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.
Photo: Lynn Grieveson / The KākāTL;DR: My top six things to note around housing, climate and poverty in Aotearoa’s political economy in the week to July 27 were:1. The Minister for Ford Rangers strikes againTransport Minister Simeon Brown was again the busiest of the Cabinet ministers this week, announcing an ...
You got a fast carAnd I want a ticket to anywhereMaybe we make a dealMaybe together we can get somewhereAny place is betterYesterday’s newsletter, Trust In Me, on the report of abuse in state care, and by religious organisations, between 1950 and 2019, coupled with the hypocrisy of Christopher Luxon ...
New Zealand is again having to reconcile conflicting pressures from its military and its trade interests. Should we join Pillar Two of AUKUS and risk compromising our markets in China? For a century after New Zealand was founded in 1840, its external security arrangements and external economics arrangements were aligned. ...
The ‘50 Shades of Green’ farmers’ protest in 2019 was heavy on climate change denial, but five years on, scepticism and criticism about the idea that pine forests can save us is growing across the board. File photo: Lynn GrievesonTL;DR: Here’s the top six news items of note in climate ...
This morning the sky was bright.The birds, in their usual joyous bliss. Nature doesn’t seem to feel the heat of what might angst humans.Their calls are clear and beautiful.Just some random thoughts:MāoriPaul Goldsmith has announced his government will roll back the judiciary’s rulings on Māori Customary Marine Title, which recognises ...
In 2003, the Court of Appeal delivered its decision in Ngati Apa v Attorney-General, ruling that Māori customary title over the foreshore and seabed had not been universally extinguished, and that the Māori Land Court could determine claims and confirm title if the facts supported it. This kicked off the ...
Earlier this week at Parliament, Labour leader Chris Hipkins was applauded for saying that the response to the final report of the Royal Commission of Inquiry into Abuse in Care had to be “bigger than politics.” True, but the fine words, apologies and “we hear you” messages will soon ring ...
TL;DR: In news breaking this morning:The Ministry of Education is cutting $2 billion from its school building programme so the National-ACT-NZ First Coalition Government has enough money to deliver tax cuts; The Government has quietly lowered its child poverty reduction targets to make them easier to achieve;Te Whatu Ora-Health NZ’s ...
Kia ora. These are some stories that caught our eye this week – as always, feel free to share yours in the comments. Our header image this week (via Eke Panuku) shows the planned upgrade for the Karanga Plaza Tidal Swimming Steps. The week in Greater Auckland On ...
1. What's not to love about the way the Harris campaign is turning things around?a. Nothingb. Love all of itc. God what a reliefd. Not that it will be by any means easye. All of the above 2. Documents released by the Ministry of Health show Associate Health Minister Casey ...
Trust in me in all you doHave the faith I have in youLove will see us through, if only you trust in meWhy don't you, you trust me?In a week that saw the release of the 3,000 page Abuse in Care report Christopher Luxon was being asked about Boot Camps. ...
TL;DR: The podcast above of the weekly ‘hoon’ webinar for paying subscribers last night features co-hosts and talking about the Royal Commission Inquiry into Abuse in Carereport released this week, and with:The Kākā’s climate correspondent on a UN push to not recognise carbon offset markets and ...
TL;DR: As of 6:00 am on Friday, July 26, the top six announcements, speeches, reports and research around housing, climate and poverty in Aotearoa’s political economy in the last day are:Transport: Simeon Brown announced$802.9 million in funding for 18 new trains on the Wairarapa and Manawatū rail lines, which ...
The northern expressway extension from Warkworth to Whangarei is likely to require radical changes to legislation if it is going to be built within the foreseeable future. The Government’s powers to purchase land, the planning process and current restrictions on road tolling are all going to need to be changed ...
Text within this block will maintain its original spacing when publishedFirst they came for the doctors But I was confused by the numbers and costs So I didn't speak up Then they came for our police and nurses And I didn't think we could afford those costs anyway So I ...
