By Bernard Hickey
If everything goes according to the Unitary and Governmental plans, Auckland is about to embark on an apartment building spree like it has never seen.
The Unitary Plan eased the rules so a lot more apartment buildings can be built on a lot more land in and around the Auckland CBD. Assuming no major legal hiccups, the Unitary Plan will go live this weekend, in theory unleashing a wave of apartment and town-house development.
Even Prime Minister John Key is encouraging first home buyers and others to buy apartments, given they are relatively less expensive than stand-alone homes in Auckland -- at least on the face of it.
There are plenty of nerves around though. Investors have always been wary of apartments, given the legacy of leaky buildings, body corporate problems and surprisingly big bills for maintenance and insurance that get tacked on to body corporate fees.
The surge in demand from investors in recent years for 'sausage flats' on sections, or for simple houses on big sections reflects that lack of confidence in apartments and townhouses in larger complexes. Investors can see the real money to be made is in the appreciation of land prices. They have quintupled in Auckland since 1996. The problem with apartments for investors, and increasingly for owner-occupiers, is that there is not enough land built into the price to get the necessary appreciation to create the necessary tax-free capital gains. The problems with lease-hold land have also repeatedly undermined confidence in apartments.
The Government passed the Unit Titles Act in 2010 with the aim of making it simpler and cleaner for apartment buyers, but there are concerns the way it is being operated could restrict the demand for apartments and potentially alienate a whole new generation of buyers -- including those taking up the suggestions of the Prime Minister.
Before the passing of the Unitary Plan, a group of experts on the laws around apartments and how body corporates operate proposed a range of legislative and other changes to improve confidence in the sector in the long run, and Building and Housing Minister Nick Smith has said this month he is seriously considering tweaking the regime for apartments. He acknowledged the Government had not focused enough on a complex area.
The Unit Titles Working Group, which includes the Auckland District Law Society, the Home Owners and Buyers Association (HOBANZ), Crockers and the Real Estate Institute of New Zealand, proposed changes to Smith in May that would include much clearer disclosure for buyers, tougher regulation of body corporate managers and a new Ombudsman scheme for dealing with disputes.
HOBANZ Chief Executive Roger Levie says many apartment buyers only get a limited amount of information about how the buildings are being managed before they sign on the dotted line. Often they don't have a clear idea of the body corporate's repair and maintenance plans or its finances. Many body corporates under-spend or under-plan for repairs and maintenance in an effort to keep fees low and attract buyers and investors, but that can mean buildings can need expensive repairs at a later date.
"It's only once you're in a contract than you can then start to get some of the additional information, and often that's too late," Levie says.
"The long term maintenance planning regime that was introduced under the old act is really not being followed by the body corporates because they don't want to spend the money to get the right sorts of building consultants involved to assess their building, and they don't want to face up to the significant costs they have building up for proper maintenance," he says.
Levie is proposing the full maintenance plans and body corporate details are available to buyers before they sign contracts.
"When they make their purchase and then find two years later they're up for a couple of hundred thousand dollars to contribute to a re-clad of a building, there's going to be litigation flying and we're already starting to see it," he says.
"We've seen the fallout across the leaky and defective properties and it's ruining peoples' lives."
The Working Group also suggested Smith look at adopting a Queensland-style system where an Ombudsman adjudicates on disputes, rather than the current system where complainants are eventually forced to go the District or High Courts. For stretched first home buyers, a court action can be intimidating and prohibitively expensive.
Apartments can be part of the solution to Auckland's housing supply crisis and can be a foot on the ladder for a generation locked out of a traditional house on a section, but the Government will have to heed the warnings and take up the proposals for better regulation to reinforce and build confidence in these homes for decades to come. A failure risks adding insult to injury for an already struggling cohort of home buyers.
A version of this article also appears in the Herald on Sunday. It is here with permission.
