By Bernard Hickey
The prevailing perception in Auckland's over-heated property market is that an influx of capital from China is a factor driving up prices.
New Zealand First leader Winston Peters challenged Prime Minister John Key to debate the issue this week.
All three major Opposition parties are proposing bans or restrictions on foreign buying of homes and it could easily be the issue that decides who wins the September 20 election.
The Government is under pressure to at least investigate whether the anecdotes from Auckland's auction rooms are borne out in fact. Key and his Finance Minister BIll English both acknowledged this week that no one had hard enough data to prove or disprove the influx of capital, one way or another.
Key said he did not think buying from China was an issue, citing a survey of estate agents by BNZ Chief Economist Tony Alexander, but Key himself said the analysis was "crude" and he agreed a call for more data was credible.
So the information vacuum remains unfilled and both Winston Peters and Labour Leader David Cunliffe are gathering the anecdotes and rhetoric to make it a central election issue.
The Government has side-stepped calls for an inquiry, although has not ruled one out. This leaves a stalemate that may only be broken with a change of Government, or a backdown by a Government wanting to secure Mr Peters' votes.
But there is another way.
What if the Government was to flip the issue on its head?
Instead of saying there was nothing to see, it could argue that an influx of investment from China could actually help solve the housing shortage in Auckland and should be encouraged.
English touched on the thorny issue of Auckland's need for an influx of small and affordable homes close to the city centre in his pre-Budget speech in Wellington this week.
He said Auckland Council planners had effectively blocked the mass development of many smaller 'shoebox' apartments by limiting them to a minimum of 40 square metres with balconies of at least eight square metres. He said these restrictions meant rents for apartments were NZ$80 a week higher than they needed to be and that planners should consider the inflationary effects of their policies on inequality, interest rates and Government spending on accommodation supplements.
Developers have said there is large demand, often from investors from China, for apartments closer to 20 square metres than 40 square metres.
The knee-jerk reaction from NIMBY baby boomers in their villas in the leafy suburbs is that the 'shoeboxes' are a real estate crime that no sane person would live in. Perhaps these BANANAs (Build Absolutely Nothing Anywhere Near Anyone) should think again, even if it is only to give those younger and poorer generations a chance to get on the ladder and to keep their own interest rates low.
The NIMBYs have already blocked more intense developments in many of the leafy suburbs close to the centre of Auckland.
The least they could do is encourage more apartments in the centre.
English rightly pointed out that not everyone dreams of living in the quarter acre pavlova paradise of old and that this demand for smaller more affordable homes should be met.
An ageing population where couples start families later, where families are smaller, or both young and old are living alone, needs these smaller homes.
One solution is to encourage an influx of capital from China to build thousands of these homes in and around the centre of Auckland. There are already signs this influx is building.
The 52 level tower planned for the empty space next to the Sky Tower is being financed by Shanghai businessman Furu Ding. The NZ$350 million project will include a 302 room hotel and apartments.
This week Beijing developer Fu Wah won the right to build a NZ$200 million five star hotel on the Wynyard Quarter site occupied by Team New Zealand. The same types of developments are springing up at an even greater rate in the likes of Sydney, Melbourne, Vancouver and London as wealthy investors from China look to spread their wealth into property outside of China.
Australia's ban on non-residents buying existing properties has turbo-charged this building spree, encouraging investors from China to buy off the plan to fund these new developments.
Credit Suisse forecast last month that investors from China would invest A$44 billion in Australian homes in the next seven years and had bought 18% of new homes built in New South Wales last year.
A National Australia Bank report on foreign buying in Australia found a record high 13.9% of demand for new homes was coming from offshore buyers in the March quarter.
Perhaps such an Australian-style restriction could kill two birds with one stone: dampening demand for the villas and townhouses of East Auckland while also sparking the apartment building boom that central Auckland and the rest of the New Zealand economy so desperately needs.
The final step is to make sure those new apartments are occupied.
Tony Alexander warned this week about the risk investors from China and other emerging markets would buy homes as safe-haven investments similar to gold bars, leaving them empty. Britain has already identified a problem with foreign buyers owning empty mansions and is looking at a special tax on unoccupied homes to encourage them to be rented out.
This risk and opportunity is expected to only get bigger.
The American Enterprise Institute has forecast China will invest US$1.25 trillion in overseas assets over the next decade, almost triple the amount invested over the last eight years.
China's new President Xi Jingping has promised to open up China's economy to the rest of the world, including loosening capital controls.
