Successive New Zealand governments have provided homeowners with an implicit guarantee that all policy decisions would protect residential house prices and ensure they only go up.
This political promise has collapsed under its own weight over the past two weeks, as Housing Minister Chris Bishop doubled down on his intention to hack down house prices.
The Coalition government has realised the only way to make good progress on housing affordability will be to allow nominal prices to fall, rather than hope for huge income growth.
Now people who are investing in residential property today, and hoping capital gains will make them as rich as their parents, may be betting against policymakers in the Beehive.
Mainstream politicians have traditionally been very hostile to this idea, even when it was suggested by both minor party leaders and conservative economists eight years ago.
And that reflex is still strong. Prime Minister Christopher Luxon wasn’t willing to say he wanted average house prices to fall in real terms when asked, although Bishop later told reporters that everyone in Cabinet was behind his policy goals.
And Labour leader Chris Hipkins said deliberately reducing house prices was not "responsible" and Government policy should only aim to hold prices steady, so that recent home buyers don't lose out.
But since there are always new buyers, Hipkins was effectively saying house prices should only ever go up. This is the implicit promise property investors have been taking to the bank.
Don Brash, a former Reserve Bank Governor and politician, has long advocated for policies that will cause house prices to fall. In a recent blog, he said unimproved houses should almost always sell for less than they cost, just due to wear-and-tear on the physical structure.
“It is surely a serious indictment on policy-makers in central and local government that it is taken as holy writ that houses should almost always be able to be sold for more than they cost,” he said.
Cracking consensus
House prices have periodically fallen in New Zealand. For example, they dropped in the 12 months ended March 2009 and didn’t fully recover for another three years.
But they have risen roughly 150% since then, even once factoring in the recent declines, which are more related to interest rate movements than anything else.
People who were fortunate enough to buy at the turn of century have seen their asset values increase almost 400%, according to the Real Estate Institute of New Zealand’s house price index data.
Since house purchases are massively leveraged, and capital gains are untaxed, rising prices have made a couple of generations very wealthy and some governments very popular.
But the consensus seems to have cracked.
There comes a point when the negative externalities of high house prices, which are shared across society, begin to outweigh the benefits largely concentrated with owners.
For Chris Bishop, that day has come. He believes high housing costs are straining government finances, hamstringing the economy, and fraying the fabric of society.
And he has made it his political mission to do something about it — house prices be damned.
Here for it
If this is still an unpopular position in New Zealand, it hasn’t been obvious in the media.
Matthew Hooton wrote one column criticising Bishop’s comments, although it was largely about immigration, and in the comment section even Act voters, like ‘Christine L’, were saying:
“Bishop is right — anyone who looked at Christchurch after the earthquake, with opening up of land forced on councils, knows that house prices were held down, even while they rocketed through the rest of the country. Supply and demand. Falling house prices are bad for the economy, but young families leaving the country, or mortgaging themselves to the hilt for 30 years, is worse.”
There were similar comments on Interest.co.nz’s story, which first reported Bishop’s comments, such as one which read:
“If he is serious, then good luck to him. If it means that my children inherit a smaller amount, but their children can choose to stay in NZ and buy a house, then I really, really wish him well”.
While there were comments opposing Bishop’s big idea, they were easily outnumbered. This isn’t a scientific measure, of course, but it still says something about the public mood.
Coalition of the Willing
It is worth pointing out that even this swing in favour of more affordable housing appears to be driven by property owners, who are still held close to the heart of NZ politics.
People in their sixties are frustrated that their children are struggling to buy a home and start their own families, and that the kids who manage it are often doing so in a far away city.
Act Party leader David Seymour pointed to this group when defending his support for a set of policies which could result in lower house prices.
“If [a house price] goes up, people who own homes will be happy. If it goes down, people who want to buy homes will be happy.”
“I would say on balance, there will be a lot of people there who are happy with the home they own, but are worried about how the next generation is going to afford one,” he said.
So, the new politics of housing is an alliance between younger people, who are facing the high costs of housing, and older people, who are secure enough to focus on non-financial goals.
This ‘coalition of the willing’ forms a majority in favour of lowering house prices, and they are armed with a long list of social and economic costs caused by the status quo.
Unproductive promises
An essay written by three policy researchers in the United Kingdom in 2021 argued that a shortage of housing in many Western countries was responsible for most big problems.
These include slow economic growth, climate change, poor health, financial instability, economic inequality, and falling fertility.
Bishop has been particularly concerned by the lost productivity that comes with expensive housing and the fiscal cost on the Crown which could be up to $5 billion each year.
“When we stop people building houses, we lock people out of cities. That makes us poorer,” he said, in a speech that outlined the economic and moral case for reform.
