Shamubeel Eaqub rails against govt failures that led to an undersupply of 500,000 homes over 30 years, and rising societal gaps as social housing was ignored

By Alex Tarrant

"It’s not about smashed avocados" - Shamubeel Eaqub, Wellington, 5 April 2017

New Zealand’s political leadership has failed for decades on housing policy, leading to the rise of a Victorian-style landed gentry, social cohesion coming under immense pressure and a cumulative undersupply of half a million houses over the last 30 years, economist Shamubeel Eaqub says.

Speaking to the NZ Planning Institute’s annual conference in Wellington this week, Eaqub gave a detailed presentation on the reasons why housing in New Zealand had become so expensive and out of reach for the bottom half of the population.

Eaqub’s disdain for the political conversation around housing, the gross inaction by successive governments and even comments made by others in his profession blaming younger generations for their inability to purchase housing was evident. “It’s not about smashed avocados,” one of his slides said, perhaps in regard to Tony Alexander’s recent outburst.

The 45-minute presentation can be viewed in the video above. A selection of key comments and quotes are below.

They include:

  • There has been a cumulative 500,000 gap in housing supply over the last 30 years
  • Eaqub predicted a construction bust next year, led by banks tightening lending
  • It’s remarkable NZ authorities do not have proper data on foreign buyers. While he estimates 10% of purchases in Auckland are made by foreign investors, he said the main focus should be on the other 90% by local.
  • However, migration creates cyclical volatility that we can’t deal with; it is unbelievable that New Zealand doesn’t have a stated population policy
  • New Zealand is still not building the right sized houses – the majority of properties being built in recent years have had four-plus bedrooms, while household sizes have grown smaller
  • The majority of New Zealand’s adult population is now renting. This could be the catalyst for a Brexit/Trump-style rising up of formerly disengaged voters – young people in our case – to engage at this year’s election.
  • New Zealand’s home ownership level is now at its lowest point since 1946.
  • We have a cultural sclerosis of buying and selling existing houses to one another

On house prices relative to incomes & home ownership levels:

“They’re at the highest level they have ever been. And they have risen really, really fast since the 90s, but more so since the early 2000s. This is the backdrop that we’re dealing with.”

“House prices…have far outstripped every fundamental that we can think of.”

The consequence is easy to see: “After nearly a century of rising home ownership in New Zealand, since 1991 home ownership has been falling. In the last census, the home ownership rate was the lowest level since 1956.

“And for my estimate for the end of 2016, it’s the lowest level since 1946. We’ve gone back a long way in terms of the promise and the social pact in New Zealand that home ownership is good, and if you work hard you’re going to be able to afford a house.”

“The reality is that that social pact, that right of passage has not been true for many, many decades.”

“The solutions are going to be difficult and they are going to take time.”

On raising a deposit, Generation Rent, the ‘bank of mum and dad’ & a Victorian landed gentry:

“Before you come and tell me that you paid 20% interest rates…the reality is that, yes interest rates are much lower. But the really big problem is, house prices have risen so much that it’s almost impossible in fact to save for the deposit.”

People could have saved a deposit and paid it off in about 20-30 years in the early 1990s. Fast forward to today, and that’s more like 50 years. “How long do you want to work to pay off your mortgage?”

“What we’re talking about is the rise of Generation Rent…those who manage to buy houses are in mortgage slavery for a long period of time.”

There is a widening societal gap. If younger generations want to access housing, it’s not enough to have a job, nor enough to have a good job. “You must now have parents that are wealthy, and home-owners too.”

The idea of New Zealand being an egalitarian country is no longer true: “The kind of societal divide we’re talking about [is] very Victorian. We’re in fact talking about the rise of a landed gentry.”

“For those who are born after the 1980s, the chance of you doing better than your parents are less than 50%.”

“What we’re creating is a country where opportunities are going to be more limited for our children and when it comes to things like housing, then ourselves. I worry that what we’re creating in New Zealand is a social divide that is only going to keep growing. This is only one manifestation of this divide.”

Pity the poor; social housing:

There had been a change in philosophy in what underpins the housing market. “One very good example is what we have done with our social housing sector.”

Housing NZ started building social housing in the late 1930s and stock accumulated over the next 50-60 years to a peak in 1991.

“Since then, we in net…have not added more social housing. On a per capita basis we have the lowest number of social housing in New Zealand since the 1940s.

“This is an ideological position where we do not want to create housing supply for the poor. We don’t want to. This is not about politicians. This is a reflection on us. It is our ideology, it is our politics. Our politicians are doing our bidding.”

“The society that we’re living in today does not want to invest in the bottom half of our society.”

On credit growth and the coming construction bust:

The really big kicker has been credit. Significant reductions in mortgage rates over time had driven demand for housing. “But we have misallocated our credit. We’re creating more and more debt, but most of that debt is chasing the existing houses. We’re buying and selling from each other rather than creating something new.”

The housing boom could not have happened on its own. The banking sector facilitated it. “We have seen more and more credit being created and more of that credit is now more likely to go towards buying and selling houses from each other rather than funding businesses or building houses.”

“One of the saddest stories at the moment is, even though we have an acute housing shortage in Auckland, the most difficult to find funding for now is new developments. When the banks pull away credit, the first thing that goes is the riskiest elements of the market.”

Seasonally adjusted house sales in Auckland are at the lowest level since 2011. This is worrying because what happens in the property market expands to the economy, consents and the construction sector.

“I fully expect a construction bust next year. We are going to have a construction bust before we have a housing bust. We haven’t built enough houses for a very long period of time. And if we’re going to keep not building enough houses, I’m not confident that whatever correction we have in the housing market is going to last.”

New money created in the economy was largely chasing the property market. Household debt to GDP had been rising steadily since the 1990s. People were now taking on more debt, but banks had started to cut back on the amount of credit available overall.

“For every unit of economic growth over the course of the last 10, 20 years, we needed more and more debt to create that growth. We are more and more addicted to debt to create our economic growth.”

“Credit is now going backwards. If credit is not going to be available in aggregate, we know the biggest loses are in fact going to be businesses and property development.

“It means we are not going to be building a lot of the projects that have been consented, and we know the construction cycle is going to come down. I despair.”

Cultural sclerosis:

“I despair that we still talk so much more about buying and selling houses than actually starting businesses. The cultural sclerosis that we see in New Zealand has as much to do with the problem of the housing market as to do with our rules around the Resource Management Act, our banking sector.”

Migration, population and foreign investors:

“On demand, we know there’s been significant growth in New Zealand’s population. Even though it feels like all of that population growth has come from net migration, the reality is that…it’s actually natural population growth that’s created the bulk of the demand.

But net migration had created a volatility that we can’t deal with. A lot of the cyclicality in New Zealand’s housing market and demand, comes from net migration and we simply cannot respond.

We do know that there is money that’s global that is looking for a safe haven, “and New Zealand is part of that story.” We don’t have very good data in New Zealand because “we refuse to collect it.” There is “a lack of leadership” regarding our approach to foreign investment in our housing market.

Looking at what’s happening in Canada and Australia would indicate roughly 10% of house sales in Auckland are to foreign buyers. “Yes it matters, but when 90% of your sales are going to locals, I think it’s a bit of a red herring.”

Historical context of where demand for housing comes from shows the biggest chunk is from natural population growth. The second biggest was from changes in household size as families got smaller - more recently that has stopped, ie kids refusing to leave home.

There has been a massive variation in what happens with net migration.

Eaqub said he had always thought New Zealand needs about 21,000 houses a year to keep up with population growth and changes that are taking place. “But over the course of the last four years, we’ve needed more like 26,000. We’re nowhere near building those kinds of houses.”

This means we need to think about demand management from a policy perspective. “It’s more about cyclical management rather than structural management.”

“Population growth has always been there. Whether it’s from migration or not doesn’t matter. The problem is our housing market, our land supply, our infrastructure supply, can’t keep up with any of it.”

While immigration was a side problem, Eaqub said it nevertheless was an important conversation to have due to the volatility that can be created.

“I struggle with the fact that we have no articulated population strategy in New Zealand. We have immigration because we have immigration. That’s not a very good reason.”

“Why do we want immigration, how big do we want to be – do you want 15 million people or do you want five?

“What sort of people do we want? Are we just using immigration as shorthand for not educating our kids because we can’t fill the skills shortages that we have in our industries?”

On property investors:

Let’s not pretend that it’s all about people wanting to live in houses.

“You’d be very hard pressed to argue that people want to buy houses in Epsom at a 3% rental yield for investment purposes. They want to buy houses in Epsom at 3% rental yield because they want to speculate on the capital gains. Let’s be honest with ourselves.”

“If your floating mortgage rate is 5.5% and you’re getting 3% from your rent, what does that tell you about your investment? It tells you that you’re not really doing it for cash-flow purposes. You’re doing because you expect capital gains, and you expect those capital gains to compensate you.”

