Here are my Top 10 links from around the Internet at 10 past 7 pm, brought to you in association with New Zealand Mint for your reading pleasure.
I welcome your additions and comments below, or please send suggestions for Monday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.
I'll pop any surplus suggestions I get into the comment stream.
1. How long before someone here does this? - BusinessDay reports Australian department store group Myer is building a website that will allow Australians to buy directly from China and avoid paying GST.
This sort of thing becomes much more attractive in New Zealand now the GST rate is 15%.
Is it already happening?
Does anyone know of plans to do something similar here?
Good idea?
Myer is working on an international retailing website that will sell goods to Australian customers, shipping them from a warehouse in Shenzhen in southern China to avoid the GST and make Myer more competitive.
At a business lunch in Melbourne today, Myer chief executive Bernie Brookes said the company was working on the website, which would be up and running in February.
Mr Brookes said the company was creating the new site out of frustration over a lack of action from the federal government over GST-free shopping online.
2. Now it's gone mainstream - Here's Stephen Bartholomeuz at BusinessSpectator using the line pioneered by Steve Keen yesterday that the Australian government should be careful before creating a '5th pillar' that increases competition, lowers interest rate margins and further inflates Australia's property bubble.
Too right.
It is worth noting that the Reserve Bank of Australia submission to the Senate committee on banking competition effectively demolished the myth that the banks have been using their post-crisis increased dominance of the local system to gouge their customers.
It is also worth noting that the major banks’ share of housing lending has recently been falling, not rising, which is an indication that there is non-bank or regional bank competition.
Given that the fixation of Swan and other politicians appears to be home lending, it is also worth considering whether it is in the national interest for the government (presumably using taxpayer funds) to try to lower the cost of home loans at a time when the RBA is trying to use monetary policy to dampen consumer spending and control the inflationary pressures it believes will flow from the income shock generated by the record terms of trade.
There are some who might also question whether it is prudent to do anything to further inflate the housing market given what has occurred offshore.
3. Costly reunifications - The reunification of West and East Germany was enormously expensive for the Germans and took a decade or more to absorb.
So how much would it cost to reunifiy the two Koreas cost, assuming it happened peacefully.
Some people have started to have a crack at estimating a cost, given the recent Wikileaked comments from China about some of the younger leaders wanting reunification and the impending handover of power from the madman to his son.
Bloomberg's William Pesek reports the cost might be US$5 trillion. Ouch.
The price tag will be $2 trillion to $5 trillion over 30 years, says Peter Beck, a senior fellow with the Atlantic Council in Washington.
A South Korean presidential committee puts it between $322 billion to $2.1 trillion, but come on. The costs of German reunification -- about $2 trillion and counting -- suggest even $5 trillion is optimistic. It’s not a matter of whether the world is willing to bear the cost. It must.
North Korea is too nuclear to fail and a stable peninsula is absolutely in the best interest of the global economy. It’s among the biggest risks hanging over markets. In a sense, peace would be, well, priceless.
In practical terms, though, meshing the two Koreas together could cost more than Japan’s current annual economic output. It could cost more than double China’s currency reserves, six times U.S. President Barack Obama’s $787 billion stimulus package and 45 times Ireland’s bailout.
4. Wondered why Australia lost in the first round of voting for the 2022 World Cup? - Here's the promotional video they created to show to the voters. Truly awful.
5. Remember nuclear weapons? - This is a piece of Digital Art from Isao Hashimoto that tracks all the nuclear explosions from 1945 to 1998. Strangely compelling and scary. HT VaughnDavis via twitter.
Foreclosure homes accounted for 25% of all U.S. residential sales in the third quarter of 2010.
Tthe average sales price of properties that sold while in some stage of foreclosure was more than 32% below the average sales price of properties not in the foreclosure process—up from a 26% discount in the previous quarter and a 29% discount in the third quarter of 2009.
7. 'Evidence of massive fraud' - Al Jazeera's People&Power reports it has found evidence that billions of euros of European Union grants for structural development is being shuffled through to interests associated with the Mafia..
As in the guys with the horses heads.
Yikes.
Fraud and irregular payments were worth 1.3 billion euros last year, it reports. Property developers were at the heart of things... It seems there are a lot of half finished hotels in the Canary Islands...
And the Italian mafia got together to extort money from the builders of a motorway in Italy. I love how the mafia describe the distortion as a tax for operating in their territory.
