By Olly Newland
As the end of the year draws near, now is a good time to review the past 10 to 11 months and look into the foreseeable future.
Let’s look at a number of influences and influencers on the property market in general.
I’ll also look at the suggestions being made to ‘help’ first time home buyers into the market, as they get further and further left behind.
‘New Initiatives’
The Government is about tell us about some ‘new initiatives’ to help the housing market and, supposedly, to put some heat into the supply of property instead of just hand-wringing.
Looking at what has been suggested, the effect will be minimal even if the intentions are well meant.
The Government is poised to announce changes to development laws that will make it easier and cheaper to build houses, stretch Auckland’s city boundaries, upgrade existing state houses and transfer state houses to non-government and local government providers.
It may also signal changes to income-related rents and state subsidies amid moves to ensure tenants’ needs match the size and type of house.
My view: Perhaps your grandchildren may get some benefit, but for those looking for affordable home today the cupboard remains bare.
Making more land available sounds good in principle, but land supply is only one part of the equation. There’s also the need to create the associated infrastructure (roading, power, sewerage, transport - even without considering the cost of that.
The cost of house construction materials is still one of the greatest problems. Despite massive imports from China of cheap fittings and appliances (some of appalling quality) the cost of building materials remains stubbornly too high. It seems odd that in a country where timber, aluminium and steel are produced in massive quantities, the end cost for us is way over what the same materials cost overseas.
The reasons are easy to explain: low turnover, lack of competition, a dearth of builders and the huge dampening effect of GST on all new materials and land. These all combine to stifle progress.
Making more land available will do little until these other price factors are resolved.
Interest rates
The low interest rate environment continues, with the pundits pushing their predictions for interest rates rises further and further into the future. I take the opposite view. I believe that interest rates will remain at or near the current levels for many years to come, and may even fall further.
This is the new “normal” and is, in effect, a huge wage rise for the mortgage belt and working classes, let alone for investors and first home buyers.
Never in my lifetime have I seen interest rates so low as now, but I am reassured by the fact that the current rates are in line with the rest of the world. Unless massive inflation appears, there is no reason why rates should ever go up significantly.
A low interest rate environment means that people can afford their mortgages - and even borrow more - which, by the way, is why prices are steadily rising in many parts of the country, Auckland in particular.
Even if interest rates were raised by a quarter or half a point, what difference would that really make?
The side-effect of low interest rates is that savers are tempted to put their money into other avenues of investment, with investment property being one of their options. In my view, the merry dance will continue. House prices are likely going to double again over the next few years. Of that I am certain.
Look at it this way: All that is really happening is that as prices rise, people are merely swapping equities.
The value of a house goes up making the owners feel richer, and they then buy another more expensive house using the “extra” wealth and thus the beat goes on. The only people affected are those NOT already on the property ladder - and they make up a small minority.
But from a political point of view first home buyers are hugely important. The left wing professional mourners love to weep copious tears about the homeless, as if it was a crisis of monumental proportions with insurmountable difficulties for first home buyers.
Don’t’ forget: that ‘struggle’ to get one’s first house has always been so. It was much worse when I was a first home buyer, (cue: violins) but these days generation Y’ers seem to want to start where their parents ended up.
A quick look at what is currently available on Trademe, shows approximately 15,000 houses, 1,800 town houses, 1,200 apartments and 1,800 home units all for sale — at under $300,000.
The trouble is, they are not all in central Auckland.
Maybe some of the first home buyers will have to learn cut their cloth a little.
Commercial Property
Commercial property does not make headlines much but it too is undergoing a revolution.
The low interest rates have made the returns from commercial property that much more attractive. Where once upon a time a 10% return was commonplace, this has slipped to 6% or less depending on the quality of the location and the tenant.
Put another way, good commercial property has doubled in value, and hence we now have a plethora of commercial syndicates offering all types of commercial investment for the smaller investor seeking higher returns.
They come dressed up in various forms such as proportional ownership, units, shares etc. but the end result is always the same: Some syndicates are absolute dogs, enriching the managers rather than the investors. Buying a big dinosaur with a specialised single tenant in the back of some provincial town is not the best investment to get into, in my opinion.
The Financial Markets Authority has finally issued some new guidelines about syndicates and not a moment too soon.
link: FMA Guidelines
One elephant in the room for commercial investment comes from the pressure from the top echelons of insurance companies to grade every commercial property according to their vulnerability to earthquake.
From level one (virtually no risk) to level two (slight risk) to level five (very high risk) - the grading is a nonsense.
Despite having sucked in huge premiums for decades, the insurance companies now want to recover their losses as rapidly as possible. You have to ask what’s happened to all the moneys they have collected over the years?
To strengthen a building can be prohibitively expensive and there is no guarantee that having done it, the building will be of any use. For example, the CTV building, the subject of the most lethal damage in the Christchurch quake, was relatively modern so what does that prove?
Furthermore, the cost of strengthening is a fiction and quite impossible to pay. In total it would run into many tens if not hundreds of billions of dollars. In many cases the cost could be on the tenant as many leases contain clauses that put the cost on the tenant if any upgrading of a building has to be undertaken.
“In the wake of the Canterbury earthquakes, lawyers, landlords and tenants are carefully examining lease clauses (possibly for the first time) to determine who is responsible for strengthening earthquake-prone buildings and to what extent. One such clause is the Improvements Rent clause, which potentially gives landlords the right to pass on earthquake strengthening costs to tenants.”
For a once in a 10,000 year event, a more pragmatic approach is needed e.g. strengthening to be carried out when major upgrades are undertaken and certainly with new building projects (as is the present case in any event).
Despite all this background noise, retail shops remain one of the more popular commercial investments, followed closely by small industrial units. Anything with multiple tenancies is of high demand because that arrangement helps spread some of the risk.
If rental housing is not to your taste think about commercial. It’s a whole new world and the difference between the two is like chalk and cheese.
The Emergence and re-emergence of Property Spruikers
The improving market has brought out the usual bunch of spruikers offering “instant wealth” through property. All of them offer a quick path to riches, initially at little or no cost to you – or so they say.
My friends, do not be fooled.
There is no such thing as a “free lunch”.
These spruikers are either going to sell you a property from which they will collect a hefty fee through an option or some kind of side deal arrangement.
Or they will charge you after you have been convinced that it was all free.
Get your investment advice from genuinely independent sources, where the fee is up-front and there are no hidden agendas or add-ons to come, and where your advisor has no part in the sales process, disclosed or undisclosed.
Public Works Act
The Christchurch disaster has brought the subject of compulsory acquisition and other powers to the fore.
The Christchurch Earthquake Recovery Authority (CERA) has draconian powers similar to the Public Works Act and many people complain that they are not getting a fair go.
You can understand why sweeping powers are needed to deal with the Christchurch situation and there will always be an element of unfairness.
The threat of compulsory acquisition of private property in Christchurch’s CBD is the elephant in the room no-one is talking about as the government moves to develop a new blueprint for the city’s reconstruction
link: Compulsory acquisition could reconfigure Christchurch CBD
But not just there.
In Auckland the Public Works Act (PWA) is being used on a huge scale for different purposes. It is being used to compulsorily acquire land and buildings by Auckland Transport (aka Auckland Council) to push through the Central Rail Link (CRL) connecting downtown Auckland with outer suburbs.
Nearly three hundred commercial and residential properties are affected and will be taken to create the rail link for the betterment of the community. The trouble is that someone else’s betterment may be to your disadvantage - and then it’s a different story indeed.
The cost runs to billions.
Auckland Transport has already stated that the estimated cost to acquire the properties will be around $2.8 billion and they hope to recover that by selling the land back to the market after the work is done. (In your dreams maybe.)
Most people would see such a rail link as a good thing - that is until you are the one affected by the stigma (yes – this is the very word being used by the people from Auckland Transport, according to my clients) when your home, commercial property or business has had the designation slapped on requiring it under the PWA.
From the propaganda available, one would suppose it’s all sweetness and light. There’s no problem. You just give up your legal rights to your private property, and all your years of scrimping and scraping and shepherding your investment through troubled time … and then quietly go away.
“We are aware that property owners adjacent to the CRL will want to know more about future construction impacts such as noise, vibration and access. We will explain these over the next few months and address them at a greater level of detail in future design and resource consent processes.” — David Warburton Chief Executive Auckland Transport
link: City rail link route identified. Also see Auckland Transport ‘fact sheet’.
When you get to the fine detail it’s a lot different for the owners and businesses.
For instance:
1. Once the designation is on your property, it remains for up to 20 years. That means you cannot sell or redevelop your property into the market or to any outsiders for all that time because the only buyer allowed will be Auckland Transport.
2. No allowance is made for any tax you may have to pay if you are obliged to sell. If you make a profit on the ‘negotiated’ price you may be reluctantly forced to settle upon, and if company or personal tax is payable then you have to bear the cost. There’s no compensation for that.
3. If you own a business in a building, there will be no compensation if your business is destroyed or if the lease is cancelled by virtue of the fact the the building will be demolished.
4. Should you get a better offer during the 20 year wait you can’t accept it – you can only get what the Council and you “negotiate”. (How you can “negoitate” when the PWA can ultimately take the property by force is beyond me.)
In summary, the owners of homes and buildings along the proposed route will eventually wake up to the fact that their property is theirs in name only and they will be faced with the stigma of the designation and in virtual limbo for many years to come.
Think about it. Would you buy a property that was going to be taken compulsorily at some date in the future? I doubt it.
I recall the same happening on the 1960s when the then Auckland City Council issued maps of Auckland showing where proposed motorways and road widenings were planned. As soon as the dotted lines appeared on the maps, wholesale destruction of value followed. Any property that had a dotted line was virtually sale-proof and remained that way for years and years.
