By Bernard Hickey
They should be known as the lucky generation.
Anyone owning property in the mid 1980s could never have imagined what would happen in the next thirty years.
Inflation fell from regularly above 10% to consistently around 2%. Mortgage rates more than halved to under 8%.
House prices quadrupled and rents doubled.
It was like manna from heaven and it was all driven by a fall in inflation.
It wasn't accidental.
The Reserve Bank Act of 1989 was focused on dragging inflation down to around 2% and it worked.
It took a while to sink in to the national psyche and to flow through the bank accounts and balance sheets into asset prices in the real economy, but when it did it was enormously powerful.
Don Brash would be a much richer man if he had been able to claim a commission for success in beating inflation down.
It made owning property much, much cheaper because interest rates fell. That was then built into the value of property and land in particular.
It's axiomatic in the world of investment that the value of any investment that produces a regular income stream, such as a rental property or bond, will rise whenever interest rates fall.
It makes sense for rental property investors at auctions too. Lower interest rates allow a buyer to offer more.
The end result is that a structural shift lower in interest rates and inflation powered a massive one-off increase in the capital values of assets with reliable income streams that could be used to pay those lower interest rates.
The scale of this accidental benefit to whoever was owning property before this shift is ginormous. The value of New Zealand's houses rose from NZ$100 billion in 1987 to NZ$725 billion this year.
Meanwhile, mortgage debt only rose from under NZ$20 billion to NZ$192 billion, which means the equity in this property has risen from NZ$80 billion to NZ$533 billion.
This NZ$453 billion windfall was only possible because of a structural fall in interest rates and this is the story of asset prices all around the world over the last 30 years.
But the crucial point is that it was a one-off.
It can't easily happen again. There's only so far inflation can fall before it can't fall any more.
The point that yields on New Zealand's rental property and bonds can't fall much more is clear in research this week from ANZ on yields on rental property across New Zealand, region by region over the last 20 years.
Auckland's yields are approaching 3.5%, down from 7.4% in 1992.
Those rental yields are already half the cost of servicing the debt on that land and just below the tax-paid returns from investing in 'risk-free' alternatives such as Government bonds.
The brutal truth is that the generation buying into property now can never hope to repeat the gains captured by the generations who owned or bought property from 1987 onwards. That horse has bolted.
They would require inflation to turn into deflation and for the Reserve Bank to cut interest rates to 0%, as has happened in the rest of the developed world. Or they would have gear up to the absolute max, taking on 120% plus loans over 50 years or more.
The Reserve Bank is in no mood to help them out, and nor should they.
But the landless generations sitting outside the fence and looking in on the more than half a trillion dollars worth of equity tied up in housing will eventually look for ways to tax that wealth and start transferring it to the unlucky generations.
A land tax, as advocated by many serious policy-makers, would help change that 30 year relationship between falling yields and rising values. And not a moment too soon.
It's no accident that the land tax proposed by former Reserve Bank Chairman Arthur Grimes in 2009 would have reduced land prices by 15%.
The trouble is that now the stakes are too high, and the unlucky generations are as uninformed and disconnected as they are unlucky.
More than a quarter of a million 18-34 year olds are unregistered to vote less than two months before the election.
They are also the generation of renters supporting the edifice of high values and low yields that is modern New Zealand.
------------------------------------------------
A version of this article also appears in the Herald on Sunday. It is here with permission.
118 Comments
Very true Bernard.
That's part of the circular cycle, the other side of it is the Keynesian side.
We've peaked over the top, the growth phase, now we're coming down the other side, the maturity phase.
Cheap interest is same as pay rise. It's more free money, which can be used to deleverage, or to fix a price (buy now, and that contract sets your buy-in point. wait and it's like floating interest rate, floating away on the offers from others), and it acts in a stimulus.... right up until the wealth:income ratio gets to low. Which is what we're seeing now. As you say to continue our free money pay rise, the interest rates have to keep dropping to keep spending the way we are.
So either income must increase (but we've got everything on hock & never never & some folks are popping the weasel to get by, so that's out). The velocity of money, because of the interest factor, is being capped, so we can't count on increasing income.
Or spending must stop. For some it will look like a depression cycle, and if they panic it probably will be. Our global racing economy must now move into the LVR style stage, build some wealth, stop stripping it all into consumables and services and government blackholes. When our wealth level is back up, then we will find we can afford to pay higher wages (with the money currently being lost to interest and tax) the higher wages will of course be matched with price rises, but that will be ok as long as the numerals used to pay wages increase faster than the overheads...which because we have wealth rather than debts we will now be able to afford. At that is what is killing us. Increasing our wages to pay people like those in the picture to keep up with our spending cycle, is going to look like inflation to the RBNZ. RBNZ is operating on rules and theories devised during the upswing of the spending cycle, following low population, low regulatory cost, major cheap opportunities, and into a war tired world. Like most economists (and humans in general) they expect the world to always operate in the manner that they're used to, in the manner that they're told/educated to it behaving. Fastest way to become a poor person? Is to keep spending like you're a rich person.
So we have to lift wages, and let inflation occur, that will allow the new generation have the money they need to buy the prices we have forced up with our cheap interest. It will allow us to pay back the debts we have created, the money flowing back into the debts will deleverage them, and restore our wealth, and return the investment to to the investors. And the _new credit_ interest rate must go up, to discourage new credit rushes, to hold steady the returns of the investors.
A failure in the current system is we put up the current debt interest rate, that means the deleverage effect doesn't happen, our wealth can't regrow, and we can't pass on those wages or other improvements. It effective increases the price point of our initial investment, so we end up paying higher than we bargined for, and we become the girl looking the window, and it traps our economy as we can't increase the income.
Keynesian behaviour is to tax and increase spending, thus stimulating the economy, the stimulation providing more sales revenue, thus more jobs, and more taxes and returns on investment. The increased spending is usually done by borrowing.
But.
The taxes are seldom as efficient/expert as the private owners own returns would have been, making them a lossy form of adding value. Borrowing is cheap in the beginning, when there is plenty of unsubscribed equity, and people with income looking to put it somewhere (ie they have a store of wealth).
So the taxes stimulate less than they take out of the system. Good to kick things off, but can't be relied on as government spending can outstrip the surplus of the private sector. Of course, the public sector also pays taxes...some of them...but that's taking from Peter to pay Peter...and obviously not sustainable.
As cheap borrowing is used, it is applied over future earnings. This soaks up existing "now" spare wealth, like all resources the natural tendency is to use the easiest and cheapest sources first. But as interest starts to add up, as one party borrows and consumes and others borrow to produce. the ability to pay sustainable wage decreases...which puts the private wage earner in the same position as the public sector one just described.
So interest is pushed up as more credit is poured into the system, prices rise to reflect increase in interest cost and tax cost receovery, but wages aren't rising because of the revenue lost to overheads. overheads however are rising to pay for increases in costs. We need to borrow more to increase productivity....but the cheap money is gone, so interest pressure increases. But the only way to get ahead is to find a cheaper form of finance to cover our interest cost, But where is that cheaper form coming from?
