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The Standard

Speculation

Written By: - Date published: 8:32 pm, July 30th, 2013 - 142 comments
Categories: business, capitalism, class war, housing, tenants' rights - Tags: , ,

I know many of the liberal left don’t like or can’t accept the thought that banning non-residents from speculating on residential property in NZ is in any way xenophobic. Thankfully, from my perspective at least, the liberal left doesn’t speak for the whole of the left. Thing is, this banning of foreign investment is similar to the proposed Crafar Farms deal with China’s Shanghai Pengxin. And just as many of the liberal left exhibited large dollops of xenophobia over that little affair but just couldn’t bring themselves to recognise that fact, well…it’s déjà vu – with the caveat that all foreigners, bar Australians, are the bad guys this time.

But good ol’ NZ property speculators? Big thumbs up. Nothing wrong there. Or at least that’s the laughable implication of the stance adopted by ‘the liberal left’.

Maybe if we want to be at all serious then, we need to acknowledge the fact that property speculation is the problem – ie, all property speculation and not just that undertaken by foreigners. And tempting though it is to argue that private individual ownership is the problem – or that a Marxist fixation on ownership that ignores control is the problem – for the sake of this post, I’ll leave the concept of private property in place.

So, to repeat what others have pointed out. 400k is in no way affordable for most people living in NZ. That’s a fact. But it’s not necessarily a problem. Thing is, as a tenant, I don’t give a toss who owns the house I live in. Mostly what I care about is the amount of rent being charged, the long term security of the lease and the physical integrity of my home.

On the basis that most people just want a decent  house to live in  – a place to call home, I’ll float the following.

Lets take the Green’s ‘fitness of warrant’ on urban rentals as a given. And let’s take the normalisation of ‘rent for life’ leases as something worth pursuing.

Given those two things, it seems an obvious step to take the sheen right off of property speculation would be the introduction of a maximum allowable rent.

Obviously, rent as a percentage of income (as per the Clark government’s 25% of income for Housing NZ tenants) doesn’t fly in the private sector, as only wealthier workers would be entertained by property owners looking to make a buck. So calculate maximum allowable rent through some formula that takes GV and rates or whatever into account. And construct the formula to yield a result that kills off the current financial incentives to owning and renting out strings of properties. And legislate so that tenants who may be ripped off get fast and full redress.

As an aside, from casual conversations I’ve had, my understanding is that rentals in major cities in the likes of Canada are about ¼ of those in provincial NZ. So it seems there is plenty of room for manoeuvre on the rent front when viewed from an international perspective.

Done correctly and thoughtfully (as opposed to this off the cuff post), we get diminished returns from property speculation and cheaper rents. And what’s not to like about that? Let the Australians and who-ever else buy whatever they want. But take the cash cow element away.

And if speculators then quit the housing market and you, for whatever reason, have your heart set on buying a house, then hey…prices are going to be dropping.

Meanwhile, why not devise exemptions or exceptions on any rent formula such that  housing co-ops and such like are actively encouraged? Then far more people than at present could wind up in a far more empowered position that today’s home owners. Just a thought.

Mind you, maybe best to just trundle along applauding half arsed measures that might – just might – be to the advantage of a fairly small proportion of the population.

142 comments on “Speculation”

  1. North 1

    Interesting Bill. Massive but interesting.

  2. Colonial Viper 2

    There needs to be a professional land lord class willing to provide quality rental housing at moderate returns to themselves ( say 5% to 6% pa return on capital, net but excluding interest). It does require base property prices to be collapsed first of course.

    • Colonial Viper 2.1

      By the way – outstanding post, Bill.

    • Bill 2.2

      Housing co-ops tend to provide quality rental housing to themselves for moderate returns…actually, and depending on how you look at it – zero return. Rents cover rates, loan repayments and agreed upon maintenance/structural improvements.

      And if speculators, who are pumping up house prices and (in part) able to do so by charging exhorbitant rents flee the housing market due to diminished returns on a legislated max rental formula….

      edit – thanks CV

  3. vto 3

    Just a comment on your first proposition – that this policy wont solve the problem / its all speculation / its a bunch of other factors…..

    Of course housing affordability is a multi-pronged problem. That has been explained countless times. This policy is just one prong of the many required. Foreign ownership is part of the problem. Speculation is another part of the problem. So too is building sector cartels. So too is Council development contributions. So too is land supply. So too is increasing GST. So too is …….

    It seems you are missing the multi-faceted nature of this issue.

    my 2c says foreign ownership is a biggie and my 2c has said many times in the past that my vote will swing on it. It still will.

    over

    • Bill 3.1

      I know there are many factors involved. But identifying ‘one half’ of one factor as Labour has done and runnning with it is crap. Speculators are speculators no matter where they live or what nationality/residency they hold.

      • Colonial Viper 3.1.1

        I suspect it came down to a detailed analysis of votes gained versus votes cost. Few votes cost by pinging foreign nationals living overseas.

        To actually do something highly effective to solidly limit or even reduce house prices = many votes cost.

        • Saarbo 3.1.1.1

          I suspect that Labour have already lost most property speculators/investors, so they may as well go the whole hog now. Homes are for living in, Im sure the social benefits of home ownership are well documented. Rental housing has contributed towards turning what were beautiful suburbs into ghettos. High housing costs is the main driver of poverty.

          Create disincentives to invest/speculate in housing. Go hard now Labour…

          • karol 3.1.1.1.1

            Rental housing with the right kind of oversight, contributes to social well being.

            Many renters contribute to their local communities.

