Here's my Top 10 links from around the Internet at 10 am today.
As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read is #1. It made me think about encryption a lot. And this Marketwatch piece documenting the rise in the US 10 year Treasury yield over 3% for the first time in 2 years is noteworthy.
1. Not so safe - The Guardian, the New York Times and Pro-Publica have published a bunch of articles overnight from fresh Edward Snowden leaks showing how the NSA is cracking the encryption codes used to protect bank records.
I would have thought banks and their customers would be very interested in this.
The enormous growth of online banking and electronic transactions depends on trust.
The latest revelations can only undermine that trust.
This story might be about to go a little more mainstream. Why would anyone trust encryption ever again?
US and British intelligence agencies have successfully cracked much of the online encryption relied upon by hundreds of millions of people to protect the privacy of their personal data, online transactions and emails, according to top-secret documents revealed by former contractor Edward Snowden.
The files show that the National Security Agency and its UK counterpart GCHQ have broadly compromised the guarantees that internet companies have given consumers to reassure them that their communications, online banking and medical records would be indecipherable to criminals or governments.
The agencies, the documents reveal, have adopted a battery of methods in their systematic and ongoing assault on what they see as one of the biggest threats to their ability to access huge swathes of internet traffic – "the use of ubiquitous encryption across the internet".
Those methods include covert measures to ensure NSA control over setting of international encryption standards, the use of supercomputers to break encryption with "brute force", and – the most closely guarded secret of all – collaboration with technology companies and internet service providers themselves. Through these covert partnerships, the agencies have inserted secret vulnerabilities – known as backdoors or trapdoors – into commercial encryption software.
2. Double non-taxation - The G20's leaders are meeting at the moment in Russia and hopefully they can stop talking about Syria long enough to agree on an OECD plan to coordinate tax policies to stop big multi-nationals gaming tax systems and falling through the cracks in the tax net.
Here's the BBC with the story:
OECD secretary-general Angel Gurria said: "International tax rules, many of them dating from the 1920s, ensure that businesses don't pay taxes in two countries - double taxation. "This is laudable, but unfortunately these rules are now being abused to permit double non-taxation."
It is calling for greater international co-operation to close gaps that allows income to "disappear" for tax purposes.
3. The exhaustion of 'Big Bank' - Bill Gross' folksy monthly columns are usually worth a read. This month's piece talks about Hyman Minsky and the 'exhaustion' of the Big Bank and Big Government solution to the crisis. He also talks about baseball. A lot.
Life’s ballgame ended several decades ago for Hyman Minsky, author of “Stabilizing an Unstable Economy” and proponent of the notion that capitalism is inherently unstable, in part because of theshort term financing of long term capital assets such as bonds, buildings, plant and equipment. His stabilizing solution was for Big Bank and Big Government to intercede with monetary and fiscal pump priming, confident in the notion that if the priming was large enough and the pumping fast enough, that stability could at least be temporarily achieved. Yet Minsky played ball in another era, before steroids and corked bats. He legitimately could not foresee the time when what he labeled “Big Bank” and “Big Government” became so large and stimulation so excessive that eventemporary stability of a closed or an evolving global economy would be difficult to attain.
Over these five post-Lehman years, financial markets have grown leery of the medicine Dr. Minsky recommended to calm the symptoms, if not the disease, of capitalistic excess. During a crisis, Minsky’s solution was for Big Government to generate substantial fiscal deficits which in turn would stabilize corporate profits, financial asset prices and ultimately the real economy. In turn, and concurrently, he advocated the growth of Big Bank, by which he meant the ability of a central bank to lower interest rates and reserve requirements in order to stimulate private lending via the monetary channel. In combination, and if large enough, the two could stabilize asset prices and eventually produce an “old normal” 3–4% real growth rate in developed and presumably developing economies too. We have lived in a Minsky-based policy world for some time now, but unfortunately in a “New Normal” world of lower economic growth.
What perhaps Minsky couldn’t conceive of was the point at which debt, deficits and interest rates would go to such extremes that the creation of credit itself, which was and remains the heart of capitalism, would be threatened.
4. A protest in Christchurch - This is an interesting way to get your message across. Although I have to say the house in the picture looks OK.
5. China's 'social support fees' - China's one child policy is an enormous factor in China's demographic structure and therefore its economic future.
It's also a big way China's local governments raises money, it turns out. Families wanting more than one child have to pay a 'social support' fee.
Even though the social support fee is important for local government bodies, it is the family planning officials, who are responsible for collecting the fee, who are the biggest beneficiaries. According to a regulation issued by the State Council, the spending of the fee should be determined by treasury organs, in isolation from the system of fee collection.
Yet, as reported by the China Broadcasting Network, in many places, the treasury bureaus return much of the levied revenues to the family planning organizations upon receiving the fees. Some authorities even allow whoever collects the fee to keep part of it as personal income. Therefore, family planning organs and their personnel are greatly incentivized to collect the fees. Authorities in some regions even allow the extra births because their incomes depend on them.
