House building rises again

Property

Building consents for new houses, excluding apartments, rose by 3.1% in July, according to Statistics New Zealand

30th Aug 13, 10:52am by David Hargreaves

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The number of new houses approved in July, excluding apartments, rose a seasonally adjusted 3.1%, according to Statistics New Zealand.

The figures were led by the highest number of building consent approvals in Canterbury since 2005, and by a strong rise year-on-year in the Auckland region.

During the month nationally there were 1675 non-apartment dwellings approved, which is a 34.8% rise on the number approved in the same month a year ago.

Including the volatile apartment figures there were a total of 1893 new dwellings approved, which is actually down 0.8% on a seasonally adjusted basis from the June 2013 figures. Compared with July 2012 the figure including apartments was up 28.1%.

However, apartment figures, which include retirement village units, move up and down a lot from month to month and the figures for actual houses are a more reliable month-on-month guide of trends.

In July there were 218 apartment approved, including 133 retirement village units.

Westpac senior economist Michael Gordon said the main uncertainty in the July figures was about how the pace of consents would hold up in Christchurch, after the city council was stripped of its accreditation to issue consents.

"The answer was: pretty well. We estimate that in seasonally adjusted terms there were 183 housing consents issued in Christchurch - still the second highest month on record, after the 198 consents issued in June."

Gordon said that in Auckland, the other key region of housing under-supply, consents rose to their highest level since late 2006.

"That said, the pace of new home construction is probably still lagging behind what is needed to meet population growth."

Statistics NZ said the value of consented building work in July 2013 was $1,123 million – $698 million of residential work and $425 million of non-residential work.

"The trend for the number of new houses, including apartments, has increased 71% since the historic low point of March 2011," industry and labour statistics manager Blair Cardno said.

The trend is at its highest level in over five years, but is showing some signs of easing and is still 38% lower than its peak in January 2004.

Comparing the July figures with the same month a year ago, the main regional increases were in Canterbury, Auckland and Wellington.

In Canterbury there were 507 dwelling units approved, up 136 from the same time a year ago and the most in a month since March 2005.

Auckland's figure was up 148 to 556 - a rise of 36.3% compared with July 2012, while Wellington's figure rose 54 to 169.

Statistics NZ said that since Since September 4, 2010 - the date of the first Canterbury earthquake - some $1,157 million of Canterbury building consents have been identified as earthquake-related.

This includes consents for 1001 new dwellings, including apartments.

In July 2013, the value of building consents identified as earthquake-related in Canterbury was $62 million. This included 63 new dwellings.

In Auckland where there is a perceived shortage of about 30,000 houses, there have been 5439 new dwelling approvals in the past 12 months.

This represents an upturn from recent annual numbers of as low as 4000, but is still a long way short of the levels required if the region is to meet the targeted 39,000 new homes in three years under the terms of the Auckland Housing Accord between the Auckland Council and the Government.

Building consents - residential

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Source: Statistics NZ

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83 Comments

by Stephen L | 30th Aug 13, 7:13pm 1377846822

Hugh,

I can be easily persuaded that ideally house costs on average would be no more than the 3 times median income multiple you have occasionally mentioned on here. It's not hard to understand that that would leave a good amount of income to spend on other things; apart of course from the house sellers who would clearly make less in such a market. I can easily get my head around that such creative people would find other useful things to do even then, so life would be good.

Are you aware of any cities that have gone from say a 7 times multiple down to a 3 times multiple and then stayed there; and without the cause being a Detroit style meltdown of no-one actually wanting to live there anymore?

What were the consequences of any such repricing on the existing house owners with mortgages? Were mass bankruptcies the norm? Were a significant minority of houses foreclosed on? Did the meltdown cause significant bank failures? Or did the banks pretend for a couple of decades like Tokyo that underwater loans were okay? And if so did they have new money to lend, or like Tokyo were they zombie banks? Did demand for a whole range of things dissipate quickly such that there was mass unemployment? Was the repricing really caused by very high inflation of everything including wages, but not including houses? Did the central bank ignore such inflation?

Just wondering. It's easy enough to see that you shouldn't get up to a 7 multiple in the first place. Just am not sure how you easily get down again, even if the magical Houston model was to be followed, and it worked in our circumstances. You might know.

by Andrew Atkin | 31st Aug 13, 10:52am 1377903170

Animal Lover: You have a point, but all I can say is willfull ignorance is probably going to prove to be incredibly expensive on many hundreds of people - sooner or later.

Though titties to those who believe you can always sell a house for 2x what it costs to build in the first place (in terms of natural values). The shear madness of the situation should have stimulated them to look further and think more carefully. In the end they will have themselves to blame when this bubble bursts.

by Stephen L | 30th Aug 13, 10:09pm 1377857365

Hugh,

Thanks for the long sort of reply. I take it from it that in fact you know of no such examples of successful repricing without massive pain.

Am pleased you have faith in the government.

There are only two options … either bust out of them … or build increasingly affordable housing stock out of them. The New Zealand Government (thankfully pressured by the RBNZ) is wisely taking the second course.

You must know something I don't. Let me know in a couple of years or so whether they've succeeded at all. Apart from the fact they don't seem to have a plan at all other than piggybacking on Auckland City Council's plan and trying to package it as their own, as soon as house prices drop say 10% (which as it happens I would welcome), watch the Key government run for the hills faster than you can say Rural Urban Limits, for all the reasons I allude to in my first questions.

You seem to want a 60% drop in median prices, or a 60% lift in wages. I'm not all that stressed, as we both know such a drop has a snowball's chance of actually happening.

From where we are, in my view, there needs to be plans that allow enough land to build 10,000 houses in a year in Auckland for 3-5 years. The Council tell us they have such a plan, although don't guarantee they all will be built. If builders are available they will find a price level that works. Yes, address building costs. The rest in Auckland anyway seems to have a plan that will get close; supported by sound monetary policy.

The objective is to remain one of the world's "most liveable cities". Housing affordability as a tenant or homeowner is important, but not the only variable, and not in itself the actual objective. Remember that every single house in Auckland now by definition is being afforded one way or another.

by powerdownkiwi | 31st Aug 13, 8:26am 1377894378

StephenL - good post.

Most folk measure their wealth by their house value. Lower those, and you get howls of outrage (I suspect the owners of valuable tulips howled similarly). The howlers will always outvote those who want in cheaply (first-homers and developers) so 'pollies will always beg off before the votes dwindle.

I suspect that in Auckland at least, Hughey's 'normal' has been absent for decades. Generally, of course, he's looking at a very small slice of time, and making the fundamental mistake of assuming permanence.

Not sure I agree with your 'afforded', though. A mortgage expects goods and services to be produced for decades hence. They haven't been 'afforded' yet, on that basis.

by Stephen L | 31st Aug 13, 10:06am 1377900365

Not sure I agree with your 'afforded', though. A mortgage expects goods and services to be produced for decades hence. They haven't been 'afforded' yet, on that basis.

PDK, good point, not just on your "peak many things" mindset, but frankly on the tolerance of many mortgages to say a doubling of interest rates. Which is one reason why mortgage rates probably won't double.

My simplisitic point is that even in a crash with many underwater loans, and plenty of foreclosures, the houses won't be bulldozed, and pricing arrangements of either house prices or rents will find an equilibrium that has the houses being lived in.

I nevertheless share everyone's concern in two key areas: Young families on reasonable incomes should be able to start out on the housing ladder- and right now many can't. And lower paid workers need housing solutions in some moderate proximity to where they work. The current model is probably failing both; and needs a correction to have that sorted. Hugh's intentions in those respects are honourable.

by scarfie | 31st Aug 13, 11:05am 1377903948

I think the answer to the question that Hugh has not been able to answer is that leveraged credit based lending doesn't go in reverse. We will find that out sooner or later.

by PhilBest | 31st Aug 13, 12:38pm 1377909507

Stephen L;

Scarfie;

I say something about these questions further down the thread, to avoid congestion up here.

This is a very constructive discussion so far.

by MikeM | 2nd Sep 13, 9:18am 1378070337

Hi Hugh. I'm absolutely in favour of a Houston style economy for all New Zealanders. But I think how New Zealand would go about acheiving that needs careful consideration. For example, if we were to fundamentally change land allocation rules, introduce taxes and laws which discourage the poor allocation of capital towards property, we need to do this gradually over a longer period of time. As it currently stands, NZ as a whole has a huge stake in maintaining the status quo. We are all tied to the current system whether it's banks, business owners, farmers, mortgage holders etc. To introduce rapid change would subsequently cause major corrections in asset values and would impose major financial and systematic stress to the entire country. As we saw with the fallout from the GFC overseas, the implications were major debt defaults, nationalisation of many major banks and even a freeze in the credit markets. In my view rebalancing would be best acheived by a stagnation in property values along with an emphasis on driving real wage growth through a re-alocation of capital and a focus on productivity improvement.

by Brendon | 31st Aug 13, 1:00am 1377867624

Stephen L what the Auckland Council will do with its unitary plan is rezone x amount residential and change some aspect of residential land, height restrictions etc so they can say y amount of houses can now be built. The problem is the landowners realise that this buildable land is a scarce commodity and it will appreciate greatly in value, especially if they slowly release it to the market. So nothing like that number of new houses will be developed.

