Housing Minister's tough talk on prices

Property

Nick Smith denies continuing house price rises are inevitable; points to new Government initiatives

10th Sep 13, 10:05am by David Hargreaves

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

Housing Minister Nick Smith is adamant that house prices will not just keep on rising and he's promising another initiative for first home buyers soon.

Latest Quotable Value (QV) figures for August showed that house price rises were continuing to accelerate - with Auckland's prices up 13.1% in the past 12 months. And QV said they were going to keep rising.

QV research director Jonno Ingerson said on Radio New Zealand that if you look back at the last three property cycles, "values will get to the point where they are increasing 20% maybe 30% year-on-year".

"At the moment they maybe halfway there and property values are likely to continue increasing at least until the end of next year,” he said.

But Smith, also on RNZ, responded: “I don’t accept that and that’s why the Government’s got such a huge programme of work going on in all fronts of the housing affordability equation. Many of those initiatives are to take action between now and Christmas.”

'Looking in the mirror'

QV, Smith said, was "very much looking in the mirror" and basing its view of what would happen on what has occurred previously.

"What that does not take into account is the huge range of changes that are taking place, for instance the important LVR changes coming into effect on the first of October."

A great deal of activity has been taking place to address the housing market recently.

The Reserve Bank announced new "speed limits" on high loan to value lending from October 1, while new legislation passed by Parliament last week will enact the proposed Auckland Housing Accord that would fast-track housing development, with 39,000 new houses targeted to be built in the next three years. The accord still needs to be approved by the Auckland Council this week.

Help for first-timers

The Government had wanted the RBNZ to exempt first home buyers from the LVR changes, but after failing to persuade the central bank to do so, launched a $64 million initiative over the next four years to assist first-timers.

The programme included making it easier for first home buyers to access their KiwiSaver funds for house deposits and changes to the Welcome Home housing loans scheme, involving 2500 first home buyers a year.

"I will also be announcing some other new initiatives to be of support to Welcome Home owners in coming weeks," Smith said.

Crucially, the Welcome Home scheme is exempt from the new LVR moves - so any further measures to beef up this scheme will operate outside of the scope of the LVR changes.

Talking about what was driving the current housing market, Smith said “the information” was that figures were "pretty consistent" and there was “no marked change” in the proportion of people buying to invest versus those buying to occupy houses.

Foreigners blamed

"We’ve had this prospect that somehow this increase in house prices is all driven by foreigners, which is a bit of a propensity whenever something is going a bit tough, whether it be jobs or whether it be house prices, to blame foreigners.

"I don’t think there is any evidence of that."

Smith said therefore that the Government had "action taking place across all of those areas of house cost from land, from infrastructure, materials, productivity work – as well as trying to get those compliance costs down".

The 39,000 target

The target of building 39,000 homes in Auckland over the next three years under the housing accord has been greeted with widespread scepticism, given that Auckland managed to build over 10,000 houses a year only briefly during the early 2000s boom, has produced not much more than 4000 a year in recent times, and has a 20-year running average of about 7400 houses a year.

An additional problem at the moment is the vast amount of resources being sucked up by the Christchurch rebuild.

But Smith's confident the economy is growing strongly and it can support the ramping up of building activity.

“I feel quite bullish and confident about the capacity of the economy – particularly that building sector – to really get rolling over the next 12 months."

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74 Comments

by Exponential Naivety | 10th Sep 13, 10:37am 1378766255

Desperation at it's very best Nick...pre-election Ostrich Politics aimed at assuring the equally desperate that they won't have to donate any limbs to achieve their dream.

Which they won't have to of course, but it is deceitful of you to feed the NZ public a false dream of curtailed house price rises in a market environment that is fueled by conditions not experienced before.

Given those supply shortages and demand pressures, how dare you try and deny the reality that exists and paint a rosy picture of corrective intervention that will be waved like a magic wand!!!

Anyone knows that the supply constraints and demand pressures haven't even peaked yet!