The real story in Auckland is that a lot of additional demand is coming from investment.

Land supply, infrastructure & house sizes:

“Land supply in New Zealand is slow, particularly in places like Auckland. But it’s not just…in terms of sections, it’s also about density.” The Unitary Plan was a win for Auckland. “The reality is that if we only do greenfields, we will just see more people sitting out in traffic at the end of Drury.”

The majority of New housing supply are large houses, when the majority of new households being formed are 1-2 person households.

Between the last two censuses, most of the housing stock built in New Zealand were four bedrooms or more. In contrast, the majority of households that were created were people that were single or couples – “we have ageing populations, we have the empty nesters, we have young people who are having kids later…and we’re building stand-alone houses, with four bedrooms.”

We have to think very hard about how to create supply not just for the top end, even though we know in theory building just enough houses is good for everybody, when you’re starting from a point of not enough houses, it means the bottom end gets screwed for longer. We have to think very hard about whether we want to use things like inclusionary zoning; we have to think very hard about what we want to do with social housing.”

Right now we’re not building houses for everybody in our community. We are failing by building the wrong sorts of houses in our communities.”

Land costs are the key driver:

“Right at the top is land costs. If we think about what has been driving up the cost of housing, the biggest one is the value of land.” It’s true that we should also look at what’s happening in the rental market and what was happening with the costs of construction. “But those are not the things that have been the majority driver of the very unaffordable house prices that we see in New Zealand today.

“The biggest constraint is in land, and that is where the speculation is taking place.”

The 500,000 home building gap

We know we’re not building enough. In the 1930s to 1940s we had very different types of governments and ideology. “We actually built more houses per capita back then than we have in the last 30 years.”

In the late 40s-early 70s, with the rise of the welfare state and build-up of infrastructure. “On a per capita basis, we built massive amounts of houses.”

But since the oil shock and the 1980s reforms, “we have never structurally managed to build as many houses as we did pre-1980. That cumulative gap between the trend that we have seen in the last 30 years, versus what we had seen in the 40s, 50s and 60s, is around half a million houses.”

Eaqub conceded it wasn’t a very technical analysis: “I did some sums. But essentially, every year we have under built relative to population growth. And that cumulative gap is 500,000 houses. So there is something that is fundamentally and structurally different in what we have done in terms of housing supply in New Zealand over a very long period of time.”

“The changes in the way that we do our planning rules, the advent of the RMA, the way that we fund and govern our local government. All these things have changed. So the nature of the provision of infrastructure, the provision of land, then provision of consents, all of these things have changed massively. But the net result is we’re not building as many houses, and that is a fundamental problem.”

Auckland house building need – the projections are wrong. We will need more (and in Carterton):

In Auckland there was a massive gap between targets set by government for house building over the past three years and the amount of consents issued. On top of this, the targets themselves were still not high enough.

“Somehow we’re still not able to respond to the growth that Auckland is facing.” Consistently we have underestimated how many people want to live in a place like Auckland.

But it’s not just Auckland. “Carterton surprises every year…it’s because they’ve got a fantastic train line and people live there – it’s not surprising.”

“But we are failing. We have been failing and we continue to fail. We have to be far more responsive and we have to have a much longer time horizon to have the provision for housing that’s needed.”

There was in fact no real plan. “The Unitary Plan is fantastic in that it actually plans for just enough houses for the projections for population. [But] we can confidently say that projection is going to be pessimistic – we’re going to have way more people in Auckland.”

Solutions in the politics – the rise of Generation Rent

Trump and Brexit had marked a shift in politics and a polarisation in the public’s view of politics.

“In New Zealand I think one of the catalysts could be Generation Rent. In the last census, 51% of adults – over 15 year olds – rented. It is no longer the minority that rent, but the majority of individuals that rent.”

Eaqub added that he was not saying we’ll see the same kind of uprising in New Zealand, but what we saw in Brexit was that discontent was the majority of voters. If young people had actually turned up to vote, Brexit wouldn’t have happened. The same was true for New Zealand.

It was strange that there was no sense of crisis or urgency. “For a lot of the voters, things are just fine. For the people for whom it’s not fine, they’re not voting and they feel disengaged.”

The kind of politics that we will start to see in the next 10 years is something much more activist – the ‘urgency of now’.

“The promise of democracy is to create an economy that is fit for everyone. It is about creating opportunities for everyone. Right now, particularly when it comes to housing, we are failing. We are not creating a democratic community when it comes to our housing supply because young people are locked out, because young people are going to suffer, and we know there are some big differences across the different parts of New Zealand.”

“It's not going to be enough, when we’re starting from a position of crisis, to simply create more housing that will appease the public. We have to make sure that we’re far more activist in making sure that we’re creating housing that is fit for purpose, not just for the general populous, but for the bottom half who are clearly losing out from what is going on.”

“We know what the causes are. I’m sick of arguing why we’re here. We know why we’re here, because we haven’t ensured enough political leadership to deal with the problems that are there.”

“We can’t implement the solutions unless we have political leadership, political cohesion, and endurance over the political cycle. This is a big challenge, but a big opportunity.”

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

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231 Comments

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39

To sum it up - vote. Come election and vote for change.

Change of government may or may not help in finding a solution but not changing government is definitely not going to find a solution.

So starting point for any solution at this stage has to be Vote For Change Of National Government.

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15

The article states the problem has spanned 30 years, over multiple governments of both sides of politics and your sum-it-up is yet another change in government. Brilliant.

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11

Maybe the problem is that for the last 30 or so years we have had Labour or National led governments. Perhaps it is time to vote for an actual change.

Maybe. But there has been a fair bit of coalition stuff going on too, so many be not.

One would therefore have to vote for Act as they are the only ones wanting to make significant changes to the RMA, Building Act and Councils oversight of all things property.

They are part of the problem not the solution.

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19

If a change in government isn't the answer, then what is? I'm hardly a fan of Labour but they're looking a hell of a lot better than do nothing National for the next three years.

Ah, but better because;

(a). change is automatically always better, or

(b). you found some written Labour policy that will solve things?

Brah, read their housing policy eh.

See post below.

Don't ever believe anything a politician writes down or says.

You can see how useless Labour will be by looking at how they have run Auckland for the last 7 years. You can see how useless National will be by how inept their response to the housing crisis has been.

Vote for any 3rd party (except the Greens, because they are just part of Labour now).

Last year I couldn't understand what was going on in the US elections. But now I think I now have some insight and sympathy for them. At least we have a few options than the lesser of two evils right?

National = Pathological Neoliberal ideology. Government spending austerity. Free market, globalisation, privatisation. Do nothing approach on social issues like housing. Epitomises the political-financial complex with MSM (Farifax) and PR companies (Crosby Textor) ‘shaping’ public opinion to represent the interests of the super wealthy which more often than not excludes middle and upper middle class NZers.

ACT = National
Maori Party = National
United Future = National
TOP = National

NZ First = Unknown

Greens = Something different
Labour = Something different

IMHO that is the reality...

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14

Kiwi build? Its got a lot more teeth than anything National is proposing. Last time there was a massive state run house building program it was Labour ( 60's I think ) Why not give them another crack?

"".. give them another crack?"

The cynic in me would like to see them nail some policy to the mast that will solve the problems first. If they haven't done anything useful on this front in close to 50 years their track record is hardly better than anyone elses'.

http://www.labour.org.nz/housing

I think you'll like some of what you see. Also note, I've never voted Labour.

To my cynical eye it doesn't look hugely different.

Both parties talk about new regulatory bodies (different names of course).

Both talk about tax reforms.

If I equate the national infrastructure fund against the labour 100,000 news homes promise - similar.

God is in the details and the execution. If we believe this article the problem has no magic sooty dust simple solutions so either policy could work or fail on performance criteria not available to me.

But then, I don't put much stock in what politicians say.

Difference being that National lack credibility because according to them there is no crisis. And they have shown zero ambition to make housing affordable - at least since they were in opposition in 2007.

Surely, as you describe well...it would be insanity to keep on voting for National and expect them to address housing affordability.

Just because you don't like national is, by itself, quite a weak argument to vote *for* anything.

At best it's a negative vote against something (national).

... I think that is the point , that rather than admit to a desire to vote for NZ Labour / Greens ... who are pretty useless and dysfunctional ( every bit as much as the Gnats currently are ) ... voters are happier to say who they want to vote against ....

And we are getting rather tired of this government ... ... they need to be given a hard boot to the bum to wake them up ...

That might the defining character of our age, we don't stand *for* anything.

.... yup ... it's the " rat sandwich theory " .... you don't really want either of the unpalatable choices being offered to you , so you choose the one who disgusts you ever so slightly less than the other ... Trump or Clinton .... English or Little ... Brexit or Bremain ...

