Here's my Top 10 links from around the Internet at 12.30 pm today in association with NZ Mint.
As always, we welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read today is #2 about how millenials are no longer buying cars and houses. Instead, they're sharing them. I've always wondered why Zipcar hasn't set up in New Zealand, although I suppose Cityhop is the local version.
1. It's the de-leveraging stupid - The Economist has a useful piece here pointing out how pervasive deleveraging is in the UK economy and how difficult it is to either turn around or handle.
Remember too that Britain's overall debt to GDP ratio is over 900% once you take into account all the debt piled up by global banks with operations in the City of London.
That will become British debt when the proverbial hits the spinning object.
If there's one thing to remember in this new world, it's this: 'It's the deleveraging stupid'.
Here's the Economist on the latest drop in lending and various attempts to get it going again:
Folk are choosing to pay off their mortgages for the same reason they are holding off spending. They see darker days ahead and stagnating wages now, and are using the opportunity to pay off their debts. It is a similar story with banks. Having amassed vast debts before the bust, they are reducing their exposure to debt now. Hence the decline in lending. Lending to non-financial companies has fallen nearly 5% on last year; it fell nearly 5% the year before that.
For the British government this is maddening. People are still heaping up savings; banks still don’t want to lend more to businesses. We still hear that giant gurgling noise as demand drains away. All ministers’ plans—to goad banks to lend more, to reinflate the economy, to boost confidence—have all failed and failed utterly. Hence their desperation. What to do? Nationalise RBS? Force lending? Try something more radical?
2. The Cheapest Generation - The Atlantic reports on how young Americans have stopped buying cars because they can't afford it and are more interested in sharing than owning.
A fascinating read. I hope Hugh Pavletich reads it too and ruminates on what cities might/should look like in future. Hint. They're not all sprawely.
The article starts by looking at how Ford and other car makers are trying hard to understand why young people are buying fewer cars. HT Leith at Macrobusiness.
All of these strategies share a few key assumptions: that demand for cars within the Millennial generation is just waiting to be unlocked; that as the economy slowly recovers, today’s young people will eventually want to buy cars as much as their parents and grandparents did; that a finer-tuned appeal to Millennial values can coax them into dealerships.
Perhaps. But what if these assumptions are simply wrong? What if Millennials’ aversion to car-buying isn’t a temporary side effect of the recession, but part of a permanent generational shift in tastes and spending habits? It’s a question that applies not only to cars, but to several other traditional categories of big spending—most notably, housing. And its answer has large implications for the future shape of the economy—and for the speed of recovery.
In the 60 years after World War II, the United States built the world's greatest middle class economy, then unbuilt it. And if you want a single snapshot that captures the broad sweep of that transformation, you could do much worse than this graph from a new Pew report, which tracks how average family incomes have changed at each rung of the economic ladder from 1950 through 2010.
Here's the arc it captures: In the immediate postwar period, America's rapid growth favored the middle and lower classes. The poorest fifth of all households, in fact, fared best. Then, in the 1970s, amid two oil crises and awful inflation, things ground to a halt. The country backed off the postwar, center-left consensus -- captured by Richard Nixon's comment that "we're all Keynesians now" -- and tried Reaganism instead. We cut taxes. Technology and competition from abroad started whittling away at blue collar jobs and pay. The stock market took off. And so when growth returned, it favored the investment class -- the top 20 percent, and especially the top 5 percent (and, though it's not on this chart, the top 1 percent more than anybody).
And then it all fell apart. The aughts were a lost decade for families, and it's not clear how much better they'll fare in the next.
5. No free lunch - The Federal Reserve Bank of Dallas' William White has written a paper here on the unintended consequences of ultra-easy monetary policy. He's a hawk.
In this paper, an attempt is made to evaluate the desirability of ultra easy monetary policy by weighing up the balance of the desirable short run effects and the undesirable longer run effects – the unintended consequences. The conclusion is that there are limits to what central banks can do. One reason for believing this is that monetary stimulus, operating through traditional (“flow”) channels, might now be less effective in stimulating aggregate demand than previously. Further, cumulative (“stock”) effects provide negative feedback mechanisms that over time also weaken both supply and demand.
It is also the case that ultra easy monetary policies can eventually threaten the health of financial institutions and the functioning of financial markets, threaten the “independence” of central banks, and can encourage imprudent behavior on the part of governments. None of these unintended consequences is desirable. Since monetary policy is not “a free lunch”, governments must therefore use much more vigorously the policy levers they still control to support strong, sustainable and balanced growth at the global level.
6. Thank goodness for the mob - Robert Saviano, a journalist under police protection, writes in the New York Times about the surprisingly strong and deep links between the various forms of the Mob and the Too Big To Fail banks that needed their money in the depths of the Global Financial Crisis.
Also, beware of 500 euro notes.
Many of the illicit transactions preceded the 2008 crisis, but continuing turmoil in the banking industry created an opening for organized crime groups, enabling them to enrich themselves and grow in strength. In 2009, Antonio Maria Costa, an Italian economist who then led the United Nations Office on Drugs and Crime, told the British newspaper The Observer that “in many instances, the money from drugs was the only liquid investment capital” available to some banks at the height of the crisis. “Interbank loans were funded by money that originated from the drugs trade and other illegal activities,” he said. “There were signs that some banks were rescued that way.” The United Nations estimated that $1.6 trillion was laundered globally in 2009, of which about $580 billion was related to drug trafficking and other forms of organized crime.