There are many more disadvantages which I will outline in a later article but you have been warned.
Where Is Best To Invest?
Now that the doom merchants have all but disappeared (and the world has not come to an end), one of the most frequent questions my advisory clients ask is: Where should I be investing for income and security?
They realise that the market is improving and that many parts of the country are now enjoying a resurgence in demand and values.
The first matter that has to be explained is that the market is not a homogeneous lump moving in unison one direction or the other.
No. The market consists of many parts all moving at different speeds. The trick is to pick the slice of the market that is about to move rather than climbing into one or another market at the last minute. Even more important is not to be talked into buying cheap rubbish in depressed suburbs. There lies losses and heartache trying to deal with third-rate tenants in fourth-rate houses.
So what is ‘hot’ and what is not?
Houses:
If you can afford to buy into what I call the “Mum, Dad and three kids” market then that’s the best market of all. Good average family homes with a bit of land to kick a ball around will do just nicely.
Regular three (or more) bedroom homes, made of traditional materials in an average-to-good suburb is the most likely to hold its value - and indeed grow in value at an above average rate. That’a what you want. The price should be in the affordable range - up to $500,000 in Auckland, and the equivalent in other cities or towns.
If the property can be improved, then so much the better. Growth and income are bound to rise because of the shortage of just these types of property. Remember it’s the LAND that is the most valuable part.
Buy as much land under the house as possible and avoid tiny sections.
With any luck you may be able to subdivide as pressure grows to provide more infill homes. Buy land, lots of land, together with rentable solid houses and it will be hard to go wrong.
Shoe Box Apartments:
These have had a bad rap in recent years and have by and large hit rock bottom. For income as a factor of the price paid, these are hard to beat.
Apartments come in all qualities and shapes so buyers need to exercise great care in this market. Remember: apartments cannot be changed (other than internal redecoration and refurbishments). There is no land to speak of, and they rarely if ever suit the “Mum, Dad and three kids” scenario.
Having said that, it has to be agreed that despite being shoe box size, the better apartments are getting hard to find, the best land having been taken, and the cost of replacement sky high. (Luxury apartments are a separate topic altogether.)
For pure rental income, shoe box apartments would be one of the best investment options around - but serious capital gain may be somewhat far off.
Townhouses and Units:
Much of what applies to houses as above also applies to these properties. Position and construction are vital as they too are often hard to extend. Town houses and units make up a great part of the market for first home buyers and retirees - so buy in confidence once you have done your due diligence.
Lifestyle & Beach Homes:
These are still suffering and are hard to make money out of unless the market regains its boom mentality again. Lifestyle and beach homes were the toys of the wealthy (or indebted) during good times. Now that times are not so good, these toys aren’t played with as much as before.
Some represent huge bargains if you like sniffing ozone or the smell of cow patties.
If you buy into these then don’t expect capital gain, or big rents in the short to medium term (Kim Dot Com may the exception if what he paid in rent is correct.)
Bare Sections:
If you can afford to buy big pieces of land in a well built-up area, then you may be sitting on a gold mine. But land that is out in the countryside, or by some swamp or silted-up river, is almost impossible to sell let alone get an income from it. Buy if you must, but at your own risk.
Shops, Offices Industrial:
Keep in mind that, unlike residential, commercial is 90% about the lease and the tenant. Investors buy cash flow and the stronger and more reliable the better the value.
Checking the lease(s) and the strength of the tenant not to mention the location, is a major task not to be attempted by beginners.
The big advantage of commercial is that it is sometimes possible to virtually double the value of a property overnight (or, equally, halve the value through a blunder or by carelessness.)
Shops are the most popular because tenants are plentiful and most people ‘understand’ shops.
Offices, on the other hand, are more difficult because of home computers doing the work of clerks and secretaries.
Small and medium industrial properties are also very popular so long as the premises are not too specialised.
When considering any form of commercial investment always ask “What if?” ... meaning, what if the tenant leaves? Can the premises be leased again quite easily? Or used for another purpose?
Commercial also has one disadvantage as compared to residential: it is a little harder to finance.
Most lenders will go to 65% of value (as compared to 90% for residential) which means a larger deposit is required to purchase.
This gap can be filled by second tier lenders but their interest rates can be horrendous.
In the good old days, finance companies were only too happy to lend on second (or even third or fourth) mortgage but since their demise, this avenue has been closed off, leaving only a few ‘lenders of last resort’ remaining.
As a result, partnerships have become quite popular for commercial investment. If a deal is too large, it then leads to the creation of large syndicates as we discussed earlier.
The Rascal’s Guide to Real Estate
My latest book, The Rascal’s Guide to Real Estate is about to be released. It is a totally rewritten, expanded and up-to-date version of the 2002 edition of the same name.
It’s available here at www.EmpowerEducation.com.
The last 10 years have (literally) seen seismic shifts in the real estate market. So much has changed. With the boom and bust, the Global Financial Crisis, the collapse of finance companies, the convictions and jailing of a string of company directors, the loss of billions of dollars of people’s savings, the Christchurch earthquake … to name but a few.
But one thing never changes with human nature: greed, fear, ambition, the quest for power and the need to own land.
If you invest in property carefully, prudently, and with forethought - while keeping your hands clean at all times - you could do very well indeed.
---------------------------
Olly Newland
© November 2012 www.ollynewland.co.nz Used with permission.
163 Comments
The problem for me, as a first home buyer, is that I'm not that concerned about interest rates, but prices.
Yes, I can afford the repayments on a "standard" 25 year mortgage without too much issue, but I'm not looking at a 25 year mortgage. I'm looking at 5 or 10 years maximum, where the difference between a 5% and 10% interest rate is small. For people like me, the high prices are crippling.
I'm in the same boat. I've got a large deposit and I'd be looking at as short a term mortgage as I could get away with. For me the difference between 5 and 8% interest is small, 1-2 years on repayment at most. Whereas most of my peers who've jumped into the property market in the last 18 months are almost dependant on interest rates lowering... even if they stay where they are now, they're going to struggle. If they rise they're stuffed!
As for house prices doubling. It can't, people aren't earning any more, despite what the CPI will tell you, costs of everything are going up leaving less disposable income to pay a mortgage. Rents certainly can't move because, again, people are struggling to pay them as is.
I think that property people sometimes forget that, no matter how low interest rates are, no matter how much cash is floating around and no matter how easy credit criteria are, at some point, someone has to actually do some work and earn that money in toil to pay for the asset and interest.... and there's precious little margin for that to happen further without a drastic increase in the productifivty and profitability of our economy.
Most of my peers are having to put off purchasing a new home or put off having children.
As for Olly's comments in regards to first home buyers needing to cut their cloth many have and now live in Australia.
If house prices double surely this would have a negative impact on the NZ economy.
You guys are correct, “large principal, low interest rate” costs you a lot more over a lifetime than “small principal, high interest rate”.
FURTHERMORE; in conditions of small principal, high interest rate, the mortgaged party has historically always had the following working in their favour:
1) Inflation is high, and the value of the “principal” relative to incomes gets steadily inflated away. Ten years later the loan might even be smaller than your annual income. This happened to almost everybody who bought a home in the 1970's.
2) Interest rates fall, leaving them with the best of all worlds; small principal, even smaller relative to inflated incomes; AND low interest rates via refinancing.
This is NOT going to happen to the abused and swindled young first home buyer of the modern era. SHEESH, can’t any of this basic stuff get spelled out once a week in all daily media until some sense is finally allowed to prevail? Of course the banks love this, low interest rates, large principal is far more profitable for them. Why can't our media make the connection between this racket and the banks record profits right now?
How much longer can Kiwi buyers compete in that bloated industry ?
I can see on many auctions to come, how the hands of the “Asian Mafia syndicates” go up and both Kiwi hands disappear discretely into their own pockets.
2020 - Tip for young NZfamilies: Buy cheap land and build your own paradise - http://www.kiwicamping.co.nz/
Raf - I think everyone wants afforable housing but I can find no evidence that a full land tax or CGT will make housing more affordable. If you have some evidence would you kindly supply it? In fact I believe CGT was implemented in the 1970's at one stage and quite a few people went bankrupt because of the introduction of the the tax. The implementation of CGT did nothing to stop rising house prices. CGT has not made a bit of difference to house prices in countries that do have it.
GBH - posted an interesting cost analysis on interest.co.nz using a $400k house. There is approximately $130K of the total cost of a house going to the Government and Councils already. Maybe you should look at all the costs involved and see who is getting a big chunk of the pie.
GBH's example used a $400K house and he split the cost 50% to land and 50% to material and labour. The materials and Labour component attracts 15% GST.
Building Consents costs are outrageous but GBH used an approximate/average figure of $25K. He did allow $5k for building consent costs in his figures.
GBH then estimated the Councils effects on land costs by controlling the land supply and usage. This has a significant effect on house costs.
The RMA has a significant effect on the cost of land. The process is cumbersome. slow and expensive on the applicants and submitters who oppose applications basically get a free lunch at the applicants expense. Submitters do not have to provide factual evidence and are not requested to take an oath.
I would add that there is very little competition in the materials supply market. The building materials supply urgently needs competition.
Builders should look at how Farmers took control of agricultural products when the monopolies were in control. This is why CRT was formed originally in Otago.
Legislation, taxation, monopolies, subsidies and other handouts are the problem. Allowing another layer of taxation into the equation will ensure that more people never attain home ownership. It is also important to remember that some people choose not to own a home for various reasons and yet these people get statistically aligned into the don't own my home category and it is assumed that affordability is an issue when it has nothing to do with it.