            The research is done in a system where home ownership is privileged and renters treated as pariahs. We aren’t.

      • vto 3.1.2

        True true, but each of these factors need attending to. Perhaps Labour should have announced it thus…… “As part of several policy announcements to be made over the next 6 months we are banning foreigners.. etc etc blah blah”

        But such vehemency towards each factor, as you show, is to be applauded. Get into it. High capital values help nobody except the banks, and that is a truth.

      • dancerwaitakere 3.1.3

        But generally overseas speculators are benefitting from a different market in their home country.

      • Brent 3.1.4

        You must be oblivious to the fact that this is one part of a whole host of housing policies labour has proposed. Did you actually go to their website and read about the CGT or Kiwibuild?

  4. karol 4

    I’m all for moving away from this obsession with property ownership and that results in affordable and secure rental accommodation for all who want/need it.

    I also am for the Greens policy on building more state houses. Plus I’m for the encouragement of not-for-profit social housing and housing cooperatives, and any measures that will help to prevent property speculation.

    However, I’m also for restricting overseas property speculation one way or another. It’s most usually done by people with more money to spend than people living in NZ, and they will add to the upward pressures on the cost of renting.

    • Bill 4.1

      However, I’m also for restricting overseas property speculation one way or another.

      Well, yes. But why single out one set of speculators and leave another set untouched? Why not restrict both with the same set of rules/laws that render all speculation unprofitable – or at least far, far less profitable?

      • Colonial Viper 4.1.1

        Ah yes, my 3.1.1

      • karol 4.1.2

        Yes, I’d be for that. But I don’t see it happening any time soon, unfortunately.

      • Jackal 4.1.3

        Because the arrangement with Australia is reciprocal while the UK and China etc agreements aren’t. It is likely built into all these FTA’s that investors should be treated by the other Party no less favourably than that accorded.

      • Draco T Bastard 4.1.4

        But why single out one set of speculators and leave another set untouched?

        This is but the first plank, there could, and hopefully will, be others.

      • weka 4.1.5

        “But why single out one set of speculators and leave another set untouched? Why not restrict both with the same set of rules/laws that render all speculation unprofitable – or at least far, far less profitable?”

        I would have thought that was obvious. Overseas speculators can’t vote in NZ elections.

  5. insider 5

    “Thing is, as a tenant, I don’t give a toss who owns the house I live in. Mostly what I care about is the amount of rent being charged, the long term security of the lease and the physical integrity of my home.”

    You may get that better with an absentee landlord than a local because its hard and costly to manage a rental from a distance. They’ll probably want stability just as much as you.

    But just because someone buys a house doesn’t mean they are speculating, which I class more about gambling for short term gain. Many of these buyers will be medium to long term holders i suspect because the risk around short termism are increased if you are not there in the market actively monitoring when you should sell.

  6. Jackal 6

    Bill

    But good ol’ NZ property speculators? Big thumbs up. Nothing wrong there. Or at least that’s the laughable implication of the stance adopted by ‘the liberal left’.

    Isn’t this latest Labour policy meant to be in combination with a Capital Gains Tax and Kiwibuild etc? Wouldn’t these powers combined increase the amount of available houses and inhibit speculation in the dysfunctional housing market?

    According to the BNZ, around 19% of houses are being sold to NZ speculators and 9% to foreign speculators. In my opinion (as a liberal lefty) the proposed policies will reduce the amount of speculators and in turn increase the amount of Kiwi families who are able to afford their own homes.

    The majority of foreign speculators will be removed from the market and New Zealand speculators will look for other investments because QE will mean housing is no longer a cash cow for them. This will surely cause more investment in productive enterprises, which will also create jobs and thus increase affordability through increased wages.

    As for your idea of setting up an entire branch of the government to regulate rental prices (the current government can’t even regulate HNZ rents), which currently stand on average at around 35% of the median household income, and that this is somehow a solution to our low and falling home ownership levels, it simply won’t work…both politically and practically.

    Renting is a mugs game even when it’s not expensive and in my opinion every New Zealand citizen irrespective of his or her ethic backgrounds should have the option of acquiring a place to call home. That is one of the only ways of ensuring affordable rentals and is after all the Kiwi dream…a dream necessity that National seems determined to turn into a nightmare of ever increasing prices, foreclosures and never-ending mortgage payments.

    • Colonial Viper 6.1

      Lifetime renting works fine for tens of millions in Europe.

      As for your idea of setting up an entire branch of the government to regulate rental prices …it simply won’t work…both politically and practically.

      What the heck

      Just beef up the Commerce Commission in conjunction with HNZ.

      • Draco T Bastard 6.1.1

        Lifetime renting works fine for tens of millions in Europe.

        The GFC and collapsing European economies would suggest otherwise.

        Rentiers are a poison in the economy.

      • Jackal 6.1.2

        Lol! How exactly do you propose to regulate such a market where the transaction is between a private client and a private landlord CV? You could implement rules that said rents could only be a certain amount and only increase a certain percentage each year, but the onus would be on the tenant to regulate this by making claims, by which time they would be out the door. There is no practicable way for the government to interfere in such a huge privately owned and operated sector of the economy. The Commerce Commission can’t even regulate the price of cheese.

        • Colonial Viper 6.1.2.1

          Lol! How exactly do you propose to regulate such a market where the transaction is between a private client and a private landlord CV?

          There is no practicable way for the government to interfere in such a huge privately owned and operated sector of the economy.

          well, we do it for billions of dollars of house sales, especially with the new real estate agents legislation and standards. And it matches exactly your description of a “hugely privately owned and operated sector of the economy”.

