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Dipping our toes into the podcasting world, interest.co.nz probes whether it would be possible and desirable for the government and Reserve Bank to deliberately reduce house prices

Property / opinion
Dipping our toes into the podcasting world, interest.co.nz probes whether it would be possible and desirable for the government and Reserve Bank to deliberately reduce house prices

Dipping our toes into the world of podcasting, we look at whether it would be possible and/or desirable to engineer a housing market correction.

That means a deliberate move by the government, with the cooperation of the Reserve Bank, local government and banks, to push house prices down.

Such a move would require a government prepared to see house prices fall by a significant amount.

We look at why homeownership is desirable, whether it would be possible to engineer a housing market correction, whether it would be desirable to do so, whether a housing market correction could be controlled, and whether homeowners who would be hardest hit by a correction could be compensated.

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

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

110 Comments

Stupid house prices well documented and discussed as the greatest driver of inequality. It socialises the damage as tax payers pickup the tab, while privatising the profit in the form of tax free gains and massive bank profits. So why not "right size" house prices...?

Orr begged for DTi and now seems afraid to apply it. There is a term for this.

End of the day if China pops, and/or the world finally wakes up that the US is bankrupt it will happen anyway. The global banking empire has simply bloated the everything bubble in the sole cause of protecting it's own debt based enslavement model. A bubble that is totally unsupported by fundamentals like income.

The question is should Orr get in front of this to manage the fall out on our terms, or continue to follow global "pump it up" instructions...

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There's frequent comment that share/equity prices are "exceeding fundamentals" (eg ROI, NTA, P/E) & not infrequently price corrections ensue that are minor, major, specific or general as the market mood takes it. Over the long run aggregate share prices increase however the volatility tends to brake excesses quickly.

House prices, especially in NZ, have very low volatility, a consistent incremental annual increase in major centres & 2-3yrs out of 10 a massive mood increase that outstrips fundamentals, the market then stabilises at the higher price point.

A few thing's particularly impact house markets differently from equities: Central Bank interest rates funding mortgage gearing (try getting a loan to buy shares & it will be secured against real property). Market makers behavior by RE Agents acting solely for the seller. Everything the Govt does that doesn't affect basic Supply Demand raises the price equilibrium point.

 

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The days of only being able to get cheap leverage on housing are ending. For example Interactive Brokers accepts NZ clients, and you can get a margin loan backed by your portfolio at rates of less than 3%

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The transfer of wealth over the last 2 years is going to have dire consequences. Sweep stake on when gated communities become a "thing". I think a very nasty correction is coming even if it happens after 17 rate increases as it did in America. We are living in never nevergrande, sorry, land.

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The government and RBNZ should stop trying to correct something that they created and have already allow to happen , its their own fault. If they stop sticking their noses in the state of the housing market then it will sort itself out.

 

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Exactly.  They don't need to engineer a fall, rather just stop propping them up.

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At least with these insane prices we're getting housing being built in large quantities and long backlog of work. Any sort of 'engineering' to stop it will have an effect.

I do want to see a return to more normal interest rates as a free market would not allow these very suppressed interest rates to happen.

An increase for the demand of loans of what we've seen for the last year and a half, would drive rates up significantly.

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That building is running with real gusto which actually is itself a problem, and wasn't mentioned in the podcast - when house prices slow or a correction is engineered, that market sputters and shudders and breaks down into a noisy problem of unemployment, and results in us resuming under-building for the soon to return migration-fueled population boost.

A government overseeing a soft or hard landing to housing needs to actively dive in and prop up the building industry too - by contracting work to have them continuing at a steady pace, with a focus on supporting efficient systems and education and training.

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At least with these insane prices we're getting housing being built in large quantities and long backlog of work. Any sort of 'engineering' to stop it will have an effect.

If the banks could be prevented from lending on pre-existing houses (though I don't know how this could happen), then new houses could continue  being built as this would count as "productive" investment.

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Nothing new has ever been made without bringing down the old which was in its place. So believe it or not. Every rise has a fall and when it's fallen, there is no whet lre to go but to rise. 

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If you want house prices to fall, then don’t join the club and rush out to buy houses. 

Dampen down demand (buyers) and house prices will weaken. It’s in our hands!

Power to the people!