It needs that earlier free wealth looking for any return. Since that's tied up in future contracts we need to borrow some more "free wealth" but the "Free wealth" has to be cheaper than our loan out rate, if not we're on an exponential interest curve. But how can we keep borrowing continually cheaper?
simple. We can't. The future contracts have to be able to run their course, which means income has to move back into wealth, not pushed around in interest/flation, because we can't borrow ever cheaper...especially when the demand for cheap interest outstrips supply
Some of the younger generation are sitting back Kimy......they are trying to work out what has been going on and what needs to be adressed......these young ones are educated and when you talk to them they see the systemic issues......the ones I get to talk to are really assessing the current crop of Political parties....most of them say they are not going to vote for the best of the worse........I'm sensing this younger generation as going to stirr the pot....look out around 2017.....because this generation are likely to get highly organised and then kick some butt.......at the moment many of them are gaining experience.......
The old joke....be nice to your kids they choose your retirement home could have a wee curve in it !!!
Keywest people will not shift to other regions / cities outside Auckland or Christchurch as there are not the well paid jobs to attract them there. Outside Auckland and Christchurch house prices are generally stable at best or are gradually falling away so there are risks in buying there. In my late fifties and retired I rarely wish I was young again as I have hugely benefited from being able to buy my first house in 1984 and from starting to buy equities from around the same time. Us baby boomers have been very lucky to have had our fantastic childhoods, cheap tertiary education and our ability to get into housing easily.
If you have benefited from house price inflation, you have not 'earned' it either - you have, by the policies of the governments of the time, effectively stolen it from future generations.
This will eventually be corrected, and when it is, it will not be a 'leftie' policy but a mainstream one.
bad monkey, we have the highest interest rates in the western world, so while we pay 6.7% to up to 10% in recent history you can get a loan in the US for 3.5% for 30 years fixed. so i'd like to say i earned it as have been paying through my nose to fund my mortgages and was nearly wiped out in 2007.
NZ already has a land tax of sorts - we call them council rates. But they don't work the way Georgists would like for several reasons:
- mostly councils levy rates on capital value not pure land value although they are allowed to choose just land value
- our valuation methodology isn't sophisticated enough to distinguish between the location value of land and the improved value of land. This means that farmers bear a ridiculously high proportion of rates in a district that uses the land value method and owners of McMansions on lifestyle blocks get a free ride
- using land taxes alone without removing the distortions caused by urban limits (which do not exist in the RMA) wouldn't be enough to let the landless young into the property market
One unintentional benefit of moving more strongly to a land tax would be the mindset change it would force in councils wrt infrastructure. Location value (i.e. taxable value) depends in part on the desirability of a location which of course refelects the value of the services that are available. When council revenue depends on how desirable a spot is they will start to think of infrastructure spend as an investment not a cost. And they will be more focused on delivering what their communities value rather than what the councils are inclined to impose.
I think the way councils rate is unfair, and means that many people are paying more than they should, and many are paying far less. Currently it is being used as a sort of weath tax. Yet it should be solely used to provide services. At the very least it should be based on land taxes, and not on CV. There are some councils that do still rate on the LV, but thse are few and far between.
But I think it would be better to do it based on the numbe rof people living in the house, like a poll tax. Currently you have got 6 people living in a house paying $1800 in rates on a 4 bedroom house valued at say $400,000. Yet you may have an elderly couple living in a 4 bedroom house in a better part of town, with a CV of $1,500,000 paying $10,000 a year in rates, and they are getting the identical services. IN fact you could argue they get 1/3 the services as they would use less water, less sewage, less rubbish etc. Why should those in a higher value house pay more than those in a lower priced house, when they all get the same services. The number of people living in the house though really dicatates the amount of services being used. Essentially that elderly couple are subsidising the rates of those paying less.
The whole rating system has been broken for some time. Especially GST being charged, wich is essentially a tax on a tax. LV charging is better and more fair, but many councils moved away from this. Many councils are also now cutting back on their services, many now provide no form of rubbish or recycling, so they are now addon costs to your rates bills. The sooner we get rid of small councils with duplicate staff the better.
There is a problem that the councils aren't privvy to the occupliers details, and in many ways that's probably a reasonable border. Originally the rates system was designed when there was little infrastructure and much of it was similar in price and development. With the amount of wealth and intensification the modern world brings a whole new range of considerations which our government and council legislation just isn't set up to comprehend. On top of this is major issues with the gap between wealth and poverty.
I seriously doubt anyone who is in a long-term relationship, in a freehold property, making over a "mere" $40,000, can actually relate to singles or new couples living in rental property. the disposable income is just that different. Being freehold, I no longer have to argue about whether we can afford to buy an extra kilo of cheap mince because it's $2 off, or whether we should grocery shop this week since the power bill is due.
And under the current system and most likely a LVT system, more farmland will fall and turn into commuter playpens aka lifestyle blocks. Farmland in Auckland is diminishing at an astonishing rate, and we are not talking small blocks of land, I mean proper farms and quite far out from the city boundaries too as land values rise, rates rise to extreme levels.
Interestingly, per hectare, owners of mcmansions pay a hell of a lot more than larger land owners aka farmers who are still hit a bomb and a half in rates as it is.
I can't see a LVT would be much better at dampening whatever everyones going on about.
Lifestyle blocks are great things, becuase they can make better use of the land, and they mean more rates are paid, which reduces everyones rates. People who tend to dislike them are other farmers, becuase it means there are more neighbours to complain about things like high noise levels. But farmers can't have their cake and eat it too, as it is farmers who subdivide off their land to create lifestyle sized sections, and it is councils that agree for them to occur, as they want more ratepayers. Ironically councils don't provide much protection for lifestyle properties in their district plans, when they really should be zoned differently from regular rural blocks due to them being higher population areas.
Partially correct in how councils use them to soak up more rates dollars, Rodney District Council used that strategy for years to probably fund their pet projects, but on the whole do not make better use of land at all. Running a few horses on a segregated paddock rather than full of overnight cows is not a more productive use of land. Lifestyle blocks are commuter play pens at best. And farmers who subdivide.... Most have no choice!. With rates the way they are they are forced to subdivide and the spread of lifestyle blocks comtinues unabated.
Sure lifestyle blocks are good for those who either want to provide them or want to own one but they are being supplied to the market over and above what would normally occur under a more rational world but in saying that, it's not the rating system I have a problem with, more so the horrendous spending by councils which should strangled first so rates are not as excruciating as they are now.
Cowboy, Very stimulating commentary. I think I see several things:
A paralysis which means people are unable to "do stuff" to make their situation better ie cancel the sky subscrition etc etc.
Maybe entitlemnet which creates a petulant, why shouldnt I have it attitude.
I think we will continue to get what we vote for until we can rise above petty self interest, and begin to plan for our childrens generation.
Successive governments seem to set policy based on vote count (stunning I know) not on solid progressive settings.
As long as the majority vote maintains their sense of entitlement we will never move forward through choice but will be disciplined through poor choice.
