BNZ's Tony Alexander challenges young people to drink as many lattes, hire as many feng shui consultants and subscribe to as many TV channels as the boomers did, if they want to buy a house

BNZ's Tony Alexander challenges young people to drink as many lattes, hire as many feng shui consultants and subscribe to as many TV channels as the boomers did, if they want to buy a house
Tony Alexander

Here is an excerpt from BNZ chief economist Tony Alexander’s latest Weekly Overview:

When something happens which people cannot understand they invariably blame someone or a group of people for the situation – illegal migrants in the United States undermining wages and decreasing blue collar job opportunities, Muslims in the UK destroying community fabrics, Chinese buying houses, Baby Boomers being greedy, witches casting spells, God being angry at the LGBTIQ community.

Most of the time the arguments are plain ridiculous, but they serve to reduce the stress of some people because failing to know why a thing is happening is stressful and our brains are hardwired to try and get stress levels down one way or the other – even if that means in extremis diving into alcohol, drugs, gambling or pornography.

I’ve yet to hear anyone blaming lust for the high levels of house prices in New Zealand. But the way some people have switched from blaming the Chinese to dumping on Baby Boomers as the cause says we may not be far off.

Sometimes house prices in a location will soar because of something very specific like an energy boom – think of Western Australia and North Dakota. Then they collapse when the boom ends – see Western Australia. But this is not the case for New Zealand. Instead we have some very long terms trends underway. And the thing about longterm trends is that they can happen so slowly people fail to recognise that they are happening.

Specifically what do we mean?

1. Not A Big Farm

First, a few decades back New Zealand was essentially just a big farm with lots of medium-sized towns highly dependent upon servicing the rural sector. There wasn’t a huge perceived difference between pursuing one’s career or business interests in Auckland versus New Plymouth or Ashburton. People tended to be quite happy being almost anywhere around New Zealand with location of choice influenced by family and cultural ties and historical business interests – even father/son footstep following.

Land was readily available in all parts of the country (still largely is outside Auckland and Central Otago Lakes), red tape to develop and build was minimal, and the hardest part was getting a mortgage rather than finding a home.

This wide distribution of people throughout the country was assisted by the manufacturing sector spreading regionally over the decades beyond the 1930s and the nature of that manufacturing. Basically it involved components being made locally or brought in at a leisurely pace, things assembled, and plenty of time spent all around shifting stuff from one stockpile to another. The concept of just-in-time production barely existed. Transport links did not need to be mega-efficient, and location next to such links mainly meant being near a railway siding.

But our world has changed. Farming is the main contributor to our exports, but only accounts now for some 6% of our economy. Note the figures for our dairy sector which has boomed over the past decade or so through conversions of land from alternative uses. But only 1.6% of our workforce works on farms and processing milk.

Farming is not a large generator of new jobs. Manufacturing is a shrinking sector here and in practically all Western countries. Since the late- 1970s manufacturing has shifted to a global supply chain basis with final products constructed from numerous inputs sourced from and processed in a variety of countries with ever changing cost dynamics. The transport infrastructure and transport costs and timeliness have become of huge importance. Just-in-time manufacturing reigns supreme and the ability to quickly retool in response to consumer and competitor changes is of high paramountcy.

Manufacturing has become a very very fast changing sector which is now becoming robotised. Closure of no longer efficient manufacturing businesses has decimated employment throughout the NZ regions for three decades now and as seen by the announcement of the planned closure of the Cadbury factory in Dunedin is still happening and affecting our regions.

And as any town which has experienced the closure of a manufacturer these past few decades knows, unless you have an employer of equal size ready to start up as soon as the old one closes, you lose people and capital to where staff perceive job opportunities to lie – the cities.

The global process of reduced relative size of farming sectors and shift of manufacturing to an ever changing global production base has hit global regional employment and boosted the cities – thus creating over at least a three decade period extra housing pressure in our cities.

For your guide, don’t read this as saying people should abandon the regions. In my talks I recommend anyone tired of their current job to move to the regions and set up a business servicing the growing number of tourists who are getting off the main routes and seeking experiences more real – hugging a sheep, feeding pretty ducks, kayaking in clean water.

2. The Technological Revolution

Second, we have entered the technological revolution. People undertake their work on computers, are ideas focussed, work collaboratively in ever-changing teams, and few people nowadays have relatively well defined career structures. Flexibility in one’s skills application, openness to continual learning have become of great importance to employers. Businesses compete to develop new goods and services, new marketing methods, and speed of change and recognition of the need to change rank very highly.

A generation has grown up being told that they will have seven careers (or something as equally glib). They assign low probability to only being in one role and even one firm for a short time. Therefore proximity to other employment opportunities is very important – and the best locations for maximising chances of acquiring a new position exist in the cities. It is costly and disruptive for one’s family to shift from one town to another following jobs.

The world is increasingly urbanising, existing cities are getting bigger, and if anything this process will accelerate rather than slow simply because broadband technology theoretically permits telecommuting. Few people seem to willingly choose that option. Tried it – went gaga.

3. Relative Return On and Cost of Property

Third, a substantial jump has occurred in the return which investment property can deliver – relative to simple alternatives like term deposits and bonds. Interest rates now average much less than during the 1980s, 1990s, and 2000s. The cost of borrowing to purchase a property has plummeted and because of this structural jump in demand for property prices have lifted. Those Baby Boomers people are dumping on paid mortgage rates in the late-1980s around 20%. This link will take you to the Auckland Council Chief Economists quarterly report which on page 3 has a good graph showing the impact of lower interest rates on housing affordability (between 2002 and 2016).

4. Retiree Loss Aversion

Fourth, a generation of people (Baby Boomers) is entering retirement having been bombarded by official campaigns for near three decades warning them of destitution in retirement and disappearing pensions if they did not save to provide for themselves. So they have built up savings with a jaundiced eye toward shares because of what they saw and experienced during the 1987 sharemarket crash, an aversion toward finance companies because of the money they lost to them a decade ago, and awareness of how house prices have increased since the 1970s.

They have been presented with data showing how shares have fared quite well for a long time now. But as we age we lose ability to recover from financial/wealth shocks and avoidance of wealth diminution in retirement becomes a matter of moment which personally in my discussions with young investment advisors I find they have little ability to understand.

Loss avoidance preference grows as you age and because houses are not repriced every day, because they have risen so much in price over time, and because the costs of property ownership seem always to get brushed over, many Baby Boomers naturally have a preference for property.

5. Rent Demand Forecast

To Be Strong Fifth, the property preference is enhanced because all investors hear in the media is that a whole generation of young people expect to rent for decades – guaranteeing occupancy and rental income. And meth contamination? That will always be assumed to happen to someone else. Further enhancement comes from the flows the Baby Boomers see into neighbourhoods they have observed for decades of unfamiliar faces. Migrants, more people seeking accommodation, strong population growth. Which gives us...

6. Population Growth

Sixth, accelerated NZ population growth. Because we are no longer just a big farm, because we have a stable democracy, and because working from New Zealand is no longer a barrier to keeping up to date with rapid technology developments, you and I are staying here. One million Kiwis offshore are increasingly returning. Foreigners want to be here.