No wonder financial markets are beginning to wonder about the financial sustainability of the European project.
For several months, the Bureau of Investigative Journalism has been looking into EU finances, and it has uncovered evidence of massive fraud.
Most disturbingly, as Angus Stickler now reports for People&Power, it seems that billions of taxpayer Euros are going straight into the pockets of organised crime.
8. Just my sort of image - This photo of a 'super cell' storm cloud in Montana republished at The Daily Mail gives a whole new meaning to the phrase: 'It was a dark and stormy night.'
9. Why American taxpayers are starting to understand how they were ripped off by rich American bankers. HT Roelof via email.
10. Totally amazing data visualisation video. HT Chris.
92 Comments
This piece at VoxEu argues China and America aren't so much in a duel as in a tango. Either way it's ugly for us and them eventually.
http://www.voxeu.org/index.php?q=node/5885
Though these two economies may be putting on public posture against each other, they are quietly playing a tango that neither can step out of. The same messy equilibrium contributed to the Great Depression and is now causing the current consternation in world currency markets. But it is an equilibrium, nonetheless.
The NYTimes Ben Protess describes how Wall St's banks pawned junk to the Fed.
Heads on pikes anybody?
http://dealbook.nytimes.com/2010/12/02/how-banks-pawned-junk-to-the-fed/
Lehman Brothers’ collapse in the fall of 2008 inspired panic on Wall Street, but it also presented a little-noticed opportunity for the country’s remaining elite banks: They could now receive cheap Federal Reserve loans without posting quality collateral.
As part of an emergency loan program, the Fed accepted as collateral more than $1 trillion in junk-rated investments from Citigroup, Morgan Stanley and others,according to data released Wednesday by the Fed. Banks pledged more than $490 billion in particularly risky collateral – which credit rating agencies classified as Triple-c or below. Some collateral included mortgage-backed securities and other risky investments.
Here's Comstock Partners with a very detailed report comparing America with Japan and finding the following.
Japan has a one decade start on the U.S. so we expect to stay in this quagmire for years to come. The similarities in this report are amazingly close if we start with what we believe to be the best dates when each country’s secular bull markets peaked (1989-Japan, 2000-U.S.).
Even when you study the differences you have to conclude that most of the differences will make the extrication from deflation even more difficult for the U.S. than Japan. (The aging population of Japan, and financing abroad vs. domestically are the exceptions to that.)
As we have stated many times, we really hope we are wrong with these conclusions and hope that the innovative capabilities of both (or either) country could make a big difference!! All in all, however, we believe that the U.S. faces a long period of below-average growth, weak economic recoveries and more frequent recessions that justifies lower p/e multiples in stocks.
Read more: http://www.creditwritedowns.com/2010/12/america-turning-japanese.html#ixzz171v6cFbX
China looks like it is about to tighten monetary policy properly. Brace for it.
China will switch to a prudent monetary policy from a moderately loose stance, the Communist Party's top leaders decided on Friday, a change that could pave the way for more interest rate increases and lending controls, the state Xinhua news agency reported on Friday.
This is a spectacular report on Merrill Lynch (the blundering, thundering herd) by Bethany McLean, the reporter who brought down Enron. John Key used to work for Merrill Lynch.
http://www.vanityfair.com/business/features/2010/11/financial-crisis-excerpt-201011?currentPage=all
At the same time Goldman executives were canceling vacations to deal with the burgeoning subprime crisis, (Merrill CEO Stan) O’Neal was often on the golf course, playing round after round by himself. Always a loner, he had become isolated from his own firm. He had no idea that key risk managers had been pushed aside or that the people he had put in important positions were out of their depth. Amazing as it sounds, the C.E.O. of Merrill Lynch really didn’t have a clue.
And the Germans are grumpy. The ECB is fudging things. This is far from over.
As Ambrose explains HT Hugh via email.
Thomas Mayer from Deutsche Bank said that if the ECB is put in a position of having to buy up to €2 trillion of debt to support Spain and Italy, it will cross a ruinous line. "If the ECB is thrown into the fire, who knows what will happen," he said.
Separately, key figures from the major parties on the Bundestag's finance committee renewed calls for debt restructuring for Greece, Ireland and Portugal, with "haircuts" for creditors.
