By Bernard Hickey
Prime Minister John Key has agreed with Housing Minister Nick Smith that Auckland home owners should expect flatter house price inflation for some time as the house price to income multiple measure of affordability improves from a multiple of around seven now to the Government's new target of around four.
Key rejected the idea that the improvement in affordability could come through a fall in prices.
Smith revealed the target for an affordability multiple of four on the Q+A programme yesterday. The REINZ Median House price for Auckland was a record high NZ$637,000 in March, implying an household income of about NZ$91,000 if the multiple was seven as stated by the Minister. To get that multiple back to four would imply house prices remaining flat in Auckland for 19 years with average annual wages growth of 3%, as is currently the case. Or it would imply house prices dropping 43% for the multiple to be rectified, or a combination of both.
"It's unlikely there'll be falling prices. In my view what you're likely to see is a flattening out of those increases. The Government's view is a modest increase in house prices makes sense. Rapidly escalating prices are not good for anyone," Key told his weekly post-cabinet news conference.
"They're not good for existing home owners because in the end they're likely to create a bubble. They're certainly not good for those wanting to get into the market," Key said.
Key said Labour Leader David Cunliffe had been disingenuous when talking about taxing rental property investors, given the Inland Revenue Department had already ramped up its efforts in recent years to tax the trading income of property traders. He said the IRD had collected hundreds of millions of dollars extra in tax from property speculators.
Key repeated his comments from last week in saying foreign buying of homes could be less than 2% of total buying and may actually be zero once sales by non-residents were taken into account. He repeated previous comments that Australia's house prices were rising in line or faster than New Zealand's price, even though Australia already had a broader capital gains tax than the one proposed by Labour and restrictions on non-resident buying.
"Those things don't fix the problem. In the end it's a supply side problem, not a demand side issue."
Key also downplayed the prospect of more investment in New Zealand property by investors from China once China eased its capital controls to allow more foreign investment by individuals.
"They may over time look to invest more, but there's arguably plenty of places they'd rather invest than necessarily New Zealand. You'll see some investment from overseas in residential property, but I don't think it's extreme by any stretch of the imagination at this point," he said.
Key said those who argued better data was needed on non-resident ownership of property were making a credible argument.
"It's not strait-forward. It depends on the structure that someone's buying that property with. It dpends on their intentions. On the best data we can see, much of which is anecdotal, the majority of offshore buyers who buy a property in New Zealand buy it because there is a fairly close connection in New Zealand. They intend to emigrate here. There is a family member living here. All of which boosts the economy in lots of other forms," he said.
"The big driving factor in Auckland is the number of consented properties has been far too small relative to the demand and Auckland's population is rising, both because of external and internal migration."
'Bring it on'
Asked if he sensed National's position on housing affordability was weak, Key said he was not bothered if the Opposition chose to focus on housing during the election campaign.
"I'd be more than happy to remind people that house prices doubled under Labour, interest rates went through the roof under Labour, they failed to reform the system under Labour, they allowed large development contributions under Labour, they didn't actually change the building regulations to make it more streamlined under Labour, they never had special housing accords as we did and they're opposed to the RMA (reforms)," he said.
"If David Cunliffe wants to have a bit of a chat on nationwide TV about it, I'd be more than happy to do so."
Meanwhile, New Zealand First leader Winston Peters issued his own challenge to Key for a debate on foreign ownership of housing and land.
“Any time, any place,” Peters said.
“Bring it on," he said.
New Council taxes downplayed
Key was then asked about Local Government New Zealand's launch last week of a review of how Councils raised funds, and whether they should have the power to tax sales or incomes, as well as property through rates.
"Generally speaking we're opposed to that. Our view is that it's the purview of central Government to be able to raise taxes in those forms and the local government can raise its revenue, either through rates or where there's a special levy that's appropriately applied like a development contribution," he said.
"My concern would be if you started to seeing ad-hoc bed taxes and sales taxes being applied by local government, they would naturally add cost to the economy and make us less competitive, and we'd need to see a really good justification for why they need so much extra revenue that they can't currently raise through the rating base."
