She says early on that no-one wants the NZ housing market to crash, because people's homes are still the single biggest asset most NZ people will own. She doesn't really say anything else apart from that, or answer the question, other than 'all the levers' blather (meaning the levers that protect investors and some home owners). Building more supply features, but as far as I can tell this is increasing house prices.
Can someone please explain to me why property prices dropping would harm individual people? Is it a retirement thing (how so)? Or that people can borrow against it?
Doesn't it only become an issue when people want to sell? Some people will have houses worth less than their mortgage, is there not another way this issue can be solved. Wouldn't less buying and selling be a good thing?
The press question was about prices going back to what they were before covid ie a 27% drop. In what ways would this cause and to whom?
The ones who will be hurt most by a crashing market are first home buyers. They have the smallest equity and tend to be mortgaged to the hilt. Believe me I see it every day. Young couples really stretching it to get into housing. They are a baby or a job loss or an interest rate rise away from huge pressure.
The market could crash or correct because of an interest rate increase. If their equity disappears they may have nowhere to go.
Many who bought in the past year or so may well lose their input equity in the next year or two.
Those paying back the loan ahead of schedule now will cope with rising rates. Others can cope by moving to higher incomes via wage increases or take on extra work or they can take in boarders – incl a caravan in the yard.
If it goes that way (c 10-20% depending on when they bought in) the share of the mortgage paid which was principal (sans the interest) instead of rent becomes their effective equity. And that grows while they can meet the mortgage payments.
It would be really dumb to foreclose in a declining market when mortgage payments were being made. Banks do not make money being dumb.
What have bank licenses to do with foreclosing on those meeting their mortgage payments? More likely banks would just toughen up on new lending (as they are doing now in anticipation).
can the government not protect people in that situation?
But in the end, if young couples are having to take such risks to buy a house isn't that because of the disparity between income and property prices? And incomes are never going to keep up.
can the government not protect people in that situation?
They never have in the past. And how would they do it? Pay the banks the lost equity (ie reduce the loan by the size of the new market value)? I can see that going down with the general public like a bucketload of sick.
But in the end, if young couples are having to take such risks to buy a house isn't that because of the disparity between income and property prices?
Well yes it is to some extent, it is also due to the chronic shortage of house supply in NZ particularly in Auckland. This is a problem that has been allowed to fester for decades now. Developers aim their new builds at the top end of the market because that is where the profit lies. No money in building masses of cheaper houses – that requires more infrastructure to start with – more materials and smaller profit on each item. Back in the 0 ties I remember the assessment then that Auckland needed 13,000 + new homes per year. Never happened. That was almost 20 years ago. The down stream result is massive prices for the few houses coming on stream and desperate people willing to take on huge risks in order to find somewhere to live.
They have indeed done so in the past….by offering refinance at a discounted rate.
However with interest rates already nearing the zero bound that option has pretty much been removed, but there are potentially other actions they could take.
set up a gov entity to offer extended terms (say 40 years) rock bottom rates or shared equity options to criteria meeting applicants that the private banks need to foreclose on.
Housing corporation did a version of this in the 1980s
Nope the rate was around 11% compared to market rates of around 19% and the term was 24 years as opposed to a market maximum of 20.
Yes the cuurrent rates are low as i noted above but currently floating rates are around 5% and rising and some 80% of fixed mortgages are due for renewal in the next 12 months so there would be some scope.
Yes that is the nub of the problem. A "correction" of $200k – $300k on a median priced house could almost see a complete wipe out of any equity (and that is a 20% reduction in house price).
Suppose for some reason you were forced to sell the property you bought last year for $1m. You had a deposit of $500,000 and the bank loan of $500,000. If the property now sells for $800,000 you still owe the bank Around $500,000 so you are left with $300,000. A loss of $200,000. Your savings have reduced by $200,000 in a year. Even though over the past year you have invested a large portion of your income in paying the interest on that $500,000 loan.
I think that for many young couples that would be a significant problem
Now you might argue that you could now buy a similar property as the one you just sold for $800,000, but you would still have to borrow $500,000 to make the purchase. Your debt to loan ratio was initially 1:1, it is now 3:5 with no significant improvement in housing.
I understand how that works in terms of the numbers. What I'm saying is how is this a problem specifically, rather than an assumption of it being a problem.
So the problem in your example is they were forced to sell. Why were they forced to sell?
And then the problem is that they have to buy a less valuable property. How is this a problem specifically?
As far as I can tell the central issue for the second question is that people want to get ahead of an already reasonable standard of living. Where as half the country are just trying to stay afloat.
As far as I can tell the central issue for the second question is that people want to get ahead of an already reasonable standard of living. Where as half the country are just trying to stay afloat.
The people struggling to buy a home for themselves and family are equally trying to stay afloat – as we are only too well aware with the increasing demands on our food banks right now.
if someone is using a food bank, how can they afford to buy a home? I understand people who already own a home, one person loses their job, they no longer have enough income because the mortgage takes it all. But that's a different situation.
Need to sell: divorce/separation, death, job loss leading to foreclosure
Want to sell: downsizing, upsizing, new job, new school, family issues, horrible neighbours
Buying and selling the same market only causes issues if the remaining equity is not enough for a 20% deposit on the next property. With a drop of 30%, that means 46% equity of the current property price is needed to still have 20% equity at the new prices.
It also means people can't withdraw equity to improve their current house if it will put them below 20%. As above, not an issue if they have more than 50% of current prices, bit of an issue if they don't. That may seem like a minor issue, but not everyone uses that for a new car – other uses are home repairs and maintenance, modifications etc. The loss of that money means a downturn in economic activity which can turn into a recession if it is sharp enough.
Its not the big problem people perceive,there have been 10 mortgage sales this year nationwide,112 last year ,the peak during the Gfc (2009) was 2620 .
Crashing is only a real issue in conjunction with high unemployment, increasing interest rates should be covered by having responsible banks that have loaded stress loadings into their calculation for what the max. loan they are willing to give to clients. Banks have shown in the last 10 years that they are reluctant to force sales.
I will say as someone within the industry there are increasing examples of building invoking sunset clauses and then relisting, i 1 case 5 town houses with an added $200k on each. Easy $1m pity for those who had the dream smashed, and have to restart their house ownership journey
With property only increasing by 23% !!!! Should there be a drop of 18.7% we would still have prices at Dec 20 levels, those innocent victims would be those who have entered the market in the mid to later part of the current year, and would possible see their equity vanish, but if still employed they would still continue be able to pay the mortgage. IMO to make housing affordability a correction of 30% would make a difference in the long term for new entrants. That is returning to mid 2019 prices!!!! And once you are in the market it is the price to transition to the next level i.e. from town house/apartment etc to family 3/4 bedrooms etc, that is the issue.
if I'm understanding that right, the issue is more if prices drop and someone can no longer afford to pay their mortgage due to eg job loss?
What would be happening to the rental market in such a situation? eg could people move into a rental and have wealthier people rent their house to pay the mortgage? Would rents be going up or down? More or less supply?
Interest rates are at historic lows. There is really only one way they can drift in the near future and that is up. One of the tools the reserve bank has in its tool box is to raise the base interest rate (currently 0.75%). The bank is given the task of controlling inflation to within a range of 2 – 3% and one of the main methods it uses to reduce inflation is to raise the base interest rate. With the current supply shortages world wide and across the country inflation is increasing so we can expect to see interest rates rise in the new year whether we like it or not.
Inflation is rising because of Government Debt creation putting more money into the system which is chasing fewer houses and scarcity of building products (and almost everything else) due to supply problems – drop in manufacture due to lockdowns and transport bottle necks.
"Market Forces" – The Gods of the Copy Book headings return!
As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.
how does more money in the system relate to house building/supplies shortages and thus causing inflation? Do you mean the cost of housing (building as well as property) increasing while people have more money is what causes inflation?
Doesn't building a lot more houses increase the property prices in the short and medium term?
Yes, its basically an issue that peoples debts become larger relative to the assets which secure them. Banks have been known to call for repayment on roll over in these circumstances so the issue is not purely an effect on sellers however.
The other thing to consider is debt repayment in similar to saving, so this works to reduce aggregate spending and income (e.g GDP). Incidentally borrowing works in reverse to this. So there is at least a possibility that debt repayment is prioratised, people pay back debts rather than going in cafes, and so the fall out is on the cafe staff and businesses who lose work. This happened under lockdown (people saved rather than going out) but there the government wage subsidy kept cafe staff paid. So if the govt manages to get the housing market into reverse they may need to support GDP to stop a recession resulting. That wage subsidy was easier to explain politically under lockdown.
Yes, its basically an issue that peoples debts become larger relative to the assets which secure them. Banks have been known to call for repayment on roll over in these circumstances so the issue is not purely an effect on sellers however.
Can the government not regulate that to protect home owners? Other than the bank selling out from under them, what's the problem with the debt/asset ratio changing?
The issues here are basically fairness. This will be a problem for recent buyers, so the question in fairness terms is should the government be influencing the housing market in ways which penalize people, and did they have reasonable warning of what was coming. Otherwise the debt/asset ratio changing will effect how much somebody carries over if they are moving. At that point its not an equivalent trade as they pay off the balance of the mortgage on the inflated purchase price, not the depressed sale price, even if they can make another purchase at a depressed purchase price.
Otherwise a bank needing some repayment is basically requiring saving as indicated below. I don't think its the preferred thing for banks to do, but it happens.
Fairness like being homeless or spending most of your benefit on rent and not being able to afford to feed and clothe your kids?
I assume you mean fairness of people that got in earlier compared to people that got in later. This is the problem of Ardern saying she doesn't want property prices to drop, people take it as assurance, bet on that, and then the govt can't actually move.
Yes, its that kind of fairness, and its not that home owners are the worst off members of the economy either.
But the problem with just contrasting house prices with rents is that house prices have a tenuous relationship with rents.
Looking at the situation a lot of landlords were in before 2010 many were basically satisfied with the capital gains and were largely not fussed about maximising the rents anyway. Though that attitude seems to have changed a bit since then. But I don't see a good reason falling house prices will necessarily result in lower rents anyway, they could well result in higher rents. A lot of the governments reforms in fact seem to be trying to get landlords to start making investments more like a business and to my mind this will mean more landlords focused on the bottom line. Best case scenario we don't know if these changes will push rents up or down, there are ways it could do either in practice.
The other problem I see is reading too much into what Ardern says anyway. Basically house prices are set by the trades happening in the housing market. The PM can say what she wants but at most its a signal about which kinds of policy her party will or won't implement, but the impacts of those policies are quite far from well defined. I suspect the main impacts are on which party various classes of people might support and the housing market impacts are largely very hard to evaluate.
' In wanting state tenants to experience the benefits of owning their own home, the government offered purchasers very generous terms: 5 percent deposit, a 3 percent mortgage rate, with a maximum purchase period of 40 years. Since this time thousands of tenants have purchased their state houses and become 'kings and queens of their castles'.
Introduced by a National Govt!
Also introduced by a National Govt…
'The National government introduced full market rents in 1991 to reduce the state role in housing provision. From the start, public debate over state housing policy in New Zealand has centred on this very issue: how far should governments intervene in the housing market. '
One of ours with a big mortgage will try to get bailed out by the Government if values drop dramatically and the house is worth way less than what they owe. She'll change her name to 'South Canterbury Finance.'
The other thing to consider is debt repayment in similar to saving, so this works to reduce aggregate spending and income (e.g GDP). Incidentally borrowing works in reverse to this.
Not quite getting that one. The government wants people to be spending rather than paying off debt? How does that relate to a drop in property prices?
