Housing: the options, the new left narrative?

Written By: - Date published: 11:07 am, September 13th, 2013 - 75 comments
Categories: capital gains, class war, david cunliffe, democratic participation, election 2014, greens, labour, local government, mana, Metiria Turei, sustainability, vision, workers' rights - Tags:

Metiria Turei’s  appearance this week on the anti-current events, infotainment show The Vote, has raised the issue of how oppositions parties will talk about their housing policies, as we count down to next year’s election.  As some commented under my post yesterday, the left needs to develop a more savvy way to deal with right wing attacks on policies to improve housing affordability for renters and buyers on mid-low incomes.

geoff argued:

keep haranguing Turei for advocating the lowering of the value of their properties for many home owners.

this.
I think Key & Co will push this angle really hard. How should the left counter this? It’s tricky because, quite plausibly, it is true that the value of houses will come down.

Tim Watkin’s post on Pundit yesterday took a similar line, but more in praise of the shabby Vote episode than in criticism.

But just as powerful is the anti-narrative – the story your opponents try to stick on you – and on last night’s The Vote we saw two examples that give us an insight on how next year’s election battle could unfold.

[…]

Turei got caught out by a simple questions; “Do you want house prices to drop?” It’s one thing to fret about housing affordability, to say how prices are out of control even and fear a bubble. But to tell the more than one million mortgage holders in New Zealand — including many of the deeply indebted Auckland liberals who vote Green — that they should be willing to take a hit on their biggest asset, well, the hashtag #politicalsuicide was used on Twitter and wasn’t out of order.

So what are the policies, and how can they be explained clearly to the electorate in the face of everything the right will throw at them over the next year?

The Green’s housing policies include a focus on state housing: Julie Anne Genter’s press release yesterday focused on some extra tools to cool Auckland’s housing market.  She is critical of the Reserve Bank’s blunt tool of interest rate manipulation:

“We need a capital gains tax, restrictions on overseas investment in residential property, a government-led programme of affordable house building, and the Greens’ Progressive Ownership plan to give young families a pathway to homeownership.

The Mana Party has put a strong focus on maintaining and improving state house provisions.  This week, John Minto was critical of Auckland Council’s Unitary Plan failure to respond to the housing crisis in the city:

Minto for Mayor would build 20,000 affordable council rental homes to address the sharpest point in the crisis with other plans to promote home ownership opportunities for every New Zealand family.

Last night on Citizen A, Wayne Hope also floated the idea of Council Housing.  Is this a practical option?

The Labour Party’s Kiwibuild housing policy (under Housing tab), focuses strongly on a partnership with the private sector: new homes for first time buyers, restriction of house buying by non-residents, qaulity of the rental stock, apprenticeships and house building, CGT, and provisions to ensure council approval of social housing.

Whatever the policy, it should be embedded within a wider narrative, not just one focused on housing.  It should be part of a broader vision, rather than being presented as part of a piecemeal roll out of individual policies as happened under Labour’s leadership by Shearer.

people b4 profit

Some, like James Henderson, have argued that Cunliffe is offering a new vision for the left.

I reckon Cunliffe’s fair deal will say ‘yup, if you want higher wages, you need to let workers bargain together, you need a government that is a good employer, you need a good minimum wage’ and ‘if you want affordable housing, if you want good jobs, in a country like New Zealand it’s up to Government to lead the way by building those houses, by buying Kiwi-made, and by not leaving everything to an uncaring, inefficient market’.

Hamish Rutherford on Stuff reports that it is based solidly on labour bedrock of employment reform:

“That’s bedrock David Cunliffe social democratic Labour policy. That is going to happen.”

He promised party faithful a visible change in tack from the current government. “The Labour Party I lead will be a true red Labour Party, not a pale blue one.”

Cunliffe’s vision has been outlined in his speeches over the last couple of years, and hinted at on his own campaign-focused website.  It is seen in his speech at Dunedin on Monday, which includes a focus on renewables and green technology.

The Labour Government I lead will take on the vested interests of markets when necessary to guarantee the wellbeing of citizens, just as I did against the old Telecom monopoly.

Our challenge must be to build a smart and high-value economy.

However, it speaks to the politically knowledgeable labour/left base.  Such a vision has yet to be clearly and sharply honed into a narrative for the broader public and distortionary MSM, using language that speaks to the hearts of New Zealanders.

keep calm sweet as

Similarly, The Greens’ vision and the Mana Party’s vision speak to their core constituency rather than the wider electorate.

cooking breaks down small

How can the narratives of eco-social democracy and/or (green) democratic socialism be told successful to the wider electorate?

