The Productivity Commission has called for the immediate release of new land for residential development in areas such as Auckland and Christchurch to help alleviate housing affordability problems, a recommendation the Auckland City Council has attacked as narrow minded.
There also needed to be more moderate-density brownfields development, particularly in Auckland, as well as development of greenfields sites which were close to existing centres, local employment, and services, the Commission said.
The Auckland Council needed to quickly bring significant tracts of both types of land to the market, and signal land with future potential for urban development, while making a commitment to major offsite infrastructure capacity.
Auckland City Council Deputy Mayor Penny Hulse attacked the recommendations, saying the Commission failed to understand how modern cities developed (see her full comments below). Aucklanders did not want their city sprawling from Northland to Hamilton, and while there were plans to allow for 160,000 new builds outside the limits, the council was looking to develop 280,000 new properties within existing boundaries, Hulse said.
The Auckland City Council is looking to allow for up to 40% of growth in the city to occur outside its existing metropolitan urban limits over the next 30 years. Last year it had suggested only 25% of new development would be allowed outside the limits, a policy that was attacked by the Commission in its draft report last year, and subsequently revised by the council.
The government was also not pleased with the Auckland Council's initial intentions, and has been in discussions with the council about allowing for more development outside the current limits.
Finance Minister Bill English told media in Parliament on Wednesday that Auckland City Council needed to take into account more the needs of lower income New Zealanders, "because the existing policies have tended to push prices up pretty sharply in Auckland more so than anywhere else."
Meanwhile, the government needed to monitor the impact of its move to not allow building owners to claim depreciation on commercial and rental properties with an expected useful life of over 50 years, for evidence that expenditure levels relative to the proper upkeep and safety of buildings was being maintained, the Commission said.
New Zealand's social housing sector would also need considerably more assistance if it is to scale up to the extent of work required of it, and that must be done within a reasonably short timeframe.
'We'll consider it'
Finance Minister Bill English today tabled the Commission's final report into housing affordability, saying the government would carefully consider its recommendations over coming months.
"New Zealand experienced a sharp rise in house prices over the past decade, resulting in declines in housing affordability and home-ownership rates and large increases in household debt," English said.
"Rising prices made it harder for families to climb the first rung on the housing ladder and the accumulation of debt left the New Zealand economy more vulnerable to external shocks. These imbalances also create further pressure on demand for social housing and accommodation subsidies," he said.
Release more land
Following the release of the report, Commission Chair Murray Sherwin said it was fundamental to the success of communities that comfortable, affordable housing was available, particularly at the lower end of the property ladder.
"Younger people and those on lower incomes currently have much less chance of ever purchasing their own home,” Sherwin said.
The Commission had found that taxation was not a key driver of the recent housing boom, he said.
“We carefully considered the claims that housing is tax advantaged, but concluded that any advantage is much smaller than often suggested,” Sherwin said.
Containment policies such as ‘Smart Growth’ and Auckland’s Metropolitan Urban Limit (MUL) were also found by the Commission to have an adverse effect on housing affordability by limiting the availability of land for housing.
“Pressure on land prices needs to be reduced and the Commission has recommended that there be an immediate release of new land for residential development in high demand areas such as Auckland and Christchurch," Sherwin said.
“Councils should also ensure they aren’t putting up barriers to development and should take a less constrained approach to urban planning. There also needs to be a review of regulatory processes with the aim of speeding up and simplifying consent processes," he said.
“There is no need for our homes to be expensive - we can construct quality, affordable homes. But, it will take councils and developers to work together so that sections can come to market quickly at a price that allows the building of homes at an affordable price."
Social housing needs assistance
The Commission also recommended reconsideration of current social housing reforms.
“The community housing sector has a unique and very valuable role to fill. It can provide below market rents and more security of tenure than is available from private landlords. It is also well suited to providing the range of ‘wrap around’ services required by many social housing tenants with needs that run well beyond just affordable housing," Sherwin said.
“But, the social housing sector will need considerable assistance if it is to scale up to the extent required, and do so within a reasonably short timeframe. The Social Housing Fund set up to help the community housing sector grow is not equal to the task demanded of it," he said.
Read more
See our report on the Productivity's draft housing affordability report: Productivity Commission wants more land for home building, puts tax changes in 'too hard' basket in draft report on housing affordability.
Also see Alex Tarrant's piece on the draft report: All the Productivity Commission needed to say in its housing affordability report: 'Quit whining about tax; It's land supply, stupid'
Following its initial investigations into housing affordability and international freight costs, the Productivity Commission is now setting up to investigate the regulatory powers of local government. See: Council development levies, urban planning, building consent and inspection processes set to fall under Productivity Commission spotlight.
Political reaction
'We need a capital gains tax'
Green Party co-leader Russel Norman said the Commission’s main recommendations for affordable housing would create sprawling, congested, and less productive cities.
"Relaxing Auckland’s urban boundary, combined with Government subsidised motorways, will simply lead to further unsustainable urban sprawl and further congestion on Auckland’s roads,” Norman said.
“Facilitating urban sprawl is not the way to build highly productive cities where people live close to their workplaces, can easily travel around the city on alternatives to congested roads, and can enjoy high quality amenities within walking distance of home. The Productivity Commission’s plan will condemn people to spending large amounts of their time sitting in traffic, spending money on fuel," he said.
“New Zealand already spends $8 billion a year importing oil, which will only continue to rise over time. The so-called Productivity Commission wants us to spend even more importing oil to fuel traffic jams on Government subsidised motorways. Smart urban planning can be achieved through rules that facilitate medium density development on mass transport spines, not more urban sprawl.”
Noman said the Commission's findings were incongruous with the Savings Workings Group and OECD’s findings last year on the role a capital gains tax would have in creating more affordable housing.
“The lack of a comprehensive tax on capital gains is keeping the dream of home ownership out of reach for many New Zealanders, especially first home buyers who struggle to get a foot on the home ownership ladder,” Norman said.
“The Government appointed Savings Working Group found in 2011 that house prices rose an additional 50 percent from 2001 to 2007 due to the preferential tax treatment of housing including the absence of a capital gains tax on housing. Likewise, the OECD found that the absence of a capital gains tax had significantly affected home affordability, widening inequalities in wealth, and leading to disproportionate levels of investment into housing instead of into the productive sector," he said.
“The Commission is defending the status quo saying that the impacts of a capital gains tax would be ‘unclear’ and have ‘significant practical challenges’ to implement, yet New Zealand remains an outlier by not having a comprehensive tax on capital gains. A capital gains tax which excluded the family home would benefit the vast majority of New Zealanders through more affordable housing and jobs as investors take money out of housing speculation and invest in the manufacturing and export sectors.”
'Release land to help the tenant generation'
ACT Party leader John Banks said the report had revealed the "disturbing emergence of a tenant generation." The Productivity Commission was established as part of a 2008 confidence and supply agreement between National and ACT.
“Bad urban planning and housing policies are denying the dream of home ownership to a whole generation of New Zealanders. These policies have increased costs and created delays at every step of home building process," Banks said.
“Council restraints on the supply of land for residential houses have had a big impact, pushing land prices up and with it the average price of a modest home. This upward price rise is reflected in our housing statistics. Home ownership rates have plummeted, largely because house prices have skyrocketed. The ratio of house price to income has doubled since the 1980s, while home ownership rates have fallen as low as 60 per cent," he said.
“The proportion of 35-44 year olds renting has doubled from 20 per cent to 40 per cent. One wonders whether our children and grandchildren will ever afford to be home owners.
“The inquiry reveals a number of steps that could be taken if we are serious about reversing this trend, with the restrictions on land being singled out as an area requring change. ACT would like to see action taken immediately to lift the restrictions on buildable land so that more New Zealanders, particularly the young, can afford to own their own piece of New Zealand,” Banks said.
Reinvest Housing NZ's dividend
Labour Party Housing spokeswoman Annette King said the Government should be doing some serious self-analysis following the release of the report, which showed its social housing policy was not up to task on the same day another report highlighted New Zealand’s on-going rental crisis.
“The Productivity Commission’s report on housing affordability points out that the Government’s social housing fund, set up to help grow the community housing sector, isn’t up to the task and needs ‘considerable assistance’ within a short space of time. It’s a sobering read. There is NZ$170 million worth of applications competing for a measly NZ$40 million in allocated funds," King said.
“This is nonsensical when the government, as part of their ‘cost-saving’ change programme, recently slammed the door on third parties who were willing and able to assist tenants into private rentals if necessary," she said.
“The Government takes a dividend from Housing New Zealand. Over the next year it is forecast to be NZ$73million. Why not invest some of that into community housing?
“We know there’s a housing crisis in Christchurch and in Auckland. Figures released by Trade Me today show the shortage of rental housing is fuelling rent rises across the country. The flow on from that is a lack of affordable homes for first-home buyers," King said.
“As the Productivity Commission chair, Murray Sherwin, says ‘it is fundamental to the success of communities that comfortable, affordable housing is available’, especially at the lower end of the property ladder. After four years you would expect National would have woken up to the fact we have a housing crisis, yet Bill English is talking about having a look at the Commission’s report ‘over the next few months’.
“More navel gazing isn’t going to fix a problem that’s here today. The term ‘housing affordability’ is becoming a misnomer. When you have people living in cars, you’re talking unaffordability," she said.
'Aucklanders don't want sprawl'
Meanwhile, Auckland City Council Deputy Mayor Penny Hulse said the report was too narrow minded.
"The commission fails to come up with solutions to deal with the cost of building materials, the favourable tax treatment housing receives or take into account the ongoing costs of living in a vast sprawling city," Hulse said.
"It dismisses the added expense to Auckland from having to provide infrastructure over a greater area or the impact to the homeowner from increased travel costs because of having to live further and further from major infrastructure. The Productivity Commission has ignored advice provided to them on these issues by the Auckland Council. They have clearly not read the Auckland Plan and as a result, the findings are ideological nonsense," she said.
"What the Auckland Plan actually plans for is 160,000 houses to be built outside the current urban limit. That is a city outside the existing boundaries bigger than Hamilton, Dunedin, Palmerston North and Hastings combined. How can anyone think that is not large enough.
"Aucklanders have told us they don't want their city sprawling from Northland to Hamilton and we are looking at realistic solutions, supported by the Property Council, to develop 280,000 new dwellings within the existing urban boundaries," Hulse said.
"There is ample room to redevelop land that gives people the chance to live near to employment, educational or lifestyle opportunities. It is that demand, along with population growth, that is driving the market, not the cost of land at the boundaries," she said.
181 Comments
Christchurch has enough land available for now. Auckland doesn't.
The Crown should replace it's state housing assets in the central suburbs with housing on the periphery, so that those inner areas can be sold and redeveloped for the types of housing Aucklanders want. Tracts of state housing in Glen Innis, Sandringham, Mt Albert, Orakei and other areas should be desposed of and sold to private owners in the short term, which would counter the supply issue in Central Auckland, because in all honesty no one really wants to live in Albany!
This backs up Hugh's point about the need to finance infrastructure properly. Under the current system councils are allowed to use development contributions to cross-subsidise their other activities, by charging much more than the actual cost of infrastructure provided. This rort needs to be clamped down on.
Hugh, you have no idea what you are talking about at all.
There are 1000s of hectares already rezoned around ChCh. If all of that was developed there would be something like 20,000 more sections than pre EQ, which with 7,000 sections lost allows for say 13,000 extra sections ie enough housing for 40,000 people when in fact we have lost 20-30,000 people!
That leaves a bit of a surplus!
Rezoning land will barely reduce prices one iota. Development costs are unchanged and as I've said before the raw land component is only a tiny fraction of the final sale price (Does it make any substantive difference if the raw land cost is reduced to $5000 from $25,000? No is the answer because it's not going to cut prices much from the current $150,000ish pricing levels).
You completely misunderstand markets if you think creating thousands of sections in godforesaken places like Albany, Manurewa, Henderson Valley etc will lower house prices in Central Auckland.