A study last year by the Colombian economists Alejandro Gaviria and Daniel Mejía concluded that the vast majority of profits from drug trafficking in Colombia were reaped by criminal syndicates in rich countries and laundered by banks in global financial centers like New York and London. They found that bank secrecy and privacy laws in Western countries often impeded transparency and made it easier for criminals to launder their money.
In 2006, Spain’s central bank investigated the vast number of 500-euro bills in circulation. Criminal organizations favor these notes because they don’t take up much room; a 45-centimeter safe deposit box can fit up to 10 million euros. In 2010, British currency exchange offices stopped accepting 500-euro bills after discovering that 90 percent of transactions involving them were connected to criminal activities. Yet 500-euro bills still account for 70 percent of the value of all bank notes in Spain.
7. ECB wants to water down capital rules to help European banks survive - Here's Bloomberg with a depressingly familiar report. When the going gets tough, the tough get the regulators to ease the rules.
The European Central Bank is pushing global banking regulators to relax a draft liquidity rule so that lenders can use some asset-backed securities and loans to businesses in a buffer they must hold against a possible credit squeeze, according to three people familiar with the talks.
The ECB, backed by the Bank of France, considers a draft version of the liquidity coverage ratio, or LCR, may hamper efforts to combat the euro-area debt crisis by curtailing lending and making it harder for central banks to implement their monetary policies, said the people, who couldn’t be identified because the discussions at the Basel Committee on Banking Supervision are private.
Faced with sluggish domestic demand and the record cost of fattening animals - due to a steep rise in the price of corn and soybeans as a drought grips top exporter the United States - China's hog producers are being forced to sell their herds.
China's food price cycle is driven in a large part by pork, the country's staple meat, and while it is in abundance now, in about six months meat stocks are expected to fall as a result of the sell-off, resulting in a surge in prices.
Any increase in food prices is expected to push up inflation, which now sits at a comfortable level in Beijing having cooled from last year, but is still one of China's biggest economic concerns given the potential for rising prices to trigger social unrest.
109 Comments
RE:#1 - If there's one thing to remember in this new world, it's this: 'It's the deleveraging stupid'.
From the non-establishment ZeroHedge
Lies, Damned Lies, And Pianalto's QE/Deleveraging Lies
There is no deleveraging - Total US Consumer debt is 0.23% from its all-time high in mid-2008, and will with all likelihood break the record at the next data point.
The only deleveraging of note has occurred in the shadow banking system - est.. USD 4 trillion down from USD ~30 trillion. And thererin lies the problem that CBs are desparately trying to rectify while lying about the rest of us.
The US Government , just like our own, is also doing it's bit to leverage US citizens for evermore - USD 16 trillion and counting and waiting until Freddie and Fannie USD 6 trillion debts are officially added to the pile.
Deleveraging?
The most interesting phenomenon about this is the screaming, the angst, the flagellation, the self-flagellation, examination, commentary, doom, gloom and carry-on going on about this subject.
Can't recall anyone screaming and carrying-on during the leveraging phase. Why now?
The only deleveraging that has occurred is the US Federal Reserve taking all those toxic debts and assets off the merchant banks, onto its own balance sheet. Real deleveraging will only begin when the Federal Reserve tries to PUT those assets back. And that aint going to happen in a hurry.
But back to NZ property, Bernard I note your neigbour's house in Epsom is back on the market today. The auction sale price should be a good bellwether for how much the market's moved since it last sold in 2009 (for about $600k ish I recall) since it appears largely unchanged.
The agent's have indicated a $700-800k initial enquiry range on the computer which may be a bit light.
Despite it's access difficulties I would be surprised if it didn't break well above that range.
It could well have been the easiest 30%-40% gain you would ever have made if you had bought it Bernard! (It might even turn out to be above a 50% gain in 3 years!)
Not really, but if you thought I was then you were brave giving me your name! (It's amazing what turns up with a couple of clicks though!)
I recall Bernard declaring his property ownership status when he predicted prices were about to fall 30% back in 09 so I checked his story and by sheer coincidence his neighbour's house (happened to be owned by the council) was for sale, which I jibed him about (as it was much less than he'd paid some time earlier).
Keeping an eye on all things property (as one does), I saw it listed again this morning. And what an opportunity it is to jibe Bernard again if it turns out prices for like for like properties actually rose 30% after 3 years rather than fell! (or is that rose 50%??)
Cheers Chris_J
Yep. Went to the open home for a nosey around on Saturday.
It has very poor access, no garage and is a cold, damp hole. You can see I wouldn't make a real estate agent...
But we are watching the price.
Our long term plan to sell in Auckland and to use some of that crazy money to downsize to Wellington.
It may well be sooner than we think.
The more I look at the world, the more I see moral hazards propping up all over the place. Our politicians and banks seem determined to support the idea that the Property market is Too Big To Fail.
Our Reserve Bank is refusing to acknowledge debt fueled bubbles.
Who knows. We could see the OCR cut to 0%, floating rates cut to 3%, no new houses built in Auckland and an influx of safe haven capital into the City of Sails.