Within this context, it is easier to understand why, despite strong public objection to the policy and academic proof of the policy’s long-term harm on China’s demographic structure, the strict birth control policy has remained resistant to reform. Softening the one-child policy means forcing the government itself to forgo its vested interests and finding a sustainable solution to the crisis of “hand-to-mouth finance.” Reforms must always be accompanied by resolutions to conflicts of interest and material compromises, and the impasse on China’s family planning policy is apparently not an exception.
6. Aunty Hekia and the very nervous Taniwha - Toby Manhire has had some fun in this NZ Herald column about the demise of Learning Media.
"Hello Uncle Bill! Hello Aunty Hekia!" said the friendly taniwha.
"Hurray!" cheered the children, who were also in the cave.
"What have you got there, Aunty Hekia?" asked the taniwha, cheekily.
Aunty Hekia grinned like a lawyer at the America's Cup.
"Following extensive consultation with stakeholders and assessment of resource allocation, a decision has been taken to undertake a wind-down process going forward," she said.
And here's BreakingViews with a nice explanation
8. Slowing credit growth - Further to #7, Bloomberg reports Chinese credit growth is slowing dramatically as the new leadership put on the brakes.
The moderation in credit after a record first-quarter financing boom stands to cap an economic rebound being driven by a recovery in confidence and Premier Li Keqiang’ssupport measures, such as faster spending on railways. Overcapacity and pressure to clean up debt loom as challenges, according to JPMorgan, which sees growth slowing to 7.2 percent in 2014 from 7.6 percent this year.
“There is less risk in the near term,” said Zhu Haibin, JPMorgan chief China economist in Hong Kong, who has worked at the Bank for International Settlements. “But this round of recovery will not be a strong one and won’t last long.”
9. The global decline of the labour share - Loukas Karabarbounis and Brent Neiman from the University of Chicago and NBER have written an academic paper pointing to a 5 percentage point slide in the labour share of income globally and what it might mean.
It's all consisent with the global drive from those on the centre/left to raise mimimum wages and to reinvigorate unions to try to redress the imbalance.
The global labor share has signicantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced rms to shift away from labor and toward capital.
The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms in uencing factor shares such as increasing prots, capital-augmenting technology growth, and the changing skill composition of the labor force.
As labor shares have declined, business earnings and corporate saving have increased. This large change in the ow of funds between households and rms may have important macroeconomic repercussions.
You betcha.
55 Comments
#1 Filling the implications in the leaked documents, it looks encryption itself is still secure (at least good encryption, if you can trust the software doing the encryption). However, if you are connecting to a secure service (like a bank) via the web, or using a program for providing secure communication (such as a commercial VPN program) then you communications are not private as the chains of trust that make up the infrastructure to do these things are compromised.
Realistically, encryption is a bit of a placebo. It's available, it works and we all love seeing little pictures of formidable padlocks on "secure" sites where we transact payments.
It keeps most good people safe from most bad people, but don't for a minute believe that there is any such thing as total security or privacy online - or even within software that you might purchase for that purpose.
A peer once told me "never email, or post anything online, anywhere, if you wouldn't be comfortable printing that information on the front page of the New Zealand Herald."
And although modern life dictates that we use technology for our communications, banking, business and social connections, it's not a bad philosophy to keep in the back of your mind.
The political, industry and professional responses to these Annual Surveys in the early stages could be diplomatically described as “cool” – and the “thaw” only began when the New Zealand Planning Institute strongly supported the Annual Demographia Surveys in early 2007 – and I responded soon after.
http://www.scoop.co.nz/stories/BU0901/S00046.htm
Releasing land to saturate the housing market, as the Government seems to be keen to do through the Housing Accord Bill, will not solve housing affordability issue, according to the New Zealand Planning Institute (NZPI).
Sorry I'm confused?
Maybe Im being cynical, but the way I read it the Govn and indeed labour have promised more building consents. That doesnt actually equate to more houses, just permission for them, ie maybe this is a slight of hand, "lets keep it off the agenda to after the election" sort of thing. If the developers dont build, or dont build affordable homes the Govn will blame someone them....."we put out 40,000 consents, not our fault not enough were built".
All the while doing nothing to tame the bubble...and whine like hell when the RB finally has to step in.
Confused about the wild and un-substantiated claims HughP makes? Maybe ask him what happened to the facebook page canterbarians unite? no sign on facebook I can find...non, nada...not mentioned by HughP any more.
regards
Your (and others) confusion is this; you think housing affordability is about making houses smaller, or subsidising them into existence, it’s not.
You think that releasing some land as residential that has been identified in advance will make land more affordable, it won’t.
And you think that this is what HughP is advocating, he isn’t.
You think more planners planning (doing more of the wrong thing quicker) will make housing more affordable, it won’t.
It’s about removing waste (non-value added cost). An inflated land value through zoning limited amounts of land allows land banking and speculation.
