Here's my summary of the key news over the weekend in 90 seconds at 9 am, including news of a 5.2 aftershock on Friday in Christchurch, followed by 10 more aftershocks over the weekend, including a 4.2 this morning.
Finance Minister Bill English acknowledged on Saturday that the latest aftershocks may further delay the rebuild of Christchurch as insurers continued to wait for more certainty around the stability of the land in Christchurch.
A concerted rebuild from the second half of this year is crucial for New Zealand's economic recovery and its budget position, generating an extra 1% of GDP growth a year for the next couple of years and a return to surplus by 2014/15.
Meanwhile, the Australian based refrigeration engineering firm Hastie Group collapsed into receivership over the weekend.
The Sydney Morning Herald reported it has 2,000 staff and owed Australia's major banks almost A$500 million, with the potential for bank writeoffs of A$250 million.
Hastie reported accounting irregulatarites in its Queensland division.
Hastie Group also has operations in New Zealand, including Hastie itself and Cowley Refrigeration. See more here at Hastie's About section.
Elsewhere, The Telegraph reports insurance market Lloyds of London is preparing for a breakup of the euro, including preparing for paying out in multiple currencies.
No chart with that title exists.
9 Comments
Funny thing but surely this is a classic let private business do what it thinks is best? ie a private insurer and a private individual should be coming to an agreement....a "rational market" solution.....if and I cant blame them [re-]insurers will not cover then its a case of abandoning areas of Chch....simple....make huge parkland area(s)......
What can the Govt do with huge unknowns except take on the risk that the private insurers will not? whcih menas in effect you are asking that I as a tax payer cover the risks or re-building....sorry Im not prepared to....
Out of curiosity how is cover during actual building in general provided? Im not sure how builders get cover...while building is happening? does the builder cover the build? or the wouldbe owner? ie who pays?
regards
That is exactly why AMI should not have been sold to IAG - IAG have not acted in good faith in Canterbury - they have delayed settlements, not fulfilled their contractual obligations claiming unreparable buildings are fixable even if they have already had to be demolished or are in red zones, on top of that they are not rebuilding anything much at all in ChCh instead offering owners replacement deals outside of the region or with existing undamaged property.
Christchurch needs a new approach with structures that are reparable (very easy to achieve) and insurance forthcoming on those buildings.
Nothing else really matters, cheap sections etc aren't the tonic to move ChCh forward, we have heaps of land that will become available at knock down prices once insurance settlements are resolved.
You're obsessed with $50k which is an entirely arbitrary number!
Anyway I am referring to the sale of existing sections at reasonable prices rather than the development of new sections.
By all means argue that development contributions and other fees be slashed but in the end unless you push the cost of servicing the sites onto councils and get them to charge the future owners of the properties more taxes/rates, you will never get sections down to $50k.
There have been numerous sections changing hands at below the $100k level in the east on relatively good land. Some have been advertised as low as $50,000. (One did sell for $30,000 last year - on not so good land!).
When the insurance situation moves along many more sections will be available at low prices.
Christchurch can rebuild: the bad land bits are now mostly categorised into don't-builds, TC1/2/3, etc.
Land supply is another matter, but good luck with any abolition of MULs (otherwise knoiwn as squiggles on maps), and of course no-one wants to deflate, by using an eraser on the MUL boundaries, the unearned capital gains of the affected landholders....
And of course the CCC stands accused (by Mike Greer of MG Homes) of asking $75K per section in development taxes, consents, and other imposts which add cost and interest charges (because they are purchased with debt...), yet confer close to zero benefits (extract the chimney collapses and rock falls from the death toll, and no-one - zilch/nada/zero - died from Badly Knocked-Tergether Residential Structures....)
So the usual combination of runaway bureaucractic costs, imposed in us 'for our own good', and planning fads, inherited from those Masters of Urban Design, the British, which inflate the cost of raw land from the rural price (at dairy dollars) of $30K/ha (or $3 per sq m, say $3K for a 1/4 acre patch of Godzone) to $200K plus. A whole lotta pain in that expansion for the purchaser, and a whole lotta gain for the leeches in between.....
