of them. There will always be turnover, in any market state ( inventory size can only affect the choice for those that can afford to pay). So as markets stall, seller retreat into their properties as they "can't afford to sell' ( they'd lose their deposits on the next place etc) and prepare to 'wait it out'. All that does is build up 'hidden vendors' that wait to come out. So, of course there is no glut! One wouldn't expect there to be at this stage of the cycle....but there will be..
Mandalay, I am Gen Y, and buying a house is the last thing on my mind, simply because it is unaffordable and I simply refuse to put my eggs in one basket, which in investment is THE cardinal sin. Read Buffet for more information. The way to wealth is through wisdom and knowledge, I like to use the Art of War when thinking how to invest. "Know the market, and know yourself, and victory is assured, even in 1000 investments" - Muppet King
Herein lies the problem. Don't mean disrespect, but you have the wrong attitude IMO. From that 80K you could build wealth a lot faster than in the 25 years it would take to pay your mortgage. I won't tell you how, I will tell you to look outside the box, its a lot easier than you think.
The fact that we are closer to family, happier, safer and warmer means alot to us. There is alot to be said about happy families. There is not enough love in todays world. It's all greed!
We are both pretty lucky in the fact that we earn good money, so that 25 years should be more like 7-12 years even if interest rates reach 15%
Mandalay;
It is only ever a question of time. House price inflation ahead of incomes, is the fair dinkum "zero sum game". It is ironic that so many Kiwis don't see this. They think free trade is a zero-sum game when it's not, and think house price inflation is real wealth, when in fact it is a zero-sum game.
It is all wealth transfer. It might be a mortgage on the future income of younger buyers, transferred to retirees trading down (and deceased estates selling up) and to leveraged investors. But it is still a wealth transfer. It means a lifetime of vastly reduced discretionary spending by the mortgaged generation. Discretionary spending IS REAL wealth. It has a feedback effect. The feedback effect of inflated housing costs, is the opposite.
Look at the graph on page 5 of this PDF. Which cities do you think will have the most growth in real wealth over the next 50 years?
http://www.houston.org/economic-development/joel-kotkin/pdf/KotkinAppen…
"Property inflation is wealth" people will all pump for LA. But look at that graph. Where do you think LA is heading, with "discretionary incomes" like THAT?
Furthermore, where do you think most businesses will want to locate, or re-locate to? Where land and the cost of everything,. is higher relative to incomes?
This is basically economic Darwinism, national "natural selection" at work. The more I learn about the intuitions of those redneck, bible-bashin', gun-totin' heartland USA people, the more I admire them. Sophisticated, sneering, politically correct elitists with their urban growth constraints and their moral relativism and their total loss of reason, are getting their big-time come-uppance, and can't even see it.
PhilBest... while there may be some truth in what you say, the point I am making is that regardless of what is or isn't common sense, the young people of NZ are desperate to own their own home. The fact they probably never will is hugely disheartening for them and doesn't bode well for the morale of our nation.
I have been fortunate to live in the US (AMONGST MANY OTHER COUNTRIES) and your one-eyed predjudice against the good folk I have encountered over there is worse then their so-called 'redneck, bible-bashin', gun-totin' heartland USA' way you so easily disparage. Particularly in light of the fact it was their young men that saved this country from the fascim of the land of the rising sun. But I guess bigotry is bigotry and I hope the replacement of US supremacy by, should we say, less democratic cultures, will be more to your liking.
y.
Mandalay, you took me the wrong way. I was being sarcastic about the 'redneck, bible-bashin', gun-totin' heartland USA'
As I said, I admire their intuitions. It is the sneering "liberals" who use these terms who are themselves guilty of utter irrationalism and unreason. Look at "smart growth" and socialism generally.
I strongly recomment "The Theme is Freedom" by M Stanton Evans, which traces the philosophical threads that led from Moses to the Gospels to Paul's epistles to Magna Carta to John Locke to the USA's Founding Fathers; versus the philosophical threads that led from the Greeks to the Jacobins, the Bolsheviks, and the Nazis.
I agree not absolute, but generally - nothing is absolute - how'd we get on to this debate? You argue "The culture of home ownership exists.." yes it does by a vast majority of gen Xers and Yers... but you are correct not every one of them, there is that one chap at work and of course MuppetKing, who may or may not be the same person..gen Xer If you can't afford to buy a home, then clearly the only option you have is to rent... or live in your car.
Despite the ongoing problems in housing, I still have a dream of owning my own home with a conservatory right outside my door step, and nothing is going to stop me from trying to reach that dream.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.