We are sleepwalking our way towards the next housing crisis.
I’m not sure when it’s going to be and I’m not making predictions – other than that, as sure as night follows day, there will be another crisis.
Look, it might seem to be odd to be talking like this at a time when house prices have actually been falling, and housing shortages are diminishing.
But that's the whole point.
We don’t learn lessons. We don't anticipate the consequences of actions. We repeat mistakes. And we are doing it now. Even as we strive to recover from the last crisis, we are setting ourselves up for the next one.
Here’s a quick quiz: When was this comment made by a New Zealand government minister?
"…we can’t afford to simply turn on the tap to the previous immigration settings. That path is a continuation of pressures on our infrastructure, like transport, accommodation, and downward pressure on wages."
That was said less than two years ago. The now gone Economic and Regional Development Minister Stuart Nash said that in May 2021 in a speech delivered on behalf of the now gone Immigration Minister Kris Faafoi.
Well, it was little more than a year later that Labour turned the tap back on. And now that tap's hosing away merrily.
Ministry of Business Innovation and Employment (MBIE) figures showed that a March month record of over 20,000 people arrived in NZ last month on work visas. Off we go again...
A recent Reserve Bank discussion paper highlighted that between 2000 and 2020 our population increased by 1,225,000 people, or by 1.4% per year. That's TWICE the average rate in the OECD.
I’ve said this before, but it is worth repeating. I’m not against inbound migration. I’m an immigrant.
I’m against ‘accidental’ migration, which I see as being when a country pumps in migrants through some short-term expediency, such as filling job vacancies - not necessarily for even particularly skilled jobs. And the impact of all this is heightened and worsened if the country has no long term strategy, or indeed even the vaguest clue, how to deal with the consequences of such an inflow. This has been New Zealand in a nutshell.
Nash spelled it all out in that May 2021 speech. "That path is a continuation of pressures on our infrastructure, like transport, accommodation, and downward pressure on wages."
And that folks, is the path we are back on again.
Now, okay, there may be an argument that what we are currently seeing is a 'blip' caused by the fact that obviously our borders have been shut and also we do have a labour market that's tighter than a tight thing.
But I do recall constant refrains through much of the 2000s so far that high inbound migration numbers was a trend that would abate. Well, it didn't. Not till we shut the borders.
Personally I'm very doubtful what we are seeing now will be a short term blip, not if we leave this to 'market forces'. Without some sense that someone's going to properly control the numbers there's no reason to believe things will be any different to before. And remember, the National Party's already indicating there will be much more of the same if it governs after the October election.
Just this week National's promised to double the cap for seasonal workers in the RSE scheme (to 38,000 a year).
The pandemic period actually gave this country some breathing space to rethink the whole question of population, housing, infrastructure etc. And the time has been wasted. Our politicians are stuck in a rut, bereft of ideas.
The country is just emerging from a long period of under supply of housing. Stats NZ figures show that nearly 50,000 new dwellings were consented in the 2022 calendar year.
But now with the housing market itself in the doldrums, there's widespread expectation of significant contraction in the building industry.
Boom and bust cycles are all too familiar in our construction industry. In 2004 Stats NZ figures show that over 30,000 dwellings were consented nationwide. Five years later that number had more than halved. By 2011 we were looking at just over 13,5000 dwellings consented for the whole country.
The subsequent rise to nearly 50,000 consents as of last year was slow and at times pretty painful. Once our building industry contracts it takes a long time to get it cranked up again.
The point of this is that we are now getting ready to pour vast numbers of new people that will need housing into an environment in which new building activity is likely heading for a very significant decline. Cue another housing shortage down the track.
At this point in an opinion article, I generally start trying to look at some potential solutions to the issues/problems I've just been raising. Try to end on a positive note.
There's a big problem with trying to do that with this subject though.
I just don't think our current crop of politicians 'get it' on any level.
Why else are they embodying the definition of insanity - by doing the same thing over and over and expecting different results.
And I don't see when and how things might change.
It seems blindingly obvious to me that once interest rates move lower, and we have more migrants seeking houses, and fewer houses are being built, then so our house prices will start heading for the moon again.
And yet here we all are madly galloping down the same path that helped lead us to such a situation previously.
Why are our politicians all running headlong to make the same mistakes, and saddle the country with the same consequences, again?
Is it the shortness of our three-year electoral cycle? Look I'm not sure that could be the whole answer. But for whatever reason there's this short term focus on expediency. There's no boldness. No long term vision. There's no genuine attempt to try to work out what sort of country we want this to be - and how we can do that.
Clearly there's huge issues in this country that could and should be addressed as part of a long term strategy.
• Population - what's the right size? Establish that and then have policies to suit.
• Infrastructure - what are the future needs? (Heavily dependent on population outcomes). How do we meet the future needs?
• Housing - how do we avoid boom and bust cycles? How do we monitor on an ongoing basis the need for provision of new housing?
• Labour market - how do we fit the skills and experience of New Zealanders to available jobs and ensure the right training so that even relatively unskilled areas of work are not left struggling to find people. How might increased mechanisation help our industries?
• Migration - don't just do this as a short-term salve for labour market woes. Decide what we want from a migration policy. HAVE A PLAN.
• Climate change - are we ready? Doesn't seem like it after the events of January/February, does it?
And I'm sure I could probably think of loads more things, but really I don't see much point listing more at the moment. You get the idea. As far as I can see, none of the six things I've just mentioned above are going to be 'properly' examined by a New Zealand Government in the foreseeable future.