Small to medium sized enterprise offers the best solution to home affordability. This means we shouldn't have large corporates having monopolies and getting into bed with Government. It also means the legislative process needs spring cleaning to get rid of impediments to small/medium business's.
New Zealand Politicians frequently ramble about how easy it is to start a business in NZ and they are referring only to the ease in which one can establish a Company structure and fulfill the necessary obligations that IRD require..
They Politicians never mention the never ending obligatory compliance that each business type has to adhere too. It is this obligatory compliance that is a severe impediment to the real market and ensures the cost of final product to the market are more expensive than what they should be.
Good points.
I'm not a fan of a CGT and that shouldn't be considered in the same space as a land tax. We should forget CGT completely.
I appreciate your comments on the costs of "red tape". No disagreement there at all. Lots of room for improvement there. BUT the elephant in the room is land and the mortgages attached to them.
The best place for data on this is Fred Harrison's books; "Boom,Bust: House Prices, Banking and the Depression of 2010" (2005) and "The Silver Bullet" (2008).
There's plenty of stuff around on the web. Henry George also did a lot of work in this space and there were some experiments with this in Australia and the UK 100 years ago (continued in some areas).
Land price inflation kills the productive economy and transfers wealth from poor to rich (or from renters to owners) and is financed completely by interest bearing debt from the banks.
Taxing land will see it used more productively and stop the squeezing of the market by land bankers and developers.
Land taxes are a good idea, period, but I am skeptical that they would keep land prices from inflating when the underlying problem is a de facto quota scheme on the supply of land.
There is an excellent essay by Mason Gaffney, who you should have heard of if you like land taxes, way back in 1964, strongly criticising urban growth containment and pointing out that land taxes would achieve the desired results without the containment policies. He did not advocate leaving the containment policies in place and enacting a land tax, he advocated land taxes INSTEAD OF the containment policies.
Some people have claimed that land taxes, not "freedom to develop" kept house prices from bubbling in Texas. But Leith Van Onselen blows that claim out of the water here, other States had land taxes and urban growth containment, and they had bubbles.
There IS an example of a market in the first world that has always had very TIGHT mortgage credit, yet they have had major house price volatility. South Korea.
I believe from the evidence that the only "credit restrictions" that would stop house prices bubbling when supply is rationed by regulators, is a total ban on lending against property, period. South Korea has used Loan to Value ratios of well over 50% and this did nothing whatsoever to reduce price volatility.
http://en.wikipedia.org/wiki/Financial_Supervisory_Service_(South_Korea)
By always you mean since 2006? Incidentally near the peak of their property bubble?
If he's about the same age as me (65) it was hellishly hard to buy a house in the late 1960's. You had to have a large deposit for a start, and usually a life insurance policy to match - Insurance companies were the best bet for a loan (AMP was our mortgagor) and if I remember rightly the interest rate was around 9% per anum and we thought that was good! Two years on from buying our first home and I'm a stay at home mum with kids - the big difference then the husband's wage could service the mortgage because we didn't have 100% loans.
AND if you were a single woman who wanted to take out a loan - well the answer was a big fat NO. My sister-in-law had to petition her member of Parliament to be able to take out a State Advances loan in the 1970s.
Ollie is right when he speaks of Gen Y wishing to start out where their parents ended. We never did back then as our parents (well mine anyway) were State House tenants who never owned a house. Only really rich people did back then. Our parents didn't give us a start-up deposit on a house. (violins ready) we didn't have the flash kitchens, we cut our cloth to suit and lived where we cld afford not in the "flash" suburbs.
Time to get back to reality I'm afraid.
You are wrong and you are unfair to the current generation of young people. Your generation ended up on the pig's back. Here's why.
“Large principal, low interest rate” costs you a lot more over a lifetime than “small principal, high interest rate”.
FURTHERMORE; in conditions of small principal, high interest rate, the mortgaged party has historically always had the following working in their favour:
1) Inflation is high, and the value of the “principal” relative to incomes gets steadily inflated away. Ten years later the loan might even be smaller than your annual income. This happened to almost everybody who bought a home in the 1970's.
2) Interest rates fall, leaving these people with the best of all worlds; small principal, even smaller relative to inflated incomes; AND low interest rates via refinancing.
This is NOT going to happen to the abused and swindled young first home buyer of the modern era. SHEESH, can’t any of this basic stuff get spelled out once a week in all daily media until some sense is finally allowed to prevail? Of course the banks love this, low interest rates, large principal is far more profitable for them. Why can't our media make the connection between this racket and the banks record profits right now?
Sorry can't help when I was born! And yeah we were what I call the lucky generation. Every dog has his day eh! Your turn might be coming. In the meantime might I suggest that everybody concentrate on this - its no good being the richest person in the graveyard so look after your health, save for your retirement (if you can) and have a good wine at the end of the day! Luv from a babyboomer!!!!
I'm very well informed thank you about the bankers and the big property interests who are behind this stuff. Informed enough to know that we are all hurting world-wide becos of them (you included probably) and that we are never going to win until something drastic happens to the economy world-wide. I remember asking a question of an accountant years ago about inflation and the like when I was a dummy on such matters - still not an expert I might say - and my friend said then that when the whole world goes broke becos of greed we will all just have to start again with something else - probably tulip bulbs - but then again thats been done before hasn't it!
I'm Gen 'Y'. I own 5 houses. All purchased within the last few years. I've never had an income of more than $35k, I've never had a hand out. HOUSES ARE CHEAP. I probably buy the houses that Philbest turns his nose up at. I wouldn't dream of moaning about not being able to afford a loan because I wanted to pay it back within 5-10 years...
Stop talking Phil, I'm embarrassed to be thought of as part of your generation...
Agree and maybe the terms "Mortgagor" and "Mortgagee" should be used more widely as it used to be. I can remember being terrified of the word "Mortgagor" because to me it implied that they owned my loan and my house and if we didn't pay the mortgage on time then it could all turn to custard with penalties and ultimately that term 'MORTGAGEE SALE" would be there in the papers against your name. Oh the good ole days eh?
A pleasure
A new house was three times av annual salary. It was a tiny box without
letter box
Clothes line
paths
drive
garage
carpet
fences
Just a box on an undeveloped section - with weeds.
By law you needed 1/3 deposit to get a mortgage - unless you could get a State Advances (Fanny May) loan. The deposit took 10 years of meager living to save.
Most high achievers had to obtain their mortgage from a solicitor. In 1972 the interest rate was 9.5%. By 1975 it was 17%. This peaked at 24.5%.
I really feel so sorry for the current market entrants - who want from day one - better than their parents. So so sorry for them
Absolutely on the button about the "good ole days". Sounds trite but boy did we work hard and because we are now comfortable we are getting slated for being so. As I said before, every dog has their day. Hopefully the greed merchants won't take too much more off us before we get to the rest home!
Rudderless: "A new house was three times av annual salary. It was a tiny box"
Yes it was. 1972. Hmmmm. Now let me guess. That would describe a "group home" from either Reidbuilt or Neil Homes, (in Auckland) in their subdivision, on their land. Bare-bones Cookie-Cutters. Choice of 3 designs. House and Land package. Limited choice. Miles from anywhere. Out in the sticks, out round Manurewa, just before Rainbows End, or Glen Eden, or Ranui. Group Housing only got going in the mid-to-late 1960s. If you wanted to buy a section closer to the city and custom build a house it was a lot more than 3 x average income. Group Builders didn't build to order on your land. Otherwise it was Award Homes or Dempsey Morton. Expensive. Or else a private one-off builder, even more expensive. Hugh calls the "group" builders, production builders now.
And just to nail it, that is what HUGH is prescribing 3 x average income.
Thanks Inconoclast
In 1972 I was on five thousand a year. For $14500 we bought a quality 20 year old home - with a garage. Built by the first owner and finsihed by the second owner.
Prime position in a nice inner city fringe. As they say - you look at 100 - attracted to 10 - make offers on 3 - and buy one. By putting in that hard work - the good deals are always there. Yes we viewed many group homes with the washing machine space beside the stove.
This house is now one of our renters. Valued at about $700,000. And grossing each year double the original number. Inflation inflation.
Oh I forgot to mention.
Our REAL 1970 starter home was an eight year old with
Kango hammer needed to clean the oven
no fences
no driveway
no garage
no woodshed
no gutter downpipe drainage
It had a letter box and a clothes line! WOW!
Purchased for $8200 and sold two years later for $11300 - which gave us the 1/3 deposit to purchase the 1972 home described above - which is so good - it will never be offered for sale.
Phil Best - please give it a rest. I am a poet and I didn't know it.
10 Years of meagre living to save?
So all of those stories I've heard then of Baby Boomers moving into their first house with their new brides in their late teens and early twenties must have meant they went off to t'mines to work between the ages of 9 and 13?
And let me guess, they had to walk there barefoot, in the snow, uphill..... both ways.
How ridiculous! Buy a bare quarter acre in an outlying suburb now (even somewhere miles away like drury), and then build a house on piles with a floor area of 80 square metres. Don't put a driveway in, or landscape it or fence it. If you come in at under $350k you'd be extremely lucky. To even put it on an average playing field with the early '70s the average NZ household salary would need to be $117k .... which is pretty fanciful stuff.
Just another 'boomer who's out of touch with how bad they've made things for Gen X and Y.
I was lucky enough to obtain a 5 year apprenticeship with an amazing boss.
My starting wage was 16% of the going rate for a tradesman. Two Pounds fitteen shillings ($5,75) per week. After 4.5 years I was paid 86%!!!!
