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.
Muriel Newman writes – When Meridian Energy was seeking resource consents for a West Coast hydro dam proposal in 2010, local Maori “strenuously” objected, claiming their mana was inextricably linked to ‘their’ river and could be damaged. After receiving a financial payment from the company, however, the Ngai Tahu ...
Alwyn Poole writes – “An SEP,’ he said, ‘is something that we can’t see, or don’t see, or our brain doesn’t let us see, because we think that it’s somebody else’s problem. That’s what SEP means. Somebody Else’s Problem. The brain just edits it out, it’s like a ...
Our trust in our political institutions is fast eroding, according to a Maxim Institute discussion paper, Shaky Foundations: Why our democracy needs trust. The paper – released today – raises concerns about declining trust in New Zealand’s political institutions and democratic processes, and the role that the overuse of Parliamentary urgency ...
This article was prepared for publication yesterday. More ministerial announcements have been posted on the government’s official website since it was written. We will report on these later today …. Buzz from the BeehiveThere we were, thinking the environment is in trouble, when along came Jones. Shane Jones. ...
New Zealand now has the fourth most depressed construction sector in the world behind China, Qatar and Hong Kong. Photo: Lynn Grieveson / The KākāTL;DR: These are the six things that stood out to me in news and commentary on Aotearoa-NZ’s political economy at 8:46am on Thursday, May 2:The Lead: ...
Hi,I am just going to state something very obvious: American police are fucking crazy.That was a photo gracing the New York Times this morning, showing New York City police “entering Columbia University last night after receiving a request from the school.”Apparently in America, protesting the deaths of tens of thousands ...
Winston Peters’ much anticipated foreign policy speech last night was a work of two halves. Much of it was a standard “boilerplate” Foreign Ministry overview of the state of the world. There was some hardening up of rhetoric with talk of “benign” becoming “malign” and old truths giving way to ...
Graham Adams assesses the fallout of the Cass Review — The press release last Thursday from the UN Special Rapporteur on violence against women and girls didn’t make the mainstream news in New Zealand but it really should have. The startling title of Reem Alsalem’s statement — “Implementation of ‘Cass ...
This open-for-business, under-new-management cliché-pockmarked government of Christopher Luxon is not the thing of beauty he imagines it to be. It is not the powerful expression of the will of the people that he asserts it to be. It is not a soaring eagle, it is a malodorous vulture. This newest poll should make ...
The latest labour market statistics, showing a rise in unemployment. There are now 134,000 unemployed - 14,000 more than when the National government took office. Which is I guess what happens when the Reserve Bank causes a recession in an effort to Keep Wages Low. The previous government saw a ...
Three opinion polls have been released in the last two days, all showing that the new government is failing to hold their popular support. The usual honeymoon experienced during the first year of a first term government is entirely absent. The political mood is still gloomy and discontented, mainly due ...
National's Finance Minister once met a poor person.A scornful interview with National's finance guru who knows next to nothing about economics or people.There might have been something a bit familiar if that was the headline I’d gone with today. It would of course have been in tribute to the article ...
Rob MacCulloch writes – Throughout the pandemic, the new Vice-Chancellor-of-Otago-University-on-$629,000 per annum-Can-you-believe-it-and-Former-Finance-Minister Grant Robertson repeated the mantra over and over that he saved “lives and livelihoods”.As we update how this claim is faring over the course of time, the facts are increasingly speaking differently. NZ ...
Chris Trotter writes – IT’S A COMMONPLACE of political speeches, especially those delivered in acknowledgement of electoral victory: “We’ll govern for all New Zealanders.” On the face of it, the pledge is a strange one. Why would any political leader govern in ways that advantaged the huge ...
Bryce Edwards writes – The list of former National Party Ministers being given plum and important roles got longer this week with the appointment of former Deputy Prime Minister Paula Bennett as the chair of Pharmac. The Christopher Luxon-led Government has now made key appointments to Bill ...
TL;DR: These are the six things that stood out to me in news and commentary on Aotearoa-NZ’s political economy at 10:06am on Wednesday, May 1:The Lead: Business confidence fell across the board in April, falling in some areas to levels last seen during the lockdowns because of a collapse in ...
Over the past 36 hours, Christopher Luxon has been dong his best to portray the centre-right’s plummeting poll numbers as a mark of virtue. Allegedly, the negative verdicts are the result of hard economic times, and of a government bravely set out on a perilous rescue mission from which not ...
