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Government and Auckland Council agree plan for fast-tracking of housing developments, with 9000 new homes promised in the first year

Property
Government and Auckland Council agree plan for fast-tracking of housing developments, with 9000 new homes promised in the first year
<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The Government and Auckland Council are promising thousands of new homes for Auckland after signing an "accord"  to fast-track developments.

The move, announced today resolves an impasse between the central Government and its biggest local authority over the future direction of housing in Auckland.

Under the deal, legislation will be introduced to Parliament as part of next week's Budget.

Auckland Mayor Len Brown said the streamlined consenting process that has been agreed to, "will apply both within and outside Auckland’s current urban limit and be subject to the rules of our new Unitary Plan once it is formally notified later this year".

Through the creation of "Special Housing Areas", a three-year plan will be developed that will see 9000 houses built in the first year following notification of the unitary plan, 13,000 in year two and 17,000 in year three.

That's a total of 39,000 new houses in the next three years from this September on. If achieved, these levels will be much higher than Auckland has ever managed before. It twice reached 12,000 annual consent figures during the housing boom in the early 2000s but has since slumped to around 4000 a year. Over the last three years Auckland's consents for new house starts totalled just 11,957.

Housing Minister Nick Smith said the "accord" reached with the council would streamline the planning and consenting process and get Government and council working more closely together on housing development.

The new accord will be managed by a steering committee consisting of Smith, associate minister Paula Bennett, Mayor Brown and deputy Penny Hulse. Additionally there will be an "officials working group" to oversee the management of the accord.

'Balanced and pragmatic'

"This balanced and pragmatic agreement addresses the economic risks to New Zealand’s economy of an over-heated and supply-constrained Auckland housing market. It is good news for Auckland families wanting access to more affordable houses to buy and rent," Smith said.

In the so-called "special housing areas" to be created by the Auckland Council with approval of Government it will be possible to override restrictions on housing put in place by Auckland’s eight predecessor Councils, like the Metropolitan Urban Limit.

Qualifying developments in these Special Housing Areas will be able to be streamlined, providing they are consistent with Auckland’s Unitary Plan, once it is notified, expected in September this year.

Six-month approvals

New greenfield developments of more than 50 dwellings will be able to be approved in six months as compared with the current average of three years and brownfield developments in three months as compared with the current average of one year.

The streamlined process will not be available for high rise developments. Those would need to be considered under existing rules until the Unitary Plan has been finalised in 2016.

"This is a three year agreement to address these housing supply issues in the interim until Auckland Council’s Unitary Plan becomes fully operative and the Government’s Resource Management Act reforms for planning processes take effect," Smith said.

“The Government respects in this accord that it is for Auckland to decide where and how it wishes to grow. The Government is giving new powers for council to get some pace around new housing development and is agreeing on aspirational targets to ensure Auckland’s housing supply and affordability issues are addressed."

'A huge boost'

Smith concedes the planned housing numbers are a "huge boost" on the average numbers consented in Auckland recently and the 7400 a year over the past 20 years.

“The accord is a sensible solution to the problem of ensuring a robust process for submissions and hearings on Auckland’s 30 year Unitary Plan, while ensuring progress is made now on Auckland’s housing supply and affordability issues. It is about getting on and building the least contentious 39,000 houses of the 400,000 identified in the draft Unitary Plan.

“This agreement will also enable the Government and council to make progress on other housing issues. There is a commitment to an inquiry into building material and construction costs, a better co-ordination on delivering core infrastructure to support new housing and a feasibility study on the development of New Zealand’s first online building consent process in Auckland. There are also significant developments at Tāmaki, Hobsonville, Papakura and Weymouth and across Housing New Zealand’s Auckland housing stock to improve the quality and quantity of Auckland homes."

Intense discussions

Smith said the "accord" was the product of six weeks of intense discussions with Auckland Mayor Brown, his deputy Penny Hulse, and many council and government officials. The Auckland Housing Accord is subject to agreement by the Auckland Council and legislation being passed by Parliament. The Accord and legislation will expire when the new Auckland Unitary Plan becomes fully operative, expected in 2016.

After several years of under-building Auckland is now widely perceived to be very short of available housing. The current shortage  is seen as about 30,000, while it is reckoned that about 12,000 to 13,000 a year now need to be built to meet demand.

The shortage in Auckland is putting upward pressure on house prices,  and this has been reaffirmed by latest QV figures for April. to meet demand. Recently RBNZ deputy governor Grant Spencer issued a warning about rising house prices and the potential impact on inflation, with particular reference to Auckland.

Taking heat out

This week the RBNZ announced that it was getting the big four banks to hold more capital against so-called high loan to valuation ratio loans, in an effort to maintain banking stability and to take some heat out of the housing market.

However, such initiatives don't really tackle the problem - which is the lack of housing supply in Auckland.

The Government and the Auckland Council have, to say the least, not appeared to be on the same page.

Earlier in the year Housing Minister Smith lobbed a few grenades in the way of the Auckland Council, saying it should "smash" the metropolitan limit, while also releasing a report that said the council had only about 2000 sections ready to build on and not the 15,000 previously claimed.