As noted many times now, there has been a trend change in NZ net migration flows. We suffered a net loss averaging 17,000 per annum in the decade up to 1986. That switched to a net gain of 3,000 through to 1996, then 11,000 through to 2006, and now 22,000 through to 2016. There is no longer a brain drain. There is no longer talk of the last one out turning off the light.

Migrants go where migrants have gone and where they see job opportunities exist – the cities. You and I are staying in the cities. Kiwis returning here are invariably coming from large metropolises and they are a tad apprehensive about the pace of life (and their acquired spouse in particular is) so they hedge bets by going to the cities. And they keep an eye on the jobs markets in Sydney, Melbourne and Brisbane.

7. Double Income Households

Seventh, the proportion of households with both partners working has risen strongly since the 1970s as women have entered the workforce. House prices have altered to reflect the increased purchasing power of two income households over the old single income bloke-only working model.

To say that high house prices are caused by Chinese buying is wrong. To say that Baby Boomers are greedy and they are the cause is wrong. To blame it all on women working would also be wrong.

And we haven’t even discussed long-term trend changes in construction costs, materials standards and costs, consenting costs and lags, builder shortages and the new factor many people have still not cottoned on to. We have gone back to 1984, the period before the banking system was opened up and credit (mortgages) flowed like the gutters in a milking shed. The growing problem for people seeking to borrow funds has shifted from the cost of credit to getting it in the first place.

This lack of credit so far caused by the loan to valuation rules (LVRs) has had the effect of stymying demand and the 40% investor deposit requirement in particular seems to have hit the sweet spot which the Reserve Bank was seeking – well done.

But the lack of credit is also slowing down new property development and many projects are being shelved. What will be interesting is the extent of market reaction to this unsatisfied demand. We can expect Chinese banks already operating in New Zealand to soon expand their operations. Their focus will be property development rather than property purchasing by individuals. We can also expect foreign hedge funds to soon seek to fund developments. But unless the gates are opened to an influx of migrant builders (little chance of that happening) then what will happen is that building costs will get pushed even higher while building standards decline – as happens every building cycle.

If you are a young person seeking first home ownership what do you do? Take courses in basic building and home maintenance skills, find a dunger or even a meth house to strip, and do it up. Basically be prepared to do what the Boomers did in many instances – after all, the way credit availability has tightened up here and is tightening up across the Tasman you’ll soon be experiencing the same rationing of credit as they did back in the day. Start out in a desolate new suburb of clay soil far from work, do up a piece of shite, or build and live in what will become your garage whilst building the rest of the house around you in the following few years.

And how to finance it? Go to cafes and spend as much on lattes, muffins, frappes, wraps, etc. as often as the Baby Boomers did. Get takeaway as often as they did (Thursday night, payday, on the way home from the weekly supermarket run in the single family car) and consume as much food beyond daily calorific requirements as they did.

Mend clothes instead of buying replacements like they did. Take as many overseas holidays as they did. Upgrade your electronics as often as the Boomers did. Change your car as often as them. Subscribe to the same number of TV channels as they received. Change your telephone as often as they did. Drink the same limited range of domestically produced non-boutique beer and wine as they did, at home, at the local motor lodge or working men’s club. Hmm, Claytons, Cold Duck. Pretend you pay the same tax rates as they did and put the difference from your actual rate into a savings account (About 65% top marginal rate for almost all of the 1960s – 1987.)

Aim for a house with as many toilets as they had (one). Hire as many gardeners, landscape designers, decoration consultants, plumbers, feng shui consultants, window washers, dog walkers dog washers, cat whisperers and general handymen as they did.

And hope to hell that when you come to retire you don’t sit looking at your bank statement shaking your head because when you had a mortgage the bank charged you 20% but now that you have term deposits you’re only getting 3.5%, all whilst listening to people saying you and your profligate ways are the problem. Oh, and whilst being pressured to give money to the generation below you don’t forget to look after your elderly technology-averse parents as the current sandwich generation is doing.

But don’t spend as much as the Baby Boomers did on fags and for goodness sake don’t use the language they did or the versions of nursery rhymes they learnt in the school yard. Oy vey! And free education? Check out the tax rates mentioned above.

And one final thing noted already above but probably not made explicit enough as you will have skim read right past it. Sometimes when the ground shifts under your feet it can take a very long time to realise it. The big ground shift underway now and set to hit you in the next two years more than it already has is credit availability. Getting a mortgage. As a young buyer you think LVRs are the constraint on your borrowing ability, but that you have special exceptions. Not so fast.

The banking world in NZ changed radically over 1984/85, then again after the sharemarket crash late in 1987 (ask a Boomer what that was, they’ll never forget it.) It is changing again courtesy of the Global Financial Crisis, the lesson of which to central banks was don’t follow the Alan Greenspan philosophy of letting bubbles grow to splendid maturity then burst by themselves, but stop the bubbles before they grow. “He said kill it before it grow He said kill them before they grow And so ...”

New Zealand’s banking sector vulnerability, our Achilles Heel, is reliance upon the savings of people overseas. Ahead of the GFC we funded between 40% and 45% of every loan in NZ from offshore. That fell to just under 30% come 2014. But since then progress at reducing this vulnerability to the sentiment of folk elsewhere has stalled.

And recently the dependency has started growing again. This is not what our central bank wants. We banks have to fund more of our domestic lending from domestic borrowing. But that is hard when Kiwis traditionally do not save and those who do are averse to leaving their money in the bank earning just 3.5%.

So, what does a bank do when it has to fund locally but cannot? It cuts back on lending. That is where we are going with the impact so far almost exclusively being felt by property developers – mainly the newer ones without track records. Next will likely be large corporates who traditionally fund from a number of banks and can issue bonds in their own name. What does this mean for young people wanting to get a mortgage offering far less security than people who already own property? Ask the Baby Boomers. They are the ones who lived through an environment of credit rationing. They had to save for a number of years with one organisation before being considered eligible to go into the pool for consideration for a home loan.

That may be an exaggeration because young home buyers are likely to be specifically given priority. But the message we aim to deliver is this. Question your assumption that when you are ready for a mortgage you will be able to get one as quickly as everyone has been used to over the past quarter of a century. And question your ability to finance expansion of your business at the pace you would like. The ground is shifting.

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?

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24
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Moral of the story: Globalisation, over-abundance of house finance, open borders, mega-city-isation, government abdication of stewardship, etc has reduced the quality of life for New Zealanders.

I see a different moral. Tony touched on it but then ignored it completely and waffled on like a typical vested interest - namely "red tape to develop and build was minimal".

I'll eat and breed like a baby boomer if I can have their red tape of yore. A side of 1970's style negative real interest rates would be handy too...

There is one red reason why it costs 185,000 big macs to buy an Auckland house today rather than 75,000 20 years ago and that is red tape and the vested interests who pile it higher. If only the red tape rate of bare land could have evolved at the same rate as hamburgers then we would all be eating cheap and living large.

Less than 2% of NZ is urbanised. Is it really that hard for councils to find a bit of bare land to stick a few houses? Java manages to cram 140 million into an island smaller than the South Island yet in NZ we can't organise a few bare, covenant free, sections.