“[And] how is it moral for thousands of our fellow citizens to live in motels for months at a time, bouncing from grotty unit to unit, often surrounded by squalor, crime and poverty?”
But there are real questions about whether Bishop will actually be able to deliver on his political mission. Or if homeowners will tolerate it, once it starts to become a reality.
In 2007 John Key also made a serious sounding speech about the “home affordability crisis” and how he planned to fix it if the National Party won the election.
His plan was to relax urban-rural boundaries, make it easier to build townhouses and apartments, build more enabling infrastructure, and reform the Resource Management Act.
This plan was never delivered. House prices went up 9% each year he was Prime Minister and Chris Bishop is giving the same speech 17 years later — almost word-for-word.
Meanwhile, house prices are expected to resume their march to the sea from next year onwards and leave those locked out of the market renting the scorched earth.
*Also see; Would it be possible and/or desirable to engineer a housing market correction?
192 Comments
the new politics of housing is an alliance between younger people, who are facing the high costs of housing, and older people, who are secure enough to focus on non-financial goals.
Would say they have read the room very well here. Leveraged speculation reach for your pepto pills cos this change is coming, and from a National crew to boot.
You're dreaming. The under 25s who "made it work" almost invariably did so through parental generosity, not hard work. They are the ones who had the best chance at financial stability and chose to blow it by taking on irresponsible debt to buy into a ponzi. They need to accept the consequences of their risky choices, not demand a bail out at the expense of ruining the economy for everyone else.
"Ponzi? Bail out?"
NZ's housing market is a bubble, driven by speculators and skyrocketing prices, not real demand. It's like a Ponzi scheme: new buyers keep it going, but it can't last. When it crashes, guess who pays? Taxpayers will end up bailing out banks and mortgage holders, just like the last financial crisis.
We need real policies for affordable housing, not more reckless speculation.
Houses are an ASSET, like a business and a stock, you're just silly if you over pay for it.
False. - Accommodation for 100% of the population (less those that are homeless or in emergency housing) is a necessity.
Its not a financial asset (except for those that treat houses as such) with alternative investment options.
You can't overpay for a house (or overpay exorbitant rent) when the alternative is sleeping under a bridge.
True. - Sorry but.by definition.
1.a useful or valuable thing or person.
2. an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.
do you think housing should be free?
I somewhat agree when you say you cant overpay when compared to living under a bridge. obviously i think anyone who wishes to have accommodation should be able to get, there are a few exceptions who don't want it.
I can see why you would think that, but as a whole it is not.
there is value in NZ housing in the form of rent, there is no value in a ponzi.
A ponzi relies on the next investor to pay the the previous person to keep it going, if there is no next person it dies.
in housing you could
1. use rent to keep it going
2. keep it forever and not sell
3. use an income to keep it going
= not a ponzi
Def not a hate club at all.
as per this article .. by far the majority of kiwis now want affordable housing, better infrastructure and public services, productive businesses.
The problem is that NZ has turned into a place everyone wants to leave.
So the tide has turned and for a long time to come there will be a movement against a house price driven economy. In favor of making nz a place our smart young kids want to live and work and raise a family. And where boomers can enjoy their retirement.
Nobody minds investors as long as they aren't driving up house prices at the expense of people's wellbeing. Making money has to be balanced against our quality of life.
I agree, that is realistic.
Nobody thinks the boom in 2018 to 2022 is sustainable.
The thing I don't like, is if house price growth is so high, then it makes it hard to find other investments that can outperform it, I think house price growth should ideally match inflation.
Currency devaluation can impact the housing markets differently depending on the broader economic conditions.
National haven't discussed this yet,but could consider it. Maybe, all the signs are there and they are building up to it.
1. Weak Economy:
- In a sluggish economy, currency devaluation may not boost housing demand significantly, as consumers remain cautious about making major purchases.
- Devaluation could lead to higher inflation, which erodes buying power and makes mortgages less affordable, putting downward pressure on house prices.
- However, devaluation may attract some foreign investment in real estate, providing some support for prices.
2. Strong Economy:
- In a strong economic environment, currency devaluation can make domestic housing more attractive to both local and foreign buyers.
- Increased housing demand from both domestic and international buyers can drive up house prices, as supply struggles to keep up.
- The impact of higher inflation on affordability may be offset by factors like rising incomes and positive consumer sentiment.
3. Overheated Market:
- In a housing market that is already overvalued, currency devaluation can further exacerbate price bubbles.
- Increased foreign investment in real estate, driven by cheaper prices in foreign currency terms, can lead to speculative buying and drive prices even higher.
- This can make housing increasingly unaffordable for domestic buyers and lead to greater risks of a market correction down the line.