The council for its part in releasing its draft unitary plan said Aucklanders want planned and progressive development, not a smashing of the city's metropolitan urban limit as sought by the central government, to meet the SuperCity's housing and population growth demands.

 

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79 Comments

Prediction - this will do absolutely nothing for affordable housing. House prices will go up until the Unitary Plan (if it's not altered too much) is operative.

 

There are a handfull of developers that can handle 50 houses plus in one go. Those that can are not charities. Freestanding houses and the associated kilometers of roading and infrastructure required are not affordable (as the DBH has already pointed out) - especially if they also have to be to Unitary Plan standard. They'll be lucky to get them under $500K and an hours commute...

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No restriction who can buy them..or have I missed it?

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Doesn't supply create demand?

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Government and Auckland Council agree plan for fast-tracking of housing developments, with 9000 new homes promised in the first year

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

The Wizz- bangs have to do something as they cause the problem:

3. The government is explicitly aiming to grow Auckland’s population as a means of achieving “agglomeration” benefits for economic growth which accrue from high interaction amongst economic players.
http://www.davidwhitburn.com/blogs/the-bnz-chief-economist-s-view-on-the

Any productivity boost would help Auckland firms compete more effectively against those
in other locations. However, considering the official projection of population growth in
Auckland (43% over the next 24 years), even elasticities at the top end of the international range would result in (agglomeration-sourced) productivity gains of only 3% in total, spread over the next two decades.

Drivers of Economic Growth in Auckland
A report prepared for the Royal Commission on Auckland Governance
........
So is the attraction of this policy the sugar rush of population increase? Does it reflect political influence from outside government?

What do Labour and the Greens think? Zzzzzz!??

If we were to hop into a time machine what would we find?

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Sometimes I find political speak a little unclear- are they committing to building 9000 houses by September 2014, or is this an "aspirational goal" for the year after the unitary plan is settled.

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http://admin.beehive.govt.nz/sites/all/files/Auckland%20Housing%20Accord%20Factsheet.pdf

 

http://admin.beehive.govt.nz/sites/all/files/Auckland%20Housing%20Accord%2010%20May%202013.pdf

 

http://admin.beehive.govt.nz/sites/all/files/Auckland%20Housing%20Accord%20Q&As.pdf

 

It looks like instead of just making the Unitary Plan operative they are going to delay it and let developers have an easier run at getting consent on certain agreed sites (5+ houses brownfield or 50+ greenfields - identified at UP notification time), with limited notification resource consents and compliance with UP rules required.

 

They reckon that enough developers will be tempted by a slightly easier consenting process to get 9000 consented presumably by August 2014.

 

This might allow more houses to be built - but they certainly won't be affordable ones. the DBH report mentioned above clearly showed that affordable housing is largely a result of higher density development (which this 'accord' doesn't cover). What will happen is there will be some fast tracked developments like Stonfields (at $700K up), maybe some fringe stuff from $600K up and maybe the very occassional anomoly like Panama Road maybe getting to around $500K for a terrace house. 

 

 

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Having a plan to make land available is a start. Agreement on expediting consents and hopefully cutting the cost of getting projects to the point where building can start is also good.

The other parts of the puzzle will be

Development funding. Not much of that around any more

Cost of materials. Always amazes me on those British property shows when someone says they intend to put on a two story extension and think it will cost 15,000 pounds when you know it would be $150,000 here.

Finding some tradespeople when the ones who aren't in Aussie are all working in Christchurch.

Normally in thiscountry when a whole lot of work in any area is undertaken we run out of capacity real fast and costs sky rocket. It is going to take some sort of public private partnership and some big thinking to get these houses built at reasonable cost. It would be nice to get economies of scale and not diseconomies of bottleneck.

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Good points on the cost of materials & availability of builders etc Waripori. We need to see the promised government paper on the impact of construction costs on housing affordability, the so-called "market level inquiry" now - http://www.interest.co.nz/property/62822/govt-market-level-inquiry-resi…

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True - all this accord does is slightly reduce the time, risk and holding costs on Resource Consent process. There might be some upzoning to the Mixed housing and Terrace/Apartment zone rules, but all in all not much oppourtunity for savings to be passed on (and as this accord can only be taken advantage of by a few big developers they'll be able to pocket any savings that are made). 

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Even with the freeing up of consenting etc, where is the colossal, skilled workforce going to come from to meet the desired output?

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This?  just need a couple of guys to put it together... straight from their factory in china

http://www.ecotechhomes.co.nz/

 

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how many d'ya want?

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"We use sustainable materials such as steel, concrete, glass and aluminium. Our focus on thermal efficiency and energy efficiency means the housing requires minimal energy to heat and cool"

 

LMAO, these guys should be in politics.

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Agree with Bob - this latest announcement will do nothing to boost supply within the next three years. The Unitary Plan should simply be made operative within 6 months - problem solved!