This is basically a question of who is impacted by the resulting change in behaviour. The summary of the point here is that an expanding housing market with expanding debt does increase our total income and spending across the country. When that even just slows down (let alone reversing) then that part of total income and spending goes away. This is basically the same as people electing to save more and spend less of their income. The unfair part of this would be that the people who are unemployed are often not involved in the housing market, but are influenced by its effects none-the-less.
The reason I also mentioned the govt here is that its spending is a good way to soak up excess unemployment which may result from this occurrence, and it doesn't have an actual financial constraint and so should be mandated to act for social policy purposes.
I wouldn't say its necessarily that fragile as it has persisted for quite a while. But eventually its probably bound to result in an overindebted household sector and inequality. Its a simplification but you can divide the income of the economy (GDP) into 3 sectors, private domestic, public government and overseas. In order for GDP to grow one of those sectors must spend more and frequently borrow more to support that spending. Since the Rogernomics reforms the increased spending initiative has generally come from the private domestic sector taking on more debt. Those reforms were largely about pushing spending off of the public government sector and onto the private domestic sector. This was only really recognised as a problem when Key came in during 2008, but the Clark government surpluses were only possible with similar expansion of private domestic sector spending and debt.
The alternative is more public government spending to support incomes (and fewer govt surpluses, especially as NZ typically runs a balance of payment deficit). Unfortunately the government budget is often described as similar to a business, rather than the factually accurate claim that government deficits are needed to create space for private domestic saving and debt repayment. There needs to be a certain level of saving if everybody is going to be saving for their own retirement, or repaying housing debt but that will need public sector deficits otherwise that behaviour change will result in some level of recession.
I think its reasonable describing a process which started in 1983 (or even starting around 2000) as (arguably) eventually becoming more critical in 2021. And its at least arguable that its not even yet over-indebted, as you have noted several times why is there anything wrong with people in negative equity on their property as long as they keep a job. If follows they are not yet over-indebted in that case.
I'm not quite saying that. I'm asking people to be specific about the details of the issues rather than just saying reflexively 'oh that's bad'.
Because I want us to look at different solutions, and we can't do that without understanding what the problem is.
I would guess for some people who lost their jobs in the past 2 years, having negative equity was a bad thing. So there's a difference for how individuals (who vote!) feel about it, and how the government and economists look at it (collectively and for the good of the whole).
Someone has to lose out apparently. I'd like the left to look at why it still largely supports poor people being the ones that are worst affected. I know some of the rationales (Labour want to stop the underclass growing more than they want to end the underclass condition itself). I just think we could be more honest about it.
I suggest you need to be more specific then, what is the meaning of over-indebted? My phrase was taking the meaning to be that such a person was over-indebted when they are prone to being unable to make payments/repay their debt (+ some bare minimum of other living expenditure). But apparently you mean something else by saying people are over-indebted.
I also don't really get the reasoning about somebody who loses their job with negative equity. Losing a job is usually the bad thing and can lead to losing a house regardless of the owners equity position. But negative equity has many negative consequences such as higher interest rates and insurance costs, lack of flexibility, potential repayment pressures and other drains on income.
I didn't know what you meant by over-indebted, I took it to mean that someone was precarious because of that debt, not that they were already crashing.
The point about job loss is that people are being sold the idea that buying a house with precariousness built in is good (get on the property ladder!). Then when one half of a couple loses their job, they can't afford to live and end up using food banks. Had property been more affordable, and/or people more sensible financially in taking on debt with regard to the way the world is, that wouldn't happen.
But negative equity has many negative consequences such as higher interest rates and insurance costs, lack of flexibility, potential repayment pressures and other drains on income.
One of our longer term tenants fell into just this hole during the 2009 GFC. Based overseas they lost jobs, property and savings all at once and were forced to return to NZ. There's lot's more to their story that I won't retell here – but essentially they've never been able to recover from that setback.
Regardless of who you vote for I don't think many people want to see their properties value go down much. I certainly don't although it is only on paper these days. As you say, for those of us watching our Retirement come closer, the value of our biggest Asset is not something we hope to gamble with. For me it is a safety net, encouraged in previous years as a Retirement Plan. and in case we get a wave of negative whiners about Northland staying Red this is one Northlander content with the decision.
why does it matter in retirement what your property is worth? Isn't the issue more that you want the mortgage paid off by the time you retire? Which is more likely generally if property prices dropped.
If the next step of retirement is moving to a Village (for example) every bit of value may be necessary for a "comfortable" existence. With a mortgage in retirement is said to be a very uncomfortable, let alone if renting. Why do you think it would be good for your most valuable asset to be worth less? The only benefit I see would be rates reduction but being quite happy paying taxes and rates for the betterment of society that's not really a plus for me.
Why do you think it would be good for your most valuable asset to be worth less? A 30% reduction only brings back prices to mid 2019, so in your case ( as long as LTO prices also corrects) then your position remains unchanged. But with increased property LTO prices increase, and that is why retirement village are able to achieve growth and pay great dividends to their share holders. They pocket the capital gain as well as the deferred management fees up to 30% of your licence fee. One of the best positive cashflow businesses in NZ.
Why do you think it would be good for your most valuable asset to be worth less? The only benefit I see would be rates reduction but being quite happy paying taxes and rates for the betterment of society that's not really a plus for me.
I don't think it's good for the individual whose asset devalues, I think it's good for homeless and poor people who can't afford rent, and lowish income people who can no longer afford to buy a house ever.
The growth we use now is financial, not production….if growth stops then there is no wherewithal to pay interest (in aggregate)
Everything is predicated on that ability…lose it and the whole system collapses.
NZ has made housing lending its almost exclusive source of financial growth (more so than any other economy) …pretty much no one is confident enough to lend/borrow for any other purpose.
It means without growth there is no ability to extract interest (that is not to say individuals couldnt)….ultimately it means that borrowing becomes increasingly difficult and people, institutions, businesses need to save before investing….think about what that does to an economy…you cant buy that house (or anything) until youve saved enough to pay for it outright.
If our growth was based on production (as it was until the neolib revolution) we would still have problems because we have reached the limits of extraction and externalities (pollution/.waste)……it is the end of growth.
We are using finance to kick the can down the road….and the road is coming to an end.
People struggling to pay mortgages because they move up to higher interest rates (this may force some to consider boarders – albeit via caravans in the yard for some).
When unemployment insurance arrives and in what form (income related or a more Canadian form) – it will help (for a certain period at least) those not able to get ACC because of illness rather than accident. Until then an option, for those able to afford the cost, is income insurance.
Income and unemployment insurance are usually time limited…i.e 6 months. Not much help with a 30 year mortgage…and that assumes a) you can afford/have it and b) it is honoured
It does what it does – losing a job and taking months to find an equivalent, or being out of work for months and being forced to sell under duress in a falling market is something to avoid if one can and there is any risk.
History (recent) has shown that those who lose employment in a recession almost invariably take an income hit if and when they find alternative employment
That can be a cause…however whatever the reason the fact remains that lifetime earning capacity decreases and consequently ability to service debt is reduced.
I remember a housing boom followed by a big price drop in the late 1980's in the UK, prices fell by 30% in some areas and a lot of people owed more than their house was worth.
big contributor here…
‘Throughout the bubble, newspapers and media played a vital role in hyping property. No national newspaper was without a glossy property supplement and weekend papers were often equally filled with property ads, reviews of new developments, stories of successful purchases, makeovers, and a gamut of columnists relating their property experiences. TV and radio schedules were filled with further property porn – house-hunting programs and house makeover programs were regular features on every channel. Even in July 2007, Irish Independent journalist/comedian Brendan O’Connor urged people to buy property, even as the bubble was clearly bursting.[42] In April 2011, journalist Vincent Browne admitted that the Irish media had played an important role in adding to the frenzy of the Irish property bubble’
I was asking what happened in the UK after the values dropped 30%. There's this implication that it's inherently bad, I want the explanation for how, specifically
If you own a home worth $300,000, and then it’s worth $210,000, you still have a home.
GDP doesn't fall due to values. GDP is a measure of income, so when GDP falls, income falls, and business (often) cut back on staff to save costs.
The effect of the housing market prices is that when a seller sells in an increasing housing market (because a borrower borrows and is willing to pay) then that becomes their income. Maybe they then take that and buy elsewhere, but… Eventually somebody ends up selling a place and not buying in again, or downsizing and so can realize their housing trades as actual income.
And when that goes away as house prices go into reverse then that income stream vanishes from the economy so GDP can fall. Perhaps there is also a shift into repaying more debts which is actively taking that spending out.
On top of this – and effect most people overlook is that the banks become increasingly unwilling to lend without substantial owner equity. What this leads to is the paradox of the price falling but the deposit needed stays just as large or even grows.
Market turnover drops because those who aren’t compelled to will hold, and those who do have sell to will often lose their equity and finish up adding to the rental demand.
sorry, but this does sound completely bonkers. The only way that works if is the people at the top keep getting richer and the people at bottom keep getting poorer.
I realise everyone here hates on me as the resident bastard landlord. It's the price I accept for being open and honest about my experiences. But please spare me the 'bonkers'.
Also what is so frequently left out of these discussions is that most powerful reason why so many people are stuck renting is not just prices – although clearly they've become a serious hurdle – but even worse than this, the willingness of any bank to lend them any money at any price.
I don't think that is necessarily an implication, and there have been sustained periods when many economies reduced inequality while still having house ownership and trading (though clearly a more limited financial sector).
But you asked how an almost 30% fall in UK house prices resulting in a two year recession and 1100000 additional unemployed and that is a reasonable description of how this happens.
The main problem the government faces here being that if they are successful at tipping over the housing market they will need to take responsibility for all the economic fallout resulting from that and that will be unpopular.
Say you bought a house last year for 850.000. for what ever reason the value of houses falls and your house is now only worth 580.000 grand. You are still paying the mortgage of the house for 850.000. If you wanted to sell because say your life changes, you can no longer get 850.000 or even close to it, you are shit out of luck and 270.000 short on your loan. The bank will want its money – your fucked..
So it is not in anyones interest to flood the market with new houses as that will leave the people that bought houses over the last ten years in negative equity. Or in houses without value. And these people vote, and Labour ain't gonna piss of middle class voters.
I bought a property in a tiny 'town', a glorified garden shed ministry of works from 1949 house with the original water boiler (in gallons) and the floor covered in news paper from 1970 (very interesting read i kept that paper) for 100.000. I am that cheap, yes i am. This property is now valued at 400.000 (yes, a good laugh), and i could sell it to some deluded person from AKL/WLGTN for more then that if i wanted too, but nope it is my retirement hovel. The locals of course are currently priced out of the market, as no one there makes enough money to pay that much. If the price of my house dropped back to what it was originally i would not be worse of. Why? I never loaded anything on the mortgage. But the same can not be said for the majority of people that bought houses and believe themselves to be millionaires. Or that bought Dachas in my little retirement place to go to with their boats for a weekend hoon and bbq. All loaded on the mortgage of a property valued somewhere as a million +.
Jacinda has no real options here, other then building to rent – and building to cheaply rent, to take pressure of the market slowly and let the market cool down in a controlled fashion.
Watch interest rates go up, and watch the house of cards fall apart.
did you see the word loan? You don't loan your down payment, you loan the rest based on your down payment. So no matter what you paid down, in my scenario you OWE 850.000 dollar, and if you can not sell your house for that money you are short on the loan, and you lost your down payment.
I hope that this is plain enough english to bend your mind around.
Last if Labour or National or Act or anyone would give a fuck about tenants and first buyers we would have gotten a Captial Gains Tax in the first year of the reign of Jacinda, and we would not have had the shenanigans last year with the very very low interest rates that resulted in no help to businesses but allowed people with inflated assets to borrow against these inflated assets and buy up some more property bringing the market up. Also keep in mind that Housing NZ is also buying up houses on the open market, cause that is easier and prolly cheaper then building.
