It is becoming clearer by the day that the ever-reluctant National-led administration will have to do more on the demand side of housing

It is becoming clearer by the day that the ever-reluctant National-led administration will have to do more on the demand side of housing

By David Hargreaves

Supply, supply, supply.

It's been the never ending mantra of this National Government in response to, firstly the super-heated Auckland housing market, and more latterly, to the spread of this heat outward to other regions.

The focus on supply has been natural enough for a National Government because it fits the philosophy. Let the 'market' ramp up the supply of houses and leave 'the market' to sort itself out in terms of the demand side.

Trouble is the supply/demand thing has been out of whack for a long time now, most particularly in Auckland. And despite this Government's efforts to ramp up supply, particularly in Auckland, with a whirl of legislation and much huffing and puffing from Building and Housing Minister Nick Smith, the construction industry has proven that you can't just switch it on like a light bulb.

That's not to say there hasn't been an upsurge in construction, because there has. But it hasn't been enough and it has fallen behind the Government's expectations.

I include here two graphs. The first is from last year's Government-promoted National Construction Pipeline Report and the second is from this year's report.

As I read it, the 2015 report was suggesting somewhere north of 13,000 consents for Auckland this year.

The total actually consented in calendar year 2015 was 9251, so, that would have been a big rise.

The latest report was released in late July this year and showed an updated series of estimates, below.

I should stress that, oddly, the text in these reports doesn't explicitly give the numbers that are captured in the graphs, so, you kind of need to work it out for yourself. Based on my reading of that graph just above, the estimates are for around 11,800 consents for Auckland this year.

Building and Housing Minister Smith had this to say in releasing the latest report: "The growth in residential activity in Auckland is particularly encouraging as it forecasts that next year more homes will be built in Auckland than ever before. Residential construction has been growing at more than 20% a year in Auckland for the past five years and is projected to reach an all-time high of 13,332 homes in 2017, and to stay at those record levels until 2022. This equates to 34,500 homes in Auckland being built during this term of Parliament and another 39,831 in the next term. The scale of this growth is unprecedented and equates to Auckland growing by the equivalent of Whangarei every three years."

Great stuff.

But how's he doing?

In the first eight months of this calendar year - up to the end of August - there were 6490 consents issued for new dwelling units in the Auckland region.

This compares with a total at the same date a year ago of 5890.

So, consents, which have been very up and down month-by-month this year so far, are overall running 10.2% ahead of where they were a year ago.

As previously stated, the total of consents for the whole of last year in the Auckland region was 9251.

If you apply a continuation of the average year-on-year growth rate during the past eight months (IE 10.2%) this would give a grand year-end total of 10,200.

It's a lot compared with where Auckland has been (just 3500 consents as recently as 2011), but it's short, well short, of the Government-promoted estimates and is still short of the 11,000 to 12,000 a year Auckland was achieving in the 2002-2004 period when its population was around 17% less than it is now.

Immigration pressure

And bear in mind that something like 40,000 was added to the Auckland population over the past year just through immigration.

You can put whatever spin you want on it, but supply, supply, supply ain't going to work on its own.

So, to demand. That thing the Government has been desperate to steer clear of.

The Reserve Bank's been trying to do its bit and as of October 1 officially commenced LVRs 3, with the latest iteration of the LVR controls meaning that housing investors nationwide now need to find 40% deposits.

The banks started applying 'the spirit' of this new rule pretty much when it was announced on July 19. And there are signs of some lessening of pressure. The question will be whether these signs are a harbinger of a further fall off in pressure, or are just about as good as it gets for the impact of the new rules. I've already stuck my neck out and said what we are seeing now might prove to be close to the full impact.

Whatever the case, we do know that debt-to-income ratios (DTIs) will be upon us just as soon as the RBNZ can get its ducks in the row (and it is nothing if not super-careful in how it presents a case). Of course once the ducks have been lined up there's then the small matter of getting Finance Minister Bill English to sign off on the deal.

Getting on with it

I'm sure he won't waste any time approving it because come early next year (when one presumes the DTIs will be ready to go) the Government will be desperate for something else to put the brakes on housing.

Ultimately though, this Government is, for sure, going to be dragged kicking and screaming to the policy table and be forced to come up with some more measures of its own. Only it truly has the power to make a lasting difference.

There's no way the National Party is going to want to fight an election campaign on housing. It knows full well that the images of young New Zealanders locked out of home ownership are damaging.

So, it will front foot this. I would expect the Government will come out all guns blazing early in the New Year and have measures in place for the Budget - just in time to take the heat out of things, get people in a good mood and deprive Labour of its main source of ammunition.

But what will they do? Ah, interesting.

I note that chief executives responding to the New Zealand Herald's latest 'mood of the boardroom' survey were not short of ideas. I further note that nearly two thirds of respondents suggested a ban on foreign investors buying existing houses.