You're completely right about the cost of regulation, but slightly wrong about the cause.

Is it really that hard for councils to find a bit of bare land to stick a few houses?

It isn't. And this is the absurdity of the housing debacle in NZ.

It isn't difficult at all, in fact it is very easy for councils to open up land. Also the councils are able to charge high infrastructure fees that incentivise them to do it. Auckland City Council is opening up more bare land for construction per capita, than at almost any time in its past.

The problem is the Auckland Super City was set up by disinterested idiots (Nat) and has been run by ineffective a-holes (Lab), a bi-partisan failure. The nub of the problem is that when Auckland Super City was set up the idiots decided to make every town in the region part of the Super City. Then the a-holes realised they could secure re-election if they made house prices go up and get lots of development cash if they open up huge areas of land to development.

Auckland Council will currently allow the development of huge tracts of farm land adjacent to all urban areas, with only one exception, and so we are having a period of hyper-sprawl.

The only urban area in the entire Auckland Region where there are tight restrictions on building new suburbs is Auckland City.

Absurdity, it is where we live.

My advice (note, not giving financial advice...), ignore TA's advice - in fact, avoid it. The current generation can make up their own minds and follow their own course i.e. either buy into the status quo or do things differently.

Who says you have to live close to cities cbd, do the daily commute, buy a house, spend your life paying off a mortgage, rat race grind..... The truth is, the baby boomers may end up with all this stuff including housing that no one wants.

Find an income where you can work from home, and that home may be a micro house or house bus near decent broadband and your work might be anywhere anytime around the world.

Interesting times....

Yep. The girlfriend and I are looking at what else we'd prefer to do in future rather than subscribing to the Auckland ponzi. At the moment we can save a pretty large number each year by renting small, and - potentially after a couple of years doing similarly in a larger city with larger salaries again - we may look to downsize into a different part of NZ with a small mortgage.

But I do feel a duty to fight for those we know aren't doing as well as we are. I despise this almost sociopathic portfolio-uber-all that many investor-voters seem to be taking to the young generations in New Zealand.

16
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"If you are a young person seeking first home ownership what do you do? Take courses in basic building and home maintenance skills, find a dunger or even a meth house to strip, and do it up. Basically be prepared to do what the Boomers did in many instances – after all, the way credit availability has tightened up here and is tightening up across the Tasman you’ll soon be experiencing the same rationing of credit as they did back in the day. Start out in a desolate new suburb of clay soil far from work, do up a piece of shite, or build and live in what will become your garage whilst building the rest of the house around you in the following few years.

And how to finance it? Go to cafes and spend as much on lattes, muffins, frappes, wraps, etc. as often as the Baby Boomers did. Get takeaway as often as they did (Thursday night, payday, on the way home from the weekly supermarket run in the single family car) and consume as much food beyond daily calorific requirements as they did."

It's kind of difficult to be this detached from reality. The above should be given as a speech to homeless people. The homeless need to stop spending their money at cafes and start saving for a house.

Even purchasing a pile of crap house costs too much money. Then carrying out DIY costs a fortune in materials and all of your weekends. In the 70s and 80s it was a lot more affordable to do this. These days you need to be careful how much you spend. I repeatedly see loan requests coming in to finance this sort of work or people using credit cards to finance it. How many people are risking going broke or ending up with a half finished project than has to sell at a discounted price? I see a few of these listed on trademe.

Now shoveling shit about tax rates is a joke. Money went a lot further and in small town NZ people weren't in the top tax bracket, and those that I know who were ended up with other perks to avoid paying the highest rate. Houses could be picked up for a fraction of the price as 50% deposits were common.

With respect to interest rates this guy is the Chief Economist but doesn't understand inflation? You have got to be kidding. If you were lucky enough to pay 20% interest inflation was running around 21% at the time. Inflation and pay increases were commonly linked. I would love to pay 20% and have 21% inflation destroying the present value of the mortgage principle. Net interest of -1% would be awesome compared with 0% inflation and 6% interest (from 2-3 years ago) which means you pay a real 6%. With low inflation a mortgage debt is just a debt.

My recommendation is that the BNZ chief economist stops smoking what Bill English has been smoking.

e: I'm also not sure why the focus of the article is on buying housing. In Wellington you can't even rent a house let alone buy one.
http://www.stuff.co.nz/national/politics/89979644/bill-english-wellingto...

19
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Could also have added, for how to finance it:

- Receive Family Benefit for having kids no matter what income
- Build your first house on cheap government leasehold land
- Go straight from high school into a job with a company who trains you so you don't have a student loan

My post was already lengthy and I had my main points down. I find it difficult to believe that he's lived through or experienced any of the events he's talked about.

There is another point where he's talking about a credit crunch. The initial part of the crunch is here but it's a tiny amount, so tiny as to be insignificant in the statistics. With respect to my clients they aren't have any trouble obtaining finance, it's just the scale of the projects is generally smaller. The reason for the small size is to reduce risk, not because of credit limitations. The real risk is Council's dragging their feet and slowing consent processes, that adds interest costs and places projects in financial risk. MBIE and Nick Smith have failed to make changes to improve this or to hold Council's accountable for their actions in sabotaging the economy. This has created the housing shortage we have now and it's getting worse. The need to free up more land is only one part of the problem.

These are baby boomer created problems, especially those baby boomers in positions of power that have acted in their own greedy self-interest.

- Build a small house with cheap sidings and an iron roof, save up for a garage later, you could do that as the section was bigger, probably 600-800sqm (quarter ace on new subdivisions was already a thing of the past), can't have a house and separate garage on the tiny scraps of land that pass for sections these days.
- Probably pick up a hammer yourself and help nail all the noggins/dwangs in. Build the deck and stairs yourself.
- Not a covenant to be seen on the purchase of the section which you could quite easily get around the rules and buy on builders' terms.

He could have also mentioned starting on the bottom rung of the housing ladder instead of wanting to jump on halfway up.

Clearly neither of them were bogarting that joint

" ...... inflation was running around 21% at the time. Inflation and pay increases were commonly linked. I would love to pay 20% and have 21% inflation destroying the present value of the mortgage principle." This was precisely the period that I bought my first home. It cost me $80K in the nappy valley side of West Harbour. I was earning $12k working in the military. We had no savings because rents and other costs stripped the money away, so had to borrow for the deposit. We had to pay 23% interest, we had three mortgages, although one was a small civil servant one at 3%. My wife had to work. My car car was a dunga cortina that I could fix myself because there was no way I could afford to take it to a garage. Any work needed to be done, we had to do it ourselves. The entertainment budget was ZIP, NADA, NIL, ZERO! I went years with pay increases of only 0.5 - 1%. There were no holidays away from home, no investments, and definitely no luxuries. Nor were there any parents to help. This was normal. Don't given me any rubbish about having it easy.

You had a $12,000 income and annual interest of $18,400? So you were borrowing more for living costs too?

That's not the norm among anyone I know who bought at the time...nor was $12k to $80k the norm in their price to income ratios (or the average at the time, as far as I'm aware). What year was that?

That was my income. My wife worked too. she earned less than me, but by scrimping we made it work. 1984.

