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Alistair Helm asks whether it might be time to celebrate housing unaffordability

Property
Alistair Helm asks whether it might be time to celebrate housing unaffordability
<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

By Alistair Helm

The latest Demographia International Housing Affordability Survey was published earlier this week and here is the surprise! - nothing has changed in each of the 10 years that this report has been published.

The top cities of the world, be it San Francisco, London, Hong Kong, Sydney, Melbourne or Auckland are assessed by the survey as severely unaffordable.

These cities (24 in total from the 85 major markets with population over 1 million) are classed as having a ratio of house price to income of over 5.

The past 10 years has not really seen much change.

Certainly not in the line-up of the cities judged to be most unaffordable as well as those at the other end of the spectrum, being those cities assessed as being most affordable as the chart below shows.


In my view the judgement of affordability in this case is not actually true to the definition of the word. If these global cities were truly unaffordable then they would suffer a population exodus which would remove demand, free up supply of homes and drive down prices. That has not happened and will not happen anytime soon.

Scanning your eyes down the list of those cities that are least affordable as compared to those most affordable leads in my mind to a conclusion that people actually want to live in those cities that are unaffordable by this measure, and conversely don’t want to live in these cities that are affordable. The case in point in this survey are cities like Pittsburgh, Detroit and others in the US. In those cities properties are cheap due to low demand, whilst wages are around the median for the country overall leading to a low ratio of house price to income. The weak demand is a consequence of a weak economy as these cities fail to attract business and people.

This situation has parallels in NZ. There are many areas of this country where the ratio of house price to income is not 5+ but more like 3 but sadly these are towns that are struggling to maintain industry and jobs and are fighting to stop an exodus of workers.

The reality in my mind is that we cannot through any land policy (which this report’s authors place as the solution) influence what is a global shift of people to major cities. Cities that deliver jobs, facilities, lifestyle and opportunity. These dynamic and successful cities are growing and with growth comes pressure on demand for property and that leads to property inflation.

In my mind rather than bemoan the fact that we have ‘severely unaffordable' housing in Auckland that ranks us in the Top 10 most unaffordable cities in this report we should actually celebrate this fact. We are in the Top 10 because we have a vibrant economy in Auckland, we have a city that is attractive to business and immigrants to develop their lives. How depressing it would be if we were not in the Top 10, if our property prices were affordable. We would likely then be living in a less dynamic city with less economic activity and facilities, forgotten by the global economic tides and left to drift in the South Pacific.

We live in a global economy where mobility is the norm and where cities are the new brands that compete for talent. This new creative talent (have a read of Professor Richard Florida’s book ‘The Rise of the Creative Class’) is what is sought by businesses. This creative class wants to live and work in cities that offer the amenities and lifestyles that Auckland offers. Where this creative class goes, so business and money follow and so begins a virtuous cycle - one we need to be a part of to secure our economic future.

So whilst this may not be of immediate help to people looking to buy their first home, the trickle down benefit of the economic success for Auckland which defines us as severely unaffordable housing will assist the country. It is a case that ultimately equality should not be the end game - rather dynamic economic activity, placing NZ closer to centre of the global economy.

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The above article was written by Alistair Helm, and is republished with his approval. The article was originally published on Properazzi here.

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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.

142 Comments

Cannot fault this argument .

The desirability of living in Auckland is a major factor in influencing house  prices. We live in a successful,  beautiful and  well run ( apart from the disgraceful mayor Len Brown)  city .

Its a bit like our currency being a reflection of our national "share-price ", Auckland  house prices  are a reflection of our city 'share-price "

He refers to trickle - down effect on all of us of a successful city that attracts innovative and skilled people  , and I am a "Triclke -down -fundamentalist "

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.... a lesson learnt many moons ago , from being in the boy-scouts .... never sleep in the bunk directly below a " trickle down fundamentalist " ...

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A term has been coined recently among the specialist commentariat: "trickle-down urbanism".

It is meant as just as much of a criticism as "trickle-down economics".

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 “On close inspection, talent clustering provides little in the way of trickle-down benefits.”

- Richard Florida

http://www.theatlanticcities.com/jobs-and-economy/2013/01/more-losers-w…

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Well, Colin Craig is keen to put a stop to that kind of behaviour. 

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10804591

I suppose that is one way to reduce Auckland's desirability, and by this theory, house prices.

 

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I don't think Auckland is particularly well run.

Public Transport is a joke

Bicycle facilites are non existent or a joke

Rates are too high and are calculated arbitrarily (as if the facilities you enjoy and thus the contribution you pay should be based on the value of your house?)

Waste management is laughable

Aucklnd Council mandarins - especially those in top jobs - are paid ridiculously high wages. They get paid multples of what our PM gets paid. Does this sound right to you? If a job is considered to be that hard that it needs a remuneration of 700K, then my opinion is that it shoyuld probably not be done by 1 person, anyway.

 

Auckland is a desirable location because this is where the work is. That's all.

 

 

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And those highly paid mandarins produce rubbish analysis that would get them sacked in Singapore. Like estimates of housing supply that assume that in the next 30 years, every school playing field in Auckland is going to have apartment blocks built on them. 

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LA and San Fran were affordable and fast-growing economic powerhouses up until the 1970's.

Has their desirability increased since then, to justify house prices 3 to 4 times higher in real terms?

UK cities all desirable going by their median multiples??  Heck, some of them are Detroit without the redeeming features of low density and large houses.

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"Trickle down fundamentalist"? Oh, so you too have discovered that fundamentally, trickle down does not work, other than that which runs down the leg of someone who is a bit incontinent

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Trickle down "works" when the creation of wealth, is by entrepreneurs operating in competitive markets.

When the wealth is transferred, not created, it is not trickling down, it is being gouged upwards by the 1%.

Inflation in land prices by regulations is the classic, classic, classic example of the latter.

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Let me paint a mental picture for you

At the top of the ladder one guy with a very big bucketful of water, the water tap is over the bucket

Below, many people with no buckets

The bucket held by the guy at the top of the ladder has a little hole in it, through which water trickles down

You may then get it, that even if trickle down worked, it doesn't work

Eventually the people at the bottom of the ladder get sick of the whole situation and kick the ladder out from under the guy at the top

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You obviously still don't get the difference between wealth creation and zero-sum economic rent, then. Let me try to explain.

Forcing everyone to pay $500,000+ for their first home instead of $100,000+ in the hopes that the wealth will trickle back down from the gainers. How clever is that?

To you, there is no difference between a land banker who has made a 2000% capital gain; or Bill Gates. Both are rich pricks at the top of the ladder with a very small hole in their buckets.

But you and I are doing stuff now in 60 seconds, that would have been impossible a few decades ago; partly thanks to Bill Gates. We haven't lost because he got rich. He got rich by turning us into winners - the consumers of goods and services that have fallen exponentially in real cost in a competitive free market.

The same thing happened with food and clothing, decades ago. Then it happened with transport and it happened with housing. Then it started happening with "luxuries". It has also happened with capital equipment of numerous types, boosting productivity further. 

Keynesians talk about "aggregate demand". Say's Law talks about demand and production being the same thing. But the only thing that makes "it" grow, is increased value for money - getting more and more for your income. 

Maybe "trickle down" is the wrong word for this; it is really "growing the pie". 

But an increase in people getting "something for nothing" obviously has the effect of shrinking the "pie" of actual production/aggregate demand. Not in dollars; in "stuff". Dollars are just a way of denominating the value of one thing versus another. Inflation and deflation is independent of the amount of "stuff" - all that happens is the nominal price of every bit of stuff goes up or down.