To get truly affordable residential land you either need massive amount of residential land zoned -say shifting the RUB 20 km out so there is a greatly more competition from land owners. Problem random piecemeal development. Or the Govt/Council buys land at rural prices, rezones it residential and sells it to the end homeowner directly -problem all developments are state designed. Some of Western Christchurch was develop this way after WW11

The government could easily do a combination of the two above solutions in Hugh's attractor markets. Do a Perth, build a motorway in one direction from the city with a commuter rail (or even Steven's trolley buses) down the middle. Buy the land for the transport links and around the stations at rural prices, rezone it, develope it and sell it directly to the homeowner. But also allow developers to develope anywhere around these new satelites. Especially if they meet certain eco village criteria.

Think if the Government or CCC had bought rural land, rezoned and developed it to match the amount lost in Christchurch's redzone.

If our Local or Central governments are not prepared to do this in periods of high demand then MULs should not be allowed and the private sector should be allowed to get on with it.

I believe the house price in inner city Auckland, Christchurch, Hamilton and Tauranga will not change -you will not see a 60% fall. As you say people who live there can afford them. They are still desirable city locations and Kiwis would rather reside in a house than realise a loss on it.

A few property investors would lose out but this is more than outweighed by the benefit of giving those who cannot afford a home an affordable option. They can choose to pay 7 times their income and live in a big city or pay 3 times their salary and live in or around a satelite town. I think this will halt house price rises in Auckland etc, but not collaspe them. Over time -10 years say, inflation will give you the combination of 60% wage rises or 60% property falls that will mean the whole market is affordable to first home buyers.

by JimboJones | 31st Aug 13, 9:14am 1377897263

Even if land was free you couldn't build a new house in NZ for less than 3 times average income. Face it, those days have been and gone unless we can significantly raise the average income.

The MULs should only be removed if all other building restrictions are removed (e.g. height restrictions). Otherwise they would be encouraging sprawl while outlawing intensification (you could even say subsidising sprawl if the council were to supply free infrustructure as per the wishes of Hugh and co)

by powerdownkiwi | 31st Aug 13, 10:21am 1377901318

Jimbo Jones - disagree. You can build - legally - for about 1x average income. You could build - entirely satisfactorily, efficiently and sustainably, for less. Some folk with other agendas, immediately denigrate such talk (they mention 'caves' :)

http://www.csafe.org.nz/archived_seminars/archives/article/92

The rest of your comments (what should) has to be painted on the bigger canvas. Hugh's funded-by-someone-else-who-somehow-shouldn't-exist-at-the-same-time sprawled ticky-tacky, is not the way. Lifestyle Blocks are closer to being sustainable (being unsustainable being an invalid goal, one presumes!). Brendon is onto it best. If you have to grow - and it'll be temporary, that growth - then eco-village clusters (I favour rejuvenating the old towns villages - they were appropriate in a low-energy world, and presumably will be again) are probably the best bet.

by PhilBest | 31st Aug 13, 11:34am 1377905686

PDK, there is so much there that I can agree on. Can we try and build on our common ground instead of arguing about urban growth containment policies which it sounds to me that you should be just as opposed to as I am? People trying to get permission from the Council Planners for those eco-towns, have no show under the status quo. The choices are "lifestyle block", or high urban density - nothing in between.

NZ cities average section size is something like 1/8 of an acre. Many US cities average section size is closer to 1/2 an acre. Which is closer to an "eco town"? In NZ you either pay $250,000 for 1/10 of an acre inside a UGB, or you pay $250,000 for several acres miles away from anywhere and spend more on ride-on lawmowers than you would on commuting if $100,000 1/2 acre sections were the norm.

I see low density urban dispersion as far closer to the "eco town" ideal than growth-contained high density living. This is the thinking that drives me. Furthermore, there is nothing stopping the "eco town" concept from happening anywhere that anyone wants to build one, in the Houston area or indeed in most of the USA. There is everything stopping it from happening here. Have you ever met Claude Lewenz or heard of his "Village Towns" proposals?

The question of who pays for infrastructure, and how, is simply a question of social justice. Upfront charges in the price of new houses, makes all houses more expensive; hence first home buyers pay "the amount of the charges" to the seller of any home that is not actually a new one that has needed new infrastructure built.

Of course people should have every incentive to live more "sustainably", and that means that there should be savings able to be made by drawing less water from the central supply, by throwing out less waste, by driving less, and by using less energy. "Pricing" these things means that more people will use passive and active solar energy for heating and for drying washing; will grow their own food; will use a geothermal heat pump; will telecommute; will try and live closer to work (and employment will disperse too); will use fresh air for cooling; will burn biomass for heating and cooking, will recycle and do composting, etc.

Why would any sincere person advocate "urban growth boundaries" as the sole essential approach (and ignore the unintended consequences) unless they were hand in glove with the beneficiaries of inflated urban land prices?

by powerdownkiwi | 31st Aug 13, 11:55am 1377906954

Co-housing is happening - or at least, beginning to happen - within urban boundaries, all over NZ.

www.earthsong.org.nz/‎

I went to a 2-day workshop given by the woman who initiated that one, It was cleverly done. Interestingly, she'd gotten the idea from her time in Waitati, our old hacienda. It - more than most villages in NZ - has always been headed in the right direction. Now, it's pushing ahead again, where we'll all have to go:

www.blueskinpower.co.nz/‎

www.brct.org.nz/‎

www.transitiontowns.org.nz › Local groups‎

Watch that space.

by PhilBest | 31st Aug 13, 12:03pm 1377907421

But are all the people within this movement incapable of seeing the potential of land prices that are not inflated? It is all very well to get the cost of dwelling per person down to a few thousand dollars, but when a 1/10 of an acre section costs $250,000, isn't there quite a lot of scope for a lot more savings, if we could get our land price curves shallower and uninterrupted at the regulatory fringe?

New super-cheap housing of the kind you are advocating goes for literally $40,000 for a dwelling plus small site, in US cities. Here, you start with $250,000 for the site. Why not start with making savings in that? All it involves is changing some regulations - it doesn't even involve "doing without", like the super-cheap "housing" itself does.

by scarfie | 31st Aug 13, 1:01pm 1377910897

As I say higher up Phil, our money supply doesn't work in reverse and it can be simply demonstrated using RBNZ numbers that houses have become money. StephenL's question is the right on the money :-) The only option is to work around the system we have and that is where the most benefit is to be gained. I would prefer to see yours and Hughs energy directed that way.

My current work involved an invention in the energy field that could be work half a billion dollars per year to the New Zealand economy, that is tradeable income not bull***t income. But the legislators never conceived of what I have done therefore there is no room to make it legal. But the catch is they didn't make it illegal either. They won't change ( I have been trying for two years and got another cognitive deficient letter from the Minister this last week), so I will just carry on working around the system and let the market decide if they want my product or not.

When people get their hands on something better then eventually the momentum will swing in that direction. Think of what PDK is saying as moving forward in a direction that expends physical and intellectual energy positively, trying to fight a bureacracy is negative energy. The current system is pretty much one way only and won't be reversed.

In regards to cities, they are actually desireable for some reasons. Things like culture and the concentration of intellect. In the city you want a higher density because automated transport works against the desireable features. Think walking or cycling.

Dispursed housing is also desireable, but not to service the city, the two don't work together. That is where you and PDK diverge. Yes have your sprawl but it needs to be self contained.

by PhilBest | 31st Aug 13, 1:51pm 1377913896

Scarfie, irrespective of monetary inflation, if supply of land for urban growth is constrained, a problem with "pricing out" of some proportion of the population will occur.

The "housing has become money" thesis applies in so far as inflated credit is in mortgage debt. Certainly the longer the racket is maintained, the more true this is. Actually it is urban land that "is money", not housing. See my comment about the price of land per square foot in the UK - after several generations of this racket, a high proportion of this "value" will be matched by debt.

In South Korea, mortgage finance was nearly non-existent until well into the 1990's; young people traditionally saved up most of the purchase price of their first home. But when a policy like the UK's Green Belts policy was enacted in the 1970's, the prices of houses inflated up and up to a median multiple of something like 16, and national savings increased dramatically as young people saved towards a rising target.

Mortgage credit was developed during the 1990's and even with LVR's of around 50%, a bubble in net mortgage debt promptly formed. But the ability to create mortgage finance out of thin air was not the cause of the housing crisis. Supply distortions will cause a housing crisis, period. The ease of credit will merely add a debt bubble. I agree in principle with keeping credit tight to avoid this, but people start grizzling immediately, and as I said, even 50% LVR's in South Korea did not stop a net savings position turning into a net debt position.

Historically, there were bubbles even when there was a gold standard. The famous Tulip bubble and the South Seas bubble both occurred under a gold standard, as did early urban land bubbles in the Netherlands. The existence of a gold standard does mean the bubble is probably self-correcting sooner because liquidity is sucked out of the rest of the economy, and total liquidity is limited.

And constrained supply of land for urban growth, even under a gold standard, has to mean that some people will be priced out of the market altogether, while the rentier class captures most of the gains from increases in productivity in land rent rises. The classical economists were all clear about this; none of them regarded the money supply as having anything to do with it; in fact monetary inflation by central bankers was unheard of at that time.

