By Brendon Harre*
“While Adam delved (dug) and Eve span, who then was the gentleman?” — John Ball priest — hung, drawn and quartered, 1381.
There was no privileged landed gentry in Adam and Eve’s time so why are they favoured in later times?
Source. Real health Price Index versus Real Personal disposable Income (2000Q1=100)
New Zealand is bad at housing its people — very bad. Relative to income, homes in the country are among the most expensive in the world.
New Zealand’s average house value has gone from $25,500 in Dec 1980 to an estimated $715,500 at the end of last year. Source Business Desk — “Looking back: The NZ housing boom — when and how it all began”
Yet for decades housing as a capital gains investment commodity has provided bumper returns — far exceeding other investment options.
The bottom 20 percent of New Zealand income earners have the highest housing costs in the OECD, an economic organisation with 37 member countries.
The disparity in emotions different groups feel about the above graphs cannot be overstated. For some the graphs represent a horror — real, visceral socioeconomic pain. For others it is a booming bonanza. Overall they depict — an explosion of the country’s egalitarian ideals.
Renting in New Zealand is bad. Rentals are more likely to be cold, damp and mouldy than owner-occupied homes. Housing poverty diseases like rheumatic fever that have almost been eliminated in other develop countries are still prevalent in rental accommodation. Eviction is a real threat and tenancies are short — on average less than two years. And there is a real power imbalance: 25 percent of rental household moves are instigated by landlords.
Rents are rising faster than wages for the lowest income groups.
Many low and middle-income workers in our most successful towns and cities can only afford a room in a shared rental. If renters face a financial setback, especially if they have dependent whānau, rent can quickly take the majority of income — leading to difficult budget choices as necessities become unaffordable. The situation can even deteriorate so badly the tenant becomes homeless. An all too prevalent problem in New Zealand.
The unmet need for affordable, good-quality, well-located housing is massive.
Figures from 2018 show more than 180,000 households — 10 percent of all households — are in financial stress because they spend more than 30 percent of their gross income on rent. Given that lower quartile rent is inflating faster than wages, that number is likely to be larger now.
Currently, there are over 4000 kiwi children living in emergency motel accommodation with their whānau. Emergency accommodation is now costing the government $1million per day, as revealed by Opposition Housing Spokesperson Nicola Willis. This expense is a reflection of how housing has become a significant driver of poverty.
Nicola Willis is concerned that this year between January and February, median house prices have increased by another $50,000.
The National Party suggest these immediate actions:
- Strengthen the National Policy Statement on Urban Development
- Remove the Auckland Urban Boundary
- Make Kāinga Ora capital available to community housing providers
- Establish a Housing Infrastructure Fund
- Implement new finance model
Nicola Willis should be applauded for making constructive suggestions. The issue though is not with the merit or otherwise of each action. The problem is strategy should come before tactics and the National party has not explained what their housing strategy is. The government have the same problem.
Discussing tactics without agreeing on strategy — is like going through the last year of Covid debating the merits or otherwise, of lockdowns, quarantines, testing, tracking and trace… without agreeing on whether the strategy was suppression, elimination or herd immunity.
For instance the housing strategy could be that affordable accommodation (spending less than 30% of income on housing) is a human right for all New Zealanders.
This strategy could be achieved by planning reforms, infrastructure provision, and government capital injection into the housing market (so similar tactics to what National is suggesting). This will build more houses which will affect rent levels. When rent falls it is important to keep building public housing at pace. Don’t slow even if the balance of power shifts — for example if the market expectation became that landlords submit references to tenants not the other way around.
For the ‘housing as a human right’ strategy to be achieved, then expectations of capital gain need to be eliminated with the same degree of ruthlessness that general inflation expectations were removed in the 1980’s and 90s. This is especially important now because house price expectations are back at 2015 highs.
If expectations are not constrained the housing crisis has the potential to get much worse.
Tenants as a group pay much more of their income on rent than homeowners pay in bank interest charges. Homeowners collectively pay just 6 percent of their disposable income in mortgage interest costs, down from a high of 14 per cent in 2008. This and other favourable conditions, that business journalist Bernard Hickey details here, means those already owning property have the financial ability to keep driving house and rent prices up if the current housing settings and expectations remain unaltered.
The situation is so favourable to landlords and homeowners, it is no exaggeration to say the market is rigged.
For decades when tenants’ incomes rose, when accommodation and other grants increased or when landlord costs fell — in particular, borrowing costs — this benefit went to the landlord not the tenant.
This rigged rental housing market drives landlord greed for capital gains, and it drives first home buyers FOMO — fear of missing out — the fear that if they do not buy now, they will be in a worse situation in the future.
And the rigged rental market increases demand for state and emergency housing.
This process is a long term drag on the economy. It misdirects borrowing and investment, and it imposes costs on employment and business.
It is the inequality effects of the housing crisis, though, that are the most worrisome.
Discussions about the crisis are fraught, characterised by blame-shifting, finger-pointing and can-kicking. In many rental households, merely talking about buying a home is taboo because of the stress and tension it unleashes. Yet in the wider community there seems to be more housing market reckons than there are people.
For many at the sharp end of the housing crisis there is a feeling of despair — a resignation that society does not have their back. For others, there is sadness at the erosion of New Zealand’s ‘fair go’ culture, the idea that even those with modest means can make a go of it. The inequality effects of the housing crisis are so great, some believe, that it amounts to an existential societal crisis.