Asked about the justification given by LGNZ that ratepayers were ageing and would be asset rich, but income poor and therefore unable or unwilling to pay for the higher costs of new infrastructure through rates, Key said: "I think that's a bit rich. At the end of the day there are plenty of mechanisms for dealing with that. They can have a lien against property. They could defer taking their rates. They could have reverse mortgages. There are plenty of ways they could extract their pound of flesh at a time when cashflow is not such a problem."
(Updated with Peters' challenge to Key for a debate on foreign ownership.)
54 Comments
3-5 years of flat auckland prices is my pick to. Secondary cities might see 20-30% value increases over this time as increased interest rates squeeze aucklanders into the more affordable markets, or more likely, investors into more rational and higher yielding markets.
Buying a stand a lone home in auckland today, you'll pay 600k, have the best part of 500k mortgage.
500k mortgage = $576 a week at 6% int plus 100 a week for insurance rates and mainenance = $676 (pure expense, not including any extra principle which will need to be paid on top)
In a years or 2 time at 8% numbers become $770 a week plus 120 for insurance, rates maintenence = $990 week. (pure expense)
Over 5 years, asuming rates peak at 8% (they went to over 10% last cycle) you will have paid over $200,000 ( $257,400 is ave 8% over 5 year period) of expenses for the privilege of owning your own home.
If the price remains flat over this period, then this expense can be directly compared to the rent you could have been paying: 257,400/(5*52) = $990 week rent per week on average to be in the exact same position.
I would be not be paying these sorts of prices for auckland property myself. I would look to rent/flat for as cheap as possible, id consider buying something around 200k worth in a farming province, or invest in foreign stocks (mainly US) taking advantage of the high NZD so if it has a sharp correction you make money, and if the global ecomony continues long slow grind higher, you'l still make money.
Ps: forgot to include the opportunity cost of having 100k tied up in a deposit for the 5 years. Approx $20,000 cost there (that you could have made via compound interest in a bank/term dep). Add that onto the $990 week expense and you get $1066 week expense.
What a wonderful way for a Prime Minister to refer to local government taxation as "extract[ing] their pound of flesh.."
I wonder if he'd use the same language when speaking about his own taxation policies. You know, like for the GST rise .. "Dear New Zealanders, we raised GST by 2.5% because we needed to extract a much larger pound of flesh from you".
Charming.
Huh?
The phrase comes from Shakespeare's Merchant of Venice and refers to a lawful yet nonetheless unreasonable recompense/compensation... "Tis mine, and I will have it [that pound of flesh]" was Shylock's famous line.
Or perhaps you understood that and think Key means to say that the council's will have the pensioners housing assets 'come hell or high water' (original unknown, I believe).
My point is, JK should not be denegrating local government's need for taxation - the vast majority of their expenditure is on essential infrastructure (stadium projects excepted).
I'd rather look at the book and tirm the fat on local government.
how many auckland council employees are in the 100k club? 1,510 as in 2013, increased by 20% in 1 year. almost every 1 in 6 council staff earns over 100k.
113 council staff earning over 200k
council debt 6.7 billion, double that from 2010. wages along costing over $700m a year.
good managment you say? how many work on "essential infrastructure" they did for that price?
You can look at the book and suggest ways to trim the fat - it's called an Annual Plan process and you just need to look at the line by line detail and let them know what you don't want.
Take libraries, for example. Quite expensive to run from both a consumables (new/replacement books etc.) as well as a capital assets (buildings to house them all over the place) point of view. A reasonable level of staff as well (picking up from drop off points, categloguing, returning books to shelves, keeping the place tidy etc).
My guess is if you just get rid of libraries, you would save at least $350m per annum - that's half the entire wages bill you are citing.
Next you could get rid of the entire economic development arm/activities. Would likely save even more than the end of libraries on a per annum basis. These are mainly staff costs - folks writing reports about how the ratepayers money can be spent in making the city a more attractive place for businesses to flourish.
And the list goes on. All that is needed is some public consensus on what is not a core service that needs to go.
The spellchecker must be partly underwater ... I guess it could've been strait-ford? dpends?
Anyway, John Key cannot complain that Labour "allowed" development contributions. With six years of National, DC's are the highest they have ever been and are now totally out of hand, being as much as 60% of the value of land in some parts of ChCh. DC's are up from around $3000 per site in 2000 to around $40,000 per site today. National have done NOTHING about it.