If you wanted to sell because say your life changes, you can no longer get 850.000 or even close to it, you are shit out of luck and 270.000 short on your loan. The bank will want its money – your fucked..
people say this so casually "you want to sell your house"
From what I can tell in the conversation tonight, what this boils down to is people want freedom and they're ok that poor people can't have freedom so long as they do. The liberal ones would like poor people to also have freedom eg to live in a house or to afford things other than rent, but if that can't happen, oh well.
People want to fly wherever they want, oh well, climate change.
People want to do whatever they want, oh well, covid spreads.
If someone owns a home even if you owe a lot of money on it, I think that is lucky.
And it's not like we don't know this shit. If someone buys into the market now, and overextends themselves, what were they thinking? That the market would keep growing their asset by a hundred thousand dollars a year forever?
Good on you for buying what you did where you did.
All human activity – everything we do from the moment we wake – has a risk or cost to it. In general as a society we have two broad pathways to mitigating these costs:
One is to innovate so as to reduce or even eliminate those costs – a progressive process that has over the past 200 years transformed the lives of ordinary people beyond all belief.
The other is to prohibit it. In some instances this is entirely warranted, but as a fundamentally coercive action we should reach for this option least and last.
yes. We will coerce in a pandemic, but not a housing crisis that affects poor people disproportionately. The political and middle and rising classes are adept at self care.
The problem I have with this is the utter lack of imagination. TINA all the way. The idea that we cannot make sacrifices and be creative and innovative at the same time is a modern conceit when human evolution is in part an adaptation in response to challenge.
That's because NZ is a well governed stable country, one of the top 20 or so in the world, that people want to live in;
But we have a dysfunctional building industry and amateur hour zoning regulations that make the cost of housing ridiculous. Keep in mind that the price of existing homes cannot get too far out of kilter with the cost of building new ones – and it's this cost that's underpinning price inflation across the whole market.
So high demand and low supply – basic shit really.
NZ is the only western country with no Capital Gains or wealth tax.
And wherever a government is incompetent enough to allow housing supply to fall behind demand the same basic rule applies – prices go up. Regardless of the local tax settings.
Its a return to the the enslavement of the Feudal system.
You have no idea of what medieval feudalism was actually like do you? For the vast majority of human history even the idea that an ordinary person might 'own their house' was unthinkable.
From what I can tell in the conversation tonight, what this boils down to is people want freedom and they’re ok that poor people can’t have freedom so long as they do. The liberal ones would like poor people to also have freedom eg to live in a house or to afford things other than rent, but if that can’t happen, oh well.
I think the situation’s dealt with even more basically than that by homeowners. At the emotional level. Homeowners can see that not owning a home makes many people fundamentaly financially & emotionally insecure. One job loss away from a benefit, with all the associated indignities that go with the govt granting you an allowance to sustain your & your family’s existence off the taxpayer.
Better to stay in your home & hope like hell prices don’t fall. It’s not callousness that makes them not worry enuf about those who can’t affird to buy houses. It’s fear.
I'm sure that is true for some people Gezza. I think it's why there is so much denial about climate from the relatively stable as well. If we look it straight in the face we realise how much we are about to lose and people would rather pretend.
Thing is, if you are content to stay in the home you own, you don't need to worry so much about a drop in price. Housing as investment is the problem here, not home ownership.
But of course it’s probably equally true that without some level of private landlordism there wouldn’t be enuf houses available to rent. For various reasons, not everybody always wants to buy the home they’re currently living in.
I suppose we could argue the government could build and rent out homes instead of private landlords, but given the track record of public servants for managing state housing stock here I’m not convinced that that’s ever going to the best solution either.
I only own my own home, which I consider to be grossly overvalued, but someone would buy it at more that the govt valuation around here. I watch the housing market, like you, scratching my head over how Kiwiland could have got into this situation & how on earth we are going to get out of it & make housing more affordable for Blazer’s Joe Lunchbox with a job and a stay-at-home or part-time-employed wife/partner & two kids.
Put some tenant protection laws in place, the greedier landlords will sell, the government and local bodies buy the properties and do a mix of social housing, community land trust management, and rent to own.
the CLT model is very useful because it takes out the investor aspect. If a CLT owns the land and housing, and never sells it, then the incentives change for everyone.
People who live in such housing could be given other incentives to save rather than investment.
But of course, if the economy now depends on the housing market, the government will actively resist any attempts to change how it works.
Its a good idea,as is soft loans expressly for first home buyers.
What happens though, is a right wing Govt gets in and reverses everything-sells off state houses,unwinds initiatives they consider detrimental to free market profiteering and the cycle continues on.
Its why the right hates the Cullen Fund,Kiwibank,and Kiwisaver….these entities mop up funds they want to administer and profit from.
Hard to see how the NACT could reverse a CLT trust system, or council owned social housing though. Not sure that NACT would start selling off state houses again, given the direness of the housing crisis.
I bought based on what i could pay in repayments (rent to myself) if shit hits the fan, and our society goes down the gurgler. But then my inner german is a pessimist who believes that the sky will fall down on us. 🙂
I am very old fashioned in the sense that if i can't afford it, i can also not buy it.
One thing that should come back is teaching basic economics and budgeting. WE have done away with financial literacy, or maybe it was the Nuns at my Convent who thought it important enough to teach us a few things that fall under 'life skills' rather then abstract math.
Concerns about Omicron in UK … Booster dose reduced to 3 Months after 2nd jab.
Given how significantly more infectious Omicron is … concerns that even if it is far less severe than Delta (as seems likely from available data) … hospitals still at risk of being overwhelmed.
Read an article yesterday in the German news that two jabs of Pfizer is no match for Omicron. They too are discussing shorter periods between the boosters and hopefully a specific jab in about 6 month.
Very brave and very stunning for this person to compete against mere biological non males. So very very brave and so very very stunning. NON Male sporting events is a good place to retire for mediocre males.
The woman in these races should just boycott any race meet that allows this shit happen , no ones going to go watch a confused man swim alone in a women's race
If they are on the swim team due to scholar ships and help with payments which is quite common in the US then they will have to go out there and lose every time in the name of inclusion, kindness, and men are women. As failing to comply could result in them being sanctioned, expelled, or suddenly charged. And that involves also the swimmer of the other teams that have to compete against this bloke.
Given the overwhelming data, we reject arguments that explain male advantage in sport as a by-product of social conditioning, or that cast it as a social construction more generally. That adult human males have a physiological advantage over adult human females in athletic performance is a matter of settled science.
Note: this blog post has been put together over the course of the week I followed the happenings at the conference virtually. Should recordings of the Great Debates and possibly Union Symposia mentioned below, be released sometime after the conference ends, I'll include links to the ones I participated in. ...
The following was my submission made on the “Fast Track Approvals Bill”. This potential law will give three Ministers unchecked powers, un-paralled since the days of Robert Muldoon’s “Think Big” projects.The submission is written a bit tongue-in-cheek. But it’s irreverent because the FTAB is in itself not worthy of respect. ...
One Could Reduce Child Poverty At No Fiscal CostFollowing the Richardson/Shipley 1990 ‘redesign of the welfare state’ – which eliminated the universal Family Benefit and doubled the rate of child poverty – various income supplements for families have been added, the best known being ‘Working for Families’, introduced in 2005. ...
Buzz from the Beehive A few days ago, Point of Order suggested the media must be musing “on why Melissa is mute”. Our article reported that people working in the beleaguered media industry have cause to yearn for a minister as busy as Melissa Lee’s ministerial colleagues and we drew ...
1. What was The Curse of Jim Bolger?a. Winston Peters b. Soon after shaking his hand, world leaders would mysteriously lose office or shuffle off this mortal coilc. Could never shake off the Mother of All Budgetsd. Dandruff2. True or false? The Chairman of a Kiwi export business has asked the ...
Jack Vowles writes – New Zealand is said to be suffering from ‘serious populist discontent’. An IPSOS MORI survey has reported that we have an increasing preference for strong leaders, think that the economy is rigged toward the rich and powerful, and political elites are ignoring ‘hard-working people’. ...
Chris Trotter writes – MELISSA LEE should be deprived of her ministerial warrant. Her handling – or non-handling – of the crisis engulfing the New Zealand news media has been woeful. The fate of New Zealand’s two linear television networks, a question which the Minister of Broadcasting, Communications ...
TL;DR: The podcast above features co-hosts and , along with regular guests Robert Patman on Gaza and AUKUS II, and on climate change.The six things that mattered in Aotearoa’s political economy that we wrote and spoke about via The Kākā and elsewhere for paying subscribers in the ...
Policymakers rarely wish to make plain or visible their desire to dismantle environmental policy, least of all to the young. Photo: Lynn GrievesonTL;DR: Here’s the top five news items of note in climate news for Aotearoa-NZ this week, and a discussion above between Bernard Hickey and The Kākā’s climate correspondent ...
I like to keep an eye on what’s happening in places like the UK, the US, and over the ditch with our good mates the Aussies. Let’s call them AUKUS, for want of a better collective term. More on that in a bit.It used to be, not long ago, that ...
TL;DR: The global economy will be one fifth smaller than it would have otherwise been in 2050 as a result of climate damage, according to a new study by the Potsdam Institute for Climate Impact Research (PIK) and published in the journal Nature. (See more detail and analysis below, and ...
New Zealand is said to be suffering from ‘serious populist discontent’. An IPSOS MORI survey has reported that we have an increasing preference for strong leaders, think that the economy is rigged toward the rich and powerful, and political elites are ignoring ‘hard-working people’. The data is from February this ...
Foreign Minister Winston Peters is understood to be planning a major speech within the next fortnight to clear up the confusion over whether or not New Zealand might join the AUKUS submarine project. So far, there have been conflicting signals from the Government. RNZ reported the Prime Minister yesterday in ...
Life throws curveballs, and sometimes, those curveballs necessitate wiping your iPhone clean and starting anew. Whether you’re facing persistent software glitches, preparing to sell your device, or simply wanting a fresh start, knowing how to factory reset iPhone without a computer is a valuable skill. While using a computer with ...
Gone are the days when communication was limited to landline phones and physical proximity. Today, computers have become powerful tools for connecting with people across the globe through voice and video calls. But with a plethora of applications and methods available, how to call someone on a computer might seem ...
Open access notables Glacial isostatic adjustment reduces past and future Arctic subsea permafrost, Creel et al., Nature Communications:Sea-level rise submerges terrestrial permafrost in the Arctic, turning it into subsea permafrost. Subsea permafrost underlies ~ 1.8 million km2 of Arctic continental shelf, with thicknesses in places exceeding 700 m. Sea-level variations over glacial-interglacial cycles control ...
The operating system (OS) is the heart and soul of a computer, orchestrating every action and interaction between hardware and software. But have you ever wondered where on a computer is the operating system generally stored? The answer lies in the intricate dance between hardware and software components, particularly within ...
Laptops have become essential tools for work, entertainment, and communication, offering portability and functionality. However, with rising energy costs and growing environmental concerns, understanding a laptop’s power consumption is more important than ever. So, how many watts does a laptop use? The answer, unfortunately, isn’t straightforward. It depends on several ...
Screen recording has become an essential tool for various purposes, such as creating tutorials, capturing gameplay footage, recording online meetings, or sharing information with others. Fortunately, Dell laptops offer several built-in and external options for screen recording, catering to different needs and preferences. This guide will explore various methods on ...
A cracked or damaged laptop screen can be a frustrating experience, impacting productivity and enjoyment. Fortunately, laptop screen repair is a common service offered by various repair shops and technicians. However, the cost of fixing a laptop screen can vary significantly depending on several factors. This article delves into the ...