But like I said - my boss was a very nice man and he taught me much more than my trade. When he sold out I transferred my apprenticeship to his son - 400 km away.
Another nice man and superb boss.
In the end it was not the money that I gained - it was the worldly knowledge.
I am NOT a Baby Boomer
No working in the mines between 9 and 13 at all. I got married at 19 and my husband was 24. He took out an insurance policy when he started work at 17 years of age because in his childhood he had been literally put out in the street becos his mother cldn't afford rent. So when he was 24 he took a loan against that life insurance policy from the AMP and together with money he had saved from 17 onwards we were able to buy our first house. Thats just one story, there are probably countless others from us very selfish hardworking babyboomers out there. Where there is a will there is a way.
Von
There are thousands of us who started with nothing and worked hard for 50 years to end up comfortable - as well as giving our familys a start in life. Few of them visit this site.
The Esprit's of this world think that we tell lies. Amazing!
They will have some reflection to do when their Starbucks closes and they have nowhere to parade thos $2000 sunglasses - on top of their heads - at midnight.
Dont you just love their bling? Image and bling!
On the contrary. I'm in my early '30s. Don't have a house yet but have over $220k saved up now for when the right time to buy comes along. Don't think that all Gen-Yers spend all their money and expect it now, some of us make just as many sacrifices and work just as hard, if not more than many if your era did.
I just don't see the point in paying over half a million to live in a crap neighbourhood in a crap house. It's all about waiting for the right time to purchase when the time comes. I was shopping for a house 18 months ago, back when things were more sensible and couldn't find the right one. In hindsight, I should have paid a little more then, but I'm young(ish) and know that opportunities and cycles all come and go around.
Congratulations, I wish you all the luck in the world in finding a home and I am sure you work very hard for your money, as my kids do. Agree - don't pay over a half a million dollars for crap - just keep patient and the right one will come along. Me, I'm still trying to sell a house that everyone that comes through says is beautiful but no one wants to buy! Not in Auckland though. Oh well - Auction day is in 21 days time - we'll see if anybody wants it then. Good luck in your house hunting Esprit - and I'm sure you are not full of bling with that much money saved.
Well done Esprit
With that amount saved you have the world at your feet.
Look at 100 (houses), attracted to 10, offers on 3 and buy one.
If the market in your town does not allow that process - change towns.
But blaming the situation on your parents generation will achieve nothing. You just have to make your own way in this life - as so well laid out by Von.
Nothing wrong with renting. The crash will be epic, and will wipe out a lot of what people thought was "savings" in the form of dried paint. Olly, too, or especially.
For $220K, you can pay cash for a lot of places, even around Wellington. Ever considered Kapiti? Weather much nicer than Welly, even though close.
You might take a pay cut, but so what? You'll have freedom. Bernard's making a smart move. Room to breathe. Enjoy life. Be less of a rat, caught in a race.
You can always visit Auckland. Way overrated. There is more to life than planting your flag in Auckland (only).
On the psychology side, there is some interesting research on support for teams that one is invested in. After betting on a team, there is support, obviously. I think since Olly is fully vested in property, of course he will be the lead cheerleader.
So do you or does anybody else out there want to buy our house - because nobody else seems to want to. DON'T say anything about the monolithic cladding, we have heard it all, researched it all (pity we didn't before we built it!) and it is depressing to say the least that the perception people have just won't let it be sold. It doesn't leak, has never leaked - no cracks anywhere, well maintained but who knows what the future holds (in fact who knows with any house). Well built by a master builder of old school with an excellent building report! Any takers? It won't be overpriced we promise but we can't give it away. Oh and we did all the landscaping ourselves from scratch, empty section when we built.
It's a tough one. My suggestion is to either add a bedroom(for a family and work at home situation), remove a bedroom (to make it retirement destination), put new cladding (eliminate perception), add more acreage, or move it closer to the city. None of these things are fun or feasible for your situation, however, I'm giving you my perspective of your problems.
Grey town is a limited market. It's a long commute, but there are people who want to live out of the city, and have a lifestyle block. However, yours isn't a large block, it's more of a large section. Add that to "who is the someone looking for 3 bedrooms?" A family with kids? It isn't big enough to have animals, but big enough to be a headache mowing the lawn on the weekend, and a long daily commute for Mum and/or Dad to Welly, when they can get something in the city for the same price, and have more time for family because no long commute.
What you have is a "tweener"- between a lifestyle block or a section, as well as between a retirement cottage and a family home (if 3 bedrooms, why not 4? Families can get 4 bedrooms for about the same price). If a family wants a small (ish) 3 bedroom home, on a large section, they can get an older home for a discount, or about the same price as a home that has "problems" (like yours- yes, I know it's not true- it's perception). I, for one, like monolithic clad. Trouble is the leaky home issue has everyone scared. Overcoming perception is extremely hard. It would require re-cladding your house, an investment you might not be willing to make, but to get the house sold....
Unfortunately, I learned a few years ago that the market doesn't care what I think, learning this selling a property much in a similar situation as yours, that I built myself. I took the loss and got on with life. Can't win them all, but you'll age a lot worrying about it. Otherwise, you live in it yourself and enjoy what you have created. Wasn't that the plan? Yes, life and our circumstances do change.
It's all part of the reason we now rent. Life changes a lot these days. And we've own a lot of houses. Taking a break.
Thanks Happy Renter, all good suggestions but we can't afford any of them. We're pensioners. Happy to say that we are getting plenty of interest in the property at present from (a) "rich" people out there who would like a nice weekender, (b) people in their fifties who are "empty nesters" which we were when we built it and (c) keen gardeners. Plus a group of gay people (Greytown is not called "Gaytown" for nothing and there is plenty of the "pink dollars" here]. Mowing the lawns no problem as ride-on is part of the chattels. So we're crossing fingers that come Auction day we will get it sold for a price acceptable to us - but we know it will be well under the QV. Whatever it sells for we will still be making a profit (lucky us we are mortgage free) - its just that it will not be what we had originally hoped for. But how greedy do you want to be eh? We'll just have to make sure that what we buy/build next will still leave money in our pockets. We'll be staying in the wonderful "Rapa" though and not going back "over the hill"!
Oh as for adding the fourth bedroom for work at home situation - I work from home on a casual basis and it is all done in the dining room looking out over our wonderful garden in the sun, from a desk purchased from the Warehouse that is hidden under the breakfast bar when I'm not working, on a work-supplied laptop, handy to the kitchen for a coffee from the coffee machine and muffins that the man of the house has made for morning tea. What more could a girl want - why lock yourself in a dark room to work. Where there is a will there is a way.
Rudderless bad fashion and coffee shops have been around since the sixties.
Over priced goods are probably more to do with the consumer based economy we have implemented
over the last 30 years.
We have lived in different times higher education was advised and encouraged over the last 20 years as oppose to leaving school early into a trade or now non existent manufacturing career.
Yes, I am impressed with the amount of info Olly provides to back up his statements. We can all see what is required to make a difference, Olly is just completely cynical that there is no political will to make the changes. Shame on him and his generation, for what they are doing to the oncoming one. Basically he is saying, "they are in the minority anyway so they are outvoted", and they just need to learn to lower their sights to dogbox apartments. This is the country of the fair go and the Kiwi way?
Eventually of course the number of "unable to be home owners" has to become a critical mass, I noticed statistics being bandied about in Parliament recently about the 35-44 y.o. age group having dangerous increases in the number of non-home-owners, it's gone from 20% of them 10 years ago, to 40% now. Probably below 35 almost no-one is a home owner.
Olly seems to be prediciting very low inflation over the next few years and yet he predicts house prices to double. This seems very unlikely to me - in all previous house price booms, inflation has been a major part.
I could imagine that house prices might increase at a rate higher than inflation due to shortages and low interest rates, but I can only see them doubling if wages go up by say 50% which doesn't seem likely.
It would require near-zero interest rates (quite possible) and positively insane "innovations" in lending against property. Of course most of the buying would be done by higher-and-higher-geared "investors" while the number of "renters" mushrooms. Eventually there has to be a revolution, I say abolish the urban growth constraints now, and avoid the burning down of parliament and the lynching of property investors in 10 years time.
He's likely to be right on the money...the "merry dance" shall continue....and don't the bank bosses love it...look at the profits to be had from created credit...fabulous fun.
English is secretly as happy as can be with the GST flood to come from chch and the corporate taxes from the banks.. so expect lots of blather about what the govt is doing to lower housing costs because blather it is.
Be realistic MK, just where in Auckland do you think you can get a dumpy box on it's own 300m2 for $500,000?? Not the central suburbs unless you're under powerlines or on a main road.
Also your 10 acres would have to be in the boondocks to have a decent house on it for $300k.
Here's an example 10 acres 25 minutes inland from Oamaru (middle of nowhere) with a dunger on it for $299k.
http://www.realestate.co.nz/1797760
Houses are expensive - get over it.
So the following are some benefits as I can think of them, Chris_J please feel free to add some because I'm sure I'll miss some out.
High house prices mean banks lend more, making more money. Good for shareholders.
People feel wealthier and spend more, boosting the economy with money created out of nothing. Good for everyone.
Lower socio-economic people get pushed out of higher priced areas, which I imagine would lower crime in that particular area. Good for higher socio-economic people.
People more likely to join real estate industry if prices are higher = more jobs
Can't think of many more
Ah, the old "debt is wealth" fallacy.
The lesson we all need to learn is that wealth is excess of income over spending. Debt is not wealth. Debt is a charge on the future's excess of income over spending. And what we are doing is REDUCING the future's excess of income over spending even as we rack up the debt.