Photo by Joshua J. Cotten on UnsplashWe’re back again after our mid-winter break. We’re still with the ‘new’ day of the week (Thursday rather than Friday) when we have our ‘hoon’ webinar with paying subscribers to The Kākā for an hour at 5 pm.Jump on this link on YouTube Livestream ...
Notes: This is a free article. Abuse in Care themes are mentioned. Video is at the bottom.BackgroundYesterday’s report into Abuse in Care revealed that at least 1 in 3 of all who went through state and faith based care were abused - often horrifically. At least, because not all survivors ...
Luxon speaks in Parliament yesterday about the Abuse in Care report. Photo: Hagen Hopkins/Getty ImagesTL;DR: The top six things I’ve noted around housing, climate and poverty in Aotearoa’s political economy today are:PM Christopher Luxon said yesterday in tabling the Abuse in Carereport in Parliament he wanted to ‘do the ...
About a decade ago I worked with a bloke called Steve. He was the grizzled veteran coder, a few years older than me, who knew where the bodies were buried - code wise. Despite his best efforts to be approachable and friendly he could be kind of gruff, through to ...
Some of the recent announcements from the government have reminded us of posts we’ve written in the past. Here’s one from early 2020. There were plenty of reactions to the government’s infrastructure announcement a few weeks ago which saw them fund a bunch of big roading projects. One of ...
TL;DR: My pick of the top six links elsewhere around housing, climate and poverty in Aotearoa’s political economy in the last day or so to 7:00 am on Thursday, July 25 are:News: Why Electric Kiwi is closing to new customers - and why it matters RNZ’s Susan EdmundsScoop: Government drops ...
Hi,I felt a small wet tongue snaking through one of the holes in my Crocs. It explored my big toe, darting down one side, then the other. “He’s looking for some toe cheese,” said the woman next to me, words that still haunt me to this day.Growing up in New ...
Yesterday I happily quoted the Prime Minister without fact-checking him and sure enough, it turns out his numbers were all to hell. It’s not four kg of Royal Commission report, it’s fourteen.My friend and one-time colleague-in-comms Hazel Phillips gently alerted me to my error almost as soon as I’d hit ...
TL;DR: As of 6:00 am on Thursday, July 25, the top six announcements, speeches, reports and research around housing, climate and poverty in Aotearoa’s political economy in the last day were:The Abuse in Care Royal Commission of Inquirypublished its final report yesterday.PM Christopher Luxon and The Minister responsible for ...
The Official Information Act has always been a battle between requesters seeking information, and governments seeking to control it. Information is power, so Ministers and government agencies want to manage what is released and when, for their own convenience, and legality and democracy be damned. Their most recent tactic for ...
TL;DR: The top six things I’ve noted around housing, climate and poverty in Aotearoa’s political economy today are:Transport and Energy Minister Simeon Brown is accelerating plans to spend at least $10 billion through Public Private Partnerships (PPPs) to extend State Highway One as a four-lane ‘Expressway’ from Warkworth to Whangarei ...
I live my life (woo-ooh-ooh)With no control in my destinyYea-yeah, yea-yeah (woo-ooh-ooh)I can bleed when I want to bleedSo come on, come on (woo-ooh-ooh)You can bleed when you want to bleedYea-yeah, come on (woo-ooh-ooh)Everybody bleed when they want to bleedCome on and bleedGovernments face tough challenges. Selling unpopular decisions to ...
Please note:To skip directly to the- parliamentary footage in the video, scroll to 1:21 To skip to audio please click on the headphone iconon the left hand side of the screenThis video / audio section is under development. ...
Given the crackdown on wasteful government spending, it behooves me to point to a high profile example of spending by the Luxon government that looks like a big, fat waste of time and money. I’m talking about the deployment of NZDF personnel to support the US-led coalition in the Red ...
TL;DR: My pick of the top six links elsewhere around housing, climate and poverty in Aotearoa’s political economy in the last day or so to 7:40 am on Wednesday, July 24 are:Deep Dive: Chipping away at the housing crisis, including my comments RNZ/Newsroom’s The DetailNews: Government softens on asset sales, ...
