By Bernard Hickey
This week Roy Morgan published its annual State of the Nation survey showing a stunning rise in the wealth of New Zealanders aged 55 and over.
(See links below for information on how to buy this market research. Readers of interest.co.nz qualify for a major discount.)
The survey of 5,000 older New Zealanders asked them how much they were worth and how much debt they had compared with the broader population.
The report confirms an extraordinary shift in the structure of wealth in New Zealand that raises huge questions for politicians, policy makers and voters for years to come. Anyone aged 30 or lower should look away now. It may prove too painful to read.
The gross wealth of those aged 55 and over has risen from NZ$188 billion in 2002 or 37% of total wealth to NZ$525 billion or 47% of total wealth. This growth was only partly due to a rise in proportion of the population who are 55 and over to 24.7% from 19.5%.
That 2002 to 2011 period was dominated by the housing boom from 2002 to 2007 when house prices virtually doubled, even after accounting for inflation. Anyone owning property early in that period is now much, much richer, given many had leveraged investments in their properties because of their mortgages. Most of the property owners through that period were aged over 30 and therefore made the bulk of the gains. This shift in in the proportion of the wealth to the aged will intensify further as that 'lucky' generation of mostly baby-boomers retire over the next 20 years.
The picture becomes starker when looking at net worth.
Those aged 55 and over added just NZ$21 billion in debt to NZ$32 billion over that 2002-2011 period. The bulk of the extra NZ$100 billion of debt added by New Zealand households over that period was taken on by those under 40 who had to leverage up to get into the housing market. Some of the younger buyers were lucky because they got in early enough in that 2002 to 2007 period and didn't have to take on too much debt. The also benefited from the house price growth late in the period.
The unlucky ones were those that took on massive debts in the last five years to buy houses at the newly inflated prices. They were mostly below 40.
The net worth of those 55 and over rose to NZ$492 billion or 52% of the total by 2011 from NZ$176 billion or 43% of the total in 2002. The survey shows 71.4% of that wealth is tied up in their own homes.
This structural shift in wealth to the aged and a loading up of debt on the young is obviously not sustainable, particularly when combined with the current promises of universal superannuation from 65 and publicly funded healthcare. With the current policies, New Zealand faces the bizarre prospect of either higher income tax rates on the increasingly indebted young to pay for pensions and 'free' healthcare for the increasingly wealthy old, or huge amounts of government borrowing, which would of course have to eventually be paid repaid by the young.
No wonder a record number of mostly young New Zealanders left to live in Australia in the last year.
So how will this end? How will the wealth and assets be passed on? Some would argue that eventually the baby boomers will have to sell their houses to a small number of younger people coming behind them. This would, in theory, drive down prices and even up the score. But there are no signs of that happening with Baby Boomers refusing to accept lower prices and instead expecting the young to load up with large debts to pay the high prices. Many Baby Boomers are also looking to further expand their wealth by leveraging up their equity windfalls to buy rental properties. They would prefer the young to be tenants rather than home owners.
Some would argue the Baby Boomers will simply pass on the wealth in inheritances. The problem there is that this will be too late for their children, many of whom will be in their 50s, to have their own children in their own homes.
New Zealand needs to have a conversation about how to transfer this wealth back. A land tax, a capital gains tax, higher income taxes, a later retirement age, means testing for New Zealand Superannuation and means testing for public health care will have to be considered.
Or the Baby Boomers will face the ultimate sanction. They will have to watch their grandchildren grow up by facebook and Skype.
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This item first appearded in the Herald on Sunday.
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140 Comments
"Baby Boomers refusing to accept lower prices and instead expecting the young to load up with large debts to pay the high prices. Many Baby Boomers are also looking to further expand their wealth by leveraging up their equity windfalls to buy rental properties. They would prefer the young to be tenants rather than home owners."
Yep - it's like financial genocide. The wrinkly rich eating their young. Bound to have devastating consequences for any species.
Bernard, all the discussion points you propose are of course essential in order to sustain NZ as a souvereign nation - but I fear that the globalisation meme will overcome that increasingly quaint idea, and NZ will become a stangnant geriocracy, where the old money thrives on the back of disenfranchised wage-slaves (serfs).
And what wiil be the consequences when the unproductive proportion of an economy overcomes the productive in terms of voting rights? oh yeah -Greece-
I graduated in 1999 and now I have 3 properties (I'm 35 now) - and I know a lot of other Gen-X's and Y's who either own their home or own more than one property.
The only reason you wouldn't be able to buy a house since 2000 is if you are being unrealistic or you're lazy. You may not realise this, but when baby boomers bought properties when they were 25-40 years old, they had to make huge sacrifices to pay the mortgage too.
There was no SKY tv, mobile phones or internet - people got by on the basics. If you want to own a property these days it requires the same principles.....
You may not realise this, but when baby boomers bought properties when they were 25-40 years old, they had to make huge sacrifices to pay the mortgage too.
There was no SKY tv, mobile phones or internet - people got by on the basics. If you want to own a property these days it requires the same principles.....
What a load of nonsense. Did they live in a shoebox in the middle of the road? I bet they walked to school uphill both ways too.
What you fail to mention is that when baby boomers bought properties when they were 25-40 years old house prices were at three times median incomes, not six times like they are now. The "sacrifice", relative to incomes, is bigger now than ever, and the only time that rivalled it was when mortgage interest rates were at 20%.
Do you seriously expect me to believe that before 2000 people were frugal, prudent penny-pinchers and since then humanity has flipped some switch and all the people who reached adulthood after that point are wastrels who incontinently spend their money on everything they see, and therefore can't afford houses? Pull the other one.
Yep, if you want to make money buy property. I also know a few genx/y's who are seeking to emulate their parents success, hoping that the value of property will do as it has done in the past. Going from a median of 2.8x median wage to 5-6x median wage, maybe it can go up to 8-10x the median wage, but I question that. I know very few people who are creating wealth outside of property, <20% of people I know have business or investments outside of property.
Many people claim to own a home, or multiple homes, next to none can do much without the banks permission.
And this is national economic suicide. Simple. Property is a "cost" to every part of the economy that actually produces anything.
Whatever "gain" anyone makes meanwhile is a transfer, not "created wealth".
Heck, Adam Smith had all this 100% clear in his famous book published in 1776.
Baby boomers bought properties at 3 times income, when inflation was much higher.
Interest rates were high too, but within 10 years your income had risen to the point where the mortgage, taken out in dollars ten years earlier, was peanuts compared to what you were now earning. AND interest rates DROPPED.
Even apart from that, it is simple arithmetic to work out that a low house price at a high interest rate costs a lot less over the lifetime of the loan, than a high house price at a low interest rate. But when the interest rate drops anyway, the baby boom circumstances are milk and honey.
Our young today are getting comprehensively SCREWED and no-one is representing them or getting them organised politically. We need a "boycott the market until prices collapse" movement among the young.
" it is simple arithmetic to work out that a low house price at a high interest rate costs a lot less over the lifetime of the loan, than a high house price at a low interest rate. "
OK Philbest lets check that simple arithmetic.
150k loan @ 14% for 25 yrs - total amount paid $541,692
300k loan @ 5.8% for 25 yrs - total amount paid $449,869
You were saying something about simple arithmetic............
Indeed.
I make the 300K loan @5.8% for 25 years, a total cost of $568,920. I don't know where you got your figure from. I agree with your calculation for the first loan.
Any comments from others?
In reality, baby boomers were buying houses for under $100,000 before 1990, when interest rates were high. And they definitely have not been paying 14% ever since then.
So that's QUITE enough of the "stop moaning, you don't know how good you young folk have it", from the baby boomer Gordon Gekkos.
PhilBest, your point about inflation helping people pay off the mortgage is an interesting one that is often overlooked. This shows in quite stark terms the wealth transfer that is inherent in government-sponsored inflation of the money supply.
Fiat money distorts economic decision-making in so many ways that it's impossible to tell what the world's economy would look like if money was left to the market rather than manipulated by states.
