Open mike 22/11/2020

Written By: - Date published: 6:00 am, November 22nd, 2020 - 66 comments
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66 comments on “Open mike 22/11/2020 ”

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  1. Jester 1
    22 November 2020 at 9:22 am

    Shamubeel Eaqub wrote an article a few years ago saying it was better to rent in Auckland than buy. Considering he went out and bought about a year later, I wonder if he still stands by that advice?

    In ten years time with Aucklands population set to increase, the median house price will probably be getting close to $1.5m. IMO now is a good time to buy (assuming you can get a deposit which is the hard part as interest rates never lower). I do not see the supply of new housing being enough for the next few years.

    • dv 1.1
      22 November 2020 at 9:31 am

      UNTIL the interest rates drift up to 5%, 8%.

      • Chris T 1.1.1
        22 November 2020 at 9:46 am

        At which time we will see a lot of screwed young people and cheaper houses

        • KJT 1.1.1.1
          22 November 2020 at 9:59 am

          Then watch younger low income people, who have scraped up enough to buy, having to sell.

          • Chris T 1.1.1.1.1
            22 November 2020 at 10:13 am

            They won't have a choice tbh.

            And it won't even be their own fault.

            Let's say a couple put a 200k deposit on a 1,000,000 house.

            At the moment they are paying (If we go for a rough 3% interest)

            They have to pay $1,745 a fortnight

            When it it inevitably moves to 8 or 9%

            $3,089 a fortnight or $6,714 a month.

            Banks say sorry, but we are selling your house.

            • mac1 1.1.1.1.1.1
              22 November 2020 at 10:17 am

              Why do you say that interest rates will move to 8-9% and in what time frame? Why 'inevitably'? What's the cause of this inevitability in your opinion?

              • Chris T …
                22 November 2020 at 10:25 am

                Because they will. Depending on inflation etc. It is just a cycle.

                Weirdly and I am no mortgage advisor, so might be wrong, but no one seems openly to tell young people about risk.

                [Re-sized image to fit into window]

                • Pat …
                  22 November 2020 at 10:41 am

                  I think the young are told, but its one thing to be told and another to understand…and there is the factor of immediacy, the future will take care of itself (or optimism) and the (mistaken) belief that 'the gov' will always step in to assist.

                  And then there is the spruiking

                • Phillip ure …
                  22 November 2020 at 10:54 am

                  Could someone with more knowledge of this subject please explain why that precipitous drop in 2008-2010 happened..?…with the obvious follow-up questions of could it go up again as fast…?…and what would the circumstances be that would cause that to happen..?

                  • Pat …
                    22 November 2020 at 10:58 am

                    GFC… yes…inflation

                  • Chris T …
                    22 November 2020 at 11:06 am

                    It is a bit of an unknown tbh and not all in the NZ govts control.

                    Massive inflation can cause massive rises.

                    Something happens with global corporates and stocks, which is all an unknown.

                    It is one of those things you just have to watch and hope nothing ugly happens, you have no control over.

                    I remember when my solo mum was trying to pay for her house by herself and it was like 19-20% or some other stupid rate.

                  • Craig H …
                    22 November 2020 at 3:09 pm

                    GFC caused banks to tighten the screws on mortgage lending significantly at a time when finance companies and other non-bank mortgage lenders were going under, so a lot of forced sales when there weren't as many qualified buyers.

                • Ad …
                  22 November 2020 at 11:07 am

                  Who here thinks they have $60,000 a year income to retire on?

                • Herodotus …
                  22 November 2020 at 11:30 am

                  Should inflation mean that interest rates increase pay rates would follow to compensate. Though I must note pay rates follow inflation so the worker does lose out, those holding assets benefit AGAIN with assets appreciating faster than pay.

                  thenonly time I can recall this not happening was proceeding the GFC when mortgages were 10% and pay increases were marginal, but we had massive net migration into Auckland then

                  • Pat …
                    22 November 2020 at 11:34 am

                    who controls interest rates (in most circumstances)?….central banks

                  • Chris T …
                    22 November 2020 at 11:39 am

                    Which won't happen with the govt raising the minimum wage to 20 bucks, the sick pay thing and companies trying to deal with covid.