Any local or central government initiatives will take years to roll out. What a 'sham-ful' load of self spun crap!!

by James007 | 10th Sep 13, 11:00am 1378767621

Come on EN, take your happy pills, pray to National and everything will be all right ;).

by Exponential Naivety | 10th Sep 13, 11:20am 1378768803

Haha!!!.... thanks 007, but I'm on a drug free campaign and have decided that no politician should be treated as a deity.

by Ricardo | 10th Sep 13, 11:15am 1378768501

National are doing a good job on the supply side, although it is several years too late...and it is disappointing they are ignoring the demand side of the property market...two areas they should be exploring are tax advantages for investors and the influence of foreign buyers in the market...it's a blind spot for them.

by Exponential Naivety | 10th Sep 13, 11:24am 1378769057

Blah..blah...blah!!!

A great job!!!

by Gummy Bear Hero | 10th Sep 13, 11:24am 1378769063

... in all fairness to the Gnats , Labour have had a blind spot to the demand side too ... the property boom kicked off in 2002 , and they did absolutely nothing to address either the supply or the demand side ...

In fact , the 39 % marginal income tax they introduced wound up adding 17 % to house price increases , according to NZIER ... as " rich pr*cks " sought investment properties to avoid the onerous new income tax ...

... but the question is being asked in Australia , why individuals across the country are allowed to avoid $A 20 billion in income taxes annually by negatively gearing investment property ... why isn't property ring-fenced ...

by Happy123 | 10th Sep 13, 11:20am 1378768830

Thousands of extra homes by Christmas.... I don't know any good builders just sitting round twiddling their thumbs waiting the the government to give them work. They're flat out as it is, not to mention the other trades, so not sure who's going to do this massive building campaign.

by Exponential Naivety | 10th Sep 13, 11:33am 1378769639

That's what I mean Happy123....this whole thing hasn't even peaked yet. Where I live on the Coromandel builders are now in the midst of a resurgent catchup bach/mansion building boom!

Some left during the quieter times to go to ChCh but like so many other localized tradespeople NZ wide not everyone is going to up-end family and all to accommodate the needs of Auckland and ChCh.

There are not nearly enough tradespeople in this country to capacitate these Big Build ideas!

The ideas are great but it's a political lie to express it as easily do-able.

by Happy123 | 10th Sep 13, 1:42pm 1378777350

Yes, the wheels can be greased and some trades will move from doing renovations to new builds but this will not drastically increase building. Unless you cut corners, use labourers instead of qualified tradies and generally make a hash of it like we did in the naughties. We could increase immigration of skilled tradies but for every builder that enters the country thats one more house that needs building.

It's going to take a long time to correct, not between now and Christmas.

by Exponential Naivety | 10th Sep 13, 11:49am 1378770585

Agreed...but as we all know talk is what they do best....if they wanted to walk it they would have become builders!!....or accomplished researchers...or...

by Chris_J | 10th Sep 13, 2:43pm 1378781018

Hugh, a good bungalow in Spreydon or Addington is now $500k plus. Up from around $300k in 2010!

In 2011 big high quality1990s houses in Burnside were $550k now the same is $850k if you are lucky.

Even little units in average areas are breaking $300k. Nearly $500k is needed to buy a good SHS in a reasonable outer suburb.

Excluding EQ damage areas we are on for an almost doubling in price from 2010 within the next year or two...

by speckles | 10th Sep 13, 3:07pm 1378782433

It all good, my humble south/north west portfolio increase in value more in one month this year than I could spend on an entire family holiday over this Northern summer..still very affordable..and next year it will happen again with the same comments on the same topic saying it will die......unless the current account gets us a credit crunch.....

by Chris_J | 10th Sep 13, 8:36pm 1378802165

Nothing the Government does will affect house prices, simply because in places like Chch the cost of building new is still well above existing prices even if the raw land value is near zero.

Auckland central has no land available, and what there is, is too expensive to lower prices even if a policy which allowed building on every scrap of land was in place.

Look at the outskirts of Chch where a new home costs $600k for an average home. The section cost is only $180k ish and the raw land component of that is maybe $50k. Even if an infinite amount of zero cost land was provided the cost of a new home would only fall $50k which would quickly be swallowed by building cost inflation which is currently 1%per month.

So inner suburban homes at under $400k seem like bargains.

It's simply too late for action, especially when 20000 homes have been taken out by earthquakes and perhaps another 50,000 are set for demolition or major repair as leaky problems become more evident in Auckland over the next decade.