However, I'd hazard a guess that the financial sector would be a much smaller part of the economy and the managed funds/superannuation industry would be marginalised. After all, people wouldn't have to save such ridiculous amounts of money and chase high returns if prices went down over time (as in the 1800s when hard money was in place) rather than increasing each year.
And on the subject of property, real money (as opposed to the stuff that can be created at the click of a mouse) would eliminate the concept of the "property ladder" you so aptly described.
I agree with you, with the proviso that even stable money does not prevent rackets in something in which "supply" is "rationed". There are tighter limits to such rackets when money is stable, because the money all has to come "from" something else, and the economy will self-correct much quicker (because productive activity is starved of investment).
But I think the sort of distortions we are discussing with housing supply, would be an ongoing problem if not reformed, even in a stable money economy.
I agree with your concerns Bernard.
There especially needs to some major reduction in the costs of land and housing, both of these costs are being kept artificially high by land restrictions and beaurocracy and "cheap money".
The cost of a piece of land and a house in NZ is absolutely absurd consideing only 4 million people in this country and huge supply of wood.
However there are so many vested interests in this situation not being corrected, as a big fall in housing prices will see many current home owners equity decimated and may lead to the collapse of banks, with a subprime mortgage like collpase.
However if housing does not become more affordable then more poeple will leave and poeple who get shut out of the housng market will get more angry at the prospect of remaining "serfs" for life. They may get very angry with those that keep politically convenient legislation in place that keeps supporting the absurdly high housing prices.
Perhaps when more of the current younger generation get into politics there may be some real action with the housing unaffordibilty problem. Recent governments have done bugger all, due to their vested interests in maintaining the status quo.
The current situation is not sustainable. It will have to correct itself in the near future and it is going to be an unpleasant process for many however that occurs.
"The gross wealth of those aged 55 and over has risen from NZ$188 billion in 2002 or 37% of total wealth to NZ$525 billion or 47% of total wealth. This growth was only partly due to a rise in proportion of the population who are 55 and over to 24.7% from 19.5%."
>> in 2002 195 people out of 1000 were 55 or over and they owned $37 out of every $100
>> now 247 people out of 1000 are 55 or over and they own $47 in every $100
This "wealth concentration" reflexts the aging population exactly - NOT "only partly due to a rise in proportion of the population who are 55 and over".
26.7% in the % of the population 55 and over
26.7% increase in the % of wealth.
So exactly what is the story here?
Contrary and under 55
At some point the older generation has to make a choice sell or leave it in their inheritance. There will be real problems when they all try to sell, this will start for real over the next 10 years. However Bernard is right it appears that some of the next genertaion are willing to load up on dept to save the baby boomers and their ponzi property scheme. I for one am not, I will wait aonther few years for some real action to be taken and if not I will take my skills and funds to another country where these inbalances dont exist.
Quite right realistic...err which other countries had you in mind?...African nations..no way...euro zone..hahaaaaa..usa..joke...Canada...same situation...ditto aus...and the UK..jeez that leaves Asian realistic...Singapore will not want you...Japan prefers you to be Japanese...gosh you are bound for China...that place where human rights are a standing joke.
Enough of the young are stupid enough to keep the property bubble blown...a fact...selling down is not necessary in all cases...many old coots just hand over the property...
A real-istic approach would be to assume immigration of the wealthy, will be boosted by govt to pork the market..that is what is going on right now. It is the normal standard nz govt way of hiding the filthy economy from the real world market..Labour invite in the unskilled potential party fodder...National seek the wealthy skilled party fodder.
Good, and people like you need to start a movement; young people need to boycott the housing market until prices collapse - they actually could cause this if they got organised instead of being the fodder for this rip-off.
Re inheritance, I noticed a disturbing finding in the following report:
Joe Flood and Emma Baker (Flinders University) "Housing Implications of Economic, Social, and Spatial Change" (2010).
They find that there is NO "inheritance" effect showing up in Australian data - the "housing wealth" is NOT being "inherited" by the descendants of the generation making the capital gains.
Philbest
Those study findings are interesting. I don't dispute them, but I still think it will not be at all rare for significant generational transfers of wealth. But yes across the whole of society the effect might not be great
Although I find it a bit distasteful to talk about, I'll give you my example. My parents are in their early 70s, still living in their 3 bedroom townhouse (probably not for much longer). It is valued at around 800K.
Now, they will probably move to a retirement village soon. Buying a unit at circa 400K, they have more than enough savings and super to put the balance of the house sale (assuming just for now they get 800K) in the bank.
Now I don't want to presume too much, however its likely that my brother and I will split the 400K. So there is a generational transfer of 200K to two individuals.
But there will of course be a whole range of other scenarios. A couple with a 500K house in Auck, and say 3-4 children, is likely to see minimal wealth transfer to the next generation, especially if they move to a retirement village.
Bernard define wealth, is it money, a debt free house, a good job, health. After some time in India my view on wealth changed. I am wealthy enough not to have to go to work in the morning and I can spend my day as I wish but I still have obligations to family, friends and my community. I’ve paid my children’s school fees, health costs, University fees, and even still support them financially if I feel they need some help.( I still have two at home) I don’t know if this has helped them a lot but I only have girls and they have a way of getting what they need from dad.
I’m not wealthy enough to own a jet, live in Monaco and chase the glitterati. If I’m careful I will be able to pass some onto my children. I have no debts and live off income, if my income drops my spending drops. I see my wealth as intergenerational, I want to share it with my children but not with some no hoper who doesn’t have the energy to get out of bed in the morning. I think welfare has done huge damage to my community and continues to do so.
I think opportunities in this country to create wealth outside of capital gains are very hard to find, and that to me is the heart of the problem, its very hard to set a business up here and succeed, the local government and state is against you. Too many laws too much tax. I’m leaving for California in June, I wont be back for a long time, I’m voting with my feet. I’m in the process of sorting out USA Tax etc and opening bank accounts. Not I think the outcome you wish but inevitable in a high cost, high tax economy with high dependence on state largesse and way too high debt levels. Even John Key must be relieved to have a US passport and no doubt a Euro one too.
Thanks Kate, going to live with our eldest daughter for a year, then heading to Devon for six months with the in-laws. Im quite a big fan of North California/ Oregon. The Salmon fishing is great, the hunting is Fantastic, its hot as hell in summer but mild in winter, kids love the snow and Mum and Dad love spending time in San Fran with friends. There is a big shortage of cash so Im going to hunt around for a bit, houses are cheap but its hard for people to get a loan and unemployment is ugly, Im living in an area so like here its ridiculous. Then we visit the UK which is going to have some problems too. Hows the wind today? you will be adapting getting shorter and stronger.
Gorgeous sunny day here - a bit of wind but having come from the beachfront in Kapiti... we're used to it! Yeah employment is sad in much of California. Had a student went back after finishing his degree here - looked for ages and then gave up and joined the military. Yikes, but as he said it was that or tent city (unless he continued to rely on parents).
Will your younger kids be attending public schools there? If so, hope that's not too much of a shock!
We are still thinking about the schooling issue, there is one good school but Im not sure we would be allowed to send our children there or not, maybe correspondence for a year. We have to sort visa's out first, then sort schooling. The military is a big deal in the States , I was surprised how big its got. Lots of skilled without work, its way tougher than here and not much welfare.
way tougher than here and not much welfare
We had a Samoan taxi driver in Honolulu tell us that some city administrations in the northern states were buying their street dwelling homeless one-way tickets to Hawaii to keep them from freezing during the winter - with the hope that they wouldn't be able to afford a ticket back to the mainland. Don't know how true that is but he seemed serious.
NZers need to wake up to how lucky they are. Don't know how long it might last however.