75 comments on “Housing: the options, the new left narrative?”

  1. Pasupial 1

    The Left stand for healthy communities.
    The Right step over homeless beggars.

    • Rich the other 1.1

      pasupial,

      If the greens get what they want, house values to drop by 15/20% you will have a new bred of homeless beggars, former house owners.

      • McFlock 1.1.1

        Let’s unpack that, shall we?
        If the value of a home drops by 20%, why would a home-owner lose their home? They might go underwater for a while if there was a sudden drop and they were highly-mortgaged, but they would still have the same mortgage and the same income.

      • aerobubble 1.1.2

        Home owners who brought high only have themselves to blame.

        Anyhow you don’t lock in the price until you sell, housing prices after any downturn, will rebound. So the possibility that they sell during the downturn is once again their own.

        Thirdly, as higher prices creep up who are the winners, well not those who sell and buy a similar property, they get hammered by a high cost to the real estate agent, less choice, and more fear over paying too much (and so sustain even high prices).

        So simple put unless you are moving overseas, die, or otherwise have no need of the home, actually housing price is never a windfall.

        Sure Greens are going to hurt those who have huge mortgages, but they also want high wages, and better redistribution. So the National party also want lower prices (its hurting the economy to put all that investment in non-productive homes), and have policies that are being rolled out to do just that, but without concerns about higher wages or redistribution of wealth back to the middle and lower classes.

        • geoff 1.1.2.1

          Home owners who brought high only have themselves to blame.

          No, not true. Not true at all.

          • aerobubble 1.1.2.1.1

            Okay. People who buy homes who could not realistically pay them off brought us the collapse, and yes that was more down to the banks and neo-liberal governments deregulating the mortgage market. So yes, you are correct Home owners only have themselves too blame if they also voted for stupid right wing parties, or left wing ones with right wing financial policies.

      • Saarbo 1.1.3

        The National House market has increased by 8.1% in the last year alone. A 20% decrease over say the next 10 to 15 years wont be too tough on people but it will direct investment cash to investments that produce real returns for new zealanders, a consequence of housing no longer being an attractive investment option.

        The realty is that a successful housing affordability strategy requires a reduction in house prices, whether it is Labour or National. If house prices stay where they are then they are not affordable, strategy fail.

      • geoff 1.1.4

        Rich the other, that would only be true over the long term, and that’s a good thing. Any sudden drop in prices will be due to a sudden increase in interest rates.

  2. just saying 2

    I think her framing could be improved, but I don’t think Turei should have lied. Let’s not hide behind wishy washy poli-speak. I know I want house prices to come down. How else does housing become more affordable? She should have mentioned that it is property speculators and rental- portfolio holders, rather than ordinary home owners that will be affected in most cases, and that as business operators they must accept that there is, and always was, risk. And the higher the potential returns, the greater that risk becomes.

    As far as I understand it, all the avenues for solving the housing crisis including my own preference for a massive state-housing programme will result in lowering house prices and rents across the board. For most people that is a good thing.

    • Enough is Enough 2.1

      “She should have mentioned that it is property speculators and rental- portfolio holders, rather than ordinary home owners that will be affected in most cases”

      Out of interest how can only some property owners be affected by property prices coming down?

      • just saying 2.1.1

        If you own a house to live in what’s the problem? If you have to move, other houses are cheaper too. Numbers on a page.

        National: “I’d love to see wages come down” (and boy, haven’t they delivered on this).
        vs the left – “we’d love to see house prices come down”.

        Say it proud I reckon.

        • Rich the other 2.1.1.1

          just saying,
          Lets say,
          I buy a house for 500k paying a 5% deposit = $25k, $475 mortgage.
          Under a green govt , Houses drop by 20% making the value of my home $400K

          My deposit of $25k is wiped out and am now paying a mortgage of $475k on a property worth $400k.

          But wait there’s more , If I sell I will be HOMELESS as I all of my equity is gone and have NO deposit to purchase again.

          Can you give me directions to the salvation army’s night shelter.

          • McFlock 2.1.1.1.1

            What planet are you on? You do realise that the fortnightly repayments on that mortgage would be roughly equivalent to as much as half the country would make in a fortnight?

