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PM Key welcomes house price investigation, but says housing much more affordable now than under previous Labour govt

Posted in Property
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By Alex Tarrant

The Prime Minister is welcoming the Productivity Commission's move to investigate whether a 100% rise in house prices over the last decade hurt New Zealand's productivity and economic capacity.

Finance Minister Bill English announced the commission's first tasks last week, which also include an investigation into international freight costs due to New Zealand's reliance on exporting. For more see last week's article here.

“Housing affordability is a critical issue in New Zealand. We see New Zealand cities constantly being at the high end of that affordability index," Key told journalists on Monday afternoon.

"It’s important that people can house themselves and not consume all of their disposable income doing so. I think it’s right for the Productivity Commission to have that as one of their initial focuses,” Key said at his regular post-cabinet press conferrence.

There had been a lot of work done on the issue over the years before the current government entered power.

"The previous government had DPMC (Department of Prime Minister and Cabinet) lead the effort in terms of looking at those issues," Key said.

"There’s a lot of different factors – we’ve addressed some of them, I think, in terms of reforms we’re making to the Building Act, [and] we’ve done in terms of the Resource Management Act. There are other areas we’ve been addressing that," he said.

"Obviously housing is a lot more affordable at the moment under this government than it was under the previous government, simply because interest rates are a lot lower, and actually house prices are not rising. If anything, they’re static to slightly negative."

Government was not looking at any more tax changes to the housing and housing investment area.

The REINZ median house sale price in New Zealand rose 102% to NZ$350,000 between February 2001 and 2011, while the Consumer Price Index, a measure of general price rises across the economy, rose 31% over that time.

The Productivity Commission was established as part of the National Party's coalition agreement with the Act Party.

See the Roost Home Loan Affordability reports here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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 "It’s important that

 "It’s important that people can house themselves and not consume all of their disposable income doing so"....Harrrrrrrrrrrrhahahahaha oh yeah like John Key gives a rat's arse.

Housing is seriously unaffordable..Key cannot get those words out of his gob......he skirts and obfuscates and dances every which way.

The plain fact is John Key's govt is busting a gut to pretend to be doing what a good govt would do. We will not get law that inhibits property speculation for tax free capital gains because too many bastard banks are deeply into the game.

Absolutely Wolly. Key knows

Absolutely Wolly.

Key knows not which way his a**e points to the ground on this one.

He wouldn't  like to see prices fall (Electoral suicide?)

Prices are unaffordable to many and servicing borrowings prevent the money being used elsewhere productively (Let those words out, Tell us more , John -like how to fix it)

The facts are that our borrowings are mainly to those Japanese housewives and Belgian dentists still. The borrowings are largely in NZ$ if that is how they get the big interest rate, so let us pay them back in depreciated NZ$ as soon as we can. Stop the banks in their tracks by pulling the LTV (officially - Job for AB) A few singed  scalps on the overborrowed property investors is a small price to pay fr more lower priced houses.

Memo  to JK -Interest rates at these levels are fleeting so do not use them as a reason for your equally fleeting success on the affordability front.

Have a look at the report

Have a look at the report above and note the 31% comment toward the end....what that is saying ought to scare the crap out of savers. In just ten years the brainless inflation policies adopted and loved by the RBNZ have resulted in the dollar being worth 31% less .....twenty more years and the loss will be near 100%......fantastic achievement ...brilliant financial management...a leader in world uselessness.

Not at all, Wolly! In fact

Not at all, Wolly! In fact it's quite exciting. Because the figure to link it too is the property increase over the same run of 102%. GIve me a fall in property of 71% from here, to normalise the CPI, and there's your purchasing power back. Won't happen?   We'll see :) - That's not a prediction, by the way - just my expectation. "Inflation is all you need ; Deflation in all you own" and in a real way. So it deosn' matter if property goes up, down or sideway, nominally. Becasueuno one will be able to afford to hold on to it anyway!

It's one big scam

It's one big scam absolute joke. I just wish somebody would have the courage to front Bollard at a meeting and ask him to explain fully why he is running an inflation policy...ask him to detail the reasons. It amounts to fraud. Why are we not able to have RBNZ policy enforced that ensures our dollar we save in 2011 will buy the same in 2021...why must we see 30% plus wiped off the value....who is it that creams off the wealth as a result of the scam?

Wolly, you have to look at

Wolly, you have to look at inflationary policy from a banks point of view because lets face it - it's the bankers who run our country and economy.

A bank takes a deposit of $NZ100 @ 6% interests and after one year pays the depositor $106. Easy maths.