But discussion about the housing crisis need not be fraught. New Zealand has been here before and social democracy solved the problem by extending universal human rights.
The first Labour government led by Prime Minister Michael Joseph Savage faced a terrible existential crisis to the global economy: the Great Depression. Their solution was to extend universal rights to free healthcare, education and social security — rights that we now take for granted but which, at the time, triggered a social and economic transformation.
The Savage government was the first to provide: free hospital care; free secondary school education that was compulsory to the age of 15; and universal superannuation for all who reached retirement age.
In housing, affordable, good-quality homes became another right. The state built 29,000 houses between 1937 and 1949, including a break due to World War II. Adjusted for population, that equates to over 90,000 houses now.
These homes were universally accessible to a wide range of workers (the first house went to a Wellington tram driver’s family); unfortunately, that right to quality housing faded away, first gradually and then suddenly with the 1980s reforms.
We can see what a difference maintaining ‘housing as a human right’ has made in societies like Austria and Singapore. Their mixed state and market economies have achieved better housing outcomes. Collective action has supported the market and the common good. There are, of course, Soviet Union-type examples where government and markets became completely disconnected but success stories like Austria and Singapore show a middle ground does exist.
There are even some local politicians in the US looking at solving their housing crisis by employing the social democracy ‘housing as a human right’ approach — specifically looking at the Austrian public housing model. When Vienna housing officials explain what they do, it is clear how competent and common sense their actions are (this provides a stark contrast with how irrational New Zealand’s housing market has become).
New Zealand does not need a fraught discussion about which affordable housing model is viable — we have done it before, and it still exists overseas.
When it comes to housing reform, the Government and market forces are not as disparate as some might think. When Auckland Council’s unitary plan was being developed, for instance, free market advocates and public housing officials were aligned in requesting a more liberal planning regime. Housing affordability activism can be a broad church.
The Black Death of 1348–49 killed about two-fifth of everyone in England. As a result, the remaining workers had their bargaining power increased — outraging the aristocracy. They responded by persuading King Edward III to pass the Statute of Labourers Law, which made it an offence for landless men to seek new masters or be offered higher wages. Workers, of course, hated it (the legislation was referred to as a contributing factor in the 1381 Peasants’ Revolt).
New Zealand has its own 21st-century version of the Statute of Labourers: regulatory and economic settings that have added needless expense and restrictions on building affordable housing near the best employment opportunities.
There is no right to affordable housing enshrined in legislation. At most levels, the rights and bargaining position of the propertied class are privileged over the landless. Even where housing affordability is specified, such as the Reserve Bank’s Monetary Policy Committee remit, it is a long way from being a universal right — for instance, the remit (see below) does not include renters in the housing affordability goal.
(d) assess the effect of its monetary policy decisions on the Government’s policy set out in subclause (3).
(3) The Government’s policy is to support more sustainable house prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers.
How can freedom of movement for workers be respected when affordable housing is so hard to access? How can the bargaining position of the landless versus the propertied be made fairer? How can housing be a right for all New Zealanders, like it is in Austria? How do we prevent the right from fading away again?
The right to housing needs to be deeply embedded in New Zealand’s system of governance.
Housing in New Zealand is based on a system of land contracts inherited from feudal times as described by Alastair Parvin in his fantastic A New Land Contract where he describes;
Mostly when we talk about the spiralling cost of housing, we refer to it as the ‘housing crisis’. But the truth is that our housing crisis is actually a land crisis; of which the housing crisis is just one of the many symptoms….And actually, it’s not really a Land crisis, it’s a Land system. It’s the rules of the game, hard-coded into the firmware of our society and economy.
New tools — such as public land buy-backs for the purposes of land value capture — are needed. This is one of the tools suggested by Alastair Parvin and is also a tool recommended in Part Two of the New Zealand’s Rack-Rent Housing Crisis series.
New Zealand needs to take a bold, innovative approach to addressing the housing crisis. As described in Parts Two and Three of New Zealand’s Rack-Rent Housing Crisis, the Government could create a powerful housing tsar, a housing commissioner who — as their legislated goal — would advance the idea of housing being a human right for all New Zealanders. This firm principle could be the basis of a coordinated state and market housing accord that over time would eliminate the housing crisis.
Ultimately, solving the housing crisis comes down to public support and the political will of elected officials. Hopefully, it does not get to the stage where the ‘peasants’ have to revolt.
This is a repost of an article here. It is here with permission.
170 Comments
Who the hell do you imagine might do the actual required business to reset our housing situation? It sure as hell won't be National, even less ACT, Labour need big boy pants on but are more likely than either of those two, we need radical change, not just seesawing with one lot of Neo Libs up and the other lot down, rinse and repeat.
I voted for TOP and acknowledge there was some convolution. Gareth pointed out; people like himself buy/leverage houses and don't even bother to tenant them because capital gains (prices) are increasing so much.
He was determined to stop this, even to the point of starting and funding a political party himself. He also wanted to legalize cannabis, an industry NZ could have dominated. It's so sad for companies like Cannasouth - perhaps they'll emigrate? The UBI and 'Wealth Tax' would have been refined I reckon and communist edges removed/smoothed.
Perhaps Labour and National will form a coalition government one day soon [we'll call it Natbour] - they have very similar policies. Stanger things have happened. NZ has really had the same party in power for the past 30 years. Would be nice to have a change.