He gave an early taste of those loosening restrictions last month when he agreed with Key to make the Renminbi directly convertible with the New Zealand.
The money is coming.
We can try to block it or choose to embrace it solve our problems.
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A version of this article was published in the Herald on Sunday. It is here with permission.
46 Comments
I agree.
Why should we turn Auckland CBD into another Mongkok.
We are having problems supporting the population growth we have now.
Infrastructure, schools, transport, open spaces.
Slow down immigration and retain the unique Auckland we have, .....that is precisely why we are one of the most popular immigration targets.
No bob, my comments stand.
If we slow AKL's growth by reducing immigration there will be less need for such shoeboxes.
I say again, is it some people's desire to turn parts of the CBD into another Mongkok?
It appears that is the desire of many Chinese investors.....well, they can go peddle their 20sqm boxes elsewhere IMO.
Remove the pressures of immigration, and foreign speculators for that matter, and the price of the current and future supply will be in reach of NZers.
Population growth is a red herring, period.
If immigrants buy NZ made whiteware, do we complain that they are forcing up the price of whiteware for all of us, or helping NZ whiteware manufacturers achieve economies of scale?
Houston grew from 3.9 million population in 2000, to 5 million in 2010. All that this did to their housing market, was enabled builders to get a bit more economies of scale into it than what they already had.
Chicken coops didn't come into it. When you can build Ford Mondeo housing at Ford Mondeo housing prices, you don't need to force people to pay Ford Mondeo prices for Tata Nano housing (because Ford Mondeo housing is Rolls Royce prices).
so to maximise profits and profits from large loans, you constrict and restrict the market options. 1000 bidders, 10 Mondeo's.... 100 Nano's.... loan sharks get rich. factory owners get rich. everyone gets screwed, walks home to their cages and shoeboxs and pay rent to the buildings owned by factory owners and mortgaged to the loan sharks.
break
the
system
You got it......
Of course "factory owners" are not generally extracting gouging economic rents from the system any more, not like the $1000 "NZ made Walkman radio" in the 1970's in Iron Curtain NZ.
The analogy is exactly right as regards urban land today, though. Yes, the system does need to be broken.
Actually factory owners, if they do not own the land they are on, or did not own it from far enough back, are also victims of the racket. It has been suggested (by Alan W. Evans, for example) that Britain's loss of industry has been worst in sectors that actually require a bit of space in which to operate. Of course if land costs are hundreds of times higher than, say, Southern USA, it is no wonder Airbus or Volkswagen decides to build a new factory in Southern USA, not Britain.
Add to this, that factory owners and all employers suffer workforce cost pressures from workers whose housing costs are double or more, what they should be - and again, it is no wonder there is a noticeable boom in footloose international producers locating in Southern USA, and an "insourcing" phenomenon occurring in the US economy, primarily in the South.
Even China's urban land costs are many times higher. In fact most 3rd world countries have expensive urban land simply because corruption in development processes is a way of life. Here, we sanitise it as "urban planning".
Correct raegun.
PB's attempt at comparing housing to washing machines is a strawman argument.
The census data shows us how our demograhics are changing.
Combine that with freely printed offshore money; and funds that are being systematically laundered through real estate world wide indicates far far tighter restrictions are needed.
This is probably something we're all aware of.
"New Zealand has the fourth worst household debt-to-GDP ratio among advanced economies, surpassing even the United States"
"An influx of foreign home buyers in recent years has contributed to the inflation of New Zealand’s housing bubble. Australians and Chinese – who both hail from countries that are experiencing bubbles – account for 42 percent of these foreign buyers, which means that the false prosperity booms in Australia and China are spilling over into New Zealand’s housing market."
See the link below.
http://www.forbes.com/sites/jessecolombo/2014/04/17/12-reasons-why-new-…
Government overseas debt has nearly tripled since 2008
Here is what to expect when New Zealand’s economic bubble truly pops:
- The property bubble will pop
- Banks will experience losses on their mortgage portfolios
- The country’s credit boom will turn into a bust
- Over-leveraged consumers will default on their debts
- Stock and bond prices will fall; the New Zealand dollar may weaken
- Economic growth will go into reverse
- Unemployment will rise
If only the opposition parties challenged the current government on their financial policies rather than focus on Judith Colins. By the time National are re-elected in September, their job of bankrupting the country will be half done.