            But more to the point, even if they bought and immediately dropped 25% and had to sell again, they’d have to make the repayments on $75 debt ($200/fortnight), not $475k ($1274/fortnight). At that rate they could quickly save another $25k in about six months (or a year, assuming that they can’t pay for rent out of the ongoing house costs for their mansion, e.g. rates, maintenance, peasants, decorating, etc). Oh, and even if they don’t sell they’ll have their head above water in a year or two.

            I mean, it sounds like a plausible problem, until one actually looks at the maths and realises that you’re just lamenting the poor little rich folk who max their credit to keep up with the Joneses. A lot of people in NZ have real problems, mate.

            In the meantime, that’s what state houses are for.

            • Rich the other 2.1.1.1.1.1

              mcflock.
              People exit their homes and move on for many different reasons , sometimes it’s not a choice, eg divorce , etc.etc.

              So for what ever reason they exit their home still owing $75k they will then have to save another deposit and purchase again at the 20% lower price eg $400k.

              Save 5% deposit on $ 400k =$20k which means they borrow another $380k + they already owe $75k which means their latest home worth $400k has an actual debt of $455k

              You seem to think saving $25k in 6 months will be easy which is around $2000 a fortnight , I hope they don’t expect to eat in that time.

              All in all this seems a very dismal picture and people in this situation will become renters which will be a real boost for land lords.

              Don’t ya just love green logic.

              • bad12

                What a great plan, shall we do nothing about making housing more affordable because of the choices of a few who decide to get divorced…

              • McFlock

                I think that if they can service a $475k mortgage, then they can service a $75k mortgage AND save for a deposit on a replacement house. Although it might mean slumming it with the plebs for a year or so (the embarrassment!).

                And at the end of it, they’ll still have a lower mortgage for an equivalent, or even the same house as before!

                Look at your rather tortured scenario: A couple are mortgaged for $475k. They sell for $400k (for whatever reason), then save up the remainder of what they’d previously been paying in mortgage and rates and so on, while renting (although they pay back none of the $75k remainder, just the interest). A year or so later they buy almost the same house at its new $400k value, and are mortgaged at $455k. Plus the $20k deposit they saved up, that’s $475k. Far from being “homeless”, they are in exactly the same position that they were before the value dipped.

                • Rich the other

                  mcflock,
                  Romney I presume, plenty of wool around the eyes.

                  No bank will lend $455k on a property valued at $400k , in other words they are unable to borrow to buy and will become renters.
                  Once they start paying rent they are stuffed and it will take years to save a deposit.

                  GREEN LOGIC , don’t ya just love it.

                  • McFlock

                    Lol
                    Oh noes, worst-case scenario if they are forced to sell: they’ll have to RENT!

                    Better than being homeless, which is what you were calling them before.
                    So, them that overextends themselves without leaving a buffer for market contingencies might have to retrench and save up for a while in order to buy their dream mcmansion.

                    Meanwhile, tens of thousands will never be able to afford to buy their own home, over-extended or otherwise.

                    Tory problems: who really gives a shit?

                  • vto

                    Rich the other, why don’t you right wingers ever try doing things by your own philosophy… if what you say is the case and those new renters want to buy then the amazing free market will see that gap and fill it, supplying homes to those renters..

                    Just like the free market does now for all those people who want to buy but can’t.

                    ha ha ha ha ha ha ha ha ha, god knows why you lot put such faith in the free market. Idiots.

                    RIGHT WING LOGIC, gotta love it

                    • Rich the other

                      Try this, the shortage is a political fairy tale.

                      Waikato,3227
                      Auckland ,1186
                      Northland, 1871
                      Wellington, 1151
                      Manawatu ,2227
                      These houses are listed on trade me , $400000 or less.
                      These don’t include listings with real estate agents.

                      The other point is why should we be worried about Auckland housing , as you can see there are plenty of choices around the country.

                      Wouldn’t it make more sense to start pushing the govt to invest in more regional development, shift the jobs, it’s that easy.

                    • karol

                      I think pushing regional development is also favoured by the Greens and Robertson and Cunliffe. But that is not enough on its own.

                    • xtasy

                      Rich the other – all those homes you list as being advertised for less than 400 k, where exactly are they located, and are they close to the areas where there are real jobs, enabling home buyers to earn a living AND pay off any loans and mortages?