As I reported about the city centre, Auckland’s rail network is also going through a difficult and disruptive period which is rapidly approaching a culmination, this will result in a significant upgrade to the whole network. Hallelujah. Also like the city centre this is an upgrade predicated on the City ...
Today, a 4 kilogram report will be delivered to Parliament. We know this is what the report of the Royal Commission of Inquiry into Abuse in State and Faith-based Care weighs, because our Prime Minister told us so.Some reporter had blindsided him by asking a question about something done by ...
TL;DR: As of 7:00 am on Wednesday, July 24, the top six announcements, speeches, reports and research around housing, climate and poverty in Aotearoa’s political economy in the last day are:Beehive:Transport Minister Simeon Brownannounced plans to use PPPs to fund, build and run a four-lane expressway between Auckland ...
NewstalkZB host Mike Hosking, who can usually be relied on to give Prime Minister Christopher Luxon an easy run, did not do so yesterday when he interviewed him about the HealthNZ deficit. Luxon is trying to use a deficit reported last year by HealthNZ as yet another example of the ...
Back in January a StatsNZ employee gave a speech at Rātana on behalf of tangata whenua in which he insulted and criticised the government. The speech clearly violated the principle of a neutral public service, and StatsNZ started an investigation. Part of that was getting an external consultant to examine ...
Renting for life: Shared ownership initiatives are unlikely to slow the slide in home ownership by much. Photo: Lynn Grieveson / The KākāTL;DR: The top six things I’ve noted around housing, climate and poverty in Aotearoa’s political economy today are:A Deloittereport for Westpac has projected Aotearoa’s home-ownership rate will ...
You're broken down and tiredOf living life on a merry go roundAnd you can't find the fighterBut I see it in you so we gonna walk it outAnd move mountainsWe gonna walk it outAnd move mountainsAnd I'll rise upI'll rise like the dayI'll rise upI'll rise unafraidI'll rise upAnd I'll ...
There’s been a change in Myers Park. Down the steps from St. Kevin’s Arcade, past the grassy slopes, the children’s playground, the benches and that goat statue, there has been a transformation. The underpass for Mayoral Drive has gone from a barren, grey, concrete tunnel, to a place that thrums ...
This is a re-post from Yale Climate Connections Global society may have finally slammed on the brakes for climate-warming pollution released by human fossil fuel combustion. According to the Carbon Monitor Project, the total global climate pollution released between February and May 2024 declined slightly from the amount released during the same ...
TL;DR: My pick of the top six links elsewhere around housing, climate and poverty in Aotearoa’s political economy in the last day or so to 7:00 am on Tuesday, July 23 are:Deep Dive: Penlink: where tolling rhetoric meets reality BusinessDesk-$$$’sOliver LewisScoop:Te Pūkenga plans for regional polytechs leak out ...
TL;DR: As of 6:00 am on Tuesday, July 23, the top six announcements, speeches, reports and research around housing, climate and poverty in Aotearoa’s political economy in the last day are:Health: Shane Reti announcedthe Board of Te Whatu Ora-Health New Zealand was being replaced with Commissioner Lester Levy ...
Health NZ warned the Government at the end of March that it was running over Budget. But the reasons it gave were very different to those offered by the Prime Minister yesterday. Prime Minister Christopher Luxon blamed the “botched merger” of the 20 District Health Boards (DHBs) to create Health ...
Long ReadKey Summary: Although National increased the health budget by $1.4 billion in May, they used an old funding model to project health system costs, and never bothered to update their pre-election numbers. They were told during the Health Select Committees earlier in the year their budget amount was deficient, ...
As a momentous, historic weekend in US politics unfolded, analysts and commentators grasped for precedents and comparisons to help explain the significance and power of the choice Joe Biden had made. The 46th president had swept the Democratic party’s primaries but just over 100 days from the election had chosen ...