I laugh at forum guests who blame Clarke for excessive borrowing that led to the downturn in the NZ economy. We are about to experience the biggest recession on record here in Godzone's country due to reckless borrowing by this government.
Yes, this may be one man's opinion and there are bound to be counter-arguments regarding his 12 reasons; however, what you cannot deny is that the country produces less than it borrows and reliance on financial products is not sustainable in the long term.
Prediction: Tax rates and GST will be higher by 2017.
Mr Wheeler and Mr Key - let the games commence!!
By 2017 Grant A, who knows which coalition may be running for government. One thing is for sure - the "good times" will soon be coming to an end as everyone begins to tighten their purse strings.
Even National may require a U-turn on their policy of 'never' increasing income tax.. in fact they may even consider this as early as next year.
Excuse me, Kiwi voters regard National, correctly so, as the more austere of the two options, and mainstream media criticism would be intense if they actually did practice Don Brash/Roger Douglas type economic austerity. There is absolutely no hope, politically, in NZ, of real austerity.
The Clark years were the ultimate in Ponzi economy tax revenue, which is why Cullen could look fiscally responsible even as he jacked government spending by some 40%. Then when the artificial boom ended, merely trying to cut 5% off the Cullen binge gets portrayed as heartless austerity AND reckless borrowing. It is a pity most voters are too obtuse to follow these realities.
The artificial Ponzi-economy boom effect on government tax revenues was a massive problem in most first world economies. The noted Fred Harrison wrote a very clear exposition of this effect in the UK:
http://www.macrobusiness.com.au/2013/03/uk-government-launches-huge-mor…
I give this the prize for
drumroll
the silliest piece Bernard has ever penned.
20 days too late, BH.
"An ageing population where couples start families later, where families are smaller, or both young and old are living alone, needs these smaller homes".
Um, may they not need less homes? And may not the homes of today, be able to house two of the families of tomorrow, and still have an ensuite to spare?
An 'capital' ? Do we still think someone else's 'money' is needed to do whatever WE choose to do? Jack Lee would shake his head, that's for sure.
Yes we can embrace it or block it.
Either way it should be on our terms. Just following overseas rules such as Australia allowing only new builds to be sold is still far to soft an option. We can do all the developments ourselves. The only acceptable terms as I see it is where there is something on offer that has extra benefits for NZ Inc.
We can choose to block them also by making the terms so onerous that they dare not try to sidestep.
Yes the ban on size should go, but there are two main reasons that there is a demand for small apartments.
One reason as noted is for those that only need a small space, like singles, or couples with no children.
And two, many people can only afford to own or rent a home if it is made that small.
Allowing these type of units to be built, by zoning and cash injection from China or wherever, does nothing to make housing truly more affordable as the unlying problem that we have with council ideology (zoning restrictions, DC levies, and general bureaucracy) is still there.
It also causes a function follows form issue, in that if you can only afford to live in such a small space (and they are building them this small at Hobsonville on the fringe), then it also means it is less likely that you will have children) and thus it becomes a self fulfilling prophecy.
Direct foreign capital to new builds. So obvious. Aggregate demand is increased through foreign investment in new builds. Australia's already done it. Diredt the hot money somewhere useful, great.
Unfortunately it's too late! The government should have done this back in 2010. Auckland house prices averaging 700K, that's 8.2 times the average salary with rental yields below 3% in places. Dangeroulsy overvalued! I'd say the horse has well and truly bolted.
A whole generation of high paid professional kiwis now feel disenfranchised, they're living in rented homes with little prospect of being able to purchase the house that by all rights their salary should command. That generation is putting off having children, remaining DINKS for as long as biologically possible so that they can raise the capital to purchase a home. That generation has one foot out the door and will leave Auckland if they can see a better future for themselves elsewhere.
It sounds like it should work, but it doesn't. As you say Aussie are doing it and their housing is just as unaffordable as ours. Everything else you say is correct and yes the horse has well and truly bolted in Auckalnd and that is why it will feel it worse when the correction comes.
But you don't know what Australia would look like without those foreign investment rules. Potentially much worse than now. Besides, what happens if Janet Yellen halts tapering, then resumes QE later this year. What happens if the Chinese CCP decide to guarantee all bonds, and increase stimulus by printing to infinity like the Japanese. It seems to me that governments and central banks have a mutual vested interest in avoiding deflation at all costs, inflation is okay to them. Its never too late to put some safeguards in place around our property market. Too late for Auckland but not for the rest of the country.
