All the Productivity Commission needed to say in its housing affordability report: 'Quit whining about tax; It's land supply, stupid'

By Alex Tarrant

Quit whining about tax changes and instead focus your energy on how to boost the supply of low-priced housing, by opening up the fringes.

That’s the basic message from the Productivity Commission, which released its draft report into housing affordability in New Zealand today. See article here.

Sure, we could have had a capital gains tax in place, or indexed interest payments for inflation (something the Reserve Bank’s been looking at since the 1970s, but as yet to no avail). But those settings wouldn't have stopped that bubble which made houses unaffordable, so why focus on that? 

We might be able to make some money off those bubbles, but a capital gains tax is not the solution to making housing more affordable.

Would it have discouraged some small scale investors from entering the property market through the 2000s (and therefore meaning more of the housing stock available for potential owner-occupiers who had to rent instead)? Possibly, but only at the margins.

That’s more a story about how investors had first distrusted equity markets and then came to distrust the finance company sector over the last decade. Where else was there to put your money? Yep, you guessed it.

Anyway a capital gains tax might not have stopped these people entering the market, but rather fed through into higher rents.

If you were/are one of the ones gunning for capital gains, thank God (and policy settings, rising building costs and falling construction sector productivity) for the undersupply of housing that has emerged. Your yields have been pretty terrible (below 4% according the Productivity Commission), so you’re in need of those gains if you’re wanting to make any money.

So how do we make housing more affordable? Particularly at the bottom end of the spectrum, where prospective home-owners have been crowded out by rental property investors over the last decade? The Productivity Commission has the answer:

Make it cheaper to build houses.

Pretty simple really.

We need to encourage more large-scale development to replace the small scale building/investment we’ve been seeing over the last decade.

Commission Chair Murray Sherwin said only five firms in New Zealand build more than 100 houses a year. Rather hard to get economies of scale in that case.

Often when land for subdivisions does become available, it’s an incremental step on the boundary of a city limit, constraining a firm’s ability to build at scale, he says.

The solution? Open up the supply of land much more, and cut the costs and time it takes to process applications.

The Commission was little pleased by the Auckland Council’s ambition for 75% of new building work to take place inside the city’s existing limits. It wants to see the council revise that figure downwards. Now.

In opening up city limits, we then encounter the greenfields vs brownfields infrastructure cost argument. How can you build affordable housing on the periphery of a city when you have to pay for new roads, new sewers, new electricity wires, etc?

Well, you’re going to either have to build a new sewer (greenfields), or do a big upgrade on the old one (brownfields/intensification), the Commission says.

Cheaper construction costs for greenfields development might help counter those costs for roads. Sherwin said construction costs for brownfields development rose considerably once a building went up above two or three stories.

In any scenario there’s going to be demand for both types of development. Just get on with opening up the fringes. And do it big time. 

To steal a phrase from that dreadful movie Field of Dreams (see clip above): "if you open it, they will come". (FYI, the actual quote is, "if you build it he will come.")

So to save you going through the 260 pages, the report summed up in four words:

It’s land supply, stupid.

You have until February 10 to tell the Commission whether you agree with its prognosis.

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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176 Comments

Seriously , Alex ....... there are only 5 firms in NZ who each construct more than 100 houses per annum ! ....... I am amazed by that statistic .......

...... and I totally endorse your summation : " It's the land supply , stupid " ........ somehow the pointy heads in Wellington & in local councils just don't get it . They're the one's who're overseeing the stupid supply of land .

This is the same short sighted knee jerk solution to a problem we have seen from the USA to Australia to Ireland and every failing country in between- it has less to do with supply and demand and more to do with public perception. There is a housing bubble because there is cheap credit, end of story. You will not lower housing costs no matter how huge a subdivision you sanction- they will be the million dollar acres, because contruction costs are so high right now there is little margin. Demand is not the pivot, credit is. 

Unless you factor in the ever escalating cost of petrol which will render your suburban dream a nightmare, this conversation is a bunch of hot air. Your solution is simplistic and has been proven false the world over. Since Levittown people have sold the idea that sprawl is affordable, but sprawl is actually expensive, only the costs are externalized.  Everyone will be paying the cost of your bargain dream in transport costs, rates, infrastrucutre maintenance,etc. This is a red herring.

Houses are expensive here because people want them to be. Everyone enjoys the boost of affluence, even if it is illusionary. If you want to see how things will pan out in New Zealand, just read Ireland's story. This stuff is not rocket science, it is social science, which plays out in the minds of consumers. They buy on credit because they are caught up in the story. It is all fiction. There is not a shortage of houses. Prices are on the rise because just enough suckers are left to fall into the ploy of the real estate advertising- "Fixer upper for only $300,000!". Do not kid youself, advertising works. It created the bubble and right now there is overhang because psychologically, people are loathe to abandon the idea of affluence and come to terms with the reality around them. 

New Zealand has turned housing into a profit centre, with predictable results. Housing is a right, not a privilege. It is a moral issue, which plays out in typical biblical fashion- ie. the consequences fit the crime. NOTHING goes illiquid faster than houses, and this will be the ruin of the country, as people sit stuck in houses worth far less than their million dollar mortgages. The way to make housing affordable is to determine that that is our priority. Right now we are talking out both sides of our mouths, and I mean everybody, from Nats to Labour to Greens, everyone likes the bouyant effect of easy credit and high housing prices when it comes to their own homes.

We have argued this many times on this forum.

The "cheap credit" scapegoat is nonsense.

Britain has had volatile property cycles ever since they started to contain urban growth in the 1950's, nothing to do with modern day credit conditions.

South Korea had a bubble in the 1980's that had nothing to do with credit at all - in fact national savings boomed as young people saved towards a rising target. Marriage and childbirth rates collapsed too. All because of new urban growth containment policies.

When you ration urban land, the prices will go up faster than MOST young people can either save money or obtain credit. If banks colluded to constrain credit growth via mortgage requirements, they would get prosecuted. What are they supposed to do - shut their doors and go out of business?

I have heard your shonky economics all over the world - property prices result from "what people are prepared to pay", nothing to do with constraints on supply. Hey, we must try that with bread some time, see how much we can force the price up to by running a quota system. Nothing wrong or immoral about it, it's just "the price people are prepared to pay for bread".

Preserving the integrity of our communities is the challenge in front of us now, not bigger is better.

Hooray for the Commission. Hooray for Alex Tarrant. Hooray for Hugh.

Man the stations, boys. The counter-attack from the body-snatchers will be last-ditch-stand stuff. Len Brown, after all, has an electoral mandate. Same with all the other mayors and councils. And all those grand plans have had hours of "community consulation". "The people" of Christchurch have a "dream", yadda, yadda, yadda.......

Do the people get a say?

 

"

An example of the opprobrium heaped upon Migration Watch was this editorial in the Independent on August 6, 2002: "Most offensive of all is the choice of name, a grotesque echo of such groups as Human Rights Watch, with the implication that it is keeping a watch on Ministers who sneakily disguise the true extent of immigration. Migrationwatch UK is a nasty little outfit, and its duplicitous research should be treated with the gravest suspicion. The group deserves to fail; sadly in the current climate, it will continue to be given the oxygen of publicity".

An article in the Guardian of 7 August 2002 was entitled "A swamp of muddled thinking". It described the figure of two million as flawed, both in its composition and its assumptions.

It gives us no pleasure to see that we were right as we have indeed seen the largest wave of immigration in our history, with no public consultation, explanation or coherent justification,’ he said. ‘It is now abundantly clear that the public do not share the enthusiasm for the mass immigration that has changed parts of the UK beyond recognition and has, in many cases, weakened community cohesion.

Said Sir Andrew: ‘It is shameful that the political system was intimidated for so long by false innuendo from the Left about racism. As a result, three million immigrants were admitted by the previous government between 1997 and 2010 while one million British citizens left the UK. All this took place without proper debate and in flat contradiction to the wishes of the British people. 

http://www.migrationwatchuk.org/

Why does the Productivity Commision get cheers and the Tax Working Group + Savings Working Group get ignored?

Who is going to pay for all the new infrastructure and why should the public subsidise large numbers of overseas arrivals?

 

The report added that there was little evidence that immigration boosted local incomes. In fact, the need to build roads and schools meant that net migration contributed to the national deficit.

"Migration is another issue that the government should investigate further," the working group said. "There are indications that high immigration rates have pushed up government spending, house prices and business borrowing, and prevented necessary adjustments to the economy."

http://www.stuff.co.nz/business/4622459/Government-policies-blamed-for-h...

Maybe it is the quality of the immigrants that is the problem, rather than the quantities?

NZ suffers in many ways from under population.

But it is obvious what kind of immigrants would actually help the country forwards rather than backwards. Increases in the numbers of high quality immigrants would help to offset the negative effects we are suffering from the low quality immigrants, even if we continued to allow in the same numbers of those people on humanitarian grounds.

It is ridiculous to say that an immigrant who works and pays taxes and even provides work for others, is a "net cost" to the country because of the cost of infrastructure. It should be perfectly simple to get immigrants whose "infrastructure cost burden" is offset many times by their contribution to the economy. If we are not, then we are not doing the immigration process right, and we need to get it right rather than halt immigration.

NZ suffers in many ways from under population.

....

Is that an assumption the national party makes???

It is not an assumption that any mainstream political party today makes, in spite of its obviousness. We are clearly in a "post enlightenment" age.

A piss take surely?

Alex - have you ever read the stuff I've posted here?

Have you ever applied some cranial capacity to it?

Forget the PB's and the HughP's and the GBH's, just concentrate on big pictures, facts and physaical realities. Use some brain.

We are in a global situation now - while it it true we have more than enough farmland to feed NZ, the comment is not true re global farmland feeding the planet. Further compounding this, is the fact that food is artificially boosted by fossil fuels (between 10:1 and 27:1), which have peaked, with no replacement in sight. Meaning food per acre has peaked too, while population has not.

Big picture, there are 7 billion people on a planet which can support two billion (or so) indefinitely. Scratch the nay-sayers (like PB) and you'll find cranial incapacities still in evolution-denial. Go figure (which will automatically put you ahead of them....)

Globally, all these expanding urban areas need fed. It ain't gonna happen. There is an argument that the first world will outlast the third world in this regard, due to possession of resources, and power/control through same. Doesn't mean the big-picture changes, though, this peaking process is exponential on the way down, too.

In a nutshell, infrastructure (both installation and maintenance) will have to be triaged from here on. The space shuttle programme - what keeps the GPS system in place now? - , road bridges throughout America, and sewerage in every western city, are examples of the oncoming problem.

The 'Council' is as blind as the bleaters. They are assuming that a paradigm - growth - which has held for one species for 200 fuelled years (a blip in the millenia earth has existed, and which it took to accumulate the resources we're chewing up in that blip) will continue.

Why is it that so few people see the big picture?

PDK   Globally, all these expanding urban areas need fed. It ain't gonna happen. 

Your in la la land the world hasn't scratched the surface in terms of utilising unproductive land  and implementing new productivity methods for agricultural.

Even if we were facing some major problem on this front the idea that global food production is going to suffer because NZ allows it's cities to spread another 10-20% is laughable.

Affordable housing is a basic human right.

I've flown over some of that unproductive land - its mostly waterless, almost every place in the world where people can live and grow food is already full of people living and growing food in many cases beyond the capacity of the land to support them.  NZ is lucky - being the last bus stop on the line to still be relatively un-populated. 

Auckland calls itself the big little city. Its already one of the most spread out, low density cities in the world.  Apart from the core CBD its about a sprawly as an american exurb.   

The problem has been identified as house prices are unaffordable - the solution is to build more further out - beyond the 60 minute commute line effectively.  I might go for that if there was a decent rail link from Orewa to the CBD.  But to drive that distance with fuel prices set to double twice over the next 10 years - no way.  

What do we mean by unaffordable - the cost of servicing the house (rent or mortgage) is a significant part of ones income.  Affordable for me would be say 1/3 of my monthly income on housing (including land taxes).  Thats the long term price/income ratio.  

Its no use my gaining on the house and then losing it again on transport.  Remember I'm looking at costs over the next 30 years - not just the next 2 year fixed mortgage. 

Now the stock of housing in the city could be dramatically increased with even moderate density housing,  I'm not even talking condo's here, In one street of quarter acre sections that have been poorly infilled with two detached houses a section you can probably build a Danish style block of single storey, attached houses, plus a courtyard, park and pool with double or even triple the number of dwellings. 

