By Bernard Hickey
Former Reserve Bank Chairman Arthur Grimes essentially undressed our politicians in front of our eyes this week when he challenged them to embrace a 40% fall in Auckland house prices.
He exposed them as Emperors without clothes.
"What I do is whenever I find a politician that says they want affordable housing, I ask them a very simple question: how much do you want house prices to fall by overall? And not one of them has been able to answer that very simple question," Grimes said this week.
He was talking about the extraordinary response to his suggestion that 150,000 houses be built in 6 years to push Auckland house prices down 40%.
Prime Minister John Key's response was immediate and betrayed where he really stands on the issue of using a supply shock to make housing affordable.
"Nah, I think it's crazy," Key said of the idea.
"Go and ask the average Aucklander who has got a mortgage with the bank whether they want see 40% of their equity disappear on a sort of notion from an economist that you're gonna crash the market," he said.
"It would also leave an enormous number of people who have just entered into the market with huge losses," he said.
"I suspect it would put enormous pressure on developers, that could put pressure on some of the banks."
So there we have it. The leader of the Government's response to the Auckland housing challenge/crisis has made clear what he really thinks. He is more worried about the short term fates of leveraged up speculators and developers than the long term fate of Generation Rent.
Despite years of saying that the only way to improve housing affordability is to increase supply, any increase in supply that hurts the investors who have bought in the last couple of years is out of the question.
The Prime Minister who prides his government on being aspirational had this to say about the idea of going for a really big response to the challenge/crisis: "Where you'd get a 150,000 homes from overnight, I don't know."
Mr Key said he hoped house price inflation could be slowed by the Government's measures, with the implication that affordability would somehow creep up on everyone with wage increases.
Treasury forecast in the Budget that wages would rise by an average of 2.2% over the next six years. It also forecast house prices would rise by an average of 5.7% over the next six years. So the Government's own forecasts show that this magical affordability catch-up is not only not going to happen, but affordability is forecast to get much worse over the next six years.
Auckland's house prices are now nearly 10 times household income. They were around 5 in the early 2000s and are almost double the 5 now seen for the rest of the country. The accepted model for affordability around the world is closer to 3 times income and New Zealand's multiple was close to that for most of its history up until the early 2000s.
The Auckland Council has an official target of improving housing affordability in the world's most liveable city to 5 times income by 2030. The trouble is the Government has no credible strategy to get there. Under Mr Key's plan to slow house price inflation down, even to low single digit rates, there would have to be an explosion in wage inflation to double-digit rates to get there. That would be magical thinking too.
Arthur Grimes is dead right. Improving affordability will require outright price falls and big ones.
Unfortunately, Labour Leader Andrew Little and Green Co-Leader James Shaw were not much better when given the Grimes test this week. Little also refused to countenance the idea of falling prices, even as he flagged a plan to be announced this weekend to address the crisis. Green Co-Leader James Shaw also would not answer the question, knowing he did not want to repeat the mistake of his co-leader, Metiria Turei, who was more honest a few years ago.
Why are politicians so afraid of voters on this issue?
They may think the housing market is now a 'Too Big To Fail' bomb that cannot be defused or dismantled without turning it into a weapon of mass wealth destruction, but that's simply not true.
An overnight 40% price fall in Auckland house prices would simply take house prices back to where they were in early 2012. Most Aucklanders have built up big equity buffers and are living in their own homes, rather than speculating. Tighter lending rules since 2013 also cut out almost all of those speculators borrowing with 90% plus mortgages. The Reserve Bank conducted a stress test late last year that found banks could cope with a 55% fall in Auckland house prices at the same time as a 13% unemployment rate and a 6% fall in GDP. Our banks are not the brittle, trigger happy banks that threw Americans out on their ears during the GFC, as they have proven with dairy farmers over the last couple of years.
Yes, a few property developers might go bust, and yes, a few rental investors who banked on tax-free gains might miss out, but everyone forgets that a house price fall would be accompanied by lower mortgage rates. Ironically, a 40% house price fall would make housing even more affordable for existing home owners because their mortgage payments would fall.
Politicians failed Arthur Grimes' big test this week and exposed themselves as fighting for the interests of leveraged up property speculators rather than future generations of potential home owners. A brave and aspirational politician would take a different view.
A version of this article was also published in the Herald on Sunday. It is here with permission.
143 Comments
Well said Bernard, you hit it on the head on the head. But it won't happen due to new regulations.
Politicians and bankers are heavily invested in real estate speculation. Why would they want prices to fall?
Why would anyone want house prices to fall? Are we not all millionaires now whilst living in our same old house because it is worth so much more than what we paid for it? Don't we all feel the "wealth effect" so publicized by the media talking heads? Are we not all looking forward to cashing-in' on our "investment" oblivious to how much our lifestyle has been eroded? Are we not all "schmucks" thinking we are investment gurus on our way to nirvana? Are we not all following their lead and behaving just as they expect us to? Think of how many real estate speculators plague this forum basking in the sunshine of their successful strategy completely oblivious to the erosion of our lifestyle. Do they want house prices to fall?
We are all responsible for this fiasco and we are all capable of fixing it, the problem is we do not want to. We could revert he glamour of becoming rich embedded in our heads by the same people we now expect to correct the problem. All we have to do is open our mind and realize that wealth is not a fat balance sheet, and money is only a tool for trading the things we need for a good lifestyle. Ironically, we are trading a wholesome lifestyle for a glamorous one where we can eat out, travel abroad, and buy cheap products from china that are destined to fill our land within a few months after purchase. Our biggest wealth is time and energy, human energy, which is an abundant resource in our young people, all of which are leaving New Zealand in droves, or at least planning to, simply because they can't afford to live here, because they can't afford to build a house, much less buy one.