Until we have a future-focussed Government then we will keep doing all the same things we've done in the recent past.
Including having housing crises.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
182 Comments
GRA invited him to speak to investors - Twitford started by referring to all investors at the large gathering as "speculators" then when Matt G asked who in the crowd has sold in the last 10 years hardly anyone put their hand up. (90+ plus buy and hold and provide much needed, actually essential accommodation to NZ'ers)
He was exposed to a degree I've really seen as a politician (and their have some horrifically out of touch under qualified poli's out there).
He failed to know the industry, he spoke to the industry as if he actually knew better - and kiwibuild will go down as the worse public policies in NZ history.
Luxon makes it a key part of national to get into the industies their portfolios are in and LISTEN, LISTEN, LISTEN (for some weird reason the "popular" voters haven't taken to him, maybe not "cool enough" - he'd be second maybe to John key as the most capable leader NZ has ever had the privilege of having; putting their hand up for the job when they could earn 10x more with half the stress in their prior respective fields).
Understanding of the problem is 90% of the job.
Labour thought they knew everything already based on idealistic philosophy alone - they didn't do hardly any of the 90% of the understanding of the problem - so all their solutions failed very very badly often doing the opposite as they had their understanding of reality so far wrong. NZ now has never been so badly placed on multiple metrics (crime, health, education, poverty).
"Seek first to understand, then to be understood" - Stephen Covey (7 habits of highly effective people people) - a book zero Labour/Greens would have even heard or read as they pump their brains for of all the popular woke lefty non-sense in the hope of being as popular and cool as possible.
While hugely underwhelming I don't think Kiwibuild is anywhere near the worst public policies in NZ. Mainly because it mostly never happened (over promised, under delivered). Worse are public policies that actually happened and had a detrimental effect on NZ e.g. are open slather immigration.
Where Kiwibuild is occurring (slowly) it is actually quite good. As someone in the construction industry I am also impressed with how the development capability of Kainga Ora has ramped up. They are probably now in a position where if the Kiwibuild policy was unveiled at this election it might have a chance of occurring.
While ineffectual in building houses kiwibuild did successfully change the narrative to "everyone should own a house". This created demand from people who were happy renting but suddenly got the impression they needed to own a house to be considered successful. The subsequent lack of supply from kiwibuild to fulfill these ambitions laid the foundations for the bubble.
I've seen Kianga Ora accused of being anticompetitive. It's not hard for an organisation to look good if they have advantages over ordinary market players.
nah hes right, in times of hardship some people hoard gib board to on sell at massive profit, people hoard concert tickets to exploit their scarcity, and people even hoard houses when lots of people dont even have one...like the guy in the bakery who sees theres only 4 pies left and 4 people in the queue so he buys them all and then waits outside to sell them back at a profit..no wonder hes getting a hiding...he should go and live in a country where being an a..hole is ok...like russia
Why do we end up with idiots in government?
1. You dont need a qualification in anything to qualify as a politician. Dumb people with agendas sèem to be the only qualification... and theyre every where.
2. MMP allows "unvoted for" morons to be in government via the list.
3, most dumb kiwis vote on personality rather than policies
4. Very low accountabilty for their ability to do the job and to make them liable for the disasters they infliçt.
The biggest problem is:
5: Instead of being mere administrators, the public now relegates the role of Sky Daddy to government, expecting it to fix or resolve any and all issues in society.
People think they can just rock up to their 9 to 5 and that's the total sum of effort they need to put into their community, and someone else will take care of the rest.
This is why National cannot switch the incentive back to NZers trading existing stock between each other for tax free gains. The rent/mortgage tax exemption in place for new builds only needs to stay in place, and not reversed by National. If they do reverse it (to win votes), RBNZ better have the DTIs for investors locked and loaded.
People think they can just rock up to their 9 to 5 and that's the total sum of effort they need to put into their community, and someone else will take care of the rest.
100% correct. My mother once said that "education is the greatest asset you'll ever own". This can be seen so easily when talking to average joes about who they intend to vote for and why. Barely anyone seems to be able to have a logical reason apart from personality or what suits them best at the time.
If everyone was more involve in their communities and in politics we would see a shift towards the better for sure.
Very low accountability (Pike River, Leaky Homes) and about to be halved by introducing co-governance - if the accepted interpretation of the treaty says 50% of governing must be by Māori leaders, then make it alternate time periods - say a decade of descendants of Queen Victoria's empire following a decade of Māori. The all-Blacks do not have co-governance on the field not even the Irish Rugby has tried that. Clear responsibility and accountability is essential.
@shaft - Post of the year so far.
Why do we end up with idiots in government?
1. You dont need a qualification in anything to qualify as a politician. Dumb people with agendas sèem to be the only qualification... and theyre every where.
2. MMP allows "unvoted for" morons to be in government via the list.
3, most dumb kiwis vote on personality rather than policies
4. Very low accountabilty for their ability to do the job and to make them liable for the disasters they infliçt.
I expect a perfectly competent person could get into government and pretty quickly look like an idiot due to the public servants that they get lumped with.
National will have a hard time turning the boat around especially given the willingness of many government employees to speak out against them publicly. I imagine the sentiment runs deep and will rise if government departments are expected to actually deliver something.
The answer is to make government smaller but unfortunately there is so much that needs to be fixed that this won't happen any time soon.