Anyway my point is that this idea of city limits maintaining prices is bs. Its a red herring. put about by small scale developers who only know how to make a profit by buying an empty section and bunging up a 'standard' (i.e badly designed, badly built) kiwi house.

Auckland has already been there done that - and expanded dramatically over the past decades - no sign of an increase in affordability over that period, in fact houses just kept on getting more expensive.  

On the other hand prices tracked the availability of credit very well.  longer and longer mortgages, falling interest rates, reduced equity requirements, as well as immigrants cashing out in EU and US.  In any purchase where there are two potential buyers the one prepared to take on the most credit wins - and as a result pushes up the price.  As credit expands the prices inflate accordingly. 

If you want prices to fall - then you just need everyone to say - absolutely no way, no sir am I taking on more than a 100k loan over 20 years.  And if that means I can only pay 120k for a home then I'll just have to wait until thats what they cost. 

Its going to happen - Either voluntarily or by a forced contraction of the credit supply.   And its going to be tough on anyone who overleveraged to buy an overpriced house.

 

 

 

One wrong statement after another.

Auckland one of the lowest density cities in the world already? On what data base? Compared to what? Karachi? Hong Kong?

Auckland and Sydney and Los Angeles are all similarly dense to a European city, not to a typical low density US city like Dallas or Atlanta. LA is the densest city in the USA by a wide margin. Even New York is so low density beyond Manhattan, that its average drops to well below LA.

Congestion is by far the worst in the densest cities. There is no correlation between density and commute time. Professors like Peter Gordon and Alex Anas have been analysing "the stability of travel time in the face of urban decentralisation" for decades. The crucial thing is jobs-housing balance, not density. Jobs have been decentralising for decades in most first world cities. 10 to 20% of jobs being in the CBD, is now typical. Wellington at 32%, is an international outlier, not a norm. Some cities have no one jobs node with more than 10%.

Transport costs capitalise into house prices anyway. You never save money by "moving closer to the CBD" unless you trade off several times as much space as you had further out. Even the famous "Costs of Sprawl 2000" Report pointed this out, there was a whole chaper of analysis on this. The only exception was when house prices have collapsed due to economic collapse, like in Detroit.

The cities with low urban land prices and flat urban land value curves, are the ones where it is easiest for anyone to re-locate close to a new job. The more concentrated the jobs, the steeper the price curve and the more impossible it is for people to afford to locate efficiently.

Increasing density within a city, regardless of whether it is forced or the result of "demand", will always result in property prices at those locations rising faster than people shift in. The result will be 98% property capital gains and 2% actual population shift. The only way to avoid this, is to nationalise property or use eminent domain to take it off its owners.

The people promoting all this nonsense are either too thick to understand this, or they have vested interests (like land banks, inner city property holdings, mortgage backed securities, etc etc).

 

PDK : The reason so few people see the big picture is because the Waimakariri Council have shut down the cinema at the Town Hall in Rangiora ...... bastards !

...... hey , you're being a bit rude to Alex , PhilBest & to HughP , fella ..... go back to sea & chill out , dude .

Gummy reckon 10 billion , give or take , is a nice population for the planet . Sustainable . All cosy & well fed .

...... growth , for lack of a better word , is good . Growth is right  , growth works . Growth clarifies and sweeps away the old ......

Thanks Gummy, thanks Colin.

I have always hoped that others have applied their cranial capacity to the plentiful debunking of PDK's Greenie political propaganda that is available. It is encouraging to see some signs that the audience is tiring of the endless sermons from the pulpits of the would-be Green theocracy, which exceeds the medieval papists in its appeal to its own authority and its refusal of reason and facts.

The better word is development -- it implies quality and quantity.

Unlimited finance meets restricted land supply might be more accurate but it doesn't have the same ring to it. Brilliant Alex, well done.

Kiwis sell overpriced Auckland houses to migrants fresh off the boat should be in there somewhere.

Unlimited finance puts up house prices.

No new land for housing say local councils.

That about sums up my postion, start anywhere and proceed to next point of your choosing. A ponzi scheme only needs more entrants than leavers to go on forever.

Valid points Roger especially the unlimited finance one this has been a major contributor for that matter to overall global financial mess.

Its a positive feedback loop. If we had not had the land supply restrictions we would have had a building boom, lots of new houses (oversupply ala Ireland) unless you sort out the unlimted finance too. The new migrant supply is limited so that would cease to be a factor if land supply was not choked.

Its not that complicated once you sort out the causes from the noise.

A bit of "overbuilding" is far too over-hyped as an excuse for restrictions.

The result is the dirt that every property in the country is inflated in value by six figures; whereas a bit of "overbuilding" on $50,000 sections, while there might be a few hundred "too many" $200,000 new homes to dispose of, how bad is that for the economy? Compared to every property in the country inflating in price by 6 figures and then needing to "re-adjust" at some point only when the Ponzi has run out of greater suckers?

Ireland and Las Vegas and Phoenix, all involved the perverse phenomenon of both land value escalation and over-building; because the "building" all occurred after the land value escalation, and "supply of land", thought to be adequate at "so many years worth" (determined by the planners) got built out far more quickly by people chasing capital gains. In markets where "supply" response is free enough to prevent prices rising in the first place, this does not happen.

Pro planning advocates interpret the Ireland experience to mean that "we need to restrict supply even further", to fewer years supply of land. This misses the point that the most of the economic damage is done by the escalation in price of every property in the country, not by a bit too much bricks and timber in comparatively few locations.  

So in a nutshell then, house prices are so high in New Zealand becuase of 'Green' politics. Figures!

Not a realestate entrepreneur in sight!!!!!!?

Land supply is not the killer single-issue. Land Use efficiency is. While NZers insist on living in bungalows, villas (call them what you will), in the urban centres because that's what they've always done, the rest of the world moved on centuries ago to two- and multi-storey buildings.

Auckland could learn a huge amount from a city like Hong Kong where transport interchanges are built over with shopping malls, offices and appartments. Re-scale and adjust for the local situation.

Second: there's a huge area of wasted and right in the centre of Auckland; the old railway yards. Tumbleweed blows across it. No developers exist that can utilise this 5-10 hectares of land? In HK, the KCR is a land developer, it subsidises the railway from it's property portfolio - and NZ can't do this, why? Hell, let the KCRC come in and show you how to run a business profitably.

The biggest chokehold on Auckland city centre development is the water and wastewater infrastructure, which has suffered from more than a decade of neglect (ask the big developers, they'll be pleased to confirm this).

Ask MP John Banks why (as Mayor of Auckland) he diverted 'profits' from the water CCO in the form of 'charitable payments' to other parts of the council to be spent on eyecatching money wasters. Water companies can't ever run at a profit; they always need to invest back into expanding, renewing or maintaining infrastructure - ALWAYS! If they don't, they get further and further behind and the costs escalate beyond income and borrowing. This is exactly what happened in the Auckland CBD which has no surplus wastewater capacity (thus limiting redevelopment) and is full of holes resulting in sewage overflows as a result of seawater ingress during high tides.

Building up in the centres, not out in the 'burbs also sloves the commuting-traffic connundrum. So, I'd say most of you commentators need to revise your blinkered views.

While NZers insist on living in bungalows, villas (call them what you will), in the urban centres because that's what they've always done, the rest of the world moved on centuries ago to two- and multi-storey buildings.

Well if you don't like the culture and the history that underpins it in New Zealand, you know what you can do. Flights depart daily from Auckland International Airport to a destination of your choice.

Thanks David B,  I took my own advice and left a year ago. I met too many head-stuck-up-their-own-@rse people with exactly your attitude for my own good. All of them whinging about how can we sort this problem out; and then all of them refusing to listen to alternative solutions from outsiders. It was like Royston Vasey.

Do you know, I was minding my own business on a flight down to Invercargill when I was approached by a fellow traveler (during transit in Chchch) who interrogated me about the purpose of my journey. Having surrendered (bit-by-bit) that I was headed south for an interview I was told in no uncertain terms not to make the mistake of other foreigners preaching alternatives from the wider world because that wasn't welcome in NZ...and especially in the south island.

So what is the point of allowing experts to immigrate to NZ if their professional opinion, backed up by decades of international experience isn't welcome?

NZ truly is a 'local shop for local people', and, David B, I suggest that you might well be an Edmund.

You left NZ a year ago yet you're still reading this website? Hello?

Anyway good, I'm pleased you've gone. New Zealand is a unique country with a distinct history and culture and that needs to be respected by you and everybody else! If, as a foreigner, you don’t like that, then get out.

David B. as a foreigner (SwissKiwi) I write articles here and they do not always conform with New Zealand’s culture, extinct history, uniqueness or the general opinion of NZpeople. Also my language is sometimes really bad and I don’t like the PM, the flag, 1'200'001 NZothers, minister Brownlee and Joyce in particular.

Some other bad culture differences: I have never been drunk, don’t have a mortgage and mow the lawn during an important Rugby game, but not on a Sunday.

David, do you think I’m still allowed to stay in New Zealand, or should I be deported ?

You have asked for my honest opinion, Kunst, then I shall give it to you. This is not a popularity contest, Kunst, but this is what I think. I think the country would be better off without you here and I am disappointed with our immigration policies that you are. In my view you are the type of immigrant, who, as I have said before, is locked into a mindset of their homeland, which has failed to make any head way in their own country, immigrates to New Zealand, and then tries to fight their unfinished business here in NZ by bashing New Zealanders over the head with it. Your environmentalist’s views are often extreme and many of your views perverse and deal with Switzerland’s problems, not New Zealand’s.  You should go back to Switzerland and fight them there where they belong.

Kunst, it is well known that you and I agree on very little, yet I find it extremely tiresome your obsessive and neurotic commenting on everything I write here that you don’t agree with, whether it has anything to do with you or not, typically in a humourless manner that is negative, confrontational and that aims to put me down in a personal way. I’m sick of it, and guess what, buddy, I’m sick of you. Why don’t you just shut up and leave my stuff alone? Everybody knows you don’t agree with it so why not leave it at that? You’ve already been banned from here once, and I think you need to go away and take that message on board.  

And no, Kunst, I will not be responding to you.

So you're the arbiter of all that's New Zealand now?  And that doesn't include a decent bloke with a successful business, just because he doesn't see eye to eye with you on some issues?

Bullshit.  NZ culture isn't that bitter, spiteful and insular.  You're the aberration.

Are you the arbiter of the arbiteriers who arbitrate? Sorry, got a bit lost among all the opinions.

 

There's probably an arbitatertatertatertaterer above me.

 

I don't doubt that. There always is.

Infinite regression.

Whooooooaaaaaa.

David - 12:08am Rreading your article I'm still - sitting - in my office chair – just amusing, love it.

It is interesting what fanaticism can do to people, claiming to be honest. Reading several, offensive and untrue comments about me - it even surpasses the point to be upset.

 

What’s even more astonishing, is the fact that regular, daily bloggers aren’t commenting on David B. disgusting racism. Are we as a society becoming less tolerant – and why ?

Relax , Walter , the last illegal immigrant whom we tried to boot out wound up costing the taxpayer $ 2 - 3 million in lawyer's fees , became a minor celebrity on Campbell Live & TradeMe , and attracted a bevy of sychophantic followers and other do-gooders ....

..... zowie ! .... DB knows we'll not be repeating that performance anytime soon .

If that half-baked Algerian terrorist ( no , not DB ! ) can find such a welcome here in Godzone , I reckon you're good to stay too , Kunstie .

More tolerant Kunst.  Once you start trying to moderate the outspoken extremists, how long before you yourself become one of those outspoken extremists.

I guess it is all a matter of one’s education level, temper and subject.

Haha yeh.  For the most part I stay away from the property debacle/debate.  Not my specialty, too many experts and too much vested interest.

http://www.youtube.com/watch?v=mqbB8aPD1UU  

Kunst - you are treading dangerous territory - best left well alone. Have just returned from AKL to MEL and been confronted by the following news article covering the loss of 250 lives in a leaky fishing boat that will be blamed on the Australian Government. I recommend you read the article and then read all 169 comments. It will give you an insight into what is happening just near you and peoples views. They cover many of the aspects you are dealing with. Comment 97 is a good representation of antipodean attitudes towards migrants.

http://www.heraldsun.com.au/news/more-news/migrant-ship-carrying-more-than-200-people-sinks-off-java-few-rescued/comments-fn7x8me2-1226224983135

Comment 97 of 169 - Chris of Brighton Posted at 11:53 AM Today
The first of my ancestors to come to Australia came as soldiers and free settlers . They came in sailing ships that didn't have engines or GPS and they took more than 3 months to get here. Even back then they had to have the proper paperwork to come here. They had the notion of nation building and the desire to contribute. There was no generous welfare system to attract them; in fact there was no welfare system at all because they had yet to create it. The so called migrants on those shitty boats out of Indonesia have no intention of being a true part of Australian culture. They are economic migrants desperate to tap into Australia's over-generous welfare system and the benefits that generations of hard working Australians have built. They are in fact so desperate for the free dollar that they'll risk their own lives and the lives of their children for it. They pay thousands of dollars to get on one of these leaky boats when they could simply go through the proper and legal process to come here. I'm deeply sorry for the loss of life but this is what happens when foolish risks are taken. I'm not sorry however if I've offended any bleeding heart do-gooders who'd let anyone in.  