TTP

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Reminds me of NZ introduce pests. The each new pest was introduced to try and fix the last botch up. We ended up worse off than if we just never touched it in the first place

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The problem with your compensation scheme is identifying who are investor buyers. Maybe you are referring to recent first home buyers who bought a lower quartile property, planning to sell up in the near future, upgrade to a better home. That makes them an investor. Whether they only own one home or own several, they still engaged in speculative behavior, so I'm curious as to why they deserve sympathy for financial hardship.

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The other problem with the post-correction compensation scheme is: what's to stop people selling their house at a loss, buying another house nearby on the cheap and claiming the compensation to reduce their mortgage?

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Jump or be pushed into one.

 

"Catastrophic" Property Sales Mean China's Worst Case Scenario Is Now In Play ... Zerohedge

 

https://www.zerohedge.com/markets/catastrophic-property-sales-mean-chinas-worst-case-scenario-now-play

No matter how the Evergrande drama plays out - whether it culminates with an uncontrolled, chaotic default and/or distressed asset sale liquidation, a controlled restructuring where bondholders get some compensation, or with Beijing blinking and bailing out the core pillar of China's housing market - remember that Evergrande is just a symptom of the trends that have whipsawed China's property market in the past year, which has seen significant contraction as a result of Beijing policies seeking to tighten financial conditions as part of Xi's new "common prosperity" drive which among other things, seeks to make housing much more affordable to everyone, not just the richest. …

 

… With that preamble in mind, we bring readers' attention to a little noticed report in Shanghai Securities News, citing China Real Estate Information Corp. research (link), which revealed that more than 90% of China’s top 100 property developers’ sales declined in September by an average of 36% from the same period last year. According to the report:

 

  • Sept. sales totaled 759.6b yuan ($118BN), down 36.2% from September 2020 and 17.7% lower from the same period in 2019, deepening a downward spiral that started in July
  • Among companies, 60% of developers saw sales decrease by more than 30% y/y in Sept.
  • Beijing, Shenzhen and Guangzhou saw transaction volume of residential properties decline 30% y/y, while Shanghai fell 45% …

So while some observers have compared Evergrande’s woes to the epic collapse of Lehman, the truth is that the coming default is just the trigger event whose downstream effects would pull down the entire Chinese bubble house of apartments cards, something the latest housing data show is already in play. Because at the end of the day, no Ponzi scheme can continue if the participants lose faith in a favorable outcome, and at $62 trillion China's housing sector is the world's biggest Ponzi scheme. Which is why other experts have said this isn’t a Lehman Brothers moment— it could be far worse, if one views China’s gargantuan real estate sector as rotten to the core.

 

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And for further context, China has approx. 66% of its household wealth tied up in property, NZ approx. 64%, and the USA 36%.  Like China, we have too many of our eggs in the property basket.

 

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Because NZ has only one basket. We are a duckling community. Everyone walks behind each other and do the same things.

This shows lack of thinking and attitude of community. 

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Yep, trouble is on it's way.

Big Trouble in Little China.

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Good read, thanks.

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Almost all of their development sector is in strife, trouble coming...

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Nice podcast. 

What seems to be the premise of this podcast is that the government and RBNZ can engineer asset price growth and decline if they have the will to do so.  I wonder whether that premise is partially a mirage?   A house price collapse might occur without government directive and government might not be able to arrest one either.

As Grimes states, there is no doubt that successive governments have underwritten and boosted house prices through all sorts of policies including aggressive net immigration.  This has created moral hazard on a grand scale, (which Michael R's idea about taxpayers compensating FHBs would only add to).  But historically, low real interest rates driven by global economic conditions have been the main driver house and other asset price inflation in my view. 

Real house prices have fallen before.  This period was masked by high inflation and that perhaps is what we should be thinking about.

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What a racist Grimes is ! (Sarc)

Some of us have been commenting for years on the disaster that is massive immigration.

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To be fair Grimes didn't mention immigration, I added it, but clearly that is a major contributing factor.

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He mentioned it in a recent Listener article.

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I tend to agree that relatively high inflation and flat house prices (real house price falls) is the only realistic way to do it.

That way people with large mortgages also have them inflated away making it more tolerable.

How to actually engineer that in a controlled manner is where it gets tricky.