Talk of prices in Central Auckland returning to four times incomes is pure fantasy.
Prices will increase and increase and increase well beyond 4 x income for the foreseeable future. In the late 1990s Charles Drace (who? he made headlines at the time) published a book predicting house prices to fall 40% in NZ - they rose over 100%, in 2008 a man named Bernard Hickey predicted prices would fall 30% again they rose, so far by about 20%.
Much of the gains in certain suburbs such as Grey Lynn, is from "gentrification" and not typical of the entire city market. For instance an unrenovated villa in Grey Lynn has increase about 300% since 2000, whereas a townhouse in the Eastern Suburbs of Auckland may have only increased 50 to 75% over the same period. Hence price increases are due to a huge number of factors and any expectation of prices returning to 4x incomes simply because that is what someone wants them to be is nonsensical.
While there is excess immigration to Auckland, and while the city is focused on its centre there is no chance of prices becoming rational during the lifetime of most readers unless ... an eruption or similar occurs...
Chris J I like your comments, they seem to come from someone with real experience and facts.
I don't have a problem with a measurable target for housing affordability, although the target should be 3x medium household income. I think the target should go to local authorities and the NZTA because they have a bigger influence over housing supply than the Ministry of Housing.
Again National are giving the appearance of doing something when in fact it is all "too little too late" to influence the market.
You can see how conflicted JonKey is about this issue. With his above statements -saying Auckland house prices will 'flatten' (yeah right!), that if house prices stay flat and incomes rise, then after 19 years Auckland would have affordable 4x income housing. Then saying "the Government's view is a modest increase in house prices makes sense." Which means what -incomes going up 3% while house prices go up moderatingly, is that 1-3% like the general inflation target?
What is the maths on how long to reach housing affordability with modest house price increases -30 years? 40 years? more?
yep... the Nats and Key have misjudged two big issues. One being housing, the other being the enviro/climate crisis.
They have an arrogant Minister in Birdges who signs off minning licenses without even understanding where they are....and what he signing off.......
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11235217
We have business people such as Mills who also seem to have had enough of the Key regime..
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11238187
....times up...
The "up yours" was delivered by Labour in the naughties where they:
Failed to control house prices;
Failed to keep interest rates low;
Blew the govn budget;
Made a massive increase in govn debt;
Consistently ran a deficit
did nothing to increase land supply.
In short all the problems we suffer today were created by the last Labour govn, to suggest Labour are the best people to clean it up is ridiculous. National are doing all the things now that Labour should have done 12 years ago.
Happy, I'm not sure if anyone takes you seriously, but it seems worth pointing out that:
Labour consistently ran a surplus, every year they were in power. So they didn't blow the budget. The Nats have run a deficit every year they have been in power and blown government debt back to close to where it was last time they were in.
On house prices, it was at least the global norm under the Greenspan put, for central banks to ignore asset prices. While the Nats have been in power, it has not been the global norm since the GFC. But Bill English deliberately avoided any chance to amend the Reserve Bank Act to allow for asset price bubbles here, or the capital flows that cause them. Labour had a defense. The Nats do not.
Interest rates have been low because the economy has been in recession; not because of some wonderful government management. Arguably they should have been higher earlier in Labour's term.
Got some stats/links for your claims on surplus and debt....
I've seen Labour supporters arguments regarding house prices before, "it was Greenspan", "it was central banks"... anything but take responsibilty. Why wasn't a housing accord signed under Labour? Why weren't LVR restrictions put in place under Labour? Why weren't stronger capital adaquacy requirements forced on our banks under Labour?
Trying to defend the Labour party defies logic.
See Government debt to GDP. Debt to GDP dropped progressively from 33.4% of GDP in 1999 to 17.4% in 2008. It then grew rapidly back to 37% in 2012, before coming back down a touch to 35.9% in 2013.
Or Government surplus or deficit. Labour ran a surplus growing from 0.1% of GDP in 1999, peaking then at 4.6% of GDP in 2005, before coming off to only a 3% surplus in 2008. National immediately ran a deficit of 2.1% in 2009, a negative 5% swing in a year. The deficit under the Nats peaked at 9.2% in 2011, before coming back down to a deficit of 4.4% and 2.1% in the last two years.