TL;DR: I’m casting around for new ideas and ways of thinking about Aotearoa’s political economy to find a few solutions to our cascading and self-reinforcing housing, poverty and climate crises.Associate Professor runs an online masters degree in the economics of sustainability at Torrens University in Australia and is organising ...
The Finance and Expenditure Committee has reported back on National's Local Government (Water Services Preliminary Arrangements) Bill. The bill sets up water for privatisation, and was introduced under urgency, then rammed through select committee with no time even for local councils to make a proper submission. Naturally, national's select committee ...
Some years ago, I bought a book at Dunedin’s Regent Booksale for $1.50. As one does. Vandrad the Viking (1898), by J. Storer Clouston, is an obscure book these days – I cannot find a proper online review – but soon it was sitting on my shelf, gathering dust alongside ...
History is not on the side of the centre-left, when Democratic presidents fall behind in the polls and choose not to run for re-election. On both previous occasions in the past 75 years (Harry Truman in 1952, Lyndon Johnson in 1968) the Democrats proceeded to then lose the White House ...
This is a free articleCoverageThis morning, US President Joe Biden announced his withdrawal from the Presidential race. And that is genuinely newsworthy. Thanks for your service, President Biden, and all the best to you and yours.However, the media in New Zealand, particularly the 1News nightly bulletin, has been breathlessly covering ...
A homeless person’s camp beside a blocked-off slipped damage walkway in Freeman’s Bay: we are chasing our tail on our worsening and inter-related housing, poverty and climate crises. Photo: Photo: Lynn Grieveson / The KākāTL;DR: The top six things I’ve noted around housing, climate and poverty in Aotearoa’s political economy ...
What has happened to it all?Crazy, some'd sayWhere is the life that I recognise?(Gone away)But I won't cry for yesterdayThere's an ordinary worldSomehow I have to findAnd as I try to make my wayTo the ordinary worldYesterday morning began as many others - what to write about today? I began ...
TL;DR: My pick of the top six links elsewhere around housing, climate and poverty in Aotearoa’s political economy in the last day or so to 7:00 am on Monday, July 22 are:Today’s Must Read: Father and son live in a tent, and have done for four years, in a million ...
TL;DR: As of 7:00 am on Monday, July 22, the top six announcements, speeches, reports and research around housing, climate and poverty in Aotearoa’s political economy in the last day are:US President Joe Biden announced via X this morning he would not stand for a second term.Multinational professional services firm ...
A listing of 32 news and opinion articles we found interesting and shared on social media during the past week: Sun, July 14, 2024 thru Sat, July 20, 2024. Story of the week As reflected by preponderance of coverage, our Story of the Week is Project 2025. Until now traveling ...
This weekend, a friend pointed out someone who said they’d like to read my posts, but didn’t want to pay. And my first reaction was sympathy.I’ve already told folks that if they can’t comfortably subscribe, and would like to read, I’d be happy to offer free subscriptions. I don’t want ...
National: The Party of ‘Law and Order’ IntroductionThis weekend, the Government formally kicked off one of their flagship policy programs: a military style boot camp that New Zealand has experimented with over the past 50 years. Cartoon credit: Guy BodyIt’s very popular with the National Party’s Law and Orderimage, ...
Day one of the solo leg of my long journey home begins with my favourite sound: footfalls in an empty street. 5.00 am and it’s already light and already too warm, almost.If I can make the train that leaves Budapest later this hour I could be in Belgrade by nightfall; ...
Do you remember Y2K, the threat that hung over humanity in the closing days of the twentieth century? Horror scenarios of planes falling from the sky, electronic payments failing and ATMs refusing to dispense cash. As for your VCR following instructions and recording your favourite show - forget about it.All ...
Climate Change Minister Simon Watts being questioned by The Kākā’s Bernard Hickey.TL;DR: My top six things to note around housing, climate and poverty in Aotearoa’s political economy in the week to July 20 were:1. A strategy that fails Zero Carbon Act & Paris targetsThe National-ACT-NZ First Coalition Government finally unveiled ...
