Greens bite the bullet and call for house prices to fall; Govt announcements on housing expected as soon as Thursday

Greens bite the bullet and call for house prices to fall; Govt announcements on housing expected as soon as Thursday
Green Party caucus

By Jenée Tibshraeny

The Green Party has broken rank from the other parties in Parliament and explicitly said house prices need to fall.  

“We are concerned that the unsustainable rise in house prices is bringing us to a crossroads as a country,” Greens co-leader Marama Davidson told interest.co.nz.

“We risk setting in place an inter-generational divide between the property owning ‘haves’ and ‘have-nots’.

“To stop this, the average house price either needs to come down or at the very least needs to stop skyrocketing up.”

Davidson didn’t go so far as to call for a fall in house prices when asked last month.

“We definitely don’t want to see them climbing at the rate that they’re climbing,” she diplomatically told media.

Her predecessor, Metiria Turei, made headlines in July 2016 (ahead of the 2017 election) when she said house prices should be deliberately reduced to bring the house price to income multiple back down.

Politicians typically say house prices need to better align with incomes, but never acknowledge that for this to happen when house prices are as inflated as they are, prices realistically need to fall.

Davidson said: “Ways to stop the rapid increase include a big increase in community housing build and a tax on wealth accumulated by property speculators.”

Prime Minister Jacinda Ardern in December said the Government's position was that it wanted to see small increases in houses prices. She made the controversial comment, reiterated by Finance Minister Grant Robertson, that most people “expect” the value of their most valuable asset to keep rising.

Housing announcements expected from Govt as early as Thursday

Interest.co.nz understands Housing Minister Megan Woods will make an announcement on public housing at Labour’s caucus retreat on Thursday.

In February or March, Robertson is expected to make policy announcements to curb housing demand.

He received advice from Treasury and the Reserve Bank on the matter late last month.

The RBNZ, which published its advice, rejected Robertson’s suggestion for it to be made to consider house prices when setting monetary policy. Instead, the RBNZ said its mandate could be changed for it to give consideration to house prices through its financial stability arm - or through the way it regulates banks.

Accordingly, it reiterated a request it's made in the past for it to be given the power to restrict banks from lending to borrowers seeking a lot of debt relative to their income.

Politicians have historically been opposed to debt-to-income ratio restrictions, as these would disadvantage first-home buyers.

An extension of the bright-line test is also on the cards. Treasury is looking into the matter. Robertson in November made the argument Labour wouldn’t break its “no new taxes” pre-election promise by tweaking an existing tax.

Under the bright-line test, anyone who sells a residential property within five years of buying it, has to pay income tax on any gains made. The rule excludes the family home and inherited property.

Ardern in November also hinted the Government was considering changing the Home Start Grant. Currently, the grant is available to low-to-medium income earning first-home buyers who buy cheap houses.  

Interest.co.nz understands that while Robertson’s announcement might include some supply-side policy, Woods will address the supply-side of housing after February/March.

Woods in December told interest.co.nz she was still working through the criteria of an underwrite she in August said would be provided to developers at-risk of not getting their developments off the ground. In August Woods said the criteria would be finalised in November.

Woods in December said previously-held fears around residential construction being constrained by banks’ risk-aversion when it comes to lending were dissipating.

Nonetheless, while banks are lending record amounts to home buyers, business lending for residential property development has been on a downward trajectory since March.

The value of outstanding loans for residential property development fell by 22% from November 2019 to November 2020 to $2.6 billion, according to the latest Reserve Bank figures.

As for the Resource Management Act, this won’t be repealed and replaced for some time. The legislation to replace it is still being drafted.

Median price - REINZ

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273 Comments

26
up

The longer this goes on, the more I'm warming to the Helen Clark Foundation idea of underwriting owner-occupiers who find themselves at risk of negative equity and then using every demand-shaping tool in the box (CGT, Brightline, DTI, LVRs) to get housing back to sane levels - and keeping it there. It would create headaches for investors, but we cannot allow one class of investors to hold the entire country to ransom. If my Kiwisaver goes down, it goes down. Protecting one asset class from the basic concept of risk is no longer acceptable when it involves speculating on something as fundamental as shelter. Time to push the reset button.

11
up

So much for The Greens talk......

Waiting for the action - and the outcome.

TTP

11
up

To be fair, they don't hold much power at all.
About the best they can do is nudge Labour.

Massive rhetoric when you know you're not in the position to do anything - the only ones who actually had to stump up on impossible drivel was Labour who promised houses from the sky not expecting actually win the last last election.

Good on them for signposting their intent and saying what we all know.

At least those young who are locked out of the market know there's a political party who will go in to bat for them. Given this demographic is growing year by year, it's likely they'll capture a progressively larger share of votes over time.

10
up

Nobody's holding the country to ransom. It's not yours and you don't have a right to buy property. Welcome to free markets.

38
up

That's the point, it is not a free market and it's been held to ransom by any of the monopoly providers, like land bankers, and council with infrastructure.

Exactly

It is a free market, it rises in response to government policy.

Nz Govt promotes inefficient spending to a huge degree, relies on the RBNZ to drive growth. Consequence is property must rise to keep money supply growth high, as it funds the economy

Councils want their piece, so charge accordingly, and have some strange utopia they’re building which makes some sense.

Land bankers just don’t want to be caught up in the Governments train wreck of wasteful policy.

You just push a rubbish narrative, if you looked at it full time you’d think differently about it. Maybe go back to the drawing board

16
up

Free market? lol, I just splurted out my coffee...

30
up

Local authorities need a kick up the slats.

They’re lazy, inefficient organisations that use their monopoly powers to obstruct housing development in our communities - but rake in a fortune in building consent fees, inspection fees, etc.

I’m all for quality/robust buildings but there must be a better way of achieving that than through the current practice (and fee charging) regimes of our wasteful, greedy local authorities.

TTP

This guy gets it.

I think its at the point where you should basically let people do what they want with there own private property. Sure you will get some poor outcomes but on the whole society will be better off. Certainly a lot better off than the status quo.

That was ACT's approach to the RMA going into the election

That's funny because last time I looked at their policy it was to only build out, never build up, especially in Epsom. Not joking.

Yep. David Seymour is all for the nanny state and enforcement of council rules when Epsom property values are at stake. He's an appalling NIMBY.

Agree. I want to build a DIY constructed 30m high toxic waste facility in a neighbourhood environment. Sounds like you'd be happy with this? What's your address? I look to set up shop next door!

Ha ha...
But at least in theory I think there's an argument to be a lot more liberal with regards to planning regulation of housing.
Yeah, some of it might be ugly, some of it may worsen traffic congestion etc but maybe in the scheme of things those negative externalities are tolerable?

You don't have to wait for that. Westlake Girls across the road from Atlas Cement Works. Rosedale poo ponds surrounded by residential housing, so who's complaining?

No one is suggesting no regulation, just better less regulation.

Has everyone forgotten that tort law exists? You don’t need to regulate the hell out of everything. Courts can come up with more pragmatic and efficient solutions

donny... 26 immigrants in a 4 beddie next door? If you want that move to the North of England.

That sounds like my flat in London 20 years ago.......

True, Auckland is turning into North East London without any of the other good bits that give it value.

Councils are scratching around for revenue in order to keep rates and tax increases low. What better way than charging high, some would say exorbitant building consent fees. I understand Auckland don't have a BC fee scale but charge on how much work they think will be involved in processing the application. This opens the flood gates to abuse. Here in New Plymouth you can go on the Council website and easily work out what your BC will cost you. The fee scale depends on the building value. Not too difficult to work out. The building consents have flooded in to NP such that they are out sourcing some of the consents to an Akl company to reduce the time in which applications are processed.
In the end the only way to see what's going on is to look at Council's financial management of income and expenses associated with BCs and hope they don't hide the income and expenses pertaining to BCs in some way.

These are the councils that have sought to keep rates low by spending depreciation for wastewater treatment facilities on vanity projects. Which now need replacing and there's nothing for it but to raise rates or increase debt. Yet another way in which young people are getting shafted.

We recently extended our house and I think the consent cost wasn't too bad considering the amount of work that goes into the consent from the council. The council are mandated to do all that work by the building code and the RMA, they are not allowed to short circuit it. If they approve something when one of those acts say they shouldn't then they can be sued by neighbour / next owner / etc.