New Zealand's wealth now and into the future depends on what is in our heads not where we lay our heads at night.
It's a good question about the impacts of implementing a land tax. But if we could get back to the point where residences are thought of as consumer goods not stores of wealth then our economy would be in a much better state.
no, the "wealth in your head" is like my very good knowledge of MS-DOS and expert modem diagnostic skills. It looks like wealth while you can find a buyer, but in the end its just a consumable and thus an expense. Wealth is the value you have after expenses are covered, so whats in your head can never be wealth - income yes, but never wealth (unless your head knows where to find fountain of youth)
RPL. but it's pretty shakey these days.
it's still not particularily good wealth-wise, because it's so consumable.
Take all my NZQA paper for example. Cost a bundle, no use at all to anyone.
Or a bunch of agricultural upgrades which are screaming to be prototyped...just not worth the hassle and borrowing cost. The concepts are "wealth" but because they can't be used they just take up floorspace. Could develop a bunch of image and branding...but that doesn't add value, just makes the consumer pay more for the same basics.
It's like much of the advertising sponsorship we see. Can you really say that ANZ are going to get the increase in net profit from these sidebar adverts that will cover the cost of buying the space...without spreading the cost across all of their customers (not just the ones influenced by the sidebars)...if it the action doesn't have positive expected value, then it's a loss (and usually cross subsidised by pedestrian sales)
What we are talking about is the shifting of wealth. All a tax does is take the income from the individual and hand it to the government. That does not make housing cheaper. Oher countries around the world that do have capital gains taxes, inheritance taxes and all the other taxes also have exploding house prices.
What currently exists is an uneven playing field. There is an incredible amount of wealth in the world now that New Zealanders probably can't comprehend.
Wealthy individuals have set up Trusts in tax shelters to avoid paying tax and a great deal of wealth is flowing in from countries like China where there are now 2,378,000 millionaires. I believe this wealth is pouring into countries like New Zealand. It may not be showing up in terms of immigration. It may be actually flowing to individuals already living here. We will never be able to track money when people can buy property using the "and or nominee" process. The people who must know where all the money is coming from are the banks and solicitors of New Zealand. However they seem to turn a blind eye. Money laundering does exist and New Zealand is an easy target.
Did you know that if you are a foreign national living in China you are only allowed to change a little over 3,000 RMB (500 USD) per day into the foreign currency of your choice. Conversely, if you are Chinese, you're able to exchange up to 50,000 RMB into foreign currency per year. You have to provide an ID card to transfer money. So in China what people are doing is paying people living in China, in order to use their name and ID cards so that they can pool excess money, in order to buy property all over the world.
In New Zealand, anyone can buy freehold land and it is viewed as cheap. Its 8 times more expensive to buy property in Beijing, most of which is probably leasehold.
In Hong Kong in 2013 a 15% tax on foreginer investors was implemented. http://edition.cnn.com/2012/11/13/business/hong-kong-property-tax/.
This is not a race issue. This is a NZ Resident / Foreigner issue.
There is not enough being done to protect NZ citizens and Residents from the impact of "hot money" flowing into our borders.
Where does it say that council rates are a type of land tax? They are soley for providing services to the people living in the property in a supposdely fair way. They aren't supposed to be a tax on your weath in land. Any land tax that may come in in the future will be additional to any council rates.
Sadly, Rob, there is nothing about rates that is supposed to be fair. The basic mechanism of rating on property value (land-only or capital) introduces a very crude form of progressivism that is based on what you own not what you earn. Councils can and do use a mix of rating mechanisms/charges to try to get closer to a user-pays ideal but that still doesn't take into account capacity to pay. The government has introduced an incredibly rough mechanism, the Low Income Rates Subsidy, to address a little of that.
Some ways of refining rates targeting:
- targeted rates (mainly used for water, sewer, and drainage but can be used for localised higher standards of service such as CBD/town centre enhancements)
- uniform annual general charges: closest to poll tax though still at the household level (our council charges a UAGC on each dwelling on a property to cover community services such as libraries);
- water meters/pan charges: water and sewer charges can be further refined by using water meters for inwards and per pan charges for outwards
The advocates of a true land-value tax (as I say elsewhere LV rating is a type of land tax but not good enough to be the real thing) want to replace existing taxes with the LVT so the total take would be the same ( or less I suppose).
They are also quite open that a LVT is supposed to tax away the unearned increase in value of land that arises just because of where it is. Not to be confused with pouring capital in to improve the land which they are entitled to recover. So, yes, an LVT is designed to tax away some of the wealth that arises through no effort just from owning land.
The council rates are charged by the Title. Titles are land. they used to be value of land based but to increase revenue they changed it to capital base, but it's still by land title, making it a land tax. Unless you've got some sort of opt out clause we don't know about.
It looks certain that National will be in government for the next 3 years and probably 3 more after that. You will not see any capital gains tax or land tax meddling take place under any National Government - all you will see in Auckland is an increase in house prices due to new construction not keeping up with demand and the net migration surge currently under way - most of these people choosing Auckland as the place to settle. These young people who do not even bother registering to vote probably feel that renting is the way to go as it is in many countries in Europe. With student loans, the desire to travel, own every gadget under the sun, motor vehicle HP's etc they can't save a deposit to buy a house and it makes more sense to them to rent. Don't forget that many MP's both National and Labour are wealthy capitalists and own multiple investment properties and/or live in top suburbs, ie Cunliffe in Herne Bay and Key in Parnell and they all want to protect their investment property nest eggs.
While the trend in the polls agrees on your first 3 year opinion, there is nothing I can see to suggest the 2nd 3 year term is in the bag already.
Postulating that it is mainly CGT is frankly a bit of a stretch. Ive yet to see such is having/considered an over-welming impact, by all means point me at some evidence? The Greens for instance are also pro CGT, yet they are polling well and up from the last election.
"Protecting their investments", well Im pretty sure that protecting their property isnt the case with either JK or DC. By all means point me at the evidence.
So back to the collapse of Labour, because that is what it looks like, again just where are they going so badly wrong? Too left? too minority? Detest Cunliffe? are swing voters that shallow that they prefer the grinning imbecile of JK?
The young and poor should welcome a CGT, tax rate on the highest paid? wont effect them. WHo does it effect? well the BBs with retirement property and the PIs, neither I'd suggest are pro-Labour anyway.
hmmm, personally I cant see exactly why they are 25%...
regards
Humbug
Another Half-Baked Hickey Hologram.
Sleight of hand.
Provocative. Certainly. Sets the hounds among the hares
To accept the thrust of your hologram one has to believe
(a) Those who bought in 1984 still hold that same property today
(b) No-one has died
(c) No-one has sold and gone overseas
(d) No new houses have been built
Great article Bernard.