The best way to make central areas of Auckland more affordable is for the state to reduce it's holdings in desirable inner areas and replace them with more property on the periphery close to local centres.
Chris J, the point Hugh and others such as PhilBest have made repeatedly is that land prices in the central city relate to the price of land at the fringe, i.e. if the price of fringe land is inflated through restrictive land-use policies that flows through to inflated prices in the CBD.
Let's face it, central Auckland is no Manhattan but maybe the planners think that if we can get property prices up to Manhattan levels then it will also become a "happening" place to be. However, as PB has shown, artificially high land prices in the CBD actually work against the density that planners want, and need, to happen (if their expensive train sets are to be viable).
The link/point is at best dubious, especially as PB claims it....in which case its probably wrong as he uses political and lot logic as a thought process. Now if there is a huge pressure on land, yes I can see fringe prices might play a part....but for me the reason CBD is so expensive is that it is the CBD or its an area very close, that means ppl will pay....they also are in a ponzi scheme so they are happy to pay more and more thinking they can make money tax free...so there are a whole raft of factors at play....
regards
WTF do YOU know about this subject? Kleefer is obviously onto it.
It took YEARS of patient repeated explanations to even get you to wake up to the fact that zoning of urban fringe land enabled the owners of ordinary farmland to suddenly ask a few hundred times as much per acre for their land, as what ordinary farmland is worth. (Your mate PDK seems to be even slower than you on this point - perhaps in about 2018 he might get it).
The findings in the Productivity Commission's Report, appendix C, pages 298 and 299, show a roughly unchanging mathematical relationship for the value of land at certain distances from the Akl CBD over a number of years. That is, the price has gone up by a similar proportion at the finge and at the centre of the urban area.
This is exactly what I have always said that an analysis of this nature WOULD find. Thank you. I am basing this on academic research, in which I am widely read. You, on the other hand, have only ever displayed on this forum, an utter ignorance of all matters economic.
I recall that ChrisJ has argued that prices inflate from the CBD outwards rather than from the fringe inwards. In a way, this is academic - the undeniable fact is that the regulatory fringe growth constraints cause the price inflation - if the growth constraints are there, we have price inflation; if the fringe growth constraints are NOT there, we do NOT have price inflation.
It is absurd and illogical to try and claim that the price inflation starts at the CBD and would have happened anyway, with the enactment of fringe growth constraints just being a coincidence of timing. This is absurd and illogical precisely because it would have us believe that this coincidence has happened hundreds of times around the world; and in fact it is INEVITABLE - you enact fringe growth constraints, you get price inflation. You want us to believe that something else happened to push up CBD land values in every single city in the world that enacted strict fringe growth constraints, independent of that enactment?
It is also inevitable that when you compare CBD land prices between cities around the world, the ones with the cheapest CBD land and the cheapest CBD apartment rents, will also have the cheapest fringe McMansions. And the difference in CBD apartment rents is GREATER than the difference in the prices of the fringe McMansions. So CONGRATULATIONS to the planners who tell us they are "increasing housing choice" to enable more CBD apartment living; when their war on the suburban McMansion does the foregoing to the city's Real Estate market.
There is hardly a more glaring example of planner hubris, to prove F A Hayek right.
It's a 330 page report.
Welcome help going through it....
http://www.productivity.govt.nz/sites/default/files/Final%20Housing%20Affordability%20Report_0.pdf
cheers
Alex
I've speed-read it.
I am very disappointed at the Commission's lack of attention to:
1) The abundant very damning British academic analysis and experience re housing affordability and cyclical volatility, given many more decades of experience with urban growth constraint planning
2) Alternative methods of infrastructure funding that are commonly in use in the USA, that do not front-load into housing prices (eg MUD bonds, "Latecomer" financing)
3) The distortions of house prices across the entire market when the price of new houses is inflated, that eliminate "trickle down"/"filtering" first home options and cause serious inter-generational equity issues and wealth transfers. A focus on building affordable housing is a red herring
4) The international synchronicity of "urban growth constraint" planning fashions, which is obviously far more significant than the international synchronicity of capital flows and low interest rates in the international synchronicity of house price bubbles
5) The difference between long run and short run "supply" elasticity, when there are examples of markets (Las Vegas, Phoenix; parts of Ireland and parts of Spain) that had high long run supply elasticity, and a serious house price inflation episode combined with serious overbuilding, leading to the worst possible economic crash. Some of the Commission's recommendations are liable to create the conditions for a future episode of this kind in NZ. As long as the "supply" of land is predictable enough due to the involvement of "infrastructure" plans and requirements for "contiguity" and so on, even if the "supply" quantity is high, it is possible for all players in the market including local government, to succumb to "animal spirits" in the chasing of shares of "planning gain". The minimisation of "planning gain" through "the principle of competitive land supply" requires a lot more market freedom than the commission seems to have been prepared to discuss.
The Commission's report is very thorough in most of the areas of analysis and discussion that it could be expected to enter on, and displays boldness in the face of expected criticisms on certain subjects such as taxation. I am especially pleased with the Commission's skepticism about planner's claims regarding "urban form" and potential "savings on infrastructure", and the very good research that the Commission has unearthed on the subject.
I LOVE the Commission's criticism of the Newman and Kenworthy (1999) study. I personally am highly skeptical of these particular authors objectivity at all times.
I am fascinated with the findings in the appendix C, pages 298 and 299, that show a roughly unchanging mathematical relationship for the value of land at certain distances from the Akl CBD over a number of years.
I take it that the inflation of the price of land at the fringe, deflected land prices from the fringe to the CBD upwards reasonably consistently with the historical relationship in locational values. This is further proof of an argument that I have long been making, that because land costs inflate by proportionate amounts across the entire urban land price curve, the dollar increase acts as a greater barrier to turnover and redevelopment the closer one gets to the CBD. Disproportionate amounts of redevelopment, new development, and location by households and businesses; is deflected further away from the CBD towards the "least unaffordable" land.
I have frequently quoted academic comment by Alain Bertaud, Patrick Troy, and Anthony Downs, to this effect. I have also recently discovered some very detailed analytical papers from the Washington Research Council that "finds" this effect at work in the Seattle area.
This is of course the exact opposite of what the planners allege to be working towards. In Singapore, this level of incompetence and/or dishonesty from public servants would lead to sackings if not jail sentences. Akl's planners and assorted utopians need their come-uppance in spades before they do any more damage to society and the economy.
In reality, the Productivity Commission is just the ultra-right wing being given a government vehicle in an impression to create the impression of legitimacy for their hobby horses.
Simply a Trojan horse for the Business Roundtable.
The far right, in the form of Act, gets 1% in the polls. But Key weasels up to them, & lets them twist his arm right up to his neck, giving them anything they want.
Once they are in position, the Commission can start banging on about land zoning, even if that is about 100 miles away from the important productivity issues in NZ, such as education & training, technology, using the tax system to favour productive enterprises rather investment in real estate, etc etc.
So far so predictable. But no doubt Key will leap to their wishes
Hardly a greeny, centrist actually. However I find the present debate hilarious.
All of these ultra-right wingers claim that their desire to remove town limits and allow further urban sprawl is to help create affordable housing for the less well off. So they are actually the closet socialists. Yeah right.
I would of course like to see more affordable housing, however there are other ways such as introducing a CGT on landlords etc to reduce Kiwis' love affair with rental housing & let young first home buyers have a sniff of the market. An inefficient construction industry doesn't help. Ultra-stimulatory interest rates are helping to prop up the market too.
I read an article in The Economist a year or so ago that pointed out that some housing bubbles seemed linked to lack of land to build on (from physical constraints or zoning limits). However others didn't seem to have any such link - eg Spain. The argument isn't as simple as Hugh P, Brash etc make out.
My core point though is that why is the Productivity Commission making zoning its big boogy? Would you say that the people of Hong Kong, Amsterdam, Singapore, San Francisco or Seoul were less productive than those of Auckland? The Commission would recommend that they encourage urban sprawl to improve their productivity!
I don’t know who first said, NZers have a love affair with property, but it logically is not true. There is generally only two ways you can put a roof over your head, either own it or rent it. Our ownership/rental ratio is about average worldwide. However, the % of our total equity/income via mortgage that is tidied up in housing, or income that is paid to rent, is very high. Putting a roof over you and your families head is first priority before you can even think about spending/investing money on any other type of investment. This basic requirement costs, as a % of our income, a lot less in many overseas countries. This naturally leaves them more to invest in their business (helps increase productivity), stock market, savings banks, etc. if we were paid more or our housing was cheaper, then we could also do these types of things, for the benefit of us all.
Philly,
What I said above in my critique of the Report, is the explanation for Spain:
5) The difference between long run and short run "supply" elasticity, when there are examples of markets (Las Vegas, Phoenix; parts of Ireland and parts of Spain) that had high long run supply elasticity, and a serious house price inflation episode combined with serious overbuilding, leading to the worst possible economic crash. Some of the Commission's recommendations are liable to create the conditions for a future episode of this kind in NZ.
As long as the "supply" of land is predictable enough due to the involvement of "infrastructure" plans and requirements for "contiguity" and so on, even if the "supply" quantity is high, it is possible for all players in the market including local government, to succumb to "animal spirits" in the chasing of shares of "planning gain". The minimisation of "planning gain" through "the principle of competitive land supply" requires a lot more market freedom than the commission seems to have been prepared to discuss.
The dozens of fast growing cities in the USA that had no house price bubble at all, happen to have very high short run supply elasticity, and competition enabling development permission procedures rather than procedures that still represent a quota-sharing scheme. Big quota volumes, but still a quota scheme with govt reaping a share via fees. As I say, the Commission's recommendations are nowhere near enough committed to market freedom, to ensure price stability. We could well be Ireland yet - high prices, high "planning gain", land bankers making a killing, local govt raking in the revenue, and serious "overbuilding"; followed by the mother of all crashes.
As a Greenie, Im all for being held to account....because right now I see the likes of you pushing to foster costs and risks onto others with no justification than libertarian politics.
Lets not forget the greens got 10~11% in the last election v 1000 votes for libertarians. So sure get voted in....
regards
You have no argument to refute when you suggest that this is some bogey-man of the ultra-right wing in cahoots with the productivity commission in cahoots with all your other political bias' to bring about 'urban sprawl'.
Reality is for NZ to be competitive we need to be able to be able to afford housing, and preferably not consume all our capital and go into huge debt in providing it. Given our meagre income, housing should not cost what it does, and international comparisons demonstrate this.
The result does not necessarily have to be 'sprawl'. But all these complaints about sprawl amount to nothing more than, "I'm allowed my section, but nobody else is allowed one". All manner of restrictions and controls are brought about.
Once again Ngati Nimby proves to be the biggest tribe in NZ by a long shot.
CGT will not do it, if you bring in a CGT, then everyone will like Bob Jones, "never sell". Then you have to get into expensive processes of trying to tax people on unrealised gains etc ... i.e. good for tax lawyers/accountants etc
Robby: "if you bring in a CGT, then everyone will like Bob Jones, "never sell""
The same as the Bob Jones' of countries with CGT "never sell", of course. Such ultra-lefty countries such as Australia, the US, the UK, Japan, Germany, France, Korea, Singapore, etc etc etc
D'oooh!!
Exactly my point re: CGT:
a) does not raise what proponents say it will. (Remember Goff not being able to say how much it would raise, probably because you could drive a bus through the data revisions)
b) is vulnerable in a downturn as property turnover slows, CGT reveune plummets (just look at some Australian state budgets, govt becomes reliant on the revenue, then when it disappears, have to get the knife out)
c) Aust etc still had bubbles despite having a CGT.
d) The truly rich never sell, so never pay it, mostly it is a tax on the middle income people perhaps making a lifestyle/family related up/downgrade.
