by Helen Kevans*
The housing market has long been a feature of New Zealand’s persistently large saving-investment imbalances.
Declining nominal interest rates, easy access to credit, strong immigration, and a tax system favoring property as an investment-vehicle fuelled a house price bubble earlier this decade.
House prices surged 120% between 2000 and 2007 and, although that bubble has since deflated, house prices today are just 5% below their most recent peak in November 2007.
This is even though the economy endured a recession stretching over five straight quarters.
The housing market did, though, soften last year after the government announced tax changes preventing investors from offsetting their losses against income. But, recently, signs have emerged that the price cycle is turning up.
We forecast that recent gains in house prices will continue, with nationwide house prices to rise 3% in 2011 and 2012 as the chronic shortage of housing supply supports prices.
Weaker immigration, increased household austerity, and higher interest rates will, however, cap the upside.
Finding a floor
Most measures suggest that house prices already have bottomed.
The most recent Real Estate Institute of New Zealand report, for example, showed that house prices rose 0.5%m/m in August (+0.7%oya), sales volumes jumped 5.4%m/m (+21%oya), and turnover accelerated.
It took an average of just 39 days to sell a house (the long-term average), compared to a lengthy 51 days at the start of 2011.
Mortgage approvals also are increasing.
Local banks approved NZ$839 million worth of mortgages in the week to September 2 (most recent data available), with the 25%oya increase marking the largest rise since mid-2007, signalling a lift in housing prices over coming months.
The number of home loans approved rose 14%oya, owing (worrisomely) to looser lending criteria.
Banks recently increased their maximum loan to value ratios to 95% (in some cases even higher) and waived some fees to revive lending growth.
Construction activity at decade low
On the supply side, the dominant driver of our forecast for further house price gains is the persistent weakness in construction activity.
The rate of construction has been insufficient to fill the existing shortage of homes, let alone meet the underlying increase in demand. In fact, residential construction activity has slowed abruptly, with the volume of building work falling to a decade-low in 2Q.
Indicative of the worsening imbalance, new housing supply increased just 15,600 last year, well below the 21,000 level we estimate is required to satisfy demand. But, as indicated by our housing market model (second chart), the level of aggregate undersupply has been rising since end-2009.
To estimate whether housing is over or under supplied we:
• Estimate the size of the dwelling stock. We derive this from Stats NZ estimates of the number of residential dwellings from the Census data. Between Census collections, we estimate the number of dwellings by adding the number of quarterly dwelling approvals to the data series.
• Estimate the size of the 'desired' housing stock, based on underlying demand. This requires an estimate of the average household size—we use persons per house (number of houses divided by population) as a proxy to obtain a quarterly series. The number of persons per house has been on a steady downward trend.
This year, we forecast that just under 14,000 permits will be issued, even accounting for an acceleration in the number of permits issued in 2H11.
Given that construction activity tends to lag consent issuance by roughly six months, new home building likely will stay anaemic until 2012.
A number of factors are constraining supply.
Red tape has increased the cost of getting building permits, some councils have limited land supply, and construction costs have risen - the CPI subindex for construction has been increasing at a faster rate than headline inflation.
Furthermore, the Productivity Commission recent take on housing affordability in New Zealand highlighted that housing supply may be unduly slow to respond to rises in demand. This, it said, potentially owed to inefficiencies in the building industry or deficiencies in government regulation, such as insufficient and delayed land release.
The Commission highlighted that poor productivity in the industry also was a factor contributing to supply constraints.
Poor productivity resulted in more expensive housing than otherwise would be the case.
The demand side of the equation
That all said, the rate of house price appreciation will be limited by softer demand-side dynamics.
Inbound migration flows have softened, households still are focused on paying-down debt, and interest rates are likely to rise.
First, weaker migration inflows will offset some of the upside pressure on house prices. Migration in and out of New Zealand tends to create significant fluctuations in housing demand. But net migration flows have reversed since the February earthquake in Canterbury and, for the year to July, the net outflow of migrants was just 2,900, the lowest number in a decade.
Second, households remain cautious with respect to their spending - most households are still focused on rebuilding precautionary savings. Households have been reining in their liabilities, with household credit falling in March for the first time in more than two decades (although it has since increased modestly) and the debt-to-income ratio recently falling.