This gives me no confidence at all - "The new accord will be managed by a steering committee consisting of Smith, associate minister Paula Bennett, Mayor Brown and deputy Penny Hulse"

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I wonder where they are going to find the skilled labour to build all these houses? Lots of workers left the industry after the bust of 08 and there were very few apprentices taken on over the following 4 years. Maybe they will use an army of first year apprentices still mastering the art of sweeping up and banging in a nail in straight!

They are dreaming if they believe its possible to build 39000 thousand new homes over 3 years in Auckland when we currently build 4000 and the second largest city has been wiped out by a quake.

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Here's the Greens take on the Accord;

The Green Party are pleased to see progress on the issue of housing affordability in Auckland, but says that we still have a long way to go.

“This afternoon’s release of the Auckland Housing Accord sets out a first step forward for Auckland’s housing crisis, but it’s only one step,” said Green Party Co-leader Metiria Turei.

“Brownfield developments are key to providing affordable housing and the best way to achieve the compact city that the Auckland Plan sets out to achieve.

“So it’s really unfortunate that brownfield developments are not given a higher emphasis over greenfield in the accord.

“Building new developments a long way from the city just piles on extra transport and infrastructure costs and keeps Auckland sprawling.

“While the accord is a first step, no one has asked the question of who is going to build these affordable houses; that needs government leadership.

“Creating affordable housing requires central government investment.

“Part of the solution is set out in the Green Party Home for Life plans which would put in place a progressive ownership model to help families afford their own homes,” said Mrs Turei.

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They will be built by Todd Property, Fletchers, McConnell Property etc. etc. who'll have a slightly easier job getting consents which will boost their projects profit margins a bit.

 

The Unitary Plan adds a huge number more potential players into the dwelling provision market - without competition it's hard to see why any savings would get passed on?

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Anti-immigration feeling has no place in the Green party Immigration and Population policies released today, Green MP Keith Locke says.

http://www.greens.org.nz/press-releases/greens-counter-peters-welcoming…

So they aren't worried about demand. Keith is no longer an MP but his entrails remain.

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Who's runs the Greens Party?
Russel Norman is it? Surely not
He's an okker isn't he?
Well the okkers have had inbound immigration running at nearly 400,000 pa for 10 years
And the refugee intake has been running at 20,000 per year for last 5 years

On target for 30,000 this year. That's just the irregular boat people. Planes are extra
It's the lucky country
And, so it has been while the minerals bonanza kept the ship afloat
And the Greens Party keep demanding that good fortune be shared with the refugees and assylum seekers. Let them in. Give them welfare, education, health, accomodation. Free

 

Now, the tide has well and truly gone out.
The minerals bonanza has ceased
The current Gillard Labor party will announce massive deficits next week - nb FX geeks
They are leaking to the press all the savage cuts that are about to come down the line

What is most evident is that all the immigration doesnt help when the tide goes out

When the chips are down, they havent helped. So dont kid your-green-selves

Now they are getting tough on irregulars and assylum seekers - telling them to go home
No more welfare hand-outs
Times are tough
http://www.dailytelegraph.com.au/news/breaking-news/failed-refugees-should-go-home-gillard/story-e6freuz0-1226638352161

 

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Auntie in Sydney was on to the phone to my Dad recently trying to palm off a Cypriot relative. Lol. When I said to my Dad she was trying to hand on her problem it confirmed his thoughts and he respectfully declined.

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And here's Labour leader David Shearer prior to the announcement;

Could you afford $1 million?

That’s the average house price Aucklanders will face in 3 years time according to an expert in the NZ Herald today - $1 million.

After almost 5 years of the problem getting worse, National still think that tinkering with consent processes is enough. But it won’t work.

Labour has the solution - KiwiBuild. It’s a bricks and mortar answer that cuts to the heart of the problem.

Yesterday Phil Twyford and I spent the day with experts and some of the biggest players in the industry to discuss the next steps in our KiwiBuild policy. Everyone in the room was there because they want to revitalise the Kiwi dream of home ownership. It was a really successful day with some great ideas being shared.

This is the sort of change a smart, active hands-on Government can make that will benefit people and boost our economy.

That’s what I was talking about in my pre-budget speech earlier this week. NZ Power is another example.

The sale of Mighty River Power will push up power prices as investors demand greater profits. Last year prices went up more than five times faster than inflation. That hurts all New Zealanders and our economy.

Labour's plan will bring down power bills for all New Zealanders and businesses. It will put money back into the pockets of Kiwis and boost our economy by $450 million and create at least 5000 jobs.

That’s the sort of change we need to make in New Zealand. It’s what the Government should be delivering in next week’s Budget.

Cheers,

David Shearer

Labour Leader

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.... it won't be a $1,000,000 house under Labour. It will be $1,000,000 + CGT just like it is in Sydney.

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That’s the average house price Aucklanders will face in 3 years time according to an expert in the NZ Herald today - $1 million.
 
Do I detect a little shameless promotion
 
I thought Bernard had sold his only house in Auckland a while back and didn't speculate in property to supplement his income. I do, however, consider Bob Jones to be an expert, as do contacts who service his professional needs.
 
Seems as though Bernard is an expert in many fields.

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Jeez you are on the war path today Stephen.

