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English: it’s all the planners’ fault

Written By: - Date published: 8:00 am, September 30th, 2015 - 23 comments
Categories: auckland supercity, bill english, local government, national, same old national, spin, you couldn't make this shit up - Tags:

The NZHerald reports Finance Minister Bill English warning that Auckland housing has a risk of a massive house price crash because of an over-supply of housing, eight years from the initial shock in demand.

Apparently a number of international studies show it takes eight years for a housing market to really react or correct. Would be great if he could table them.

He said the housing market was “probably the largest market in New Zealand where the rules need to be reshaped” and the most evident indication of a problem was Auckland house prices.

I have to quote the NZHerald because it was a private speech, so:

The point is that when the supply of housing is relatively fixed, shocks to demand – like migration flows increasing sharply as they have recently – are absorbed through higher prices rather than the supply of more houses.”

Long lead times in the planning process tended to drive prices higher in the upswing of the housing cycle. Planners, eh?

And those lead time increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed.

The resulting excess supply could produce a price crash.”

English blames planners and Councils. After the GFC austerity responses, after 2.5 National terms, after National’s legislated amalgamation of Auckland 5 years ago, after leaky homes, after corporatising both water and transport into CCOs across NZ, after not passing the cartels bill against materials suppliers, after the post-earthquke Christchurch rebuild, who else to blame is there but planners?

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23 comments on “English: it’s all the planners’ fault ”

  1. savenz 1

    I blame the RMA process that pretty much guarantees a successful result on any application. This means developers and paid planners don’t really have to worry about ‘rules’ like the district plan as their barristers led by in particular Auckland council planners will sign anything off.

    This has led to very poor quality developments both visually and liveability (no sun, an apartment built next door blocking light and views,), mature trees being removed for lazy development instead of building a solution to keep the natural surroundings) and in terms of problems like leaking and stability.

    Some of the ‘red zone’ in Christchurch should never have been built on in the first place. The victims are the home owners who bought them not realising and the taxpayers who have had to compensate them, not the original developers and the barristers that argued for them to be built on, with devastating results.

    Pike river and CTV building shows how resource consents and building standards can be meaningless. Pike river should not have been operating..

    And the RMA process is gamed to massive reports that ‘hide’ information to get the application through. Even if someone is in breach of their resource consent or are lying in their reports the onus is on others to point it out, not the council to enforce or discoverit.

    In the usual Crosby Textor, the public are instead told that the RMA needs to be ‘relaxed’ further . It hardly seems possible to have it more relaxed, maybe meh when Rena spills oil, and the chicken farm and toxic dump sites (recently blowing someone up in Auckland), pop up next door. Cos someone need to make a $.

    It is simple, NZ needs property controls on migration in this country and houses should have more holistic approach to development. If houses were smaller for example then they are more affordable. In Auckland average Joes are building right to the boundaries over height to boundary and the council is saying – Go for it! They are not affordable houses – they are unaffordable and poorly designed.

    You can have well built houses that are affordable. Look at the State houses in 1937, no leaky buildings there and able to access sun and light. Savage would be horrified how backwards we have come.

    As for the crash, agree as soon as migration slows there might be a crash. So the idea should be of a transition to slow migration while transitioning to houses that are designed within Kiwi’s budgets and with Kiwi living in mind, so when the migrants slow, Kiwis can purchase houses which were designed for them.

  2. Bill 2

    An excess of housing supply?! He being serious?

    What is the approximate shortfall in housing in Auckland at the moment? What is projected population growth for Auckland under normal or long term trends?

    Seems to me that all he’s saying is that in all circumstances homeless people or those feeling compelled to ‘double up’ in overcrowded houses (whether hanging on in a parents home or co-renting) can go fck themselves.

    • tracey 2.1

      His crystal ball tells him when migration dips, and it will, houses built to accommodate the higher numbers will be vacant?

      So, why is one of his cures to open up green spaces, dump regulatory processes and get houses built quicker? Or was National lying when they said they were going to build houses and quickly?

      I’m confused.

  3. DH 3

    As usual he doesn’t make a lot of sense. To get an oversupply of houses people would need to build them and who would build a house when there’s no buyers? Developers aren’t idiots, they’re hardly likely to keep building more dwellings in a falling market.