Supply of land for urban growth is an issue worth focusing on.

by scarfie | 31st Aug 13, 2:09pm 1377914981

Yes the Land is issue I quite agree with that. It is the land that carries the title and that is the important part when it comes to lending. But in recognising that it provides and opportunity of a work around. Interestingly I suspect land held by Maori will be the saviour of this country as it is harder to borrow against.

Some othere interesting info in there Phil. Let me say with the economists though as you will have to hunt pretty hard to find one that understands the effect of interest. As such anything they say can be disregarded. It is interest that is the problem as that necessitates and expansion of the money supply, the expectation of inflation and is a claim on future wealth. Interest compounds as a portion of that of that money supply. It also facilitates causes a transfer of wealth by its very nature. Fiat or commodity currency makes no difference, interest will kill either in the end. (M.V)+i=P.Q models it.

So the problem in Korea wasn't so much the credit, it was the interest on the credit. Without the interest you take out a greater portion of the ability for unearned income.

by PhilBest | 31st Aug 13, 2:52pm 1377917559

The interest question is a chicken-or-egg one. Under a gold standard, a lender does not need to charge interest to hedge himself against the decrease in value of the money lent. This is probably why some religions had prohibitions on "usury", referring to the charging of interest, period. Under a gold standard, the "CPI" will be negative, and will correlate closely to the increase in productivity. Yes, there were decades of pre-central-bank monetary inflation, in which prices of common items steadily fell, and new units of money had to be introduced, of smaller nominal value; eg the introduction of a "half-penny".

And of course when money was gold, there would be costs involved in keeping this safe - so banks tended to charge a fee for looking after someone's gold for them. Even when paper money is backed by gold reserves, there is a cost of keeping this reserve safe.

But it is very hard for people to get their heads around the concept that without monetary inflation, and with "CPI" deflation, people would willingly save money (and by definition, lend it) because when they got it back (without interest) it would be worth more anyway.

So it is increase in the money supply that means interest charges are necessary, not the other way round. Otherwise, why would anyone lend money, when it is going to lose, not gain in value? And without lending and borrowing, society ends up going without quite a lot of beneficial growth.

If "the interest on the credit" is the problem, then would ultra low interest rates (fractions of a percent) be the solution? This would not work without massive monetary inflation, because otherwise there would be nothing like the amount of money people would be willing to borrow, around for lending, and how would you determine who got the artificially cheap loans?

This whole situation "flips" under stable money (gold standard) conditions, where you will have a balance between willing lenders at nil interest, and borrowers willing to earn income and absorb the loss in the value of the money borrowed, just so as to pay it back in the nominal value.

I find it absolutely fascinating that there has not really ever been a combination of gold standard monetary conditions, with free markets, modern trade, and the end of much "economic rent". When gold standards existed, transport and communications costs and trade were so undeveloped and expensive relative to incomes of those days, that "economic rent" was rife, even in land for food production. Goodness knows just how prosperous an economy based on a gold standard could be, when co-existing with these beneficial economic advances. Much of the negative publicity attaching to the era of gold standards may well be no fault of the gold standard itself.

I believe the very high extraction of economic rent is primarily responsible for lack of socio-economic progress, not the gold standard. Now that the first world is putting the economic rent back into urban land (via growth containment urban planning) we are seeing a return to the socio-economic distortions of the pre-modern-transport era. And even worse, because now it is combined with the bottomless creation of credit.

by scarfie | 31st Aug 13, 5:13pm 1377925980

You just had to bring that around to urban limits again didn't you. Lol. Yes a lot of gold standard analysis does fall short. But saying that no one would loan money without interest you touch on the fallacy. I had this argument with Don Brash and although he didn't like my answers he couldn't refute them. It is the money being a proxy thing again, try swapping it out and running your theories with perishable commodities. There are plenty of reasons why you might lend your surplus out interest free and I suspect you are quite capable of working out a few.

by PhilBest | 31st Aug 13, 8:21pm 1377937287

My point is that people would not loan money out interest free if the money is losing value. They used to loan money out interest free, in fact, paid banks to look after it, when money gained in value and "CPI" prices fell. That is what a gold standard does, and I thought this might be what you are advocating. It addresses your concerns about interest.

I don't see any system not based on a universal medium of exchange as a workable one; "money" evolved for a good reason. I enjoy having such a discussion, but perhaps not as a diversion every time urban planning comes up.

All the best for your invention, BTW, it sounds most interesting.

by scarfie | 2nd Sep 13, 2:54pm 1378090440

Phil if I gave you the choice of loaning me money interest free, or I will rob or steal it from you anyway, which choice will you take? What if the stakes were higher than that? I proposed you think or reasons why not to charge interest and you haven't, which is being intellectually lazy. I can assure you there are more reasons.

I am not advocating anything in terms of money either, except that interest be made illegal. I am trying to get you away from money as a proxy, that is what drives a true understanding of its nature.

I bring this up in discussions about property because it is the paramount issue. I hope you will see that one day. Here is a very good quote I found via Market Oracle from "The Five Stages of Collapse" that explains things better than I can. "This is by no means a new idea, nor is it the least bit radical; it is deeply conservative and highly traditional. It was Aristotle who first defined the economy as an exchange of goods and services for money, commerce as a parasite on the economy (where those who create nothing extract a share by trading) and finance a parasite on commerce (which extracts a share by switching money from hand to hand - a parasite on a parasite). A typical US politician, such as the president, who counts financial companies such as Goldman Sachs among his top campaign donors, could be characterized as a parasite on a parasite on a parasite - a worm infesting the gut of a tick that is sucking blood from a vampire bat, if you like." - Dimitri Orlov

The property game operates in the commercial realm and finance feeds off it. As long as finance can feed of it then it will continue to do so. Finance is behind it and property is just the method finance uses. Chop off its arm (urblan limits) and it will feed somewhere else, to stop it feeding you need to chop off its head. You might even compare it to a hydra.

by notaneconomist | 2nd Sep 13, 3:15pm 1378091710

Scarfie - Poor Don Brash was probably having one of those OMG I can't believe what I am hearing moments which can lead one into not bothering to have any further dialogue on the topic.

by scarfie | 2nd Sep 13, 3:30pm 1378092644

It was on a forum where there were many participants not just Don. Actually Don's answer was to use fallacy and say that because Aristotle believed the earth was flat his other thinking was worthless. Can you come up with an equally stupid objection to the wisdom of Aristotle?

by scarfie | 31st Aug 13, 9:14pm 1377940483

Oh such a penetrating and witty slight leaves me wounded and scarred. There must be an impressive intellect behind your bruising offense.

by Christov | 31st Aug 13, 9:19pm 1377940767

Your not doing a bad job on the old balloon lifter yourself there ZanyZ.......schools out for the weekend...did you forget your bike or something,,,?

by Gummy Bear Hero | 31st Aug 13, 10:14pm 1377944098

The weekend ..... is it Thursday already ? .... gosh ...

... I am a tadge parched , Count .... pass the Bolly please ....

No !!!!!!!!!!! ... not Alan .... ahhhhhhhhhhhhhhh !!!!! ...

.... t'was a fowler thing to do , me old China .... Glurk glurk glurgle shlork ....

by perigoL | 31st Aug 13, 5:03pm 1377925416

powerdownkiwi | 31 Aug 13, 10:21am

Murray,

I went to the link provided which gave a synopsis of your talk. Sounds very interesting but it was a little scant on details. Do you have a more detailed summary of it somewhere on the net or available digitally?

Cheers.

by powerdownkiwi | 31st Aug 13, 6:33pm 1377930793

perigoL@5.03 - that talk was my usual style; 100-odd photos and the odd vid clip in a slide show, I spoke to it and I tend to use the white board a lot. Just my style. Printed stuff no, but I'm happy answering questions, and could send some pix - I'm on landline - or post the lot.

Get in touch with your email via my blog : powerdownkiwi.wordpress

cheers

by steven | 31st Aug 13, 7:40pm 1377934847

You could, but no you couldnt based on ppls expectations. We live in a 1960s house, its simple, robust but 'basic" All of my eldest's friends live in newer and far bigger and more complex houses. So the first thing is understand that builders and developers build in apparant value add as a way to justify the price. Then understand keeping up with the Jones's......

Quite radically, low cost, maintainance buildings could be built, earthship.com. However just what we'll see getting built here due to the regs is another matter. Then there are kitsets, then there is PDK style, all fairly low cost and doable solutions at a 3 to 1 multiple and energy efficient.

Hugh goes on that houses should be built at $1000/m2 the trouble is I see nothing from him how he explains just how materials and labour excesses in the build will get slashed. Sure in the USA they build far cheaper, they have scale, 400million of them v 4 million of us.

regards

by PhilBest | 31st Aug 13, 8:24pm 1377937480

Why use that as an excuse not to bother to tackle where the single biggest difference can be made? One thing we do have that is the same as the USA, is oodles and oodles of spare land per person. That means, well under $100,000 per hectare raw land cost. Not $2,000,000 plus.

It is noticeable what a ducker and diver you are about the real issue. Which land banker is paying you for all the hours trolling on here against the urban planning reformers?

by Stephen L | 31st Aug 13, 9:41am 1377898880

Brendon,

Actually a good answer, thanks. I'm not convinced that Auckland is quite as broken as some would make out; although a quick drop by 10% would be healthy so as not to lock in too many people on bubble mortgages. 5,000 permits a year is probably only half required, but it is plausible they could get up to 10k. Even Christchurch is getting up a head of steam, while to some extent excessive pricing here is probably the best regional development policy for everywhere else that you could design. And that will help take some of the bubble effects away over time.