This is why I say the affordable-housing regions of the USA "OWN" the future of western civilisation right now. When people can pay off their mortgage in 7 years on average, what do you think they will be doing with their incomes for the next 23 years they are not paying off their first home, while Kiwis, Californians, Australians, Poms, etc all ARE?
"......Why would I buy a dumpy box on 300m2 in Auckland for $500,000 when in the country I can get a nice house on 10 acres for $300,000?....."
The statistics on the growth in lifestyle block living show that a LOT of Kiwis agree with you. The amount of land taken up in lifestyle blocks in the last 10 years is actually more than the size of the existing cities. It is certain that this would not have happened if a quarter acre within the planners growth boundary actually cost less than the 20 acres out in the wops, instead of several times as much.
House prices can only double over the next few years if Wheeler drops the rates to practically zero and our currency depreciates by 50% and our incomes rise significantly. House prices in NZ on a global scale are starting to look unattractive as it stands so any significant rises would look silly. Additionally if Wheeler saw house prices rising significantly rates would rise. If New Zealand gets downgraded rates will also rise as borrowing costs go up. Olly is right in that rates will still stay relatively low on a historical basis for an extended period but maybe not beyond two years and maybe sooner. Significantly higher house prices and higher debt levels would put New Zealand in a vulnerable position. We need to over time get house prices back towards 3 to 1 on income. If we cannot control building and land costs then we need to work to deregulate all the red tape making it easier build quickly and cost less on regulations. For example someone wanting to build a basic carport should not need pay an approval cost of $30,000 dollars (scrap the red tape and will do it for $125). De-regulation not only in housing consent , but in business trade with overseas partners is required to attract business revenue to the country. It is happening in Europe , USA and even John key has mentioned this. Cut out the unnecessary red tape , save money and be more productive, competitive and easy to deal with. Just remember also that low interest rates will not be forever. Governments around the world will do what they did in the 1930's and inflate the debt away.
Ollie , I dont see houses doubling in " a few years " because for this to happen we would need one or more of the following :
1) A steep rise in incomes
2) Inflation at close to 10% per annum
3) Almost zero interest rates
4) Massive long-term funding of our Banks by foreigners
5) NZ Immigration Service would need to double the number of new migrants it lets inevery year
Your working off the wrong assumptions, this market is being driving by overseas investors...all your factors are small contributing factors only. Take the greater LA property market, one could easily argue a much worse local economy than here..still shoratge of listing like Auckland and now with similar price appreciation again driven by overseas money.
Same story Vancouver, Hawaii and Sydney....sorry to tell you it has little to do with your take home pay for now....
Correct speckles .. what is overlooked is for someone contemplating buying property in Hong Kong .. with USD $1 miilion they can get a 46 sq/m apartment with a balcony in Hong Kong, no land, or they can look further afield to other places ie Vancouver, Toronto, Sydney, Melbourne, Auckland and get a heck of a lot more for their $1 million, and it is (untaxed) CASH, CASH, CASH, CASH, or it is borrowed from Tokyo at 1%. These other places must look like paradise.
Olly may be proven right so don't knock the idea.
Statistics show that house prices have doubled every 7-10 years over the past 50 years
QV also proves that has been the case since their records began in the 1980's
At each catch up period the public out cry was the same- "it's not possible"- but double they did.
It is more likely that there will be a major catch up in wages sooner or later, as they have been stagnant for far too long ( except for fat corporate bosses who have been creaming it non stop)
Stop the cashed up overseas speculators and most of the problem would disappear.
I believe it is only the extra cash from those sources that is the major cause.
Based on Tuesday's Top 10, how much of the $US3.8 trillion that has exited China since 2001 landed here?
Someone answer the question of how much cash has entered the country looking for a place to invest.
If the right signals are sent out, there would be an equally great desire on these same people to get it out again and a major slump in residential prices.
As far as I know Hugh has no political allegiances, he is simply driven by the admirable desire for kiwis to pay sensible prices for housing, rather than self interested clowns like you who are only keen to see the value of their investments appreciate at a cost to wider society
uh well to me its pretty clear Hugh has a rather libertarian bias, and while he may say he has that desire, well sometimes there are deeper, invisible, more powerful and counter currents that drive things.
Big Daddy on the other hand....couldnt agree more.....as shallow as they get...like periscope depth at most. No matter, the likes of BD are in the future scenario I see toast if their debt is substantial. My worry is for the ppl Hugh says he wants to help, those are innocents by comparison.
regards
Libertarians and advocates of genuine "free markets" are the people for whom there is exponentially lower financial backing available from anyone. All the big fat vested interests, in banking, in property investment, in bureaucracies, are feeding exponentially greater amounts of funding to anyone who is advocating distortions in free markets that the vested interests can take advantage of.
There is hardly anything more misguided and scandalously unjust than focusing condemnation for "vested interests" at the advocates of market freedoms. There is an exponentially higher chance that "steven" and PDK are being paid to do their trolling here; compared to us free marketers. Hugh certainly isn't and I certainly am not either. The Koch Brothers are universally smeared by the Left, and yet they are a rare and honourable exception who support market freedoms for their true wider benefit. But the Rockefellers, George Soros, Ted Turner, the suppliers of exponentially greater amounts of funding to leftwing and Green advocacy groups, all know what is good for their wealth transferring, rent-seeking, pork barrelling activities in the economy.
There is probably no worse example than distortions to urban land markets. Of course Rockefeller fingerprints were all over "urban growth containment" activism decades ago.
Here is the economist Mason Gaffney in a 1964 text book chapter:
".........As the German economic historians relate, the monopolistic city can exploit its customers. The city exploits its customers by stunting its own development, limiting the number of creaking doors and sagging gates through which its customers may go for supplies and services.
There is also exploitation within the city. Employers, merchants, and assorted rent-collectors are generally happy with policies that keep out untrained interlopers who might have alien ideas about competing for labor, tenants, and customers, and in general keeping the natives restful in their compounds. Negative containment policies have an instinctive fascination for anyone whose interest is to limit competition.
There are many groups which would like to limit competition, of course. But cities tend to fall most strongly under the sway of those who stand to gain or lose most by municipal decisions, and those whose assets are irrevocably committed to the city, that is, the landowners. The rest of the citizens are 'by comparison mere transients, outsiders and climbers whose organization and influence is seldom commensurate with their numbers. 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......."
Getting a bit thin skinned on this one Hugh. One wonders why you percieve the very exposure of the obvious link between your politics and property development as an insult, or maybe duplicitous.
In fact given your own overt statements about how the market apparently works, one would have thought that developers were some kind of saintly figures, seeking mostly to bring the market price down to reasonable levels, and council bureaurocrats in league with the most insidious forms of greed and waste (hyperbole for effect).
So why is your personal perception of this your own conflict of interest not as such? Are you self aware of your own biases in regard to your explanation of how the housing market works? The comment seems rather innocuous for somebody to get so upset over. In fact one might have expected you to be pretty self righteous about your own actions as a housing developer, given your stated opinions.
I love doomsday scenarios - especially as we are heading rapidly towards one. Like all species before us who overpopulate, the population reaches a critical and unsustainable mass and then there is a rapid and massive crash in the population. The scenario for 2050 is actually looking like approx 9 billion people, which is going to be a problem considering WHO estimate we'll need at least two planets worth of resources by just 2030 (18 years away).
So forget about climate change, or peak oil, or an asteroid hitting the earth - we're going to find out pretty soon what humans can be really like when it comes down to every man for himself. The population will go from 9 billion to just a few hundred million (at best).
And the most entertaining part:- 500 nuclear powerstations without the huge support services (nuclear technicians, cooling, electricity etc) will all go 'poof' like 500 Chenobyls, so those few hundred million survivors lett staring at the ruins of our current civilisation and picking and choosing their house anywhere have about 2-3 months to enjoy it before they die from radiation poisoning, along with everything else.
You've gotta laugh.
Your kind have always, for centuries, gone to their graves convinced that had they just lived a few years longer, they would have seen the collapse they had buffed over all their lives.
But inconvenient technological paradigm shifts keep coming along. Some "experts" calculated in 1880 that the streets of New York would be 20 feet deep in horse dung by 2000.
The hyper-linear predictions of Malthusians always will look that stupid a century later.
I do agree with Matt Ridley ("The Rational Optimist") though, that bad politics can be self-fulfilling prophecies. Had the whole world gone communist instead of just Russia and China, we would indeed all be dying of both an inability to produce sufficient to support our populationsm, and of poisoned environments. It is an amazingly stupid and perverse politics that is capable of this sort of leap backwards, but "Green" politics and its unintended consequences is a prime candidate to rational thinkers.
Stan - beware the PB one.
He;'s been absent a while, and it's been good. But - the rants when he's around are long, the debate nil, and it's based on religion (from memory, he had apoplexy when we touched on Darwin....), and an Act supporter to boot, I seem to recall. No idea of exponential numbers, no idea about limits, probably based on reliance on said mythical deity. Always brings it back to 'communism', which suggests a fair old age; you had to be living in the '50's for that.
Yeah, I've been hearing this for a long time now.
I remember the Club of Rome (a so called group of wealthy, scientiests and influential politicians) saying the exact same thing in 1970. We were going to be over populated, and resources - such as oil - were going to be all gone by 2000.
There was also a guy - I think - named Thomas Muthas who predicted that the then rampent birth rate would mean that there would only be standing room left in the world within fifty years. He was writing about 1750.
Smile, phone the chick up, take her out in the V8, do burnouts, and make more babies!
Smile, phone the chick up, take her out in the V8, do burnouts, and make more babies!