Well, that certainly defined John Key and after 8+ years radiating it down onto the spellbound from above, it should come as no surprise, should it?

No, point missed again. No need to build up straw men.

It's not that I don't like National - I have only not voted for them once before - but that they have shown themselves to lack any credibility and willingness to deal with problems, and the other parties have indicated they are willing to tackle the housing crisis in more ways.

I feel pretty safe in saying that anyone who has read your posts here about national could see it's not any straw man.

"National have not proven themselves credible" ≠ "don't like National"

2/10, must try harder. Pretty clear strawman.

Here is a great Policy... just what NZ needs:

"Under our policy only citizens and permanent residents will be able to buy existing homes. Removing this speculative demand from the market will help stabilise prices and give Kiwi families a fair shot at buying a place of their own."

National ignore the issue and make sure LINZ are unable to report the correct figures despite 2 years trying.

Labour is going to address the issue head on.

I would tighten it even further " Only citizens can buy NZ property"

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24

Today with national in government - Anyone but National for number of reason.

Have been national supporter but I think last time also (After 6 years in power) should not have voted for national but this election will not repeat lat election mistake.

Need change

Agreed. As stated before I will break the voting habit of a lifetime this election and switch from Nats to NZF. The strategy is to return a Nat led government albeit weakened by the Winston influence. Ousting Nick Smith would be a bonus as well.

What's the point? One reason National was voted in was because they said there was a 'housing crisis'. It hasn't been solved, and only got worse since, as we decided to open the door to a flood of overseas people into the country, even though we had a lack of houses. This made our books look better, but there will be a cost further down the track, with a lack of investment in infrastructure,and rising retirement costs. People 40 and under are already affected by it as the retirement age is rising, so they will each have to find another 70k to make up the shortfall, which is already what many of them had to pay for their student loans. It is just shifting costs onto younger generations.

Excellent video from 2min 41seconds
https://www.youtube.com/watch?v=qEcmkmaD3ro

They had 9 years to fix the housing problem. In that time Auckland prices went up from $0.5m to over $1million

Exactly. On top of that, looking at average values just now show a period in the early to mid 70's where house prices doubled in 4 years. Is that an anomaly or was it omitted intentionally? Was it driven by the government of the day (likely, but I don't know - does anyone here?) or was it just a rather huge blip? The issues are real and what he says makes much sense, no doubt. Still, it's spun by a guy who sold up and moved into a rental shortly after the GFC because "it made more economic sense". If this were the case he would be advocating the move to renting. Or perhaps missing the boat these past 5 years has hit home, subconsciously of course. I don't have an answer and I agree with much written in this article, still, it is a biased view. Changing governments isn't the answer, to this mess in any case, it's far deeper than that.

But do we really need a change in government to achieve outcomes? Or do we really need a change in culture in our society to ask for goverment to do the right things?

As Shamubeel points out, these issues have been building for decades and we've had a number of different leaders at government and council levels - all who have failed to address the issues - mainly because it hasn't really been a priority to the voters.

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11

A - we need a government that acknowledges the problems that exist, and B we need a government that is willing to bring about the necessary structural reform. So Yes we need a change in government.

Fat pat - not sure if you get my comment above. The people we have elected into government and local council roles aren't leaders, they're followers. They're simply doing what the people want. And there has been no desire from society to fix the problems we have because of the financial benefits that it generated. "If there's a will, there's a way". If we truly wanted to fix our housing issues, we would have found a way by now. At a deeper level, I believe we don't want to fix the problem.

I don't think changing government is going to do much to resolve our housing issues, until the people (that is you and I and the 40% of people who purchased property in Auckland in recently, speculating on capital gains) all collectively decide that the problem/s need to be fixed.

Unil then, we're going to continue to erode the quality of life/society here in NZ - all so 'the few' can make money land banking and putting younger generations into rental accommodation for the rest of their lives.

In 2007 John Key ran on a campaign of restoring housing affordability and increasing the rate of home ownership. People voted on that. So there is voter support for housing reforms. National though has failed to deliver. The problem is finding a party with the political will to make reforms. Clearly that is not National -it is not part of their DNA to make bold progressive changes..... This is a huge opportunity for the other political parties to step up.....

Oh, were the Greens in favour of gutting the RMA 8 years ago?

Are you kidding – people are screaming at the top of their lungs. The 30 year build-up is nothing compared to what happened in the last five years. Housing in Auckland has gone hyperbolic since 2012. 20% per year is hyperinflation! Up until last year I lived in Kohimarama. I went to the Auctions. I don’t care what people say – by my reckoning greater than 70% of the houses being sold were going to Chinese Singaporeans, Taiwanese or whatever. I don’t care what nationality they are, the point is they pay 1.5, 2.5, 3.5 million whatever it takes. NZers don’t stand a chance. National is willfully ignorant because their constituents are beneficiaries of the hyperinflation. Yes we need a change in government!!

You know I was at Shortland st a year or so ago, there was a European girl sitting in the front row with her ear to the phone. She had just won a million dollar with no emotion because she was too busy bidding on the next one. The auctioneer seemed to be familiar with her, as if she was part of the woodwork. How many thousands of houses have been sold to foreigners like that. How fuc*^d is that for young people wanting to make a life for themselves in Auckland. Oh whatever I’m just talking to myself. Its nearly midnight her in Germany, good night!

Two things could change this, and which one probably depends on the government.

1. Policy

2. Anger and increasing xenophobia / extreme behaviour.

I don’t harbor any ill will towards foreigners. They are making good financial decisions and you have to respect them for that. It’s the government’s job to ensure that policy settings are right to maximize opportunities for all New Zealanders. National haven't done that because they're blinded by neoliberal ideology. The belief that somehow NZ will be a better place without barriers tariffs & taxes, that money and unicorns would roam free and we’d all be trickle-down millionaires.

"Trump and Brexit had marked a shit in politics..." Shift.....

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10

Appropriate typo is appropriate.

Whoops, fixed now. But I agree, it was sort of appropriate...

Looks correct to me...

sometimes you need events such as the above two to change the Paradigm!! otherwise its just status quo..

Politicians are responsible for Trump and Brexit by turning blind eye to mood of the country and believing, that they can fool all the people all the time.

NZ is no different.

Times have changed and is now, no more possible to play with the sentiments of the people and more the lie and manipulation from the government more the anguish and the result will be for everyone to see in election.

I'd like to see this boy as a candidate for the TOP party.

Surely he is more intelligent than that.

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13

I may vote Green this time around. I liked their policy of govt setting residential rent prices, strengthening the rights of tenants and implementing a warrant of fitness for rental properties.

As the govt is moving away from social housing and expecting private companies and charities to fill the gap its now the time for stricter regulations to be put in place to protect the vulnerable,

I believe that you represent a significant portion of the electorate that will vote National out, and while I may disagree with you I respect your viewpoint. The problem with more regulation, laws, "rights" is that they always increase in number during societal declines (e.g. Roman Empire, USA, EU, etc) and don't actually improve anything. Most western govts are now over 30% of GDP and are an inherent part of all of our problems. And, the more control they take of our lives, the less freedom we have. Given that the majority of people are always wrong through history, we will call for more govt, more regulation, more taxes, etc, until the whole system implodes and we will invariably blame some minority for all of problems (the Jews, the Russians, the rich, etc).

Ah, but it is fundamental to left wing politics that regulation and tax fix everything. With this assumption intact we can arrive at the conclusion that taxation can save a planet!

I thought the 'free market' solved all problems? (Excepting all externalities which it ignores entirely of course)

Who would know, we haven't had a free market in living memory.

Probably precisely because it ignores all externalities.

Well, I am not so naive that I think markets exist in vacuums. But in the last 50 years we have seen an unrelenting wall of regulation (in the west) and world markets are less free than they has been for a long time.

All markets are a construct, but the more you interfere the more unintended consequences you get and the more you load red tape on top the less productive investment you get. Over regulation also breeds corruption, cronyism and inefficiency.

There is no such thing as a pure market. There will be either by chance (serendipity) or intent (to game or cheat), players who will be able to gain an edge on their competitors; ultimately to drive them out of business and monopolise the market for the greatest profit. The aim of all business to to raise the barriers their competitors as high as possible, best by innovation but easier by manipulation (corruption or cheating). Its not a lot different to drug cheating in sports.
I think you are wrong about regulation; there are markedly fewer restrictions now in terms of international and local trade plus banking now, than there were 40-50 years ago. Buying a house with a mortgage or buying a new car in the 1960's here was not easy at all . Now I can buy almost whatever I want in China on the internet with a minimum of intervention (shitty reinforcing steel, synthetic cannabinoids, untested electrical
wiring etc), is that a good thing?

US suffocating under regulations:
http://www.economist.com/node/21547789

Cost of increased US regulation at 100 billion:
http://www.heritage.org/government-regulation/report/red-tape-rising-201...