No we need less legislation. Central banks need to be eliminated, no lender of last resort. Bring back supply and demand and let the incompetent speculative banks fail. No bailouts. After all banks are just private corporations, creating currency out of thin air and then expect the debt slaves to pay it back with interest, that was never created in the first place. A Ponzi scheme I believe.
Agree. The only hope I have of getting rid of central banks is when inevitable currency collapse (triggered by broke govts and bailouts) finally happens and most of us jump for possible life rafts like gold, some BRICS currency, BTC or whatever is next. The central banks will still be there thrashing around peddling their fake money, but will barely matter. Ponzi schemes always end messily.
I'm surprised you made no mention of this glimmer of hope: Govt agrees to issuing of policy statement on immigation. Maybe you haven't read it lol ;)
Also
Why [...] are they embodying the definition of insanity - by doing the same thing over and over and expecting different results
I thought we all agreed at this point this is no incompetence and not even ignorance but exactly the intended outcome. Looks like consecutive NZ governments have a single economic growth playbook - actually a single page - and that's the one which erodes quality of life the most. But, hey, GDP numbers, wealth effect...
Political parties can only march off to the next election burying this issue if we let them. Pressure them, expose them, shame them. If they get a free ride, we get exactly what we have always got, appallingly inadequate governance. I guarantee, they won't be talking about mass immigration! They believe it's an automatic right to switch on the tap as wide as they please.
Labour was elected in 2017 on a platform of, among other things, lowering immigration to "sustainable" levels.
By the time the borders were slammed shut as part of our "world-leading" COVID-19 strategy in 2020, long term immigration was at an all-time record high.
The mistake people make is thinking that immigration is what causes house prices to rise. Shutting the borders did not cause house prices to crash, and opening them isn't going to cause house prices to skyrocket again. The "demand" side of the "supply and demand" equation isn't a measure of what people want, or even need. It's a measure of what people are ready, willing, and able to buy.
Opening the borders to more long-term migration than what our infrastructure and society can handle will cause all sorts of major problems. But it will not result in another property market like the one we've seen here over the past 2 decades. That was entirely dependent on the availability of cheap credit, and those days are gone.
Trashing the value of cash with negative real interest rates was virtually forcing speculation on property. Tax free gains for non residents. Then you have people actually needing to buy a house to live in, all in a period of 25% population growth. Well duh! All to keep the cult of exponential growth churning out their happy figures.
Great article. Common sense struggles to rise against the self preservation of politicians and greed.
How do we establish a long term goal of what we want NZ to look like in 20 or 30 years. Population, Health and Education targets that all parties have to work towards. We seem to be able to do this for inflation!
All the anglosphere countries are showing indecent haste to cram as many humans into their borders, as quickly as possible. Canada just had the largest yearly increase in population on record. Australia is scrambling to squeeze as many people in as possible. The UK, which voted to get some control over immigration with brexit, instead got an increase.
I guess they are all banking on China exporting deflation once again to more than offset the domestic inflation caused by high net migration. NZ’s non-tradable inflation ran at 2.5-3.5% between 2013 to 2019 coinciding with a period of 1-1.5% annual net migration rate.
I reckon a lot more pain is coming on the cost of living front.
Right now the cost to ship a 40' container from Shanghai to Sydney is USD 300. Twelve months ago it was USD 6500. I would say that is deflationary. By the way they cant even fill the ships at that rate because inventories are so bloated and companies are not ordering enough. New Zealand is on a similar trend down in import costs for the same reasons. The time is right for a disruptor in grocery trade.
Ohh yeah politicians with a vision. We just had one who was going to build 100k houses.
We need to sort out our education system so we can have adults in this country who have half a brain and ideas to take us into the sustainable future.
We have become reactive rather than proactive.
I'm just waiting for the whole education to revert back to what it was in the 1980's and 90's. They should never have changed it in the first place and now its taken decades before people have finally realised its not working. Who wants to make a bet that they will not change it back and they move to something even worse than what we have now ?
Most OECD countries have to invest in business capital, R&D (avg 2.7% of GDP), policy reforms to keep their economies growing.
NZ, Canada and Aus have had it easy for decades with no incentives to put in any of the hard yards. Just pull resources out of the ground, ship them in bulk and import people to grow domestic activity to make up for lost productivity.
Nearly two-thirds of students failed the writing standard in the latest NCEA literacy and numeracy pilot. The highest pass rate was the reading standard, with 64% of students scoring an achieved or higher. That was followed by numeracy at 56%, writing at 34%. Those pass rates were even lower than the results in 2021.
The government quietly released the literacy and numeracy result before a long weekend, with no accompanying press release.
We have to import people. There are far too many working age people sucking off everyone else, creating demand for services and goods but not contributing to any extent. We import truck and bus drivers for G*d sake!
I know that nothing will change under this govt or the greens as its their MO to 'fix poverty' handing out more and more free cash.
If I wasn't such a workaholic I would choose free cash to live a comfortable life, over beating myself up to extend myself more than I am capable of. Too much information 🤣
Contribution brings a person self worth and satisfaction
HW2, a workaholic should not need to import people to sustain his lifestyle. Nothing will change with that type of mentality. You are a workaholic because that is all you know and expect everyone else to bow to your indoctrinated thesis. Tough to swallow but keep working hard for the people needing government handouts.
The average New York City bus driver makes USD 70k per year and they are employed directly by the city. In New Zealand we contract out public transport to corporations who rake in all of the subsidy and run the most minimal service they can get away with. All while paying drivers a pittance. The answer is to import more bus drivers. Yeah right.
creating demand for services and goods but not contributing to any extent
Probably because we're too busy "investing" in property, rather than putting capital into productive enterprises and automation. I don't think getting more cheap labour is going to be the best way to fix this.