The housing accord identifies the land to be developed. It already has been land banked and the owners by virtue of a monopoly want and need a high return. These people can make huge non-valued added super profits without adding any utility to the land. This makes land more expensive not less. Yes more land than present maybe be released, but it is the wrong priced type of land. We want sections that are brought to the market at the most efficient way possible and therefore are TRULY more affordable on a m2 rate.
Also as councils have the monopoly on service provision and granting of permission to develop and build, they can also, and do, charge fees that only are able to be charged by virtue of that monopoly. Again this adds costs that do not need to be added. By using a different method, like they do in Texas, the same result (ie release of land and development of services) can be achieved at prices that are far lower than what the housing accord will achieve.
Faster processing of consents is great, some council were already doing these as little as 10 working days, and this is as measured from the customer’s perspective, not the councils. After all how come we can have a law that says consents must be processed in 20 working days, and council can show they are meeting that deadline, yet the customer in real time is waiting far longer. The reason of course is they are using a different form of measurement, just as they do when they try to justify the fees and levies they charge.
Changes to the LGA and RMA will help with this, but will be and is already resisted by council. I do have some sympathy for councils on this as this could mean less revenue for council and it is a bit unfair by central Govt. to withdrawal this without providing some other assistance during the withdrawal process, as it would be for any junkie.
Subsidising of course, especially of the middle class as is happening in housing, is a very worrying sign, and again is not supplying TRUELY affordable housing but social housing. Calling it affordable housing sounds better than calling it what it is, and better still, many gullible people believe them.
Housing costs are very important and are being looked at, but it is the purchase, zoning and development of land that needs to be sorted first. Our response to housing costs at present is to reduce the size of the house, rather than sort the land and building material side. These smaller houses are pitched to the market as ‘this is what people want’, but it more about ‘this is all they can afford’ under our present system which has so much non-value added waste in it.
Irrespective of what type of housing you prefer, it should be developed with as little non-value added costs as possible. And yes there will be a cost to some people (land bankers and speculators mainly) if the right system is used, the present methodology is not it, but is a very small step forward the right methodology.
Still confused?
Hence a CGT would be most useful.
Of course they could compulsory purchase at a "fair" agricultural value...
Roll on labour and a CGT.
Worrying sign, yes our entire global economy and growth model is underpinned by cheap and plentiful fossil energy, that's history (cheap and plentiful) and so therefore is our economy.
regards
Dale Smith - Still Confused? - in a word yes
Puffery - That's a lot of words to disguise the one big issue that HueyP refuses to discuss or engage in - the costs of development and infrastructure - in response to requests for further and better particulars Huey says he doesnt get involved in micro-analysing, preferring instead to stick with the bigger picture.
However on a different stream of consciousness, on a different thread, on a different level, we have Kumbel who is a local-government insider who has been providing a detailed insight into where the costs are - which appear to contradict much of yours and Huey's raison-detre
Have just been investigating the costs of land close to the urban boundary ie semi-rural
In the areas we have been researching, generally we found the cost of raw land is approximately $50,000 per hectare
An examination of a nice new subdivision, right in the midst of $50k per hectare land, with sealed roads, curbing, street lighting, underground power, telephones, sewers, the works. The whole lot. The finished product has nicely grassed, level, finished sections of 700 sqm on the market at $160,000 each which equates to $1,600,000 per hectare
Another example we inspected was a 5 hectare block where a "developer" offered the vendor $2,000,000 ($400,000 per hectare) 5 years ago and was turned down. It is in the middle of whole bunch of available blocks with raw-land price tags of $50,000 per hectare. Today it is still available. The owner is holding out for his $2,000,000 but no-one is buying. According to the RE the owner is off the planet and away with the pixies.
But, more importantly no-one is buying the other blocks either.
I have a question that maybe Kumbel or Dale can answer.
I have a nursing friend who has a 4 hectare block on the Canterbury plains in Waimak District Council, lets call him Smith (no relation to Dale). His daughter has the neighbouring 4 hectare block. They both have access to a sealed road that is well under its road use capacity. They are allowed to take a certain amount of water from a bore, that is ample for many households but does impose some limits on some high water use agricultural options. They both have septic tanks (I think). Their blocks cost between $200k to $250k. Note these are true facts as far as I know.
Lets say some day they want to create Smithville, a small village for their extended family. They would be prefer to construct any needed infrastructure located on their properties themselves. They don't want to make a profit from selling to family but at the same time they don't want to subsidise them either.
Should they be allowed to create Smithville, should their be a minimum or maximum size?
And how cheaply could they sell the sections to family?
Hi Brendon. With that name, like the sound of it already.
Yes in theory they can do this. Unless something is expressly prohibited, there are processes that you can go through to achieve this.
However there is a very long road from theory to practice, in that there are so many opportunities for ‘others’ with vested interests, or no interest other than objecting for the sake of it to stop you, that a small land owner without the finance, legal support and time would be crazy to consider doing it.