Auckland Transport have started rolling out new HOP card readers around the network and over the next three months, all of them on buses, at train stations and ferry wharves will be replaced. The change itself is not that remarkable, with the new readers looking similar to what is already ...
Completed reads for April: The Difference Engine, by William Gibson and Bruce Sterling Carnival of Saints, by George Herman The Snow Spider, by Jenny Nimmo Emlyn’s Moon, by Jenny Nimmo The Chestnut Soldier, by Jenny Nimmo Death Comes As the End, by Agatha Christie Lord of the Flies, by ...
On February 14, 2023 we announced our Rebuttal Update Project. This included an ask for feedback about the added "At a glance" section in the updated basic rebuttal versions. This weekly blog post series highlights this new section of one of the updated basic rebuttal versions and serves as a ...
Have a story to share about St Paul’s, but today just picturesPopular novels written at this desk by a young man who managed to bootstrap himself out of father’s imprisonment and his own young life in a workhouse Read more ...
The list of former National Party Ministers being given plum and important roles got longer this week with the appointment of former Deputy Prime Minister Paula Bennett as the chair of Pharmac. The Christopher Luxon-led Government has now made key appointments to Bill English, Simon Bridges, Steven Joyce, Roger Sowry, ...
Newsroom has a story today about National's (fortunately failed) effort to disestablish the newly-created Inspector-General of Defence. The creation of this agency was the key recommendation of the Inquiry into Operation Burnham, and a vital means of restoring credibility and social licence to an agency which had been caught lying ...
Holding On To The Present:The moment a political movement arises that attacks the whole idea of social progress, and announces its intention to wind back the hands of History’s clock, then democracy, along with its unwritten rules, is in mortal danger.IT’S A COMMONPLACE of political speeches, especially those delivered in ...
Stuck In The Middle With You:As Christopher Luxon feels the hot breath of Act’s and NZ First’s extremists on the back of his neck and, as he reckons with the damage their policies are already inflicting upon a country he’s described as “fragile”, is there not some merit in reaching out ...
The unpopular coalition government is currently rushing to repeal section 7AA of the Oranga Tamariki Act. The clause is Oranga Tamariki's Treaty clause, and was inserted after its systematic stealing of Māori children became a public scandal and resulted in physical resistance to further abductions. The clause created clear obligations ...
Buzz from the Beehive The government’s official website – which Point of Order monitors daily – not for the first time has nothing much to say today about political happenings that are grabbing media headlines. It makes no mention of the latest 1News-Verian poll, for example. This shows National down ...
It Takes A Train To Cry:Surely, there is nothing lonelier in all this world than the long wail of a distant steam locomotive on a cold Winter’s night.AS A CHILD, I would lie awake in my grandfather’s house and listen to the traffic. The big wooden house was only a ...
Packing A Punch: The election of the present government, including in its ranks politicians dedicated to reasserting the rights of the legislature in shaping and determining the future of Māori and Pakeha in New Zealand, should have alerted the judiciary – including its anomalous appendage, the Waitangi Tribunal – that its ...
Dead Woman Walking: New Zealand’s media industry had been moving steadily towards disaster for all the years Melissa Lee had been National’s media and communications policy spokesperson, and yet, when the crisis finally broke, on her watch, she had nothing intelligent to offer. Christopher Luxon is a patient man - but he’s not ...
Chris Trotter writes – New Zealand politics is remarkably easy-going: dangerously so, one might even say. With the notable exception of John Key’s flat ruling-out of the NZ First Party in 2008, all parties capable of clearing MMP’s five-percent threshold, or winning one or more electorate seats, tend ...
Bryce Edwards writes – Polling shows that Wellington Mayor Tory Whanau has the lowest approval rating of any mayor in the country. Siting at -12 per cent, the proportion of constituents who disapprove of her performance outweighs those who give her the thumbs up. This negative rating is ...
Luxon will no doubt put a brave face on it, but there is no escaping the pressure this latest poll will put on him and the government. Photo: Lynn Grieveson / The KākāTL;DR: These are the six things that stood out to me in news and commentary on Aotearoa-NZ’s political ...
This is a re-post from The Climate Brink by Andrew Dessler In the wake of any unusual weather event, someone inevitably asks, “Did climate change cause this?” In the most literal sense, that answer is almost always no. Climate change is never the sole cause of hurricanes, heat waves, droughts, or ...
Something odd happened yesterday, and I’d love to know if there’s more to it. If there was something which preempted what happened, or if it was simply a throwaway line in response to a journalist.Yesterday David Seymour was asked at a press conference what the process would be if the ...