Theyre driving me batty here in the north... existing suburban area, last section to develop... but they want reports that the local bats will not be affected by an extra house despite council having large high and bright street lights. And they say they want homes duh

There is no such thing as a FREE MARKET - get with the program JLM

You are dead right Talk is Cheap and the Greens are good at it

I also mulled over what HC Foundation suggested, but I would call it a ringfencing of a small portion of those homeowners that would find themselves in this position, rather than an underwriting. They still have to pay off the debt even if it is greater than the value, but the banks cannot unilaterally make them sell up, and it possibly stops a domino effect.

I emailed the author to see if they had done any hard analysis on any numbers, but have heard nothing.

From memory the original proposal was meant to be targeted at low earners but I'd be bloody surprised if what counts as a 'low earner' is able to buy a house today - so there would have to be some significant overlap into the middle. And yes, you're right - it's effectively the interest that is underwritten and a ZIRP offering to aid with paying down the mortgage. In terms of the stated aims and level of intervention, I think that's about what we're facing now if we ever want to get things back to sane levels.

In terms of stopping a domino effect, it's hugely important.

But being underwater in a property is still a big life imposition. Part of why the US economic recovery after the GFC was so sluggish is because a lot of people were still underwater on property - that makes it impossible to sell up to move to a better job elsewhere in the country for example, depressing potential (and would otherwise have been normal) economic recovery.

Think of it as being able to tread water, rather than underwater, and if that is the only two options the former is preferable for most people. But you are absolutely correct about the sluggish effect, which NZ also experienced after the GFC.

And this is what people overlook when they say that property prices don't fall.

For example, if an investment property was to go from positive cash flow to a negative cash flow (and thus on paper potential negative equity) as long as the owner can service it they will. This means funds are taken from other things like savings, education funds, business growth etc. (causing the sluggishness) to fill the repayment hole, and this will never show up on the sales record (when it sells in the future) of that property as a loss of other funds/opportunities, attributable to that property.

This is why the stats. show that prices rarely fall.

I agree that treading water is better than drowning, but my point was really that the suggestion by the foundation may not really be sufficient, and it would still be very politically unpopular amongst the electorate - people aren't really going to be happy if you deliberately sink their pleasure cruise but give them life jackets first.

Also thanks for pointing out all the unseen costs built into house sale prices, I hadn't thought about it from that angle before.

Perhaps not, but that has to be balanced against what sort of sacrifices people are making today to meet current price levels; as far as what 'the electorate' wants, that's how we've gotten into this mess. I really don't think you're going to have many people too upset houses and rents dropped in price if they can be sure they won't be on the hook for interest on negative equity on a family home - especially if it means they can spend that money on their kids or other aspects of their standard of living that they're currently doing without - fresh fruit, doctor's visits, job opportunities with greater travel commitments & childcare, etc. The ones who have over-reached and leveraged themselves past all sane logic in the expectation of perpetual, limitless capital gains across multiple investment properties... I have less sympathy there.

I am not sure treading water is always better than drowning, if all you can manage is to pay off interest for an long period of time perhaps its better to cut your loses. Since your income maybe high, so you won't get any government aid. Free lawyers, cheap doctors and free dental if you don't earn anything. Give up move into a nice insulated state house where you don't have to pay for maintenance, rates, and have low electricity bills, get all the free time you want, low transport cost since you don't have to go to work, and walk other places you now have the time. In our system there really is very little advantage to just getting by and "drowning". Once you are unemployed you could even start your own business (become a you tuber) that may pay of in a significant way.

I think you are right treading water is "preferable" because most people try are honorable, but I don't think it is necessarily the best option.

Well Yes, they do their best to make you voluntarily put your head under.

Research highlights that that cohort who just miss out on a subsidy or Govt. support are worse of than those that do qualify, and to better of, they have to be way ahead to do so. Thus there is less energy/more motivation needed to fall back than getting ahead.

So yes, instead of treading water, you need to either stop paddling, slip beneath the waves into the bosom of the state sirens, or paddle like hell, climb the 20-foot cliff and keep miles from the edge of that gorge.

Anyone who has lost their job, needs to move suburbs or cities, is getting divorced, or needs to sell up to provide funds for rest home care etc are in big trouble if they are in negative equity. It basically forces them into bankruptcy. Anyone who has used a house as a security for a business loan will see that business loan called in, putting them out of business (along with the people who used to work for that business). People seem to have very short memories, its as if the societal destruction that occurred in the US and Europe as a result of the GFC (which was caused by falling house prices) is something that nobody even remembers.

Yes, which is why the focus ought to be on #rentcontrolnow, not wealth tax; not more state housing; not more accommodation supplements as the means to lower house prices. Our cost-of-living is just too high and its the cost of accommodation that anchors that high cost.

That's exactly why action needs to happen now, as the longer things go on this way, on the more people could potentially end up in the situations you are describing. But no, our willfully obtuse PM is only ducking and dodging, deferring and delaying, and the B-U-B-B-L-E G-R-O-W-S B-I-G-G-E-R

Why not introduce non recourse mortgage legislation and leave it to the bank to worry about the risk?

edited for spelling: thanks to those who knew what I meant and responded in kind.

Worth thinking about I reckon.

Wouldn’t that kill the FHB market in favour of higher equity lends?

That's the risk. It might remove some of the higher-leverage speculative investment though, which would be a good thing.
It comes back to the same problem of wanting to encourage new builds and discourage land-banking and leveraged hoarding of existing stock. We need *blunter* tools rather than more indirect ones, I think. Armed chaperones in council offices, to ensure applications are being processed speedily. Zero tax on profits from construction of new builds. Ban on any individual owning over three properties, to be enforced by uncompensated confiscation, with the properties added to state housing stock. That kind of thing.

Possibly, FHB are competing against other first home buyers, and because they are all desperate to get into the market that will raise the price. This means that lower equity is quickly eroded, and you end up having to spend the rest of your life repaying the principle. What first home buyers need is cheaper houses not the ability to borrow more.

Or, you know, people put on their big boy pants and take **responsibility** for the **commitment** they **chose** to sign with the bank.

Your solution to a government induced problem is more government. Yeah.. nah.

The solution is getting the government, in all its hideous forms, out of the market as much as possible.

Release land, cut planning bureaucracy and focus on building basic infrastructure to support our growing population. Cutting tax wouldn't hurt either.

Wait until then apartments start going up in Ponsonby, then watch all the 'minimal government' types start complaining and advocating for stricter controls.

The solution however does have to be more than - send all the poor(er) people to the outskits of the city.

This is why the changes need to be made by central government: there are no where near enough people living in Ponsonby for them to lose sleep over. The RMA should not allow the council to be able to invoke restrictive planning regulations without very good reason ("the current residents don't like apartments" should not be a valid reason)

...to support our growing population

We can't afford to renew/properly maintain the basic infrastructure that was built 40-50 years ago. I'd prefer we stopped growing and started triaging.

12
up

GV. Yes. House prices need to go down. No. the government does not need to cover or underwrite any losses.

Agreed, let the banks deal with the losses, they have made the most from this ponzi (barring RE agencies)

.. but if your Kiwisaver goes up, it goes up. Should we then bring in policies to have it come down?

You get that people don't live in their Kiwisavers, right? I feel like it should be obvious why housing, of which we have an affordability crisis and that people need for shelter, is kind of different to Kiwisaver when it comes to this kind of thing.

Is Kiwisaver causing economic and emotional stress for 35% of Kiwis?

No, because we don’t have a corrupt market where a scumbag rent seeking class can constrain the supply of public companies.

Fix the fundamentals and the problem will go away. Taxing isn’t the answer. If you stop house price inflation then a capital gains tax won’t collect any money. Fixing the supply side is the answer.

If I have to pay tax on gains, I can also claim all my losses from the taxpayer. So even if a CGT reduced house prices, those who sell for a loss as prices drop will be subsidised by the taxpayer. Thats less money going to education, healthcare, roads and everything else that people seem to want. Not to mention everyone will be able to start claiming losses on shares, cryptocurrency, and any other "investments" that didnt work out.

Nope, the proposed CGT did not work this way - capital losses would only have been available to offset future capital gains.

underwriting negative equity.

FFS I could honestly vomit all over my computer reading that.

Delete your account here.

OMG, so much anger that I can not adequately articulate right now.

And why not? Would mean starting over without the millions being paid out in subsidies and top ups, but I guess you are maybe happy with that, especially if they are going into your pocket

I would not be keen on underwriting owner-occupiers. Why should the tax of those who saw the risk and avoided piling into the Ponzi be used to remove the risk to those who dove in?