73 Comments
This video is great.... good to remind ourselves that if prices continue to rise (which they look like With Key in control) then inequality will increase and the gap between rich and poor will only grow
http://www.ted.com/talks/richard_wilkinson?language=en
Per ted:
We feel instinctively that societies with huge income gaps are somehow going wrong. Richard Wilkinson charts the hard data on economic inequality, and shows what gets worse when rich and poor are too far apart: real effects on health, lifespan, even such basic values as trust.
Thanks Joe Public I have long believed that excessive house price inflation is a driver of inequality and I told the cross-party Homeless Inquiry this. https://medium.com/@brendon_harre/homelessness-inquiry-my-verbal-submis…
PocketAces you would think this is a no-brainer but it is not.
The National party (John Key, Nick Smith...) argue that protecting existing property wealth -i.e. the $1/2 million capital gain the average Auckland house owner has made from this governments administration is more important than implementing the needed range of policies to reduce housing demand and increase supply responsiveness to allow housing to be affordably provided.
Everyone else knows a comprehensive range of policies would return sanity to the property market and provide more equality of opportunity to a greater number of kiwis. But still the Nats deny the obvious......
Brendon you are correct that everyone knows but who cares specially not Chon Kee.
When Chon Kee friends had concern he was co tensed ed and concerned that immediately came out with open letter to address their concern. How proactive he was.
Today also many kiwi feels that he is inactive in dealing wiyh housing crisis but reality is thag he is active in promoting and proctecting spevulators - it is a matter of perception and whom do you feel for speculators or FHB.
Chon Kee is totaly wrong this time as the voting percentage will be high (more middle and lower middle class) will vote for a change and can bet on it irrespective of the survey result. This type of survey are welcome to give false confidence to Chon Kee.
If you are looking at some videos to watch on housing inequality and some solutions here are three.
Sara Maxana is a YIMBY mum and expert on urban planning in Seattle https://www.youtube.com/watch?v=TmHNqdPdxn0
David Parker lays out the rationale for opposition parties -LAbour + Greens -commitment to remove restrictions on housing development. http://www.inthehouse.co.nz/video/45201
David Parker refers to Making Room -this is a concept that the NYU =Stern institute promote -they put out a short 5 minute video. https://www.youtube.com/watch?v=wQkuoPFq3PM
Labour & Greens are standing still and unless they wake up will lose the next election
The solution is easy. If they want to win they need to target foreign buyers & investors..
1. Vancouver Tax on Investors & foreign buyers buying existing homes
2. Classify Foreign buyers correctly so include foreign students & Temp Workers (like Aus & CAD)
3. Announce that any TAX will be directed towards building affordable homes.
4. Ensure Loan to income ratio's are brought in (4 to 1)
Not sure what they are waiting for.... doing nothing will keep them on the sidelines again.,,, its time for some action. The NZ public is screaming for this....
Yes agreed, all the opposition Parties need to do is look at the evidence of what's been happening to the global housing market and what's been hugely influencing and driving prices up.
Vancouver is a shining example of that. Even the Chinese media has admitted to driving up house prices.
Here's a very interesting recent news article on the subject: Chinese Media Warns Canada's Housing Crash Will Put U.S. To Shame
From the Huffington Post: http://www.huffingtonpost.ca/stephen-punwasi/canadian-housing-crash_b_1…
Quote from article: Shots fired! While our media has been pointing out how Chinese buyers are driving up real estate prices, the Chinese media has been dissecting our economy and government, and warning Chinese buyers of the dangers of owning Canadian real estate.
While the Chinese media does acknowledge that Chinese buyers are a contributing factor to our prices -- and admit they have been capitalizing on it -- they also point out some interesting observations that our media has failed to cover. Here are the most interesting points we found from three major Chinese publications. (See rest of article).
Labour's policy on foreign buyers which dates back to before the last election is the same as Australia's -that foreign buyers cannot buy existing homes -foreigners can only buy/build new homes -i.e they must add to housing supply.
National in its TPPA negotiations deliberately put the country at risk by playing petty party politics because they did not ask for this opt out in negotiations -which would have been simple to obtain as Australia and others had already established the precedent that this opt-out is ok.
