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PM Key on NZ housing fix: Increasing land supply in Auckland the answer, not a massive government-subsidised build

Posted in Property

By Alex Tarrant

Fixing land supply road blocks, particularly in Auckland, is the simple answer for New Zealand's housing affordability woes, Prime Minister John Key says.

Changes to the Resource Management Act and building industry reforms would also allow for houses to be built for cheaper, Key said as a new TVOne poll showed 62% of voters polled thought the government should be "doing something to lower property prices in New Zealand."

Younger voters were the most keen for the government to 'step in,' TVOne reported. Three-quarters of voters aged 18-34 wanted a government-led reduction in property prices, based on the poll's question.

The debate comes after the government's response to the Productivity Commission's report on housing affordability showed National would focus on the supply-side of the housing market.

However, the onus was placed on local authorities to make changes to planning rules, while government-led changes to the RMA and building consent process could still be nine months away.

That prompted the Labour Party to announce its 'KiwiBuild' policy, promising to finance building of, then selling, 100,000 dwellings over ten years at an average build cost of NZ$300,000 each. Dwellings would be sold at 1% above the government's cost of borrowing.

Speaking in response to the TVOne poll at his post-Cabinet press conference on Monday evening, Key said it was not the government’s intention to make moves which would lower property prices.

"That would actually undermine the value of everyone’s home in New Zealand – that probably wouldn’t be welcomed by the bulk of New Zealanders, certainly not home-owners," he said.

"Certainly the government doesn’t want to see rapidly escalating property prices, because that’s probably not in anybody’s best interests."

"The plan that we’ve got, around release of land, Resource Management Act reforms, and reforms to the building industry, I think will help address some of those issues about rampant increases," Key said.

Auckland problem

The property price debate was very much an Auckland story.

"To a certain degree the rest of the country’s had quite flat property prices over the last five years," Key said.

“The only other point I’d make is that, at one level, the biggest single driver [of] whether people can afford to have a home or not, is their capacity to service the mortgage, and we’ve got interest rates at a 50-year low. So that is at least good news for both home owners and potential home owners," he said.

Fix land supply

The government was considering ways to solve the Auckland centric problem.

“And that is very much land supply," Key said.

“If you go and have a look at the pipe-dream of Labour that they’re going to build 100,000 houses for NZ$300,000, if they’re going to do it in Auckland, they’re going to build it on a cloud. Because they’re not going to get a section for NZ$50,000 in Auckland easily," he said.

“Around the rest of the country you might be able to, there’s plenty of places you can buy a house for NZ$300,000.

"But it’s an Auckland-based issue. If you want to deal with that issue, some sort of small subsidy to a home-owner isn’t going to fix the problem. You’ve got to fix land supply issues in Auckland," Key said.

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

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

82 Comments

I think the plan was to sell

I think the plan was to sell them at a small profit so there should be no subsidy.  The advantage of the government doing it will be some purchasing power, ecconomies of scale and muscle to cut through the crap in the consenting process.  Yes the land supply issues are also important and they need to be adressed, but I very much doubt that anything meaningful will happen before Key has gone.

Out of the "No action"pan

Out of the "No action"pan into the"No,No.No 'fire.

Chris-M - it would be a

Chris-M - it would be a subsidy on housing values. For a kick off there is a large shortage of housing as you know. All houses being rolled out for sale at $300K would automatically be valued at what the market price at the time is.
 
If an average house in say Auckland is $600k then the purchaser of a $300k house would instantly have a house worth double what they paid. What a nice little hand out that would be for the 10,000 recipients per annum. I can hear it now, "oh I was lucky I got one of those kiwibuild homes and made $300k profit before I bought it". I make no apologies for not supporting kiwibuild, as affordable housing is not about a $300K or more handout to those who are whining.
 
Addressing the Land supply issues, Councils exorbitant costs and the RMA is very much a step in the right direction. If people are really so concerned about housing costs why do they not get off their proverbials and look at taking legal action against the Councils instead of jumping up and down and expecting the Government to do everything for them. 
 