4. Depressed Market:
- In a stagnant or depressed housing market, currency devaluation may provide a much-needed boost in demand.
- Cheaper prices in foreign currency terms can attract foreign buyers and investors, helping to absorb excess housing supply and support price levels.
- Domestic buyers may also find housing more affordable, further stimulating the market.
The overall impact depends on the balance of these various factors within the specific economic context. Careful analysis of the local market dynamics is required to assess how currency devaluation will affect housing prices in a given scenario.
Investments that outperform houses? It seems the golden rule in NZ is houses double every 10 years or a 7% growth a year (compounded). That is not... great.
NZX 50 outperfomed that (11766 today, 4800 on 01/07/2014). Of course tax is weighting in favour of RE and if not for Covid it would not have achieved doubling in 10 years. I know you should also factor in rent (if investment property) but also council charges, maintenance, insurance, etc.
Even in the "good" years of Covid, an exceptional event (we don't have a pandemic that often, do we?) with +20 to +30% a year, my stock portfolio outperfomed that, so did cryptos.
crypto is too volatile as a reliable investment (i'm not saying its a bad one).
Anyone who had Nvidia stock probably pumped these numbers.
the benchmark for index funds is around that 10%.
if housing grows 7% capital gains and a yield of 3.3% ( 5% - insurance, rates, maintenance) i did some napkin math.
that's around 10%.
Id be interested in what your portfolio consists of, if you don't mind.
Hey Rookiester, If your buying at a 7% plus yield, its more likely to be an investment and giving a small, but reasonable return, for the inherit risk.
If your buying at less than 7%, you are a speculating punter and these people invariable get burnt when the Ponzi dies or the tide goes against you.
The market is retreating fast and this tide isarunning.
Simple.
Obviously, you have purchased as peaker and get very low yields (I can smell it very strongly, you smell just like Yvil)
So quit, while you can and get into something that makes a REAL return and live a happier, less stressed life.
Education is very important here and I will always address typos.
Let me simplify it:
Simple, If you buy to speculate (very low yield, don't buy for sustainable income) you are risking it all.
As this market is likely just mid crash, protect your capital.
Speculation on just capital gains is risky and not assured.
You can't compare a non productive rental property to a productive business. Property returns are generally non existent, with many rookie investors pouring money in the front door on the monthly. I've mentioned this before, based on cashflows, leveraged rentals are trading insolvent. Reliant on CG's to be cashflow positive.
You would get to run a productive business this way for not long before going tit's up. Unless you are a money launderer, then it's par for the course.
Agreed, the lowering of price will create more demand short term.
Ideally, I'd like to see the immigration tap turned off prior to the removal so there were a few more empty places prior to a move such as this or Kate's excellent rent regulation idea.
Of course, just lowering immigration would by itself also lower rents and as such the accommodation supplements being claimed.
Edited to add: If you were referring to renters being stuck paying 800pw and now without accommodation supplement then maybe rent has to decrease by accommodation supplement when removed. This would have side effects too which is why Kate's method would be preferable (lower all rents so that the accommodation supplement becomes redundant).
I'm starting to notice more and more:
- Older people who are often well off, have their own property interests, but ultimately realise that it is not great to have their children (or their grandchildren in some cases) effectively locked out of comfortable property ownership if only because it raises the risk of them packing up and moving overseas, and then the holiday money has to be spent on seeing the kids rather than going to more exotic places. Some have even put two and two together that the housing crisis is a huge contributor to social issues.
- Comments, both made in-person e.g. in business meetings/at dinner parties or on platforms such as LinkedIn, that having so much of people's incomes going to mortgage and/or rent payments is not good for the "real economy" as people are left with so little to spend in restaurants, or in shops, or to invest into companies that actually make useful things or innovate.
Those who worship at the Temple of Property Gains are coming under increasing pressure I believe.
Yes I always did wonder why productive businesses weren't more vocal and outraged with residential property in this country.
If not only sucking discretionary dollars out of the productive economy, but the upward pressure on wages/salary driven by rising housing costs, combined with skilled employees jumping ship for a payrise. Residential property investment most certainly has become a cancer or parasite on the economy, largely driven by narcissists born at the right time.
I hear this claim a lot, yet unable to find any credible documented source of the Government of the day making this suggestion.
Are you sure you're not repeating the same old dribble designed to deflect heat away from rampant and excessive greed driven property investment?
Imagine if our property bubble did fully burst, with a moment's thought you can realize the Boomers were adults and in charge during both the Stockmarket Crash 1987 and the Property Market crash of 202x.
The side effects of one generation's exposure to lead based products in their childhood resulting in 2 economic shocks. What a legacy.
What productive business are we talking about?