Buy with your ears pinned back Chris_J. I'm sure there's a bank to lend 90% plus. And no capital gains tax. Forever.
You can never lose with property. Always ever upwards and beyond.
As long as interest rates never rise again...
Never. Forever.
cheers
Bernard
PS It's been fun Chris_J.
You're right. I was wrong about house prices falling 30% across the country. They are still down that much in coastal areas and in many provincial towns. But Auckland (and unfortunately Christchurch) are on another planet since the earth quake and a lack of new house building in Auckland.
I'm a property fan, but I'm not denying property can be a horrendous investment too.
30% falls in some coastal areas may seem bad, but between 1997 and 2001 some properties fell 60-80% in value - we bought a few - and that's the point - buy at the right price, for the right reasons and you will generally be ok.
But:
Do I think prices are about to collapse? No.
Would I sell at present? Yes (we are selling some property to take advantage of the market but only enough to do other things including a house in Epsom).
Would I sell out of the market completely? Never. I would never sell up entirely unless I no longer needed a house (ie not living) or had left the country for good. People who sell because they think they can beat the market rarely (virtually never) succeed and often take a huge financial step backwards.
If you purchased something a decade ago on the basis that interest rates might average 10% and rents stay the same, when in reality rents doubled and interest rates averaged 7%, then it becomes very hard to have lost money.
Forever is a very long time Bernard.
Positive inflation is almost a "forever" with paper money, democracy and government debt, isn't it?
Scarfie, the discount from the market rate is exactly what you are stealing from your landlord, so it seems you might be the thief after all!
You are in Dunedin aren't you scarfie? We have quite a number of properties down there rented at relatively low rates because to be honest we can't be bothered having to tidy them if tenants leave and don't want any turnover.
In fact we have quite a few slightly grumpy middle aged tenants who have been in the properties for several years (in one case several decades - before I owned it). So to reassure me that I or my brother aren't your enabler perhaps let us all know what suburb you are in, what you pay and if it's a standalone or in a block of how many! (It won't give you away unless you are one of our tenants!!!)
Not be brother, I live at the beach in the subtropics. The landlord is a willing recipient in this transaction, and probably gets non taxable benefits from my occupancy. However the discount you state would not be large, in fact in this instance the rent is probably marked to market. Perhaps his property might be yielding a little better since the beach bach nature of it has probably reduced a little in price over the last five years, the cost of energy being manifest in this instance. It could actually be the case where my landlord is getting the benefit from not marking the rent to market, it did in fact sit empty for six months prior to my moving in. I benefit solely by being shrewd about choosing how to live, not at the expense of others. Much as you might like to deflect away from your own behaviour by focussing on mine, a classic fallacious tactic.
PDK, that plea for assistance was immediately after Feb 22 and it was for support to reinstate some democracy (nothing financial) in a city which had been commandeered by bulldozing lunatics who were doing whatever they felt like doing.
Unfortunately many of the same bureaucratic dictators remain in control and we are still stuck in a similar situation 18 months down the track.
I and others (such as Hugh) still demand the return of common sense, fairness and democracy. It seems however that the rest of the country doesn't really care as long as it doesn't affect them directly... unfortunately it does affect them but the rest of the country just don't realise the indirect implications.
GBH .....let's not lose sight of the Administrations that have enshrined the "entitlement mentality " here ,for the purposes, as you know full well, to create another tax structure , and ensure most evey penny they spend that was ours gets recycled back into the economy and ultimately Corporate profits...
That said hello my good man , have missed your injection of happiness hereabouts, just ducking off for a bit , I'll look in on your mischief later.
It's be kind to Steven day BTW....now it's only once a year .....so....you know....eh.
" Be kind to steven Day " ....... jeepers , is it August 30'th already ! ..... Winter flies by when you're having fun , Count .......
..... so , Chris_J & moi should cut Mr scarfie a little slack , too ...... 'cos the " entitlement mentality " is not his fault ...... Nanny State is to blame ...... aha ...... yup , hmmmmmm !
Just ducking out myself , to create some mischief & mayhem in the carpentry workshop ....... curious that our tutor's hair has turned grey , in just the 6 weeks that he's had our group , ... he must be having " problems " at home , methinks .......
You lost me there Gummy, I am not sure how your logic took you from my questioning the morality or honesty of unearned income to my having an entitlement mentality. Quite the opposite I would have thought, as it is all about fully recognising ALL those that don't pay(work) their way in our community.
Bernard – You need to re-read the article about the Millennials. The Urban light form it mentions is exactly what Hugh suggests with the one council, many communities model. Since there is a direct correlation between land prices on the fringe and inner city, then lowering fringe prices will help lower inner city prices. Rather than causing a one way explosion in sprawl, lowering fringe prices will help with an implosion of growth to the centre. When prices are more affordable BOTH on the fringe and in the centre, then we will really see how the Millennials like to live. They are not all staying at home because they love their parents.
Except the cost of energy to move from the fringes is a growing component of a household's costs and in turn councils costs (maintaining ever lengthening, piping, roads etc)....Sure lets say you have "cheap" land, given that isnt a big component of the final price big deal (even if it is cheap of course)....
regards
Steven, the answer to this issue is to make people pay for the stuff they use. This means getting councils out of the provision of infrastructure altogether as they love using revenue raised from one source to cross-subsidise their favoured special interest groups.