And, while nominal house prices are just 5% below their most recent peak in 2007, in real terms they are much lower, with the ratio of housing assets relative to GDP falling from 3.5 in 2007 to 3.1 in 2010.
There also is the threat of rising interest rates.
We think that the RBNZ will deliver the first rate hike in December, providing the global situation does not deteriorate further.
Regional disparities to widen
House price gains will not be uniform across the nation, however, particularly given the distortions created by the earthquake in Canterbury. Persistent aftershocks in the region imposed constraints on rebuilding in the first half of the year, limiting new housing supply.
House prices increased until July amid high demand for homes in undamaged areas, before falling in August. Canterbury likely will experience further house price declines in the near-term as some residents leave the area permanently.
But the exodus of Canterbarians likely will mean, at least in the interim, that existing housing shortages will intensify in other areas, such as Auckland, and house prices rise.
Momentum in the Auckland market already is building, thanks to strong internal migration inflows and a chronic shortage of new housing. The city of Wellington will, though, benefit to a lesser extent. The Wellington housing market is directed by trends in government hiring more than other cities, and the government has committed to reducing the size of the state sector.
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Helen Kevans is a Sydney-based analyst at JPMorgan Australia.
You can contact her here.
60 Comments
There is NO cronic shortage of houses in New Zealand, Helen! If there was, we would have had more building consents issued in the last month. Why are consents so low? (1) there is no final demand, because (2) the prices are too high to stimulate that demand. So in the absence of demand, occupiers will seek to 'spread' out' amongst the existing stock until such time as it becomes economic to do otherwise. That time, as I pointed out to BigDaddy this morning, could be dcades away.
And, Helen, that graph of 'Over/Under Supply'. It goes all the way back to... 2008... in this article; but it does look good!. What about 2007, and 2006, and 2005 and all the way back through the last property expansion period? Was there oversupply being built then? ( my suggestion is :Yes). So ALL that oversupply, years of it, has yet to be taken up before the market comes back into equilibrium, let alone a cronic shortage.
NA.... thats not quite the way I see it.
Building activity ( consents ) are a function of the difference between what a developer can build a place for and what he can sell it for. ( Bob Jones called it the Gap )
In this regard ... building activity is ...kind of... a derivative of the underlying supply and demand, and resulting prices for existing homes.
SO..... it does not make sense to say .... " prices are too high to stimulate that demand"... ( in terms of building consents) OR... that an increase in consents shows a chronic shortage.
Because the supply of houses is constrained by Local Body policies... I suppose the housing mkt does not, properly, reflect the real underlying supply/demand dynamics.
ie. there could well be strong demand for new homes at current prices BUT Developers can't supply them at that price..????.... AND.. maybe at current prices the average person can't afford to buy.... AND then u have a vicious circle that leads to a real Chronic shortage.
cheers Roelof
NA... what I'm saying is that if the supply of housing was completely elastic... then u would find that building consents would more closely correlate with population expansions and contractions and booms and busts.
Of course demand is a function of price.... BUT in housing, Supply has been "perverted" by local Body Monopoly practices and no longer truely reflects the underlying supply/demand dynamic.
ie. U are saying that the low level of building consents reflect a lack of demand for housing. I'm saying it is not as simple as that, and that we could well have a shortage of houses ( I don't know if we do or not... just making a point )
Cheers Roelof
Are these the internal forecasts that JPM are putting their own money on, or the external forecasts for the indentured debt serfs?
Do JPM have two separate teams, one producing forecasts for the gullible based on consensus economists' vacuous thinking and one based on reality for themselves?
Just asking...
However, instead of there being this projected increase in building activity, it is more like there will be greater acceptance by an impoverished population to avoid building new houses, given that the costs of doing so are set to shoot higher as the chch and rotting rebuilds lead to instant price jacking by all concerned...with gst slapped on top.
On top of which the cost of credit is far more likely to rise ...much higher...regardless of Bollard's near zirp game. If this rate rise prospect were not on the cards..why are the house building companies not offering 25 year mortgage finance at these super duppa low levels?
Only a bloody fool would take on a mortgage today...and pay asking prices for used property.
IF anyone remains confident that we can pull out of this and resume our old ways they shoild have read of this
I think the conventional wisdom of planners and economists on akld's economic and population growth will be proven wrong. The days of the construction and infrastructure boom are long gone. The chch rebuild will continue to divert funding away from akld. Tourism will decline with the global malaise. There won't be the jobs to support migration. Yes fewer houses will get built but there will be much less population growth. Where pop growth does occur it will tend to concentrate in housing nz estates. Thats why despite low building rates i can't see house prices rising
It's unreal.