 
 
 
 
 
 

It is really a matter of who

It is really a matter of who is subsidising who.  Presently houses are far too expensive as a result of a raft of market failures (or diliberate manoevers).  Net result is that people buying into the market are subsidising the people selling the ridiculously high prices properties.  This initiative is really just helping to restore a bit of balance to the market.  I doubt that the fine print will allow new owners of these houses to turn round and flick them for a quick profit.  As the capacity develops to put affordable houses in the market, others will join the supply side and the value of all properties should fall to something more sane so any windfall profits should be more modest.

true Chris-M. All taxpayers

true Chris-M. All taxpayers are subsidising the current housing market through the accomodation subisdy. Taxpayers are paying the rent or mortgage of 1 in 5 households. This is a subsidy to landlords and the banks. Add to that the tax subsidy for residential property investors i.e. more generous tax treatment than other investors in say shares. Who really is subsidising who? 

Good point.  I had forgotten

Good point.  I had forgotten about that one.  The accomodation suppliment costs the government $1.2B per year and rising rapidly.  Quite a subsidy to landlords.  That alone would buy 4,000 $300,000 houses per year.  Further, every state house costs the government $300 per week over and above the rent recieved.  (some but not all double accounting here)
All this means that if labour can push these houses out into the market at affordable prices and without any subsidy, they could save a lot of government expenditure.  This is a hell of a lot smarter than anything coming out of National

  notanecon;   I would

 
notanecon;
 
I would imagine that the govt would impose a time limit (5 years?) on when those 300k houses could be sold. With some kind of punitive measures in place to catch those who sell before that time. Say, anything over and above the original purchase price + inflation is claimed back by the govt.
 
I agree, local govt largesse needs to be trimmed. I'm in favour of a mixture of approaches, supply and demand side. So long as they have the desired effect of bringing property prices back from the bubble cliff.

Noponies - I cannot see how

Noponies - I cannot see how any Government can impose much of a time limit on selling as the banks will have a role here assuming people have a mortgage on these properties.
If the kiwibuild home owner was unable to service their mortgage then the bank who sold the mortgage would have to be able to step in and sell the property to get their money back. Also the person who couldn't afford to pay the mortgage will probably end up with a handsome little sum as the difference between original purchase price and the sale price will be double or more.
Any time limit imposed would only be of a short duration and Labours criteria are: proof of saving deposit, and as for any penalty being applied, when your talking $300k or more profit at purchase many people will simply pay the penalty.
 
Assuming you have read the Labour kiwibuild document below you might want to re-read the "who will be able to buy the houses" section. "No household type will receive preference over any other household type. Nor will there be any income restrictions. On the whole, people will ‘self-select’, with those who can afford to move up the property ladder excluding themselves".  I sincerely hope you understand the significance of that statement! If Labour thinks those who can afford to move up the property ladder will exclude themselves they are stupid. Why would anyone purchase an average priced home of say $600k when they qualify to purchase a $300k home which would have an actual value of $600k? A couple who have high earnings between them could easily have one partner purchase a kiwibuild home and a year later the other partner could purchase. Two homes betweem them which they paid $600k for and worth $1.2million.  Good on Labour they interferred in property last time they were in power and they intend to do it again. Fastest way to make housing even more unaffordable is to implement this policy.
http://www.labour.org.nz/sites/labour.org.nz/files/Conference_Factsheet_...
 
Currently appopximately 40% of the cost of a new home gets paid to Councils. Add on another 15% in GST and that is why housing is so expensive. Governments and Councils are eating all the cream and everyone else is left with the fat free version off the factory floor.
 
I think we have to go back to around 2004 when building consents peaked at about 34,000.
2004 is also the year the new Building Act was introduced to deal with the problems associated with leaky buildings. Building consent numbers started to decline from their peak of 34,000 and supply has remained constrained ever since with demand being higher than the supply. 
The WFF subsidy when introduced further distorted the market along with other income assistance packages the Government delivers. Many people have focused on the taxation side of housing and especially no CGT. These discussions have not assisted in identifying the underlying cause of house price increases which are:

  • Supply is extremely limited.
  • New housing is extremely expensive due to Council, compliance and GST
  • New housing wont be built in quantity until the gap between values of old housing and new housing is closed.

There are also other peripheral issues like income subsidies, immigration numbers, off-shore investor taxation benefits which locals end up subsidising.
 
 
 
 
 

Sure it may be not a pipe

Sure it may be not a pipe dream.
 
But to get land for nothing ('Council and Government land'...) may imply that the volcanoes get built on, bye-bye Cornwall Park, or that the Cheap Houses are set on piles in the midst of the Mangere sewerage ponds.
 
Or are they gonna exercise the Workers' Customary Rights and fill in a Bay or Three (it's been done before, y'know...) and build on the reclaim?  
 
Just exactly where is all this luvverly Free Land gonna come from?
 
That's the Key question!