Summary:As New Zealand loses at least 12 leaders in the public service space of health, climate, and pharmaceuticals, this month alone, directly in response to the Government’s policies and budget choices, what lies ahead may be darker than it appears. Tui examines some of those departures and draws a long ...
The Minister of Housing’s ambition is to reduce markedly the ratio of house prices to household incomes. If his strategy works it would transform the housing market, dramatically changing the prospects of housing as an investment.Leaving aside the Minister’s metaphor of ‘flooding the market’ I do not see how the ...
As previously noted, my historical fantasy piece, set in the fifth-century Mediterranean, was accepted for a Pirate Horror anthology, only for the anthology to later fall through. But in a good bit of news, it turned out that the story could indeed be re-marketed as sword and sorcery. As of ...
An employee of tobacco company Philip Morris International demonstrates a heated tobacco device. Photo: Getty ImagesTL;DR: The top six things I’ve noted around housing, climate and poverty in Aotearoa’s political economy on Friday, July 19 are:At a time when the Coalition Government is cutting spending on health, infrastructure, education, housing ...
TL;DR: My pick of the top six links elsewhere around housing, climate and poverty in Aotearoa’s political economy in the last day or so to 8:30 am on Friday, July 19 are:Scoop: NZ First Minister Casey Costello orders 50% cut to excise tax on heated tobacco products. The minister has ...
Kia ora, it’s time for another Friday roundup, in which we pull together some of the links and stories that caught our eye this week. Feel free to add more in the comments! Our header image this week shows a foggy day in Auckland town, captured by Patrick Reynolds. ...
TL;DR : Here’s the top six items climate news for Aotearoa this week, as selected by Bernard Hickey and The Kākā’s climate correspondent Cathrine Dyer. A discussion recorded yesterday is in the video above and the audio of that sent onto the podcast feed.The Government released its draft Emissions Reduction ...
Save some money, get rich and old, bring it back to Tobacco Road.Bring that dynamite and a crane, blow it up, start all over again.Roll up. Roll up. Or tailor made, if you prefer...Whether you’re selling ciggies, digging for gold, catching dolphins in your nets, or encouraging folks to flutter ...
Waiting In The Wings:For truly, if Trump is America’s un-assassinated Caesar, then J.D. Vance is America’s Octavian, the Republic’s youthful undertaker – and its first Emperor.DONALD TRUMP’S SELECTION of James D. Vance as his running-mate bodes ill for the American republic. A fervent supporter of Viktor Orban, the “illiberal” prime ...
TL;DR: As of 6:00 am on Friday, July 19, the top six announcements, speeches, reports and research around housing, climate and poverty in Aotearoa’s political economy in the last day are:The PSAannounced the Employment Relations Authority (ERA) had ruled in the PSA’s favour in its case against the Ministry ...
Te Rangi e tu nei (The sky above us) Te Papa e takoto nei (The land beneath us) Tatou katoa te hunga ora (To us all the living) Tena koutou katoa (Greetings) ...
A late change to charter school legislation will cheat educators out of fair pay and negotiating power proving charter schools are just a vehicle to make profit out of our education system. ...
In 2004 te iwi Māori rallied against the Crown’s attempt to confiscate our coastlines and moana with the Foreshore and Seabed Act. This led to the largest hīkoi of a generation and the birth of Te Pāti Māori. 20 years later, history is repeating itself. Today the government has announced ...
It has been five and a half years since the Royal Commission of Inquiry into Abuse in Care was established to investigate the abuse of children, young people, and vulnerable adults within state and faith-based institutions. Yesterday, the final report - Whanaketia through pain and trauma, from darkness to light ...
The Green Party is calling on the Government to take action off the back of the International Court of Justice ruling on Israel’s illegal occupation of Palestine. ...
On Friday the International Court of Justice reaffirmed what Palestinian’s have been telling us for decades: that the occupation and colonisation of Palestinian lands by Israel is illegal and must end immediately. They also called for reparations for Palestinian’s who have lived under Israeli occupation since it began in 1967. ...