15
up

For 30% of households, it's rent, not house prices that matter.

#rentcontrolnow.

30% of households...they'd rather concentrate on the 70% to convert into voters.

The two are related. If house prices dropped by 50% then with a delay rents would come down. But not by 50% unless rates, insurance and repairs also dropped. The delay would depend on the time it takes to consent and build new houses.
Rents could come down more than prices if there were fewer people looking to rent. This has happened with my CBD apartment - reduction in forign students means I've taken a 20% cut in rent and been happy to get it occupied - 10% of the apartment block is currently empty.

There are nearly 5500 rentals available in Auckland on TradeMe.
Without the usual influx of international students it will be interesting to see how much downward pressure on rents occurs.
Anecdotally too more 20 somethings seem to be staying at home, or returning home...

Yes, it is interesting. I have two Uni kids looking for a new flat in Auckland. And because it's the usual time of year for them to be looking (high demand), even though there is a lot of supply, it is all priced high.

So I see that those seeking tenancy because they can't wait, will still end up paying a high price, and it won't be until late Feb/March that we will see what happens with rents on all those vacant after this date.

Yeah some of the advertised central city apartments still look too high, $400 pw for a fairly crappy one bed box?

Judging by my property agent (who I trust) there is an opportunity to negotiate down. Mine went from a trade-me advertised $500 to $425pw actual. I'm happy since $425 is way better than what it has been this month: $0pw.

Yes, the is how it works in jurisdictions that have truly affordable housing.

Houses are approx. 3x median income. eg at least 50% cheaper than in NZ, but the rents are not 50% cheaper. That is because being a stable market they don't have a capital gain greater than the rate of inflation, so almost all the gain they make is in yield which is a lot higher. But the overall effect is more affordable houses and rent.

When has Green's focus shift from environmental issues to economic issues?

The Green's have focused on more than just environmental for quite a while. Here are their policies - https://www.greens.org.nz/policy_election_initiatives_2020.

There hasn't been a shift, right from when they were the Values Party they also talked about economic and social issues

It's always been an anti-capitalist movement. They just swapped red for green when socialism and communism were proven through real world experiments to be a total disaster.

Greens live in a world where China is still on the Long March and haven't converted to state run capitalism yet.

Prob when Sue Bradford the professional protestor became involved.

Seems to me the Greens are saying what everyone else is, pretty weak really "...or at the very least (housing) needs to stop skyrocketing up.” No politician wants to be responsible for the fall in house values, it would be political suicide.

25
up

Usually but not now. I am on owner occupier and own two rental properties but my 5 adult children in NZ are all renting and too poor to even dream of buying. All 6 of us would be happy to see house prices come down. I have never voted Green but may reconsider. We have been let down by both National and Labour.

11
up

What the Greens are suggesting (wealth tax + more state housing) will not lower house prices. They are disingenuous - we can't expand tax and the welfare state as a means to fairness and a good life for all. Put very simply, forget all supply and demand arguments - and just understand that the cost-of-living is too high (way too high) in New Zealand. Any policy ideas which are not aimed at lowering the cost-of-living are a total ruse/waste of time. Given the biggest outgoing for all households in NZ is the cost of accommodation - that is the marketplace to start.

The very reason we have high prices is that we have forgotten about the supply and demand arguments.

Hence the tax suggestions as a solution to a problem they first created. Take away the problem by allowing the 'lightest hand' regulatory mechanisms to ensure adequate supply, and there would be no need to tax.

The 'lightest hand' regulatory mechanisms is purely a neo-liberal economic premise. It's ACT's 'build anywhere' (except Epsom, of course) approach. And it always ends in an absolute mess. And then to clean up the mess - folks suggest more of the same is needed. We need to get off the hamster wheel.

And the counter comparison to your neo-liberal premise would be what you are suggesting - the heavy hand of the hammer & sickle.

See how easy it is to make a counterclaim.

There is nothing in your comment that even closely describes what I am suggesting.

And further, what is happening is certainly nothing to do with Act- and you think the present state is not a mess?

How would dramatically expanding state housing - which typically charges income related rent - not reduce the cost of living?

Taking demand out of the private rental market should reduce rents, aka, reduce cost of living.

Yes, it reduces the cost-of-living for those that qualify. But a majority of the population don't qualify for state housing. And moreover, just how big, as a percentage of all households, do we want to be dependent on the welfare state? Exponentially growing the welfare state is not the answer. Steady-state economics is the way to go - and to achieve that you need to regulate markets/market behaviour.

https://steadystate.org/discover/definition/

And yet amazing the jurisdictions with the most steady-state housing prices are those that have the least restrictions.

It's not about the number of regulations, but the right regulations.

Are restrictive covenants, such as we have that are applied by the landowner/subdivision developer, allowed in those jurisdictions?

Yes, the covenants are as much or as little as the market the subdivision is marketed to dictates. And in lieu of zoning, they are the zoning, just like they used to be historically everywhere, including NZ.

But a majority of the population don't qualify for state housing.

Taking demand out of the private rental market will reduce private rental prices. More supply is more supply and the market will rebalance as supply is added.

And moreover, just how big, as a percentage of all households, do we want to be dependent on the welfare state?

Of course, a lot less than we have right now would be ideal. But we already have accommodation supplement going out to a huge number of people in private rentals. If private rents went down, then accommodation supplement could be reduced.

Also it's quite arguable that the private rental market should be substantially smaller than it is, and the only reason it is as large as it is (and thus contributing to the increasing spiral of house prices) is that the government isn't housing as many people as they should be, particularly people in precarious life situations who have trouble holding stable employment or have health issues etc. Why are private landlords the ambulance at the bottom of the cliff catering to these people, and not the government? Private landlords who own 1 or 2 houses each can easily be ruined if they get a bad tenant who smashes up the place - that's not fair on the private landlord and nor is it good for rental prices that need to try and accommodate this risk factor by being priced higher. If the government has 100,000 tenancies, they can handle 100 bad tenants a month smashing places up without much sweat.

All excellent arguments for #rentcontrolnow.

They are disingenuous Kate I agree. But the fact that they say that house prices must fall is about the only thing I agree with the Greens on (but they are watering it down too much as well). They just haven't thought through their methodology - it won't work the way they think. I have indicated this before - the only way to achieve it is through strong regulation. the problem is as Jenee has indicated, the Government as in JA and GR, just like National won't do it because of politics. It makes a degree of dissonance with some of their other policies where they put people before money, but here they are putting money before people.

Couldn't agree more.

12
up

Kate. It will always come down to supply and demand.
If we had a decent population policy and no population growth building would soon catch up. Prices and rents would stabilise and even drop.
While we also have a silly bubble effect that doesn't help, that would soon collapse when landlords find they can't find easy tenants, and the capital gains halt.

is the "demand" fuelled by cheap money seeking yield, or genuine people seeking a roof over there head?

is the "demand" fuelled by cheap money seeking yield, or genuine people seeking a roof over there head?

Correct. Next installment of housing crisis about to unfold 11 Feb. I await and watch with interest. As in, we'll see houses both left empty by astute investors not willing to take the risk and the less astute who over paid expecting the high rents either unable to get tenants to pay or if they do they'll get problem tenants.

Don't think NZ seen nothin yet in terms of crisis... get the popcorn out from 11 Feb to infinity and beyond.

I assume your rentals are occupied by your adult children?

"But Dad's only got a couple of rental properties to supplement his income and retirement....." they say so it's all good, mirroring the comments of their peers.

And therein lies one of the problems of our high cost-of-living. Retirees would be able to live comfortably on the National Super if it weren't for our high cost-of-living. It is pegged at 65% of the net national average wage - and with no dependents, that should suffice as a retirement income. But wages are not growing as fast as cost-of-living, and hence the need for most seniors to supplement their income.

Agree Kate. As a retiree, with TDs expiring in April, I have to look at rental property.

Exactly. And it's sad - as you'll be buying into a way over-inflated market where you might struggle to find the yield that will replace your previous income on savings. But, given there is now NO income on savings - you are not alone in being forced to pursue higher risk, yield-seeking measures.

The pension is also given assuming the retirees live in their own home.

Yes, indeed, pegging to 65% of the average wage made that assumption. That is why every pensioner without their own home now qualifies for state housing.

What a treat that would be...

To qualify for state housing, you need to:

have after-tax income under $635.75 a week if you have no partner and no dependent children or under $978.06 a week if you have a partner and/or dependent children; and have less than $42,700 in cash savings or other property that could be converted into cash

https://communitylaw.org.nz/community-law-manual/chapter-24-tenancy-and-...

