US inflation expectations contained; copper has a moment but not steel; Aussie new home build signals weak; Aussie mortgage pain strongest; UST 10yr 4.42%; gold up again but oil slips again; NZ$1 = 60.3 USc; TWI-5 = 69.3

Landlords win

Tenants win

Homeowners win

Banks win

Taxpayers lose

That's the accommodation supplement.  Nothing to do with:

"the recent publication of $ millions of government funding being forked out to mortgagees in need" 

As a result of a shortage of AFFORDABLE housing in the house ownership market, fewer households are able to buy.

As higher income households are unable to buy, they rent and increase market rents.

As rents rise in the private rental market, there is an increase in the number of lower income households that find housing unaffordable and more households require:

1) social housing

2) due to the insufficient availability of social housing, those on waiting lists require temporary housing

3) other lower income households have difficulty meeting rents in the private market and require housing accommodation supplements

Note that during the period, 1 year mortgage interest rates declined from Nov 2017 from 4.49% and bottomed in July 2021 at 2.162%.

This drove the nationwide house price to income ratios from 6.2x in Nov 2017 to peak at 9.3x at its peak. 

The house price to income ratio that is considered affordable in the house ownership market for owner occupiers is below these levels.  

Auckland has been an unaffordable housing ownership market for many years.  Those who had access to the bank of mum and dad may have been able to buy.  Households that did not have access to the bank of mum and dad either chose to rent or to move out of further and further out of Auckland (fringes) to either buy or rent as rents in more desirable areas became unaffordable.  Many chose to move to other areas of the country and buy (if they were able to find suitable employment). 

Remember, as a result of a shortage of AFFORDABLE housing, home ownership rates have been falling 

https://tradingeconomics.com/new-zealand/home-ownership-rate

There needs to be an increase in new residential dwellings built.  Increasing supply of rental housing at the expense of owner occupier buyers in the existing house market is merely decreasing home ownership rates and increases wealth inequality as the rich get richer and the middle income households are unable to afford to buy.

Non owner occupier property investors are reducing supply in the long term rental market due to cashflow stress. Cashflow stress has resulted in 

1) selling their property

2) by choosing to rent out their property in the short term rental market

Other property investors in the long term rental market are not buying as current rental yields are inadequate. The reduced supply in the long term rental market will likely result in an increase in market price in the long term rental market. 

So in the existing house market, we have 

1) in the house ownership market - falling market prices

2) in the long term rental market - rising market prices

Thereby resulting in rising gross rental yields. 

The current issue with building new housing, is that current construction costs in many places are above current market prices in the house ownership market, so there is no financial incentive to build new builds by the for profit sector.  



Note that recent conditions have been favourable for non owner occupier buyers.  Some of the reasons that non owner occupier buyers can outbid owner occupier buyers (such as upgraders, first home buyers)

1) interest deductibility 

2) interest only financing

3) in an upward house price market - equity recycling resulting in zero savings required as the deposit is borrowed (in effect 100% of the purchase price is borrowed)

4) investor / non owner occupier buying syndicates - combined borrowing power results in higher purchasing power, higher than for a owner occupier buyer on 2 incomes for most owner occupier buyers.

 

But if they sell they will free up a lot of capital from their home. After all they have a low mortgage. They can then use this to buy a small portfolio of shares to cover their rent. I don't see why young taxpayers who can't afford a home should subsidize older Kiwi's who probably live in a home that is way to big for them anyway. Then again I am not a socialist.   

Hmmm indeed. I'm all for having a last resort e.g jobseekers, but these sorts of things aren't meant to be comfortable to live on. We seem to be transitioning to a world where nobody can fail and the government has to help when everything goes wrong. This both costs those that have, and puts off people that haven't, taken adequate precautions to protect themselves from risk. When this sentiment flows through to business like insurance and banking.....we need to be careful.

Ultimately you may be correct Chris, but we're not there yet. Possibly naive, but I'd like to think there is still some hope that a government will work to do something substantial to hold house prices down at an affordable level.

Back 12-13 years, Reddit's population was very small and had more in common. In the past 6-7 years it's simply become a large site with vastly heterogeneous users.

Others would say the fiat currency has lost value against the metal.

Some comments from GATA from April 7.

Tonight's action in gold and silver is astounding. Both monetary metals opened down hard, as if somebody was trying to set a negative tone in the market for the day ahead after many days of strong advances.

Whereupon somebody pounced on the price smashes as if metal was a bargain at any price.

Something major has changed.

The Federal Reserve and U.S. Treasury would not have been letting the monetary metals rise so sharply over the last few weeks if they still had much control over the markets and if they still had much metal they were prepared to lose.

Is the second great era of gold price suppression ending just as the first great era ended with the collapse of the London Gold Pool in 1968, with the exhaustion of the ready reserves of the price suppressors?

In any case the U.S. dollar is in danger of being murdered by its own government through over issuance, spectacular and still-growing indebtedness, and political weaponization.

While the longstanding gold price suppression policy of the U.S. government and its allies, undertaken to defend the dollar and executed largely through the futures markets, remains a prohibited topic with the cowardly mainstream financial news organizations in the West, major central banks and governments throughout the world -- including those of China and Russia -- long have known all about it and have even discussed it openly.

Major financial houses know about it too, though they won't take the risk of discussing it openly.

GATA is a big reason why they know.

They all are aware of the uncoverable short position the Federal Reserve and U.S. Treasury have been running in gold for almost 50 years. The violence of the recent rally in the monetary metals strongly implies that this short position is being squeezed by equally big operators.

So maybe the sun won't be the only thing eclipsed tomorrow. Maybe a predatory financial system will be eclipsed too, and payback, as the saying goes, is ... well, very unpleasant.

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.

"Benign strategic environment" was not a left wing ideology or belief at all, but rather a broad zeitgeist. And actually a follow-on from conservative political scientist Francis Fukuyama's ideas germinating in The End of History: https://en.wikipedia.org/wiki/The_End_of_History_and_the_Last_Man

The idea of a benign strategic environment certainly seemed to persist through John Key's years too, with Key and Co's very favourable stance toward China, even allowing Jian Yang into such positions as he was. National was anything but nationalistic, too. It's only more recently that large portions of society have swung back away from the more liberal view to a more conflict and power-based view of things, along with folk hailing strongman leaders and nationalistic ideas.

Probably reasonable that we're better off having AU and US as allies than China, though. Although the US seems to have generally had little regard for NZ or any other country than themselves, China seems a still worse version of that.