But I tell you what people, under the trade agreements we have signed, it just isn't going to happen. It CAN'T happen.

Catching the wind

One wonders if Auckland mayor presumptive Phil Goff, who has been a politician roughly forever and didn't get where he is today without knowing which way the wind is blowing, has picked up early that the Government is looking at Vancouver-style taxes on foreign buyers. By now suggesting such a move himself, he can look well and truly ahead of the game when and if the Government does move in that direction.

Apparently such a tax would pass the smell test in terms of our free trade arrangements, so, would be a starter.

It looks like a good idea to me. Even better would be that if such a tax were to be collected, the revenue from it be specifically directed toward affordable housing. That would be a great idea, though I wouldn't hold my breath waiting for that to happen given how Governments have a long and ignoble record of requisitioning all tax for 'general purposes'.

So, it could be that such a tax might be the front line in the Government's necessary response next year.

Better late than never? Well, maybe.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

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15
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Yip National MP's are getting a gob full at the moment over the housing issues facing this great country of ours. It will lose them the election if they don't get a handle on it. Of course there are investors and speculators who think they will do nothing as the people who vote National generally own property. The problem with that argument is that the people who own houses but fear for their children's and grandchildren's futures housing wise are the ones who will be giving their local MP's grief over this matter while the people who don't give a tuppence for those who miss out surely by timing of birth cannot say too much as they would only be considered greedy by those they convey their opinion to. There is nothing more unpredictable than an MP who fears for his job. Party leaders have lost their jobs and parties have become the opposition party as they did not listen to the ordinary people in the centre who feel their government is not listening to them.

22
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Absolutely spot on Dave. The Nats will come up with another smoke and mirrors token measure.

Just to recap some of the spin so far:
- In 2007/8, "housing crisis" needs to be fixed
- It's easy to find a house in Auckland under $xxx
- Joker John's Capital gains tax with massive loop hole
- Nick Smith's special housing areas...James Law, principal agent at James Law Realty, said more than 100 people, all ethnic Chinese, registered interest with the agency to purchase sections in a Hobsonville subdivision.
- Labour did it
- Subsidies which actually push the prices up. Putting out the fire with gasoline.
- Only 3% buyers are foreign (* for accounting purposes)
- Even more subsidies
- It's easy to find a house appartment in Auckland under $xxx
- Pay people to move around the country
- Labour did it
- Kiwis are lazy for not wanting to compete with immigrants who'll work for next to nothing.

17
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Ha. It's certainly been something of a farce.

Who to blame?
1 Labour
2 The RMA
3 Silly Auckland Councils
4 Even sillier Auckland Very Important Pompous Super City Council (who would have thought that combining a bunch of buraeucratic institutions into a giant one would make it even less responsive?)
5 MMP as it ensures the RMA is unchangeable
6 Speculators (always safe to blame speculators, just as it is always a good idea to shoot the messenger).
7 Furriners? No, we need their munny.
8 Foreign students? They are not buying houses, honest.
9 The banks? What, those friendly Australians?
10 First home buyers who want everything done for them. Like a house that isn't mouldy, damp and cold. Anyway, they don't earn enough to pay Hong Kong, I mean Auckland, prices.
11 Cats killing native birds
12 Builders not training apprentices
13 The intoxicated and dope smoking yoof of tooday who don't show up for work and if they do they fail their drug tests. Apparently drug tests are now needed because people have been unemployed for so long they have discovered that a little ganga helps the time pass more pleasantly sitting in the sun.
14 First home buyers who have just bought a hovel and would be upset if house prices went down
15 Kiwis borrowing too much when interest rates are low instead of paying off debt
16 Cows producing methane and causing global warming.
17 Cows peeing in rivers
18 Cows standing in lakes
19 Fossil fuels
20 Cars
21 People wanting to own a house. That's it. They should jolly well know their place and rent.

Who's to blame, simple, its the non voter who is directly affected by government housing and immigration policy but refuses to vote because "one vote ain't going to affect things"
To change things we need to get out the vote.

No, not fair Im afraid. Its not the non voter at all. It the dumbass myopic lot who continually vote for the either of the two major dumb or dumber parties. Then followed by the plonkers who vote for the likes of Dunne or the separatist maori party who have sold out to National.

Many of the 'non voters' out there don't vote for many reasons. It can be reasons such as a feeling of longterm dis-infranchisement, for example, people who don't have children, things like WFF is discriminatory in this regard. It can be simple political dis-illusionment which is hard not to dismiss as legitimate going on history of the BS our so-called leaders have burdened our eyes & ears with over the years!

Don't blame the non voter. Everything WRONG with government is due to the voters who really only vote for selfish reasons. No one seems to look at the big picture.

The non voters fault? Thats a new one.