The important thing is to allow people to make their own decisions, rather than have Big Brother types make the decisions for them based on their own subjective view of what is right. If people are prepared to pay extra in transport/energy for the privilege of living in the suburbs or even (gasp) a lifestyle block, why should they be prevented from doing so just because someone else doesn't like their choice?
I can't understand how your argument supports the need for urban limits; if anything it shows why they are not needed, because if suburban living is really so horrible and expensive people won't choose it. If living in a "compact" city really is such a great idea, why aren't you prepared to allow a level playing field and see what happens?
Contradictory comment in terms of the thread....users pays , but uh not. Part of Dale's and Hugh's argument is that councils should raise municipal bonds to pay for new services to new homes and not the developer I strongly disagree on that. Its certainly not how it should be in this case I think, so simply a developer should pay the cost of new infrastructure for new houses, yes user pays.
Now yes I agree there shouldnt be significant cross subsidising, Ive seen no evidence there is, URLs? (evidence?) Now if the Govn/Council bought (or some other method) large sections of farm land and changed them to residential en mass, and sold them back to small builders/developers at cost, yes OK...
So to meet you view on stopping cross subsidy I'd certainly have no problem with a developer putting in the services themselves but they would have to get them inspected and certified by a professional engineer who certifies to the council it meets standards, rather than say a council monopoly charge, no problem.
Urban limits, well that for me its a bit of a mixture...I wouldnt want to see a sprawling mess but at the same time its probable that the limits are somewhat counter-productive. However the issue is very complex and simply having cheap sections (as if they will be) solving the issue isnt creditable. And for me the problem is moot, surburbia is a dinosaur, the era of cheap energy is ending that layout.
"If suburban living is really so -8><---- expensive people won't choose it." which is what is happening in the USA. My biggest problem is the likes of Hugh cant or dont want to see the landscape has changed...post peak oil...so they will happily rush on doing things that dont make sense over the life (100 years) of any new standard style buildings.
regards
Steven, you are impervious to rational and logical argument, aren't you? Where is your land bank, or who is paying you to troll all day every day on the internet opposing the liberalisation of land supply for urban development to end the exploitive racket that Gen X is running at the expense of Gen Y?
You were asked: "why are you so scared of a level playing field and people choosing" and your circular logic was to respond, "oh, but they ARE choosing what I think, even in the USA's free markets".
Steven, this is just typical of your propaganda and I say for the sake of all Generation Y-ers, you should get a conscience and stop this endless apologism for corruption, racketeering and social injustice. Suburban growth has NOT stopped in the US cities where it is allowed, housing is affordable, and the policy framework is business-friendly. The migration flows within the USA are massive and ongoing, TO the low-cost growth cities.
Maybe some proportion of young people ARE staying in the exploitive cities and not buying houses and cars - just how much of this is "choice" is a question. People who claim that the human desire for mobility is dying, only prove how out of touch they are. I suggest reading Dargay, Gately and Sommers: "Vehicle Ownership and Income Growth to 2030".
The actual cost of running a car over a lifetime, per km, has level-pegged for decades regardless of oil price rises. Human ingenuity has won the battle. Peak Oil is BS propaganda: there is a "fossil fuel pyramid" and the harder the oil is to get to, the more there is of it. Price rises will flatten out, not speed up; and cars will get more efficient faster than oil prices rise, for the foreseeable future.
Besides this, decentralising urban form maintains roughly stable travel times. This is not disputed in the urban economics literature. The real world data now show much worse congestion, longer trip times, and worse local air pollution in Europe's famous dense old cities and heavily-planned forms. This is in spite of Europeans driving much more efficient cars on average thanks to petrol taxes. Urban economists have always said if you want to reduce the use of petrol and energy, tax it. If you want to increase the efficiency of providing infrastructure, price it properly to everybody. Why would anyone collect rainwater and recycle water, if it is "free"?
A significant "unintended consequence" of urban growth constraints and inflated housing prices, is that people buy further and further out of town because that is all they can afford. Travel distances increase and congestion increases. Well done, "planners".
And lumping the costs of infrastructure up front into the cost of houses, increases the price of ALL houses; paying for it in rates or bond levies over the lifetime of the asset is simple social justice, otherwise the levy represents a windfall capital gain for every person who already owns a property, at the expense of everybody who does not.
At last after years of my patient explanations, you have said something which shows a glimmer of understanding:
".......Now if the Govn/Council bought (or some other method) large sections of farm land and changed them to residential en mass, and sold them back to small builders/developers at cost, yes OK......"
What I ask you, is why is NO-ONE among the growth constraint advocates saying this is what needs to happen? Whose pockets are they in? This goes for redevelopment and intensification too - the "Fine Grain Analysis" by Jasmax Consultants, of the Auckland Spatial Plan, said it is "unworkable" because the cost of land everywhere is so high that no-one can afford the "redeveloped" properties even at very high densities. Have you seen "Shoebox Living and What You Get For Your Rent" on TVNZ archives? 20 square metre apartments costing $220 per WEEK? This is what a 3 bedroom suburban home costs in rent, in an US affordable city; and a 50 square metre apartment in the CBD is more like $220 per MONTH. Dale Smith is right; prices go up EVERYWHERE when urban growth is constrained, not just at the fringe where the planners HOPE they are making it "too expensive".