Gawd help me. I'm starting to sound like Occupy.....
Who pays for the new services though? (which I assume makes up part of that $75k?) Given the leaky home fiasco and who's being stung ie councils, what did you expect with regulation?
Leeches, dont miss out on the developers who want to make a huge margin....and then go out of business so they carry no risk....
Died, well leaky homes can make you seriously ill....if only from stress....
regards
Hugh,
that all makes good sense to me. thks
One thing that I am a little bit skeptical about is the relevance is the medium multiple in determining the degree of bubble we are in.
With Globalization, the western world has undergone massive deflationary pressures on labour rates.
If anything ...I would argue that it is the income levels that are too low, rather than housing values being too high.
the quantity theory of money suggests that as money supply increases so do prices. ( i'm being very simplistic here )
If money supply has been compounding at 6% per annum and realestate values have been compounding at ,say, 5% per annum and wages have been compounding at 2% per annum, in terms of your medium multiple it is hard to draw the conclusion that Real estate is over priced ....into bubble territory..???
Having said that... pretty much agree with most of what u say.
They say ... the mortal enemy of price is inventory... so until the supply constraints of home building are dealt with... it is hard to see a crash.. ( I think there will be a 0% OCR before the powers that be stand and watch a crash)
Just my view..and thinking out loud :)
More on Hastie Group's NZ operations here - http://www.interest.co.nz/news/59537/non-operating-parent-company-stric…
Steve – Development contributions charged by councils have very little to do with the infrastructure costs associated with the development they are charged against. Remembering of course that the cost of the infrastructure for the development itself is paid for by the developer (passed onto the section purchaser in the section price) and then this infrastructure is vested (given free) to council which is added to their asset base.
So what do the development contributions contribute to? They are meant in part to provide a charge against infrastructure/services that the council provide off-site for the benefit of that development, like parks, libraries, works upgrades etc. Some of these benefits have already been built, or will need to be built. Other charges are meant to against the cost of council having to provide sewer, storm water etc. to the development site boundary. However as already stated, the developer pays for the cost of the development infrastructure and since most developments are simply dovetailed onto the last development (Sprawl), there are very little extra direct costs the council have to pay.
In most cases the council also gets the developer to pay for any external infrastructure and any wish list the council may have through ‘Planning Gain’, i.e. council see what extra costs they can pass onto the developer, both knowing that if the developer does not agree he ‘might’ not get approval. These extra ‘Planning Gain’ costs are above and beyond the costs of the development contributions. None of the costs (whether you agree with them or not) account for the massive costs of development contributions. Different councils have different mathematical formulas to arrive at what they charge, none of which the council have to justify.
What needs to be understood, the bulk of development charges are not for services that are directly attributed to the development itself, or to services that will be used the development inhabitants, either presently or in the future, but are a way of gathering revenue for the council, to go into the consolidated fund. For example it has just been reported that a large number of storm water pipes in Auckland are in need of replacement. The cost of which will be paid by all Auckland ratepayers, and/or by a few new section owners by way of their development contributions. Because of the councils monopoly (read dictatorship) position, developers are a far easier and less public target to extract revenue from.
As such the development contributions are really a revenue tax by stealth. The new changes to the local govt. act will require councils to justify what they charge and these charges will be able to be challenged if developers disagree.
However, the true cost of these extra costs to new housing is over looked. If the revenue needed by the council was passed directly onto those ratepayers effected e.g. the ratepayers of the damaged storm water pipes in Auckland in the example above, then this extra capital cost would be reflected as a charge against those properties i.e. lower their value. Since this does not happen, these property values are held artificially high. Further, not only does the development contribution unnecessarily increase the cost and therefore the price of new homes, but it also lifts the price of all houses in comparison in that locality/city, including all those older homes who have never had to pay a development contribution(or a far less development contribution). In effect all these older homes get a free capital gain increase due to the inflated cost of new housing, again artificially increasing their value.
It is going to be interesting to see the council’s reaction once they have to justify development contributions as a service cost against the development that they are levied against.
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