          I mean seriously, get with the programme mate and stop acting the free market believing fool.

          • Jackal 6.1.2.1.1

            Real estate agents legislation and standards? WTF! We’re talking about keeping rents affordable, not any superfluous and meaningless amendments to already weak legislation.

            There’s a big difference between me pointing out the impracticalities of what’s proposed and advocating for the free market. I expect better than your obvious straw man blowing away in the wind CV.

            • Colonial Viper 6.1.2.1.1.1

              I just mentioned the example of the entirely privately operated billion dollar for sale and purchase property market, which is being effectively regulated by government decree. Get used to it.

              • Jackal

                Real estate agents being effectively regulated by government decree…surely you’ve exceeded your irony quota for today CV?

                • Colonial Viper

                  hey jackal, if you don’t think that government can be an effective market regulator why not just ditch the whole enterprise and go small government libertarian?

                  • Jackal

                    I didn’t say that CV. What I did say was that it won’t be as effective to try and regulate rents directly by government decree where the tenant will be left holding the can. Instead, increasing the amount of available houses will be more effective at regulating rental costs. You seem to be proposing that we simply do away with the current economic system entirely in favour of totalitarian state control? The failure is with the free market not providing enough houses, not with the economics of supply and demand.

                    • Colonial Viper

                      I don’t see why we wouldn’t put in place some solid regulation as well as your idea of increasing housing supply.

                      You seem to be proposing that we simply do away with the current economic system entirely in favour of totalitarian state control?

                      Sure, if you took my idea and extended it in every possible direction by 1000%, I suppose that’s what you would end up with.

                    • Jackal

                      There’s no point in regulations that are impracticable to enforce CV. You’re effectively proposing that the government take over managing all privately owned rental properties. There would need to be another department to firstly work out what an appropriate rental price is for the approximately 500 K rentals and inform the owners that their incomes will be significantly reduced.

                      In 2011, rents on average were overpriced by 43%, meaning that such a law change would cause a huge reduction in a lot of people’s incomes. If you thought the whinging about foreign speculators was bad. In the event of such changes, no investor would be looking at providing rental accommodation, which would likely cause a reduction in overall housing availability for the poor. It would certainly cause the housing bubble to burst in a very economically damaging way.

                      This new department would also need to work closely with a large number of government employed lawyers, because most landlords have the means to fight your proposal through the courts forever. However, many of them would simply ignore the law change, because it’s a private transaction using people’s private bank accounts.

                      Instead of wasting all those millions of dollars, why not just increase competition in the first place CV?

                    • Colonial Viper

                      So you’re saying that government regulation is impractical, you are afraid of the reactions of investors and the way to deal with the problems of the market is to increase competition?

                      OK.

                    • Jackal

                      I’m saying that increasing the housing stock to increase competition for buyers and renters money instead of trying to regulate a dysfunctional market that has caused a lack of houses and overpricing is the answer.

      • tricledrown 6.1.3

        warrant of fitness it works for cars!
        I work for a lot of landlords their are very few good ones most landlords do the absolute minimum maintenance and lots do none at all less than 10% actually maintain their properties to a good standard!
        like wise the worst landlords usually end up with the worst tenants!

    • srylands 6.2

      “a dream necessity that National seems determined to turn into a nightmare of ever increasing prices, foreclosures and never-ending mortgage payments.”

      Oh boo hoo

      You do remember that it was the last Labour Government that created the conditions for the spectacular rise in NZ house prices (esp Auckland) between 2000 and 2006, and did nothing about it?

      • Arfamo 6.2.1

        “But Labour did it way back when…” doesn’t really fly here much any more. That was then. Now they know it’s got to be fixed.

        • srylands 6.2.1.1

          Yeah until they get into government and fail.

          • Arfamo 6.2.1.1.1

            Oh boo hoo. :) It’ll most probably work out ok. It’ll be bucketloads better than the situation we have now.

          • Jackal 6.2.1.1.2

            As an obvious National party supporter I guess you know all about housing policy failure eh srylands?

          • tricledrown 6.2.1.1.3

            srylands they increased interest rates, labour was National lite with peter Dunne and peters to rely on and the big four Aussie banks breathing down their necks, the big four aussie banks being the biggest beneficiaries as well!
            most people had jobs as well.
            Economic growth has always been higher under labour than national!
            Labour got booted out because of its anti smacking civil union shane jones pornography winston peters indiscretions etc shower head pressures energy saving light bulbs petrol tax increases(National have increased petrol tax far more after promising not to and increased gst read my lips no new taxes john key)!
            the only thing they failed on was to much change at once!

    • karol 6.3

      Renting is a mugs game even when it’s not expensive and in my opinion every New Zealand citizen irrespective of his or her ethic backgrounds should have the option of acquiring a place to call home.

      Call me a mug then, because I have always preferred renting and never had a desire to own a bit of real estate. Works for me. Never understood the home owning obsession.

      • Bill 6.3.1

        ditto

      • Murray Olsen 6.3.2

        Mug number 3 here. As far as I can see, the home owning obsession helps banks and real estate agents, which has never been one of my life goals. I’d be more than happy with long term rentals such as they have in much of Europe.

  7. Draco T Bastard 7

    I know many of the liberal left don’t like or can’t accept the thought that banning non-residents from speculating on residential property in NZ is in any way xenophobic.

    That’s because it isn’t. Being xenophobic would be banning them from becoming immigrants in the first place solely because they’re different. We don’t do that and none of us are suggesting that we do.