If the planners are too ignorant to understand this, they should be sacked lock, stock and barrel. If they DO understand this, they should be in jail for corruption and racketeering. That is the alternatives: sacking or jail. Staying at their posts destroying NZ should not be on the menu. Now get on with it, National-led government.
Steven I have almost given up trying to make sense of your arguments. Firstly, regarding infrastructure for new housing in new ("fringe") subdivisions - I am referring to public roads in the subdivision, water and sewer reticulation, drainage, electricity, gas and telecomms - I am led to believe (Correct me if I am wrong) the developer I bought my section from paid for these to be provided, and recovers these costs by selling the sections. I bought a section, but do I then own a share in the infrastructure I paid for? No, the council takes ownership of it, and charges me rent for it to boot. Please explain this in terms of "user pays"..
It makes total sense for such natural monopolies to be community owned and provided, I have no problem with that. But the current model for funding "fringe" infrastructure is, in my view, flawed.
Secondly, I have difficulty with your disdain of new housing on urban fringes. You harp on about transport costs but have an assumption that people travel frequently from the periphery to the centre, and back again. This assumption is such a crass oversimplification of reality that it renders any subsequent analysis into gibberish. Unlike you, I believe that deep down, the average Joe is not an idiot. Given the choice, he will choose to live somewhere reasonably handy to his work, kids' school, etc, as long as he can afford to. If, over time, the relative cost of commuting increases, he will consider options which will include changes in transport mode, relocating etc. He doesn't need eggheads to do this thinking for him.
By all means lobby the Government to recognise our current externalities and implement efficient methods of bringing these into account and thus into peoples decisionmaking I would support you in this. But let people, through open markets, decide where they will live, not urban planners. Whether you personally approve of their decisions is not the issue.
An excellent point Dale, and it contradicts the idea that people who are opposed to "smart growth" are automatically "pro-sprawl". As you've outlined, growth-containment policies work against growth in the CBD. They can also increase the pejoratively titled "sprawl" rather than reducing it.
Just look at London, where everything is tightly packed within the urban limit which is surrounded by a "green belt". So what happens? Thousands of people live in the "exurbs" beyond the green belt, commuting much further each day than they would if they were allowed to live in the area bureaucrats have arbitrarily decided should be left as empty fields.
A similar phenomenon is starting to appear in Auckland, where many ex-Aucklanders now live in surrounding towns like Pukekohe, Tuakau and Waiuku (in the south). Would they live so far away if houses in Auckland were more affordable and they were allowed to build a new house on the outskirts of, say, Drury?
Advocates of the inaptly named "smart growth" agenda often use anecdotes or one-off data points as evidence that people don't want to live in sprawling suburbs and would prefer to live car-free in high-rise apartments in the CBD. My answer to that is, "If people want this outcome anyway, why do you have to try to force it on them?" Funnily enough most of these people live in semi-rural areas or small towns beyond the urban limit.
http://www.zerohedge.com/news/guest-post-new-endangered-species-liquidity-reliable-income-streams
Charles Hugh-Smith's explanation for #2
Good read...about the only point i didnt quite agree with was his comment that oil wasnt that in-elastic. I think there is an elastic element like summer drives to somehwere and a huge in-elastic component, driving to work, business use etc. The former is I think what we have seen die off for 3 or 4 years and some of the latter, if you dont have work you dont drive and un-employemnt has doubled.
I agree with his comments on liquidity and reliaible income streams as well.....which since house prices are illiquid doesnt bode well for the present bubble.
regards
Re # 2 - an interesting article, but also a flawed one.
It talks of the decline in the proportion of new cars bought by 21 to 34 year olds, from a peak of 38% in 1985 to 27% now. However, the article doesn't mention that 21 to 34 year olds as a proportion of the total population was significantly higher in 1985 as compared to now (in 1985 21 to 35 year olds were the big demographic bulge of baby boomers). This is not to say that there isn't some sort of movement away from car ownership amongst Gen y - only to say that the trend is probaly nowhere near as great as the article suggests.
Matt in Auck
Good point.
Although I can never work out why anyone would ever buy a new car. The depreciation is enormous in the first year.
First rule of personal finance: never buy a new car. Second rule. Never borrow money to buy a car. Third rule. Definitely never borrow money to buy a new car.
cheers
Bernard
Bernard, agreed and despite my point about demographics I am sure fewer young people are indeed buying new cars. And the overall theme of the article is very relevant - a generation facing a sluggish at best economic future, high unemployment and high student debt is going to be a drag on the traditional economy, and a huge factor preventing future housing booms
The headwinds are indeed very strong for the younger. I think my biggest worry is the increasing costs and losses will be passed on to them as well.....Unless we go into a significant depression which forces whom ever is in Govn to drop the candy handouts paid for with debt quickly....At the very least WFF has to go....its level is obscene.
regards
Speaking as somebody from the millenial generation, the article rung true for me. Things like houses and cars simply don't have enough value to many of us to justify the cost relative to our lousy incomes. We have found other cheaper ways to feel connected with communities, to spend our entertainment and discretionary dollars, to display independence and personality to others.