                    I think you can write off pay rises to your average worker for a lot of years

                    • Pat …
                      22 November 2020 at 12:18 pm

                      It depends …if the RBNZ can keep the ponzi scheme afloat long enough then there is a possibility the asset inflation will force wage/consumer inflation, but as you note there are counter forces…but if they are unable to maintain the asset prices (or offshore events) then we could expect deflation….and ultimately there will be deflation at some point as the debt is unsustainable but the question is can it be propped up one more time?….personally I think not for very much longer when you look at the amount of debt being added and interest rates at zero in much of the world.

                    • KJT …
                      22 November 2020 at 10:07 pm

                      Many workers locally already getting pay rises. As employers cannot use the standard response, of bleating for more cheap labour from overseas, at the present time.

                • Drowsy M. Kram …
                  22 November 2020 at 1:08 pm

                  Have mortgage rates in NZ ever been as low as they are now? Going by that nice graph (@10:25 am), not during the last 56 years.

                  Given the low (~1%) and very flat term-deposit interest rates that major banks in NZ are currently offering (basically no difference between 1-year and 5-year terms), maybe interest rates won’t rise anytime soon.

                  Heck, maybe the mortgage interest rate cycle is now longer than the 25 years it might take to pay off a mortgage. For example, the 30-year fixed rate mortgage average in the US has been falling since it last peaked (at ~18%) in the early 1980s (and falling from 7% over the last two decades), Japan's mortgage rates haven't been much above 4% since the mid-90s, and except for a short-lived spike in 2008, even Australia's mortgage rates have been below 7% for ~25 years.

                  It is difficult to make predictions, especially about the future.

              • aj …
                22 November 2020 at 3:38 pm

                A rise in interest rates can now only occur if there is massive wage inflation at the same time. It takes no brains to work out that any significant interest rate increases when the world is flooded to the top of the mast with debt, that increasing interest rates to even 5-6% would result is widespread debt default.

                Debt that cannot be paid, won't be paid.

                • Pat …
                  22 November 2020 at 3:50 pm

                  which may be defaulted without an increase in interest rates…its taking some pretty serious measures currently to avoid it…..and many of them have just expired or are destined to shortly.

            • WeTheBleeple 1.1.1.1.1.2
              22 November 2020 at 10:21 am

              Modern day land grab aka how to put poor people back in their place.

              I don't get how people can take large sums of low interest money without long term fixed rates, especially when prices are so exorbitant. A scenario exactly as you wrote is staring them in the face.

            • Drowsy M. Kram 1.1.1.1.1.3
              22 November 2020 at 10:30 am

              "200k deposit on a 1,000,000 house" = 800k mortgage.

              Serviced at 3% interest = 800k x 0.03 = $24k mortgage payments per year, or

              ~$923 per fortnight, not "$1,745 a fortnight"?

              • Chris T …
                22 November 2020 at 10:32 am

                I'd bother to point out the obvious, but feel you need to work it out yourself.

                https://www.westpac.co.nz/home-loans/calculators/mortgage-repayments/

                Hint.

                You actually have to pay it back.

              • alwyn …
                22 November 2020 at 10:39 am

                You are correct if you have an interest only mortgage which means you are never actually going to pay for the place and will never own it.

                Banks don't really like providing that sort of mortgage for people who claim to be buying a permanent home.

                The numbers given are correct for a 25 year mortgage at 3% and actually plan to buy the place.

                Edit. I see that Chris beat me to it.

              • Chris T …
                22 November 2020 at 10:48 am

                Sorry.

                Re-reading that post I probably came across as a bit blunt and a prick tbf.

                Basically by your calculations yes you are correct and are paying the interest.

                But you are not paying off the 800k the bank owns on your house.

                So the bank is basically the majority owner of your own house.

                So unless you are paying off the 800k you are kind of just paying rent to the bank to live there.

                And if interest rates suddenly rise, which is inevitable, going by historical trends, the bank still owns 800,000k of your house and if you cant afford the interest rises, they will say. "Tough luck mate. We still love you as a customer, but as we own 80% of your house we have decided to auction it. Please move out by next month"

                If it helps we can give you a credit card at 19% interest.

