First home buyer affordability improves as cheaper house prices stay flat, but standard affordability worsens. Your view?

Not only am I too old be at university, but it would be doubtful I would ever pay of a mortgage at current price levels for housing before I retired. Just as well I don't have a mortgage and recognised a few years ago now that the house of cards would eventually fall down.

I will be able to afford a home, but it will be at the expense of some other poor sod who didn't know or give credit to the principle 'Caveat Emptor'.

it will be at the expense of some other poor sod who didn't know or give credit to the principle 'Caveat Emptor'.

Such people are too stupid and greedy to deserve any sympathy.

Yes true in a lot of instances, but there will be a certain percentage that have been thoroughly deceived.

I still remember buying my first home back in 95 only to see the value drop by 25% over the next three years. I had no idea I was buying on the high and only found out when I needed to sell. I got my money back in the end by waiting, and by being fortunate it was positive yielding.

But I can only nod and smile when people say to me that property never goes down.

Trouble is those who were naive won't get the come around that I got.

I agree with you Hugh,

Imagine what you could buy and the retail lift that would occur if you didn't have to spend so much damn money on servicing a mortgage just so you can have a roof over your head.

You are right all we are doing is keeping the banks profit levels up and bossess bonus' up and very little else.

My view.....Homes are still seriously unaffordable...the govt doesn't give a bloody stuff...the Reserve Bank is working to keep them that way.....young people should not borrow from any of the banks....they will be conned into supporting the situation which traps them for life as serfs to a bank.

The savings working group have wasted their time but they served a govt need to sidetrack the media. The level of saving will not rise because the banks have a deathlike grip on incomes due to the bubbles.

This is the same in the rural regions where banks have wormed their way into the lives of farming families. Sheep farmers can detect worms in an animal at a hundred yards...they need to start looking at themselves and their business models with the same eyes.

Young families in NZ ought to look for different and far less expensive types of accomodation and recognise that they are being 'managed' by a system intent on farming them. Opt for pooling resources....recognise that the demise of the old farts will see a massive number of properties coming onto the market. This trend can only get stronger.

Deflation and dollar debasement are here to stay. Buy only what you really need. Grow or catch the rest. Learn to trade your eggs for their spuds etc. Use the banks to your advantage. Save enough to make it worthwhile to buy aussie dollars and bank your wealth over there. You have no reason to support a system that sees you as a target.

Scarfie parrots the myths about urban sprawl and the need for density, that are doing just as much damage as the early 2000's myths about the new paradigm for endless economic growth based on low-interest debt.  Just as very few people were right in 2003 about the existence of a new bubble based on mortgage debt, very few people are right today about the futility of "urban limits" and their role in economic bubbles of an unprecedented magnitude to anything experienced before.

It is my opinion that World Bank Economist Alain Bertaud should get a Nobel Prize in Economics, for his papers that show the following:

".......While a high or a low density does not have necessarily negative effect per se, a positively sloped density gradient constitutes always a liability for a city. For a given average density, in a city with a positive gradient, the median distance per person to the CBD will always be longer than in an equivalent city with a negative gradient. It is reasonable to infer that in a city with a positively sloped gradient ALL trips would be longer......:"

".........SPATIAL DISTRIBUTION OF DENSITY itself is more important in city performance than whether a city is monocentric or polycentric......"

".........When planners try to improve urban design, i.e. when their intervention stays at the neighbourhood level, the market can easily test their success or failure. For instance, the impact of a well designed, planner initiated, pedestrian street can be assessed by the increase or decrease of property values along the street, reflecting the positive or negative acceptability of the design by the general public. It is expected that by trials and errors planners could develop an experience, probably unique to each city, which allows them to improve the quality of the urban environment by designing and regulating the use of public space in close harmony with the demand driven use of private space. This coordination is always difficult if not impossible to accomplish by the private sector alone when relying on pure market mechanisms. However, planners often attempt to apply at the metropolitan level the practice of designing by the proxy of regulations. Attempts to "design" or reshape an entire city through land regulations have unpredictable negative side effects, as the examples in this paper have shown. Measuring the economic costs and benefits of shaping a metropolitan area through regulations is a complex operation very different from measuring the performance of planners intervention in urban design. At the metropolitan level, positive or negative results appear only after a long time. Given the time resilience of urban shape, it is dangerous to engage in experiments that may prove to shape cities in an irreversible way......."

I have said this on here before: if you look at the worst cases of unaffordable housing in the Demographia surveys, then look at them on Google "Earth", you can see for yourself the effect that Bertaud is describing. DENSITY, DENSITY, DENSITY, MILES AWAY FROM THE CBD; ending at the urban growth boundary with an abrupt cut-off into green fields or wilderness. Look at Los Angeles, look at Sydney, look at Vancouver. Look at Auckland.