And WHERE do you DO this "....feel connected with communities, to spend our entertainment and discretionary dollars, to display independence and personality to others...."
In the CBD where 20 square metres costs you $220 per week? Because Len Brown, Celia Wade-Brown, et al will tell you about what a wondeful "vibrant" community their CBD is. A wonderful vibrant de facto "GATED" community, more like it.
It is overdue for Uni students in Wellington to start organising and protesting about the fact that so many of them now have to flat together in leaky, draughty old homes in Porirua and Upper Hutt and even further afield. Oh, at least the GWRC will say it provides them with train trips at $3 - that cost the ratepayer $7. Hopefully a few years of this will make these young people unenamoured of smart growth and mass transit, much like the citizens of the former USSR have rushed to own cars since communism collapsed. There is nothing like having to actually "live" something for a while, to disabuse people of utopianism.
Movement away could be caused by 2 factors that were and weren't available in 1985.
1. Shift in drivers licensing from full license at 15 to current version means this age group is required to find alternatives to the car, which we didn't need to consider.
2. Public transport has improved immensly providing the alternatives more accessable and readily.
Yes, it's pretty appalling, Edwin Tufte would certainly fail it.
One point that struck me - "10.7% of Australian houses are unoccupied". This seems pretty high. Are there that many rundown shacks in the back of beyond just sitting there or is something else going on?
Steven – Once the constraints on bare land has been removed , then we can also look at removing other constraints in the system one of which as you have pointed out is infrastructure. Classic case in point is in CHCH the wastewater treatment plant is in the east in the heavily damaged area, new subdivision growth is mainly in the west. New subdivisions are connecting to 15 plus km of damaged infrastructure to get it to the treatment plant. What developers should be doing is using the new STEP waste water treatment systems http://www.innoflowtechnologies.com/ , which are cheaper and more environmentally friendly than last centuries gravity feed wastewater systems.
Councils should also be using these systems but by making it compulsory for developers to join their system, it also gives them the ability to charge development levies amongst others. The irony is that because gravity feed systems are such dinosaurs, they are either under capacity or over capacity and cannot be developed at rate of demand, which means councils do need these fees to feed the beast.
Compare this to Toyota were the rate of demand is max. 5 days, ie if demand increases for a car they can ramp up production to meet that demand with 5 days, therefore price stays the same or could fall as demand increases. Imagine that, the more we sell the cheaper we can make it. Conversely, if demand falls, they can scale back production within 5 days. Either way they do not have to hold inventory (just in time systems) ie can build at rate of demand. It takes council years of bureaucracy to implement new infrastructure and as they are generally behind the eight ball in managing costs and time, then the end result is expensive.
The STEP wastewater systems also allow development at the rate of demand. And by not needing council, you remove there reason for charging development levies. The council still need the money but the excuse of only charging new section developers/owners is removed.
So where have we got too so far? Cheaper bare land price, cheaper and better infrastructure, develop at rate of demand, faster turnaround so less holding costs, far lower development levies, gee if we could only stop the developers and council from pocketing all these savings, then we might be on the way to achieving more affordable housing.
Indeed, earthship.com and not need a or virtually no centralised sewage plant or fresh water plant.....what a strange concept....! however Im not sure on the life costs of 1000s of individual plants v a few big ones, or what that does to GDP....scale is usually more efficient and hence cheaper per unit.
NB Just in time systems however tend not to have any resiliency, take Honda's issue with floods in thailand, no critical car parts, no cars or Dell not being able to get harddrives, no computers. Our food systems are similar, 3 or 5 days food on the shelves...lots of things are way to optimised IMHO but thats another argument.
In terms of planning constraints actually I agree with PDK, and in a way you, these will go bye bye because as you say they are too slow to adapt rapidly and eventually no one will or afford to pay to sustain them. The causes of course are way different....
Affordable, well thats an interesting argument....materials and tools are significantly cheaper in the USA, let alone the choice....here a $1600NZ tool is $500US in the US...etc etc....and of course economies of scale and (lack of) competition...
Then we have a huge price bubble yet we are told building a new house costs this similar amount, something does not add up. When that bubble bursts even cheap land wont make up for 50% declines, no one will build its going to be interesting, yes indeed.
regards
Synchronicity: unmentionable. no comment.
Today: Steve Keen article produces australia-wide un-occupied houses of 10.7% out of 8.8 million houses (thats 800,000)
Yesterday: This article pops up showing 90,700 vacant houses in Melbourne city/suburbs alone. Interesting the simple way of discovering if a house is un-occupied. Assume Steve Keen used census data. Newspaper article rang up the local water utility. The houses are well maintained. Dont look abandoned. Land-banking? Money-Laundering? Worth the read.
So ... really ... how many un-occupied houses are there in New Zealand?
So ... really ... how many un-occupied houses are there in New Zealand?
An important question requiring a rather urgent answer - it maybe the case that government plans to build transport related facilities continuously at a cost of many many $billions may have been prepared using false estimates of the real needs.
"It is important for the country's economic growth that we continue to invest in infrastructure that will assist the economy and for that work to progress in a timely manner."
Errh, yes indeed - higher tech and forward looking type of infastructure that allows us to compete on the world stage was probably what the consultant meant Mr Brownlee.