Mean-while inflation runs @ 3% so the effective return of the investment is $106 - 3%  = $102.82 and in real terms the return is only 2.82% so why bother saving? And all of a sudden property looks like the next best investment.

Instead of a savings based sustainable economy which is boring and predictable the bankers plan was to expand the money supply through debt based borrowing from overseas. People could borrow upto 95% on a mortgage, the money supply was endless, at the end of the day and best of all for the banks - the country's that followed this path would be serf's in their own land - read up on PIGS.

This borrowing basically doubled the money supply (i.e.102% increase in property value), and has left a vacum wear-by (as Bernard points out in an article), our countries profit is syphoned out through banks interest charges so that no matter how hard we work we stand still - as reflected in our output figures.

The debt based lending equation looks like this. Investor has $100 and borrows $1000 from the bank and buys a property for $1100. The investor receives rent and pays the bank interest @ 8% interest - so $80 per annum.

In the first example the bank paid it's client $6 per year, in the second example the bank was paid by the client $80 per year and now you can see why banks love inflation and property.

Yep Wolly, don't have too

Yep Wolly, don't have too much cash slopping around in the banks, have it in real income producing assets, only way to protect in any inflationary scenario.

Thanks John, Housing is more

Thanks John,

Housing is more affordable than it was in 2008 because the economy's still tanking, interest rates are low and prices falling. 

Good effort, mate.

Key is full of bull. Housing

Key is full of bull. Housing is not "much more affordable" under National - it is "ever so slightly more affordable"  

National are no better than Labour. Plenty of talk, plenty of studies add policy waffle, little action.

Shameful.   Abysmal.

Where is Hugh P to shake them up.

Have we heard from Hugh since the quake?

Hi Matt, Hugh's alright. He

Hi Matt, Hugh's alright. He was going on holiday a few weeks ago when I last heard from him. Invlolved a cruise I think

Is he taking credit for low

Is he taking credit for low interest rates now?!

probably is taking credit as

probably is taking credit as he inappropriately talked in public about expectations around the RBNZ cutting rates...does anyone really believe the RBNZ is really independant of the govt in its decision making????

Well Key's argument would be

Well Key's argument would be (and has been) that govt is controlling its spending, therefore taking away some of the inflationary pressures in the economy (those from govt speding).

Bollard has also said if govt showed fiscal restraint it would take some pressure of interest rates.

But full credit? No. See ChrisJ's comment above. Pretty much sums it up I reckon.

Define affordability. Cheap

Define affordability. Cheap borrowing for everybody, that's what the smiling assassin means.  The trend is zero equity lease/rent "ownership". For everything.
"looking at those issues", right. There's just one big issue making property prices go sky high; plenty easy borrowing. Anyone looking at this? Nah.
We're (on the edge?) past speculative borrowing but the banks have managed to divert the consequences from them to, well, everybody else. Let's sell our assets and resources eh, and pay for ever. Yeah, I call it treason.
Doesn't look like our PM, a former banker, is working for us, does it. Sad.

No, ACT thinks there is

No, ACT thinks there is another big reason, too much urban planning restriction, they will want the "too much regulation" drum hammered to that point we will see their developer mates getting public land cheap to build on, aiming to turn NZ into a quality of life as long as the rich continue to make lots of $.

All that will do is pork a building frenzie that will go bust...JK, well he needs something to keep his Govn afloat and un-employment down...and one day we'll see lots of young families who have paid too much stuck in neg equity for a decade....or they will simply walk away leave for OZ or the UK.....I think ACT etc is f*cked in the head....but there you can see this in the US....real life situations should teach ppl something.....

RBNZ is looking at structural seperation as is the UK, so if the banks go bust they still we get to use the ATMs and eftpos....cant come soon enough for me. Get rid of the moral hazard....our kids dont deserve that or finding themselves living in or paying for sprawling gettos...






I love Steve Keen in Aussie

I love Steve Keen in Aussie on this one

This is a great summary of the subject. As far as he can tell house prices do in fact track cpi over the long run. Sometimes they run ahead of cpi for a while and then they fall behind.

Do we have anyone of Steve Keen's calibre in NZ? Can we get him to move here?


No, no one of his caliber by

No, no one of his caliber by a long way....he doesnt need to move, jsut keep doing what he does, we can read his work...

I like the fact he's apolitical and exposing the stupid.....


I like this guy as

I like this guy as well.


Yes, well cheap oil maybe

Yes, well cheap oil maybe over but cheap natural gas seems likely.