Has the lack of building been because no land has been zoned residential, or because developers didn't see a potential profit in building on what was available, even at what seemed very high prices already? I suspect more of the latter. A key constraint now I suspect is builder capacity.

I'm actually not sure if the Labour party is proposing government buying of land as you suggest; the Nats are presumably only buying up red zoned land, and not for building purposes. Unless though it is compulsory acquisition, any land sellers will be unlikely to want to sell at Houston land prices, whether to developers or the government. Their expectations will all be based on recent sales in the area, and if they don't get close to that, they'll keep the sheep and cows on there. Buying land does not seem something the Councils should be doing on a mass basis. Even the government should really only be involved in low cost housing; an area where developers will struggle to make a business case.

Nor am I remotely convinced (as you are not) that building lots of cheap houses in Pokeno (half way to Hamilton) will have any material effect on house prices in Mt Eden; nor that there is pent up demand for such houses in Pokeno. Auckland City is right in my view to try and allow/encourage more central housing options, not only because that suits their city design, but in our paradigm, that is where the demand is. I can understand that maybe if you were starting a city from scratch you would look at the Houston model more closely, and maybe Christchurch has that opportunity

Nevertheless Hugh's contribution to the housing debate is actually an important one; especially on building costs; and on breaking any really artficial land spikes due solely to zoning issues. Those thoughts do need for me anyway, to consider how they would likely play out in NZ; what are the total economic effects, where would the houses be built; what types of houses; what type of city does that mean in terms of hubs and transport and key commercial and industrial areas. And on how we would get there from here. For Auckland, Hugh is pretty light on much of that.

by Brendon | 31st Aug 13, 10:46am 1377902775

Stephen L thanks for the supportative reply. One thing I was meant to say was that the peakist amongst us cannot say whether small compact walkable/bikable cities or spread out urban areas made of villages self sufficient in food production is the way to go. All other objections to building on rural priced land is just greed as far as I'm concerned.

Building capacity might temporarily hold us back, but given enough supply of affordable buildable plots then the construction industry then has the confidence to invest in increased capacitty. Such as factories to prefabricate/ manufacture major building components.

Did you know that Japan something like 30 years ago adopted the Canadian building code alongside their own, so that if one of their cities got destroyed and they lacked the capacity to rebuild quickly they could import the houses from Canada.

Labour wise the European collaspe of their construction industry means their is a lot of construction professionals on the market. That could easily come here.

I haven't heard Labour of the Greens suggest compulsory acquistion of land is an option. And it isn't my first choice but maybe it should be thrown into the debate. We have done it before.

And for Jimbo I think it is just greed that some object to the 'subsidising' of infrastructure spending on motorways/public transport in my 'do a Perth' idea (originally suggested by Kumbel). We do not seem to have a problem in subsidising rents with accomadation grants and WFF for landlords gain.

An isolated subsidivision in Pokeno might not appeal but what about a whole new town with transport links, amentities -libraries, parks sports fields etc and jobs in nearby office and industrial areas etc? I am not from Auckland so cannot say if this would work but the problem we are developing down here in Canterbury is that the satelite towns are exploding, they are not cheap, just cheap enough to pull people from Christchurch and they lack proper amentities like good transport links. I think in a few years time there could be a lot of problems with them.

by powerdownkiwi | 31st Aug 13, 11:31am 1377905493

Actually, us peakists can :)

Have a wee think, though: peak determines the 'way to go'.

We will go right down the ladder (descending EROEI, reducing-to-nil fossil fuel availability, sea-level rise, extreme weather events, droughts, water-table depletion, resource depletion) within the lifetime of most existing buildings, most existing infrastructure, and all new of both.

So existing cities will see it all, as will their existing houses. They have the Cuba problem, well ducumented so no surprises there. They have the sea-level problem - Dunedin, for instance, has the Peninsula as an island, the surfers paddling over the old Carisbrook site, and will be attempting to repel borders using ? Fossil fuels. Putting out their fire with gasoline.

Existing lifestyle blocks, and spaced-out towns and villages, will survive best of all. Close-clustered sprawl will be abandoned, is my guess, until it is half-occupied and therefore better spaced. New builds have to be resilient to a post-peak world. There are folk in this country, who scanned the globe and decided that here was the best place to be, Given that they have the correct mindset, I've been interested to see what they have chosen to set up; in the main, its lifestyle to small farm places they choose, it's as sustainability they aim for, and they seem to understand the need for strong social networks.

The young poor, should look at buying a farm between them, maybe cropping hay and leasing paddocks until they're debt-free, then setting up a tenants-in-common, co-housing kind of thing.

http://en.wikipedia.org/wiki/Cohousing

http://www.converge.org.nz/evcnz/

by PhilBest | 31st Aug 13, 11:44am 1377906253

Now you are talking like a sincere "peak everything" man.

".....Existing lifestyle blocks, and spaced-out towns and villages, will survive best of all. Close-clustered sprawl will be abandoned, is my guess, until it is half-occupied and therefore better spaced....."

No argument at all with that. So why did I have to ask repeatedly why you always jumped into these discussions in the past, in support of Len Brown, growth containment, etc etc? Did you ever actually read my arguments? I have always been arguing for "better spaced" living. You can't have better spaced living when urban growth boundaries are causing the cost of land for housing to be $1,000,000 per acre, and the only options are $250,000 1/10 acre section inside the boundary, or several acres (lifestyle block) miles outside it for about the same price...!

A free market would result in a scale of choices, with space and location both being trade-offs on a continuous scale, not a scale with a massive "discontinuity" in it.

by Brendon | 31st Aug 13, 12:52pm 1377910351

PDK I respect what you are saying and I have no doubts about your sincerity. But not all peakist believe you. I could show you documents from CCC where Peak Oil was used to justify the UGB and compact city model.

Stay well. : )

P.S the solution if someone is trying to 'cherry pick' the rules for their gain, is to ensure the rules work for everybody.

by PhilBest | 31st Aug 13, 2:12pm 1377915139

Brendon, PDK (at least on this thread) is an honourable exception among "believers" in "peak oil" etc - by far the greatest majority of these "believers" are to be found among the advocates of UGB's and compact city urban planning.

Low density, lifestyle block and eco-town survivalists are a tiny, tiny minority. But they are either more intelligent or more sincere than the other lot.

I have constantly asked "compact city and public transport" advocates whatever jobs all those apartment-dwellers and train riders will be travelling TO in the brave new post-energy future. Every single one of them replies, "the same jobs they already do, why....?"

"Steven" replied in this way on this forum just a couple of weeks ago.

PDK is more intelligent than this.

I said "at least on this thread" because my main source of disagreement with PDK in the past, was his contradictory advocacy of lifestyle block survivalism along with kneejerk apologia for UGB's and compact city ideology, and denial of the racket in land capital gains. If he has relinquished the latter positions, we can definitely work constructively towards mutually agreeable solutions.

I was even goaded more than once into making the accusation that he wanted lifestyle block survivalism for himself, but wanted everyone else to die off in apartment buildings with no food supply or heating. In which case I was not the only one who pointed out that he had better be ready for starving hordes swarming up the Kaimog in search of someone with a stash of food.

by steven | 31st Aug 13, 7:53pm 1377935622

Stop twisting my words and taking them out of context, thanks.

I certianly dont see "the same jobs as they ever did" no way absolutely not that yes some ppl think it will be like. This isnt a 10% less scenario, or -20%, its a -75%+ less energy scenario. IF we look back at the early 1800s humanity lived within the annual energy model. We will be going back to that but hopefully somewhat higher, 1920s maybe. The only point of contention or open to discusion is just what stages and time frame there will be. Pretty sure Ive said the end game will be a life style thats Amish like (just hopefully without the religious mumbo-jumbo).

Ive listened extensively to the likes of and agree with Nicole Foss...try doing the same, then maybe you might understand where I sit.

in fact try reading this very article,

http://theautomaticearth.com/Finance/the-global-economy-suffers-from-hy…

The point is we will see an attempt to keep the CBD's of this world going, vested interests ensure that and the ppl who will be carrot pullers of the future will scream for that. Indeed if we are only going to see some less energy (say 10% less then plateau) then yes this make sense, its not of course...10% per year is quite possible for some years.

regards

by PhilBest | 31st Aug 13, 8:40pm 1377938455

OK, that comment rates as "sincere peakist" with me.

You DID say what you now deny saying, on THIS thread:

http://www.interest.co.nz/property/65326/finance-minister-says-compact-cities-drive-house-prices-says-people-should-support-mo

But I am quite happy to accept your sincerity about the "Amish lifestyle" end game, and the vested interests that are "keeping the CBD going". So I ask you, why do you constantly leap into these discussions defending UGB's and urban plans that are all about rent-seeking rackets and are probably driven by those very same CBD-perpetuating vested interests?

I would respect the sincerity of you and PDK if you had always said, we disagree with cars and big houses, urban living is coming to an end, so we disagree with CBD-centric planning too, we will need eco-towns and subsistence living, and by gosh, even if we disagree with where they are coming from, Hugh and Phil and Dale and Matt and so on, have a damn good point about UGB's......!!!