                      At least you give a figure for the whole of Auckland, that seems to be close to the ones under 500 k, as John Campbell said on Campbell Live on Thursday evening. We had Lotu Iiga from the Nats on the Vote claiming there were 1,100 homes under 500 k on the market in his electorate alone, which was proved to be total BS. Campbell or his staff only found about 200 falling into that category.

                      As for Northland, Waikato and so forth, you will not find many jobs there, and I dread to see the quality of some of those homes.

                      Yes, regional development is needed, but it will take time, while the housing pressures in Auckland, Christchurch and a few other places are real and pressing right now.

                  • Colonial Viper

                    No bank will lend $455k on a property valued at $400k , in other words they are unable to borrow to buy and will become renters.

                    Those valuations are illusory. Price mean reversion is inevitable.

                    Might as well do it in an orderly, planned fashion.

              • Mike S

                You’re paying twice the value of the house to the bank anyway even though they didn’t have the money in the first place and created the money you ‘borrowed’ out of thin air. That’s what you should be up in arms about.

                If you buy a house to live in, then house prices going up or down doesn’t really affect you that much as you’ve still got to pay the agreement you signed up to. If you’re buying to flick on at a profit then tough shit, you should have invested in the productive economy. Many people and the number is growing, will never be able to own their own home. That is disgusting in supposedly one of the richest countries in the world.

        • QoT 2.1.1.2

          That’s one angle I think would be good to see politicians using: “Most people who buy a house are buying a home, a place to live for their family. They don’t need to worry about a short-term dip in the market, because they’re not in it for a quick buck.”

    • Pasupial 2.2

      just saying

      She did mention all that, but the TV3s news edit-with-a hatchet job made it seem like Turei wanted every one of NZ million home-owner’s destitute. If you watch the online video of “The Vote” (which I don’t advise if you value your sanity), Peters had a good line about how house-prices going to fall anyway when the property bubble bursts, so why not have a controlled and targeted reduction now (paraphrased from memory – I can’t be bothered going back and transcribing the exact words).

      • just saying 2.2.1

        Thanks for the extra info. I didn’t see the programme.
        Great line from Winston.

      • karol 2.2.2

        Thanks, Pasupial. More damning info about 3 News.

        It also means the left or left parties need a consistent one liner, that encapsulates their broader narrative, to keep repeating in TV appearances.

    • Lanthanide 2.3

      “I know I want house prices to come down. How else does housing become more affordable?”

      By the price of houses staying the same and incomes rising.

      • karol 2.3.1

        By the price of houses staying the same and incomes rising.

        But doesn’t that mean house prices coming down in real terms?

  3. BM 3

    Eco-social democracy

    From wikipedia

    Eco-socialists advocate dismantling capitalism, focusing on common ownership of the means of production by freely associated producers, and restoring the commons

    Here lies your problem.

    • karol 3.1

      BM. New task for you. Check the difference between eco social democracy and eco-socialism.

      • BM 3.1.1

        Is there a difference.?

        • Pasupial 3.1.1.1

          BM

          “The concept of an Eco-social market economy aims at balancing free market economics, the strive for social fairness and the sustainable use and protection of the natural resources.”

          http://en.wikipedia.org/wiki/Eco-social_market_economy

        • karol 3.1.1.2

          Just add environmental considerations to the differences between

          Explained on Wikipedia:

          Social democracy is a political ideology that officially has as its goal the establishment of democratic socialism through reformist and gradualist methods.[1] Alternatively, social democracy is defined as a policy regime involving a universal welfare state and collective bargaining schemes within the framework of a capitalist economy.

          Our left political parties these days tend to go with the 2nd (revisionist?) definition.

          Wikipedia on Socialism:

          Socialism is an economic system characterised by social ownership of the means of production and co-operative management of the economy.[1] “Social ownership” may refer to cooperative enterprises, common ownership, state ownership, citizen ownership of equity, or any combination of these.[2]

  4. Fran O'Sullivan 4

    Personally, I thought Metiria was spot on.

    Have seen a few property cycles now. Leveraged myself into my first “home and income” in Wellington in 1978 after the housing market dropped around 1976 and lower prices enabled me to get a foot in the door even with multiple mortgages. Interestingly, prices recovered in subsequent years and five years on I was offered (but declined) a price about one-third higher than I paid. If you can wait out a slump and don’t have to shift the cycles tend to even out. A property is only “under water” if you have negative equity and cannot service a loan.