    But good ol’ NZ property speculators? Big thumbs up. Nothing wrong there. Or at least that’s the laughable implication of the stance adopted by ‘the liberal left’.

    BS. Several people on here and on other blogs have mentioned the sociopathy of the speculators. Calling them parasites is being nice.

    Let the Australians and who-ever else buy whatever they want.

    No. It really is bad for NZ and will turn NZers into serfs. Ask the Palestinians about how well that works.

    Meanwhile, why not devise exemptions or exceptions on any rent formula such that housing co-ops and such like are actively encouraged?

    We have this really remarkable co-operative – it’s called government. It’s a co-operative that involves all the people in the country.

    • Colonial Viper 7.1

      BS. Several people on here and on other blogs have mentioned the sociopathy of the speculators. Calling them parasites is being nice.

      Bill isn’t talking about us. You, me, Bill, etc are basically by definition so far left that there’s only the ditch remaining. The “liberal left” are another breed altogether.

      We have this really remarkable co-operative – it’s called government. It’s a co-operative that involves all the people in the country.

      You’re smart, and your comment shows a high level of conceptual insight, but as a neighbourhood scale model for practical living, your idea is completely useless.

      • Draco T Bastard 7.1.1

        You’re smart, and your comment shows that, but as a neighbourhood scale model for living, your idea is completely useless.

        And where did I say that it had to be central government?

        One of the realisations that I had in regards to government created money was that it would be a mistake to leave it solely to central government. The solution would be to have local government creating money as well (under strict conditions of course) which would allow, and encourage, use of the local communities resources for the best of the local community decided democratically.

        Central government would assist of course but the decisions would be local.

        • Colonial Viper 7.1.1.1

          Would you have local government issue regional currencies or national currency?

          • Draco T Bastard 7.1.1.1.1

            National currency. Having regional currencies would push the administrative costs up.

            • Colonial Viper 7.1.1.1.1.1

              Having regional currencies would push the administrative costs up.

              That doesn’t make any sense at all. Why would it push the administrative costs up? Why would it matter if the administrative costs go up when you are issuing your own currency and not borrowing it?

              • Draco T Bastard

                Why would it push the administrative costs up?

                It would use up more resources – power, telecommunications, computing, time etc – as people would have to make sure that they had the correct currency when they went from Auckland to Hamilton.

                Why would it matter if the administrative costs go up when you are issuing your own currency and not borrowing it?

                Because the economy is about resources, not money.

                • Colonial Viper

                  Local currencies are going to be a must in the future.

                  Because the economy is about resources, not money.

                  Yes. Which also includes keeping people employed.

                  power, telecommunications, computing, time etc

                  Our power is a resource but electricity is largely renewable in NZ. The telecommunications and computers are already there. It is difficult to consider time a resource.

                  The real hard resources are land, water, minerals and non-renewable energy.

                  • Draco T Bastard

                    Local currencies are going to be a must in the future.

                    Perhaps but I doubt it.

                  • weka

                    How can time (of people) not be a resource?

                  • Draco T Bastard

                    Our power is a resource but electricity is largely renewable in NZ. The telecommunications and computers are already there.

                    Doesn’t mean that they’re unlimited. At any given time you only have so much of any of those and thus you need to choose how to use it. My computers already there but when I’m doing my 3D Art I sure hell ain’t playing games because the software that does the art is, quite literally, using all of it.

                    It is difficult to consider time a resource.

                    Really? And here’s me thinking that was the easy one and the most important.

                    You have 5 minutes you can either:
                    1.) Make a coffee
                    2.) Organise exchanging currencies
                    3.) Kissing your SO
                    4.) Making a move in a game of chess

                    Note: In that five minutes you can only do one of those things. Sure, you could do the whole lot in the next 20 minutes but in the 5 minutes after the first 5 minutes you have different choices.

                    The real hard resources are land, water, minerals and non-renewable energy.

                    Don’t kid yourself. All resources are limited, some are renewable, some are recyclable but all of them are limited at the time.

                  • TheContrarian

                    To understand Draco’s…interesting…take on all things political/economical I suggest starting with Jacque Fresco.

                    http://en.wikipedia.org/wiki/Jacque_Fresco

  8. weka 8

    I’m not sure if I follow all the arguments here, but can someone please clarify. Is it inherently a problem if one person owns many properties, or does it depend on what they do with them.

    I’m thinking of someone I used to know who owned rental properties in a city and he went and lived in the country. The rental properties gave him an income and he also worked doing things he liked doing. I never knew him to buy and sell property, and I don’t know what kind of landlord he was, but he struck me as a kind enough person in general (not that that necessarily transfers to business). But let’s say for argument he’s not greedy, is a good landlord and keeps the rents reasonably stable.

    Is there an ideological objection to what he is doing? Is there an economic objection?

    • Waffler 8.1

      I think most people here agree that Kiwis should have the option (and economic ability) to purchase their own house.

      That said, there will always be a need for rentals. Some people don’t want to rent, and there are very few people who can go straight from living with their parents into home ownership.

      Personally, I think it’s much better for those rentals to be owned by a landlord for a long time. That way they’re gaining a long-term investment (which will probably be used to pay down the mortgage before being sold later in life to provide a retirement fund).

      Speculators, on the other hand, buy for short term gain. Purchase a property, do it up (not necessarily well), then on-sell it. If this is done by several speculators in an area it can push the price of the neighbourhood up – which pushes prices away from first homebuyers.