Maybe in your world they all should of voted Labour, who I am pretty sure wouldn't have done anything either. They can barely lead their own party let alone the whole country.

Maybe they should they have voted for the Greens, who would have fixed one problem, but sent us back to the dark ages in the process.

Maybe NZ First, Immigration would have stopped immediately, but do you really trust Winston? pretty sure he will create more problems that he will solve.

United Future? ACT? Maori Party? You think we would have a better NZ under them?

Oh wait, the future was in the Internet Party, they would have solved everything. If Hone and Kim can't do it then who can?

What about conservatives? Colin Craig has shown he is great in a Crisis.

The problem is not with the non voters, the problem is with the available choices. Voting for Biege, Ivory, white, cream, or off-white will not solve a problem when what you really need is Black.

As far as I know home ownership is still above 50%. You're saying as long as that exists it's perfectly moral for a majority to transfer wealth into their pockets from a large minority. By the time the boomers die off the place will practically be Chinese like Vancouver.

I suspect that another part of the problem is that the housing market is so defunct because of the many market imbalances, artificial constraints and abnormal stimuli; that the price points have moved well beyond the resources of those who need houses. So while we have screaming need, few can afford the new houses that are required to solve the problem. Still the governments continues to pump in ever increasing demand through new immigrants and foreign investors (largely in the guise of students and others on temporary visa). This cannot end well. I doubt that anybody is smart enough to tread the line between ever increasing prices and crashing the market by trying to address the causes. It is going to be an interesting year leading up to the election.

10
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Increasing supply actually increases the house prices in Auckland, as Auckland is like a true astrophysical black hole, the bigger it gets the more people it attracts, increasing demand further..
Consider: 1975, house price 50,000; 500,000 Aucklanders
Now price =1,000,000; 1,500,000Aucklanders. despite/because of a massive increase in supply.
So in real life , prices are controlled by demand; looking the the long-term trend, adding 40,000 houses will actually be associated with a long term price increase(not to mention rates bills for infrastructure costs, and pressure on the environment and quality of life).
I have not heard one politician give an upper limit for the population of Auckland, or NZ for that matter.No guts.
Incidentally NZ is not underpopulated, it is just that the rest of the world is grossly overpopulated(at massive environmental cost).

11
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"So, it will front foot this"
This comment is the only thing that I do not like about this article.
Its too late for National to front foot it!
Front footing it would have been to front foot it when they got into power all those years ago.
There may be a better phrase, something like "National will cynically bring in some other mechanism just before the election in order to be able to say that they are doing things (along with the previous rather ineffective ones)".

11
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Yes its sad but true, This fundamental issue (NZ population) will become a political plaything.
In my mind we need a 20% tax, on all residential property not wholly owned by a NZ citizen. And shave immigration to about 20,000 pa. Then we can look at rasing DTI levels for those who are not FHB...

16
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It's demand - it's always been the demand

I can now say "I told you so" - nobody listened - I was the lone voice

I been telling you so for 5 years - nobody listened

The supply-siders shouted me down - so I gave up

It's on the record, right here on interest.co.nz

That's because you are wrong. It's supply. The whole issue is supply can't respond because of the RMA (among other minor issues). Once supply can't respond then demand is just a matter of timing.

If supply could genuinely respond there wouldn't be an issue. Scrap the RMA and the problem will go away. If you want the RMA then this is the price you pay.

David Parker makes a coherent case that NZ's unresponsive housing supply could be fixed by a simple change in the RMA -a national policy statement that eliminates UGBs and internalises the infrastructure costs of development.

http://www.inthehouse.co.nz/video/45201
http://www.inthehouse.co.nz/video/45207

The RMA does not need to be scraped -reforming it would massively improve our built environment. The Greens and NZ 1st both support this proposal so there is political support for modifying the RMA in a way to improve supply responsiveness.

"a simple change in the RMA"

I thought such a thing was verboten; a sacrilege; very, very, very, very definitely not on. National tried bribing Northland with bridges, of all things, to no avail, in order to change the RMA. Am I missing something?

10
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I think the bit you are missing is that National is 'all talk no action' when in comes to finding solutions for the out of control housing market. They spent 8 years doing feck all about housing -from both the demand and supply side of the policy toolbox. They blamed everyone and everything else -including the RMA -because initially they liked their constituents benefiting from house price rises and now because they are too scared. There is support to fix housing affordability -at least in some policy areas -but National refuses to do anything. It all comes down to political will. Clearly John Key doesn't have it and for that reason he must go.