Kate, I hear lots of horror stories, lots of homeless get to Vancouver, I dont know how they do it. They winter in LA and as it gets warmer migrate north. Its very easy to find heartbrake and loss and it impacts on the rest of us, we get much more careful with our money. Some rural towns are just empty shells, but now the gas price is so high will people still drive miles to shop? I see there are pumps in San Fran that are as high as $6.09 a gallon. If people cannot drive as far they will be forced to shop locally, which will be a good thing for small towns and bad for malls.
On a different subject I see see Ruger have sold out of guns :-( so be carefull out there.
http://www.zerohedge.com/news/fourth-largest-gun-maker-us-out-guns
Oregon and Northern Califonia are special. Have a block of land near sisters. It was always a popular spot for the wealth set from LA however prices are more reasonable since 2007.
I have one daughter I'm paying for private schooling in Eugene just outside of Portland, it costs three times the price of a similar private school here in NZ, have a daughter in private here as well...long story :-)
From observation and results.... I would say they provide similar quality of education experiences, more networking opportunities there though, possibly the parents are more keen as they need to get a payback to fund the education...
One of the problems I perceive that leads to the exodus of good people, is that small numbers of people are constantly being dealt with by the agencies of government, like Jews in earlier 1930's Germany, but the great mass of people couldn't care less.
It doesn't matter when it is someone else having to pay thousands of dollars in fees just to get a carport built, or someone else having to pay thirty grand "go away money" to the employee from hell (and their small business startup can't afford it anyway), or someone else getting their property de facto nationalised with a "heritage" designation, or someone else disallowed from using their property as they wish because it might offend a Taniwha or dislodge a rare species of snail, or someone else getting their kids taken off them by CYF on the basis of an accusation from some beady-eyed feminist activist, or someone else whose daughter is murdered by some thug still walking the streets after 100 convictions including 40 violent ones.
But the economy and society dies a death of 1000 cuts, and each and every one of people quitting the country will have some story of this kind to tell.
"The unlucky ones were those that took on massive debts in the last five years to buy houses at the newly inflated prices. They were mostly below 40.
The net worth of those 55 and over rose to NZ$492 billion or 52% of the total by 2011 from NZ$176 billion or 43% of the total in 2002. The survey shows 71.4% of that wealth is tied up in their own homes."
Let's rewrite that...."the stupid were those that took on blah blah blah....." They have the RBNZ, the parasites, govt and media, along with themselves to blame...perhaps some of them will learn from the event and when next, the mad bubble disease returns as it seems to be doing in Auckland...they will say "NO"
Then we have the comment that 71.4% of the net worth of those over 55, is tied up in their homes.....think about that.....their net worth is entirely dependent on the bank credit bloated property bubble remaining intact, in place, thanks to the RBNZ, govt, parasites and the public.
Bernard seem to be on a crusade to redistribute wealth to the younger generation. Why!
Does he believe the younger gen would be 'better' at managing the wealth!
Does he see it as a way to 'save NZ'....if so he is in for a shock...the younder gen by and large are seen as prime bank credit target fodder..the banks know dam well the young are as thick as two planks when it comes to debt...so handing them the wealth would be the fastest way to lose it.
I'm under 55 - and I'll put my wealth up against most in the oldies bracket. Yet if you do this survey in 15 years time suddenly you'll try and tell me that I'm part of the problem too?
Iain what you say about interest is true to a point - but all it really means is that most people fail to have basic financial literacy - and do not understand the potential for interest to be wealth destroying ... or else they do understand but simply don't care and must have the latest consumer items.
Understanding basic household finances is an important skill to be learnt and should be a basic secondary school subject in order to prepare students to be able to handle the "easy credit" that destroys wealth - and will be on offer when they turn 18.
News flash: here is how economies really thrive in the long term, this is why Southern USA is on its way to the world's economically strongest region.
When house prices are low and stable, households have high discretionary incomes.
Well I never.....!
And they spend these high discretionary incomes on actual stuff; which is far better for the local economy, than spending a high proportion of your money on nothing; which is what a mortgage is when house prices are inflated.
Households become mortgage free sooner.
Well I never.......!
Households predominantly accumulate wealth in something other than their house.
This wealth accumulation is actually useful to the productive part of the economy.
Well I never........!
Adam Smith pointed out in his famous 1776 book that inflated housing prices are no more "wealth" than inflated clothing prices would be. They are both necessities, housing just lasts longer. Anyone who gains from inflated housing prices, Smith pointed out, has not grown the total wealth in the economy one iota; this wealth has merely been transferred from somewhere else in the economy.
Smith pointed out that "wealth" depends on production. Not transfers, or consumption based on debt.
Well I never.......!
You assume high descretionary incomes, or everyone across the US is paid the same, this is not the case. Texas is supposed to be a low wage state......hence why companies move there, and then ppl move there looking for work.
If this is the case then stating they can pay off mortgages quicker is questionable, and in fact you are saying that they not only can spend more but also pay off mortgages quicker and also save.
OK, for the middle and latter at least there should be some evidence of this? ie can you prove it?
Adam smith is pretty classical....but yes well worth reading....and in this instance I agree....however again we get to what is production....it is usually the conversion of a raw materials using energy into a finished product which then gets transported....
regards
It's just plain self evident and logical. But:
Edward Glaeser's book "Triumph of the City" discusses this.
There have been sections of the Demographia reports on this.
Page 5 of THIS shows what eventually happens to “discretionary income” in “high land price cities” versus low land price cities:
And THIS is confirming too:
http://www.macrobusiness.com.au/wp-content/uploads/2011/09/ScreenHunter…
I should have pointed out before, that for discretionary incomes not to be eroded as house prices are inflated, would require incomes to rise in lockstep with house prices, clearly an absurd suggestion. That is what I meant about it being self evident.
You obviously can't impose a wage rise order of 10% or more per year just because that is how much house prices are rising(as they did from 2000 to 2007 in NZ); you'd put every employer out of business.
But this is exactly what median multiples are for.
After years of Demographia reports and press releases it is truly tragic just how slow some people are to get the point. But at least, Steven, you got the point about the racket in land within regulatory growth boundaries. I wish certain of your fellow Malthusians were at least no slower than you.
wouldnt it be better to look for, and address, underlying causes..???
Dealing to symptoms with band aid style solutions.. just gives us worse outcomes.. in my view,
Probably the vast amount of this wealth is the result of Real Estate Capital gains... ( where thepower of compounding returns can really do its' thing ).
In 20 yrs of reading and watching the unfolding of economic events ... this is my view.
1/ The growth in real estate values has been mirrored by the growth in Money Supply.ie. if money supply has been compounding at 6% per yr.. then Real Estae has also been compounding at x% per yr.
2/ Growth in av. Wages has been growing at a MUCH lower rate than Money supply growth. This is largely because of Globalization and the deflationary forces that the emerging economies have has on Global Wages. ( this gap has been filled by borrowing )
3/ Financialization.... It is the Banking system which, mostly, creates the new money.. It is created as "credit"... ie DEBT.... This has resulted in the finanialization of almost all asset classes... eg. the family home is now less a family home than it is an "investment".... Farmers percieve themselves as having 2 businesses... one farming..the other Real estate
4/ The system is set up so that the best way to profit from the debasement of money ...is to borrow and buy real estate.
In summary... It is not the Baby Boomers that are to blame for the concentration of wealth...they have simply done what they had to to preserve wealth.
It is the extreme money supply growth... $45 billion in 1990 to $235 Billion today.... that is the underlying cause of wealth transfer.... and the main reason we sore our wealth in Realestate.
The craziest thing is that Central banks still use the CPI to measure whether Money supply growth is excessive or not....
"The craziest thing is that Central banks still use the CPI to measure whether Money supply growth is excessive or not...."
To comment on my own comment.. :)
Part of the reason that Central banks still use the CPI to measure excessive monetary growth... is that the CPI is roughly used as a deflator to determine real GDP growth.
This is such an amazing ...crazy ...delusion.... In my view it vastly overstates real GDP growth.
Money supply grows by 7% in a yr... CPI for that yr is say 3%... Then say they determine that GDP has grown by 4% in real terms..
