Auckland Council and Housing Minister Nick Smith are at loggerheads over the Government’s Special Housing Zones.
The Government wants more houses built, but the Council are putting the brakes on development until they know how the additional transport costs will be funded.
We warned this was going to happen six months ago.
Sprawl might make for cheaper land, which means cheaper houses, but it doesn’t reduce costs overall.
It creates far bigger costs – transport being the main one.
This cost falls on all existing ratepayers.
Auckland Council – on behalf of their ratepayers – are rightly saying they don’t want to foot the bill for Government policy.
Sprawling suburbs will not reduce housing costs
Making new land available on the fringes of cities will not solve the housing problem in Auckland.
Nor will it reduce poverty as the Government claimed last year.
Yes, rising housing costs are an issue, but building new houses on ¼ acre sections in Helensville merely shifts these costs from housing to transport. The people of Auckland will be no better off from this sleight of hand, as any savings in rent or mortgages will get spent on roads, petrol or bus tickets.
Auckland Council is right to speak up
Auckland Council has tried to force development ‘up not out’ – pushing higher density housing over new suburbs.
But they haven’t found the job easy, because many in Auckland’s swanky inner suburbs don’t want higher-density housing near them. The age-old NIMBY problem again. Except in Auckland it comes with a twist – in most cities the high-density houses are in the inner city, the expansive estates further out. But because we’ve been so slow out of the blocks anticipating and dealing to the agglomeration abomination that Auckland’s become, those inner city plots are all taken by the PM and others.
Instead of helping Auckland Council deal with that issue, the Government stomped in over the top of them by creating Special Housing Zones that will only worsen Auckland’s sprawl.
To make matters worse, they have stymied all attempts by Auckland Council to generate funding to improve public transport – such as tolls.
This means that ultimately ratepayers will have to pick up the added costs, as they have to shell out for the added infrastructure and transport costs that this sprawl will generate. The Government is effectively running up a tab at the bar and asking the Council and ratepayers to pay it.
Auckland Ratepayers should not pay for Government policy
Auckland Council are right to speak up, and existing ratepayers should get behind them with the message that they aren’t going to pick up the bill for sprawl.
There are good reasons for this – successful public transport systems overseas focus on providing a high quality, cheap service for short trips. Spending large amounts of money subsidising trips from Helensville to Auckland is a waste – in most countries in the world that trip would be viewed as a long distance trip between cities. Councils should make it clear that new suburbs will not be the priority for their investment, and any rational ratepayer should back that stance.
Of course ratepayers are part of the problem – the same people that stand to lose from sprawl are the ones opposing development in the city.
House owners in the central city need to swallow their pride and accept that high-density housing – if done well – can bring all sorts of benefits. A major one is future proofing – a major new report shows that denser cities have far lower carbon emissions.
Instead of spending their money on new suburbs, Councils could calm ratepayer concerns by focusing their investment on making areas of high-density housing very liveable.
Councils need to ensure that high-density housing areas have the best services in terms of parks, access to shopping and cafés, and transport.
They also need to ensure the high-density housing itself is high quality to avoid repeating the mistakes of the shoddy apartments that went up in the 1990s.
Once people see that high-density housing can actually be a very pleasant way to live, attitudes will shift. After all, high-density housing is a way of life for the majority of people living in the most liveable cities in the world.
Government policy is the true problem behind the housing bubble
Ultimately the Government’s tax policies are the real driver behind the housing bubble.
House prices have been driven by demand rather than supply factors primarily.
And because every rational investor in housing knows that, they just keep speculating that the government won’t do anything about it. It’s a no brainer for people with means to keep buying houses – well beyond one’s accommodation needs.
To remove that problem we need a tax on the effective income received from capital – not a lily-livered, exemption-riddled capital gains tax as previously suggested by Labour and still pushed by the Greens, and certainly not negligence on that front as the Nats have shown.
A Comprehensive Capital Tax is required together with a review of the RBNZ policy of risk weighting on mortgage lending.
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This article was first published on his blog, Gareth's World. It is here with permission.
51 Comments
Gareth , I beg to differ , the Auckland Council has received hundreds of millions of Dollars in something called Development Contribution levies .
These levies are for the purpose of upgrading the roads , transport infrastructure etc .