    The real and horribly pressing issue is what happens to all those over-leveraged people who are already facing difficulties servicing mortgages when the RB ramps up interest rates in 2016 according to reports of Wheeler’s comments.

    • Saarbo 4.1

      “The real and horribly pressing issue is what happens to all those over-leveraged people who are already facing difficulties servicing mortgages when the RB ramps up interest rates in 2016 according to reports of Wheeler’s comments.”

      plus the downstream consequence of increased exchange rates driving our export businesses to the wall.

      How about making investment housing less attractive so that investors sell their homes to increase supply, eliminating the need to increase interest rates. The only loser are house investors, the winners are first home buyers and renters.

      • bad12 4.1.1

        i think Wheeler said April next year was when He would be most likely to start the pain for the highly leveraged…

    • geoff 4.2

      Describing the present situation as a property cycle is not accurate, Fran.

  5. Well, yeah, a fall in house values would be really bad for:
    1. Property investors.
    2. People who feel that tax-free capital gain from their house is a human right.
    3. Idiots, aka people with mortgages almost as high as the value of their house.

    Those three groups may be large, but they’re not ones I feel a great deal of sympathy for and aren’t exactly core Greens’ constituency either. Turei should have stuck to her guns and told ’em fuck.

  6. bad12 6

    OK, on house prices dropping in the Auckland market because of either Kiwibuild or the Greens ‘rent to own’ policies, everybody is barking up the wrong tree,

    PRICES WILL NOT DROP, there can be no overt sudden drop of house prices in the Auckland market simply because the proposals from both Labour and the Greens mean that the Houses they cause to be built WILL NOT BE SOLD IN THE MARKET,

    As these homes are going to be targeted at first home buyers there will still be a large upwardly mobile demographic in the Auckland housing market seeking better/bigger/flasher homes so WHY would house prices suddenly fall, it’s actually an economic nonsense to suggest or believe such,

    If the left are going to buy into whatever lie Duncan Garner can think up on any given day then election 2014 is going to be a lot harder work than it should be…

  7. vto 7

    There is absolutely no doubt that lower house prices is good for everybody and it should be aimed for.

    High values benefit only the banks – nobody else,

  8. geoff 8

    So what are the policies, and how can they be explained clearly to the electorate in the face of everything the right will throw at them over the next year?

    Realistically, anything that a left government can do will take a long time to have an effect on any metric. This is a good thing because Greens/Labour can highlight that they are taking a long term perspective, doing ‘the right thing’. This is in stark contrast to National’s hands-off, ‘let’s let the market fix this’ (even though it was a hands off approach that caused this problem in the first place).

    In terms of selling policy, I think Gordon Campbell’s recent advice is really sound, tone back the personal attacks on Key and talk past him, because he is an irrelevancy that has ignored this, (and many other) problems.

    http://gordoncampbell.scoop.co.nz/2013/09/12/gordon-campbell-on-dialling-back-the-anti-key-rhetoric-and-the-putin-plan-for-syria/

  9. Ad 9

    If I ruled New Zealand I would create 100 public development companies under the Housing Corporation, and use the Public Works Act to take out huge swathes of land and houses both inside and on the periphery of NZ cities, and rebuild whole suburbs at a time.
    And invite the private sector developers to take large minority interests.
    Then put the designs and pricing and quantity surveying out to competitive tender.
    Iwi companies could join in if they wanted.

    10 Hobsonvilles

    10 Massey North’s

    10 Tamaki Transformation projects

    10 New Lynns

    All of the public profits would have to get recycled.

    Given the housing demand I would be able to sell them all off the plans, to new couples who have to live in them not rent them out.

    Once I had started making serious money I would then use some of the profits to buy up and start demolishing the worst of Flaxmere, Kawerau, Murapara, Kaikohe, and other dying towns full of poverty and crime. Depending on how patrician I was feeling at the time.

    • Herodotus 9.1

      So you are happy for those who purchase raw land and spend massive resources and time to be by passed by the govt, yet earth works , civil works, aggregate suppliers, concrete manufactures , building products manufacturers etc to continue to make their margins? In other words paint the land developers in a bad way yet allow companies mentioned above (read fletched to continue to make their profit margins).
      Ad everyone appears to be an expert in land developer and the property market, pity many have little to no understanding of the industry or how the market really functions.
      But at least you are being constructive with ideas, keep going

      • Ad 9.1.1

        Raw land developers are welcome to the risks they take. I just think it’s time they got the chance to share their risks with the public sector – who so clearly have public policy goals to achieve.