Iconoclast - on the SBS TV channel http://www.smh.com.au/entertainment/tv-and-radio/go-back-a-ratings-winner-for-sbs-20110622-1ged3.html

It seems the more people know and are involved about immigration/ refugee the more there is an understanding and a debate possible of the problem - away from racism.

I'm still reading this website, because it's a damn good read and round up of international financial stories. I always thought BH was on the money, even if some of the commenters (like you, fr'instance) are extremely blinkered. Is this ok with you?

You're damn right that NZ is a unique country with a distinct history and culture, in my international travels and work across every continent apart from Antartica, I've found the same could be said about every one of the nearly 50 countries I've visited. Of those countries, funnily enough, NZ reminds me most of Wales, Scotland and Ireland. Not for the usual references to landscape, but because one runs into the same pointless nationalism amongst people who have adopted a place as their home.

There was an English chap I recall (Taffified his name from plain Fred Francis to Ffred Ffrancis) who moved to Wales and became an extreme advocate of Welsh nationalism and used to write the most hilarious letters to the Carmarthen Journal inciting violence against the appaling English invaders.

So let's see, David...are you indigenous (whatever that means in the context of NZ)...are you first wave PI, or subsequent wave of caucasion? Is there somewhere you should go back to? Are you someone who people edge away from at the pub after you've had a few pints?

Remember, we're here to help...

Hehe...thanks for providing a chuckle...we all know that guy in the pub :)

Just curious, what generation do you need to be to lose the foreigner tag here in N.Z.?

There's plenty about N.Z. culture that I don't like. I've lived here for most of my life now (35 years here and counting). The pissed people causing mayhem get younger and younger, the entitlement attitude continues to grow, people seem less inclined today to say g'day to their neighbours and stop for a chat, a bit more of this is my place, get off, good old sleepy holiday beach spots now with no campsites and hideous townie apartment blocks springing up.

Having said that, there's a lot I like about the place too. So no, I'm not going anywhere.

DavidB,

What's the use of a "distinctive culture" that "favours low density living", when it rolls over at the first sign of enforced change and allows planning elites to tickle its tummy and steal what it is alleged to be guarding? Hello? Was Len Brown democratically elected? Do we have 11 Green MP's now? Did Asians vote them in? Hellooooo?

Low density isn't the issue it is mass migration and how it benefits the rest of society that is the issue.

Rubbish, NZ could fit 25 million people into current wilderness and hicksville areas and none of the current 4 million people need even notice. They might notice their increased incomes, though.

What sort of level of wealth and quality of life would we expect of those 25 million? What is our competitive advantage that can make use of those demographics?

As a person born in new Zealand I can add David B that this country would be better off if you left as well.  Your rude obnoxious rascism is not needed here.  

I took my own advice and left a year ago

.....

Good luck in Bangladesh!

Erm...nah, I don't get it. Everyone who leaves NZ goes to Bangladesh!? Is that it? Actually, I left for a country that has economic growth...can you remember what that feels like?

"....the rest of the world moved on centuries ago to two- and multi-storey buildings......"

But cities spreading out at low densities, is "moving on", too, compared to the way people had to live when travelling by foot was their only option. This was regarded by planners at one time as necessary even purely for its health benefits. The cities you refer to, started their "development" later than the cities of the USA, when there was health and medical technology to solve the ill-effects of high density living without needing to spread the population out. This was not the case when US cities were spreading out pre WW2.

Hong Kong today is near-unique in that there can only be a few cities in the world where high finance is what keeps their economy going. Can any land intensive industry exist in Hong Kong today, and who can afford a decent apartment in Hong Kong except people with good jobs in high finance? Where do the cleaners and other low income workers live - in little holes in the wall?

When urban land prices are inflated by regulations, the brownfields land in inner locations becomes even more inflated in price than the fringe land. This acts an an obstacle to the development of that land - it sits empty, with its owners "holding out" for higher and higher prices. Brownfields land actually gets put to use quicker in cities with low land costs.

Hong Kong's method of integrating rail transport and land ownership was a good idea for Hong Kong. But what if Hong Kong had never become a succesful centre of international high finance? In any city that does not achieve this unique position, there will never be anything like the same "rent" to be extracted from the land ownership, to pay for transport improvements etc. This really only works for a small city-state that is an international tax haven. You can't just do this again and again all over the world.

"........The biggest chokehold on Auckland city centre development is the water and wastewater infrastructure, which has suffered from more than a decade of neglect....."

Exactly. As the Commission's report says, this means that it is not true to say that it is cheaper to increase density there than to do it on greenfields. It is much more expensive to try and expand infrastructure capacity in an already built out and congested area. Everything depends on planning this decades in advance, in fact when it was greenfields. This is one reason why Manhattan (and probably Hong Kong) have been able to sustain such high density - the planners allowed for sufficient infrastructure capacity decades ahead of time. Ironically, it helps to start with very low density everywhere, because if one area turns into a vital hub of activity, there is room to operate to instal underground services etc as it densifies. Otherwise, only totalitarian government works because you need to force everyone to relocate while the city is torn down and rebuilt.  

Building up in the centre does not "solve traffic congestion". Manhattan is by far the most congested street system in the USA, by a factor of "several times". Increases in density never cause an actual reduction in total numbers of cars on the road, they just cause a gradual marginal reduction in the rate of increase. Manhattan needs to be literally tens of times as dense as, say, the CBD in Houston; and this results in tens of times as many people, about half of whom use public transport instead of car. If you have 50,000 people per square mile, half of whom use cars, congestion is many times worse than if you have 5,000 people per square mile, all using cars.

The reality is that "decentralisation" of employment and amenities as well as population, leads to stable travel times in the face of growth. "Monocentricity" of cities is the real cause of increased congestion, increased travel delays, and increased inequality due to the way the real estate market functions (pricing out low income earners from the concentrated "efficient" locations). Furthermore, the US economy is the world's most productive economy (except small nation-states) and the low density of most of their cities, is no disadvantage for this productivity. The US economy has high density in Manhattan and a few other small locations, and this is optimum. You actually hurt your economy by trying to force it to be high density everywhere. Professor Patrick Troy, the author of "The Perils of Urban Consolidation", calls this kind of planning "physical determinism", because it tries to force the rest of the economy to adapt to an imposed urban form, rather than the urban form evolving from the economy.

Every study that has attempted to put a price on every tonne of carbon emissions saved, has found that more efficient cars involve costs of about $50 per tonne, while changes in urban form involve costs of thousands of dollars per tonne. Public transport costs hundreds of dollars per tonne saved, under status quo conditions of urban form. Many public transport advocates pre-assume changes in urban form, without including the costs of changes in urban form in their analysis - and these changes are actually several times more expensive than the public transport itself.

 

Grief, too many words Phil. And since you didn't read mine, I can't be bothered to wade through all of yours either.

I wrote to take the HK idea and adapt it to the local situation (or words to that effect). In fact, the new development at Newmarket has (sort of) adopted the HK style of stacked development in a small way. This is a good model to be adopted at other major stations in the future. In the end, congestion will force this situation on Auckland when traffic grinds to a complete halt. Why not anticipate that moment and redevelop now?

sorry to spoil your naive dreams, but having worked in and around the development industry for the last 15 years, with much of it in medium and high density housing, I can assure you that the future IS NOT apartments in and around train stations.

The only way the newmarket project worked is that it was built 4-5 years ago, architectural and building quality was severely compromised, and its in the Auckland Grammar zone, attracting largely Asian immigrants who are willing to squeeze into small apartments in the name of sending their kid to a prestigious school. The main plaza has all the charm of stalinist Poland, bleak and often sunless.  

Build a similar development today of the same oridnary quality and you'd need to be selling poky 90 square metre apartments for close to 600K. Then tell me where the market is for that apartment when that apartment would realise a gross yield circa 4.5%, and a good detached house on a full section in a good Auckland suburb will sell for the same price.

There will be SOME market for apartments, mainly in areas of higher amenity, or as part of retirement complexes. However, much of Auckland's future housing will need to be built in peri-urban masterplanned communities.  Here in Adelaide, there are some good masterplanned peri-urban communtiies happening where you will get a little neighbourhood centre, surrounded by medium density low rise apartments / terrace housing, plus small lot subdivision and your more typical suburban sections. Some of the small lot options are great for first home buyers, 300 sq m sections, with single storey 130-140 sq . m houses, selling for circa $350K.

Hugh - there is plenty of centrally located housing that is very pricey here, that no doubt pushes the median multiple up, but a key difference from Auckland is that you can still buy new starter housing for 350K (in new masterplanned communities near nice beaches) within 35 minutes (by train or driving) of the CBD at rush hour. Not as good as Houston but far better than Auckland. 

Where can you buy a new detached house in a good subdivision near nice beaches within 35 minutes drive of the CBD in Auckland for less than 450-500K?????? NOWHERE

 

So OZ has not had the strangulation problem but has a worse cost to ownership ratio? thats kind of contra-indicative is it not.

Also in quite a few states they didnt have "strangulation" of land yet still had bubbles, and have in turn seen large collapses.

This suggests NZ can go the same way.....

Now I can see there is probably some claim on restricting land has an upward impact on prices, but that as we can see from the above is hard to justify as THE reason for crazy prices...the biggest seems to be exceptionally low interest rates and herd type speculation....helped with tax breaks...etc....

regards

 

 

Fair enough on the vagaries of transplanted wisdom, I have often looked at those apartments and wondered who would choose to live there. But other points raised about lack of water infrastructure maintenance are spot on. And really, the point is not to try to overlay solutions directly, but to utilize the thinking behind them. Not a planner so I won't be making grand suggestions here.

We are in a net loss migration trend now, are we agonizing over yesterday's problem? We seem to be assuming that the future is going to look like the recent past- exponential growth- but treasury report keeps lowering the estimate on growth rate, so at some point we are going to have to come to terms with the reality in front of us, instead of the rosy future being painted by many here.

Wait, Matt in Auck is in Adelaide? Is anyone left in Auck?

I am disappointed in this:

".....Grief, too many words Phil. And since you didn't read mine, I can't be bothered to wade through all of yours either......"

Rubbish. I carefully argued against every thing you said, Mr Kubo, paragraph by paragraph.

You might be an "international expert", but you are just as wrong as all the experts at councils in NZ who are trying to impose this high density nonsense.

I am not racist at all, I welcome any immigrant who will fit in with our culture, and I regard White left wing radicals as the single biggest threat to our culture, not immigrants. Some of the staunchest defenders of our culture, are Asian immigrants who came here because they admired that culture, and wanted to get away from the consequences of a failed culture in their own lands. These people are far more helpful to the nation's future than the ignorant, "she'll be right" locally-born mob who can't see civilisational decline and cultural sabotage (by white left wing radicals) to save their lives.

What a bunch of silly billies we NZ's are. Insisting on living in bungalows with gardens and space to park the car and or boat.  What were we thinking!  All that time we could have been residing on the 35th floor of an apartment block built over a railway station. Memo to self: Repeat this 3 times a day. "Must be like the the rest of the world"

I hope you aren't living on the 35th floor of that shoebox apartment built on the railway land in Mechanics Bay, Auckland, when the next big one hits, moa man. Given that all that land is reclaimed land which instantly turns to the consistency of freshly poured porridge when violently shaken, I'd hate to think what the liquefaction will do to you. Still think of it this way, as you come crashing down to your oblivion, you can compliment yourself on having lived the best of international lifestyles - just like they do it in Hong Kong!

Well, to be honest, when I first arrived, I couldn't figure out how it was that so many Kiwis could afford the 3-4 cars per household and the boat...but it rapidly dawned on me that they couldn't. They're up to their eyeballs in debt on the house, the cars and the boat and the big screen TV. All this on poor salaries and while being overtaxed. Since they seemed to be very content with this situation as the world slides into the GFC, I realised that I didn't share that perspective.