So, a surplus every year under Labour. A deficit every year under National.
Stephen - do you really think anyone (well I can think of a couple on here) really gives any credience at all to any comparisons on debt performance between Labour's time in Govt, when the world was operating in an unsutainable leveraged boom time, with the current Govt's period of the biggest financial crisis and recession globally in 80 years, plus with a Chch earthquake added into the equation as well. For God's sake, Labour just about had NZ in a recession well before the crisis, they performed so badly.
Again do you really think people are so stupid to listen to such absolute utter cr**p spoken on a blog where some of those people actual can think ? .
Grant,
Happy123 started this particular thread with the following ridiculous assertions:
Labour…
Blew the govn budget;
Made a massive increase in govn debt;
Consistently ran a deficit.
The last three could not be more incorrect. I merely pointed out the fact that if you started the sentence with National instead of Labour it would be a correct sentence, by a huge margin. It seems to me any political discussion is better informed using facts rather than myths. Castigate Happy for being too lazy or economically ill informed to do basic research that two minutes on Google would fix.
You now have come up with the usually trotted out extenuating circumstances, which for 2-3 years were partly valid. The Nats have been in for 6, and the excuses are getting tired. A fiscal deficit was I accept a good idea for 2-3 years, although tax cuts for the high income earners were a cynical and poor economic solution. Tax cuts in the lowest tax brackets would have been a far more effective solution. Adapting the Reserve Bank Act was a no brainer that Bill English was either too conservative, or somehow too beholden to some groups to enact. Pre the GFC our Reserve Bank was orthodox. Now it is an outlier. The world has moved on, for better or worse. Our people have not well explained why they have not adapted. Separately I don’t see too many Cantabrians on here congratulating the Nats for the detail of their response to the earthquakes, but maybe I have that wrong. Certainly they have spent some money, I'll give them that.
Stephen - ok I understand your comments as Happy was totally wrong in what he's said. However it still annoys me greatly when people start debating the debt performance of the Labour and National Govts when the economic conditions in which they both operated in at those times were about as different as I've seen in my life time....you simply can not compare so you do not know how one would have responded in either situation. The other thing that annoys even more is the "tax cuts for his rich mates" inane comments by some here. There is little doubt that lower corproate taxes encourage business to invest, and investing creates jobs. But if youre taking corporate tax rates down to 28% you simply can not have a 39% top tax rate, National had to move both for it to work.
I dont agree with the lower tax bracket move either. As one in the top 10% bracket I like many others rearranged my affairs when Labout took it to 39% - there is a level where you no longer think its fair and for me that was it. I have unwounded much of that in the past 3-4 years since that tax cuts and so currently Key is raising more taxes from me now comparitively than Labour did. But with that top 10% paying 75% of the tax take still now, and 50% paying no tax at all, both Govt's have probably rightfully seen WFF and housing support as their way of providing the equivalant of a better targeted "tax cut". Tax isn't the low paid's problem, income is.
The RBNZ Act, we will have our own opinions, but its been a godsend compared with what we had before we had an inflation targeting central bank - bloody high crippling inflation tnat hit the lowly paid the hardest. Change it, maybe, but I have not yet seen one example of someone with one that works betters, plenty that are different and worse, none better.
come on, that's a pretty weak excuse isn't it?
How can you defend Labour? Just because the rest of the world decided to be bloody stupid, you are saying that Labour is excused?
My point is this: A government has a responsibility to its citizens. They let housing DOUBLE in 5 years, and they made it bloody hard for their constituency (a lot of poor people) to ever get a house. We shouldn't forget that. Labour bleating about affordability now is too rich to believe.
Definitely support and have faith in returning house prices to 4x incomes, especially in the over-cooked suburbs such as Grey Lynn, Westmere & Ponsonby. An average household income of $120k will see an average 3-bed 2-bath Grey Lynn villa on 500 sqm land sold for 480k, benefitting our next generation. Win-win for all.