        Everyone should get their margins – that’s the point of business.

        • Herodotus 9.1.1.1

          Yet from my reading of your comment and labours Kiwibuild all attention has been centred on the land developer yet build materials manufacturers, earth movers, civil workers, trades and councils appear to be able to able to trade as normal. Or with both Nats 39k dwellings over 3 years or Kiwibuild no consideration has been made for prices to rise as those sectors within the industry are pushed beyond their capacity = result increased prices. Such increases are occurring already and there is little increase in land and building consenting level, especially compared to the levels of 2003-4.
          As many have commented, if $400k affordable housing is the solution ( i.r.t Auckland ) then who can benefit ? Not those in need that is for sure.
          Far better for govt resources IMO to be directed to state housing than performing the function of developing for the private market.

          • Colonial Viper 9.1.1.1.1

            You make some good points and they should be considered and incorporated into the final plan.

          • Ad 9.1.1.1.2

            I think you underestimate the power of the market to regulate its own labour, land price and materials supply and prices. Everyone can see the bubble, especially in Auckland. The only question now is how quickly it deflates and how bad the damage.

            The housing market as a whole is however too big to control. It can now only be blunted. That is done partly by choking eg the Reserve Bank risky lender controls, partly through land supply eg Housing Accord, partly through monopsonising the market ie SKIRT and the Chch rebuild, but most importantly by incentivising the private developers to work with the state and form common companies with common interest.

            I’d love it if we could go back to the patrician days of the state command-controlling everything. Those days are dead.

          • bad12 9.1.1.1.3

            i don’t disagree with you on the State House build, state houses as an economic function do not ‘just’ house the poor,

            When there was an adequate supply of State Houses in the city of Auckland there was not a problem of affordability for those wishing to buy their own home,

            State houses as an economic function takes away the one thing those who see housing as an investment need to make that investment succeed, Tenants,

            Without tenants, those in the middle class who have a love affair with rental property, a large number of them as 100,000 homes have in the past 20 years become rental properties, would not be so keen on putting their monies into rental investments which would mean that there is less demand in the housing market…

  10. Swan 10

    Politicians just need to sell the fact that lower house prices are a good thing for most people. For anyone who doesn’t own a house, lower prices are good. For everyone who owns only one house lower house prices are largely neutral to their direct circumstances, but good via the benefits to the wider economy.

    There seems to be a meme that goes: if you own a house, lower house prices are obviously bad. This is pretty much nonsense for most people.

    • Ad 10.1

      Best of luck with that.

      75% of our debt is private and it’s real estate.

      Every % increase in capital value is either leverage up the great real estate rat cycle of happiness, or a year closer to selling up and out to an earlier retirement.

      Superannuation used to be the political third rail. Home ownership is the new their rail in politics. And it requires perpetual price increases.

      • bad12 10.1.1

        i still fail to see how the Government building any amount of houses will lower the price of existing houses,

        None of the houses proposed to be built will be initially sold into the market so these houses will simply serve to take away part of the demand particularly in the Auckland housing market,

        There will still be sufficient demand from those who are upwardly mobile and those buying rental investments and removing from the equation first home buyers at the most is only likely to slow down the time it takes to sell a property…

        • swan 10.1.1.1

          bad12,

          “i still fail to see how the Government building any amount of houses will lower the price of existing houses”

          “these houses will simply serve to take away part of the demand particularly in the Auckland housing market,”

          You have answered your own question. And if you make an impact in one segment of the market, you will indirectly affect the whole market through substituability. Aaron Schiff expains that concept very elegantly here:

          http://aaronschiff.net/2013/08/something-that-cannot-carry-on-must-eventually-stop/

          • bad12 10.1.1.1.1

            Are you suggesting that current home owners who have gathered over a period of years a substantial amount of equity in their current property are not going to keep ‘climbing the property ladder’, leveraging themselves into what they see as bigger, better, flasher home in a ‘better’ suburb,

            You will also have to be suggesting that the middle class love affair for the second and third property as a rental investment is suddenly going to come to a halt,

            None of the above is anywhere near the reality and as the proposal is that the Government who build the affordable housing will be selling these homes directly to the new owners presumably by way of ballot such housing will not in the first instance not be any indicator to the market on pricing of existing stock,