Ah ok. So am just working through the maths...interested to hear your situation.

Roughly $20k combined income before tax? That equates to around $75k income today (Auckland median income) according to the inflation calculator. The inflation calculator puts the house cost at $565,000 based on the whole of NZ, but I'd assume in West Harbour your house would now be more like $900,000? (I.e. similar to the Auckland median.)

Any idea what your weighted average cost of interest was, i.e. how much of the 60k was in each mortgage at the different interest rates?

On a $75k salary today that's a take home pay of $1,120. Assuming you can save $180,000 deposit on $75k in Auckland today, your mortgage payment for the remaining $720,000 is $4,088 (calculated at 5.5% - but what happens when it goes up?), leaving you $400 per month to pay for food, petrol, maintain your car etc.

Nothing has been meant to imply that people didn't have to work hard or that nobody had it hard. Just that the maths is worse these days - hence am genuinely interested in your example.

Interest is an interesting beast, certainly. Price to income ratio is obviously one key measure (especially beneficial to those who were in the position to save). Today that median house is 12 times that median income and the mortgage payment over 30 years is effectively out of reach.

Actually, my memory is faulty - we bought it for $60k ish, sold it for $80k four years later when I was posted to the central NI. But it was four years with no spare cash at all. Moving back home was a blessing as houses were a lot cheaper. But becoming anchored in the regions has it's cost too.....

My first mortgage was on bareland in mid 1980's. 24%
The land cost $57, 000 and would now be worth $500,000 - $600,000.
I was earning flat rate, no holiday pay, no sick pay $24 an hour, Same job now would be $35 - $40 an hr.

Stop snivelling. Welcome to the real world

23
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Really? This article is pure arrogance and presumption, not to mention its cherry picked data points and single minded perspective of today's world. It's 2017, not 1977, come join the rest of us in 2017, old man.

10
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Pure propaganda, designed to justify continuing policies which favour the already privileged boomers, and shame the 20-somethings into shutting up and letting themselves be reamed. Don't fall for it, kiddos.

Don't feed the trolls...

13
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Well, that's a very one sided view that even rocks out the 20% interest point and - predictably - fails to mention that inflation was running almost as high.

Also fails to take into account that boomers are the ones voting (by default) for foreign ownership of houses and rampant immigration that pushes up those house prices, for tax policies that privilege property over other investments, for a government that kicks the pension affordability can down the road, and for young Kiwis to bear the cost of training themselves for work (something companies did for boomers).

You only need to look at how Germany has better managed housing supply to see that solutions are able to be brought, and - if some boomers weren't so obsessed with building up the value of their property portfolios with no regard for future generations of Kiwis - how tax measures can be used to address land banking et al.

New Zealand's own history provides the example of Land Tax being used to break up land banks and make land available for more Kiwis, and even of more extreme measures such as government builds being used to create better housing outcomes. Boomers benefited from these, but too many of them have abdicated any such similar responsibility in favour of solely focusing on their own portfolios.

Others have provided counterpoints to Tony's opinion column too:
https://www.bostonglobe.com/ideas/2017/02/26/how-baby-boomers-destroyed-...

And of the problems Tony has listed above, he's also by implication shown some potential solutions:

- Limit foreign (non PR and Citizen) purchases to new builds and add a 20-25% Stamp Duty
- Tax on land banks
- Remove tax advantages for property investment
- Bring in German-style tenancy rules to give those who cannot afford to buy some measure of security in life
- Slow down immigration

If boomers choose to vote only in favour of growing their own portfolios and do not demand practical actions from the government then yeah, they damn well can bear blame for that. And if it's all about standing on one's own two feet - why should the young facing the harder ownership equation present today have to pay both rent and a pension to millionaire landlords?

And his comments regarding saving vs. cafes etc. should not be dignified with a response. They're insulting to all the Kiwis out there who are trying and saving as hard as they can to have a reasonable and practical life. He's also more than a little out of touch if he thinks young Kiwis pay for Sky TV.

18
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I find it concerning that a bank economist knows so little about NZ's economic history, especially that which he has referenced.

Also curious that the head economist of BNZ is recommending that NZers stop spending.

Stagnation, anyone?

Dead right, consumerism is all the economy is based on nowadays. We had manufacturers back then making everything from carpet to roof tiles, shoes to cars, clothes to washing machines. Then we had the next tier down and the guys who fixed those things we built when they needed to be, the cobbler resoling your shoes, the electrician fixing your jug, toaster. That is all gone now, we import everything so to partake in the economy we have to sell imported stuff to each, imported stuff with limited lives so we can rinse and repeat and do it all over again.
If people don't buy coffees and smart phones, how is the salesperson behind the counter selling supposed to save for a house?
And from that you can ascertain I am a baby boomer, there are more of us fighting against what is going on than those of us taking advantage of us, so there appears to be a position open for a new whipping boy.

It's always a relief to hear from boomers who do care about what's left to the next generations, thanks.

I do think it's dangerous if the boomers neglect the next generations to the point the younger folks start to lash out back at them. Ageism is already an issue in the workplace, so I'm told - and many boomers will need employment till late in life too, from the sound of this: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1180...

The last thing they should be doing is castigating youngsters for acting entitled, not saving etc., while voting for politicians who only enact policies beneficial to the older generations at the cost of the younger ones.

Boomer voices and votes for passing a decent lot to the next generations need to be heard.

I am reminded of famed conservative Edmund Burke describing a generation's role in society (discussed by Douglas Murray, but I can no longer find the source):

"...that a culture, a society is not simply about us here now, but it is a deal between the dead, the living and those yet to be born. And that you cannot break that pact, and that what you have inherited you do not have the right to give away, any more than you have the right to destroy future generations of your own family or future generations yet unborn, it is a very central pact of civilisation, that deal, between the dead, the living and the yet to be born.

If you give it up and say it doesn't matter if the next generations' society resembles Mogadishu more than Stockholm, then you are breaking that pact."

Either the generations of NZ society are in this together, or they're going to be increasingly in conflict.

excellent point Rick. Apart from all the many stupid statements made by a chief economist above, to not understand that the debt incurred by the millennials is what is propping up the pension schemes & the lifestyles of the boomers ... truely amazing lack of insight...

The bigger point he misses is that energy / Oil was easy & abundant from post war to the early 70's, when the first Oil shock hit. Since then in rough terms, debt has been used to promote growth... So the effect is the boomers used all the cheap abundant energy & resources then leveraged everything to the max ... in the name of a having a standard of living never before seen and never to be repeated... now we are collectively broke.

Also fails to take into account that boomers are the ones voting (by default) for foreign ownership of houses and rampant immigration that pushes up those house prices, for tax policies that privilege property over other investments
........
Some are some arent. Backgrounds and circumstances differ.

Yes, apologies - I should have said "many boomers".

I have boomer friends who are devastated about what their children and grandchildren are facing, despite themselves having done very well out of the soaring market. They also - unsurprisingly - are the same ones against the adage "But it'll be okay because we'll pass it on to the next generation", knowing that means they're choosing to entrench multi-generational haves and have-nots.