The whingers and whiners just cannot accept that the housing market has remained steady throughout the GFC and is in fact getting stronger by the month.
The smuggeroos who rent while waiting for house prices to fall are being left in the dust and it serves them right .
They are doomed to rent and never even own the letter box.
Olly Newland predicted this ages ago and he is proving to be 100% right. ,
Who'd want to own a million dollar letter box! Because that's how much the necessary receptical is going to end up being vauled at, for some property 'investors', when they take off the capital deprectaion of their assets and value the letter box as' the difference'.
" House prices went nowhere for most of the 20'th century . They rose only 0.4 % per year from 1890 to 2004 . And in many parts of the country they went down . ( The price of farmland in western Kansas , for example , hit a high in the commodities boom of the late 1880's and has still not recovered ) . Then , from 1997 to 2005 house prices soared , doubling in many areas , setting off a consumer boom . " : R.J. Shiller : Irrational Exuberance , 2'nd edition .
..... of course this applies to America , not New Zealand . We are different , special ... .. immune from a property stagnation . ... Yup ! .. all goody good in Godzone .
Your gloating smugness is lovely to behold Big Daddy'O...
But you presume too much... people aren't buying homes because they're waiting for the price to come down. They aren't buying because they can't afford them now. They certainly couldn't afford them at the peak and probably couldn't afford them before prices soared 120%... They can't afford them full stop! You are witnessing a country in decline...
Aren't you glad to be living in a country that's destined to have its population impoverished... I'm pretty sure that's what my granddaddies and their grandaddies fought for in the last 2 wars... poverty and dead dreams for the generations that follow!~
In the late '80s, I was a NZ based salaried buyer in Central Auckland. It wasn't cheap then and I bought what I could afford, a non descript brick and tile box. I then sold up and joined the scores of people moving offshore, because the country was supposedly in decline.
A decade later I returned; the decline evidently wasn't large enough as houses still weren't affordable where I wanted to live, so I went back offshore to save the money to buy in the location I wanted.
Another decade later and I've done it, plus bought a second for my superannuation. Both houses were bought off NZ born Kiwis downsizing, but the neighbourhood mix is different to the late '80s e.g. more immigrants and returning expats than I expected.
In my wider circle the above is not unusual and may explain why at least some houses in Central Auckland sell at prices NZ based people believe are unaffordable. Personally, I don't have the inclination to rent for another decade in the hope that my experience over the last two is an abherration. People have competed strongly to rent my houses and are at my whim as to how I maintain them and their tenure. I treat them with dignity, but it's not a life I would choose.
Good luck to those of you hoping to get a more affordable house in the near term. However, fundamentally I think some of the thinking on this forum is flawed. Not all of the world is in recession, the current prices are affordable to some immigrants and returning expats for particular locations and I don't sense that sellers there are pressured. Sadly, you or your children may have to take a similar route to me to make it happen, or choose to live in the many locations around the country that are already very affordable. One thing is sure, endless posting of doom and gloom on this forum isn't going to change your situation.
BTW: If all goes to plan those houses will pass to my children who will be saved from mortgage slavery or being priced out of the market, if they don't want to go offshore..
It's not about whether ' being in the market' is right Asia ExPat, but whether it's right ot be in the market, now. Did you own when you were off-shore, like many of us did over the last many decades? It made sense in many locations over that time, in the same way it didn't to you here, then. Many stayed on-shore, bought when it was more affordable here, even if you did not see it that way, and either retain what they had, in another iteration, or have quit the market to explore another lifestyle; one of more flexibility and freedom; perhaps what you had before (?) but no longer wish to aspire to. We are all different. Those of us who see the local market as overextended and overpriced, do so in the light of resident experience. London, New York, Sydney, Hong Kong or Tokyo are likely to be as 'cheap' to foreign money as Auckland is to it. But has that stopped prices in many places falling at different times, for different reasons? No. Auckalnd and wider New Zealand are not imune from global infuences. And those of us who see property price falls here are not 'gloomsters' ~ In fact the opposite! I always see lower prices for any asset or commodity as a positive, don't you?!