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"Dipping our toes into the podcasting world, interest.co.nz probes whether it would be possible and desirable for the government and Reserve Bank to deliberately reduce house prices"

Gareth Vaughan, why is it that this question / doubt was never raised and discussed : whether it was desirable for the government and reserve bank to deliberately boost the house prices at time in double digit in a month". This they did at drop of hat following policy of LEAST REGRET - Action first.

They said that they  wanted to stabilize the housing market but in reality used pandemic to go all out to support and promote the ponzi....even now knowing what is happening ....what are they doing ...still using pandemic to not act...how is lockdown stopping their discussion on DTI.

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An artificial correction? Sure, restrict lending. Just apologize in advance to anyone who has bought recently. 

A long term correction? Take one of those myriads of reports that compare housing cost differences between NZ and AU and actually implement something.

 

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The market will correct itself eventually. Either you let markets function and small regular corrections occur, or you have state controlled markets that correct infrequently but massively. Guess which one this is.

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Prices would quickly level out if all house buyers were limited to NZ citizens or permanent residents.
 

And all Trusts or companies worth more than 3 million had to pay a 5% stamp duty and go through a personal vetting process with a nominated named person of interest who must be a citizen or permanent resident before being permitted to buy (another) house.  
.
Somehow, currently,  global mega-money is still pouring into NZ property.

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I give you a hint… research how many single/widowed women from a certain country seem to have taken up residence here in the last 5-10 years. Then try to establish what they do for work to support themselves, their kids and often their parents here too. Once you get to talk to quite a few, you suddenly find a pattern of self employed (property development or related!), regularly traveling, very business aware and focused, smart women. Many seem to look for partners here but are rather guarded how they afford their lifestyles. And when you figured out how to find a pattern, then it doesn’t take too much more info to start seeing a bigger picture. But unfortunately neither you, I or anyone else is likely to find useful evidence. Perhaps there is a silver lining in the Covid cloud…?

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Your observation is bang on the money. I look at Evergrande and wonder if worse case scenario emerges, could this cause offshore funds to dry up and negativity impact the young property developer types you describe?

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Nice idea totally unworkable and more holes than a sieve, so will be attractive to this Govt of clowns.

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But kiwis expect house prices to rise... I was proudly reminded by someone at a picnic yesterday that house prices double every 7 years...

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Wait, I thought it was 10!

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Nope after the recent rises is should only take 5 years.

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What has made houses such a good, reliable investment over decades is not just capital gain - but rental return...... People here tend to forget/ignore the rent factor.

As people get older, they often appreciate a bit of rent $$$ coming in because it supplements their retirement income. Many older people have used houses as a strategic investment for this very purpose.

After all, it's difficult to live comfortably on National Superannuation.

TTP

 

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It's really only difficult if you are a superannuitant still renting!

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Agree with you, Kate. Absolutely no doubt about that.

TTP

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Kate: if you have your own home mortgage free then you can survive on Super.  That is survive but not prosper. A few hundred a week permits reasonable purchases at the supermarket but leaves very little to cover other expenses when you have to pay >$2000 in rates, >$1000 in house insurance, >$500 water rates, >$500 electricity and you want to travel - nothing flash just to see the grandchildren, attended weddings and funerals.

NZ Super is decent but not over generous. You may be tempted to divorce when you retire so you can get more Super and more accommodation allowance.

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Reverse mortgage - sorted.

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If you have been a 'boomer' with all the advantages our generation has had and you have arrived at retirement with no savings or assets then maybe you have only yourself to blame. Excepting the odd case of bad luck of course).

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Your figures for Rates?Ins/Power/water are data from the tooth fairy. Try double.

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Great podcast - but how about you do one on the government intervening (regulating) in the private rental market?  Quash the subsidies and rent and asset prices will both go into reverse.

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Put up interest rates, problem solved. They should be around 7 to 8% right now. It’s just nuts!

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Seems to me that the NZ economy is now based on housing. The only way forward is building more houses and opening the floodgates to let in even more people to buy houses and turn into "Good little consumers" to boost what is perceived to be our "Economy". There is no way in hell that any government is going to force any kind of house price drop. If you waiting for a correction it will now only come from some massive global event that is beyond what the government can do to stop a house price correction. To be very clear the government are stopping prices falling and are not interested in prices rising.