Now that said, a land tax could be more equitable all round, but rates are essentially a form of land tax that has been rising at >inflation rates, so overtime perhaps this will become defacto land-tax, unless local govt is brought into line.
a) Its not meant to.....its meant to stop ppl invetsing to dodge tax....
b) As is GST, so?
c) Well lets look at why there was a bubble, cheap money and ii) a CGT isnt meant to and never will stop a bubble...it just aims to stop stupid invetsment decisions...
d) The truely rich go into things like hedge funds and various other ponzi schemes that bleed real wealth / profit out of the system.....so a CGT on shares etc is a good idea.
land tax, yes it will come..
regards
Actually he does.....they sing from the same mantra.....de-regulate....turn NZ into a cesspit like the USA but hey some of us will make a fortune......
Housing is a ponzi scheme, it bears at best a dubious link to NZ being competititve....quite simple.....everybody is gambling in a game of musiical chairs that they can make a capital gain and not pay CGT.....so bring in a CGT...kill the ponzi scheme driver(s). Then we will have affordable housing. What we need is that money being waste don a ponzi scheme re-directed into making goods....
De-regulation is a crock, it has turned the banking system into a nightmare that we ie normal ppl will have to pay for....shortly as a second great depression un-folds.
regards
One of interest.co.nz's resident housing racketeer smokescreeners endlessly recycled offerings. Get this, pal - the rational discussion is all going the opposite direction to you. Read the Commission's report - can you read? I guess even that is little use if you are incapable of understanding economics and markets. There are such people, I am well aware.
I do know of an academic survey that found that women are far less likely to understand basic economics than men. It also found (in the USA) that any regular Democrat voter understood less than any regular Republican voter. And it found that Catholics understood economics less well than most other religions; "evangelical" protestants were the top scorers, so no wonder certain parts of the USA elect more sensible governments.
Ref: Buturovic and Klein, "Economic Enlightenment in Relation to College-going, Ideology, and Other Variables: A Zogby Survey of Americans". Of course the study aroused a storm of hissy fits from the economically illiterate academics and pundits, along the lines of "but you right wing free market ideologues determined what the correct answers were......!!!!!!!! Restricting the supply of something does not force the price up.......!!!!!!! Waaaah, waaaaah, waaaaah........!!!!!!!!" And the sun does too rise in the West......!!!!!!!!HUGH PAVLETICH YOU ARE EITHER BLATANTLY LYING OR A FOOL
If the Council had acted responsibly from the time of the first earthquake events September 2010 and allowed affordable new sections on the good ground on the fringes of the City from the outset, there would likely have been an additional 5,000 plus new homes on the fringes of Christchurch by now
That is entirely untrue. There is NO possible way AT ALL that 5000 houses could have been constructed in ChCh between Sept 6 and today.
For starters after Sept 4 scores of homes were started in areas where they were completely destroyed in Feb or June and dozens more post Sept 4 homes now sit in red zones (mainly Brooklands and Burwood).
Secondly the main reason new homes are not being built has nothing to do with land zoning and everything to do with insurance - both settlements and coverage.
Thirdly there is little desire to rebuild. Most people are opting for settlements rather than rebuilding, and of course as you will see from section sales there isn't actually any real demand for land at any price - (even yellow zoned existing sections are going at low prices in the city and blue zoned at next to nothing - asking prices at $50k are out there right now).
Fourthly, building houses at twice the rate of the biggest construction boom years during a period when there were at least 3 extreme earthquake events would simply never have been possible.
You really need to get real and stop trotting out rubbish.
Development levies and council fees should be the big target. More flexibility for getting development proposals through with less conditions and expenses placed on the developer is key to lowering prices. Wholesale rezoning won't acheive anything useful, as we have already seen over the past 9 months since Sutton started the rezoning free for all.
$50,000 sections is a nonsense that will never happen close to main centres, certainly never in Auckland or Wellington where geographical constraints restrict supply much more than ChCh. It may well happen in ChCh for other reasons (ie everyone leaves), but it won't be new subdivision lots selling at these prices, it will be existing sites in older areas (as we are already seeing).
ChrisJ, you need to read a good urban economics text book.
Govt fees are just one share of "planning gain".
When the level of price inflation from distorted supply of land is higher than the fees, eliminating the fees will not bring prices down, it will just grant a bigger share of planning gain to land vendors and developers and other participants.
What Hugh is talking about actually exists; the problem people in NZ have believing it, is that we are so numbed into insensitivity to socialism and govt interference in everything, we can't get our tiny minds around the level of market freedom that actually has the kind of results Hugh is talking about.
The ability of developers to "leapfrog" develop is crucial – to keep landowners closer to the fringes disciplined on pricing. Subdivision developers can purchase “blind” via third parties, with the objective of buying it at true rural values or very close to it.
This is why it was a failure on the Productivity Commission's part, that they did not use the “true rural values” as a base in determining fringe land price uplift. The “urban echo values” (or "option values") do extend out a k or two from the fringe. The volume of land out from the fringes developed annually for urban use is miniscule in the whole scheme of things. The land bankers who can and do corner the supply of land immediately adjacent to urban fringes, simply cannot corner every bit of land within 5 minutes drive of the fringe - this can be easily 100 years supply for urban growth. This is really the most significant key to the affordable stable housing markets in the USA, of which there are dozens if not a couple of hundred. Development permission processes and infrastructure provision processes can both be de facto supply rationing schemes, and bureaucrats insistence that "there is x years of supply" provided for, is basically useless for price stability and affordability. Another crucial key is short run supply elasticity and also the shape of the supply curve. Phoenix and Las Vegas were long run "elastic supply" markets, and "supply" kicked in with a vengeance only once "planning gain" or a similar factor was significantly elevated. Government semi monopoly land ownership can be abused to maximise prices; also local government chasing fee revenue, can participate willingly in "over supply" without prices coming down for some time, with poor short run supply elasticity due to regulatory distortions having already initiated steep price increases. These factors also explain Ireland and Spain. Price inflation and oversupply in combination, lead to the biggest possible crash. There is long standing academic literature to justify discontinuous "splatter" development. Developers can more intelligently decide on the best use of still-undeveloped land after the urban area has already partly grown around and beyond it, compared to when they are expected to develop land "contiguously".
This is an interesting comment in the report on scale - pg 183
The New Zealand building industry is dominated by small firms and has been characterised as a “cottage industry” (Fletcher Building, sub. 21, p. 4). Sole traders (with zero employees) are by far the most common firm size in the residential building sector.
Conversely, businesses employing more than 20 employees constitute only 9% of total employment (Statistics New Zealand, 2011b). Compared with Australia there is a much smaller proportion of group home builders and multi-unit home designs (Figure 10.5).
..........
Larger firms are able to generate cost reductions through more efficient organisation of subcontractors, and working on several houses with an efficient schedule which results in less downtime (Page and Fung, 2011).
Conversely, many smaller firms “do not have the capability or capacity to implement good management and quality control systems” (Registered Master Builders Federation, sub. 16, p. 13).
Inquiry participants also noted that larger firms have the ability to purchase at a greater scale, particularly materials, with one large building firm estimating that they are able to reduce material costs by 10–15% through ‘smart buying’
Hugh are you really comparing apples with apples??
Some of these homes in Aus (especially in Qld) and the US are built with unreinforced masonry (exposed internal brick walls) even single skin masonry in the the garages, such construction is incredibly cheap and unable to be reproduced in NZ for obvious reasons.
But apart from that can you please point to any firms in Aus that charge $AU800/m2 for a new build, because from what I've seen it's more like $AU1000 for what in NZ is $1200/m2 which is almost the same accounting for exchange rates.
Now comparing to the US, our currency is normally US60c which of course makes a house at $US600 about $1000 here so it's not a million miles away especially considering we are in a recession.
Remember the $1000/m2 or less is possible in NZ for VERY low budget construction (many of the big chains offer big very basic homes at that level). $1200/m2 will get a mid size average home. $1500/m2 for a smaller average home. So putting exact numbers on what it costs in any place is always misleading unless you are comparing the exact equivalents.
It can cost $3000/m2 for a 2 storey high stud house in NZ - that certainly doesn't mean you can't build a super budget house 90m2 for $80,000 if you really really REALLY cut corners (ie essentially build a lined corrugate shed). So show us some companies that really build equivalent quality homes at those prices!
(As always, I expect Hugh to get on his high horse and fudge the facts and not give us any examples - prove me wrong!).
Yes indeed, Alex, re the lack of scale. I've been around building sites for over half a century and apart from a little more pre-fabbing (roof trusses, the occasional entire wall etc) the methods used now would not faze a builder from way back then. And the other thread re Lockwoods and Fraemohs type housing shows what can be done: an OOTB small Lockie is circa $75K ex factory. But good luck with the Bracing...
To get big, you have to have many ducks in a row, and the issues of having staff and of scaling up, mean that it's easier to stay small, use subbies (sole traders like you) and avoid the headaches of scale: wages, levies, contracts, leave, scheduling, contingencies, PG's, OSH, compliance, DoL, Safety at Heights, etc. Far better to con DBH out of an LBP ticket, and carry on, on your own.
There are I'm sure plenty of ways to build stylish, warm affordable housing but there is not the market for it in NZ absent a new round of large scale state housing development or perhaps iwi housing. I spoke to a sales manager at this company Framecad before Christmas as I thought one of their roll forming frame machines would be a great business opportunity especially in Christchurch. So many opportunities for training unskilled labour too.
http://framecad.com/gallery/videos-and-animations/framemaster-f300i-demonstration-video
He said they would love to sell more machines here but there's just not the volume and you would be a very brave person to get into the building industry here, Christchurch rebuild included. You need to be building hundreds of houses a year. He told me of a couple of guys in the US who have built an enormous business building thousands of prefab homes in large factories using their machines and trucking them partially or fully assembled to site.
- Even if you could build a nice 3 bedroom home for say $75,000 could you find enough reasonably priced land in NZ to put them on. Govt/Iwi intervention is needed here. Joint venture anyone?
- Would Kiwi's raised on a diet of house porn in magazines and TV accept prefab type housing no matter how good it was. Everybody wants something "different". That said many people live in apartments and in townhouses and the original state houses weren't exactly of great variety
"........could you find enough reasonably priced land in NZ to put them on......"?
We have squillions of acres of farmland priced at $10,000 per acre or less.
Somehow, affordable cities in the USA convert farmland to urban development with minimal profit-rake-off for incumbent land owners and land bankers. Even 1 acre sections might still only be $40,000. 2 acres might be not much more than $50,000 because the raw land is somehow still only worth about what it was as farmland. The "cost of development" is not a lot different if you are going to put a house on 1 acre or on 2 acres.
And "cost of development" is roughly what you are paying for, on top of the cost of farmland; in these affordable US cities. You are NOT paying for some land owner's Lotto win when the local urban plan was revised to include his farm. This is NINETY PERCENT of this whole debate we are having.
You can see just what a racket this is by comparing the prices of sections of different sizes here: in the affordable US cities adding an acre adds about $10,000 to the cost - here, adding a TENTH of an acre adds about $100,000 to the cost.
Then there is the "urban land rent curve" from fringe to CBD, to consider. There are actually city centres in the USA, in cities bigger than ours, where CBD land is cheaper per acre than our fringe land. The cost of CBD apartments in these cities is a quarter or less, than in Akl. Under what conditions do MORE people have a "choice" of living in a CBD apartment? DOH.
And our planners say they are about "increasing choice"?????? Sack the b----y incompetents NOW before they do any MORE damage to our economy and society.
I agree. On another post I suggested the govt buying up a lot of rural zoned land on the fringes, rezoning it residential and selling back at cost, pummeling the land bankers and resetting land values from the outside in rather than from an overpriced centre out. Never happen under Labour or National though as their sole objectives are supporting existing property values and protecting the banks.
I am a free market purist, but even I support that proposal as the next best thing after liberalisation to Texan levels. The Netherlands has been doing that for decades; of course they are truly short of land, they have 20 million people in the amount of space Canterbury contains. But this is why their economy is very much more competitive than Britain's, where land banking has been the most lucrative thing to be engaged in for about 60 years now.