    Depopulation would create an oversupply but that would be an economic cause, maybe English expects us to have a major recession in eight years?

    I think English is just trying to talk the market down.

    • tracey 3.1

      Developers need to build things. They think about the end of the current project and no further, with an aim to make money now, and as much as poss.

      Builders are the ones who will really suffer and all other associated trades.

      IF he has such figures he needs to table them because tertiaries and Schools are stepping up their work on getting youngsters trained in jobs so they have a future

      • DH 3.1.1

        Don’t think it works that way Tracey. Most developers tend to just go broke when house prices fall, they live on borrowed money. We saw that in ’08-09, the banks stopped funding them so all their building came to a halt and they went to the wall.

        From what I’ve seen of big developments they do them in stages; buy a big parcel of land and build dwellings in lots sufficient only to meet existing demand. It’;s in their interests to keep prices up, they wouldn’t willingly build more houses than the market can stand.

        I think you’d really only get a surplus of land, not houses. Councils with their planners don’t build houses, they just release land for building on. If land fell in price you might see more renters looking to build a new house but I doubt it would be significant enough to create an oversupply of houses.

    • savenz 3.2

      I think you will find many developers are idiots DH. Most have been bankrupt more than once. But it’s perfectly legal. Remember how Mainzeal went bankrupt with Jenny shipley as Chairman prior and in a construction boom?

      “It is in their interests to keep prices up, they wouldn’t willingly build more houses than the market can stand”. Nope most borrow as much as they can and then make a lot of money or lose a lot of money. But if they lose a lot of money they just declare bankruptcy. Like the banks losing it, someone just bails them out, and then they have a bad year and are back to their tricks next year.

      Obviously there are some quality developers but I think it is largely a mixed bag.

      If people do start leaving the country then yes, there could be an oversupply of shoddy dwellings that nobody wants to live in.

      But another issue is, why are we selling off state houses when we have a shortage of houses?

  4. Graeme 4

    The whole development sector is dependent on, and perpetuating of boom – bust cycles. Developers and financiers, while making us believe that they are go – getter entrepreneurs, are actually very conservative and timid people. (which accounts for their political leanings)

    They need to see someone else move first and be making money before they will commit or even commence a project. This leads to most development starting too late in the cycle, leading to an oversupply once these properties come to market 3 years later. Then values going south a few years later in the resulting liquidation. There’s probably a relationship between the property and electoral / govt. term cycles at a very basic human behavioural level. Bill might find some unpalatable truths if he digs too deep here.

    The RMA process has nothing to do with supply, it only approves the suitability of the land for development, and will generally be gamed by developers and submitters to increase the value of the site, for later sale or development. Trouble is, I don’t think anyone has managed to come up with a mechanism to provide efficient, successful counter cyclic development. Both market led and more guided models tend to have unfortunate outcomes.

    • savenz 4.1

      +1 Graeme – agree that land for development, and will generally be gamed by developers and submitters to increase the value of the site, for later sale or development, but the developers are biting off more than they can chew – making everything too big or too complicated (i.e. adding extra stories to an apartment block over what the district plans allows, removing 500 year old Kauris to make parking or Historic Pohutakawas for roading, , or for a specific market that might disappear (the Auckland CBD shoeboxes for example were for Asian students apparently, but sunk the CBD market as people including the Asian students didn’t necessary want to live in them).

      Being too greedy is what can also cause the developers to become unstuck and crash.

      Like leaky building. They wanted to save money by not tantalising the timber for framing.

      There is a happy medium between commerce, risk and long term outcomes in development.

      In general rules tend to work. It is because there is such an ‘anything goes’ attitude and planners and developers are breaking the rules that there is a problem.

      Saying that, the main shortage is immigration. Whether immigration is good or bad is up for debate, but having 30,000 people coming into he country is going to cause a housing shortage especially if they are all coming to Auckland and buying a house (or more than one house).

    • Ad 4.2

      Very intreating to see the Christchurch development vehicle being launched between central and local government, with a view to handover to Chrisstchurch Council in time.

      This, together with launch of Development Auckland, is very spatially interventionist.