There are a few other issues. Look at building...
Replacement cost of building a house is very high. Land development very slow and expensive, no guarantees that the price you contract at is the final price, and, right now front of mind, is the builder financially viable?
It's a miracle we are able to service any population increase, let alone keep up.
Houses will end up affordable for educated professionals.
Most our current immigrants are unskilled and arent paid enough to buy a house at current prices. Best case 2 or 3 of those immigrant families can afford a rental.
Good news is that there will be plenty of renta left by the nz bases young skilled immigrants and kiwis (e.g. teachers and nurses) who will leave en mass for Aus.
Wont leave much for us.
Off topic
IT GUY, I saw this listing you may be interested in: Navara 4X4 https://www.trademe.co.nz/4077632752
Forget that genteel EV, you need a real man's wagon
That one is a bit townhouse luxury... I was thinking Luxury Luxury. Executive townhouse, what a joke, Executives live in Glendowie in 5mil sea view houses..... The Mrs has decided she gets a Toyota hybrid, its got an 8 month delivery cycle..... mean while the girls cars have dropped in value as they each want one, so they will be getting 2015 VW polos etc.
"I just don't think our current crop of politicians 'get it' on any level."
They actually do. But they also know they won't get (re)elected if they make the right choices that you allude to above.
So those choices are being made on the politician's behalf by the only entity that can wield a big stick and not have to worry about the short term consequences. That's why Adrian Orr was reappointed for 5 years - to do what has to be done. And that will be to the 'benefit' of ALL political parties who can point their weak fingers at the RBNZ and say "Look! It's them not us"
And thankfully Adrian Orr is playing his part well; doing what he was appointed to do. Sort out this mess once and for all.
"If you can't pay for it, you can't buy it"
Triple like BW.
I've seen shades in the last year.......is he the unlikely Paul Volcker of our time?
Time will tell if his spine is stiff or will become rubber when the real pain comes in the next 6 to 24 months.
Will he then stake the BEAST once and for all, with a 4 -6X DTI.
Time will tell.
Yip - agree bw.
My experience from my time in Wellington was that it was the ministries that ran the country and not the political parties - and hence often the complete flop on promised policies by newly elected governments.
And the culture rot among the various ministries was so bad that unless you get leaders/minister elected who are willing to destroy their mental health trying to enlighten/redirect a culture of corrupt bureaucrats working in these ministries, then nothing is going to change.
But we haven't elected strong leaders, we've been elected populist leaders who are people pleasers (as opposed to principled/values based leaders) - so we have ministers pleasing corrupt bureaucrats in the various ministries and the rot just gets worse.
I don't see anything changing on this in the near future.
That is the problem, the unelected officials in the various ministries. Have to also wonder what the culture is like in some of those departments, particularly around any partisan biases at their managerial levels.
We had a political party that campaigned on reducing migration, yet that did not happen once elected. I would have thought Immigration NZ's job was to reduce migration numbers. Did Labour not send a simple memo to INZ, or did INZ give Labour the middle finger because our public sector employees are untouchable.
I've posted about this topic on here before, but to repeat my theory.
1. New government gets elected.
2. Treasury briefs the new government on the numbers around boomer retirement and huge deficit it is going to cause (see Treasury reports).
3. Options are;
a. significantly increase taxes or
b. increase size of population in the taxable age bracket.
4. Governments know that new taxes aren't a political winner as it has an immediate and obvious impact.
5. So they bend on their previous immigration policies that got them elected into government and they increase immigration.
i.e. the ministry calls the shots and promised government policies are never delivered.
If you read the treasury reports/projections then you realise the future is going to be very difficult. Why?
1. If we don't increase our tax pool dramatically by bringing in hundreds of thousands ot working age people from abroad, then the cost of the boomer generation retirement/superannuation is going to cripple the country's finances.
2. If we do increase our tax pool dramatically by bringing in hundreds of thousands of working age people from abroad, but we haven't fixed our infrastructure issues, then the quality of life is going to drop across the board for the country as a whole.
Either way, it isn't good. Call me a DGM if you wish, but this just appears to be the reality of having not well planned for the retirement of the boomer generation - while simultaneously pumping a massive debt/asset bubble so that the boomer generation could experience peak wealth at the point of their retirement.
(and this isn't a dig at the boomer generation - just a summation of where we are at as a society and the failures we've had/lack of quality/wise planning for the future).
I don't know why anybody goes after the boomers, my parents are boomers and it's not as if they sit around cackling and rubbing their hands together. They spend most of their time trying to find their keys and checking whether dishwashing soap is on special this week.
Currently a median income NZ family cannot even dream of owning a lower quartile house in the country. This is the result of retirement being funded by ever increasing asset prices and rental income. Rent-seeking behaviour is a zero-sum game which benefits few without creating added value
Your parents' generation was responsible for voting in this kind of policies, for entranching them and for spreading this economically illiterate narrative. Your two parents aren't guilty of anything, but the result of your parents' generation mentality and policies and actions is socially dividing the country
That's why
The tit for tat narrative all started when we started talking about house price issues. Boomers hear about house price struggles, and it turns into some sort of competition. Just the twisted selfish mindset of that cohort showing through, nobody did it tougher than them.
Comments cutting back on cell phones, avocado on toast, and "we had 3 mortgages at 20+% interest rates" are not surprisingly met with resistance. Not all millennials are frivolous, but anyone that took out 2 - 3 mortgages in their early 20's @ 20+% interest rates certainly was.