A married super annuitant couple (both qualifying) receive $1,304.08 fortnightly, or $652.04 weekly. The way I read that, provided they are under that savings threshold - they qualify.

https://www.superlife.co.nz/resources/articles-guides/understanding-nz-s...

Sorry Lapun, you're part of the problem and have benefited from it with your two rentals.

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Labour are absolute clowns. The delay in the underwrite policy sounds like another debacle.
Good on the Greens.

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Hippies want to turn NZ into a commune! Can’t punish the smart members of society who chose to buy property and get ahead.

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Yeah, they're real smart. Just buy a house. Why didn't the rest of us think of that? /s

They are real smart, some decided to put buying a house as a priority. I have friends who earned as much or more than me that decided that their "Lifestyle" would be impacted to much if they bought a house and being a "Slave to a mortgage" just was not for them. That's fine but don't get to 50 and start complaining when you suddenly want to slow down on the work front and then realize your still going to be working when you should be retired at 65.

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Your argument is essentially the tired "maybe if you didn't eat avocados" argument. Obviously you'll have peers who didn't manage money wisely. But the issue now is inter-generational. The only thing smarter about my landlord is she was born 15 years earlier.

Anyway, ranted about this too much on this site. Nothing changes, besides getting worse. There's no future for NZ's youth. Can't wait to leave.

Where you going? Genuine question... the big sand dune western isle or further flung fields afar?? Interested.

They’ve got the lifestyle and killing it in the US stock market with 100% gains, while the losers in real estate get what? 15%? #shortNZ

Right now it's deciding whether to buy a home when it's clearly a massively overvalued market entirely linked to low interest rates, which can rise at any point.

Because it sounds easy but many lack the commitment to make a purchase. My first house was $203k (1997). The 10% deposit took me 3 years to save and I had a 2nd job. IIRC my monthly net was $1900. If a single person can't acquire a deposit for a basic 2 bedroom unit outside of Auck e.g. P.North, Invercargill to get on the property investment ladder then something is wrong. Owning and occupying are 2 different things. Houses 1 (2 bedroom) and 2 (3 bedroom) I rented? Why-cheaper for me to live in a hovel and put excess capital into reducing their mortgage. House 3 became my first owner-occupier. I'll take some hate...bring it. But there are too many whiners who talk about 'average house prices.' Your first house is likely a pretty ugly creation. You paint walls, replace carpet, add new curtains. Heat pumps, sky tv, alcohol, going out, concerts are all luxuries if you aren't a home owner. Take the pain, reap the rewards 10-15 yrs later.

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yep yep yep can't think of any reason why someone's experience from 23 years ago when the population was 1.4m people smaller than it is now might not be relevant anymore, no reason whatsoever.

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Yeah, it's always the people with a number like "40-60" at the end of their name that are wildly out of touch. Love patting yourselves on the back at how hard it was 20 years ago. House prices went up 20% this year, in a year when I was hit with pay freeze. Already working 60 hours a week in a highly skilled job. The solution for us is simple - leave NZ.

Timing, opportunity and stars aligning are everything. I relocated to the Wairarapa 3 weeks before Christmas 2016, paid $210k for a 3 bed on 1/5 acre in 2017, and signed the S&P agreement sight unseen. But I had support from my employer, I had inlaws to stay at until we bought and chanced on a distressed landlord who wanted a quick sale before they listed.

I couldn't do that today because the property according to Core Logic is worth mid $400s so I'd be better off staying in CHCH/buying in Rolleston. Yes I "committed" but you need something realistic to commit to.

Yes, well said, not 'committed' as in you 'need your head read' which FOMO can be about.

Sounds like my assumptions the other day were spot on...

No hate from me Cheetahlegs, and I think your advice and situation is still relevant today despite what some commenters say. My partner and I saved over 4 years and were priced out of auckland so 2 years ago decided to move away from work and friends, back to Hamilton. The place we bought was a real dive when we moved in but had a lovely big section/great state home bones, right in town. We have worked very hard and renovated it almost completely ourselves. Bought at 400k and just had agent estimate high 500s. Now looking at property 2 (another fixer upper) - hopefully our forever home. Hamilton aint so bad... well, it works for us anyway :)

Not prepared to do it bud, they want the $1.3 million dollar house first up, new cars, phones, overseas travel and eating out all week long. You can easily spend all your money on "Lifestyle" rather than putting a huge percentage of it into a below average house. Totally comes down to your personality and its not even directly connected to how much your earn. If your prepared to start at the bottom and get in a flatmate or two its still possible. If your not prepared to compromise for a few years it gets ugly in later life.

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It's not about punishing property owners. It's about creating good social outcomes. I'd like to see it balanced with company and income tax breaks

The Prime Minister and her team need to be honest with themselves and the public. The need to explain what their housing affordability goals are and how they will achieve them. If they don't do that - there can be no common cause - no resolution - only finger pointing and blame shifting.
The best approach in my opinion would be to create a Housing Commissioner who has clear targets and tools.
Tools;
That rent is less than 30% of income for the lowest income groups
That house price inflation be slower than wage increases
A stable housing market that does not destabilise the wider economy
And the following tools:
The ability to direct an increase in public housing placements where and when needed
To purchase and release land as needed (probably releasing land to Kainga Ora)
And the power to review planning regulations, by creating, directing, and appointing Independent Hearing Panels

Good points Brendon.
I think the government has the power to buy (compulsorily) land under the Urban Develooment Act. They can then effectively rezone under that legislation too.
Why aren't they using it?

For example they could buy xxx hectares of land in xxx location near Auckland, at current rural land value. They could rezone then do all sorts of things, for example partner with a developer and sell the housing at affordable price points (that can be achieved because the land is valued on rural land values, rather than the usual model of rezone then sell at massively inflated urban prices)

Surely this is a no-brainer

I had heard that in general government are a bit hesitant to use compulsory acquisition powers, because it is quite heavy handed.
But surely a profound housing crisis is a pretty good reason?

Overseas government compulsory acquisition powers have been abused. In the US for instance small property owners have been deprived of ownership to give sweet heart land deals to big corporations. But yes with proper safe guards in place it seems reasonable to me. In most cases voluntary land purchases would probably be adequate and it would only be necessary to pull out the big gun of compulsory acquisition for clear hold-out cases that are attempting to land bank.

And that is what I have been suggesting for years EXCEPT allow private developers to do this as well, as per the Texas model.

What makes anyone think that the Govt. is best able to do this?

Their track record clearly shows they are not.

Fritz I don't know why they don't do it. It has been suggested.
Personally I can't see many objections to the government repeating the 1925 Hutt Valley Land Settlements Act which paid for double track electrified rail in the Hutt Valley, which meant state housing was successful in the Hutt Valley for the First Labour Government whereas the earlier Liberal governments attempt to build public housing in Petone was a failure.
See the following links
http://www.valleysignals.org.nz/documents/hvsettlement1925.html
https://en.wikipedia.org/wiki/State_housing#The_Liberal_Government
The government could even restart rail prefabrication housing factories
https://en.wikipedia.org/wiki/Railways_Department%27s_Housing_Scheme

Which of those tools addresses this issue?

That rent is less than 30% of income for the lowest income groups

The ability to direct an increase in public housing placements where and when needed would be the most effective tool. It would directly build rentals where rent is less than 30% of income for the lowest income groups. Indirectly it would remove tenants from the private sector rental market which would mean landlords would have to compete more for the remaining tenants.
The other two tools would also help because they increase the supply of more affordable housing - which evidence from within NZ and overseas shows decreases rent inflation.
These tools being
To purchase and release land as needed (probably releasing land to Kainga Ora)
And the power to review planning regulations, by creating, directing, and appointing Independent Hearing Panels

All that is going on at the moment as the Government is directing an increase in public housing but given the pace of rent rises, more and more and more and more people daily qualify for state housing. Hence the building of state houses can never keep pace with rental price rises.

So far, my figures for the Hutt suggest rent asking prices are averaging 15% above tenancy.govt.nz market rents, and 25% above the 30% of household income affordability measure. You cannot build your way out of these price rises by moving everyone to state housing.

#rentcontrolnow.

Love your ideas but since when do politicians ever come clean re what their plan is. This govt got elected on unrealistic plans. So do people just want to hear a nice story? I think so, yes many seemed to.