      • weka 8.1.1

        Thanks Waffler. I understand the difference between speculators and longterm landlords. What I was asking is if there is any inherent problem in one person owning many properties. I’ve seen it suggested that there is, but I’m not sure why.

        • Colonial Viper 8.1.1.1

          The idea of a capital owner rent-seeking from labour (i.e. from actual income earning workers) while not adding anything productive to society with their own labour, is where this bias comes from.

          Now the interesting example if that of RL, who had built from scratch 8 units of accomodation that he now rents out.

          • weka 8.1.1.1.1

            RL?

            “The idea of a capital owner rent-seeking from labour (i.e. from actual income earning workers) while not adding anything productive to society with their own labour, is where this bias comes from.”

            Is that ideological? Ethics? Or are there economic reasons? What about the person I knew who also worked productively? And as I said below, how is providing affordable housing not being productive within society?

            • Arfamo 8.1.1.1.1.1

              +1. I made a similar comment below.

            • Colonial Viper 8.1.1.1.1.2

              Red Logix.

              Is that ideological? Ethics? Or are there economic reasons? What about the person I knew who also worked productively? And as I said below, how is providing affordable housing not being productive within society?

              Obtaining financial gain by owning and not by one’s own labour is a basic definition of capitalism.

              I agree with you, providing affordable housing is a productive endeavour within society. Buying over existing housing to add to your property portfolio does nothing much to provide affordable housing to society however – that housing was already there.

              • weka

                “Obtaining financial gain by owning and not by one’s own labour is a basic definition of capitalism.”

                So? That doesn’t explain why it’s inherently a problem. It also doesn’t explain why owning two houses is good but owning ten is bad (as a landlord)

                “Buying over existing housing to add to your property portfolio does nothing much to provide affordable housing to society however – that housing was already there.”

                Unless the person selling no longer wants to own the house (someone has to own it, don’t they?). Or the previous landlord was a shark who kept raising the rents. Or the house wasn’t being rented before and is now available for someone to rent. etc.

                • Colonial Viper

                  “Obtaining financial gain by owning and not by one’s own labour is a basic definition of capitalism.”

                  So? That doesn’t explain why it’s inherently a problem. It also doesn’t explain why owning two houses is good but owning ten is bad (as a landlord)

                  You have to study historical examples and theory for examples for why this scenario came to be considered a problem, starting with Marx.

                  Who said owning two houses was “good”?

                  True capitalists seek to accumulate more and more productive (income generating) assets, and their behaviour inevitably moves to that of rentier capitalism.

                  The follow on from this is concentration of financial wealth from the hands of labour (the workers) into the hands of the owners (the capitalists).

                  Further than this you’ll need to study up on your own, or ask Bill, Mr Rattler, DTB et al.

                  • weka

                    “You have to study historical examples and theory for examples for why this scenario came to be considered a problem, starting with Marx.”

                    So it’s an historical problem, not a comtemporary one? I’m not trying to be smart here, I just don’t understand why this is so difficult to explain in real terms (as opposed to referring to theory).

                    “Who said owning two houses was “good”?”

                    Is it bad then? Is all ownership to rent bad?

                    “True capitalists seek to accumulate more and more productive (income generating) assets, and their behaviour inevitably moves to that of rentier capitalism.”

                    But I’m not talking about true capitalists.

                    “The follow on from this is concentration of financial wealth from the hands of labour (the workers) into the hands of the owners (the capitalists).”

                    Theoretically. But is that inevitable or can it be controlled?

                    • Draco T Bastard

                      So it’s an historical problem, not a comtemporary one?

                      It’s a problem that goes all the way back to Sumer about 5000 years ago. It’s the reason why civilisations have banned interest and had debt jubilees. The advent of a rentier class always results in all the wealth going into the hands of the few and massive poverty for everyone else.

                      Is all ownership to rent bad?

                      Yes.

                      But I’m not talking about true capitalists.

                      Yes you are. Just because they’re small time doesn’t make them any less a capitalist.

                      But is that inevitable or can it be controlled?

                      It is inevitable because the capitalists always end up with the wealth (the real wealth, the land and resources) and thus control over the society. The correct terms to describe this is plutocracy, oligarchy, aristocracy and feudalism.

                      Yep, our economic system is taking us socially backwards 500 years.

                    • TheContrarian

                      “Is all ownership to rent bad?”

                      “Yes.”

                      What fucking crap, Draco.

      • tricledrown 8.1.2

        the interest charged on a rental is a business expense and can be written off by a land lord capitol gain can but not always can be tax free!
        Maintenance costs can written Off!
        So the Mortgage lender is much happier to lend to a landlord than a family who’s kids are seen as a liability!
        The home owner can’t write off interest or maintenance!
        So the home buyer is behind the eight ball!
        Which is anti family and needs to be balanced out in favour of families like it used to be!

    • Draco T Bastard 8.2

      Is it inherently a problem if one person owns many properties, or does it depend on what they do with them.

      Speculators, which is what Bill is addressing, tend to be people who buy and then sell later for a profit. Of course, foreign residents could also be buying long term and their ability to pay more for a house would still be pushing house prices up.

      Is there an economic objection?

      There’s an economic objection. A person who owns many houses to rent out is acting as a massive dead weight loss on the economy over all but especially to those people that they’re renting to. See Adam Smith, Henry George, Ricardo IIRC, and several other economists over the last couple of centuries. It’s really only with the rise neo-liberalism in the latter part of last century that renting became a respected part of the economy according to the economists. The GFC and increasing poverty that their policies have brought about should tell you just how good their economic theory is.