Gaming laptops represent a significant investment for passionate gamers, offering portability and powerful performance for immersive gaming experiences. However, a common concern among potential buyers is their lifespan. Unlike desktop PCs, which allow for easier component upgrades, gaming laptops have inherent limitations due to their compact and integrated design. This ...
The annual inventory report of New Zealand's greenhouse gas emissions has been released, showing that gross emissions have dropped for the third year in a row, to 78.4 million tons: All-told gross emissions have decreased by over 6 million tons since the Zero Carbon Act was passed in 2019. ...
Experiencing a locked computer can be frustrating, especially when you need access to your files and applications urgently. The methods to unlock your computer will vary depending on the specific situation and the type of lock you encounter. This guide will explore various scenarios and provide step-by-step instructions on how ...
While the world has largely transitioned to digital communication, faxing still holds relevance in certain industries and situations. Fortunately, gone are the days of bulky fax machines and dedicated phone lines. Today, you can easily send and receive faxes directly from your computer, offering a convenient and efficient way to ...
In our increasingly digital world, home computers have become essential tools for work, communication, entertainment, and more. However, this increased reliance on technology also exposes us to various cyber threats. Understanding these threats and taking proactive steps to protect your home computer is crucial for safeguarding your personal information, finances, ...
In the ever-evolving world of technology, server-based computing has emerged as a cornerstone of modern digital infrastructure. This article delves into the concept of server-based computing, exploring its various forms, benefits, challenges, and its impact on the way we work and interact with technology. Understanding Server-Based Computing: At its core, ...
The absolute brass neck of this guy.We want more medical doctors, not more spin doctors, Luxon was saying a couple of weeks ago, and now we’re told the guy has seven salaried adults on TikTok duty. Sorry, doing social media. The absolute brass neck of it. The irony that the ...
Buzz from the Beehive Oceans and Fisheries Minister Shane Jones relishes spatting and eagerly takes issue with environmentalists who criticise his enthusiasm for resource development. He relishes helping the fishing industry too. And so today, while the media are making much of the latest culling in the public service to ...
Having written, taught and worked for the US government on issues involving unconventional warfare and terrorism for 30-odd years, two things irritate me the most when the subject is discussed in public. The first is the Johnny-come-lately academics-turned-media commentators who … Continue reading → ...
Eric Crampton writes – Kainga Ora is the government’s house building agency. It’s been building a lot of social housing. Kainga Ora has its own (but independent) consenting authority, Consentium. It’s a neat idea. Rather than have to deal with building consents across each different territorial authority, Kainga Ora ...
Muriel Newman writes – The Coalition Government says it is moving with speed to deliver campaign promises and reverse the damage done by Labour. One of their key commitments is to “defend the principle that New Zealanders are equal before the law.” To achieve this, they have pledged they “will not advance ...
Chris Trotter writes – The absence of anything resembling a fightback from the public servants currently losing their jobs is interesting. State-sector workers’ collective fatalism in the face of Coalition cutbacks indicates a surprisingly broad acceptance of impermanence in the workplace. Fifty years ago, lay-offs in the thousands ...
Mariupol, on the Azov Sea coast, was one of the first cities to suffer almost complete destruction after the start of the Ukraine War started in late February 2022. We remember the scenes of absolute destruction of the houses and city structures. The deaths of innocent civilians – many of ...
Lindsay Mitchell writes – Ten years ago, I wrote the following in a Listener column: Every year around one in five new-born babies will be reliant on their caregivers benefit by Christmas. This pattern has persisted from at least 1993. For Maori the number jumps to over one in three. ...
Climate change is expected to generate more and more extreme events, delivering a sort of structural shock to inflation that central banks will have to react to as if they were short-term cyclical issues. Photo: Lynn Grieveson / The KākāMy pick of the six newsey things to know from Aotearoa’s ...
It’s a simple deal. We pay taxes in order to finance the social services we want and need. The carnage now occurring across the public sector though, is breaking that contract. Over 3,000 jobs have been lost so far. Many are in crucial areas like Education where the impact of ...
Hi,A friend had their 40th over the weekend and decided to theme it after Curb Your Enthusiasm fashion icon Susie Greene. Captured in my tiny kitchen before I left the house, I ending up evoking a mix of old lesbian and Hillary Clinton — both unintentional.Me vs Hillary ClintonIf you’re ...
This is a re-post from Andrew Dessler at the Climate Brink blogIn 2023, the Earth reached temperature levels unprecedented in modern times. Given that, it’s reasonable to ask: What’s going on? There’s been lots of discussions by scientists about whether this is just the normal progression of global warming or if something ...
The schools are on holiday and the sun is shining in the seaside village and all day long I have been seeing bunches of bikes; Mums, Dads, teens and toddlers chattering, laughing, happy, having a bloody great time together. Cheers, AT, for the bits of lane you’ve added lately around the ...
Today in our National-led authoritarian nightmare: Shane Jones thinks Ministers should be above the law: New Zealand First MP Shane Jones is accusing the Waitangi Tribunal of over-stepping its mandate by subpoenaing a minister for its urgent hearing on the Oranga Tamariki claim. The tribunal is looking into the ...
Bryce Edwards writes – Politicians across the political spectrum are implicated in the New Zealand media’s failing health. Either through neglect or incompetent interventions, successive governments have failed to regulate, foster, and allow a healthy Fourth Estate that can adequately hold politicians and the powerful to account. ...
Citizen Science writes – Last week saw two significant developments in the debate over the treatment of trans-identifying children and young people – the release in Britain of the final report of Dr Hilary Cass’s review into gender healthcare, and here in New Zealand, the news that the ...
One night while sleeping in my bed I had a beautiful dreamThat all the people of the world got together on the same wavelengthAnd began helping one anotherNow in this dream, universal love was the theme of the dayPeace and understanding and it happened this wayAfter such an eventful day ...
This is a guest post by Oscar Simms who is a housing activist, volunteer for the Coalition for More Homes, and was the Labour Party candidate for Auckland Central at the last election. ...
Turning what Labour called the “holiday highway” into a four-lane expressway from Auckland to Whangarei could bring at least an economic benefit of nearly two billion a year for Northland each year. And it could help bring an end to poverty in one of New Zealand’s most deprived regions. The ...
Tonight’s six-stack includes: launching his substack with a bunch of his previous documentaries, including this 1992 interview with Dame Whina Cooper. and here crew give climate activists plenty to do, including this call to submit against the Fast Track Approvals bill. writes brilliantly here on his substack ...
On February 14, 2023 we announced our Rebuttal Update Project. This included an ask for feedback about the added "At a glance" section in the updated basic rebuttal versions. This weekly blog post series highlights this new section of one of the updated basic rebuttal versions and serves as a ...
You're in the mall when you hear it: some kind of popping sound in the distance, kids with fireworks, maybe. But then a moment of eerie stillness is followed by more of the fireworks sound and there’s also screaming and shrieking and now here come people running for their lives.Does ...
Karl du Fresne writes – There’s a crisis in the news media and the media are blaming it on everyone except themselves. Culpability is being deflected elsewhere – mainly to the hapless Minister of Communications, Melissa Lee, and the big social media platforms that are accused of hoovering ...
I don’t normally send out two newsletters in a day but I figured I’d say something about… the news. If two newsletters is a bit much then maybe just skip one, I don’t want to overload people. Alternatively if you’d be interested in sometimes receiving multiple, smaller updates from me, ...
Buzz from the Beehive David Seymour and Winston Peters today signalled that at least two ministers of the Crown might be in Wellington today. Seymour (as Associate Minister of Education) announced the removal of more red tape, this time to make it easier for new early learning services to be ...
Politicians across the political spectrum are implicated in the New Zealand media’s failing health. Either through neglect or incompetent interventions, successive governments have failed to regulate, foster, and allow a healthy Fourth Estate that can adequately hold politicians and the powerful to account. Our political system is suffering from the ...
David Farrar writes – The Broadcasting Standards Authority ruled: Comments by radio host Kate Hawkesby suggesting Māori and Pacific patients were being prioritised for surgery due to their ethnicity were misleading and discriminatory, the Broadcasting Standards Authority has found. It is a fact such patients are prioritised. ...
PRC and its proxies in Solomons have been preparing for these elections for a long time.A lot of money, effort and intelligence have gone into ensuring an outcome that won’t compromise Beijing’s plans. Cleo Paskall writes – On April 17th the Solomon Islands, a country of ...
Is speeding up the trip to and from Wellington airport by 12 minutes worth spending up more than $10 billion? Photo: Lynn Grieveson / The KākāTL;DR: The six news items that stood out to me in the last day to 8:26 am today are:The Lead: Transport Minister Simeon Brownannounced ...
You're a fraud, and you know itBut it's too good to throw it all awayAnyone would do the sameYou've got 'em goingAnd you're careful not to show itSometimes you even fool yourself a bitIt's like magicBut it's always been a smoke and mirrors gameAnyone would do the sameForty six billion ...
This is a re-post from Yale Climate Connections The June general election in Mexico could mark a turning point in ensuring that the country’s climate policies better reflect the desire of its citizens to address the climate crisis, with both leading presidential candidates expressing support for renewable energy. Mexico is the ...
2024, it feels, keeps presenting us with ever more challenges, ever more dismay.Do you give up yet? It seems to ask.No? How about this? Or this?How about this?When I say 2024 I really mean the state of humanity in 2024.Saturday night, we watched Civil War because that is one terrifying cliff we've ...
Buzz from the Beehive A pet project and governmental tunnel vision jump out from the latest batch of ministerial announcements. The government is keen to assure us of its concern for the wellbeing of our pets. It will be introducing pet bonds in a change to the Residential Tenancies Act ...
A recent report generated from a Growing Up in New Zealand (GUiNZ) survey of 1,224 rangatahi Māori aged 11-12 found: Cultural connectedness was associated with fewer depression symptoms, anxiety symptoms and better quality of life. That sounds cut and dry. But further into the report the following appears: Cultural connectedness is ...
David Farrar writes – The Herald reports: From the gory details of job-cuts news, you’d think the public service was being eviscerated. While the media’s view of the cuts is incomplete, it’s also true that departments have been leaking the particulars faster than a Wellington ...
Remember the good old days, back when New Zealand had a PM who could think and speak calmly and intelligently in whole sentences without blustering? Even while Iran’s drones and missiles were still being launched, Helen Clark was live on TVNZ expertly summing up the latest crisis in the Middle ...
Costello did not pass on analysis of the benefits of the smokefree reforms to Cabinet, emphasising instead the extra tax revenues of repealing them. Photo: Hagen Hopkins, Getty Images TL;DR: The six news items that stood out to me at 7:26 am today are:The Lead: Casey Costello never passed on ...
True loveYou're the one I'm dreaming ofYour heart fits me like a gloveAnd I'm gonna be true blueBaby, I love youI’ve written about the job cuts in our news media last week. The impact on individuals, and the loss to Aotearoa of voices covering our news from different angles.That by ...
While commentators, including former Prime Minister Helen Clark, are noting a subtle shift in New Zealand’s foreign policy, which now places more emphasis on the United States, many have missed a key element of the shift. What National said before the election is not what the government is doing now. ...
A listing of 31 news and opinion articles we found interesting and shared on social media during the past week: Sun, April 7, 2024 thru Sat, April 13, 2024. Story of the week Our story of the week is about adults in the room setting terms and conditions of ...
The Green Party has joined the call for public submissions on the fast-track legislation to be extended after the Ombudsman forced the Government to release the list of organisations invited to apply just hours before submissions close. ...