Haven't they signaled their intent recently... kiwis expect price increases and rbnz printing into 2022, so it's a foregone conclusion prices are going up so therefore isn't that the plan? The plan may not be explicitly stated but it's there if you look at the action or non action as the case may be. The plan therefore is to keep prices going up. Govt needs inflation to deal with all the debt.

I think inflation will sort things out in a few years when rates rise. People will be locked in on their high mortgages they got for paying high prices back in 2020/ 2021. There'll be less churn, home owners will have to tough it out and stay put, not do that amazing reno or trade up. But at least inflation will do some of the heavy lifting for heavily indebted owners.

It is interesting why plans are unrealistic. To Whom?

And I agree that for Labour they were. Because they are incompetent.

Take building 10,000 house per annum. They couldn't even build 1,000 Kiwibuild houses in three years, yet ONE housing company in the USA builds 50,000 plus houses per annum.

And Yes, everything we have got, we have planned for.

We have such lightweight political leaders in NZ.

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The NZ economic model relies on increasing house prices to provide that borrowed into existence cash.
Stable prices means no extra debt and thus no more growth.
Declining house prices and mortgages being repaid makes it even worse.
Can kicking economics if ever there was one.

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Long-term the housing crisis pretty much engulfs everything else in New Zealand. Perhaps only climate change is as significant. I think our Prime Minister Jacinda Ardern and Finance Minister Grant Robertson have to ask themselves - when they are out of government - what will they have achieved? Unless the housing crisis is sorted nothing else they do will really matter.
Sorting out the housing crisis will take political courage. It may come at a political cost. Taking on the beast that is our housing market - the endless free money it gives to a crucial voter segment - the expectation of needless capital gains mixed with fear of a drop from the home-owning majority is a challenge not for the faint hearted. But not to act is also unthinkable.
Over the summer (my winter) I wrote a series of posts on the rack-rent housing crisis which Interest.co.nz kindly republished.
I believe these papers outline a sensible path out of this 'brutal catch-22' (H/T business journalist Bernard Hickey for the catch-22 term).
I have now collated this series into one piece here.
https://medium.com/land-buildings-identity-and-values/new-zealands-rack-...

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Agreed. None of their other policies on poverty reduction or inequality are going to work if they don't hit housing very, very hard.
Which they're not doing. The failure of this Labour term is already baked in.

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I agree if Ardern does not insist that housing is hit hard then this will bugger up her entire agenda - poverty reduction - not possible when the housing related cost of living is rising faster than income. Reducing child poverty and mental health - not possible when basic needs like shelter can not be provided. Fixing the poor performance of the education tail - not possible when the rental market is poked meaning many children do not experience a stable school-life. Productivity related economic reform - not possible because the loss of skills to Australia will continue - only Sydney and Melbourne are more expensive than Auckland and Wellington. So yes if housing continues to be under-promised and under-delivered then the failure of Labour this term is baked in.

Do you have confidence in Minister Woods?
I don't.

I have nothing to base confidence on. I have never had the opportunity to talk housing policy with her so I can only base 'confidence' on her actions. I hope she has the Helen Clark under-promise and over-deliver strategy. But as time goes on...

I've heard from well-placed sources that she is in fact one of the most competent Ministers they have.
That's irrelevant though, if they don't have the policy and they don't have the push from the whole Cabinet + PM. Which they don't seem to. They're not exuding urgency right now even though this one issue is likely to leave us looking back at the Jacinda years, much like the Key years, as a wasted opportunity and period of slow decline.

Fair point.
I wonder where the barriers are? Robertson and Ardern's conservatism?

I wonder what position the Maori caucus will take. Maori are over represented in rental household figures. Renters are the ones at the sharp end of this housing crisis. They are the have-nots. Will the Maori caucus fight to ensure that Maori and renters do not become the permanent have-nots - the group that always works but never gets ahead...
There is an intriguing rumour about a full-on verbal stoush between Grant Robertson and Willie Jackson over Grant telling Treasury that spending levels will not change and the Labour’s Maori caucus wanting to prioritise action on poverty, *housing*, education, justice and health - which will require higher spending levels. Apparently the argument escalated up to Jacinda to resolve. Currently the rumour is only that a fight occurred not what the resolution was.

Interesting/great to hear - I'll fire off my findings and suggestions on #rentcontrolnow to Willie Jackson. Had only directed correspondence to the PM to date.

Correspondence to the PM and most ministers is a waste of time. They aren't interested in different ideas.
Maori MPs - better bet.

Which way do you think they will go?

Ask for more Govt. support, or favour houses becoming more affordable so they don't need the support?

The latter.

My prediction is the Maori caucus would want a combination of both. More spending on public housing, housing related infrastructure bottlenecks and public land purchases where private ownerships exploits strategic land locations for price gains. Plus the caucus should want structural reform of planning restrictions so the public sector (which they will ensure includes Maori providers in the community housing sector) get more bang for their buck with their build programme and so Maori whanau can go to the private sector for lower cost new builds if that is the whanau preference.

I think that is too deep for them to consider, plus in fairness due to their size and limited influence, I think they will go for the former, much to their long-term detriment.

I'm surprised Maori are not kicking up more of a stink about the housing affordability problem. In main stream media there is talk of under representation in just about everything but home ownership. Especially irksome are comments I see on here of such as - "just leave NZ and go off to Australia etc, if you can't afford a house here". Why should they leave, be driven out of their ancestral lands?

Why should any NZer have to do that?

the barriers are power -- simple as -- they know they can only have power if they dont do a CGT, if they dont shut down immigration ( covid situation withstanding) - And of course avoid any controversial policies such as taxing empty property !

Bottom line -- in their four years house prices have rocketed at their fastest rate in over a decade - immigration pre covid was still 70K a year - unemployment had reversed its downward trend and was climbing - and hte housing waiting list went from 8000 to over 20,000 despite all their rhetoric

Ardern is blinded by her own press pack fawning over her - and a desire to get the top UN job that auntie helen missed out on - and dam anything else in NZ -- as long as she is promoted on the global stage -- Crap gun legislation that has failed completely to take guns off the street - but massively penalized those responsible gun owners - farmers for pest control - is a clear example of global admiration - practical failure and misery for New Zealanders

Agree.

#rentcontrolnow.

needs a lot more than rent control Kate --- need to see changes that promote very long term rentals - and that protect both landlords and tenants in a different way -- similar to some EU countries like Germany -

The tenancy tribunal here is a standing joke -- tenants and landlords agree -- and needs a complete reform - including a better income source than simply interest on bonds -- this would allow any Tenancy orders to be paid directly to tenant/landlord on the day -- and the tribunal having the powers to recover any costs/ penalties directly from the landlord or tenant

A tenant who pays rent on time, does not willfully damage the property - or cause a public disturbance should have the right to at least 5 years tenancy -- if not 20 - with only annual rent reviews in line with some inflation/wage linked index -

A landlord then knows if a property is trashed they will get the full costs back immediately and not $5 a week over the next 50 years!

I know -- greedy landlords will want to maximise income etc -- but if the regulations are clear and fair -- allow a reasonable rate of return on investment on one side -- and surety of tenancy on the other -- everyone wins - and people can make a choice if they want to be a landlord or not under those conditions -- instead of a whole lot of poor landlord simply speculating on capital gains -

I am not generally in favour of regulating business -- but Housing is the most essential of all services and rights -- and the one that has the most significant impact on Mental Health, wellbeing, AOD , and general quality of life -- so would happily support it

This Government has an overwhelming Mandate ( in an NZ context) to think radically and create a move even society -- and its failure ( 528 new homes in three years) is shocking given its whole initial mandate was arounf 100,000 Additional homes in ten years!

I agree - major reform across many areas of tenancy, planning and building/infrastructure law are needed.

But right now - as an urgent measure able to be implemented via regulation (as opposed to via legislative change) - rent controls are one of their only immediately effective options.

Pretty clear Jacinda totally out of her depth on housing and, as another commenter mentioned, the climate thingee is the perfect foil for her to deal with it - housing.

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Good on the Greens. I'm a home owner and know that if house prices drop, I would get less for my house, but the house I purchased would also be less. I worry about my children and their friends ever being able to own homes.

Precisely. My three bedder has gone up in value by $150K since I bought it a couple of years ago. Seems excessive for the new carpet and painted doors we've had done, tbh. The problem I have is I will soon need more bedrooms and moving to an area with better schooling options presently means doubling my current mortgage, which is already a fair whack of our take-home pay. The odds of our household income doubling in the next five years seem rather small. Unless you're downsizing or fleeing to the regions, then there's a decent chance your next home is increasing in price faster than the one you're in.