 

This thread reminds me of your link from the other day with this comment towards the bottom : "Ever heard of the trivial saying "money is whatever people agree it is" - well, that's great. But problems emerge when one assumes houses are money. As the chart below shows, households chose to hold less cash during the last bubble as the "moneyness of houses rose. Sure enough, "when the moneyness fell, cash holdings rose abruptly." Still confused why the Fed is desperate reflate the housing bubble at any cost? Simple: it is the only lever left for the Fed to force households to not only spend, but to ramp up on credit."

 

This isn't going to end well when people find out they are not.

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Yes scarfie, the moneyness of many things are being called into question right now.

 

The repeated past closures of the JGB market and now a limit move halt certainly brings the point in focus - also Bernanke is not too confident about the wholesale financing markets in New York - the very source of much of our local banks foreign funding which we know remains significant.

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If power prices go down, Govt will lose a big income stream and have to increase taxes to make up the shortfall.

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More houses -Yeah right

How about less or nil immigration?

Less people will alleviate the problem by the fastest achievable means.

Stop new overseas arrivals and wait until housing catches up. Then think again.

No brainer.

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Even with zero immigration Auckland population is increasing. Forcing people to live outside  cities is a bit un PC - too Khmer Rougish. 

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80% of our population growth in the last couple of decades has been the net inflow of non NZ citizens

http://www.treasury.govt.nz/downloads/pdfs/mi-jarrett-comm.pdf

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Presumably the other 20% growth is still growth? 

 

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Yes but 80% is 4 times larger than 20%. Government is supposed to be putting it's citizens first (not sectional -pardon the pun- interests).

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20% is still growth - so we still need to build houses whether immigration is stopped or not. Obviously not as many, but still some. We also need to be upgrading and replacing substandard housing - from 1991 the building code only requires a house to last 50 years and some from that period will barely do that.

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Conclusion, mine at least.

It sure would be an easier task to cope with the 20% natural growth than with the present shmozzel. Add to that the education of kids they produce and the health burden of decrepit parents and Auckland will have even more problems to cope with than just the numbers here already without keeping the inflow going.

This is NOT and Auckland responsibility but a Central Government one created by both main parties when in power over the last 20+ years.

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More people and more houses so you can keep making unearned income selling them?

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Yep , the other 20% is those migrants kids , Pasifikfas , Chinese , Indian , etc

 

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*/

Houston Houses Cheap?

We've all seen the articles proclaiming that Houston is a low cost of living paradise, where jobs flow like milk and honey and houses are all the size of mansions.

Well the job market is indeed good, and gas is cheap, and eating out is cheap, but what about housing? That's the biggest single expense for most working people and therefore the most important. My professional geographer's opinion is that the cost to own a house is NOT low in Houston.

All the proclamations of low cost of living are based on house value statistics, which are aggregated spatially, but those aggregations don't necessarily have meaning. The only value that matters is that of a house you actually want to buy. The vast majority of us would only want to live in one of two places, the suburbs or one of the good neighborhoods "inside the loop". In between those places is a big sprawl of ghettos, strip malls, and various levels of urban decay and ongoing gentrification. ALL of that is included in the home value averages.

*/

http://www.city-data.com/forum/houston/1768694-houstons-low-cost-living-myth-baytown.html#ixzz2Sn3kDfB2

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jh - Having lived and worked in Texas in property development I could easily easily refute your claim that Houston is expensive, but since you quoted an American? post, here is another American post in reply to it,

'Your post makes no sense. Housing is cheap in Houston across the board. The suburbs are embarrassingly cheap (compared to the top 5 largest cities in the US) and even housing in the loop is dirt cheap when also compared to other downtown living in the top 5 cities. Price me a condo in River North Chicago, Murray Hill in Manhattan, Brentwood in LA, Beacon Hill in Boston or Georgetown in DC. On a "relative" basis Houston is not even close. It's way cheaper. And property taxes are generally cheaper in the loop in Houston vs the Burbs. Honestly, it's not even close. Your avg mortgage in Houston compared to Chicago, LA, NY, Boston or DC will be 1/3rd of those. And a majority of your cost of living is going towards that mortgage. Throw in cheaper gas prices and food costs and it's mind blowing.'

 

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I think you should change your handle to antihugh :-P I notice Dale completely misses the point, sich cognition deficit isn't suprising from a property developer as it seems to go with the territory. Total blinkers because they are on the take.

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I would like some insight into how this is going to happen , THE EXACT MECAHNICS OF "HOW "

There are thousands of unsubivided sections and thousands of speculators holding out for a windfall .

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There are thousands of unsubivided sections and thousands of speculators holding out for a windfall .

 

Not their banks as well?- I pray the interest has not been capitilised over many years - is this another banking accident waiting to happen?

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Well we all agree (almost) that this accord won’t achieve more affordable housing. What both the local government and central government have failed to address is the underlying systematic failure of the present system.

Typical thought process of those that promote this type of failed methodology is to think the reason it is not working is because they are not doing it fast enough. Their response is therefore to do the wrong thing quicker.

Anyway saving to be made in shortening the consenting process will be first captured by council with their proposed shared land value uplift and/or inclusionary zoning that they will place on developers as a planning gain counter to being allowed quicker consents. Any saving left will be captured by the developer.