Comment Section ZH "We find

Comment Section ZH
"We find ourselves more amazed than ever at the ability of those in power to lie, misinform and obfuscate the truth, while millions of Americans( and NZ'ers) willfully choose to be ignorant of the truth and yearn to be misled. It’s a match made in heaven.
Acknowledging the truth of our society’s descent from a country of hard working, self-reliant, charitable, civic minded citizens into the abyss of entitled, dependent, greedy, materialistic consumers is unacceptable to the slave owners and the slaves. We can’t handle the truth because that would require critical thought, hard choices, sacrifice, and dealing with the reality of an unsustainable economic and societal model. It’s much easier to believe the big lies that allow us to sleep at night."

We humans are a truly

We humans are a truly depressing lot sometimes with our unlimited power to deceive ourselves. Cognitive dissonance reigns supreme
 
Key/English and Clark/Cullen before them are just managerial can kickers relying on a binge of borrowing and consumption to create a feel good wealth effect, especially in property. Slowly it's dawning on some that all they're doing is running faster and faster to stay in one place, or even slowly going backwards. But the majority  either wilfully don't get it, they feel they have a vested interest now in maintaining the current system, or they know its wrong but are going to grab as much as they can before it goes bottom up, hoping they will cash out in time. Any government acting proactively will be blamed for causing a crash that would have happened anyway. No politician wants that on their shift, as their legacy.

Typical Key, avoid actually

Typical Key, avoid actually discussing any ideas on merits and stoop into scaremongering about property values. He looks and sounds more like Muldoon each and every day. Is Key actually capable of holding an intelligent conversation? I really have to wonder.

If 'scaremongering' means

If 'scaremongering' means informing the public about the consequences of lowered property values, then that's a valid discussion.
 
Because suddenly lowered property values sets off a chain reaction/domino effect something along these lines, small horsey:

  • A number of owners are instantly underwater:  mortgage > value.  Their ability to borrow or refinance is zero.
  • The banks will eventually mark the lowered values of their collateral down, and this will reduce their ability to lend to homes and businesses.
  • The banks may also need more capital simply to preserve prudential ratios and this is by definition not available for lending - a further suck of $ out of more productive uses.
  • Interest rates will tend to rise to cover the greatly increased risks and to attract the capital needed.
  • Businesses will be affected as they cannot borrow (e.g. for working capital for inventory) as easily, and their costs will rise.
  • Customers will react to increased prices and reduce discretionary spend at businesses
  • Increased interest costs for homeowners will drive some to sell despite being underwater, and these will be at fire-sale prices.
  • Which won't do much for the businesses in the vicinity.
  • Wash, rinse and repeat.  For a working example, see Detroit.

Still so gung-ho about crashing the housing market, Zero Equines?

Its a stretch to think that a

Its a stretch to think that a few affordable homes priced at 300k are going to crash the property market. I mean really. These houses will be brought by people who are not currently in the market. Plus as the market is not actually currently building these houses, this programe will stimulate the construction sector, provide jobs etc.
 
You don't have a vested interest in the current inflated market do you? I'll declare that I have a vested interest in buying an affordable home.
 
 

Its a stretch to think that a

Its a stretch to think that a few affordable homes priced at 300k are going to crash the property market. I mean really.
++++++ Exactly!
Key is becoming more disingenious by the day
Labour's plan would merely limit price increases - surely desirable - its highly unlikely to lower prices  

New QV Stats - top 15 suburbs

New QV Stats - top 15 suburbs based on average house value:
1          Herne Bay       $1,898,556
2          St Marys Bay  $1,539,778
3          Parnell             $1,301,167
4          Epsom             $1,163,167
5          Stanley Point   $1,141,667
6          Remuera         $1,140,444
7          Takapuna         $1,100,222
8          Westmere        $1,073,778
9          Ponsonby        $1,073,611
10        Mission Bay     $1,059,444
11        Devonport       $1,038,833
12        Mt Eden            $999,667
13        Freemans Bay  $993,333
14        Cambells Bay   $973,000
15        St Heliers         $960,611

thanks for putting those up

thanks for putting those up dloublegz. Just shows NZ is in la la land....we'll end out 3rd world as huge debts run up then unable to pay as all borrowings investing in unproductive assets. Argentina moment here we come...