It's so funny how people in the near east suburbs get upset about the inner west being so much more desirable. Like that columist woman in the Herald. They think it's some law of nature that the inner east is reserved for the most exclusive and expensive suburbs - and how dare those scruffy westie suburbs usurp them in expensive and desirability etc. ('cos living amongst conservative oldies in beige houses is sucky?)
There is just as much wrong with being a sycophant of Right lies and innuendo as there is being on the Left. A similarity to the like minds of neocons and fascists in their beliefs and extreme dogma?
It is nicer to stay in the middle even if you have strong views to express.
Sounds like a case of he who smelt it dealt it, Happy. shifty suspicious eyes
How can I get on this paid-partisan-commenting gravy train, (assuming the whole thing isn't completely imaginary)? I'd rather stick needles in my eyes than join a political party, but I'm more than happy to write whatever nonsense they want if the price is right.
The Merchants of Venice, now resides in New Zealand (periodically).. to ensure that the pork rates keep the meat rates, well below the tax rates so that some can borrow at extreme rates to extract their currency rates, to offset the borrowing rates, determined by the exchange rates and the shipping rates, plus GST.
Some say Shakespeare was not the real author of the tragedies he produced.
But it is as true to day as the day it was written.
Some want their pound of flesh at any price. I call them a lot of names, but Shylocks will do.
Nothing more sure, than some wanting an arm and a leg, of your endeavours.
Nothing more sure than those who were the authors of our tradegy, and continue to edit and cut off their pound of flesh.
Read into it what you will.
Same idiots, same insanity, same ideology, nothing has changed.
RIP Shakespeare, more foresight than a bank economist.
Politicians and Bureaucrats need to be reminded of the following and ensure that they all meet the components of the Bill or Rights 1688. It is worth noting that the Universal Declaration of Human Rights also has these same basic Rights.
The rediculous LGA and funding problems would be in direct contravention to these Rights and the Bil of Rights 1688 in particular mentions the requirements of Parliament to:
Frequent Parliaments-
And that for redress of all grievances, and for the amending, strengthening, and preserving of the laws, Parliaments ought to be held frequently:
And they do claim, demand, and insist upon all and singular the premisses, as their undoubted rights and liberties; and that no declarations, judgments, doings, or proceedings, to the prejudice of the people in any of the said premisses, ought in any wise to be drawn hereafter into consequence or example, to which demand of their rights they are particularly encouraged by the declaration of His Highness the Prince of Orange, as being the only means for obtaining a full redress and remedy therein:
If all the people in Parliament abided by the Constitutional arrangements and redressed all grievances, keeping in mind the requirements of the ancient freedoms and liberties as outlined below and in particular pay attention to the last 3 Rights outlined in the list from Brits at their Best below then housing and it's affordability would not be an issue. The RMA is one of the biggest pieces of BS legislation that has created severe unaffordability.
Where is the equal opportunity component in NZ when we have a system where entities are protected over individuals? When one house attracts tax credits, when one house attracts interest deductions etc the equal opportunity Right has been eroded.
http://www.britsattheirbest.com/archives/004726.php
The English Bill of Rights repeatedly refers to ‘ancient rights and liberties’, ‘undoubted rights and liberties’, ‘the rights and liberties asserted and claimed’, ‘the true, ancient and indubitable rights and liberties of the people of this kingdom’.
So what were those ancient rights & liberties, so well known nobody wrote them down?
The right to be safe and secure against unlawful killing by your government
The right not to be tortured
The right not to be enslaved
The right to a fair and speedy trial with presumption of innocence (Habeas corpus and trial by jury)
The right to freedom of thought, conscience and religion
The right to freedom of speech
The right to freedom of association and assembly
The right to marry
The right to a private home and family life
The right to equality of opportunity
The right to peacefully enjoy one’s possessions.
Corruption has taken away many of those rights and bestowed more 'rights' on some, more so than others.
When you can fiddle the books as much as they do today, then you can get away with almost anything.
And do!.
Take being an MP and not turning up for work, not then not giving a fig who replaces them, but loved the pay, the pension, the mana, the audacity?.
Take a another who can borrow his way to his success at the complete expense of the 'taxpayer', then can rinse and repeat, wash away any expenses, any comeback and comes out the other end smelling of roses on a nice fat pension.