I seem to see a land of small nepotistic driven companies relying on overpriced agency workers at busy times with no such dreams of expansion except for feathering the families nest and a large portfolio of investment properties that they'll either keep in the family or sell when they retire to someone else who only wants the business to fund the big Ute or Vintage classic,boat and bach and several holidays abroad each year.
The very reasons most of the minions aren't recipients of yearly decent pay rate increases and feel apathetic and reluctant to be productive as well.
Sure, you're probably right, but here's the thing. What do you think will happen if the minions receive decent annual pay rate increase?
Here a clue: The rent will go up by a very similar amount to the average pay rate increase.
Are businesses not paying enough, or can they never pay enough, because there's so many parasitic mouths latching on to their employees?
25. And how many do you know that are getting divorced etc at 28? Having to sell-up, or try to cobble together some scheme of arrangement to tide them over to a time in the future to do the same? Probably not many yet, if any. But you will. That's part of human nature....and as time tighten up, even more so.
(NB: Almost 50 percent of all marriages will end in divorce or separation. Researchers estimate that 41 percent of all first marriages end in divorce. 60 percent of second marriages and 73 percent of all third marriages.)
Compared to some countries yes, there are other countries similar to NZ that are less affordable.
according to this website, affordability index in NZ is cheaper than. https://www.numbeo.com/property-investment/rankings_by_country.jsp
Australia, UK, France, Switzerland, Germany, Japan, Spain, Netherlands... the list goes on.
Have you considered house prices become more expensive in these countries because people around the world would rather live here than their own country....because it is a nice place to live?
Have you been to Singapore, you think that is affordable?
Have you considered house prices become more expensive in these countries because people around the world would rather live here than their own country....because it is a nice place to live?
Arguably, the cost of shelter should be low relative to income in a developed economy. That is the whole point of 'economic development.' Yes, not everyone can live on Miami Beach and the Hamptons.
I would have to say bw that many marriages end in divorce wether they have a house or not so I think your argument is irrelevant.
I know plenty of young couples who have purchased their own home and some under 30 who have several.
I say good on them. The rules of the game are what they are. Until they are changed, so be it. This Govt is very inconsistent as on one hand they are handing out to multi home owners with tax write off's etc and now they want to lower house prices.
And Labour leader Chris Hipkins said deliberately reducing house prices was not "responsible" and Government policy should only aim to hold prices steady, so that recent home buyers don't lose out.
But since there are always new buyers, Hipkins was effectively saying house prices should only ever go up.
Dan, if supply increases to meet demand, what then? Methinks you may want to revisit that statement.
What about a the roll of mass immigration in this fiasco?
What indeed Timmyboy. Let me catch you up, firstly you're a racist to mention it. If that doesn't dissuade you, then there's also the fact we don't like logical and simple to implement solutions to big problems. Especially if those solutions would result in in local businesses having to work with and train those that haven't fared so well in society (been added to the scrap heap or un and under employed). I could go on, but I'm 100% with you but many smart people do seem to have a blind spot-on immigration they way we do it in NZ, possibly because they themselves are immigrants (as were my ancestors).
Debt has a nasty habit of being twice as nasty on the way down as it was exciting on the way up. It's nominal, of course. And that...is what is going to undo many an asset portfolio owner. You can't leverage Debt up on the way down, only consolidate it - if you still can.
Don Brash, a former Reserve Bank Governor and politician, has long advocated for policies that will cause house prices to fall. In a recent blog, he said unimproved houses should almost always sell for less than they cost, just due to wear-and-tear on the physical structure.
Yeah. But there's land too.
https://homes.co.nz/address/auckland/ponsonby/33-john-street/jwEGz
(That one got the extremely rare 'house prices double every 10 years' accolade.)
And that is a fair comment on houses by Brash. I don't think you/Chris should assume he thinks land should/doesn't to go up simply because he doesn't mention it.
Pretty sure I saw Brash on TV decade(s) ago bemoaning just that - land/section prices going up with the owners doing nothing to deserve the winfall.
Yes, imagine if our population went up by 10x and we had to find space to house everyone. We'd still have a population smaller than the UK, on a landmass larger than the UK, and yet their land prices aren't particularly detached from ours. My old house in a city the same size as Christchurch recently sold for less than half what my current house is worth.
Maybe it's more complicated than you think? Theoretically you're right, but we're hitting other boundaries like zoning rules long before actual land scarcity becomes an issue.
Exactly. If prices fall below the value of the deposit which enabled the loan, banks are facing making good on unsecured depositors underpinning the majority of the extended credit. Remember:
According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.