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You have nailed it 100% in that comment, probably don't need any more comments for the rest of the year!!!

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To paraphrase Jim Rickards. They’re tinkering with the market as though it was a thermostat.  What they’re really doing is changing the settings on a nuclear reactor which has non-linear dynamics and could easily blow up.   

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Yep, as the great philosopher, Gnarls Barkley said, 'Bless their soul, they think they are in control. But what they really are is crazy (ie incompetent).'

'https://www.youtube.com/watch?v=-N4jf6rtyuw

 

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Hi fat pat,

There's been much discussion here about doom and gloom merchants (DGM).......

Clearly, you're one of them.

TTP 

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Weren't you sooking about covid doom and gloom on the other thread?

Pot, kettle.

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Ps. More podcast content would be good. Real time interviews etc. 

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Twice in my time in the housing market in NZ have we been caught short. After the sharemarket crash in 1987, the following 4 years were bloody tough. We'd just bought our 3rd home & watched our value decline by 25% before finally getting our noses back in front almost 10 years later. The second was 2007-2009 GFC. Values declined 20% where were were before lifting back slowly mid-decade, then.... well, you know what. Boom.

We missed the millennium troughs (Asian crisis, Y2K) as we were starting a business & didn't own property at that time. I remember the early 1970's were also tough but I'd only just left school & didn't really understand the ins & outs at that time. We're overdue for another correction in my mind. A 20% fall over a two-three year period would be ideal. This is a good thing long term for all aspiring home owners in New Zealand, but no good short term for the govt. Anyhow, I don't think she'll have a choice. It's offshore where all the action is, already. But it'll come.

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In any market correction there are two sides to the same coin - being Long of 'something', and so Short 'of something else'. It just depends on what one is long and short of when it happens.

What you had going for you; what most of us did, was being 'long of time and productive capacity (a job, or prospect of one, in other words). Whatever age you were, you had time to recover from the two downturns you soberly look back on, and progress. The demographic of many in the property, and other asset markets, today may not be so kind to them in the future. "Holding on" might be beaten by Time Left.

And that's with just a flesh-wound of a correction (~ 20%). There have been times, even in New Zealand, where prices corrected far more than 20% and then took 50 or 60 years to recover. How many of us will survive that if /when another such 'unexpected' even occurs?

 

 

 

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WJ, if your house lost 20% of its value after the GFC you unfortunately lost double the average value drop in NZ, which was only 10%

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Which was no consolation for those in, say, Whangaparaoa Peninsula/Hibiscus Coast.  (22% as I recall. But, hey. It's a long time ago now)

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Just to float such a scheme is like a dog walking on its hind legs: it is not done well but one is surprised to see it done at all.

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Another dumb idea.  If it was possible to crash the market let's go for 50% NZ would suffer a depression type scenario that would last for years. 

It would completely kill of the construction industry and lead to a substantial depopulation which some people would like. 

Several banks would default,  savers would lose their savings. 

Where would it lead to,  cheap house's for some but massive unemployment would still make house buying impossible. 

The unintended consequences would be so great and lasting I for one would leave the country hopefully before the event. 

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As would the small portion of millennials who managed to get a family home that they had to pay the odds for and commit to a 30 year mortgage as standard so they could raise a family in a stable environment?

How much do people think one generation would put up with after being spat at in the face at almost every single turn? 

Send the bill to the people who actually caused the problem. I'm sick of being expected to pay for their damage as well as being expected to finance things like my own retirement while I underwrite theirs.

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Hear hear

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Another dumb idea.  If it was possible to crash the market let's go for 50% NZ would suffer a depression type scenario that would last for years. 

The bulk of the loss would be in land values, so would that really matter? A small number of recent purchasers would find themselves 'underwater', but could be compensated. With land a lot less expensive building would continue even though the government might have to consider providing finance. The first hundred thousand of bank deposits is guaranteed so most depositors would not lose. There could be some unemployment amongst bank staff but we could no doubt cope with that. (Perhaps it would provide an opportune moment to nationalize the banking system.)

I would think that the economy would recover pretty quickly.

 

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The government bank deposit guarantee on the first $100,000 isn't planned to begin until 2023. Happy to be corrected if I'm wrong, but I believe that even the legislation hasn't yet been presented to parliament.