Hi,From time to time, I want to bring Webworm into the real world. We did it last year with the Jurassic Park event in New Zealand — which was a lot of fun!And so on Saturday May 11th, in Los Angeles, I am hosting a lil’ Webworm pop-up! I’ve been ...
Education Minister Erica Standford yesterday unveiled a fundamental reform of the way our school pupils are taught. She would not exactly say so, but she is all but dismantling the so-called “inquiry” “feel good” method of teaching, which has ruled in our classrooms since a major review of the New ...
Exactly where are we seriously going with this government and its policies? That is, apart from following what may as well be a Truss-Lite approach on the purported economic “plan“, and Victorian-era regression when it comes to social policy.Oh it’ll work this time of course, we’re basically assured, “the ...
Hey Uncle Dave, When the Poms joined the EEC, I wasn't one of those defeatists who said, Well, that’s it for the dairy job. And I was right, eh? The Chinese can’t get enough of our milk powder and eventually, the Poms came to their senses and backed up the ute ...
Polling shows that Wellington Mayor Tory Whanau has the lowest approval rating of any mayor in the country. Siting at -12 per cent, the proportion of constituents who disapprove of her performance outweighs those who give her the thumbs up. This negative rating is higher than for any other mayor ...
Buzz from the Beehive Pharmac has been given a financial transfusion and a new chair to oversee its spending in the pharmaceutical business. Associate Health Minister David Seymour described the funding for Pharmac as “its largest ever budget of $6.294 billion over four years, fixing a $1.774 billion fiscal cliff”. ...
Bryce Edwards writes – Many criticisms are being made of the Government’s Fast Track Approvals Bill, including by this writer. But as with everything in politics, every story has two sides, and both deserve attention. It’s important to understand what the Government is trying to achieve and its ...
TL;DR: Here’s my top 10 ‘pick ‘n’ mix of links to news, analysis and opinion articles as of 10:10am on Monday, April 29:Scoop: The children's ward at Rotorua Hospital will be missing a third of its beds as winter hits because Te Whatu Ora halted an upgrade partway through to ...
span class=”dropcap”>As hideous as David Seymour can be, it is worth keeping in mind occasionally that there are even worse political figures (and regimes) out there. Iran for instance, is about to execute the country’s leading hip hop musician Toomaj Salehi, for writing and performing raps that “corrupt” the nation’s ...
Yesterday marked 10 years since the first electric train carried passengers in Auckland so it’s a good time to look back at it and the impact it has had. A brief history The first proposals for rail electrification in Auckland came in the 1920’s alongside the plans for earlier ...
Right now, in Aotearoa-NZ, our ‘animal spirits’ are darkening towards a winter of discontent, thanks at least partly to a chorus of negative comments and actions from the Government Photo: Lynn Grieveson / The KākāTL;DR: These are the six things that stood out to me in news and commentary on ...
You make people evil to punish the paststuck inside a sequel with a rotating castThe following photos haven’t been generated with AI, or modified in any way. They are flesh and blood, human beings. On the left is Galatea Young, a young mum, and her daughter Fiadh who has Angelman ...
April has been a quiet month at A Phuulish Fellow. I have had an exceptionally good reading month, and a decently productive writing month – for original fiction, anyway – but not much has caught my eye that suggested a blog article. It has been vaguely frustrating, to be honest. ...
A listing of 31 news and opinion articles we found interesting and shared on social media during the past week: Sun, April 21, 2024 thru Sat, April 27, 2024. Story of the week Anthropogenic climate change may be the ultimate shaggy dog story— but with a twist, because here ...
Hi,I spent about a year on Webworm reporting on an abusive megachurch called Arise, and it made me want to stab my eyes out with a fork.I don’t regret that reporting in 2022 and 2023 — I am proud of it — but it made me angry.Over three main stories ...
The new Victoria University Vice-Chancellor decided to have a forum at the university about free speech and academic freedom as it is obviously a topical issue, and the Government is looking at legislating some carrots or sticks for universities to uphold their obligations under the Education and Training Act. They ...
Do you remember when Melania Trump got caught out using a speech that sounded awfully like one Michelle Obama had given? Uncannily so.Well it turns out that Abraham Lincoln is to Winston Peters as Michelle was to Melania. With the ANZAC speech Uncle Winston gave at Gallipoli having much in ...
She was born 25 years ago today in North Shore hospital. Her eyes were closed tightly shut, her mouth was silently moving. The whole theatre was all quiet intensity as they marked her a 2 on the APGAR test. A one-minute eternity later, she was an 8. The universe was ...
