A variety of politicians and industry leaders have quickly responded to the first rise of interest rates in nearly four years

Years ago someone explained the way RBNZ adjustng the OCR  is like driving a car; you see the road ahead and adjutsing your gear and change speed accordingly - that'd be the most economically and safest way to drive.  Or you can drive the car and change gear/accerelation as it runs out of power, or you can see how the road was by looking at the rear view mirror as you are driving along!  Has the Greens offer any better alternative other than CGT?

Sorry Notaneconomist, when did NZ have deflation, I missed that important point ? When did the world as a whole together have deflation during the whole of the GFC, it was for one quarter in 2008. 

The net effect of NZ's housing policy is a transfer 'tax' of at least 10% and growing from the property less working class to the property class. Read the below to see why. What is JonKey doing about it? Probably playing golf with the property class..... 

Mike Greer from Mike Greer Homes the biggest builder in Canterbury puts it simply.

"Honestly the main problem is land costs. Land costs are just rocketing," Greer says.

Ten years ago he bought sections in Milnes Estate in Halswell for $70,000 and now sections in Aidanfield across the road were fetching $240,000.

He points to Wigram sections, being sold by Ngai Tahu Property, rising nearly 20 per cent over the past year.

The cost of labour and materials in Canterbury was not too different from the rest of the country.

"But the land in Christchurch and Auckland is the killer," he argues.

One of the keys to greater affordability is a lot more land being zoned residential and councils providing the essential water and sewer services pretty quickly.

"That's the problem, not enough zoned land that is serviced."

For example, parts of the Awatea Basin between Halswell and Hornby were zoned residential but did not have services still.

If Christchurch local authorities mass zoned new land residential and provided the services of sewer and water plus intensified housing in the city, land prices would come down, he says.

This as Hugh says has consequences. A nursing colleague rents in Halswell. He has worked himself out of Zimbawe through brains, good character and diligence. Obviously he has little in financial backing from family. He has been renting a 3 bedroom home in Halswell for his young family. They are now well established in the area, in particular the kids are doing well at the local school.  When they first rented it cost $280 per week. Then a few years ago it was increased to $360 a week. A month or so ago his landlord sold up making a very healthy capital gains profit. The new landlord increased the rent to $450.

Wow, Local Government is a cancer on society!

Big call.

Seems the public disagrees with you though or the small govt low taxes candidates wouldn't do so poorly in local body elections.

Good points, Simon.  What we have here is a ratchet effect, and as you note, any small supply of cheap land will simply feed CG to the lucky owners once they give it the flick.  At the sorts of distortions we see here - sections at 150-250K - the CG on a $50K section is of the order of $100-200K.  Even if a swingeing CGT was put in, it would have to be well north of 50% to start to act as a disincentive - i.e. reduce the in-trouser sum to something less than say $30-40K.

And if the called-for effect - all housing values Cheaper by (thought experiment) 1/3 - was to come about by some sorta magic or perhaps via Normal Russian as Finance Minister, who would suffer?

• Owners with underwater mortgages
• Bankerz with impaired asset/collateral on their books and capital ratios to maintain
• Savers who will be called on to prop bank's impairments
• FHB's who will still be outta the picture as banks tighten lending to prop capital ratios
• common taters can prolly think of many more effects.

Point is, it's gonna be a hard landing.....unless ya has no debt....

I suggest for the Canterbury case we rezone a 5-10km radius circle around Lincoln University as residential. That is roughly 300sqkm or 30,000 hectares at $50,000 a hectare (rural prices), that is $1.5 billion worth of land. So $20 million will give you no monopoly pricing power, so why would you bother. Better to buy something unique like Auckland or Wellington waterfront properties.

Then a similar area around a new Waimakariri bridge just north of Airport.

Not sure what you do Auckland....

Hugh is talking about removing the concept of land-zoning.

There would be no such thing as "monopoly on land zoned for residential development" because you would need to buy up all the land in the country.  Anybody would be able to turn a random farm into residential land.  Which farmers wouldn't want to sell off 500sqm for 200K ?  They flood of supply would quickly lower the price of fringe land, and have knock-on effects for central land.

Yes the point both Simon and Waymad are making are all true, although there are some mechanisms that a developer could put into a contract that prevented what would essentially be a speculative ‘flick’ that an owner enjoys in the CG. Community Housing groups have similar covenants built into the subsidised housing schemes.

The whole trick (for the Govt. at least) is to introduce a mechanism that makes housing cheaper but spread the cost of it across all housing (the pain does not hurt as much if we all share it) so as to stop or limit the growth in value of the whole market and allow inflation to reduce the value to what it should be ( 3x medium income) over a 10 to 15 year period.

This is an almost impossible task in Auckland and is best to left to a sudden market adjustment to correct. Christchurch is not far behind but has more ability for a smoother transition.

The real advantage for some areas lies in certain provisional towns that already have lower medium multiples making system changes to welcome business, employees, their families etc. and that allow housing supply to easily meet demand, therefore keeping prices stable, which further encourages business and people to the area.

However,  the first thing any of the elected officials like to promote to the established residents’ when promoting growth is that it will be good for their property values.

It’s a head space thing, and unfortunately we have a lot of land economic illiterates in council.

The developer already provides the residential roads, the three waters (fresh, storm and storage), paths, parks etc. The Council needs to provide the trunk infrastructure that these services connect to.

Hi Simon – the whole point is that you can start with a clean slate. You can buy land at its rural land value; develop your own infrastructure which does not need council involvement. You flip the growth boundary assumption on its head, rather than saying you only build in this area unless we say so, you say you can build in any area unless we say so.

The areas that you exclude are the environmentally sensitive areas etc. This way there is in theory an oversupply of buildable land. There is no more people to build for than there was previously (although now more people can afford to build), just more land options.

You don’t need to worry about a 10 year, or 50 year, or 100 year growth boundary, as these are just arbitrary numbers that councils create and make no more sense than if you had said 11 year, 51 year, or 101 growth boundaries.

Also since present growth boundaries are mainly concentric in nature, and a small amount following transport lines, they have never taken into account fertility of land anyway. What decides whether fertile land gets sold as development land, are the owners of that land. It would be quite simple, if the owners of that land cared enough about its fertility, for them to covenant that as a protected use when they went to sell it.

But of course they would only receive $30,000 to $50,000 per ha rather than over $500,000 plus per ha.  With no urban growth boundaries, owners can only sell the land at its rural land price. For starters, you have removed the greed factor for the old owners and would get more of them covenanting their fertile land, assuming that was something in their nature that they cared about anyway. 

You also would get developers still looking to buy the cheapest rural land (so as to be competitive and more so because anyone could potentially enter the market) to develop and in many cases this means looking to buy the least fertile land. The present system encourages the use of fertile land as the price the owner can sell for as development land is greater than its present value as fertile rural land.

When you remove UGB’s there is less incentive money-wise that a developer can offer a rural land owner that does not want to sell, to sell, because if the developer does offer more then he becomes less competitive in price than if he had purchased from a rural land owner that was selling at the rural land price only.

UGB’s cause high section prices, which the beneficiaries are land bankers and council. 

not just fertile farm land, but farmland close to cities tends to have capital gains value, thus high equity, and therefore much invested in its own farming infrastructure.  The better the land quality, the more is likely to have been spent in development already.



Open up the sprawl corridors through government legislation and RMA, and it becomes a lot more risky to develop decent farms on good land near towns/cities.  This includes rural and industrial areas within RMA distance of the work (as pig farms with generations' old farms found when the town came to Dunsinane! )