Increases in petrol tax and road-user charges....
From Steven's link above.
Didn't they JUST a few months ago release a budget with all these previously announced Roads of National Significance as well as the CHCH earthquake recovery projects budgeted for?
Can anyone tell me, were these petrol and road user tax increases also signalled in that budget?
That would be interesting wouldnt it......6% rentals empty? even if its only 5% then thats 10% un-occupied...bachs?
Funny thing I noticed 2 weeks ago that a house down the road had a stuffed letter box with sun and rain faded mail and the electric box door banging in the wind.....stayed like that for a week....no cars in sight....must try and spot the no bin houses in the mornings as I walk down the road.
regards
I assume that if you take on a rental but cant rent it out or do so at a loss you can book that against your PAYE?
In which case land banking would seem to be advantageous if the Govn covers most of your losses and you have no tenant hassle and you can sell it some decades hence CGT free.
regards
It came up on this forum a couple of years ago, that there was anecdotal evidence that around 1 in 100 houses are empty. It was suggested that readers take a look around their own neighbourhoods and spot the 1 in 100. It worked for me everywhere I looked. This does not mean there is an "oversupply", it means that prices are "downwards sticky" after a bubble (for some time, anyway, until they finally crash) and a gap between what vendors want and what first home buyers can pay, is too great.
It is perfectly consistent with a seriously supply-distorted market, to have empty properties at the same time as there has never been more people under 35 who have yet to own their first home. Failure to understand this has led to "supply" steadily collapsing in the UK at the same time as the average age of first home buyers has crept up to 37. The pooh-bahs point to the empty housing and say, "but we can't permit more construction, we already have an over-supply...."
The same phenomenon produces, in China, 500 million people still living in slums, while a few tens of millions of grossly over-priced speculative apartments sit empty.
The Natural gas ponzi scheme.
http://seekingalpha.com/article/832831-the-natural-gas-ponzi-scheme
"Our analysis of shale gas well decline trends indicates that the estimated ultimate recovery (EUR) per well is approximately one-half of the values commonly presented by operators."
maybe fraud...
"We have seen several publicly traded companies write down the value of their shale gas assets tremendously. Here are links to several companies that have written-down assets: BHP (BHP); BG Group (BRGYY); Apache (APA); Pengrowth (PGH); Encana (ECA); Ultra Petroleum (UPL)."
"In 5 years Congress will shamefully trot out the executives of these companies, putting on a show for the public as they publicly condemn them for what turned out to be a giant investment scam."
Buying lots of gas plays GBH? you know it makes sense.
regards
So the smart money must be shorting gas-related shares en mass, huh? Start a hedge fund and make a few billion, Steven, seeing your intelligence is so superior. After all, this is a serious finance and economics blog and there are other places for malthusians and neo-pagans to hang out.
"Emergency" tax on wealthy
http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/950…
"Mr Clegg will outline plans for his new wealth tax - which he suggests is necessary to ensure that British society remains “cohesive” - at the Liberal Democrats’ party conference next month."
regards
Steve Keen touring NZ
http://www.debtdeflation.com/blogs/2012/08/13/steve-keens-tour-of-new-z…
regards
Of course the defination of poverty varies from person to person, some consider starving poverty, others consider not getting a second gucci handbag poverty. Maybe you should consider how shallow your words make you and your wife look.
You see there are some and it seems you and your wife are two, that consider having a multitude of expensive trinkets to look at or show off to your friends as the height of life style. For myself I have NZ, good food, family, fantastic views, good health and children in NZ that I want to see do as well, I am very happy with that.
Poverty, well if the coming Greater depression doesnt do it to such gamblers as yourself nature will see to it, think of cheap fossil energy as helping King Canute for a while, the present economic farce is on borrowed time.
I can quite understand that more than a few dont want to change their lifestyle, so will try not to, helped by accomodating leaders, remember Marie Antoinette from your history lessons? The choice of path into the future is ours to take.
Besides you were saying you didnt profit from this "enlightenment" of yours, this wasnt true?
In terms of living in trees you just show your ignornance and intransigence. There are very good low cost, low energy sustainable housing, earthship.com for one....designed and sold by a capitalist American no less.
Luddites actually rejected technology, I dont...the difference between you and I is I know what real technology is and what's 1960s hollywood fantasy which will never be.
regards
Steven, for the zillionth time, why is "smart growth" smarter than Houston, when instead of paying for houses and roads and infrastructure and food and clothing and travel and health and education and hobbies, "smart growthers" pay MORE, for NOTHING? Which is the PONZI scheme?
Also for the zillionth time, urban sprawl plus mixed land uses and dispersed employment, equals NO LESS EFFICIENCY of urban economy. It is planned cities where everyone is supposed to work in offices in CBD's, that are "Darwin award" material. What pays the office workers wages if the economy is supposed to not be actually using resources?
Are people so thick these days that they cannot see that the flow of wealth HAS to start from mines and wheatfields and drilling rigs, and enter the economy via production of actual goods? If "peak oil" was true and all resources were indeed running out, I would move to Texas because that is where the last surviving humans will be. The rest of the race will have voluntarily culled themselves with misguided and lunatic proscriptions on all survival-related activity. I mean, who survives; the people with 1 acre lots, or the people stacked up 500 to a building?