Well firstly, I wouldn't do that even if it was the last day on earth, I'm just not that bogan. Sorry :-)
Sure, people have been predicting the end of the world since John was marooned on Patmos and ate too many of the mushrooms lying around (and then went on to write the Book Of Revelation). But I have three things on the side of my argument that you guys are missing...
1. hysterical predictions in the past were based on wild guesses laced with a religious bias. The science of today is spectacularly more advanced (even since the 1970's) and we are much better today at predicting the rate we are chewing through resources.
2. The population of the world had never even come close to being a drain on the worlds resources until just a few decades ago. I forget now the exact date but somewhere in the 80's we started actually consuming more than the world could recreate. We have continued doing so at an increased rate since then - we take more and more each year and the planet has less and less to give. Read about it here...
http://en.wikipedia.org/wiki/Ecological_Debt_Day
Just as we had a GCF caused by too much financial debt, we're heading for an environmental Global Crunch, but with no intergalactic environmental bank to bail us out.
3. I don't have kids and therefore don't give a crap about what happens to the planet after I'm gone, so I'm totally unbiased as I have no vested interest. This whole 'debate' is pointless with parents - they just can't accept that I might be right because of what it means for their kids (very bad things).
But sure, Denial isn't just a river in Egypt. Perhaps Jesus will come back before then as John predicted and take you all away in the rapture...
Well said!
If you look at what the scientific data is telling us then the writing really is on the wall. Part of the reason I don't hold out high-hopes for humanity is due the attitude (arrogance/ignorance?) being displayed above. Sadly it will take a major crisis before people even begin to comprehend how deep in the s*** we are, of course by that point the horse has already bolted.
Like all organisms we will boom in times of abundance followed by the inevitable bust. Are we smarter then yeast? - Sadly it appears in this respect we are not.
Good luck with asking nature for a bail-out! :-)
Plutocracy - Biochemist.
Printer8 - you either have a genuinely faulty memory, or - not uncommonly round here - a disingenuous one.
The Club of Rome (you failed to mention MIT, but there you go) indeed stated that we would be overpopulated, and that - on present trajectories - we would have a resource issue.
There have been 10-year updates, and every one reinforces their original (and it was in the days of Fortran!) hypothesis.
http://www.greatchange.org/ov-simmons,club_of_rome_revisted.html
http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html
(the first might have too many words for you, the second has the original graph - it's worthy of close study - especially by glib folk who got it wrong in the first place :)
You heard it wrong, though. They had conventional oil peaking - not 'running out' - about 2000. It peaked late 2005. Not too far away. Interesting to note the 'actual' is following their 'expected' very closely.
Malthus, of course, was right, given the energy-sources used at the time. Coal (finite resource) then oil (ditto) staved off his predictions, but just put us in more extreme overshoot.
If you're going to post around here, please try and verify/reference before hitting 'save' - we have enough mantra-chanters as it is...
cheers
(great graph, eh? Population declines following economic collapse.........
The world population reached a very important inflexion point in 1961 when the rate of growth turned negative for the first time ever. The rate of growth is still getting less each year and given that they look backwards, it is possible the population has already peaked. That isn't a prediction, that is the the seneca effect in action.
Given that the population have to feed, and the food is - to all intents and purposes - oil, it's impossible that we will get to 9 or 10 billion; more probable that we've peaked now.
Which makes a nonsense of what Olly, and several posters here, are rabbiting on about. No mortgage gets paid beyond 2030, nt by that graph, not even at negative-interet rates.
Dude sorry that doesn't match up with the scientific models of population growth - yes it is true that the rate of growth is slowing, but all that means is that we are growing by a lttle less each day, but we are still growing. Until the point is reached where the growth rate slows to equilibrium and then slips to negative, the worlds population keeps going up - currently some 70 million people every year (the population of NZ every 3 1/2 weeks).
Barring any black swan events the population growth is forecast to peak around 2050 ish at around 9 billion.
Well were to start on your lack of knowledge and mis-information.
The club of Rome are/were scientists, they actually did a manual model (no computers really then) that has been watched over for 40 years and is proving reasonably accurate. Accurate enough to be of concern.
Oil wasnt going to run out in 2000 but daily production peak....that date of 2000 was based on the energy use in the 1970s. After the oil embargos our rate of increase decreased enough that the peak was actually 2004/2005....not a bad result for a 30 year prediction.
Great troll btw....I can see your IQ matches the number of cylinders in your engine....
regards
Well you may as well party like it's 1999. Whether you believe the end is nigh or refuse to accept it right up until it happens, it's going to happen regardless of what you believe or do. So in some ways ignorance is bliss, and denial is probably the best response.
It'd be cold comfort to be standing there going 'told you so' as you are about to be killed by an invading army or die from radiation poisoning.
dollar_bill the latest breed of race cars being developed by porsche and the like are hybrids and even electric and they are fast. Have you seen that youtube clip of an electric car smoking a Porsche gt3 and Ferrari?
(the electric car is a great example of why we aren't a long term species btw ;-)
This is the usual rubbish from Olly. He talks in riddles. Ambiguous Comments like "housing will double in a few years" are intentionally vague - what's a few years? 3? 10? 20?
In my book, "in a few years" means within 5 years - let's be a bit generous and say 5-10 years maximum. As others here have stated I think the chance of house prices doubling in that time frame is close to zilch. It's extremely simplistic to say prices have doubled every 7-10 years in the past, so they will again in the next 7-10 years!
Even if interest rates stay low, its near mathematically impossible for average prices to double assuming wage increases are very moderate in the next 10 years. House price increases in the 90s and 00's were supported by more female work participation, the ability for this to increase any further is minimal, therefore household incomes can't increase much more to support higher prices.
Through the early / mid 00's we also saw quite strong wage growth - again quite unlikely in coming years. What could underpin good growth in Auck over the next few years? Res development? Nope, not at least until the new Unitary Plan is operative in say 3-4 years. Big surges in tourism - nope. Big infrastructure projects - limited compared to the 2000's. Retail? Seems oversaturated to me, and in the face of rising house / rent costs etc (hence less disposable income) and lower population growth, plus growing internet retail, seems likely there won't be much growth
I see three possibilities for Auck house prices in the next 5 years:
1. Median house prices across Auck increase by about 3-5% per annum over the next 5 years (50% likely)
2. At some stage over the next 5 years, Auckland experiences a housing crash, and prices end up 20-30% lower than they are today (35% likely).
3. Median house prices increase by over 7% per annum over the next 5 years (15%)
He says watch out for spruikers - bit rich coming from the King of Spruikers who proclaims house prices will double in the next few years!!!
Inner Auckland is up 30% in the last 2 years - doubling doesnt seem so outrageous a possibility when viewing the world from off the back of a Grey lynn deck.
The dinosaur has been through this before - his missives are designed to agitate - as it has done once again reading all the scandalized punters above.
I'm with you Matt. I predict that in the coming century house prices will bubble and then crash and go up three times, and then maybe even drop somewhat. Yeah, give me blog!
Reassuring to see though that NZ media has the same bad habit as Oz media of asking someone with a massively invested interest to comment about a subject. Want to know about property? Lets ask real estate agents and property speculators shall we?
It's like the AFR asking Andrew Forrest about how Fortesque was doing a few weeks back - he's the Chairman FFS, what do you think he's going to say - "OMG it's all going to shit, sell all your shares now and run" ???
Come on Interest.co.nz, lets have less spruiking please?
well, yes, I am less bearish! 3 years ago I expected the govt to have well and truly acted on the planning problems by now, given that was one of their key platforms when elected 4 years ago. Of course, they have in fact become the "do nothing" government, the most passive and uninspiring govt in living memory
So yeah I was expecting more from them, so that a better housing supply would eventuate. It hasn't happened, and the lack of new housing has pushed prices up.
However, as noted above I think a house price crash is still a real possibility. A number of respectable financial commentators - not of course biased commentators like the bank economists and Olly - are calling Auckland as being in a dangerous bubble
time will tell
Most people seem to be focussing on the ability to pay mortgages not on the cost of houses. People who say houses are too expensive have obviously never built one. The fees, consents, materials, labour etc are horrendous. The reason few houses are being built is because it is cheaper to buy. It costs $2,000 per sq metre to build plus section. When existing houses get to this level it will be just as economic to build. So an increase in existing house prices is entirely possible as they need to catch up to the cost of a build.
Auckland is expected to keep growing over coming decades so if you think prices are going to drop in the face of increasing demand you're dreaming. How can prices drop below the cost of a new build in the face of this increasing demand?
its says something when Olly's prime reason for housing to continue to bubble is low interest rates. Or in another words, if our economy continues to underperform then the housing market will over rperform due to monetary stimulus.
That said, NZ housing is in a truely crazy situation based primarily on monetary manipulation and deliberate bubble policies from govt after govt after govt. But its not as crazy as Aus, and could get worse. My opinion - across the board there is NO CHANCE of doubling over the next "few" years. We COULD have a crash, we COULD have short term sizeable growth, or we COULD stagnate. Its basically a battle between a govt and central govt who want to maintain a bubble and the market which wants to return us to prices that will reflect sensible yields. In the long term the market will win but I've given up speculating on when that will be and if in fact it will be in my lifetime. Our economy is run by bankers for bankers and bankers like bubbles.
"Our economy is run by bankers for bankers and bankers like bubbles". Yep that pretty well nails it. Serial bubble blowers in stocks, bonds, property, commodities, tulips.... Pump, dump and repeat. There are hundreds of instances in dozens of countries over the last few hundred years of credit fueled manias that have ended badly. Each time those involved have claimed "this time its different"
Consider this
In Hong Kong the Multiple Median is 17:1
In Auckland the Multiple Median is 6:1
Hugh wants to get the NZ Multiple Median down to 3:1
with 17:1 money flooding into Auckland, does anyone really think the Multiple Median is going down, or is it going UP towards 10:1 or even 17:1?