It is a tragedy that most people don't see this, and as Henry George lamented 100 years ago, the ignorant leaders of "labour" spend all their time attacking and tearing down the wealth creators, and ignoring the zero-sum gougers. Ironically it is the political "representatives" of "labour" who are least likely to reform the racket in urban land and the equally egregious one in finance, "quantitative easing". 

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Are you deranged? If affordability was a ranking of desirability then here is a list of cities with the most desirable first

Darwin 6.5

Swansea 5.4

Middlesborough 4.8

Launceston 4.7

Palmerston North 4.5

Tokyo 4.4

Quebec 3.9

Chicago 3.5

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... some choice locales there .... Palmy .... and Lonnie ..... Swannie  .... aha haaaa haaaaaaaa ...

 

Truth be told , I thought April 1'st had come early this year ....

 

... then I remembered that Helmy is just pushing the industry line ..... On his theory , if Auckland houses stretch out to become as unaffordable as Hong Kong's we'll be the most desirable place in the world for business and for living .... nothing to do with the crunted supply of affordable sections due to the demented city council ....

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The Auckland helms man doesn't have to wait for April 1'st to make a complete fool of himself ....

 

.... as Phil B says ( down the thread ) what a load of absolute rubbish .....

 

Is this indicative of how disconnected from reality the " leaders " of the residential property industry have become ?

 

.... watch out for the " rags to property riches " seminars to start anytime soon coming to your capital city .....

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Relax boys and girls , I often post things just to get a reaction .

Having worked in a few third third world African countries I have seen enough to realise that and I dont really believe the trickle down of wealth works ..... and few drops in the bucket or crumbs off the table maybe , but real trickle down does not really exist .

Human nature is one of voraciuos greed and accumulation , there is seldom much left to trickle down

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That is because those economies are run by oligarchs and rentiers. Free market competition is the solution, not the problem.

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The house price inflation, is an Auckland/Christchurch issue.  Why handicap business and other parts of the country with increased interest rates.  Let the market self-regulate.  Sooner or later people and businesses will move to the provinces because of the unaffordability (if it is unaffordable).

 

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Trouble is, they are all going anti-growth in their turn. Don't disturb our nice sleepy rural town ambience....!

We need "edge cities".

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Hi Alistair, agreed, like anything else, if a city is desirable it will cost more.  Auckland may become cheaper if it is allowed to sprawl all the way to Hamilton, have sky high rates and even worse traffic.  Some would say that’s making it ‘affordable’ but what your really doing is making it less desirable hence cheaper.  

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Cities with low density sprawl don't have worse traffic. That is a myth, a shallow assumption, or a lie, depending on the culpability of the person stating it.

Check out real life data, not anti-car fanatics cheap talk.

There is also no correlation between density and local taxation burdens. 

And quality of life is far higher in leafy green low density conditions with plenty of parks and green space dotted through the urban area at low opportunity cost due to the low cost of land, as well as large yards and gardens.

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When you claim that low density sprawl produces less traffic (and pollution) you are talking about congestion/pollution per square km not per capita (refer your guru Wendell Cox on newgeography website). Per person sprawl produces more traffic and pollution, but because it's more spread out Wendell says it's better for the environment and healthier. He doesn't get into how much of the traffic in denser areas is generated by visitors from the suburbs. He just says Manhattan has densest traffic and densest population therefore Manhatanites cause more traffic congestion and pollution than suburbanites - how are we supposed to take Demographia seriously? 

 

You reckon the quality of life is much better in sprawl Clendon Park  than in dense Ponsonby - could you clarify why people pay 6x as much to live in Ponsonby?

 

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Correct: I am indeed talking about congestion/pollution per square km not per capita.

This is also what the propaganda being fed to the people of Auckland is all about - less congestion and local pollution for them in their daily lives. 

This is a lie. These people voted for Len Brown on a lie. 

That is my point.

Urban land price curves always slope up from fringe to centre I have never said anything different to this. This even happens in Houston.

But there are consequences to forcing this land price curve up. If it was not forced up, it would still be like it was a couple of decades ago - Ponsonby was affordable, cheaper in fact than newer fringe homes. 

The land price is what has inflated. This shifts everyone's choice of location outwards away from the centre. I can remember when you could buy a new fringe starter home for 3 times household income, and an old fixer-upper house in Ponsonby for LESS than that. Now there are no fringe starter homes, and there would be no point, because the section alone is around 4X household income at the median, and more like 6X a young household's income.

The Ponsonby fixer-upper HOUSE is still worth almost nothing as a structure, but the land is 6 times as expensive as the land at the fringe. That is what has changed. Alain Bertaud's studies on the "spatial distribution of density" were pointing out this unintended consequence back in the early 2000's. But planners are mostly impervious to reason backed with real life evidence. And then there are the Gordon Gekko types in the vested interests........

 

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You have not answered the question. 

 

You haven't explained why people choose to pay to live in a denser area when there is a 6x cheaper option available right now in Auckland providing (you claim) a higher quality of life.

 

 

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Far FEWER people will be choosing to locate in Ponsonby under the status quo, than if the market was not distorted. It is a simple matter of supply and demand curves at each location. There is no accounting for the tastes of a hardy minority who will pay $1 point something million for a shitter for which fair value would be $200,000 or less. I suspect many of them are greed-crazed speculators gearing up and up on their portfolios, and I wish them all loss of shirt off their backs when the crash comes. 
 

As I keep suggesting to you to read, Alain Bertaud's studies on "the spatial distribution of density" show that MORE people end up living at the inefficient, "fringe and beyond" locations when the prices are forced up by a UGB. 

A city population density curve is normally a gentle increase from low density at the fringe, to high density at the centre.

Cities with a UGB all have a land rent curve that is pushed up at the UGB by a factor of 10 to 20 or more, and the next effect, visible on Google Earth, is an increase in weirdly higher density right at the fringe without corresponding increased density in inner suburbs. And what you can't see on Google Earth, is the proportion of people commuting from exurbs and rural towns up to 100 miles away. Driving past tens of thousands of acres of land that is worth $30,000 per acre, that they are not allowed to live on closer to work. 

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I see. People only chose to pay $1.5M+ to live in Ponsonby instead of choosing to pay $300K to live on the fringe (with you claim a better life style) because there's a limited number of $300K fringe houses. 

 

You should spend less time posting and more time with people.

 

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You also haven't guessed at how much traffic in denser areas is caused by visitors from lower density areas.

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The planners are guilty of trying to centralise everything more in the hopes that more people will use public transport. So they are guilty of forcing suburbanites to visit the core and indeed commute there for work. But only a small proportion will use public transport even so.

Planners are in denial about the basic reality, which is that the 3 things that matter for efficient commuting are:

1) Co-location of businesses and residences

2) Systemic affordability so that there is minimal "pricing out" from any location anyone might desire to live nearer to

3) The intensity of road space where the travel is mostly taking place - in the dispersed areas. By necessity a more dispersed, lower density city has more road space intensity.

There are some good theoretical papers on this. 

Anas and Xu (1999): Congestion, Land Use, and Job Dispersion

William Wheaton (2002): Commuting, Ricardian Rent and House Price Appreciation in Cities with Dispersed Employment and Mixed Land-Use

These authors suggest that cities will trend towards an equilibrium of improved mixing, shorter commute times, and lower real land costs per household - IF planners get OUT OF THE WAY. 