Again Moa Man - I'm not suggesting that the whole country needs to live in tower blocks (or that the scale of those blocks should follow HK - I've now had to repeat that for a third time), but you've got a choice haven't you: sit and stew in a traffic jam twice a day, five days a week, or provide accommodation near the jobs. It's pretty simple. The bungalows look very pretty, but Auckland has moved on from the century ago when many of them were built. They are not appropriate for the centre of a 1m+ city. Seriously!

I notice you don't have any solutions apart from humour.

Hong Kong has a land area of 1104 sq km (426 sq miles) and a population of seven million. Auckland has an area of 5,600 sq km. Hong Kong is a city of high rise buildings, no open spaces, no recreational areas. Are you seriously advocating that Auckland should move on and immitate Hong Kong? 

Thanks for the question, icon. I'm fully aware of HK's and Auckland's stats - I worked in HK for over 8 years and Auckland for over 4 years. You're doing that Kiwi thing of covering your eyes, putting your fingers in your ears and screaming at the top of your voice. Calm down and read what I actually wrote. I did not suggest carpeting Auckland with 40 storey blocks of flats. Go back and fact check me!

I deliberately suggested that Auckland moves away from bungalows in the city centre, looks at going multistorey over the transport interchanges and when existing bungalow plots are redeveloped, they add storeys...fairly obviously, not 40, but 2 would be a good start, don't you think?

The Auckland isthmus is constrained by the sea in a similar way to HK (which includes the NT). You have a choke point on north-south traffic running through a narrow strip of land which happens to house millions of people. so looking at how they've handled that and ADOPTING the process to your own situation seems very reasonable to me. Why the hysterics? Has a foreigner frightened you?

reproduced from 27 Jan 2011 by iconoclast

Go and interview a half-dozen old-timers, third or fourth generation aucklanders who grew up there, and have been pushed out, sold-up, and moved to less over-crowded places, slower-paced places, and ask them why, what happened. Ask them what has happened to auckland, and whether they or their offspring like it. For many people, Auckland became a safe-haven from the Sitiveni Rambuka coups (ethnic cleansing) and the Frank Bainimarama coups (ethnic cleansing) and the when Hong Kong sovereignty reverted to Chinese control, the huge inbound suitcases full of cash into new zealand .. has turned many auckland suburbs into enclaves ... walk up and down many of the CBD streets and you have to know mandarin or cantonese to read the signs in the windows of the shops ..

Iconoclast

Having lived in Australia now for 4 months, I have had some time to reflect upon Auckland.

In my view, Auckland was at its peak in the 1990s. It was getting multicutlural, but not TOO multicultural. It was relatively affordable, and the traffic wasn't so bad that it took ages to get anywhere. Inner city suburbs were relatively diverse rather than being enclaves for materialistic dickheads driving their urban tanks everywhere.

A few things have improved for the better - better and more competitive shopping options, a better waterfront etc. But I'd have to say overall Auckland is a far less pleasant place to live in 2011 as compared to 1995 

I live in a 40 story tower block in HK. Usually 5 live in this apartment - one sleeps on the sofa. I work from home ( this is why I am able to check in regularly to interest.co ). 2,000 + people live in our building. There are approximately 600,000 people in the general area - Kwun Tong. There are recreational areas and ample opportunity for walks through parkland. 70% of HK is left to nature. I walk the hills and down to the harbour most days, for up to 2 hours. I used to own a 4,500 sq foot house. I don't miss the maintenance at all or the space that much. After a year here I have got used to the small size, the height, the traffic noise and the convenience of shopping 27 floors down and transport links, buses and MTR. This is not for everybody and some day I will return to NZ to a smaller house and garden. It always surprises me how people seem quite happy here and how generally harmoniously people live together. If you make up your mind to be happy you can live anywhere. I will look back at my time in HK and be pleased to have lived in one of the world's great cities.

Throw in having green belts to go with that space.....quality of life, otherwise yeah I could live in a doggy doo doo hole like say London with 14mil others ants........(which I left).....

regards

As usual, the very elements that are necessary to a well-informed discussion are missing. What is required is a tabulated itemisation of the component costs of bringing raw-rural-fringe land through to developed sections, including all services.ie Roading, footpaths, drainage, sewerage, council add-ons, etc etc. Pity there are no land developers here. Cant be too hard. Poster Bob appears to have a good grip on what goes into the mix. The only two items that would vary up and down the country would be (a) economies of scale, and (b) cost of raw land. The rest should be fairly standard. Anybody?  

Patrick Troy, in  "The Perils of Urban Consolidation" - published 1996 - points the finger at the bureaucrats who favour density, as responsible for the lack of clarity on infrastructure costs:

"......achievement of the objectives of the consolidation policy can only be through the imposition of tighter development control regulations in the sense that local community options are constrained by State government, by the direction of government investment in housing and infrastructure, and/or by setting excessively high costs for urban services in new areas. The net effect of which will be to reduce choice.

One of the difficulties of critics of the policy is that it is extremely difficult for them to obtain access to information about the costs of urban services or to require that the information is made available on comparative bases. Political proponents of the policy are understandably loath to open the issue for genuine debate. Consideration of the policy is also affected by the traditional concerns in exploring many urban policy issues: those adversely affected by the policy may be weak, unorganised and have only a general public interest, whereas those who stand to gain or who are directly involved in the policy's formulation have much to gain or lose, are strong and highly organised, and have direct access to political power......"

"......We are now witnessing increasing resistance to these policies as more people become exposed to their realities....strong opposition was expressed....to "dogboxes" and "sardine city"......

Regarding infrastructure:

 

- "Under-utilised" inner city schools: use the land (and possibly the buildings) for something else, not as an excuse to try and force families back into these areas. 

 

- "The assumption that there is excess infrastructure capacity in inner city suburbs is frequently erroneous, the various hydraulic services in particular are rarely uniform in capacity and often require upgrading." (Woodhead, 1994).

 

- "Increasing the demand for peak-period, centrally oriented public transport services......would likely lead to a further reduction in the quality of the services because they would become even more overcrowded and delays longer, leading to increased deficits in their operations, especially should governments succumb to pressures to invest in increased capacity...."

 

- "The comparisons between inner area redevelopment or consolidation, and outer area lower density development, usually understates the costs of the disturbance......the costs of breaking into the existing services such as water supply and sewerage is frequently very high......" Furthermore, there are frequently "limits to capacity elsewhere in the network", and the costs associated with expansion of these limits is often disregarded in comparisons of infrastructure costs. 

 

- "There are two additional common assumptions which affect the estimates of savings in infrastructure......

 

(1) "The population housed at higher density in the inner area will travel to or from the CBD......and the bulk of their commercial and recreational interests will be able to be satisfied by using public transport. All the evidence we now have about the changing employment structure.....and the evidence about recreational and cultural activity patterns, show this to be untrue....."

 

(2) "The street and subdivisional pattern of the lower density inner areas is appropriate for redevelopment to a higher density. But inner area redevelopment puts more traffic on to parts of the road system that are already congested, unsafe, and very costly to expand....."

 

- Infrastructure cost comparisons are usually "silent on the issue of relevant standards" (eg open space for passive and active recreation, including the size of school playgrounds)

Yeah well. I have read what they have to say about tax, and its a pretty pathetic effort, as well as being downright wrong. You'd think they could afford to hire a housing economist or two.

My reading of what they are saying is "we dont have a clue about the effect of taxation on housing markets, therefore we are recommending no change.". Seems clear enough.

It is perfectly possible to tax away the huge windfall gain existing dwelling owners have received ever since governments deregulated finance markets without deregulating land markets and planning - but no government has the guts to even start to consider it.

 

 

I personally found the Commission's lengthy analysis of taxation factors entirely convincing, and an education in its own right.

Politicians and advocates who look at the potential tax revenue a CGT would have reaped 2001 to 2007, are completely missing the point - the whole point is to prevent episodes of price volatility this severe; a CGT would not do this, and would incentivise politicians not to. Successful and equitable housing policy that provides stability and affordability, would minimise the potential revenue to government from a CGT, especially if it was net of CPI inflation.

One of the worst distortions in the whole system, is the fact that tax on interest is not net of inflation. This applies to interest on mortgage debt just as much as it applies to interest on savings. Any capital gains tax that was not net of inflation would likewise be inequitable and distortionary. If a CGT was net of inflation, it would reap very little revenue. 

The Commission also estimates that local body rates on average are equivalent to a 20% tax on imputed income from home ownership. Speculators chasing capital gains rather than rental income, do pay rates and often fail to recoup them from renters. The fact that rents remained low while house prices increased, shows that this was common. This is a classic symptom of a bubble.

The Labour and Green MP's who support a CGT, really need a good grilling on mainstream TV from someone who knows their stuff (which excludes all NZ's current show hosts, sadly). In fact Greenies generally are getting a free ride from the media on almost all points regardless of how absurd their position is.

AND there is the effect of GST.

by Hugh Pavletich | 01 Oct 11, 11:49am

0

Nudge Nudge Wink Wink

ENVIRO BLATHER OF THE HUMAN HATERS

PhilBest - thank you for your comments.

 I find much of the enviro blather sort of amusing. People such as Julian Simon (The Ultimate Resource) dealt with all this nonsense of Paul Ehrlich of The Population Bomb infamy decades ago.

The reality of course is that people are our greatest resource. And for most people, life is getting better and better all the time. The human progress over the short span of the past 200 years (only about 8 generations) has been truly remarkable.

The collapse of communism just 20 years ago has lifted countless millions out of poverty as well, in an extremely short time.

To think that back around 1850 (just 160 years ago) at the time of the Great Stink in London (when the started to put sewage underground), the average life expectancy of a male in that city was just 28 years.

With human ingenuity, enterprise and rapidly growing affluence, we sure have come a very long way in an extremely short span of human history.

http://www.interest.co.nz/property/55704/acts-brash-slams-aucklands-plan...

You have no engineering or science in your background....and blathly accuse ppl who see the problems of over-population as "Malthusian".

Yet cant show any "technology" or "science" that will prove them wrong.....just wishful thinking or bible study.

A rather desperate stance in light of the impact of less fossil fuels.

regards

Steven, at every time in human history, people like Thomas Malthus and yourself, could have done their mathematics, analysed the conditions of contemporary science, and come to the same conclusion.

And still been wrong.

Just as you will be.

It is a funny thing that many people who are scientific and mathematic geniuses, haven't a clue about economics, for one thing, or human progress per se, for another.

If you are not convinced by "Environmentalism Refuted" by George Reisman, then you and I might as well be trying to have a debate in two different languages.

If you are not convinced by the many items by Jesse Ausubel that I have linked to in the past, then I suspect that even your claim to scientific credentials is hollow.

Our civilisation is, or once was, epitomised by "Popular Science" magazine and its readership among the youth. If "Pacific Ecologist" or something similar has supplanted "Popular Science", then that spells doom for our civilisation, totally unrelated to resources. The enviro theocracy will of course say that the calamity that comes upon our civilisation is because resources have run out, but that will be no different in truth or morality to the Nazis saying "the Jews did it".

Hey Bill.....there's a bloke building a new house in the South island....silly sod isn't he...you better raise gst again if you wanna him to behave like the rest have...

Now let's see....we should be witnessing a change of the forecasts about now...the chch rebuild promises will start to have 13 instead of 12 on them....."expected to begin in early 2013"....yes that's the ticket....

Not that the activity will fail to happen you understand...it's just that the recession and the gst theft and the fact that chch has yet to stop shaking and the insurance companies want it all back like dam quick..the money that is.....well really....would you expect umpteen thousand wide awake Cantabs to rush in where they see fools sinking and spot the one chance in a lifetime to bugger off.

Not me. I see a pop migration heading south and north away from the swamp city before the rest of the problems show up...like the rates burden...

But but the rotting houses are here to save the building sector...really!

What else is there?....gst on top of the debt recession has killed new builds...what little life remains is having the blood sucked from it by Councils as they grasp for money to enable the 'make work no layoffs' policies to continue...hell Marlborough even got a high rise little used carpark out of the madness...who needs improved flood protection when you can have a carpark.!

And now we read of falling tax revenue...of a hint from the Beehive that the govt splurge will have to end...cutbacks..falling staff ceilings...one cake for morning tea....no loot to reseal the resealed roads or rebuild the quake threatened govt buildings across the country...that'll mean the building activity will come to an abrupt "HALT"...as Shultz would bellow.