HK is a bit special - serious land shortage and Chinese with a few bob climbing in big time. They can't own the land in Mainland Cina.
Based on this article Olly reckons we'll get to around 10:1 income to house prices - then what?
With events like the Spanish and US house bubble collapses fresh in peoples minds it does seem highly unlikely - buyers and lenders will be holding back big time and Government or the RB will be forced to act long before we get 10:1. A massive horde of cashed up immigrants might do it but that would cause so many other problems it also seems unlikely.
Can't see that it's more than the remotest possibility.
you do raise a good point iconoclast - but I seem to recall somewhere that places with the highest house to income ratios tend to be third world (eg Bombay) or developing (eg Hong Kong). In these societies there are a lot of workers who are at the bottom rung of which there is no equivalent in OECD countries like NZ, Aus, Uk etc. They might be earning $1 a as a sreet hawker.
That said, Singapore is a scary example. My brother recently bought a place there, and I reckon must have close to a 1 mill mortgage - people do it because rates are so low. There is definately a risk that low rates feeds straight into housing inflation. On the flip side that has not occurred in US, Japan et al.
Bottom line is there are better investments elsewhere. Why buy a house with a 3% net yield when you can buy shares in a govt guaranteed big bank with 7% franked dividends? House prices and housing market values are very strongly correlated in the long term especially seeing so many loans (62% for the CBA) are to residential property. If thats the case better to go for an investment with a sensible income stream - at least you have a bit of insurance if the crap htis the fan. If the bank shares are worth 50% less in 10 years, you still will have come out on top on dividends alone. There are no guarantees, but surely that has to be the more sensible investment.
Exactly, but dog box apartments that Len Brown et al think we should live in, are nearly as expensive in Akl as in HK. This is a classic unintended consequence of growth containment planning that terminally ignorant planners do not understand. You cannot force up the cost of land at the fringe without causing a similar percentage increase everywhere including at the centre. And because prices are always already far higher at the centre, the result is far more people "priced out" of the centre altogether.
CBD apartments in Houston are only a fraction of the cost they are in Akl. It is not just fringe McMansions that are cheaper, it is all property, including the kinds of property Len Brown et al want us all to live in instead of fringe McMansions.
What we need to keep in to perspective is true value for money. The USA house prices are attractive, Ireland house prices are attractive, Greece house prices are attractive. Hong Kong prices are not attractive and past experience here is that prices have fallen fast by 40% , just as they can rise sharply. Hong Kong Property market will tank towards the end of 2013 / 2014 due to the actual Chinese economy coming off the rails during this period. How this will have a knock on effect with Australia and New Zealand will definitely weaken the currencies and whether the impact of this will have a knock on effect on New Zealand property is yet to be known. If New Zealand cannot keep the lid on house price growth, then a hard landing will be on the cards as some point. We also need to take into account jobs, if we have rising unemployment due to slow New Zealand goods growth overseas then this could also hamper house price growth. Having all these kiwis going to Australia has definitely helped keep the unemployment numbers down. New Zealand and Australia first need to find a way to be competitive on the world stage as currently we are looking expensive. Europe and USA are trying to race to the bottom to be competitive. If you go the UK, USA, or southern European countries it is so cheap to buy things, its like being in Thailand during the 1980's. Its dirt cheap !
Re Mortgage interest rates
I'm sure that Olly isn't that young that he can't remember mortgage interest rates of 3%. (Or didn't his parents need a State Advances loan in the 1960's?)
However, I agree that current interest rates may last for some time. We tend to have a mind-set that because rates have been around the six to eight percent for the last decade that this is the norm. From memory the norm in the sixties was 3%, the late seventies it was about 10% climbing to 15% (and even 20%) in the mid eighties.
The current global economic situation has already resulted in a new order of economic powers, and the economic landscape is also likely to be very different to that of the so called "norm" of the past decade.
I like the fact that Ollie notices that Commuter Rail "investments" create winners and losers. Absolutely. Unlke the mobility provided by cars and roads, the mobility provided by rail is concentrated at a few locations and the "wealth transfer" effect of public "investments" is high.
Prof. Patrick Troy (Australian National University) had a book published in the 1990′s called “The Perils of Urban Consolidation”, in which he strongly advocates policies to SUPPORT decentralisation and NOT the CBD. He condemns policies aimed at supporting the CBD as the result of vested interests among property owners trying to maximise their “economic rents” (i.e. zero sum wealth transfers from other sectors of the economy).
“Downtown, Its Rise and Fall” by Robert Fogelson, is a scholarly discussion of numerous actual case studies of this phenomenon. He points out that “investment” in “radial transport networks” are “a popular tool for this purpose”, all the better if the transport networks costs are paid by out of revenue other than CBD “rents”.
Colin Clark, in “Regional and Urban Location” (1982) says: “….In net effect, the subsidies on rail and subway suburban transport are subsidies to the owners of certain types of land – for which there is no social justification. …..”
This is why commuter rail creates much greater incentive for lobbying and pork barrelling than roads do. Roads tend to spread their benefit widely, and minimise the capture of zero-sum wealth transfers (economic rent) by any one operator whereas radial transit networks focus them.
Len Brown's pet rail loop schemes SHOULD be paid for by property owners where the destination of most riders will be. If it is not worthwhile for them to pay for it, then that just shows how much zero-sum wealth transfer is being sucked down a black hole out of ratepayers and taxpayers pockets, to make such schemes happen at all.
Interest rates in the 60's were never 3 pc for the general public. Only those who qualified for state assistance qualified for concessionary rates. The lowest ordinary rate then was around 7- 8 pc from banks and building societies. But you had to wait five years to even get these loans and then only by lucky dip ballots. Those were the days of one income families, severe restrictions on all types of borrowing, import controls, travel restrictions and even rationing. Women could not get mortgages on their own let alone have a cheque book. Even in the 70's you couldn't use a credit card overseas without permission from the reserve bank. Currency smuggling was a full time occupation. It's all roses today by comparison.
Apart from the headline...I don't read anything that says prices will double..??? ( guessing the headline is the creation of interest.co )
What Olly says makes sense to me.... keep in mind ..he is talking about "good quality"....whether it be in Glen Eden or Mt Eden.
I totally agree with him that the best real estate is a home with "land".....
Our leaders are moving like dinosaurs ... in terms of making some tangible decisions and taking action..... AND the Super City council seem more concerned with their City rail link than with the looming Housing shortage.
The forces of supply and demand should limit any downside ...particularly in nice houses..( there is a lot of infill type homes that are not that great..)
Throw on top of that the increasing costs of construction..
Our new Reserve Banker is not about to change anything... At the first sniff of trouble the OCR will go to 0.
If we do get another surge in credit growth.... then it is possible for prices to rise substantially....I do recall Olly saying ...somewhere... that the next bust might be ugly.... I agree with that also.
With our Govts. capacity to keep borrowing ...and the Reserve banks willingness to lower the OCR......and the great economic powers of the world printing money ..hand over fist... it is hard to see a shortage of money to borrow..
The only big spanner in the works...is the global economy moving into recession in 2013.
So...maybe quite a bit of volatility .
With the way Global Capital flows... there might be plenty of reasons for foriegn money to buy into NZ real estate. ( interesting to read about money leaving China and Hong Kong real estate ). ( Our Govt welcomes wealthy Asian investors.... becoming NZ residents)
In the end... it is the fundamental forces of supply and demand that determine prices....
SO.... Matt from Auck has made a call which I think is good..BUT.. I''ve changed it a little.:(just for the fun of it..... predicting real estate prices is beyond my ability)
I see three possibilities for Auck house prices in the next 5 years:
1. Median house prices across Auck increase by an accelerating amount.. maybe say av. 8-10% per annum over the next 3-5 years (50% likely) ( mini boom )
2. At some stage after 3- 5 years, Auckland experiences a housing crash, and prices end up 10-20% lower from the highs (but above todays levels).
3. Median house prices increase by about 5% per annum over the next 5 years.. without any bust... ( ie. no boom or bust )
4. I don't see very much downside ... the fundamental supply/demand imbalance is to great.... the lack of good quality housing to large.. ( council town planning should be embarrased by how much crappy housing there is )... the growth rates in good quality homes on a decent section might be alot more than the averages or med. prices.
To me... it looks like NZ is in the early stages of going thru another credit growth business cycle.. ( we have not learnt)
I also see one of the unintended consequences of ultra low interest rates that give -ve real returns as being a flow of Capital from financial assets into "hard" assets....
Even Warren Buffet is saying...buy...buy...buy
http://www.youtube.com/watch?v=58-GHsG_ydw
Poppycock. We are a democracy. Maybe I'm naive but given this, ultimately the only things that will come to pass, will do so because it benefits the majority.
I like the Chinese, and am a halfy myself, but if we keep heading towards becoming New HK, as some here are tabling as reason for doubling, it will get ugly.
Reality check; The underclass are there, there's lots of them and they are waiting to vent their rage. It would only take one or two martyrs to scare quite a few people back from whence they came.
As stated before, I've been attending lots of auctions lately but haven't seen Ollie anywhere. Is he buying or selling?
simplistic, unintelligent comment as usual.
If kiwis return en masse to NZ, then there would only be a significant impact on house prices if there were plenty of jobs for them. And if Aus really did fall away, then NZ's economy would too. So....guess what.....there wouldn't be many jobs for returning kiwis, and many would shack up with family / friends, placing minor extra demand for housing
The price increases in Auckland are not the start of a trend but rather a one off adjustment to new zoning regulations. People in the know become the marginal buyer in central Auckland property auctions, out bidding everyone else who are then forced to compete with each other in less and less desirable areas that won't benefit from the zoning changes.