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Oh I see. It's all the planners fault for forcing suburbanites to drive which makes them cause traffic congestion. If there was no dense areas then the suburbanites wouldn't have to drive to get to them.

 

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Big tick to the NZ Herald for the interactive map.

 

I think it visually shows what a nonsense Alisters 'desirability' argument is.

 

 

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It is a shame more analysis isn't available for Europe because like the US the whole continent is not unaffordable but we lack the exact statisitics.

 

From Lorax in the comment stream on MarcroBusiness
 
Leith, can I make one point without being yelled at? As discussed many times here the planning system in both Germany and Houston/Atlanta have resulted in much more sensible house prices than the UK, Australia etc. However the German system has created more compact, walkable, sustainable cities whilst Houston and Atlanta are known as the poster children for sprawl. Why then your emphasis on promoting the Houston model over the German model?
 
Leith replies
 
I have written many times on the German system. It, too, is a worthy model. The key benefit is that Germany has “right to build” embedded in its constitution, which provides a presumption in favour of development, rather than the negative approach employed here. Germany is also very decentralised, with loads of small cities built around its various manufacturing companies. It is a real economy.
 
There are other interesting comments made in the same comment stream about Germany. Check it out.

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On Germany, you might remember we ran this from Oliver Hartwich last year - http://www.interest.co.nz/property/66860/changing-nzs-local-govt-fundin…

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Bear in mind that Germany's median multiples are actually not as impressive as the US affordable cities. But they are better than NZ. They are also very stable, and there is a lot more renting, with rents being way below what prices suggest they should be, due to rent controls. Yet strangely this does not seem to have resulted in undersupply.

Hartwich's colleagues did a good job in this report; read the chapter on Germany there:

http://nzinitiative.org.nz/site/nzinitiative/files/publications/Differe…

The whole culture appears to be different.

Also bear in mind that Germany has famous autobahns and a vibrant car culture, and its cities are nowhere near as dense as the UK's. In fact several of its cities are less dense than Auckland is now. As are all French cities with the exception of Paris. 

Public transport costs huge subsidies in Germany too. It is a mistake to think that anywhere is otherwise even if their system is beloved by Greenies all over the world. Greenies think "funding" is something that governments can simply print.

Germany has such stringent and expensive requirements for car ownership and driver licensing, that a significant lower socio-economic cohort cannot afford it. So public transport subsidies are partly a sop to the conscience of elitist Mercedes and BMW drivers who like to have the roads clear of loser proles.  

 

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Thanks Gareth there is also this one. 

 

http://www.interest.co.nz/property/67118/nz-initiatives-oliver-hartwich…-

 

And the NZ Initiative has also put out their proposed housing reforms which was flawed because they thought giving GSt from new builds to local councils was a good idea. But it defeated the whole idea of encouraging LG to not bugger around with increasing land prices. 

 

I am not sure why they did that because it didn't follow from their analysis of what Germany does.

 

Anyway the point is that these issues have been well covered in Interest.co.nz and people like me that take the time and effort to understand them can see where the problems and potential solutions lie.

 

But without better data and easily understanding graphs, maps etc it is very difficult to quickly explain this to the wider public.

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".......the point is that these issues have been well covered in Interest.co.nz and people like me that take the time and effort to understand them can see where the problems and potential solutions lie......"

And it is a shame that there are people with more responsibility in terms of their potential influence for clarity and good, who remain "unhelpful" to say the least. In spite of the clarification of the issues that you refer to. 

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Well Phil perhaps some more time and effort is requird on your part to see where the problems and solution lie with regard to the "unhelpful". :-)

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Or perhaps you need better data, graphs and visual presentation of your interpretation of events?

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Perhaps the best comment on Germany from Marcorbusiness

 

But as I’ve said before…Germany has had its Stalingrad moment and they’ve learnt from it. Snail cafe

 

When does NZ learn this leson?

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...... 'vibrant'.. the most overused word to describe Auckland. 

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There is a very interesting paper/academic book chapter called "The Creative City and its Distributive Consequences", by Philip Morrison of Vic Uni.

The problem is high housing costs cause all the amenities to be hogged by higher income earners who can afford the location nearer where the centralised infrastructure spend actually is. 

Even Richard Florida has conceded this; which Helms either doesn't know about or doesn't want to know about.

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yep...i'm heading off down town tonight and see if I can do some vibrating....anyone in Auck know whre the best vibrators hang out... apparently there heaps of it about?

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I can think of a prominent Aucklander who would be just the man to advise you, and he is dedicated to promoting his city and its vibrancy.

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Gee I'm 60 wonder if I can do that, are any attractive 28 year old filipino guys out there looking to "hook up"

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What a load of rubbish:

"....How depressing it would be if we were not in the Top 10, if our property prices were affordable. We would likely then be living in a less dynamic city with less economic activity and facilities...."

The prices in the utopian centrally-planned housing supply cities all end up so high that creative young people end up going elsewhere. No city has grown because it adopted exclusionary policies. They have all grown in spite of them, if they have grown at all, and would have grown even more without them. 

http://www.newgeography.com/content/003007-the-us-cities-getting-smarte…

New York urban area growth has collapsed since its house prices headed into unaffordable territory. 

All the UK's cities are growth-contained. Has that produced vibrant cities where talent wants to live, all over the UK?

Would the UK be better off with a Houston or 2 as well as London, instead of, say, Liverpool and Newcastle?

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THE METRO AREAS WITH THE MOST ECONOMIC MOMENTUM GOING INTO 2014

http://www.newgeography.com/content/004111-metro-areas-most-economic-mo…

 

DENSITY, UNPACKED: IS CREATIVE CLASS THEORY A FRONT FOR REAL ESTATE GREED?

http://www.newgeography.com/content/004031-density-unpacked-is-creative…

 

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NOT WHEN ONE LOOKS AT AUCKLANDS UNEMPLOYMENT RATE ALISTAIR!

It’s immegrant or cheap hot bank money and a highly manipulated property market (those clever creative people you mentioned) causing unaffordability and creating the huge imbalance in the local economy shutting out average earning Kiwis.

Mainly those who brought prior to and around the 90's when the Government decoupled the dollar are the ones smuggly celebrating in their retirement - and then theres the rest (majority) of NZ?

Wages have definitely not kept step in NZ and not far of what people were getting paid in the 80’s.

Remember NZ only side stepped the 2008 GFC, caused by over priced housing.

 

 

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Only 50% of the posts in this thread are from Hugh and Phil - I know it's Friday but you really are slacking. 

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Now it's less than 50% - sorry.

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Someone's got to fight the unreason.

The idea that "planning" will produce wealthy cities all by itself, is akin to THIS:

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

 

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Wendell (Mr Demographia) argues that if an area with 4.5 x more people causes 3.9 x more pollution it pollutes more. Therefore if those people spread out and individually polluted more it would be better for the environment.

 

Your concept of reason is different to mine.

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When did first world countries become pagan nature-worshiping theocracies? I thought secular government was an inviolable principle.

It is "impact on people" that matters, not "impact on the Gaia Earth Mother".

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I'm starting to get it - you're nuts.

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And we have been through an enlightenment, and turned our backs on it. Those poor primitives have yet to have it.

C S Lewis once said something like this: the difference between primitive pagans and the post-enlightenment declining West, was like the difference between an ignorant girl born into squalor and prostitution, and a Lady who has abandoned her Nobleman husband for a life of debauchery with guttersnipes. 

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Auckland may be a great city to live but it still got crap public transport and (not) free wifi.  