If I was in my early youth I would also be voting with my feet.
Our lifestyles haven't eroded. It's way better now with cheap cars, computers and overseas holidays.
Young people left NZ in droves when times were good and houses more affordable.
They left when it was easy to double your money on property which was like anytime in the last 40 years.
The old days were also full of wife beating, drunk patriarchs...or so I have been reliably informed on this forum.
Whatever are you on about?
The "shmucks" were those that didn't buy property when they were able to. And what do you mean speculators plague this forum? I'm sure we are out numbered here. Do you just want an echo chamber?
Just go away - I'm tired of your arrogant self centred crap - you don't contribute much in the way of intelligent commentary - you repeat the same comments over and over again - the "shmucks" you talk of are those who don't realize that there has been a shift in how the "establishment" is viewed. In Australia one of the issues Labour campaigned on was removing some of the tax benefits of investment housing - and the election is still not decided one week later - it is that close - I would have thought the tax benefits were sacrosanct and that Labour would loose heavily just for suggesting it - times they are a changing - Brexit and Trump.
Or are you the "shmuck" for not realizing that things can and do change. The whole Auckland housing market story has been getting louder and louder - going from something that would appear on the back page to the front page and all because National would not acknowledge that there is a problem - i.e. it has risen in the popular radar as a significant issue (along with immigration).
I think you are scared that your only form of investment is under threat from something you don't control - and it could all be taken away.
Just don't read/respond to any of my comments. I do this with a few commenters here.
And hey, I didn't use shmuck first in this discussion.
Let's see what happens come election time.
Just remember a thing about this website - "Helping you make financial decisions".
Also just over the last couple of days some responses to my comments:
Smokey -Not a bad idea. Hope the government seriously thinks on these lines.
Narabeen Boy -Hey zac.what are your thoughts on the rbnz's announcement late this afternoon?
Hardworker-does.. -Look forward to your report Zach.
Zachary, you have a very selective memory and a very poor understanding of wealth. There have been several periods of falling house prices over the past 40 years. And as for lifestyles not being eroded, you are clearly living on a different planet from most of us.
In NZ of the 1960s to early 1980s every district had a post office and and hospital, and most had a sense of community; almost every mechanical or electrical appliance could be repaired by someone who knew what they were doing; most employment was for a locally-owned business; the foreshores were generally unrestricted and kia moana was generally collectable; councils were small and council officers were accountable; there was job security and affordable housing ($15,000 to $40,000 when incomes were $5,000 to $12,000)......
All that has been traded for cheap consumer goods, junk food, overseas holidays and superficial lifestyles that rapidly bring forward the day when fossil fuels become unavailable and climate change (along with rapid sea level rise) renders many regions uninhabitable for humans.
Things are rarely black and white. I agree that to some extent things were horrid in nz back in the day but we have also lost good things.
I felt a good balance had been struck in the 90s. Auckland was pretty multicultural by the 90s, we had a good food culture and there was a lot of good culture generally. There was a really good music, art and film culture in Auckland in the mid 90s.But the traffic and house prices were still sane.
Thanks to:
1. Migration policy
2. Short sighted land use and transport planning
...things started to go downhill. I would argue Auckland hasn't got a whole lot better since the mid 90s in things like culture but it has got a whole lot worse on several fronts
You miss the point, Zachary. It's not about you - it's about those left behind. Saving away with no prospect of long term security in the city that offers them the best employment prospects. Those still too young to have ever made the wrong decision in the time you were talking about - like 'Hardworker doesn't matter'. How would you be feeling now?
Are you serious??? You know NOTHING about me and why I'm where I'm at. I have lived through tragedy and illness which has lead me to where I am NOT bad decisions!!!! Zach go take a long walk try make some friends and quit spending so much time on interest. You don't need help making financial decisions anymore your job is done here. Go find another hobby. Sad.
I am "Right Wing". The sense of community that Afewknowthetruth speaks of comes from a time of cultural homogeneity but now we have multi-culturalism. I am also an evolutionist and I know that different groups vying for the same resources will be problematic. Notice folk complaining about Chinese?To survive and prosper in this world I ride the tiger of capitalism. The Right Wing can build it's utopia in the form of an Elysium using economics - you could describe it as multi-cultural fascism if you like. Much like modern corporations.
I hope you understand that the 'tiger of capitalism' is founded on fraud -creation of money out of thin air and charging of interest on it- and exploitation of other people and exploitation of the environment. I hope you understand that that capitalism is in its death throes as a direct consequence of the fraud and exploitation it is founded on. Negative interest rates are not going to fix the underlying faux foundations, though they may extend the life of the system by a few years (or are we down to months now?).
And I do hope you understand that modern corporations are an abstract creation, and that corporations are the prime agents of destruction of society and the looting and polluting of the planet we live on.
I hope you understand modern corporations are prime agents in the ruination of the Earth to the point that most of our progeny won't be able to live on it ..... the exact timing of which is still open to debate but some time in the period 2030 to 2050 is more-or-less certain, with collapse of current arrangements coming some time around 2020 after a major jolt in 2016 or 2017.