Actually, the way economic land rent works, it doesn't matter what the peripheral policies are, house prices will find their level at "the most that people can stand out of their expected future incomes". Urban land prices will rise to take out any slack created by any policy. South Korea, for example, has LVR restrictions that vary to not much better than 50% at any time, yet their house price median multiples are still 12+
Aussie has a CGT and restrictions on foreign investment, but because they have deliberate strict urban growth planning, house prices end up at systemically high levels anyway.
The only cities in the world where house price median multiples have remained flat at historically normal levels of around 3, are cities where for cultural reasons (they love freedom), urban planners have not been allowed to ban sprawl. All "other cities" now have median multiples at the very least trending around 6, but always going higher in the case of a nation's primary cities. Systemic downsizing of average housing size makes no difference. Presumably a few percentage points here and there are due to differing policies, yet some policies, like South Korea's LVR restrictions, don't seem to make any difference at all, contrary to the expectations of their advocates here.
Even in Singapore where there is stuff-all property rights and urban planners can rebuild stuff at higher intensity without any mucking around, it is obvious that fast-track intensification and building "up" and nil NIMBY rights don't create systemic affordability, contrary to what certain advocates here say.
BH. R U fkin INSANE?
IF that was a good idea, why don't you give away all _your_ investments and passive incomes, and go get a wage-labour job.
Y R U people even suggesting such crap - it's not funny. Some idiots actually _believe_ you.
Yay lets all through away our property and investment opportunities - residental property doesn't go down so _LETS_GIVE_THE_MAJOR_MARKET_SHARE_ to someone else.... that's gotta be really smart don't you think. .... won't that immediately make prices go down?????? giving price setting control to someone completely outside the ENFORCED encased target market.
where you going to live while you're slaving for your masters, pat.
the property investors already on the ladder will do marginally better than those who will now be forever blocked from freedom from rental.
...so pat... you're being the perfect example of why many dumbass kiwi's are still in poverty (working for the profits of foreign masters and investors, now want to pay profits to foreign landowners)
Or do you think someone offshore with enough brains to navigate the Chinese and other foreign investment systems is going to be stupid enough to plow in enough capital to crash the prices in the local market...or if they do, they'll won't have enough vulture money in reserve to pick up any bargins? that they won't have well commissioned contacts, who know they get a quick sale and sweet finders fee, by passing on any good deals?
And that these foreign folks, who have no other beneficial interet in NZ, apart from financial gain, and the ability to park their funds out of the reach of their local banks, governments and other "haircut" groups is the primary thing they seek... You think they'll start cutting prices and selling because the market shifts a few points. Chinese (and many foreign buyers) the rule is you buy land, and once you have it, you NEVER let it go. They're not speculators looking for a quick buck. they're not impovished kiwi investors looking for a pension and a bit of return in their dotage. They're not even business developers hoping for a keystone assist to leverage a business against.
They're banking a nearly impossible to create resource, in a country with growing land needs, who are still as ignorant as beads'n'blankets indigenous cultures. In a place daft enough to have population that *wants* to slave away for sub-subsistant wages (beads) and pay it all away for food and accomodation (the balnkets), and will give everything up for that right.
You think those foreigner owners, banking land, really care about rent-out rates or competing for price??? If they have a large market share, especially of modern housing, they can set the prices and wait. You WILL pay the rent...or what? THEY put in the necessary "100,000 houses", where do you think you will compete with them to build/buy your 1 house on the cheap? where will you live while you're saving that 20% deposit???
You think "your" government will protect your needs, your culture or your way of life? With A massive foreign investor breathing down their neck, threatening to close the holding company that owns how many kiwi loans? that has the power to drop the entire auckland rental market into the toilet, taking with it how many local investors? What will that do for those with business or loan exposure? And if the NZ government acts against the interest of foreign corporations? (TPPA?? or a sister agreement) or against the heavily invested nationals of the Chinese government...if those people have money, power and influence you think their government is going to sit by and let the NZ government push them around?????
Hell, they fold like a wet serviette now, what will happen when there's real (financial and military) pressure!!!!
Is it any wonder that NO politicians ANYWHERE have ever done anything about inflating house prices bubbles? No matter how much lessons have been provided by bad examples in other countries, median multiples in Auckland can go from a historical 3, to 4.5 by the early 2000's without any politician beoing able to be made interested in addressing the problem - to 6.5 by 2007 - to 7.5 by 2011 - to around 9 now........