UK Banks fight back against wave of regulation:
https://www.ft.com/content/02b106ba-0a9a-11e5-a8e8-00144feabdc0

It goes on and on.

There's a reason why we don't have anarcho-capitalism. Have you tried playing Monopoly? You know how that game ends up toxic and with one winner... same thing. Free market capitalism is loaded with feedback loops that lead to concentration of wealth and societal and economic collapse.

Ultimate anarcho-capitalism and you'll just have warlords.

I recommend reading a bit about the Feijoa, arguably NZ's most socialist fruit. http://thespinoff.co.nz/society/04-04-2017/in-praise-of-the-feijoa-new-z...

I don't really think Monopoly is an accurate model for any "market" outside of a board game though.

Absolutely it is.
It is because the exact same human nature is what drives both of them

Sure, but human nature is only one variable in an extremely complex system with many technical features.

Human nature is a predictable as night following day/

It is one of the best variables for forcing complex systems to a singular outcome (one wallet)

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I'm a dyed in the blue National supporter. Business is business and to that end Commercial property Landlords have a purely business relationship with their tenants however I believe residential landlords have a social responsibility.

Of course the best outcome for society is for people to own a property they can call home but this government has taken that away and for that and the sake of future generations they must be held to account.

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I too was a dyed in the wool National voter. In fact, last time around was the first time I voted for someone else.

They've just been too abysmal on the housing crisis that they campaigned on back in 2007, especially their refusal since being elected to even admit there is a housing crisis. I can't accept that level of dishonesty and irresponsibility.

Agree with Rick Strauss I voted JKey twice but not a 3rd time
Would not vote Nat again either
However I do recall the last Labour govt used housing inflation in exactly the same way!
Some people may choose to forget that fact

Same here. Voted for national but not any more.

Their policy has been rightly summed : Policy of Denia, Lie, Manipulation and if nothing works pass the blame to one and all.

Take any policy of national snd you will be able to identfy with one of the above

I gave my party vote to ACT last time but this time round I'll vote for National, however my electorate vote will still go to ACT to make sure that David Seymour is re-elected for Epsom yay.

And here, folks, we have proof indeed that Turkeys will NOT vote for an early Christmas.

Ask yourself how we get a rebound if we implement more regulations and rights in the downturns? Does that mean there's a positive effect of those changes? Are we making changes in response to the issues that are causing the downturns? It seems like they often do have a positive effect, or the downturns would only get deeper.

What other country has a govt setting residential rent prices?

there are not too many other countries that have let Rents and house prices to get beyond the reach of most people

How have theses countries controlled rents and house prices ?

Places with high land taxes tend to have cheap house and rent prices.

Is that true Ocelot?

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Germany has limits on how much rents can be raised, as well as a raft of other tenancy laws that give society much greater stability. Many Germans have in fact not purchased houses because housing outcomes were similar either way, through their government's comparatively sane and well-managed approach to housing.

Especially compared to National's "Jesus take the wheel" approach to managing housing outcomes here.

Not true, germanies tenancies are much more in favour of landlord and they can raise the rent to whatever they want, remember in Germany tou pay the insurance and council taxes as a tenant. The reason why German Rents haven't skyrocketed is because Germany is full of Germans who speak and write and talk in German and only Germans want to live there

It is regulation that has made the people vulnerable in the first place so more regulation will just make more people vulnerable.......

please explain

Implement a Warrant-of-Fitness regime for rental properties and expect to find a substantial drop in the available number of rental properties as tenants get tipped out and the properties listed for sale

Tipped out to return as homeowners. Bring it on.

I don't trust the greens to not throw open our borders, the mess in Europe has been largely caused by greens and the other far left parties. Immigration is a huge part of the housing crisis. We can recover from all manner of economic bad times and useless governments, but we cannot recover from having our indigenous population replaced by alien cultures. I disagree with the greens on doubling our refugee intake, better the money spent on helping people in camps close to their homeland so they can return home when the war is over.

'Alien Cultures'! WOW! Xenophobic much?

Firstly, Innes did not capitalise alien cultures and in English the first definition of alien as an adjective is "belonging to a foreign country" with the second being, "unfamiliar and disturbing or distasteful". Foreign cultures are unfamiliar and yes can have disturbing and distasteful aspects. Our culture of women in skimpy clothing, eating pork, drinking alcohol and general secularism is disturbing to some of the 'alien cultures' believe it or not.

Xenophobia in the context of millions of people fleeing the horrors of their own country seems entirely logical because you could reasonably wonder if they are bringing this horror with them. Maybe we should call it Xeno-anxiety?

Well no, the mess in Europe has been facilitated in part by the Russians propping up Assad (and indirectly the Americans supporting the rebels), by destabilising Syria with barrel bombs and chemical weapons that have displaced millions escaping the butchery. Putin is more than happy to have 5 million Syrians pouring into Western Europe desperate to survive, relying on stretched Northern European charity to save them. US and Russian acceptance of refugees is pitiful in comparison. The result is that it destabilises Putin's political Enemies, making alt-right movements more popular with rising xenophobia (in the US, UK, France, Germany etc), this weakens the EU and especially Nato. So Innes, you have been "played" like many.

Syrians only make up a fraction of the refugees. We are seeing refugees coming from Africa, Pakistan, Bangladesh, Yemen, Somalia, Romania, Sri Lanka, even Haiti and many other places. Assad has been calling for Syrians to return to Syria and help rebuild it. The revolutions and chaos in the Middle East are almost entirely caused by over a century of Anglo- American meddling.
Regarding barrel bombs, they are not a super weapon, the Americans have used fuel air bombs, Massive Ordnance Air Blast bombs, Multiple Launch Rocket Systems and depleted uranium shells while actively aiding groups that have indulged in all manner of atrocities against the civilian population.

A large fraction, but you are right in that some of the issues started with the carve up of Ottoman Syria after WW1.
http://syrianrefugees.eu
http://www.pewresearch.org/fact-tank/2016/10/05/key-facts-about-the-worl...

Seem ridiculous that we have a housing crisis when there are so many empty homes and as this article points out a lot of that is caused by overseas investors.

Ghost homes - properties lie empty in spite of crisis
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1167...

Inner-city Auckland apartments and residences in Manly, Takapuna, Newmarket and Gulf Harbour rate highest for empty or "ghost" dwellings, an analysis shows.

John Polkinghorne, associate director of specialist property consultancy RCG, said a breakdown of the city's empty dwellings showed these areas had the highest number of vacant dwellings on Census night.

Stanley Bay, Turanga, Grafton West and Glen Innes East have the next most vacancies in the top 10, he found in his analysis of the 33,330 vacant dwellings from the last Census.

For some things, tax indeed is the best answer.

As well as raising revenue taxes are excellent for modifying incentives and motivations.
https://en.wikipedia.org/wiki/Land_value_tax#Incentives

None of those areas are holiday homes or bach country

"And if we’re going to keep not building enough houses, I’m not confident that whatever correction we have in the housing market is going to last.” - Bullish on property, after telling people not to buy for the last 8 years.

This guy has always been the best of the economists who speak out in NZ
He however is looking at NZs housing shortage
in the paradigm that exists and has not considered the coming ramifications of GFC2 which will indeed impact on mortgage holders
who will be foreclosed on .
The landed gentry may find themselves landed out on the street if they are under capitalized.
Homes in Toronto are selling within TWO HOURS of being listed right now it's reported on the news as I'm typing this ! A 33% increase march to march year ! The ponzu is going CRAZY here.
When the crash comes there will be plenty of homes at lower price points.
Same applies in NZ regardless of the claim albeit subjective that there is 500K too few homes.
If you truly believe that then imagine how many thousands of homes would be empty if NZ had another 500.000homes today !?
Just concentrate on reducing DEBT because GFC2 is the real problem coming

Methinks he doth protest too much.
or
It's election year.

Political Parties, if in power for too long gets arrogant and forgets that have been voted by the people to serve the people instead are being ruled by politicians.

9 years is a too long period for any political party - more so for national - complacency has set in and the time has come for a change.

Very good piece.
One point I disagree with him on though is his view that we'll have way more people in Auckland than the projections project. I think it will actually be lower - Boomer flight out of Auckland etc
And how bout if the foreign education sector fell away (for a host of potential reasons)

Maybe Boomer flight will occur, but it will be preceded by young Kiwis leaving as rents and house prices are too high.

Yes that too.
Although a certain number of young kiwis will 'Have' to live in Auckland, due to the fact that is where so many of the jobs are.
But if they can, many will work and live elsewhere

Some boomers are leaving now, realising their capital. But not young kiwis, because house prices are high everywhere.

Soon a regional correction will occur (probably 2019-2020) with prices and rents dropping significantly in Australian cities (and Tauranga, Hamilton, Christchurch in NZ) whilst Auckland continues to have high rents.