It won’t matter that you comply with all the environmental concerns etc, and that your family want what you are offering, by the time you have gone through the process, costs and time, if you get approval, it won’t be worth the effort, and of course the cost that you can pass it onto your family will be based on the costs incurred, which will be huge.
In Texas they can do this and because everyone in theory can do this, there is no cost advantage on price (plus or minus)to be gained so there is no flood of land on the market, but no shortage either. Being able to supply at the rate of demand means prices are low, and no boom or bust.
And as far as how small they could go, I think the market in this case will decide the optimum size ie how close do you really want the mother-in-law to be.
Spot on. The RMA is permissive but councils have contorted themselves to bend it back into the old Town and Country Planning Act. The only people who get what they are entitled to under the RMA are developers with deep pockets and the councils themselves who are never turned down when they apply for a resource consent.
Actually that's an accurate description of my situation except the part about thsealed road. I'm not a planner but here's a couple of observations:
- the rules are a bit more relaxed outside urban areas. I have two dwellings and a bakery built to dwelling standards on one title. Dairy farms often have multiple dwellings etc.
- notwithstanding the misuse councils make of it the RMA is really about managing the environmental effects of development; if provisions for mitigating environmental effects are sound then you have a good case for proceeding
- WDC wouldn't service this one group of dwellings anyway so they wouldn't care that you were doing your own infrastructure. ECan would want to know how you are disposing of effluent and storm water.
- the absolute key to this question is the legal structure. A single entity such as a trust or company that retained ownership of land and improvements would probably get an easier ride than an application to subdivide into new lots held in fee simple
I am guessing that the only people who would care what you sold the sections for could be the IRD
My view is it's a terrific idea and more people should be doing this.
Kumbel – As both you and I have said in our different ways, yes it can be done. And at face value the RMA allows it.
So why isn’t it?
The fact that this does not happen as easy as it is written is for those reasons I and others have given, and is further evidenced in the cost of land and housing in NZ.
Changes are needed as is happening to the LGA and RMA and at face value they should also work but given what happened to the RMA, cannot be sure. Things might also have potential to go too far the other way. Time will tell.
Hey Kumbel do you sell your bread somewhere? I used to do some bread making in Finland for some restaurants, really small scale stuff, 20 loaves max in a batch-Forcacia bread, breads with a poolish, rye breads and occassionally sourdoughs.
My finnish mother in law has a wood fire brick oven which she made 6-8 loaves at a time. I would love to be able to build something like that here in NZ.
I miss good quality European bread.
Doesn't this create as many problems as it solves? No clear title, so banks are reluctant to give mortgages individually. What about insurance? Inheritance? Divorce? Same problems as a trust or company being the owner, I think?
I remember in parts of Europe, some villages might say they date back to such and such 'royal decree'. At the time I thought how feudal things were back then, they didn't even have the freedom to form their own villages.
But really are we much better now? In theory we are free to do it, but in practice we need permission from our planning overlords if we want our own 'Smithville'.
hey Brendon,
I think he was referring to the Papakainga legal structure which allows Maori families to amalgamate their small blocks of land into one and build multiple dwelling. Many councils in New Zealand have included provisions in their bylaws. I really doubt that non Maori would have recourse to the provisions of the Papakainga housing scheme.
Speaking from the perspective of someone with Maori heritage myself, I have to concede that having a separate property ownership regime for Maori is socially divisive.
I concede that Maori have suffered much from the former regime of institutional racism due to our colonial heritage and continues to suffer systematic racism in daily life, but I think affirmative action, which the provision of "racially" exclusive legislation represents is counterproductive and even damaging. To me giving special status to one social group smacks of guilt ridden political correctness and even patronizing. Maori have to receive special assistance from local government because without it they'd not be able to provide shelter from themselves.
Its got to the point where the government has now granted access to credit exclusively to Maori who wish to construct housing for their families. Is that fair on Pakeha families such as who you're talking about. I don't! I also think it creates grounds for social division, because Pakeha would have legitimate grounds for being aggrieved for government preference based on "racial" grounds.
"Mr Heatley said with the Crown stepping in as guarantor for qualifying home loans the problem of Maori not being able to provide multiple-owned (papakainga) land as collateral to the bank had been overcome.
"It is difficult for Maori to own a home on multiple-owned Maori land," Mr Heatley said.
"The special nature of Maori land means it cannot be sold, which means banks are unable to meet their standard requirements for mortgage security.
"National campaigned on exploring ways to give banks more confidence to back papakainga housing.
"I want to thank the Maori Party for their support in the development and launch of this important initiative."
Today's partnership provides a home ownership opportunity for Maori to build, purchase or relocate a house on multiple-owned Maori land.
Kiwibank is the sole lender for the product and will approve and provide home loans, which will be insured by Housing New Zealand.