And of course the guilty parties who have been corrupting the politicians all this time will get big fat bailouts after the crash.........
Don't tell me that Labour is not guilty, how many investment properties in Auckland did H. Clark own (and still does?). MP's from all parties are deeply corrupted on this issue, even before the question of undue influence from fat cat financiers and property magnates is considered.
What a depressing read. Yes of course the government can and should take action to protect us. Look at Australia mentioned above in regard to their capital controls on property. They just signed a free trade deal with Japan! basically a one fingered sauté to the TPPA. I guess the Australians didn't want their country run by SOPA lobbyists and litigations corporations like Philip Morris. Everything you say about china's 1.3billion seeking to bank land forever just reaffirms the need to tighten up investment rules over here. And what's this crap about one holding company sinking the New Zealand economy, blah.
The "holding company" being China (as an example). Can be anyone who has a superyacht or megaplaza and a few friends.
And its not the 1.3billion we are concerned about, just the top 100,000. If each build 5 "cheap" houses (with borrowed money on foreign banks), and they decided that they didn't like the way NZ was run, or if they decided everyone was charging too much rent and knocked it to $50/week in Auckland and Wellington (for those 5 houses each).....
then what you think happens to the market in auckland? Those 100,000 can spend that "rent loss" on an evenings drinks, it's not like they have to concern themselves with debt servicing. You think tenants are going to pay "auckland rents"? or go for the foreign $50/week option.
And if those same people refuse to add upgrades, and won't pay council fees, you think Auckland council or "Brand NZ government" is going to take their property in a court battle??
Thus the "holding company" acts to control the market. And I'm absolutely SHOCKED if BH had not seen that outcome.
Cowboy lay of the shrooms, you're in fantasy land. Are you seriously saying that we should sign the TPPA and bend over with regard to housing for fear of angering some mythical group of uber wealthy Yank or Chinese illuminati. ho ho ho! Now if a Chinese (or Russian, German, Scandinavian) sovereign wealth fund had invested a few billion in Auckland housing that would be a different story. Politicians would be hung. The foreign buyers are just wealthy individuals, no sinister co-ordination.
The real issue is monetary easing may have a long way to go. The reserve bank and government have put kiwis on hold with LVR's and high interest rates, while giving foreigners the green light to buy our productive assets on the cheap. Its a crappy situation which will only get worse with time.
I have long said there is no need for sinister co-ordination or Illuminatis or anything, to explain the connections between rich land rentiers and advocacy of "Agenda 21' type urban planning.
Heck, the Rockefellers and George Soros alone would get many times back in capital gains on long term property investments, than what they have flicked to "smart growth" advocates over the last 3 decades by way of funding of "studies" etc.
At the level of the individual city, how much funding do you think the owner of ONE SINGLE land bank like THIS one might have been prepared to flick to "save the planet" local politicians to ensure the UGB policy remains absolutely sacred?
http://www.nzherald.co.nz/anne-gibson/news/article.cfm?a_id=39&objectid…
It would be safe to say that there would be numerous such land bankers, and owners of property throughout Auckland. Even CBD values are all part of the same phenomenon. If fringe land costs $10,000 per acre, CBD land is unlikely to be more than $200,000 per acre. Literally true in affordable US cities. If you are talking about $2,000,000 per acre fringe land as in Auckland, you are probably talking about $20,000,000 per acre CBD land. There are probably similar tales of CBD sites that some guy paid less than $1 million for 20 years ago, that is worth over $100 million now.
And the anti-sprawl agony aunts claim that the vested interests in capitalism are guilty of "promoting sprawl"....... BAH.....! Useful idiots, to put it kindly, like the Baptists were for the Bootleggers.
That's exactly the problem, no-one seems to take the logical ground, hey there are massive capital gains happening here, wonder what stuff vested interests might be perversely incentivised to do in terms of political donations etc. There are a whole lot of people remaining blissfully unaware of the problem, and a small minority that spots some evidence somewhere (like Rockefeller and Soros money in Agenda 21 promotion) and proceeds to construct a major world-takeover-conspiracy theory around it, destroying any credibility in the process.
There doesn't need to be any huge "conspiracy". There's no need for CalPro type conduct or dealing.
The conditions are set for some simple large funds, eg the equivalent of a Kiwisaver retirement plan or Fujitsu's pension scheme, to say "here's a reliable low risk moderate gain" and sink 20B in Auckland housing.