Unbelievable prices for

Unbelievable prices for houses.  Does this mean that in 15 suburbs of Auckland all those people who own those houses are multi-millionaires or are they million dollar-mortgagees!  If the latter, there must be an awful lot of really well paid people in Auckland to service those mortgages - can someone tell us where they work so we can all get a job in those places and therefore afford these houses. 
I'd love to see pictures of these "average" houses.  I'm betting that a lot of them are just that "average".  Foolish absolutely foolish times. 

Sure, here is a Grey Lynn

Sure, here is a Grey Lynn villa sold last month for 1.07 mil.  Grey Lynn is on no.16 with average house value 955k so narrowly missed out to make the top 15.
http://www.3news.co.nz/What-sort-of-house-does-1-million-buy/tabid/367/a...

So the land must be worth

So the land must be worth $1.07mil  - the house itself to me is worthless and I wouldn't give it to my worst enemy!  No one seems to have any answers to stop all of this nonsense.  I feel absolute sorrow for people trying to buy a home (note the word "home" not "house") in Auckland.  Young people in particular.  They should not be pushed outwards and outwards from workplaces just because of greed.  Its all got to end in tears at some time. 
It seems rather hopeless at the moment.  Maybe the financial system of the world has to collapse at some time and we all have another starting point.  If this cld be achieved by some commonsense peaceful means it would be wonderful, but I don't think so somehow. 
Glad I am at the end of the lifespan although I hope I have at least another 20 years in front of me and all I am trying to do is live comfortably having paid off the mortgage, brought up the kids.  But boy do I worry for the future of my grandchildren. 
The money lenders need to be thrown out of the temple do you think?

Yikes, wouldn't like the look

Yikes, wouldn't like the look of the next lot of council rates once revaluation occurs.

Can I just gently remind

Can I just gently remind everyone that the most important things in life are not all money money money, but it's our happiness, health and kindness to others.  While money is important, it is not everything.  So please don't be too up tight about all these reports on house prices.

I think I like you.  Good

I think I like you.  Good comment.  I'll stop worrying and sleep well tonight. 

I dont worry about it ....

I dont worry about it .... sleep well

ahh city fringe .... nice

ahh city fringe .... nice suburbs though .... bought a bunglow 1 yr ago 800k a few renovations 400k and stilll here but now valued at 1.5 ish. Don't fight it !

ahh city fringe .... nice

ahh city fringe .... nice suburbs though .... bought a bunglow 1 yr ago 800k a few renovations 400k and stilll here but now valued at 1.5 ish. Don't fight it !

Noponies - please go back and

Noponies - please go back and read my response near the top.
 
I don't think you understand valuations, subsidies etc.

Hmm interesting. Urban

Hmm interesting. Urban Sprawl  ... build greenfields developements and coucils / developers / owners get hit with infrastructure costs = expensive housing & transport issues with all the cars etc. Local GVT gets fees and consent money regardless.  
Why not re zone Pt England / Mt Wellington South / Otahuhu / Onehunga South / Mt Roskill / Avondale / Henderson / Te Atatu / Bay View / into High Density which in turn could raise the developed land value to off set losses in inmprovements values enabling the residents to bank some gains and move to a better or equal suburb if they want otherwise stay there and land bank.
Secondly more houses more availabilty more lower cost  rentals of living for those who cant afford houses.
Third in order for public transport to work it needs Frequency / scale / density. 6 people per train / bus stop yeah right but 60 starts to work. Invest Transport money based in denisty improvement not greenfield locations.

I have plenty to say at

I have plenty to say at http://www.facebook.com/CantabriansUnite
 
Didnt Key hear what English had to say with the Governments Affordable Housing Policy announcement  late October?
 
 He was standing right beside English.
 
Is Key deaf as well ?
 
Hugh Pavletich
 

It was the same Prime

It was the same Prime Minister John Key who put a spanner in the works following the 2008 election, after promising to deal with the issue in the kead up.
 
The history of this political circus is at www.PerformanceUrbanPlanning.org .
 
Hugh Pavletich

If anyone has looked around

If anyone has looked around at who is buying the properties in Auckland, they will note that it is in many cases not New Zealand residents.  How about a tax on non-residents and visa holders buying property in New Zealand.  Set this at say 25% (or whatever it needs to be to work) and this would stop the crazy money coming in from corrupt foreign sources driving our house prices up.  It would give young New Zealanders more realistic chance of getting close to the prices foreign property investors are paying.  If this tax was restricted to residential property then the foreign investment would likely be redirected to businesses instead.  The 25% tax on those who are still wanting to buy could then be used to increase housing subsidies for New Zealand first home buyers or on schemes such as rent subsidies.