While it's amusing to read Hughey's wee snipe at Big Daddy, sad to see the screaming ranter is back, and ho-hum to skim the predictable comments from the predictable angles,
I'll put this link up again.
http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html
Then ask Hughey, Big Daddy, ChrisJ, kane02, PB, and all the rest (who from the prespective of that graph, are all in the same boat) and ask the questions:
1. What will happen to mortgage repayment between now and 2030, given that we seen to be on solidly on track to the predicted 'economic collapse?
2. Given what is inevitably ahead (couldn't be anything else chewing exponentially into a finite wee planet - note Japan, Korea, China and Russia wanting to fish in Antarctica, symbolic of ever-increasing abundance,not) is expanding oil-serviced sprawl the way to go? (Is there a better target format - small rural clusters or high-rise, or?)
Given that 'markets' are reactive, or at best short-term-anticipatory, given that whatever housing stock / infrastructure we build now, will 100% surely go through what that graph shows, we need to apply intelligence to what we build/do, and we're late addressing the issue.
No ignorant replies, please. (That includes mentions of Malthusian, perhaps one or two of those 'pro-bono' hours could be diverted into real research?). A simple guide-line might be that put-downs and derision are not science.
Having followed these blogs for the last few months since returning to NZ. There seems to be a big argument against increasing the capacity of our cities to build more houses (increasing supply) to bring down house prices. There would be many ways to do that from Hugh's Texas MUD model to Bernards print money to build state houses like we did in the 30s. But we cannot even get to the step of deciding what is the best method because we cannot even agree that it is a problem, that it can be solved this way or even that there is any point doing it.
People like Olli say there isn't a problem, that it has always been hard to buy a home. Well look at the statistics, 1990 a 75% home ownership rate and homes were at a traditional 3 times income level. Now home ownership rate 65% and homes cost 6 times your income. So there is a problem.
Others like Gareth Morgan argue that there is a problem but it isn't caused by supply constraints it is caused by bad monetary policy, that it is just a demand thing. But why cannot it be both? Prices of anything are determine by the combination of supply and demand factors. We know in New Zealand the supply of housing affects its price because we have seen Christchurch lose some 10,000 houses and house prices and rents have gone up 20 to 30%. Further we know that cities that have less supply restrictions on building new houses do not have the same house affordability problem, even though they share the same monetary policy. Hugh's housing affordabilty statistics from the US clearly show this.
Then there are those who argue that there is no point in solving this problem because we are heading for environmental armagedon. In Western society there has always been a minority who hold doomsday beliefs. It used to religiously based nowadays with the decline in traditional religions it is environmentally based. It is hard to argue against because you are aguing against fanatics. Luckily it is just a minority who are negative about the future, the majority are optimistic. Combining that optimism with collective effort will allow us to solve our problems.
Having followed these blogs for the last few months since returning to NZ. There seems to be a big argument against increasing the capacity of our cities to build more houses (increasing supply) to bring down house prices. There would be many ways to do that from Hugh's Texas MUD model to Bernards print money to build state houses like we did in the 30s. But we cannot even get to the step of deciding what is the best method because we cannot even agree that it is a problem, that it can be solved this way or even that there is any point doing it.
People like Olli say there isn't a problem, that it has always been hard to buy a home. Well look at the statistics, 1990 a 75% home ownership rate and homes were at a traditional 3 times income level. Now home ownership rate 65% and homes cost 6 times your income. So there is a problem.
Others like Gareth Morgan argue that there is a problem but it isn't caused by supply constraints it is caused by bad monetary policy, that it is just a demand thing. But why cannot it be both? Prices of anything are determine by the combination of supply and demand factors. We know in New Zealand the supply of housing affects its price because we have seen Christchurch lose some 10,000 houses and house prices and rents have gone up 20 to 30%. Further we know that cities that have less supply restrictions on building new houses do not have the same house affordability problem, even though they share the same monetary policy. Hugh's housing affordabilty statistics from the US clearly show this.
Then there are those who argue that there is no point in solving this problem because we are heading for environmental armagedon. In Western society there has always been a minority who hold doomsday beliefs. It used to religiously based nowadays with the decline in traditional religions it is environmentally based. It is hard to argue against because you are aguing against fanatics. Luckily it is just a minority who are negative about the future, the majority are optimistic. Combining that optimism with collective effort will allow us to solve our problems.
Brendon - then there are those who should listen, and do their homework (you didn't look at that graph, not did you rebut with references - I did ask that we keep it scientific )
And I asked a question, nothing said about 'no point in solving the problem', indeed I've spent more time, energy and though trying to solve the 'housing' part of the problem, than anyone.
The religious trait, of course, is manifest in those who thing extraction-based growth can continue on a finite planet, forever.
http://www.energybulletin.net/stories/2012-10-31/futuristic-physicists
"Combining that optimism with collective effort will allow us to solve our problems".
Now that's a belief. Note the need for a mood (as if it made any difference - did optimism/pessimism change what Sandy did?) and the failure to understand that 'collective effort' is currently based on the use of a finite energy source. Perhaps you need to go back one, and define 'effort'?
Chris J - what do you reckon this Epsom beauty on 850m2 might be worth?
http://www.realestate.co.nz/1896703
Public records say CV $990,000 and last sold April 2005 for $613,000
It's Bernard Hickeys place - will be interesting to see how it performs on the market given the housing predictions BH has made over the last few years. Am picking he will at least double his money - whaddya reckon?
BigBlue, 28 which is a grottier house sold for $800k a month or so ago.
I haven't been through (Bernard never invited me round!!), but no off street parking, basic standard of fittings, no flat lawn ... it's hard to value without going through because the market in Central Auckland is all about how a house "feels" and whether it has that sizzle factor to make the price soar.
Going by the photos, it looks below the standard of most renovated houses in the double grammar zone, but it is close in, but then it's on a steep hill too.
My valuation would be a whisker over $900k on fundamentals (but without seeing it that's possibly a bit unfair), I can't see it making $1.1m unless it blew me away on inspection (which is not what I see in the photos).
If it was on the flat in the same street with good sun, drive on access and a garage, it would also be zoned 6A (subdivisible), so such a property would be worth $1.6m - 1.8m. But it's not that, so $920k to $1.02m is my ballpark figure for an auction result (a broad range since I haven't seen it).
I could be wrong (I am well known for that too!).
Another option would have been to buy this:
http://www.customresidential.co.nz/sold/CR5072/
1.1mill I believe. Try working that out.
Inflation - watching your grandkids leave school and start on a wage that was the pinnacle of your career ;)
I've only just reached middle age so it's not that many years back I was working for $4.50 an hour and paying 75c a litre for petrol & milk. And we had 5c pieces, 2c & 1c !! (also $1 & $2 notes). How long before we lose the 10c, 20c & 50c and the smallest denomination will be the $1 coin?
One thing will still be the same - people will still be complaining about low wages & the high cost of food, energy & shelter.....
yes Vera, just a spring chicken ;) a gen x'er who put his head down, bum up, and worked hard while a lot of his peers jet-setted around the globe.
So I don't have much sympathy for any of them complaining about not being able to afford a house & having to work all the time. In many cases, they're paying for the lifestyle they led for the last 20 years. If you want to build equity & assets, and get out of the rat race, you actually have to do something about it ! It doesn't just magically happen while you're busy doing an extended OE.... ;)
Actually, I remember Olly predicting the crash SEVERAL years early, I remember him on 60 minutes in 2003-2004 saying he'd basically sold off his entire portfolio and he was getting out because the crash was coming. That mistake must have cost him a packet.
What it showed me was that "experts" know nothing that we don't. They have access to all the same info we do, and are prone to making the same decisions... they're just a little more experienced. I'm sure this current boom will continue. For the next 6 months to a year I see nothing but gravy and clover in particularly the Auckland market.... that much is sure. Beyond that though is anyone's guess..... guess being the operative word.
"Auckland Transport has already stated that the estimated cost to acquire the properties will be around $2.8 billion and they hope to recover that by selling the land back to the market after the work is done. (In your dreams maybe.)"
I think you have made a big error here $2.8 b (inflated to the time of spend) is the estimated cost of the entire project. Proporty purchases make up only a very minor part of the project (most of the link will run under public roads).
According to the councils own website the $2.8billion outlay whether for the properties or the whole project will be recouped by selling the properties and land back to the market in the fullness of time.
Almost 300 properties, many of them substantial inner city buildings, will not be cheap and the owners are not your usual apathetic and financially weak residential home owners.
Nor has there been any estimate for dust, dirt, vibration, collateral damage or loss of business costs which the council has already admitted will occur.
Wouldn't light rail be cheaper, less invasive and quicker to achieve?
Whatever the figures are, the main problem is the ongoing invasion of owners rights for decades to come.
Nothing wrong with renting. The crash will be epic, and will wipe out a lot of what people thought was "savings" in the form of dried paint.
For $220K, you can pay cash for a lot of places, even around Wellington. Ever considered Kapiti? Weather much nicer than Welly, even though close.
You might take a pay cut, but so what? You'll have freedom. Bernard's making a smart move. Room to breathe. Enjoy life. Be less of a rat, caught in a race.
You can always visit Auckland. Way overrated. There is more to life than planting your flag in Auckland (only).
For those who STILL dont get it. Housing was never meant to be affordable, else you will not be enslaved through debt.
MPs, PM, Council Heads are all heavily invested in property, and they are making the decisions. Do you really think they'll shoot themselves in the foot?
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