Thanks brisket. It is a shame, and some other words too... Jack Tame might not be every ones cup of tea but the other day he had a great question about the housing crisis which should be put to every politician - how does it end? Which might be a simpler way of asking what is the strategy?
Its a very pertinent question. We know all about the wealth affect that rising asset prices and falling interest rates have had on our economy. We know the "boost" they provided on the way up will apply in reverse if prices ever fall. We also know we are almost out of "rope" when it comes to stimulating the economy by lowering interest rates.
So where does that leave us? It seems clear the government is happy to keep the foot on the gas as the country speeds towards a cliff.
Low interest rates to inflate asset prices and make owners feel rich enough to keep the economy going was the PURPOSE of the post GFC, and post COVID actions. Denying it now is a lie, or are the government are admitting that they did not know what they were doing when they implemented monetary and fiscal policy.
On the positive side for Labour, now they can talk up the need to use tax policy to restrain the monster they created. But talk is cheap, eh Jacinda.....
Brendon...Nicola Willis gives her 5 recommendations but none are related in any way to immigration, even though it is a huge driver of increasing rents and house prices, almost certainly one of the two biggest drivers together with low interest rates. Do something about immigration and interest rates and it will go a long long way towards solving the problem.
Jack Tame is hosting an immigration edition Q and A this Sunday. About time and I hope it includes a lengthy, honest and open dissection of how mass (low quality) immigration affects our rents and house prices.
I agree Sherwood that Nicola Willis recommendations individually make sense but they do not make a housing strategy. There is no explanation on how they will work together and with other policy settings (immigration, monetary policy etc) and how vigorously they will be pursued, how expectations around housing need to change, for what purpose (everyone being able to afford accommodation - spend less than 30% of income on housing - housing being a human right).
Basically National like Labour are not explaining the housing crisis exit strategy.
They totally make sense. Problem is as soon as National gets into power (just like Labour), all those ideas will be thrown out or modified to ensure it doesn't hurt house price rises. Donkey banged on and on about the housing crisis in opposition and came up with a million things that sounded good. Once he got into power, there was no longer a housing crisis and he threw most of them out or diluted them enough to not make any difference. He then pumped the housing crisis up even bigger.
And now we see the same playbook from Labour.
These parties aren't going to fix it, they simply aren't interested in doing so. It requires transformational structural change, neither of them have a hope of doing that as they are all caretaker idiots who talk a big game but aren't prepared to do anything.
Well, I don't think it is. I saw the headline, and knew who the author would be.
The headline is wrong; if you have unlimited population, you cannot have 'rights; that's just arrogance. There is a national (rather than global angle to Harre's writing, but ultimately NZ is part of the globe, and it is 6-7 billion overpopulated, long term. My guess is that NZ is 3 million overpopulated, if you're aiming for sustainability long-term.
Get there, and you don't have a 'housing crisis' (which was really a population crisis, anyway).
Almost every one of these issues, long term can be sheeted back to too high a population growth and especially growth in the form of already fully formed adults, who need housing as soon as their feet hit the ground here, at least with a bit of baby boom you can estimate what you might need a few decades down the track.
But, back to too many people, yes there are too many of us, and proof of that is the calamity we are causing to the environment, climate and other species with as much right to this planet as ourselves.
Okay, so there are too many people consuming the planet. We can't reduce the number of people in a way people would accept, therefore we need to reduce what we consume. Everything that you personally consume means someone else down the track will miss out. Think about that before you buy something for your own vanity or send something to the landfill that still has life left in it. It is all personal choice...there is no pillow so soft as a clear conscience :-)
Oh yes, we can. All it takes is women in control of their lives and fertility and it happens like magic. Birthing kids is a very risky thing to do, so given the choice and surety of their future and women will limit the number of births, often delay the start of reproduction and many will choose to bypass the whole deal altogether for other choices of life. It IS that easy.
It is over $100000 per month x 8 months. Still No words from PM
https://www.nzherald.co.nz/nz/auckland-grey-lynn-home-sells-for-755000-…
To be honest I'm actually blown away that we've allowed this to happen here - its like a bad nightmare yet every day you wake up you realise once again that it is for real.
I never quite understood how societies could break down, but now I'm witnessing the making of it here in NZ through self interest, ignorance, greed and a general lack of wisdom.
Sorry I meant to say, they may be forced to pull the rug on the 'cheap' part and hike rates. Another possibility is once banks have had their fill of investor debt then they turn their attention to extending credit to FHB through looser lending such as happened pre GFC. Australia is winding back lending laws to 2010 levels https://www.google.com/amp/s/thenewdaily.com.au/finance/your-budget/202…
Thanks, I really enjoyed the article and couldn't agree more that housing is a human right. When we first moved to New Zealand we where quite surprised by the very stringent zoning laws where, having built in Ireland and renovated in Germany and Italy previously (all of which have a far higher population density than New Zealand.)
The zoning laws here don't benefit society. Land zoned for development is expensive (and much lane is effectively excluded from development by arbitrary zoning rules like needing 10 acres to build on.) The towns and cities New Zealand has are not beautiful, liveable, lifestyle friendly, do not promote a high quality of life, protect the beauty of our landscapes or promote sustainable living. By every measure the rules are not working, it would be better to have none than continue with what we have.