Lothar Binding from the Social Democrats said it was becoming "very difficult" to keep explaining to taxpayers why they should provide fresh money to these countries at a time of welfare cuts at home. He warned that the chasm between Europe's northern and southern nations had grown impossibly wide and that sooner or later the common currency might have to split in two.
One of the best vids - on the very slight chance you missed it.
ft Thom Yorke
And here come the Chinese. Marta Steeman has the story.
http://www.stuff.co.nz/business/industries/4420508/Mining-jv-could-create-thousands-of-jobs
Large Chinese resources company Qinghua Group and small Australian partner Greywolf Goldmining are scoping mining investments in lignite, coal and ironsands in New Zealand and say that could create "a few thousand'' jobs.
Lancaster said he was doing his hardest to persuade Qinghua New Zealand mining was a good investment.
He reckoned once the Chinese chairman had met the ministers it would be "all go''.
The Chinese company had not yet committed to mining investments here but Lancaster said "I would say they are 90 per cent there unless you bring in some great tax''.
And bakeries ! Why should those buggers at Couplands profit from our need for bread . As it is an essential part of our diet , all bakeries should be nationalised into a Kiwi-Bakers network .
We'll ensure that those usurious sods don't make so much dough in the future .
"English-born Lancaster, who has spent most of his career in commercial real estate development....".
So we've now got a Sydney based English spiv trying to flog off our coal and iron to the Chinese, and this is supposed to be good news?
How many times does it need to be said, develop our own resources, this is not difficult technologically or financially
"I would say they are 90 per cent there unless you bring in some great tax''.
Bloody good idea, thanks for the suggestion Lancaster. A Hole.
I hardly like to interrupt the discussion, but I will anyway,....
It seems very unlikely that the Germans will agree to substantial bond purchases by the ECB going forwards, and if that court case succeeds in the German Constitutional Court, then its game over for Portugal, Spain, Italy, France, .......
Alan.
Alan, I agree.
For those who like to play with interactive charts:
From "Der Spiegel ONLINE International"
The US Embassy Despatches Interactive Atlas
Cobber-digger Bernard : No ruddy wonder Australia lost the FIFA world cup vote ............................. Stone the flaming crows , that female impersonator was a shocker , why didn't they get the real Julia Gillard to lend a hand ? .................. Maaaaaaaaaaaaaaate !
Associate Judge Hannah Sargisson ...." Developers and their funders are partly responsible for costing savers, many elderly, an estimated $8 billion in the finance firm collapses since 2008."herald story.
I am surprised not one of the developers has been shot....honestly, it is a wonder!
The rest of the article is worth a read.
I would not be surprised in a few years to read of complaints by 'developers' that they are being kept out of the market by a masonic group of banks and other funders, councils and product suppliers.........how else can a market ensure the parasitic scumbag element are never able to repeat this episode of thieving.
A return to the age of the Gild is needed.
"The New Zealand Banks learnt their lesson in the late 1980's".........err.. no they didn't Hugh.
They are being protected by the RBNZ and their real exposure is being swept under the carpet.....if they were not heavily exposed to the property ponzi bubbles, the Govt and RB would have hammered the rural and residential bubbles from the day of the election....
I think it is unfortunate that some of the "best" developers have been bankrupted.
Fontein did very good things with Kensington Park in Orewa, Nigel McKenna generally built quality developments (Beaumont Quarter, Westin Hotel etc) and Kruckziener (sp?) of course had done some quality development (eg. Metropolis)
Pity that these guys are unlikely to be around for awhile if at all in terms of the quality of urban development out there
No it comes back to greed, driven by cheap interest rates and the belief that property was a sure thing...
Ethical developers.....lol....ive never met one....and I dont think I ever will.
This bubble could have easily been stopped by decent regulation....something similar to Texas....or Singapore....
regards
"Key needs to realize fast that this country is going nowhere while "Environment" controls our critically important land use law. It needs to balanced ....."
That's the biggest load of arrogant, ignorant nonsense since I don't know when.
I'm calling you, Hugh.
"Balance" was 80's waffle. What do you imagine it means? A bit for Hugh and his kind, a bit for the 'environment'. Oh dear, Hugh and Co have used their bit up. At bit more for Hugh, then, and a bit less for the ........oh, dear, there's no environment.
John Clarke / Fred Dagg called that for the nonsense it is, 1/4 century ago. "we towed it out beyond the environment.....", he said.....
The environment is the whole biosphere, including you.