      I hear Labour’s own version of this will no longer be launched in the Conference. again no caucus policy courage. I presume Labour’s caucus are now less spatially interventionist than the Nats.

    • Ad 4.3

      I would like to see how much profit the government has made out of the Hobsonville town. Both land and capital have gone through the roof since this previously public land was transferred from Defence purposes to Housing purposes under the Public Works Act a decade ago. The Crown can and should make money from this booming market.

      Both the new Christchurch development entity and the Auckland Development Company are but dipping toes in the water – even at some scale like Ormiston Town Centre.

      I want a government whois prepared to act at real scale to actually send strong pricing and quality signals to the development and real estate market that the public good will be a major part of society.

      Labour have to be very careful now that they don’t allow National to form and enact policy that (again) is sufficiently good that it’s removed from the political consciousness.

      IMHO Labour need strong interventionist housing development policy to be announced now, not later.

  5. alwyn 5

    What Bill is proposing sounds a little bit like the “hog cycle” that is covered in stage one economics.
    https://en.wikipedia.org/wiki/Pork_cycle
    It sounds not unreasonable as the housing market probably fits the bit about the long period to change output levels, although it isn’t part of a market where product that could be sold is removed from the market in order to provide next years breeding stock. I’ve never actually seen houses breeding and producing new houses, although some people with more vivid imaginations may have.

  6. Stuart Munro 6

    English is hoping an attack line works better than trying to defend his disgraceful non-performance in office. Loads of luck dude – we knew you didn’t give a toss about your job when you went double dipping.

  7. Mike the Savage One 7

    Sounds to me like English is preparing us for a slowing in internal migration, that is of New Zealanders with some cash to spend, coming back from Australia. He may also sense that there may be a bit less other immigration, so he has decided to talk about “risks” now, to the housing market.

    For years it was totally hands off, all was good, as people came back to New Zealand to work or do business, now where most that may decide to return have come back, it is the “risk” of a bubble bursting?

    It speaks volumes about a failing government, that has got nothing much under control, except looking after their clientele, offering unaffordable tax cuts, feathering the nests of their mates.

    The only “returnees” that may be coming over the next few years may be those New Zealanders now in detention centres in Australia, who have prison sentences, that now deny them a right to residency there.

    Get ready for the correction, that seems certain, where some home buyers may have more debt than equity, to pay of for many years to come. Add the commodity bubble that burst, and we are heading into a downward spiral for the economy and the state’s finances.

    All down the gurgler, that “brighter future”, “on the cusp of something special”, hey?!

    • Ad 7.1

      Australian migration to New Zealand is going to stay strong esp those from construction sector who can cash up their houses in Perth and Queensland. Their can and talents are good for us.

      English will not be praised internally for talking up a panic. People vote and donate in they interests of their own capital. Generally.

  8. Rob 8

    Well why do you think we are renting pandas or changing flags??

    • Mike the Savage One 8.1

      Distraction and diversion is the day to day routine under this government. Just do not touch anything serious, but English at least seems to be getting a bit worried. He is the boss of the finances, and the economy, and given his past record, he takes some matters more serious than our silly bugger John Key, who just loves those Pandas, flags debates and so forth. Key has the privilege of getting away with any frivolity, English has to be accountable, that is the difference, I think.

  9. Brendon Harre 9

    Bill English periodically has these speeches where he gives the impression the National party is going to do something about housing affordability. But inevitably the greedy and cynical in his party ignore him because a significant amount of National support wealth is dependent on housing unaffordability. John Key supports the greedies.

  10. Majic Mike 10

    Double Dipstick is Jaw boning.
    And excusing his governments slow low no response to housing bubble and homelessness (not even mentioned by Double dipton.
    Shifting the blame is National big third term policy.
    Opposition party’s need to keep reminding the public who are fed up with flag and pandas excuses and blame shifting.

    • Ad 10.1

      Jawboning is, like the Reserve Bank Governor’s statements, the least he can do to try and cool the real estate market particularly in Auckland.

      The one thing the Government’s moves to tax houses bought less than two years ago will do is force foreign investors to get an NZ tax number. I bet that is what is sending the foreign speculators away from the auction rooms, nice and fast.

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