Just in case you missed it: http://energyskeptic.com/2016/limits-to-growth-is-on-schedule-collapse-…
Of course, in a fact-free consumer society based on selfishness and greed, the truth is often extremely unwelcome.
If you're a fan of evolution you'll be aware of the underlying random nature of it, and the role of blind luck presumably? The right mutation at the right time being lucky enough to survive and prosper. Perhaps you could do with some acknowledgement of the role of luck in life too, perhaps you are doing well due to having the right upbringing, the right opportunities and the right investment strategy at the right time and in the right place. Perhaps others not doing so well these days would have done better with your opportunities.
I know that 'successful' people tend to react badly to suggestions that luck plays a part in their lives, how do you feel about it? It might help with consideration and empathy towards others. Note that acknowledging you have been lucky does not in any way conflict with you having worked hard and made sacrifices.
Replication, mutation and selection. While all are important for the process to work it is selection that really builds the organism. Most of the randomness is really bad if you choose it and it mostly gets deleted. That's why evolution used to be called natural selection.
I will admit I am lucky and a little bit special but I have an important mission to perform for my own progeny.
PS. The lucky accident, the one that is actually useful in a survival sense, is a rare and beautiful thing and something that is looked after and preserved.
This isn't an effing computer game! We don't go on QUESTS! I'm sorry everyone but this guys is a total creep. I can't have some faceless stranger judge me from a few comments he has read. I appreciate all of the commentary I've had from everyone but I can't deal with Zach anymore. I've completely had enough. He's on here way too much, winding everyone up and pushing everyone's buttons like a true sociopath. Sorry. This website has helped but I won't be around anymore.
Hardworker would have been okay if she made different decisions in the past.
You do understand the concept that not everyone was as smart as you in being born in the same generation? "Different decisions" - okay, what about today's 18 year olds?
You unbelievably condescending narcissistic arrogant selfish fool.
It is about me and the horde of other land owners.
Of course it's about you and the land owners. This is how landed elites get started. The luck of time and place, consolidation, and screw all the peasants.
I've got an iron sword and you've got bronze one. Ha, ha, you're dead (or my slave).
I've got a horse and you haven't. Ha, ha, you're dead (or my slave).
I've got a bank and you haven't. Ha, ha, you've got to borrow money from me and become a debt slave.
I've got several houses and you haven't got any. Ha, ha, you've got to pay rent (for the rest of your life) while I get richer.
Did I miss anything?
Zach going back and patting yourself on the back with comments you'd have to spend time finding for another ego boost, omg sorry but that's so sad.
Had a real estate agent turn up at my house yesterday to talk to me about selling it. Stupid leech had no idea what was coming from the renter in front of him. I've had enough and I let loose a tsunami of anger. There's a backlash coming. I'm not the first and I won't be the last. There have been times when I thought Zach almost got it but now I know he feeds off the same misery mr real estate does. Parasites. Loving the fact we will never have a home. No matter what anyone says,this isn't even about me anymore. This is about society as a whole and it's doing is no good in the long run.
Just providing some data - only took about 20 seconds.
I have provided a lot of useful suggestions. ( I even solved global warming -lol )
I understand Hardworker but they declared war on me and my family (landowners have families) and brought in the big guns from the Universities..
Yes indeed - substitute NZ residential properties for equity market/securities in the following.
Much of America has still not recovered from the violent consequences of the last yield-seeking bubble the Fed engineered. Now the Fed has engineered another, and has drawn nearly every pendulum to an extreme. We expect $10 trillion of “paper wealth” to be wiped from the U.S. equity market over the completion of this cycle, because it is not “wealth” at all. From an investment standpoint, the value of any security is inherent in the long-term stream of cash flows it will deliver to investors over time. Artificially jacking up financial securities through reckless monetary policy doesn’t change the cash flows that those securities will deliver over time; it only converts future expected return into past realized return, leaving nothing but risk on the table for years to come. Central bank intervention is not a benefit to long-term economic prosperity. It is the head of the snake.
By John P. Hussman, Ph.D.
President, Hussman Investment Trust Read more
'Our lifestyles haven't eroded. It's way better now with cheap cars, computers and overseas holidays.'
That's a very materialistic view of the world. Some of us have a view of happiness that is more than 'cheap cars, computers and overseas holidays.'
Apart from a relatively small minority, most people are working harder and harder just to keep up.
Of course some things are better in NZ today than they were 30 years ago. But we've also lost a lot too.
For me, the biggest thing NZ has lost is its egalitarian world view. It's a country now dominated by self interest and a lack of interest in the condition of our fellow humans.
Witness the cues of Lotto buyers yesterday....
The unsubstantiated opinions of uninformed fools have no value.
All the archeological evidence points to people living before the advent of agriculture being a lot smarter and far more conscious than those living after the advert on agriculture: they had to be very smart and be very conscious in order to survive from one day to the next. Dimwits and dopeys fell into ravines or got eaten. And the evidence is irrefutable that the adoption of agriculture resulted in poorer overall health and lower individual skill levels.
Contrast self-sufficient people living away from the comforts of civilisation with people living in modern industrialised societies who can behave incredibly stupidly and detached from reality most of the time and get away with it because energy, food and water arrive without the recipient making any effort. indeed, all the evidence indicates humans living in modern industrial cities are not only on average the stupidest ever to have walked the Earth but also the most unhealthy.
What a load of nonsense you spout Afewknowthetruth.
Humans only developed consciousness in the second millennium B.C.