Post the '80s sale I stayed out of the market. I was convinced that increasing migration to Australia and elsewhere, the then depressed economy, and high interest rates would give better buying opportunities later on.
Wrong. On my return a decade or so later, I was surprised to see the same property change hands at a price which equated to 5% annual compounding growth over the intervening period. I say surprised because everything I read said the market was depressed.
I was depressed as well because to me a house was no longer a commodity like a car, but a home for my family, and what others were seeing as easy capital growth was something I would have to pay for out of savings or increased borrowings. I chose savings and a delay.
While I obviously paid more, I'm less leveraged than most and cash flow positive on gross yields of 5%, and thankfully didn't get caught in the leaky home debacle. I've lost liquidity in savings but am no longer exposed to the poor post tax returns cash gave, nor to what I see as insidious devaluation of its buying power.
As for the merits of house prices being lower, I would love to see money freed up for more productive uses, but I have learned the hard way - the market decides the price no matter what your hopes are. You can wait, improve your buying power or rent for life - the market doesn't care.
My main points above are that most of New Zealand homes are very affordable. The high priced areas are at those levels because some have the ability to pay and sellers are not pressured. Both houses I bought had been in the same family for 20+ years, and I imagine reinvested a significant sum back in the market for their new abodes.
I believe the prices represented good value; I know where my family will settle; my yields are good in the meantime, and I know I could not build the same houses for anywhere near the same price. Housing is a basic need and I feel secure now I've got that sorted. Here-on out I couldn't care less where the market goes, but I suspect it will be more of the same, not a collapse.
Much, if not most, of what you post I entirely agree wit but I differ with your comment, "..You can('t) wait, (to) improve your buying power or rent for life.." I believe one can do both :), and am giving it a good shot, having been an owner here and o/s between 1975 and 2008, with a couple of years out 80-82 and 2000-2002. On reflection, those gaps slotted in quite nicely with market pauses, quite by chance! I have no problem ,as I have often posted here, with people, families paying whatever they like, wherever they like, and in fact have friends who have paid $50m and more for houses, overseas, at times that I thought were 'suspect'. But they, like you could both afford it, and it was to be their family home. My main agreement with you is that property has morphed into a commodity for enrichmnet, and lost its primary purpose. That, I believe, is the sector that will be chastened by what I see as a necessary property correction in New Zealand. To those who have a home, like you, that will be immaterial; to me it will be nothing more than satisfaction that I chose to exit the market when I did after a lifetime of ownership. To those who continue to see property as a means to richness, it will mean ruin.
Each to his own - I wouldn't know what to do with the cash if I liquidated and rented. Well actually I do and none of it would hold its value for the rest of my days, whcih is what worries me. Nothing in NZ is cheap now, let alone where it will be in decades to come when I can't compensate with increasing salary.
I agree on the property obsession for wealth comment. During my time away I noted at each trip home that it was a major topic of conversation and plastered all over the TV. Equally concerning were the mortgage funded lifestyles. I think that is largely gone.
Have a look at Japan, for where I believe we are headed ( for different reasons). Interest rates at virtually zero, and have been for many years, and property has fallen 90% in extreme cases and probably 60% more generally from their peak. The benefit of cash savings in that environment cannot overestimated. Our generation have spent a lifetime accummulating 'wealth' though inflation. What are the chances that we will give it away to the same phenomenon? Slim, I'd suggest. And as the Japanese have shown, deflation is what suits an aging society; and 'we' are aging.....
yeh, but, Japan keeps running trade surpluses, we haven't for 40 years. Japan has invested heavily in high Tech industry over the last 2 decades, what heve we done? Chased a commodity boom in Dairy farming. No we wont be like Japan we dont have the wealth or the work ethic and community belonging.
Asia Expat, good on you mate, you have worked jolly hard and deserve your reward. I agree with you that leaving NZ to seek your fortune is probably one of the only ways left for Kiwis who want to get ahead in their own country. However that may only work for a few and as the world recession tightens the international job market will make it even tougher for even the hardest working Kiwi expat...
House prices will contnue to rise here as the wealthy flee to NZ during the Recession Ugly - the sequel. If you're in you're in if you're not... too bad! Life is just going to be that much harder... I am pleased you are a good landlord, there are some here who relish in the struggle of so many who'll never get ahead because of their life's timing...