"Spatial Distribution of Density", Scarfie - THAT is the term that the urban planning profession desperately should have got its head around years ago when Bertaud published his paper. When land prices are low, the "spatial distribution of density" is WHERE IT SHOULD BE. The density is greatest near the CBD, and tapers off to the periphery. The result of what Bertaud calls a "disturbed density curve gradient", is LONGER AVERAGE COMMUTES, Scarfie. THAT is what Urban Planner are doing to us, Scarfie; loading us with mortgage debt, for NOTHING. They are NOT EVEN ACHIEVING THE "BENEFITS" you claim, by way of "offset" to the costs of houses and mortgages.

Let me refer to some more studies: the ones done by Paul Cheshire and Stephen Sheppard of the London School of Economics on "The Welfare Effect of Land Use Planning".

"Although directed to the British system of Town and Country Planning this paper has relevance for many OECD countries, including some with systems of land use regulation which evolved entirely independently of the British. The paper starts by characterising the basic features of the British land use planning system, viewed from the resource allocation point of view of an economist. A conclusion is that the system explicitly excludes any use of price signals from its decisions. The paper then summarises the problems which the exclusion of price information has given rise to. Because the UK planning system has deliberately constrained the supply of space, and space is an attribute of housing which is income elastic in demand, rising incomes not only drive rising real house prices but also mean that land prices have risen considerably faster than house prices. Several housing attributes other than garden space are to a degree substitutes for land but the underlying cause of the inelastic supply of housing in the UK is the constraint on land supply........."

".......Policies of containment and densification limit the supply of land (and also space), not just for housing but for all non-agricultural land use in Britain. Our system of designated land use categories and development control imposes considerable costs. Where a full net welfare evaluation has been possible – for a tightly constrained urban area in South East England – it shows that the increased costs of space for housing substantially exceed the value of planning amenities generated, imposing a net welfare loss equivalent to a tax of 3.9% on incomes.

Eliminating that welfare loss by substantially relaxing the constraint on land supply policy was estimated to increase the urban land take by 70%. Given that the total area of greenbelt land alone is 1.5 times the total urbanised area, even such a strong relaxation of containment policy as this would leave very substantial areas of greenbelt, and even if all additional urban land was taken from existing greenbelt areas.

This evidence is now quite old. But given what has happened to prices for housing land relative to agricultural land over the intervening period, and the evidence that the valuation of greenbelt amenities has fallen rather than risen, it is almost certain that the net welfare cost today would exceed the earlier value. There is also evidence that the planning system is imposing higher costs on productive uses of land.........."

"......Making the planning system responsive to price signals and less arbitrary in its impact on land supply may seem problematic. But doing nothing is in the long run even more problematic. House prices may not collapse from the 2004 boom; but they may. We do know that if land supply does not become more responsive to underlying demand, all the problems identified in section 2 of this paper will become cumulatively worse".

(THIS WAS IN 2005....!)

Houses are not meant to be affordable...you are meant to pay as much as you can afford in interest to the banks. That is the plan. What follows is about the US but its no different here

Michael Hudson's excellent  interview

Quote

"Alan Greenspan explained this very clearly a decade ago. He said there’s something wonderful about debt: it’s cured the labor problem. The workers are now one paycheck away from homelessness. If they go on strike or if they’re fired because they complain about working conditions, all of a sudden their interest rate goes up on their credit card, all of a sudden they miss their mortgage payment, they’re losing their home. Alan Greenspan said debt is what has created stability of wages in this country, meaning steadily falling wages.

In America, despite the amazing rise in productivity we’ve had in the last 30 years, real wages have actually gone down. All of the increase in productivity has been taken by the finance, insurance, and real estate sector, called the FIRE sector, almost all of it by the financial sector. So all of this growth has been siphoned off, not taking the form of rising living standards, but taking the form of debt service, mainly interest and fees. The fees are as large as interest for the credit card companies. So it’s all siphoned off financially.

So instead of having industrial capitalism a century ago, we have a finance capitalism that actually is stifling industrial capitalism here. So what Alan Greenspan and others call the postindustrial economy is really neo-feudalism. It’s a financialized economy where all of the surplus goes to the banks. And if you’re a banker and somebody comes in and wants to take out a loan, you say, how much do you make? How much do you spend on food? You realize that most people, most workers in America have to spend 20 percent of their income just on basic goods and services–food, clothing, transportation to get to work. Everything over that, they think that’s all available to be paid to the banks. The idea of a banker is for the entire economic surplus to be paid in the form of a financial surplus."

Unquote.

edible hedge - great idea must google it.

Well Hugh I think that is good news, the buck ultimately had to stop at local government as they were taking peoples money to ensure compliance that buildings were safe and habitable. By taking the fees they are ultimately culpable,and it is reprehensible they have spent so much money trying to evade their responsibilities.