Skeptical Science is partnering with Gigafact to produce fact briefs — bite-sized fact checks of trending claims. This fact brief was written by Sue Bin Park in collaboration with members from our Skeptical Science team. You can submit claims you think need checking via the tipline. Is Antarctica gaining land ice? ...
Images of US students (and others) protesting and setting up tent cities on US university campuses have been broadcast world wide and clearly demonstrate the growing rifts in US society caused by US policy toward Israel and Israel’s prosecution of … Continue reading → ...
Barrie Saunders writes – Dear Paul As the new Minister of Media and Communications, you will be inundated with heaps of free advice and special pleading, all in the national interest of course. For what it’s worth here is my assessment: Traditional broadcasting free to air content through ...
Many criticisms are being made of the Government’s Fast Track Approvals Bill, including by this writer. But as with everything in politics, every story has two sides, and both deserve attention. It’s important to understand what the Government is trying to achieve and its arguments for such a bold reform. ...
Peter Dunne writes – The great nineteenth British Prime Minister, William Gladstone, once observed that “the first essential for a Prime Minister is to be a good butcher.” When a later British Prime Minister, Harold Macmillan, sacked a third of his Cabinet in July 1962, in what became ...
Ele Ludemann writes – New Zealanders had the OECD’s second highest tax increase last year: New Zealanders faced the second-biggest tax raises in the developed world last year, the Organisation for Economic Cooperation and Development (OECD) says. The intergovernmental agency said the average change in personal income tax ...
We all know something’s not right with our elections. The spread of misinformation, people being targeted with soundbites and emotional triggers that ignore the facts, even the truth, and influence their votes.The use of technology to produce deep fakes. How can you tell if something is real or not? Can ...
This video includes conclusions of the creator climate scientist Dr. Simon Clark. It is presented to our readers as an informed perspective. Please see video description for references (if any). This year you will be lied to! Simon Clark helps prebunk some misleading statements you'll hear about climate. The video includes ...
It is all very well cutting the backrooms of public agencies but it may compromise the frontlines. One of the frustrations of the Productivity Commission’s 2017 review of universities is that while it observed that their non-academic staff were increasing faster than their academic staff, it did not bother to ...
Buzz from the Beehive Two speeches delivered by Foreign Affairs Minister Winston Peters at Anzac Day ceremonies in Turkey are the only new posts on the government’s official website since the PM announced his Cabinet shake-up. In one of the speeches, Peters stated the obvious: we live in a troubled ...
1. Which of these would you not expect to read in The Waikato Invader?a. Luxon is here to do business, don’t you worry about thatb. Mr KPI expects results, and you better believe itc. This decisive man of action is getting me all hot and excitedd. Melissa Lee is how ...
…it has a restricted jurisdiction which must not be abused: it is not an inquisitionNOTE – this article was published before the High Court ruled that Karen Chhour does not have to appear before the Waitangi Tribunal Gary Judd writes – The High Court ...
Lindsay Mitchell writes – One of reasons Oranga Tamariki exists is to prevent child neglect. But could the organisation itself be guilty of the same?Oranga Tamariki’s statistics show a decrease in the number and age of children in care. “There are less children ...
David Farrar writes: Graeme Edgeler wrote in 2017: In the first five years after three strikes came into effect 5248 offenders received a ‘first strike’ (that is, a “stage-1 conviction” under the three strikes sentencing regime), and 68 offenders received a ‘second strike’. In the five years prior to ...
Bryce Edwards writes – Prime Minister Christopher Luxon has surprised everyone with his ruthlessness in sacking two of his ministers from their crucial portfolios. Removing ministers for poor performance after only five months in the job just doesn’t normally happen in politics. That’s refreshing and will be extremely ...
TL;DR: These are the six things that stood out to me in news and commentary on Aotearoa-NZ’s political economy in the two days to 6:06am on Thursday, April 25:Politics: PM Christopher Luxon has set up a dual standard for ministerial competence by demoting two National Cabinet ministers while leaving also-struggling ...
Hi,Today I mainly want to share some of your thoughts about the recent piece I wrote about success and failure, and the forces that seemingly guide our lives. But first, a quick bit of housekeeping: I am doing a Webworm popup in Los Angeles on Saturday May 11 at 2pm. ...
It is hard to see what Melissa Lee might have done to “save” the media. National went into the election with no public media policy and appears not to have developed one subsequently. Lee claimed that she had prepared a policy paper before the election but it had been decided ...