They have discovered 200 - 300 years supply in the US in the last few years what with the technolgy of drilling improving. Yes there will be issues they have not sorted like possible groundwater pollution but you ignore the possibilty of technological breakthroughs at your peril.

We are so conditioned by endless spin and noise that we can fail to hear the good news as well as the warnings.

Roger W - seeing through spin

Roger W - seeing through spin - lesson 1.

Whenever someone tells you "100 years supply" or whatever, you must immediately ask "at what rate of consumption?".

A recent article about NG in the US, suggests 100 years, and in absence of any quoted rate, we can assume that it is "at current rates".

Then the article goes on to postulate that cars could convert to it en masse. Well, that has to shorten toe 100 year window, indeed, if all cars converted, you're probably talking of a cross-over graph of around 20 years!

Brownlee fell into the same trap (or used it to run his spin) re lignite - quoting years but not rate. It's nonsense - absolutely meaningless.

Then there's the EROEI question - gas is a ling way short of oil in bang per volume terms.

Technology?  Maybe, but until proven, one shouldn't count on anything. CCS is a classic example of 'much speak but no substance'.

"The first effect of this

"The first effect of this imbalance between demand and supply is an increase in the time to sell, and in the number of unsold properties on the market. The second effect is a moderate fall in prices, once sellers who have to sell realize that they have to take a haircut. The third effect in Australia may well be an increase in sales by property speculators, if they see their capital gains diminishing the longer they hold on to their “investments”."

Didnt I just read something about "increase in the time to sell" and havnt we been seeing a "moderate fall in prices" in NZ.?

No, or course not; just listen to Olly, Your Landlord etc say all is well....all is well...keep buying.....


What a dissapointment John

What a dissapointment John Key has turned out to be. I watched his interview on TV3 this morning; and not only will he not answer a straight question with a straight answer, but his analysis of the Christchurch situation is at serious odds with that posted by Chris_J, here yesterday. I know whose view I believe; and it is not John Key's.

Ive noticed he never answers

Ive noticed he never answers straight when a difficult Q is better than any other Pollie mind, except with him its really noticable....I know when I see that he's lying or the truth isnt what is coming out of his lips.

Other thing Im noticing is, he gives out the good news, not the bad, thats left to BE etc....PR and spin is well done....


Well, he's a politician

Well, he's a politician right. Since when do politicians give straight answers to anything?!

Thing is Snarlypuss, it pays

Thing is Snarlypuss, it pays to never expect to be told the whole truth...not even half the truth..and to always expect to be handed a bucket of BS...

I stopped paying any attention to all the media shite on the tv and radio. It is just "noise". Meaningless drivel feeding the sheeple for the day. There is no difference between this drivel and the 'Coro st' factory garbage spewing out to keep the brainless occupied.  

The real unemployment in the

The real unemployment in the US when you look at the same method of reporting going back decades forwarded to today is 22%!!! thats GD territory....

Though one thing is he seems to be a hyper-inflation believer...saying in Dec 09, 2010 was the year!  um even 2011 doesnt look probable dude.....




Wow Wolly and crew I now feel

Wow Wolly and crew I now feel like committing suicide.. Not one positive solution offered. You are obviously very educated and intelegent how about doing something about it.. run for parliament or change the banks from within... I admire anyone who is prepared to handle the ridicule dished out for trying to bring a change.. I dont believe anyone goes into NZ politics for self serving reasons...

I suspect you intended to

I suspect you intended to post "I don't believe everyone goes....."

Throwing rocks and bricks at politicians and hitting them amounts to "doing something about it" jomo.....putting the public blowtorch on their collective arses is what the useless poodle media in NZ ought to be doing but won't.

It would not surprise me were I to hear the next interview of John Key start like this...."Mr Key welcome to the show...what would you like me to ask?"

Get the message jomo...the country is buggered with debt and there is no bloody way out of this without people getting financially smashed. For that you can thank 9 years of utterly useless Labour fatheads and 2 years of National dithering.

That fairly well sumarizes

That fairly well sumarizes what I think. And what we need is aggressive & innovative leadership-not the sleep inducing waffle we are getting.

"how about doing something

"how about doing something about it"

I give Wolly credit for doing exactly that.

Postive solutions won't arise until we have got through denial, anger, bargaining and depression to acceptance. If Wolly's comments make people uncomfortable that is a positive contribution to countering the sedatives dished out by politicians, bank economists and the MSM.

Oh jeez thanks Colin ..that's

Oh jeez thanks Colin ..that's all I need...more credit...not!......I hear the ECB is about to start raising and the jabber is for .25%. I expect Bolly will hold out until the day after election day and then the sky will fall on all who believed in a flat earth and flatter rates forever....