I will be glad to see a reduction to the bureaucracies as a price to pay for their incompetence.

I suspect the same band of people are responsible for smart growth ( I create post another response for that discussion)

It is just a shame that ratepayers will share some of the burden, but hopefully it will sharpen their minds.

I remain thankful that I am not currently a ratepayer.

Phil and Hugh,

since when have I expressed being being a proponent of smart growth? I think you will find I have posted as being a opponent. High density does not equal smart growth, and I don't see why high density can not co exist with free urban limits. The issue not addressed by either of you is the problems that arise from zoning. This is a 20th C problem that arose from the work of Corbusier.

On the same note I have read some of your links Hugh and find the research flawed, because it uses higher density smart growth areas as subjects for comparison. My urban design paper did not use these as model examples of housing. You won't really find any contemporary examples, only small enclaves within greater schemes. I have mentioned Jorn Utzon's Kingo houses, and a local example in Kensington Park, Orewa. The Kingo houses are rarely put on the market as the resident don't want to move.

If you want to look for models, look to pre motor car areas in europe. Italy in particular.

 Dr. Tony Recse makes out that the Garden city solved the problem of slums, but that is far from the case. Garden cities were more a theory than an actuality. Only a few were ever built at the hand of a few philanthropists such as Cadbury and Sunlight. The slums were never really solved, but rather evolved. In some respects the worker housing in New Zealand is worse than 18thC England. The only difference being improvements in sanitation. We owe our urban design heritage to the middle class housing of the 17th and 18th C England. Those that emigrated aspired to improve their lot and copied what they knew as 'better'. Doesn't mean it was good though, and we still suffer from this mistake.

Phil your link to the study on densities faces the same problem, it is linked with smart growth, and I agree that doesn't work. There is plenty of work to show how cities can be high density and work, look to the publications of Christopher Alexander.

I don't know if the houses illustrated in the 6th Annual Demographia International Housing Affordability Survey: 2010 are included as good examples Hugh, but I hope not. They are great examples of unsustainable, psychologically damaging designs, that will be unlikely to make it to the end of their 50 year design life.

The trouble with housing like this is it is part and parcel of the system that many interest.co junkies recognise as flawed. Houses sponsored by irresponsible bankers.

Where is the thermal mass, aspect window/floor area ratio, solar water heaters etc.

Heck they all look like leakers also.

It is junk housing made to make people feel like they are somebody. It is just a veneer.

Hope your respective weekends are going well.

Cheers

Scarfie

PS. Without the benefit of academic study I have always known subconciously that our urban living was unhealthy. I have not participated in it for most of my adult life. 

Bernard

The addition of a thumbs down would add credenceand perspective to the thumbs ups, don't you think? I believe it would certainly make this aspect of the site more relevent and popular.

Otherwise your readers are tempted to write comments in the heat of the moment that maybe they would have refrained from if they'd had a more simple and prompt way to voice their displeasure.  I note that despite your entreaties to the contrary, readers are resorting to personal attack on occasion.

Can't have it both ways.  Either allow open slather, or make good your threats to deregister, or let Wolly's peasants (myself included) let off steam.  You've got kids, haven't you?

Looks like a dead thread but interested to hear peoples thoughts… 

I think it’s obvious that a fair proportion of New Zealanders are condemned to being a generation of renters.  However, they have options…EDUCATION!  The only way to increase your earning potential (assuming you are not an entrepreneur) is to up skill. Don’t rely on wages catching up – you’ll still get paid rubbish for doing the same old thing in the future.

Increase your earning potential by investing in your education…don’t listen to Wolly.  Acquire tradable and sought after skills.  For the ones who put in the effort this will equate to higher salaries and good opportunities.  If they don’t exist in New Zealand at the time, then they certainly will in the global market place.  Choose your profession wisely and wake up to the fact that there is a world outside the borders of our fair country.  Earn and come back. Before anyone says that the world is stuffed and there are no opportunities, look again - there are always hot spots.

Work hard, get promoted or look and move for good opportunities and save, save and save.  One day you’ll be able to enter the market or invest in profitable sectors of the economy.  It takes HARD work, some more HARD work, THOUGHT, PATIENCE and TIME.  These are things that seem to be in short supply these days.    

The other option is to do nothing and condemn yourself to poverty, MOAN, put your hand out, wait for an inheritance (if you’re that lucky) or grow vegetables (sorry Wolly, stole this idea of you mate) in the back yard of your rental, cross your fingers and hope for the best. Don’t trust or wait for the government or anyone else to do it for you, you’ll be very disappointed! Get EDUCATED and try and get ahead.  

Nothing visionary in these comments granted, but I don’t see this being discussed.  Millions of poor Indians and Chinese have figured it out - do everything they can to educate their young, or themselves and ensure that the next generation is better of than the last.