Who? were they working for.
Obviously, "time" does not allow me to continue.
So what you're saying Prime Minister, is that demand does NOT affect price? Are houses somehow exempt from the basics of economics?? And then to blame Labour for the current situation after being in government for almost two terms! Incredible. As for claiming that people buying houses here have a connection to New Zealand? Well, I've met people who buy and sell houses in New Zealdand to make profit. Their connection to New Zealand is that they buy and sell houses in New Zealand for profit.
His response is astounding, he appears out of his depth. It's a wonder his spin doctors are even letting him open his mouth on the issue!
VA - the PM is correct when he says there is a supply issue........which of course is affecting the demand side pricing levels. The PM is wanting to increase the supply side which would take the pressures off and flatten prices but it will take a lengthy period to achieve this.
I think a better line of questioning would be:
Why aren't all the Politicians working together to address the RMA issues that are known to restrict supply?
Have Labour, Greens, NZ First, etc shown support for the proposed RMA changes?
I would have to agree with you that many houses are being bought and sold for profit as the taxes that have been generated are significant. I would suggest that most of this tax generated has been from internal endeavours rather than external off shore investors as NZ has many tax treaties in place which would mean many off-shore investors do not have a liability to pay taxes here in NZ.
IRD has been in collection mode for a while collecting taxes from NZ Tax payers who have been actively speculating in NZ property but have not paid the appropriate tax. It would be interesting to see a list of tax years and the amounts of tax for each year that has been collected from these speculative endeavours.
Notaeconomist, you've hit the nail on the head, it's a supply issue and National is doing exactly the right thing in increasing supply to the market. Labour lecturing anyone on expensive housing is very much a pot calling the kettle black. The left like to ignore who created the problem in the first place and ignore thier own past failings.
Cunliffe will be eaten alive in his debate with Key, another shrewd move by National and another utter fail for Labour.
It is only a supply side problem because the demand side has been neglected.
Key/Smih/English see only the jaundiced supply issue.
At least three other partys recognise the demand side as an issue even if they do not have the data to support it, mainly because the Nats refuse to even try to collect the information lest it damn their argument.
BBlll - if you increase the supply side then the current pent up demand won't be there. If it turns out that foreigners have a love affair with NZ property as many posters think then increasing the supply would dampen their enthusiasm as their asset wouldn't be growing as fast or values might even go sideways and down sligthly if Politicians and Local Government ever got there act together and these two groups are notorious for holdong things up so don't see that scenario playing out.
If those properties are vacant (foreign owned) as some people are claiming and supply issues are met then those investors face a new dilemma if they are parking money in real estate and the value doesn't increase.
When claiming that the "demand side has been neglected".....are you referring to NZ'ers who can't get onto the house market ladder? Why would anyone want to dampen the demand side and not allow Kiwi's the right to buy a home?
If you are referring to Off-shore buyers then I think the issue would be to increase the supply side as I mentioned above.
If there are a lot of off-shore investors in NZ, they have invested in an asset class that is not very liquid as you can't bale out easily if there is trouble. The other issue is that if there is some kind of economic issue and our dollar declined then it would appear these off-shore investors would suffer a double whammy if they tried to bale with their cash if they were able to sell the house that is.
I have no argument with increased supply but at a much lower price v income.
No way will the present supply policy allow that without dropping standards.
Unlike you I believe the demand side can be quickly changed by pressurising holders who have only a passing interest if any in occupying their property. Yes that means foreigners and also tightening immigration rules until a balance is achieved
There is a supply issue because we have housing stock for a country of 4.5 million that is for sale to anybody in the world - there is unlimited demand. Is that what you're suggesting? That New Zealand should be a supermarket of houses for the rest of the world? Especially those that get 100% mortgages and super cheap interest? And what happens if we build a huge housing stock for foreign investors and then they need to withdraw their money and sell up?
I'm sorry but anybody that understands economics knows this is a huge problem. If it's being defended then it is because of self interest (profiting from the market) or ideaological reasons (mummy and daddy voted National).
VA - go back and read my post again. I'm not sure you understand supply and demand and investment. You are also not understanding that houses do not always achieve a fast sale especially in a bad market.