            Why exactly then would the price of a recently built 200m Whenuapai dwelling suddenly fall when everything the Party’s proposing building the affordable homes has said would indicate that the ‘plan’ is to build 100m dwellings which if they are smart they will sell on condition of the Government having a buy back option based upon sold price + equity,

            The effect on the Auckland market of such a Government build i would suggest is that property will become a little slower to sell, and the odd ‘bargain’ will pop up in the market caused by sellers for whatever reason ‘having’ to sell…

      • swan 10.1.2

        Ad

        “Every % increase in capital value is either leverage up the great real estate rat cycle of happiness,”

        But that’s the thing. Rising house prices work directly against people trying to upsize. If you have a 400k house and you want a 700k house, you need 300k extra debt. If prices go up 10%, you suddenly have a 440k house, but the house you want is 770k, so you need an extra 30k. You are worse off.

        “or a year closer to selling up and out to an earlier retirement.”

        You are right about those downsizing, but I think this is often overstated. Someone downsizing has to basically move out of town to somewhere cheaper – either that or move to a cheaper suburb or into a very small unit. Basically you need to make a very significant jump downwards for it to be worth it (once you account for the costs of selling, moving etc). People often dont want to do that when they retire, so they dont get any benefit.

        • bad12 10.1.2.1

          You may correctly see the step up the property ladder as debt but the great swathe of the middle class currently playing this game of monopoly do not really consider this,

          i know someone with a 500 grand home and 2 rental apartments in the city, last time i talked with Him his ‘debt’ was close to being a million bucks,

          He tho doesn’t consider the debt at all, in His mind He is sitting on a million dollars of assets…

  11. xtasy 11

    This talk about the great danger of a house price collapse and equity wipe-out is vastly exaggerated. Tolerable adjustments have happened in a moderate way in the years following the tail end of the 2007/2008 boom of the real estate market already. Indeed the ones that would likely suffer most would be the very “investors” and “speculators”, as most NZers will continue to do all to just buy and pay off their own homes to live in.

    If some people over-leverage with too much debt on overpriced homes, of course some will be forced to sell and lose, but they would face lower other homes they can then buy, as the reduction in prices will likely go across the whole price range of homes. There is already a kind of bubble developing, and any economic slow down can already upset the market and lead to a downturn and price reductions.

    I would not feel too much pity for the investors who already have portfolios and enough cash and credit to expand these. Them going bust or losing out a bit will hurt themselves and their banks more than the average home buyer.

    As we saw overseas, the government could step in with some measures and bail out banks, but as the Australian owned banks here are much healthier than many overseas ones, few will face serious dangers.

    In any case, as long as migration and overseas buying continues, there will be continued demand, and existing house building is years behind meeting demand. To actually have a collapse of the whole market seems unlikely at present, and for the near future. The Reserve Bank has already announced higher interest rates to “cool” the markets, so there is already intention to slow price growth.

    This is all just more of the panic creation by the government and stakeholders involved, who rather want things to carry on as it is, and have their pockets filled with endless book value money, which can though be wiped out by many other “crisis” any time.

    The home building plans by Labour and Greens and Mana are targeting first home buyers, and will only catch up with demand that is pressing. There is also need for low end social housing, of better quality than what exists. The higher end market will be little affected, that is the 3 to 4 brm “plus” large homes, that presently are preferred by NZers returning from OEs, by some well cashed migrants and overseas investors.

    Do not fall for all this panic, same as was tried with the policy release of the one state agency electricity buyer, to supply various retailers.

    Sadly Metiria is not an economic whizkid. If Russell Norman had been there on The Vote, he would have handled it very differently.

    • McFlock 11.1

      Agreed.

      The thing about economics is that although the ideal is that any change does not worsen the outcome for any actor (e.g. in the market both buyer and seller “win” from the transaction. Theoretically. I know, I know…), in practise there is a conceivable “loser” for almost any policy change described. So the standard tory playbook when responding to left policy is to wank on about a theoretical loser and ignore the far greater number of peope who are helped by that policy.
      Funnily enough, they do the same thing for their own policies – wank on about the few people who might be helped, and ignore the far greater number of people they’re kicking in the nuts.

      • swan 11.1.1

        “So the standard tory playbook when responding to left policy is to wank on about a theoretical loser and ignore the far greater number of peope who are helped by that policy.”