100%
And people seem to keep missing the cunning nuance in Bishop’s rhetoric. He wants ‘average prices’ to fall. He can do this without affecting existing house prices in a few ways that he has proposed ( which aren’t mutually exclusive):
- enabling the construction of many more small homes (granny flat proposal plus existing NPS-UD stuff)
- enabling the construction of many more homes in far flung urban locations (via fast track legislation)
- improving the competitiveness of the construction sector (their proposal around opening up greater opportunity for imported materials)
Fair point, but are they mandating that it needs to be retained on the same title? I recall something in their proposal saying granny flats will be subject to council subdivision rules. In Auckland this would often mean a granny flat could be subdivided off - unless the government’s proposed national standard would prohibit that (but it wouldn’t seem to)
Also I assume many who build granny flats without subdividing will be looking to hold (rather than building and selling straight away)
Anyway, the granny flat proposal is probably neither here nor there in terms of getting average house prices down
But fast tracking a few big new housing developments in far flung locations might be
At the end of the day, politicians talk a lot. But they should be judged only on their actions alone.
I'm in the skeptical band too as it stands. Even if Chris Bishop wants nominal house prices to fall I'm not sure Luxon will back him. Like I've pointed out a few times, we're losing young skilled workers who are moving overseas. Despite what the coalition fanboys want to believe the ones that I am aware of (significant proportion of my industry) are leaving because of the direction the current government has indicated it wants to take, in particular their stance on climate change (transport emissions) and housing (borrowing 3 billion for landlord subsidies).
This smells like a ploy to try to stem the flow by promising things will change. I am, however, undecided and open to being convinced otherwise if Chris B follows through with actions. Approving Wellington's upzoning against the NIMBY panel recommendations was a good first test.
I'm a home owner but also a Dad who's watching his daughter (who's a lawyer and barely spends a penny) struggle to buy a two bedroom flat with a flat mate's support, an hour's commute from work in a pretty ordinary area. I'd be very happy to see house prices come down further and I suspect I'm not alone. Good work Chris Bishop.
100% Steve - we are the same. Have our OO house and the only way to help our kids and country at large is to stop the madness. Honestly, I was not a fan of Chris Bishop but he is making all the right noises and are fast beginning to think I have him all wrong. Time will tell.
Might not look it, but he's a millennial and not the confused "woke" sort. Likely offers a fresh fairly young mindset to parliament without the victim mentality and minority focus other young polticians in this country ascribe to.
If you follow his Facebook page, there's one good thing he does and that's huge support for his local constituents. Advertising small local businesses, volunteering his time including monthly rubbish clean ups along the Waiwhetu Stream/Hutt River, giving appreciation to other volunteers in the community. What a local MP really should be.
How do you hack down house prices when everything keep going up? The cost of subdivision, fewer new builds, the cost of building, immigration, less land available for subdivision, the cost of architects...they're dreaming.
It's taken me 6 months to get a set of house plans approved by Auckland Council. With thousands more dollars in associated costs.
Nope.
I exploded on the phone the other day to a guy in the Council who I think's feathering his nest. I gave him 7 days to approve my build in Riverhead or I'd take it further. I found out this morning that my build has been approved....finally. But I still have to pay another invoice to get it released. It's taken 6 full months.
This has cost me thousands extra.....and that's one of the reasons house prices won't be coming down.
I exploded on the phone the other day to a guy in the Council
Unless this is the first time you've done it, I think I see the issue here. Council staff can hold a long grudge. I know of people who have been trespassed from Wellington City Council buildings for raising their voice too much in consent meetings.
It worked, the council dude just took it, which surprised me. I thought he might whine about me being "inappropriate" or some other PC language.
7 days later I rang the Council back to file a formal complaint against the pen pusher handling my consent, only to find that it was going to be signed off next day.
Application to build was filed in early January, and it's just been approved. If Bishop wants to bring house prices down he's going to have get a lot more land subdivided, and that's not easy and takes a long time.
A consortium of 3 companies want to build 1,800 houses in Riverhead, but the Council have told them it's not happening......at the moment. So while everyone's whining about house prices, the Council's tightening the grip.
Only if you haven’t provided the needed information. If you have a good architect they will struggle to do that.
Although I’m talking about building consent, not resource consent. If you do something outside the planning rules and need resource consent that’s a whole different story.
Seems like quite a bit of luxury property on the block according to Granny.
https://www.oneroof.co.nz/news/mortgagee-sale-of-luxury-lodge-linked-to…
If Bishop (and his Cabinet collegues) are genuine in the statement (actions will speak louder than words) then they may wish to revisit their fiscal position and/or provide policies that will encourage private investment in something other than RE.
And shifting the brightline and interest deductability run contrary to that message already.....so meh.