NO MAJOR NZ CITIES HAVE $10,000 PER ACRE LAND ON THE PERIPHERY unless it is steep and unuseable. Try $40k-100k in ChCh and well old Auckland City and Wellington City don't have rural land on the periphery!
Why do the land free for all land rezoners not understand that even if land is freely available that it doesn't translate into cheap new subdivisions??
Dunedin has ooddles of cheap land (sloping sections in less desirable areas are freely available at about $20,000 or less) yet most new subdivisions have flat sections priced at $120,000 upwards.
Invercargill has ooddles of flat cheap sections ($10,000 or even $1 if you look hard enough!) yet in desirable parts of town expect to pay about $100,000 for a site in a new subdivision. The near zero land price in less desirable areas also doesn't provide a supply of cheap housing and certainly did not prevent a massive boom in house prices 2002-2007.
There is such a thing as "urban echo values", or as some economists call them, "option values". Hugh is right - see what I say to you above about the difference between these and true rural values, and why true rural values apply in the affordable US markets.
I believe that if the low land cost cities (like INV) in NZ KEPT their land costs low through low regulations, at the same time as other cities keep them high, in a few decades they will have captured a disproportionate share of population and economic growth.
There is a certain effect of existing "critical mass" of a city - it would take decades for Invercargill to capture enough growth that enough people would go there to join in the prosperity and affordability, to make prices more affordable in the rest of NZ.
But I doubt that even INV would be NZ's Texas - give it a bit of demand shock and its prices would quickly be "too high". I would be quite happy for INV to prove me wrong and "go for growth".
But we are talking about getting housing affordability into the NZ market as a whole, NOW. Relying on INV to grow to a viable competitor to the Big 3, will take too long to have the desired effect.
Auckland City should allow subdivisions down to 250m2 or 300m2 in the Res 5 and Res 6a zone and no longer charge the $30,000 plus financial contriibution for such subdivisions.
That would lead to the creation of thousands of additional inner city sites. Far better solution than the likes of the Hobsonville, Albany and Dannemora developments which rely on cars and motorways.
Hmmm, this gives me an idea, let's invest in things that aren't taxed, anyone with me? Plus, if we can maintain a system where money suppliers favour borrowing toward those same things, hey presto ..... Watch the recent Auzzie film linked from here:
'Real Estate for Ransom'
Cheers, Les.
Russel Norman should shut the &@(# up unless he has somehting sensible or constructive to say .
If we slap a Capital Gains Tax on property investment , who exactly is going to supply housing to those who really cannot and never will be able to purchase a home ?
Certainly not the Government, which is already running a massive deficit just to keep us in free education , free healthcare , supperannuation and the massive benefit social security system.
The loony left masquerading as Greens should get over themselves.
Change in emphasis: from an inflated NZproperty market to real NZproduction.
Boatman - the reason why people can afford houses in NZ is an inflated market over decades, lack of decent jobs and low wages in general. In most countries where houses are affordable, the property market is not a leading industry, but production - e.g. manufacturing is solid and the wider population have decent jobs and make decent earning, so they can afford houses. A Capital Gain tax in NZ is working in that direction. So, after all Dr. Norman’s proposal makes 100% sense.
Kunst, it is you who is missing the point 100% - median multiples are the way to represent the relationship of house prices to incomes.
It doesn't really matter what level incomes are, in roughly free markets, housing will cost around 3 times median houshold income. People cut their cloth to suit their income levels.
When median multiples are 6 or 9 or 12, there are govt induced distortions, NOT people all en mass trying to live beyond their means. China's median multiples are insane, like 15 or 16 - yet apartments are literally cheaper in Houston in DOLLAR terms let alone as a multiple of income. This is because Houston is a pretty free market and China is not - the same apartment that is 16 times median income in China is more like 0.5 median income in Houston; and of course this is great for a very low income earner.
It is absurd to blame "low income levels" for high median multiples, this misses the whole point of median multiples.
I agree that incomes should be higher in NZ and I do have ideas how this could and should be achieved but it is highly unlikely you would agree with me. I think Singaporean tax levels and size of government would be a good start.
Karl Marx actually theorised, correctly (and so did Henry George), that rising incomes resulted in rising rents, so that workers were never any better off, only the landlords. What prevented housing development at fair prices and rising standards for everybody, back in his day, was the fact that people had very low mobility. Only the wealthiest people could afford horses, stables, and servants to look after the horses. Cities "grew" in terms of land utilised, very slowly and at continued high densities because most people had to walk anywhere they went. Streetcars and rails provided much greater ability to cover "distance", but any urban development was predictable (because of the fixed rail routes and the narrow strips of useable land around them) and was captured by the landlord class. It is only "automobile based" development that allows farmland to be converted to urban in such potential "supply" quantities that no-one can "corner" the supply and "gouge" the pricing. This is really what defeated Marx's theory, not "capitalism" per se. But strict urban planning makes Marx's theories relevant again - this is why median multiple house prices go up to 6 and 9 and 12, when land supply is rationed and prices gouged again. Median multiples are always around 12 in a pre-automobile society, like in 3rd world countries today, and the housing is much smaller and lower quality. Smart growth basically winds the clock back on socio-economic development, to Marx's era, with rising inequality, transfers of wealth to land owners, and the workers rising incomes only driving up their own housing costs - leaving them no further ahead. This is the colossal flaw in your whole line of reasoning.Russel Norman obviously is an irrational neo-pagan Gaia worshipper. It's not that he can't see that land supply is the issue, it's that he cannot bear to see snails, shrubs etc disturbed for the sake of human beings, i.e. young people getting affordable housing. His obsession with capital gains tax is partly red herring and partly Watermelon-ism.
The Commission's discussion of CGT's was entirely convincing to a rational observer. Housing already is taxed via GST, rates, and taxes on interest that are NOT net of inflation. Significant capital gains on housing are always only temporary - should govt's refund CGT revenue when the crash comes?
Phil - see my comment at 11 Apr 12, 1:53pm, thoughts?
Also my comment at 11 Apr 12, 4:56pm, thoughts?
Cheers, Les.
Les, I like land taxes and think we should have them instead of other kinds of taxes, but I do not believe that they would stop the problems we are discussing, that are caused by growth constraint regulations.
I am not sure how much we have discussed this before, I have lost track of who I have had this argument with before or not.
Mason Gaffney argued in favour of land taxes and AGAINST "negative urban growth constraint" way back in 1964:
http://www.masongaffney.org/publications/E3Containment_policies.CV.pdf
"......To the dominant landowning oligarchy, few limitations on competition
commend themselves with quite the same force of logic as
limitations on the entry of new lands into urban use. It is therefore no
accident that negative containment is the most respectable and salable
kind of planning in many quarters. It harmonizes all too mellifluously
with the interest of a dominant class. But from the viewpoint of social
economy, of other interest groups, of the general welfare, of the region,
state, and nation, and even of most urban landowners in their roles as
workers and capitalists, negative containment is an instrument of
monopoly exploitation......"
Gaffney points out that land taxes would actually help "constrain urban growth" as well as all the other beneficial effects they have (versus other tax types). He does not try to argue, however, that you can have urban growth constraint regulations AND use a land tax to counter the land price distortions that result from THAT.
Leith Van Onselen points out in "A Housing Whodunit", that there was no correlation between States in the USA with land taxes, and States without house price volatility:
http://www.macrobusiness.com.au/2011/08/a-housing-whodunit/
Phil - resultant influence on affordability due to difference in inertias associated with land and credit supply? (Keen'sian stuff, I've referred you to twice before.)
If Texas repealed their 80% LVR constitutional legislation, would you expect their property appreciation and affordability (the ratio) to improve, or worsen?
Cheers, Les.
Les, here is my gut feelings on the relationship between "free markets in urban development" and LVT's.
In a market like Texas where there is BOTH, I think median multiples MIGHT be around 10% lower because of the LVT on top of the free market in urban development.
Repealing the LVT's might mean median multiples cycled between 3.0 and 3.6 instead of 2.7 and 3.3.
But introducing urban growth containment would drive the median multiples up a LOT more than that, even if the LVT's were retained. There are States in the USA, as Leith Van O pointed out, that have LVT's as well as urban growth containment, and it is hard to discern any effect on median multiples.
I think Texans are some of the most economically intuitive people on the planet - a free market in urban development does wonders for housing affordability and indeed economic efficiency per se, but they have LVT's as WELL? HEAVEN.
These people are so NOT dimwits as sophisticated lefties like to portray them.
Phil - I don't contest that deconstraining landsupply, dealing to development and construction costs is important and influencial. I'm glad you recognise the impact sensitivity in other parameters, eg. LVRs.
Looking at your figures there might be a change in median ratio of around 20%, taking your range extremes. Then add in Westpac's 17%, (increase in house prices in the bubble years) they thought was attributable to tax-sheltered property investment once Cullen increased the top tax rate and we are not talking an insignificant potential for improvement in affordability if credit supply and tax treatment is dealt to, alone. Add in your's, Hugh's, Waymad's angles and hey presto ....
So if any of these other influencial parameters could make a positive difference to affordability, why not support relevant change to them?
Cheers, Les.
I certainly agree that Labour helped to pump up the housing bubble, by not supporting a CGT that would have taken the froth off the landlording boom.
The sad reality is that Labour benefitted from the boom, in that it encouraged unsustainable borrowing & spending that pumped money into the economy & therefore porked up GST receipts etc. All of which payed for their ludicrous WFF, interest-free student loans etc.
Mind you, several postings above this I was accused by several bloggers of being an ultra-leftist - so I can't actually have said this!
Philbest- as long as real estate in this country is a major industry, we have a problem with our economy.
Read 11.4.- 13:18pm - Change in emphasis: from an inflated NZproperty market to real NZproduction.
How would you tackle the problem ?
http://www2.careers.govt.nz/jobs-database/whats-happening-in-the-job-ma…
Kunst, it is you who is missing the point 100% - median multiples are the way to represent the relationship of house prices to incomes.
It doesn't really matter what level incomes are, in roughly free markets, housing will cost around 3 times median houshold income. People cut their cloth to suit their income levels.
When median multiples are 6 or 9 or 12, there are govt induced distortions, NOT people all en mass trying to live beyond their means. China's median multiples are insane, like 15 or 16 - yet apartments are literally cheaper in Houston in DOLLAR terms let alone as a multiple of income. This is because Houston is a pretty free market and China is not - the same apartment that is 16 times median income in China is more like 0.5 median income in Houston; and of course this is great for a very low income earner.
It is absurd to blame "low income levels" for high median multiples, this misses the whole point of median multiples.
I agree that incomes should be higher in NZ and I do have ideas how this could and should be achieved but it is highly unlikely you would agree with me. I think Singaporean tax levels and size of government would be a good start.
Karl Marx actually theorised, correctly (and so did Henry George), that rising incomes resulted in rising rents, so that workers were never any better off, only the landlords.
What prevented housing development at fair prices and rising standards for everybody, back in his day, was the fact that people had very low mobility. Only the wealthiest people could afford horses, stables, and servants to look after the horses.
Cities "grew" in terms of land utilised, very slowly and at continued high densities because most people had to walk anywhere they went. Streetcars and rails provided much greater ability to cover "distance", but any urban development was predictable (because of the fixed rail routes and the narrow strips of useable land around them) and was captured by the landlord class.
It is only "automobile based" development that allows farmland to be converted to urban in such potential "supply" quantities that no-one can "corner" the supply and "gouge" the pricing. This is really what defeated Marx's theory, not "capitalism" per se. But strict urban planning makes Marx's theories relevant again - this is why median multiple house prices go up to 6 and 9 and 12, when land supply is rationed and prices gouged again.
Median multiples are always around 12 in a pre-automobile society, like in 3rd world countries today, and the housing is much smaller and lower quality. Smart growth basically winds the clock back on socio-economic development, to Marx's era, with rising inequality, transfers of wealth to land owners, and the workers rising incomes only driving up their own housing costs - leaving them no further ahead.