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Send us more Chinese builders  .....we dont have enough skilled people to build  9000 houses a year , ( 251 working days)  , or 36 new houses to be completed each working day,  nearly 2 houses an hour ..... thats in addition to CHCH Rebuild .

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Well, the travel arrangements are in entrenched - cannot see a problem extending home numbers to accommodate those wishing to stay unless they provide tents as a qualified Hamilton builder was offered not so long ago in ChCh - he has since retrained and stayed at home.

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I disagree with the criticism. I have been a fierce critic of this government but I think this is a great initiative and it will make a difference, how much is another question. Of course there are still other things that should be done, like building more state homes, changing rules on foreign property ownership etc. But credit where credit is due 

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The problem is the underlying principle of expansion rather than containment first and then wheeling out the solutions .. making these grandiose gestures and presenting them as "the solution" is sad

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A much better initiative would be to make Unitary Plan operative - at least the bit that lets most people add a minor dwelling within the permitted envelope. Would add dwellings faster and far cheaper than this scheme. Would not change the 'look' of anything (don't scare the NIMBYS) and would be in areas people want to live.

 

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An awkward, but nonetheleess pertinent question since high LVR loans are the topic du jour. Maybe, an experienced landlord such as Kimy will come to the rescue with the obvious solution to such a testing conundrum?

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Excuse me, think about it...an average husband and wife are already earning 90k each, so the average household income in Auckland should be 180k (plus minus a few thousands) already, if not, more.

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Bollocks doublegz.. and what the hell bullshit too,no they are not.....statistics encompass the wider picture where the narrow skew the many.

 Don't be so small minded to think you live in a society where the average  citizen earns 90K per year before or after tax, you risk making yourself look more foolish than you already do.  

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Since Ostrich is talking about his average 1 million house in Auckland, I am only referring to the million dollar suburbs in Auckland (there are about 20-ish) where the average house value is over 1 million.  The average household income in these suburbs is in fact more than what I quoted.

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It was gracious of you , to say the least ostrich to dignify his comment with researched data......i must learn more patience with the slow of wit.

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@doublegz , get real mate , we run a professional practice and none of the qualified professionals are earning over $90k each . Only the partners do.

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Ohh - so it's free lottery tickets for the trroops on Friday night then.

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The targets of course wont be met ... and all will say in due course "We tried ... and failed ... again".

 

pretty much Hugh, pretty much.....but then there is always the cynics view as to why targets are not met.

It's counterproductive to demand Hugh...ya follow..?

Keep up the good work.

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Long live the Five Year Plan! Another triumph of the Central Planning Authority! They just can't stop themselves telling people what to do. And why should they? After all they know best, eh, comrade?

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Protecting the politically well-connected financial interests of the old Crony Capitalists, is clearly of more interest to the political elite.
 

Sorry for repeating stuff but this is so good it deserves to be read twice.

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Even our regulatory authorities have to go begging to undertake their duties. Read more

 

The Commerce Commission is seeking assurances from banks they will not victimise farmers who give evidence in its interest rate swaps investigation.

 

The commission's notes for a meeting with MP Damien O'Connor say the investigation is being given high priority.

 

The notes reveal the commission has already written to banks advising them of its view that witnesses can provide information without fear of adverse consequences.

 

It has scheduled meetings with the banks to seek assurances they will abide by that view.

 

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The National party are between a rock and a hard place on housing. If house prices go down they will not get re-elected. They know this. The conversation has changed though, a few years back the other lot all thought house prices going up was a sign of a strong economy. At least we now know that house prices going up is a sign of restricted supply and unlimited debt servitude.

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Hugh, with all due respect I think your criticism is unfair. The Unitary Plan will open up a LOT of new green field and brownfield land for development, it would be good if it would happen sooner but the need for public enaggement is understandable. In the meantime the accord (Subject to legislation being passed) will allow development generally in accord with the Unitary Plan to be contemplated.

what is wrong with that?

What do you want to see? The unimpeded and unregulated "smashing" of the MUL? That will NEVER happen  nor should it.

I'm all for release of greenfield land, provided it is planned and co-ordinated. 

Auckland can learn lessons from Houston, sure, but there are many geographic, cultural and economic differences that make a straight transfer of the Houston model to Auckland both unrealistic and undesirable. 

This is admirable progress from the Govt and Council, at last....

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Hi Matt in Akl- There is more agreement across the ideologies that this accord won’t work in these posts than I have seen for a long time.

Two reasons (but not the only two) it won’t result in more affordable housing is: 1) the Unitary Plan was not designed to make housing more affordable. It has been designed as a revenue collector for council. You cannot have mechanisms such as shared value uplift and inclusionary zoning that will allow council to increase developer costs and hence home purchaser’s prices and expect housing prices in real terms to go down. Council will have already done the sums, x number of sections at x$ per section = a hell of a lot of money to spend on their pet projects.