Property has fallen in real terms, but that is just as much to do with universal influences as to anything that our Govt. did. However, their actions do determine the degree of any multiplier effect their policies cause.
But I think the message that Bishop is trying to tell you is, that if prices are kept stable, only rising nominally to reflect general inflation and hopefully slightly behind wage inflation., then everyone should be doing their sums more on yield rather than any capital growth.
And the easiest way to automatically increase your yield is just to admit your property is worth less than you think it is, or wait to the market tells you so when you go to sell. This is different than what you may have paid for it, so don't confuse the two.
It's easy to work out what the price of your property really is, by deduction of all the speculative monopolistic costs, that if removed, would mean your property could be developed for considerably less than what you paid, and with no loss of amenity value.
I estimate that NZ properties are still overvalued by 10 to 20%. Those 425m2 sections they are trying to sell off the plan in Drury for $825,000 are not really worth that.
I think the Govts. goal is to drip feed policy that reduces this speculative non-value added gain via freeing up land use restrictions, material import regulation etc. to nullify any increase in other areas (maybe labour costs, general inflation, etc.) so the prices remain stable and the median multiple will be lowered and thus affordability improve.
This will need to go hand in glove with lowering/rising of interest rates/immigration so supply can equal demand to achieve the stability required.
But there seems still to be a disconnect between what is being signaled and what the expected result will be given the article ends with this:
'Meanwhile, house prices are expected to resume their march to the sea from next year onwards and leave those locked out of the market renting the scorched earth.'
I'm going to put my money on Bishop.
All the developers and investors are still acting as though this property cycle low is just going to take off as per any other 'next year.' as if it was just some immutable law of the universe that this will happen regardless of what any Govt. does.
If the Coalition keeps to their actions as they have done, after all, it's more than just words they have delivered, then I think we will see a different result.
Watch the median multiple Median Multiples | interest.co.nz
I assume you are talking about their vague, ill defined plan to open up 30 years of supply.
Auckland already has 30 years capacity.
There’s speculation that the *translation* of this vague idea is to live-zone all Future Urban Zoned land, now
Yet, Council won’t be able to fund infrastructure for all places at once.
To which I guess you will say ‘well the developers can do it’
To which I will reply ‘many won’t be able to make the feasibility work, regardless of who pays for infrastructure’
There’s only so many people who want, or can afford to pay, for a poky 2 bedroom townhouse for 800k+, miles away from anywhere
Govt. policy makes all land along the price curve more expensive than it needs to be, forcing people to the fringe looking for affordability, and dislocating them from their work (both parents working now due to the unaffordability etc.) and forcing them to drive back in.
It's a self-fulfilling negative feedback loop, that a whole industry feeds off on. What to everyone else is waste and needless extra cost, is to them revenue.
If land was more affordable at the fringe where the price is set for all land, then it would be more affordable closer in for those that truly wanted to be there.
The 30 years supply is a NZ urban myth and is a poor interpretation by 'zonists' of the amount of zoned supply that you would need to have the same type of presumptive zoning to give effect to supply being truly able to meet demand.
I have pointed this out to Minister Bishop, so they are having another look at it.
And of course, if their answer is to live in all Future Urban zoned land now, then they still don't understand land economics and how to match supply with demand.
And yes, if the right regulations were put into place to give effect, then true free market developers unshackled from council bureaucracy and unsaddled with historically overpriced land would easily be able to afford to do it. But unfortunately, many NZ developers are stuck in the past, both financially and with their tunnel vision as to only the NZ way.
It's only the present status quo that is forced to build 'poky 2 bedroom townhouses for 800k+ miles from now where. And the $800K plus I was quoting was for the land only.
This will need to go hand in glove with lowering/rising of interest rates/immigration so supply can equal demand to achieve the stability required.
It's really pleasing to see more and more posters I regard highly acknowledging the demand side of housing affordability.
Personally, I don't trust Bishop based on what I've seen over the years, but if he's visited Damascus recently then that's fine by me!
House (land) prices going up:
a) financialisation of housing as a financial asset since the 1980's
b) unsustainably high net inbound immigration
c) tight planning laws
d) excessively low interest rates during covid19
e) tax - limited capital gains taxes on investment properties - investors buy to rent & reduce supply of houses for sale pushing up prices
f) undersupply of new housing being built
g) outcome NZ median price/income ratio = 9.3 in late 2021
House (land) prices coming down:
a) no change
b) we still have unsustainably high net inbound immigration (pushing up prices)
c) National likely to make planning laws looser (e.g. granny flats) & require 30 years land supply (but this doesn't address the immediate short fall only medium to long term prices)
d) interest rates have gone back up to historic norms pushing house (asset) prices down
e) tax - bright line changes & changes in interest deductibility increasing demand for rentals reducing houses for sale pushing up prices
f) supply of housing being built > increasing demand in the recent short term but doesnt yet address the long term deficit
g) outcome NZ median price/income ratio = 6.3 May 2024
We still need to get down to NZ median price/income ratio = 3 to 4, i.e. houses need to fall to 48% to 64% of their current values. I.e. they still need to roughly halve.