This is the colossal flaw in your whole line of reasoning.
There is a REAL problem when bubble value appreciation is 10 times as much as the value of stuff actually getting BUILT.
Kunst, you are also missing the point I am making here, that instead of Kiwis who have entered the housing market since about 1999, or up-scaled; now carring around 60 billion dollars of excess debt for NOTHING except inflated prices of dirt; that 60 billion dollars COULD have been spent on a LOT of actual housing repairs and renovation and insulation and replumbing and repiling; it could also have been spent on actual building of stuff including infrastructure.
Paying tens of billions of dollars for precisely NOTHING is our single WORST problem.
I agree with Prof. Paul Callaghan's analysis of what was wrong with the NZ economy; you are probably pretty wise about this too - we need a lot more wealth creating occupations, and a lot more high value wealth creating occupations. Farming and tourism provides jobs, but not high or rising incomes.
Callaghan said something like this; that if NZ had another 80 of the kind of firms that are our current top 40 highest-paying manufacturing exporters, that alone would put us from the bottom of the OECD wealth rankings, to the top.
What Callaghan did not know, was that in 1998, the McKinsey Institute said in the report "Driving Productivity and Growth in the UK Economy", that Britain could not possibly ever have anything like "Silicon Valley" BECAUSE of their rigid town planning system and inflated urban land prices. Furthermore, the CEO of Cypress Semiconductors outlined in an open letter to the Bay Area Regional Council a few years ago, that "the Silicon is being driven out of Silicon Valley" by high local taxes, rigid regulations especially on development, and housing costs so high that even IT whiz kids couldn't afford it. This letter also pointed out that Silicon Valley started up because young whiz kids with very little money could get very cheap rural land to build business premises on, near to a Uni, decades before the urban planning utopians stuffed up everything of this nature.
Over to you.
It is not a matter of missing the point, but how we see the balance of industries in the complexity of economics.
Here in NZ Real Estate is a major player and as a consequence inflating prices increasingly to levels of prohibitively expensive for the wider NZ population.
http://www2.careers.govt.nz/jobs-database/whats-happening-in-the-job-ma…
In Singapore and other dynamic, balanced economies - Real Estate even doesn’t exist on the list of major industries: http://www.guidemesingapore.com/incorporation/introduction/singapores-economy
Obviously when free markets efforts are unable to navigate their industries through a positive, successful process for societies as a whole, the government needs to intervene. Here in NZ it is time for a balanced, more complex economy. E.g. thousand’s of real estate personnel should be re-educated working for the production sector.
Kunst, I see the balance of employment by industry as symptoms, not causes.
It is always a disaster to just address symptoms by Statist force. Take people out of Real Estate jobs and re-train them; what are you? Muldoon? Or Mao? Or Clement Attlee? He finally got tossed out by the British voters after years of socialist madness, after trying to do something very like that - mandate to everyone what job they should be in.
Read "Ordeal By Planning", by John Jewkes, about this phase in British economic history. The Town and Country Planning system was the bit Thatcher unfortunately failed to address.
Let's increase steel production - wa - hey......!!!!!
"Yes, Minister"
"Napoleon is always right"
etc.
Jewkes' book should be regarded as another classic on the follies of the politics of utopianism, it reads like a real life version of Animal Farm, only in Britain, not the USSR.
Hayek was never more right about planners, than he would be about urban planners today. You would think if planners wanted to prove Hayek wrong and show that they really DO "know everything", they would bother to learn a bit of basic urban economics. The fact that they remain so pig ignorant about the stuff they are supposed to be "planning", is like structural engineers who only understand materials hardness, making buildings of harder and harder material in an endeavour to earthquake proof them, wondering why they fall down, and trying to make them of harder and harder materials again, and refusing to learn anything about tensile strength and ductility no matter how hard other people try to introduce these concepts to them.
Thousand’s of books tell ten thousand’s of stories and one or two authors always suit one’s opinion. Philbest, I don’t buy into your arguments.
The NZReal Estate industry is traditionally far to dominate in comparison to others and therefore does a lot of harm not only for other industries, but for our society.
How idiotic can a society be selling houses to each other – daily, weekly and not producing enough to pay for it ?
I’m still waiting for a concrete answer how this can be solved here in NZ.
I THOUGHT this whole thread was about the solution - abolishing urban growth constraints and bringing the price of urban land down.
The number of RE agents is a peripheral issue. The WHOLE ECONOMY is distorted in all the wrong directions re productivity, discretionary incomes, opportunity, inequality, exclusion, growth; and all you can talk about is playing God and telling people what jobs they SHOULD be in?
If you can't learn from the history I am talking about, of the State and planners trying to do this, not just in the USSR but in Britain, then you are a not just unhelpful, you are dangerous.
Philbest - my articles over years are always based on a : Mixed economy - http://en.wikipedia.org/wiki/Mixed_economy not on extreme planned/ command economy models.
It is fine to describe the mess we are in, but you are still short of solutions.
What steps/ actions are necessary to get rid of a gigantic, harmful NZreal Estate industry ?
As we earlier discussed, why can a clever designed CGT or a land tax not be part of the solution ?
Ha ha! "Almost every serious bubble so far has happened where there ARE CGT's"
You can't really lose that one, can you PhilBest! Since just about every single country has got a CGT! (except exceptionalist KiwiLand of course). I generally feel that a CGT is immaterial to whether a country develops a bubble. I just feel that Labour had the opportunity to introduce it in the noughties, & it might have tamped down some of the worst excesses of the landlording mania. But maybe not, of course.
There are of course a number of reasons why NZ should have a CGT. I don't really feel that preventing property bubbles is one of them.
Re your other point, "Almost every serious bubble so far has happened where there ARE CGT's". Well, of course, you could just as easily say "Almost every serious bubble so far has happened where there AREN'T CGT's", by the same argument above. eg Germany, Italy, etc
The key issue seems to be land supply , not tax ......... artifically constrained land supply , as deemed appropriate by the local councils is the problem ......
...... a CGT would merely cause Kiwis to alter investment behaviours , to get around it ...... it would not solve the land " shortage " ...... nor would it improve business or productivity in the general economy .
( But what do I know , my house is made out of bamboo and nipa ! )
"seems to be", please old chap, more rigour. What do, you mean?
Rog, you are a dag:
" .... a CGT would merely cause Kiwis to alter investment behaviours, ... "
So Roger are you saying less money would get invested in property? What effect might that have on asset price appreciation and thence affordability?
Cheers, Les.
I'm agreeing with Bernard on the desirability of a broadly based land tax , .... and no CGT .
....... a CGT will encourage business owners to take profits out as dividends , rather than re-invest to upgrade and to grow their enterprises .......
...... is that what you want , Les ?
GBH: Everyone knows that a broadly based land tax would be better than a CGT.
Everyone except the property-obsessed monomaniacs who seem to infest this site.
However, it will be politically impossible in a place as backward as NZ. So the CGT is the only feasible surrogate.
To be honest, I tend to think that those who promote a land tax are simply introducing a spoiler, to get the CGT off the political radar.
Does that describe you, GBH? 'fess now!
The land tax captures everyone owning land ........ even those pesky American entertainment celebs , who own vast tracts of land in absentia .... they too , get pinged annually .
..... so there's an incentive to get some production out of the land , to recoup the tax..... 4 hectare lifestylers , this means you ..
From the Gumnut's point of view the tax is low cost ( high bang out per buck expended on collected & administering ) ..... and steady , even through recessions , the tax take is reliable revenue .....
....... my motive is purely for what is best to re-orientate the Kiwi economy toward savings, production , and investment ......
The CGT is a " dog " of a tax , a pain for everyone concerned , and the returns are likely to plummet during a recession , the very time that the Gumnut needs the revenue most .......the greatest friends of the CGT are the nation's accountants and tax advisers , it would be a goldmine for them ...... and the financially illiterate love it too ( Labour & the Greens )
Even Adam Smith and I think John Stuart Mill were firm believers in property tax and that other really popular tax, inheritance tax, as the fairest ways of taxing wealth (as opposed to income)
CGT would be expensive to administer, unevenly applied and really only benefiting accountants and lawyers. Tax system needs to be much simpler and virtually impossible to avoid, preferably collected electronically. Business owners should be able to work out their company's own tax on the back of an envelope without an accountant :)
....... which is what Steve Forbes campaigned on , years ago , when he had a run at the American presidency .....
He showed that the 9000 page US tax code could be simplified to just one page of A4 ....... actually , he easily fitted the new tax system onto the back of a postcard ......
...... the $US 1 trillion of governmental subsidies would disappear overnight ,... as would their annual budget deficit !
Roger - almost, you see what you Left-Swiggers always seem to forget when introducing new taxes is the repeal, reduction of other taxes that hamstring the real economy, that is, PAYE and corp. So land tax = good, but not if we don't remove or reduce PAYE, corp taxes.
Hey Sore Loser : My beach-front section ( 1350 sq m ) has annual rates bill of 1200 pesos , about $NZ 31 ..
.... of course we don't get many of the " services " which local councils in NZ provide , whether you want them or not ...... so we pay for anything we need , rubbish removal and the like , and it's so cheap that way ...... we're " incentivised " to not be wasteful ..... and the local contractors are competitive in trying to gain our business .
..win/win/win : for us , the local service providers , and for the environment ......
Alex,the Page and Fung report also stated that the most cost effective bulding per squre metre was achieved by the medium sized building firms who could achieve economies of scale on the purchasing side of the materials yet hadnt involved themselves significantly in marketing and middle management drag that larger building firms become involved in.
However,back to affordability and the big bad Councils,as an elected representative of one such body I find the imposition of the Central Government and accordingly Regionals enforcement of Land.Water,Environmental considerations into our plans and consents over the top and feel this is a case of dont shoot the messenger.
Theres plenty of land readily available in most of the provinces but the pull to the cities for employment,entertainment,education,etc is greater for our young and immigrants.This is where we need to focus our attention,Whangarei,Gisborne,New Plymouth,Napier etc with employment and education opportunities and some of this pressure may be resolved.
Hugh,Was sorry to hear that Council rejected the last offer of land from the developer,I hope some heads are being banged behind doors and we need to accept that Christchurch is in a different waka to the rest of NZ at present.
" ... read the next article with an eye on explanation of his [Steve Keen's] term 'Credit Accelerator' and ask yourself, will the inertia associated with land supply ever be less than any inertias associated with credit supply? I'm not inferring that we shouldn't deconstrain land supply, but in terms of better understanding the affordability issue, how can we ignore all causes, except land supply?"
Enjoy the Steve Keen articles off that link.
"As I’ve [SK has] explained elsewhere, the causal factor behind asset prices is not just rising but accelerating debt. This is an extension of my basic proposition that macroeconomic analysis must include the role of credit—which is ignored by conventional neoclassical economics." - and by you know who ..... doh!
Well Les you may have seen my recent posts regarding interest on this credit you speak of.
My self education on economins has lead me to modify the quantity theory of money in include interest. Thus M.V=P.Q becomes (M.V)+I=P.Q
It isn't pretty where tha takes you when you plug in some numbers.
Sorry for the cut and paste, I will send you the full article I have written Les. I have just used Spending (S) to replace Velocity (V)
For example if in a given year 100 bicycles are produced that cost $100 each, then each side of the equation must equal $10,000. The money side could be say $1000 and each dollar is spent 10 times. But say the next year the money supply is increased by 10%, but no extra spending takes place, then the right side of equation still has to equal the new total of $11,000. There are still 100 bicycles so the price of each bicycle now has to become $110.
What about the price of money? All money is introduced as debt, so it must have interest attached, this must be accommodated into the equation.