I can't believe Auckland Council put up street signs promoting free wifi along Parnell, Ponsonby, Mt eden and CBD.  You'd would be extremely lucky to be able to connect and only get a measly 30MB free.  Even Nepal has better connection that that.  Common Len, shape up..what do you do with our rates!

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Considering Auckland's natural assets, it's a shocker. I've only lived here on and off for 10 years, but looking at Auckland's history it's basically a long story of missed opportunities leading to poor infrastructure, brainless sprawl and myopic develoment caused by petty squabbles between vested interests. A potentially great city knackered by selfishness.

If you could get another 200k people with 5km of the cbd that would be a start, but I can't see it happening while Aucklanders are prepared to pay a million bucks for a leaky old villa in Ponsonby, or to spend 2 hours a day going 15kmh in their car to St Helier.

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VL: There is such a simple solution - reclaim the entire foreshore from CBD along Tamaki Drive to St Heliers by 400 metres, widen Tamaki Drive to 8 lanes, and HNZ develop 400 sqm sections along the reclaimed land, and build 80 sqm houses and sell them off to FHB's .. that'll fix it

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That's a great idea TOGs

My previous plan was to spray Agent Orange over Ponsonby and Parnell so they'd be forced to replace all those terrible old villas with some decent medium density housing, but I'm struggling to get the right consents....

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I hope you are yanking my chain - about increasing the density in Ponsonby and Parnell - oh - I forgot to mention those recommended state-house new-builds along the foreshore should all have septic-tanks - because the existing 1900's sewerage system is overloaded now

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 "......the existing 1900's sewerage system is overloaded now...."

Quite. And the Council wants to pay for renewal of it by forcing developers to do intensification there, for which they will shake them down for fees.

After having claimed "intensification better utilises existing infrastructure".

Welcome to one more facet of the great conspiracy against the public. Renewal is one of the things rates are for.

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Guys, guys, guys.

This is a complex question but I think many people who contribute on this site are well capable of understanding it.

Imposing a UGB forces all land prices up.

That immediately chokes off the potential for "redevelopment" at any densities, simply because available finance is taken up far more with the raw land cost.

Jasmax Consultants "Fine Grain Analysis" of the Auckland Spatial Plan did not blame the UGB (although it should have), but found that the cost of existing sites was a barrier to redevelopment at virtually all locations.

If you buy an old villa in Ponsonby for $1.5 million, knock it down and build 3 townhouses on the site, those are going to end up at something close to $1 million each. This is ridiculous.

In Houston or any other city with a low, flat urban land rent curve, you can buy the centrally located old villa (on a larger site too) for $100,000, knock it down and build 3 (larger) townhouses and sell them for $200,000 each. 

In which city is there "choice"?

The UGB is one of the single worst "planning" instruments in human history. Urban economists are virtually unanimous about this, but what do they know compared to planners and their infinite wisdom?

If you want to densify a city at the right places you have to resist the temptation to enact a UGB, and you have to be prepared to use targeted land taxes to hurry up the process of inensification. Or even better, compulsory acquisition of land. 

Now I am a free-market person, but I do say that if it is really so necessary to save the planet with urban planning, then compulsory acquisitions are surely justified? Otherwise the whole thing might just be a ploy to create capital gains.....no, wait.......

 

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Condoms, the pill and vasectomies will save the planet

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Already are. Birth rates plumment everywhere that survival rates increase thanks to modern medicine etc. On trend, the population of the earth will start to "do a Japan" anyway before it reaches 9 billion.

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One can but hope, but no matter how I look at it, I do not think the planet is capable of sustainably supporting 9 billion. Sustainable is only about 3 billion so a looooong way to go

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The resource economist Colin Clark, in his 1967 book "Population Growth and Land Use", estimated that the world could, with the technology of that time, feed 47 billion people. He also quoted Soviet researchers who claimed 80 million with coming tech advancements.

But if the world "does a Japan" it will be back down to 3 billion from the 8 - 9 billion peak within a couple of generations. 

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I'll bet he'd made little allowance for other species to co-exist on the planet. Be damned if I'd want to exist on something like that, confined to some box multi stories in the air as there was no room on the ground. Sod that

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Surely this author can't be serious.  His premise is that expensive housing is a sign of an attractive, 'vibrant' city where people and businesses want to locate.  Is Hamilton (median multiple 4.8) more vibrant than Tokyo (4.4 multiple, 30 million people), or a bigger business hub than Houston, Texas (3.3 multiple, 24 Fortune 500 company headquarters)?  

And what about heavily taxed, congested Los Angeles (7.7 multiple)?  Was it "unattractive" during the 1970s when it had much faster population growth, yet somehow managed to maintain house prices at three times incomes?  Is Auckland (8.0) really that much better than it was 20 years ago, to justify the 150% increase in house prices relative to incomes since then?

Mr Helm is right about one thing: most of the expensive cities in the Demographia survey do have natural advantages that make them attractive for potential migrants.  However, their "smart growth" policies make housing so expensive that many people who would like to live in these cities are forced to move to more affordable locations.  Five of the ten fastest-growing cities in the US are in Texas, and I doubt they're moving there for the weather.  

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After reading this article I feel even better about being invested in the Auckland property market.

Thank you.

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Who says Aucklands housing is unaffordable?

And, what is "affordable"?

And who are we comparing it to?

If it were unaffordable there would be no sales at all , yet Auckland accounts for a massive % of New Zealands property transactions

Auckland property is unaffordable for some , but that is the case in every city on the planet .

One could argue that it is expensive , but so is New Zealand lamb and New Zealand Milk and New Zealand sourced fish, and so is New Zealand's Petrol price  .

 

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So no complaints are to be entertained if food and clothing were being hiked in prices by an oligarchy, because after all, people would still be buying them.......

And of course the nice friendly mortgage lenders are happy to help.... they make a LOT more profits the larger "loan principal" is.

GO, Gordon Gekko. Housing always was your natural forte, the writers of the show just never realised this.

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But, Hugh, it's ignorant. Of fact.

 

"with rates fixed for 30 years".

 

Only a moron thinks we have 30 years left of this fossil-energy-fuelled regime. No mortgage gets paid back if it's that long. What the hell goods and services will be trtaded to pay it off?

 

All else is ponzi - as you rightly point out.

 

Funny how some folk need to cling to what they need to believe, while they're quite happy to reveal the portion of the real, which suits their case.

 

 

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What is peak wind power for NZ? Geothermal, Solar, Hydro even? We are a long way off peak energy in NZ. We will have plenty of energy to make stuff to trade with others.
Whether they have much to trade back is debatable.

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Brendon we currently import 50% of our energy needs.

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I know NZ has barely started the renewable energy revolution we are capable of.

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Let alone the fossil fuels extraction.

But Kevin Cudby in "From Smoke to Mirrors" describes how easily NZ could go 100% renewable; are you aware of him?

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No I have not read it. I have an engineering friend so do not need to read a book written by an engineer. But from the title it seems to be ok.

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One wind farm nearly 10% of our electrical energy needs and about 5% of our total energy needs. It is all consented and waiting for when we have a genuine shortage of energy.

 

No need to worry about a shortage of energy in 30 years time, for a small initial capital outlay we get continous energy. My friend did some calculations and even using electricity rather than coal to make steel it would only three months electricity from a windfarm to make the various components to construct itself.

 

So to answer my own question, no we have not reached peak energy in NZ yet. PDK that is a fact and it is not based on ignorance, it comes from asking the experts who run our electricity system.