With a Kāinga Whenua loan, Kiwibank can lend 100 per cent of house building costs or the purchase price of the house, up to $200,000, as long as the borrower has a right to occupy the land, a valuation from a registered valuer and a satisfactory building contract. No deposit is required for a loan below $200,000.
http://www.beehive.govt.nz/release/unlocking-tribal-land-housing
http://www.beehive.govt.nz/release/unlocking-tribal-land-housing
Perhaps racism wouldn't be so pervasive in New Zealand if Pakeha weren't constantly confronted with the bad treatment of Maori in the distant past, which today's Pakeha weren't party to and due to the preferential treatment because the Pakeha liberal Establishment have a misplaced guilt complex. After all it wasn't just the Maori who got screwed over by the depredations of the Anglo Saxon elites, but so were the Scots, the Irish, and the English workers and peasantry too. Many of our forebears fled to these Isles, in hopes of making a better life for themselves and their families.
Sorry for the digression, but "race" relations have been a big issue for me today, sparked off by reading about the racist cartoon in the Malborough Express recently.
btw, there's another regime allowing joint-ownership of land and the clustering of multiple houses which is provided by councils. Its called "Rural Farm Parks" and I believe its a promising development for New Zealand. Perhaps it may suit the family in question.
"Subdivision rules to encourage clustering of residential allotments within a
countryside environment are being developed in a few plans. Kapiti Coast Operative District Plan provides for clustering as a discretionary activity for up to 12 ‘rural hamlet’ lots as clusters within a larger balance property. The Proposed Whangarei District Plan enables ‘close subdivision’ in clusters of at least five residential allotments as a controlled activity within its countryside environments. Each plan includes lists of specific standards to define the cluster, the proximity of the residential allotments, the nature of the enclosing larger allotment, and distances from other clusters or other development." http://www.mfe.govt.nz/publications/rma/development-impact-on-rural-values-jul00.pdfIt is believed in my family we were French Hugenouts who suffered from religious persecution and forced to leave France. Starting a migrant story from Germany to London to Scotland and eventually to NZ over the last three centuries.
This was where we were possibly from.
I doubt my family will ever have a succesful land claim against France though...
Yes I'm sure many people have got family stories of displacement and loss of land, but I don't think it'll do anyone good to bring up the Treaty of Waitangi here, lol.
I definitely think it worthwhile looking into the "Rural Farm Park" regime for joint land ownership, though. I don't know how many Council's in New Zealand have a provision of it in their bylaws, but it wouldn't hurth to investigate. Good luck.
Interesting post Anarkist and I appreciate you sentiments on this issue. There are two issues I see that almost supersede the conventional arguments on cultural issues. What worries me is that the processes invovled in the economic suppression of Maori are still in place, leading the charge is the failure of the justice system to deliver for Maori. I don't know if you have caught my posts on this issue before? The courts finally took a step in the right direction but the resultant Seabed and Foreshore Act undermined the Court, and thus Maori. The Waitangi Tribunal is just window dressing until access to justice, my understanding of what Maori really signed up for, is delivered. However I don't see that happening.
It is clear that finance is a parasite on society so in the long run I think it is a blessing in disguise that it is difficult to lend against Maori land.
Scarfie, I apologise for originally missing your comment.
I think you make pertinent points and the discussion about the issue is very timely.
My concern is that Maori economic development and the Treaty compensation process has been hijacked by a self-interested elite concern only with their own self-aggrandizement.and the pursuit of accumulation of "capital" for the sake of their own prestige and status rather than to serve the ends of social justice and the common good.
Today its not only the Maori minority who are being economically suppressed but also poor Pakeha, small business owners, and even the lower middle class, in favour of large scale economic units like our SOEs, council development corporations, multinational corporations, and even Tribal Trusts.
Great examples – you are so close to seeing how it is, maybe you cannot see the forest for the trees. Spot on for rural land at $50,000 per ha. At say 11 sections per ha equals $4,545 per section raw land cost.
So the question is ‘how does it go from that raw land cost to $160,000 per developed section? First reason is you are not allowed to buy rural land and develop it at the rate of demand into a finished section (yet) without a plan change etc. This costs a lot of unnecessary time and money to do, without any guarantee of success which adds a high degree of risk. This inflates costs hugely.
So what speculators/land bankers do is ‘park’ the rural land and wait for demand to build up to such an extent that council rezones the land. This is what the vendor with the 5 ha block might be doing. With the rezoning he can then get consent, still with more cost, but greater certainty. Or he could not genuinely be interested in selling (might be happy farming), unless of course he was offered a price he could not refuse.
These two reasons alone (there are others) are why MUL style releases of land does not make land more affordable, as most of the land that is released will not be developed by the owners to meet the current rate of demand, remembering the demand is for more affordable sections now, not just for sections per se.
With all respect to Kumbel, of course the council costs are, from their perspective, correct, but they are coming from the wrong perspective. I have developed both in NZ and Texas and the Texas land development model is light years ahead of ours.
I have recently completed an analysis on a piece of NZ land and compared the difference in costs between developing the NZ way or the Texas way. Using the same example as you did with raw land at $50,000 ha, the Texas model allowed the sections to be sold at between $55,000 and $98,000 per developed section (depending on how many of the Texas variables would be used in NZ, eg infrastructure bond financing). The sale price needed if done the present NZ way would be $175,000 per section.