Labour remain committed to the ban on foreigners buying property policy and will inform TPPA partners of this decision if elected. NB -the TPPA is not operational and may never be given the state of US politics.
Problem is Brendon you won't get elected as you are not taking any risks and playing it safe just like the last 3 elections....you are playing into Key's hands.....
You need to do the following
1. Firstly, classify foreign buyers correctly.
Foreign Buyers = Offshore + Foreign Students + Temp Workers
This is consistent with Australia and Canada
2. Secondly, apply a VANCOUVER TAX on foreign buyers 15% when buying existing properties.
3. Third, state the revenues from this tax will go to affordable housing.
Apply the wide definition of Foreign Purchaser that Australia has done to include Trusts and companies with foreign beneficiaries. See below. They have done the homework for you.
My worry is that you are going into this election with the same failed policies that didn't get you elected last time. FORTUNE FAVOURS THE BOLD. People have had enough you just need to start listening more.
http://www.sro.vic.gov.au/foreignpurchaser
Foreign purchasers
You will be a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.
Foreign natural persons
You are a foreign purchaser if you are not:
A citizen or permanent resident of Australia,
Or a New Zealand citizen with a Special Category Visa (Subclass 444)
Foreign corporations
A foreign corporation includes:
Corporations incorporated outside Australia, and
Corporations incorporated in Australia if a foreign natural person, another foreign corporation or trustee of a foreign trust has a controlling interest in those corporations
Foreign trusts
A foreign trust is a trust where a foreign natural person, foreign corporation or in the trustee of another foreign trust, has a substantial interest in the trust estate of that trust.
Joe Public, PocketAces and CJ099 I am definitely in agreement that the opposition party's need to be bolder regarding their housing policies. Tentatively they are moving in that direction -but you are right they need to confidently and boldly set out their agenda to fix housing affordability.
Thing is they just need to get enough to National out..... labour doesn't need to win on its own just needs to take 10% off National and form a coalition government. Very possible if they are bold.
A vancouver tax is a policy that many kiwis would vote for ..its an election winning stake in the ground that says enoughs enough lets put kiwis ahead of foreign buyers.but the key is ensuring foreign buer is defined correctly as the media have it wrong in NZ currently to understate the issue.
Joe Public you might like this article by Australian economist Leith Van Onselen -"NZ PM goes into bat for foreign housing speculators". http://www.macrobusiness.com.au/2016/09/nz-pm-goes-bat-foreign-housing-…
Where Leith says, "The sad truth is that New Zealand’s authorities, like Australia’s, are no longer managing an economy, but rather a property bubble."
But as I told Iconoclast over on Deborah Russell's article, it is not one policy area that is being manipulated to support this property ponzi. http://www.interest.co.nz/opinion/83637/deborah-russell-says-all-its-te…
Iconoclast -it is the whole bloody lot -taxation, immigration, foreign investment, planning, infrastructure provision, competition policy -the blind eye turned to the duopoly in construction materials, kiwi-saver withdrawal rules for housing deposits ...... it is all a rort that benefits a few wealthy property owners plus their cronies and buggers it up for everyone else.
As I and others have said - these property ponzi policies cause inequality and rising social tensions. Eventually the day of reckoning will come......
Brendon you are wrong to call it a housing bubble. It is first and foremost a credit bubble. Housing is a symptom, not the cause. Or you could call it a method. You can't solve a credit problem with government policy, unless the government steps in to control monetary policy.
No it is a housing bubble -the problem is due to market and regulatory distortions. There is excessive demand and supply is inadequately responsive wrt providing new affordable homes. If the problem was excessive credit -why do not other assets escalate in price -like say the price of cars?
And why is there some cities within a common credit zone (US currency area for example) like San Francisco that are massively escalating in housing asset prices but there is others like Nashville or Houston that are not?