                • Phillip ure …
                  22 November 2020 at 11:07 am

                  Would this be an opportune moment to note/remind that the word mortgage comes from the french language..it's literal translation is 'death-grip'…

                  • Gyrogearloose …
                    22 November 2020 at 12:24 pm

                    Good laugh for the day !

                    Looked it up and got slightly different translation

                    "You’ve undoubtedly heard the word “mortgage” thrown around a million times. But you may not know that in the literal sense, it is defined as a “death pledge” in the French language.

                    Ironically, the French don’t actually use the word themselves (they use hypothèque, while Spanish speakers use the similar word hipoteca).

                    Broken down, the mort part (pronounced more) means death and the gage part (pronounced gahj) means pledge."

            • Incognito 1.1.1.1.1.4
              22 November 2020 at 12:02 pm

              House buyers and banks always bet on the House and the House usually ‘wins’.

              Let’s take your example and assume they fix for 3 years for a Loan Term of 25 years. After these 3 years, they can no longer service the mortgage for whatever reason and are forced to sell. Over that period, they’ll have paid $69,093 in Interest to the bank, which is their ‘loss’. They’ll also have paid $67,480 in Principal, which they’ll ‘get back’ upon sale. So, their house would need to have increased in value by $69,093 to ‘break even’, which is an annual increase (appreciation) of 2.25% over the 3 years. This does not take into account one-off costs incurred such as moving costs, real estate agent fees, lawyers, loan fees, etc. Also, in real dollar terms they’ll go backwards although inflation is quite low. If they sell the house for more than $1,069,093, they’ll come out in ‘positive territory’, more or less. Seems doable.

              During that time, they won’t have to pay rent, only insurance and general upkeep of the house, which they can call ‘theirs’ for the time their name is on the Title.

              The interest cost averaged over 3 years equates to $441 per week or $883 per fortnight (with some rounding).

              • Chris T …
                22 November 2020 at 12:11 pm

                And which means they will end up with luck, their 200,000k and by then not enough for current deposit for another house.

                • Incognito …
                  22 November 2020 at 12:26 pm

                  They’ll end up with $267,480 if they sell at what they paid for it. But that’s just from the sale, as I explained.

                  Over the year to October, the median Auckland house increased in value by $140,000. Awkward.

                  https://www.stuff.co.nz/business/opinion-analysis/123456016/ardern-should-cash-in-some-political-capital-to-intervene-in-housing-market

                  It seems my estimated increase in the value of their house at $69,093 over 3 years seems a tad on the ‘conservative’ side, shall we say 😉

                  • Chris T …
                    22 November 2020 at 12:32 pm

                    Which means they have to pay that much more if they want another one in deposit.

                  • Jester …
                    22 November 2020 at 4:55 pm

                    And I wonder how much rents would have increased over the years until they sell?

                    Still better to buy IMO.

                  • Jester …
                    22 November 2020 at 8:02 pm

                    "Why do you think it is better to buy than to rent?"

                    I've always thought it better to be paying towards eventually owning than paying rent and effectively paying some one else's mortgage. In example above: $1m house; Couple have $200k deposit and $800k mortgage. Should be able to get 2.65% with bank (or less at moment and rates likely to fall again next year as Reserve bank talking possible negative rates). Paying P'pal and interest weekly is approx $840 a week, whereas you could easily be paying $700 -$800 in rent per week. I would rather pay the bit extra and get on the ownership ladder (assuming couple can afford the higher mortgage v rent payments).

                    • Incognito …
                      22 November 2020 at 8:15 pm

                      Ta

                      Is “the ownership ladder” a euphemism for tax-free CG, by any chance?

                      I think many people would rather live in something they can call ‘their own’ even though the bank tends to co-own it. In Europe, tenancies can be very long-term and tenants treat ‘their’ rental as their own; very different attitudes over there compared to over here.

              • Chris T …
                22 November 2020 at 12:14 pm

                You also have to add-in the amount they still have to be paying in interest, they can't before the house is sold.

              • Gyrogearloose …
                22 November 2020 at 1:38 pm

                Unless you lumped rates under general upkeep there is thag vist too.

                I live in rural SI. No sewage or rubish collection. Rv $750k rates $3000

                What are rates for a $1m house in Auckland?