The difference being extra cost of non-value added zoned land, council costs that the developer can do more efficiently, and of course the multiplier costs of any percentage based cost like GST, sales commission, developer margin, holding costs etc.
Of course, as Kumbel would be correct in pointing out, you cannot do a Texas type development in NZ. And that is the whole point, legally in theory you can, but whether or not it can be done is based on the human want or will to do it or not. It is not some law of the universe that is stopping us, but a man made, selfish, vested interest, ignorance is financial bliss (take your pick), type law.
In part the changes to the LGA and RMA give us the opportunity to move more to a Texas type model. But they then go an introduce the Auckland housing accord, which counters all logic to making housing affordable.
This mix and matching of two systems is like trying to leap a chasm in two leaps, you either make it in one leap or you are in for a hard landing.
What is most likely to happen with a large increase of overpriced sections to the market is that many developers will go bust as building what the market wants at the rate of demand at the right price is very hit and miss, unless of course we can artificially create extra demand via immigration. But unless I have missed the point, this is about proving TRULY affordable housing for New Zealanders.
Conversely they will try to convince all those desperate enough to buy, that shoe box houses on the periphery is the new New Zealand dream a la Hobsonville. Note that the Govt. is getting approx. $1,400,000 per ha raw land cost for this land.
I hope this is providing some clarity.
Fantastic - at last
What we have been missing for so long here on interest.co.nz is a fair-dinkum developer to pop his hand up and tell us what the costs of development are - and now - here you are
You say
I have developed both in NZ and Texas.
I have recently completed an analysis on a piece of NZ land and compared the difference in costs between developing the NZ way or the Texas way.
Can you share with us a detailed costing of land subdivision in a tabular format - so we can all understand it - how we get from $4575 to $160000. Don't worry about the Texas thing just yet. Get into that later.
Hi Iconoclast - Yes, I can do that for those genuinely interested but not for handing it out generally as there are some herein that have enough trouble understanding the written word eg what affordable really means, let alone some numbers.
Will need a little bit of time to put it into a more noted format to understand at a glance as I have other priorities over the next few weeks. I’ll let you know when it is ready.
Huey. Such a bombastic extravaganza of hyperbole.
Be extremely careful too, to work from the Top Down from final market sale price.
It is a complete waste of time to work from Bottom Up.
The raw land is simply the "residual value".
Do I have to wet nurse all you blind dullards?
It is very important you all read what China-Bob has to say, bureaucratically bludgeoned, the whole circus, understandably corrupted, True Market Pricing, go to North America, Be extremely careful, complete waste of time
Dont need you to "tell" us what is a waste of time and what isnt a waste of time.
This was a discussion about the COSTS of developing land.
The purpose of my request is to understand EXACTLY "where" the costs are arising. For too long, too many have propagated the the view such that it has been common-currency around here that the problem is the "land-bankers" who are the predators, that they are making a fortune. It now transpires they aren't. We have got that one nailed. Now for the rest.
I for one , most strenuously disagree with you ... Hugh isn't repetitive , and he is a legend in the battle for " affordable " housing ...
... he's proactive in trying to bash some sense into our local busybody bureucrats .....
Repetitive ? ... Pish !!! ... he's no more repetitive than I am , no more repetitive at all , nada ...
Hi Iconoclast – As I mentioned I am happy to get figures to you on development costs, but obviously something has been lost in translation, Hugh is right, the land only has a residual value.
This may sound counter intuitive considering Hugh, I, and others also mention that if you get the land price wrong, then everything is wrong, but by treating the land as a residual value, then this will tell you what the real price of the land is worth.
And that is why the mechanisms that allow land to be banked and speculated on are the biggest problem as it not only effects the price of land but also why councils charge the development levies they do etc. It’s all part of the same methodology and ideology.
By using the market price as your ‘top’ (this also has limitations which I will cover below) and working backwards deducting all the other ‘fair’ costs, whatever is left over is what you have left to buy the land. You then put this figure in as a cost (and it should be the figure you purchased the land for) into your development budget. If the land price you purchased the land for is higher than the residual land value, then you have a problem that can only be solved by 1) reducing your other costs ie building a smaller cheaper house, or/and 2) raising the price.
The problem of using the ‘market price’ as your top is that unfortunately the market price for housing is very elastic in that as a roof over your head is a necessity, then people can be forced to pay (buying or renting) more by 1) having to work longer hours, and/or partners and children working to provide the extra housing income, and/or 2) reducing expenditure on other costs, eg health and education. By saying ‘but that must be the market price because that is what they agreed to buy/rent it for,’ is like someone holding a gun against your head and say ‘they gave me the money of their own free will.’
That is why you need other measures like the medium income, and mortgage multiple to get another waypoint to measure from. And if you do that, you will find that the rural unrestricted land price is about where the residual land value ‘should’ be.