There was I thinking it was because they couldn't reform the RMA because of MMP. Silly me.

when you have 2 seats that will only get in because of the grace that national affords them, then it is not MMP because those members will do what they are told and vote according to party lines same as the national caucus

David Seymour from ACT handed his proxy vote to National and they voted against David Parker's RMA reform legislation. When he found out -he tried to blame Labour -Phil Twyford for not giving him enough notice. So the blame everyone else habit is spreading....

https://www.parliament.nz/en/watch-parliament/ondemand?itemId=177890

I guess I was following the line that MMP has been a big mistake. It looked like such a good thing at the time, but has resulted in stagnation. It has cemented the status quo in place. National are thus following the well trodden path on housing that Michael and Helen took.

The previous system looked worse as it allowed the elected government free reign to mess things up good and proper. However, when things fell apart we could elect the other lot who would then reverse the excesses of their predecessors and try out some barmy ideas of their own. Chaotic, yes, but change was allowed, even encouraged. Basically the system was more adaptive than it looked. The adaptive survive.

The facts don't quite fit that story Roger. There is a majority of political parties who support removing the UGB and internalising the cost of infrastructure development. The Greens (although they add the qualifications that intensification restrictions also need to be removed and the costs of climate change needs to be accounted for), ACT, NZ First, Maori Party and the Labour Party.

National although initially supporting Labour's UGB proposal.
http://www.labour.org.nz/bill_english_and_nick_smith_on_different_pages

Have since voted against it in parliament and used David Seymour's proxy vote to also vote against it.

This seems more like the old two camp first past the post voting pattern than MMP Roger.

Correct.
The root issue is definitely supply.

Credit growth is a symptom of the issue and always will be as long as there is domestic demand, positive demand growth, and a restricted supply.

In and around chch there is plenty of land. Yet it get's hoarded and sliced into tiny 400sqm sections. Zoning isn't the only problem - there needs to be a cost to hoarding land. That could be an LVT or down-zoning of undeveloped land after a period of time.

Once you have control of the land, if that ever happens, then there is the building cartel. With the land hoarding still going on any savings here are mostly capitalised into the price of land.
On the building side we need to get rid of red tape. I recently got a build quote which included $7k of scaffolding- on a single story house! Knauf a huge materials company globally tried to enter the NZ market but were pushed out by the big boys here. Get rid of the BRANZ beaurocrats and allow materials in which meet international standards suitable for earthquakes.

Mate if there were no consent process, no rma - guess what - there are no builders to build any more than is being built. Not only that, we dont have enough concrete trucks/plants, quarries, hardware/timber outlets, prenail plants etc etc.... Theres your constraint.

This excess demand would translate to business growth/inflation until the equilibrium is reached.

When anybody in the world can buy property here it has to be demand. You could supply a thousand houses a week and the demand would never be satisfied. For New Zealand to get back on an even keel we have to limit house purchases to New Zealand citizens and residents, have a sensible income to loan ratio and abolish tax advantages that favour the investor.

You were not a lone voice

Well, there's two people who are wrong then..

You and who else?

Not me, buddy.
Your pocket Aces don't beat a full house

A couple of them on the table as well sure do

Well in the 5 years you have been telling us this, we "supply-siders" have noticed some things.

Brisbane's population has grown from 1.977 million in 2011 to approximately 2.46 million in 2016. We've also noticed they've constructed apartments about 4x faster than us. And we've noticed that their land supply cost is about 1/3 as much as Auckland's. And finally we've noticed that Brisbane is going to have a housing surplus in 2018.

Auckland population is growing relatively slow, our rate of housing supply amazingly slow, our cost of land is amazingly high. And we are staring down the barrel of housing shortage until the middle of the century.

http://australiapopulation2016.com/population-of-brisbane-in-2016.html

A satellite township of Brisbane -Springfield, I think has the sharpest price/amenity combination in the common market of Australasia. You can get a near new house for 400,000 aussie dollars. It is 30km from Brisbane CBD, which can be accessed in 30 minutes by either motorway or train. Nowhere in NZ can compete on this combination of price or amenity (the ability to access the benefits of a international city in a reasonable time frame). Once Australia gets over its current economic downturn -with fundamentals like this and what Unaha-closp reports about affordable apartment building it will gobble up our best and brightest....

Check these links out.
https://www.realestate.com.au/neighbourhoods/springfield%20lakes-4300-qld
https://en.wikipedia.org/wiki/Greater_Springfield,_Queensland

Sorry, that's rubbish compared with the great state of Texas:
https://www.trulia.com/for_sale/Gainesville,TX/CONDO_type/?cid=sem|google|tbw_nb_natdsa_x_pgtitle_nat!7530a71a|For%20Sale

Check that out and weep.

Brick ranch in a well established neighborhood. It features over 1,200 square feet of living space, hardwood floors, 3 bedrooms, 2 bathrooms, and an attached 2 car garage. Almost a quarter of an acre of land. Only 1 minute drive to State Road 82. $65,700
https://www.trulia.com/property/3244397247-1216-Magnolia-St-Gainesville-...

Or for the same as your Aussie bargain:
https://www.trulia.com/property/3208439409-220-County-Road-285-Gainesvil...