New Zealand’s good work at reducing climate emissions for three years in a row will be undone by the National government’s lack of ambition and scrapping programmes that were making a difference, Labour Party climate spokesperson Megan Woods said today. ...
More essential jobs could be on the chopping block, this time Ministry of Education staff on the school lunches team are set to find out whether they're in line to lose their jobs. ...
The Government is trying to bring in a law that will allow Ministers to cut corners and kill off native species, Labour environment spokesperson Rachel Brooking said. ...
Cancelling urgently needed new Cook Strait ferries and hiking the cost of public transport for many Kiwis so that National can announce the prospect of another tunnel for Wellington is not making good choices, Labour Transport Spokesperson Tangi Utikere said. ...
A laundry list of additional costs for Tāmaki Makarau Auckland shows the Minister for the city is not delivering for the people who live there, says Labour Auckland Issues spokesperson Shanan Halbert. ...
The Green Party has today launched a step-by-step guide to help New Zealanders make their voice heard on the Government’s democracy dodging and anti-environment fast track legislation. ...
The National Government’s proposed changes to the Residential Tenancies Act will mean tenants can be turfed from their homes by landlords with little notice, Labour housing spokesperson Kieran McAnulty said. ...
Green Party co-leader Marama Davidson is calling on all parties to support a common-sense change that’s great for the planet and great for consumers after her member’s bill was drawn from the ballot today. ...
A significant milestone has been reached in the fight to strike an anti-Pasifika and unfair law from the country’s books after Teanau Tuiono’s members’ bill passed its first reading. ...
New Zealand has today missed the opportunity to uphold the right to a clean, healthy, and sustainable environment, says James Shaw after his member’s bill was voted down in its first reading. ...
Today’s advice from the Climate Change Commission paints a sobering reality of the challenge we face in combating climate change, especially in light of recent Government policy announcements. ...
Minister for Disability Issues Penny Simmonds appears to have delayed a report back to Cabinet on the progress New Zealand is making against international obligations for disabled New Zealanders. ...
The Government’s newly announced review of methane emissions reduction targets hints at its desire to delay Aotearoa New Zealand’s urgent transition to a climate safe future, the Green Party said. ...
The Government must commit to the Maitai School building project for students with high and complex needs, to ensure disabled students from the top of the South Island have somewhere to learn. ...
Mental Health Minister Matt Doocey and his Government colleagues have made a meal of their mental health commitments, showing how flimsy their efforts to champion the issue truly are, says Labour Mental Health spokesperson Ingrid Leary. ...
Māori are yet to see anything from this Government except cuts, reversals and taking our people backwards, Māori Development spokesperson Willie Jackson said. ...
The Coalition Government’s refusal to commit to ongoing funding for social housing is seeing the sector pull back on developments and families watch their dreams of securing a home fade away, says Labour Housing spokesperson Kieran McAnulty. ...
Changes to minimum wage and benefit indexation means many New Zealanders will get less this year, as the Government gives a big tax break to landlords instead. ...
New Zealand is demonstrating its commitment to reducing global greenhouse emissions, and supporting clean energy transition in South East Asia, through a contribution of NZ$41 million (US$25 million) in climate finance to the Asian Development Bank (ADB)-led Energy Transition Mechanism (ETM). Prime Minister Christopher Luxon and Climate Change Minister Simon Watts announced ...
The Government is today releasing a list of organisations who received letters about the Fast-track applications process, says RMA Reform Minister Chris Bishop. “Recently Ministers and agencies have received a series of OIA requests for a list of organisations to whom I wrote with information on applying to have a ...
Attorney-General Judith Collins today announced the appointment of Wellington Barrister David Jonathan Boldt as a Judge of the High Court, and the Honourable Justice Matthew Palmer as a Judge of the Court of Appeal. Justice Boldt graduated with an LLB from Victoria University of Wellington in 1990, and also holds ...
Education Minister Erica Stanford will lead the New Zealand delegation at the 2024 International Summit on the Teaching Profession (ISTP) held in Singapore. The delegation includes representatives from the Post Primary Teachers’ Association (PPTA) Te Wehengarua and the New Zealand Educational Institute (NZEI) Te Riu Roa. The summit is co-hosted ...
A stopbank upgrade project in Tairawhiti partly funded by the Government has increased flood resilience for around 7000ha of residential and horticultural land so far, Regional Development Minister Shane Jones says. Mr Jones today attended a dawn service in Gisborne to mark the end of the first stage of the ...
Foreign Affairs Minister Winston Peters will represent the Government at Anzac Day commemorations on the Gallipoli Peninsula next week and engage with senior representatives of the Turkish government in Istanbul. “The Gallipoli campaign is a defining event in our history. It will be a privilege to share the occasion ...
Science, Innovation and Technology and Defence Minister Judith Collins will next week attend the OECD Science and Technology Ministerial conference in Paris and Anzac Day commemorations in Belgium. “Science, innovation and technology have a major role to play in rebuilding our economy and achieving better health, environmental and social outcomes ...
Prime Minister Christopher Luxon held a bilateral meeting today with the President of the Philippines, Ferdinand Marcos Jr. The Prime Minister was accompanied by MP Paulo Garcia, the first Filipino to be elected to a legislature outside the Philippines. During today’s meeting, Prime Minister Luxon and President Marcos Jr discussed opportunities to ...
The Government has announced that $20 million in funding will be made available to Westport to fund much needed flood protection around the town. This measure will significantly improve the resilience of the community, says Local Government Minister Simeon Brown. “The Westport community has already been allocated almost $3 million ...
The Government is proud to support the first ever Repco Supercars Championship event in Taupō as up to 70,000 motorsport fans attend the Taupō International Motorsport Park this weekend, says Economic Development Minister Melissa Lee. “Anticipation for the ITM Taupō Super400 is huge, with tickets and accommodation selling out weeks ...
Local Government Minister Simeon Brown has announced an increase to the Rates Rebate Scheme, putting money back into the pockets of low-income homeowners. “The coalition Government is committed to bringing down the cost of living for New Zealanders. That includes targeted support for those Kiwis who are doing things tough, such ...
The Coalition Government is investing in a project to boost survival rates of New Zealand mussels and grow the industry, Oceans and Fisheries Minister Shane Jones has announced. “This project seeks to increase the resilience of our mussels and significantly boost the sector’s productivity,” Mr Jones says. “The project - ...
Benefit figures released today underscore the importance of the Government’s plan to rebuild the economy and have 50,000 fewer people on Jobseeker Support, Social Development and Employment Minister Louise Upston says. “Benefit numbers are still significantly higher than when National was last in government, when there was about 70,000 fewer ...
The Government’s commitment to doubling New Zealand’s renewable energy capacity is backed by new data showing that clean energy has helped the country reach its lowest annual gross emissions since 1999, Climate Change Minister Simon Watts says. New Zealand’s latest Greenhouse Gas Inventory (1990-2022) published today, shows gross emissions fell ...
The Government is bringing the earthquake-prone building review forward, with work to start immediately, and extending the deadline for remediations by four years, Building and Construction Minister Chris Penk says. “Our Government is focused on rebuilding the economy. A key part of our plan is to cut red tape that ...
Prime Minister Christopher Luxon and his Thai counterpart, Prime Minister Srettha Thavisin, have today agreed that New Zealand and the Kingdom of Thailand will upgrade the bilateral relationship to a Strategic Partnership by 2026. “New Zealand and Thailand have a lot to offer each other. We have a strong mutual desire to build ...
RMA Reform Minister Chris Bishop and Transport Minister Simeon Brown have today announced the Coalition Government’s intention to extend port coastal permits for a further 20 years, providing port operators with certainty to continue their operations. “The introduction of the Resource Management Act in 1991 required ports to obtain coastal ...
Today’s announcement that inflation is down to 4 per cent is encouraging news for Kiwis, but there is more work to be done - underlining the importance of the Government’s plan to get the economy back on track, acting Finance Minister Chris Bishop says. “Inflation is now at 4 per ...
Refreshed health guidance released today will help parents and schools make informed decisions about whether their child needs to be in school, addressing one of the key issues affecting school attendance, says Associate Education Minister David Seymour. In recent years, consistently across all school terms, short-term illness or medical reasons ...
Oceans and Fisheries Minister Shane Jones is streamlining high-level oceans management while maintaining a focus on supporting the sector’s role in the export-led recovery of the economy. “I am working to realise the untapped potential of our fishing and aquaculture sector. To achieve that we need to be smarter with ...
Associate Agriculture Minister Mark Patterson is speaking at the International Wool Textile Organisation Congress in Adelaide, promoting New Zealand wool, and outlining the coalition Government’s support for the revitalisation the sector. "New Zealand’s wool exports reached $400 million in the year to 30 June 2023, and the coalition Government ...
The Government is making legislative changes to make it easier for new early learning services to be established, and for existing services to operate, Associate Education Minister David Seymour says. The changes involve repealing the network approval provisions that apply when someone wants to establish a new early learning service, ...
Changes to the Resource Management Act will align consenting for coal mining to other forms of mining to reduce barriers that are holding back economic development, Resources Minister Shane Jones says. “The inconsistent treatment of coal mining compared with other extractive activities is burdensome red tape that fails to acknowledge ...
Trade, Agriculture and Forestry Minister Todd McClay has concluded productive discussions with ministerial counterparts in Beijing today, in support of the New Zealand-China trade and economic relationship. “My meeting with Commerce Minister Wang Wentao reaffirmed the complementary nature of the bilateral trade relationship, with our Free Trade Agreement at its ...
Prime Minister Christopher Luxon today paid tribute to Singapore’s outgoing Prime Minister Lee Hsien Loong. Meeting in Singapore today immediately before Prime Minister Lee announced he was stepping down, Prime Minister Luxon warmly acknowledged his counterpart’s almost twenty years as leader, and the enduring legacy he has left for Singapore and South East ...
Prime Minister Christopher Luxon held a bilateral meeting today with Singapore Prime Minister Lee Hsien Loong. While in Singapore as part of his visit to South East Asia this week, Prime Minister Luxon also met with Singapore President Tharman Shanmugaratnam and will meet with Deputy Prime Minister Lawrence Wong. During today’s meeting, Prime Minister Luxon ...
Foreign Minister Winston Peters has made further appointments to the Board of Antarctica New Zealand as part of a continued effort to ensure the Scott Base Redevelopment project is delivered in a cost-effective and efficient manner. The Minister has appointed Neville Harris as a new member of the Board. Mr ...
Finance Minister Nicola Willis will travel to the United States on Tuesday to attend a meeting of the Five Finance Ministers group, with counterparts from Australia, the United States, Canada, and the United Kingdom. “I am looking forward to meeting with our Five Finance partners on how we can work ...
The coalition Government has today announced purrfect and pawsitive changes to the Residential Tenancies Act to give tenants with pets greater choice when looking for a rental property, says Housing Minister Chris Bishop. “Pets are important members of many Kiwi families. It’s estimated that around 64 per cent of New ...
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Ardern answering questions in the Monday stand up on housing. Starts around 28m
https://www.rnz.co.nz/news/national/457821/watch-live-prime-minister-jacinda-ardern-announces-any-changes-to-traffic-light-system
She says early on that no-one wants the NZ housing market to crash, because people's homes are still the single biggest asset most NZ people will own. She doesn't really say anything else apart from that, or answer the question, other than 'all the levers' blather (meaning the levers that protect investors and some home owners). Building more supply features, but as far as I can tell this is increasing house prices.
Can someone please explain to me why property prices dropping would harm individual people? Is it a retirement thing (how so)? Or that people can borrow against it?
Doesn't it only become an issue when people want to sell? Some people will have houses worth less than their mortgage, is there not another way this issue can be solved. Wouldn't less buying and selling be a good thing?