But no, the stance of both of you has always been absolutist defence of anything emanating from the "Green" pro-planning left, regardless of how contradictory of your stated "peakist" position. Which of course leads quite logically to suspicions of stooging and smokescreening for the vested interests behind that racket. If not stooges, certainly useful idiots. "Baptists and Bootleggers" connections between "conservation" and environmentalist groups, and "big property", have been identified by astute writers going back decades now. For example, in "Containment Policies for Urban Sprawl" by Mason Gaffney, 1965; "Your Home: Big Brother Wants Control of Housing" by Gary Allen, 1974; or "The Environmental Protection Hustle" by Bernard Frieden, 1978.

by steven | 1st Sep 13, 8:43am 1377981825

Context....depends on degree of scarcity...if we do indeed only regress to say 1920s they had things like trams and still had cities. Trams are electrical powered when we do have a lot of renewable electrical power. If we can use alternatoves well then there is no reason we end up at Amish level....and I hope very much not.

The second thing leading from a scarcity of fossil energy is swapping to alternatives. So public transport using electrical power needs a certian level of population density to be worth the energy cost to put it in and run it, I think we both agree on that? We have had this discusion before, the aim has to have 30+ ppl on it to be worth while, 3 is a huge energy loss, I dont contend that, its simply wrong. I see large empty buses running around with maybe the odd gold card holder on it, thats wrong, a 7tonne bus for one OAP is crazy waste and polution.

So what we are discusing really is a huge change in many things, ie how we work and even when we work. For instance if we use tidal in Wellington for power and the tide is out, maybe everyone starts work 2 hours later, in the means time they dig their veggie plots. The interesting thing is just what is the work going to be....hence I see a lot of de-specialistisation (if there is such a word). Ppl with such skills as financial planners amd media experts even if they are bright almost certainly lack useul skills for a different world....hence carrot pullers.

In terms of boundaries again I see no great fix here, and in fact the potential to waste the very short time left...plus petrol prces is rising and will continue to do so, the urban sprawl that is the USA isnt functioning to well. The debt via MUD's Hugh wants is hey more debt that someone is stuck with, or if a default occurs someone elses loss.

Pro-planning isnt Green...by and large. The rules on building say an earthship make that hard if not impossible in NZ.

Anyway in a way its moot, at some stage the boundaries will simply go because the enforcer of them will go, bankrupt....ppl will build earthships...there sure will be lots of tyres.

No I do not defend the "pro-planning left" and in fact even the right of centre have planning, so this really sums up just how extreme right/libertarian your position is.

regards

by PhilBest | 1st Sep 13, 4:06pm 1378008410

Steven, there is no proven deterministic connection between urban density and energy consumption. There are far more "sustainable" ways of living that cannot be done in high density conditions. Every time I list these, you say something like, "yeah, but, nobody actually chooses to live this way, so therefore we must force everyone into high density".

But nobody actually chooses high density either, so if you are going to use force......?

Also, have you ever stated what is your preferred approach to getting everyone housed in high density living on rail routes? Because in economies with private property rights, what happens is that the price of that limited amount of land goes sky-high. It is possibly fair to assume that the total value of land within an urban economy currently, gets concentrated into the smaller footprint. The result is of course that no-one can afford to live there, at least not once the first percent or two of people have actually moved and the land prices have reacted.

I am quite blunt about the need to nationalise land to achieve the stated aims. In this case, expect the "strong support" for intensification that is the behind-the-scenes mover, to mysteriously flip to strong opposition. "Get it"? Your type are useful idiots for rent-seekers. Possibly you do not even understand the meaning of that term in economics terminology.

by Christov | 31st Aug 13, 9:14pm 1377940495

uhhhh..? ZanyZ .............they are having what appears to me to be a reasoned , intelligent discussion, unless you have some real input , why not leave em to it huh..?..... crack a tube and watch the end of Shrek or something...I dunno.

by Gummy Bear Hero | 31st Aug 13, 10:25pm 1377944751

.. the lone survivor will be Gummy TV , on Free View , near you ...

It's kinda like when you're staggering down the street ( most folks walk : Gummsters stagger ! ) and you notice there's a skerrick of chewing gum stuck to the sole of your stilettoes .... and no matter how much you wipe your heel , on some long grass , a store's doorway , even on a pile of vagrant's vomit , the gums stays put upon your footwear .....

.... well , Gummie's just kinda 'like that !

by Brendon | 1st Sep 13, 11:10am 1377990614

As most of us know PDK is Murray Grimwood. He has a lifestyle block in the Kilmogs that used to be a forestry block. If anyone did a library search you would find he writes a very successful column for a Lifestyle block magazine. He has been in both local and regional government so it would not be surprising if he continues to do some work in that area. But is it relevant if he gets some income from writing for public or private organisations.

Hugh not all of us have the luxury of being retired and independent financially.

by powerdownkiwi | 1st Sep 13, 5:36pm 1378013810

I'm pleased to inform Hugh, that he's as wrong on that, as he is on everything else. He understands wrong.

Probably for the same reasons: lack of ability to ascertain facts, and need to keep within ideological constraints.

Hughey. I do anything I do, pro bono. For nothing, for the good of others. When you realise - properly (you didn't read that link, did you? You chose continued ignorance, then) - what sustainability entails, you don't charge, and certainly not a profit. You also do as little (formal work-wise) as possible. Being sustainable personally, of course, takes more work than most folk put in of a day.

My income, believe it or not - is less than $10, 000 pa. None of that is from the public trough. You're a mile out, Hughey, and a mile out of line. (Goes with the territory, one suspects).

by PhilBest | 1st Sep 13, 7:05pm 1378019110

PDK, you had better watch out that the Tax people don't decide to do you for the imputed income from all the food and energy you produce yourself.......

Socialists always "run out of other people's money" and come looking for more and more inventive ways to extract it from non-payers under the status quo......

by steven | 1st Sep 13, 7:21pm 1378020078

It was in the last few months that I read that the CEO of Nestle? wanted to make all water privately owned so the "appropriate return" could be earned...so whos being "inventive here I wonder?

Really there is no difference between either political extreme.

In some ways though you are right, I do expect that both counicls and Central Govn will tax heavier on those who can afford to pay as those who used to be abe to pay collapse under the burden, capitalists will do just the same thing given the opportunity....

regards

by notaneconomist | 2nd Sep 13, 10:31am 1378074685

Now hugh - I'm all for helping people out but helping people out who encourage the rapacious bureaucracy won't let them learn their own lessons. It is not like enough people haven't tried to warn them and advise them. What is that saying about things falling on deaf ears........

Chipping in would only encourage participants to rely on private Joe Citizen even more.

by notaneconomist | 2nd Sep 13, 10:45am 1378075530

Haha Hugh so am I but have come to realise that being is soft is how we got into this mess in the first place. There is nothing wrong with a hard pill when the cause is right.

by powerdownkiwi | 2nd Sep 13, 9:19am 1378070379

Actually, the 'taxing' of the poor is being done via theft of their income-generation commons (soe's). Not completely; selling off Air NZ is a good idea because it hasn't long to go, and the 'profit' from generators was from 'themselves' - the wealth was generated by the energy input - charging profit from yourselves is stupid. What is happening, now, though, is that some are charging it from others - a very different story.

Hickey is on to what will happen next; tax on static items (land tax etc). That is the inevitable next step in a zero-sum game, suck it out and suck it from the bottom/vulnerable first.

And yes, I understand that in some US States, you can't catch your rainwater off your roof - someone else owns the rights to the stormwater. Maybe you could post your share to the IRD in water-balloon form. Me, I'd save the postage by solar dehydrating it first.....

by PhilBest | 31st Aug 13, 11:55am 1377906955

Stephen L:

I can understand your skepticism that abolishing UGB's will cause affordable development, when the land can still be "held off the market" and farmed until worth developing.

But you are underestimating the sheer amount of land and the number of landowners that are within car-commuting distance of a city fringe. Many people on the Left hold assumptions about free markets that are completely invalid in practice - we do not see oligopolies in food and clothing, and we should not assume them in housing development either. The fact that large numbers of potential competitors are allowed to compete, means that someone, somewhere, can rock the boat and start a "price war".

Also, there are thousands and thousands of lifestyle blocks with potential for 20 to 50 houses on each of them. Just one family or church group or community organisation could easily develop a lifestyle block into highly affordable housing for their members, and there would be hundreds of such groups in society keen to get going and do that as soon as it was allowed.

You are correct that "building capacity could hold us back"; there are numerous potential choke points in the chain for supply of homes - as Hugh P pointed out above, even Houston has experienced a blip because of constraints on developer finance since the crash. But NZ has the opportunity to get so many construction workers back from Aussie, plus some of Aussie's own workforce, it is not funny.

by powerdownkiwi | 31st Aug 13, 12:05pm 1377907538

While it is interesting to note that some have softened their apoplectic approach to lifestyle blocks, they still cloud the debate with ideology. Left and Right are nonsense here, as is the 'free market'. There is no such. Our whole society - personal, national, global - is still failing by several orders of magnitude to value things real.

A real market would fully mitigate any impact of anything, any other type (and our present one is grotesquely an 'other type') is not properly valued. What the 'free marketeers' are arguing for, is a very selective cherry-pick.

by PhilBest | 31st Aug 13, 12:35pm 1377909319

I am inclined to agree there is no such thing as a free market - you should read Ayn Rand's "Capitalism: The Unknown Ideal".