Labour calls on the Government to act after the International Court of Justice (ICJ) ruled that Israel’s occupation of Palestinian Territories is illegal. ...
The 53.7 percent rise in benefit sanctions over the last year is more proof of this Government’s disdain for our communities most in need of support. ...
Aotearoa could be a country where every child grows up feeling safe, loved and with a sense of belonging in their whānau and community. But for some of our children, this is far from reality. Instead, they are trapped in a maze of intergenerational harm that they can’t escape on ...
Te Pāti Māori are calling for David Seymour to resign as Associate Health Minister in response to his call for Pharmac to ignore the Treaty of Waitangi. “This announcement is just another example of the government’s anti-Tiriti, anti-Māori agenda.” Said Co-leader and spokesperson for health, Debbie Ngarewa-Packer. “Seymour thinks it ...
The soaring price of renting is driving the rise of inflation in this country - with latest figures from Stats NZ showing rents are up 4.8 per cent on average while annual inflation is at 3.3 per cent. ...
National’s Emissions Reduction Plan will take New Zealand further from the economy we need to ensure the next generation has a stable climate and secure livelihoods. ...
Following consultation with named parties and thorough consideration of privacy interests, the Green Party is in a position to release the Executive Summary of the final report from the independent investigation into Darleen Tana. ...
Prime Minister Christopher Luxon should be asking serious questions of his Minister for Resources Shane Jones now it’s been revealed he misled the public about a dinner with mining companies that he didn’t declare and said wasn’t pre-arranged. ...
Te Pāti Māori have submitted to the Justice Select Committee against the Sentencing (Reinstating Three Strikes) Amendment Bill. The bill will further entrench racism in our justice system and fails to focus on rehabilitation. “Reinstating Three Strikes will empower a systematically racist system and exacerbate the overrepresentation of Māori in ...
The Transport and Infrastructure Committee is set to make a determination on the Residential Tenancies Amendment (RTA) Bill in the coming weeks. “This legislation will give landlords the power to kick our whānau out onto the street for no reason” said Housing spokesperson, Mariameno Kapa-Kingi. “Their solution to the housing ...
“National’s campaign was about tackling crime and the best they can do is a two-year long Ministerial Advisory Group,” Labour justice spokesperson Duncan Webb said. ...
“There are more examples of charter schools failing their students than there are success stories. The coalition Government is driving to dismantle our public school system and instead promote a privatised, competitive structure that puts profits before kids,” Jan Tinetti said. ...
“This government is choosing to deliberately mislead and withhold information, keeping our people in the dark about this government’s agenda and the future of our mokopuna,” said co-leader and spokesperson for Health, Debbie Ngarewa-Packer. The call comes after the demand from the Chief Ombudsman that Associate Minister of Health, Casey ...
“Today’s climate announcement by Simon Watts makes clear the National Government is simply paying lip service to meeting its climate change targets,” Megan Woods said. ...
National is choosing to make life harder for workers by taking away the rights our communities have fought hard for. Here's how they’re taking workers backwards. ...
Australia, Canada and New Zealand today issued the following statement on the need for an urgent ceasefire in Gaza and the risk of expanded conflict between Hizballah and Israel. The situation in Gaza is catastrophic. The human suffering is unacceptable. It cannot continue. We remain unequivocal in our condemnation of ...
Attorney-General Judith Collins today reminded all State and faith-based institutions of their legal obligation to preserve records relevant to the safety and wellbeing of those in its care. “The Abuse in Care Inquiry’s report has found cases where records of the most vulnerable people in State and faith‑based institutions were ...
Minister of Internal Affairs Brooke van Velden says the Government’s online safety website for children and young people has reached one million page views. “It is great to see so many young people and their families accessing the site Keep It Real Online to learn how to stay safe online, and manage ...