I have noticed that you are very anti of those who own rentals. A huge number and percentage of the population have Always needed to rent. Somewhere between 25 percent in the 90s to 50 percent in the 1940s
One solution used to be leasehold when land values and ground rents were low. But now that model is completely broken and those house owners are robbed.
I suppose you know this
I agree there are people who need to rent, and yes I often sound quite anti landlord. I'm not anti-landlord per se, I'm anti the mechanisms that enabled people with none of their own money to outbid first home buyers on entry level properties. And I'm sure I've made these clear in my previous posts.
I'm all for landlords who save a 40% deposit through retained earnings/savings, rather than recycling equity. Hell, keep equity leverage for new builds. But we shouldn't be making it easy for every man and his dog to outbid FHB on existing stock.
Here’s the thing though, my boomer parents voted labour as they could see what has been happening over the past 10-20 years and didn’t like it. They also want lower house prices and better infrastructure with a plan in place for population. They don’t want their kids and grandkids to feel like they have to move away to get ahead (too bad, we’ve already moved, but they like to hope that we’ll have an incentive to return one day). I think a fair chunk of boomers like every one else voted for labour in the hope that what they promised in 2017/2021 would come through. But it hasn’t happened. So who are politicians listening/bending down to? Certainly not the clear majority who voted for them. Is it lobbyists? Are they just so loud and powerful, that they are simply drowning out the voting population’s voices? Is the three year election cycle a problem too…I tend to think it is. Interesting article, anyway.
If you think owning a house at retirement somehow makes you rich, then you are mistaken. Its a place to live that is all. Plenty of retired people can't afford rates, in fact my rates/insurance combined are higher than the amount that a person on the benefit would pay in rent.
If a lifetime of working and saving doesn't afford you a place to live then what does.
While I get it that now that people won't be able even afford that, but instead of being angry at boomers for living their lives and saving a little perhaps we need see a house prices collapse, perhaps that will make this generation happy and not effect boomers who simply want a place to live. All these polices to make retirees pay will do is force them into getting reverse mortgages, and instead of their assets going to the next generation they will got to the banks.
As for them voting for these polices, where have you been living? Have you ever participated in an election? You get a choice of the moron on the left or the moron on the right. They say a lot of things and once they get into power do whatever they want.
We'll they could have voted for parties that:
supported higher taxes to pay for the infrastructure
Supported parties that had a strong focus on tax as a means of redistributing wealth more evenly across the population
Supported parties that committed to adequately funding free or means tested universal healthcare
Supported parties that increased investment in education, primary, secondary and tertiary
Instead they appear to have voted in parties that supported deregulation, market solutions to social issues, encouraged a selfish attitude to society, protected the interests of those who were already wealthy or had good access to credit
I can't remember a party with those policies 15 / 20 / 25 years ago. Which one was it? Were you eligible to vote last time? The time before? The time before that? If so, aren't you and your generation equally to blame? Blaming "Boomers" is a cop out. Buy a house, work your arse off to pay the mortgage and save like hell so you have some savings when you retire, that's what a lot of boomers have had to do, similar to now. Perhaps you and the other anti boomers above, could do something about it, and set up a party with your mythical policies above?
So take off people who work hard to fund people who don’t. Why should a rich person who looks after their health have to pay for care when a fat lazed poor person gets it for free. I agree on education, but think the way to do this is less government involvement. Too much regulation and social engineering by government departments is the big problem.
nah HSL, the cleaner I know at the hospital works real hard cleaning up vomit and blood for minimum wage so she can pay her exorbitant rent to a greedy landlord...when she retires shes paid off his house and has nothing herself...most people you're calling fat and lazy are just the grafters who hold the whole thing together versus either inherited wealth or crap govt policy that encourages exploitation
I was talking to an old lady who seemed to be miffed she had to wait until 62, as the age was being increased from 60. She's now 83 and seems healthy to live another 20+ years. There's about one million or more in payments to one person, who btw is comfortably well off, not rich. She was filled with pride of getting an increase in the pension on 1 April. I looked around the table of six people to see I was the only taxpayer
No wonder the young generation see inequities with the system
I would be ok with that, although you're using the wrong metric. It's impossible to know years to death. Someone living to 69 is being ripped off. No, a better metric is the amount of time wearing a tie. For every month wearing a tie the retirement age goes up a month.
I'm all for it, should have been done years ago, it's gutless that no party has done this. Whoever is in power could have / should get cross party support and then do it. Has any party tried this approach? Perhaps your mythical party above could add this to their policies?
Interestingly, I heard the Retirement Commissioner say she doesn't share your commonly held view that we can't afford superannuation given demographic 'challenges'. And if all we're doing is adding more people to the country then the problem (if there is one) doesn't go away - it gets worse as they age.
NZ housing crises - bring on the next one
“Ultimately there’s no natural income streams to be able to service and repay loans. What you have is capital gains which are contingent on the game continuing. So it’s a Ponzi scheme. says Werner. - https://wire.insiderfinance.io/richard-werner-qe-infinity-707e2c627e03
Would you concede if there were "natural income streams" though? If the return on a property was 4% and a typical term deposit was 4% then it wouldn't be regarded as a Ponzi scheme. Recently we had a situation where a mortgage was 2% and the return on a TD was 1% yet property was returning 3%.