This a quick summary and there is a lot of evidence behind this, so for those that have gotten sick of Hugh’s name in front of what he writes, then remove it, but whatever you do read them.
You may not like his delivery, but do not let that stop you from understanding the message.
And as I said in my earlier post about subdivision numbers, the numbers won’t mean anything unless you first understand the words.
Dale Smith: Land Development Costs
Simple request. I was hoping you would be able to shed some light on the costs of developing a subdvision. I dont see what "affordability" has to do with it. I'm sure some subdivisions will be more expensive than others. I have assumed the raw-land owner and the developer are two different entities ie the "developer" buys the raw-land off the original raw-land owner, develops the subdivision, then markets the sections
Looking for a simple table along these lines
Raw-Land Cost
RMA costs
Council Consents
Developer Contributions
Roading
Underground Power
Water
Sewerage
Developers Profit
Sell Prices per section
- Normalised on a per ha basis, or
- Done as a percentage, or
- Normalised to $100
Working backwards. The Raw-Land cost is the "residual". That is dis-ingenuous. Fletcher Building purchased The Manukau Golf Course 1 year ago. They're about to begin subdividing. They know up-front beforehand, the minute they bought the golf-links what the land cost was.
Yes I will get you the subdivision cost breakdown in due course.
Re Fletchers buying the land, they would have done a hypothetical subdivision budget (which is a known valuation method) which as I mentioned in my last post tells you, based on what the market price (top down) will be for your planned development, what you have left over is the top price you can afford to buy the raw land for, not that you do as you try to negotiate a better price.
This is known as the residual value. Otherwise you would just buy the land at what the vendor wanted, add the other costs, put on your margin, and this would be the market price that the buyer would be expected to pay. Sadly enough, this has been happening lately to some degree, but buyers are tapped out.
That is why I think the SuperCity and the Regional Councils should be allowed to tax PAYE to fund transport links and encourage more industry.
New Zealand has two problems with transport links -they are either cheap and long, following the terrain rather than a more direct straighter route. Note this is why NZ has smaller gauge railways because they can have tighter corners. Or we have roads/rail that is operating above its design capacity i.e. they are congested. The solution in both cases is more investment.
The Councils could in exchange for this extra power be made to agree that they will conduct their planning in such a way that housing becomes affordable -as Hugh Demographia surveys define it. This could be assessed regularly and if housing affordability is not heading towards affordable ratios the Council could lose their planning powers, similiar to how CCC lost building consent accreditation.
PAYE is already the highest taxed segment I believe, taxing it higher is a bit like adding insult to injury....
Pricing v council powers, this isnt a council issue....its what private ppl choose to do, ie speculate in housing. When we see a huge collapse, should teh council stop all building? That makes no sense if we really need 10000 moree homes per year the state of the economy shouldnt matter much....
In terms of moving / encouraging industry many ppl simply want to live in the CBD or fairly close by, I dont see how you encourage this myself...without getting into tax relief etc....
regards
PAYE tax if it was earmarked just for transport could be just 1-2c in the $ to generate significant funds for Councils. People should see it as not your typical tax that transfers there $ to someone else, but as essential public investment needed to develope and maintain infrastructure for the area they live in.
If you read some history you would know that one of the triggers for a regions growth in the US was when they gained Statehood, basically when they got the right to tax and develope their own infrastructure. I know you only see growth as energy related but in reality there is other factors too.
An alternative new tax source would be petrol tax. But if you think about that, it actually discourages the Council providing public transport because the more people who use public transport the less revenue the Council receives.
The benefit of PAYE tax is that Councils would have an incentive to attract workers to the region. One way to do that is by ensuring affordable housing. Another way would be to ensure the marketplace provides industrial/retail/office space at affordable prices with good connections.
What Perth has done is build a new 'cities' north of Perth connected by motorway with a commuter train link.
Councils have two options to provide affordable housing. They could possibly in partnership with central government compulsory acquire land at rural prices, rezone it residential, develope it and sell it directly to the end homeowner. Charging the end buyer just the rural purchase price and development costs. They did this in Western Christchurch post WW2. Alternatively it could go down the easing of planning rules that Hugh, Phil etc have repeatedly explained to you and have proven to work in some North American markets.
But this explanation you have had before. Arguing with you is like being trapped in Ground Hog day. We keep trying explaining the same thing from different angles. You seem to get it sometimes. But the next day it is back to square one.
PAYE is the heaviest hit already, plus they have rates already.
Energy is the "buck stops here" what you are talking about simply measn you dont get growth is finsihed with expensive energy...
Plus lets look at how bad councils are in "picking winners"....suck.
Workers will pay more tax but will want to go there? that makes a lot of sense, yeah sure....tui anyone?
regards
#1 Yes, there are trapdoors everywhere.
Including in the silicon. ZTE or Huawei routers in your network??? And how would you know 'xactly whose chips are on all them boards? And where the chip fabs are located? And who specifies the etchings...you gets da picture (pun...).