Talk's cheap....who remembers Aunty Helen ring-fencing West Auckland at Whenuapai, and telling the populace that Auckland needed to go up...not out? I do.
Now SH16 is urgently being widened to Waimauku.
https://www.nzta.govt.nz/projects/sh16-brigham-creek-and-waimauku/
Since property booms have been the backbone of our economic growth for the last 4 or 5 decades, what does the government propose to do in its place?
Hopefully direct capital toward people who make stuff and hire staff to do help them do it - and improve our per capita output at the same time.
It will require legislative change which hasn't been mentioned at all. As has been said, it's easy talk about lowering property values but having the balls to enact change is another thing altogether. Hence why it looks good when politicians talk about it, because that's a safe easy option.
“[And] how is it moral for thousands of our fellow citizens to live in motels for months at a time, bouncing from grotty unit to unit, often surrounded by squalor, crime and poverty?”
Ouch! Thoughts and prayers to our resident coalition voting motel owners sucking at the taxpayer's teat, can't be nice to have your noble efforts being characterised as such
Bishops comments are not needed where I live which is a North Island provincial capital. There are so many properties coming onto the market. All types. All price ranges. Not much is selling. Wherever you drive there are so many for sale signs. Some of the houses coming into are very expensive. There are not many buyers at their price level. Prices can only soften more as the volume of houses on the market increases as spring hits New Zealand.
Where people really don't want to live? It's in Auckland's ex-burbs with really poor public transport, super expensive comparatively speaking, miles away from the city action and having to spend hours fighting traffic to get into work, all the disadvantages and none of advantages, places like Riverhead ...
Maybe he can see what's coming and wants to throw out an early statement of his intent. So when the inevitable price falls occur, he can refer back to this statement and claim it as National/Bishop's "achievement" rather than economics at play (supply/demand/credit).
The convenient thing about throw away lines like these, is by the time they come to fruition they're no longer in living memory. It'll be the claimant's discretion whether they want to bring it back to the surface, depending on the outcome of course.
Sure, the odd reference might be made on the comments section of a site like interest.co but everybody's moved on. If a reporter were to write an article bringing up the house price crash and subsequent economic turmoil, many would write them off as a left leaning looney. If house prices do crash and the economy does well, Bishop will no doubt request a write up in the Herald and cite these current aspirations.
The nature of housing is such that it will take a few years for the positive impacts to flow through to the market. If National are going to do this they should pull the trigger esrly and often. One of the many reasons their predecessors efforts failed was being excessively cautious and very slow, so slow in fact they had little measurable impact.
won't happen, this is the same party that has just passed a range of policies to keep prices up
ie interest deductibility for investors and bringing the bright line down for flipping houses that and the new fast track which will lumber rate payers with huge infrastructure costs, lucky that NZ first stepped in and stopped the opening of our housing market to anyone offshore.
he is saying one thing for the media but doing the opposite in parliament
You nailed 1/3 of it ST. You got 2. spot on
What will sink this housing market still further, that's already well into crash territory??
1. Mortgages rates remaining above 4.5%. Its obvious.
2. Rates/Land holding costs rising massively over coming years. (yes the infra spend is going to be eyewatering and the ratepayers are fully on the hook)
3. Insurances are going to double or more so, over the next 4 to 8 years. Risk based pricing, may more than double some, as they reinsure.
Those without very good incomes, will find holding costs too much "a hot potatoe" and send the piggy to market.....
This sucker is going down. The Bishop has played his hand and it's on song.
He can take the credit, when we all are singing the song to come, of the 3x to 4x DTI virtues.
And Labour leader Chris Hipkins said deliberately reducing house prices was not "responsible" and Government policy should only aim to hold prices steady, so that recent home buyers don't lose out.
WTF... let the market decide and get your filthy fingers out of the mix Mr Hipkins
I think that 2nd hand HP are driven by longer lifespans and the cost of a retirement unit. Retirees can't afford to "giveaway" their homes to an FHB despite having on average a million in equity
Retirees won't have a choice. They cannot rattle in their hundreds of thousands, in their large, cold cages, any longer.
Their massive demographic size, will sink this already holed housing market boat, over the next 5 to10 years.....
They are 100% price takers (not price setters) in this high interest rate, flooded with 4sales, housing market.