      • weka 8.2.1

        Why is it an economic problem. I’m not going to read hard core economics, is it that hard to explain simply?

        • Draco T Bastard 8.2.1.1

          The basics is that rentals end up with a large amount of money going to a non-productive purpose.

          • weka 8.2.1.1.1

            How is a home a non-productive resource?

            • Draco T Bastard 8.2.1.1.1.1

              I didn’t say that the house was non-productive. I said that a large amount of money was going to non-productive purpose – the capitalist who’s only use of the money is to take it out of circulation and thus crippling the economy.

              • srylands

                “take it out of circulation and thus crippling the economy.”

                Isn’t rent just a payment to the owner for the use of an asset that has been paid for? No rent = no asset for use.

                It is just the same as a lease payment on a commercial factory or a lease payment that an airline makes on its aircraft?

                Payments for assets that are linked to the asset vale are a sign of a well functioning economy. It is totally bizarre g for you to say that rental income flows “cripple” the economy. It is interfering in the market that will cripple the economy! Good grief.

                • Draco T Bastard

                  Nope, due to the dead weight loss of profit.

                  BTW, the capitalist system isn’t, and cannot be, a well functioning economy. The ever increasing poverty we see in them is proof of that.

                • tricledrown

                  srylands rent is taken out every week the tenant is not making money out of the asset commercial leases provide an income the cost of the lease can be written off as business expense.
                  home buyers don’t get the write off either but when the mortgage is paid off more money flows into the local economy as well we get the proven benefits of a stable family in a stable community.
                  renting creates itinerant families (costs to the economy) rents keep going up while after few tears mortgage payments generally become lower than what you would pay in rent!

              • weka

                You’re talking about the landlord, Draco? Aren’t they taking the money (rent) and spending it in the ecnomomy on things like food and goods and services?

                • Draco T Bastard

                  You’re talking about the landlord, Draco?

                  Yes.

                  Aren’t they taking the money (rent) and spending it in the ecnomomy on things like food and goods and services?

                  Yes they are but they’re not spending all of it. Some of it goes in the bank which earns interest as well (another form of rental) and as we all know by now the money that goes into a bank doesn’t get back into the economy as the bank just creates the money at the time that the loan is created.

                  The ever increasing rentals and the exponential nature of interest means that the capitalists will, eventually, own everything and everyone else will be dependent upon them and have no say in their own lives.

                  • srylands

                    “the bank just creates the money at the time that the loan is created.”

                    No

                    • tricledrown

                      srylands where have you been the banks are aloud to create up to 60% of the value of the loan.Before the financial crisis it was up to 90%.
                      But now it could be still higher considering countries like the US Japan The UK the EU are still Quantitative easing lending printed money and .5% interest to goldman sacks bofa etc etc those multinationals are lending that money to the big four Aussie banks who are mixing that with deposits and printed money of their own to kiwi’s.
                      Merrill Lynch the company John mugaabKEY worked for was found to be lending money to the likes of Ireland at 38 to1!
                      yes for every dollar Merrill Lynch had on deposit they leveraged it by printing $38 Dollars fact the SEC securities exchange commission of the USA investigated Merril lynch!
                      John MugaabKEY was at the heart of this ponzi scheme!
                      YES!

                    • Draco T Bastard

                      Yes

                      That argument was won a long time ago. It just hasn’t filtered out to the people yet that the banks are ripping them off.

                    • Colonial Viper

                      Easier way to put it is that loans create deposits. It must be remembered that your deposit at a bank is actually considered a bank liability on their balance sheet.

          • Arfamo 8.2.1.1.2

            I’m still thinking about this. I don’t see that some private rental housing provision is a bad thing if there are rent controls. While not strictly a “production” output (is that what you meant by productive purpose?) it’s still providing a useful purpose for society. You might just need rent controls to prevent tenants being exploited. I don’t see how someone, particularly someone who builds rental units as a source of income or retirement fund, is not contributing to society in their own way.

            • Colonial Viper 8.2.1.1.2.1

              Well thats what Red Logix has done.

              The main objection is people loading up themselves (and hence the country’s balance sheet) with debt to flip existing housing to each other.

              • Arfamo

                Yep I agree and that’s why I like the CGT policy.

              • weka

                Right, so that’s an objection to speculation, not being a landlord with multiple properties.

                • Arfamo

                  That’s how I see things, yes. I’m also opposed to tenant exploitation via too high rents.

                  • weka

                    So theoretically, multiple property ownership could be an ok thing if there were controls on that?

                    • Colonial Viper

                      Yes, but Bill’s idea of housing co-ops is still superior. People own and control their own situations within communities which suit them.

                    • Arfamo

                      I haven’t been able to get my head around how that would work if it was the only option. I see no reason why it couldn’t work in a housing policy environment where it was simply one option a group of so-minded individuals could successfully operate.

                    • karol

                      Yep. I’m all for housing co-ops.

                    • Colonial Viper

                      Well it shouldn’t be the only option, but it should be a viable option, so that people who wanted to begin to opt out of the capitalist system could do so.

            • srylands 8.2.1.1.2.2

              Yes excellent. Internationally, rent controls have worked effectively where they have been applied.

              • Arfamo

                Well, perhaps they won’t be needed if people have the choice of sufficient supply of council and government provided rentals at reasonable rates. I’m not really opposed to private accommodation providers renting a shoebox with a view in Queenstown to people like you for astronomical sums.

                • srylands

                  Yes because everyone should aspire to live in a council flat.

                  • Arfamo

                    I think I’ve gone off you a bit. It’s probably the sneering.