Generally rental return has been comparable to term deposit returns but property had the advantage of keeping up with inflation whereas cash didn't so if inflation was 2% and rental property return was 3% the return was 5% compared to the TD return of 1%. This could never be described as a Ponzi. Ponzi schemes generally have no real investment as a foundation at all and simply return part of the invested money as profit while the operator lives the high life until he is caught.
Honestly quite surprised that I have to keep pointing this out to people who should be a bit smarter than this.
by Zachary Smith | 23rd Apr 23, 5:36pm 1682228167
Yes it is about yield. Maybe negatively geared at first but eventually achieving a reasonable yield due to rising rents, rising salaries inflation etc. All perfectly understandable. Why is this so hard for you?
We will find out ZS - whether an asset priced at 10x incomes (houses) can continue to grow at 7% on annum (double every 10 years), when its priced based upon the discounted future cash flows of wages, that are targeted to grow at only 2% by the central bank!
The numbers don't add up - much like a ponzi scheme where early entrants win big and take the benefit from those who enter late.
That is only the case if once you achieve that you simply don't go out and borrow to return to a loss again. If you are negatively gearing then you are buy definition doing it for capital gains so should pay tax on those gains.
from here https://www.investopedia.com/terms/n/negative_gearing.asp
Negative gearing only becomes a profitable venture when the property is eventually sold via capital appreciation. At the time of sale, a prerequisite is that property values must be rising, not falling, or holding steady. If property values are falling or holding steady, the owner might not be able to sell the asset at a high enough price to make up for the losses while the asset was producing insufficient income to cover expenses.
Bingo - hootenany. You appear to get it.
And people have used the capital gains (tax free) equity from negatively geared properties, to buy even more properties! This is paper money, and not money derived by working a job in the real economy where you earn wages and save a deposit for a house. That equity used to buy these houses could vaporize as easily as it appeared - because it wasn't earned from the production of goods and services of working a job in the economy....it was earned by central banks dropping interest rates to 0% from 20% over the past 4 decades. If/when interest rates regulate, as they appear to be, this false economy is going to be painfully obvious for everyone to see.
What other business can you get into where being negatively geared is ok... I cant think of one. Property investing by johnny come lately, negatively geared, one stacked against the other, completely based on capital gains, selling outside of brightline (tax is evil !) ....
Its like all on black at the casino. Im not saying all investors are like this, but the last couple of years gave rise to many, most had no idea what they were doing, and probably cant understand why its falling down around their collective ears...
Its been mentioned on here before, their is a regulatory moat around the big banks, small operaters cannot afford this before they break even. Perhaps we need different class of bank regs to push fintech etc, The Open banking announcements are great but about 3 years to late for most NZ fintechs... Its real hard to raise money now, the vacuum will be filled with international fintechs offering services here.
Foresight and planning is something almost completely missing in modern day governance in NZ, and probably other countries. Governments flip reactively from one approach to the other. Analytical and strategic thinking is very poor.
David talks of widespread understanding that a construction crunch is unfolding, and that this will be another boom-bust situation.
So, why wasn’t that foreseen two years ago, and something done about it? I have been raising this issue consistently for the last two years.
I suspect the answer is that our governments and bureaucrats are stunningly arrogant and incompetent. And frankly often dumb.
But I think that it’s wider than government and bureaucrats. It’s something that is consistently demonstrated in the private sector too.
Is it partly our ‘Shell be right’ attitudes? Our neoliberal, ‘just in time’ ingrained thinking? Our ‘anti-thinking’ or ‘anti-intellectual’ culture? The inherent short-termism in how our society looks at the world?
Could someone really have predicted covid 19 and the insane escalation of building materials and costs? Supply chain issues?
Three years ago we have just come out of lockdown and every economist was predicting a property collapse.
I certainly didn’t predict what actually unfolded.
I didn’t say those things were easily foreseeable. I have used the construction slump as an example, which was totally foreseeable regardless of the pandemic. Bust follows boom like night follows day.
And what are we doing now that we have seen what a pandemic can do? Are we doing everything in our powers as a country to get our systems and infrastructure ready for the next one?
How well prepared is Wellington for ‘the big one’?
You are right that nobody predicted that Covid-Zero would work as well as a it did. Where the banks and government got it very wrong is they didn't start to unwind the emergency stimulus measures for 2 more years. They should have pivoted to targeted support immediately and increased the OCR within 3 months of the first lockdown. Businesses couldn't borrow if they had tried because banks were reassessing everyone to see COVID impacts and nobody could prove anything.
Good governance is about preparing for the unexpected so yes they should have had a plan. What happens if a war breaks out tomorrow and supply chains are broken - their job is to ensure we are prepared. Although they can’t predict what will happen they sure as hell can make plans for potential risks.
Current leaders don't like problems - if you raise issues like this in the work place, most don't have the mental capacity to deal with them so they deny that they exist.
Like the idea that house price rises were going to cause financial and social issues down track unless we addressed the issue years ago - which I was raising with many - but those who were benefiting from the problem, wanted more of the problem, and none of the solution/s.
So we've had leaders who have been benefiting from problems and the more they avoid dealing with the solutions, and creating more of the problems, the more successful and popular they are (in the short term).
A good article.
Problem is that the big business/construction/farming lobby got the Hosk and Heather DPA and a bunch of other journos to push the "we need more (cheap) workers" story without any context as to whether there is a cost to society through massive population growth and whether that is ultimately good for living standards of the existing resident and our productivity. Nor has there been any examination as to why we have this sudden shortage of workers and how could it be alternatively resolved by a bit more carrot and stick from the existing potential labour pool.