I think you're both right really and make good points . A housing credit bubble lets say. But as Brenden points out most of it is due to poor government action, regulation, immigration, and local slanted tax law incentives. Credit is the precursor feeding most of the speculation alright, but a great deal also appears to be foreign investors looking for a safe cash haven in the form of assets like homes and property globally, and Nz has that door wide open for anyone to come in and snap up.
Stats I have already posted on these forums. GDP is growing at 3% while M3 money is growing at 7%. In the last 10 years M3 has grown from 8% more than GDP to 43% more. That is excess credit driven by several factors, one of them the structural foundation of the money supply. The bit you are missing is that it is money seeking a yield in any financial asset it can. Housing demands a yield, so falls into line with other financial assets. You simply can not separate housing out from ALL financial assets. So to quote Houston or Nashville shows an inadequate explanation of the money flows.
Credit can flow into the quantity of assets, as well is the price. DC put something up in the past few weeks about new vehicle sales being very strong.
I know you have done a lot of work on housing Brendon, and do admire the effort you put in so don't take it as a personal criticism. Look instead for the deeper meaning to what i say as the work I have done on the supply and demand of money, it has predictive value. Something else I have been saying on here for some years is that interest rates must, and will, decline over time. It it built into the money supply. I can also promise you that yields on financial assets conform to the same rules. Yields will go down, and prices will go up (in economics accepted that interest rates move in an inverse relationship to money). If you increase the supply of housing, the credit fueled total price of housing still increases at the same ovearall rate. You MAY prove this point by looking at statistics for the total price of Nashville and Houston Housing, although I would have to think about that.
Declining interest rates are a more than 30 year trend that transcends the recent housing crisis.
Houston.
Remember Hugh Pavletich and Phil Best going on and on about Houston as a how-to template for Auckland
Now I smile whenever Houston is held up as a shining light
Currently reading a book written in 1992. The main character travels from Boston in the north down to Houston on business and describes it thus
I left the freeway once I got in the general area of a few skyscrapers that stuck out of the urban sprawl. Since the elevated highway had been running for 10 miles through neighbourhoods of mostly 2 or 3 story buildings I figured the high-rises must signify some sort of downtown
I wandered around at random for an hour, sometimes trying to find myself on my map of Houston, not worrying too much if I couldnt. The city was kind of interesting. Three million people (1992) had spread themselves out over a flat pancake of land 20 miles wide. The invisible hand of the real-estate market had sprinkled bowling alleys, hospitals. pawn-shops, million dollar homes (1992), car-washes, schools, skyscrapers, parking lots, churches over the whole of the pancake pretty much at random.
I drove through a couple of blocks of low (single-level) fancy houses shaded by live oaks, immediately into a commercial strip with cell-phone stores, gyms, an animal hospital, palm-readers and a muffler shop. Then more expensive homes, with here and there a taxidermists or a maternity shop.
The city was laid out like a pizza with everything
This was because Houston, unlike most cities, never had any zonng laws. Most cities are planned. Like Boston where you cant just go and build whatever you want to, anyplace you feel like building it. In Boston you have to pay off first. That's the plan
Remember this was 1992. It cant possibly be any better now
Phil Best and Hugh Pavletch never told the Houston intensification story between the 1999 planning reforms and the current day. It is quite good -certainly not perfect -but something for Auckland to consider.
There is a nice description of Houston -that is a more recent than 1992 on Transportblog today. It includes nice gif's -before and after pics http://transportblog.co.nz/2016/09/18/sunday-reading-18-september-2016/
Scarfie -I can concede that historically low interest rates must be a demand factor pushing up house prices but I believe it is just one factor in many. In my opinion it is not the only or dominant factor.
But for your credit fuel asset price theory you should consider why Japan has stable house prices yet has had low interest rates for the longest of any developed country. Hint -declining pop doesn't explain it -because Tokyo is still growing yet its house price growth has been nothing compared to the likes of London and San Francisco. https://techforhousing.org/how-tokyo-built-its-way-to-affordability-e62…
Gee Brendon, did you look at Japan credit growth before you made that comment. https://data.oecd.org/money/broad-money-m3.htm
Note the parabolic nature of the chart, take the time frame right out and highlight the countries you want.