Yes I know Roger. On a world scale what is happening in Brisbane is not fantastic. If NZ learnt some lessons from places like Texas, or even Tokyo we could definitely compete against the likes of Brisbane. The point though is we share a common labour market with Australia. So if Aussie provides a better lifestyle due to more affordable housing then we could lose a lot of good people.....

It is extraordinary to me. I stayed in Gainesville, Texas a few years ago and I could not believe how cheap their houses are. A similar house in Nelson to the somewhat ratty $65,000 dollar one I chose at random would cost $350,000. Their wages are higher, their country is nuts, Texans are very friendly. Why, why, why?

I had mentioned it in my comment on interest.co.nz (in below article) on saturday as had heard from some reliable sources :

http://www.interest.co.nz/opinion/83857/bnzs-craig-ebert-says-very-low-i...

Seems they were correct.

12
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I agree its always been DEMAND Demand DEMAND
Investors 46% market
Foreign students and temp visa 29% (13,500 homes)

For all these years all we have heard is supply yet we will never make enough homes to catch up with the demand

Vancouver,hong kong, singapore all charge foreign buyers 15% to reduce demand as they realise how large of an impact these buyers are having.

In china and usa the number of new millionaires in next 4 years is expected to be 4 million or so. The world is full of cheap cash looking for a home.

As other countries charge vancouver taxes more will look for places that dont ie NZ

I just hope labour acts 1st to implemet as a policy. I would hate to see National dtay in power after all the damage they have done.

more will come here now, Sydney, USA, any where it is open to buy as Chinese authorities are placing limits and restrictions on property to try to cool their market and they have mega supply of credit to be spent

http://www.cnbc.com/2016/10/03/chinese-cities-curb-property-purchases-as...

13
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If they don't do something, they should be out on their backsides.
If they do do something, they should be out on their backsides for ignoring it too long and only doing something when it looked like it could tip them out. Nasty, cynical b*st%$ts

The government can't solve the problem.

Brisbane is building about 9,200 apartments per 1,000,000 people per year. Auckland is building about 2,200 apartments per 1,000,000 people per year. These are two cities in the same labour market, with high population growth and the same booming property market from swelling international investment.

The only difference is planning and land supply. Brisbane allowed for the City of Brisbane to grow like a normal city. Auckland restricted the City of Auckland and subsidises sprawl in a series of exurbs miles away from anywhere. Auckland has land prices 3x that of Brisbane and apartment construction rates 4x slower. Auckland imposed high land costs and slow growth resulted.

The only person who can solve the problem is Phil Goff and it is not by introducing a new tax.

14
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It always was demand. (and a bit of bubble behaviour) We can cut immigration drastically. High immigration has created problems but no benefits. We can decide that New Zealand property can only be purchased by citizens.

One simple question. How can any seller justify pricing a 308sq m site in Flat Bush at $720000+?

Therein lies the consequence of immigration and speculation.

Ahh, that awesome thing called an unconstrained market...?

Simple.

The next valley over from Flat Bush is the Clevedon Valley. An area of flat easily accessible, ready to develop land that consists of mostly dry stock paddocks. We are forbidden from building on the Clevedon Valley until 2041 at the earliest.

It is the consequence of immigration for sure.
As for speculation? you can only have speculation if there is demand which brings us back to excessive immigration creating the demand.

If it were all about "supply" what would stop investors (foreign or not) purchasing these new builds and sitting on them as per the 33,000 empty houses that already exist in auckland
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1165...

If an investor had $1million in equity, used 40% ($400k) as a deposit on a $1 million property in Auckland.
Covered the interest for 2 years $600k @4% = $48,000p.a or $460 per week. Covered the annual rates + insurance $10000??
Sold the property in 2 years with a 16%p.a return on investment (compounded) assuming current house price inflation.

$1,345,600 less $68,000 plus legal fees for buying and selling

A profit of approximately $270,000 (give or take) with an empty home for two years. Exempt from tax of course as the property was owned for 2 years.

Looks easy for somebody already in the game.

Why would such a person leave lying on the table, the additional income he could make by renting the property out? Rich people don't get to be and stay that way by passing up opportunities to make more money.

I agree. However, apparently 33000 home owners/investors can't be bothered with renters and therefore happy to take the capital gain.

good way to wash money without coming to the notice of authorities

This is due to the idiot Rodney Hide taking every holiday home from Orere Pt to Te Arai Pt - and making it party of "Auckland". Some of these places are several hours commute away and no normal person would call them the same city. But Rodney Hide.

Am I missing something? If I had $1m equity in my house, and drew $400k to cover the deposit. Would I still not then need to pay interest on the $400k, in addition to the remaining $600k. Assuming I am right (and please advise if I am not as this is something I have always been unclear on) your numbers need to be scaled up to $1m, not simply calculated off the $600k. This suggests that you will need circa $80k to cover the interest (if calculated at 4%), plus enough to cover rates, insurance etc. That requires significant (after tax) cash flow.