And 2) present developers have paid too much for the land, which they are now starting to admit as Mirvac has just done:

‘Developer Mirvac today released its Q3 operational update and strategic review, which confessed that the company has been hurt by:

  • paying too much for residential land;
  • inappropriate deal structures;
  • creating too much higher end product in shallow markets; and
  • proceeding to build for reasons unrelated to market fundamentals.’

 

This means the only way they can get out of the hole is to A) find some other sucker to sell it onto (hello Asian investors), B) sit on it longer in the hope some future event will add value or C) more intensively develop it ie smaller sites and houses to make them look ‘more affordable.’

 

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It seems both of our major parties are as bad as each other regarding housing. With Respect to National I see the problem as less to do with Nick Smith and more to do with John Key. I think Nick came in with the right idea of increasing competition amongst developers by 'smashing the MUL' but he has been told not to pursue that policy direction. Who is the only person that can tell a cabinet minister what to do. The PM -John Key.

 

John's fingers are all over the accord and if it fails to deliver the voters should know who to blame.

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And why didn't John Key send in his Finance minister Bill English to negotiate alongside Nick Smith with Auckland City Council. How come Bill and his focus on (a) land supply (b) infrastructure financing (c)  process and (d) construction costs has gone MIA?

 

Does the PM trust his Finance Minister judgment about economic matters? How does John and Bill reconcile their actions with their previous statements about housing? Why should we put up with politicians who say one thing and do another?

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Hugh - not every dairy farmer is a "dirty dairy farmer", not every car salesman is "sleasy", not every politican is "self-servering", not every lawyer is "corrocked", and not every banker is "corrupt or self-centred".

 

But every so called expert blogger who uses terms and comments such as  " how Key in employment terms, ever got past filing papers in the back office of a Bank" and  "The only ability this fellow seems to have (as best I can tell and please tell me if I’m missing something), is the capacity to ingratiate himself with people, put another way, he is a social climber.", when they admit they don't really know the man, are inevitably someone that instantly loses all creditablity with fair minded people, certainly those that know the man concerned

 

I'm telling you something

 

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Quite right Grant.

Just rang the Beehive to ask JK round for a beer so I can get to know him. They said it might take a while because there are 4 million other Kiwis who haven't met him and arn't likely to either.

Will let you know how it goes.

In the mean time, I guess I will have to be content with media coverage.

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Hugh you miss my point totally.

 

I'm not here to defend John Key's record, I was making the point that anyone who character assassinates someone they admit that they don't know says alot about the character of the individual doing that, and it makes some of us question what else they say - and that fact that you state you've been doing it for a long time is certainly not a mitigating factor. 

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Hugh...Fair point

 

But whilst I can see you making the connection, I do think character and leadership are somewhat different issues. Winston Churchill was undoubtedly a great leader, but he could just as easily have been a flawed character as far as we know. We will disagree on both the leadership and character issue in Key's case, but least we disagreed as adults. 

 

 

 

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Matt in AKland I used to think like you. That the release of greenfield land, provided it is planned and co-ordinated is the way to go. That if house price inflation was a problem you could just release more greenfield land or allow more densification/ higher building. But the housing market doesn't work like that. You either have competition from developers to provide new housing or not.

 

So now I am all for planning so we all know where the new and better transport infrustructure is going and where the parks etc. But that there should be no MUL, because as soon as you say you can build here but not there the here becomes scarce and gets a shortage value that rockets up in price.

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I think HT is right about how this work,s and where it ends- deflation, but keep trying Im enjoying the circus.

 

 

When more comes out than in the numbers are red when more comes in than is taken out the numbers are green...china is constantly trying to sustain inflation. The required amount of inflation is not too much and not too little but always greater than previously. The non consistent numbers that are causing perplexity is the result of all the game playing all along reaching the point where it can't be covered up anymore. from 1991 to 2005 US new home construction was increasing per year exponentially during that time and flooding the world with a seemingly endless supply of inflation. That did not really require any effort to sustain. It was basically an endless party for 14 years. It was sit back and get rich and pretend you are an economic genius because look at my bank account. But someone forgot to invest into the production of line signers and in 2005 the bottom of the barrel was scraped and the new home mortgage supply collapsed.

Below is just ball park but close enough.

A home builder goes to a golf course and plays a round with their banker friends and tells them they are going to need financing  for a new money making scheme. they then they go back to crunch the numbers.

Let say the wholesale cost of a new home was around $75,000 in 1992 and it takes 3 months to construct and sell the house. The homebuilder then requests the bank to inflate the money supply of the USA by $75,000 for 1 year at prime which was 6.5%. Of course the home builder has enough income to make the payments on the loan of $6,400 per month for 3 months.

the house is built causing the $75,000 to be spent into circulation and then the house is sold to a home buyer.

The home builder marks up the house and sells it for around $120,000 to a home buyer that has to request a commercial bank to inflate the money supply by $96,000 since the home buyer put down 20%.

The bank then inflates the money supply of the USA by $96,000 for 25 years at the retail mortgage rate of around 8%. The home builder is then supplied with $120,000 to pay off the cost to build the home of around $55,800 remaining on the original money created to finance the construction.

During the 3 months the bank received around $666 of yield or profit from inflating the money supply. with the home builder receiving $44,000 potential profit.