Instead its used to pay exorbitant salaries and on fleets of shiny brand new cars and pet projects and al manner of nonsense including a quarter of a million dollars on stupid artworks like that Pizza oven statue in Albany park and ride ( when the narrow bridge across the road is a single lane stop/ go serving 100's of new houses )
These incompetent fools have failed spectacularly in doing what they should this with the money , the city is brim-full of narrow dangerous roads and bridges leading into major residential subdivisions ( Oteha valley and Albany heights being 2 examples as well as Kyle Rd in Greenhithe and there are hundreds more )
We all know money is fungible, more so when it is paid to a Government or any Department of Government ... it simply goes into the pot and is frittered and whittled at astonishing speed on everything except that for which it was intended.
You are correct about sprawl not being the solution , but events have even overtaken developers and land is now so horrendously expensive it is not viable or feasible in many cases to demolish existing homes to make way for 2 or 3 units or flats.
And as long as we get 1000 new migrants arriving every 7 days with either money or skills ,( and therefore are quite affluent ) , the housing backlog cannot be simply wished away .
Problem is
(a) no skin in the game for the people making the decisions
(b) they are all employees so as long as they're doing tasks as per contract, the end result is meaningless to them personally, and may even been opposed to achieving their KPI's
(c) not only do they have no skin in the game, and are employees whose income is divorced from their ability to produce real improvements, the organisations income is provided by legal fiat and super low special rate loans. So even if everything is done incredibly badly, so much so that a private business would be destroyed, they are guaranteed not only survival of the organisation but also personal indemnity too
(d) And it has become so bad and so institutionalised without any effective checks and balances that the majority of New Zealand legal, government and public will let them just make up new laws and rules without holding anyone accountable, not even to the fundamental consitutional or fundamental principles. If they make a mess, they just get the public to pay for it, and tomorrow pay themselves to make more messes.
Problem is
(a) no skin in the game for the people making the decisions
(b) they are all employees so as long as they're doing tasks as per contract, the end result is meaningless to them personally, and may even been opposed to achieving their KPI's
(c) not only do they have no skin in the game, and are employees whose income is divorced from their ability to produce real improvements, the organisations income is provided by legal fiat and super low special rate loans. So even if everything is done incredibly badly, so much so that a private business would be destroyed, they are guaranteed not only survival of the organisation but also personal indemnity too
(d) And it has become so bad and so institutionalised without any effective checks and balances that the majority of New Zealand legal, government and public will let them just make up new laws and rules without holding anyone accountable, not even to the fundamental consitutional or fundamental principles. If they make a mess, they just get the public to pay for it, and tomorrow pay themselves to make more messes.
http://www.aucklandcouncil.govt.nz/EN/ratesbuildingproperty/development…
I don't actually see anywhere on the schedule a single " shiny brand new car", "quarter of a million dollars on stupid artworks", " al manner of nonsense" or "exorbitant salaries"?
It may not show a shiny new car.. but it does repeatedly show that ACC budgets $200k -$300k to build or replace a public toilet. Not sure how a shed sized concrete block building, with a couple of basic stainless handbasins, a couple of toilets, a cleaners closet (maybe) and maybe a bench or two can cost as much to build as a three bedroom house?
The "cost" of housing is an artificial construct. I house doesn't actually cost anymore in Helensville than it does in Ponsonby, it is the lines on a piece of paper that you pay for. However the cost for transport is real, it soaks up real resources including a finite energy and mineral supply.
The thing is,
a) where / what suburbs have had the biggest speculative gains? if its the close in and/or well to do suburbs (and it is isnt it?) and not the outer ones then I fail to see how building more even further outer ones will make much of a difference to the tulip mania.
b) There does indeed seem to be a lot of cost shifting going on, so really we are not seeing the REAL and true costs upfront, that is dis-honest IMHO but then oh so typical of politicians.
c) My biggest head scrather is, how much of this shortage is real? or how much of it is created by speculation? We dont know yet seem happy to spend 100s of Millions on speculative guessing, that just seems crazy IMHO.
d) When I look at 550k for one of these new special houses, plus then transport costs/pain I'm left wondering just how many ppl can afford to buy one (or indeed should).
e) There seem to be some easy fixes that have an immediate effect yet are being ignored, again looks like the shifting of costs / unearned income scenario running rife.