The Origin of Consciousness
in the Breakdown of the Bicameral Mind
The Internet has expanded our consciousness exponentially. Just watch a TV show from just a few years back and see how bad the acting was and how lame it is.
Methinks you confuse the ability to browse the Internet with consciousness.
'Running down a list of changes that have occurred in our skeleton and skull since the Stone Age, the University of Wisconsin anthropologist nonchalantly adds, “And it’s also clear the brain has been shrinking.”
“Shrinking?” I ask. “I thought it was getting larger.” The whole ascent-of-man thing.
“That was true for 2 million years of our evolution,” Hawks says. “But there has been a reversal.”
He rattles off some dismaying numbers: Over the past 20,000 years, the average volume of the human male brain has decreased from 1,500 cubic centimeters to 1,350 cc, losing a chunk the size of a tennis ball. The female brain has shrunk by about the same proportion. “I’d call that major downsizing in an evolutionary eyeblink,” he says'......
http://discovermagazine.com/2010/sep/25-modern-humans-smart-why-brain-s…
You would agree with Jared Diamond then that the cannibals of the Papua New Guinean highlands are far smarter and more conscious than the European. We should bring them all over to run our institutions. I'm sure the University boffins would be all for that.
The Internet is an extension of the conscious mind. Why do you think there is a huge push to get the Internet to all the Third World people?
Long ago I read a book that impressed me greatly which was called, "Ever-Expanding Horizons. The Dual Information Sources of Human Evolution".
This was long before the Internet but I can see now that the Internet is the greatest tool we have for expanding our horizons. The expanse of the horizon determines the level of human consciousness.
an interest rate fall will reduce the amount that the price of housing can fall because it would enable people to simply hold the properties that they own for longer without the pressure to sell. Increased density means that house prices drop but land prices rise because houses get smaller
What we're seeing is an enormous act of theft from our children and grandchildren - no different in kind from helping ourselves to the inheritance left them by our own parents. Young professionals - and I speak of my own family and their friends - are now unable to enjoy the independence and security of owning their own homes in our largest city, while others gorge themselves on multiple property purchases and earnings. To their minds - and I have every sympathy with them - their futures are being trashed in this and a host of other directions by the most ugly selfishness and greed. We inherited a liveable city. We seem determined to deny the same opportunities to our children.
We are reverting to the feudalistic model most of our forebears were running from. Inherited wealth.
Some of us, like me, are fortunate that one day, we will inherit a reasonable amount of wealth from our parents' gains in property. My parents are in their mid/late 70s and their property in Wellington has gone to a stupid value - about 1.2 million now I think.
Sadly, there are many people who won't have the benefit of inherited wealth, or may be a long way off inheriting that wealth.
And whilst I will benefit from this scenario, it brings me little pleasure knowing this is the way things have gone.
Of course the other way by which affordability would improve would be if greedy banks reduced their margins back to where they have been historically rather than holding them at current record margins. Banks could easily offer 3.8% for 3 years fixed right now and soon as swaps continue to dive we will see fixed mortgages around 3%. The problem is the average Kiwi is happy to pay a rate between 4.1% and 4.5% - they need to put more pressure on the banks for a better than published rates. I suspect that the next round of quarterly bank profits reported will be the highest ever seen. The banks are making billions every quarter and it is time they spread the wealth with lower margins and lower mortgage rates!
All this talk of 'by 2030' would be hilarious if it were not so serious, so utterly inept and/or deceitful. The reality of the world we live in is that the fossil energy supply necessary to maintain present financial-economic-social arrangements DOES NOT EXIST. And if it did exist humanity would not be able to utilise that energy for environmental reasons.
Right now NZ is in a very precarious position with respect to liquid fuels (and energy in general) quite similar to that of Australia, which, despite what politicians say, is close to 'falling off the cliff':
http://crudeoilpeak.info/prime-minister-turnbulls-exciting-energy-secur…
Yes, priniting money to pay for energy imports and other imports does work in the short term, but like practically everything else the NZ government (and local government) says and does, it is a recipe for catstrophe.
What we are currently witnessing is analogous to a windmill without a governor in a hurricane: watching it spin out of control we wonder how much longer it will hold together, knowing that once something does fall off it will become so unbalanced it will disintegrate very rapidly.
the reason our politicians wont do anything meaningful to drop house prices is because so many of them are in on it from all parties.
they created the tax laws, then the policies,
ie high immigration , accommodation supplement, selling state housing, claim interest and other expenses
then all jumped onboard, have a look at the MP's holdings and you can see we have many foxs in the hen house
https://www.parliament.nz/media/2721/register-of-pecuniary-and-other-sp…
Great article Bernard however the major factor in house prices increasing in Auckland is the Chinese - Barfoot and Thompson secretly know the makeup of the buyers - if they were to release the last quarters surnames of all their buyers over 50% would be Chinese - not racist simply fact. So Key and his cronies, Joyce, English, Smith and Collins need to have pressure put on them to shut immigration down for at least 2 years. You will note the Chinese real estate websites have lowered their profile over the last 6 months so as not to focus attention on their rampant purchaser database.
A challenge for interest.co.nz - attend the next three weeks Barfoot and Thompson auctions in the central city and North Shore rooms and do a head count of the number of Chinese in the rooms and the percentage of Chinese buyers that the homes are knocked down to and you will be shocked - it is likely at least 60%.
And that's a great danger and conundrum in itself isn't it. Because there are several scenarios where that hot money can vanish and vanish very rapidly:
- Stricter Capital controls
- Better money laundering compliance
- Yuan devaluation
- Chinese debt implosion
- Change in New Zealand government.