The Labour Party is saddened to learn of the death of Sir Robert Martin, a globally renowned disability advocate who led the way for disability rights both in New Zealand and internationally. ...
Labour is calling for the Government to urgently rethink its coalition commitment to restart live animal exports, Labour animal welfare spokesperson Rachel Boyack said. ...
Today’s Financial Stability Report has once again highlighted that poverty and deep inequality are political choices - and this Government is choosing to make them worse. ...
The Green Party is calling on the Government to do more for our households in most need as unemployment rises and the cost of living crisis endures. ...
Unemployment is on the rise and it’s only going to get worse under this Government, Labour finance spokesperson Barbara Edmonds said. Stats NZ figures show the unemployment rate grew to 4.3 percent in the March quarter from 4 percent in the December quarter. “This is the second rise in unemployment ...
The New Zealand Labour Party welcomes the entering into force of the European Union and New Zealand free trade agreement. This agreement opens the door for a huge increase in trade opportunities with a market of 450 million people who are high value discerning consumers of New Zealand goods and ...
The National-led Government continues its fiscal jiggery pokery with its Pharmac announcement today, Labour Health spokesperson Ayesha Verrall says. “The government has increased Pharmac funding but conceded it will only make minimal increases in access to medicine”, said Ayesha Verrall “This is far from the bold promises made to fund ...
This afternoon’s interim Waitangi Tribunal report must be taken seriously as it affects our most vulnerable children, Labour children’s spokesperson Willow-Jean Prime. ...
Te Pāti Māori are demanding the New Zealand Government support an international independent investigation into mass graves that have been uncovered at two hospitals on the Gaza strip, following weeks of assault by Israeli troops. Among the 392 bodies that have been recovered, are children and elderly civilians. Many of ...
Our two-tiered system for veterans’ support is out of step with our closest partners, and all parties in Parliament should work together to fix it, Labour veterans’ affairs spokesperson Greg O’Connor said. ...
Stripping two Ministers of their portfolios just six months into the job shows Christopher Luxon’s management style is lacking, Labour Leader Chris Hipkins said. ...
Tonight’s court decision to overturn the summons of the Children’s Minister has enabled the Crown to continue making decisions about Māori without evidence, says Te Pāti Māori spokesperson for Children, Mariameno Kapa-Kingi. “The judicial system has this evening told the nation that this government can do whatever they want when ...
It appears Nicola Willis is about to pull the rug out from under the feet of local communities still dealing with the aftermath of last year’s severe weather, and local councils relying on funding to build back from these disasters. ...
The Government is making short-sighted changes to the Resource Management Act (RMA) that will take away environmental protection in favour of short-term profits, Labour’s environment spokesperson Rachel Brooking said today. ...
Labour welcomes the release of the report into the North Island weather events and looks forward to working with the Government to ensure that New Zealand is as prepared as it can be for the next natural disaster. ...
The Labour Party has called for the New Zealand Government to recognise Palestine, as a material step towards progressing the two-State solution needed to achieve a lasting peace in the region. ...
Some of our country’s most important work, stopping the sexual exploitation of children and violent extremism could go along with staff on the frontline at ports and airports. ...
The Government’s Fast Track Approvals Bill will give projects such as new coal mines a ‘get out of jail free’ card to wreak havoc on the environment, Labour Leader Chris Hipkins said today. ...
The government's decision to reintroduce Three Strikes is a destructive and ineffective piece of law-making that will only exacerbate an inherently biased and racist criminal justice system, said Te Pāti Māori Justice Spokesperson, Tākuta Ferris, today. During the time Three Strikes was in place in Aotearoa, Māori and Pasifika received ...
Cuts to frontline hospital staff are not only a broken election promise, it shows the reckless tax cuts have well and truly hit the frontline of the health system, says Labour Health spokesperson Ayesha Verrall. ...
The Green Party has joined the call for public submissions on the fast-track legislation to be extended after the Ombudsman forced the Government to release the list of organisations invited to apply just hours before submissions close. ...
New Zealand’s good work at reducing climate emissions for three years in a row will be undone by the National government’s lack of ambition and scrapping programmes that were making a difference, Labour Party climate spokesperson Megan Woods said today. ...
More essential jobs could be on the chopping block, this time Ministry of Education staff on the school lunches team are set to find out whether they're in line to lose their jobs. ...
Te Pāti Māori is disgusted at the confirmation that hundreds are set to lose their jobs at Oranga Tamariki, and the disestablishment of the Treaty Response Unit. “This act of absolute carelessness and out of touch decision making is committing tamariki to state abuse.” Said Te Pāti Māori Oranga Tamariki ...