..youre onto it. He has borrowed $1mill, not $400k.

11
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Lots of bickering about supply / demand in this article.

The final word should be with our august PM who came out early in the month and said that restricting demand by putting a sales tax on foreigners would crash the market. (He didn't say a lot about why the nats have let it get to this stage though)

http://www.interest.co.nz/news/83557/pm-says-wary-policy-action-could-ca...

"Prime Minister John Key has warned against any strong Government policy moves to restrict or tax foreign buyers, saying he did not want to cause a catastrophic slump in the market."

Anyone who says its all about supply is simply spruiking their own book - its always been about demand.

Self-Imposed-Self-Fullfilling-Self-Explan-a-Tory explanation for that, it is self evident, he is selfish. He has more to lose than most. A bubble needs hot air, to support it.

That article needs referencing every few days on this site and a few others as well

Since JK has said "he did not want to cause a catastrophic slump in the market" would this be the same slump that would cause housing to become affordable? Ergo he has basically publically stated that he has no interest in affordable housing, what a PM!

Do not vote National, if you want a fair deal, fair trade, fair mortgage, fair pension plan, fair crack of the whip at the Fair Banks, fair distribution of labour, fair immigration for all levels of society, fair tax structure, fair capital gains tax structure, fair cost structure, fair ratings system, fairway to heaven in housing in Awkland, fair support of Savers, fair tax deduction of mortgages for all stupid citizens, with no leveraged accounting for profit scheme, against their double /tripple/quadruple,etc, etc...dipping houses...oh and farms and businesses and civic centres, Sky towers and Casinos, filming rights, filming wrongs, Insider Trading, Currency Manipulation rule bending and OCR manipulation and ratings squads.

Because you support them all, but it is not a level playing field. It is not in the National interest, what they have done, have achieved, have stated, have prevaricated against.

The bigger the deal, the bigger the divide, the wider the margins, the closer scrutiny, it all needs. Especially, when your money and a Bank is involved.

They can steal from right under your noses no sweat, no equity, no work, just coining it.

And we are just one of many, in a world wide scam the Middle, for diddlely squat Trumped up charges, Tax avoidance, debt defying campaigns.

This may help explain housing policy
http://imgbox.com/hPbuHrAE

DAVID H congratulations someone in MSM finally has the guts to call for a Vancouver Tax in NZ.
Great article as you focussed on the demand which is often missed.

I mentioned on the weekend that Labour and Greens should annouce a Vancouver Tax otherwise i do feel national will beat them to it and will win the election off the back of it. John key will want to win at any cost so i do believe he will make some dramatic policy.

Housing is the issue. 1m average.
500k increases in median house prices last 10 years however wages up 17k

Only thing you missed is that we need to classify foreign students and temp workers as foreign buyers as Australia and Canada do.

I also agree that taxation is allowed under FTA and people asking for a ban are wasting their time and energy.

The tax needs to be significant 15%

Well done going against the grain.

Article of the year !

Here is the problem
- In NZ 50,000 houses are sold a year so roughly 960 a week (Extremely small market)
- Foreign investors(Temp Visa & Students) buy 13,500 a year per the LINZ results. (Page 13 of their report)
This equates to 260 a week.

So of the 950 houses that are sold a week 260 are sold to foreign buyers. This excludes companies & trusts so the figures is probably considerably higher.

When Supply is tight (and it will be for years to come as we cant build fast enough) and supply is fairly inelastic as it is in NZ (see definition below) then focussing on supply and ignoring DEMAND as Key has done will never solve the problem in the short to medium term. This means that the problem has only become larger and larger with each year he has been in office and we get to the situation we have now.

To Summarise what is required:
Classify Foreign Students & Temp Visa workers correctly .... tick
Vancouver 15% Tax on existing home purchases ... tick
Introduce severe penalties for non compliance(200k fine and imprisonment) ....... tick
Ring fence funds for tackling housing affordability and infrastructure only ... tick
Tax empty homes ... tick
LTI rations 4.5 to one .... tick
Tax Investors who buy existing properties a Vancouver Tax also ... tick

The above will encourage new supply and reduce demand for existing properties. It will also reduce the expectations of future house price gains which is why lots of mum & dad investors are getting into BTL investing & flipping.