The majority of young kiwis will leave Auckland and create growth in Australia (or Tauranga, Hamilton, Christchurch in NZ). The boomers who held on will see their house price fall by more than 50% and never recover - those boomers face a very bleak retirement.

So boomers quit when they are ahead. Smart move.
The younger generation should grow a pair.
The way of the world.

Boomers are a such a large cohort, that 5% of them leaving Auckland each year could have quite significant impacts

>"And how bout if the foreign education sector fell away (for a host of potential reasons)"

Not the least of which should be rooting out corruption and poor practices.

Fritz you're right There seems way too much bias toward expansion of the NZ population with little thought given to the historical fact that when Australia is booming there is a flight of labour from NZ to the higherpayingAustralian job market.
Newly minted kiwis who migrated are the likeliest to seek Australian jobs because they usually have no extended family in NZ anyway to hold them back.

short memories ey?

Interesting seminar, thanks for putting it up in its entirety. I think we must stress that these problems are Auckland specific (except Qtown) and not generally New Zealand wide.

What problems are Auckland specific? House price to income ratios at 10:1 aren't. More people renting than owning their own home isn't. Wong size houses being built isn't. Or do you believe that only Auckland has problems and the rest of NZ is sunshine and rainbows?

Actually they are pretty Auckland specific problems. The income to house price ratio is Wellington is about 5:1, although it may have risen lately. And in other parts of New Zealand the ability to increase supply to met demand is far easier. You can buy a three bedroom home in Wellington for around $300,000

I think you are well behind the times in Wellington, it is a market I follow as I am planning on buying there. $450,000 is the minimum you will pay for an ok 3 bedroom house even in a fairly rough suburb. The median house price in places like Kapiti and Lower Hutt is now around $500,000. Wellington is on track to be the next Auckland. I wonder if the changes to the immigration rules last year, that awarded 30 extra points for being outside Auckland, has something to do with this.

Well, young Wellingtonians will just have to knuckle down and realise that their chances of affordable home ownership is the price that must be paid to fund National's economic growth plan, that being to sell houses out from under them to all and sundry around the globe as much as humanly possible.

A friend bought an excellent refurbished 3 bedroom property in better parts of Porirua for $350,000. As a lawyer it was a suburb he felt comfortable coming home to. The difference with Wellington is that land is available and has construction capacity relative to the size. There are lots of additional new properties going up to meet the demand - and the population growth is relatively slow. Auckland is going to slowly deflate and as a result opinions will change on property as a 'fool-proof' investment so Wellington prices will stabilise around their current level.

A friend bought an excellent refurbished 3 bedroom property in better parts of Porirua for $350,000. As a lawyer it was a suburb he felt comfortable coming home to. The difference with Wellington is that land is available and has construction capacity relative to the size. There are lots of additional new properties going up to meet the demand - and the population growth is relatively slow. Auckland is going to slowly deflate and as a result opinions will change on property as a 'fool-proof' investment so Wellington prices will stabilise around their current level.

@ Wildcard, you say: "What problems are Auckland specific? House price to income ratios at 10:1 aren't"
YES THEY PRECISELY ARE, look at regional housing affordability charts published here on Interest.co.nz

The problems may have been majorly limited to Auckland all this while, but signs of it moving south to Hamilton and Wellington are apparent. Investors lurking for capital gains would put their money into any half-decent property that might promise good returns regardless of its PIN code.

"New Zealand’s political leadership has failed for decades on housing policy,"

Decades????, that can't be right, I have been assured on this very web site that it's all John Keys fault.

"Our politicians are doing our bidding."

No no, this can't be true, I have been assured on this very web site that it's all National's fault.

They have made it worse by not admitting to its existence

Yes, because it worked soooooo well last time. And the time before that

Someone told me once, that one definition for insanity is doing the same thing over and over again expecting a different outcome.

You're exactly right.. that is voting for National AGAIN and hoping for a different result..lol

many comments on here have blamed previous governments for the start of the problems,
he is right on the 30 years, that is about when our politicians decided it would be a good idea to incentivise private owners of rental housing through tax breaks, of which many of them jumped onboard.
how do you get change when there are many involved from just about all parties.
i still remember the hoohaa when the greens got found out investing in houses for a MP super fund

The Green Party is about to announce it will stop taxpayer-funded accommodation allowances being channelled into its superannuation fund. …
The party’s superannuation owns two properties in Wellington, in which three of its MPs live, and the taxpayer picks up the rent. …
It’s understood Green Party co-leader Metiria Turei will shortly announce plans to sell both properties, ending the practice of funnelling the accommodation allowance into the fund.

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If you care about anyone other than yourself please, dear god, vote for Labour or Greens.

Unless you want to live in a greedy, self-serving society where there are no young people anymore (because they will have to move away).

Because when Labour was in power for multiple terms they solved the 30 year housing crisis!

And what about National, who've been sitting on their greedy hands during this housing bubble?

What are you saying - that they are both useless??

They didn't, but they ran multiple surpluses back to back, introduced KiwiSaver, founded Kiwibank, introduced student loands, paid off debt and kept the country in some sort of order. They were hardly the greatest government in the world, but they did a hell of a lot better than what National has done (or more accurately, hasn't done).

But...did they campaign on the urgent need to address the housing crisis, then pretend for the next nine years there was no such housing crisis?

When Labour was last in power even real estate agents were openly saying they thought house prices would go back down again and the market must have reached its peak.

So your measure of success is not - in fact -solving anything but convincing real estate agents its over. So long as they said openly is the key thing.

Call me picky, but I might have higher standards.

Well that's a seemingly deliberately obtuse reading right there. Point resoundingly missed.

The point - for a simpler explanation - was that even when things weren't so bad, National was crying there was a massive crisis and an urgent need to fix it. After they were elected they spend the next nine years denying any such crisis exists, let alone trying to fix it.

And the second point was that during the last Labour terms, the problem was less so a crisis. Many expected it to subside naturally.

Try to stay on track.

>"Call me picky, but I might have higher standards."

Marvelous. Perhaps rock them out some time, then.

Seemingly perhaps, yet not.

Labour had two terms before that and didn't fix anything either.

So arguably Labour at the time were not competent re housing (or failed to see the urgent need to address it), while National saw the urgent need to address it...only to do a cynical about face and deny for the next nine years that any crisis exists.

That's quite a difference.

When I take the emotion out of it, all I want is results.

Who will you be voting for then Ralph?

Such a tough question isn't it.

On the national score card we have experience. No one in opposition has any clue how to actually run a government, always a problem for every opposition of course. They didn't bankrupt the country, that's good and not be to taken for granted given the last nine years. But we have a big housing problem that hasn't been addressed.

On the labour score card we have a higher social conscience. In the end people matter more than anything else and inequality is real. But Little seems like a wet fish to me and as the American's have proved change for changes sake doesn't always work out the way you planned. I don't see anything revolutionary in their housing policy so have low expectations on that front.

On the greens score card we have idealogical purity. Whilst a solid moral base is good I draw the line at ordering everybody else how they must live. Unfortunately, I equate greens with more taxes/levies/fees (insert your thesaurus for tax here), they don't seem to have anything actually innovative. I am a traditional environmentalist, so I am against oil inn water supplies but don't buy into taxation as a way to "save" any planet.

And the environment we face has (at least);

(a). an intergenerational debate that is very hard to have,
(b). an extremely unhealthy world economy that could implode a bit soon(ish),
(c). a serious housing crisis that requires major restructuring and not political squabbling,
(d). a seemingly black hole of demand from iwi who have no checks and balances at all.

We seem bereft of moral leadership at the moment outside of the crusade to save the planet through tax.

For me, it might come down to who will do the least damage.

"For me, it might come down to who will do the least damage."
I guess that rules out National, then.

Can you expand on that at all?

I'd have to say it is all pretty self evident, to be frank.

Ive voted National most of my life as Im a capitalist pig and I want to make money. I have started a business and I want to take it globally, but to do that, I will have to pick up sticks and move, as housing has become to expensive for me in Auckland. Australia is looking good at this stage. I thought National were the business party. They are the housing party. Labour may be hopeless as well, so I may vote Winny to reduce immigration. Im not sure. But national are not getting my vote. We need to reduce the crises we find ourselves in.

All I know is that when National came into government, I could buy 2 beers in the pub for a tenner, now I cant even buy one beer. By my beeranomics National are hopeless.

About the most honest comment for a while

Social Credit? (oops wrong century)

-

Voted for a Labour Mayor of Auckland who promised a compact city, he gave us sprawl from Pukekohe to Wellsford. He promised apartments & affordability, but jacked up land prices.

Labour aren't worth the effort.

I would consider that the mayoralty seems to erase political leanings as such. If he was true Labour he would preserve the Pukekohe growing soils as Phil Twyford has said Labour would do.