The Government is trying to bring in a law that will allow Ministers to cut corners and kill off native species, Labour environment spokesperson Rachel Brooking said. ...
Cancelling urgently needed new Cook Strait ferries and hiking the cost of public transport for many Kiwis so that National can announce the prospect of another tunnel for Wellington is not making good choices, Labour Transport Spokesperson Tangi Utikere said. ...
A laundry list of additional costs for Tāmaki Makarau Auckland shows the Minister for the city is not delivering for the people who live there, says Labour Auckland Issues spokesperson Shanan Halbert. ...
Te Pāti Māori co-leader Rawiri Waititi, and Mema Paremata mō Tāmaki-Makaurau, Takutai Tarsh Kemp, will travel to the Gold Coast to strengthen ties with Māori in Australia next week (15-21 April). The visit, in the lead-up to the 9th Australian National Kapa haka Festival, will be an opportunity for both ...
The Green Party has today launched a step-by-step guide to help New Zealanders make their voice heard on the Government’s democracy dodging and anti-environment fast track legislation. ...
Trade Minister Todd McClay says Canada’s refusal to comply in full with a CPTPP trade dispute ruling in our favour over dairy trade is cynical and New Zealand has no intention of backing down. Mr McClay said he has asked for urgent legal advice in respect of our ‘next move’ ...
The rights of our children and young people will be enhanced by changes the coalition Government will make to strengthen oversight of the Oranga Tamariki system, including restoring a single Children’s Commissioner. “The Government is committed to delivering better public services that care for our most at-risk young people and ...
The Government is making it easier for minor changes to be made to a building consent so building a home is easier and more affordable, Building and Construction Minister Chris Penk says. “The coalition Government is focused on making it easier and cheaper to build homes so we can ...
New Zealand lost a true legend when internationally renowned disability advocate Sir Robert Martin (KNZM) passed away at his home in Whanganui last night, Disabilities Issues Minister Louise Upston says. “Our Government’s thoughts are with his wife Lynda, family and community, those he has worked with, the disability community in ...
Good evening – Before discussing the challenges and opportunities facing New Zealand’s foreign policy, we’d like to first acknowledge the New Zealand Institute of International Affairs. You have contributed to debates about New Zealand foreign policy over a long period of time, and we thank you for hosting us. ...
From today, passengers travelling internationally from Auckland Airport will be able to keep laptops and liquids in their carry-on bags for security screening thanks to new technology, Transport Minister Simeon Brown says. “Creating a more efficient and seamless travel experience is important for holidaymakers and businesses, enabling faster movement through ...
People with an interest in the health of Northland’s marine ecosystems are invited to a public meeting to discuss how to deal with kina barrens, Oceans and Fisheries Minister Shane Jones says. Mr Jones will lead the discussion, which will take place on Friday, 10 May, at Awanui Hotel in ...
Kiwi exporters are $100 million better off today with the NZ EU FTA entering into force says Trade Minister Todd McClay. “This is all part of our plan to grow the economy. New Zealand's prosperity depends on international trade, making up 60 per cent of the country’s total economic activity. ...
There are heartening signs that the extractive sector is once again becoming an attractive prospect for investors and a source of economic prosperity for New Zealand, Resources Minister Shane Jones says. “The beginnings of a resurgence in extractive industries are apparent in media reports of the sector in the past ...
The return of the historic Ō-Rākau battle site to the descendants of those who fought there moved one step closer today with the first reading of Te Pire mō Ō-Rākau, Te Pae o Maumahara / The Ō-Rākau Remembrance Bill. The Bill will entrust the 9.7-hectare battle site, five kilometres west ...
Energy Minister Simeon Brown has announced 25 new high-speed EV charging hubs along key routes between major urban centres and outlined the Government’s plan to supercharge New Zealand’s EV infrastructure. The hubs will each have several chargers and be capable of charging at least four – and up to 10 ...
The coalition Government will not proceed with the previous Government’s plans to regulate residential property managers, Housing Minister Chris Bishop says. “I have written to the Chairperson of the Social Services and Community Committee to inform him that the Government does not intend to support the Residential Property Managers Bill ...
The Government has announced an independent review into the disability support system funded by the Ministry of Disabled People – Whaikaha. Disability Issues Minister Louise Upston says the review will look at what can be done to strengthen the long-term sustainability of Disability Support Services to provide disabled people and ...
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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