Tēnā tātou katoa, Ngā mihi te rangi, ngā mihi te whenua, ngā mihi ki a koutou, kia ora mai koutou. Thank you for the opportunity to be here and the invitation to speak at this 50th anniversary conference. I acknowledge all those who have gone before us and paved the ...
New Zealand’s payroll providers have successfully prepared to ensure 3.5 million individuals will, from Wednesday next week, be able to keep more of what they earn each pay, says Finance Minister Nicola Willis and Revenue Minister Simon Watts. “The Government's tax policy changes are legally effective from Wednesday. Delivering this tax ...
An experimental vineyard which will help futureproof the wine sector has been opened in Blenheim by Associate Regional Development Minister Mark Patterson. The covered vineyard, based at the New Zealand Wine Centre – Te Pokapū Wāina o Aotearoa, enables controlled environmental conditions. “The research that will be produced at the Experimental ...
The Coalition Government has confirmed the indicative regional breakdown of North Island Weather Event (NIWE) funding for state highway recovery projects funded through Budget 2024, Transport Minister Simeon Brown says. “Regions in the North Island suffered extensive and devastating damage from Cyclone Gabrielle and the 2023 Auckland Anniversary Floods, and ...
Indonesia’s Foreign Minister, Retno Marsudi, will visit New Zealand next week, Foreign Minister Winston Peters has announced. “Indonesia is important to New Zealand’s security and economic interests and is our closest South East Asian neighbour,” says Mr Peters, who is currently in Laos to engage with South East Asian partners. ...
He aha te kai a te rangatira? He kōrero, he kōrero, he kōrero. The government has reaffirmed its commitment to supporting the aspirations of Ngāti Maniapoto, Minister for Māori Development Tama Potaka says. “My thanks to Te Nehenehenui Trust – Ngāti Maniapoto for bringing their important kōrero to a ministerial ...
Transport Minister Simeon Brown has thanked outgoing Chair of the Civil Aviation Authority, Janice Fredric, for her service to the board.“I have received Ms Fredric’s resignation from the role of Chair of the Civil Aviation Authority,” Mr Brown says.“On behalf of the Government, I want to thank Ms Fredric for ...
The Government is proposing legislation to overturn a Court of Appeal decision and amend the Marine and Coastal Area Act in order to restore Parliament’s test for Customary Marine Title, Treaty Negotiations Minister Paul Goldsmith says. “Section 58 required an applicant group to prove they have exclusively used and occupied ...
Regulation Minister David Seymour says that opposition parties have united in bad faith, opposing what they claim are ‘dangerous changes’ to the Early Childhood Education sector, despite no changes even being proposed yet. “Issues with affordability and availability of early childhood education, and the complexity of its regulation, has led ...
After receiving more than 740 submissions in the first 20 days, Regulation Minister David Seymour is asking the Ministry for Regulation to extend engagement on the early childhood education regulation review by an extra two weeks. “The level of interest has been very high, and from the conversations I’ve been ...
The Coalition Government is investing $802.9 million into the Wairarapa and Manawatū rail lines as part of a funding agreement with the NZ Transport Agency (NZTA), KiwiRail, and the Greater Wellington and Horizons Regional Councils to deliver more reliable services for commuters in the lower North Island, Transport Minister Simeon ...
Local Government Minister Simeon Brown has announced his intention to appoint a Crown Manager to both Hawke’s Bay Regional and Wairoa District Councils to speed up the delivery of flood protection work in Wairoa."Recent severe weather events in Wairoa this year, combined with damage from Cyclone Gabrielle in 2023 have ...
Mr Speaker, this is a day that many New Zealanders who were abused in State care never thought would come. It’s the day that this Parliament accepts, with deep sorrow and regret, the Report of the Royal Commission of Inquiry into Abuse in Care. At the heart of this report are the ...
For the first time, the Government is formally acknowledging some children and young people at Lake Alice Psychiatric Hospital experienced torture. The final report of the Royal Commission of Inquiry into Abuse in State and Faith-based Care “Whanaketia – through pain and trauma, from darkness to light,” was tabled in Parliament ...
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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