GDP is measured in $ dollars.....
If we have expanded the money supply by 7%.... is it really possible to have grown GDP by 4% ..in real terms.
To use a metaphor... One of the qualities of money is that it is a unit of account ( unit of measure).. Just like a 30cm ruler ..we use money to measure things.. If I streched a 30cm ruler ..to say... 45 cm ... but still called the total length as 30cm ... how realistic would my measurements be..??? People would call me mad.
BUT...when it comes to economics.. we have all sorts of distortions..... which end up making lies of the statistics that use $dollar as the unit of measure.
Cheers Roelof
There are actually crazier things than this Roelof, for example, in the US, the imputations they add onto GDP - eg if you own your own home the government adds onto your income what it would cost to rent your own to yourself (that's well over 1 trillion upwards adjustment of fake income that doesn't exist, niether in cash or receivables - I mean its not like you can go to the diary and use those imputations to buy a bottle of milk...), then if you have a 'free chequing account', which many do, for example, provided by your bank, the government will add onto your income (for GDP calculations) what that financial service was 'worth' - that's all up another half trillion in financial services... So just on those two imputations US GDP is overstated by over 1.5 trillion of entirely made up income that doesn't exist.
Of course you are correct about CPI - understating inflation overstates GDP aswell, but you leave out that GDP itself is massively overstated meaning that any growth figures they produce are good comedy but that's about where the usefullness of them stops.... (next they will be adding in - if you own your own car the cost to rent it from Hertz or Avis will also get added to GDP, I say this tongue and cheek in the hope they don't do this but if I read it as an adjustment in the next BLS report I'll not be surprised)...
Statistics, don't you love them...
If the 'adversarial pursuit of unearned income from interest' is a threat to present and future society, then it should be mitigated before it becomes so polarising that society implodes (which is what is playing out right now in some nations, and where NZ is headed). I mean it's not like it's never happened before.
And if it's really just the fault of fools who accept this drug and don't know how to manage it - then it ought to be regulated like a phamacy is required to regulate poisons.
Kiwi laws suck. They are easily side stepped, and the rorts ensue. Met a guy the other day who has >$5 million in housing. He has no job, yet the government pays him more than 50k a year as his "income" is negative. He wasn't too pleased when I told him he was a festering wart on the soul of this country. Doesn't the avergae Kiwi have a soul or concience anymore?
If he has no job then the government does not pay him 50k per year. Either you heard him wrong or he was winding you up and suckered you into making a big dork of yourself. If he had losses of about $180k he could carry them forward for 7 years and could ameliorate future taxes by 50k. But the point is the losses are real. Property as an investment now has less tax advantages than other avenues of business because you can't claim depreciation. Hence the reason investors are bailing. The real rental shortage hasn't really begun yet. It's going to be a doozy.
Hence the reason investors are bailing. The real rental shortage hasn't really begun yet. It's going to be a doozy.
I wonder if many people who are renting would buy if they did not have to compete for property with investors - so maybe it will not work out in the way you sugget, maybe we will start to move back to our long term trend for home ownership which we have only moved away from as a result of a whole bunch of dumb gvt policies that made debt so important.
that makes no sense, you have missed something or you have misundedrstood. If you make a loss you will not automatically get anything back from the Government without an income stream that has tax paid at source. Even family assistance is now includes trustee distribution/income in its wider definition of income.
I think the whole system needs an overhaul. Currently there is no incentive to save, if after you go into a rest home, you then have to use your assets to pay for that care. This is because you get the same treatment whether you have saving and are paying yourself, or you don't have any savings and the government/taxpayers are paying. The amount you have to pay is also set, so you can't negiotate on the price of resthome care, and get a better deal for paying 'cash'. Becuase of this, it is better to spend, and by the time you reach resthome care age, you should have depleted your savings. That is just the way the system is geared, and I imagine this happens a lot anyway, which is why many people are forced to sell there house to pay for rest home care.
I remember when I was at uni, I couldn't get any student allowances, becuase my parents earnt too much, yet, I had no financial connection with my parents. However a friend of mine whose parents owned a huge farm, got allowances because of the way their finances were structured, and on paper they weren't earning much money. They sold they farm a few years ago for many millions of dollars.
And CPI doesnt' cover the biggest expense, housing. Absolutely laughable!
When a man can't provide a decent house for his family on an average salary THERE IS SOMETHING WRONG.
I like NZ, but I can't afford to live here. When interest rates are taken into account, Auckland is one OF THE MOST EXPENSIVE cities compared to incomes IN THE WORLD.
It's disgusting what's happening in NZ at present. John Key and co are oblivious.
How many more years will it take before NZ is little more than a retirement village?The powers that be all over the OECD took it into their heads years ago that "rents" are a sufficient statistic for "housing" costs.
None of them thought that house prices could rise faster than rents at any time? Or that this would be a textbook evidence of a bubble?
It stinks that these alterations to how the CPI was measured were introduced at about the same time as urban planners went nuts "saving the planet" by regulating against growth and setting the supply-related conditions for a bubble.
Shouldn't the author be providing the averages, rather than the total, as there are more poeple over 55 now than 2002, so it doesn't really mean that much, aprt from looking like a big number. Also wouldn't it be better to look at people over 65, which is the retirement age, and those people would also all be eligiable for the super. Would be interesting to see what the top 10% and top 25% of the NZ population over 65 had in savings.
Nothing left in 20 years – just a mess.
Talking about unbalanced economy and the BB's, but on another subject: Isn’t unbelievable now the people of the Kaikoura region (NZcentre of marine life) have to go to the lenght and sign a petition to stop the possibility of fracking ?
Shouldn’t our politicians not be obligated and protect our NZenvironment for all of us and the next generation ?
http://www.stuff.co.nz/marlborough-express/news/kaikoura/6613317/No-mor…
Are you sure about that.
You can hang your hat on the debt number, but who says where the value is?
These self certified asset value numbers are more an estimate of what another can borrow against it. The conversation goes like this:
I'll pay you what the bank let me ....., or the bank say its worth this .....
BH: can there be figures pulled asking the same by:
Gross Income
Tax Payments made to/fro IRD.
"New Zealand needs to have a conversation about how to transfer this wealth back. A land tax, a capital gains tax, higher income taxes, a later retirement age, means testing for New Zealand Superannuation and means testing for public health care will have to be considered."
Isn't the real conversation that is needed, more along these lines?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10559030
Because the thing is Bernard if you think a simple wealth transfer is going to solve the issue you are overlooking that many of this older generation will probably have to keep working, and thus deny opportunities for new entrants into the labour force.
Yes, why is it that whenever somebody has something in NZ, people want to have a conversation how we can tax it to transfer it it back (like we used to have it in the first place)? ... then, having removed incentives for people to actually do well, we turn around and wonder why talent leaves our shores and why NZ doesn't do better, like we pretend it's a big unknown mystery yet to be solved?
Welfare is the main incentive in NZ... perhaps we could start there... how do we transfer the huge welfare system to something that is actually productive and creates something?
So easy to solve this problem:
1: Means test Super, anyone owning more than one property OR a family home over the value of more than $2 million gets NOTHING!
2: If they try to 'cash up' just before allegibility they get a IRD real estate cross check that back dates inline with the MT and includes a massive ONE OFF capital gains tax at retirement.
Sorry, but the corruptly gained wealth must be redistributed
So basically you're saying that if someone has saved up hard their extra income all their lives in order to be able to afford a nice home or more than one property, they should not get Super.
However if the same people had instead spent it all month after month on IPods/IPads/IPhones/IWhatever/TVs/flash cars/boats/jewels/designer clothes/overseas holidays and the likes then it's all right, they should receive and rightfully deserve their taxpayer-funded Super? Interesting line of thought. As far as I'm concerned, when one has earned an income and paid their tax on it they are free to use it in whichever way they wish, whether it be spending it all on consumer goods (including houses) or giving it all to charities or family (or whatever combination they can dream up!).