Jomo - you ain't been

Jomo - you ain't been listening. Some of us are a long, long way down the road of affordable housing.

The unfortunate consequence, of course, is that affordable housing inevitably entails not spending as much, which curtails someone else's income, which reduces the tax take, which.........

But affordable housing?   Easy peasy.

Affordable housing in terms of what the mass of brainwashed hausefrau think of as 'essential'? Not so easy peasy.

The biggest key to affordable housing, may well be to choose your partner carefully.


It really does not matter if

It really does not matter if you miss your plane by an hour or five hours-if you miss it-you miss it.  Under recent governments, ordinary hard working kiwis have missed out on housing.  It matters little if you miss out by less now than you did a couple of years ago-you still miss out.  An economy with reasonable housing costs (house being worth @3 years pay) always flourishes.  Thank goodness housing will be an election issue and the following election-it will be the only issue. 

National has actually

National has actually intensified Labour's brutal housing shortage policy. If the housing shortage has actually eased anyway it is because their procyclical economic policies are killing housing demand faster than they can reduce housingl supply.

Question: house prices

Question: house prices drop... suddenly I can afford to buy a few more investment properties - forcing up the prices.... I would argue that supply and demand has given us house prices exactly where they should be... Building more housing would increase the supply.. to me a better way of reducing house prices... gives people jobs, increases tax take and lower house prices.. Wolly, I take your point about throwing bricks and it has its place forcing change.. yes the media are pathetic in NZ... but I believe and hope that you're obvious abilities are well utilised in serving this great country and creating a better place by other means also...   


As long as you can borrow the

As long as you can borrow the money, you can! But here's a Catch 22 from Aussie that I read about yesteday. A  Big Four's commercial division lent a developer money to do a subdivison of X amount of properties, based on a valuation for each plot. But when the home buyers came to buy those same plots, the valuation from that same banks retail divison was less than the developers costs! So he can't get them moved from wholesale to retail.. All because the bank didn't want any more retail exposure to the land market.

At current costs nobody can

At current costs nobody can afford to build affordable housing.  Maybe the central government needs to take over this role ala Labour public credit policy of the 1930's.  Unfortunately they're all in the bankers pockets so we have to hope other factors pop the bubble.

Affordable public housing

Affordable public housing isn't wanted by local and regional council. They are the ones responsibile for the artificial shortage of land available for new housing development. There is no real shortage of available land in this country with our tiny population.

By taking months upon months to even grant compliance for you to even subdivide your own section, and then charging you $50,000+ for the hassle you have caused them, it is a wonder how any new developments even take hold. Why would anyone with a bit of cash even bother developing property anymore? Why get held up in red tape for months upon months costing you tens of thousands, even hundreds of thousands of dollars to maybe make a return in twelve months time?

I will build you a 190m2, 4

I will build you a 190m2, 4 bed, 2x bath dwelling for $197,750.00 inc gst. Thats $1040.79m2.

Its limited to my area (Manawatu-Horowhenua). Send me a contact email, I'll send you the plan & spec! It isnt the new build thats so bad - its the cost of land.

But Petrus, that's been half

But Petrus, that's been half the problem over the past few years - why do we need 190m2, 4 bed houses when a 100m2, 3 bedroom is perfectly adequate?  Yes, the cost of the land is a major part of the issue together with development charges but 190m2 is almost 2 houses.  Wouldn't spreading the cost of materials/labour over 2 houses reduce the build cost?

I have 130sqm and its

I have 130sqm and its minimal, and Im really short on storage....but 190spm is probably OTT.  The build cost is per probably comes down as the sqm goes up as its just a bit more space, ie  I would guess that smaller houses I would think are more expensive per sqm when all factors are considered, yet a bigger house fetches more $....hence why builders build as big a house as they can on as small a section as possible (I assume)?



Thats about right! Tho we

Thats about right! Tho we arent in control of section size - thats the developer in most cases.

Thanks Steven, I enjoy

Thanks Steven, I enjoy reading your replies/posts as you seem to one of the more sensible people on this site.

I understand the financial drivers but I'm of the belief that there needs to be more balance between financial/social costs as well as wants/needs. 

Building one large house only incurs one land cost and one development charge and these are financial drivers to both the developer and the local council but without consideration to the social cost.  I don't know how much the difference in materials costs or quantity would be between 2 medium houses and one large house but I would assume that 2 houses would make a difference to the supply side.   I think buyers attitudes make a difference as well, do I need an oversized house or do I want one?  If there was no demand for oversized houses would they have been built?  I do see a lot of wasted space in most of the larger house designs.