Immigration was about the only policy that I agreed with Labour/NZF on in 2017 (not that they ever implemented it prior to 2020) and they cravenly backflipped.
Something else I have been thinking about is planning rules. They often help protect amenity but at the cost of housing supply and affordability.
If most of them were gotten rid of you would see a lot more housing built at lower price points. But you would also see more ‘slums of the future’ housing built.
But perhaps in terms of hierarchy of needs we should put getting people housed more affordably ahead of things like outlook from their living rooms and private outdoor space.
The Building Code still provides minimum building requirements in terms of daylight admission, natural ventilation etc.
Don’t know, just putting it out there…
Agree with these points - natural demographic changes may also play a significant part here.
Hundreds of thousands of boomers are going to die and downsize their living conditions in the next 1-2 decades and this may free up housing/land constraints.
(in my neighbourhood we are surrounded widowed woman in their 60's and 70's (there are 5 within a stones throw) - their properties (2-3 bedroom homes on 500sqm + sections) are far too big for them to manage so find myself helping them with manual labour tasks around their homes - but this isn't going to be sustainable in the long run....so on my street alone, I'd say >50% of the housing stock will be up for sale in the next 10 years (could even be as great at 80%) as the older people living there need to downsize into much smaller accommotion).
The next gen do not have the wealth to buy their parents homes. They have been locked out of the market. I have also mentioned a lot, the gap between 2/3/4/5 bedroom houses in AKL is often another 300k per bdrm... The step up costs is nuts nowdays. almost like buying a first home again.
Farmers refer to succession planning and how they will divide the family farm between their offspring. They angst about this long before the day of reckoning. Often those kids are already comfortable by the time their parents pass on yet they still want their slice of cash.
I told my kids years ago, when they were still at school, not to expect anything from me when I pass on. In saying that, I wanted them to think for themselves and create their own wealth independently.
Yes I helped them later, but that came out of the blue. Funnily I have been true to my word as I haven't passed on yet.
Depends how they have their affairs structured of course. Care is pretty expensive these days and unless the family home is protected behind a legitimate trust structure, and if inflation remains high, there might not be that much left behind for younger generations to inherit.
Many of the boomers I've talked to are going to have to sell their current home and downsize to free up cash to pay for their retirement. i.e. they are asset rich but cash poor.
And they won't be able to buy their groceries and pay their power bill with their $1,500,000 home.
by Zwifter | 24th Apr 23, 9:27am 1682285220
In which case you are better off in a retirement home.
Which argues for my point above - that many boomers will need to downsize to get through retirement. Many are still living in 3-4 bedroom homes on 800sqm sections that will soon be too big for their needs (and they will likely need to free up capital from their home to pay for living costs....including retirement homes/care - unless of course the family home is well secured within a legitimate family trust structure and the family is willing to support them living in a 3-4 bedroom home and their physical capacities mean they can't maintain that size property).
There are 5 widowed females in their 60s-70's within stones throw of my current residence, all of whom are overwhelmed by the size of their current properties and are struggling to manage by themselves....and there are more female family members living around the country now in their 70's who are too stubborn to leave their current family homes after being widowed in recent years....the writing is on the wall for them as they become too much of a burden to their family members and neighbors. Selling up is going to be a reality for them and downsizing within the next 5 -10 years. How lenient will their millennial children be in regards to doing their lawns, and maintaining their oversized properties as the arthritis sets in and the hips/back give out?
There are big demographic changes taking place in society at present - but doesn't get talked about much. Retiring and downsizing boomer generation is going to have a big impact on the way our society functions.
Great article David, although I would have preferred you didn't make it so obvious to all readers:
"It seems blindingly obvious to me that once interest rates move lower, and we have more migrants seeking houses, and fewer houses are being built, then so our house prices will start heading for the moon again."
It's a great thing to have a fairly good idea what is going to happen in the future, for "making good financial decisions"
A young Indian migrant to nz I knew before 2020 left nz in search of a wife and greater success. Now he is back with a young family and soon his parents. The pay is lower than Oz but the climate better here in NZ. He could have gone to the US where he has family or stayed in England where he was, but personal safety isn't as good.
He rang me looking for accom.
Good to hear. Unfortunately, we aren't doing enough to position ourselves as a preferred choice for talented migrants like the one you mentioned.
On the contrary, this immigration strategy of overpopulating our urban centres without building the underlying infrastructure will drive the talented workers we "accidentally" end up acquiring.
Our international guests cannot believe the cost of housing in NZ, and food etc.... If the only thing going is trading houses we are stuffed..... Why would people immigrate to a country that was unaffordable.. hence maybe why we are not attracting too many nurses. Low pay and crappy rentals are not appealing.
It would be great to see the immig stats.
- job type
- country of origin
- estimated salary once here
- number of family members tagged on visa in first 10 years.
Would provide a view of why they come. Along with the likely tax paid toward infrastructure per family member. My guess is per migrant the rest of nz pays about 90% of the infrastructure required over their lifetime.
Judging by my friends and family the are people living in the 3rd world prefer their home country but the attraction of free education and free medical in NZ are just too strong. My 1st world family has two members who developed cancer; so has my 3rd world family. The two in the 3rd world has one dead and one who would like to be in NZ; the 1st world cancer sufferers are both alive, one in the UK and one who is in NZ and now cured.