You need to think about the prices that investors traded into NZD as well.
What the heck is with your attitude by the way?
Mr Key is very used to what he says coming true, despite often significant opposition. I have been very impressed with his ability to talk things into reality. He is now trying it on with house values. I for one will be very interested to see how he gets on with this. Perhaps he could declare world peace within 20 years while he's at it and sort that out too.
"I'd be more than happy to remind people that house prices doubled under Labour, interest rates went through the roof under Labour, they failed to reform the system under Labour, they allowed large development contributions under Labour, they didn't actually change the building regulations to make it more streamlined under Labour, they never had special housing accords as we did and they're opposed to the RMA (reforms),"
Nail.......head
Get real everyone. You'd be nuts to think the Prime Minister or his cabinet have any significant say or control over the direction in house prices. The housing market is the most emotional self-reinforcing beast on Earth.
When he says it will take 20 years to correct - what else do you expect him to say? It would be political suicide to say he wants house prices to go down 30% - what about all those poor young families who did manage to get 20% together or snuck in before the LVRs - they would be destroyed. He can't say he hopes house prices continue to grow - because that too is unfair. So he went with the obvious choice - he hopes house prices still static and wages catch up. The fact it will take 20 years is basic and unfortunate math.
I'm not saying National's take on house price affordability doesn't annoy me massively. The government does have tools that can moderate (but not change) the rate of change in price growth. And it is irritating that Government has this toolbox and the answer to if they are going to use them or consider them is always no and they won't have much impact so won't bother trying.
Anyway - most of the tools in a Government's (ex RBNZs) toolbox are all pea shooters. Interest rates, offshore funding costs, net migration, LVR, emotion, and expectations of future price changes - they are the only things that matter and can ultimately change the direction of prices.
I've pontificated aboot Housing a lot over the years.
But thing is, it's a Gordian knot: not untangled easily or perhaps at all given current settings. Which include (as if y'all needed reminding):
- Councils, able until recently to extract large revenues for dubious spends (buskers, events, amateur redistributions) - have reached the political limits of rates and are desperate to Tax Other Stuff.
- The baleful legacy of the Brit Town and Country Planning fad. What them Plans have eventuated in is a classic economic cluster f..k. These bozos (or should that be Bozoes?) have managed the trifecta: pushing up land prices for all and sundry compared to raw rural land values, conferring real CG wealth increases upon the land-bankers and existing homeowners, and then taxing the resultant 'increase' in value.
- There's a ratchet effect in that homeowners with their feet on the Property Ladder, cash up any spare equity by either withdrawing and spending it (ATM-bolted-to-house syndrome), aided and abetted by bankaz and RE types (more $ value = larger revenue streams), or leveraging it into guess what - mo' property. Either way, a great disincentive to lower prices of any component.
And so on and so forth.
Picking this mess apart is gonna hurt a lotta folks, and so there's no political will to touch the festering mess in that sense.
But it's such a stink that populist flies and their big mouths are drawn to it like - well - flies.
Just recall the old mantra - how can ya tell when a Pollie is Lying?
Their lips move.
Might as well stir the pot some more.
Fiscal prudence has never improved in New Zealand, since last they were at the tip of the peak of income per capita.
Then they blew the lot, the section, the land, the whole shebang, because they did not adapt, just continually tried to outdo each other by borrowing more than they can ever repay, trying to be the big I am.
Sheepples every one.
Then Labour decided to play games with families. WTF I think it was called.
Then the ones who had saved a bit of coin were decimated by our illustrious Leaders and our penchant for a rate above the average, so some bright sparks, thought I know what, we can have a thing called Finance Companies with fancy names and start a ponzi.
And the Government let them, they even bestowed their cleverest and brightest idiots to participate.
So after the money all flew the coop, some bright spark, said we can sell the land and houses and the electricity to pay for our Old Age.
And here we end up today.
Still no real law, no real money, just scamming the unwary, all over again.
No SOE's , nothing but oversold houses to fiscal illiterates and un-wise men from the east, wisely looking for a safe haven for their ill-gotten gains.
I think I cover the years since the war.
Time was of the essence.
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