But the most egregious things we need to focus reforms on, is economic "rent seeking". That is, people getting "something for nothing".

I agree that instead of using the labels "right and left", we should frame each discussion in terms of each policy we are discussing.

In the UK, "Conservatives" are strongly involved both in "The Campaign to Protect Rural England", and the massive rentier mortgage finance sector. "Labour" is so enamoured of "planning", that they too will do nothing to reform the supply of land to help their constituents. Both left and right are dismal failures there.

A libertarian "right" would say, chuck the growth boundaries open". A more sincere and economically informed left would say, "compulsorily acquire the land for urban growth". The Netherlands and Sweden both do the latter. Most of the USA has the former. Both cause housing to be more affordable (but the Netherlands and Sweden have failed to keep this up in recent years) to the benefit of lower income people and the young, and to the disempowerment of the FIRE sector rent-seekers.

So let's frame the argument in terms of "people who actually care for the poor and the young", and "people who don't, or who say they do, but are economically ignorant". And going along with this, "the rent-seekers useful idiots, versus the wise and moral".

BTW I have never been someone opposed to lifestyle blocks, and I know of no contributor here who is. It is just an obvious fact that far more people have them in NZ because there is no range of options between that and the quarter-of-a-million-dollar postage stamp section. In terms of unintended consequences, it reminds me of the USA's mandates for cars petrol economy, that have made V8 pickup trucks (which are exempt) the biggest selling vehicles in the household vehicle market.

by PhilBest | 31st Aug 13, 12:20pm 1377908403

Stephen L:

You raise a good question about the flow-on effect of reform, on equity and financial system stability.

But consider the alternative path that the UK has been on for decades. The longer you go on without reform, the greater the amounts of equity in the system based on the price of land per square foot - which goes higher and higher and higher. So reform gets more and more difficult.

The housing for which the median multiple is 6 and higher, is on smaller and smaller plots of land. So the later it is left to do reform, the further the value of these very small plots of land will fall. Reform will essentially mean that a 1/4 acre section will be less than $100,000. So all the 1/16 of an acre sections that were "worth" more than $200,000, suddenly end up at less than $20,000. All the crummy old poky row-houses were worth nothing as structures anyway; most of them could be bulldozed to make way for new decent size dwellings.

So the Poms are stuffed. Reform would absolutely finish their FIRE sector. But the zero sum wealth transfers to the FIRE sector will kill the whole economy anyway. It nearly has already.

But the lesson to take from this, is certainly not "don't do reform". It is, as you say, "don't start with the UGB's"; but it also is, "do reform while the pain is still manageable".

One interesting little historical lesson: in the early 1970's when the Kirk government very stupidly opened the subsidy spigots to all comers for housing, "supply" was swamped to the extent that a short but very volatile mini-bubble in house prices occurred. But through the rest of the 1970's, house prices reverted to their mean in real terms, without ever actually falling in nominal dollars, because CPI inflation was running so high. Rodney Dickens describes this as "washing away our house price bubble sins in a tide of inflation".

http://www.sra.co.nz/pdf/RealHousingChapterOne.pdf

So relaxing the RBNZ's inflation targets for a few years while urban land supply is thrown open, might actually help to prevent the dire effects of mass "negative equity".

by Stephen L | 31st Aug 13, 8:37pm 1377938273

To Phil and all,

Am impressed that after a very pleasant day's golf and one beer too many, I had only the intellectual capacity to read all your inputs (without remotely getting serious about any of my own), and was very impressed at the depth of thought, and pleasingly, the doing so in a very respectful manner.

My one contribution:

Phil,

So relaxing the RBNZ's inflation targets for a few years while urban land supply is thrown open, might actually help to prevent the dire effects of mass "negative equity".

Good point.

I'm not actually sure how the western world including the Eurozone, the US and the UK for example, as well as probably China, India and Brazil if I remotely understand their issues, get over their issues of negative equity (or lots of debt), without some inflation. Our house prices are small potatoes in comparison.

At some stage politically the valves will probably be opened. Let's see.

by PhilBest | 31st Aug 13, 9:30pm 1377941448

The USA barely has a problem compared to us and the rest. Most of their cities and most of their households are not affected. Something like 200 out of their 260 largest cities had no price bubble to speak of.

Many of the price-bubble cities have reverted to lower levels already. Had government tackled the land supply issue by now in the cities where it needs to be tackled, the USA would be on a better track than it is now. As it is, prices are bubbling again in half a dozen cities. People never seem to learn, do they?

Ireland and Spain should never let it happen again, now that their prices have reverted.

Germany and Italy and Switzerland and Austria don't have much price bubbling yet and their governments absolutely should not let it happen.

Many of the other nations; Canada and Aussie and France and Sweden and ourselves; are in a "first cycle" of bubble and unaffordable housing behaviour, so we should stop the cycle now before we get into the Mexican hostage stand-off situation the UK is in.

The developing nations position is different and interesting. Their housing markets are generally marked by very high median multiples, with the cost of land being very similar to 1st world countries, only with much lower incomes. This is because they have never had in the first place, a liberalisation of the processes by which rural land is converted to urban, with "planning gain" eliminated. Their rent-seeking classes generally still have a grip on these processes. Thailand and Vietnam might be interesting exceptions but there is no data as good as the Demographia stuff on the Anglo world.

If you went back 120 years or so in the Anglo world, you would find a very similar situation. I argue that "The Great Depression" of the 1930's and the following several decades were when massive amounts of "high land rent" equity were wiped out. The bust happened anyway, but the land values never returned to their pre-1929 levels. I don't know if all developing countries have to go through a similarly violent phase. I argue that if they never experience the decades of low-rent, stable urban land prices that most of the 1st world has, they will never match the 1st world's level of development or social mobility or democratisation of ownership of urban sections.

The elderly economist Mason Gaffney just recently said the following about the post-1945 era in the USA:

“…..Affordability of land ran high, e.g. for housing and farming. Ambitious young entrepreneurs and home buyers could borrow to buy cheaply. Loans were mostly for production and use; price/earnings ratios ran low, payoffs were fast……”

http://masongaffney.org/blog/index.php/2012/01/reverberations-between-i…

The whole discussion there is very interesting.

I believe the developing nations will go through violent busts but the question is whether they achieve the stability, or just further booms and busts, or even political revolutions. I believe China and India and Brazil are all vulnerable to busts right now because speculation in urban property is at just insane levels, like Japan in the 1980's. Thousands of acres of land more expensive than Manhattan.....? WTF?

But note that actual tenancy rents per square foot in virtually every city in the UK are higher than Manhattan too. This is what 6 decades of the UK's kind of urban planning does. You might find THIS comment and the immediately following one, very interesting:

http://www.macrobusiness.com.au/2013/05/european-economy-facing-generat…

by steven | 1st Sep 13, 7:40pm 1378021239

I think assets / equity will simply plumet in value at some point aka 1929. Right now we see that these things have insane P/E ratios and dont forget thats based on BAU (ie no peak oil)...when it finally dawns on ppl that thier investments can never give the returns they expect.....oh boy will that be interesting.

The only other option is as you say print like crazy...except this time the money has to end up in main street in ppls wallets. The only way I see that is a debt jubilee, fat chance.

What I think will happen is just like we have observed for 5 years now the pollies will do as little as they can to can kick....but at some point they'll mis-kick, get the ball stuck in doggy doo and then it will be 1929 again, they will be simply too slow, too little and too late.

regards

by PhilBest | 1st Sep 13, 7:53pm 1378022029

It is 1929 again, because urban land values are involved again, just like they were in 1929.

This time, there may be no long stabilisation as there was from the 1930's to the 1990's in most developed countries.

See this comment and the one following it:

http://www.macrobusiness.com.au/2013/05/european-economy-facing-generational-shift-down/#comment-245246

BTW, that is a proper finance and economics blog - no neo-Malthusian trolling allowed.

by steven | 1st Sep 13, 7:57pm 1378022239

Actually you are not in charge / editor here, unless we missed you buying out DavidC?

Otherwise er no.

regards

by PhilBest | 2nd Sep 13, 1:59pm 1378087163

Just dropping a pointed hint to Mr Chaston as well as to you and PDK.

by KH | 31st Aug 13, 3:59pm 1377921560

I am struck by this mortgage slave idea. People with less housing than befora. Twice as many hours worked. GDP is obviously not the useful measure.

by powerdownkiwi | 31st Aug 13, 6:40pm 1377931228

http://www.odt.co.nz/opinion/opinion/152297/false-gospel-according-gdp

agreed.

by notaneconomist | 1st Sep 13, 7:54am 1377978853

Hugh - fantastic article "Suffocating Bureaucracy & Failed Institutions".

Your outlining the Bouazizi suicide is very important. Far too many people especially in the bureaucracy and institutions fail to recognise the effects of their actions on others well being.

If I decided to perhaps bake cakes and sell them on a little road side stall outside my house I would soon find myself in breach of many laws and regulations in NZ. This type of suffocating is epidemic in NZ and many people who have a special skill that could be turned into a business opportunity choose not too due to the fact that start-up has to many costs and to many hurdles.