 

 

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You may have missed my previous comments on this Brendon but you won't see concrete delivered by electric vehicles. In fact no heavy freight. Copper is the barrier to electricity generation, there is less than 40 years at current rates of consumption. If the world gradually shifts toward greater use of electrical energy then the demand on the copper will see those reserves depleted pretty quickly.

 

Yes we have an abundance of energy, but is that an excuse to waste it with out current lifestyle? A single person moving around in a 1-2 tonne motor vehcile is a gross waste. There is no excuse for not building passive solar into our houses, it is a greater factor than double glazing for thermal performance.

 

Instead of burning our fossil fuel it should be utilised directly in sustainable infrustrature, that would be the way to ensure economic prosperity for New Zealand.

 

Decentralised is also the better model, which you advocate for local governance I see. If it is decentralised then it makes it very difficult for the asset to be sold off to foreign interests so the unearned income disappears offshore.

 

For transport fuel I am already on the record on this site for saying that 10% of a farm will have to be given over to the production of biomass energy production.

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Scarfie the future is not without challenges. I think it is helpful population growth in NZ is tailing off, if we didn't have emigration and immigration we would be pretty much at peak population. I am ok with economic growth leveling off too. Maybe just efficiency and technology gains -better medications replaing older ones -that sort of thing. I don't see us living like the jetsons anytime ever.

 

Recycling stuff like copper is going to be important.

 

Re heavy trucks my friend says there is a lot research going on to using the 50-60 degree 'waste' hotwater from the NI geothermal plants that is uniquely in the world combined with a large source of waste wood products to improve the efficiency of making biofuel.

 

I think the urban small vehicle fleet will run on electricity and the rural + heavy vehicle fleet will run on biofuel in the medium to long term.

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Question needs to be asked: Can an average Joe Blog afford to live in Herne Bay, Remuera, Epsoms and surrounds??  Ask the people who sit around you at work and see what the responses are then you will know what's real and what's not.

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This Chinese lady might appear to be the average Joe Blog based on her NZ earning but deep down her money from overseas proves that she is anything but average!

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Its brilliant. I celebrate every day that my home town is up there in the world's most grotesquely unaffordable cities.

Auckland is a nice place to live if you bought a house a long time ago. But its really not anything more special than plenty of other places in the world and commuting is a nightmare.

If you are a young Aucklander and have half a clue the best option is to pack up and take your talents elsewhere.

The sad thing is that nobody really cares that so many young people leave. They are just replaced an avalanche of wealthy immigrants who perpetuate the cycle.

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For $ 800 K you can buy 4 or 5 nice 3BRM homes in Oamaru .... each with a generous 900 m2 section .... live in one , rent the others out , spend your days Steam Punking !

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Sorry, but the racket is unsustainable in Auckland or anywhere. Somewhere along the line there is a disconnect between actual incomes/production and the cost of land, that cannot be exceeded. 

Here is some median multiple data for Ireland:

2007:
Cork 4.7
Dublin City/County 5.4
Dublin Exurbs 5.0
Galway 4.6
Limerick 3.5
Waterford 4.1

 

2008:
Cork 5.4
Dublin 6.0
Galway 5.6
Limerick 4.3
Waterford 4.9

 

2009:
Cork 3.6
Dublin 4.7
Galway 3.2
Limerick 4.2
Waterford 3.7

 

Obviously we are way beyond what the Irish economy could sustain in terms of the disconnect I mention.

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The Republic of Ireland is where they come from. Northern Ireland is where they go TO. High median multiples there, too; actually since much longer than they were high in the Republic. Belfast hit 8.8 in 2007. 

Israel has expensive property too. Getting bombed by terrorists frequently must be an attraction.

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The IRA mainly recruited from Northern Ireland. Not the South.

They're defunct, now, anyway.

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Why dont you include stats for Majorca and French Riviera, and Nice in France, and Aspen in US, because that's what Auckland is. A playground for rich migrants.

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Come on, Kiwi small man/Len Brown syndrome is bad enough without trying to claim we are Majorca and the Riviera; as well as Hong Kong, London and Vancouver. 

Here's a RE site for the Riviera:

http://www.realtor.com/international/search-listing/Provence-Alpes-C%C3…

Come ON; is anyone STILL not going to "get a conscience"???

Young Kiwis have to pay "higher than Riviera" prices just to exist in a tinpot bottom-of-the-OECD country; sounds like logic and justice (NOT)

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I live 4km from the CBD and the lowest CV in my street of over 30 houses is $1.3 mil.  Where is this 800k coming from?

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Your numbers are exaggerated, how about we just work with the median prices from the 2014 demographia survey for a more accurate comparison (yeah, they are a few months old now...)

Auckland: $561,700
Melbourne: $595,500 (NZD $627,884)
London (GLA): £326,000 (NZD $652,293)
Sydney: $722,700 (NZD $762,002)

In real terms the differences are nowhere near what you are trying to make out.

It seems like everybody tries to justify the prices high prices in Auckland by comparing them to big global cities like London or New York.  The thing is Auckland is just about as expensive and doesn't really hold a candle to them in what it offers.

Anecdotally, I have lived in London for some time now.  I get the impression people in New Zealand think it is an expensive place, and yet I find it's more of less the same cost of living as Auckland (for many things much cheaper) and there is a *huge* difference in your earning potential, the opportunities available and the amount of disposable income at your hands.

And of course, in real terms a house on the fringes of Auckland is "cheap" compared to say the centre of London or New York.  It's just a real shame that the only option available to anybody starting out in Auckland these days, is to leave Auckland behind, in order to one day afford Auckland.

Its rather silly.

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I gather that you are long windedly asserting that a typical "kiwi-style" freestanding house on a quarter acre section is going to be more expensive in other cities than the median prices there would reflect.  You'd be right to some degree.

Then again on the flipside you could argue that houses in Auckland are much more poorly insulated, barely soundproofed, damp and leaking and have terrible amenities, transport options and long car-only commutes.  There are pros and cons to all places. 

Most people don't really care about how far their house is from a central point, they care about how much time and effort it takes to commute to work.  Same goes for the free-standing house and 500sqm of land.  It's not really required depending on soundproofing and the quality and quantity of public space nearby.

In Auckland there is little choice.  You must pay for the freestanding house and yard and commute to the CBD or live in some awful CBD apartments.  No wonder kiwis hate them when they are typically a tacky shoebox.  

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$100k ??? Typo ???

Whenever I look at houses around north-west Auckland (where I grew up) its circa $500k a house these days.

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Huntly isn't "Auckland fringe". Anyone living in Huntly will be driving past thousands and thousands of acres of $30,000-per-acre land that they could have lived on far closer to Auckland, but are not allowed to. 

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That's because it is farmland, where that stuff called food comes from. We'd be crazy to carve up the best of that for housing any more than we have. We have already sacrificed some of the best volcanic soil anywhere, and that is in and around Auckland. Look at Mangere. 

Better we start to look at just how big we want Auckland to be in terms of numbers

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We export 90% of what we produce on our farms. If we had competitive urban economies, we could make up several times in exports from urban economies, what we would "lose" from every acre converted to urban use.

No economy in the world has done anything but slide down the wealth rankings when it relies on farming produce exports. All the growth in incomes globally has been via "value added" industries. The "terms of trade" for farming products has declined 75%. You need to export 4 times as much farming product now to pay for the same stuff you import. 

Ignorant Kiwis admire Sweden's welfare system, but we are not so smart as to export fighter jets so as to pay for a welfare system just as good.