Every year the amount of Money has to be increased by the amount of interest owed on the principle, otherwise there wouldn’t be enough money to pay back the interest from the year before. So using the same original scenario, $100 has to be added to adjust for the 10% interest rate. The problem with this though is that the interest subtracts from the amount of Money available to buy stuff. The new total of M.S is $10,100, but still only the $10,000 can get spent because $100 is used to pay the interest. Balancing out the P.Q side means the price of a bicycle increases to $101. So while Spending hasn’t increased, prices have by 1% and decreased your purchasing power. M.S=P.Q now looks like this: 1000.10+100=101.100 or (M.S)+I=P.Q. The addition of interest has made the equation unbalanced and it can’t be balanced until it is removed again. In effect there is only enough money to buy 99 bicycles, so the question could be asked “who gets the 100th bicycle”?
OK, put it through here, FAO me:
http://www.nzmea.org.nz/contact.aspx?subject=Feedback
it will get passed on.
Sounds like you are not saying money is the root of all evil, but interest is? You don't work for Hell Pizzas do you?
Cheers, Les.
PS - answer to your question is, Norman Tebbitt, famous UK Tory. (Probably a 1%'er.)
Scarfie - another way ..... have a look at the discussion I was having here with Matt S and Fred:
It starts above the link to that thread at 05 Jul 10, 12:03pm.
Cheers, Les.
Yes a very interesting discussion. Lots of people arriving at the same point from different directions. Interest only works with growth and the subsequent addition of new people unecumbered by debt. Fred's uses productive assets to describe growth, but it is the same thing. I haven't got to the stage of looking for answers on a better way for this yet Les, to be honest I don't think there is much point as we are stuck with what we have until it fails. Or there is a revolution, don't see that in NZ though. Did you see my post on the inflexion point in the population growth curve over in the top ten?
I have another problem you may be able to help with, will send something through once you return my email. Is to do with my invention, and so might fit into your line of work.
Scarfie - thanks , we got your email via the NZMEA website. I'll reply later today or tomorrow. I've not even opened the doc yet, however, from what youv'e outlined above I envisage there might be quite a few similarities to the approach taken in the papers listed here:
http://sustento.org.nz/research-areas/
Where Lowell and Raf also get into some solutions. (NZMEA helped sponsor some of the work.) Plus have a rumage around this place:
http://www.positivemoney.org.nz/Site/Solution/default.aspx
I'm not as engaged in all that kind of thing as I once was a couple of years back and that's also true of reading Int.co, so nope, I've not seen your post on, "the inflexion point in the population growth curve", but will look it up when I get a moment.
Re. your invention, am happy to have a look, but am wary of spending lots of time on such things, and before we get into that I'd want to be sure you have your ip protected, at least by me signing a simple NDA. (I have some proformas if you don't) Anyway, we can talk about this by email, when I get a moment.
Will be in touch, Les.
Report is light on additional infrastructure costs of sprawl, and economies of scale of intensification. Land outside the MUL is only 'cheap' if you ignore infrastructure costs e.g. New roads, schools, hospitals, car parks. The MUL is a policy choice with pros and cons, so it's strange that the commission attacks it in this way. Why not recommend changing council zones e.g res 5 and 6. Sherwin said on radio that nzers prefer to have a garden, but this isn't true of many aucklanders, and also isn't an evidence based approach. It's strange that the commission's findings are so helpful for the national party's manifesto. ..
The report is NOT "light on additional infrastructure costs of sprawl, and economies of scale of intensification."
You obviously have not read it very carefully.
What they say, is that existing infrastructure is often NOT up to the capacity required for extra population intensity, and renewing it in these established areas is actually far more expensive than "greenfields" infrastructure. They quote several good academic references on this too, from around the world.
They also quote studies on the levels of local taxes relating to infrastructure, and their correlation to density, which find definite "diminishing returns" once an initial shift from very low, to low-medium density has occurred.
Ironically, there has never been any actual analytical PROOF that the "urban intensification" advocates were basing their ideas on; it was only ever shallow assumptions that were not in fact true. This is not the only shallow assumption these people make that is 100% wrong.
As Olly Newland has long predicted, the housing shortage is going from bad to worse and he also predicts that absolutely nothing will be done about the problem.
read:
The steady complaints about "speculators" and "capital gains tax" will ensure that not enough houses will be ever built because those who could afford to buy or build them will be dissuaded from doing so.
Add the recent tax disincentives and the crisis will deepen even further.
Releasing land is useless. The land might be there but how many years will it take to build roads, supply water, drainage, schooling, transport, shopping, let alone somewhere to work?
There could be some benefit from infilling in exisiting suburbs as many are spread very thin, e.g Glen Innes, Panmure, Mt Roskill etc where many low income people enjoy over sized sections courtesy of the tax payer.
Hugh and his hysterical acolytes can rant as much as they like, but who is going to pay the bill?
The Socialist left are great at spending other peoples money- until it's their turn to pay that is .
"The Socialist left are great at spending other peoples money- until it's their turn to pay that is"
and property investing scum are quite good and manipulating the fraudulent money supply to accumulate their unfair share of money. Criminal intent no less.
You nicely ignored my explanation as to why property investors are criminal scum.
For Pete's sake, all these puny minded Kiwis, check out how fast cities in China and the growth States of the USA put in roads and infrastructure. Houston has grown from 4 million people in 2000, to 5 million in 2010 - adding an Auckland in 10 years flat. McAllen TX has gone from 350,000 to 800,000 in the same 10 year time frame. House prices have hardly blipped.
And we can't cope with 100,000 anywhere? So much for the spirit of KZ-7.
Existing infrastructure is often NOT up to the capacity required for extra population intensity, and renewing it in these established areas is actually far more expensive than "greenfields" infrastructure. The Housing Affordability Report quotes several good academic references on this too, from around the world. There are a few commenters on here who obviously aren't bothering to read it before opening their mouths and holding forth with their false ideas.
The report also quotes studies on the levels of local taxes relating to infrastructure, and their correlation to density, which find definite "diminishing returns" once an initial shift from very low, to low-medium density has occurred.
Ironically, there has never been any actual analytical PROOF that the "urban intensification" advocates were basing their ideas on; it was only ever shallow assumptions that were not in fact true. This is not the only shallow assumption these people make that is 100% wrong.
So what does the Productivity Commissions recommendation really mean when they say to release more land and for councils to identify which areas that will be and to do that they should get together with developers? Again the council will draw an arbitrary line on a map, that will mean land from one side of the fence to the other will go up over night by as much as a factor of 20 x. They will be talking with developers who have already paid big money for the land they own and will not want to see any cheaper land come on the market unless they can profit from it, at the expense of any affordability to the end user. By including the two parties that have the greatest conflict of interest in the implementation of this, means it is doomed to fail. Considering the cost of this report, the recommendations are pretty lame.
The answer, as well documented by overseas success, is to do away with restrictive zoning per say and instead tie development to meeting environmental standards, like water and sewer etc. If you meet them, then you can develop. This pops the zoning bubble, as development land is basically worth no more than the cost of the rural land price, which also means prices closer in are more affordable, so guess what Ross Norman, people can live closer to work, wherever that is, not just in the CBD where Ross thinks everyone (Green or not) wants to work. As shown by Houston and Germany, this results in a stable housing market, which makes it far less attractive for speculators as they are looking for more rapid (bubble) capital growth that these zoning restrictions can cause. A capital growth tax, or not, is now not an issue.
Secondly, by tying development standards to environmental standards as above and building standards to known (international) performance standards re structural integrity and weather tightness’s, we could streamline the consenting process and cut a huge amount of waste (time and money) out of the system. There is far too much time spent on the fluff of just doing enough to meet the minimum. Why? Because after you have paid far too much for the land, there is not much left between the land price and the market value from which to build the house with.
Third, remove development levies that one new home owner has to pay at one time (when they purchase) that is for the benefit of many over many generations. Also when a new development levy is put into the price of a section, it not only raises the price of that section higher than it should, but also gives a free capital gain increase of about the same amount to all other sections that have never had to pay a development levy. Subdivision infrastructure should be Govt. bond funded over the life of the asset with repayments built into the individual subdivision owner’s rates. It is also more cost effective and rates would be lower.
If you did these three things you could reduce section prices to approx. one third the value of present prices (just as they are in countries that have adopted the above strategies). Imagine what you could do if houses where cheaper and you had more money in your pocket. Live closer to work, use less fuel, Invest in business and help increase productivity, build a warmer house, have a healthier family, lower electrical costs etc.
Unfortunately, this report and any of the political parties are incapable of providing the necessary regulatory environment for NZ to have affordable housing.
Man made green, I don't think that is what Matt had in mind. All contrived sorry Hugh, but nice try.
I notice that Christopher Alexander isn't on your academic list. Cambridge, Harvard, and Professor Emiritus at Berkeley. Seems like a glaring omission, as his seminal work is not restricted to Architecture and Urban Design.
Alexander's Notes on the Synthesis of Form was required reading for researchers in computer science throughout the 1960s. It had an influence[9] in the 1960s and 1970s on programming language design, modular programming, object-oriented programming, software engineering and other design methodologies. Alexander's mathematical concepts and orientation were similar to Edsger Dijkstra's influential A Discipline of Programming.[10]
A Pattern Language‘s greatest influence in computer science is the design patterns movement.[11] Alexander's philosophy of incremental, organic, coherent design also influenced the extreme programming movement.[12] The Wiki was invented[13][14] to allow the Hillside Group to work on programming design patterns. More recently, The Nature of Order's "deep geometrical structures" have been cited as having importance for object-oriented programming, particularly in C++.[15]
Mr Scarfie, any link between Man Made Green and the prerservation of housing stock, has been disproved since at least the 16th century.
Indeed, I believe it was 1535 when Lord Percy, heir to the Duchy of Northumberland, failed to disrupt the forclosure of Lord Blackadder's house by the the Bishop of Bath & Wells.
The Bishop of course, being the branch manager of the Black Monks Bank.
Motto: Banking with a Smile and a Stab.
Fortunately, documentery evidence is available here.
http://www.youtube.com/watch?v=TkZFuKHXa7w
On google earth Woodlands looks just like Manukau City or Albany - big box retail surrounded by suburbia. Why don't they change the name of Albany to something like 'Albany Woods' then it would become a green development?
I'd hope Woodlands is cheap 'cos it looks like a pretty suckfull place to live.
"........Woodlands is cheap 'cos it looks like a pretty suckfull place to live......"
HUH?
In NZ people are paying a million bucks to get a home anything like in Woodlands, in areas nowhere near as green and leafy.
WTF is YOUR criteria for a non-suckful place to live?
Humans are evil......!!!!!!
Seeds sown by birds and carried by the wind, that grow into trees, are holy. Seeds sown by human beings are anathema.
Lakes created by tectonics and landslides are holy. Lakes created by dams built by humans are anathema. I could go on.
What a twisted mindset. So much for 300 years of "the enlightment". I say bring back the medieval papal theocracy, it was less of an obstruction to progress.
Over 10 years limit the maximum legally allowed mortgage to 3.5 x main earner in family unit.
1. Makes houses more affordable (as the prices adjust to accomodate market forces)
2. Caps useless investment in basically crap (leaky, uninsulated) NZ houses and money to better use in more productive enterprises.
3. Reduce crime etc. by having a parent have the choice to be at home for the kids (no need to have both parents be mortgage slaves).
Etc.
Not likely to happen though is ... can't have the rich fellas losing all their "useless" profits.
NOTE: You can still but a $1,000,000 home; its just a cap on mortgage !!! so if you want a big house; save a big deposit or do it the old fashioned way and inherit.
Scarfie:
Your question has not been ignored at all. No one knows how to answer that, except you.
Please explain for all our benefits why you consider property investors are "criminal scum " and while you are at it what system would you like to have instead?
I am sure we would all love to know.
Actually the answer is very simple and the evidence has been supplied to you, but then a thief never thinks he is a thief. Iain Parker in his regular posts on here provided an excellent piece on how our money system is fraudulent so there is no need for me to repeat his work.
Does Ponzi on top of a Ponzi ring a bell? That was Skudiv's explanation not mine.
The average person doesn't understand their money is leveraged (fractional reserve banking). Leveraged money plus interest means inflation is a certainty, so property investors take this leveraged money and then leverage it again to gain an extraordinary pecuniary advantage. Like the thief though, there is no thought to the person or persons on the opposing their criminal actions.