Exactly! It does not take

Exactly! It does not take many of these investors(?) to upset the natural balance of seller/buyer balance in Auckland.
If we assume that most people who need accommodation in Auckland do have it the real problem is how to satisfy renters (now) who are prospective owners (when?)
So is there a real shortage of accommodation in Auckland?
Certainly it is no where near as great as the numbers of unsatisfied buyerswho are also owner occupiers.
 

With the various "Investor

With the various "Investor Rights" clauses in the international trade treaties we have signed up to (and in particular, are about to sign up to with the TPP), my suspicion is that any attempt to discriminate against off-shore investors will be a pretty open and shut case. It might be a little different if NZ did not have an existing free for all land market (which could stay closed), but the treaties tend to kick-in when governments try to restrict access from foreign markets.

Would be interested if anyone

Would be interested if anyone knew this for sure.
Where there is a will there is a way.  If we can give money to first home buyers below a certain income level, that there must be some way that a cost could effectively be imposed of foriegn buyers.  If we can't put targeted taxes, surely we can't give targeted subsidies either.  Does that make the whole argument pointless? 

It is a bit hard to know for

It is a bit hard to know for sure, as the TPP is being negotiated in secret and the NZ media aren't particularly interested in it as it is too drawn out to be "news", however among those of my acquaintance following the negotiation leaks the consensus is that the Investor Rights clauses will enable foreign corporates to take the government to task for loss of profits if the market is restricted to NZ buyers and this leads to a drop in land values. The same people suspect this is going to be more of a problem around agricultural land, as that tends to be owned more by corporates. But I would love for Santa's Elves to deliver some in-depth journalism about the consequences of this. Pity I have to depend on the real media.

Here are the members of the

Here are the members of the TPP
 
Brunei Original Signatory June 2005
Chile Original Signatory June 2005
Singapore Original Signatory June 2005
New Zealand Original Signatory June 2005
United States Negotiating February 2008
Australia Negotiating November 2008
Peru Negotiating November 2008
Vietnam Negotiating November 2008
Malaysia Negotiating October 2010
Mexico Negotiating June 2012
Canada Negotiating June 2012
 
Australia currently restricts foreign investors buying residential property to :- new houses, apartments, units that have not been occupied before. An existing home can be purchased if it is to be demolished and redeveloped which must commence within 1 year. Buying new or redeveloping enforces a plus to the local economy and not a minus.
 
Note the absentees

The first thing that the govt

The first thing that the govt needs to do is to make immediate changes affecting foreign purchase and ownership of private residential properties or land in New Zealand. 
 
a.     Foreigners and non-individuals (corporate entities) buying any residential property or   land will have to pay an ABSD ( Additional Buyer's Stamp Duty ) (atleast 10%)
b.     New Zealand citizens and permanent residents  owning one and buying the second and subsequent residential property will have to pay an ABSD (Additional Buyer's Stamp Duty)  (atleast  5%)
 
If a foreigner wants to buy New Zealand residential properties or land
They can only get the consent if:
- They have the capability to benefit New Zealand by contributing sufficiently.
- Experienced and qualified people in different areas that will benefit New Zealand.
 
If this change in the Residential Property Act is implemented it could take the heat out of the property market . Subsequently bring about other measures that would increase land supply, lower building costs , give incentives to devlopers for multi density housing etc.

More good thinking ++++++ Key

More good thinking ++++++
Key seems to think its only about land supply - it most certainly is not

BY foreigners i am presuming

BY foreigners i am presuming asians mainly.
They benefit me for the simple reason of safety.
When i see a group of asian youth coming toward me i fear nothing something that cannot be said about a lot of other macho groups inhabiting this country.
 
 

In my comment I used foreign

In my comment I used foreign to mean all non-New Zealanders.  African, European, Russian, Asian and American (North, Central and South).  Not a racisim thing, it is just about ensuring that New Zealanders are not out bidded by big foriegn money.

So what we can take from this

So what we can take from this thread is:

  • No-one has any clue where the land is coming from
  • There will definitely be some effect on values (100K houses ain't peanuts even in Awkland)
  • Argumentum ad hominem is alive and well (although we have managed to dodge Godwin fer now)
  • It's a multi-faceted issue:  land supply is important but there are other bits
  • Lowering property values is a Not Good Idea although maintaining them at the present Median Multiple of 6 is somehow OK???
  • Deathly silence about Councils and their rapacious fees, levies, contributions and other non-Rates income streams
  • Deathly silence about the Materials Duopoly
  • Deathly silence about regulation and Elfin Safety

In short, BAU@interest.co.nz!