Now back to the bank which is up $666 but from the home buyer who owes them $96,000 financed at 8% for 25 years.

The bank receives per month from the creation of money out of thin air to inflate the money supply in order to loan it to the home buyer $740 per month. of which 640 in interest/yield or profit that the bank makes and $121 goes to paying down/off the $96,000 of money created out of thin air owning.

The bank creates a mortgage which is an asset to equal the liability which is the money they created out of thin air. The $121 is subtracted from the asset and liability and the inflated money supply then shrinks by $121 to $95,879

over the whole term of the created out of thin air loan to the home buyer. the bank will make 222,282 total payments received minus the  $96,000 mortgage or $126,282

How is it possible to receive $126,282 back from the creation of $96,000?

Volume. constant requests for new money creation in greater amounts than the old money created out of thin air returns back into thin air as it's paid down/off.

Lets say the bank financed 10,000 home buyers like the above in a year...The money of profit flowing into the bank from 10,000 home buyers like the above per month at the front end of the amortization which pays the interest first rather than principal would be $7,400,000 per year if they were able to find 10,000 people in a year to sign on the dotted line by inflating the money supply by $960,000,000 for 25 years.

this is how commercial banks have been operating for 600 years.

well what happens when new home buyers dry up like in 2005?

All the new money being created and being pumped into the economy stops and all the yield from it flowing into the bank stops.

Now what does the banks do with all that money derived from lending money created out of thin air?

Well for the past 30 years they have been reinvesting it into Bonds to engineer rates lower and lower to keep the supply of line signers or volume from deflating faster than it inflates.

and from 1991 to 2005 the volume of line signers was growing exponentially for 14 years straight until they ran out of line signers willing and able to sign on the dotted line or volume to support yields.

cutting off the supply of new money into the US economy but more importantly cutting off the supply of new money into the banking system. Which caused it to begin imploding to oblivion since the banks went from more deposits in than withdrawals going out. To more withdrawals out than deposits in.

Requiring the money center banks at the top of the hierarchy to be bailed out and propped up with Federal  reserve loans to make up for the lost revenue from new home construction which is the primary source of new money creation in the economy. it's the key reason why the economy is not recovering like all previous times in the past. The line signers have dried up. and all the the FED is doing is propping up the banks by supplying them with the lost profits from new mortgage creation without the new mortgage creation.

and since new mortgage creation has collapsed. All that new money being supplied to the US economy has dried up and the flow out into the rest of the world has been cut off. the flow out which was sustaining the inflation of the global system from 1991-2005. The EU is collapsing without this inflation and China is slowing down on the way to collapse...and my return key does not work unfortunately so the above is a mess.
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Yes and the Fed pumping ends up supporting the abstract representations of our endeavours while those things we consume and their associated cross border pricing mechanisms suffer on a relative basis. - right? 

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And yet there is still room to capture the mechanisms of the state and return an indefensible windfall. Will it ever not be thus? Read more

 

Shell out $265,000 and collect more than $10 million. It's one of several nice little high-country earners.

 

That's the mark-up that one South Island runholder couple made from subdividing some of their land freeholded through the tenure review process.

 

Lincoln University academic and tenure-review expert Dr Ann Brower has for several years been following the money trail from the Crown's coffers to the bank accounts of high-country farmers.

 

Now, newly released details of some of the deals have allowed her to calculate the profits made from subdividing previously publicly owned land in some of the South Island's most pristine locations.

 

Federated Farmers is taking issue with Brower's findings, saying any subsequent multimillion-dollar gains from subdivision do not expose flaws in the tenure review process.

 

Instead it says they are merely a consequence of district council plans allowing subdivision to take place.

 

Of course.

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Federated Farmers says they are merely a consequence of district council plans allowing subdivision to take place

 

consequence ? consequence ?

 

Oh Right. The District Council, of its own accord, changed the plans of a remote station, miles from any metropolitan centre, allowing subdivision, and then went to the owners on bended knee, begging them to subdivide .. really?

 

Yeah .. right .. I can just see it .. pixies at the bottom of the garden?

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Its much worse than it looks. This land was owned by us all, and leased to farmers. The  dude Cullen guy gave it to farmers,  payed for the land they didn't use anyway and gave them freehold on the best stuff. Its was a friggin joke. I tried to object at the time, got laughed at. A massive wealth transfer from us all and under Clarke/Cullen, which proves that all politician are stupid, regardless of affiliation.

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our future

 

 

http://blogs.telegraph.co.uk/finance/jeremywarner/100024476/spain-is-officially-insolvent-get-your-money-out-while-you-still-can/#disqus_thread

What a great article, Jeremy!

You have taken the reader along with key definitions and then application of the facts that lead to logically derived conclusions and a robust recommendation.

Anyone, with assets in Spain, reading your analysis here, and does not get those assets out now. will only have themselves to blame for their losses.

Otherwise your key insight is this:

"But in the end, no amount of liquidity can cover up for an underlying problem with solvency."

Now do us a favour and work the same analysis for Italy and France.