The press question was about prices going back to what they were before covid ie a 27% drop. In what ways would this cause and to whom?
If you think a market rising too quickly is bad – wait until you live through one that is crashing.
presumably I will at some point. But that doesn't answer my questions. I want someone to spell it out in the NZ context.
The ones who will be hurt most by a crashing market are first home buyers. They have the smallest equity and tend to be mortgaged to the hilt. Believe me I see it every day. Young couples really stretching it to get into housing. They are a baby or a job loss or an interest rate rise away from huge pressure.
The market could crash or correct because of an interest rate increase. If their equity disappears they may have nowhere to go.
Many who bought in the past year or so may well lose their input equity in the next year or two.
Those paying back the loan ahead of schedule now will cope with rising rates. Others can cope by moving to higher incomes via wage increases or take on extra work or they can take in boarders – incl a caravan in the yard.
If it goes that way (c 10-20% depending on when they bought in) the share of the mortgage paid which was principal (sans the interest) instead of rent becomes their effective equity. And that grows while they can meet the mortgage payments.
Which assumes the lending bank will not foreclose and that the RBNZ will allow the lending institutions to operate outside their licences.
It would be really dumb to foreclose in a declining market when mortgage payments were being made. Banks do not make money being dumb.
What have bank licenses to do with foreclosing on those meeting their mortgage payments? More likely banks would just toughen up on new lending (as they are doing now in anticipation).
can the government not protect people in that situation?
But in the end, if young couples are having to take such risks to buy a house isn't that because of the disparity between income and property prices? And incomes are never going to keep up.
They never have in the past. And how would they do it? Pay the banks the lost equity (ie reduce the loan by the size of the new market value)? I can see that going down with the general public like a bucketload of sick.
Well yes it is to some extent, it is also due to the chronic shortage of house supply in NZ particularly in Auckland. This is a problem that has been allowed to fester for decades now. Developers aim their new builds at the top end of the market because that is where the profit lies. No money in building masses of cheaper houses – that requires more infrastructure to start with – more materials and smaller profit on each item. Back in the 0 ties I remember the assessment then that Auckland needed 13,000 + new homes per year. Never happened. That was almost 20 years ago. The down stream result is massive prices for the few houses coming on stream and desperate people willing to take on huge risks in order to find somewhere to live.
They have indeed done so in the past….by offering refinance at a discounted rate.
However with interest rates already nearing the zero bound that option has pretty much been removed, but there are potentially other actions they could take.
Such as?
set up a gov entity to offer extended terms (say 40 years) rock bottom rates or shared equity options to criteria meeting applicants that the private banks need to foreclose on.
Housing corporation did a version of this in the 1980s
IIRC the terms were 25 years and 3% (that was a pretty small rate then) and the sums were around $25,000.
Current rates for a fixed mortgage are around 2.5%
Nope the rate was around 11% compared to market rates of around 19% and the term was 24 years as opposed to a market maximum of 20.
Yes the cuurrent rates are low as i noted above but currently floating rates are around 5% and rising and some 80% of fixed mortgages are due for renewal in the next 12 months so there would be some scope.
Yes that is the nub of the problem. A "correction" of $200k – $300k on a median priced house could almost see a complete wipe out of any equity (and that is a 20% reduction in house price).
https://www.nzherald.co.nz/business/nz-house-prices-hit-new-record-925000-up-238-auckland-now-13m/BNNOELUO2JVKP5VA43YYZNKQUQ/
in what ways is this a problem?
Suppose for some reason you were forced to sell the property you bought last year for $1m. You had a deposit of $500,000 and the bank loan of $500,000. If the property now sells for $800,000 you still owe the bank Around $500,000 so you are left with $300,000. A loss of $200,000. Your savings have reduced by $200,000 in a year. Even though over the past year you have invested a large portion of your income in paying the interest on that $500,000 loan.
I think that for many young couples that would be a significant problem
Now you might argue that you could now buy a similar property as the one you just sold for $800,000, but you would still have to borrow $500,000 to make the purchase. Your debt to loan ratio was initially 1:1, it is now 3:5 with no significant improvement in housing.
I understand how that works in terms of the numbers. What I'm saying is how is this a problem specifically, rather than an assumption of it being a problem.
So the problem in your example is they were forced to sell. Why were they forced to sell?
And then the problem is that they have to buy a less valuable property. How is this a problem specifically?
As far as I can tell the central issue for the second question is that people want to get ahead of an already reasonable standard of living. Where as half the country are just trying to stay afloat.
The people struggling to buy a home for themselves and family are equally trying to stay afloat – as we are only too well aware with the increasing demands on our food banks right now.
if someone is using a food bank, how can they afford to buy a home? I understand people who already own a home, one person loses their job, they no longer have enough income because the mortgage takes it all. But that's a different situation.
Need to sell: divorce/separation, death, job loss leading to foreclosure
Want to sell: downsizing, upsizing, new job, new school, family issues, horrible neighbours
Buying and selling the same market only causes issues if the remaining equity is not enough for a 20% deposit on the next property. With a drop of 30%, that means 46% equity of the current property price is needed to still have 20% equity at the new prices.
It also means people can't withdraw equity to improve their current house if it will put them below 20%. As above, not an issue if they have more than 50% of current prices, bit of an issue if they don't. That may seem like a minor issue, but not everyone uses that for a new car – other uses are home repairs and maintenance, modifications etc. The loss of that money means a downturn in economic activity which can turn into a recession if it is sharp enough.
so maybe maintenance and upgrade should be part of the income budgeting not the capital gains budgeting.
In the need to sell category, why can they not rent the property out?
Its not the big problem people perceive,there have been 10 mortgage sales this year nationwide,112 last year ,the peak during the Gfc (2009) was 2620 .
2620 is quite a lot though.
Who supplies that information?
Years ago there would be pages of Mortgagee sales in publications like the Property Press.
Those with vested interests realised this was not a' good look'and worked against ramping prices and profits and was discontinued.
A controlled drip feed of mortgagee sales became the new order.
In bull markets like NZ is having for the last decade or more, banks have no trouble finding buyers for distressed sales.
Corelogic
Yes Micky this happened in Queensland, so people took in boarders. Full Board and meals, with one price for Monday to Friday more for a full weeks.
How so.
We are told that buyers are stress tested at a much higher interest rate than the rate they take for the mortgage.
As first home buyers are actually living in their homes and paying less than rent,a drop in price/equity would mean little.
Losing their job would be worse.
Most have 30 year mortgages ,so in that time frame inflation should restore any equity and…some.
Why doesn't the Govt do something about it then?
Crashing is only a real issue in conjunction with high unemployment, increasing interest rates should be covered by having responsible banks that have loaded stress loadings into their calculation for what the max. loan they are willing to give to clients. Banks have shown in the last 10 years that they are reluctant to force sales.
I will say as someone within the industry there are increasing examples of building invoking sunset clauses and then relisting, i 1 case 5 town houses with an added $200k on each. Easy $1m pity for those who had the dream smashed, and have to restart their house ownership journey
With property only increasing by 23% !!!! Should there be a drop of 18.7% we would still have prices at Dec 20 levels, those innocent victims would be those who have entered the market in the mid to later part of the current year, and would possible see their equity vanish, but if still employed they would still continue be able to pay the mortgage. IMO to make housing affordability a correction of 30% would make a difference in the long term for new entrants. That is returning to mid 2019 prices!!!! And once you are in the market it is the price to transition to the next level i.e. from town house/apartment etc to family 3/4 bedrooms etc, that is the issue.
if I'm understanding that right, the issue is more if prices drop and someone can no longer afford to pay their mortgage due to eg job loss?
What would be happening to the rental market in such a situation? eg could people move into a rental and have wealthier people rent their house to pay the mortgage? Would rents be going up or down? More or less supply?
An interest rate of itself could deeply destabilise the market, eat into equity and raise mortgage costs and rents.
And if you have cash it could be the perfect time to buy.
do you mean interest rate increase? Why would that happen?
Interest rates are at historic lows. There is really only one way they can drift in the near future and that is up. One of the tools the reserve bank has in its tool box is to raise the base interest rate (currently 0.75%). The bank is given the task of controlling inflation to within a range of 2 – 3% and one of the main methods it uses to reduce inflation is to raise the base interest rate. With the current supply shortages world wide and across the country inflation is increasing so we can expect to see interest rates rise in the new year whether we like it or not.
if rises are inevitable why are people being encouraged to borrow with so little leeway?
Why is inflation increasing atm?
Inflation is rising because of Government Debt creation putting more money into the system which is chasing fewer houses and scarcity of building products (and almost everything else) due to supply problems – drop in manufacture due to lockdowns and transport bottle necks.
"Market Forces" – The Gods of the Copy Book headings return!
As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.
how does more money in the system relate to house building/supplies shortages and thus causing inflation? Do you mean the cost of housing (building as well as property) increasing while people have more money is what causes inflation?
Doesn't building a lot more houses increase the property prices in the short and medium term?
"Why would that happen?"
http://bilbo.economicoutlook.net/blog/?p=48850
This describes one reason.
can you not summarise it for me?
"Central banks are resisting the inflation panic hype from the financial markets – and we are better off as a result"
Is the title, but it probably should be read in full for people new to the subject.
Yes, its basically an issue that peoples debts become larger relative to the assets which secure them. Banks have been known to call for repayment on roll over in these circumstances so the issue is not purely an effect on sellers however.
The other thing to consider is debt repayment in similar to saving, so this works to reduce aggregate spending and income (e.g GDP). Incidentally borrowing works in reverse to this. So there is at least a possibility that debt repayment is prioratised, people pay back debts rather than going in cafes, and so the fall out is on the cafe staff and businesses who lose work. This happened under lockdown (people saved rather than going out) but there the government wage subsidy kept cafe staff paid. So if the govt manages to get the housing market into reverse they may need to support GDP to stop a recession resulting. That wage subsidy was easier to explain politically under lockdown.
Can the government not regulate that to protect home owners? Other than the bank selling out from under them, what's the problem with the debt/asset ratio changing?
The issues here are basically fairness. This will be a problem for recent buyers, so the question in fairness terms is should the government be influencing the housing market in ways which penalize people, and did they have reasonable warning of what was coming. Otherwise the debt/asset ratio changing will effect how much somebody carries over if they are moving. At that point its not an equivalent trade as they pay off the balance of the mortgage on the inflated purchase price, not the depressed sale price, even if they can make another purchase at a depressed purchase price.
Otherwise a bank needing some repayment is basically requiring saving as indicated below. I don't think its the preferred thing for banks to do, but it happens.
Fairness like being homeless or spending most of your benefit on rent and not being able to afford to feed and clothe your kids?
I assume you mean fairness of people that got in earlier compared to people that got in later. This is the problem of Ardern saying she doesn't want property prices to drop, people take it as assurance, bet on that, and then the govt can't actually move.
Yes, its that kind of fairness, and its not that home owners are the worst off members of the economy either.
But the problem with just contrasting house prices with rents is that house prices have a tenuous relationship with rents.
Looking at the situation a lot of landlords were in before 2010 many were basically satisfied with the capital gains and were largely not fussed about maximising the rents anyway. Though that attitude seems to have changed a bit since then. But I don't see a good reason falling house prices will necessarily result in lower rents anyway, they could well result in higher rents. A lot of the governments reforms in fact seem to be trying to get landlords to start making investments more like a business and to my mind this will mean more landlords focused on the bottom line. Best case scenario we don't know if these changes will push rents up or down, there are ways it could do either in practice.
The other problem I see is reading too much into what Ardern says anyway. Basically house prices are set by the trades happening in the housing market. The PM can say what she wants but at most its a signal about which kinds of policy her party will or won't implement, but the impacts of those policies are quite far from well defined. I suspect the main impacts are on which party various classes of people might support and the housing market impacts are largely very hard to evaluate.