Interested in the schooling point GV. Quality of schooling is important for many.
For the development we bought into, the local schooling is poor. Most of the residents have no kids, or have infants, or are about to have children. It will be interesting to know how many have plans to sell and move once kids approach school age.
One option might be to retain the existing house and rent it out, and rent in a better school area?

I sympathise with people who argue this is a form of 'white flight' because the idea is that parents should get involved with schools and the community to help improve things and then everyone benefits. However given it now takes two working parents to pay a mortgage, opportunities for investing time outside the home are limited and while my generation has taken plenty for the team over the years, I don't want my children to be given a less-than-optimal education for the sake of my own naive moralising - if it actually mattered, someone would have done something about it by now.

Yep exactly.
Would you consider renting out your current house, and renting in an area with better schools?

In all honesty, probably not, because a) I've developed quite strong opinions about home ownership as an investment in the last few years and b) a major selling point of ownership is the stability that comes with it. Moving to a desirable area and then renting seems like it would undo the gains we made from taking on ownership of a property in the first place over renting, just with a bigger $$$ cost attached to it.

Fair enough.
So you will sell up and buy in a much more expensive area, taking on a bigger mortgage.

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But our P.M. said most people expect to see a small gain in value of their most valuable asset, i.e. their house(s), no?

As a follow up to that, I'd also like to see a small gain in value of my second most valuable asset, i.e. the family car. Be good if this can be arranged somehow through policy (or lack of policy and action). Thanks.

I'm looking forward to her extending the expectation to precious metals, cryptocurrencies, the sharemarket, staple foods, life saving medication... that sort of thing...

Did she say small gain, or that people expect house prices to go up?

This shows she has no idea what that means, because as a hoped-for expectation then almost every property owner in the world would expect that, and guess what, in jurisdictions where property is affordable, they also expect prices to go up, and they do.

However, they only go up at the rate of inflation, but stay the same price as a ratio of the median house to income multiple. This is because their system gives stability both up and down, so while they don't boom, they don't bust either.

JA made it sound like people are expecting the type of rises we have seen under her leadership, so I can rightly assume that this has been a cunning plan of the Labour Govt. to make this happen.

Also my cat, I paid $100 for her 15 years ago, and she has increased in size somewhat since I purchased her,.I'd like a return on my investment please

Also my cat, I paid $100 for her 15 years ago, and she has increased in size somewhat since I purchased her,.I'd like a return on my investment please

It's a reasonable idea, just how it's done is the variable. If house prices were to fall say 40 percent then building costs both materials and Labour would have to drop too other wise the housing shortage would get worse quickly. How would the building industry feel about a drastic drop in income.
Then there is that nasty little fact that a 40 percent drop would potentially crash the banking system and we could expect a extended recession and high unemployment.
Better to try and flatten house price inflation and raise average salaries.

Prices of existing housing doesn't have to drop. As outlined higher up, there are tools in existence that the government could use to realise new housing in NZ's major cities for circa 350-500k, for FHBs.
If more of those opportunities are available then the price of existing housing matters less.

New housing on the fringe sets the price for all housing going in.

If a house costs more on the fringe, (maybe due to that new-build costs are $50,000 more or land cost etc.), than the closest older adjacent subdivision, then that older subdivision gets a free value uplift because of that. Maybe not the full $50,000 but close. This ripples all the way into the CBD.

Just like the present price rise due to lack of supply going out, as well as up is affecting all properties, so then will a true fall.

Lots product prices going up 1 Feb... ply, decking timber... big jumps too, 8% product increases.

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The Greens first have to own up to the fact they are in part responsible for the present state of affairs.

They have been great promoters of restrictive growth boundaries and the compact city model that has been largely responsible for the system we have that causes high house prices.

The high house prices also provide a feedback loop that further speeds up the process, ie high house prices force people into smaller and smaller accommodation eg townhouses, and apartments.

The price of the housing takes money away from everything that the Greens see as an over consumption, like the ability to own a car, use fossil fuels, which then gets you to use PT more, etc.

And then with a completely straight face, they say they want prices to come down. And what is their policy to achieve this?

Great points Dale. And never forget the main perpetrator here: central bank monetary stimulunacy. Look at those two low mortgage rates from ANZ and Westpac, while savers are hollowed out.

And the ANZ's economist has the audacity to proclaim the profound housing issues we face!

Yep. Hypocrisy rules. The FED proclaims it has played no part in wealth inequality, when they are the prime cause of it over the last 12 years in the US. Adrian Orr and RBNZ monetary policy are hopelessly conflicted around all housing issues.

The Stats. are something like 35% of the USA's wealth is in their home, and rest in other things like some direct savings in banks/cars/etc, but most in other business growth investments/shares etc.

In NZ we have over 75% of our wealth in homes, as it's the only game in town, which takes alot of money from business growth investments/shares.

Once homeowners, especially FHB, have committed to the price of a NZ home, they have very little left to put into other things.

Words of wisdom there man. Thanks for adding that.

Sorry but I just can't take anything the Greens say seriously, even less now with their ludicrous posturing.

Those on the public housing list when this Labour government came in: 6,000.

Those on the public housing list now: an incredible 30,000.

And the media, which vilified the last National government on this issue every day in the press relentlessly, goes largely silent. Because the press now plays its favourites: there is no journalism as I understood that profession growing up.

Just saying. And I wonder if this government regrets in any way their war against landlords.

Plus incentives matter: electioneer on providing free food and free housing and a life as a lolly scramble from the Nanny State, and a lot of people will sit on their chuffs filling up the food banks and waiting for that free accommodation.

Because National used every trick in the book to prevent people getting onto the list or kicking them off early. Same as they did by 'getting rid of waiting lists' for health services.

They do this every time they're in government, and useful idiots like yourself fall for it and think they're amazing managers, when all National has actually done is swept the problem under the rug, so when Labour come in and remove the rug, useful idiots such as yourself scream about how bad Labour are at managing things.

Reported. Personal abuse. Keep that out.

The formula is: (Commenter + calling Labour out for failings) = (Lanthanide + deflecting to historical National shortfall)^divide and conquer.

Maybe find out what the phrase "useful idiot" means.

I know what it means. I'm 55 years old. :)

Trouble is I'm the furtherest thing from a communist apologist. Plus you were using it in a derogatory sense: I'm sick of the personal invective from some accounts and will report them every time from now.

If people behave like ducks by running around quacking, it's not derogatory to point out they're behaving like ducks.

Mark do you have a source for 30k please? I am not questioning you, I just want a source so I can quote it for something.

A New Zealand mortgage broker put the figure up on Twitter this morning: his exact words: 'waiting list will soon break 30,000, from 6,000 at start of this government'. He's a respectable source: always has his figures right.

No Mark is wrong. The public housing waitlist is 22409, according to the latest released data (November last year).
Journalist Henry Cooke wrote about it today in Stuff.
https://www.stuff.co.nz/national/politics/300209428/public-housing-waitl...

You're basically right Brendon. By the way, Cooke is one of the few journos that is reporting on this.

For clarity, the mortgage brokers full tweet was:

'Appears we are on track to hit the 30,000 I predicted this year under the most anti-landlord government we have ever seen. Incredible growth given it was less than 6000 when they took office.'

So, on track for 30,000 this year: and we know that will come to pass.

Every single and or couple on the national super qualifies for state housing (provided they have cash savings less than $42K and do not own their own home);

https://communitylaw.org.nz/community-law-manual/chapter-24-tenancy-and-...

https://www.superlife.co.nz/resources/articles-guides/understanding-nz-s...

Everyone unemployed qualifies; everyone on the current minimum wage working a 40 hour week qualifies.

Whether they all get on the waiting list is another matter.

#rentcontrolnow

Again :) rental control will make this issue much worse, Kate.

Try: The one issue every economist can agree is bad: Rent control https://www.washingtonpost.com/opinions/2019/06/15/comeback-rent-control...

One economist has called rent controls the best way to destroy a city outside of bombing it.

Again :) the problem in implementation of rent control in most jurisdictions is that only some rental accommodation is subject to rent controls - and hence the market distortions you (and the article) refer to.