Yes it is interesting. "The towns and cities New Zealand has are not beautiful, liveable, lifestyle friendly, do not promote a high quality of life, protect the beauty of our landscapes or promote sustainable living." Spot on. On the other hand, it must be remembered NZ is not those other countries you mention. Our geology demands a building style that lacks a feeling of permanence. We have always been a primary produce exporter and have had to fight extremely hard to market our products to countries that don't particularly want, or need, what we are selling. Land has been our pay cheque. Covering it with sprawl has never been an intelligent thing to do, although that seems to be currently happening with indecent haste anyway. What makes NZ real estate valuable, is that it is not an industrial northern hemisphere powerhouse. Far from it, literally!
I observed the opposite, you have all these people buying "lifestyle blocks" so they can live in the countryside but actually they are typically using only a small part of that land area productively. A quarter acre section is a perfectly adequate size for most houses, something even the first settlers noted when surveying towns, why force people to own lots of land?
I seem to remember the "lifestyle" trend started in earnest through the '90s. Cutting off 5 acres blocks was about the only way farmers could stay in business and the demand for the "country experience" is increasingly popular now. You are right, 1000m2 is enough to grow a large % of your food and give some privacy and room to move, although huge houses and sealed driveways would eat up a large chunk of the good ole kiwi 1/4 today. Rural blocks can be down to 8000m in our region, but frankly you are losing any rural feel at that point. I suspect with all the new limitations being imposed on farming there may be demand from the farming community to allow splitting much more land into lifestyle blocks.
That's what I see as well, most people who buy lifestyle properties do so because they enjoy the quiet life and not because they will use the land (many still have jobs in towns). It's fine to live rural but we shouldn't be carving large chunks of productive land off farms for someone who really needs a quarter acre section in the corner of a field. Farmers keep the land, people get small plots for houses.
That model only worked with the fossil energy input of the last two centuries.
Some of us are looking ahead, beyond that....
I suspect 1/2 acres per house, or 1-2 surrounding commons per village/town. Cities don't work above 1 million people, ex fossil energy. And they weren't too flash to live in before that, either....
I think the point about what is the overall strategy is very important. It has allowed politicians to tinker at the edges, when they have no real intention of actually making housing genuinely affordable for the average New Zealander.
JA and labour claim to want affordable housing, yet they believe that can happen while prices continue to rise "moderately". How can you reconcile the two statements with a straight face?
Another horror fact.
Since the onset of Covid — the wealthy are now sitting on property and savings that have risen by $271.7bn, and poor families received an extra $2000 or so in benefits and winter energy payments over the last 12 months. That increase of $38 per week was gobbled up by a $50 per week increase in the median rent to $500 in 2020.
https://www.stuff.co.nz/business/opinion-analysis/300251702/where-did-t…
We might as well automatically add any extra that poor families 'receive' straight onto the figures for the rising wealth of property owners in this country, because that's where it's destined to end up. The anger and frustration is snowballing. Hope has been holding this at bay for the middle class, and it's just about dead for many of them. If nothing significant enough to be meaningful is enacted shortly, then we will see just how people react once the blinders have truly come off a significant portion of the population. Far too many people still believe that Labour might just rise to the occasion. But even if they placate people with talk of action for a little while longer, I don't think this will last them through to the end of the year.
Great article Brendan. Unfortunately there is a snowballs chance in hell of any positive change happening with brain-dead Ardern and her gaggle of diversity hires running the show. Her predecessors were bad but she really takes the cake.
Returning home to New Zealand after my OE has been even more shockingly bad than even I imagined. It's almost dystopian how messed up it is here and many people seem to be brainwashed into thinking it's like this in the rest of the world. It really isn't.
Sadly it's now looking highly likely I'll be relocating my family, my remote work and my tech business to Australia as soon as is practical.
New Zealand lacks opportunity and no longer has much to offer for quality of life.
"many people seem to be brainwashed into thinking it's like this in the rest of the world. It really isn't" Isn't it? Seems the perceived most desirable places to live are exactly the same bubble mode?
https://www.straight.com/news/as-immigration-falls-sharply-red-hot-hous…
https://www.theguardian.com/australia-news/2021/feb/16/the-australian-p…
https://www.aljazeera.com/economy/2021/2/24/hot-us-housing-market-new-h…
Yeah but they are coming off a lower base. And none of them went up by 25% in a year from prices which were already one of the most unaffordable in the OECD.
It's really going to be catastrophic here when it pops. People heading overseas is going to accelerate that timeline probably but will save them from being in it. I am advising all young people I know to get the hell out of here both for a better quality of life and to run first before the pop. 3 young people at my work are now seriously considering Aus as well. Plus some younger family members and a couple of others I know.
Why stay? Work in this country is devalued to the point of destitution for most young.
A housing tsar is not needed to initiate rent controls. The government if it cared enough would do just that. I continue to be astounded that everyone that discusses this topic as if they care - completely ignores this action that could be taken immediately. What all these other solutions provide are longer-term remedies and given the crisis worsens by the day - every day counts - we can't wait months/years for building to catch up with need; as need I suspect will always outpace our ability to build.
#rentcontrolnow.
I would be ok with rent controls - as long as it was combined with some sort of overall housing as a human right strategy - which would have to involve building more public housing and more housing generally. Otherwise all you are doing is attempting to allocate an insufficient amount of decent affordable housing on a 'first come first served' basis i.e. allocation by queuing rather than price. Rent controls help the first comers - but after that it does not answer the question - how will the housing crisis end.