And there is another issue, the wealth is being redistributed in no small way to the likes of Ryman's and Bupa

Well unless the boomers have investment properties their offspring might be waiting a very long time for their inheritance as many boomers will live in their homes well into their 70s or downsize and free up capital for their retirement

14
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Wow.
What this fails to realize is that even doing all these things, having two incomes, and being patient, still really struggles to compete with 10-20% asset price increases, unless mum and dad are both loaded and generous.

Dual income should be able to keep up with the $3000 per week price increase in housing that was happening last year. Not spending $10-$20 per week at a cafe will make a big dent in that.

A decent cutting compound and a bit of polish and no-one will ever notice that dent

{Argue a point. Personal abuse not acceptable. Ed]

This Ed guy seems a solid sort.

12
up

This guy was advising everybody to buy at the peak last year and being very condescending while doing so.

Not much has changed.

Love this article so so much! You have hit the nail on the head Tony Alexander!
What's the point of blaming other ethnicity then switch to boomers just because you want to reduce stress?? Chinese were born Chinese and Boomers were born when they were born...as if you have control over it. Stop whinging and start loving life!

He he, Wait for a few months, I think prices in Auckland will have slid enough be then for everyone to see what's been going on.

15
up

Chinese have been a major factor PERIOD!
They are a major factor in Vancouver in Toronto In Australia and in the USA where they have surplanted Canadians as the US top foreign buyers of RE !
Alexander is grandstanding as he always has done.

BBC iPlayer only works in the UK.
Sorry, it’s due to rights issues.

Or America : BBC The US poverty challenge facing Donald Trump
http://www.bbc.com/news/world-us-canada-39122283

Well I think we're going to see at lot more urgent sales in the Auckland market quite soon: China's New Watchdog to Tackle Shadow Banking, Property Bubbles

https://www.bloomberg.com/news/articles/2017-03-02/china-s-new-bank-watc...

China’s banking regulator outlined wide-ranging efforts to rein in financial risks, including clamping down on shadow lending and curbing funding for property speculation.

Yes, a developer I know quite well - who has become quite cautious - told me about this a few months ago.
He thought it would have a big impact.
I think he's right.
Prices down in Auckland 10-20% by end of 2018.

Large and poorly regulated shadowy finance sectors always fall down.
See - mezzanine financers in NZ, and the financial, sector in the USA pre GFC
China's will end up the same way. The difference is that it's impact will be disproportionatey large, including on property values in NZ

11
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So, you're planning to vote for a government that you know will choose policies that push property further out of the reach of young Kiwis, to feather-bed your nest-egg...but you want young Kiwis NOT to blame you for your selfishness?

Err...that doesn't sound like a realistic expectation, sorry.

Oh My Gosh! Its Tony Alexander ! Back from the dead but looking just as impish as before!
This is the same clown e Con omist who reckoned the NZ economy was doing great when taxi drivers & plumbers were calling talk back lines saying how BAD things actually were on the ground !
Alexander hasn't had his feet on the ground since arriving in his ivory tower and collecting his 6 figure salary
He is the LAST person to be taken seriously on anything past toothpaste maybe ?
Glad I cashed out of NZ so I never have to listen to this clown preach on radio news any more
Good Luck NZ

Another property puff piece masquerading as analysis me thinks! Taking investment advice from a bank's chief economist is akin to asking a fox if the hens are safe - too many conflicts of interest.

So they have built up savings with a jaundiced eye toward shares because of what they saw and experienced during the 1987 sharemarket crash, an aversion toward finance companies because of the money they lost to them a decade ago, and awareness of how house prices have increased since the 1970s.

So when the residential housing ponzi collapses how many decades will it take for today's 20/30/40 somethings to lose their jaundiced view towards residential property?

Remember - a 50% drop wipes out a 100% gain.

The same doom Sayers every time someone expresses the truth!
Look, housing is affordable in New Zealand, but notin Auckland we all know this!
How many times do you need to be told that NZ is not just Auckland.
Get off your butts and do what anyone with foresight and a keenness to get ahead do!
They stop whinging and complaining about everything, and dam well be pleased that the opportunities in NZ
still exist, and in fact are no harder whatsoever to get ahead in NZ!
Interest.co is meant to help people make financial decisions, and yet we get all these supposed know alls, that just have no idea, except that they can whinge about everything!

You seem to whine and whinge about enough....

Good god your a pice of work! We have p##s por govt policy causing major housing issues, major social injustice, major stress to those trying to rent, a destruction of our once equitable society ...and so on ad finitum. And you just want people to roll over and accept that this is how it should be. Sorry junior....you need to Wise up.

Trying to boost the ponzi scheme and support national agenda.

I hear he's committed to door knocking with David in the next election round;

https://www.youtube.com/watch?v=hEkPoZSBXh0

There are some valid points but the tone is very condescending. The norm now is the parents have to downsize or remortgage to help the kids get a deposit to buy..not ideal.

Higher taxes on second home ownership and income tax relief for first time buyers. When I bought my first home in London I got income tax relief via the MIRAS scheme and was a great incentive for FHB's.

19
up

I take issue with this,

>>>

When something happens which people cannot understand they invariably blame someone or a group of people for the situation – illegal migrants in the United States undermining wages and decreasing blue collar job opportunities, Muslims in the UK destroying community fabrics, Chinese buying houses, Baby Boomers being greedy, witches casting spells, God being angry at the LGBTIQ community.

Most of the time the arguments are plain ridiculous, but they serve to reduce the stress of some people because failing to know why a thing is happening is stressful and our brains are hardwired to try and get stress levels down one way or the other – even if that means in extremis diving into alcohol, drugs, gambling or pornography.

>>>

He's telling people who are scared of never getting on the housing ladder, those who think there should be sensible restrictions on Chinese buying houses, who think immigrants compete for jobs and lower wages, push up house prices, who believe there should be a capital gains tax , restrictions on housing debt and more tax on landlords and higher levels of home ownership are in league with Witches, homophobes, drug abuses, porn addicts and alcoholics.

It's a clever way of telling us that anyone with half a brain or any intellect should be on his side. It's b/s you learn in PR school, how to be a convincing and manipulate peoples thinking to your own end.

I'd be curious to read his "analysis" of Vancouver's problem, likewise.

Comment of the day.

How correct andrew

Mai Chen is on the board of BNZ and BNZ is sponsor of her Superdiversity Stocktake.

The key propositions, as we understand them, are:  Superdiversity is economically beneficial for New Zealand  ‘Investment’ is needed to maintain the ‘diversity dividend’  More diversity is inevitable and is to be welcomed  The benefits from superdiversity need to be more widely understood and better communicated. The argument that ‘superdiversity’, now driven primarily by large-scale immigration from Asia, is beneficial to New Zealand is by no means intuitive, and there are arguments to the contrary, which we will cover below. While the tone of the Superdiversity Stocktake suggests the economic case is almost self-evident, there is a discussion of some relevant evidence from the economic literature and other sources and a number of less formal arguments in other parts of the paper.

https://www.tailrisk.co.nz/documents/TheSuperdiversityMyth.pdf

He's telling people who are scared of never getting on the housing ladder, those who think there should be sensible restrictions on Chinese buying houses [less demand = less houses built], who think immigrants compete for jobs and lower wages [higher wages = less houses built], push up house prices [lower prices = less houses built], who believe there should be a capital gains tax [higher tax = less houses built], restrictions on housing debt [less debt = less houses built] and more tax on landlords [less houses built] and higher levels of home ownership are in league with Witches...