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"Dipping our toes into the world of podcasting, we look at whether it would be possible and/or desirable to engineer a housing market correction"

 

A housing market correction IS underway, just like a huge tanker changing course, it takes time to manifest itself.  2022 will show no house value gain and quite possibly some drops

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Depends how you measure house price inflation.

I think the median will increase moderately significantly (5-10%), the HPI only a bit (3-5%).

But if a financial crisis hits - as I have predicted here many times (I have said 2022-2023) - and all bets are off...

 

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Why would they do that.  They already engineered an upwards housing market correction when they used their superhuman levels of intelligence to drop interest rates to zero, pumping billions into housing lending and virtually nothing into business lending, while removing loan to value restrictions and swearing not to reinstate them for a year.

I clearly remember being censored by "Ed" for uttering the word "morons" in dismay at the obvious stupidity and recklessness of their actions.

In hindsight, far stronger language would have been accurate.

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"The spirit of envy can destroy; it can never build." - Margaret Thatcher

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I doubt thatcher would’ve wanted to be associated with a government driven housing bubble. Her policies greatly increased home ownership levels.

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Why would anyone want to engineer a situation that put FHB in negative equity?

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Negative equity is only an issue if unemployment rises or incomes fall. Being in negative equity while maintaining the same income to be able to pay the mortgage is only a timing issue. Once, inevitably, house values rise then negative equity goes away.

 

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Just stop cramming more humans into the country every year. Problem solved. 

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Lol hate to break it to you, but we’ve been doing that for about two years already, and price increases accelerated. Blaming immigrants has been debunked.

In any case, we have an incredibly low population density (half the United States’s) and less than 1% of our land is built up. We could easily afford to bring more people in if it were legal to build.

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'For the greater good, a case can be made that a house price crash would be desirable'

I didn't hear anything in this podcast that makes this case. Presumably if the RBNZ were to do this they would abandon LVRs, DTIs etc. as every time they tighten them up they cite the risks of a housing bubble and subsequent crash - they are doing it to protect banks and borrowers from themselves and to stop the market from crashing.

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Agree, the only reason house prices would fall would be because no-one wants to buy or there is an oversupply.

If noone is buying, it won't increase home ownership, and will cause new construction to stop.

There are no easy answers, but I think the only long term answer is to allow supply to be much more flexible.

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New construction won't stop next year but it will start slowing, possibly quite a lot.

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... given the unintended consequences of the governments  & the reverse banks actions to date  ... pushing house prices up 50 % across the nation since 2017 ... why would we allow the same bunch of incompetents to engineer a mini crash ?

Or ... we could just address the multitude of constraints on the construction industry ... and ratchet up the supply side whilst achieving cost savings on section prices , materials , and council permits ...

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Completely possible to do and highly desirable for house prices to drop. 

This has become New Zealand greatest social disaster.  With negatives in every sphere, right down to childrens health.

We need to build a high income low cost nation.  And be  a nation of owners not borrowers.

 

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Maybe the endgame is to disestablish home ownership for families?!  
Then Govts can exert more control.  

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Righto team. I’m 29 years old with roughly 100 in Auckland as a FHB.

 

Any resources or advice? 

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Get a partner with the same outlook, financial acumen, equity and earning capacity. Makes life easier.

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It is good to have company.

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Arrange wealthy parents.  Earn $500K pa and live on $100K

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Alright I’ll do it next Monday 

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LOL!

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I would consider moving to Australia.

Apart from Sydney, your money will go much much further.

Look at Melbourne, Brisbane, Adelaide or Perth. 

If you are adamant to stay in Auckland, I'd wait a year or two and see how things play out. I don't think prices will get much worse in the next 1-2years, and there could be a financial crisis which pulls prices down 15-20%.  Just keep saving as much as you can.

If there's no crash in a year or two, consider buying a new 2 bedroom townhouse, with what might be a 125-150K deposit if you save hard (and depending on how much you earn).

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Do nothing.  Follow the international news only (China is showing early stage melt-down).

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I’d like to thank everyone for their advice, it will go a long way in helping.