Power down kiwi has it; productive land is more important than real estate. Anyway, I thought it had been well established that housing bubbles were generated by copiously available foreign credit (more readily available to BB's than others) not by immigration or land supply? Food supply will become more critical as fossil fuels dissipate - the world will only support AT MAXIMUM 500 million - 2 billion, and unfortunately all the pesticides and fertilizers that have been used (ironically) have made much of the currently exploited farmland a waste of time without those same inputs.Therefore, build houses on farmland at our peril! Look at what happened in India - they went from being a net sugar exporter, to being a net sugar importer, because farming wasn't as profitable as converting land to real estate. And then there were supply problems....

You know over the last couple of decades many have made good money writing books on these subjects especially when they use sensational headlines an opening here.........

Paul Ehrlich made a personally successful career out of over the top dramatic sensationalising ...... despite the fact that none , not a single one of his predictions from his 1971 best-seller book " Population Bomb " has actually come to pass , he has been lauded and feted the world over as a genius and a visionary .

....... the guy was a butterfly entomologist ..... he drew all his theories on the human race from his observations of butterfly populations  .....

Even today , thick-faced against criticism of his failures ( 40 years of constantly being totally wrong ) , he still maintains that he is essentially correct ...... and millions believe him !

" Population Bomb " , you gotta credit the fellow with knowing how to gussy up a pile of rubbish , and sucker people into believing it ..

Oh no, not another one of these mentally and morally confused individuals infesting this serious economics and finance blog, I hope. Bernard, can't you just politely direct these people to "Frogblog" or somewhereappropriate, and if other people want to wade through hours of hysteria from Malthusians, they can go there.

Or how about dedicating one thread to all the arguments previously aired by these people and countered by others like myself, and politely directing all fresh resurrections of the same old same old argument, there; and indicating "this correspondence is closed" on all other threads where we are trying to seriously discuss economics and finance?

Discussing limits to growth, climate change impacts, peak oil implications and resource limits is seriopusly discussing economics and finances.

Blinkered business-as-usual advocacy does not progress matters one little bit.

George Reisman, "Environmentalism Refuted".

The Rationalists manifesto.

Land-supply is one of the four aspects of the Perfect Storm which has enveloped housing since the 90's.

The Times article I referenced in those enthusuaistic bloggie years long ago from William Rees-Mogg is now behind a paywall, but the money shot is this:

"1. license housebuilding, so that no one could build a new house without a licence, or even rebuild an old house or a redundant barn.
2. encourage developers to maintain large land banks in order to benefit from rising prices.
3. leak out new permissions only after long periods of delay.
4. combine this with an unlimited flow of mortgage credit and relatively low rates of interest.

If you restrict supply below the market clearing level and increase funding, you will inevitably create a bubble and you will lock people out of the market."

And there is also the Nanny State impost, which I've summarised as having five components:

1. Dopey 'helping hand of der State' loan offerings which promptly drove prices up by, oddly enough, the exact amount of the maximum available Magic Money tree pesos.

2. Certification for tradies - the 'how not ter fall off of a Ladder' piece of paper for scaffolders is the classic.

3. Fencing around sites. certification of power tools annually (hence the rise of cordless...) , endless and inconsistent inspections, and the 'we know best' top-down attitudes which are squeezing self-constructors out of the white economy...

4. Development Contributions, which have long since been hijacked for the Social and Cultural Wellbeings brigade.  Try getting a coherent Source and Application of Funds statement out of yer local Council, for DC's.  Should be in the LTP.....

5. Planners and zonerators.  More of the 'We Know Best' crew.  Except, funny that, there isn't a trained economist among 'em who could perhaps point out the Weevils of Supply Constraint....

Ya hafta laugh aboot all this, really, because the alternative is....

Well, actually, one alternative is simply that landowners just do everything as R&M.  Especially it there's no road frontage, no fine-grained Google sat view to compare building footprints, and no close neighbours.

 

I know all you right wingers think the only reason we have such a brain drain from NZ is our low rates of pay. I would say a bigger reason is because NZ is so boring. There is no big vibrant city where you can live in a decent sized apartment right near bars and shops. You have to go to London or New York or Sydney for that. If Auckland grew up instead of out, maybe it could be an exciting place to live for the younger people, as well as providing a good place to bring up a family out in the 'burbs.

That's daft. If people want to live in a big vibrant city like London or New York, then they will go to London or New York - they are bigger in population than NZ!

Auckland needs to stop pretending it is a big city and concentrate on what it is and needs to be - what it will be is the decision of the council I guess. 1m people is not even a town in most countries.

Auckland is more like 1.5 million and will be 2 million in 15 years or so.  I'm not saying Auckland will ever be like New York or London, but we could have at least a couple of high density suburbs, couldn't we?  Not everyone wants to live on a 1/4 acre where you have to drive the car just to get to the corner dairy. Going by some of the comments on this forum, I doubt anyone has ever been to Europe and experienced living in a compact city. Its pretty easy to think our way of living is the best when you haven't tried the alternative.

If we have a lot of low cost land opened up, then what incentive would there be to start intensifying the more expensive land that is closer to the city. And how can we compete with more compact cities as the price of petrol goes up constantly yet we have no option but driving to work? 

I have lots of friends living in London that don't want to come back to NZ for the simple reason that it is too boring.  There are already plenty of spread out cities in NZ with affordable housing - why does Auckland have to be the same?

The thing that you do not understand, is that Manhattan (not "New York"  - "New York" total contiguous urban area  is less dense than Auckland) and London both exist on the inflow of international financial transaction charges. This is why David Cameron's government is shunting in tis rompers about the idea of an international financial transactions tax - this would kill London, which is just about the only thing left in the UK economy thanks to land regulations killing everthing BUT the finance sector.

The same goes for Hong Kong and approximately ten other cities in the world.

It is impossible to make all cities like these ones. 99% of cities have to exist on messy real world sources of inflow of income, like actually making stuff.

The difference between "the rest of Britain" apart from London, and Texas; epitomises the difference between the real world outcomes of strangling urban land supply ("the rest of Britain"), or not strangling urban land supply (Texas).

Your advocated policy settings would not turn Auckland into London, it would turn it into Newcastle or Liverpool. In fact, that is the way we are heading now.

OR, if we listen to Hugh P, we could turn it into Austin or Minneapolis or El Paso or Nashville or Boulder or Charleston or Little Rock.

That or Liverpool/Newcastle. Choose wisely.

Not true.  Hugh has stated that he wants to keep on strangling land supply in urban areas and only allow free for all unregulated sprawl in the countryside around urban areas...

Hugh says "This is why I'm for open fringe zoning ... with flexible internal zoning, where internal zones can expand and contract with neighbours consents."

If we listen to Hugh we continue to have expensive housing in the city surrounded by satilite slums for poor people - just like Johannesburg where all the poor workers commute in from Soweto each day to do the menial jobs.

Where is the city that still has expensive housing in the city, when fringe development is low cost?

Just curious.

Note what I said above about Manhattan and London being exceptions, and the reasons why.

Northern France.

What city?

What I want to see, is an urban land price curve that starts as low as Houston at its fringe, and ramps up to central London/Manhattan levels at its centre, without that centre being a near-unique centre of international finance.

This won't exist anywhere in the world.

Phil, how about doing some conducted walking tours of the bungalows of central London, Liverpool, Manchester or Newcastle? I'd fly to the UK to watch the crowds of confused people following your raised umbrella as you exalted on high.

Google Earth is a very useful resource.

Compare the cities I referred to above - low density medium sized US cities, and British cities that have had urban growth containment for 60 years now..

Also compare their rates of unemployment, their poverty (not % of "relative" poverty, BTW), their productivity, their employment growth, their space per person, their local pollution indexes, their housing affordability, and their discretionary incomes.

I assure you, it is game, set, and match to the low density medium size cities of the USA.

They have miles of trees , all green & leafy , in those low-medium density population USA  cities ..... some places you can't easily see the houses , for all the trees around ..... wide green grassy berms and parks , ...... awesome , really .

...... and then you compare to those soul destroying UK towns , concrete and brick as far as the eye can see , ...... folks crammed in , elbow to elbow , .... nary a green blotch of plant life  in sight .....

Ha ha ha! Very good! I'm off dahn the pub for a pint of best and a good yarn.

Cheers

Thank you, Gummy.

Pass it on. The smart growth emperor has no clothes.

Colin - we are a species, alle same any other, just more cognitive (but some of the above comments suggest, not much more cognitive). It's nothing whatever to do with "basic human rights', this is a finite planet and if we overpopulate it of resource-rape it (largely the same thing ) then your 'rights' are in triage territory.

Hugh - if I had a bet with you every day, as to whether you'd be alive 'tomorrow', I'd say both of us were being stupid. Thus I regard both Urlich and Simon, re that bet. Urlich is right, though, long term. I can predict, with 100% certainty, that you will be dead within 100 years. If I studied your ancestry, diet, addictions and exercise regimes, I could take a fair stab at the likely actual date (which is what I do re peak oil, energy and reource-depletion) but the outcome long-term is not up for debate. You mistake the vagary of the actual death-date, for vagary as to whether you are immortal.

The question is you case, is whether you do it knowingly as a narrow lobbyist, or whether you're really that deluded.

PB - how many '20 years supply's do you think there are? Are they increasing exponentially, or linearly (don't tell me - it'll be linearly at 2% p.a., right?).

 

 

The earth is less than 1% urbanised and you get all hysterical about "how many 20 years supply" there is?

It took centuries to achieve the 0.8 percent current level. "20 years supply" is something like 0.000000000001% of the world's land mass.

Look at just how much land is taken up by a decade's growth in any city, as a fraction of "what is already there".

Your type suffers from a serious delusion about "scale".

How this works Phil, is you start deducting things like desert, icy mountain ranges, tundra, steep slopes and TRF (to be on the safe side). Utilisable agricultural land is what is feasibly left after all the too hard stuff is taken away. In that case, what % of the land is now urban? Discuss!

I suggest that our worst problem is sheer misinformation about the extent of the world's land availability. Here is some data from the Lincoln Institute's "Atlas of Global Urban Expansion":

 

HOW MUCH land in the world/ each region/ each country, is "urban"?

 

Worldwide: 0.47%. Sub-Saharan Africa: 0.12%.

Between 1% and 2%: USA, India, Bangladesh

Between 0.5% and 1%: China, Indonesia, Pakistan

 

As a percentage of ARABLE land: Worldwide: 4%. Sub-Saharan Africa: 1.5%

Between 4% and 8%: USA, Egypt, France

Between 2% and 4%: China, Russia, Spain, Mexico

Between 1% and 2%: India, Bangadesh, Canada, Vietnam, Ethiopia

Less than 1%: Afghanistan, Sudan

 

So much for "paving over paradise", eh? "Overcrowding" is, almost everywhere in the world, NOT because of over-population, it's because of over-concentration of population.

 

I recommend browsing the whole Atlas. Europe is by far the most densely populated continent, and that has not left them starving, poor, and running out of resources. Julian Simon was right, "people" are "the Ultimate Resource". All that is needed, is to get the culture right.

What about the energy footprint -- what percentage of that are we using?  50% of the sun's energy used by humans and human modifed ecosystems?

Where on earth did you get that nonsense statistic? 50% of the SUN's energy???????

Mate, we could run the world several times over on solar alone if we could harness it.

Pure Unadulterated Corruption:
“The exclusion of a capital gains or land tax from consideration has prevented an accurate assessment of measures needed to promote savings by the Savings Working Group (SWG) say the New Zealand Manufacturers and Exporters Association (NZMEA). The SWG detailed the tax differences between assets and other forms of investment but was prevented from drawing the logical conclusion. There is little point tinkering with savings vehicles while large tax harbours still exist.”

http://www.realeconomy.co.nz/148-terms_of_reference_blight_swg_.aspx

In America, we have a ticking time bomb of unfunded liability for infrastructure maintenance. The American Society of Civil Engineers (ASCE) estimates the cost at $5 trillion — but that’s just for major infrastructure, not the minor streets, curbs, walks, and pipes that serve our homes.”
http://www.strongtowns.org/journal/2011/10/3/announcing-the-curbside-chat-companion-booklet.html

yep.....and then there are the upgrades to make say a national elec grid for resiliance, that was some trillions...2?

Personally I think the USA is poked and with it the Internet...so when the USA goes dark so will a lot of the Internet.

regards

 

The funny thing is, that the cities with low land prices and rapid growth, have the least problems in this regard.

I say it is all to do with NOT destroying capital in bubble values of a constant resource, land.

Not to mention the very healthy levels of discretionary income and rapid freedom from mortgage debt, of the local population/taxpayers.

Yes, yes, I mentioned this with respect to Auckland. MP Banks (as mayor) diverted 3-water infrastructure money into Council general revenue. It probably got pissed up the wall for a David Beckham non-event.