Lets make our houses our homes again... and not some commodity on the world market.

http://www.economicshelp.org/concepts/inelastic-supply/
Factors that make supply inelastic

Usually if the price increases, the firm would like to supply more. The good becomes more profitable. However, there may be several factors which make it difficult for the firm to supply more, therefore supply is price inelastic.
•Firm operating close to full capacity.
•Running out of raw materials.
•Short term. Supply will be more inelastic in the short-term. In the short-term capital is fixed. It takes time to invest and increase the size of a factory. However, in the long-term, farmers can cultivate more land or firms can increase the size of their factory and supply will become more responsive.
•Limited factors of production. Some firms may come across labour constraints, especially if the work requires highly skilled labour. For example, the supply of extra maths lessons may be limited by the ability to employ sufficiently skilled maths teachers.

JP, Channel your energy to buying some investment properties and you may make some money, thousands of words on this website ain't going to make you any wealthier...just sayin'

Haha Keywest you are right if cant beat them join them ....

Do think long term NZ will be a better place if they get a handle on this.
Anyone with kids will have to fit the bill for their deposits and that with retirement costs etc it will only get worse. Incomes arent rising and they wont unless we can move money to other areas than property.

I'd guess many FHB's get deposits or loans for deposits from parents to get on the property ladder...end of the day you cant take your money through the pearly gates so an advance on your children's inheritance is quite a common strategy..

Yeah that works at the moment however for this babyboom generation however I am not sure the next generation will have that ability.... plus as we are living longer then retirement is longer so this further complicates how much people need to set aside....

Interesting times ahead that is for sure.

Classify Foreign Students & Temp Visa workers correctly .... tick
- What will this actually do to slow demand? Nothing; thus it is inconsequential in this economic system.

Vancouver 15% Tax on existing home purchases ... tick
- Go to your 'economicshelp' website and read up on taxes. Yes, the burden on the tax will largely be on the buyer. Lagged effects will be felt by tenants. Subsequently, as the supply becomes more elastic, the burden will be on the seller. So, initially we might see a transitory effect of an arbitrary tax, but medium to long term this will be ineffectual.

Ring fence funds for tackling housing affordability and infrastructure only ... tick
What funds? We have no funds to do so. Without an increase in marginal tax rates, we have no way as a country or region to fund this.

Tax empty homes ... tick
A ridiculous notion. It would cost more to police than it would yield.

LTI rations 4.5 to one .... tick
Nope. That is not the answer. We don't need to further incentivise or force private domestic institutions into sub-optimal practices.

The above will NOT incentivise new supply significantly. It will change the demand dynamic, but not solve the fundamental issue long term.

I wrote in the NBR in April about the critical urgency in addressing the demand side through immigration / foreign investment policy, in addition to the supply side. I had been harranging some politicians on this for quite some time (2 years at least). We are pretty slow in this country, aren't we? Too much rugby killing brain cells?
You gotta laugh, because you'd otherwise cry...

Fritz, eveyone knows so does the government and the so called experts what you are saying but do they care. Go and meet any estate agent and they will confirm but who cares.

So vote sensibly and support #Jkexit.

Write to your MP'S. They all have email addresses

phil.goff@parliament.govt.nz
winston.peters@parliament.govt.nz
andrew.little@parliament.govt.nz
james.shaw@parliament.govt.nz
metiria.turei@parliament.govt.nz

Email them all calling on a Vancouver 15% tax. That's what the public can do. In the email state you would like to see policies that :

1. Ensure foreign Purchasers & Investors pay the Vancouver Tax when buying existing housing stock (new builds exempt)
2. Ensure we classify all foreign buyers correctly and therefore include
- Foreign Students
- Foreign Temp Workers
- Foreign Offshore buyers
- Companies/Trusts where a foreigner as per above has an interest.

This will bring us in-line with the global definition of what a foreign buyer is as used by Canada, Singapore & Australia.

This is what the concerned public can do.

WRITE THAT EMAIL DONT BE SHY.

AFTER ALL, THEY WORK FOR US AS WE PAY THEIR SALARIES.

Agree, but I am not 100% convinced about new builds either, I mean, what reason would a foreigner have to build one house? As a holiday home? Result, no functional change in supply. So why would a foreigner build several houses? To rent back to us, and there I have a problem, I do not think we need foreigners being landlords here, we have plenty already without them. I might grudgingly allow them to build houses to sell, but only grudgingly and maybe review that a few years down the track.

Good on you Joe Public.
I'm just too cynical to care anymore. After many years of lobbying, I've decided our masters just don't care, so I don't waste my precious time on this earth. It's easy to talk up supply side measures, like both the Nats and Labour do. It gives the impression they are doing something, but it's only partial and not enough to make a significant difference and to eat into their and their mate's housing nest eggs...I hope you and others have more luck than me.

Cheers Fritz I am also getting a little sick of this however David H's article today has given me some hope that MSM is starting to listen in regards to DEMAND being the issue and a Vancouver Tax being a sensible WIN/WIN policy that is allowed under FTA.

I am on my SECOND WARNING from the Editor after I mentioned John Key's nickname from his time at Merrill's the other day (as reported by Sydney Morning Herald) so you may not hear from me soon if I step out of line again.