Japan just came off the boil a bit earlier than other western countries, but it is still in a bubble. Ask yourself where the credit has gone if not into housing (at least some of it has) and when you do you will find a credit bubble there.
Or I could ask another question of you, why does supply of housing matter but supply of the means to buy it not?
And so you are dismissing what Brendon, Hugh P and Phil H have said based on this book you are reading, a book that makes its sole judgement based on the authors observation as he drove into Houston?
Are you not in the least bit interested to know how a jurisdiction with high immigration growth, very low interest rates, has a medium multiple to income of 3x, no non value speculator growth, but a higher yield (for real investors)?
Opposition parties spent two days debating housing policies in Parliament the week before last, when through procedural incompetence the government lost control of the house. MSM gave it virtually no coverage. Check out the following videos
Phil Twyford (Labour) on the importance of removing restrictions on new housing supply http://www.inthehouse.co.nz/video/45199
Julie Anne Genter (Greens) agreeing with this as long as restrictions on intensification are also removed and global warming pollutants are taken into account http://www.inthehouse.co.nz/video/45200
David Parker (Labour) explaining how the Making Room concept over time will save millios to billions of dollars of infrastructure costs for the taxpayer -http://www.inthehouse.co.nz/video/45207
Ian Lees Galloway (Labour) explaining how the government is doing sweet bugger all on housing affordability -including by not agreeing with opposition party proposals on restricting foreign buyers. http://www.inthehouse.co.nz/video/45234
Not sure what they are waiting for.... doing nothing will keep them on the sidelines again.,,, its time for some action. The NZ public is screaming for this....
Are they? Because for the last 70 or 80 years they appear to have pretty consistently voted for policies that double their property values once every decade or so. Democracy's a bitch.
I was thinking the same thing. Why would you buy one of these?
Capital gains are tied to land value which is an insignificant proportion of value with an apartment - probably equal to the demolition cost of the building. All buildings are ultimately worthless and looking at some of this crap I would suggest that the 50 year lifespan requirement will be about it - maybe less.
There also a question mark over liquidity if you needed to move in a down market or when the place is taken over by crack heads and prostitutes later in it's lifespan. Our Asian immigrants love these sorts of places as that is what they are used to, I don't think many Kiwis would be so keen though, long term anyway.
Correct apartment will only give more ammuniation to John Key friends to speculste.
In the name of FHB buyer is helping his friends and masters.
Good apartments too will be expensive unless one is ready to move in pigeon hole in the name of house.
Voted for John Key. Now no choice but many Aucklanders will have to leave Auckland to make way for his friends. Proof is him and his gang telling kiwi to move out of Auckland. Wonder why has he not said to his overseas friends.
Is it not a fact.Cananyone deny it
World over as house price goes up, one will see more luxary houses or apartments being built as more viable unless government intervens and make good quality houses at affordable price.
Number of houses being built is important but not at the cost of size and quality in the name of affordability.
Remember inequality gives rise to social tension and will be harmful in the long run to ecenomy as well - which will happen sooner than later.
By next year same time is my bet and will be just below the election which government too is worried behind closed doors unless John Key announces the election earlier.
Yes fair point nzakl, though you can start to understand what motivates a lot of overseas investors to buy up in more popular cities such as Auckland, Sydney, Melbourne, London and Vancouver. And why virtually all of these cities popular with foreign buyers have introduced property taxes to reduce demand, except for us of course here in little NZ.
When you look at main property investor driving forces from areas such as Hong Kong where property prices are around 19 times income multiples (Though this may have increased), places like Auckland look to be relatively cheap by comparison to foreign investors.
To give you an idea of the high cost of property in Hong Kong you may want to look at this article: HK$5 million Kai Tak flat deals a blow to Hong Kong government’s affordable housing plan
http://www.scmp.com/property/hong-kong-china/article/2008929/hong-kong-…
So it's not surprising that Kiwi citizens and even local investors are being pushed out by soaring property prices.