As for me, standing up for the less fortunate, who in this instance is a big perecentage of Kiwis who will never be able to buy a home, doesn't necessarily mean I am one of them. I too have worked abroad and owned my first home at 26, but that doesn't stop me from caring... you won't see me just sitting back and saying "I am ok jack, stuff em all." This world requires everyone to be able to see a chance to get ahead, not just a lucky few.
I as no doubt you have, have seen how poverty exists in so many countries around the world, and though I may be called a hazey eyed socalist by some, I firmly believe the world can only get ahead by improving the lot of every man (read women too), by giving hope, there is nothing more scarey than a man with no hope. If we fail to work on this together our walls will just get higher, our insurance premiums will sky rocket and the security industry will be the biggest provider of employment in a country with marauding youth, taking all that's not screwed down...
Because, mark my words if the rich just keep getting richer and everyone else is below the poverty line, in the future while you're patting yourself on the back and saying what a good bloke Oli is, you'll be looking over your shoulder and wondering how quickly you can get to your 'panic room.' Frankly I have seen that in South Africa, Brazil and many other countries and how they live there, both rich and poor and I'd hate to see it here...
The bulk of my time offshore has been in countries with poverty problems. The worst are where there is alienation from land, as that takes away the means for a subsistence lifestlye as a back stop.
I too fear the results of a widening wealth gap in NZ, although it has to be said that we are nowhere near as bad as others. I still believe that someone with the abilitiy can access the education to make the most of that in NZ - it is not the same elsewhere. We also have a support system, which few others have.
What does confuse me about NZ is that home ownership per se at a country wide level is affordable right now, however the focus is on where the prices are high, which is because there is demand.
Either the demand has to drop or the supply increase, to reduce prices. With internal and external migration ending up in Auckland and new homes so expensive to build I just don't share the pessimism for that location.
"We forecast that recent gains in house prices will continue, with nationwide house prices to rise 3% in 2011 and 2012 as the chronic shortage of housing supply supports prices.
Weaker immigration, increased household austerity, and higher interest rates will, however, cap the upside.."
so let me get this straight, house prices are going to keep trending up, but they aren't really...?
ECRI declares US recession inescapable
Have a look at this clip Asia ExPat ( or BigDaddy even!) and tell me: If this comes to pass, how does New Zealand escape a nasty recession as well, and how does our property ( read that as : Debt) market avoid a downturn of some significance?
This popped out yesterday , on Bloomberg . Lakshman and his crew have a good track record at forecasting recessions .
..... but he says something very important for Bernard Hickey to hear .. kindly pin back yer lug-holes big guy ... he says that this is a new recession , not a double dip . We've had a mild economic recovery . And may now be heading into a new recession .
Recessions ( until the Greenspan put an end to them ) occur frequently . They are not the end of the world as we know it .
..... if you wanna double dip , head down to the dairy and get a Tip Top hokey-pokey cone .
I liked the bit where he noted " Spain never left recession..." But to add to your point; Recessions are a regular, and I'd suggest - important, part of any economic cycle, single double or whatever multiple it's called. And to labour a point, NZ property ( and Aussie for that matter) has not had one for yonks, if ever! Recessions and price corrections are necessary to clean out the system; get rid of dead wood, remove inefficiencies etc, and allow growth to resume. We need that in our local property market; to re-set it at more rational levels, so our economy , as a whole, can move on. It won't be the death of NZ property. It will be the start of something more sustainable. Because in my view, what we have at the moment...isn't.
One school of thought has it that the GFC was made all the worse by Greenspan pumping liquidity into the system after each bubble burst . The creative-destruction process never stood a chance to operate fully .
.... which is why Bernard's refrain about unfettered capitalism is pure baloney . The central banks have alot to answer for . As do law-makers who took away the perfectly fine banking regulations , Glass Seagull . There has to be a reasonable limit to bank leverage .
Chuckle GBH - whether this is a new US recession or simply a continuation of the first is surely the mootest of moot points! The fact remains that a forecasting group with a 100% record now say it is US recession on - and the US authorities are practically devoid of bullets with which to fight it (all used up in unsuccessfully fighting the first). Given the US economy is now ENTERING this recession with U3 at 9.1% and U6 at nearly 16% AND 45million people dependent on food stamps AND interest rates already set at zero - how you can turn around and say this is an ordinary run of the mill event is bonkers!