                    • srylands

                      Thats OK. I’m gone now. To paraphrase David Farrar, “If you play with pigs, you get covered in mud. You feel dirty and the pigs love it.”

                    • Arfamo

                      I expect he’s just re-using what someone said to him. I can see why they would’ve said it.

                  • Colonial Viper

                    “Yes because everyone should aspire to live in a council flat.”

                    A million NZers would simply like warm dry housing that they call their own. It would be a big improvement over their situation today.

                    • RedLogix

                      Sorry … been too busy to contribute to the thread CV.

                      The one point I would like to add is that I’ve long held that all urban residential land should be leasehold, rented long-term from the TLA, ie local council … and that landowners should pay rent rather than rates.

                      This would stop the land price speculation that Bill rightly identifies as a huge problem (because the banks could not use it as security) … while retaining the flexibility of rental market.

                      And I totally agree that the market needs tightening up. The Ministry of Housing and Building does an ok job at present, but in practical terms there remains far too much uncontrolled risk for both tenants and landlords. Lot’s of ill-will, distrust and horror stories from both sides.

                    • karol

                      I’m all for the leasehold option RL.

                      I recall reading a history of NZ in which, there was a heated debate in the late 19th century about whether land in NZ should be freehold or leasehold. (May have been Keith Sinclair’s book.)

                      There was a lot of support for the leasehold option back then. It’s disappeared from public view these days.

            • karol 8.2.1.1.2.3

              I agree, Arfmo.

              As well as rent controls, there need to be regulations to enable and support long term renters with a right to continue living in the same accommodation. It’s done overseas.

              The last few places I have rented have been in units on properties were the landlord also lives. Only one of them had more than one rental property. They always on hand to perform repairs or hire others to do it. They tend to treat me as a person and with respect for my needs,

              That is vastly different having absentee landlords, looking only to make a profit, and who sees me as merely a unit on their balance sheet.

              Good landlords are needed, to provide a satisfactory and humane rental service. It’s a job, if done properly and without the system being skewed by greedy speculators..

              • RedLogix

                Yes… that is our situation too. We’ve always lived on site. At least up until now. Absentee landlords (especially ones that never visit the place or ever meet their tenants) are not desirable.

                And personally I’d love another name for what we do. The lord part of the name just seems so archaic and counterproductive these days.

                • karol

                  I agree, it would help to shift focus by having a name that indicates they are providing a service and that it should be done in a non-exploitative way.

                  And some of my landlords have been landladies. There needs to be a gender neutral term.

                  • Colonial Viper

                    And some of my landlords have been landladies. There needs to be a gender neutral term.

                    I think Labour should start pushing this as part of their housing policy. It will make all the difference in the public eye and media.

                    • karol

                      Heh. I wouldn’t expext Labour to have a policy to change the name of “landlord”, de-gendered or not. The current caucus is clearly too scared to do anything a little bit unusual.

                      I was thinking of a need for a cultural change in perceptions of renting, ;easing property, etc., and not as something to be legislated for.

                • srylands

                  Howe about “rentmaster”?

  9. BLiP 9

    The OP seems to be conflating objection to international economic imperialism with a fear of foreigners.

    • Draco T Bastard 9.1

      +1

      • srylands 9.1.1

        +2

      • tricledrown 9.1.2

        a radical socialist agreeing with a fundamentalist monetarist unbelievable!
        Didn’t john MugaabKey say we are in danger of becoming tenants in our own country!
        -GSCB
        +GST

        • srylands 9.1.2.1

          “a radical socialist agreeing with a fundamentalist monetarist unbelievable!”

          I was taking the piss you pilock

          • Arfamo 9.1.2.1.1

            That would explain the aggression. A little less of the piss probably not a bad idea. Last thing needed on this site’s an angry drunk. Best place for them to post is Whaleoil.

          • tricledrown 9.1.2.1.2

            as if i wasn’t

    • karol 9.2

      Agreed BLip. I object to the way the wealthy are given a free pass and privileges in order to be able to invest here and drain the profits out of the country.

      Immigrants, “economic refugees” and others on limited means just looking to live in NZ and contribute to the community, social and economic well being of the country tend to be given less of a welcome, and have fewer regulations operating in their favour.

      The priorities and values are wrong and should be reversed, IMO.

      We should welcome low -to-middle income immigrants, and put up a “not welcome” sign for the wealthy speculators and greedy profit-seeking rentiers.

  10. Sanctuary 10

    In capitalism, money seeks profit and to much money chasing to little profit creates bubbles. This fundamental aspect of capitalism has to be understood when looking at our housing market. When you have foreign banks inflating an economy with cheap money that money is bound to try and seek a profit.

    Now, if the economy you are pumping that money into has a semi-criminal financial sector, a volatile exchange rate that punishes productive manufacturing enterprise, and a neo-liberal ruling elite biased towards monopolies, duopolies and corporate oligarchies then the only place the cheap money funneled into the general economy can go is property speculation.

    To my mind, the overheated property market is a symptom of how sick our capitalism has become. It is capitalist in name only. If our economy was actually more capitalistic in deed rather than words it would be more dynamically productive, rather than geared towards rent taking/seeking by a wealthy elite. Strong anti-monopoly laws that fostered competition, Inheritance tax, land tax, capital gains taxes, death duties and nationalisation of mortgage financing would all help to break the middle class addiction to the idea of getting rich by doing nothing other than looking for a simplest, quickest way onto the one way bet into the easy street of landlordism.