Jonathan

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Depends on the context? on "our future".  Given our Govn debt is low and deficit decling, I wouldnt say we are as bad as spain, what makes you think so?  (The thing will be just how much bailing out  of the banks we have to do when our housing market tanks but thats a way off).  Nz has a floating exchange rate and a big primary sector for output, lots of variables.

regards

 

 

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Another plague of leaky buildings on the way??don't even pay lip service to building standards this time??

Built by registered master "cowboys", good at disappearing after the build, as are those who issue consents and "inspect" the build(more likely a brown bottle)

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My 2c worth FWIW. 

  • Unless something unbeknown to all us common taters is a'lurkin' in the wings, there is nada in this Accord which gets the land price down to a proper range, which I take to be 1/4 of the house+land price as determined by a 3x median Multiple.
  • In particular, there is nada in any of this to tackle the CG about to be handed to lucky owners of 'greenfield'.  Or. most prolly, brownfield either.
  • There is no linkage/connect-the-dots to TLA differential rating,  Gubmint tax audits or similar pressure, with the objective of socialising some of the landbankers' CG which is undoubetdly gonna get crystallised by this Rush ter Build.
  • There is nada, indeed there is the sound of crickets/an altogether unseemly silence on the question to TLA DC's, levies, contributions, fees and other racketeering (a racket is traditionally defined as the offering of a threat, and the promise to mitigate said threat via a continued cash infusion)
  • There is absolute silence on the cost of building materials.  Just as Fletchers is making up like a bandit on the Chch rebuild - look up the history of FBU and note the timing.
  • There is nada to indicate just How all of these luvverly little boxes is gonna get built.  Recall the Productivity Commish finding that only a handful of builders do more than 100 units pa.

Too many moving parts to this multivariate.....too many to believe it is a serious Accord.

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"Lurkin in the wings" is a second Greater Depression, the odds are very high on it within 5 years IMHO.  Of course then land will be very cheap but  no one will want the debt.

You are right in terms of the accord, its worthless unless there is a price collapse, from external influences or compulsry purchase and release en-mass.

Of course in both what happens to the ppl in the market with 95% and 30 years today? they are so toast. Those are the ones I will feel sorry for somewhat.

I wonder on the materials, if its much of our small size then there really is nothing that will see the price drop, though I wonder on what a builder pays V myself as a DIYer.

regards

 

 

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With over a hundred comments here so far and the talk being about fast tracking building it would be interesting to discuss what we would like to see happen long term. The Key Government is capable of short term thinking only (apart it seems from extending Sky City contract to 2038) and so we end up with the plan as above.

On the other hand those of us who can remember witnessed when home ownership was as high as 80% and it is now less than 60%. Investors can outbid those who want their own home and this is the major real problem.

I believe we show tackle the debate from an entirely different angle which would help repair the damage that has occurred over the last 25 years and so I am reminded of Edward De Bono and his use of lateral thinking. An example is his solution to inner city parking congestion. He suggested that parking meters would not be needed if all parked vehicles had to leave headlights on at all times of restriction.

So let us apply something like this to housing and here I suggest that it was (and still is) the desire of most citizens to own and occupy their own home.

I will put up a few questions for which I do not proffer and answer right now.

1. Is there really a housing shortage and how bad is it?

2. Do we see more people living on the streets today than we did in time before the present problem?

3. Are there many unoccupied dwellings out there?

4. Are there possible policy initiatives that would serve us well into the future?

I would like to try to answer with some general thoughts about what might be true.

There are indeed some people living on the streets but not a large number more than we have had in the past. Yes, there is overcrowding but that was also true in the past.

There is a recent surfacing of suggestions that unoccupied properties are held and in particular by speculators.

Here is where I step up with the De Bono thoughts and the aim is to suggest that we had an owner occupation rate of close to 80% in the past and it is now below 60% in some areas. The people in general would like to return to those days when it was possible to aim at owning your own home and the above is the best way of measuring it.

So we would wish to:

1. Shift the position of 20% of the population to owning their own from renting from an investor.

2. Incentivise bare land to be developed for owner occupation.

3. Make holding unoccupied property unattractive.

The important thing to note is that all of the above are under the control as a political decision. Neither RBNZ /lenders nor local councils have any ability to do anything helpful here.

Some options to help achieve the balance desired:

1. Reduce deductions for tax on mortgage interest cost. This has been highlighted before because owner-occupiers have no ability to do so while investors do and can even shift the burden further than rent income will allow. To make the transition easier one suggestion would be to remove 20% in the first year and each year for five years. Investors then have five years to either divest themselves of the asset or become mortgage free so the impost would not affect them.

2. Bare land with a mortgage would come under that same rule. However an incentive may be needed to encourage development and the existing FIF regime gives a good potential method. Under this an asset is ''deemed'' to earn 5% and if taxed at 30% it means the tax payable is 1.5% of the asset value every year held.

3. Unoccupied property would have the same ''deemed'' value for tax purposes

4. Overseas owners (individual or corporate and less than 75% NZ ownership) who do not have a tax relationship with the IRD would receive no concessions as to expenses incurred outside the NZ system.

 

 

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