The UK has destroyed its once-great manufactured exports sector by "preserving farmland". If it wasn't for financial services provided to the world, they would be bottom of the OECD along with us. Getting rich on selling financial services to the world is not something you can "plan" into existence. It relies on stuff that happened hundreds of years ago. 

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NZ being a long country has a great range of climates, to use up all the land in some of the best parts, climate-wise is just dumb plus we do not need hordes more people anyway

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Both the UK and NZ are illustrations of the flow-on consequences of housing being so dam expensive that recent buyers have 60% of their incomes sucked out in mortgage repayments. Then people express surprise that they don't spend more money on the dump they paid far too much for......!!!

Look at housing in the UK to see the consequences after a few more decades of doing this stuff. 

Please show us the $100K houses anywhere near Auckland. RE site ads, please.

Here is what you can get in Houston, near the CBD, for $100,000:

http://www.realtor.com/realestateandhomes-search/Houston_TX/type-condo-…

This is in fact not unusual of most cities back in the days before they "ran out of land". Of all the famous, vibrant cities we are talking about; New York was affordable up till around 2000; LA and SF were affordable up till about 1975; Melbourne was affordable up till around 1995; Chicago has barely ever become significantly unaffordable; Paris was always known to be far more affordable than London and indeed the rest of France was known to be far more affordable than the UK's cities; Tokyo has been an absolute bargain for years now; Rome and Milan are famously affordable; Spain's cities were famously affordable up till around 1995; Scandinavian cities were affordable up till around 1990; Zurich and Vienna are cheaper than Geelong and Wollongong.

The "value for money" is simply all over the place; and the explanation is (patiently repeating this for the zillionth time) distortions in land markets as the result of regulatory interference.

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Actually, Auckland's apartment rents are a disgrace.

http://tvnz.co.nz/close-up/shoebox-living-and-you-get-your-rent-3379779

http://www.realestate.co.nz/rental/search/property_types/11/suburbs/3095

http://www.tokyoapartments.jp/search-area-result/Central-Tokyo-Area+Unf…

Knock yourself out. The exchange rate is around 83 yen to the NZ $

You talk about Hong Kong and Mumbai as if these are places, in their culture and institutions, that are worth emulating. Heck, why is "western civilisation", western civilisation at all? 

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*double post*

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Chucking the fringes open and letting the developers rip would have had everyone housed by now, and prices affordable as the icing on the cake.

The CBD should have been left to re-evolve over the next 20 years or so. Real families and their needs should have come first.

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Agreed but the financial funding side of councils need to be addressed. We need a different system than rates provides the maintenance for LG assets (if that in some cases) while developer and financial contributions provides the new capital -the new roads, the serviced sections etc. This system forces the councils into an anti-competitive alliance with the few big developers who survive the land bidding war in our restrictive zoning process.

 

The Canterbury earthquakes have been a major test of NZ's planning and urban development systems, so far it has been a massive failure. The whole of NZ should be concerned because what has happened quickly to Christchurch will happen slowly elsewhere in terms of housing affordability, leap frog sprawling past the UGB and the stuttering growth below expectations.

 

A few words from Alain Bertaud on how to make things better.

 

Land use regulations and the availability of trunk infrastructure heavily constrain the supply of developable land.

 

Planners, therefore, have a key role to play in ensuring an elastic supply of land by auditing land use regulations and by planning new trunk infrastructure that would allow the development of new areas or faster travel time to already built-up areas.

 

A periodic regulatory audit should weed out obsolete regulations to allow an elastic land supply and to increase households’ ability to consume the amount of land and floor space that would maximize their welfare in the location of their choice. Part of the audit should concern the regulations, taxes, and administrative practices that unnecessarily increase transaction costs when building new housing units or selling or buying existing ones.

 

The twin objectives of maintaining mobility and housing affordability should drive the design, financing, and construction of trunk infrastructure. Because the building of trunk infrastructure often requires the use of eminent domain, governments have a monopoly on its design and construction.

 

Here is a new simple job description for urban planners: plan the development of trunk infrastructure to maintain a steady supply of developable land for future development, but leave land and floor consumption per dwelling to the market.

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Re: "Because the building of trunk infrastructure often requires the use of eminent domain, governments have a monopoly on its design and construction."

 

The only way to get competition into trunk infrastructure provision is to get government competing against itself. The way to do that is to devolve funding and responsibilty for transport to Local government.

 

That way towns and cities are competing against each other on the quality of their infrastructure. This is what underpins the diversified economies of Denmark, Germany etc.

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A Global Perspective on Localism P.14 by Oliver Hartwich

 

As an economic liberal, Hayek was suspicious of government as a service provider. But if there was to be a public service provider, then he clearly preferred local government to central government.

Hayek’s preference is valid from an economic perspective. Apart from government intervention, economists fear few things more than monopolies. Where a national government provides public services, it would be a monopoly. For an economist, these are two evils in one.

Economists therefore favour competition in the provision of public services, and one way to ensure competition is to let local government provide public services. This idea goes back to a seminal article, ‘A Pure Theory of Local Expenditures’, published in 1956 by Charles Tiebout in The Journal of Political Economy.7

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There is no more 'affordable'. Ever.

 

As we deplete resources - be it farming-area, topsiol erosion, nutrient, water-table, finite resource extraction, or unmitigated exhaust (landfills, eutrification, CO2) the 'cost' has to go up. Worse, as the depletion-rates hasten (it's called growth) the cost has to hasten it's 'up'. Worser - the end-point of cost must logically be infinity, and the graph therefore trends to the vertical.

 

Funny to watch those who blame others for something so mathematically predictable.

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I would relax a bit about the "coming ice age" stories, because:

1) this round of stories began in the daily mail, so I'm calling that the reporting may not be fully nuanced about the 20% chance based on the accuracy of everything else published in the daily mail.

2) there is been so much global warming over the past hundred or so years, that if global temperatures drop by as much as the difference between just before the little ice age and the little ice age, then temperatures would be dropping to about the level of 1900.

3) the little ice age actually wasn't that bad for most of the world, it is just Europe got a real hammering, and most of our reporting comes from Europe. I've seen good arguements that if any major climate events disrupt the Gulf Stream, then Europe suddenly stops getting warm air from the tropics and is as cold as it should be at that latitude. Something like that may have happened. The main point is the effects you read about in the histories of the period were pretty regional.

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Just ignore that guy wearing the beard, robes and "the end is nigh" sandwich board, everyone. 

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.... which one .... PDK , steven , Bernard ..... or raegun ?

 

Oooooooooooops ! .... silly of me .... obviously one of them is not a guy with a beard .... kindly omit Bernard , then ....

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The security guys haven't the heart to stop him at the entrance. They assume he is harmless.

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"....As we deplete resources........ the 'cost' has to go up.......

"......Funny to watch those who blame others for something so mathematically predictable....."

No need to worry about 2000% zero-sum capital gains on something that isn't running out, then - i.e. urban fringe land in New Zealand (and food supply in NZ, and energy in NZ - news flash: there are 4 million of us in a country the size of Japan with 127 million).

Does "big property" pay you to say this stuff to protect their racket? Nah - I can't believe they would have anything to gain by paying someone say something so transparently stupid as that houses and urban land are unaffordable in NZ "because NZ is running out of land and resources".

How have you avoided being certified, for so long?

 

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If you were from Mars and landed in NZ with a bucket of money to invest the only place you would invest would be the housing market.Prices just seem to keep rising while headlines about the NZX read sharesfall on Asian concerns,Chinese investment slowing and soforth.