I don't presume to know the answer as to an alternative, but that the status quo allows unmitigated evil is certain.
Actually, it is urban economics 101 that the biggest gainers from transport infrastructure are the owners of land where trip destinations are most concentrated, not the owners of land where trip origins are dispersed.
There is nothing as corrupt as "CBD first" planning, and transport networks focused on one major centre, especially fixed route public transport.
"Big Property" HATES ring-roads and inter-suburban connector improvements.
Agree, I'm also anti cbd centric development. But existing akl has many centers that will be developed.
The cbd brigade and land owners on the fringe of the city are one in the same. Socialize the costs of the sprawl incl the holiday highway, privatize the profits from increase in land value.
But in the affordable, less controlled markets in the USA, that Hugh P is talking about, there is stuff all profits from increase in land value.
Deregulation of land supply is not about helping anyone get any, let alone more, profits from increase in land value - at all. Quite the opposite.
I am still finding interesting things in the detail of the report.
I never knew before about the following paper:
"U.S. House Prices: The Role of Fundamentals"
Victoria University of Wellington - New Zealand Institute for Study of Competition and Regulation Inc. (ISCR)
Victoria University of Wellington - School of Economics & Finance
November 4, 2011
Listen to this: these guys are absolutely sound on their urban economics:
".........The left-hand graph in Figure 3 shows that when undeveloped land is relatively homogeneous, competition amongst landowners prevents house prices on the city boundary rising much above construction cost. In contrast, the right-hand graph shows that when undeveloped land is relatively heterogeneous, competition still allows
city-boundary house prices far in excess of construction cost.
The explanation for this behavior can be found in the competition that exists between
the owners of undeveloped land. In the limiting case where undeveloped land is homogeneous, if the owner of a piece of undeveloped land delays development, the level of housing services generated by the best unit of competing land will be the same even after the delay.
The owner will never be in a position to receive a positive development payo as there will
always be a competitor able and willing to preempt him. He is thus eectively faced with the choice of investing as soon as the break-even point is reached or never investing. Since a positive development payoff cannot be achieved, the market value of undeveloped land is zero......."
1. STOP all immigration that is not absolutely critical.
2. STOP residential ownership by anyone who is not a citizen or
3. STOP overseas owners unless they can prove they occupy that property for a minimum time each year.
Evidence exists that the only investments made by 'high worth' economic immigrants is in residential property (usually multiple properties). Why? Because they do not have the language skills to operate a business if it is 'hands on'
So
4. Put a time limit on ownership so that these people have to sell their existing properties unless they can obtain citizenship within a specified period.
Great idea - how small minded can you be. Most of the medical staff in NZ are from overseas and I am sure they don't all have citizenship - I just hope if there was one other person in NZ with an opinion like yours and they had the power to implement such a stupid policy that you didn't end up in hospital needing medical care.
Respectfully, I don't see this blaming of minority groupings as really being anywhere near the root of the issue. Also within your rules:
1. who decides who is / is not absolutely critical?
[who is this great decider?, some migrants have gone on to create great business, beginning from nothing]
2. by anyone who is not a citizen [so they wait to become a citizen - a minor inconvenience]
3. unless they can prove they occupy that property [more paperwork/proceedures and BS]
4. time limit on ownership [at least the govt can hire ex. hall monitors from primary schools]
So what do we do, create a whole new group of mandarins, perhaps they can be called the Ministry of Proof, and be paid by the government to do non-productive jobs and keep Wellington rental prices high?
Or perhaps we could actually begin to address some of the underlying problems with system. I'm actually surprised that BE might be starting to get it with his comments on that video ...
By all means sort out the KIND of immigrants we let in, so we aren't just acting as a kind of flophouse for the world's hopeless. There are many immigrants who do in fact contribute heaps to the country, we can't possibly get "too much" of that type.
In fact it wouldn't be hard to raise the average, given the kind of Kiwi thicko whinger bludger that we are increasingly left with as the best and brightest leave. Give me a "banana" (yellow on the outside, white on the inside) Asian (they use this term, of themselves, with pride) who is dedicated to all the values that have made western civilisation great, over any anglo saxon lefty whinger/ P.C. cringer, any day.
I am afraid most of you are wrong. Auckland's problem is that it sprawls. Releasing more land will only temporarily address any housing shortage. In this age of having the ability to work away from the office, more land should be made available in places further south down State Highway 1 and instead restrict new land development in Auckland. Sorry to take a contrary view to all you Aucklanders, but sometimes it takes a view from outside the problem to see sense.
What we often lose sight of, is that the very efficient large urban economies of the USA, actually function as many not-so-large urban economies that just happen to be right next to each other.
"Auckland" sprawling from Hamilton to Whangarei, if it was a typical large US city, still would not involve average commute times much over 20 minutes. Of course no one is stupid enough to live in "Hamilton" and commute to Queen St. every day.
And the price of housing is seldom the reason that someone can't live any closer to a job, in these affordable US cities. The main reason they are affordable AND efficient and we are unaffordable AND inefficient, is that here, the price of housing is the MAIN reason for longer and longer commutes.
Sorry to inject some facts into this discussion but if anyone bothered to check the REINZ stats they would see that NZ House Prices have risen 236% since 1992, the figure for Auckland 241%.
You must admit a pretty immaterial difference over 20 years and completely undermining the argument that its urban sprawl restrictions in Auckland that are the problem.
The issue is, for ALL of NZ, that we have a dangerous cocktail of easy credit and favourable tax treatment pushing up house prices everywhere.
Atlanta has a multiple of 1.8 because it is riddled with slum housing:
http://www.realtor.com/international/rdc/listing-detail/1245-Byewood-Ln…
(that's a boarded up house for $US4,000)
and it's not exactly cheap for a normal house in a reasonable area:
http://www.realtor.com/international/rdc/listing-detail/203-Degress-Ave…
(that's an older 230m2 bungalow on 900m2 for the better part of $NZ1m)
In fact about 10% of all listings in Atlanta on realtor.com are over $NZ1m. 20% are over $NZ650k.
Obviously I'm not arguing that Atlanta is more expensive than say Auckland, but be realistic, a house in Manurewa can cost as little as $189,000
Are you talking about the municipality of the City of Atlanta, or the "Atlanta" greater urban area?
There is a difference.
It's good that you are looking at Atlanta property prices. Get this point: those $650K houses you are looking at would be $2 millions plus, here. Look at the size section they've got.
We need to constantly realise, too, that there are dozens of cities around the USA that are not in Texas or Georgia, that are growing just as fast or faster, and with the same conditions re development and affordable housing.
http://www.newgeography.com/content/002769-the-urban-us-growth-and-decl…
From 2000 to 2010,
Charlotte, North Carolina:
758,927 to 1,249,442
Raleigh, North Carolina:
541,527 to 884,891
Fayetteville, Arizona:
172,585 to 295,083
Avondale, Arizona:
67,875 to 197,041
Cape Floral, Florida:
329,757 to 530,290
Orlando, Florida:
1,157,431 to 1,510,516
We can be proud of beating these guys at yachting, but we NO CAN DO urban growth. DUH.
Hi eurokiwi – yes it is a NZ issue, so any solution should be applied NZ wide, but easy credit is a relative term as compared to many countries, and those that have far easier credit but no housing bubble, credit in NZ is expensive. You get used to what you get used to, even if you know there is a better way. Like most addictions if you get weaned of it to quick you go into withdrawal and will take more when offered. Remember it was not that long ago borrowing at 18% per annum for your house mortgage was considered a fair deal.
What should happen is the density rules should be deleted so building bulk is controlled, not the makeup of households within that bulk.
What will happen is that Auckland will be forced to sprawl as it's politically easier.
The result will be Auckland sprawls to Huntly so that the cheap house you can buy right now in Huntly is in Auckland then Hugh will get all exicited about how Auckland sprawling made houses cheap. Meanwile central Auckland prices will be higher than ever.
Simply not true. Check out William Wheaton's paper, "Commuting, Ricardian Rent and House Price Appreciation in Cities with Decentralised Employment and Mixed Land Use".
Check out Alex Anas' paper "Discovering the Efficiency of Urban Sprawl".
I could recomment a lot more stuff by Alex Anas and also by Peter Gordon, and also Edwin Mills.
These guys are distinguished urban economists, not hack Greenie advocates who do not have two "economics" brain cells to rub together. But of course the "planning" courses at uni brainwash, sorry, "teach" students using the work of hack Greenie advocates.
The crucial point is that decentralised cities with undistorted, shallow urban land rent curves have far lower land costs everywhere, not just at the fringe. It is absurd that fringe land in our controlled cities is more expensive than CBD land in these dispersed US cities. OUR CBD land is exponentially more expensive again - this does wonders for that "housing choice" that our planners are forever talking about, eh? Decent size CBD apartments in Akl a million dollars, same as in Manhattan for Pete's sake - while the same thing in Houston is under $200,000 - so much for "choice", which city has "choice"?
Get away from the McMansions, what's wrong with basic 3 bed one bath home gargage or no. Builders and speculators for years have shied away from anything under 200-250 sq m homes for years citing that anything else is not viable and I suppose at ridiculous land values they may be right..
We may need more intensive inner city housing, I don't know, all I know is that high rise sounds like a fate worse than death as a living circumstance for me
No non-resident, foreign landlords would be a beginning. We have been right royal suckers over the years allowing this sort of ownership with no capital gains tax. Get them out of the equation and see what happens to house prices. They have got to find some relevance to the income of NEW ZEALANDERS and no-one else. Yes there will be people who will suffer from that, but as it stands the younger people are missing out and in the end I think that is the greater evil
And stop thinking that what we need is more and more people, the time is now upon us to get used to a far more sustainable way of living with growth growth growth no longer being the yardstick for sucess, as actually unchecked it will be our ultimate demise, whether you like it or not
Problem is, you can't build a modest 3 bedder on most sections - as they generally have covenants forcing a minimum size (200-220+), in a desire to maintain values for the developer etc. You have to find a non-covenant in-fill section with no ties/covenant - then you can build your 'micro' house. Good idea. Do we really need to build a house for our 2 cars as well?
Another problem is no developer would actually sell a section for $50,000. The demand would be so high, the prices would follow. A beer is $8 at a pub because people will pay that, not because it's worth that. Perhaps developers think they'll be in the running for sainthood. We would also have the issue of the neighbouring properties suddenly plummeting in value. The owners are left with houses worth half what their mortgage says it's worth. Sounds like a long recession...
You can buy your own beer and drink it at home cheaper.
Without urban growth regulations, you can approach a farmer, buy a few acres for well under $100,000, and build a few houses for you and your mates.
Savings comparable to supermarket beer drunk at home versus pub beer.
Try it and see what happens. The Pommie govt sends in the cops and the bulldozers. I don't think anyone has tried it on here - YET.
Can do... But then I'd be drinking beer at home... and I don't want to... I'd have no-one to impress with my new car and no-one would see me with my latest iPhone that i had to get on tick from GE credit as my credit rating wasn't good enough to go on contract cause I pissed what money I did make while living in my squat in london away on pills and alcohol...
Got any cheap houses Guvn'a??
I did actually live in a squat in Brighton once upon a time. The Government gave it to us cause we'd lived there so long...
OK, let's try again with an extension of my analogy.
Imagine if the pub was the only place the govt let you get beer at all. Would the price perhaps be even higher then?
Might the price of housing be lower if you and your mates COULD whack up a few houses on a bit of farmland?
Ironically, where people DO have this right, they don't bother to do it very often, because the SAME freedoms keep the price of ALL houses provided by ALL developers, so sharp and honest that there is no money to be saved by DIY on farmland.
Imagine how cheap pub beer would be if there was no "licensing" of pubs at all, and you might see that drinking it at home then would be even more pointless.