There are those in the world who want to control via any means possible so they find a cause to implement the controls they desire, until we address the psychological issues of these people then we will remain trapped in this BS. It is my opinion that we have far too many people with psychological issues they are personally repressing that end up in jobs repressing others.

by steven | 1st Sep 13, 9:08am 1377983330

Without doubt, yes workable, the problem is determining workable. So hiding the true cost of a build with a new debt model (MUD) is just can kicking....really it achieves little I can see.

Sprawling out assuming energy costs wont get much worse is simply not workable, we see that in the USA.

regards

by steven | 1st Sep 13, 8:06pm 1378022817

Last tiime I had the mis-fortune to go near an apartment developer his margin was 100% clear. So sure it might be selling for $4000+ but the actual cost was $2000 and that includes his subbies and suppliers generous margins. So what I wonder is the true cost? considerably under $2000...

I stopped doing "serious" DIY 10 years ago, the costs were rocketing,,,,yes sure the Council fees were crazy but the costs of materials just made it pointless to to do improvements.

regards

by PhilBest | 1st Sep 13, 4:19pm 1378009151

".......So hiding the true cost of a build with a new debt model (MUD) is just can kicking....really it achieves little I can see.

Sprawling out assuming energy costs wont get much worse is simply not workable, we see that in the USA......"

For the zillionth time:

There is only one difference in the load on society, between the MUD model/ PAYGO, and "levies upfront". The latter is the Councils kicking the can down the road, that they have lost control of their costs and have failed to responsibly use rates for what their core raison d'etre IS. The Councils are "double dipping", charging upfront as well as charging rates.

Of course they love useful idiots repeating non-arguments again and again and again.

The MUD model is just PAYGO for a "new municipality". Every municipality started somewhere. One of the beauties of the MUD system is genuine inter-jurisdictional competition, which keeps local government honest and lean and efficient.

Your comment about the USA is pure mythology; our cities are far less efficient; so are the UK's. The correlation between density and traffic congestion, commute times, housing affordability, economic productivity, and local fiscal sustainability, is all in favour of lower density and "MUD development" freedom.

Kindly engage with the numerous figures and examples I have repeatedly provided you. I realise you are merely saying what Len Brown and the Auckland Planners are, but they are saying what their garbage-in-garbage-out computer models tell them, which bears no resemblance to real life outcomes. These models have been critiqued by advanced academics and their failings are well known. That does not stop planners relying on them and stating policy options as if they were fact rather than de facto barefaced lies.

by powerdownkiwi | 31st Aug 13, 8:26pm 1377937576

Hughey, I castigate politicians of all hues, long and loudly. Crossed swords with Metiria Turei's partner recently, will clash with David Parker (he's giving the Eman lecture after mine) soon, etc.

But not for your reasons. Have a careful, slow, prejudice-aside read of this:

http://www.openfuture.co.nz/unsustainability/meaningofsustainability.html

Then read it again. And again.

How does your 'cheap fringe dwelling' fit into that? If you're not asking the right question, you'll never get the right answer! Councils are between a rock and a hard place; having to comply with unsustainable rules, with guaranteed-to-dwindle income and guaranteed to increase costs, and an unsustainable fossil-fuelled lot of inhabitants; 50% of the planet now. As we haven't time/resources to rebuild for them all (think about what it took to build what is current) the cities will have to attempt to adapt.

Sprawl doesn't fit that picture.

by PhilBest | 31st Aug 13, 9:01pm 1377939689

As I have asked you a zillion times before; where does inflating the price of land for new houses from under $100,000 per hectare, to $2,000,000 plus, "fit the picture" YOU are drawing? And inflating the prices of ALL housing by the $200,000 plus of this completely non-productive, zero-sum inflation in land prices?

Another way of putting this, is that doing it the "growth containment" way, might mean that infrastructure costs borne via taxation MIGHT be $50 per annum lower per household (based on the "Costs of Sprawl 2000" study); external costs of “automobile dependence” MIGHT be a few dollars per annum lower per household (local pollution is actually far higher and there are significant other external costs to “density”); and possibly there are “savings” (most likely forced) in lower direct cost of automobile use, possibly as high as a couple of thousand dollars per annum – but housing costs are easily $20,000 per annum per household too high, and this for the entire 20 years of a mortgage term (in fact mortgage terms in the UK are typically exceeding 30 years now).

If we applied the $20,000 per household per annum to infrastructure instead of to banker's bonuses, we could have highways and water and waste hooked up for the entire region from Wellsford to Thames to Piha to Waiuku to Huntly.

AND, this is the kicker, NONE of this has one iota to do with future-proofing society; it is having the OPPOSITE effect to the spreading out of population that you admitted earlier is vital to the post-energy future....!!! So what the heck do you mean by "sprawl doesn't fit that picture"????

Growth boundaries are preventing sprawl, therefore they are good, which is a Green article of faith; future-proofing society means households need more space each, which growth boundaries are preventing......!!!

Are you going to "get it" one day or are you going to carry on wasting intelligent people's time and derailing constructive discussions with incoherent and self-contradictory arguments?

by Gummy Bear Hero | 1st Sep 13, 12:33pm 1377995628

I suspect that it won't be " peak oil " that destroys our way of life , nor global warming , but " peak bureaucracy " will crash the economies of the western world ....

.... stifled , strangled , and buried under a mountain of red-tape and existing , plus recently formed government bodies & quangos ...

" Sir Humphrey Appleby " would've been well pleased with the path we're currently on ... Helen Clark approves of John Key's administration .... says it all , doesn't it !

by PhilBest | 1st Sep 13, 4:26pm 1378009587

Couldn't agree more, Gummy.

"Yes, Minister" wasn't comedy, it was a warning allegory - like Orwell's "1984" and "Animal Farm".

by PhilBest | 1st Sep 13, 3:48pm 1378007308

".......if central government and local government consults with PDK then no wonder our policies and the anti development practices and inaction is prevalent amongst our beauracrats......"

You sure said it....! Even so, he is just a useful idiot to both the bureaucrats with their own self-interest, and the vested interests that you bet will be issuing dire threats to the politicians over reforms - like the FIRE sector.

In a way I am glad to have someone like him participating in these discussions because he is beyond parody as a scientific-technical buff who has not the first clue about a single economics principle, or real life consequences of policies - akin to the kind of people who ended up running economies in Commie and other totalitarian systems and making an utter human tragedy of it.

by PhilBest | 1st Sep 13, 3:55pm 1378007738

One of the epiphanies that anyone with an interest in politics can experience, that helps them make sense of the world, is to realise that bureaucrats do NOT act in the interests of "the public" or even of "the government". Their priority is the growth of their department, their security of tenure, their chances of promotion, their growth in income, and the chance of pursuing their pet ideologies.

Lee Kuan Yew was such a wise man, he foresaw this and pre-empted it with "3 year tenures of employment" in the Singapore public service.

Hugh Pavletich is so right that housing affordability reflects the state of bureaucracies. Singapore manages to have housing prices around 1/3 of Hong Kong's even though they both face very similar ultra high population levels for the available space. In fact Singapore manages to have lower housing prices than a lot of cities with nowhere near as severe land availability problems. Vancouver, for example, is an absolute disgrace. Notice how Len Brown always speaks so deferentially about Hong Kong, Vancouver, and London - three of the worst possible housing markets in the world in terms of mismanagement of affordability?

by Brendon | 1st Sep 13, 9:46am 1377985565

PDK like Stephen I went off yesterday and did other things -in my case a family outing. But it is great to read such a debate on my return.

To answer your question of how does cheap fringe dwelling help, I think Phil answered that up thread a bit

"there are thousands and thousands of lifestyle blocks with potential for 20 to 50 houses on each of them. Just one family or church group or community organisation could easily develop a lifestyle block into highly affordable housing for their members, and there would be hundreds of such groups in society keen to get going and do that as soon as it was allowed."

That doesn't sound like tacky cookie cutter sprawl to me. It sounds like something closer to a earthship or what you and I have referred to as an 'eco village'.

To me it is imperative if we go down the road of allowing developments outside of the UGB, then the new development rules allow/encourage these 'eco-villages'.

It would be really disappointing if the 'freedom' to build outside of UGB rules were such that only developers doing cookie cutter sprawl were allowed. The likes of Hugh and Phil need to reassure us the freedoms they are seeking will be as easy for a 'family or church group or community organisation' to use as conventional developers.

I am perhaps less committed "Peakist" compared to you or Steven. The way I see it, is it will happen sometime and possibly in my lifetime, not sure of the severity, but potentially it could be very bad. Given this it is a little like earthquakes. It is something to consider when buying land or building a house.

So I see allowing 'eco-villages' is giving people the freedom of deciding for themselves how to manage this risk.

Using your words it gives more people the option of building a lifeboat.

by steven | 1st Sep 13, 3:54pm 1378007691

I work on if my 3g stlill works i have not gone far enough in my kayak yet

by steven | 1st Sep 13, 3:57pm 1378007874

Yes and that is why if the density isnt high enough you dont get the superscaling

by PhilBest | 1st Sep 13, 4:24pm 1378009471

Is Silicon Valley dense? Is Hartford, Connecticut? The two highest-income locations in the USA, along with Manhattan.

The highest income location in Germany is Wolfsburg. Far from the densest.

Agglomeration economies are not synonymous with clustering. This idea is 250 years out of date. The growing efficiency of transportation and communications has enabled a substitution of these things for clustering, which has dis-economies of land rent and congestion.