A 'proper' land tax would need to be significant - i.e. 5%+ of land value each year, and in turn personal income tax could be reduced, maybe to zero. Property prices would correct significantly and there would be very little land banking. Contrary to Olly N's scare mongering the building industry wouldn't be ruined - in fact with cheaper land once things settled down there would be more building because land would be more affordable and people without property could save faster. There would need to exemptions for retirees who don't have enough income to pay the land tax (up to a threshold). And it would have to be implemented gradually to avoid smashing the economy. Whether it makes sense or not, there is no chance of it being implemented anytime soon.
It's understandable that kiwi's have invested and speculated in property over the last few decades as it has generally been a good way to make money - the problem is many see it as the only way to invest. I was horrified to see an NZ Herald article a few months back applauding some young Aucklanders who had saved up and leveraged into property (yes it's good they are saving - but not if its only a means to keep leveraging).
The biggest issue to me as a young-ish person is not the fact I've missed out on all of this 'wealth', it's that many young people can't and won't be able to afford to purchase their own home to live in. The fuddy-duddy's suggest this is because young people are frivolous and like 'gadgets' but really house prices are just too far out of sync with incomes. How long would it take even the most thrifty nurse or teacher to save an $80k deposit for a dog box in Auckland? And if they buy in Manurewa or Swanson it's going to cost $100+/week to commute. My parents have given me the "in my day...20% interest rates, rah rah" speech but when we sat down with a piece a paper and did a few sums it was obvious how much easier it was to save a deposit, buy a house and pay a mortgage.
The day young people are as up in arms about the situation as the property investors who post on this website are when there is any untoward news (heaven forbid interest rates are rising or property prices ease a few %) then we'll know there might be political opportunity to do something.
You are onto it, but you need to realise that the difference between the old days and now, was elastic supply of new family homes.
Don't follow Bernard on that general point, he is the blind leading the blind. Land taxes are a good idea, period, as a higher proportion of the tax mix than what they are now.
But having genuine free markets in land, where land can be converted to housing use from other uses at a rate that keeps prices stable, is far more significant than a land tax. I say you need both, to get the maximum benefit from the land tax anyway.
When you have an "inelastic supply" of housing, the nature of the economic land rent is quite different. Besides the premium value of "location" and the capitalisation of local services and amenities, you have "extractive" economic rent; that is, straight-out gouging. There was economic rent to be taxed away in a property that was worth $150,000 in 1996, which was all related to location and amenity; the same property having inflated to, say, $800,000 today is virtually all a matter of "extractive" economic rent. It is absurd to claim that it is anything to do with amenity value or capitalised services.
The "extractive rent" proportion of the land rent will be affected as follows, if you reduce income taxes and put a land value tax in place to replace the lost revenue. The increased incomes "in the hand" will add to the extractive rent gouged in property prices, leaving no-one any further ahead. The payer of income taxes will simply pay more for housing in future, and the rentier vendor of land/property will gouge more on gross but end up with about the same after tax.
Of course the effect on existing property owners will be yet another one-off gain at the expense of the following generations.
When Bernard stops humouring the Gaia worshipping nutters and the malfeasance-perpetrating bureaucrats and "gets it" about the supply of land for housing development, I will regard him as having a bit more credibility to pontificate on land economics issues.
I'm surprised so many commentators are supportive of a new tax - land or capital gains.
I believe I've never significantly benefited from increased taxes on anything.
Increasing taxes or implementing new taxes simply decreases disposal income and makes people more reliant on the state for handouts - bugger that!
I support more freedom for people, not charity.
If you want to reduce property prices simply restrict foreign ownership and limit immigration. Remove these buyers and our market will correct so fast it won't be funny.
Why is it taking so long for this forum to be a beacon of sanity on the role of supply of land for urban development in the housing market? Make UGB's illegal and allow developers to create a "utility" that would recover the cost of infrastructure from the eventual residents, and that would definitely solve the problem. CGT's, immigration, interest rates, macroprudential policies, etc are all just red herrings that the fat-cat rentier classes love to see us squabbling about to divert attention from the real problem.
After that, shifting some of the burden of taxation onto land and off structures/improvements and income, would be a good idea. Fred Foldvary advocates doing it in stages so that the benefits become evident in stages and voters are convinced that taking it another step would be a good idea.
The idea behind a land tax is that it is our collective decisions to congregate into a community that drives up property prices. That this increase in value should belong to the community and therefore it is right that land is taxed and the 'unearnt value' returned to the community.
Henry George from the USA in the 1870s was the most influential in promoting land taxes but interestingly here in Australaisia we had already experimenting with it for several decades.
I can see several problems with land taxes. Firstly finding the correct 'rate' of land tax that captures all the unearnt value and no more when the correct rate would need to vary over time and geography. The rate needing to be high in cities and low in the countryside and high in boom times and low in busts. Also once 'rates' go above the 'unearnt value' it is basically just government land rent. In other words the government is gradually taking over land ownership.
Secondly land taxes are usually put to use, here in NZ 'rates' provide local amentities. But there is no gaurantee that the costs of the needed amentities for a locality will match the revenue from land taxes from that locality. Especially if the land taxes rate also has to match the unearnt value in the locality.
Thirdly the imposition of land value taxes does not necessarily mean new congregations can form their own value-added communities. If restrictions are in place from 'planners' then the next generation could easily be priced out fully participating in existing communities.
Thank God you've turned up at last.
If Bernard seriously wants to get land value tax into the public arena then we need a lot more than a single throw-away line. We all know there is a problem with housing affordability - that's hardly news. The question is what will we do about it?
Now, it will take a little while but eventually the penny will drop that special housing accords and minor tinkering with the wording of the RMA don't solve the problem, they simply slow down the rate at which we keep digging ourselves deeper into the hole. When that time comes we will discuss issues like how we finance public infrastructure (which may include land value taxes), why we tolerate councils torturing the spirit of the RMA and the Building Act for their own benefit; why we tolerate inefficient markets for building supplies and services and so on.
What we need in the public debate is an economist with a gift for public communication. The reality is that land value taxes are really hard to understand and I know I am going to need some worked examples before I can truly assess whether they are a good idea or not.
One thing I can assure the commenters here is that pretty much every land value tax advocate wants to replace other taxes not add extras on. In fact these advocates sometimes style themselves in favour of a "Single Tax". Wouldn't work in the 21st century but it does show how serious they can be.
100% agree that land value taxes are pointless while UGB's remain.
I don't know who these people are supposed to be when i hear others speak of unearnt income.
When i've made money from property I worked my tits off to do it. And most people i know who have achieved solid gains in property did the same.
Unearnt income is bollix!
When people work hard and invest wisely - be it a business, property, or shares - they deserve to make some profit and see their hard work appreciate.
The problem i see is property prices have now got out of whack with incomes and yields. The market needs a correction so others will have the opportunity to purchase, work hard, and receive some rewards for their effort.
Taxing the workers is not the answer. Only fools would believe Politicians who preach this rubbish. They want people dependant on the state as it empowers them, not the people.
If you want property prices to drop then reduce the demand by restricting foreign purchasers and immigration, or start taxing them - don't tax Kiwis.