My rent controls propose rent re-calculations in line with revaluations done by QV (and adjusted as needed in order to align the lower tier rental, with a 30% of lower income). So they aren't fixed in the sense of 'first in first served' and they would apply universally, that is to every rental property. In my (limited) modelling, the formula mainly impacts the lower end of the rental market - high end and/or new builds are already pretty closely aligned to the formula I tested.
Someone down thread suggested you write an article Kate. I think that would be a good idea. That way you could explain your proposal in the most easily understood manner.
Berlin is using rent control - so it isn't a whacky idea that has never been tried.
Check this video out.
https://www.youtube.com/watch?v=Nkrl4FR8LZY
Don't you think that this is a recipe to redevelop the house, removing the connection to low end rentals and cutting those people out of housing even more?
My private home has an inflated CV due to excessive increase on land value in the last revaluation for some reason, if it were a rental it would allow an inflated rent well out of line with the market pricing
You can check out the market pricing for your property were it a rental on this website:
https://www.tenancy.govt.nz/rent-bond-and-bills/market-rent/
Redevelopment, if it involves a building consent as part of that upgrade (e.g., adding a garage, or another room), will be reflected in the next revaluation (or earlier, if a homeowner asks for a revaluation). However, upgrades such as paining the house, or replacing an outdated kitchen that require no consent - don't qualify in terms of increasing a valuation relative to all/other property. They are considered by QV to be normal maintenance.
In other words, low end (or lower quartile) will remain lower quartile as re-valuations are (in the main) relative; unless major building works are completed.
Who decides rents? We already have some rules - as a landlord I cannot change the rent every week and as a tenant I cannot leave without notice. So your #rentcontrolnow needs explaining. I've seen rent control in London during the 70's - anything like that would be dumb but I'm told Germany has rent control and it works well. So everything depends on the details.
Kate - write an article explaining how you would implement rent controls - give us the details.
Meanwhile my daughter her partner and their child are leaving our secondary dwelling next Friday - we are seriously thinking of leaving it empty because of the hassle in renting it out. We may try AirBnB because you can always shut it down whenever you want.
Lapun...it is not personal but leaving a house unoccupied or using it as an Air B n B are two of the issues negatively impacting our society. You should have the right to do either but the tax imposed should be astronomically prohibitive. We do it with cigarettes because of the damage they do to society (and it has worked by reducing the amount of smokers) so why not with other cancers like unoccupied homes and Air B N Bs?
Lapun, let me know what the GV of your rental property is (and which council area it is in) and I'll apply my formula to let you know what the weekly rent maximum would be. The formula is derived based on GV (and adjusted depending on what stage in the three-yearly ratings cycle of your current GV)..
I'd be happy with rent control. I'd be happy with anything that had teeth as long as it happens now and not in 3 or 6 months. Hell, even a roll of a dice if deciding is so impossibley difficult. 1 for rent control, 2 for stamp duty etc. Even that approach would give me more hope than our ineffectual govt continuing to do nothing while houses keep booming to insane amounts
If you haven't seen this graph, it puts the NZ house price rises into an international context. Scary.
https://www.howestreet.com/2021/01/the-biggest-housing-bubbles-of-all-t…
"From 1970 to 2020 New Zealand house prices grew the fastest, going from 100 on the index to about 7,500, growth of 75-fold."
And yet our Prime Minister has become so weak now that she even thinks house prices should keep going up to keep property owners and investors happy....
Its like giving children 75 marshmallows then saying you'll keep giving them more because you're afraid they might cry. Gutless leaders and a weak, unprincipled society.
You've got it. Explains why the ANZ wrote to the govt pleading with them to make it clear to property investors that these price rises cannot go on for ever and may well reverse. What did the govt do. Doubled down and told the public that they would ensure that prices rises would carry on (presumably for ever????? the never ending ponzie scheme!!!! really!!!!) and continued to plow more money into the economy.
The situation is very reminiscent of pre the 1987 market crash. The consequences of this however will dwarf that. What will the govt do then? Plow even more liquidity into the economy so that those who were smart enough to get out can hoover up the fixed assets at rock bottom prices. Rinse and repeat of what we have been seeing for the last 30-40 years. The definition of insanity is to keep doing the same thing and expect a different result. May be I am mistaken and this is exactly the result that they want and expect?
Chris, NZ only F.I.RE economic scene try to find salvage by following Japan QE, even lowering OCR (I still hope RBNZ to be steadfast, bring it to negative).. as truly want to follow Japan.
Eventually it took around 30yrs for Japan to bring the housing cost down, won't be that long to wait for NZ. After all, Japan still produced the most reliable car on the planet which still last more than those 30yrs, just unsure what the world will remember NZ as in the same period, but heck - could already vote becoming republic? change name? join OZ? .. or become like Hong Kong? in old days, some prisoners went totally insane bang their heads to the wall, expecting the wall to crumble.. sadly, more often than not.. the wall won, too gruesome to describe the opponent status.
Not sure about you but I'm thinking about the end game. The current situation will continue to get worse because those in control of it are pulling all the strings. The question becomes where is the tipping point ? Current home owners may appear sympathetic but in reality they are thinking thank God I got in just in time. The majority rule and the majority still own homes so really its just math. At what percentage does home ownership need to fall to before the Revolution starts ?