I almost come around to the MUD's, idea ie zone off / ring fence an area and let private enterprise "solve it" so there is no risk to the existing ratepayer. So they do designs, inspections (with 10+year guarantees) roads, power, sewage etc, the damn lot incl Motorway accesses etc. Then we start to see the real and true costs.
Until we see someone do such an experiment and succeed or fail frankly its all a waste of time.
Doesnt fix the oncoming 9transport) energy problem of course, but then the stupids dont want to see it, and I'll include the Greens in this.
Dear Gareth.
Let me explain to you why the morons of NZ -- and by that I mean Kiwis in general -- are so transfixed by the residential investment property pyramid scheme:
No Capital-Gains Tax.
That's it.
The lack of a CGT has lead 4 million drooling retards to convince each other that they can't lose with houses no matter what the facts. NZ's financial gurus have all the economic sense of a stray dog on the motorway and so they have promoted the residential property investment pyramid delusion as a sure thing. In fact, they promote it as the only thing, mainly because NZ's financial gurus have the sophistication and intellectual prowess of a crushed barnacle. No matter what, all any of them and their fellow Kiwis want to talk about is houses. To Kiwis, houses = money and money = houses.
You lot are like a record perpetually stuck on a crappy album's worst track but when the end of the pyramid scheme finally arrives you will be telling everyone how you "saw it coming" even as you file for bankruptcy due to your unserviceable residential investment property mortgage debt.
LOL
LOL... (Comment edited, please leave out the abuse. Ed).
There is Capital Gains Tax on property. Just like any disposed capital asset.
if you aren't complying with the Capital Gains Tax legislation then you are taking part in ILLEGAL tax evasion.
And yes, doing things illegally has often been profitable, but the legislation is very clear, there is tax on Capital Gain for residential property. Please get this through your head and stop spreading the lie.
- - -
As way of proof: A trust I'm connected with brought a property, in the Trust document one of the clauses was that "If I or one of my descendants resided in the property at XXX Rd, I or they would do so rent free in return for maintenance". That is one of the numbered clauses in the Trust Document. Changing that document is a bit of an undertaking and is still there even through the Trust ended up selling the property. the Trust was offered 60% more than purchase price 18 months after inital purchase, and part way through the renovations. This was clearly not a planned sale, so no tax is liable... other properties in the area were even more expensive at the time of sale. The Trust sold and put deposit on two smaller properties. It isn't capital gain because the entire market had shifted.
The two properties that were purchased were intended for rental and the Trust had to file for a loan with the bank. The application business plan detailed the inital prices, the rental prices, and what price we expected or would be prepared to sell the properties. The properties themselves were added as an attachment to the Trusts documentation (very easy to amend). Clearly these properties were bought with option to retain or sell in the future. Therefore any profit (or loss) will be declared income (which is taxable capital gain)
Not libertarian, although their dogma is similar.
If there are no individual rights and no protection for the individual from the State (after all why have a State if not to protect it's members from threats) then how is injustice or abuse stopped?
The issue is not one of Capital Gain Tax, but whether that existing law is being poorly applied (and why!).
Initially it was to protect families, especially those who might move as part of their career. Why penalise NZ or NZers' career and economic development to grab a few tax dollars.
But for some reason that hasn't come clear yet, is that IRD and Courts have decided that any property trading from a non-commercial falls into that space. Why?? Could it be that government departments and influencial indviduals were the ones initially affected by capital gain? After all, 40 - 70 years ago, there wasn't much capital gain to be made, and not many average Jo's were making profits. Except for a few hotspots like Auckland with questionable money and buyers, which set off the 2005-2007 property bubble in the rest of the country., most areas only get 1 - 3% p.a. price increase... which is in line with the "holding value against inflation" theory (ie not capital gain, just everything else devaluing).
But why the hate-on for it? You guys all love taxation, you want more of it.
I think it would be better to have minimal property trade tax (starting with defaulting the "intention" clause to (a) only people with a single house, (b) that house isn't resold frequently (contact the Minister for exclusion related to job or health or earthquake shifts).
but what really needs to make it fair...is to drop the PAYE (and corporate tax) by 10% across the board (and no clawbacks). That would be more fair. Then real NZers not guzzling at the tax trough would have real buying power... the more they spend the more jobs and businesses are created.