Such measures need to be universal (i.e., all rental accommodation is subject to rent control) and the formula for calculating a weekly rent maxima needs to be tailored to particular geographical areas/markets. For the data modelling I am doing for Hutt Valley, I am using the formula RV/1000 = weekly rent maxima; and it is that formula that presently suggests an average weekly rent 25% above that formula. And the new builds that are being rented out are all coming in under that maxima - in other words, that high end of the rental market would be unaffected by the rent maxima. It is the low end of the market that is the issue - price gouging is clearly evident (based on purchase prices) for nearly all of those low end rentals.

Can you name an instance where rent control has ever not ended up in all the worse outcomes shown by the peer reviewed literature?

Yes, hoping to summarise all those comparisons in an article shortly. According to the OECD (2019) the administrations where rent controls are applied universally are Colombia, Luxembourg and Sweden. Sweden works on price-control setting based on a 'utility value', whereas I would suggest NZ works on a price-control setting based on 'market value' (i.e., a RV-related formula).

My brother lives in Sweden and apparently availability of private rentals is diabolical. Potentially that could be one of the unintended consequences of rent control there.

Yes, and there is a 'black market' of sub-letting going on. The problem I see with their present regulatory settings relates to their application of 'utility value' as the factor determining rental prices. Explained in brief here;

https://www.politico.eu/article/sweden-rent-too-low-stockholm/

Universality is the way to go but you have to have a formula that is based on market (not utility) value. Which is why I'm recommending a formula of rent maxima = RV/1000 +/- x%. The variable 'x' being available to temper the market price of a property where market valuations are running well above CPI and wage inflation.

At least the last National government did everything right - built lots of state houses and never sold any off. They certainly left the state house stock in better shape than when they were elected.

Oh wait...

It's just too simplistic to blame the people in charge now when it is a problem that governments arguably since the 90's have contributed to.

Though whilst i agree Labour today could so far have performed much better, they couldn't just magic up thousands of new houses overnight. That being said there is no excuses this term, they need to do more.

My point was more with their current policy settings, Labour *can't* fix housing. They have the wrong incentives, they can't attack RBNZ independence so they can't stop stimulunacy, they won't attack Greens so there will be no loosening of regulation around supply, and Ardern and Robertson are on record that they (wisely) don't want to see house price falls: thank god for that given the number of fully mortgaged FHB's who've entered the market.

I agree. Their only effective option is #rentcontrolnow.

Ahem :) Can you name an instance where rent control has ever not ended up in all the worse outcomes of rent controls shown by the peer reviewed literature?

See above response to the same question.

Yeah exactly. But no more excuses now it's their second term.

Probably shouldn't have sabre-rattled to the point of unrealistic hype in the lead-up to that election then huh - there wasn't exactly a stack of moderation when it came to attack National. Lots of lofty promises and tight deadlines, which they then immediately failed to deliver on, and then continued to fail to deliver on, and even promoted the guy who oversaw the failures in the lead-up to the election. But sure, let's blame the expectations of the electorate. It's better than actual accountability, I guess?

Guess John Key shouldn't have crowed about a housing crisis in 2008 before the election, and then refused to admit one existed up until he resigned, eh?

Probably not! OK, now it's your turn. I know it's hard, but give it a crack.

I dont know about you, but i dont buy into any hype generated by a political party campaigning before an election. It is the oppositions mandate to attack the government's performance. The only thing some do it better than others, look at the current leader of the opposition for an example of how not to do it.

There were very good reasons for Labour to attack National and the hapless Nick Smith on their performance, after nine years they did nothing on housing - even went so far as dismiss it as a problem. It's hard to compare a 3 year term government with a 9 year term one though. As i mentioned above, fixes to intergenerational problems are not fixed overnight and need time, but there is no excuses this term.

What i would like to see from National this term is to try and build a bi-partisian consensus as they are equally to blame for where we are today. Right now I am seeing a lot of opposition from National to Labour for opposition sake, but no actual concrete policy ideas from them that will make a difference long term. Labour would also be smart to extend an olive branch.

Why is the bar higher for the party in opposition in terms of scrutiny than it is for the party that made extremely specific promises to get elected and is literally in power and capable of doing almost anything they want at this very moment in time? And again, if things cannot be fixed overnight, why did they promise extremely specific things in specific time frames to get elected? It's not an acceptable form of advertising when businesses do it and I fail to understand why we should accept bait-and-switch from our political parties.

So if we did not insist on allowing all these essential workers (many of whom can be found serving liquor and coffee) and all these third world economic migrants (masquerading as students) to soak up so many of our much needed rental houses would that 30 000 not be a lot lower? Personally I would call immigration the best gift a landlord could ever receive.

I find myself agreeing with you once again Mark Hubbard. Let's face it - Labour got in this time around because of their performance re Covid. Housing is now the crisis and the Govt appear to be 'missing in action'.

The media these days in NZ focus simply on opinion pieces (which I suspect are funded by either party), or supporting anyone who makes the most noise.

I think the figure is 22,400 but whatever... point taken, the numbers have exploded and it's in direct response to Labours caring sharing feelz policies.

As I've indicated in previous posts, waiting to see what kicks off from 11 Feb. Don't think NZ has any idea what lies in store following next rental laws.

They're correct, but what will they do with all FHBs they've collectively encouraged into the market in the last 2ish years? They've been signalling all will be looked after. In Ireland, outside the best suburbs in cities, it took 12-14 years for property value to recover to peak values. That's a lot of people in negative equity.

I dont know why the govt does not go lease hold on sections with option to buy later for house owners

I have suggested that to them. Their response is that there is stigma around leasehold.

I'd find that a credible viewpoint if they hadn't yeeted body corp reforms with no firm alternative plan to do anything about them.

The stigma is due to the lack of clarity over / ability to freehold the land. I would invest in funding the land portion for a house purchaser if I had known rights and it made economic sense.

Yeah. If Govt provided leasehold land with certainty of tenure, and certainty that ground rent couldn't be jacked up beyond some agreed limit (set at CPI, say) then it would be a much more attractive option.

I have argued that. They aren't interested.

I wish we had leaders who could capitalise on their charm factor and lead a change in that sort of stigma.
Imagine "Kiwis expect house prices to always rise... but actually that needs to change, housing needs to be desired because it provides stability and security, not because it is a path to risk-free investment."
...
"Leasehold land has a certain stigma, but our government will develop a lease-to-own program to significantly reduce the cost of land to owner-occupied property purchases"

They should stick to their knitting. Like keeping the wharepaku clean and make sure there is plenty of toilet paper handy.

there are two key initiatives that would bring immediate relief from house price pressure:

Reduce the bright line test to 2 years to free up the locked up properties that investors are holding onto in order to avoid the tax implications

Increase the OCR to 2% in order to shake out the marginal players, thus freeing up even more housing stock

the combined effect will bring escalation to a halt overnight and probably reset the market without any serious damage.

The Govt can implement this by:
Building 60k Govt houses across NZ
Force all councils to provide 1000s of cheap 100k sections
Delete the accommodation supplement
Reduce tax on interest earned up to a limit

Could work but Tax payer would have to pay for the services as Council bloat wont be able t pay for this. Alternatively flat land tax on everything and make every debt speculator pay a minimum rate of return quarterly.

How would the council provide the infrastructure to those sections? One way would be to allow councils to offer infrastructure bonds, which our central bank can buy (at very low interest rates, like 0-0.1%). This is what China does...

How would a council provide "1000s of cheap 100k sections"

I can only image this would be done by forecebly buying land up and reselling it for far less then they paid for it? It's not as if councils own all this land already.

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Yes house prices need to fall. So good on the Greens for talking sense for once.
We just need another party to actually do it.

Well it matters very little what the Greens think about house prices, they are not in government and have no way of influencing house prices.

You are right, but in some ways they could/should function as a journalist within the parliament - they can repeatedly bring the conversation to house prices or house supply or whatever it is when the government plays the game of claiming progress unfairly.

Exactly. A not dissimilar function to the opposition.
It's actually a really important function.

Hahaha, you mean like the constant whinging here on Interest... LOL

NZ holds so much for the future generations..

I concur why should housing be any different to any other commodity.

Good politics really. If they can take 5% of the vote off labour then they will be in kingmaker position after 2023 election.

Not really 'king-maker' if they refuse to work with parties on the right.

2026 I think.. the Nat is going nowhere with JC and Donald T episode!

I think 2023, I think we have hit peak jacindamania in 2020. By the time 2023 comes around COVID19 will be recent history & politically dead. What else is there but housing. The PM won't be able to do a switcharoo on the issue as she has sort of entrenched herself in the "New-Zealanders expect house price rises" position. Labour will then hemorage votes to greens over the issue & after the 2023 election Labour will require greens supprot to form a govt.
The question is then will the greens be a good little lapdog for labour (like act to national), or will they have backbone???