Coordinated action is here now with the advent of social media (until governments shut it down) but the question is still how hard do you need to back people into a corner before they feel they have nothing to loose ? Its already happening in other countries around the world, mainly due to financial collapse and runaway inflation and war with the odd coup thrown in to the mix but if you look at what it takes to get down to that level, New Zealand is a million miles away from that.
So nothing really changes then. I know 2 of my mates left and went overseas and many left Auckland because it was to expensive 20 years ago. All you get is more people with money coming here to replace them that can afford the housing. Plenty of them around the world, when your a multimillionaire everything is still cheap.
Carlos67... the monied (net positive) immigrants flocking to Auckland was certainly the situation last century. But in the 21st century it seems the vast majority of our immigrants have been poverty stricken, unskilled, uneducated (net negative) economic migrants fleeing their own hellholes. Earning minimum wage, often working 70+ hours a week and paying 35% of their income in rent is a small price for them to pay. But the cost to NZ......
There will be no revolution as the under 35 brigade are subservient to govt propaganda.
I thought grant and jacinda were both socialists in their youth wanting change?
Lord Acton said "power corrupts" and "absolute power corrupts absolutely".
Jacinda and Co are about status and power and nothing else.
We have recently been looking to move. I have a lot of large artwork and need a house with pitched ceilings to best display them. Bought the place we are in at a time when very little was on the market and we had to buy, as we had already sold.
Anyway, spent the last 3-4 months looking at properties. Thing is, even though a buy and sell in the same market would be relative for us (i.e., existing homeowners) - I think I'll wait until the crash.
Thing is, our house is an ideal family home - good neighbourhood, good schools, good garaging, fuly renovated 1960s weatherboard. Small enough to be a first home (3 bed). But the price we've been told we could get is ridiculous, absolutely ridiculous - such that I don't want some young family to pay that way OTT price in a bubble I know will pop. I think I'll wait for the pop - so that a potential FHB gets a fair go.
For us, provided we are both selling and buying - it's all relative.
Interesting Kate - we could get stupid money for our first home - a small 3 bedder starter in West Auckland - but the cost of an extra bedroom or a house in a nicer area/closer to where we work would involve doubling our mortgage. Unless our income doubles, that's extra debt, plain and simple.
The group of people who actually benefit from house price increases is incredibly small; it's a) people who can cash out to downsize (i.e. older) or b) people who can move to the regions and enjoy a mortgage-free, more relaxed lifestyle possibly on one income, and c) investors who have about six or seven properties accruing massive gains with relatively little debt who can cash out all at once if they choose.
Everyone else, home owner or not, is either going backwards away from having a deposit or relative to the price of their next home - unless they took on stupid levels of debt to buy a forever home right off the bat. There have been points in time where I seriously regret not just winging it and doing that.
Yep I have made this point before as well. Politics is math.
Some home owners genuinely care about this crisis, but I would suggest very few do to the extent that their voting pattern might change.
We will probably reach a demographic point in 5-7 years where it potentially swings enough to really demand change. That's when the kids of boomers will be reaching their late 20s to mid 30s en masse - prime (potential) home buying age
Egalitarian NZ?
"A booming bonanza. Overall they depict — an explosion of the country’s egalitarian ideals"
(not exactly sure what that means) The egalitarian society of NZ 1960-1990 has been destroyed - not inculcated
What did the central planners in Wellington expect, bringing in Foxes and Flies, Princes and Princesses, International Students buying $5 million properties on the shores of Takapuna Beach
The stage has been set where the immediate solution is to terminate building upmarket homes, and build only Housing Corporation homes and sell them ONLY to verifiable NZ native born first home buyers aided by State Advances Home loans
Too many locals have been displaced in this land of plenty
Why?
If you buy a shared equity property there are numerous benefits over renting, including:
- your housing outgoings will be much less than if you rent
- you will have stability and security of tenure, unlike renting
- you acquire equity, and have the possibility of acquiring full ownership in time
So, what are the drawbacks? Obviously it's not as 'good' as owning a freehold property, but we passed the time many years ago where that was a realistic option for low to middle income households that don't have 'the bank of mum and dad' to lean on.
Honest question Fritz, are you expecting a major announcement thats really going to have an immediate impact ? I mean it needs to have an immediate impact that cuts in on the 1st April 2021 not 2022 because by then all the home owners will be trying to stand at the top of Everest.
Hi Carlo67
Firstly I am not expecting an announcement along the lines of what I advocate for. I wrote to Woods a year ago and she dismissed it.
I agree even if it was introduced it would be far from having an immediate effect. But if ambitious and well delivered (admittedly big 'ifs' for this mob) it could give hope to thousands of kiwi families in the next few years.
I would also point out that it wouldn't be a silver bullet. Plenty of other things are required, including different tax approaches, different legislation governing the RBNZ, different immigration policy etc etc.
Shared equity is on the same trend path as everything else, ie does nothing to stop the non-value added costs that have been an accelerant to house price rises.
The more they do this type of stuff, the more they need to do it.
If you want to stop the end results that are caused by bad behaviour, then stop doing the bad behaviour.
"New Zealand needs to take a bold, innovative approach..."
I'm reliably informed that its on the way.
Our fearless Finance Minister was spotted entering a phone box on Lambton Key this afternoon to change into his Bold Grant outfit...