' In wanting state tenants to experience the benefits of owning their own home, the government offered purchasers very generous terms: 5 percent deposit, a 3 percent mortgage rate, with a maximum purchase period of 40 years. Since this time thousands of tenants have purchased their state houses and become 'kings and queens of their castles'.
Introduced by a National Govt!
Also introduced by a National Govt…
'The National government introduced full market rents in 1991 to reduce the state role in housing provision. From the start, public debate over state housing policy in New Zealand has centred on this very issue: how far should governments intervene in the housing market. '
The rules have changed to allow shared equity. Some will resort to this.
One of ours with a big mortgage will try to get bailed out by the Government if values drop dramatically and the house is worth way less than what they owe. She'll change her name to 'South Canterbury Finance.'
Not quite getting that one. The government wants people to be spending rather than paying off debt? How does that relate to a drop in property prices?
This is basically a question of who is impacted by the resulting change in behaviour. The summary of the point here is that an expanding housing market with expanding debt does increase our total income and spending across the country. When that even just slows down (let alone reversing) then that part of total income and spending goes away. This is basically the same as people electing to save more and spend less of their income. The unfair part of this would be that the people who are unemployed are often not involved in the housing market, but are influenced by its effects none-the-less.
The reason I also mentioned the govt here is that its spending is a good way to soak up excess unemployment which may result from this occurrence, and it doesn't have an actual financial constraint and so should be mandated to act for social policy purposes.
so the govt needs a runaway housing market to keep the economy afloat by people taking on more personal debt? Isn't that insanely fragile?
I wouldn't say its necessarily that fragile as it has persisted for quite a while. But eventually its probably bound to result in an overindebted household sector and inequality. Its a simplification but you can divide the income of the economy (GDP) into 3 sectors, private domestic, public government and overseas. In order for GDP to grow one of those sectors must spend more and frequently borrow more to support that spending. Since the Rogernomics reforms the increased spending initiative has generally come from the private domestic sector taking on more debt. Those reforms were largely about pushing spending off of the public government sector and onto the private domestic sector. This was only really recognised as a problem when Key came in during 2008, but the Clark government surpluses were only possible with similar expansion of private domestic sector spending and debt.
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt
The alternative is more public government spending to support incomes (and fewer govt surpluses, especially as NZ typically runs a balance of payment deficit). Unfortunately the government budget is often described as similar to a business, rather than the factually accurate claim that government deficits are needed to create space for private domestic saving and debt repayment. There needs to be a certain level of saving if everybody is going to be saving for their own retirement, or repaying housing debt but that will need public sector deficits otherwise that behaviour change will result in some level of recession.
Why do you say eventually? That's what is already happening.
I think its reasonable describing a process which started in 1983 (or even starting around 2000) as (arguably) eventually becoming more critical in 2021. And its at least arguable that its not even yet over-indebted, as you have noted several times why is there anything wrong with people in negative equity on their property as long as they keep a job. If follows they are not yet over-indebted in that case.
I'm not quite saying that. I'm asking people to be specific about the details of the issues rather than just saying reflexively 'oh that's bad'.
Because I want us to look at different solutions, and we can't do that without understanding what the problem is.
I would guess for some people who lost their jobs in the past 2 years, having negative equity was a bad thing. So there's a difference for how individuals (who vote!) feel about it, and how the government and economists look at it (collectively and for the good of the whole).
Someone has to lose out apparently. I'd like the left to look at why it still largely supports poor people being the ones that are worst affected. I know some of the rationales (Labour want to stop the underclass growing more than they want to end the underclass condition itself). I just think we could be more honest about it.
I suggest you need to be more specific then, what is the meaning of over-indebted? My phrase was taking the meaning to be that such a person was over-indebted when they are prone to being unable to make payments/repay their debt (+ some bare minimum of other living expenditure). But apparently you mean something else by saying people are over-indebted.
I also don't really get the reasoning about somebody who loses their job with negative equity. Losing a job is usually the bad thing and can lead to losing a house regardless of the owners equity position. But negative equity has many negative consequences such as higher interest rates and insurance costs, lack of flexibility, potential repayment pressures and other drains on income.
I didn't know what you meant by over-indebted, I took it to mean that someone was precarious because of that debt, not that they were already crashing.
The point about job loss is that people are being sold the idea that buying a house with precariousness built in is good (get on the property ladder!). Then when one half of a couple loses their job, they can't afford to live and end up using food banks. Had property been more affordable, and/or people more sensible financially in taking on debt with regard to the way the world is, that wouldn't happen.
But negative equity has many negative consequences such as higher interest rates and insurance costs, lack of flexibility, potential repayment pressures and other drains on income.
One of our longer term tenants fell into just this hole during the 2009 GFC. Based overseas they lost jobs, property and savings all at once and were forced to return to NZ. There's lot's more to their story that I won't retell here – but essentially they've never been able to recover from that setback.
You got it Weka….the ugly truth no politicians want to admit.
Regardless of who you vote for I don't think many people want to see their properties value go down much. I certainly don't although it is only on paper these days. As you say, for those of us watching our Retirement come closer, the value of our biggest Asset is not something we hope to gamble with. For me it is a safety net, encouraged in previous years as a Retirement Plan. and in case we get a wave of negative whiners about Northland staying Red this is one Northlander content with the decision.
why does it matter in retirement what your property is worth? Isn't the issue more that you want the mortgage paid off by the time you retire? Which is more likely generally if property prices dropped.
If the next step of retirement is moving to a Village (for example) every bit of value may be necessary for a "comfortable" existence. With a mortgage in retirement is said to be a very uncomfortable, let alone if renting. Why do you think it would be good for your most valuable asset to be worth less? The only benefit I see would be rates reduction but being quite happy paying taxes and rates for the betterment of society that's not really a plus for me.
Why do you think it would be good for your most valuable asset to be worth less? A 30% reduction only brings back prices to mid 2019, so in your case ( as long as LTO prices also corrects) then your position remains unchanged. But with increased property LTO prices increase, and that is why retirement village are able to achieve growth and pay great dividends to their share holders. They pocket the capital gain as well as the deferred management fees up to 30% of your licence fee. One of the best positive cashflow businesses in NZ.
That would be great IF Villages reduced their prices by 30%. Not holding my breath, while I still have some.
I don't think it's good for the individual whose asset devalues, I think it's good for homeless and poor people who can't afford rent, and lowish income people who can no longer afford to buy a house ever.
The answer in one word is 'growth'
The growth we use now is financial, not production….if growth stops then there is no wherewithal to pay interest (in aggregate)
Everything is predicated on that ability…lose it and the whole system collapses.
NZ has made housing lending its almost exclusive source of financial growth (more so than any other economy) …pretty much no one is confident enough to lend/borrow for any other purpose.
what is aggregate.
does that mean we have growth because we have borrowed money internationally?
What would happen if economic growth was based more on production?
aggregate= in total
It means without growth there is no ability to extract interest (that is not to say individuals couldnt)….ultimately it means that borrowing becomes increasingly difficult and people, institutions, businesses need to save before investing….think about what that does to an economy…you cant buy that house (or anything) until youve saved enough to pay for it outright.
If our growth was based on production (as it was until the neolib revolution) we would still have problems because we have reached the limits of extraction and externalities (pollution/.waste)……it is the end of growth.
We are using finance to kick the can down the road….and the road is coming to an end.
Bernard Hickey on the NZ economy…reality
New Zealand's economy is a housing market with bits tacked on | Stuff.co.nz
That’s a good read & an intelligent analysis.
A fall about 10% next year is my pick.
20% over 2 years would be OK too.
Other looming issues
People struggling to pay mortgages because they move up to higher interest rates (this may force some to consider boarders – albeit via caravans in the yard for some).
When unemployment insurance arrives and in what form (income related or a more Canadian form) – it will help (for a certain period at least) those not able to get ACC because of illness rather than accident. Until then an option, for those able to afford the cost, is income insurance.
Income and unemployment insurance are usually time limited…i.e 6 months. Not much help with a 30 year mortgage…and that assumes a) you can afford/have it and b) it is honoured
It does what it does – losing a job and taking months to find an equivalent, or being out of work for months and being forced to sell under duress in a falling market is something to avoid if one can and there is any risk.
History (recent) has shown that those who lose employment in a recession almost invariably take an income hit if and when they find alternative employment
In part, that's because people get forced into the first full time job they can find which may or may not suit their talents.
That can be a cause…however whatever the reason the fact remains that lifetime earning capacity decreases and consequently ability to service debt is reduced.
I remember a housing boom followed by a big price drop in the late 1980's in the UK, prices fell by 30% in some areas and a lot of people owed more than their house was worth.
then what happened?
Irish property bubble – Wikipedia
big contributor here…
‘Throughout the bubble, newspapers and media played a vital role in hyping property. No national newspaper was without a glossy property supplement and weekend papers were often equally filled with property ads, reviews of new developments, stories of successful purchases, makeovers, and a gamut of columnists relating their property experiences. TV and radio schedules were filled with further property porn – house-hunting programs and house makeover programs were regular features on every channel. Even in July 2007, Irish Independent journalist/comedian Brendan O’Connor urged people to buy property, even as the bubble was clearly bursting.[42] In April 2011, journalist Vincent Browne admitted that the Irish media had played an important role in adding to the frenzy of the Irish property bubble’
I was asking what happened in the UK after the values dropped 30%. There's this implication that it's inherently bad, I want the explanation for how, specifically
If you own a home worth $300,000, and then it’s worth $210,000, you still have a home.
It is not a problem if you can service the mortgage…supposedly stress tests are done at +3% of the mortgage rate you strike.
If people have to refinance at higher rates with reducing equity, problems occur.
The Irish example actually has a number of correlations with the NZ housing market now.
https://www.boleat.com/materials/the_1985_93_housing_market_in_the_uk_1994.pdf
GDP Fell -2.5% in 1991 and unemployment increased by 600000 during 1991.
GDP Fell -0.5% in 1992 and unemployment increased by an additional 500000 during 1992.
unemployment rose only because of the drop in the housing market?
I don't get it. If the GDP falls because of values (not actual production) how does that cause unemployment?
GDP doesn't fall due to values. GDP is a measure of income, so when GDP falls, income falls, and business (often) cut back on staff to save costs.
The effect of the housing market prices is that when a seller sells in an increasing housing market (because a borrower borrows and is willing to pay) then that becomes their income. Maybe they then take that and buy elsewhere, but… Eventually somebody ends up selling a place and not buying in again, or downsizing and so can realize their housing trades as actual income.
And when that goes away as house prices go into reverse then that income stream vanishes from the economy so GDP can fall. Perhaps there is also a shift into repaying more debts which is actively taking that spending out.
Good explanation.
On top of this – and effect most people overlook is that the banks become increasingly unwilling to lend without substantial owner equity. What this leads to is the paradox of the price falling but the deposit needed stays just as large or even grows.
Market turnover drops because those who aren’t compelled to will hold, and those who do have sell to will often lose their equity and finish up adding to the rental demand.
So what happens to the houses that are sold by the people who have to sell?
sorry, but this does sound completely bonkers. The only way that works if is the people at the top keep getting richer and the people at bottom keep getting poorer.
sorry, but this does sound completely bonkers.
I realise everyone here hates on me as the resident bastard landlord. It's the price I accept for being open and honest about my experiences. But please spare me the 'bonkers'.
Also what is so frequently left out of these discussions is that most powerful reason why so many people are stuck renting is not just prices – although clearly they've become a serious hurdle – but even worse than this, the willingness of any bank to lend them any money at any price.
the bonkers comment was to Nic
I don't think that is necessarily an implication, and there have been sustained periods when many economies reduced inequality while still having house ownership and trading (though clearly a more limited financial sector).