The market finds a balance, when allowed to. When not allowed to, as in the UK, the forced higher density is the main cause of the entire national economy lagging in economic productivity.

by powerdownkiwi | 1st Sep 13, 6:02pm 1378015351

Looks like we ended up going nowhere with that one. The two narrow-focus folk have gone back to exactly their "everything in the world is summed up in the hight price of urban-fringe land, and it's someone else's fault".

And one somehow slides that into a 'commie' prejudice, which merely suggests he was alive in the McCarthy - is bloody old, in other words.

We have a none-too-literate spinner there as well, which leaves StevenL and Brendon perhaps as thinkers worth engaging with.

Interesting.

This sums up the lack of understanding:

"the main cause of the entire national economy lagging in economic productivity".

Britain went from being self-sufficient in energy and food, to being an importer of both. Given that all wealth is either underwritten by energy (or is a bubble in the making) it is not hard to see why she's on the decline. Add in the fact that she was once an Empire, sucking resources in from everywhere, mostly using repressed-renumeration labour, and you get her downturn. That was what WW1 was about, the joke being that neither the pretender nor the incumbent emerged as the Empire - that was a third party, now on the decline.

As applied to housing, Hugh says

The young ones now should have even better housing than we did at their age

Well, maybe his generation should have thought about that, before they raped the planet, didn't mitigate their pollution, doubled their numbers, and chose to believe in a false (Economic Growth is unsustainable, so it's not worth worshipping) god.

by PhilBest | 1st Sep 13, 7:09pm 1378019366

It is a fact that urban land prices per square foot were approximately 300+ times higher in the UK than in comparable US cities, back in 1984 (Cheshire and Mills, 1998). The difference has possibly gone higher since.

The market rents for CBD space in almost all UK cities, is higher than in Manhattan.

You have the gall to accuse me of assigning "one cause to all ills", and you are the guy covering your ears and chanting "running out of resources...! running out of resources....! running out of resources...! running out of resources....! running out of resources...! running out of resources....! running out of resources...! running out of resources....!"

The young ones do have better housing than their parents, still, in all the US cities that do not run this gouging and enslaving racket at the expense of their young. Funny, eh, if by 1984 the price difference in the UK was 325 times plus, sounds like there is a correlation with "resource peaks".......NOT.

All the major environmental indicators have steadily improved for decades. You are just blathering when you talk about "failing to mitigate pollution". Tailpipe emissions of particulates and noxious elements from cars have fallen something like 99%. Patrick Moore, one of the founders of Greenpeace, wanted to "declare victory" in 1986 and was censured by colleagues who declared their mission was not to improve environmental indicators by regulations and technological improvements, but to "destroy global capitalism".

A term like "raping the planet" just shows what an irrational, neo-pagan belief system you have. The planet looks just beautiful to me and indeed most people who are not bleeding heart Gaia-worshippers. The ugly bits are miniscule and where urbanity is involved, are mostly the result of lack of economic development. 29 miners would still be alive if Pike River mine had been done the sensible old fashioned open cast way, but some pack of neo-pagan theocrats deem that to be an insult to their Gaia god. NZ is a secular country and that means that all religions can butt out of social and economic and scientific matters.

Hating economic growth makes you an enemy of the enlightenment and all the progress that has occurred so far. It is as if you are sorry humans did not stay in the trees and caves fighting and eating each other. Wasn't the discovery of fire, dreadful? And the ability to forge metals? And that dreadful wheel? And coal as a source of energy......! And oil and refining.....! And modern medicine and antobiotics.....! And hydro power.....! And nuclear....! And fertilisers....! And the Borlaug revolution.....! And infant survival rates....!

There, there, there, take your pills and go and have a lie down, I am sure this is all very upsetting for you.

by Brendon | 2nd Sep 13, 5:19am 1378055940

Zany Zane, Philbest and Hugh would you talk to Jeremy Grantham the same way as you do with PDK? Because I think Jeremy and PDK would agree on many things.

Or do you just dislike PDK because he is not like you, he seems a bit hippie weird alternative type?

by powerdownkiwi | 2nd Sep 13, 9:08am 1378069699

Brendon - I'm not too fussed. When you prick the bombastic, you usually find fear, and shooting the messenger is a common form of denial. What is more interesting, is that they now have to think about the stuff I put up, which is exactly why I did it. This might explain their cranial reactions:

http://www.resilience.org/stories/2013-08-30/wanted-political-leader-with-a-vision-for-a-sustainable-future

The funniest thing, from my pov, is the attempts to typecast (therefore to categorise, prior to denigration). Some will be just hoping the uncontinuable will be continued.

The unfunniest thing is that some of those who do it will be very aware of what is ahead, and are ruthlessly aiming to be survivors - laying propaganda behind them flat-out to put the rest off the track.

I enjoy second-guessing which is which. Go well

by PhilBest | 2nd Sep 13, 1:57pm 1378087031

Brendan, if Jeremy Grantham changed the subject in approximately 1000 consecutive discussions on the effect of urban growth boundaries, to "resource scarcity", I would assume he is a particularly low kind of crony capitalist, and I would tell him so to his face quite gladly. But he hasn't done that, and I very much doubt he would.

I would expect him to see the point that UGB's do harm and are nothing whatsoever to do with future-proofing our society.

I disagree with the Malthusian thesis and used to have lengthy arguments with PDK about it. I would agree to differ on that. But using them as a constant diversion and pretext for the UGB racket is just plain monstrous and PDK deserves not an ounce of respect for it. He has been doing this for YEARS; long before you started participating on here. He has had things patiently explained to him dozens of times to no avail. No, he just avoids the subject of markets, rationing, prices, and zero-sum dead-loss wealth transfers.

I suspect that among genuine scientific experts he is regarded as a crank and a charlatan, and only gets away with playing the "expert" on this forum because we are economics and financial specialists. To be as pig-headed as he is about the land value thing indicates to me that he can't actually be all that intelligent about ANYTHING.

by steven | 2nd Sep 13, 7:23am 1378063391

Who hates economic growth?

In the broadest terms I certinaly dont, (ignoring for the moment the excessive environmental damage etc done in the name of growth) what I do accept and understand is its not possible going forward. It was only possible due to the 100~150 years of fossil fuels that we have / will shortly) burn through. So increasing GDP, well thats a fiddle, on the other hand increasing understanding/knowledge, life expectancy there are some great things we have achieved.....

Hence when I say we need to reduce population and get our energy sustainably that doesnt mean I want us to go back to the dark ages....which ppl such as yourself will cause due to your political beliefs IMHO.

regads

by MikeM | 2nd Sep 13, 1:41pm 1378086082

That's a great film from 1966. What strikes me is that to have a lifestyle which replicates the one in the film, nowdays, you would almost have to be considered wealthy.

I guess the point I was attempting to make in my first post is that all people whether unwittingly or not are woven in to what we currently have, which is essentially a consumer dominated economy dependant on the "wealth effect" of property. When the government finally realises our current situation is actually destroying our standard of living (which hopefully they are showing the beginnings of) and not improving it, careful consideration will be required as to how to make a transition. I'm not at all concerned about those who have a deliberate interest in the status quo, but those who are unwittingly involved through having no choice but to take on a 500k mortgage simply to acheive home ownership, if nothing else. Regardless of whether we love or loath the banking industry surely if it were to become severely impaired due to rapid change, the impact on society would be great. We have to keep in mind here that although our banking industry is over leveraged and poorly capitalised, the central bank and the government are ultimately responsible for facilitating that outcome.

Every level of society, innocently or not, has contributed to what we have today.

by PhilBest | 2nd Sep 13, 2:04pm 1378087443

MikeM, StephenL raised similar questions halfway down the thread. This is what I said to him:

You raise a good question about the flow-on effect of reform, on equity and financial system stability.

But consider the alternative path that the UK has been on for decades. The longer you go on without reform, the greater the amounts of equity in the system based on the price of land per square foot - which goes higher and higher and higher. So reform gets more and more difficult.

The housing for which the median multiple is 6 and higher, is on smaller and smaller plots of land. So the later it is left to do reform, the further the value of these very small plots of land will fall. Reform will essentially mean that a 1/4 acre section will be less than $100,000. So all the 1/16 of an acre sections that were "worth" more than $200,000, suddenly end up at less than $20,000. All the crummy old poky row-houses were worth nothing as structures anyway; most of them could be bulldozed to make way for new decent size dwellings.

So the Poms are stuffed. Reform would absolutely finish their FIRE sector. But the zero sum wealth transfers to the FIRE sector will kill the whole economy anyway. It nearly has already.

But the lesson to take from this, is certainly not "don't do reform". It is, as you say, "don't start with the UGB's"; but it also is, "do reform while the pain is still manageable".

One interesting little historical lesson: in the early 1970's when the Kirk government very stupidly opened the subsidy spigots to all comers for housing, "supply" was swamped to the extent that a short but very volatile mini-bubble in house prices occurred. But through the rest of the 1970's, house prices reverted to their mean in real terms, without ever actually falling in nominal dollars, because CPI inflation was running so high. Rodney Dickens describes this as "washing away our house price bubble sins in a tide of inflation".

http://www.sra.co.nz/pdf/RealHousingChapterOne.pdf

So relaxing the RBNZ's inflation targets for a few years while urban land supply is thrown open, might actually help to prevent the dire effects of mass "negative equity".