Why is land expensive when we

Why is land expensive when we have so much land and such small population?

Billy.....your questions are

Billy.....your questions are answered if you go to the Cantabrians Unite facebook.....note the hyperlink on this thread.
 
Hugh Pavletich

Beautiful comment over at ZH

Beautiful comment over at ZH from a real US builder - the prices he's quoting (inclusive of land) will make ya cry.

Waymad - Good one and

Waymad - Good one and thanks.,,,,
 
Kiwis need to stop being suckers and stand up to the likes of Key talking drivel.
 
Hugh Pavletich

mmmmm sitting on

mmmmm sitting on Auckland property sidelines and smoking peace pipe ...been thinking, sometimes smaller is not better for the herd .... easier for leader to pull the wool over the sheeples eyes ....in the vast plains here,  leaders voice lost in wilderness ...sometimes a very good thing ... mmmmm

keep smoking that peace pipe

keep smoking that peace pipe crazy horse....love your comments!

Key being against Govt

Key being against Govt subsidies is a bit ironic, when you consider the massive effective subsidy that is given to landlords through the tax system, encouraging ongoing speculation into property & keeping struggling young families off the property ladder - since they can't compete with baby boomer landlords with their tax dodges.
 
"That would actually undermine the value of everyone’s home in New Zealand – that probably wouldn’t be welcomed by the bulk of New Zealanders, certainly not home-owners."  It is interesting & depressing that several times Key (& English) have said that they won't do anything to cause property to fall from its nose-bleed levels.  He would rather have enormous profits going to Australian-owned banks, & finance diverted from productive enterprises. 
 
 

Philly....in essense what

Philly....in essense what Prime Minister John  Key is saying is....
 
"It's my job as Prime Minister to ensure the interests of my Banking mates are looked after. While in normal housing markets you should not have a mortgage load exceeding about 2.5 times your annual household income, I think it's a better idea if your mortgage load is at in excess of 6.0 times. Indeed if I continue to do nothing, it will exceed 8.0 times".
 
Pretty callous eh ? And sadly....thats only part of the story.
 
Can someone please tell me why John Key is in politics ?
 
Hugh Pavletich

@Hugh Pavletich..I agree. We

@Hugh Pavletich..I agree.
We are way off the mark.
Housing prices are mostly the result of what banks will lend against it....Imagine a system of pay as you go for housing. What is truly affordable?
If you lend to property at compound interest you must get exponentially rising prices. Only a crisis will interupt this.
Historically this is an anomally. Many cultures have banned usury (compound interest) and periodically written off debt. As they must. 
The debt around today will not be paid back, it mathematically cannot possibly be. The growth will not be there. To focus on land to feed this monster is bad policy.
This is the root of our bubble economy, the financialization of the real economy. It is parasitic and extractive and will squeeze the economy to death over time.
Monetarism is dead.
Cheers

You are right that a

You are right that a continuously expanding money supply is a problem but charging interest in and of itself doesn't cause the money supply to increase.  We need to be careful to separate the two issues because the charging of interest in return for foregoing current consumption is what allows capital formation in the first place. 

Also, it's very popular these

Also, it's very popular these days to promote personal responsibility. 
Well how about about all the people who have paid stupid prices for houses taking some responsibility for their madness? If prices fall and the banks suffer and people go under, who'd fault is that? I bet a lot of the same people who want beneficiaries to be responsible for themselves also want society to pay the price for insane property prices and the farmers and business who pollute without cost.

All NZ subsidize this bubble

All NZ subsidize this bubble in property. All the "investment" from offshore has interest attached, compounding exponentially. Scary stuff.
Cheers

I'm a fan of JK...but he

I'm a fan of JK...but he isn't doing a good job on this issue...he's been in Govt four years and still hasn't properly addressed housing affordability...although there are question marks over the feasibility of Labour's Kiwibuild policy, but at least they are prepared to do something.

1. Key only changed slightly

1. Key only changed slightly clauses in the RMA knowing fully that it is Councils that gets the final say in Goverment costing and delays in the implementation of lnd supply.
 
2. Insistance that house prices should not "decrease"  because it hurts current house owners.
 
This will therefore be the basis that this goverment will work on regarding Housing in New Zealand.
Sorry young people. You are all truly screwed. Forget about owing a house for your family in New Zealand.
 