        I dont think that playbook is restricted to the “tories”. The left seems to go on about losers from welfare enhancing policy all the time. (eg free trade, less prohibition of land development, eradicating price floors in the labour market etc.)

        Not sure why we are talking about UK politics though…

        • McFlock 11.1.1.1

          same hat, different country.

          The difference is that there are almost always more poor people than rich people. So the left is almost always pointing out the effects for the majority of people (be they winners or losers), not just being obsessed with the welfare of 0.5% of them.

  12. xtasy 12

    What makes me damned furious are those landlords, who may owe little or perhaps a fair bit on mortgages, for the homes they rent out in Auckland and Christchurch. They are “creaming” it at present, as interest rates are comparatively low for NZ conditions, so they have less to pay off, but can charge as much rent as the market can demand.

    That gives them a very easy way to pay off debt rather quickly, and at the same time have their property values increase substantially.

    Auckland and parts of Christchurch have largely become a landlord’s and speculators paradise. These are the ones very happy with values going up and up, and having heard Metiria Turei make an “apology” to basically “calm” such person’s nerves, that really shocked me.

    Metiria get some extra lessons in macroeconomics perhaps, as it is all more complex and less straight forward as many think. Booms are followed by busts, and any larger home building policy will at least slow price growth, if not lead to some moderate decrease in prices in at least the lower end of the market.

  13. Ad 13

    My general struggle with both the Green and Labour policies is that they look at simply building places for families.

    I think we need to rebuild our cities and towns. To me that means integrating great design, energy efficiency, public transport, integrating schools and police and water and health and fitness. All stuff that makes for a good life. A civic life.

    Labour used to presume that it could plan whole towns. Some elements of masterplanning with the full integration of local and central public services and amenities still remain, but very few.

    It’s a task worth doing, and we need the commercial, governance, and Public Works Act instruments to do that.

  14. Treetop 14

    Did anyone else hear Garner say on 3rd Degree that only 1% of land was occupied in NZ?

    If so

    Why is the cost of a section in Auckland, Christchurch and Wellington so much?

    • Colonial Viper 14.1

      That’s the 1%. Not many people want to live in Dannevirke or Winton you see.

      • Treetop 14.1.1

        Because there is no work and it is too expensive to purchase and run a car when a client of Work and Income.

        Did you see earlier in the week that in Richmond parking was free and in Nelson it is $1 an hour and some people shop in Richmond 10 minutes away when in Nelson because of no parking fee?

        • Greywarbler 14.1.1.1

          The usual wisdom is that it costs to go some kms to escape parking fees, so a case could be made that it’s futile. But then there are outlets offering cheaper cuts of meat and vegs on the way, and because parking is free in Richmond then there are no nasty surprises of $40 over-parking tickets. Which spoil your day, when you have lost track of time and find one on the window. Bus to Richmond is over $2.50 from Nelson, not sure how much – so return would be at least $5 a day if you had to go there to look for or get work.

  15. Greywarbler 15

    Because the wealthiest 1% have monpolised ownership of it. A strange form of yin yan.

    • Treetop 15.1

      I have been trying to feng shui my home lately. Yin is stagnant energy, Yang is flowing energy. So 99% are languishing out there when it comes to affording to purchase a section in the three mentioned cities.

  16. Neoleftie 16

    A slave owner I once slaved for bought a block of farm land for a solid price, waited a few years, developed that said land in subdivision, landscaped, roads etc by another of his setup companies and then flogged off 400 sections over the space of ten years at $90k to $250 k a section. In the process inflated the land and section price by both controlling demand and supply by mimicking same pattern as California in the 60’s. point is simple labour uncoordinated and divided by the rise of consumerism and individualism will always be weak and poor.

  17. Sable 17

    The value of NZ homes is actually quite high when compared to many other countries so an adjustment in values should not really make as much of an impact as people might think. I think house values should hold up quite well even if Labour’s housing vision is implemented.

    It should also see more money injected into the economy as people feel more confident about spending with house prices becoming more reasonable. It may even lead to upward mobility which could boost house prices over the longer term too. Especially properties where people have added value.

    • Colonial Viper 17.1

      People who have owned their homes for at least 10 years have experienced massive growth in their home values, growth well beyond the long term trend, and it is time for them to give a small amount of those gains back.

      The problem will be people who bought much more recently, say in the last 3-4 years. They could easily end up underwater from where they are at now.

      However I think this situation which will be manageable, and doesn’t preclude making homes more affordable for all.

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