Good point, Triple. Land value taxes would be better called "Location, location, location taxes". No-one wants to deprive anyone who improves a plot of land from getting their reward. The rural land owner who fences, clears, improves fertility, puts in water and access roads deserves every cent of that investment back. Anyone who builds on, landscapes, provides services to urban sections deserves every cent they get for that work too.
But how do you feel about the lucky "double-zoners" in Epsom who have had large cheques written to them by the Ministry of Education when they drew some lines on a map. What did they do to deserve that? When an LVT proponent talks about unearnt income they mean just increases in value that come from events outside their control.
But, as Brendon says above, the main reason land value taxes would be hard is that we have no way of accurately distinguishing the location value of the land from the improved value of the land.
You speak of rezoning - what really happens when something is rezoned? Someone wins and someone loses. You could say in business and in life, you win some and you lose some.
However when someone wins by a rezone then i believe the saying, "fortune favours the bold" is appropriate. The land owner acquired a deposit, took on debt, serviced the loan, and benefited from the risk. Their profit was hardly an accident.
Rubbish - how could he know of the rezone boundaries?
That's luck but you have to have some skin in the game to have a chance.
The owners probably saw an old unkept house, bought it and improved it wanting to rent it and/or make some capital gain. A rezone is a fluke not speculation.
And quite frankly there are just as many unlucky rezonings happening under PAUP presently.
What about Council resource consent fees nearly doubling this month? It isn't all in favour of the property owner....
If this market turns then plenty will get caught with their pants down. Why are you focusing on only the winners? There have been plenty of property investors who have gone broke.
I mean seriosuly do you ever attend auctions? It's not your average Kiwi driving up your property prices in Auckland. See who the bidders really are....
I understand what a speculator/trader is and they are already being taxed.
You do not seem to understand who has been driving up this market in recent years. It's not just traders Kumbel.
And the market is now seriously slowing without requiring more taxes.
I feel empathy for the next generation of buyers as it will be almost impossible for them without help. So i would also like to see a correction in the market. But to assist the correction you need to first understand the market drivers.
It's predominiantly overseas buyers and new immigrants creating the demand which has fuelled the recent gains and the resulting housing ponzi scheme.
Taxing Kiwis is not the answer.
Cheshire and Sheppard (1998) estimated that the real price of land in a city in the UK was 325 times higher per square foot than a comparable one in the USA, due to the UK city having anti-sprawl planning and the US one not.
THAT is "unearned income".
It is nothing to do with increased incomes from clever application of capital and increased productivity - it is a straight-out higher share of the honest incomes of true producers and workers, transferred from those producers and workers, and at their expense.
You don't have to look very hard to start seeing evidence of BIIIIIIIIIIG money backing advocacy of "save the planet" urban planning. BIIIIIIIIIG fat-cat FIRE sector rentier money.
To maximise property debt requires 3 things not just limiting urban sprawl.
1.) Limit supply of land by creating urban boundaries.
2.) Increase demand by reducing interest rates.
3.) Create competition by allowing immigration.
You need all 3 of the above to maximise debt. And debt is the name of the game. The banks are laughing.
The rural owner who is doing all those things is adding cost.
The homeowner who does those improves adds cost.
where is their returns?
(apart from having to service debt).
The lines on the map, Someone wants these things. things are worth what people are willing to pay for them. That demand is what "deserves" them to have the extra value.
The gumboot developer or the property creator...if they create what someone wants (and can pay for) they too will get returns/rewards. But if they do the best job in the world, and there is no demand or no ability to pay, then they don't deserve any reward.
Your customer must be able and willing to pay for you to receive reward.
There is no profit, honour, glory or entitlement in spending or hard work alone.
That attitude of entitlement from "work" is the damning sin of socialism.
"work" adds cost, not value. demand (& ability) adds value.
You need to distinguish not between "work" and "wealth transfer", but between "wealth creation" and wealth transfer.
You are quite right that the socialists are completely confused about this.
Wealth is created with some element of "work", but the overwhelming difference between a poor nation and a rich one, is how SMART the "work" is, not how much sweat is exuded from brows.
Wealth transfers as the result of gouging of "extractive economic rent", make wealth creators and consumers worse off. Economic rent relating to location and amenities and capitalised value of investments, is not zero-sum gouging; it is a share of increased incomes via productivity, and hardly matters. Like a typical house that was $150,000 in 1996 that is $800,000 now - virtually all the difference is "extractive" economic rent, nothing to do with location having improved or productivity having improved, or more public investment in the location.
Of course these value increases are not instant lump-sum wealth transfers, they are wealth transfers as first home buyers and new business start-ups have to pay through every orifice for space to live and do business, and eventually the increased costs filter thru to every part of the tradables sector of the economy. This is economic Hara-kiri in the long run.
The "wealth creation" and "weath transfer" is next step, after "work" and "wealth transfer".
the house you mention, if the income keeps up with the price, then little has really changed.
With the "wealth transfer" you mentioned we also have to be considerate of the fact that the tenant is gouged and transfers their wealth (ie a sizeable portion of the wealth they gained from their trading their time or goods, after expenses are fully accounted for) but they have consumed in doing so. And the consumption was a necessary part of the process, they have few alternatives, everything needs location (even if it's a virtual location). Their alternative is what? To purchase the rental location at market price?
A main point I'm trying to make is that bankers, service workers, unionists and many others say they work hard and are therefore entitled to decent incomes. But often the work they do doesn't create wealth, it doesn't add value that a consumer wants or is able to purchase. So where do they expect their income to come from?? so "working" isn't earning, isn't creating wealth. And if we paying, and not creating wealth (value after all costs), then we're asset stripping the value out of existing wealth. and that tends to result in two things, (1) the profit and wealth gets totally removed and the operation goes bankrupt as customers won't or can't pay for services, or (2) the prices go up to recapture the cost (so we end up with the enternal house loan - the bank owns the property rights through the mortgage registration instrument, and is receiving interest "rent" from each and every tenant-owner on the resell)
It's generally because they're making the mistake of mixing up the technical term "earnt income" and "unearned or rentier" income.
earnt income is capped by supply of labour or stock holdings. You can only sell as many widgets as you have in inventory. You could sell paper widgets from factory, to distributor, with promise of prices and warehousing... but the paper and widgets aren't limited, making the paper widgets "unearnt", where the real widgets must be stored, transported, made, promoted, sold so they're "earnt"
the paper widget, or a rental item/property you don't sell the widget or the house. You sell the time. But you don't own or buy time nor do you manufacture or pay wage structure to produce nor is it warehoused anywhere. It's just there. So as a rentier, that is considered "unearnt" as you don't have to find and personally provide the item you're selling...you sell the means, for the customer to utilise their own supply (of time).
The worker has a limited supply of time, unlike the rentier. The rentier can have many houses or machines, because they never on sell them in the sales process. The worker only has their own personal supply of time, which they can sell, thus "Earning" them a wage. They can sell widgets, and customers pay sales revenue for a widget, as the widget is lost in the trade, it earns revenue in return.
the biggest difference is that rentier can have increasing orders of revenue streams. hiring workers, contracting management structure to supervise workers, building more widget machines, using rental income from houses to buy more houses. Because it never requires the rentier to personally directly "earn" that revenue.
the earner though, is forever limited by their ability to provide and sell their stock or time.