My apologies for voting National the past two elections. My vote now goes to Labour (by default) 

key is a tweaker...pure and

key is a tweaker...pure and simple...sometimes things need more than a tweak. He's going to lose his job over housing affordability. As it goes below 60% home ownership in auckland he will lose the Auckland vote and be out of government and into the opposition

Could well be the housing

Could well be the housing affordability/immigration issue in Auckland that has been bubbling away that erupts in National's face. I'm not convinced on Labour's policy - don't think it goes far enough by a long chalk, but it has put the issue at the forefront for the next election. The Greens and NZ First would do well to run long and hard with it too.

rp - the home ownership

rp - the home ownership figures are distorted. People who have their house assets in a trust  technically do not own their own home, as the Trust holds ownership and these people end up being statistically represented in the percentage of people who don't own a home. 
 
 
 
 

maybe notaneconomist...I've

maybe notaneconomist...I've haven't looked at the methodology just the headline figures.
What I do know is there's a lot of pain out there. Not just in Auckland but out in rural areas. I live in Auckland but have a rural property as well. My neighbours on the rural property are farmers. The neighbour's son and his freinds are in misery. They want to be farmers like their fathers. They grew up there and that's what they know and love to do. They look it now and know they'll never be able to buy a farm...the prices have skyrocketed out of reach. The parents, as well as the children, are highly frustrated at this. Same thing applies in town here in Auckland for many people that can't afford a house. Those that can't afford, and their families, just won't put up with this kind of bad economic policy

rp - I agree that many people

rp - I agree that many people appear to have fallen through the cracks in getting onto the property ladder. There is a lot of bad management out there and also an enormous lack of education on money. People should educate themselves on money, taxation, structures, systems, legislation and banking. Look I help out business's and there are three  areas 1, Attitude 2, Structure, and 3, Systems - without fail if I address these three the other things fall into place.  However I have noticed a very high increase in business problems associated with bureaucracy. This bureaucracy has been steadily growing and they are now completely out of control the costs to business and people are astronomical. We have a broken structure for the citizens as the Bill of Rights is not held up as being the document for all decisions, policy and interpreting legislation. The systems are fragmented and not serving the intended purpose. Attitudes in most Politicians and Bureaucrats are appalling and many of the people are now suffering from this also. 
 
I am not in favour of Political parties interferring within any market as we get the situtation we have right now. The legal system should have been left to deal with the leaky buildings instead of the introducing the Building Act 2004. Building consent are too expensive, The RMA actually needs binning. Councils need to have half as much say as they currently have and That leaves taxation and as you know every time the Government spends any money they end up distorting the economy in the direction of the fiddling they are doing. If Government would only get back to the core essentials the majority would be very well off.
 
I have empathy for people when the feel they can't get ahead. Labours policy will do nothing to raise the standards of the majority of the citizens and that is what all Politicians should be aiming to achieve. Bad economic policy is any policy that creates distortions and this kiwibuild proposal creates distortions.
 
 
 
 
 
 
 

Yeah wtf, I don't think the

Yeah wtf, I don't think the public understand or care much about the underlying issues that people like Hugh raise and others raise with issues like non-resident cash. And I don't think they understand well the economic issues like over-investment in unproductive assets using borrowed money offshore is a timebomb. What I do think will be clear to nearly everyone, and they will care about, it that our young people don't have a show in the John Key economy...realistically they have to leave or be rent serfs they rest of their lives if they stay, or have a giant debt. And it's this which will prick John Keys bubble. 

Immigration could become an

Immigration could become an issue as part of the housing and environmental sustainability debate next election. The Greens at least have a population policy. Their spokesman was talking about a population limit around 5-5.5m long term. National and Labour still seem committed to the bigger is better , all "growth" is good belief with no long term plan on how to manage population pressures. Immigration has always been fertile ground for NZ First as well.

...I hope it does. I think

...I hope it does. I think the greens policy is good. Immigration should be balanced with what resources e.g. hosuing and infrastructure, can accomodate. We can't just pour people in with nowhere to put them. It's just crazy to do that but that's what's been happening. I like thr greens policy better than labour, that non-residents shouldn't be allowed to own houses. Also they should control immigration to match infrastructure. Auckland is now bottle-necked everywehre

The odd behaviour of PM John

The odd behaviour of PM John Key...
 
The announcement by Dep PM Bill English on housing issues late October was very clear - with the focus on the four major areas of land supply, infrastructure financing, process and construction costs.
 