If one of those eventuates we may find that the Auckland property market can't get it up anymore.
Those with long memories or who have read their history know what happened with Japanese property investment in Aus and NZ in the late 80s / early 90s when the Japanese bubble burst.
It had a nasty effect. If a similar thing happened with China the impact would be much greater as the Chinese have invested much more in Aus/NZ than the Japanese ever did.
No - the official government data said of Auckland 4% of buyers were foreign, 34% were either foreign students studying here or those on temporary work visas. The people in those categories that are buying the houses are almost all Chinese. Last week John Key said "I don't think foreign students are buying houses" yet the data shows they are.
Wake up NZ it is time for JKExit!
You do not need any visa to enable the purchase of New Zealand property. The Chinese could buy New Zealand this afternoon if they wanted, student or not. The data released was so inconsistent in its detail possibly for a reason. The same issues are being cited in Canada , in particular Vancouver about the Chinese pricing out the locals, yet the reality is far different. If as you state that the bulk of the foreign buyers are cash or offshore financed then Auckland has a much larger problem in regards to its household debt and the inevitable collapse in prices .
It is racist when you are instantly claiming all people with Chinese surnames are instant foreigners regardless if they are local or not.
That NZ-born Chinese teenager who has lived in New Zealand her whole life is right that she says she no longer feels welcome in New Zealand.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11632998
Chinese people have been in New Zealand since 1842.
If Labour put anything in their housing package, to be released today, that has things like no more negative gearing, or tax deductibility on losses no longer able to be claimed, then we will end up suffering another 3 years of the John Key club. Labour need to limit migration to no more than 17,000 a year and of those 17,000 only 25% should be allowed to live in Auckland.
Hugh Pavletich was interviewed by RadioLive late Jan. He didn't fail the price fall test.
Hugh simply said that property owners/speculators didn't care about those priced out of the market when prices went up -the homeless etc so why should we care about them when prices fall?
The whole interview is great listening. Here is the link.
http://www.radiolive.co.nz/We-live-in-a-housing-hell---Housing-commenta…
"Hugh simply said that property owners/speculators didn't care about those priced out of the market when prices went up -the homeless etc so why should we care about them when prices fall?" and that is as much as our Zach needs to understand and to take particular note of whose mouth it came out of.
Wow Zach, woke up and can see the bullet holes everywhere....what makes me upset is BH stuffed up in 2012 and told everyone to sell or move to Wellington and his side kick SE said renting was better, guess what 4 years later to atone for his sins he now writes in our national newspaper that prices should drop by 40%, shameful
most would continue to live in the HOME they brought pay their mortgage and go about daily life. unless they need to move or circumstances change and they need to sell it would not affect them in the long term.
even for old long time investors that have positive cashflow properties no biggy.
the people most likely affected are flippers and leveraged investors that need GC to make their models work
and they wont get much public support and nor should they, they take the risk, they get the reward or loss
In Auckland, Hamilton and Tauranga they are the most at risk along with highly leveraged speculators and investors. I don't have a lot of sympathy for them. Greed and stupidity comes to mind. Everyone forgets we are at historically lowest emergency interest rate levels.
Problem is the moment you say truth may sound racist but the fact is that more than 80% property atleast in Auckland are being bought by Asians.
If any doubts take details from any estate agency office. In fact in many the percentage goes up to 92%.
Dotcom - where he rented has been sold and agency is not divulging the name of the buyer but wouldnt be surprised if the name is asian.
Problem is the moment you say truth may sound racist but the fact is that more than 80% property atleast in Auckland are being bought by Asians.
If any doubts take details from any estate agency office. In fact in many the percentage goes up to 92%.
Dotcom - where he rented has been sold and agency is not divulging the name of the buyer but wouldnt be surprised if the name is asian.
A 40% decline would finally expose NZs economy for what it really is - borrowing on the house and thus spending, pretending we have an enviable, robust economy. Meanwhile our neglected export industry is ill prepared to fill the void. Then the government would have actually have to think and work to achieve real growth. It's too easy to run up house prices with leverage and immigration to produce lazy headline growth. It's clear with a Labour lead government we'll see more of the same.
That's the really important issue here. When we come to our senses and the euphoria of having the world's biggest debt for the world's most expensive mouldy gib board wears off, what's left? Sod-all, really, and precious little added value. What our 'leader' seems to have overlooked, or more likely hopes that the public will overlook, is that you don't become a Switzerland by undermining the integrity of your institutions to facilitate the activities of the world's tinpot crooks for minimal return. You become a Switzerland by having lucrative high-quality manufacturing industry in specialist chemicals, pharmaceuticals, and precision scientific instruments.
Note the E Class Mercedes billboard in kingsland .... from $99,990 - good deal. This sort of shotgun approach advertising is usually reserved for attainable wide audience products.
I can only assume that 100k for a car is now attainable for most landowners.
Mint idea.
Some heavy comments today.
Relax people!
One thing missing from the article is the effect of a run on the bank. I know that its been slowed down by the 1 month notice period to break a term deposit, but I for one would not wait until house prices drop 54% before making a request to take my money out!