And yes this is leading to social tensions, not just due to citizens being locked out of their own housing market but it's also killing businesses too (And I can directly relate to this) we simply can't attract the highly skilled quality staff that we need, no matter how competitive the salary offered, as they take one look and Auckland's rents and house prices and say no thanks.
So thanks Mr Key; you're really killing this wonderful country with your do nothing approach. Even China has tried to help its own people to obtain affordable housing.
Not sure what that Interest.co.nz article was on about the other day in regards to Vancouver. Somehow they were trying to convince us that the Vancouver Tax meant that house prices were rising faster now than they would of without the tax and that the tax was making it harder for citizens that were FHBs.
.... honestly ....like the readers are a bunch of idiots with no basic economic knowledge. When does introducing 15% tax ever increase the demand/price that people will be willing to pay for something ?
The real story is below. The beauty of this is that they will tell us Vancouver is different blah blah blah however we all know it isn't and that their solution would work perfectly fine in Auckland as it has done in Singapore.
http://www.huffingtonpost.ca/2016/09/15/vancouver-average-home-price-ba…
Vancouver Average Home Price Dropped More Than Banks Expected It To
Vancouver's housing market is exceeding expectations — in a bad way.
The city's average home price fell by 18.1 per cent month-over-month, beyond what TD thought it would be, said a note by economist Diana Petramala.
"The average home price correction in Vancouver has already exceeded our expectations for a 10 per cent peak-to-trough correction, falling particularly sharply in August," she said.
Great Article also CJ thanks :
http://www.huffingtonpost.ca/stephen-punwasi/canadian-housing-crash_b_1…
"Hexun was a little more blunt, stating the Government of Canada "must introduce policies to cool the property market, or face collapse," further adding that "this crisis threatens the stability of [the Canadian] financial system."
John Key is killing this wonderful country.
Justice it is a sign of frustration -because for selfish reasons Big Daddy doesn't like the way the housing debate is going -with more and more people worried by the inequality of it all and less and less people worried about protecting (his) property wealth. Despite trying many times in the past Big Daddy cannot find himself a publicly acceptable argument. So all he has left is snide and sarcastic remarks.
Maybe, but Brendon you see this kind of thing so often now. Where people just have to find the most lame a$$ way to have a go at someone. It demonstrates such insecurity, vindictiveness and just a total lack of perspective. For people to spend energy in such fashion is beyond me. There are even websites now dedicated to such nonsense. Example. Fairfax's "Neighbourly" site via Stuff.co.nz. Along with the obvious likes of FB etc
In some apartments in Wellington, body corp fees went up by huge amounts due to earthquake premiums. It went up so much that you could never recover the costs by renting it out and I imagine it would have made selling difficult too. When I owned a townhouse, we had a body corporate, but it was run by one of the town house owners, so there cost was only a few hundred a year. That went into an account to pay for driveway replacement and tree maintenance. Never any problems in over 20 years. These days though it seems body corps should be run by a professional company who will add on their own fees, making it a lot more costly. I recently looked at a town house and the body corporate fees were about 15k a year, with rates on top of that. This was for a house you 'own', and those cost didn't make it much cheaper than renting. It seems come complexes can get around it by setting up Incorporated societies to run it.Does seem that there are a lot of people who want to clip the ticket to take their own cut.
The other thing to look out for is leasehold vs freehold. I suspect more and more apartments will be sold as leasehold, so the developer can continue to make money off the land in the future. In a way I think leasehold should be banned.
I lived in a block of apartments in Sydney in the 80's.....never again. A block of 12 apartments mainly inhabited by a group of grumpy old ladies has put me off for life. All you need on the body corporate is one grumpy old obstinate prick and your life will be a misery. I imagine not a lot has changed, except guess who is the grumpy one now !!!