But you asked how an almost 30% fall in UK house prices resulting in a two year recession and 1100000 additional unemployed and that is a reasonable description of how this happens.
The main problem the government faces here being that if they are successful at tipping over the housing market they will need to take responsibility for all the economic fallout resulting from that and that will be unpopular.
Say you bought a house last year for 850.000. for what ever reason the value of houses falls and your house is now only worth 580.000 grand. You are still paying the mortgage of the house for 850.000. If you wanted to sell because say your life changes, you can no longer get 850.000 or even close to it, you are shit out of luck and 270.000 short on your loan. The bank will want its money – your fucked..
So it is not in anyones interest to flood the market with new houses as that will leave the people that bought houses over the last ten years in negative equity. Or in houses without value. And these people vote, and Labour ain't gonna piss of middle class voters.
I bought a property in a tiny 'town', a glorified garden shed ministry of works from 1949 house with the original water boiler (in gallons) and the floor covered in news paper from 1970 (very interesting read i kept that paper) for 100.000. I am that cheap, yes i am. This property is now valued at 400.000 (yes, a good laugh), and i could sell it to some deluded person from AKL/WLGTN for more then that if i wanted too, but nope it is my retirement hovel. The locals of course are currently priced out of the market, as no one there makes enough money to pay that much. If the price of my house dropped back to what it was originally i would not be worse of. Why? I never loaded anything on the mortgage. But the same can not be said for the majority of people that bought houses and believe themselves to be millionaires. Or that bought Dachas in my little retirement place to go to with their boats for a weekend hoon and bbq. All loaded on the mortgage of a property valued somewhere as a million +.
Jacinda has no real options here, other then building to rent – and building to cheaply rent, to take pressure of the market slowly and let the market cool down in a controlled fashion.
Watch interest rates go up, and watch the house of cards fall apart.
Your first 2 paragraphs are quite misleading…
1-the figures you quote make no allowance for a deposit,which is generally required-i.e 20% of k850,000=170,000.
Flooding the market with new houses is definately in the interests of first home buyers and renters.
People who are not home owners also …vote.
yes dear.
Happy to…help.
did you see the word loan? You don't loan your down payment, you loan the rest based on your down payment. So no matter what you paid down, in my scenario you OWE 850.000 dollar, and if you can not sell your house for that money you are short on the loan, and you lost your down payment.
I hope that this is plain enough english to bend your mind around.
Last if Labour or National or Act or anyone would give a fuck about tenants and first buyers we would have gotten a Captial Gains Tax in the first year of the reign of Jacinda, and we would not have had the shenanigans last year with the very very low interest rates that resulted in no help to businesses but allowed people with inflated assets to borrow against these inflated assets and buy up some more property bringing the market up. Also keep in mind that Housing NZ is also buying up houses on the open market, cause that is easier and prolly cheaper then building.
I saw this plain English and managed to bend my mind around it-
'Say you bought a house last year for 850.000.'
You should be clearer.Your new scenario suggests the house is bought for a lot,lot more than $850,000.
people say this so casually "you want to sell your house"
From what I can tell in the conversation tonight, what this boils down to is people want freedom and they're ok that poor people can't have freedom so long as they do. The liberal ones would like poor people to also have freedom eg to live in a house or to afford things other than rent, but if that can't happen, oh well.
People want to fly wherever they want, oh well, climate change.
People want to do whatever they want, oh well, covid spreads.
If someone owns a home even if you owe a lot of money on it, I think that is lucky.
And it's not like we don't know this shit. If someone buys into the market now, and overextends themselves, what were they thinking? That the market would keep growing their asset by a hundred thousand dollars a year forever?
Good on you for buying what you did where you did.
All human activity – everything we do from the moment we wake – has a risk or cost to it. In general as a society we have two broad pathways to mitigating these costs:
One is to innovate so as to reduce or even eliminate those costs – a progressive process that has over the past 200 years transformed the lives of ordinary people beyond all belief.
The other is to prohibit it. In some instances this is entirely warranted, but as a fundamentally coercive action we should reach for this option least and last.
yes. We will coerce in a pandemic, but not a housing crisis that affects poor people disproportionately. The political and middle and rising classes are adept at self care.
The problem I have with this is the utter lack of imagination. TINA all the way. The idea that we cannot make sacrifices and be creative and innovative at the same time is a modern conceit when human evolution is in part an adaptation in response to challenge.
Yes the basics for survival are food and SHELTER.
Ordinary people can no longer own a home in NZ.
If that's 200 years of progress….it certainly is…transformational.
Ordinary people can no longer own a home in NZ.
That's because NZ is a well governed stable country, one of the top 20 or so in the world, that people want to live in;
But we have a dysfunctional building industry and amateur hour zoning regulations that make the cost of housing ridiculous. Keep in mind that the price of existing homes cannot get too far out of kilter with the cost of building new ones – and it's this cost that's underpinning price inflation across the whole market.
So high demand and low supply – basic shit really.
Its not basic shit…at all.
NZ is the only western country with no Capital Gains or wealth tax.
The FIRE economy has fuelled investing ' in RE as the only rational asset class,and successive Govts encourage it.
As you know a 500k mortgage @8% costs around the same to service as a $1000,000 mortgage @4%.
This is a rigged,manipulated ponzi scheme ,a direct consequence of Q.E on an unprecedented scale.
Its a return to the the enslavement of the Feudal system.
NZ is the only western country with no Capital Gains or wealth tax.
And wherever a government is incompetent enough to allow housing supply to fall behind demand the same basic rule applies – prices go up. Regardless of the local tax settings.
Its a return to the the enslavement of the Feudal system.
You have no idea of what medieval feudalism was actually like do you? For the vast majority of human history even the idea that an ordinary person might 'own their house' was unthinkable.
What a coincidence-every single country in the western world has incompetent Govts=remarkable!
My reference to the Feudal system is a comparison to enslavement…just like the translation of the french….mortgage…I'm sure you are familiar with it.
From what I can tell in the conversation tonight, what this boils down to is people want freedom and they’re ok that poor people can’t have freedom so long as they do. The liberal ones would like poor people to also have freedom eg to live in a house or to afford things other than rent, but if that can’t happen, oh well.
I think the situation’s dealt with even more basically than that by homeowners. At the emotional level. Homeowners can see that not owning a home makes many people fundamentaly financially & emotionally insecure. One job loss away from a benefit, with all the associated indignities that go with the govt granting you an allowance to sustain your & your family’s existence off the taxpayer.
Better to stay in your home & hope like hell prices don’t fall. It’s not callousness that makes them not worry enuf about those who can’t affird to buy houses. It’s fear.
I'm sure that is true for some people Gezza. I think it's why there is so much denial about climate from the relatively stable as well. If we look it straight in the face we realise how much we are about to lose and people would rather pretend.
Thing is, if you are content to stay in the home you own, you don't need to worry so much about a drop in price. Housing as investment is the problem here, not home ownership.
Yes. Agreed.
But of course it’s probably equally true that without some level of private landlordism there wouldn’t be enuf houses available to rent. For various reasons, not everybody always wants to buy the home they’re currently living in.
I suppose we could argue the government could build and rent out homes instead of private landlords, but given the track record of public servants for managing state housing stock here I’m not convinced that that’s ever going to the best solution either.
I only own my own home, which I consider to be grossly overvalued, but someone would buy it at more that the govt valuation around here. I watch the housing market, like you, scratching my head over how Kiwiland could have got into this situation & how on earth we are going to get out of it & make housing more affordable for Blazer’s Joe Lunchbox with a job and a stay-at-home or part-time-employed wife/partner & two kids.
I'm fine with private landlords. I just think the government should set the rules around that to protect tenants more than investors.
Do you think private landlords would invest in residential property based just on yields?
Most landlords buy existing and by their ability to leverage, cut first home buyers out of the market.
The historic, untaxed ,capital gains are the incentive.
It is a very rational incentive.
Just like the banks (for whom this is their profit pot of gold),the property ponzi has become…too big to fail.
The implications for NZ society are…dire.
Agreed.
That was an excellent article by Bernard Hickey that you posted yesterday.
Put some tenant protection laws in place, the greedier landlords will sell, the government and local bodies buy the properties and do a mix of social housing, community land trust management, and rent to own.
the CLT model is very useful because it takes out the investor aspect. If a CLT owns the land and housing, and never sells it, then the incentives change for everyone.
People who live in such housing could be given other incentives to save rather than investment.
But of course, if the economy now depends on the housing market, the government will actively resist any attempts to change how it works.
But of course, if the economy now depends on the housing market, the government will actively resist any attempts to change how it works.
Bernard Hickey says the economy does depend on the housing market:
https://www.stuff.co.nz/business/opinion-analysis/124385961/new-zealands-economy-is-a-housing-market-with-bits-tacked-on
Its a good idea,as is soft loans expressly for first home buyers.
What happens though, is a right wing Govt gets in and reverses everything-sells off state houses,unwinds initiatives they consider detrimental to free market profiteering and the cycle continues on.
Its why the right hates the Cullen Fund,Kiwibank,and Kiwisaver….these entities mop up funds they want to administer and profit from.
Hard to see how the NACT could reverse a CLT trust system, or council owned social housing though. Not sure that NACT would start selling off state houses again, given the direness of the housing crisis.
I bought based on what i could pay in repayments (rent to myself) if shit hits the fan, and our society goes down the gurgler. But then my inner german is a pessimist who believes that the sky will fall down on us. 🙂
I am very old fashioned in the sense that if i can't afford it, i can also not buy it.
I feel we've lots a lot of traditional values that would be serving us well now.
One thing that should come back is teaching basic economics and budgeting. WE have done away with financial literacy, or maybe it was the Nuns at my Convent who thought it important enough to teach us a few things that fall under 'life skills' rather then abstract math.
It would be best if Jacinda just deferred all questions on house prices (and economics in general) to Grant Robertson.
Concerns about Omicron in UK … Booster dose reduced to 3 Months after 2nd jab.
Given how significantly more infectious Omicron is … concerns that even if it is far less severe than Delta (as seems likely from available data) … hospitals still at risk of being overwhelmed.
Read an article yesterday in the German news that two jabs of Pfizer is no match for Omicron. They too are discussing shorter periods between the boosters and hopefully a specific jab in about 6 month.
Watch the video of the race about halfway through the article to see the disparity in performance.
Fury as transgender UPenn swimmer, 22, who used to compete as a man smashes TWO US women's records in weekend competition and finishes one race 38 seconds ahead of her nearest rival – Daily Mail UK
Note the crowd's reaction to the record breaking finish compared to second place.
Then, make another entry on the log – SheWon.org.
Very brave and very stunning for this person to compete against mere biological non males. So very very brave and so very very stunning. NON Male sporting events is a good place to retire for mediocre males.
The woman in these races should just boycott any race meet that allows this shit happen , no ones going to go watch a confused man swim alone in a women's race
If they are on the swim team due to scholar ships and help with payments which is quite common in the US then they will have to go out there and lose every time in the name of inclusion, kindness, and men are women. As failing to comply could result in them being sanctioned, expelled, or suddenly charged. And that involves also the swimmer of the other teams that have to compete against this bloke.
Honestly I have nothing but contempt for this. Nothing to do with trans this or that – just cheating of a very low order.
You may have already spotted this essay – but makes a conclusive argument.
Poor old Smithy … it's all coming out in the wash.
“I’m the MP and you’re just the f…ing secretary”
.
Reminds me of this for some reason (25:08):
https://youtu.be/J4qwOzLPKVs?t=1484