Nearly every country has a city that is its commercial hub and those cities attract the world to live in them for a variety of reasons. House prices in those cities are always high. Auckland is that city for NZ so stop dreaming about prices dropping 40% ( although I will so that I can buy another house for my kids) cause as soon as they fall even 10% there will be droves of buyers diving in that will start driving them up again. I bought my house in 2009 that is now worth more than double and luckily didn't listen to Bernard's prediction that house prices would drop 35% or I would have been another of the voices here still waiting for the prices to drop and being left behind. The prices have effectIvely been reset and if anyone knows the cost of building now they'll know affordability is a very relative term. Have just seen Labour are proposing building cheap kit set houses for an affordable $600k.$600k affordable? Really? That is just telling me my house is going to be worth even more.
You should buy a house in China for your kids Ken (As Chinese parents are doing foretheir kids). Yen falling so bargains to be had..., what ..you cant buy in China, rubbish its a 2 way deal thats what John said. Will invite the neighbors over to dinner and ask them as they immigrated. Gardens a mess though and haven't seen them since it was sold? Must be down at the batch in Coromandell or working big hours. Miss the nice young couple renting the house though, think they wanted to start a family or something like that disappeared down to Tauranga I think.
They should have been smart like us in 2009....easy street now, now better get to the local meeting to halt any more development in the neighborhood, bloody talk of 2 story apartments down the road. Not over my dead body, streets cant handle any more SUVs and we dont want apartment dwellers hanging around.
You do understand that if the workers cant afford to live here, then industry has to move out, then Elysium burns.
A dead zone with no industry that produces nothing except high house prices is not a winner.
I dont feel left behind, but I do feel that those that have 800k mortgages are akin to swinging from a tree by their necks.
These are the first numbers released by the Canadian BC Government in relation to foreign purchasers of real estate.( Its odd they also had a survey during the year quoted on Asian sounding names - just like New Zealand). The numbers relate to a three week period starting in June. Over the past few years , just like Auckland , Vancouver has pointed fingers everywhere but at themselves. The stats , foreigners accounted for 3.3 percent of the 10148 real estate transactions in BC equal to 337 . In metro Vancouver 5118 transactions , 260 made by foreign nationals , and in the city of Vancouver 1139 transactions 47 by foreign nationals. Not all foreign nationals are Chinese , nor does the data show how many foreign nationals are selling( I am sure Australians would be selling in New Zealand to capture both capital and fx gains). Additionally given there is little historical data , there is no way of deciding whether foreign nationals are acquiring real estate in any larger number than years gone past .Bottom line in the city Vancouver that has many characteristics of Aucklands overblown real estate , locals account for over 95 percent of real estate deals. Any cursory look at RBNZ mortgage data would confirm the very same in Auckland.
WOW?? , Ok few words to express how I feel about all that has been said above ( not necessarily popular) :
1- Please STOP calling others names because you differ in opinion, that is unhealthy debate and democracy.
2- I didn't know that Bernard has joined the Morgan Foundation? correct me if I am wrong.
3- The same people who want the 40% price drop and advocate for the rights of FHBs are ready to sacrifice those FHBs who bought in the last two years and naming them as collaterals , how silly and irresponsible is that?
4- What will the banks do when your property value goes down by 30% ( let alone 40%) ? the security they hold against the mortgage has been devalued so they will either ask for more security, higher rates or take you to Mortgagee Auction ...so people who have homes cannot just carry on with their lives as some naively suggest and ignore their Lender ..
5- Everything will show in the Election Wash ... those who dream / hope that Labour / Green will be better governors and just making loud noise about it continue to be disappointed by their leaders' outcomings and plan, instead they keep shouting JKexit !!.
6- this issue is too complicated for most simple and ill informed people to solve ( most of us are, because we don't know what's happening or signed & sealed behind closed doors) and we don't have all the economical data and budgets in sight.. we are just observers of daily life each from his own corner....so chill down I say, this is not an issue that can be solved by making loud noises in the media trying to bring the wall down!!
7- If it was as easy as building 150,000 units in 6 years and crash the property values, then everyone else would have done that, including London, San Francisco, Singapore, Hong Kong ...etc ...should that happen unsystematically over a much longer period of time then more than half of NZ houses will be underwater in mortgagee auctions or abandoned like happened in California in 2008 .... let alone riots on the streets!!! at which time we will see real homelessness problems.
8- there is No point in comparing the quality of life 10, 20, 30 years ago, that is nonsense and leads to no where, anyone interested in going back can leave the cities and go bush .. life evolves and economical systems and condition do just that.. cannot turn the clock back but need to learn how to live with it.
9- Everyone is blaming the NAts and particularly the prime minister JK, very little blame has gone towards the real culprits and major contributors of this problem - Auckland City Council .... after sleeping at the wheel for years and being entrenched in old silly static bureaucratic processes and ignoring their incompetencies problems , spending rate payers' money inefficiently, they suddenly found themselves naked after the tide receded and they will be punished in a month's time.
10- I suggest that the Government starts serious plans to build a NEW CITY south of the Bombays anywhere between papakura and Huntly ( Ignore Mr, Geoff Simmons.explanations of farm land and the price of veges!!!!).. the main roads and Rail are mostly there ( for now) and new infrastructure can be put down smartly in a year - offer DIRT cheap industrial land for manufacturing businesses with proper covanance to encourage some of them to move out of Auckland City and use their land to expand vertically with High rise dwellings - put a plan over the next 10 years and borrow money to do that ( I am sure a lot of people will invest in these projects if allowed to through PPPs) .. Everyone will be happy then and prices will gradually subside and most of the value will be preserved....