There are few environmental data trends tracking positively = even the ones like PCB cleanups, CFC disuse/ozone repletion, are attempts to regain lost ground.
Most - aquifer quantity/quality, water quantity/quality, carbon-cycle equllibrium, erosion, pollution, species depletion, resource depletion - are going backwards, at exponentially-increasing speed.
No matter how arrogant, self-sure, cocky or even intelligent a species is, if it can't survive because it has altered its habitat beyond tolerable parameters, then it can't survive.
That responsibility is undeniably in our hands - but I'd rather folk who make comments like yours were relieved of the responsibiity.
"...retailers are having to work overtime to encourage increasingly reluctant shoppers to open their wallets. A frugal mood has hung around since the middle of the year, and it has worsened since the official interest rate increase last month and the decision by the big four banks to go above the Reserve Bank's 25 basis points rise."
http://www.theage.com.au/business/retailers-face-a-very-unmerry-christmas-20101203-18jth.html
If it's gloom across the Tasman...imagine what it will be like in Noddyland...peasants are already conditioned to expect endless sales...what can they see coming post xmas!
This might explain the comments coming from many directions that 011 will not be a time of 'recovery' but rather one of survival....
With commodities reaching record highs and nz internal demand / growth being low the outlook is not so good if our currently high exchange rate drops. Imagine paying $2.50 a litter for petrol an what that will do to the tight wallets of average Joe. Joe will spend even less apart from the staples needed for existance. There will be less tax receipts The govt will not get it's growth it wants and govt borrowing will increase above the 250 mill per week which will create a dim view of the ecomomy from the rating agencies with a another lowering of the exchange rate and higher priced imports. This could create a spiral which an election bribes focused political party will not get us out of.
Wrong, in fact your piece is totally wrong full stop, i see nothing in it that makes any sense what so ever.
We earn money by having exports...a dropping dollar helps exports....imports are bad, lower dollar makes tvs etc more expsensive....thats a good thing...except for the retailers...but our workers need to move into the productive areas and not the service areas.
There wont be less tax receipts, they'll get the GST on petrol anyway and I think excise duty? So the tax take might actually increase...Petrol demand is whats known as in-elastic...
Real growth is via businesses expanding and doing more exports, this is productive growth, consumption growth is what we have too much of and want less of.
The rating agencies will be looking at our ability to export, bringing in income to pay down what we have borrowed....simple taxes are probably going to have to rise.
I agree the game of bribery has got stupid....but both parties are doing it...
regards
and do what with it? tv just sucks....I was given a free 29inch CRT....bet if i could remember I could count the number of times ive watched tv on one hand.....
You miss the point....exporters make us richer and provide jobs, no job no tv no matter how cheap it is.
regards
Way to pretend you didn't get my point.
Many claim that importers make us richer and provide jobs. It's usually importers claiming that, just as it's almost always exporters who claim that exporters make NZ rich and provide jobs. And both groups demand and expect to be given preference over the other, because their own group is "more important".
That's what's known as self-interest.
Yep but I am in the exporting game ant it is not that easy to ramp up production to sell more and to even market more of our products. Esp with globlal demand being weak. So with a lower dollar it won't mean a sudden growth in exports. And a lot of our manufacturing exporters have move offshore anyhow. We may return more per widget but that don't mean that we can sell more widgets and build more factorys to employ more people. But at the moment our dollar is still high an the govt is borrowing13 billion per year so after 10 years where will we be with an extra 130 billion added onto the govt books?
Maybe you need to chat to Les...he seems prety adement that lowering the Dollar is the key to helping exporters....
I never said ramping up production was easy....my point was that the easy option of growing our service and retail sector beyond what is sustainable without debt is now biting us...We simply cant keep on selling more TVs, buying more property and opening more coffee shops....it isnt working....so teh hard yeards have to be done....ppl who have tarined to make a coffee or sell a TV have to now re-train in a job thats of benefit to NZ.
regards
Survey of NZ businesses, reported in the papers, indicated 2011 would be a year of growth, so guess wait and see. We will know by this time next year but reckon neither the extremely alarmist and the extremely optimistic views will be on the money. And of course we will also know who has won the RWC, which will have a bearing on the mood of the country.