As for property. Yes you will work your butt off. and the more you go up , the more you will work. There is a name for someone who doesn't work, "poor" and the fastest way to be poor is to spend like you're rich.
There is stuff-all unearned income in urban land in the US cities with no constraints on coverting rural land to housing use, simply because the value of land at the margin is set by the next highest-value user of the land who is out-bidded by an urban user. That is, the rural user.
The real cost of transport and travel is so low that the amount of land available to the urban economy provided there are no regulatory distortions, is so much greater than the actual need, that land prices are kept low and flat, with values increasing towards the centre only according to reasonable travel time and cost savings relative to high-productive and high-amenity locations.
US cities with a house price median multiple of 3 literally have cheaper land per acre right in their CBD, than what greenfields land miles from Auckland is instantly worth if the UGB is shifted to include it. Then we start adding the other stuff relating to location and transport cost savings, etc, TO THAT. The Productivity Commission's Report on Housing Affordability had an appendix with a calculation of the land rent curve in Auckland at several different dates in modern history - it has been pushed up along its entire length.
The irony of this is that fewer people can afford the efficient locations now. It is just SOOOO thick that so many people don't "get" this unintended consequence.
was that unearned or earned income Phil?
And yes, the price of transport in the US is shockingly low, hence their ability to "cut&carry" feedstock for animals and industry. I really wish the NZ government would wake up to this particular point and start investing (ie subsidising, sponsoring and rebating) in alternative power sources. Not only would it be better for our health, environment and trade but the major desire for high exchange rate is so we can buy fuel cheap (and since oil is actually one of our main exports...that's just crazy-crazy)
But sadly the NZ mindset is to the fast buck. Get some seed idea - fight the government to actually make it happen, sell your soul to the banks to fund it. then make your fortune flicking it to the foreigners rather than seeing it implimented in NZ.
A few years (6? 7?) some US friends of mine were outraged Gas was going to be a dollar a gallon! It was the end of the world as they saw it. Admittedly her and her partner were on over $100k US a year, but they were upset for the poor folk who wouldn't be able to drive/fly to conventions like they liked to.
The fuel and land are two of the major costs which blows me away when people say farming must have similar cost structure throughout the world.
You keep repeating that flawed argument Kimy because you fail to realise the house value is fictitious (what Bernard really means is price) but the debt is very real. With a few additions, they are the same houses that were once priced at $100B now simply repriced at $725B. The debt on those same houses has increased 9.6x in the mean time. The price of those houses could return to $100B but the debt won't similarly decrease.
You also fail to see the leverage in the system, which also artificially inflates the prices. Like all leverage it works nice going forward, but gets ugly in reverse.
The ugliness doesn't end there, but that will do for now.
Scarfie, houses will never fall to those levels......I wrote a post under the following article.....the overhead costs keep getting pushed up.......there could be a small drift downwards but I think at worse it will affect only 20% of the housing stock and in certain suburbs......the other 80% of housing stock should be stable as the owners should meet their mortgage payments.....so this really means that there could be some buying opportunities when over-exposed people can't keep up with their payments......of course they would most likely need something like a job loss or similar to occur before they got into problems. For prices to drop back to the level you are talking NZ would have to have a major financial catastrophie on its hands.....and I think that it would have to be a global event for that to happen.......too many people (mainly Govt organisations) are getting a spin off this.
http://www.interest.co.nz/property/71121/nz-home-loan-affordability-imp…
You are right on one level, housing more or less is our money supply so it is too important to let fall. But understand it HAS to fail at some point. That might be in the context of some worldwide financial crisis, or may be that the world will see out bullshit economy for what it is and turn against us.
Keep in mind it is all leveraged, which you can't do forever.
"who actually, will they sell the bulk of this now unafforadble housing stock to?"
Exactly, BH and indeed others have been making such comments for some years.
"Sweden and its Central banks"
Agreed, Sweden's central bank damaged its economy by hiking, our RB risks the same effect.
regards
Sweden, well these would be a start,
http://krugman.blogs.nytimes.com/2014/04/18/how-do-you-say-nobody-could…
http://www.nytimes.com/2014/04/21/opinion/krugman-sweden-turns-japanese…
http://krugman.blogs.nytimes.com/?s=sweden
http://www.voxeu.org/article/why-leaning-against-wind-wrong-monetary-po…
regards
How is it a bad thing? Reduction in risk premium due to an increase in underlying value of the asset? My question would be can the yield and tax concessions sustain the interest on the debt taken up to purchase the asset? And what happens if the risk premium increases due to a fall in capital value or market rates increase to a point the debt is not sustainable?
Speaking of land taxes how about this. Demolishing a house in a well known expensive location in Auckland which does not require a resource consent to do and replacing the house with a relocated house which does not require a resource consent to do but the parking area is a platform which will cost $7000 to build requires a resource consent costing $5000 all up and to date 3 different Council people have asked the same question. What do you think could go wrong with Land Taxes!!
Good thread, with comments from some folk who actually know their subject.
My two cents worth:
I think Bernard's piece conflates at least four major tides:
- The rise of the UGB's and other squiggles on maps, which dates roughly from the TLA amalgamations period post 1989 and the intense corporatisation of their structures which then ensued. Lotsa Plannerista with shiny new academic fads on board, waiting to Make their Mark.
- The Four Well-beings (LG Act 2002, thanks to the reliably dopey Sandra Lee) which gave TLA's carte blanche to spend on anything that fitted them. Which is of course every human activity. And which Well-beings, may I remind yez all, is Green Party policy to put right back into the LG Act.....But I digress. The effect of this inclusion was to fairly much irrevocably blow out the cost structures of TLA's, and set off the frantic search for New Pockets to Raid.
- The rise of the RMA, which was supposed to be an effects-based set of procedures, but which was strangled at birth by the Plannerista, who have successfully converted it into yet another Spatial Planning SNAFU a la the UK (where the old line goes, the Planners finished what the Luftwaffe started)...And what a windfall this has all been for the lawyers, consultants and other camp followers - pure economic deadweight by the tonne here.
- And the one he picks on: the lowering of inflation and thus interest rates (which translates to Easy Money).
Using the old 'cui bono?' test, the beneficiaries of these grand Tides in the Affairs of Men are many and various:
- The parasite class: lawyers, tax accountants, rule interpreters, planning firmsd and let us not forgot the latest: Building Consent Application Process Greasers. In a rational world, few of these would be necessary.
- Builders and Architects. Why build Small when the boundless supply of Munny and the niggardly supply of Buildable Land, point solidly in the direction of Build Big and Clip the Ticket?
- Funders: Banks, second-tier lenders etc - Mo' Munny = Mo' Interest Revenue streams (particularly when they can borrow offshore at 2%, lend onshore at almost 7%). If you want a reality check, try purchasing a Large Ag Machine from a US vendor like JD, on tick. You'll pay 1/3 or at most 1/2 what an onshore lender would charge....