There are other places to invest your money in but just as rugby makes us a 1 country sport housing makes us a 1 investment country.

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Cynically investing in a property bubble and joining the cheerleaders is like playing a poker game on a sinking ship with the best cabin as the stakes, instead of trying to stop the ship from sinking.

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Says a shrieking one-topic, machine-gunning troll/poster, who advocates more cabins.

 

On said sinking ship.

 

While advocating others to ignore the warnings.

 

Brilliant. Follow that man immediately.

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Two years ago, an article by Olly Newland became the most commented on article ever. It attracted more than 300 comments. Huge-One and his faithfull sidekick Phil, between them accounted for 60% of them. I know, I downloaded the HTML pages and rang a program over them and counted them. It's a fact

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It is a honour to defend the public interest against a pack of charlatans and members of a conspiracy to defraud the public. You can't play a game of "whack-a-mole" with only moles and no-one to do the whacking.......

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.... if you and Hugh , and one or two other guys with a zany high profile weren't here to redress the balance , from the screaming leftie green banshees .... many of us would abandon the site as just another Malthusian Luddite infested waste of space ....

 

Carry on Machine Gunning the Watermelon Men ....

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".... a shrieking one-topic, machine-gunning troll/poster....."

Did you look in the mirror to think that one up?

I suspect you have posted several times as many comments on here as I have in the last 4 years. 

And as for being a one-topic shrieker, you've got a gall to call someone else that.

At least I know a bit about stuff that is relevant to this forum. I don't know of any other finance and economics sites that are so tolerant of shrieking Mathusian trolls with nil understanding of finance and economics, as this one. That's Chaston et al's funeral if they are happy with that. 

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... you remember that scene from the Vietnam war movie " The Deerhunter " where the guys were playing Russian roulette with  one bullet in a revolver .... they had a 1 in 6 probability of dying at each turn ....

 

Whereas in NZ real estate , particularly that in Auckland .... from an investors point of view , it's more like playing Russian roulette with a loaded blunderbuss ....

 

... blunderbuss ? ..... does that sum up the Auckland public transport system ???

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I haven't even bothered to read this article due to the absolute absurdity of the title.

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Nice post Alter Ego

I agree most wealthy people are satisfied and content and being rich doesn't make you happy

unfortunately most of my peers don't even have a plan for 2014 let alone retirement 

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Here is another absurd one.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11191755

A cheap state house, if ever I saw one.

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Once upon a time POMS were encouraged to come to New Zealand. We charged them £10 for the privilege. They had to surrender their passport for 2 years. They were known as £10 POMS. Most of them arrived with nothing but the clothes on their back. Don't know why they came. The sunshine and acquatic setting and pure 100% nature must have appealed. Many stayed. Many didn't. What is £10 in 1950 worth in todays money? A lot of money

 

What I do know is, if you give someone an expensive toy to play with, they wont respect it.

 

Why would they? It cost them nothing.

 

They assume there is more where that came from. Now we don't charge anything. We let them in for nothing. They don't respect it. They treat it with disdain.

 

Look at the news this past fortnight. Our beaches in Auckland and Wellington and Hawkes Bay are so polluted the swimming holes are having to be closed. When was the last time that happened?

 

Don't worry, when it's too late, when it's stuffed, the rich migrants will turkey off, say thanks for the pleasure, it's too polluted for us, we're off. Leave you to it.

 

Thanks for coming.

 

The next generation of native born kiwis will be able to buy dirt cheap houses in a place that no longer has the qualities and attributes that made it what it was.

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You ARE talking about New Zealand, are you?

Our 4 million population leaves us 0.7% urbanised.

If we can't manage our pollution, Japan with 127 million people must be turning the whole Pacific Ocean into a cess pit. 

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Phil I have some sympathy for the anti immigrant thinkers. Not because migration is a more significant demand factor than the artificial scarcity supply factors. Houston is flooded by migrants and house to medium prices have only risen to 3.3 or 3.5 thereabouts. If only we were so lucky.

 

But given NZs highly mobile migrants to better pastures it is only an equally high immigration rate to NZ that keeps the housing market bubble status quo stable.

 

If we really cared about competition and opportunities for all we would have highly competitive local institutions (public and private) and lower immigration then use local migration to drive better outcomes.

 

Does that make sense or have I had too many Friday beers...

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You mean the problem is that we are losing "better" people on average and gaining "not as good" people on average?

I agree with that.

I think we should stop losing the best people, and let the population rise. There are immigrants that we should definitely not be letting in, but I don't agree that we need to aim for zero population growth. 

If we were expected to do our bit for global rebalancing, as a temperate country where human existence can potentially be less energy intensive, we should let in a lot of (good) people from less temperate places. I can't understand why we don't get more Scandinavians, for example. Singaporeans would be logical too. 

But there are 1 million expat Kiwis and 4 million at home; while there are 1 million expat Aussies and 22 million at home. I reckon NZ might have one of the biggest diasporas proportional to the size of its population, of any country in the world. And these are all above average people we have lost. Even the builders labourers we have lost, are the best builders labourers.

My dream is for NZ to ride out the global depression by building houses for returning Kiwis, at affordable land prices so that the maximum actual "construction" occurs relative to the outlay for "housing". A surge of creativity and entrepreneurship would gradually supplant the "growth for its own sake". The rest of the world is going insane running property Ponzi schemes and if one small nation bucked the trend there would be a killing to be made in it. Sadly though it has been left far too late - "affordability" now means "crash". But we could still recover far better from the crash, than we would by repeating other nations mistakes and trying to restore bubble values as if they are a new norm.

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Re: You mean the problem is that we are losing "better" people on average and gaining "not as good" people on average

 

I didn't quite mean that, although I don't disagree with you. I have 8 brothers, sisters and cousins, 4 of whom are overseas. The overseas ones are probably on balance the best of us. While my Finnish wife has 30 cousins etc and only she is overseas. NZ is odd.

 

What I meant to say is that the high immigration rate hides a failing of our institutions. Our civilisation is failing, NZ Inc is pretty much a monopoly compared to others diversified economies. We could do better if we listened to people like you.

 

Building is better than bubbling....

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My dream is that NZ decentralised around its natural geographic regions -roughly the 10 provinces, focusing on affordable housing like Texas or Germany and a more diversified economy like Denmark or Germany.

 

If Australia did something similiar by a big bang increase in States to 20. Then Australaisa could be as competitive as a small version of Europe or the US.

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yes big tends not to work. Niall Ferguson the historian made the observation regarding European success - small worked better

 
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But what about the United States of America Plan B?

The most powerful economy in the world, the most innovative, dynamic etc.

It's the best of all the good things, a huge magnet to people all around the world. And those migrants become so patriotic when they go there.

All the states stick together, 'cause they think big works best.

 

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It used to be, when it pumped its own oil, ie 1950s and 1960s.  Personally I see it as a dead man walkin, just as long as its debt is being bought it will shamble along.

"states stick together", hmmm,

http://americanfreepress.net/?p=7525

"Currently there are active petitions in support of secession for all 50 states, with Texas taking the lead in number of signatures. Texas has well over the number of signatures needed to generate a response from the administration, and while I wouldn’t hold my breath on Texas actually seceding, I believe these petitions raise a lot of worthwhile questions about the nature of our union."