The definations of "smart" growth Ive seen are not.
Interesting that your points are somewhat more realistic than says Hugh's, for him it seems wealth is urban....yet both quote Houston. BTW any other good examples?
"thick" yes they indeed are.
Peak oil is indeed true....book your house mover now.
1 acre lots v 500 to a building, that is actually the Q. Its the Q because we dont know the end state and we dont know that because we dont really know how much energy we are really going to have.
What I do know is Houston as it stands isnt either, its reliance on individual transport energy is far too great.
CBD v dispersed indeed, try reading what PDK, I and others have been saying for years. Work is going to change and significantly....commuting is simply not a workable sollution when you are paying $3NZ a litre or $5US a gallon each.
regards
.
Record artic ice loss, but with a month to go...great nose dive that, no sign of an upswing....
http://www.realclimate.org/index.php/archives/2012/08/an-update-on-the-…
Sea Ice News – Volume 3 Number 11, part 2 – other sources show no record low Arctic ice extent
Another NSIDC product, the new and improved “multi-sensor” MASIE product, shows no record low at ~4.5 million square kilometers.
I have a lot of time for Hugh and Philbest's views but I will just say this - most suburban developers do the urban fringe subdivision case a great disservice. Many such subdivisions ARE bland, sterile, inefficient, and soul destroying.
HOWEVER, many medium and high density delveopments are also bland, sterile, inefficient and soul destroying
It is all too simple to be critical of one development form and not the other.
Suburbia can be a great option, but it needs to be done better. We need more variety and design quality in our suburbia. Both the development sector AND councils need to step up.
Developers need to focus less on the size of houses and sections and more on their architecural and urban design qualities.
As Joel Kotkin argues, we need to focus more on PLACE as opposed to LOCATION ("The Destruction of Distance").
Agree Phil. As EQ refugees here in Chch we bought one of the last available sections in a fringe subdivision that was close to where we work, and bought the biggest (and dearest) one. Personally I think most sections (this was a Living G zone) are way too small, but then I was brought up on a quarter acre.
Likewise for bland houses, reasons why they are? Kiwis build the biggest house they can afford, sacrificing style and individuality in the process, also they paid too much for the plot in the first place, this impacts on the house. Also, covenants on minimum house sizes - these may force quantity of a sort, but at the expense of quality. I can quite understand why many people find these developments loathsome.
Oh dear, church must be in recess. The aging pontiff has returned, spreading tales of unlimited growth for all.
Sorry PB, but it's time to move on.
The G7 are getting the picture, I guess it'll trickle down. Funny how the need to believe, drives the need to believe. If you need growth to be happening, you need sea-ice not to be melting, and finite fossil fuels not to be depleting, and CO2 not to be altering ocean icidity, and exponential growth to be linear (or less) and all distances to be equal.
Big stetch on credulity, but it seems to work for some.
Oh , I do agree ........ it is wonderful to have our friend Phil Best back amongst the flock ...... a fresh perspective on all things under the sun , in this great land of ours , girt-by-sea ......
....... 'cos I was running flat , getting a little powered down on some Kiwi's repetitive pontificatiing ......
Welcome back , PB .
Actually I think the G7 got the picture, now they are failing around for someone to blame.
Witnes their call to the IEA (who simply monitor and report) to fix things. That should tell you they are clueless. Or the hopeless calls for more oil output to drop prices...when the marginal costs are $90......really clueless.
regards
I like the sound of a bland, sterile, inefficient, and soul destroying AND CHEAP house. That is my kind of property. If only there was the freedom to live in a very low-cost house so I could save some money. Alas, the Central Planners have decreed that I must live in a high quality house that with a mortgage that I cannot afford.
LOL, yeah right.
I wonder if the plans from earthship.com would get through NZ planners/councils. Not bland, sterile or soul destroying, but definately cheap to build and own.
"High quality" actually acceptable quality.....its the builders and developers who add the knick knacks to give the illusion of high quality to get a better price.
regards
You quote from a piece you quote that lays it out very well,
"After 110 years of mining in New Zealand, the easy coal has gone."
To paraphrase PB its how wealth is put into the system, while you think we can go on building more houses as that is the modern wealth / economy creator.
regards
The interesting thing of course is Solid energy is saying they cant get a high enough price to extract as the global market is slumping. This is a company saying exactly what will be happening in the oil boardrooms around the world.
a) Shut the spigots for now.
b) Whats the point in trying to start a new mine / well when no one can or will pay.
c) Shows how deluded Labour's MP is in blaming National. Pot calling the kettle black.
regards
Interesting how you see things....
What you dont get is, you will do best in a community....the highway men tend not to last long...brief and uh in-glorious.
Do you really think the likes of PDK or myself wont pull the trigger on you? or that you are the only one with bush skills?
LOL.
regards
Here is a link to an article on house prices in the USA and elsewhere.
http://dailyreckoning.com/us-housing-surprising-numbers/
The suggestion seems to be to buy carefully in the USA and make good money, but watch out for the bubbles in Aus, NZ, HK, Canada, Hawaii. The Demographia survey is the basis for much of the information, which, as we know, Hugh Pavletich co-authors.
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