11- FHBs today who want to buy in Mt Eden, or City, Or the NorthShore for under $500K ...sorry you are late, that train has left ...you win some and you loss some, start somewhere else and small ( just like everyone did) save a bit more and be patient to get up the ladder JUST LIKE MOST PEOPLE DID.
12- The same developers, Landlords, investors, that are being asked to be crucified and burned down because of their greed etc... will be the same the country will need to build up the new dwellings and expand the economy - Only short sighted people would call for their demise out of jealousy or because they missed that train.
13- Yes, misery likes company .... but moaning alone has never been productive!
Yes basically in Politicians eyes this is a problem that must be avoided at all costs. But it's not just us as you know here's a London perspective on a housing crisis, what is scary is the house prices the refer to even for London are in proportion a lot lower than Auckland!
Yep Bernard. The politicians failed the Grimes test. Some offer the simplistic reasoning that it's because they are investors themselves. But I think there are other reasons. The Nats promote the idea of promotion of the economy and increased GDP, but they are clueless about why.
Economic progress is supposed to benefit our citizens, but to get the desired percentages many have been progressively screwed. There were the poor, but in the last couple of decades the middle classes, educated and industrious people, now struggle to live where it was once easy.
To pass the Grimes test our politicians need to get back to basic understanding what economic progress is for.
I have been reading above some views about whether we are well off. I don't think we are. I have been told that for 20% of the people who die in New Zealand WINZ pays a funeral benefit. Meaning of course that those people had not assets at all.
I have been trying to reference that all afternoon but failed. Anybody got any ideas.
Zachary, that thread was getting a little cramped, so I'll answer here.
'You would agree with Jared Diamond then that the cannibals of the Papua New Guinean highlands are far smarter and more conscious than the European'
Yes, very much so. They managed to live within the ecological limits of their land base for many tens of thousands of years (probably around 60,000), whereas Europeans messed-up practically everything wherever they went, and industrial Europeans have been messing-up at the fastest rate in all of geological history: apart form the utterly catastrophic climate predicament, industrial humans are responsible for the death of the oceans and the Sixth Great Extinction Event. Messing up your vital life-support systems to the point of causing the extinction of your own species is not at all smart and is certainly not an indication of consciousness.
The European industrial culture of loot-and-pollute that commenced around 1780 won't manage just 300 years (and might not even manage 250 years the way things are looking: 'Are You Planning Your Retirement? Forget About It. You Won’t Survive To Experience It'.
http://www.paulcraigroberts.org/2016/07/08/are-you-planning-your-retire… )
60,000 years versus 300 years is not at all impressive if you're claiming the 300 is superior. Or does superiority simply revolve around providing more artificiality for a very short time?
If anyone manages to survive what is coming it will be 'savages' living in remote locations, not city dwellers..
' Why do you think there is a huge push to get the Internet to all the Third World people?;
To exploit them, indoctrinate them, and extract resources from their land bases at a faster pace in one last orgy of stupidity.
That's pretty extreme Afewknowthetruth. Why don't you go and live PNG?
My thought is that being a more stable and unchanging lifeform doesn't equate with being smarter or more conscious. By that logic cockroaches or crocodiles would be rated smarter or more conscious than humans. It is a trait of a simpler organism. Europeans have survived for just as long as Papua New Guineans it's just that they have changed their culture and genetic mix a bit more. All things living today are successful survivors on an equal level.
Most of us wouldn't swap our comfortable, horizon-expanded, civilized life for one of terrifying superstition where witches are still burnt alive and relative's brains eaten for dinner at funerals just so our culture can survive.
The modern world is extremely extreme, Zachary. It is characterised by its extremeness.
In your response you have avoided the whole point of the discussion. The 'success' of European industrial culture has been predicated on stripping the world of resources and transferring a large portion of them to Europe (and associated nations like NZ and the US) and using them at a rate which is unsustainable; it has also been predicated on polluting the world at a rate which is unsustainable, which already causing catastrophic effects, and if continued will cause extinction of the human species, along with numerous other species in much less than 50 years. It has nothing to do with the intelligence of cockroaches or crocodiles.
We now see that most people living in western industrial nations (and rapidly developing nations) would rather die prematurely in an unpleasant manner on an overpopulated, resource-depleted, overheated planet (or have that happen to their children) than reduce their outrageously high levels of energy and resource consumption. By the same token, governments would rather destroy nations and cause extinction of the human species than tell the truth about anything that matters..
Atmospheric CO2 continues to rise at an unprecedented rate, currently twice the 2005-2014 average, as must be the case when the completely insane globalised economic system based on burning fossil fuels continues to be operated. The so-called upper 'safe' limit of 450 ppm will be breached by 2030 (just 14 years from now), perhaps long before then.
The unprecedented escalation in house prices, particularly in Auckland, is due primarily to the following:
1. Record low developed world interest rates driven by Central Banks failed attempts to kick start the world economy. They are now heading towards deflation.
2. "Tulip-mania" - speculators believing prices can only ever go up.
3. Record immigration
4. Under supply
What we do know is that at some point the following will happen:
1. Interest rates will go up (liquidy crunch)
2. Inverse "Tulip-mania" - people will believe that prices can only ever fall (Hong Kong, Tokyo, London, USA are good past examples)
3. Net emigration
4. Over supply
In addition it's very likely there will simultaneously be a recession and banking crisis to throw into the mix. This mania is akin to the share mania of the late 80's. We know how that ended and almost 30 years later Mum & Dad investors are still fearful of the NZ sharemarket.