Economists, apart from Tony Alexander (BNZ), can be a bit of a worry. Tony is quite clear when he asks "why do people buy and invest in homes? Seek out and you will see why investment in homes is, relatively speaking,desirable.

Tony works for a Bank so is effectively the bank talking .

He doesn't push any of the measures that have worked overseas such as Stamp Duty on Foreign Buyers, Loan to Income Ratios (4 to 1) , taking away negative gearing , Stampt duty on investors to stop them flipping existing homes...

He just talks about the problems none of the solutions... we all know the problems.

Of course, if it is not sustainable it will not continue ad infinitum. Our money masters are just postponing the inevitable bust that will eventually correct these imbalances through worldwide capital re-allocation. This earthquake of an economic downturn has been building tensions for so long that the consequences will be mass unemployment and financial losses like never seen before. Political upheaval and social unrest undoubtedly follows.

Federal Reserve parlour tricks that used to work when saving rates where high(er) and financial wealth more uniformly distributed will, to the amazement of today’s pundits, stop working. Moving capital and wealth from the poor to the rich, through inflationary depressing wages and boosting asset values, is a tax policy with rapid diminishing marginal returns, as witnessed by ever-larger amount of debt it takes to create GDP growth.

http://bawerk.net/2016/06/18/you-are-currently-living-through-the-dumbes...

And somehow through all that we still have to create an environment where we build more housing stock.

Ironically, the regulatory failures that have made such a venture non profitable for 30 years has will be fixed by, er, more regulations.

I agree AJ... this an underlying cause of financialization and the division of wealth...

It manifests, in a global world, like a 2 sided coin.
heads is the inflationary forces on asset prices
tails is the deflationary forces on av. wage rate growth ( eg.. global money supply grows at 7%/yr while av wages might grow at 3%/yr )

It is not just about division of wealth. It is also about wealth creation and regulatory regimes that destroy freedoms, forcing large misallocations of investment as the unintended consequences of social engineering experiments.

Lest we forget it was stated US government policy that everyone in the US should own a home. Regardless of whether they could afford it.

In the comments Bawerk
The imbalances in the system are a direct consequence of the debt based credit being used as if it were money. You can’t correct a debt saturation imbalance with more debt, and that’s the only way the credit being used as if it were money existences, as someone else’s debt. And, that debt based credit’s continued existence is totally dependant upon the ever rising values of the assets backing it, and the solvency of the institutions that administer it, either one of those two fail and it’s !POOF!, 2008, or worse, all over again.

but debt also elevates commodity prices ... take away this debt and you will find many commodity producers are insolvent...and that will be an ugly reckoning - we are caught in a cul de sac

Its not about misallocation of capital - there's no shortage of capital. There is however limits to actual resources underlying the capital. (if the masses had far more wealth, resource bases will collapse even faster). Simply the resources are not there to create anything but phoney growth, so as debt MUST increase, asset prices MUST increase where real growth is absent.

The new Debt is a call on future prosperity, and future prosperity is itself entirely dependent on availability of cheap fuels. So slowly but surely the future debts (pensions, mortgages etc) become unsupportable.
There isnt reallocation ... there is default.

Shortage = there isn't enough capital (quantity).

Misallocation = there was plenty but we used it for non productive activity and now there isn't enough left to do anything productive (mis-use).

where is the data that backs up there is a shortage of capital for productive enterprise?
there is money everywhere looking for a return....

Ahh, the fact that we have so much going into the property market...
Capital cannot be allocated in two places at once.

It still says nothing about there being a shortage of capital for "productive" purposes ... theres money everywhere looking for a return. Clearly the risk is not perceived to be worth it

The sky is falling, the sky is falling.

You just make no sense some times.
Yes, there is money looking for a return - and all of that smart money is being poured into the housing market due to the arbitrage potential. Buying and selling existing resource from (to) each other is not productive.

Sorry ham n eggs, I was trying to clarify the following;

"not about misallocation .. there's no shortage of capital"

Because that's two different ideas in one sentence that makes them sound the same.

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There's definitely something fundamentally wrong with NZ housing when it's agreed there is a structural shortage of houses and yet we're still likely to experience a construction bust in the not too distant future.

It would be funny if it wasn't so serious. It's like being at an all-you-can-eat buffet and managing to starve to death.

Properties are vacant because most of these investors see it as a place to park their ill gotten gains from overseas for a couple of years. They dont care about yeilds or capital gains, this is a place to hide some if that wealth till they figure out the next soft spot in the world where they can take it with no questions asked. Thanks to NZ lax trust, tax, lack of large cash transaction reporting and transperency requirements, they could do it with the blessings of the authorities.

Lots of good points here - the question is whether we have the leadership to do it.

And whether if anyone attempts change on the scale required the electorate won't just boot them out.

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Yes and last poll shows a Labour/Green governments beats a National one. Winston would be Kingmaker. Vote people before the NZ society you have always known is gone for good.

Only an economist could suggest a possible "population of 15 million" as if its an arbitrary choice without stopping to think what those people would actually do ..
Thats right, i forgot, in an economists world we pay each others wages...

You did not read him properly ham n eggs. He did not suggest 15 million. He said we need to decide. He just said " do you want 15 million people or do you want five?"
I agree with him. We need to decide. If we just keep up our current thoughtless progress, we will sooner or later end up with 15 million anyway. I would prefer to think about it and my view is it should be 5 million.

Definition of an Economist I read long back : One who sees something work in practice and goes on to find out whether it will work in theory also.

“We are peppered with opinions of what and how things will happen in the future. Whether it is dairy prices, interest rates or economic growth – the track record of forecasts is bad”.
Eaqub 2 April 2016

http://www.stuff.co.nz/business/opinion-analysis/78457883/shamubeel-eaqu...

Maybe he should breathe through is nose for a while.

Introducing to you a failed economist - Shamubeel Eaqub. Too many economists/experts/lawyers/accountants around. For the last 20-30 years it has all been about getting useless degrees with low emphasis on doing a trade.
And for all of you thinking a govt with Green input is better than the current lot, you are fantasists and retards.

Nothing more retarded than the 9 years of National allowing foreigners to speculate in NZs housing market and repatriate profits back home tax free !
How many long years was that allowed to continue again ?
So " the best status" wake yourself up !

And the previous 9 years with labour...

OK, So all we need are tradespeople who look at the world through the prism of their own function. How about psychologists?

New houses/ apartments are never cheap. Because they are nice and shiny and new. No matter how small they are. And if intensive subdivisions are forced to include "affordable houses" as part of being classified as being a "special housing zone", as soon as these lucky owners can, they will sell them for a big profit. In future we will hear of all sorts of rorts where the developers nephew bought one...

That's certainly the case at Hobsonville Point. In a block of 3 affordable homes, 2 were for sale immediately after the 2 year minimum term.

And I'm convinced a builder bought an affordable home from the builder's developer recently.

Our leaders have been making housing non policy on the go, especially during the last 2 decades or so.
The result is events and developments have overtaken the capabilities of elected leaders and now the opportune time has gone. Housing has been our major 'one horse wonder' during the recent past and now the horse is tired, leaving the future generations to pick up the pieces of the run.

Man this is depressing, particularly that no political party seems to really understand the social ramifications. Noam Chomsky's Requiem for the American Dream is similar.

I've tried to resist it (being reluctant to condemn an entire generation), but I'm becoming more and more convinced that in 100 years time the Baby Boomer generation will be looked back upon as the most wasteful and self-centered generation in human history (particularly politically), and will eventually be forgotten for their non-achievement. Even though every generation is a product of its environment, the pre-war generations would be ashamed of where we are at.

Perhaps in ten years time the Boomer owned properties will be undesirable to the current generation. Now that would be equalization that is needed.

I think you'll enjoy this rant from an Australian.

https://np.reddit.com/r/australia/comments/61p3dd/underemployment_of_you...

Everyone is taking about housing, only because it is a crisis - ask average Kiwi who cannot even dream of owning a house and for National - their is no housing crisis - infact is a sign of prospeity - does it not reflect whom the national government represent and workd for.

This election - will be for change.

I am sure you are right, But a change of government won't solve the housing crisis.

It's better to have parties in power who can at least admit a housing crisis exists and have *some* policies design to address said crisis, than a party who campaigned on the need to address the housing crisis only to spend nine years denying any such crisis exists.

" have *some* policies design to address said crisis"

What are these policies you speak of??

You can lead a horse to water but...

Dude.

Read.

Link

See post above.

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A salient point made by Bernard Hickey on an interview with Katherine Ryan ( Radio National ) recently , was that the total value of the housing stock of New Zealand is 4 times the value of our nation's annual GDP .... whereas in the USA that ratio is only 2 times ...

... so much money , much of it borrowed , is going in to push house prices ever higher in NZ.... so we can trade very expensive houses with each other ...