It came out of months of internal / external Government discussion following the release of the final Report by the Productivity Commission during March.
 
A major paper then went to Cabinet early October.
 
So Key was bound by the collective decision of Cabinet and stood beside Dep PM Bill English when the policy was announced late October.
 
So now we have the very odd situation of the Governments policy on this issue and the dissenting John Key one.
 
The major question that needs to be asked is – why isn’t PM John Key following proper process and supporting the collective decision of his Cabinet ?
 
Have the approved Cabinet papers on this issue from early October seen the light of day yet ? Has the media followed up and reported on this ?
 
It certainly appears this current Government is fracturing, with Key stepping seriously out of line. The drivel the guy is coming out with in the public arena over recent days is odd in the extreme.

Key is inarticulate at the best of times...but the drivel he is talking now is seriously irrational and must be a huge embarrassment to his Cabinet colleagues.
 
The media certainly has a lot of digging to do, in exploring why Keys behaviour is so odd and erratic.
 
Hugh Pavletich

The answer :   This goverment

The answer :
 
This goverment is not really interested in reasonably affordable housing cost for the  people of NZ, and that all goverment announcements so far is PR spin.
 
J Key has let the cat out of the bag !!!

kin....with all due respect

kin....with all due respect your response is superficial.
 
Even to the witless Key, it must be obviopus NZ cannot stand the housing bubble being further inflated by another $100 billion through $200 billion incorporating $25 through $50 billion of further bubble mortgage debt. Thats already on top of the $75 billion of bubble mortgage debt already in there !
 
Then you have currently got new fringe stock going in currently in the range of 10 / 11 Median Multiple....way way out of line with where it should be in a normal market at 2.5 Median Multiple.
 
The fringe is the only sufficiently responsive supply / inflation vent. Well at least it is suppose to be !
 
Refer back to the household incomes within the Demographia Survey (www.demographia.com ) and then relate it to the Definition of an Affordable Housing Market on the front page of Performance Urban Planning www.PerformanceUrbanPlanning.org .
 
Then I think you will be better able to gauge just how dangerous the current situation is. Dep PM Bill English is certainly acutely aware of this.
 
Hugh Pavletich

I liked the decription in the

I liked the decription in the first comment
These old fossils are hogging living space purely by virtue of being born while opportunities existed to buy cheap real estate; a “squatocracy”.

Quote: "That would actually

Quote: "That would actually undermine the value of everyone’s home in New Zealand – that probably wouldn’t be welcomed by the bulk of New Zealanders, certainly not home-owners," he said."
 
Of course it won't be welcomed. SO NOW WE HAVE A GOVERNMENT IN THE BUSINESS OF PROTECTING COLLECTIVE MONOPOLIES FROM SUPPLY-RESPONSE COMPETITION, AND OPENLY ADMITTING IT LIKE IT'S ACTUALLY OK.
 
If you think national is all about the free market, think again. Also Key has functionally admitted that we can forget about housing afordability, because housing affordibility can only mean a mass-scale price correction on houses.
 
Like I have said before - the young renters of Kiwivanian need to uninionise. John Key, for all his faults, has done as much to outright admit this. Hey who knows...maybe he's not as powerful nor dumb as he looks? Maybe he's giving NZ a clue?

Can I simplify it even

Can I simplify it even more?
"Hey New Zealand, we'll give you your housing affordibility, but it's gonna be a chicken-coop coz we can't upset our dominant voter base by allowing their property values to correct (fall)".
John has done this before. At times he all but says it like it really is because he's too rich and famous to have anything major to lose, and he doesn't like looking like an idiot. Honestly, this might be his way of telling the National party career-politicians to go get...you know what.

Key said it was not the

Key said it was not the government’s intention to make moves which would lower property prices. What a signal to all those property buyers out there. Property is a one way bet because nothing will ever be done to reverse price gains.
 
It's like the Greenspan put, it was ok for asset prices to go up but if they ever fell then interest rates had to be cut etc. Everyone loved him and called him a genius until the cycle ended... 

Greespan, everyone wasnt me

Greespan, everyone wasnt me to start with...
;]
I cant blame JK though as lowering prices can be a self-reinforcing cycle....that would be bad news IMHO....so a balancing act...stagnation....let inflation correct it. Your right of course, that's what evertone is thinking....The cycles though have a nasty habit of self-correcting, just watch OZ...
regards

Greenspan never pushed

Greenspan never pushed against asset bubbles and Key is falling into the same trap.