    • srylands 10.1

      “then the only place the cheap money funneled into the general economy can go is property speculation.”

      So how come the share market in NZ is so short of capital? What you are saying is so laughable.

      There are two things that would make a big difference. All your class warfare bullshit is well just bullshit.

      1. Release more land for housing. Radically reform idiot local councils.

      2. Introduce a comprehensive capital gains tax on all assets, including all housing. Labour’s “exempt the family home” thing is mad.

      So we increase the supply of land for anyone who wants to build a house. We treat all asset classes neutreally for tax.

      Then I would go after some of the pratices that inflate building materials.

      For gods sake stop making shit up and read the Productivity Commission’s report on housing affordability.

      • vto 10.1.1

        Good morning srylands, we were getting right to the crus of the issue of the labour capital split yesterday when you suddenly disappeared. I thought a reminder would be worthwhile so that the debate can be run completely through. This of course is at the very heart of the left right divide when it comes to economics etc. All else is meaningless until this point is crossed. http://thestandard.org.nz/this-gives-me-heart/#comment-671537 See you there.

      • Sanctuary 10.1.2

        “then the only place the cheap money funneled into the general economy can go is property speculation.”

        “…So how come the share market in NZ is so short of capital..?”

        Because the pervasive and largely unpunished criminal culture of our financial sector has created a generational perception that the share market is full of insider trading, sharp practice and corporate raiders. The key thing about a house is that it is, well, as safe as houses and a therefore a lot harder for a shiny suited bullshit artist to steal.

        “…There are two things that would make a big difference. All your class warfare bullshit is well just bullshit…”

        Nothing liked a bit of reasoned dialectic to get Plato smiling up there on Olympus, eh?

        I was actually arguing for “proper” capitalism. That the defenders of the neo-liberal status quo like yourself now equate competition with class war shows how decadent our model of oligarchic rent seeking neo-liberalism has become. Capitalism is actually strongest when it is productively dynamic – when it creates jobs, can facilitate wage growth by conceding to workers a portion of the profitability generated by investment and can allow working people some say in the process of government.

        “…1. Release more land for housing. Radically reform idiot local councils…”

        Zombie “fact”, long since disproved. Next.

        “…2. Introduce a comprehensive capital gains tax on all assets, including all housing. Labour’s “exempt the family home” thing is mad… …Then I would go after some of the pratices that inflate building materials…”

        Did you not notice I suggest a CGT and strong anti-monopoly laws? Are you literate?

  11. bad12 11

    Bill, while i agree with you totally that a maximum allowable rent would be a welcome solution when it comes to private sector rentals,

    Tipping that section of the property market on it’s head by Legislating for one would be in my opinion electoral suicide,

    There are far too many in middle class New Zealand that have piled into ‘rental investments’ to make ‘maximum allowable rents’ a viable policy for any political party,

    My opinion is that the fix for unaffordable rents is the same solution as that taken by the First Labour Government and every Labour Government up to the point of the Lange government,

    A State House building program where all the houses are rented to the tenants for 25% of their income,

    Such a program takes the ‘heat’ out of the whole housing market and has been proven to have done so since the First Labour Government first started building en masse State houses…

  12. Bob 12

    Why not simplify things further? From the 1/1/2014 it would not be possible to own more than 2 houses unless you built the additional houses yourself/purchase a new build (existing ownership exempted).
    This means anyone (including foriegn investors) can own as many houses as they like, but they would need to add to the existing housing stock in order to do so. More new houses built, more existing houses at affordable prices for first home buyers.

  13. Rosetinted 13

    When setting maximum rents also work out a valuation process that keeps the historial purchase price at the base, then adds a reasonable investment return and allowance for rates and maintenance which must be carried out and inspected every year, and then give a decent sized tax rebate, a sort of Housing for Families allowance to the landlord, who has to set the rates at a certain level and can’t put them up by more than 7% a year or something.

    It’s not hard to work out. The sort of people who have money can work out how to buy a bet on something, that might happen, and offset it against something that they are going to make happen, to invest in something that is still on the drawing board etc. And then sell it off as a venture note or some such label.

    In other words, when I hear financial people wanting simplicity and flat tax and the other well-worn cliches, who are they kidding, they love complexity. Getting round it buys their pleasure boats and overseas holidays.

  14. Binders full of women 14

    I agree 400k is a lot of money so why aren’t people buying the 95k houses instead? 1700 of them for sale on trade me (obviously not inside the beltway)…6,700 if you up it to 200k. I read something this morning that said banning Asian/South African/British buyers won’t build any more house.. and that may be the problem.

    • Colonial Viper 14.1

      If you can create decent jobs in the places where those houses are, then I’m sure they would be taken up.

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    GreensBy Jan Logie MP
    2 weeks ago
  • OCR rate cut a result of flagging economy
    The Reserve Bank's decision to cut the Official Cash Rate to 3 per cent shows there is no encore for the so-called 'rock star' economy, says Labour's Finance Spokesperson Grant Robertson.   "Today's interest rate cut comes off the back… ...
    2 weeks ago
  • Reboot to an innovation economy, an Internet economy and a clean economy
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    GreensBy Gareth Hughes MP
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    2 weeks ago
  • Key’s KiwiSaver deception exposed
    KiwiSaver statistics released today expose John Key's claim that the cutting of the kickstart payment "will not make a blind bit of difference to the number of people who join KiwiSaver” to be duplicitous, says Labour Finance Spokesperson Grant Robertson.  “Official… ...
    2 weeks ago
  • Minimum Wage Amendment Bill to protect contractors
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