This is why we "need" more and more people and why the development industry shills go on and on about our underpopulation disease

Analyst Owen McShane quoted a 1960s report, on the relationship between house construction and employment, that concluded that every 1000 houses would generate a total of 40,000 contracts and jobs over 15 to 20 years. (3) He showed that reducing the residential construction rate from 26,000 a year to a no more than 16,000 a year, and probably much fewer, is cutting 400,000 contracts and jobs over 15 to 20 years. Is this the legacy that the Key-led government wants to leave?

Where does immigration fit into the Key government’s grand scheme? Net migration went from minus 6760 in 2001 to plus 34,580 in 2002, and up to plus 42,090 in 2003, the beginning of the boom. Since more people require more dwellings, the residential property sector keeps a close eye on net migration. Whether the Clark-Cullen government deliberately allowed the influx to pump up the economy or whether it was an administrative cock-up has never been discussed. There are quality migrants around the world who would give anything to be able to live in New Zealand. By world standards, New Zealand is thinly populated. Would it not be worthwhile to investigate a managed increase in immigration?

http://breakingviewsnz.blogspot.com/2010/10/mike-butler-english-banks-and-property.html

synopsis?

regards

Both Oram and Ryan skirted the real issue.

Ryan knows, because I've hammered her this year. She 'got' peak oil, interviewed Fatih Birol, addressed 'growth', then immediately fell back into 'the economy'.

It's a dissonance, hard to grasp it listening - how are two so divergent facts accepted as mutually concurrent-able?

Oram probably knows, deep down. Just like BH here. Both don't dare open the discussion (BH knows enough from you and I here, to make quite different comments on The Panel, for instance) due probably to fear of lack of peer cred - Emperors Clothes stuff, in other words.

Ryan mentioned 'infilling to Cape Reinga, Oram mentioned 'transport', but neither really went there.

There was a better on Nights last night (think it was 7-8pm). I missed a lot of it but it sounded worth listening to the podcast.

The Commission won't debate, though. They're on a yesterday's agenda, appointed and driven by a yesterday's government, trying to reacquire yesterday's growth rates.

.......yesterday.....all their troubles seemed so far away.........

http://www.peakoilblues.com/

"What's a 'normal' reaction to learning about a post-oil world?

Fear? Anxiety? Shock? Depression?

No one really knows.

Many people say preparation is "90% mental," but how do you separate out what's "mental preparation" from what's just "acting mental?"

Here we explore what we've learned about various emotional reactions."

 

etc etc

regards

"I sat at my computer for weeks. First I read the Peak Oil sites, then I started reading all the skeptics' websites. It was like some kind of drug. I was totally fixated on trying to figure out whether this was real or not."

Sounds familiar...

"My husband got it right away, but my Mother kept saying 'I'm really worried about you. You talk like it's the end of the world,' and I'd say 'Well, it just might be,' and they'd say 'Well, since you don't know for sure, why worry about it.' I'd stop talking after that. They didn't get it... They refused to even listen..."

regards

BH, maybe he's tried out such Qs and like me got ppl looking at him like he's a loon, so once ppl thought he wasnt credible, he'd starve then...

regards

 

Why don't you alleged scientific types follow some genuine science sites instead of those hysterical doomsayer ones?

What I said the other day, was that a society whose youth once devoured "Popular Science", and now devours "Pacific Ecologist", is a society in terminal collapse, and this is nothing to do with resources. The enviro Taleban will say it is, just as the Nazis always said "the Jews did it".

some genuine science sites

such as??????

Yeah, crazy people like Richard Branson and other top businessmen in UK

http://peakoiltaskforce.net/download-the-report/2010-press-coverage/

 who have to respnd to  reality, not the comfortable bedtime stories like "We'll always have enough oil, land, and resources". That is the dinasaur thinking that has led to, among other things, the crash in fishing stocks- the cod up north have not come back in 20 years. The mantra of businesses that actually want to succeed in this century is- "Without the environment there is no economy, stupid".

Or how about that other loony greenie leftie (used to be pinko commie, then hippie, the name calling indicates the lack of a credible stance) Jeremy Grantham on the US:

 

"I despair that this country and its government have failed to take at all seriously the most important and the most dangerous issues: depleting resources, development of a comprehensive energy policy, and, yes, global warming.  Wake up dudes!"

http://www.gmo.com/websitecontent/JGLetter_ShortestLetterEver_3Q11.pdf

But these are just successful saavy businessmen, not the ostriches who haunt investment sites, they are out there now having to make a living in the market as it is. You can always tell the difference between the action men and the pontificators, the latter form in groups and wheez on all day, congratulating each other on their agreed on narrow world view.

People are leaving New Zealand for the work. Unless you are a 68 year old dairy farmer in this country there is no future for you. And that is due to wash up in the next few years as milk becomes too expensive to transport.

So all you dinosaurs who keep cheating my children's future to fund your retirement- go back to the 20th century, and leave us to clean up the mess  you've left us after your 30 year resource binge.

 

 

If some of your type were advocating Amish lifestyles, I'd regard you as a but more credible.

But advocating high density urban living, paying through the nose for nothing, and public transport? DUH. DUH. DUH.

"Cheating your children's future to fund your retirement"....haahaaaaaaha....that load of old flannel has been rubbished by a recent study in the UK...go find it Pickle and learn...

You chose to have the sprogs...your problem.

Hello pension ...I can see you.....not long now!

I do look at science sites, thats just it, many are flawed, they see th epart picture....the really good sites take the bits and glue them together to make a big picture.

.....you on the other hand live in la la land....you spend the time look for props to suypport your view of the world as infinite consumption for ever more.

Cant and wont happen....at some point our system has to re-adjust and morf, trouble is thats about now this decade, at the latest, next.

 

regards

"....thats about now this decade, at the latest, next...."

As the doomsayers have been saying ever since Tertullian, who preceded Malthus by several centuries.

"Birol said crude prices could rise to $150 by 2015 if oil-producing countries in the Middle East and North Africa don't invest $100 billion a year to maintain existing fields and develop new ones.

More than 90 percent of global crude production growth during the next 20 years will come from that region, led by Saudi Arabia, Iran, Iraq, Kuwait, Algeria and United Arab Emirates, Birol said.

"Recent developments, including the Arab Spring, have changed the mindset of many governments," Birol said "In some countries, oil investments have been diverted to social spending. Oil policies are taking on a more nationalistic tone, which means not to increase production as much is needed in the world market.""

http://www.google.com/hostednews/ap/article/ALeqM5hxepH49Buv9EC6Q4HWljaGcqk1lw?docId=42cd79eb465946818337512d004a1c47

Excpet Saudi says it never will.

Its at or about its peak of about 9.

regards

"....One day, the oil will be left in the ground. The oil age will end, not for lack of oil, just as the stone age ended not for lack of stones...."

- Sheikh Yamani, Saudi Oil Minister

Rod Oram (It's about more than affordability)

"Fast population growth over the past decade has strained infrastructure, boosted house prices and reduced the quality of life in the Auckland region. Addressing such issues goes right to the heart of the long-term strategies of the region’s councils for obvious economic and social reasons.

Auckland’s ambition to become a truly international metropolis depends in part on maintaining the quality of life, which in turn requires bold vision, sound strategies, good regulatory processes and citizen commitment. Clearly, the RMA is a critical tool to help achieve those goals, which in turn will then help attract migrants, and help keep existing residents here. On present forecasts, the region could have a population of around 2m by 2050, a 65% rise from current levels, suggesting the challenges will be formidable."

http:// http://img.scoop.co.nz/media/pdfs/0705/RMA__Oram_Paper_May_2007.pdf

As an addendum, he also has a useful set of figures of growth from 1990 - 2004: population 21%; economy 54%; industrial production 32%; road freight 46%; car traffic 57%; energy consumption 42%; CO2 emissions 49%; household waste 35%. If we are to have sustainability with capitalism we clearly need to disconnect economic growth from resource use growth and that is going to involve a very significant change in the way this market system works.

Yep, price the proles out, create de facto gated communities for wealthy elites. Never mind the increases in inequality, the diminished living standards for everyone below the top 5% percentile, the increased local pollution indexes, the deprived childhoods (because 70% of mum and dad's income is going on the mortgage or the rents), the dilapidated housing stock, the health outcomes, etc etc.

People who support this are either economic ignoramuses akin to the Bolsheviks, supporting unworkable and unintended-consequence-causing utopia; or they are corrupt - they own property or land banks, or are on the take from people who do.

Work out why the Rockefellers and George Soros have been fundin enviro and "smart growth" advocacy long since. Whose useful idiot do you want to be?

An urban plan is like a tailored suit. Mass in ward migration is like going on a massive eating binge.  There has to be a good excuse to allow a lot of outsiders to live here (other than make property developers fat).

To explain for about the one zillionth time on this site:

Urban growth constraints create a racket in "planning gain" that hands a few land owners hundreds of percent capital gain. Property developers either have to join a long term land banking racket, or pay through the nose for sites, and carry far heavier financing costs either way. They also have to become wise to increased cyclical volatility, including the fact that there will only be a narrow window of opportunity for them to make money between "getting permission" to build anything, and the next cyclical downturn starting.

Contrast that with the good old days Hugh Pavletich remembers: making modest and honest profits actually building stuff that people want, at a fair price.

The "making property developers fat" argument is nothing more than propaganda from the people who are made extremely fat by urban growth constraints, and their useful idiots, who may sometimes be people who genuinely care about the environment, but........

Wendell Cox's Voodoo Economics

http://www.cp-dr.com/node/2810

Oh, Bill Fulton, still in denial that urban growth containment causes inflation in urban land prices.

I have a term for him - "fiscal child abuse denier".

It is time to stop mincing words about these utopian dealers in human suffering. They differ from the Bolsheviks only in the scale of suffering they are responsible for. Their brute ignorance and intransigence is equivalent.

Oh, Bjorn Lomberg...

Bill Fulton:

"I respect the anti-anti-sprawl researchers – Cox, Randall O’Toole, Sam Staley – and I try to stay on good terms with them. But what drives me crazy about this stuff is that the self-fulfilling assumptions undermine the valid points and make it difficult to reach consensus about what’s going on.

There’s no question, for example, that UGBs do increase home prices at least a little and also create a "bounce" effect, as my colleague Rolf Pendall and I have acknowledged in a piece of research Cox cites as part of his source material. But UGBs do not, by any means, account for all home price variation.

Instead of acknowledging the complexity of the situation, however, Cox lumps all public policy into the same category of intrusive regulation and then ascribes all variation in home price to that regulation. (O’Toole does the same thing all the time.) I’m no academic snob, but I can’t believe this would pass any serious peer-review muster."

http://www.cp-dr.com/node/2810

Tell Fulton to get himself an education:

http://www.performanceurbanplanning.org/academics.html

Bill Fulton admits:

".......UGBs do increase home prices at least a little......"

This is like admitting that Nazis might have killed a few Jews.

When housing is developed at and beyond the urban fringe with a minimum of "planning gain", due to genuine competition in the land supply processes, "consumption of land" actually has a minimal effect on the price of housing. Most of the cost of a lot in this kind of market, is the cost of development. Raw land costs might only be $4000 per acre; therefore a 1 acre lot will only be around $2000 dearer than a half acre lot - perhaps $32,000 instead of $30,000. Reserving "public space" to create amenity, also has minimal effect - sacrificing half the raw land in a new subdivision for parks and heritage and so on, will only add $4000 to the cost of a one acre lot, $2000 to the cost of a half acre lot, and $1000 to the cost of a quarter acre lot. Amenity value and (possibly) increased developer profit, may lead to lots being priced at $40,000, when they could have been $30,000 had affordability considerations been kept to the fore.

 

But to call this "exclusionary", as many analysts do, sounds a little strange now that we are used to the cost of raw land being inflated, in cities with stringent planning procedures, to well into six figures per acre. This changes everything. Developers will now wish to cram as many houses in to a development as possible, because a half acre lot may well cost $100,000 more  than a quarter acre, and a one acre lot may well be $200,000 dearer again. Sacrificing land in the development to public space, will force up the cost of each home provided by a similar margin. A development involving one acre lots and half the suburb devoted to public space, will now have a lot price of some $800,000 each instead of $40,000.

 

No amount of cramming affordable housing of any kind, into a development with raw land this costly, will bring the price of land consumed per unit down to much below the $40,000 that one acre previously cost. In other words, even the smallest new home is likely to cost similar to what a large home cost before the regulations - and the traditional large home will now be literally millions of dollars, most of this being land cost.