Such outfits tend to move in packs, and since they'll quit happily sit for 5 - 50 years even on shortterm loses, a target like CBD land is a good target. Population will be growing, so CBD will be more in demand, infrastructure will pay well for the land AND increase the value of surrounding holdings.
Such outfits aren't looking for double digit yield, they're too big. But something solid like city CBD's are "too big too fail" and that gives big money leverage against the country (and the landlords in commercial/industrial areas tend to band together, to insure stability in the market.)
Very easy to nominate or transfer a frontperson for the operation, a made man, to run the local holdings.
That would be worrying if true. Here are the numbers calculated from the RBNZ value of NZ housing stock. Pretty big numbers considering most of the price rises are happening in Auckland. They don't look like sovereign wealth fund numbers though.
Q2 2010 -> Q2 2011 change= $-1b
Q2 2011 -> Q2 2012 change= $28b
Q2 2012 -> Q2 2013 change= $59b
Q2 2013 -> Q2 2014 change= $30b
The minimum size is not actually 40 plus an 8 deck anyway. In cbd (from memory can't load council PDFs on this device) It's 30 plus a 5 deck for studio, 40 plus 5 deck for 1 bed, 62 plus 8 for 2 bed and 90 3 bed (and decks are optional). Then there's a mix rule - 30% 2 beds or more. In the ithsmus sizes are all bigger and deck becomes 8 sqm or more so a 1 bed is 45 plus 8 in mixed use.
The big contention is not about the little units it's about the minimum sizes of bigger units 2 and 3 beds mainly. People want these, but not at the size/cost council stipulate. In Newmarket an 80sqm 3 bed would suit the market , but rules require 90 plus 8 which is just too expensive.
In the big picture, when you are systematically containing fringe growth and building "up" instead of "out", the average cost of housing NEVER falls as average sizes fall.
The lowest housing costs are all in cities with no fringe growth constraints. 3 times household income in an affordable city gets you a decent multi-room family home, almost regardless of what income quintile you are. The very lowest income earners MIGHT have to accept a medium size apartment.
In contrast, if you are a median income household in Hong Kong, a 40 square metre apartment will cost you 12 times your income.
If you are a median income household in London, a 70 square metre rowhouse will cost you 9 times your annual income.
If you are a developer on the fringes of Boston and you are obliged to not develop at any denser than 2 homes per acre (due to their zoning mandates) then you are not going to pay the rural land vendors more than about $500,000 per acre, (plenty of profit for them anyway seeing they will have got the land as rural land years ago at about $20,000 per acre) and you will sell 1/2 acre sections - at a profit - for about $450,000 each, after development costs, infrastructure contributions, and after sacrificing the necessary 50% or so of total space to non-saleable uses.
If you are a developer on the fringes of Manchester, Portland, Vancouver or Auckland and you have permission to do 20 units to the acre, you will pay the rural land vendor about $2,000,000 per acre and sell each townhouse on its 1/20 of an acre, at a price that incorporates around $250,000 for the land - after development costs and infrastructure contributions.
The price elasiticities of demand for land space per home, are a funny thing. They could be represented as a curve on a graph, where the curve gets steeper and steeper the higher the price gets. People gotta have space, it is a necessity.
But let developers get rural land at $10,000 per acre and it does not mean that home buyers consume 20 acres each. Well, they do, in NZ, outside urban growth boundaries; but if the UGB's were abolished along with the lifestyle block minimum size zonings, you would see a lot FEWER 20 acre households - and a lot of households who were otherwise tolerating 1/20 of an acre each, happily buying 1/8 of an acre for half the current cost of the 1/20.
Of course the land rentiers love the combination of UGB's and upzoning. Happy land rentiers never let on that they know only too well that they are gaining from being able to force 100 households to pay $400 per week each to live on their developed site, compared to an undistorted market where probably only 20 households would be prepared to do so, at $200 per week.
Len Brown loves Hong Kong - where a median income family has to pay 12 times their income for a 40 square metre apartment. Obviously the "big property" sector in Auckland loves Len Brown.
If a median income family has to pay 12 times their income for a 40 square metre apartment, what happens to the people at the bottom of the income ladder? Glad you asked:
http://www.dailymail.co.uk/news/article-2275206/Hong-Kongs-metal-cage-h…
This is the housing market conditions that Len Brown wants to import from his inspirational city, and Bernard Hickey is obviously just as economically clueless or a tool of the "big property" sector.
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