                • Andre …
                  22 November 2020 at 2:00 pm

                  Looking at the formulae on my rates bill, on a $1million house the annual rates would be around $2500. Of that, $141 pays for recycling and other general waste services.

                  Household rubbish is charged separately at $4something per 120litre wheelie bin. Water and wastewater are charged separately at $231/year for the connection plus $3.75 per cubic metre for the water (nominally it's $1.59/cubic metre for the water and $2.16 to take it away after it's been filled with piss and shit).

                • Drowsy M. Kram …
                  22 November 2020 at 2:15 pm

                  Don't know about Auckland, but in Palmerston North my annual rates bill (based on a Land Value of $355,000, and not including the $416.18 Regional Council annual rates bill) is $3,308.19. PNCC does take sewage and rubbish away though.

                • joe90 …
                  22 November 2020 at 2:18 pm

                  GV of $695k in a provincial NI city paying $4500 in reg/dist rates.

                  No water/sewage/footpaths and user pays rubbish collection.

                • Incognito …
                  22 November 2020 at 3:32 pm

                  Ah, yes, rates. How could I forget the rates, the final nail in the coffin of each existing and aspiring home owner?? What was I thinking?

      • Jester 1.1.2
        22 November 2020 at 4:42 pm

        Do you really believe the interest rates will get to 8% within the next 10 years?

  2. joe90 2
    22 November 2020 at 12:06 pm

    ACDC's never going to sound the same again.

    https://www.instagram.com/p/CHteLWYBzrg/

  4. R.P Mcmurphy 4
    22 November 2020 at 1:59 pm

    I dont give a tinkers toss about cars, houses, accumulating consumer goods or fulfilling my destiny by going somewhere exotic and coming back. What I care about is the freedom to smoke a joint without the door being bashed in or the neighbours narking. I beseech everybody to use the break to write to their mp's and asking them to do something about the inequitable laws at presented enacted to criminalise and imprison otherwise innocent people. I know there are some sanctimonious, self righteous reactionary members of the NZLP caucus but they must be neutralised and not allowed to impose their views on the rest.

    • mac1 4.1
      22 November 2020 at 6:49 pm

      'allowed to impose their views on the rest."

      R.P. Mc, the majority spoke on the marijuana referendum. It voted against. BTW, I voted for it- the arguments persuaded me, though I am not a user.

      The majority imposed its view. That is what happens with referenda.

      Would it have been better tactically to have sought decriminalisation?

      Did all that supported legalisation and were entitled to vote in the referendum do so, especially amongst younger voters? There's a lesson in citizenship there.

      • KJT 4.1.1
        22 November 2020 at 10:14 pm

        referenda like this would work better if a range of options were presented and could be rated, like STV.

        I suspect many who voted against, were against total legalisation. Not necessarily decriminalisation of usage.

      • R.P Mcmurphy 4.1.2
        22 November 2020 at 10:50 pm

        1,000,000 people saying 1+1= 3 does not make it so. there should never have been a referendumb in the first place.

  5. Ad 5
    22 November 2020 at 7:07 pm

    Jane Barnes is a preschool teacher who was bullied out of her job.

    She had been a teacher for 23 years, until a new manager came along and basically ruined her life.

    https://www.stuff.co.nz/national/education/123466658/victory-for-bullied-kindergarten-teacher-after-more-than-five-years

    She won $100,000 plus some costs. That's just for the entitled sick leave.

    There's no way it will rebuild her life as it ought to have been.

    The Canterbury Westland Kindergarten Kindergarten Association, the Manager who bullied her, and the HR Manager Karyn Willets (quoted in article) should simply be required to pick up rubbish for the rest of their professional lives.

  6. Pat 6
    22 November 2020 at 8:00 pm

    "Premier Gladys Berejiklian wants to use a third of the state's hotel quarantine slots to bring in international students and skilled migrants, starting in as soon as six weeks, in a move that would cut the number of overseas Australians able to come home through NSW."

    https://www.smh.com.au/national/nsw/berejiklian-and-morrison-split-over-return-of-international-students-skilled-migrants-20201120-p56gj2.html

    Pressure mounting