NZ has one of the slowest building rates in the world you are advocating heaps of measures to slow down that building rate even more. Wow.

Stopping houses from being built would not increase levels of home ownership.

All you would do is make house prices lower and allow Gen X to join the boomers in owning property, but it will do it by screwing over everyone from Gen Y onwards to an even greater degree than right now. Because less houses = higher rent.

Thats again a slightly disingenuous , the biggest problem is the cost of houses to income ratios.
We also have other issues that are not being addressed.
>>
The New Zealand economy is usually seen to be successful: It has been ranked first in the world for Social Progression, which covers such areas as Basic Human Needs, Foundations of Wellbeing, and the level of Opportunity available to its citizens.[20] However, the generally positive outlook includes some challenges. New Zealand income levels, which used to be above those of many other countries in Western Europe prior to the crisis of the 1970s, have dropped in relative terms and never recovered. As a result, the number of New Zealanders living in poverty has grown and income inequality has increased dramatically.

New Zealand has also had persistent current account deficits since the early 70s, peaking at -7.8% of GDP in 2006 but falling to -2.6% of GDP in FY 2014.[21] Despite this, public debt (that owed by the Government) stands at 38.4% (2013 estimate) of GDP,[11] which is small compared to many developed nations. However, between 1984 and 2006, net foreign debt increased 11-fold, to NZ$182 billion.[22] By March 2014 net foreign debt had dropped back to NZ$141.6 billion, which represents 61.5% of GDP.[10]
Despite New Zealand's persistent current account deficits, the balance on external goods and services has generally been positive. In FY 2014, export receipts exceeded imports by NZ$3.9 billion.[21] There has been an investment income imbalance or net outflow for debt-servicing of external loans. In FY 2014, New Zealand's investment income from the rest of the world was NZ$7 billion, versus outgoings of NZ$16.3 billion, a deficit of NZ$9.3 billion.[21] The proportion of the current account deficit that is attributable to the investment income imbalance (a net outflow to the Australian-owned banking sector) grew from one third in 1997 to roughly 70% in 2008
Between 1982 and 2011, New Zealand's gross domestic product grew by 35%. Almost half of that increase went to a small group who were already the richest in the country. During this period, the average income of the top 10% of earners in New Zealand (those earning more than $72,000)[50] almost doubled going from $56,300 to $100,200. The average income of the poorest tenth increased by only 13% from $9700 to $11,000.[51]

Growing inequality is confirmed by Statistics New Zealand which keeps track of income disparity using the P80/20 ratio. This ratio shows the difference between high household incomes (those in the 80th percentile) and low household incomes (those in the 20th percentile). The inequality ratio increased between 1988 and 2004, and decreased until the onset of the Global Financial Crisis in 2008, increasing again to 2011 and then declining again from then. By 2013, the disposable income of high-income households was more than two-and-a-half times larger than that of low-income households.[52] Highlighting the disparity, the top 1% of the population now owns 16% of the country's wealth – the richest 5% owns 38%[53] – while half the population, including beneficiaries and pensioners, earn less than $24,000
Shamubeel Eaqub, formerly a Principal Economist at the New Zealand Institute of Economic Research (NZIER), said that thirty years ago, an average house in New Zealand cost two or three times the average household income. House prices rose dramatically in the first years of the 21st century and by 2007, an average house cost more than six times household income.[38] International surveys in 2013 showed that housing was unaffordable in all eight of New Zealand's major markets – unaffordable being defined by house prices which are more than three times the median regional income.[39]Property analysis company CoreLogic says 45% of house purchases in New Zealand are now made by investors who already own a home, while another 28% are made by people moving from one property to another. Approximately 8% are being made by overseas cash buyers[38] primarily Australians, Chinese, and British – although most economists believe foreign investment is currently too small to have a significant affect on property prices.[49]

Tony Alexander quite literally just instructed us whinging kiddos to get out there and DIY a meth house.

A meth house.

You couldn't make this stuff up.

Note to self: boycott BNZ.

I wasn't going to read the article but when I read your comment I thought - surely not. But surely he did;

If you are a young person seeking first home ownership what do you do? Take courses in basic building and home maintenance skills, find a dunger or even a meth house to strip, and do it up.

OMG - I can only assume he's a National Party supporter trying to help out Bill with a money-making idea for all those unemployed young druggies.

Yep..in my day plenty of do-ups around and that's how I got my first house with 60% deposit.. Swings and roundabouts though....there is a heap of deteriorating rental stock out there and based on the financial position of many of thes landlords, not a dog show in keeping them up to scratch. Give it time and these will be on the market... And they will only be economic for a handyman to do up. The time for the fhb will come again.

Really is it worth doing up a 'P' house?

A P house will usually be detached and on a decent piece of land. Even assuming the house is a write off, in Auckland still paying upward of 800-900K for the land.
So if Tony thinks that equals an affordable option......

Had you seen that while Bill the Shill was baselessly bagging the local youngsters for being druggies to justify importing people to undercut them, there's fairly compelling evidence gathering that the Irish and UK tradies imported for Christchurch rebuild are whizzing their tits off on cocaine?

Yeah think I read that somewhere - sharp increase in meth use reported too;

"It [meth use] has increased steadily as the Christchurch rebuild has gathered pace . . . you've got this influx of largely young men involved in the construction industry who have higher levels of drug use than anyone else in the population."

http://www.stuff.co.nz/national/crime/74637458/christchurch-construction...

Meth use can be incentivised in industries where there are unreasonable demands as to hours and working pace.

Mmmmm
Also, Bill bags the young beneficiaries on drugs, bet a larger % of 'professionals' take 'designer' drugs

I'd be willing to bet that you'd get a far higher hit rate if you drug tested people in advertising, real estate, law, entertainment, hospitality, and the children of wealthy families.

and chief economists from major trading banks!!!!

So what's the big deal with that?
You work hard and play hard.
That's life.

Oh but you can't do your own work on a house now without it being notified on your lim now the government gave builders a licence to print money ie the lbp. http://www.lbp.govt.nz/lbp. As the council charges us for inspections it shouldn't matter who installed a certain component if it was carried out correctly.

10
up

This guy must be joking,right? On many fronts.
'Kayaking on clean water' ? Hmmmm
Given he is employed by a bank he is not in a position to comment objectively and independently.
Plus he is incredibly condescending and full of lazy stereotypes and assumptions
I will refrain from calling this guy what I want to call him...

Another odd point with this.

My parents used to buy us the occasional fish and chips meal (as a family). It cost them - in today's dollars (checked the inflation calculator) - around $40 each time.

I am jolly amazed that despite wasting their money on fish and chips the equivalent cost of a couple having a breakfast at a cafe, they still miraculously managed to afford a four bedroom house on a single income with a stay at home mum to three children. From reading Tony's deeep, deeeep analysis one would not suppose that possible.