.... but so very little money , by comparison , is going into creative , productive , entrepreneurial business ventures ... where the jobs and overseas earnings are ...

Sigh !

It is indeed a tragedy.

But under leftist political ideology anyone who owns a business is, ipso facto, a "fat cat" and their main purpose is as a target of vilification and taxation. Except for short periods, when the electorate get fixated on someone else, like foreigners or politicians.

So young people emigrate for opportunity, wage growth and innovation stall (or reverse), productivity slows (growth itself is an evil word) as we sit around using the precious capital we have to borrow off others (because we don't save ourselves) to drive up each others house price.

As a society, we don't value people who innovate or work hard.

Leftist policy is to reduce inequality which is shown to boost GDP growth.
It's also to put more tax burden on capital holders and less on the working classes.
A better spread of money throughout the populace means you have a far larger consumer base with disposable income.

Young people emigrate when they can't afford to own the piece of land that they live on or because the rents are disproportionate. Auckland will just become a retirement village, at least the wages will be extremely high when there are all sorts of labour shortages, it's just all those wages will be going to rent.

My experience is young people leave when they can't get good jobs. In some respects the other side of the 'can't afford a house' coin.

My philosophical problem with the idea of reducing inequality is that I want equality of opportunity but can't see that equality of outcome is a practical goal and is often unjust.

I want a high income community but I don't like the hidden socialist assumptions that wealth will always create itself and it is always okay to gouge people who work hard.

I'm sorry, but that is rubbish.
Leftist policy has never been shown to boost GDP growth.
In fact, of the natural experiments that exist, it is always free market economics that proves to be a success.

The problem isn't with the free market in NZ, it is with the fact that we don't have one. Don't persecute the rich for perpetuating inequality, go after central and local governments because they are the real drivers of it.

http://www.oecd.org/newsroom/inequality-hurts-economic-growth.htm

NZ did best when we had more social housing, free tertiary education, comprehensive social services, high taxes on the wealthy, land tax instead of GST. We had the highest GDP per capita in the world.

Surely you realise that everything we were talking about yesterday with regard to land tax was leftist policy?

The government both local and central seem to be largely doing the bidding of the wealthy only. It is the wealthy who decide these policies and are just as accountable as the government themselves.

Here I was thinking you were a bit smarter.

That's a poor reference. Who would have thought - an institution finding that more institutionalism is a good thing.
They are essentially only saying that education access is the driver of economic growth. Something that is well understood. Their fault is that they suppose greater social policy is the means to achieve it.

New Zealand did best actually when we had no social assistance. Right at the start of the colonisation when there was no regulation was what established NZ. Look at it everywhere; USA, Canada, Australia, Victorian Britain, German and Austrian industrial ages - never before (or since) has more prosperity been brought to so many people than in times when the free market has been permitted to function.
New Zealand feigned success with socialist policy. We also had some pretty bad things too, like high and volatile inflation, poor access to goods, and extremely inefficient allocation of labour. None of which are sustainable. Socialist policy can never ensure equality, because by its very nature it is structured on inequality.
The fact of the matter is that we can all be relatively poor and relatively equal, or we can all be relatively wealthy and unequal. It's much better to be the latter.

Land tax is solely a leftist leftist policy? How is a flat taxation on the intrinsic value of your land at all more leftist than conservative? If you had a tax like we currently have where you pay more based on how opulent the capital improvements are, this would be leftist policy. A flat tax equitably distributes the burden of the most fundamental governmental services needed.

, Why would you take what Mr Eaqub says as being gospel?
He has an appalling record of predicting anything correctly over the years!
The thing is that people who want to chuck out the current National Party and replace with Labour,Greens and any others that Labour can get with are deluded.
Just because many can't afford to buy a home in Auckland is no reason to vote out a government that has done a very good job over the past few years.
Do you really think that the Greens and Labour will be able to grow the country with their socialist and greeny ideas.
Yes they may drop the price,of,housing in Auckland because there will be,so many out of work and not being able to pay rent let alone mortgages!!!

Despite the regulatory regime severely constraining supply I know plenty of young people who have got themselves onto the property ladder. One could spend all their time beating their head against a brick wall trying to get people in Wellington to see sense or one can choose to get on and find a way to buy a house at the end of the day it is still about personal choice.

It doesn't take a degree to buy a house, it takes basic skills. A persons first house doesn't have to be their home for life. If you are prepared to do some hard work like renovating and landscaping you can turn your grotty first home into something with a higher value.

NZ has too many people without the practical skills and discipline of physical work. Too many people thought they could free ride off other people's labour and have chosen sedate desk jobs instead of practical functions........and the irony is the desk jobs stop the building work, push for more regulation and compliance all the while complaining about the price of houses.........

If you took 50% of the workforce out of the offices and strapped a builders belt on them instead and at the same time threw out the RMA and Building Act and Councils oversight on building then we would have an oversupply of cheap houses........so who is the problem?

When I was a young fulla 25 years ago I was on $30,000. House prices were $150,000ish. Beer was $2.00 a handle.

Now Im an old fulla on $120,000 beer is $11.00 a small bottle in pubs, houses are $900,000.

Now Im no economic genius, but my wages are up 4 times, my beer is up 5.5 times and houses are up 6 times. Im not sure how many young people earn 120K, but the young are worse off. Its disengenuous to say the young have to save harder and work harder when relative to my income I have gone backwards. (way to go National). How hard must it be for young people. I think there are a lot of selfish people on this site and dont care for other people.

As a side note, Im trying to increase my income by starting other businesses, but just because Im doing this, I dont expect all and sundry to do the same as a lot of people are struggling to survive. Its possible, but not always doable.

To summarize voters need to go Labour or Greens, if only to avoid Winston as king maker since he could go either way and end us in the same cesspool as now.
We can note that even Andrew Little is making encouraging noises about Immigration numbers (note not ethnicity) which is one major housing bugbear.

... if the defamation case that the Scenic Hotel owners Earl & Lani Haggiman have against Andrew Little is anything to go by , we can have very little faith in Andrew's ability to sort out a mess , big or Little ...

As a former union man , I'd have thought he could have been skilled enough to meet them personally , and to nut out a resolution ... and to avoid at all costs an expensive and embarrassing legal battle ...

Mrs Haggiman says he never even offered to meet them ...

... I have little faith in Andrew's ability to negotiate , to mend fences , and to build bridges .... and these are things the country desperately needs , does it not ?

I agree.
Unless your wearing a cloth cap and coming out of a mine.

Your comment has something to do with this topic?

Yes .

“Land supply in New Zealand is slow, particularly in places like Auckland. But it’s not just…in terms of sections, it’s also about density.” The Unitary Plan was a win for Auckland. “The reality is that if we only do greenfields, we will just see more people sitting out in traffic at the end of Drury.”

The Unitary Plan is very bad, quite possibly the worst in the world.

A higher proportion of growth is allocated to greenfield under the Unitary Plan (40%) than Auckland has utilised for the last 50 years. The Unitary Plan is mostly about encouraging greenfield sprawl, the high land pricing is how Auckland goes about forcing people to build miles away and commute long distances.

http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=11...
Go Winston.. you're hitting the nail on the head.. Discontent is the word..

Come the revolution Gummy, after the storms of discontent..we may not need to mend fences, ala Trump nor rebuild build bridges after the storms of Climate Change Denial.

We shall all have a room in a McMansion and be very thankful for the privilege.

It never rains, but it pours in NZ and no amount of New Immigrants, will change a thing. The rivers of a discount tent, will blossom and bloom and flow, but no simple Politicians will learn to dig holes, other than the Housing Malcon-tent that flows before our eyes, this take.

Give everyone a spade and we can rebuild this land, into one containing lakes and ponds and drains....if only a single politician....had a Brain.

Infrastructure, is what we crave....and less hangers on.

We do not really need Mcmansions...but a once in a lifetime flood, keeps happening to frequently for my tired eyes.

I have to mop away the tears for those really in need of a break....and a ditch in time...would save an enormous amount of sludge and whatnot......up shite creek, without a paddle..

Plus more to come it......seems.

Infil crap houses, plus concrete are all very well, but the rest is a drain on the economy, of not doing things right...first and everytime.

Given the amazing quantity of precipitation we have received Alter Ego , could we take your drain on the economy .... and re-route it to the good folks of Edgecumbe ....

One mans drain is another mans salvation. ...A precipice of precipitation, is above some peoples heads.

There are more dykes in Holland, than I care to think about, but they do a grand job, holding back the tides of stuff flowing inland, not out to sea, a downhill slide for most of New Zealand.

So why do we not build levees, that work,, with levees that pay... in more ways than one...it will keep people employed.and provide essential work. We need to do something...we are way over the edge of reason and Edgecumbe is shaky enough and been hit big before. But so have a lot of places, yet nothing major is done.