A must read for the weekend, Hugh Hendry is back with the latest Eclectica Fund newsletter. Superb.
http://www.zerohedge.com/article/hugh-hendry-december-commentary-must-read
It's the same all over though mate. Show me an area where it isn't happening and I'll show you an area full of idiots trying to deny reality. Prices got too high, higher than people can pay off, so now prices are falling back to levels that can be sustained on NZ incomes, but history suggests that they will fall even below those levels for a while. And that's a damn good thing, I'm sure you'll agree.
Oily, in response to your comments, I went to a meeting to hear Cameron Bagrie speak 'off the record''. He is very impressive. He said a mistake people often make is to look at supply and demand as a one year snapshot, but you have to look at the cumulative effect- that is, how many houses have been built over a decade relative to underlying demand. He discussed supply and demand as a driver of house prices, concluding that there was a SLIGHT EXCESS of housing stock in NZ at present, but it had been built in the wrong places, such as the coastal strips.
There is an over- supply in the likes of Coromandel and and under-supply in the main centres( compounded in Chch with earthquake and with the leaky homes issue in some places ).
He likened the recovery to like getting in and out of the bath tub, with a few small waves that lift sentiment up and then down. He expects 2011 to be pretty good all- round but sees a long, slow road ahead for NZ Inc with a 5 year journey of modest growth, leading eventually to a newer and stronger economic model.
I appreciate this might not fit in with the preconceived ideas that some may have, but he's not the loudest drunk at the bar mouthing his views like one can get on blogs, but does actually put a considerable focus on studying what is happening.
And in answer to the claim he will spout the ANZ Bank's mantra , he quite openly said, that a condition of his position is that the day they try to tell him what to say is the day they expect his resignation. As I indicated, the guy is a breath of fresh air and is insightful.
Mate, the loudest drunks were all roaring on about how "Ya can't beat property", etc etc.
The fact remains that fundamentals are unchanged, because fundamentals are not affected by fads and bubbles.
Back before the property investment bubble took off, houses were priced at a reasonable and realistic level, where most people with an income could expect to afford one. (Notice I said "afford", not "buy".)
Then the bubble mania began to creep in, with suckers gleefully believing every stupid opinion they heard about how "Ya can't lose with property!" and all the rest, and off they trotted to the bank to borrow as much as they could so they could buy their dream investments.
As we all know, the banks were as much to blame as the suckers and the RE mob conning the suckers, and so they lent the suckers as much as they could borrow, but far more than they could repay.
So asking prices spiraled ever upwards, with a seemingly endless stream of gullible idiots willing to bid them even higher, and finance outfits willing to loan them the money to do so.
Eventually the bubble ran out of hot air and began to deflate, because what else could it do?
Most of those borrowing heavily to pay ridiculously high prices hadn't seen a real income increase in a long time, and there were only so many suckers in the pool available to buy their investment properties from them at even higher prices, so the whole CG scam fell apart.
What's left? Lots and lots and lots of property up for sale and sweet bugger all people in a position to buy any of it, even if they were dumb enough to want to, and most don't, because the mania has gone now.
Lots and lots and lots of available property and lots and lots and lots of available property owners with debts they assumed would be taken care of by CG but weren't and who are still on the same incomes they were earning darn near a decade ago.
It looks like some RE agents know the jig is up and are willing to admit it, but of course many will desperately attempt to spin the collapse of their dream market as either a temporary blip or not happening at all.
But the party is over and all that's left is the smashed furniture, pools of vomit, and the pounding hangovers.
The good news is that I don't drink, so no problems here. Shame about the f**kwits who are either losing everything, or are about to, but that's life, they shouldn't have been so moronic, and really I don't care, because they're getting what they deserve in all honesty.
LB.
Bagrie is definitely the best of the bank economists, although even he is a bit too bullish in his current views IMHO
What is he picking for economic growth in 2011?
I think the NZIER with a prediction of a rather sluggish 2.3% GDP growth are about right, even that might be a bit high (they do acknowledge downside risks)
Compare that to some of the bank economists forecasting 3 to 3.5%
I believe so...ie one or other.....the gains cant continue and from where I sit thats very clearly not the case....so PI looks bad sport....
When you look at the salary to house cost ratio, it should be 3 to 1....at most 3.5 to 1.....currently its 6ish to 1 (and parts of OZ its 9 to 1).....so a drop of 40 to 50% is quite possible....also consider that if thats fair value we might see it even lower as the drop overshoots.....Whether we see a dip over the next year or the next decade depends on the next year(s). As long as we stagger along with a low OCR and incepid growth ppl will hang on and sell slowly....if interest rates satrt to rise...ie OCR at 5% then ppl will start selling....but personally I think we are going into deflation and depression....fools hanging on now from greed could well be widhing a year from now they'd sold at 10% off...
regards
This is 1987 all over again. Back then I still lived on the Coromandel and before 1987 the place was infested with share market playing dumbarses who thought of themselves as financial giants and tycoons.