He's just disingenious, lazy, stereotyping and frequently just plain wrong.

There is NO way, even with high interest rates, that things are easier today, no way at all. It was very common to call into the pub on the way home from work, definitely drive home over the limit of today, smoke half a pack of cigarettes and still own your own house. Not everyone did that, but it was not uncommon, and yes, often there was only one income coming into the household.

And people didn't come out of Uni saddled with large debt.
Didn't need to subscribe to Sky to watch cricket, rugby etc

I remember my dad listening to Winston McCarthy calling the rugby from the other side of the world, in the middle of our night on the valve radio.

11
up

Tony Alexander is the reason I don't bank with BNZ.

Looks like a PR disaster for BNZ to be honest.

I keep meaning to join KiwiBank rather than back the Aussies.

RYMANS and BUPA,Certainly a growth industry in NZ and a good reason why people tie their wealth up in Trusts etc.

Also income taxes might have been a lot higher, but there was no GST at 15%, plus there are a lot more charges today for things there didn't use to be charges for

Tony, I can't see how annoying the public is good business for BNZ. If I was your boss you'd be getting a bollixing for being a pretentious prat and losing potential customers.

His brain finally snapped. Forget about how out of touch this guy is for a moment. Think about the fact that this guy represents a business. I have never seen a business model that works by abusing their potetnial customers. "Hey you lazy millenials, get off your lazy ass and fill our coffers!".

His brain finally snapped. Forget about how out of touch this guy is for a moment. Think about the fact that this guy represents a business. I have never seen a business model that works by abusing their potetnial customers. "Hey you lazy millenials, get off your lazy ass and fill our coffers!".

Go elsewhere for that mortgage, youngsters.

See, I said never trust a man with a perm.

He has a particularly punchable expression in that photo.

And Feng Shui consultants??? What??? That's a new one. Unless he's trying to piss off the Chinese as well?

Nor a man with transitions lenses

One of the key reasons I left BNZ last year was because he pissed me off big time.
He's very punchable.

So NZ was just powered by farming in the past. What powers it now, what makes the economy stable and not a bubble? Anything?

We're the world-beating powerhouse Switzerland of $2 shops, fast food franchises and foreign student scams.

don't forget tourism and all the high paying jobs that generates

or all the professions (lawyers, planners, architects) feeding off the frenzy of bureaucratic overkill

You forgot about money laundering and foreign trusts.

True. We don't even cook our own methamphetamine any more. It mostly comes in ready-made.

Property speculation.

I think we misunderstood this piece.
It's clearly satirical

The 65% Tax rate, I looked into this. The 66% top tax rate cut in at about 3 times the average national wage. What was also 3 times the average wage? The average house.

The size of government in proportion to the economy was also about the same size in those different time periods, so the tax load on the population was about the same. But they had higher income tax rates? Yes, it’s all the stealth taxes causing economic friction in a non-progressive way.

Then there is the risky outcome, random sized poll tax that is a student loan.

tony does not get it. A more progressive tax system means more redistribution to those at the bottom on the ladder - i.e. Young people, just starting out. The early boomers and their parents were beneficiaries of that more socialist system.

you need to compare total tax paid per person, remember we had no 15% GST back there
also you need to compare expenses, cheap power, free medical etc etc
and inflation adlust
it is easy to cherry pick certain things and say we are better off

Just staggering. If this is the guy that guides BNZ's strategic direction how can I short their shares?

Was he there when they took a dive into the septic tank in about 1989-ish and had to be bailed out?

Dunno, I tried to get a quick cv from his website but gave up in disgust. He's certainly not lacking for self -promotion though.

Why does this sound so familiar: What's Driving Australia's Property Boom: QuickTake Q&A

https://www.bloomberg.com/news/articles/2017-03-01/will-australia-s-prop...

Who is in for a protest!?

Housing crisis
Social injustice
Destruction of equitable society

Perhaps you are joking. but there bloody well should be one. From every level of government the message to young people is the same: "could you please f**k off and build your lives somewhere else". The smart ones already have.

Seems like Auckland has or is becoming a city only for the wealthy, the message from the government is pull your socks up if you can or buzz off somewhere else

Yeah, Bill's message is basically "buzz off somewhere else and we'll import a ready-made underclass who's used to being at the bottom of the heap and won't complain".

11
up

My brother has lived in London and Sweden for the past 20 years. In recent times he has plenty of pangs for NZ.
I tell him he's dreaming of the NZ of old.
Is NZ so beautiful? Places just as beautiful in Europe, Asia and North America.
We are a very expensive country and increasingly unequal.
We are a long way from most places which makes international travel time consuming and expensive.
Our environment is far from '100% Pure'.
Career options still have limitations.

The only real valid benefit I see in NZ is it's 'relative' safety.
So why am I here? The only real reason is kids are in schooling and settled, and I don't want to destroy that. They come before me.

Perhaps a protest outside Barfoot & Thomson on Shortland St would be a good start. On auction days.

These Waiheke Islanders have the ideas :-)

"We do not want to sit on roads, drive slowly in front of the double deckers, raid board meetings and shame the elected mayor - but we will," said spokeswoman Pam Oliver.

You go girl!!!!

Commie hippie druggie scum???

Me
There should be anger, and plenty of it

BNZ should think about this guy and it's reputation

BNZ is not protecting its own customers by passing comments like this

Comrades the evil genius Tony has spoken, please note he's usually spot on so I'd heed his advice or otherwise sell up like Bernard, howl at the moon like Gareth Morgan or rent like Shamubeel.

He's spot on in that unless someone changes things, this present government and its utterly selfish investor-voters will continue to sell New Zealand out from under the next generations as fast as they possibly can. All for a quick buck.

I can't shrug the feeling that this guy is nothing more than a ball of smarmy self satisfaction. What terrifies me is that what he perceives is an accurate representation of reality.

So much wrong with the article, so little time to comment it all up tonight.

Great commentary Tony, in my view you tend to hit the nail on the head everytime!

My survey of real estate agents indicates about 20% of dwelling sales go to people located in China. There is no information on foreign purchasing of houses in NZ beyond that survey and much more work needs to be done before one can say definitively what the actual proportion is. More than a simple survey is needed for that. There is no information on the proportion of the housing stock currently owned by foreigners and certainly zero information on any of the characteristics of any of the foreign groups buying houses in new Zealand.

– See more at: http://tonyalexander.co.nz/regular-publications/bnz-weekly-overview/hous...

That's not right surely - I thought the figures showed only 3%.
JK thought it was also......

This wouldn't be the same JK who left the building just as advance indicators suggested maybe the peak had hit, would it by any chance? What an astounding coincidence!

This guy is completely out of touch. I don't read his BNZ reports anymore because they are biased propaganda.

I know many hard working, frugal young people with deposits saved, stuck between a rock and a hard place because they have the smarts to know what you're getting for your money in Auckland lacks complete and utter value.

I also know many hard working, frugal young people who haven't a hope of owning a house in Auckland, no matter what they do, despite the fact they've been flatting right into their 30s to save money. Honestly, I challenge Tony Alexander to try living with 6 other adults in a cold mouldy flat!