LOL at the "corruptly gained wealth". Why do you assume that anyone with a nice home or more than one home must have obtained their wealth in a corrupt way?
I was in an interesting meeting on Friday and present was the National party head of policy. He said as a parting shot that growth doesn't happen unless somebody makes something. So at least he gets it, but no one at the meeting had any clues about decreasing resources with which to do it. But there still is room to move, although I doubt capitalism will deliver it in the right places.
Good piece Bernard, although I would add that the intrinsic wealth effects of house values doubling are limited for most people (other than property speculators who have done very well thank you). House owners don't have any more money in their pockets. And savers are in fact now paying the price for the housing boom, with a post-boom slump in interest rates.
What it does do is exacerbate inter-generational wealth differences. Again not necessarily in terms of money in hand, but certainly in terms of asset wealth. That is, its so much harder for young people to get in to home ownership today.
As others have alluded to, the wealth does often transfer down the generations however.
Re inheritance, I noticed a disturbing finding in the following report:
Joe Flood and Emma Baker (Flinders University) "Housing Implications of Economic, Social, and Spatial Change" (2010).
They find that there is NO "inheritance" effect showing up in Australian data - the "housing wealth" is NOT being "inherited" by the descendants of the generation making the capital gains. It seems to be going to somewhere OTHER than the descendants - perhaps spent before death, or bequeathed to charity.
I suggest the welfare State is responsible for a lot of attitude change re one's own family, both one's parents and one's offspring.
Hugh is closer to the truth than Bernard here.
Not that he has it all.
Yes, we had/have a bubble. Yes, it of overwhelming proportions. It's not just housing, though - it's almost everything. Radio NZ this morning, had a (flawed, but that's another matter) discussion on taxing, and the comment was made that financial transactions outgun goods-and-service provision by 25:1. That's some overhang.
Foss reckong the whole overhang is in the order of 99 in 100 parts non-underwritable.
I suspect somewhere in between, but over 50% currently would be a good guess. So all the 'wealth' Bernard describes, is expectation based on 'valuation', based on the expected ability of the future to underwrite in an increasing manner.
Can't happen, so won't. If an asset is only worth what a buyer will offer, I suggest much of that 'equity' is so much horsepoo. As Foss points out; if coffee costs $10,000 a cup and everyone is a billionaire, no problem. If it costs 5c a cup, but nobody has any money, you have a whole lot of broke baristas.
For Hugh, this means the young will have no ability to pay any mortgage, the system he takes for granted because it existed in the 'sixties', is on it's way out. For the old/rich, it means that they are soon going to find they aren't as rich as they though they were.
I posted the formula the other day by which wealth is stripped from the bottom and given to the top. So here it is again.
(M.V)+I=P.Q
It is the quantity of money theory with interest accomodated. The interest is matched on the right side by production. But that production can't be bought and gets accumulated by those charging the interest.
To add to this. The problem is clearly not enough young people, and the rate of new people being added is still declining. But to change the context in terms of the equation above, it is the new people that enter unemcumbered by debt that are paying the interest on the money the old people borrowed to get where they are. As the rate of new additions declines, the ability to pay that interest is slowly collapsing. Basically a ponzi scheme and the lack of new people to perpetuate it will bring it down.
Powerdownkiwi, I can certainly agree with your general principle there. Just "get it" about the way regulations create the opportunity for bubble rackets in selected parts (the urban parts) of the very much larger total land mass, and you will be a pretty good member of the team.
THIS site is amazing:
http://www.thebubblebubble.com/european-housing-bubble/ And the home page: http://www.thebubblebubble.com/ Astonishing, eh? A whole lot MORE nations having housing bubbles SINCE 2007..........! As the author of that web page, Jesse Colombo, concludes: "........It is simply mind-boggling that the world is back to blowing massive property bubbles so soon after the U.S. and peripheral European housing bubbles popped and caused such incredible economic carnage. The Western and Northern European housing bubble is proof that we are living in the era of The Bubble Bubble (a bubble of bubbles) as well as an era characterized by the most outrageous arrogance and hubris that humanity has ever experienced. The 2008 global financial crisis should have taught everyone their lesson once and for all, but we are clearly living in a world filled with excruciatingly slow-learners. More punishment is coming our way and will keep coming until we finally learn from our mistakes. Sadly, by the time we learn from our mistakes, it will likely be too late....."He seems to be picking bubbles in commodities, college education, healthcare, emerging markets, and social media, too. I think he is probably right on all of it.
I agree Hugh.
I am one of the "younger" generation.
It amazes me how economically illeterate this country is.
Too many of the young do not understand economics and debt.
Many in the older generations do not understand economics either and think that their pensions and funded medical care are sacred and will be there forever.
I have tried my best to educate those around me. No one listens.
House prices are too high.
The young especially need to avoid becoming indebted peasant serfs to the banks for life!!
Demand affordable subdisvions and affordable housing.
There are only 4 million poeple in this country and we have huge amounts of timber.
We should have the most affordable housing in the world.
This current housing cost situation is totatlly absurd!!
They just don't get it!!
I've avoided $300,000 of unecessary debt compared with many of my friends (and maintained just as good a standard of living as if I was indebted) over the last 3 yrs by having some knowledge of the ecomony.
I feel I have been wasting my breath, they just wont listen to economics for 10 minutes that could save them a fortune. But would talk about the rugby world cup for hours!
The BB"s have the numbers, they have the votes. Even if all the under 40's raised a stink, policy would not be changed. It's just much easier to leave, and say hello to Australia, or some other contry that has it's shit together.
Honestly, most of my friends under 40 thought the capital gains tax was a bad idea. Just another Tax they said. There is an attitude in NZ that if you have an expensive house that you have managed to "make it" onto the property ladder, and all your finantial dreams will come true - and we can't tax that!
BTW, the few of my friends that actually own houses, have intrest free loans from thier parents in the order of 50% of the value of the house.
I reckon the non home owners seriously COULD collapse the market within a few years if they all organised and signed pledges to boycott the market until prices were sane again.
The racket does require SOME new "suckers" every year to sustain it.
Note that quantities of turnover in the market can sit at low levels for years, before PRICES start to come down.
I think as a country is is rather too late to instill an enterprise culture. Here it requires a near freaky talent to be a successful entrepreneur. The successful, enterprising young business people here all know each other... as there are so few .After starting a business when I was young not many new faces have appeared in this circle, possible 80-100 in the last ten years. In addition, many with the potentail have followed the property path instead.
True science and technology types with the knowedge and skills to make it commercial, take to market....thats a rare talent. The people I know doing it well are all overseas.
As a firm we have 280 young self emplyed clients, under 35 in NZ and 315 in the US.
Only a handful of the kiwis have moved into a business with serious size or scale. Most are contractors feeding off insitutions.
Can't say the same for their US peers, even since 2007, they are streets ahead. Except for larger and closer markets it appears to be cultural. A third of the US pears are financially independent before the age of thirty. Yeah what can ya say...lets solve it in NZ by sharing the reducing pie.
NZ'ers are WAY to busy being debt slaves to thier houses to be able to consider being entrepreneurs.
Imagine if houses were half the cost (like most of the USA), you could start to consider the possibility of being an entrepreneur by lower repayments, or paying off the house sooner.
Better still, in the UK, I know of a mate who was PAID by the bank to take out a loan. Yes, anegative interest rate. It was a special deal only for the first two years, but hey, he started a business in that time and is doing quite well now!
You’re right about it being a cultural issue, speckles. New Zealanders have attitude and belief problems that are holding them back, and until those change, the country will continue its down ward trajectory to join the second world. We’re getting close to it now as it is, but the first world continues to prosper and grow, notwithstanding periods of recession. What this country needs is a Margaret Thatcher type figure who understands where the insidious rot lies and draws a line in the sand and says, enough! The anti-progress Malthusian loser, poverty loving socialists and their redistribute wealth through tax and welfare supporters, ecomentalists, and the academic left’s social inequality engineers, would all be lined up as public enemy #1, with respect to the wealth, advancement and prosperity of the nation, and dealt to.