Every weekend or long weekend they drove up from Auckland and Hamilton, Morrinsville, Matamata and places to their beach 'pads' and strutted around the peninsula like they owned it.
One time I saw one of these losers actually snap his fingers at the elderly lady who ran the Ferry Landing store because he wanted her to pump gas into his boat. Totally arrogant wankers.
They used to stroll around the community with wine glasses in their hands and expensive jumpers wrapped around their shoulders and the flash sunnies propped on their heads, and they shrieked about all their money and shares.
But then the market crashed and it seemed almost like overnight that for sale signs went up on at least 2/3s of the holiday pads in the place. (Almost all of the houses there were holiday places, only a few of us lived there permanently.) Seriously it seemed like it all happened while I was asleep one night. And nothing sold at all for years.
It was great because the only time you ever saw the pricks after that was when they were clearing out their stuff from the beach houses they were trying to sell (or the bank was trying to sell out from under them!) After that they were gone. BLISS!
My guess is that this is a sign that a lot more houses in towns and cities are about to hit the market because in 1987 the losers tried to deal to their debts by selling their holiday houses but of course they couldn't so they went bust and lost their flash city mansions. This looks like a repeat of that.
The question we should be asking is - did those promoting and participating in creating these bubble values, consider for a moment, the plight of the young and those on lower wages denied home ownership and reasonable rentals?
It seems that a lot of them did, but not in the way you'd hope. They revelled in it. It's been years of naked gloating and an overblown sense of entitlement to exploit others, and demonisation of those who were priced out. The businesslike and professional landlords generally don't badmouth their customers or treat them with contempt, but the past few years have seen a lot of clueless amateurs enter the field who are arrogant, insulting, and with no scruples about exploiting their tenants. That's an attitude that's bred a lot of resentment.
But they won't be the first people in history to discover that making enemies on the way up can come back and bite you when the fortunes reverse.
There are always twits in every generation, and those holding huge mortgages now are qualifying for that label. There are basically two drivers, fear and greed. Both need to be avoided, fear of doing anything will get you nowhere and greed will set you up for a fall. This can apply to shares or property or money invested (read finance companies in recent years). Bagrie says property will go up and down in cycles, sees the new down cycle will take about 5 years, the amount of the downside in NZ remains to be seen. It will obviously not be pretty in the likes of the Coromandel or Marlborough, but they are not typical of NZ overall.
"Bagrie says property will go up and down in cycles, sees the new down cycle will take about 5 years, the amount of the downside in NZ remains to be seen. It will obviously not be pretty in the likes of the Coromandel or Marlborough, but they are not typical of NZ overall."
Everyone knows property values are cyclical but generally trend upwards over very long periods. That's the kind of thing you learn in 3rd form economics, if not earlier.
The bubble of (approx) 2003-2008 was an aberration, not a part of the 'mainstream' part of the cycle and wasn't at all supportable, something any schoolboy should have known, although lots of people seem to have forgotten such important lessons!
And Coromandel and Marlborough are very typical of the rest of NZ, but are ahead of the curve. The rest of the country has yet to fall as far, but it will, you can count on that. "Where they go, we follow". That's what Kiwis said about the rest of the world, back when it was swilling champagne and gobbling down caviar like there was no tomorrow, right?
You're kidding yourself if you think we don't follow them down as well as up.
Alas, Coromandel and Marlborough are not where most people in NZ want to live and work, that's why they are not growth areas, hence areas of decline. Nice places for a bit of a holiday though.
And comparing house costs/ratios to income in 60's and 70's is a bit like comparing apples with oranges. The typical house now is about 80% larger (that's an enormous difference) and back then statistics indicate that female workforce participation was relatively low to now (often single income household v dual income household).
There is one obvious way to reduce house costs and that is to lower people's expectations and offer lower levels of service for new developments. But how many would want to revert to the 100 square meter Beazley-type house with no garage, often septic tank or stormwater into the ground, put up with basic water treatment, no kerbing or chanelling and single way chip seal roads, which is what people got in the days when housing was really 'affordable' in NZ
Hugh Pavletich never mentions these considerations.