It's a waiting game for many of us, to when this unprecedented mass of overvalued houses drops back to a still undoubtedly expensive, but better level.

The sad thing is how he's backhandly insulting an entire generation.

In the last five years house prices in Auckland have doubled. Has my wages doubled? Of course not. How many lattes and sky subscriptions does he think I have? The simple fact is that there is housing bubble and banks such as the BNZ benefit greatly from it. His advice effectively is to borrow more and more and more; this isn't neutral advice and I think for most people to have a mortgage that is 10 times your salary is financial suicide. That's why I have opt out of the housing market and I think a lot of younger people are too.

"...find a dunger or even a meth house to strip, and do it up. Basically be prepared to do what the Boomers did in many instances..."

This guy works for a bank and doesn't seem to know how banks view those kind of properties. You 100% will not get approved for a mortgage on a meth infected house, and the cost to repair them, even if you managed to do it yourself, is likely to be about the cost of the property in the first place. The dunger properties he talks about are still selling for tens of thousands above the rating valuations that again, banks are unlikely to lend on unless you can get a registered valuer willing to give a generous appraisal, valuing the house fair higher than it really is worth.

Encouraging young people to invest everything they have and more into a blatent liability. Great advice, Tony.

Let's everyone submit mortgage inquiries to BNZ at once, for meth-affected houses we wish to do up, saying BNZ's chief economist recommended we do so.

Invest everything you have in this over priced market, become our slaves for the rest of your life and when your wheels buckle on the way, you will still owe us!

My cousin used to work with TA as a car salesman/groomer in Penrose around '85 I think.

Did he suck less when operating a vacuum cleaner?

This is a fine example of government and associates political cover up, redirecting their mistakes on to us, turning the blame onto you, 'your irresponsible and not working hard enough' using figures like Feng Shui would only cause racial conflicts. NZ borrowing rate has hit 167% today, people cant cover their basic living costs, never less worry about sky TV! The best products of NZ have been taken of the shelves from its people and sold at high prices overseas, and yet still have the audacity to blame the younger generation.

Tony always acts independently to his bank and is a contrarian. If you look at his records for the past 10 years he pretty much gets it right.

But of course it's much better to suspect a corporate and government conspiracy! However I just don't think Tony has the time to be so sinister as he seems quite busy.

Profle, with your below comment you have hit the right cord :

"Less than 2% of NZ is urbanised. Is it really that hard for councils to find a bit of bare land to stick a few houses? Java manages to cram 140 million into an island smaller than the South Island yet in NZ we can't organise a few bare, covenant free, sections."

Can I ask one more question: why is the shoe box apartments, where many would be happy to live in, been discouraged by Council--not just discouraged, they will not allow them anymore simply because its too tiny--too tiny foe who??. No chance of us cramming any more than 5M between both islands as long as these non sensicle drama goes on. Personally, a shoe box is too small for me, depending on where I am, what stage I am i.e am I single etc.

And they keep an eye on the jobs markets in Sydney, Melbourne and Brisbane.

We might also be looking at the property markets of Sydney, Melbourne and Brisbane. Where in the 2017/2018 200,000 apartments are due to be completed.

I think this is the Friday Funny, so I cannot compete and will not compete with Clowns.

Debt is the problem...and always will be. It is now money. Economics, is not working. It is borrowing, land banking and speculation.

Normally I would say something, trite, but I will just say this, if you do not know why you are in debt, cannot compete with imported inflation funds, cannot beat siphoned and laundered loot, then I think we all need a lesson in economics.and a throwback in time to 2008.

Buy a Delorean and start over.

Or put a 4x4 on the House...go for broke...

Big Spenders...Houses, costs, inflation....ain't no real point in working...just chill out and wait for your house to inflate and join Snapchat...keep throwing money at it...one day you will be in a positive position...But do not come crying to me...if you ain't...Rent and be damned....borrow...up to the hilt....Banks, depend on it....plus the inflows..of course.

http://www.interest.co.nz/news/86305/february-vehicle-sales-data-brings-...

I don't disagree with a lot of what he has written in this piece. The real problem with TA is that he u-turns about as often as the National party elite.

Having listened to him speak, he always struck me as a mediocre economist. Never exceptional, instead one of those people who just sort of lucked into positions of influence.

Interesting......

"Most were automatically eligible for residency as skilled migrants. Even a former student with a Level 5 qualification (the lowest level) would get the required 140 points if he or she had stayed on a post-study work visa, had a job offer and was under 30.

Other more valuable applicants were likely to miss out. "For instance, a 50-year-old Chief Technology Officer recruited from offshore with a job offer for $120,000 and 25 years of industry experience, who holds a diploma qualification, would only be eligible for 135 points."

http://www.nzherald.co.nz/education/news/article.cfm?c_id=35&objectid=11...

Yes, shocking really that it takes an OIA request to expose the real truth.

What is worse is that Bill English (having full knowledge of real evidence of fault in the immigration policy settings by immigration officials) some months later decides to slander NZ youth with a trumped up 'drugs charge' as a means to legitimise his flawed immigration policy.

Lowest of the low - and given JK was his predecessor, that says something.

He is not alone. The Fed tried to pull the same nonsense to evade responsibility for failed policies over the last decade.

We have to infer causation from correlation, but it doesn’t seem at all likely that unemployment rises because drug addiction does. Rather, it is very likely that drug abuse has risen in total because the economy never recovered (I want to stress this is not a conclusion reached by the authors, it is my own inference beyond their scope). The Fed, unsurprisingly, has it all backward. Read more

Mind you, that's a low salary for a CTO with 25 years experience...May as well just send your IT manager on a Strategy day course and change his or her job title.

Yea, it is a bit out of whack.
Last year I met a PhD qualified economist/econometrician from Scandinavia who was having heaps of trouble securing a visa. The trouble was, in Immigration's view, that he didn't fall into the skilled due to his job title being along the lines of 'Consultant'.

Nothing to worry about, soon all of NZ will become one big Auckland and it is going to be great fun.
As the author says, the world is urbanising fast and urban areas are expanding, so it will all be good quickly.

He is silent about the role of the Banks in all these....Low interest rates (after the GFC manufactured by the investment banks primarily), no viable savings options, easy credit at low rates, banks funding mostly housing as investment options here in NZ, easy profits driving business of lending for housing, etc.

The 'Baby boomers didn't drink lattes hence they could buy houses' line is really really grating, and totally disingenious.
It ignores the fact that until the 1990s:
- People smoked a lot more than now
- People drank a lot more than now
People might not have been drinking lattes in the 70s and 80s but they sure as heck were smoking plenty of cigarettes and drinking plenty of beer!

Money is borrowed into use....cos nobody actually has enough..

If they did. there would be no need to borrow and leverage up into 14 X their borrowing capacity...

They are called Banks.

Although he will no-doubt claim wild and eclectic diversity in his private life, I am sure this guy is just echoing the constant narrative of his friends and colleagues - not to mention the bank's clients who bend his ear about low Term Deposit rates versus bank profits. So the author has come up with some angle to blame their low TD rates on people who were still at school during the GFC. The mean-minded moneyed-up elderly (who look at young people through watery eyes of jealousy anyway), will lap this up. Job done.