- TLA's. Mo CV - Mo' Rates, and remember they have a now-massive cost structure to fund thanks to the Four Well-beings. The old phrase 'good enough for Gunmint work' applies to their workforces and practices, and they have stroppy unions to support their comfortable lifestyles. So no immediate way to reduce that cost burden.
- Land-bankers. Buy, Hold, Wait, Collect. Structure yerself the right way, no or minimal CGT. After all, most of it was a Farm, which I'd hoped to Pass On to my Children before those Plannerista decided to was to be the next Remmers. Or Mangere. Or something. My Intent was Pure....
- Existing homeowners. They may complain aboot the Rates, but ya won't hear a peep outta them when it comes time to Downsize and Sell.....and that's not counting the grand old time they've had (because this stuff has been happening for a decade now) withdrawing Equity and blowing it I mean, sorry Investing in Holidays, Rentals, Vehicles and Merry Consumption.
- Retailers and suppliers: guess who gets the Home Equity Withdrawal pesos?
So, sorry, Bernard, pointing to a tiny corner of a very large ecosystem and yelling 'Not Fair' won't cut it.
Any serious analysis has to advance ways to gently unwind all of the above. Without causing the whole shebang to blow up in all our faces....
How to gently unwind the above?
Well Stevens Swedish links show that monetary policy by itself is not the answer.
I think the answer is to bite the bullet and go full on with supply side reforms. Then use monetary policy to mop up any systemic financial problems.
Being afraid to implement effective reforms now just compounds the problem.
By supply side you mean build lots more?
Same string 5 years on that assumes we have a real shortage and not mad speculation?
Ive yet to see any evidence that apart from Chch we have a genuine shortage, hence Im concerned to make such a decision to spend lots more based on, well nothing. I mean if it was your money would you? I know I would not spend my money to deliver extra supply that that didnt keep sustainable prices and volumes sustainable. of course if you are getting someone(s) else to pay, yeah sure its a great idea......ho hum.
So who pays for this supply side "deluge"?
Right now in Chch we have a genuine problem of shortages pushing prices beyond the norm. If/when that is corrected a price crash would be on the cards and that would possibly cause a recession.
Look at the USA and especially Ireland, looks like a large amount of over-building much of it in distant areas no longer economic to commute from. Now if this is privately funded/supplied Im not so bothered as long as the failures are ring fenced. Frankly however looking at the leaky homes fiasco I think it will be expected that the tax payer bails out the stupids/greedy, Im getting a bit sick of that.
Maybe a ring fenced MUD is the answer, but Im not so sure. I also dont think that leaving it to the free market will solve anything. The industry will drip feed just enough houses to keep prices up. So the Govn needs to step in and confiscate land en-mass and sell it to private individuals/groups to build on, at cost. Then of course who puts in all the services.
regards
By supply reforms I meant reforms that allow new housing to be supplied elasticity without all the unearned costs. Compulsory acquisition of rural priced land is one option especially if combined with new transport infrastructure. MUDS is another option. Combining the two could work with the compulsory acquisitions providing the framework and the MUDS filling in around this as supply and demand determines.
So tell us.
Let see, purchase farmland at a fair agricultural price, ie minus any excess vslue due to its location. Re-zone it to residential, sub-divide it en-mess on sell as close to cost as possible and in bluk, ie min 1000 plots at a time, maybe more, say 3000.
The Govn that doesnt that gains a significant voting block and loses votes? well the land bankers were not voting left anyway, no loss. Since some of the land is foreign owned, no ovte loss at all.
The downsides are what?
land bankers (some foreign owners?) lose a massive profit they wouldnt see anyway unless the land gets re-zoned.
Im all ears on the "costs".
regards
Exactly new town Kiwi Builds keeping the price down and if private developers push up the prices just do another one and so on. Competition from the private sector keeping the bureaucrats honest too. Make sure it has good public and private transport links so it is desirable then it will not fall into Ireland s trap.
I'd add the following two aspects, BrendonH.
- Abolish zoning and UGB's in the area - a Build Anywhere guarantee. The RMA can sort any location-specific Effects (that was the original intention before the Town and Country Act Planners got their mitts on the adnministration thereof). This should greatly lower the rentier effect which the squiggles on maps presently cause.
- Multi-proof consents, on all factory builds, as of right. Slap an ISO process across 'em to keep Q up, to be sure, but if Ian Cassels can promise 72 square apartments for $130K build cost, then yer costs have a benchmark...the duopoly in building materials gets a kick where it hurts too. And best of all, multi-proof keeps the Council Incompetents out of the loop except for founds, which are mostly these days an engineer certifiable component anyways. This solves the build-cost conundrum and end-runs the Build Big and Clip the Ticket rort which is the current default setting.
Well, Triple, you will look in vain in the RMA (download the pdf and word-search it...) for the word 'spatial', the word 'zone' except as for Clean Air and Exclusive Economic zones, the word 'boundary' except for title and TLA boundaries, the word 'urban' is constricted to apply to Tree issues, and the word 'rural' is used twice, once in a Rural Fires context.
I take this as sufficient proof that Zones, Squiggles on Maps and other CG-conferring and rentier-creating notions of spatial zoning, MUL's, RUB's and the like, are entirely (and properly) absent from the Act. It is intended to gauge Effects: emissions (noise, vibration, smell, air/water quality, traffic) mainly.
Now, what TLA's, guided by their misguided and economically clueless Plannerista, have made of the subsidiary Plans pursuant to the RMA, is another matter entirely.
But their economic effects are wonderfully clear, as Bernard touches upon:
- Zoning creates CG : a wealth transfer of tens of thousands per section, from house buyers to land owners. Consider that good rural (hort and dairy) land goes for say $50K/ha: the cost (at this rate) of a 600 square plot allowing 30% for roads, utilities and reserves, is $2,600.
- This creates a perfect incentive to land-bank: the Productivity Commish notes that the typical AKL urban land price multiple is 10 times cf rural land prices.
- This CG promptly spreads sideways to existing land: consider a new subdivision at the end of your long-established street where new-plot prices are $250K. You have bought your plot 30 years ago for $30K, and allowing for 5% inflation, compounded, it's intrinsic nominal value now is $130K. What would you sell it for now? Because every cent over $130K land value is CG.
- From your street the value ripples spread, to the suburb, to the locality, to the city. Everyone Feels wealthier, and most in fact can be if they withdraw the unearned equity increase via the ever-obliging Bankstaz. But this does not alter the fact that it is UNEARNED.
- TLA's never complain about increased values, because it gives them a very useful rates cushion. Rates are simply set: Rates Required (in the big cube, that's an Important Parent) divided by Known Value. If more of that Value comes along, Whoopee: mo' Munny.
- TLA's both set off this value-ratcheting effect (by zoning and restrictions of various sorts), then perpetuate it via district-wide re-valuations which look at recent-sales prices Here, and apply them Everywhere.