While Chris Bishop's honourable intentions are worth reading, nowhere does it say how he's going to achieve the goal of lower house prices.
Talk's cheap, bringing down house prices is going to be much more difficult. . Does anyone here have any idea how he's going to do it, because I'd love to know?
MacDonald's is opening in Kumeu in the next few days......and they do their homework, so there's a clue where the development's going to be.
Really glad you found a Maccas straw to clutch, in this very soggy and crashing housing market!! :)
Best you keep this Maccas straw in your swag, ole Winger....it may help you breath, when underwater ???
Bishop's fine words and Govt Goals is not really needed, he is just hitching a ride on the popular song, already well into the downslope, of much lower house prices.
At the end of the day a property should only be worth the value of the land and the insured value of the building itself.
As people in Christchurch found to their dismay after the earthquakes.
Only a complete idiot would pay over the RV of any property these days.
I for one, am not going to be suckered in to the hype anytime soon.
It might be in North Korea, but in NZ you have a choice, and people are going to pay extra for what suits them and what they think's going to be a good investment. . It's a fact of economic life.
Why do you think the Grammar Zone's been a great bet over the decades? And double Grammar Zone...house prices on steroids.
and people are going to pay extra for what suits them and what they think's going to be a good investment.
And it's that's part of your reply that is the whole issue around speculation driving up prices.
If the previous governments ensured tax breaks around other investments like stock markets,bonds,etc and more innovative ideas around how the population would afford their retirement without using real estate in the first place.
This conversation wouldn't even be happening.
I funded my retirement without real estate,yeah,I had losses,but talking with my peers,the outcome has been pretty much the same.
The most important aspect though was working for a company that gave me a company pension.
Maybe the younger generation need to think more about lobbying for that little nugget from their employers,a situation that could ensure that they dont need to speculate in real estate and avoid retirement poverty in their dotage.
It's all very well having a company super scheme, but people change jobs and even countries..and that makes it complicated.
You've also got the companies that run these super schemes taking their share, which can make a big difference over a few decades. A property is yours, you can gear it up, rent it or live in it, and they're great options. The populace need houses, they don't need shares or fixed interest. Stock markets crash occasionally, and they can impoverish those that make bad, ill-timed, or unfortunate choices.
It's all very well having a company super scheme, but people change jobs and even countries..and that makes it complicated.
And with a bit of lateral thinking them issues can be corrected or changed.
But I know for a fact that several large businesses that operate in Australia somehow offer their employees an opportunity to have a company pension, and yet the same option to employees of the same companies NZ arm has no such obligation.
You could also buy/start a business and get it to a point where it pays you for not showing up. I started mine at 42, 12 years later I don't show up anymore and still receive a large income. Currently sailing round fiji. Own no property and have no debt.
Biggest issue in NZ is the generational push that property is the answer. Blinded by it. Possibly too thick to see any other option.
People don’t need to own a house, they just need assets that has income to cover the cost of rent. It is either asset $$ or net cashflow $$ that matters, many have high asset $$ but low cashflow, start pushing other asset classes. Reducing the cost of leverage on other classes could help.
I concur.What we need are tax breaks around other investments.
Kiwi saver would be a great investment vehicle if it was tax free or the government contribution increased by at least the CPI.
We just need to think out of the economic square.
Just because it is,doesn't make it right.
For those of you that think building costs are going to decline, I've spent $49,564 on my new build so far, and construction hasn't commenced. This is not for a mansion, it's for a 230 sq. m. villa. Consent was issued this morning
This is just architect, engineer, Council fees, surveyors, geotech and stormwater. It doesn't include retention and detention tanks, excavation or electrical connection,
Council fees totalled $17,035.
This makes me laugh, whenever organisations interfere in markets you always get unintended results. The only way to dramatically drop the price of houses is to cause a land price collapse. You can do all sorts of things around build costs, importing other products etc, it may cause a 5-10% difference but that isn’t the difference between affordability and not. The whole Western World has increased its wealth on the back of housing over the last 80 years and it is all going through the same issues. Land and buildings have made people money since someone owned one and rented it to someone else, that will not stop. The last 30 yrs growth is caused by 2 working parents boosting incomes and a structural decline in interest rates that has occurred over the last 30-40 yrs. Those two great changes will not repeat. Compounding growth has clipped along at between 6-7% during this time. DTI’s may reduce this to 4.5-5.5% with small blips of more due to the normal supply and demand imbalances. The people in trouble with a sustained decline, the country, banks, small businesses owners secured against the house and why take out a 30 yr mortgage to buy something that decreases in value, more stories from the financially illiterate. This drop house price idea and DTI’s are more likely to cause high rents and a lack of rentals and a fiscal problem, like all market interventions it will never achieve what is hoped for
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