And cap loans/credit cards to income (at the rates to 10 - 17% interest). At the moment it is too profitable for banks to make massively expensive loans, and too easy for NZ economy to rely on that for money-input (vs real economic activity)
I go with the position that tax should be a) over everyone, b) thus minimised. ie all profit should be taxed. so no sectors pay little or none pushing the burden onto others. It seems however that there are some who think the "State" should do even less and hence tax less and that any new taxes are bad and hence fight them tooth and nail, especially if they are a vested interest. I'd rather have a more balanced discussion where we bring in taxes that cannot or are significantly harder to dodge and replace some of what we have.
So for instance bring in a land tax that is collected with the rates, hence minimal cost and get rid of GST, I would hope this is fairer and less costly to run.
CGT may well be inadequately policed, however there is no reason not to then say well lets collect the revenue by a different more effective and less costly means.
I dont love more taxation i recognise it as a necessary "evil". What I object to is ppl earning $400k paying little or not tax while someone on $40k carries that, this is what I want o solve.
If we put it "over everyone" then we could go with a flat head tax. That's means those who don't want to train up or put in the hours, who who get married to rich people, or get rich inheritances can pay their share.
When I was a student and later trying to start my own business (back in late 80's early 90's) getting a job was nigh impossible and what little I did get was heavily taxed. Between tax and rent there wasn't much left for business investment or education. Very hard to bootstrap an economy then. I had a BBS, and we had UUCP connect to university. I applied for grants to get the BBS online (instead of store & forward), tried to get classified ads system running (local and NZ wide) through the forums but we had a Fido feed and the Christians who owned much of the distribution system disliked the commercial aspect. Was turned down for grants "as the computer BBS/internet thing" was a gimmick or toy and had no "real world" value. The main thrust was to combine "display as it downloads" JPG technology, download graphics sprites for infinite character sets, ANSI style code and animation, each person could design their own public and private front pages (like our BBS had various ANSI front pages, with animation!), a just-in-time interpreter on the terminal software, in-built gopher and FTP support, and ties to the USENet, Fido and other forums. I was told by experts that it was a waste of time and would never be of any use. Government funders said they wouldn't waste funding on something so unfeasible (1987).
But I couldn't pay for it. Even with the maximum loans, I still had to "pay my fair share of tax".
Couldn't get decent jobs, had to work stupid hours. Got fired eventually (for reading email on the work computer after hours) "misuse of company equipment". which was the phone, modem, terminal software I was developing in my own time to read power meters remotely (1987). An add-on to some collegues who were using their work time to develop their own company's digital readable meter (IR).
Your tax burden squashed that.
I'm looking at people who make ten times what I made, who have no risk, and not a development or improvement bone in their body... running what has been described as "a money machine" from their government bosses.
Come building a house, do I want to pay extra for the good materials and a good builder? Or more for consents and red-tape? I, like millions of others, can't do both. If I go with the good materials and the good builder, their businesses get better, more people are employed, more encouragement to demand the job is done right.
But I can't afford that, I have to pay your taxes and red tape, no matter how foolish, wasteful and unaccountable. And when the materials or cheap builder doesn't do the job, there isn't the money to pay for expensive lawyers or fancy courtrooms to correct it.
But with flat taxes, what of someone like myself who has chronic injuries or disability?
I have to be very careful driving, that's why I finished up working for Fujitsu/DTSL. Too many late night drives results in me falling asleep at the wheel. That's those jobs off the list, the foot injuries means physical jobs options are limited, and the dysphasia which makes my writing so hard to read kills most office/report work and also anything with a lot of writing. So should I slip out back and put a bullet through my forehead? I'd do that before I step foot in WINZ again.
Should we tax the wealthy? Take anyone who has a big income in the last 50years and take that in the form of a capital tax. The rest of us live on near nothing, so that would be "fair". But who gets to decide who gets to have the free rides (disabled, married, chronically unemployed, rich kids) and what are the incentives for working hard or developing stuff, if some paper shuffler with no risk and no interest and no reasoning skills can just take what they want?