And of course we also have Europe in the process of destroying itself and the Chinese now staggering.
I sense that your concession that a US recession is imminent represents a lessening of the force with you. Probably secretely you've even been dumping your equities. The dark side has you in its grip GBH, its not too long before even you will have to admit that.........Bernard IS YOUR FATHER!!!
andyh : an even mooterer point is that central banks should stop firing their bullets ... and let a recession run it's course . Cleanse the system . Shrink the government . Deleverage , increase savings . Get power back into the productive sector ....
A great part of the US problem is that they have wasted a hundreds of billions of $ on an ineffective stimulus and selective bail-outs . The previous " too-big-to-fail " banks are even biggerer than before , and still they're as arrogant and stupid as ever .
.. the longer that the Europeans continue to prop up this failed experiment with a common currency , the greater will be the eventual impact when it does collapse . Eurozone ? ... may the farce be with Euro .
... and lest you forget , Luke Skywalker killed the Lord of Darkness ... hasta la vista Hickey !
Blah blah blah - no comment on why asking prices rose 6% last month in Auckland.
Would be fair to consider that there may be a shortage in that city perhaps - since actual recent evidence would support that theory - but no - couldnt expect any critical thinking here.
Obvious answer, SK! If you were going to sell one of your renters ( which you should have done by now :), would you guess that the bidders would start, say 20% below your asking? What would you do? I'd suggest you'd put it up by the amount you expected to drop it during negotiations...no? So, if the bidders are going to start at 20% down, then 6% up tells me that the market would anticipate a sale price of 14% below the asking price. Looks about right to me, at this stage of proceedings......( As a matter of interest: How are people, say you, viewing the ratings agencies downgrade of NZ debt on Friday?)
Of course not, SK. I was adding buffer margins onto my property sales way back in '08, and all the transactions for years before that. It's as old as hills and standard practice, but answers your question as to why asking prices have risen. Basically it's summed up as " If it 'aint gonna sell, it may as well 'not sell' for a higher price than a lower one." (PS: those ratings downgrades are going to have a bigger effect on property prices than you think, regardless of how casual you saw the official reaction)
A conspiracy theory for you, SK, on the ratings downgrade:
Bill English was over seeing the rating s agencies the week before last, right? (yes), and he knows he has an election to fight in November, right? (yes). He also knows that he needs to do something to pay for unexpected earthquake, leaky home, insurance company problems and finance company failures, so he needs to raise money to balance the books, right? (yes). His obvious point of taxation is where the money is in NZ i.e. property. So he ‘agrees’ that the ratings agencies should lower our ratings, when he get back ( we are on negative watch, after all!) and he can act ‘all surprised’ and set about having to raise the money from property in all sorts of unpopular ways. But he, the National Party, don’t get blamed for it, and can point their fingers at Fitch and S&P and say, “It’s not us, they made us do it!”
Spring sales surge for housing market
This is such an interesting headline from the Herald. I read the article but could only find reference to "asking prices" and increase in listings. They do it every time!!
I have to say Nicholas A that the decline in house prices is painfully slow. Do you really think the ratings downgrade is going to affect the housing market significantly? I'm hoping something will trigger a decline to reality.
I didn't think the standoff would last so long but then everything has been thrown at keeping the property dream alive.
"Average sale price more than $50,000 below asking price"~ (Sunday Star Times). Asset price falls are often sticky events, properop.Whether it's shares or houses, owners find it very hard to accept their purchase will fall in price, and hold it far longer than is rational. That's why when a Minsky moment comes along ~ "OMG! Prices are gonna fall" the herd stampedes and we get an '87 type event . But with an average transaction price of $363k being $50k less than 'Asking' of $413k in August, the cracks may be easing open.
They can go lower with the OCR and I believe he will unfortunately Matt. We all know it should be over 5% in reality. Bollard will use any slowing excuse to do as such. Did you hear his National Radio interview? As for immigration floodgates i believe your right. The NZD would put alot off also.
A few simple tax changes could help NZ i feel.