There's about as much chance of reform coming now as Grant exiting that phone box in a change of clothes. None.
Look at the graph - it speaks for itself. 2012 was the last-chance time to 'Hold the Line', and we didn't.
Why on earth would we think we would now, given the massive financial cost that would play out on the Household Balance Sheets of our landed and political classes?
The Market is going to have to do its savage work for us, as it always does.
"Things alter for the worse spontaneously, if they be not altered for the better designedly." – Francis Bacon
And not much of a goal at that, ie it could be achieved if you lowered house size to a tiny house and/or lowered build quality. The goal/target must be measurable (otherwise how do you know if you have achieved it or not) and must encompass the total problem (which has to be correctly defined).
The strategy as you say is the how, the plan, of getting there, and is normally broken down into smaller achievable parts (measures), eg house price no greater than 3x median income, house quality, sustainability targets, etc. that run parallel to each other, all of which must be achieved to meet the target definition.
We are NOT meet one definition, with regard to price, quality, sustainability etc. because that is what the Govt. has planned for.
While labour have been useless it doesn’t sound like national have anything better in mind. I’m getting sick of hearing about urban limits and public housing when the biggest cause is quite obviously low interest rates and favourable tax treatment. Does anyone honestly think we would have these kind of prices if interest rates were still 8% and we had a comprehensive CGT?
(Don’t get me wrong I do think we need to remove all planning capabilities from useless councils too but it isn’t going to fix anything for a long time to come)
First of all Govt have enough to BAIL OUT so don't worry investors "Take it to the moon" it will never come back (at least for couple of decades). I am sure, no new law will change anything and even nothing substantial will come, if you read between the lines Jacinda have already confirmed it, Quote "There is no silver bullet".
So keep shouting on interest.co.nz, nothing will happen. Majority of Homeless & Renters will maintain there status Quo for rest of their life (if they stay in NZ). Credit goes to Labour and our beloved PM.
Honestly I think the government has no idea what to do and are just buying time. Its pretty obvious that these price rises cannot keep on going even if they do nothing so the longer they stall, the more likely it will just plateau by itself and then they can come out with some free market crap that its now all sorted and they did a great job.
"the government has no idea what to do"
Not just our Government - ALL Governments.
That's why they are doing what they are doing - there is no other alternative to buying time and hoping that something unexpected happens to save the economic and social situation.
It's not going to.
The Expected is going to happen. The Expected that they fear, and we know is inevitable.
How do I know?
Watch the television tonight - any channel you like, and you'll see riots, protests and civilian crackdown going on across the planet. It doesn't matter how developed the country is ( USA, France, UK) or whose in charge (Yemen, Burma, Chile) - the people know what's coming and are going to force change on The System
All that we can hope is that New Zealand changes as a result of witnessing the offshore violence, and that it doesn't end up here as well.
Exactly - were living under a failing economic system and the riots are a sign of that.
It’s like the 1920s/1930s. Question is how do we get out of this without the financial system and society falling apart? I don’t see a path at present other than things getting so bad that is breaks.
What nobody has touched on yet, is square metreage per head. My guessing is that there are a lot of Boomer couples ratting round in 200-300 sq/m mansions, with 3 time the loos they have posteriors. They are also likely to have an empty 'bach' which would put a '30's house to shame (and ditto the loos, one suspects - sooooo important).
So I'm guessing we have more built square metreage per NZ'er, than we ever have. What it is, is more unevenly distributed that ever before. But rather than advocate equalising the current housing crop, the message is to build everyone up to the bigger standard. Can't work for the planet, can't work for NZ.
Good point. Alongside that issue, no one that I've seen so far has analysed the divorce/separation rate in NZ over time. All separations (whether they be homeowners or renters) end up with two, instead of one household - and thus two (as opposed to one) requirement for shelter. I suspect we have a shortage of housing because the number of people in a household has decreased as the divorce/separation rate has increased.
There is a demographic study of housing demand here
https://www.nzinitiative.org.nz/reports-and-media/media/new-media-4/
Good Lord, looking at the chart, no wonder OZ can think/act without impunity in the little ol' NZ: retail Banks/mainly OZ, groceries/mainly OZ, Healthcare standards/mainly from OZ, Absorb terror suspect from OZ (include the Chch shootings main actor), Put their Crims 'trash'/mainly OZ.. loong way to JK time. Really, if NZ is just good to be pretend including of 'to be kind'.. really wonder why those young professional Kiwis, even bother to call NZ home.. when clearly their politicians basically just pretending that it is.
https://www.tvnz.co.nz/one-news/new-zealand/courage-needed-solve-housin…
Mr Orr says courage is needed to solve housing crisis but by WHOM.
He should spell it out as to who is not having the courage just like him....
We all know the solutions. Pretty much every solution leads to increasing rents and some property owners/investors going bankrupt, after which rents would go down.
Best to let the above happen. While it's happening the government needs to underwrite LARGE residential housing programs/developers. NOT increase accommodation supplements and NOT impose rental caps.
This will cause pain for the poorest and richest, however, it will solve the housing problem. It's the only way, but nobody wants to say it out loud; BOTH the rich AND the poor will have to suffer to solve housing. The poor may have to suffer a lot in the short term - but they are already.
@Fritz
I was thinking about that today. I don't want to buy a house here in Christchurch if society keeps going down hill. SOME current home owners and investors must feel this way too.