It would seem that people still want to buy beer in the pub, just cause it is the pub. Hence the pub can charge more. If no one was willing to pay for the beer in the pub then maybe the pub would be cheaper. Even though the supermarket is about 800% cheaper, people still buy very expensive beer in a pub... Go figure
Snippy - the government is helping speculators - Housing NZ just sold one for $850,000 according to this article:
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10798236
If you look at the agenda I believe it more a case of displacing a demographic rather than being directly involved with the speculative act on the day of sale.
From the Parnell rise..sales to the Tamaki rise sales.to the current Pt.Chev sales all of these were earmarked as far back as the previous National administration to
A. realize in return the $ value and reinvest in housing in lower socio ecomomic areas .
B. to displace persons who do not reflect the socio economics or dynamics of that area.
Now Glenn Innes..is probably one of the most interesting in how they are going about managing it....as some portions ( by the water and up line road) are cuspers, as in could be really good if not for.
So far they have sold a number of desireable properties with it in mind to expand the number of dwellings on an existing site (state house) futher along G.I.,creating, if you like a socio economic boundary.
If we are truthful, I think we can say the pepperpot probably wasn't the greatest idea from the get go...... but inadvertantly or not as the case may be..... may have been longsighted landbanking.
Actually, Maori could do wonders for housing affordability in this country if they utilised their land intelligently.
Even their land that is currently a long way from cities, if they turned it into a kind of free enterprise zone, NZ would have its own Houston before long.
If only Tim Wikiriwhi was the Maori main man........ dream on, eh? Maori "spokesmen" as we have them at the moment (Harawira et al) would be more likely to build Cuba in the South Pacific, than Singapore or Hong Kong or Houston.
And of course, being the old grizzled ex-County-Treasurer that I am, here's a plug for them what wants ter do sumfing:
Find out when your local Council consults on its Draft Annual Plan
Submit on something in that plan (suggestion here, cut and paste away, me hearties)
Ask to be heard in support of your submission
And appear, speak, and be ignored (probably).
But not even bothering is infinitely worse......
s'called Democracy - but you have to work fer it....
The problem is population growth where the jobs are and the demand that this creates, take away the populaton growth and the cost of housing will stabilise, i.e. no need for many more houses, no excess demand.
Housing will never be affordable until population growth stops, as long as there is growth, affordability where people will want to live will fall. The current supply of resources required to house and employ are not infinite or increasing, and cannot keep up with demand for ever, so prices rise.
Have never seen a town where the population is falling suffer from affordability issues.
In Detroit, houses are available for $40,000 that would still be $300,000 here. That's what falling population SHOULD do. But cities in the UK that are "Detroit with tiny old houses" are STILL seriously unaffordable.
And check out the growth in Texas cities - Houston gone from 4 million to 5 million people in TEN YEARS - Dallas/ Forth Worth and San Antonio growing by similar amounts, Austin smaller but growing even faster in proportion; and the smaller cities growing insanely, like McAllen, 350,000 people in YR 2000, 800,000 people now.
Atlanta and a dozen other non Texas cities growing just as fast.
http://www.newgeography.com/content/002186-the-census%E2%80%99-fastest-…
House prices? Hardly a blip on the graph. In fact, these places are growing BECAUSE they DO affordable housing and provide opportunity for businesses and their employees to get ahead.
You're still all over the place.
You say the cheapest urban form is the best and then randomly say that low density is cheapest therefore low density is best - in Auckland it's the highest density that's cheapest so if you really wanted the cheapest you'd be arguing for high density.
Even worse is you're constant arguing for the cheapest - the cheapest is cheapest because it's the worst. Why should we have the worst.
Bob, PhilBest's argument is both coherent and logical: when land supply isn't artificially throttled, land prices are so affordable that people have much more choice as to how they live. They can live in a high-rise apartment if they want, or they can live in the "cheap", low-density fringe suburbs you so deride.
There is no reason affordable (median multiple <3) cities necessarily need to be low density either. There are affordable markets in Germany, the Netherlands etc that have much higher densities than affordable US markets such as Houston, Atlanta and Indianapolis - cultural and historic differences obviously play a large role in urban form.
Rather than saying "low density is cheapest", advocates of an end to land supply restrictions argue that trying to "force" higher density not only causes damaging increases in house prices, but usually results in outcomes that are the opposite of what planners intended. This theme of unintended consequences is common in all forms of government restrictions on private economic activity.
Yes, you've got the point, Kleefer.
Actually, affordability goes along with an absence of fringe development restrictions, period.
When you have price inflation caused by restrictions, no amount of trading off space compensates for the price rises. The affordable low density cities in the USA have cheaper one acre sections than our one-tenth-of-an-acre sections are. Quite a BIT cheaper, in fact.
High density in Akl is far more expensive than low density in most US cities. The ultimate low cost living, is high density in a city without fringe growth constraints - but most people choose affordable low density over even more affordable high density.
Denying people THIS "choice", is really what our planners are all about. But they are all so economically ignorant, they can't see that their regulations cause distortions that affect LOCATION choice as well as density choice, and this location choice is all to the bad.
PhilBest, here's a house in Central Detroit for $225 (yes $225, there are 8 listings at $1 and 48 under $1000 on realtor.com):
http://www.realtor.com/international/rdc/listing-detail/2986-Cadillac-B…
The equivalent type of house in the equivalent proximity to Central Auckland would probably cost $1.2m in any condition.
It's just a meaningless comparison.
Population growth or lack of development aren't the sole reasons for current house pricing. Auckland, Wellington, Sydney, Melbourne and Perth are all very desirable with beautiful inner city suburbs that people really want to live in - hence the high prices in the central areas. On the periphery it's relatively cheap already. Houses rezoning land alone won't achieve cheaper new homes - you can buy a section on the fringe of Auckland (not a flash subdivision) but infill or cheaper subdivisions for low-mid $100s - that makes no impact on house prices in the area let alone in the central areas. (For example here is a section in Gulf Harbour for $125k http://www.realestate.co.nz/1531402 ).
What's the price per acre of raw land?
THAT is what makes up an urban land rent curve.
Halving the size of fringe sections, and infill development in less expensive far flung suburbs, won't do anything for the price of land per acre in the CBD.
I have discussed Detroit on interest.co.nz several times. The UK has cities that are just as big an economic disaster, yet their house price median multiples stay stuck at 5 or more, and poky little old dilapidated grimy houses are still 200,000 pounds each. It is highly unlikely that Detroit will stay a disaster for as long as, say, Liverpool or Newcastle have been.
Detroit is an example of what a housing market SHOULD do in response to economic disaster - if the city is EVER to recover. Detroit is an extreme example - but there are plenty of examples where property markets are relatively "free", and adjust to underlying economic realities.
When an economy has been stagnant for years, and house prices have remained stuck at median multiples of around 6, and even show signs of rising higher, you have a serious problem. No real economic recovery is every going to happen - the only "growth" the economy will ever get, is in Property Ponzi - until finally it HAS to turn to custard BIG TIME, because there is simply nothing else happening to actually pay the rent.
Even Detroit has pleasant suburbs, where prices would have been much higher at one time, but have moved down with the rest of the market. Something that would have been $300,000 is now $150,000. Something that would have been $600,000 is now $300,000. It is the stuff that would have been under $60,000 anyway, that is worth nothing now.
WE don't have ANYTHING that "is under $60,000 anyway" regardless of how shite it is - neither does Newcastle or Liverpool. But most US cities WILL have super affordable fixer upper houses, even the cities that are growing like blazes. (In fact, no city with inflated housing prices, is growing like blazes, except perhaps Washington DC, because of the massive expansion of Federal Govt).
It is the elimination of super affordable fixer upper houses in lower socio economic areas, as the result of the land supply racket, that is the single biggest social injustice of our time. The "bottom of the market" now leaves even middle income 1st home buyers in shite houses that they can barely pay the mortgage for, let alone afford to actually "fix up".
And the earners below that........? Oh, they can eat cake, going by the morals of our "Marie Antoinnette" urban planning utopians. Bring on the tumbrils and guillotines, I say.
Clearly you don't know what you are talking about Philbest.
You can buy in Newcastle or Manchester or similar a grimmy little terrace 20000pounds, and a nice tidy one for around 60k.
http://www.zoopla.co.uk/for-sale/details/16693954?search_identifier=dbd…
Detroit is another story because of severe population decline (population has halved since 1950).
AS long as you stay stuck on the myth that the median multiple has to be 3 you will continue to remain bamboozled as to why your predictions don't pan out. The multiple that counts is not the countrywide median but the median of the group attracted to particular class of property. We recently sold a surplus coastal North Shore town house. 100 groups through the open homes got down to 6 seriously interested parties. The sale price was probably less than a third of the income of these folks and less than half the income of the couple who bought it.
Proffering Detroit as an example of a market functioning correctly is only valid when comparing to other markets in developed economies that have suffered catastrophic population decline through loss of the major employer. Similarly your figures for Newcastle and Liverpool are just plain wrong. Crap places in crap suburbs don't sell for 200k pounds. Not even close. Even your "morals of Marie Antoinette" comment demonstrates your preference of myth to fact.
Phil, rechecked the report and it's still woefully light on evidence. The commission had the chance to do some primary research an Auckland infrastructure to back up their position. At least they could have done a proper literature review; one or two submissions does not equal research.
Instead, they started with their predetermined conclusion and made a bogus attempt to back it up.
A lot of infrastructure has been built with latent capacity to cope with growth. Deal with it.
Are you reading the 330 page report and its appendices, or just the summary?
There is heaps of stuff on cost of infrastructure, high density versus greenfields, in the appendixes.
Sure they haven't got actual studies on Akl; who's responsibility is it to do those studies and get their facts straight? The Akl planners. They are gambling our futures on a pack of myths.
Yip, read the whole thing. Again, a few cherry picked papers is not research. The commission ignored the council submission as it contradicted the Nats desired conclusion. Didn't do their own research on akl, so again, they have no good evidence on which to base their bogus conclusions
Is 450k the average mortgage size in Auckland now? http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=107…
Phil B - If they cannot understand it after this, they probably never will. But I do think that many have got it (just), and realized that when what we are advocating comes to pass, then their own areas of conflict of interest, ie present house ownership at overly inflated prices, might not be such a good place to be. They have no option but to defend the indefensible.
The solutions really aren't that complex.
As well as opening up more greenfield land, Council should rezone all Res 5 and 6 land to allow small lots in the order of 200-300 square metres. By international standards, this is still only low-medium density. That still leaves plenty of Res 1 and 2 character / heritage areas in tact - the areas that really matter.
Parts of Glen Innes which are zoned Res 5 look like a run down country town. The densities in suburbs like GI are ridiculously low for a relatively central suburb in a mid sized, growing city.
Hopefully we will see some big leaps forward once the Council has finalised its Unitary Plan.
I am still finding interesting things in the detail of the report.
I never knew before about the following paper:
"U.S. House Prices: The Role of Fundamentals"
Victoria University of Wellington - New Zealand Institute for Study of Competition and Regulation Inc. (ISCR)
Graeme Guthrie Victoria University of Wellington - School of Economics & FinanceNovember 4, 2011
Listen to this: these guys are absolutely sound on their urban economics:
".........The left-hand graph in Figure 3 shows that when undeveloped land is relatively homogeneous, competition amongst landowners prevents house prices on the city boundary rising much above construction cost. In contrast, the right-hand graph shows that when undeveloped land is relatively heterogeneous, competition still allows
city-boundary house prices far in excess of construction cost.
The explanation for this behavior can be found in the competition that exists between
the owners of undeveloped land. In the limiting case where undeveloped land is homogeneous, if the owner of a piece of undeveloped land delays development, the level of housing services generated by the best unit of competing land will be the same even after the delay.
The owner will never be in a position to receive a positive development payo as there will
always be a competitor able and willing to preempt him. He is thus eectively faced with the choice of investing as soon as the break-even point is reached or never investing. Since a positive development payoff cannot be achieved, the market value of undeveloped land is zero......."
The paper is HERE:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1852186#217845
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