Remind me ter tell y'all about the 70's era Harris mainframe which on a hastily scheduled manual reboot, came up asking for DoD authentication.....
This stuff goes right back to the birth of the Interwebs, ex DARPA. And then remind yerselves what the D stands for.
Oh, and BH, cracking AEP piece of ultrabear Euro-ragging over at Torygraph...
To get at that silicon of course you need some software...or a route to it, huawei == cisco no difference to us both sides are not our (NZ) side.
If its in your network, well it has to get out....and that means packets....which means seen and blocked and alerted on.
As was said in that piece NSA works at either end on the weak security of the computer and works with vendors...which has to say Microsoft needs some hard Qs asked of it.
Rock on open source software....no hidden code...
regards
US and British intelligence agencies have successfully cracked much of the online encryption relied upon by hundreds of millions of people to protect the privacy of their personal data, online transactions and emails, according to top-secret documents revealed by former contractor Edward Snowden.
.........................
Good nothing to hide in my bank account!
That Ed Snowden...he's a scamp isn't he.....but is he a traitor...?
A perplexing topic, very divided opinions in the States.....perhaps he should have sat down with Ban Ki moon about the whole lil affair....you know as a kind of International Ombudsman.....
And that about sums up the U.N. capability.
I wonder how many of our beloved MPs send Govn business that would be of value for the US to know as email etc in open text. What has Ed Snowden done exactly? he's raised ppls awareness that a foreign power(s) has the ability to compromise NZ from top to bottom.
That isnt the action of a traitor its the action of a patriot.
regards
A traitor? nooooo ..
he's the necessary needed bad-guy .. manning had reached his use-by-date
The hoi-poloi in Amereeka "need" to believe bad guys really do exist. Gets their attention. Makes their days for them. Kenneth Lay? good guy. Goldman Sachs? good guys. Yeppy-doo. As that guy, the el-presidente of the American Rifle Association telt-them-all .. the only thing that can beat a bad-guy with a gun is a good-guy with a gun .. but ssshhhhh .. don't tell him a good-guy with a pea-shooter won't beat a bad-guy with an AK-47 or a Kalashnikov
Can't wait any longer for Chrisovs friday joke so here's one. Apologies to all who know it.
A guy gets the bad news he is dying so calls his three friends together and say, "All my life I've hated the power of money so I've decided to bury it all with me. I want each of you to take a third of my life savings here and throw it in the grave with me after I'm gone."
In due course the sad day arrives and each one of them throws a bundle into the grave just before they throw the soil in.
As they stand together and watch the grave filling up the first friend says, "I'm only this upset because what you don't know is - I didn't have the guts to throw it all in. I kept half and made the rest up with old newspaper."
The second friend says, "Well mate at least you're more honest than me because all of mine was newspaper!"
The third friend says, "Geez, I'm the only honest one amongst us, I put in a cheque for the full amount."
Have a good weekend everyone.
Two young fellers are out shooting , deep in the Westland forest , when one slips down a cliff and falls heavily onto rocks below ....
.... his mate heads down to help ... and also uses his cell phone to call emergency services ...
" Me buddy's dead , I'm sure he is , he's not moving .... bashed his head on some rocks , see ! "
.... the emergency services lady says " calm down sir , just relax ... now go and make sure for me that he is dead " ....
..... there's silence for a few seconds , then a rifle shot cracks out .....
" Yes ma'am , he's dead now alright ! "
Ronald Coase
"During his lifetime, Coase, who was born in London’s Willesden neighborhood and educated in England before moving to America in 1951, was transformed into an icon of the political right. His famous “Coase theorem” was used to justify a hands-off approach to big business on the part of politicians, regulatory agencies, and judges, leaving pollution and other economic problems to the corrective powers of the free market. During the nineteen-seventies and nineteen-eighties, when the Chicago School of economics was sweeping everything before it in Washington and in the nation’s courts, Coase’s work proved immensely influential. In 1991, the Swedes awarded him a Nobel Prize in Economics, just one of many honors he received.
Which is all pretty ironic, or tragic, depending on how you look at things. As a conservatively inclined economist, Coase was instinctively skeptical of government regulations, but he was also an English empiricist who recognized that reality is complicated. He didn’t believe in laissez-faire, and he freely admitted that the Coase theorem didn’t apply to many cases of pollution and other instances of what economists refer to as “negative externalities,” especially those that affect large numbers of people.
It wasn't even their mouse......
The Weekend Herald has learned details of the tests that led to Fonterra being warned of botulism. Scientists told of the tests were appalled they were the basis for a decision which threatened New Zealand's international reputation as a quality food exporter.
The tests will raise further questions about the role of the AgResearch laboratory, which the Herald confirmed last night was not accredited to carry them out.
AgResearch backed its status, saying its tests were never going to be able to tell Fonterra whether botulism was present.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=111…
One small dead mouse - that's what brought New Zealand's dairying giant Fonterra to its knees.
The rodent was one of five mice injected as part of the AgResearch tests that raised fears about botulism in milk powder.
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