It won’t happen of course. It’s too late for that and the mediocrity imperative of you can’t do that is too far entrenched in this country for it to be changed. New Zealand is headed for a second rate economic future while the rest of the world obliviously marches on, and we are forced to pay ever increasing amounts to use the innovation, technology, inventions and IP of others who don’t perversly tie their own shoe laces together.
A consideration of PepsiCo, the maker of Pepsi, illustrates nicely what New Zealand’s failure actually means. Most people are familiar with Pepsi. There’s nothing particularly special or remarkable about it, nothing high tech. It’s a soft drink company that generally runs second fiddle to Coke in most markets. In some respects because of that it’s a surprise that it’s still around.
In 1980, before the election of Labour’s social reforming hippies, 1000 shares in PepsiCo cost US$2,300. (~NZ$2,450). We all know the history of New Zealand’s reforms since then and what’s it being through. The nuclear free nonsense and many other examples of Labour’s and the Value’s party (the Greens) self-important social engineering exercises, too numerous to mention here. We also know that in that time, economically the country hasn’t performed to its potential, and my argument is that that is due largely to the choke hold that the aforementioned groups have placed on the country. So where’s PepsiCo now in all of this? How much do 1000 shares of PepsiCo cost today? Would you believe, US$65,300, (NZ $79,634)! And the dividend stream that they generate every year? US$2,060 (NZ$ 2,512). And that calculation does not take into account the stock splits that have happened during the last 30 years, so the real value of those share now are likely to be 2-3 times the amount above.
One ordinary, not particularly sophisticated company and product, but well run, in a country that has a first world attitude.
What would New Zealand have achieved if it was one ordinary, not particularly sophisticated country, but well run, with a people that had a first world attitude?
Now let us sit back and read the howls of indignation and anger from New Zealand’s capitalist deniers and its know-it-all flat earth apostles.
The real problem we have is media and commentators that lack the intelligence to have anything but a superficial understanding of things. Scratch below the surface and their stupidity and ignorance shows. Oh was it you that didn't understand how a decline in growth works David?
The real shame is that people read, and might believe, such ill conceived twaddle.
Ah no, scarfie, that was you who doesn’t understand how a decline in growth works, not me. But then that's not surprising really as you seem to understand very little about how anything works, and much like the rest of your Malthusian mates, you have very little insight into that. By the way, have you designed any more stadiums that float on water lately? How’s the demand for that?
These forums attract some intelligent people and going by the votes on the growth issue it is quite apparent that David isn't amongst them. Nic the Nzr 15 vs DavidB 5. For every person that thinks you know what you are talking about David, three more think you are a fool. How does that make you feel? But you still keep coming back for more, amazing.
I guess that Dunedin might be wishing they had built a floating stadium about now, at least they could sell it and get their money back. What are the odds of Eden Park suffering a similar fate.
It's not about popularity, sacrfie. That's very childish and what one would normally expect from something still functioning at the level of high school. I'm disappointed in you, scarfie, but not surprised. 50 people voting for something when they don’t understand it, or when they are wrong or mistaken about it doesn't suddenly make it right or correct. That’s fantasy thinking, and is what Malthusians do all the time.
You really are unbelievable and can't even form a reasoned debate. Troll to the max.
by Nic the NZer | 23 Mar 12, 11:24pm 16 Vote up!
Thumbs up anybody who understands that a decline in population growth could only be a measurement of rate.
Nics question wasn't that of popularity David, that was a comprehension test which you failed. You just failed a second one. I don't know whether you are deliberately fallacious or just really stupid, but yet again you miss the point completely. No fantasies here either, just plan maths that a 12 year old could understand.
Yet NZ is supposed to be one of the easiest places to set up a business. Not so sure on freaky talent, I seem to come across quite a few one man bands that are making a decent living.....have a nice 4wd, boat etc. It cant be that tough, but I agree the tax incentives/breaks make being a Landlord almost a no brainer.... The US certainly appears to shine on tech/science stuff, it seems ppl just jump in and go for it.....I wonder what the failure rate is though...
"reducing pie" yep....that will happen...mostly I think there are two types of ppl, those who worship money and those that have abroader outlook on success...it comes donw to how you see society....if the USA is what you want then I think its silly you dont move...
regards
set up is not the same as running a successful business. A one man band is work for essence a wage (hopefully a good one) it not a business typically that can contribute to the community on an substantial level as earlier mentioned. Yeah the wage slave that knows its simple :-)
I recall from a presentation by Sir Paul Callaghan, that the proportion of businesses in the US economy paying their staff an average wage of over $100,000, was ten times as high as the proportion in the NZ economy.
This basically comes down to the value of the products being made and the demand for them internationally.
Callaghan said something like this: the NZ economy has 40 such businesses, and if it had another 80 as good as those 40, this alone would catch NZ up to Australia.
But none of it thus far, had anything to do with government policies and "picking winners". All such govt policies so far had been conspicuous failures.
What you say is very interesting. A couple of years ago when we had about 12 years of work experience, we made the switch from being employees to self-employment and contracting (consulting in software design & devt). In the longer term the idea of growing our company to actually make new products and employ people is rather appealing.
However I must say I sometimes question whether the effort involved would be worth it: why try and do something even harder & riskier when we already earn twice as much as we used to and have also gained complete flexibility and far more job satisfaction (due to the much higher responsibilities, variety in the projects we work on, finding our contracts ourselves, direct contact with the customers who are usually small or large business managers etc). In a way, going down the path of launching our own line of products is an exciting idea but the potential stress that must come with becoming an employer makes me question why we would actually want to grow further (also taking into account that we have 5 young children so there is quite enough stress and exhaustion in our life already!).
We know a few other contractors in the same area (hardware/software) but even those who have been very successful in a "one-man show set-up" for many years don't seem particularly enclined to going to the next level. That's food for thought for us for sure.
Im not so sure on the cleaners...
If you look at supply and demand alone there will be more BBs selling than X and Y buying....so that is a downward pressure on prices, can the BBs retain thier properties and act as LLs, yes thats quite possible, the Q is what is the mix. i suspect it might be bigger than expected....because they wont get the prices they expect.
X & Y will be paying off student loans and having children later, another limiting factor on what they can pay.
Reverse mortgages are a possibility but from what little Ive seen these are very poor payers.......but it may indeed be some BBs only way....the good thing is I think banks will/would get burned and not the BBs who take them out (soon) but read the small print.
Banks will probably sell into a buyers market..yet more downward on prices
I think there will be a high structural un-employment in a Great depression and it will be a 20 to 30 year event, taht alone will wipe off the bubble money. I also expect WINZ to collapse under the strain, so it will be work in the fields or starve....its going to be interesting, a very tough few decades....at 70? Hugh I doubt you will see it to 90....
How much was a typical house in the 1960s? I seriously wonder if I wont live to see my house worth what it was when it was built.....
regards
Bernard, can you please clear up what point you were trying to make, because based on the numbers you have given here actually don't back up your point it all - it looks like you got all fired up looking at some raw numbers and didn't take the time to understand what they meant?
According to you, the Net Wealth of the baby boomers has risen 9% from 43% to 52% which is just over a 20% increase in Net Wealth. However, you state that the population of 55+ has grown 5.2% from 19.5% to 24.7% which is an increase in population in that period of 26.6% - which means the overall Net Wealth of Baby Boomers per capita has decreased over that time - yet you are claiming it has exploded??????
And more to the point, you state that 71% of the 55+ wealth is in their property values, which makes your point even less relevant than it was in the first place, due to the lack of liquidity of said wealth.
I'm really scratching my head trying to understand what you were trying to say here, as the numbers you produced actually disprove the statements you were making?
Well you are not the only one wondering why this is news...?