This is an important point to grasp and understand. I am surprised that it is not commonly understood. I really owe this insight to Hugh Pavletich, who is not an academic at all.

Sure my figures might be "rough" and actual examples will differ, but the broad principle is glaringly obvious.

"Trickle down" housing used to involve that older depreciated homes would typically cost quite a bit less than new ones - because the land cost is a minimal input. But in distorted-land-price cities, the worst old dumps still cost over $300,000, this mostly being the cost of the land, the house being worth approximately nothing. Contrast this with US cities where new homes are $140,000, new townhouses $90,000, and dilapidated older homes that would be $300,000 here are $60,000 or $40,000.

Contrast, too, the prices in Detroit, with the prices in Newcastle, England, where the prices have been kept high by strict urban planning in spite of "rust belt" and unemployment phenomenon being at least as bad as Detroit. Detroit will recover, just as Cleveland has. But "keeping urban land prices inflated" merely preserves a rust belt economy in aspic.

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When housing is developed at and beyond the urban fringe with a minimum of "planning gain", due to genuine competition in the land supply processes, "consumption of land" actually has a minimal effect on the price of housing.

How do we know the farmer('s) will want to sell? The town council would have to purchase to bring all the land into a supply chain.

And why push the system with mass migration (other than genuinely needed skills)? Inward migration provides an income but is an unsustainable ponzi scheme if it is an end in itself (assuming there are limits to growth- which most sensible people do).

Raw land costs might only be $4000 per acre;

the key assumption

The first paragraph makes the most sense.

Phil Best:

When housing is developed at and beyond the urban fringe with a minimum of "planning gain", due to genuine competition in the land supply processes, "consumption of land" actually has a minimal effect on the price of housing.

How do we know the farmer('s) will want to sell? The town council would have to purchase to bring all the land into a supply chain.

And why push the system with mass migration (other than genuinely needed skills)? Inward migration provides an income but is an unsustainable ponzi scheme if it is an end in itself (assuming there are limits to growth- which most sensible people do).

Raw land costs might only be $4000 per acre;

the key assumption

...................

Perhaps Moa Man can explain the $4000 figure and why Harcourts  Shanghai etc, etc don't make a difference?

Why would I be interested in Harcourts Shanghai and  $4000 per acre.

Here's a tip for you jh. When some pointy head at the ECB says things are bad, which they do at least 2 days every week, put a mil on LYNAS CORP, trades on the ASX under code LYC.

On the days which the aforementioned pointyheads then say something positive,which they also do at least 2 days a week, then sell your LYC holding.

Or you could just piss around blabbing on about realestate I suppose. I don't really care

I am actually very glad to get down to this nitty gritty; getting the answer clear to this question is very important.

There are always farms for sale somewhere.

The going price is usually around $4000 per acre.

IF a developer is allowed to build houses on ANY farm he buys WITHOUT triggering off expectations of capital gains on the part of the farming seller, this keeps a lid on the prices of ALL land sold for urban development.

There is a kind of volatile tipping point that makes this an "all or nothing" question.

IF you "constrain urban growth", you GUARANTEE that the sellers of land for urban development WILL "hold out" for hundreds of thousand of dollars per acre for it, because they have been handed a near-monopoly position.

The Productivity Commission correctly identifies the inadequacy of an alleged "20 years supply" in a spatial plan - the monopoly effect still kicks in. To avoid the monopoly effect, it is necessary to draw a growth boundary so loose that you might as well not have one at all.

But the absence of growth boundaries in low land price cities in the USA, does not mean that all development is only done on land that farmers have sold for $4000 an acre miles and miles away from the existing city fringe. What it means, is that because developers CAN do this, farmers nearer the city are realistic, and might push their luck and ask for $8,000 per acre. There is NO chance of any of them asking six figures per acre. Even their long-built-up areas do not have land this expensive; as the price of fringe land keeps the price of all land low.

Some "holding out" by land owners does occur, so that "splatter" or "fragmented" development is common. However, there are NUMEROUS academic studies that find that "splatter" development followed by later in-fill, is MORE EFFICIENT for land use long term, than mandating incremental development. This is because it is clearer later on, with some development having put some of the land to use already, WHAT is the "best" use for the gaps. "Holdout" land owners quite fairly do expect a reasonable capital gain for holding out to this point. Even so, the capital gain is nowhere NEAR as big as the gain handed instantly to land owners when a tight UGB is redrawn.

You are quite right to raise the suggestion that government compulsorily acquire fringe land for development. This is what they do in the Netherlands, specifically to keep prices low in spite of their very real pressures on land. This enables the Netherlands economy to remain competitive, unlike other densely-populated countries where "actual runout of land" leads to colossal destructive bubbles (eg Japan).

I constantly raise this point with advocates of urban growth containment - I argue that containment, if it is justified, absolutely MUST be accompanied by compulsory aqcuisition of land to keep prices from bubbling. You tell me why they always come over all coy and say that this is not politically workable? If we need growth containment to save the planet, why are a few land owners massive capital gains a sacred cow not able to be sacrificed also, in the cause? Why are fair priced homes for young people not MORE sacred?

 

Because 'fair priced' is not the issue.

Never was.

This is about absolute limits, and the fact that they aren't making any more land.

You can trace it back to some idiots who took 'go forth and multiply' too seriously.

I suggest you get you head around the fact that evolution happened, and is happening. That opens up all kinds of understanding, trust me. You get to understand about 'swarming', overshoot, dieoff, and things like that. Jettisoning religion makes you realise you are a member of  just another habitat-requiring species - multiplying media just melt into the background.

Happy epithanizing.

 

 

What the.......... did that have to do with what I said about land values in the year 2011, with and without regulatory distortions?

You might as well be a cave man witch doctor responding to everything I say with another round of mumbo-jumbo and bone-pointing, for all the evidence you show of actually understanding the real world here and now, not some future dystopia of your imagination.

On afternoons with Jim Moira an email from an expat in Hong Kong. Apparently there was a large spread in a newspaper encouraging investment in NZ property. The lack of taxes was a major selling point.

 

"......a major selling point......"

Major selling points are often a cause of major trouble later on when gullible herds of people swallow them.

How would Wall Street have destroyed the world economy without a few "major selling points" that gullible herds of people swallowed?

Financial freedom is probably the dream of most.
The ability to do what you want whenever you want.

Wealth and Financial freedom tend to go hand in hand, the only differing factor is how much each person considers they need to be Wealthy or Financially free.

If you look at any of the World's Richest People (US "Forbes 400 Richest Americans", or Australia's "BRW Rich 200 List"), you will see these people have generated their wealth from a wide variety of businesses and professions, and all invest in real-estate as an important Wealth creation mechanism.
90% of millionaires get there by investing in real-estate.

The attraction with New Zealand property as an investment is the low barrier to entry, favourable and stable exchange rates and the tax system. Property price growth is closely linked to population  growth.  Expected population growth in New Zealand's major cities provides a sound basis for increasing property value. Property prices are also relatively undervalued compared to its trading partners and closest neighbour Australia.

http://www.propertymarketnz.com/1_22_Why-Invest-in-Property.html

 

Party Vote NZ First.

I don't think Hugh would find Red Russel or Sue as amenable as Winston.

Ah, I am the first to argue that it is wrong and destructive for economies and societies, when "property" and "finance" are increasingly the way that most wealth is made, relative to actually producing things and employing people.

Check out my comments on THIS thread:

http://www.macrobusiness.com.au/2011/11/expect-the-revolution-to-grow/

 

$4000

Once he comes up with these categories, he then goes through an exhaustive – and, frankly, mostly well-executed – quantitative analysis about home construction cost, accounting for variation in construction costs in each metropolitan area.

But then he assumes that construction cost is typically 80% of the advertised home price, meaning 20% is attributable to land cost and regulation. He says he has data to prove this but doesn’t provide references; he simply assumes that 20% is what land and regulation cost should be in a less restrictively regulated market. And then he simply assumes that if the difference between home price and construction cost is more than 20%, then all the difference must be due to regulation.

For example, if construction cost is $80,000, the sales price of the house should be $100,000. Under Cox’s methodology, if the cost of the house is more than $100,000, anything over that price is either due to excess regulation or due to high land cost that is caused by excess regulation.

???

http://www.cp-dr.com/node/2810

He just happens to be RIGHT.

Immerse your brain in this for a while:

http://www.performanceurbanplanning.org/academics.html

Start with the papers authored by Paul Cheshire. Go on to the ones authored by Alan W. Evans. Alain Bertaud is good too, and so is Alex Anas.

The advocates of urban growth containment are wilfully ignoring the best academic evidence.

There has been some very interesting posts on a site called "SmartGrowthUSA" about the endowment funding of the Professors who still support urban growth containment.

I can tell you very quickly what are the repeated flaws in all "studies" that purport to "prove" that urban growth containment "has XYZ beneficial effect". Besides delivering housing unaffordability and economic volatility, these regulations do NOT even deliver the alleged "benefits" (shorter commuting times, reduced CO2 emissions, etc etc).

But the single most FRAUDULENT claim of the advocates of urban growth containment, is that it will IMPROVE housing affordability........!  This is a flat lie - there is simply nil basis whatsover for making this claim, and never has been. This is akin to claiming that restricting the supply of bread will make it cheaper.

Why isn't the PRODUCTIVITY COMMISSION's first report about productivity?

Housing costs, and the factors that relate to housing costs, are actually very connected to productivity.

Higher workforce cost pressures tend to lower productivity. High urban land costs for businesses also lower productivity. Higher urban land costs tend to swamp other factors in decision making re location and use of land, that affect productivity. Productivity can usually be raised by using more land rather than less.

Take a look at a local tyres and exhausts fitter with inadequate space, for example. Or a warehouse with narrow aisles rather than wide ones.

Because it isn't a serious exercise by the government.

How the Tea Party Is Upending Urban Planning

Across the country, Tea Party activists have been storming planning meetings of all kinds, opposing various plans by local and regional government having anything to do with density, smart growth, sustainability or urbanism. In California, Tea Party activists gained enough signatures for a ballot measure repealing the state’s baseline environmental regulations, while also targeting the Senate Bill 375, the 2008 law that seeks to combat climate change by promoting density and regional planning.

Florida’s growth management legislation was recently undone, and activists in Tampa helped turn away funding for rail projects there. A planning agency in Virginia had to move to a larger auditorium and ban applause, after Tea Party activists sought to derail a five-year comprehensive plan and force withdrawal from the U.S. Mayors Agreement on Climate Change.

What’s prompting the ire is anything from a proposed master plan to a new water treatment plant, rules governing septic tanks, or a bike-sharing program. What’s driving the rebellion is a view that government should have no role in planning or shaping the built environment that in any way interferes with private property rights. And in almost all instances, the Tea Partiers link local planning efforts to the United Nations’ Agenda 21, a nearly two-decade old document that addresses sustainable development in the world’s cities – read as herding humanity into compulsory habitation zones.

 

http://www.theatlanticcities.com/politics/2011/12/how-tea-party-upending-urban-planning/718/

I love it. Go, the Tea Party.

It is noticeable how the people most sneered at by modern leftwing liberals, have intuitions that lead to the greatest success - like in Texas, where urban growth constraints are banned at the State level, and they have had stable, affordable house prices, no bubble, and around 70% of all the new employment in the entire USA since 2007.

"Resembling a “mini Los Angeles” is not a good thing for livability and attracting talent, at least not according to the World Bank.

In a recent report about Malaysia, the World Bank said Malaysian cities need to adopt more compact urban forms and start investing in “smarter cities” to improve livability and attract talent. In their current form, the report says that Malaysia’s cities have “significant urban sprawl” and declining population densities – each looking more like a chaotic and messy “mini Los Angeles” rather than a densely-populated Asian city."

http://blogs.wsj.com/searealtime/2011/11/22/kuala-lumpur-a-southeast-asian-los-angeles/?KEYWORDS=urban+planning

Yes, Alain Bertaud, who used to author the World Bank's studies on urban form, says that his former colleagues are completely clueless.

Check out his site for some of the most advanced stuff you will ever learn about urban economics and urban form:

http://alain-bertaud.com/

By the way, did you know LA was the USA's densest city? It has often been described as "dense sprawl" or "dysfunctional density".

The cities with miles and miles of 1 acre lots work far more efficiently. New York is actually extremely productive because it has this spreading miles away from its very dense core; its average density ends up lower than LA. Manhattan is dense because it became one of the world's 4 main centres of international finance about 120 years ago, not because a bunch of urban planners like high density and tall buildings.