Because then we end up like Russia circa 1970-80's. No property meant no crime. You didn't own yourself so even assault was a State reprogramming issue. You didn't own your house, or your transport, or your food, or your family. But what was noticable was that some people in society made decisions, and others had to follow the decisions that were made. Such responsible positions couldn't be paid more because their was no money - but people had to be nicer to the people making the decisions because if you weren't nice, when a volunteer to be moved out of a house, or supply a child for labour was requested of the area, the nice people got a free pass, and those not being nice enough got to make the sacrifices for the State. It also became useful to trade in information, if someone did something wrong (eg broke something, or "borrowed" some food or medical supplies to "gift" to someone they wanted to be extra nice to) then that information was leverage. What was more useful was information on such people hoarding or trading in information, they couldn't be paid of course, no money, but they did receiver the nicer house on the warmer side of the street or the prettier view. And those with the advantages tended to be selected as decision makers. No-one could dare object, that would be putting yourself before the State, or worse, not looking like a nice person, which marked your family for split up and removal...or your family would be the ones whose rations and clothing got "borrowed from" before distribution. Did you want to be disruptive and try to turn in the "nice person" who was doing favours for the decision makers?
But NZ. It would be nice to even the tax up a bit. We can't tax the poor much because they don't have much. but they do use a certain amount of communal resources (often more than others).
We could tax the rich? But if they are providing for themselves and not using the communal resources, why do you think they owe the community anything?
While land tax via rates is an ok idea. Rates is already a land tax. And we already have two sets of rates. so this would be district rates, regional rates, government rates. Why do we need it set up like that? Perhaps just a big grab of communities money, and the different branches of government can pit-fight it out between themselves. After all, the lines between them are just words on paper. Remember regional rates used to be collected with the district rates until government made it illegal, and forced them to double up the whole billing system... "just because".
My concerns about the taxes are:
- It assumes and encourages the idea that the government or community owns people and all the property. This is simply not true but that doesn't stop certain people making a very profitable living forcing others to pay whatever they decide should be paid.
- There is no risk or personal dependance of the process. My "good builder" has a very strong interest on seeing his work is well respected, that his clients are solvent, and the project is properly managed. Everything relies on them achieving that, otherwise no-one wants them.
for the government tax paid employee, as long as the contract is covered and they are nice to their superior (see Russia) then they're guaranteed income.
- The rate of payment to service providers are completely out of line with the services provided. this translates to the risk. Auckland housing market is crazy. But all the best paid people who are in charge of fixing things like that, have absolutely no incentive to do anything about it. But they are paid as if they do. If it's fixed they don't go out of business, they don't personally go broke or have to pay back the debts. No they just claim they need more resources, and pay themselves more !
etc
I recognise 10% taxation, with a minimum per head, parents contribute for children. protection from foreign "waterempire breaking" markets, via massive continuous PUBLIC funding contribution. as worthwhile and necessary. Anything more than that and the government is either out of control (eg police state) or trying to do more than it's function (it's trying to run peoples' lives rather than just protect them from each other and outsiders).
At figures above 10% it means that the government is overspending in some areas. It also means that in a lot of areas people _are_failing_to_take_personal_responsibility_for_themselves_ !! and the government is enabling this. Part of the problem with the enabling, is that it leads directly to running peoples' lives for them. Rather than a cheap court system where an employee can refuse to do things dangerous or to afford to sue for injury or for injunction for a employer contracted to provide a usable option, we have expensive courts, over paid lawyers, mystical legal systems, huge government departments employing lots of nanny elfs, lots of report writing. If that was a self-employed business, contracted for 5mil p.a., you'd be amazed how fast much of that system would be changed. But it's not, so as long as it can keep generating paper it will just keep getting worse.
No longer is the government the referree, it wants to be all the players, the media, the player guide makers, the bookie, the grounds keeper, the auditor, the coach, stadium owner, the advertiser, the ticket seller, the accountant. but in doing all that it's failing at refereeing and at keeping the game worth watching or playing.
You are correct by current law. But that is why many say the CGT and intent rule is wrong as currently written.
Whether you intended to or not, the trust made a huge gain in a short time and should pay their fair share of tax. It was an investment after all.
To me the only way around that would be living in it and moving on.
Actually it wasn't an investment, that's why the law is written that way. It only become an "investment" when someone turned up with a fistful of cash.
If the Trust had bought a similar property at the time it would have lost 10%.
And the only "fair" share of tax is zero.