You're ignoring all the market fundamentals. Prices too high, incomes too low, finance dried up. Many sellers, no buyers, lots of debt everywhere.
And you're also telling yourself that the value of your property isn't going to fall, that it's all going to be fine in your area, and that only a couple of 'special' locations are feeling the pinch.
But you're wrong.
Hugh, that's truely amazing value in Houston, but Christchurch is obviously not Houston. If you build a 235 sq metre top executive house in Riccarton for sale at $200,000 (US $140,000) let me know!. That would be good value even in the likes of Coromandel at present. My point for NZ was that to compare the houses of the 60's and 70's to this century is like chalk is to cheese.
Lol, your point taken, but there is a better supply and demand situation in growth areas, so there will be regional variations, even variations within metropolitan areas. By the way, I am not a big property investor, just have enough to generate a cash flow to live off when I retire (still some time away). Don't get me wrong, I believe greed gets people into difficulties, so probably like you I've avoided leveraging etc and desire to remain mortgage free .Basically my reading of the situation is that it is a human tendancy to over-exaggerate how good everything is when it is bouyant, and over-react how bad everything is when it isn't.
I have observed that most people actually start buying property and shares when prices are going up, they don't like buying when the prices are lower, although some professionals of course make their move then.
The very marked tendency manifest right now by PIs is to pretend nothing's wrong, that no market correction is taking place, and any who state the inconvenient truths are "negative" and "envious" and many other unwholesome things.
But that is the mentality which caused the problem in the first place, as greedy sucker after sucker leapt aboard the already-crashing PI bandwagon, while telling themselves that they were doing the right thing and somehow going to get rich from their unservicable debt.
So I repeat: Prices too high, incomes too low, finance scarce, debt everywhere. It can only go one way until most or all of those fundamental factors change.
Thoughts from the Frontline Weekly Newsletter
Texas, Ireland and Ten Little Indians
by John MauldinDecember 3, 2010
http://www.frontlinethoughts.com/article.asp?id=mwo120310
The sh,,hitting the fan scenario???...Silver for the last five thousand years has been at the ratio of 16/1..JP morgan has been issuing paper to the fed on Silver it does not physicaly have.Have a look at this its a laugh.. http://beforeitsnews.com/story/294/103/ JP morgan might be the next to be to big to fail,but it will cost trillions.
GBH Prediction for 2011 : Winnie will be back ! ........... As no new serious contenders have popped up , to snare the vote of the many electors disaffected by both Labour & National .......... NZ First will take those votes ............. Plus the oldies still love him , Winsome can do no wrong , in their fading eyes .
[ no offence Hugh , but you're rather silver haired yourself , want Winnie to add some goodies to the Gold Card , to buy your vote ! ]
And with Dunne finally done & dusted , that will leave JK with just Cousin Rodney as an ally .
Dare I predict a 2011 win by Labour / Maori / Greens / NZ First ?
Apologies for adding extra age & colour to you , good sir !
And yes , if Winston had kept his ego under control , he would have been PM .......... Just as Rob Muldoon was grooming him to be . And compared to Rowlings / Bolger / Shipley , I think that Winnie would've done a far better job of it .
The pity here in 2010 , is that we've got alot of flapping gums of dissent in NZ , but no new parties emerging , with serious intent . Recall the huge vote that Bob Jones achieved under FPP , with his NZ Party . ........... Imagine a G.Morgan , a C.Bagarie or a B.Hickey led group of malcontents ........ Under today's mood , the electorate would give them a good support .
In summation of politics NZ from 1999 to 2010 , I would say to both Labour and National : A pox upon you ! A plague upon your houses , you scoundrels , wastrals .
"Under today's mood , the electorate would give them a good support ."
Probably not. As Bob Jones can tell you, despite lots of pub and BBQ rhetoric to the contrary, precious few Kiwis are prepared to put their money where their mouth is and vote for anybody other than those they always vote for.
Maybe it's because very few Kiwis have any money...?
Bob Jones didn't have to do much publicity work because the journos slobbered after him 'like the pack of drooling dogs that they are ............. And Bob belting one , who interrrupted him whilst fishing , all added to the man's mana .
NZ Party started in 1983 ............... Muldoon calls as snap election in 1984 ( when severely intoxicated ) ............ And Jones party collected more than 12 % of the vote . Under FPP that translated to no seats in parliament , back then .