Within the US (according to the all-knowing Wikipedia, US Cities by Population) New York city is the densest city (in population not iq) at 27,016 per square mile.

Los Angeles city is 28th densest at 8,091 people per square mile.

Your beloved Houston city is 3,501 people per square mile, the 109th densest city of the top 275 by population.

The figures are from 1 April 2010.  

To answer your question then: no I did not know that Los Angeles was the USA's densest city.  It looks like I am not alone in not knowing that. The US Census Bureau is also did not know.

This is a very common mistake, but one that has unfortunately led to and perpetuated reams of faulty analysis re population density and urban form and function.

The US Census Bureau goes by the number of people within a political boundary.  But a "city" is an entity that often crosses numerous political boundaries.

The "city" of New York goes dozens of miles in several directions beyond the Municipality called "The City of New York", just as the "city" of Auckland goes way beyond the Municipality called "Auckland City".

The "municipality" called "Los Angeles", on the other hand, includes in its area, mountains and rural areas - about half of it, in fact.

To accurately assess the true population density of any city, it is necessary to "map" the "footprint" of the actual city, not political boundaries, and add up the numbers of people within that footprint. Demographia does do this analysis, and that is what I am relying on.

http://www.demographia.com/db-worldua.pdf

It is very important to clear this point up and spread the word about it, because a LOT of damage is being done by faulty assessment. Los Angeles is condemned as an example of the consequences of "sprawl" when in fact it is an example of the consequences of density inadequately served by road lane miles.

The authoritative Eric A. Morris says, in “Los Angeles Transportation Facts and Fiction”:

 “.......by the standards of U.S. cities, Los Angeles is not sprawling, has a fairly extensive transit system, and is decidedly light on freeways. The smog situation has vastly improved.....

“........Los Angeles’s traffic woes stem from the fact that it doesn’t sprawl enough and has overinvested in costly rail transit at the expense of developing its undersized freeway network.....”

http://www.freakonomics.com/2009/03/10/los-angeles-transportation-facts-and-fiction-driving-and-delay/

Thanks, I thought it would be difference in the boundaries used for comparison.

Table 4 in the Demographia report is urban areas by population density.  It shows the density of 792 urban areas with populations over 500,000, plus a whole lot more places with smaller populations.

What is noticeable is the low density of all US urban areas compared with the rest of world.

Los Angeles urban area -- 677th on the list, density 2,400 per sq km. 

Auckland urban area -- 680th, density 2,300 per sq km

New York urban area -- 710th, density 1,800 per sq km

Houston urban area -- 742nd, density 1,100 per sq km

The highest density is Dhaka at 35,000 per sq km.

It is therefore valid to describe all US urban areas as low density.

 

 

And it is also valid to describe all cities in developed countries, as low density, compared to cities like Dhaka and Lagos.

Advocates of urban growth containment usually use European cities, and Manhattan and Hong Kong, as their models.

Manhattan and Hong Kong, and a few other cities, are centres of international capital. Hong Kong is what it is because it was a tax haven city-state for decades. Manhattan is surrounded by low density anyway. Cities like Tokyo, happen to be in a country where 120 million people have less space than NZ - and the prices of property are significantly restraining their economy. Netherlands cities exist in a country the size of Canterbury, with 14 million people.

It also makes a difference how "old" the city is - does it predate the car? How much "urban renewal" did it go through back when planners were trying to reduce density for health reasons?

Basically, the way real estate markets work, "increasing density" within an existing footprint is impossible in a mature city in a "developed" country, without government compulsorily acquiring the land - and I don't see that being proposed anywhere, let alone happening any time. (Also, NIMBY rights would have to be totally over-ridden). Once you've got low density you are stuck with it. It really, really matters, what the "planners" did 5 decades ago. Large minimum section sizes were never a free market idea.

I will keep repeating - the fact that people who want to "save the planet" via urban form, do not insist that compulsory acquisition is essential if any of their alleged results are to be achieved, means that they are either so incompetent they should not have any credibility or be in a position of authority at all, or they are corrupt and on the take from property owning participants in the racket.

 

Repeating dumb comments doesn't make them any less dumb.

We need to stop population increase, both here and globally. The sooner, the less, the better.

We then need to address the sustainable - essentially the forever - use of land.

You're hell and gone from understanding that.

 

Actually printing out loud seriously dumb stuff 'like " we need to stop population increase , both here and globally " .... doesn't make it any less dumb , more dumberer , truth be told .

.... wanna volunteer  for your family to be euthanised or sterilised , to kick things off  ?.....

Or will your ghastly population control measures only apply to some other people , them over there ,..  in India , China , ..... just not in your personal backyard ?

Seriously dumb comment , pal ..... if we're gonna give out a " Shiney Turd Award " for the stupidist comment of the New Year , my money's on you to win it ........

Too late Gummy - we're already dead, it's just that no one has sent us a letter to advise us of our altered state.

 

Over 4.5 Billion people could die from Global Warming-related causes by 2012

Hydrate hypothesis illuminates growing climate change alarm

Compiled by John Stokes

A recent scientific theory called the "hydrate hypothesis" says that historical global warming cycles have been caused by a feedback loop, where melting permafrost methane clathrates (also known as "hydrates") spur local global warming, leading to further melting of clathrates and bacterial growth.

In other words, like western Siberia, the 400 billion tons of methane in permafrost hydrate will gradually melt, and the released methane will speed the melting. The effect of even a couple of billion tons of methane being emitted into the atmosphere each year would be catastrophic.

http://www.agoracosmopolitan.com/home/Frontpage/2007/01/08/01291.html

 

And this never happened before, when the earth was warmer still? Before the capitalist-industrialist complex was even around?

Propaganda from the extremely dangerous Al Gore, Inc.

Well, yes, there's evidence that it has happened before.  Quite catastrophically.  Here's just one of many papers, and as good a starting point as any.

http://www.sciencedirect.com/science/article/pii/S0037073803002860

 

Hear, hear, Gummy Bear.

PDK also ignores the fact that Western Civilisation is already in Demographic decline. Perhaps if the rest of humanity got as rich, they too would stop breeding and the population level would be fairly self balancing?

Hugh's point re the ChCh earthquake thread is good too - why doesn't PDK just come out with it and say that he expects the people of Christchurch to just report to the gas chambers now? Because "we haven't got the resources to let evil people like Hugh P actually get houses built for them".

It's time to get the people of Christchurch forming lynch mobs against the Enviro Taleban who are blocking real solutions to their problems.

I have decided to invest in an inter stellar plasma powered ship and scoot off to pillage a planet or three...by the time I get back the oil crisis will be over...so will about 1000 years...but I will be only 5 years older....you gotta love the AE solution.

It's The Power and Influence Thing Stupid!

by Alex Tarrant | 31 Mar 11, 11:48am

0This is also rather ironic after the Prime Minister said last week that if they introduce a CGT, or more importantly a land tax, then house values would fall and he did not want this to happen:

http://www.interest.co.nz/news/52737/imf-recommends-govt-broaden-capital-gains-tax-base-and-introduce-land-tax-your-view

Prime Minister John Key reiterated later a land tax and broader capital gains tax were still off the cards. Asked whether the implementation of one or the other could allow government to reduce income taxes to give people more income to spend, he replied:

At the risk of repeating myself from last year, we looked at a land tax, and land taxes, one, reduce the value of land in New Zealand, by definition, and it has an impact on every single homeowner in New Zealand."

“I wouldn’t have thought we’d want to do that on the back of a very weak housing market at the moment,” Key said at his Monday media briefing in the Beehive.

 

http://www.interest.co.nz/property/52864/productivity-commissions-first-tasks-investigate-housing-affordability-international-

So you mean it isn't just about land supply:

www.interest.co.nz/news/57328/90-seconds-9-am-bnz-fall-us-jobless-claims...

If it isn't also about taxation, why did Westpac* conclude that 17% of the increase in house prices in the recent upswing was a result of changes to the upper income tax rate implemented in 1999? Why was it so easy for people affected by that change to shelter income as they did? Better question - when it was balls-on-dog obvious this was also a driver in unaffordability, why didn't the governments of the day pull finger and sort it?

Is there anything else?

* I could look up the ref, but we've have seen it on Int.co many times, if someone has it to hand easily, add it in here please.

Under any conditions, blunt regulations against urban growth are a bad idea.

But a land tax is a good idea, and would have its own "growth containment" effect, as well as its other numerous advantages (eg the taxation of gains from the provision of amenity, exactly according to the capitalisation of those amenities into land values, hence avoiding wealth transfers from the provision of amentities).

THIS way back in the 1960's, is an excellent analysis:

http://www.masongaffney.org/publications/E3Containment_policies.CV.pdf

Tax land, not buildings and improvements.

CGT's are not land taxes, and are useless as anything except a revenue gatherer and a broadener ot the tax base.

The Productivity Commission was right to point out that both CGT's and taxes on interest are regressive to the extent that they are not "net of inflation".

 

'Quit whining about land supply; it's credit supply, stupid'

No offence meant Phil, just playing with this article's strap-line. Have a look at these Steve Keen articles:

http://www.debtdeflation.com/blogs/2012/01/07/australian-house-prices-again/

http://www.debtdeflation.com/blogs/2012/01/03/the-debtwatch-manifesto/

He makes that case that it's more to do with 'debt acceleration', which is a dynamic of credit supply. Quoting from first article

"Spruikers happily make a “supply and demand” argument about why house prices have risen, but obsess about regulation-impaired supply and equate demand with population growth. In fact, demand for housing doesn’t come from population growth: it comes from the growth in the number and value of mortgages. That growth rate in fact peaked back in 2004, and it has been trending down ever since: the First Home Vendors Boost merely delayed this process without stopping it."

"As I’ve explained elsewhere, the causal factor behind asset prices is not just rising but accelerating debt. This is an extension of my basic proposition that macroeconomic analysis must include the role of credit—which is ignored by conventional neoclassical economics."

Then read the next article with an eye on explanation of his term 'Credit Accelerator' and ask yourself, will the inertia associated with land supply ever be less than any inertias associated with credit supply? I'm not inferring that we shouldn't deconstrain land supply, but in terms of better understanding the affordability issue, how can we ignore all causes, except land supply?  Especially when other causes maybe as, if not more significant. See article about LVRs quoted in my comment above. (Anyway, I'm getting a better understanding of why property speculators/investors don't like the idea of public credit, or any constraint on credit supply, creation.)

An aside, especially for Amanda, as she thinks Steve Keen's idea of a debt jubilee is, "krazee" (although Amanda wouldn't say why when Kiwidave and I asked?) see:

http://www.debtdeflation.com/blogs/2011/12/27/partial-mortgage-jubilee-plan-from-us-fed/

Happy New Year, Les.

www.nzmea.org.nz

As for tax, I wouldn't disagree about land tax, but given nil effective taxation in this area, would we have less of a problem with affordability with more appropriate taxation:

http://tvnz.co.nz/health-news/massive-new-year-s-push-give-up-smoking-3990150

(Anyway, I'm getting a better understanding of why property speculators/investors don't like .....) 

I would be interested in any comments regarding the idea of including the right of the individual to pursue their economic, social (and holistic) development (liberty is very narrowly defined at present) in the New Zealand Bill of Rights Act 1990 (Key government is presently conducting a constitutional review, including bill of rights matters). This is so individuals can challenge bureaucratic red tape in court (remembering the Key government thru orders in council had to cut thru' about 22 statutes to get business up and running after the first earthquake).

I visited ChCh twice after the two major earthquakes because of my concern re bureaucratic red tape might stiffle rebuilding and also because at the national level little progress seems to be taking place and there may be a conflict of interests re Chch.

You may like to read a letter I sent to the St Alban's community centre and published by Scoop New Zealand - it is entitled Global, ethical human rights culture to rebuild Christchurch (see internet). I am writing a book (my third) which will include the application of this approach with respect to Christchurch but as human rights are universal it will be extended to the rest of NZ, even the world.

@Phil Best: I've posted about it before, but how about a refinement of the land tax being explored in the States, dubbed the 'McMansion tax'?

The McMansion issue seems to have been glossed over in the Sherwin report, with the possible exception of 'excessive customisation'. But they just happen to be speculators' wet dreams, and turkeys aren't going to vote for their own Thanksgiving.

Apartment living is one partial solution, but typically there's only 1 chance to get it right - the shoeboxes in central Auckland are an example of how not to build upwards. Vancouver has largely managed to pull it off.

And further to your point on "white left liberals" on 19 Dec 11, 4:41pm, Anders Breivik took it a trigger-happy step further. The rest as they say is history.