From recent commentary I believe both National and the RBNZ know this is a great big horrible bubble but are running scared for fear of being blamed if they pop it. Meanwhile the bubble gets bigger and nastier and ultimately it will be the "market" that will blow it for them. However we will have to live with the consequences for decades.
Dr Zachary Smith .....I would take a solidly built house in the USA, over some overpriced, crappily built, "leaky cardboard" piece of **** here in Auckland ......built by some smart a** arrogant builder, with overpriced materials, from the well known building supplies "cartel" ....financed by Aussie banks with the highest consumer interest rates in the OECD...and then hindered by the greedy Auckland Council and NIMBY's like you !! ......a true winning bonanza !!
Investors who fail to understand the difference between paper wealth and value are likely to learn that distinction the same way they did during the 2000-2002 and 2007-2009 collapses, both which we correctly anticipated, with a constructive shift in-between. So not to throw stones in our own glass house, see the “Box” in The Next Big Short for a narrative of the challenges we encountered in the speculative half-cycle since 2009, as the Federal Reserve intentionally encouraged yield-seeking speculation long after previously reliable warning signs appeared. This has created what is now the third financial bubble in 16 years, the third most offensive valuation extreme next to 2000 and 1929, and the single most extreme point of valuation in history for the median stock.
It's the interest, stupid.
http://www.globalresearch.ca/its-the-interest-stupid-why-bankers-rule-t…
I just received this in my inbox from the Labour party. The next election is going to be interesting. National is going to have a hard time convincing generation rent that their interests are represented.
................
That’s why I was proud to announce that Labour will:
Build 100,000 affordable homes across the country,
Ban foreign speculators from buying existing homes,
Introduce an Affordable Housing Authority, partnering with the private sector, to fast-track development in our cities,
Tax property speculators who flip houses within five years,
Help 5,100 more Kiwis into emergency housing every year,
Make Housing New Zealand build more state houses and maintain them properly, rather than paying dividends and selling stock,
Require all rental homes to be warm, dry and safe to live in,
Abolish the urban growth boundary and allow Auckland to grow up and o
I didn't vote nor have I ever voted National. IF ANY political party wants my vote then details are compulsory. I'm a progressive. We don't vote for anything but substance. If YOU and others want to AGAIN elect a party just making flawed promises then go right ahead.
without details how does the voter become informed to the point of demanding accountability?
I cannot believe I'm having to explain this to anyone on this forum. Don't be naive, don't be a mug as soon as someone starts just telling you what you want to hear. THEY must present a detail plan and case outlining they have done their homework and where and who is paying for what. I think that's a fair and reasonable demand from any voter
Surely the whole point about being a mainstream politician is to never announce any details or indeed have any; fudge, bloviate, obfuscate and make it up as you go along. Make promises you have no intention of keeping or which are physically impossible to keep. Generate stories about how bad things will be if your political opponents were to gain power; scaremongering often works well. Never apologise: always blame someone else or 'unforeseen circumstances' for your failures. Hope everyone has forgotten what you said a few weeks or months after you said it. If pressed, contradict your previous position and declare that you do not remember ever adopting that position.
The whole point about being a mainstream politician is that you orchestrate the looting and polluting of the nation, ensure that a good portion of the bounty ends up in your own bank account and your sponsor's bank accounts, and pretend that you are facilitating progress when in practice all you are doing is wrecking practically everything you touch.
The corporate-owned mainstream media play the politicians game, of course, by never asking questions about any of the fundament issues and by keeping the main focus restricted to peripheral issues with short-term popular appeal, such as when tax cuts might be implemented.
NZ has suffered 40 years of a combination of manipulation and utter nonsense emanating largely from parliament, and everything that matters is now in the worst state it has ever been in as a consequence.
Surely the big question is this: how much longer are ordinary folk going to be fooled?
He was talking about the extraordinary response to his suggestion that 150,000 houses be built in 6 years to push Auckland house prices down 40%.
Building homes does not crash a property boom.
It should bring rents down and there would be less people living in cars, but prices aren't likely to fall.
I normally really enjoy reading the follow up comments on this site (often as much as the articles itself!) however this particular article, or more importantly the comments, is showing that like a lot of social forums it is swinging away from intelligent constructive commenting and becoming a rant forum where people (or person) with their own agendas basically aims to disrupt and corrupt was is a great place for discussion on some extremely important issues (the first part of this comments page is a good example). What a shame as I believe there are some very smart people commenting here from whom I have learnt a lot from in recent times.
All the upset expressed above has a cause that is not easily recognizable.
For many decades, even back in the 1950s and 1960s the average person has never been able to advance their lifestyles through wages alone and needed an alternative. That alternative was the family home.
Some made the most of this advantage by acquiring multiple homes.
In the past people had two choices. They could use their wages for a comfortable lifestyle or they could buy a family home.
Those that chose to buy a home had to make sacrifices in their standard of living for the first few years.
But after a short tightening period, inflation took over and raised wages and house values, thus lifting these people (artificially) into a higher socioeconomic class,
But this was how, and the only way, for most people to get ahead.
Today the means to get ahead have been taken away from ever increasing numbers of people making them frustrated and angry. because without this there is no hope of a future.
It is time that we all appreciated this fact and give our full support to those who are now being left behind.
By the way the people of the 50s and 60s were just as stupid as the people are today.
They would vote for National who would make them poorer. Then they would vote for Labour who would make them richer which turned them into National supporters and so the merry wheel went round and round and round.
Today both Labour and National make you poorer.
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