I was living in it at the time, hence the Trust documentation, when it was sold, the Trust could have lost money and re-bought a 3 bedroom house, and have the Trust Document amended to reflect that situation, but it made more sense not to lose money on the deal, and buy two 2 bedroom rentals instead (one I moved into, and had to pay rent on).
I think that the more than a single dwelling shows clear intent that there is trading potential, and that Trusts need to be transparent in that manner. A Trust doesn't need a dwelling place unlike a natural born person. Likewise a "for profit" organisation such as a Company, really doesn't have a defense as a company exists to trade for profit (ie that trading intent is it's entire reason for existing).
Hey, Ed. I used moron, because that's what the earlier poster used. yes, I put in retard, but I later corrected that to be in line with the original poster. After all what should I call them since they made such a erroneous call, and labelled others "morons" but his was the mistake !
Disagree. A CGT is a complicated, ineffective tax. I want to see a comprehensive capital income tax in place. Explanation here https://www.youtube.com/watch?v=ukq2Cm7vFHQ
I agree that calculating true Capital Gain, especially avoiding double taxation is problematic. Hence the look at property transfer charge instead.
however that is a matter of addressing untaxed personal income. Completely different to Aucklands woes.
What I would much prefer to see is more stimulus and support given to other investments (ie businesses and development) , that a small tax change on capital income isn't an issue. ie that it's not significant enough to make the (tax avoidance) gain worth pursuing. While closing the doors on the more obvious evasions that have been happening (multiple properties, undeclared "option" being equivalent to "no intent". that last one just so smacks of iconoclast's Detergent Beer, where our nanny state legislation is now swinging completely the other way, where the product is what they say it is no matter what you have to say about it or go to jail
Ok...lets _really_ put the cat into the pigeons and make the laws change.
Bought a house in depressed town, existing owner was in negative equity situation. 2004.
3 bedroom, 1920 villa on quarter acre section. $40,000. I had a sentimental reason for purchase and hold.
Needed to borrow money for herd 2009. Got property valued by professional valuer. $80,000.
Not bad capital recovery. Still no intention to sell.
Had bad tenant who damaged the place. re-did the roof. A few other repairs that a previous DIY owner had inflicted on the place. About $30,000 in deductible expenses. 2011
Sold the place in 2011 to recover the cost of the repairs. Quick sale (finishing the repairs was part of the S&P agreement). Capital sale price = $67,000.
Claimed both the expenses and the $13,000 Capital Loss. (80,000 - 67,000). sale was to a complete stranger via real estate agent.
- - -
Again something you can do with any business or personal asset. But with proeprty it's a common occurrence.
Dear Ed, as a member of Kiwis in general NZ populace I strongly object to being labelled a moron!!!
Would LOL please provide the relevant evidence that NZ housing is a pyramid scheme? If LOL believes residential housing to be a pyramid scheme then what authorities has she/he reported this issue too?
Would LOL also please provide evidence of how a CGT will increase housing supply and also reduce house prices??
Would LOL also please provide information on where in the constitutional arrangement of NZ including the Universal Declaration of Human Rights where it discloses that Taxes may be collected for use beyond those recorded..?
Would "notaneconomist" please explain how the NZ residential property investment pyramid scheme is not a pyramid scheme.
In what kind of universe is it anything else?
Property shortage, when 8-out-of-10 properties at auction are passed in? No, that's not a shortage of anything. It's a shortfall in the seller's and auctioneer's expectations, but not a shortage.
Is a junky Auckland house that cost $95k a few years ago really now worth 10 x that amount with the application of $20k worth of paint, wallpaper and carpeting? Nope.
Do you believe the hysterical desperation of YA GOTTA BUY NOW, BEFORE IT'S TOO LATE!!!!!!!!11 suckers is healthy in any way? Surely not. Nobody is that stupid they could think it's anything other than a mental illness.
Crooks and fools continue to fan the flames of the residential property investment pyramid scam, while everyone sings the REINZ's anthem. You know the words, so join me in a chorus:
A-spruikin' we will go,
A-spruikin' we will go,
Hi-ho a merry-O,
A-spruikin' we will go!
Aaahhh, lovely.
LOL
I'm not spruiking anything!!! - I'm asking you to substantiate your claims and also what you have done about it....if you are that concerned about the residential property market being a pyramid scheme then surely you would be taking appropriate action???