I'm not saying I have my wants/needs perfectly balanced but I believe this mindset or lack of is one of the many factors that has contributed to the housing affordability issue as well as the overall financial issues we discuss everyday.

I have a 1960's straight

I have a 1960's straight design house, i think its a housing NZ pattern, ive seen it before thats for sure. I picked it for its efficiency, what it does lack is storage and Im working on that.  Newer houses have architectural um "flair" I suppose they look fancier so will fetch higher prices....Im very much an engineer, function over wife is all the other works out...LOL


How do you add social costs/considerations? I guess thats council regulation....

When I was looking I was struck at how little choice there was in terms of size for new houses really the builder is trying to make a living, so he's looking for the minimum work for the maximum return...hence houses were getting bigger, but also ppl wanted more space.....the donside is it costs more to heat....and paint etc....I also think there is an element of specualtion in home buying, for some at least....Status symbols etc know big house, big car, small um.....

Housing affordability is I think down to cheap credit, the desire to dodge tax/save by PAYEs and mad speculation by PIs......I dont seee anything to substantiate rational markets of present prices....and I think it will end in tears.....Fortunately I bought back far enough that the worst I expect is 15 years of "profit" to go bye biggee IMHO.

I dont know we need more houses. I think we should be stabilizing and reducing our population, we simply dont need ppl we cant sustainably have once oil production goes into decline....

My worry then is of course all the NZers living abroad come home to no jobs and welfare...meanwhile all our pacific dependancies see an exodus to here.....need to shut that down.....sure take on ppl but pick and choose.




It includes double internal

It includes double internal access garage (36m2), so nett to living is 154m2.  If you exclde the garage, you have to provide alternative garage/storeage - that means you might need a bigger & usually more expensive section. No, spreading the cost over two would not reduce cost. The most expensive areas of a house are 1. Kitchen 2. Bathroom - so the more times you replicate eg., a kitchen, the more very expensive m2 you incurr

The cost per m2 rises quite dramatically as size reduces. Having in past years been heavily involved in building 90-100m2 housing & thus creating in many case areas which today after 30 years are still unattractive (understatement)- I dont want to go there again!

Thanks Petrus. If cost per

Thanks Petrus.

If cost per m2 rises as size reduces why were so many 50s/60s bungalows not built larger, they certainly had the land size.  I would still think that nett living of 154m2 is larger than necessary.  I only ask this because as I child I grew up in the older style bungalow with 2 brothers and it seemed perfectly adequate.  I also owned a 95m2 house and although cosy it met my family's needs.

Why are kitchens and bathrooms so expensive?  I understand that other rooms only require walls but the cost of fittings/components for bathrooms and kitchens must be able to be minimised if one chooses to?

Is it the size of the house that makes the area unattractive or the quality of landscaping/external maintenance?

Cost perm2 effect:  Small

Cost perm2 effect:  Small house costs less overall than large house - tho cost per m2 is greater. Bathrooms & kitchens are more costly because of the joinery & fittings going into them - plus labour to install. It also follows that even larger houses with same no & quality of fixtures & fittings results in even lower cost per m2.

Have a look at the Dept. of Building & Housing site - they have a very good explanation of differing costs for 145m2 ($1626m2) & 202m2 ($1347m2) - thats a difference of $297m2!

I dont agree with  their cost assessment - but they show the difference!

Thanks Petrus.  I've seen the

Thanks Petrus.  I've seen the numbers on the Dept. of Building & Housing site, just trying to understand the fundamentals behind them.  As I mentioned in a previous post I'm looking at a bigger picture than just the financial drivers.  Without knowing margins and so forth I believe it would be better to make 80k off 2 houses rather than 100k off 1 house and finding more of a balance between financial/social costs.

$80k of one house!  In todays

$80k of one house!  In todays market its impossible to make $40k of our 190m2 dwelling. Half that maybe - if you budget tightly & tightly control every item on site!

No friggin way jomo...I done

No friggin way jomo...I done my serving.. now I do some booting and brick biffing...pollys make great targets don't you think!

easy targets :) Good luck

easy targets :) Good luck with it..

Meh: Housing is being built

Meh: Housing is being built and houses are being sold... I have a tenant in my building who owns and operates a residential construction company.. he has never been busier.. The market is paying the current values... The current system does not allow for everyone to be able to afford a house... People with more generally want more.. unless we regulate the purchase of one house per person or some other state controlled system. Rent control exists in other countries maybe we could have property ownership control. The other option is for people to get over the obsession of house ownership..