Rents are going to move and quite quickly. There is a shrinking pool of owners, and of those who are holding, many are shifting to emergency housing as a stop-gap wrt the tax increases. New build sales have fallen off a cliff, with banks for some reason not willing to lend at 6.5% on an asset that will return 3% net.
Building costs are about to increase again, so the only thing that will lead to an increase in housing supply is one or more of:
- Rent increase (watch the next 6 months)
- Interest rate decline (watch the next 6 months, this will be recession led)
- Government as the buyer (this is happening a lot right now as a ton of builders pivot to KO)
- More subsidies of rents (everyone just got a bump on April 1 I, I believe)
So yes, more of the same. There doesn't seem to be any concerted effort to lower the cost to build houses, which would lower the value of existing homes and lead to a lot more supply.
I haven't even touched on the viable pool of exisiting homes shrinking as weather patterns change.
At the limit what you suggest is that Auckland and WGTN start to look like Queenstown.... a great place but sadly the workers cannot afford to live there.... Our major cities will become unlivable if the new bus drivers cannot afford a rental. We simply must build more, and the way to do this IMHO is to massively increase the amount of land that can be built on.
Good luck in Wellington. Last visit there wasn't exactly a plethora of open fields waiting to be developed and the council are horrific to deal with. Whatever their MO is, it is not adding housing. I renovated an old villa there once, converting it to two flats. Got knocked back on adding a 30sqm studio unit to rent to nurses as it was near the hospital. It got rejected due to traffic impact.
Isn't that why Wellington is going to migrate to Palmerston North? The airport (Ohakea) is already being 'done up' for that, and there's neither the problem with an earthquake (which will come to Wellington) or available land to expand into.
If so, Wellington as we see it today will become a ghost town.
How a six-storey pod building with 79 new apartments sprang up 'like Lego' | Stuff.co.nz
https://i.stuff.co.nz/business/300855186/how-a-sixstorey-pod-building-w…
Our current account cannot afford more imports but the NZ off site manufacturers are going broke.
Politician with integrity! Has one ever existed? Remember the time we all went to bed and woke up the next morning. While we were doing that our politicians voted through all three stages of their gold plated superannuation. They were too sneaky and embarrassed to do it through normal working hours. And so they should be.
The article has written my comment: ""...between 2000 and 2020 our population increased by 1,225,000 people, or by 1.4%. That's TWICE the average rate in the OECD. I’ve said this before, but it is worth repeating. I’m not against inbound migration. I’m an immigrant. I’m against ‘accidental’ migration, which I see as being when a country pumps in migrants through some short-term expediency, such as filling job vacancies - not necessarily for even particularly skilled jobs.""
Is it only immigrants who can see this?
We had Covid lockdown 3 years ago and still we don't know how to keep nurses in NZ or attract people to be care-givers for the elderly. Everyone except our politicians learned how important they were.
As Sam Neil says, "we have become a country of whiners" . Once the whining gathers momentum, aided by media, who have amplifying whining down to a fine art, everyone starts telling themselves they must leave for a "better life". This then becomes self fulfilling.
Remember having a champion whiner at a place I worked years ago. He basically had all the staff around him in open revolt within a year. The good news is, once whiners bugger off, everything can settle back to a nice workplace again.
I think our friends at NewstalkZB and other radio outlets really initiated the national whining characteristic. Pre "Radio personalities" was a much happier time in NZ.
That’s the extremely wealthy Sam Neil I presume. The technician term for his comment is gaslighting. NZ isn’t going to settle down to normal, there’s a new normal or democracy as they say….except it’s not democracy, it has more in common with nazi Germany then a democracy….I.e. race. And the open indoctrination in schools….yep happened before actually…those pesky Nazi s.
We had Covid lockdown 3 years ago and still we don't know how to keep nurses in NZ or attract people to be care-givers for the elderly.
Caregivers for the elderly in Germany are well paid and respected as they are the custodians of our elders whom have more respect over there. Here is is a minimum wage job that nobody wants to do unless they are forced to as we have much less respect for the elderly.
‘A recent Reserve Bank discussion paper highlighted that between 2000 and 2020 our population increased by 1,225,000 people, or by 1.4%. That's TWICE the average rate in the OECD.’
Could this figure be explained to me? Does it mean 1.4% a year?
per year but compound increase so NZ added 25% to its population.
Double the OECD average means we need twice as many teachers, nurses, doctors, houses, hospitals, sewers, etc - extra human resources and extra physical infrastructure. They are costs but politicians see them as growth in GDP and congratulate themselves.
I wonder how much the ‘immigration tap’ will be countered by the equivalent ‘emigration plughole’ recently announced changes to citizenship acquisition in Australia for New Zealanders. Australia will now suck even more New Zealanders (including residents who might be recent immigrants) towards it. No mention of two parties who do campaign on these issues - TOP and NZF - maybe they’ll make a comeback and force the issue as kingmakers. I’d much prefer TOP and I don’t care for NZF’s past xenophobic and Greg-power-favouring politics but if they forced a cross-party long term population plan (which itself would mean migration and infrastructure commitments) then maybe I’d hold my nose and vote for them.
NZ needs immigration to pay for the future, it’s just that we lack the infrastructure to take them. Personally I don’t think this country can recover now, labour have done too much damage. NZF said all the right things one election and then put labour into power….never forget that (although sadly I voted for labour in their first term because they said all the right stuff too)
Open the floodgates so developers can sell their crappy filing cabinet housing. They are building the slums of the future. Some of these developments will become crime ridden in 10 years. All in the name of profits and capital gains. Don't even start me on Fletchers.
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