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Wait 2-3 years. Seems likely a market correction is coming and the new planning rules will change the potential for inner city development. A lot of people live further out not by choice but by necessity due to property / rent costs. In 3-5 years the impact on supply from the new planning rules will start to have a reasonable sized effect on values.

Agree, if not already a double income situation makes a big difference (but not if the relationships not stable). 

Also consider alternative locations. I moved to Whangarei from Auckland for the same salary and got 3x what I would have for my money in Auckland. All depends on how much family you have etc in Auckland. Just get clear on what your priorities are medium to long term and then don't be shy about adjusting your game plan to something outside the usual playbook so long as your priorities are maintained.

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House prices are about right it is land prices where reality is abandoned. 

Imagine all land being nationalised and trading at roughly the price you would pay for it if you were growing strawberries. That would cut the value of my property (1960's bungalow on 1600sm in Auckland) by at least two thirds but leave the new build apartments and town houses just slightly reduced.

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Land used to be the main restriction and still is due to the fact it is the first physical input cost, but we have doubled down on this and now also have added time restrictions via consenting times, material costs, logistics costs, and labour costs.

I've never seen so many restrictions in the market.

 

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Most of the house price increase has been because land supply is being squeezed by councils. Just remove their authority and watch house prices plummet.

New Zealand has two choices, we either have a managed decline or a crash.

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Supply & demand….

Enable the ability to demand

Enable the ability (debt, cheap credit) to demand (bid, buy, speculate)….., add to that a perceived zero risk mindset, plus a competitive banking environment.

Do all these other countries with the same problem as us have land restriction issues or cheap credit issues?

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Land restriction issues. And conversely, those that have less of a problem are the ones with fewer land restrictions.

Houses are the fuel. Supply imbalance is the ignition, cheap credit is an accelerant. Without the fuel being ignited, accelerants have no effect. 

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If accelerants have no effect as you say.

Reduce credit availability and see what that does to demand. 

With no demand, or reduced demand what happens to supply imbalance?

Then what happens to prices….

Credit enables the ability to demand. Demand is not defined by who wants a house. Demand is defined by whom has ability to demand (ability to buy).

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With sufficient land supply, the price of housing would reduce by nearly 50% which automatically reduces the NEED for credit in the first place.

In jurisdictions that have fewer land restrictions, so supply can equal demand, and low-interest rates, the interest rates have no effect on house prices.

 

 

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Engineering a housing correction would have serious unintended consequences i.e for small to medium business owners who have funded their businesses via mortgage borrowings.

These academics and politicians fail to grasp the fact the property market is cyclical not linear. i.e. there are times of rapid strong growth (Boom) and times of less or even negative growth (Slump).

The emotional fiction view consistently being voiced (by people who surely must know it's untrue) that we have not had a correction in property values in decades is false.

In 2008 values fell according to the most reliable house price measure in the country (the QV HPI) by 10%.

That is fact not emotional fiction.

Ironically when property becomes cyclically most affordable during the Slump phase of the property cycle few people are motivated to buy, yet when values are rising everyone wishes they had bought yesterday. Human nature does not appear to follow common sense sometimes.

It does appear the real issue is to ensure FHBers can be able to afford to enter the market and the government DOES have the resources and can easily create the tools to achieve that but they keep tripping up on all the crazy advisory boards full of talking heads with all their theories and hypothesis of dreamlands devoid of any real world practical applications.

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"Engineering a housing correction would have serious unintended consequences i.e for small to medium business owners who have funded their businesses via mortgage borrowings."

"Businesses buy houses, houses don't buy businesses"

I think it was my older wise banker or accountant whom told me that, 15 years ago. lol!! 

Why has the last 15 years turned that old expression on its head?

 

 

 

 

 

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Yes some business owners invest in property however many SME entrepreneurs starting out and then Conti new to raise capital to grow their business, fund that via a mortgage on their own homes as Banks often won't lend to them otherwise.

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For as long as NZ govts continue with our (Lange/Caygil debacle based on Don Brash's report) draconian Superannuation TTE (google it) tax system, people will save for their retirement by using housing. Other forms of retirement saving in NZ are blasted by tax so that the outcome when one turns 65 is a poverty pittance income. Other countries we identify with don't have the same housing issues as us because their Super savings systems are fairer and generate bigger nest eggs (ie EET based systems) and result in a much higher living standard for retirees. I've experienced living in Canada and OZ and have seen their superior retirement savings tax systems. For USA think:

  • 401(k).
  • Solo 401(k).
  • 403(b).
  • 457(b).
  • IRA.
  • Roth IRA.
  • Self-directed IRA.
  • SIMPLE IRA.