Most of the old Countries have rivers and even years ago, they managed to contain em. So what is the cost now, using Diggers and any other Nationality and equipment to do a similar job.

A no brainer, if we want to keep our heads above water. It ain't rocket science, any ex ex Banker, ex Farmer, Ex School Teacher, ex-United Nations hero, could build dykes, will nilly...If they put their minds to it....

(If they had one, we have given them all the Chances before...Nada)

.They seem to have made a name for themselves, achieving Sweet...FA and I do not mean...to be unkind, but that is the reality...or we would not be in the mire ...so I would admire em, not despise em....another ...levee on the idle rich, would be nice...and I do not mind contributing...via taxes...as would any sane Burgher....if it were used wisely, not in their self interest....as ye well know.

Little may be done. in our life time... but surely there must be an alternative to sitting on ones thumb in Parliament........besides a very over rated, but underachieving bunch of half-wits.

Real Estate and real life is complimentary, we need water to conserve, not floods of it, through our front door....Little and Large.....is equally insecure....but no safe Infrastructure to ensure our continued well being.

That is nuts...and a Dyke would fix many things...but they have a different agenda.

We gotta get with the program. Even a 1% tax on Tourists and tourism, to see how we do it....in our Clean and Green Land, without turds in the office...meadows and rivers and streams...Gummying ...up the WORKS...etc...would be a change....Ewwwwwwwwwww. know what I mean.

.

I have voted National my whole life. This year I will be voting for a change. Why? Because National has absolutely no social policy. In fact I would go as afar as to say they are heartless and I don't want my kids and grandkids growing up in a heartless society. The only thing preventing me voting Labour is Andrew Little and I know a vast number of people feel the same way. So I am tossing up between the Greens (whose leadership I actually like) and Winston. I know considering Winston may make me hated by some but when it comes to more selective immigration, foreign ownership and stop sucking up to China I am on board with his policies. Also I just can't see Labour winning any election with Little; crazy as it may sound maybe they ought to roll the dice nice and early and replace him with Phil Twyford who I think is more acceptable to the middle ground that will determine the outcome of this election.

Winston Peter may go with National so vote for Winston many not be vote for change unless Winston declares that will not go with mational which is hoghly unlikely so think and vote but yeah definitely No National.

“Why do we want immigration, how big do we want to be – do you want 15 million people or do you want five" Yes Shamubeel. We do phaff about over immigration all the time - and have never identified the desirable population number to work to.

up
11

Er, when did anyone actually choose more immigration and more Auckland? We are repeatedly told they are good for us by Those Who Know Best. Seems decidedly fishy to me, it smells of stale old ideas that don't actually work.

After watching this, I think it may show that we have a major problem with NZs society, where there are few too people living in houses. Maybe this is due to broken families and high divorce rates. Also maybe due to less people not having children, eg leaving it too late before they have purchased a house and are in a comfortable situation to have children. Or maybe people can't afford to have children due to the mortgage needing two working family members, and also having a big student loan.
Also do we want NZ to have a huge population? It is having a small population that makes NZ special, and isn't as expensive to service. I believe that since 2000, NZ isn't a better place to live, than it was prior to 2000.

I believe Carterton had a lot of population growth because their council has made it easier to build and removed a lot of the red tape. Also a lot of old people moving there, as new houses are probably the cheapest you will find there, and an alternative to moving into a retirement complex, where you don't actually own the house. Also heaps of land.

I wonder if Shamubeel has considered politics? He could be a good Labour Minister of Finance.

What an evil curse you propose on Mr Eaqub.

ha ha
He's probalby way too clever to even think about becoming a .$%,35 cough, splutter ,....sW$$# politician

He sounds like a National politician already.... suppy is the issue , dont worry about demand

Isnt that the message we have been spun.

yes, he doesn't focus on demand side enough.
If you read his book 'Generation Rent' you will know the guy practically worships Edward Glaeser, who is a big supply-side guy.
Look, I tend to think it is more a supply side matter, but demand side is still important. I'd say it is 65% about supply, 35% about demand. Yet supply gets about 90% of the attention.
Remember he is an economist at the end of the day, and even the better economists think within a pretty small band.

•There has been a cumulative 500,000 gap in housing supply over the last 30 years

500,000 short, seriously where do they come up with these figures ? Doesn't NZ already have 20,000 or so empty homes. Assuming 2 people a house where are these million people sleeping at the moment ?

I understand there is a shortage however 500k feels like he is just trying to get attention

He is playing safe and does not want to offend any political parties as he too has to run the show.

The whole thing has become a fiasco, successive governments (bad governance) are to blame.. What only would have required minor policy tweaking ten years ago, now requires a crowbar and may yet be our next downfall.
Housing is the sledgehammer that drives a wedge between the rich and the poor. Its been tried before and has never improved society, as in.. we are not lifting all boats equally ... No good will come of rising rents and leases nor taking on of humongous mortgages This has been a good for some and bad for many.
So much money washing about out there (wheres mine?) and only hard assets to spend it on i.e. bricks and mortar. the imbalances have been obvious for years .. Truly a case of "short term gain and long term pain" but make no mistake.... this is a deliberately engineered economic clusterduck "Quack".. Sack the lot of them i say.

"It’s remarkable NZ authorities do not have proper data on foreign buyers. While he estimates 10% of purchases in Auckland are made by foreign investors,"

Define Foreign Investor... Does Mr Eaqub include Students and Temp Visa workers in that Category.
Also if we don't know the figure how do we know it is not a problem. He dismisses the issue without even knowing the extent of the problem.

To me this just confirms what we already know and doesn't provide any decent solutions on the demand side
- No Stamp Duty on Investors buying existing
- No Loan To Income Ratios
- No mentioning of bringing NZ in line with Australia such that students and temp visa workers are classified as foreign buyers
- No Vancouver Tax or Ban on these Foreign Buyers

Time to vote Labour and actually target Demand...
"Under our policy only citizens and permanent residents will be able to buy existing homes. Removing this speculative demand from the market will help stabilise prices and give Kiwi families a fair shot at buying a place of their own."

The cold hard reality is that most of our career politicians will not make the hard calls for the greater good. For example, a rational social/economic analysis would dictate that we need an immigration rate closer to 25,000 per year as opposed to 70,000. No party, Labour or otherwise will act on this key driver. Why? Because they know that this would tank the property market and that would cost them the next election. The interests of our politicians across all parties are not aligned with the best interests of this country. Vote for Labour, Greens, NZ First, National and 4yrs from now the problems will be bigger than today...that is one virtual certainty. A classic example of this political cancer is the recent US healthcare vote. US healthcare costs are over $12,000 per person per year, yet Republicans and Democrats voted for the status quo, even though it's bankrupting America.

The cold hard reality is most people don't earn very much money...hence Auckland housing will remain out of reach for them. The only way you will get cheap housing is to start building London style estates in Pokeno and Warkworth and wouldn't that just be great, innit Gov

The pessimist in me thinks that humanity has had one and only one golden age of 'relative' economic equality and prosperity, and that was between circa 1950 and circa 1980.
that was probably the product of a number of factors, including: the horrific experience of WW2, societies still largely grounded on Judeo-Christian values and ethics coupled with modernity....
I don't think we'll ever get that back. NZ, like many countries, is falling back towards an almost feudal scenario.
There is only hope if there is more pain. Once the strong majority is people on struggle street, then we will see real change. I'd say give it about 10 years.
Out of suffering comes salvation. It's been the same story time and time again throughout history.

Welcome to the layer cake.

Good Luck everyone..

Whether foreign buyers is 10% or 30% that additional marginal demand is what pushes up the price especially given low supply.

It is incredible that an economist doesnt understand the basics of supply and demand and its impact on price.

500,000 shortage.... good laugh

Move to America...not quite the Land Of The Free,...but certainly much cheaper than rip-orf NZ.....in some cases...and states..

Plus Non-Recourse Mortgages....unfortunately...Plus Trump....(I knew there was a catch).

https://smartasset.com/mortgage/best-cities-first-time-homebuyers-2017

Move to America

Maybe this is the new paradigm. In the age of globalisation staying in one country your whole life is like staying in one village your whole life was last century.

God save the PM
he's not a human being
and There's no future
And NZ's dreaming

In the 1930s to 1940s we had very different types of governments and ideology.

Worth pondering? Hmmmm ...the age of heroes and epic struggle. You know a lot of people blame the Baby Boomers, Rick I'm looking at you, but weren't they spawned by the generations that preceded them? How would you like to have a Silent Generation bringing you up? And if you were the Silent Generation how could you follow in the footsteps and live up to the epic deeds of the heroic G.I. Generation? It's no wonder they were silent and a little traumatized. And frankly I'm not that convinced about the heroism of the G.I Generation being all that good a thing but who could blame a generation that was spawned by the Lost Generation?

Strauss–Howe generational theory

What ever this guy says do the opposite...