- Misallocated capital could see tenants unable to make rent (lack of high-paying jobs)
- Increasing random acts of psychical violence (a numbers game)
- The braking down of municipalities (people's cities getting a bit sh**)
- Having your friends and family move away because they can't put roots down
- Having our nation's social services decline, health, education, etc (no housing = BIG welfare spend)
- Decay of the culture
Those are some reasons I thought about. You might know this Fritz, do us Kiwis have to pay a stamp duty when buying property in Australia.. maybe a territory thing?
The Greens need to go too.. their climate extremism/nimbyism is holding New Zealand back. We need to be a lot harder on environmental fascism. 'First Strike' they can opt for mental-health-services but Second Strike there needs to be mandatory sentencing.
Environmental fascism and nimbyism should be viewed and TREATED as a high crime due to the enormous social harm it's causing. Obviously mental health is a huge component, but is no excuse as their actions are usually premediated.
You could argue this would put pressure on our legal/prison system , PLEASE KEEP IN MIND, these people are litigious, abusive the tie up the legal system and development for years. If anything their mandatory sentencing would improve the legal system and save NZ money.
A face reader can clearly see that Orr (in interview) is bluffing, there will be nothing substantial, keep waiting for next 3 years. He already mention this is 5th cycle so nothing new.
Every person looking for pity says, I was not able to sleep and kept thinking about the issue (Keep thinking and then fix it in your dreams).
What ever will come will be a bandage to stop the flood, which already taken away labours face value and Jacinda fake smile.
So the next announcement will only be an announcement and nothing more than that.
But? you missed how the momentum works, can understand the despair to most of those young professionals, recently/newly graduate.. their best hope is clearly to enhance talent pool across the ditch, while at the same time... NZ have to cope receiving the 'unwanted' from OZ - they're roaming around now, more and more.. NZ slowly but progressively turned into.. segregation community. Social fabric in NZ cannot be stitch just with the words 'be kind' - it doesn't pay the bill for the newly graduate, even add interest to student loan when work from across the ditch? the graphs above, still giving a dimmer lights of meaningful/productive life, which otherwise already extinguished in NZ.
Shame we can't do memes in comment stream here. If we could I have replaced Lego Jacinda's COVID sign;
https://www.stuff.co.nz/life-style/124537624/jacinda-ardern-made-into-l…
With this story pic from interest.co.nz;
https://www.interest.co.nz/property/109315/astonishing-increases-housin…
or replace her covid sign with pic of millenials in 40 years time https://www.thestar.com/news/world/2013/02/07/hong_kongs_poor_live_in_c…
NZ general professional workers, basically will just have to get their collective act together. Stop from work, strike at any possible way, roll over work/activity stoppage. Prolong, continue.. until say govt or rbnz willing to admit the correct nice NZ ideal DTI index, a target to be achieve.. and admission of failure by allowing more than the normal common 'affordability DTI ratio' to happen in NZ, read this. Ensure your have a good blood pressure;
https://www.stuff.co.nz/business/opinion-analysis/300251702/where-did-t…
But the only way that change would actually work would for rioters to actually overthrow the government - Labour received 50% of the vote to get on with fixing the housing crisis and they don’t the opposite. So it would appear there is no longer any point in voting or expecting democracy to fix these issues that need to be fixed for democracy to keep working in the future. If you go on strike, Labour would probably just pay you a wage subsidy and pay rent to the landlord for you! And nothing would be fixed!
Yes clearly given how much of a flop they've become on the housing front - one just wishes they were more upfront about that in their communications prior to the election - 'hey team of 5 million, we're going to keep the borders closed to fix covid, but we're going to be a complete flop on the housing front and back track on our previous policies, and instead we're going to pump the housing market this year and make every dwelling that landlords own go up in value by at least $150,000. First home buyers there's nothing in this for you and we're going to drop rates even further so you get no interest at all on your savings'. If they said that prior to the election - they would not have got 50%. So in essence, they've mislead large parts of society.
@dago
Grant Robertson is way worse than Orr. Orr knows he's gone too far and has promised change OVER the next 3 months.
As far as Central Bankers go, Orr is better than most by a country mile. I'll admit that, even though it's through gritted teeth. He has 3 months to prove me wrong.
The poor man has to deal with Natbour - so I like to cut him a little slack now and then. Natbour is now how I refer to Nation and Labour. I think there are real NLP benefits in doing so.. mostly it groups them together as one failed block.
I have him on record as saying housing increase is a first class problem and also witnessed him giving the reporters a bollocking for focusing on housing and said its 'clickbait'. He's a QE junkie mowing down everyday people with the best of the central bankers. GR needs to do his job but refuses
We’ve got our tax settings seriously wrong. Carrots and sticks are what people need to modify behaviours and taxes are the best tools that we have to move people from land banking and property speculating. We need more houses clearly and we need property investors to stop competing with FHB in the existing housing market. Tax settings could easily be change to modify behaviours and fix these issues (but we have weak unprincipled leaders).
Have a look where Japan is on the graph, so NZ must steadfast with more QEs & negative OCR soon.
But may be, as it is.. all the current NZ 'market distortion' is enough to put NZ at the very enviable top? then wait and observe the gravity. NZ is where Japan in early 90's, but in today's internet age the swing down to bottom probably doesn't take 30yrs, could well be like that BTC volatility.. brace for impact everyone.. brace..
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