For Canada think:

  • RRSP
  • CPP
  • TFSA

...and the like

 NZ retirees relying on NZ savings vehicles including Kiwisaver are headed for poverty in retirement due to crushing tax burdens unless they invest in property (mainly houses for most Ma and Pa savers). In addition small business and bigger business rely on housing as security for business loans/development/growth/exports/ employee jobs. A New Zealand Govt that tampers with investing in residential property risks endangering the entire economy. The USA doesn't have the same issue because it doesn't allow personal guarantees for mortgages (hence jingle mail - keys in the mail back to lenders when defaulting) during the GFC 11 years ago. Its a complicated area which NZ govts have exploited for revenue raising at great cost to NZ citizens. Note that parliamentarians' 'old style' defined benefit super schemes means MPs are immune to the retirement deprivation problems that will faced by their constituents.

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Kiwisaver contributions should be tax free, absolutely. There is no guarantee for NZ Super for the <50's so let's just be honest about that now and allow people to start saving accordingly.

And property as an investment class must be taxed, including the family home as far as I am concerned.

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You have to be paid income in order to be able to bank it in Kiwisaver. Whole thing kind of falls apart in a low-wage economy, no matter how much warning you give people. Can't save what no one is willing to pay you. 

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A compensation scheme should be relatively simple, but I would not go there until the banks go bankrupt and we can regain ownership and stem the $6 billion annual loss to the country. 

As for compensation :

1 Property investors - none.  Investment caries risk and the government has never compensated share investors and their investments are far more benefit to society.

2 Corporate farmers - none.  similar reasoning and I would rather remove farm price pressures so that family farmers and share milkers have a better chance

3 Commercial lending - none

4 Owner occupiers - Write off a proportion of the mortgage equal to how much the value of the property has fallen below what you paid for it when you bought it.  E.g.  say you paid $750 K for the house, 3 years ago, borrowed $500 k and the house value drops to $500 k, then the mortgage would be dropped 1/3 to $333 k.  I.e the owner and lender still own the same proportion of the property.

5 Farming families actively working the farm - the same scheme as 4 above. 

 

But why are we even considering any of this.  Jacinda has vowed that she will never let house prices drop, and if the past 20 years have taught you anything, it is that no government will ever let this happen.

If you are holding out in the hope that you will be able to afford a house in future when prices fall, - forget it.  It is never going to happen and you need to accept that and move on to an alternative plan.  - leaving the country is your only hope.

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"Would it be possible and/or desirable to engineer a housing market correction?"

Gareth, The Very thought is frightening and anyone even thinking should be silent.......why do you want to give heart attack to Uncle Orr and  Aunty Jacinda.................ponzi........characteristic of ponzi is that it has to continue or will crash..........so please do not even think of disturbing  the only economy in NZ.

You are a brave person to even suggest and good that are in democracy otherwise would have vanished from the earth..........

 

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Once the absolutely shoddy standards of recent builds begin to manifest themselves, in the not too distant future, they are going to collapse anyway.

But yeah, the price of housing needs to be affordable, end of story.

Disappointing to hear about 160,000 immigrants in the pipeline. Haven't we done enough of this already?

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Why is this old article displayed?

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Because someone commented on it recently (I think)

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Oh, that would be an amusing feature of their CMS!

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Of course! Neoliberal shifts over the last several decades have manufactured high property prices. It's as simple as reducing tax burden on GST and income tax and bringing back land tax which was abolished in 1990. Job done.

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Exactly. And triple the tax for foreign ownership, and those that can't prove the cash was NZ tax paid.

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RBNZ, Government, Bueaucrats, experts, media, advisor - all who make decession have vested interest so  if anything they will find excuses to promote the ponzi like Orr and Robertson used covid19.

Now the fear is that house prices have reached a point where growth may slow down so both government and opposistion got together to inflate house price again by rem9ving any restriction to build ghetto house and irony is that is potrayed that is been done to help FHB but reality is .....

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