And to clear up any confusion you may have:
http://www.investopedia.com/terms/p/pyramidscheme.asp
And if you truly believe that prices are over heated then you'll be readying yourself for the new buying opportunity that will be presented isn't that what you are spruiking??
I'm not spruiking anything!!! - I'm asking you to substantiate your claims and also what you have done about it....if you are that concerned about the residential property market being a pyramid scheme then surely you would be taking appropriate action???
And to clear up any confusion you may have:
http://www.investopedia.com/terms/p/pyramidscheme.asp
And if you truly believe that prices are over heated then you'll be readying yourself for the new buying opportunity that will be presented isn't that what you are spruiking??
If the Auckland market is a pyramid scheme how come the people that I sold my first house to didn't give me a cut when they sold it? and how come I didn't get a cut from the next sale either. In fact I only ever got paid once for the first sale - never has someone I sold a house to ever given me a cut from future sales they have made.
This pyramid scheme is not working
"Is a junky Auckland house that cost $95k a few years ago really now worth 10 x that amount with the application of $20k worth of paint, wallpaper and carpeting? Nope."
Sorry troll. You got it wrong AGAIN.
Again showing that you knowing about the topic.
Is that 95k house, bought for 10x time really worth the 950k?
if next year someone is going to pay 8 - 11% more for it, hell yes !! that's a free (otherplaces) house in a year. Is that worth it? hell yes!
a "pyramid scheme" is a system where early entrants to the program contribute little or no payment then receive payment of part portions of future members joining fees.
Signs of a pyramid scheme are ongoing (if small) "payouts", "dividends", "yields","coupon payments", "ticket fee","clip","reward dollars" despite the member not providing any work or service. (beyond recruitment, if even that).
Especially if those payments are from members whom others have introduced.
A major point of a pyramid scheme is that there is no real product or service of value provided by the system. Which has proved a sticking point with "Multi-Level Marketing" distribution/franchise systems, where rewards are based on the downlines bulk turnover as a profitable rebate. Or buying clubs which use the size of their membership to leverage better prices from suppliers, yet the profits that pay the organisers is directly from the subscription fee.
Compare that to the "airplane pyramid", Where a "pilot" recruits 6 "passengers". They don't actually take a ride anywhere, but the pilot keeps a portion of the "ticket", and pays their own pilot a portion of the fee. This is a pyramid because no service is provided.
A pyramid scheme that has a "service" is the "make money fast report" pyramid. for a small fee (eg $40) you can receive copies of the "make money fast report". The report basic says advertise and sell copies of this "make money fast report". The "join fee" is $40, the profit is however many copies you can photocopy and get others to buy. It is directly replicable, but no value is added at any step, nor is any service provided by the distributor. It is debateable whether it is just a scam, or a pyramid, as the pyramid generally requires the increase in base width as it steps down to provide the huge profits for those at the top.
The best working pyramids fit the chain letter scheme, which is also used as the underwear or tights scheme. The person at the top sends out a selection of letters to associates saying send money or underwear of size "x" to the person at the top of the list. Cross their name out, write your own name at the bottom of the list, then copy and sent to as many people as you dare. As the names on the list get sent "wide" the width times depth number of people contacted increases. Even if the amount is $1, a small pyramid can net thousands of dollars. The only difficulty with this system is (a) people don't necessarily fulfill their contractual commitment rendering the whole purpose ineffective, and (b) when it reaches (theoretical) saturation, you have to contact people who have already been contacted before - so either the saturation stops, or it eats into their profit to sustain it.
This is entirely different to the Auckland property situation which is pretty much value hoarding and market arbitrage (ie people buy property they don't need in Auckland, while not buying more expensive exposed property they don't need in other cities which are more expensive) . the arbitrage factor is that Auckland is acting as a hedge and/or money cache, simply because it is lower than other cities but the hedging effect has generated its own market demand, pushing prices up. Compare Auckland market with similar cities around the globe to see where bubble demand is occurring.
Clearly this isn't a Pyramid, as you asked to be shown, as there is most definitely an item of value being traded, and the value of the trade is based on the items demand value (unlike the "airplane tickets",the"make money fast report", or the underwear mob.