I guess the point maybe is that if someone has net wealth from savings over the years ... let's take it, their savings should be redistributed, maybe using the tax system or the banking system? (I'm 42, so quite a bit to go before I'm 55) ... as the young can't wait to inherit it?
the 71% is telling as the property wealth is unrealised. There is nothing worse than expecting, planning upon a value and not realising. It is a lot worse than never having had it at all. Few have sufficient property equity to retain as investment portoflio throughout their retirment. They will get theirs.
I think the 71% is just saying they have paid off their mortgage.... they still need to live somewhere - even in retirement.
Traditionally paying off a mortgage and saving for retirement may not be the same thing, (although maybe its just preparing to live on a lower income, having no rent or mortgage to pay). If house prices drop it just means the house they move to is cheaper, and if they have a rental - no doubt it is providing net income for the 55/60yrs olds plus, rental that between the bombays and walkworth, at least has a good chance of going up (re coming rental shortage) on top of capital appreciation (so better than the banks 3 or 4 percent).... Can't see why or how they 'will get theirs'.... there are thousands of people qued up to buy AKL property (obviously not near the million $ bracket though)...
Even for an economist you are making a few lofy assumptions there. The point is current situation in Auckland i.e rental/capital gains will continue for the next 20-30 years? I can't find anyone in economic consultancies in US/Europer who privately see the world economy looking anything like it is today in even 10 years give resource constraints alone. They all see a masisve transformation which leaves todays middle class skilled people outsourced. Have you ever wondered why many in the profession went to financial economics? They are well aware you need to make a quick buck given what lies ahead and set yourself up. New venture deals are now based on making your money upfront as quick as possible. No one is planning over five years...need to be done and dusted on any business and set up
A consumption based economy like Auckland already has it problems... they will not become any less acute and what point is it simply not attractive to live/move there. Lucky to have ten years. The family and friends pull is all it will have.
Hi there speckles - if you read my other posts you will see I agree things will be different, totally. But you are saying put their savings into shares? or are you saying put their savings into a business venture directly for a quick buck? (highly risky in this climate and when you are 55+ you don't want to take excessive risk) or are you saying they should just consume/spend or their income then rely totally on GRI and taxpayer support?
At the end of the day if you buy a 500,000 home in AKL with 100,000 deposit, the rent generally will cover the interest and outgoings and is a hedge against inflation - unless you believe that Bill English and co have beaten inflation? Even if the capital goes up less than inflation - you still beat having money in the bank - or finance company... The current rental capital gains don't need to continue for it to bet bank deposits anyway - infact if rents and capital gains don't keep up with inflation they still will probably beat bank deposits...
Ian Parky above is correct - it's the monetary fiat system and hedging against that - that makes for mal-investment (property or otherwise). In finance companies a lot of them have lost a lot, or in shares - a lot of 55+ still remember the 87 crash, property is something they understand... of course Im not suggesting they go out and get a 90% + mortgage... but if you want to better the bank returns over the longer term (like for retirement) - bank deposit real returns being below inflation at present then where do you go speckles? If you want to take the bet that neither rents nor capital values in AKL will keep pace with real inflation (not the CPI fantasy) - that would be a very bold bet for you to take....as in real terms the amount of land per capita in AKL is declining...
Sure AKL has problems, as do many places - a shortage of (good non-leaky) housing is perhaps one of them, amoung others...
I think actually the 71% in property shows how little thay have saved for their retirement after paying off their mortgage.... most 55+ that I know don't have any rental properties...
Bernard says the - ".... extraordinary shift in the structure of wealth in New Zealand that raises huge questions for politicians, policy makers and voters."
Really?
What makes anyone think politcians give a wotsit about this problem?
See any evidence that they did when Labour was in power between 99' and 08'?
See any evidence that NACT have given a wotsit since '08?
Why don't they seem to care?
Cue, Mr Tarrant. (Let it rip Alex.)
New Zealand needs to have a conversation about how to transfer this wealth back. A land tax, a capital gains tax, higher income taxes, a later retirement age, means testing for New Zealand Superannuation and means testing for public health care will have to be considered.
Jesus wept.
The wealth an individual has, regardless of age, is their wealth to do with as they want: it is not the business of policy makers, politicians, voters, or economic commentators who go straight to the immorality and force of theft, as in the above sickening paragraph.
You are why the West is being destroyed Bernard. The free West was made from the blood of patriots, and is now being drowned under the tears of liberals.
Gotta say Bernard you get as much traction out of this dead horse as you get out of property....git up boy come on one more lap.
After the events of the mid eighties and again in recent years have taken their chunk of what you regard I stole from you....I am more than happy to pass it on without regret or predjudice, right after the Taxman tells me just what is mine of the remainder .
I think you may need some counseling on this subject ...your bitterness has blinkered your view.
P.S. Dont worry too much me old potato....just as soon as we start fracking...drilling....digging lovely big holes , all over the show we'll be swimming in loot ...you'll see.!!!!!
Failing that, maybe you could organise train rides for the decrepit hoarders to Maui...tell em there's tea n scones in the big shed.
Inequalities in wealth will eventually resolve itself tthrough inheritance and changing asset values because of supply and demand. A lot of that "wealth" is highly illiquid.
I am more concerned about inter-generational theft from environmental degradation, especially our water-ways and soil fertility.
Are water ways and soil fertility not things that are pretty good in advanced economies like, say, Germany?
NZ is of course the world's cattle yard, like China is the world's foundry.
Sir Paul Callaghan had it right, high tech, high wage industry is the best way to both wealth and a good environment.
Of course communist economies and primitive hunter gatherer societies have always been the absolute world's worst destroyers of environments, but most people can't think this through.
There is no correlation between urban boundaries and how "polluting" a nation's economy is. We have urban growth boundaries and "rivers of shame". Germany somehow manages their urban planning to deliver more affordability than we do, and their economy is advanced, industrial, high tech.
The papers of Alan W. Evans and Oliver M. Hartwich are very illuminating about German development permission processes - apparently there are strong fiscal incentives for local bodies to be pro growth rather than anti growth, and land banking is not worth it.
The world according to St Bernard
It is forbidden for elders to be richer than their off-spring
It is forbidden for youngsters to be poorer than their elders.
Following the defeat at the Siege of Edessa, Bernard was commissioned to preach the Second Crusade. The last years of Bernard's life were saddened by the failure of the crusaders, the entire responsibility for which was thrown upon him.
Wow Bernard ... talk about opening a can of worms .
WTF ...Everyone having a go at us Baby Boomers as if we had it easy .
Its our generation who left school at seventeen to keep our families fed and clothed , who laid the foundations of the modern day farming industry, who fought in wars to protect our way of life from Dictatorship and Communism , who were taught early in life that you CAN fail, and how to get up again, our generation who was taught to save today and avoid instant gratification, and to help those less fortunate, it was our generation who built most of New Zealand's macadamised roads and electricity grid.
We also had resepct for authority , believed in God and country, and trusted our leaders to lead us with trust and dignity .
We scripmed and saved and worked all day and went to night school (without student loans), and ......car ownership before the age of 25 was rare 30 years ago
We had recessions, banking criseses , shortages, and while none of this was new from an historical persepective , it was far from easy.
To "blanket blame" the older generation because houses are too expensive is disingenous to say the least .
Its time to stop blaming people and start a culture of saving for the First home ... baby steps like we baby boomers had to take
Boatman ...you have obviously never met Bernards hobby horse Dirty BB......he gets it out at least once a year to see if the punters will back it , but the punters who may are in transit while the punters who won't can only recall it DNF'd three out of three starts.
Still doesn't stop it getting a good flogging eh...?...it'll be that Quixotic syndrome of his again...hey but everybody's got a windmill or two to kill I guess.. said it to you many times Bernard ..............Baby Boomers are not a collective thinking nor ideology just a collective birth statistic...which leaves your collective judgement ill advised and poorly thought through.
But we still love ya Big Guy..!!!
Completely agree, Boatman. Moaning & wishing house prices were lower isn't going to make it happen.
Waiting for the "house price crash" - well some on this site have been waiting 3 or 4 years for that to happen.