Hence my characterisation of them as economically clueless: history will see this pattern and will not be kind to them.
And no, I have not subdivided. I talk a lot to those who do and there's good munny to be had. But I would not even if I could. I know too much about the intergenerational damage this whole sorry cycle has caused and will continue to cause. Which is, after all, why we comment on articles like this.........
I know the RMA fairly well so i do not need to download it - i have a shortcut on my desktop.
The RMA is and was always intended to work in conjunction with Operative District plans. These district plans deal with location specific effects, not the RMA. The RMA is more of a general unbrella with which all of the District Plans must adhere to and it provides consistency throughout NZ.
I do not mean any disrespect or to sound patronising but i think you really need to be involved in either the subdivision process from the applicants point of view - or the resource management planner (i.e. the council officer granting consent) to propertly understand the process. Or at least a consultant for either party.
These broad ideas you speak of make no reference to issues like geotechnical contraints, traffic engineering implications, contamination issues, infrastructure restrictions, ecologically sensitive areas, historically protected sites, regional planning issues, etc, etc,...
Large scale subdivision is fairly complicated.
Producing more residential land will not solve anything if NZ continues to allow mass immigration. You can subdivide all day long but there will never be enough!
If you want to understand the problem then follow the money.
If it's any consolation, waymad, I have always understood the RMA to work the way you say it does. I got my info from the guy who wrote our District Plan (the sort of cluey guy you think of as the regulators' regulator). About the time we were making our plan operative he told me exactly that: the RMA is supposed to manage the environmental effects of development only - there are no zones.
Firstly, a District Plan is not written by one person, it is formulated by many Policy Planners.
Secondly, if the RMA truly managed specific effects then why did your friend need to assist in writing the District Plan? Why do you need these District Plans if the RMA covers everything?
The RMA is a broad set of guidelines regarding effects for God's sake - it's not specific.
Can you imagine employing someone and asking them to decide whether an RC (resource consent) should be granted based on the RMA..... they would fall off their bloody chair. People need more specific rules to do their jobs - thats why we have District Plans.
At what point in time in New Zealand 's history did the State nationalise the right to develope private property?
When did we lose the freedom to decide what to do on our own land?
Even in germanic Germany they have the constitutional freedom to build a home on their own land.
First there were just building permits. Then came the Town and Country Planning Act with District schemes and specified departures. Then came the RMA. Now we have the proposed Auckland unitary plan...
There is one consistent theme - "they" are continuosly creating more rules and regulations and people are losing more and more freedom to use their land the way they want.
On this point i agree with you completely Brendon.
Triple, I think from the thread above that my subsidiary point is solidly founded: the RMA manages Effects not Spaces.
But I also note, with wry amusement, that you have not commented at all upon the substantive point: that UGB's and other spatial restrictions, have caused, and continue to cause, huge externalities about which the Plannerista who dream up these distortions are utterly, utterly Clueless.
Waymad in reality the only people who regularly deal with the RMA in a detailed manner are RMA lawyers. If you leave it to them we'll all go broke!
Yes I agree that spatial restrictions have assisted land to be expensive - no question.
But there would be little demand or need for these new sections if it wasn't for foreign buyers and new immigrants.
The planners are not calling the shots here, the bankers are the ones in charge.
Drive through the city and look at the signs on top of the big buildings then you will see who is in charge and making a killing out of this housing scam. You do not seem to understand what is really happening here. A little tweaking with planning regulations and acquisitions under the RMA won't solve the problem.
However some honesty in the media might be a step in the right direction!
I don't buy the anti-immigrant argument for two reasons:
1. Auckland and Greater Christchurch have been the targets of internal migration for years and years (remember places like Invercargill, Dunedin, Central Hawkes Bay and Ruapehu are struggling to keep their growth rate up to 0%) Funnily enough they are the two cities struggling to keep up with demand for housing.
2. The vast majority of external migrants are NZ citizens who have been living abroad. Are you proposing a 'use it or lose it' policy for NZers who leave for a while to stop them coming back?
OMG Kumbel - mate take your blinkers off.
See the link for B&T's top 25 sales agents:
http://www.barfoot.co.nz/News/2014/April/Top-25-salespeople.aspx
21 out of 25 of their top agents are non-european.
Do you think the fact that 84% of their highest sales agents are non-european is an accident?
(Maybe the Asian agents are just better at selling - yeah right!)
It's not anti-immigration to state the truth.
tsk tsk. As I thought no insight. Are you going to take a 25-30yr breakeven mortgage to develop a business if there is the chance someone with a warm chair and a pen is going to forcefully take it off you (or your family), on threat of violence and siezure of property?
The problem is I dont think you can do it "elastic" without un-earned costs. If you are going to do it release it in bulk at cost plus costs so one man builders and self builders can buy it freely and cheaply.
Who pays for the roads and public infrastructure and even transport is a big concern / worry for me. In the US for instance there are lots of sub-divisions that have had services supplied but have never been built on. Someone wasted a huge amount of money, that cant be existing NZ rate payers.
This of course is leaving asaide things like is it even needed away from Chch, I suspect not.
regards.
Cowboy I do have a clue. More so than you do. You are a farmer and your entire living is based on compulsory acquisitions. How would your farm function with no power, no roads rail or ports and no mobile or landlines? How do you think the land was acquired for these strategic infrastructure? On the open market with the seller extracting every last penny from there important land? No the government uses it's compulsory acquisition power to pay a fair price.
Has housing become a strategic problem? If it has then compulsory acquisition is on the table.
Triple - you are confusing the argument. Yes, immigration can be a problem. But the fact remains that if UGB were removed, then you are heading in the right direction to making housing more affordable, notwithstanding that issues like immigration need looking at.
And the reason is, not just because of the removal of the UGB itself, but it would only happen if Govt. (central and local) had an epiphany over what is needed to make housing truly affordable. This would also make them reform developer levies, overhaul the present tax (rates) system to something that was more equitable AND issues like immigration.
That's nonsense. Immigration increases our housing requirement, but it doesn't make it impossible to fill. If we needed 10K new dwellings a year to cope with the existing population moving to lower household sizes and reproducing, then we let in an immigrant family, we simply need 10,001 dwellings. What is it about that extra dwelling that is impossible compared with the others?
I do not believe i am confusing the argument - we are talking about creating affordable housing which i too would like to see for our future generations.
However i believe the reason houses are unaffordable is because very clever people and organisations with vested interests make a fortune from debt. They manipulate the market and debt is the name of the game.
Changing some zoning wont stop them. And taxing average Kiwis is not the answer.
Agree that the present system is rigged, and that is why ALL the rules that allow this to happen need to be removed.
The issue on taxes is also confused, because some see it as a way to increase revenue AND not remove other tax. What council are already receiving needs to be looked at first as it is either being unfairly collected from sources that receive no benefit, and/or is substantial higher than it needs to be because of inefficient council bureaucracy. There is always a cost (tax) to pay for those services that are fairly targeted and apportioned and efficiently supplied.
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.