But today , under MMP , how mant seats does 12 % parlay into ?
And you really believe that a high profiler couldn't replicate Bob Jones effort ? Either in votes , or in clobbering some fool journalist !
Lol,
They will be worried if they can't service the debt, which will happen for any highly leveraged owner who
1. was relying on building depreciation to make up for a negative income flow
2 is relying on interest rates remaining subdued
3 their income from business declines too much, or if an employee they lose their job.
Scoring all 3 will be pow for them!
The statistic I haven't seen for a while is how many property owners there might be who ARE highly leveraged, have you got the stats on that?
There is also a difference betwen a PI who invests in an income-bearing property, as opposed to those yuppies, even baby boomers who should know better, who have bought beach properties in the likes of Coromandel or Northland with the expensive boat etc on mortgage - they tend to be the ones who have strutted around trying to impress everyone, drinking their lattes or whatever, but being a pain in the butt and are actually total idiots.
I bought a whole bunch of investment property in Auckland not the Coromandel or in Northland so I'm fine. The houses I can't rent at the mo will soon get sold for a fat capital gain and then I'll buy more houses with that money and rent them out. Rents are rising and will more than cover this temporary lull property is going through right now. It's just a breather so it can catch up again later. My bank isn't worried about my debts so why should I worry about them? Investment property is the only investment worth having......that's a fact.
As I swing in my hammock , under the coconut palms of Panay Bay............. I contemplate what a loser I am , because I have no debt . And it saddens me , really saddens me , to be such a failure .
Sitting here , with the cricket on Radio Sport coming through the laptop . And my other laptop , the delectable Cherry , fronting up with another mango slushy ........... I think to myself , " Gummy ...... You have no debt , you must be a bloody loser ! " .
Where did I go wrong ?
Well, I don't have any debt. But I've got plenty of cash, does cash equal nothing these days?
My cash allows me to take a holiday whenever I feel like it.
My cash allows me to live wherever suits me best.
My cash means that if I need, or want something, I just buy it, for cash.
My cash means that when I'm in a job or on a career path that I'm not enjoying, I just pack it in and do something else.
My cash allows me flexibility, which is a very important liberty to me.
So look, I'm debt averse & therefore not what you would call a speculator, but if I kicked the bucket in the morning there would be plenty of cash lying around to bury me & just the small matter of the distribution of that cash to be attended to. I may be a loser in your eyes, but at least I'm not a dickhead.
cool--actual sale numbers and stats come from to various state govt,s valuer generals depts-- and you have to pay for it [of course]--this site has rent +price reduction info--see the refined search field----after you do the initial search
" Housing Habits Hard to Shake " : Now where did I read that headline , Bernard ?
So property is simmering again , a smell noxious to your refined nostrils , of folks reaping a capital gain ................ Prices going up , not down 30 or 15 % ............. Olly Newland got it right , but we'll keep that a secret ............. He can quietly remain rich , whilst the clamourous throng who hang onto your every word , can remain vociferous , and poorer .
The Bill is a major element of the Government's plan for the Big Society.
Ministers believe the planning system is too bureaucratic. Last year local authorities spent 13 per cent more in real terms on planning than they did five years previously, despite a 32 per cent drop in the number of applications.
Any ideas worth nicking?
"Fill her up mate"
If you follow the trail..The satalite pictures of the Gulf stream show that in places its slowed.The Ocean temps,have dropped.The effect of this is to cause the balmy areas of western europe previously warmed by the Gulf stream to chill.Note that the winter in western europe, at the moment is very cold.The effects on food production will be dicey..But were a food producer...and since the Russian wheat harvest is a third of what it should be.The saying that " its an ill wind that blows nobody any good comes to mind".
I'm in Sydney. Terrifying house prices yet people aren't getting what they wanted. A lot are holding back as they think they can get more later on. Little do they know there will be no later on.
I had an agent tell me on Thursday that they have a flood of properties coming to market in February and that their existing listings aren't selling.
I know some people who bought a house for $4.5 million and spent $10 million renovating. Serious over capitilisation. They were hoping to live there for a long time and probably thought that housing only ever goes up. Only finished building 2-3 years ago. Had tax and business issues and needed to sell. Thought they could get $17 million. Withdrawn before auction and then on the market for $8.5 million. Just sold last month. Ouch!
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