You are right though National is basically a joke.

All hat, no cattle.
Always smile, no solution

Good, finally, someone in the halls of power has said it. and they are right. Rather than peeling of note after note of top up and subsidy money, I think it would be cheaper, in the long run, to scuttle house prices and underwrite the losses of those most vulnerable to the falls.
Rip the scab, then no more subsidies etc, only state owned houses for those who need it, and tenancy laws rewritten so that provision can be made for those needing long term rentals housing, but also need to feel secure and have some sense of a stake in the ground and control of their lives.
It has all gone too far now.

RTA rules have been rewritten and the state will be taking on new tenants shortly. Hooray.

Yes except they can't house them of course.

Lucky the moteliers can step in though.

Lucky we had a pandemic wiping out the tourism motels would have got.

Oh wait... what would Labour have done if the pandemic hadn't emptied the motels??

Funny isn't it how politicians operate:
- 2016 outside government Greens were saying house prices should fall.
- 2017-20 in coalition government - house prices soar.
- 2021 outside government Greens again saying house prices should fall.

Greens only had confidence & supply after 2017 election. Winston kept them out.

Do you still honestly think the Greens were part of the 2017-20 coalition? SMH

The Watermelons don't want you to own a house. They don't want to help you buy a house. Best case you rent from the state for ever and they get to allocate housing based on your fealty to the party. Next best is they give you a subsidy for life to rent from private landlords which secures a few votes from some richer Watermelon landlords that enjoy the wealth transfer but still want to feel like they are "making a difference"

1 Family 1 house. Make it law. So simple it makes one cry.

Define family. Define house. Also decide if you want other entities (such as companies, and housing charities) to own houses or not.

Not so simple maybe. Also what are you going to do to enforce it?

Do you get paid per comment? Or on retainer?

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Housing is an attractive investment because of the generous tax treatment it receives. This keeps pouring petrol on the housing fire. Other investments (like my bank savings account and my Kiwisaver) are taxed until they bleed . What about levelling the playing field by reducing the current punishing taxes (like FIF taxes) on other investments so that housing gets some real competition?

I'm not usually religious but feel free to join me in a prayer:

St. Jacinda, Patron Saint of Property Investors,
May your reforms be as ineffectual as a Nationals housing plans,
May they be as unclear as Adrian Orr's speeches,
May they be as slow as the progress of New Zealands average infrastructure project,
Amen.

Now, what do RBNZ have to say about this? They must be ready to stoke the fire if housing prices don't increase fast enough to support consumption levels. They can't allow government interference to interrupt their game of economic Jenga.

What we need is a government who can build 100,000 homes....

Oh wait.

Why are Japanese demographics a problem? No Immigration.
Why have NZ demographics not been a problem? Mass immigration.
What doesn't NZ have right now and for the at least the rest of the year? Any immigration
What do you think will happen to Auckland house prices as large amounts of new dwelling supply comes on stream?
The RBNZ will need to extend the privilege to banks to excuse all who can't pay their debts for at least another year. The banks are still granting new mortgage deferrals on a weekly basis.

actually in the 12 months to the end of October 2020 the net migration into nz was 60k despite 8 months of restricted flights. That is a city the size palmy coming into nz in the last 12 months. That is why the housing shortage has been getting worse.

Government will do nothing but like national believes that economy is only based on supply as for them too now housing crisis is a Good crisis.

Close to zero net migration and keep building. The problem will be solved in a few years. Demand side policy will just change who gets the money (i.e. government will take a bigger cut), it won't solve the fundamentals of too many people and not enough suitable housing.

Double post

#rentcontrolnow - an example

For rent - Brown Owl - Upper Hutt - 2 bed, 1 bath - asking $430/week
https://homes.co.nz/address/upper-hutt/brown-owl/29a-shanly-street/A1z9x

All calculated at interest rate of 4%; assuming no deposit on purchase price; $1,000pa insurance; $2000pa maintenance; and current rates..

Rental Yield (based on original purchase price and rent at $430/week) = 15.04%
Rental Yield (based on current RV and rent at $430/week) = 4.22%
Rental Yield (based on my rent maxima formula, RV/1000 and rent at $385/week) = 3.64%

The $45.00 per week difference between the current asking price and the rent maxima formula makes little difference to the rental yield - but a huge amount of difference to the renter on a low income. And, based on the original purchase price of the property - the landlord is doing extremely well with that particular investment. And when they sell, the capital gains are tax free.

I think its very easy to blame the government, whilst they have some important levers to pull, they are just a manifestation of our wishes.

We as a society need to decide - should property be something to allow people to put a roof over their heads and get on with life to manage their lives without a large financial burden

Or alternatively - is it something that should be speculated, where we are allowed to make large risk free profits on?

If you fall into the second camp and vote along those lines, there is your answer as to why government is hesitant to move.

Maybe its time we (the collective we) need to reset our expectations about what the purpose of housing is, then the government and our political parties might be able to make some more bold moves that are for the good of all in society.

Here come the Greens. Rocking up late. Toting the law of unintended consequences.

Otherwise, just build. Build, build, build, build, build.

Im sorry Greens you can not control asset price increases that were created by injecting $100 Billion into NZ economy and also decreasing the OCR. They did this knowing asset prices will increase and now they want to stop this increase , GOOD LUCK Greens stick to green issues not money issues.

Which government is it you are talking about, clearly not NZ's, we don't have a Green Party government?

I expect the government to do something like extending the brightline test early this year. I hope they will take more substantial action on housing supply once Covid has passed, the borders are more or less open and the threat of a major depression has passed. I hope Jacinda's statements before Christmas about maintaining house prices was in large degree about not wanting to undermine the economy in the meantime.

The extension of the Brightline Test is the number one reason why there is a shortage of houses for sale. Everyone is now sitting on them. 2020 would have been the year when houses purchased in 2018 could have come back to the market without paying the tax, so what we are seeing is the impact of the 2018 Brightline. This year we are missing the houses that were purchased in both 2018 and 2019. Next year we will be missing the houses that were purchased in 2018, 2019, 2020. And so it goes on as each year compounds the lack of listings. Extend the Brightline to 10 years and it will be low stock levels for the next decade.

Should reach a steady state in 2023.

Ah...so it is all about tax free.

That will do jack and would be just what you can expect from this lame government.

Yep I agree the brightline test won't do much - I just think they will want to look like they are doing something. I hope some real action will come once the economic risks are lower.

Start implementing wealth taxes, and forcing house prices down, and Qantas better start putting on some extra flights from NZ. The Green Party forgets that people can vote with their feet, and when 3% of the NZ population decide they arent going to have all their money stolen from them so that welfare beneficiaries can get free houses, they will head offshore and take the 25% of income tax that they currently pay with them. Aint globalisation a wonderful thing?

Yes, house prices need to fall. Now. We need to raise interest rates gradually but immediately, and if necessary provide some support to owner-occupier who find themselves under negative equity as a result.
Better sooner rather than later. The longer we wait, the bigger will be the mess caused by this hyper inflated housing Ponzi.

Get the banks to provide the support, they have built the environment, they underwrite the assets, they have profited from the rise.

Can we wait till I refix before rates rise again please?

I do think we'll see rate increases in 2022.

No need to fall, when they're (housing cost) not yet reached their peak potential.. NZ still not yet ceiling here.

What is in store for Kiwis if PM Kachinga keeps doing nothing - Hong Kong style cage apartments. It's nearly the end of January, WHY ISN'T THE GOVERNMENT DOING SOMETHING? Because they want this, PM has already confirmed - people want their house prices to keep increasing

Will never happen. Do you honestly think property owners are going to allow their assets to fall just so the minority have a chance of buying something? Ridiculous cheap talk from the Greens

Wow... there is a political party in New Zealand that can state the bleeding obvious. One thing needs to be done to right the mess overnight. At the point equity is released from an existing property to buy another, the property/s from which the equity is released should be valued and tax applied on the released funds. The money is being spent..so it must be income. The banks will cry foul.. who cares they are not our banks, and they have driven this farce. The housing market will fall. Anyone who thinks you can fix this without the market coming down has their head firmly stuck in the sand. Currently it is the growth that feeds yet further growth through equity release on existing portfolis of property.