Scrimping & saving is hard in a consumer goods saturated society, but you can't have all the toys as well as the first foundation of financial security - your own house.
Many of the 20 & 30 somethings in a typical office/workplace have: 2 nice cars, laptops, broadband, Sky Tv, regular holidays, late babies, buy lunch everyday, out on the weekends etc etc ... and rent with no consideration for the sacrifice over several years that may be necessary to get home ownership.
Boatman, you are right in everything you say, but you forgot one significant thing. Your generation believed in God and Country, not the Gaia earth mother and hapu and tapu.
Hence when you wanted houses and roads and dams and so on, you got on and built them.
It is not entirely your generation's fault that such utter post-reason nonsense has wrought such evil on your children, but you seem to have stood aside and just let it happen, and it has been beneficial to you in probably unpremeditated ways. But the fact remains that much of the NIMBYism today is boomers who own nice properties in good areas etc.
I have nil sympathy for the younger people who are a pack of post-rational Gaia worshippers; they deserve every consequence they bring on themselves as a result. It is a pity that thousands of decent young people who just want to get on with life, are collateral damage.
Sunday Star 5 September 2010
On Bernard Hickey
IT'S LIKE a scab. Pick. Pick.
He can't help himself. Bernard Hickey is a man with a compulsion.
http://www.stuff.co.nz/sunday-star-times/business/4093494/Matters-of-life-and-debt
Bernard Hickey On Wolly
"We've got one guy who comes on, Wally. He's usually like the first to comment on everything. I don't know what he does. He must, like, live on our site. It's fantastic. We don't pay him a cent.
"No wonder a record number of mostly young New Zealanders left to live in Australia in the last year."
I wonder why they come to Australia? Australians are actually the wealthiest people in the whole world, as measured by median wealth...
Credit Suisse Global Wealth Report 2011 -- Australians are World's Wealthiest People
However, in Australia, just as in NZ, this wealth is all tied up in housing. What happens when the property bubble bursts? That's right... all this illusory wealth goes up in smoke!
Jay.
Ahem, I think the Baby Boomer generation is generally defined as those born between 1946 and 1964......
If Bernard was born in 1965 he would have been only been 15 to have started university in 1980!!
Either he was a child prodigy or.......he is a nasty BBer HIMSELF!!!!
Ergo, he can now whip out his own hairshirt and start leading the mea culpa chant ......
Bernard, just because you loath and hate you mother and father, it does note mean that all our parents are as bad as yours. Shame on you
Bernard, have you forgotten, really forgotten about those fascist nazies and how you are behaving just like them. Get everyone to hate someone and then be pleased with the bloody result. How could you?
Bernard, i guess statistics do not lie - Yea right
Far be it from me to tell the Editor ...but it would appear the readers choice actually belongs to by Roelof | 25 Mar 12, 12:52pm with a 9 as opposed to the 5 currently holding that position.
Is this selective when you don't favour the response ....? if not, let's not make it appear so eh.
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The Industrial Revolution brought gains in productivity. Year after year jobs were being replaced by machines as these machines became better and better at replacing workers. Yes, people just like you and i. The businesses don't want you, they need to find ways to get rid of you so they can increase productivity and hence their profits.
By the late sixties or thereabout's the Industrial Revolution was reaching it's peak. Henry Ford had a worker built a car every twelve and a half hours and got that down to one every ninety three minutes. But nowdays improvements in machinary bring fewer gains.
In the eary days of the IR life was tough and miserable for workers, so they united and formed unions. It was through this action that the economy prospered, as the workers shared in the rewards, and so were able to aford the products they produced and so production increased.
Some argue that those boom years were a result of cheap oil but I dispute that. Had oil been a problem Henry Ford would have mass produced some other fueled vehicle such as an electric car and industry would have continued using coal for much longer. What cheap oil did do was allow the workers to move out of the smoggy cities and into the newly established suburbs. They could live just about anywhere as they possesed their own transport. Unfortunately, because oil was so cheap it was wasted. Big petrol guzzling eight cylinder cars and it didn't matter if you had a bit of a petrol leak. It was shamefully wasted, but not the cause of the boom years.
By the seventies, economies, struggling to make further productivity gains through replacing workers, were faltering. Governments and economists were desperate for a solution and so resorted to monopolies on the grounds that economies of scale would save us. But that was only a short term measure.
Along came the eighties and a new breed of young bright eyed economist who new everythig. Yes, they were going to save the world, they produced the magic wand “The Market”, deregulate eveything, sell everything and slash wages even further.
By the nineties it was clear, the “The Market” was not going to save anything, or anyone but the rich, and so a new solution was needed. But with no solution in sight further wage cuts was the answer and so enter the employment contracts act.
Since the nineties we have contiued meddling and still no solution in sight. Free Trade Agreements to further reduce wages by taking jobs to low paid economies, borrowing and debt spiralling out of control but no answer, no solution.
For over a hundred years we have been attacking the worker, wasting valuable resources and manipulating the money system, and now all three are under constant threat, will it ever end? However what the banking and the finance sector destroys can be repaired. Debts can be forgiven and money can be printed to infinity. It will not be peak oil that destroys us as other forms of energy can be found. There is only one BH and there is only one of you and I. Destroy the people and you have nothing left, everything will collapse.
As we can see, since the start of the IR the goal for our future has been to destroy our jobs and our wages. All prosperity is based upon destrying jobs and wages, and that must change, we must help guide our governments and economists to a future we all desire. It will not be easy but it is essential.
By people uniting in the early days of the IR, they achieved a more equitable share of the prosperity, and as a result the economy, and the people, prospered. We must do the same today or face the consequenses.
The are two roads to our future, the right one and the wrong one, I guarantee it will take the wrong road unless people intervene. The people have a choice, take action or sit on your bum blaming others, like baby boomers, while we sink.
WHAT DO YOU CHOOSE?
But automobility did more than anything else to break the iron link between rising incomes and rising land rents, leaving land owning oligopolies capturing all the gains from rising incomes (viz Karl Marx and Henry George).
"Automobile based development" is the secret to true competition in land for development. If it's all restricted to the distances people can walk, or restricted to rail routes, it's "hello, mr Oligopolist landlord, how much rent do you want"?
Urban planning has made Marx's theories on land rent and social mobility relevant again. Not that lefties "get it".
FYI from a reader via email:
Hi Bernard, You hypothesize that when people inherit the wealth of their parents, they will not be young enough to be able to usefully use it. I disagree. These days, the wealthier people are waiting to the very last minute to have children. So, the men are in their late forties and the women (generally of European ethnicity: that is another story!) are in their early forties when they finally decide to have children. Assuming that both of these people kark it when they are 82, their children will be about 40. Not ideal, but still possible to have children at that age. And able to usefully use the inheritance at that time. But even if there are older than that when they inherit, could this inheritance not be considered to be retirement savings? Up until their parents kark, these children could put all their money into housing and children things. Ie There is no need to put more money into retirement savings. Relying upon the inheritance for retirement savings is slightly risky. Eg A parent gone rogue, or requiring expensive medical treatment. But at a minimum there should be at least a house to divvy up between siblings. RegardsWhy do you wonder that , Bernard ? ...... please tell us what is on your mind , there ......
..... I am one who has delayed having a family , until into my mid 40's . No problems for me . And I feel no personal blame for the state of the New Zealand economy , neither .
I'd also like to rebut your theory there Bernard.....I have facilitated both my children into positions of advantage both in education and personal security .
There is a fine line to be walked there though...they still need goals to strive for in order to be productive..in order to not rest on their laurels.
Which is why at this stage I choose to facilitate rather than provide.....
Is it that you would have the State discourage their need to strive to attain ...self independance......because I guess that is what the State does best.
Tribeless was on the money this time...although there will always be times when the World needs a Liberal it should not be an indoctrinated thinking from cradlle to grave as it is in Godzone.
The entitlement mentality lies like an oil slick on a stagnant pond.
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