Sure its a huge magnet, when about 5.5billion ppl live in 3rd world conditions the alure of a 1st world nation has to have some shine.

regards

 

 

 

 

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Gettin worried about you Philbest

Have you checked out the Great-Pacific-Garbage-Dump floating around in the Pacific Ocean just off the coast of California which has expanded exponentially in the last two years with junk from Japan?

The Great Pacific garbage patch, also described as the Pacific trash vortex, is a gyre of increased marine debris particles in the central North Pacific Ocean. The patch extends over an indeterminate area, with estimates ranging very widely depending on the degree of plastic concentration used to define the affected area.

Just last week it was reported that Beijing is now exporting its polluted smog atmospherics to Los Angeles

You never listen to others do you?
Basel Brush the 3rd has told you on any number of occasions that Chinese migrants arriving into New Zealand will only locate themselves within a days walk of Auckland International Airport.

Which is code for saying it doesn't matter how much of the rest of New Zealand is un-occupied by human settlement - they ain't goin there.

Of course, that leaves it open for you to devise a mechanism that will re-distribute them.

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Getting worried too,  that New Zealand is getting like the Maldives, not just like what floats around in the water in the Pacific either, we and they pollute our own towns and lands with crap, landfill and other run-offs, it is better not to know about, then bring in the dregs to make it even worse, to import even more.

If you saw the "Garbage" that these beautiful Maldive Islands have to endure to bring Tourism to their once pristine islands, some people might think twice about ruining our once fair isles.

 

 

 

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I don't get why NZ spends $100sK on the health, well being and education of their young only to throw it all away at the last stage by being skin flint on transport spending, tertiary education/research and the provision of public services (the 3 waters etc) for new urban areas. Then putting an impossibly restrictive set of planning rules for new builds, thus pushing down our future incomes and up our house prices.

 

So our young make a rational choice of cost of living versus income . For half of them the choice is not NZ. How anyone can say Auckland or NZ is desirable when millions of kiwis who know the place best have buggered off is beyond me.

 

To me a few simple reforms could reverse all of this. It is not rocket science. Just copy the best features from Texas, Germany, Denmark etc.

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exactly right.

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Thanks Plan B sometimes I think I am yelling into a vast emptiness. So it is relieving to know that someone is listening.

 

When Key gave all the power to rebuild Christchurch to Brownlee. He obviously wasn't thinking 'big tends not to work'.

 

Maybe when the dust settles and we realise what a mess central government is making of our cities, Christchurch in particular, we will have our 'Stalingrad' moment and realise it is better to put our faith in local institutions -public and private.

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Thanks Hugh. Here's Mike Greer talking about land prices, rebuild etc.

 

http://www.stuff.co.nz/the-press/business/the-rebuild/9648410/Home-buil…

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1.We live in a global economy where mobility is the norm and where

2.cities are the new brands that compete for talent. This new creative talent (have a read of Professor Richard Florida’s book ‘The Rise of the Creative Class’) is what is sought by businesses. This creative class wants to live and work in cities that offer the amenities and lifestyles that Auckland offers. Where this creative class goes, so business and money follow and so begins a virtuous cycle - one we need to be a part of to secure our economic future.

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

1. We live in a nation state where immigration is controlled by a government

2. So what are these creative people doing? How about naming a few unique businesses started by migrants?

The construction industry has grown by 10,000 firms since 2002 ***[flowing a jump in immigration]**** /*-->*/

*/

He [Steven Joyce] said that the industry was experiencing unprecedented growth, driven by the Christchurch rebuild and demand for housing in Auckland.

The report showed that despite the global financial crisis and an associated downturn in construction, the construction workforce grew by 30 per cent in the last decade.

It also identified challenges faced by the sector - low productivity, the aftermath of the leaky building fiasco, and the vulnerability of the industry to boom and bust cycles.

****[hence need to lobby for immigration]****

Construction sector likely to underpin manufacturing growth

*/

Financial performance: residential building construction

Residential building firms generate lower profits per worker than the NZ average, but more revenue per worker and a higher return on equity than the NZ average [capital gain]

...

*/

CE, building firm

Why would a builder who does three houses a year build a couple of low cost houses? Spend equal amount of time at it...There could be a profit, a modest profit. But it’s too modest and too risky.

*/

 

http://www.mbie.govt.nz/pdf-library/what-we-do/business-growth-agenda/sectors-reports-series/construction-report.pdf

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JH - building firms

Why would a small builder who does three houses a year build a couple of low cost houses? Spend equal amount of time at it...There could be a profit, a modest profit. But it's too modest and too risky

 

Correct - it will never happen

 

Up until about 1960, the Sate Advances and Housing Corporation were the main bulk builders of economy housing in New Zealand.

 

Then in the 1960's and 1970's was the dawn of the Group Builder, one of whom was Reidbuilt Homes and a couple of others, providing cheap house and land packages

 

Then there were the two upmarket custom builders who built to customer specifications on customer owned sections, Dempsey Morton (now Fletchers) and Award homes (Auckland)

 

Where are they all today? They all seem to have gone. The small spec-builder and customer-specification builder will never provide to the market economy homes - ever - unless to customer-requirements.

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So immigration is fuelling construction.*

*/

If immigration falls we have unemployment.

They are in it for capital gains.

there is less money in affordable housing

To ensure profitability it is essential to attract the [funds earned offshore of] the "creative class"

..

*

Economic Development Minister Steven Joyce said that the construction sector now employed 7 per cent of the New Zealand workforce - around 170,000 people - and generated annual revenues of $30 billion. /*-->*/

..but I stand corrected.

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Why So Many Emerging Megacities Remain So Poor

Ed Glaeser s blind to the role of resources; it's all about people and ideas.

http://www.theatlanticcities.com/jobs-and-economy/2014/01/why-so-many-mega-cities-remain-so-poor/8083/

 

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Interesting thread.   Lotsa heat, rather warmed up this chilly Christchurch evening.  Not so sure about the Light though...

 

PhilB, HughP and Brendon - nil carborundum bastardii. 

 

Y'all are quite right:  managing to simultaneously inflate the cost of land, the build price of houses, and (shortly) the costs of a mortage ter pay fer it all, while handing the CG to a buncha land bankers and offshore financiers, the materials profit to an untrammeled duopoly, the rates on this inflated mess to visibly incompetent Councils led by clowns and charlatans, and the interest revenue flows to a whole gaggle of agents, managers, yet mo' bankers and other ticket-clippers, takes a great deal of Planning.

 

Of the inadvertent kind.

 

Oh fer the good days, when a craftsman builder, a wise but unobtrusive inspector, and a good deal of yer own sweat, got you onto the housing ladder.

 

After all, for all the Plannerating and Inspectorizing, no-one was killed in the Christchurch quakes by badly put together residential builds.  Unreinforced Masonry, chimneys and external agents (rockfall etc) excepted, of course.

 

So the net value-add of all the overhead loaded into the equation nowadays, is fairly much zero, when put to that eminently practical Gaia devised test:  a dynamic shake.   All cost, for little to no benefit.

 

And a Ray of Light for you, Brendon.

 

Christchurch is very much active, vibrant and going ahead business-wise. 

 

Just not in the Old CBD.

 

Un-noticed by the planners, the transport routers, and the Clueless Council, a New CBD has arisen, unplanned, organically, along an axis stretching from Sydenham/Addington/Middleton/Riccarton/Hornby/Airport plus the area bounded by Victoria street/the Avon/Bealey Ave.

 

Exactly the areas not controlled by CERA and CCDU.

 

I know Correlation ain't Causation, but sometimes ya gots to wonder....

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