The value of the property is far closer to investment in art or jewelry. Where the value is purely speculative on ownership, not from the service provided. The major demand is therefore, that of a value store, or too remove exposed money into something more transferrable (more similar to money laundering or risk protection).
so as long as there is money to hide or make safe; and it doesn't cost too much; then Auckland will always be in demand for some very big pockets.
That isn't spruiking.
And there is your explaination for how it is most certainly NOT a pyramid scheme. (but technically "unit" based superannuation schemes are :) )
Here is another pyramid scheme, and one worth getting your mind around.
https://twitter.com/UtopianFireman/status/595682190412906497/photo/1
It uses the future promised income to settle the theoretical debt today, while skimming a profit for big salaries and nice cars (and frequent office redesign)
Pyramid scheme, well buying on the hope you can find a bigger fool to sell to strikes me as a dodgy method to gather wealth. No good is really created just ticket clipping, I cant see how that benefits NZ as a nation.
CGT, have a look at the effect a CGT has had in the UK.
With that last para, well I can see why ppl would consider less than well of you, shall we say.
Its not really a pyramid scheme... and yet in a way it kinda is.. ( there is a phase in the cycle where it is purely a ponzi/pyramid scheme)
If one can see That M3 money supply in 1985 was$84 billion and today it is $290 billion.....AND...if one can understand how the effects of that money supply growth can manifest in an economy ...THEN.... one might understand how a large part of the growth in land Values might be a function of the inflationary growth of Money Supply..
I agree with Lowell Manning ..... and I agree with his solutions...( barring a complete restructure of our Monetary/Financial system )
http://www.interest.co.nz/opinion/64724/lowell-manning-says-problem-hou…
I disagree with the idea that residential housing is "non-productive". It satisfies a consumer service demand like many other small businesses. Hamburger places and grocery stores service hunger, farms service their needs. Houses service the need for shelter, and do so quite cheaply compared to commercial shelter (eg Motel, hostel). But like cooking for yourself vs going to the burger joint, it is low value, direct to the consumer productivity. If you're using productivity in monetary terms consider it in relation to savings vs commercial services (poor NZers save by not going to restaurants and not staying at hotels)
Only a couple of things wrong with this article:
1. Empirical evidence: there are plenty of places all over the world where urban expansion is allowed and facilitated and where the cost of living is demonstrably lower than in Auckland - even when transport costs are taken into account
2. The government foots over 50% of the transport bill in Auckland (motorways, passenger transport and other subsidies). As it turns out every NZ taxpayer subsidises Auckland transport. Its not an Auckland ratepayer issue
3. The incompetence and complacency of both AC and the government have created the perfect environment for land-bankers and other speculators to hoover vast sums of money out of the Auckland region. If even a fraction of that money was going to infrastructure instead of the Cayman Is we would not be having this argument
4. If AC or the government were serious about allowing urban expansion the design for Auckland would be different and you wouldn't be having an argument over this particular infrastructure design.
I wish to god that these experts would stop talking as though what is good for Auckland Council is all that matters. Its what's good for householders. I am picking lots of householders would be happy to trade a doubling of their transport costs in return for a great house that only cost $250K instead of $1m. Who gives a toss whether AC can shave a few mill off their capex?
With #2, given that most business have their most expensive stuff in Auckland, and Auckland has the lion share of the big career PAYE, I would hazard a guess that the NZ taxpayers in Auckland actually end up subsidising the poor relations.
Hence my meandering attempt to identify that it's Government trying to overreach its jurisdiction to do that subsidy/transport work which really should be handled at a different level/approach. But because it's done through government/local body the taxation is higher to do it.
They would be better off looking for a solution that fixes their problems, then devising a path to solving it; rather than attempting to steer things with committees and generalised legislation. And while it might be worth using a nationwide contractor/consultancy team (even a quango one) trying to do it by "remote control" through paper legislation and consent style processes is just a bureaucrats wet dream.
Me too. It was always an article of faith to me that Auckland subsidised the rest of the country. But that was before the Clark govt bunged a couple of cents/l on petrol to pay for the completion of spaghetti junction and I suspect it has been funds inwards ever since.
Brendon dug that one out. I'll see if I can find the reference.
BTW the >50% contribution is straight out of the draft Regional Land Transport Plan that was covered on this site a few months ago.
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