1: tax the f**k out of second property and trusts (not too late)
2: lower start up company taxes and any company with less than 100 employees
3: remove RWT on all domestic savings accounts held with NZ owned banks
4: massive tax brakes on R&D
5: a far simpler PAYE system in terms of %
6: GST back to 10% across the board
As a country we are certainly going to pay in more ways than one for the mid 2000's debt fuelled greed driven accumulation of property for investment by baby boomers in the majority. And suprise suprise the younger generations are off to Australia to get ahead. We had driven up the price of housing beyond what the average New Zealand family could afford as this crazy increase in prices was not fuelled by wage/salary increases but rather because of access to cheap finance by those who already had assets they could lend against, ie baby boomers in the main.
And now we have high inflation, the prospect of higher interest rates for borrowers and an economy stalling again as our overseas trading partners such as Australia and China slow down. As I have said for some time this is a very good time to have a debt free house to live in and money in the bank. Those investment properties have to beat inflation of 5%, the costs of interest, rates and insurance and maintenance before you can even think your property is going up in value. That has to be a total of nearly 10% per annum currently before there is even a suggestion of capital gain. Our dollar has dropped considerably in value over the last few days so the cost of imports will now have to go up. Watch this space as more and more investors realise it is a mugs game. Inflation eating into the value of the assets with little or no equity in them will quickly become less appealing when they get sick of propping up the cash flow of those investments with their wages and salary.
Banks and mortgage brokers have a lot to answer for. But they need to make a profit like everyone else.
Seems patently obvious the RBNZ ought to have been slamming the door on the bank drug pushing that encouraged the property madness and left the country in the economic shit.
Sadly as we know the RBNZ takes its direction from those drug pushers, as do the fools in the Beehive. Consequently the drug pushers now own the productive economy and the residential property economy, which is far far larger!
We will never see a time when saving leads to a surplus of capital and the investment of that capital overseas to augment our GDP and boost living standards. This pipedream is a serious threat to the fat endless profits of the drug pusher banks. They have the money to influence every political party load of plonkers. whether red blue green or bloody purple.
This is not a nation. It is a big bankers private farm and all you lot are serfs to the landlords. How you like them apples?
I was listening to National Radio archive interviews the other day Wolly. Katherine Ryan interview with Bollard this week he said this:
Bollard: "you can't reward both savers and borrowers". LOL, my god the guy is full of shit.
When was the last time you remember NZ savers being rewarded?
Take your nz property market and mix with the aussie housing implosion..add in a spoon of decay across the usa and a touch of Chinese credit chaos...stir well with a euro farce and cook for two decades.
Serve on a matt of fiat paper. Not spicey enuff?....use a dash of political BS.
Aust Homes set for "50pc crash"
The next global recession will make the GFC look like a picnic, with property prices to fall by almost half across Australia.
That's the view of American economic forecaster Harry Dent, who says Australia could be dragged into a massive global economic slowdown, brought on by Europe's sovereign debt crisis.
http://www.skynews.com.au/businessnews/article.aspx?id=668484&vId=
Harry Dent was awarded the " Ultimate Charlatan " award by financial reporting site " maxfunds " . In 2006 , before the GFC struck , he predicted that the Dow would surpass 40 000 points before 2010 , and that the Nasdaq would exceed 13 500 points . Markets crashed thereafter .
... now , at what may well be the bottom of the market , he is predicting a crash . Having completely missed the last one , he's jumping on the gloom & doom bandwagon for the next one .
I wonder if Bernard has a complete collection of the Harry S. Dent books ?
2008 RV $5m - Sold $2m
http://www.stuff.co.nz/business/farming/5713378/Vineyard-sells-for-2m
Can you imagine having paid rates on that ridiculously inflated land value over the past 3 years? But, in the same vein can you imagine QV resetting rural land prices in line with actual sales in the next ratings valuation period? Individual land owners might be prepared to take a 50% devaluation on their land provided their rates reduce by a similarly significant amount - but that's not how local authority funding works. The reality is - one could see RVs fall dramatically but the rates due on the property remain the same, or more likely - go up.
Kate..you fail to realise rate revenue is determined by council splurge...a 50% drop in values for one sector is not a 50% drop in rates...the other areas also dropped. Yes there will be rate reductions but not 50%. The real problem is the extent to which idiots in councils sniffed an endless flow of loot and splurged accordingly.
The average selling prices are still lagging more than $50,000 behind asking prices.
The average asking price in September rose 2 per cent to $425,565, according to the latest New Zealand Property Report from Realestate.co.nz.
However, selling prices are flat, rising just 1 per cent in the past year, despite the lowest floating mortgage interest rates since the 1960s
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