It may be a blessing in disguise as it really does waste a lot of time.

I'm going to put two and two together here, compare this article to Big Daddy's comment on another one about %s of houses selling at auctions being down, and ask, is it all about to blow?

Why do we even want a fair trade agreement that gives away our sovereignty?
Not even counting the fair trade agreements, anyone, anywhere in the world can purchase up to 5ha of NZ land and or houses, no questions asked. Working class kiwis can't compete on NZ wages and are doomed to pay rent to foreign landlords. At least if you pay rent to a kiwi landlord the money stays in our economy..

What, so just mentioning the fact that his ML nickname was the Smiling Assassin, as openly reported in SMH, and numerous other media sources for at least the past 8 or 9 years, to the point it is common public knowledge, is a knuckle-rapping offence?

Well, isn't that interesting.

The number one issue that needs to be tackled is the MSM DEFINITION OF FOREIGN BUYER in NZ and solving this will be the catalyst for some prompt and effective demand side action that is currently missing.

If MSM were to classify foreign students and foreign temp visa workers as Foreign Buyers (as they do in Canada and Australia) then :
- The true foreign buyer % would make the headlines ie 30% versus 3% currently reported
- The public Outcry would convince John Key and the opposition to bring in a Vancouver Tax to tackle the demand.

This government is all for overseas buyer and specilators and do not want to act BUT only election may make them see some sense.

Vested Interest.
National Interest.
Lowered Interest.
Leveraged Interest.
Imported Inflated Self Interest.==========>
Sod the interests of Land Bankers, Bankers, scanks and scum landlords, Corporate Landlords...most of whom are politicians and their best mates, who bought em, with the mantra of Cheap Levereged Credit., compounded with Capital Gains.....well it ain't cheap for some...
We need a peaceful revolution to remove revolting people so that we can get back to basics and remove those vested interests from our lives. Once and for all.
I have been saying the same thing for years, never follow an Imported Banker, they will only bring you grief, in the end. Even with QE, NIRP....etc...the costs are way too high.
They do not call it Land Banking for nothing, nor a Tax Free Capital Gain...
They do not bail out and bail in Banks for ..........Nothing.
Someone always gets hurt in their, repeat THEIR..CAPITAL processes.
Con-joured out of nowhere,
Someone always pays in the end.
you..
QED.
And it is not the people who caused all the harm.,,but long term debt.
I try to keep my sentences short these days,
But for a Banker and a Politician, I would extend that to a Life Sentence.
In the National Interest...of course.

Have been reading all the comment and come to one conclusion that next election vote for anyone but national. They have been annoying or arrogant in so many issue besides housing. So definitely #JKEXIT

New Cabinet Has The Skill And Nous
Tuesday, 18 November 2008, 1:43 pm
Press Release: Property Council Of New Zealand

New Cabinet has the skill and nous needed to provide leadership and reform
Pulling New Zealand’s economy out of the recessionary ditch will be made easier thanks to the new Cabinet announced by Prime Minister Designate John Key, according to Property Council New Zealand.
Connal Townsend, chief executive of Property Council, said the new Cabinet was brimming with Ministers who understand the economic and infrastructure challenges that need to be addressed to return New Zealand to a period of sustained economic growth and rising living standards.
“Property Council has been impressed with the Government’s acknowledgement that New Zealand needs to change if we are to unshackle the economy. By giving the new Infrastructure portfolio to the Deputy Prime Minister and Minister of Finance, Bill English, the Prime Minister Designate has confirmed that developing infrastructure that enables an increase in economic productivity is a top priority.
“We are also pleased that reforming the Resource Management Act has been clearly signaled as a priority workstream, which is evidenced by giving the Environment portfolio to sixth-ranked Minister Nick Smith. The broad thrust of the National Party’s policy on resource management is sound and when enacted will enable New Zealanders to build and develop without the vexatious litigation that destroys affordability,” Connal Townsend said.
The inclusive nature of the new Ministry should also enable the Government to pass important new legislation in a timely manner, which will provide greater confidence to the commercial property industry.
“By having Act New Zealand, the Maori Party and United Future in the team, John Key has wisely expanded the Government to ensure that it is broad-based and stable. Property Council looks forward to working with all Ministers to progress changes that enable New Zealand to grow and prosper again.
“We are currently preparing briefing papers for a variety of Ministers, which informs the Government on key public policy issues of particular significance to the commercial property sector. Our first paper is being drafted for the new Minister of Local Government, Rodney Hide, which prosecutes the numerous failings of the local government sector as well as articulating a series of legislative changes that would once again make that sector operate for the betterment of ratepayers, as opposed to politicians,” Connal Townsend said.
End.

They have been half right?

Ill vote for the party that begin KiwiBrexit. That will fix everything!