Agree, make my day. Apartment living has issues. I owned a nice apartment in an art d'eco building in Elizabeth Bay in Sydney. Had its own inground swimming pool (= high water charges) and a concierge ( = higher body corp fees). Never again. Massive cockroach infestation due to tenants in one unit in the building leaving decaying food behind when they did a runner. Dodgy people always slipping past the decent bloke-but-gormless concierge, and they were always loitering in the hallways on the higher levels; drug deals being done there and around the pool; occasionally coming across lowlife in the actual lift. Fractious body corp meetings, essential maintenance like rewiring constantly deferred; and a property management who got their own useless tradies in at extortionate rates.
Sorry KH for not addressing the topic. My bad.
I lived in an apartment in Finland. We had elections which appointed the board which ran the equivalent of a Body Corp -they then hired professional property maintenance firms to do the various tasks -this was standard practice. It all went quite smoothly.
The way apartments were advertised the past and future maintenance schedule was included. Body corp fees were also always stated, which was further broken down to component parts -heating, water etc.
Buyers very much assessed the quality of the body corp as much as the apartment itself when making a purchase decision.
I think all this information was mandatory -also previous owners could be held liable if there was poor workmanship/repairs resulting in say -mold.
All this blather about Bodies Corporate would be much alleviated if the Bodies Corporate could vet any buyer of an apartment before and then could deny or approve the purchase. This not much different from any landlord who can deny or permit a new tenant to take residence within certain rules. This way would prevent the lower orders ( in behavioral terms) from spoiling it for the good upright owners and make apartment living that more pleasant and civilised.
Vetting including credit history and other background checks are standard practice in places like New York (where I'm located) to protect the other owners from defaults in common charges.
http://www.nytimes.com/2011/07/17/realestate/condos-demand-more-paperwo…
Put on your seatbelts folks
http://www.telegraph.co.uk/business/2016/09/18/bis-flashes-red-alert-fo…
China has failed to curb excesses in its credit system and faces mounting risks of a full-blown banking crisis, according to early warning indicators released by the world’s top financial watchdog.
A key gauge of credit vulnerability is now three times over the danger threshold and has continued to deteriorate, despite pledges by Chinese premier Li Keqiang to wean the economy off debt-driven growth before it is too late.
The Bank for International Settlements warned in its quarterly report that China’s "credit to GDP gap" has reached 30.1, the highest to date and in a different league altogether from any other major country tracked by the institution. It is also significantly higher than the scores in East Asia's speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.
250billion household debt in NZ thank you MR KEY
All those suggesting that if Labour and the Greens would only get their act together on housing policy and they would then be elected to solve the crisis, are living in a fantasy world. There are a handful of easy, obvious policies which would solve the crisis in short order, and these policies have been well canvassed in the comments so I won't repeat. However, there is absolutely no way any party with policies to solve the crisis will ever be elected - to solve the crisis would put a stop to increasing house prices, and even trigger a fall. Sadly, NZ voters are too self-interested - a majority of households own their own home and want to see rising house prices for ever. And this group vote. People who feel the worst affects of the crisis tend to be the young, and the poor. And these groups don't vote. House prices are going to keep going up - interest rates are going to remain low for decades, and people can continue to service the interest costs on huge mortgages. Affordability in this sense is still very reasonable. The principal may never be repaid, or else there will be 50/60+ year mortgages passed down generations. Already, 40 something first time buyers are taking 30 year mortgages when their prospects of working that long are negligible.
All in all, a very depressing picture. You might as well join the party and buy your first home if you've been sitting on the sidelines waiting for a correction. A correction is not going to come.
The thing is compared to a house with it's own land, apartments are nowhere near as good an investment. Huge potential costs in the future when it all needs upgrading or even rebuilding. You also need to get everyone to agree, and have additional body corporate fees. Houses have so many more advantages, and obviously this is one reason house prices have been increasing so much in Auckland. There is definitely a big move of NZers from Auckland, cashing up and moving further south. Many are now millionaires +, so houses out of Auckland look cheap as. That is one reason house prices are now going up in areas further south.
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