The fact that property with income and capital gain is an exceptional investment. This means that with current prices, current rents and likely capital growth and rental growth, property still remains cheap and certain to rise further.

by Chris_J | 10th Sep 13, 8:41pm 1378802484

Note also that insurance rebuilds will probably only number 3 or 4000. All the others will just be cash settlements or existing home purchases or government buyouts at rv.

So there is no supply of cheap insurance rebuilds to lower prices either.

by Chris_J | 10th Sep 13, 10:02pm 1378807353

Hugh, I've been following real estate for over 25 years and heavily involved for the past 18 years (over half my life!). I also like reading old newspapers and researching property history.

This is the same stuff I've heard for years, and given that politicians have no idea what they are doing and generally make things worse even when they are explained the consequences of their actions in public submissions, so I have no confidence anything will change.

What I find amusing is your expectation that things will change! What did Einstein say about insanity??

Seriously though, I happened to be reading a 1955 newspaper (hidden in a house) and there was a letter to the editor from a concerned housewife about the escalating house prices, she couldn't understand how anyone could afford housing!! In 2001 we had the same complaints when housing was the most affordable it had been for two decades. We had the same complaints in 2007 and here we go again.

Nothing will change. Prices will continue to rise. Our property portfolio grew by about 25% in the past year.

by Chris_J | 10th Sep 13, 11:57pm 1378814259

If they want some advice:

1 Cut immigration to Auckland.

2 Add a stamp duty to non NZ property buyers on purchase and a flat capital gains tax of 10% payable prior to the transfer of title on sale.

3 Limit development contributions to 3.5% of total end value (at present in Chch it can be as much as 20% if you try and build a low end property and as little as 1.5% on a top end Fendalton townhouse.

4 Use the 3000 or so good houses left in the red zones as relocatables! Running out of time for this by the day.

5 Sell the state houses in central suburbs and build new ones on the fringe (Take a look at this house that the state sold last year when it was a filthy hovel:

http://www.trademe.co.nz/property/residential-property-for-sale/auction…

6 Change take rules so that developers aren't penalised by tainting rules, and allow related party GST transactions so that investors can develop their properties for sale, if they choose to.

7 Clean up the grey area of tax law about selling for profit so that people don't speculate and therefore drive up prices just in the hope of a quick tax free gain.

by steven | 11th Sep 13, 7:07am 1378840030

#5 yet those in state housing are the ones least able to afford petrol / transport....so I have to strongly disagree here.

regards

by steven | 11th Sep 13, 7:26am 1378841204

I agree with ChrisJ, I dont think we'll see much building, not 39000 homes. a) Even if you get the land price down to a "reasonable cost", thats just extra profit margin for the builder/developer, ie he'll price the house at what the market will stand. Ditto a MUD, the builder/developer will still charge the same amount just he'll offload some of his costs...naieve if you think anything else will happen. Then you have not adrressed the price of materials and labour, 2 very large component costs that will be hard to do much about.

So you lets say you end up with lots more houses on [beyond] the fringe, the transport costs are going to hurt....we see examples of this in the USA...long distance commutes to cheap distant properties the poor can afford killed by $4US gas......and that's going to get worse.

So OK lets say we get a housing driven recovery, that's just like the US's last recovery, which popped badly. All you have achieved is some can kicking...you have not improved NZ's economy by actually producing goods for export....you have just increased churn internally and sucked in more debt which will be left after a price collapse....

Timing, so right now chrisj is right, its way to late due to time delay....those houses wont effect the market for 3 to 5 years....the bubble will have popped and we'll be looking like Ireland.

Which is another good example....Ireland had a huge building boom to meet "demand" thats vapourised...partially built hoses that will never be completed and in fact bulldozed....

regards

by Machiavelli | 10th Sep 13, 11:59am 1378771163

Nick Smiths comments read like a comedy.

"QV, Smith said, was "very much looking in the mirror" and basing its view of what would happen on what has occurred previously." - what an absurd idea, basing future outcomes on prior experience...

"What that does not take into account is the huge range of changes that are taking place, for instance the important LVR changes..." - What a huge range!

"A great deal of activity has been taking place to address the housing market recently." - A great deal of talk perhaps but I haven't seen much activity!

Well done Mr Smith. If actions speak louder than words you have stated bugger all!

by BigDaddy | 10th Sep 13, 12:26pm 1378772765

The best initiative would be to exempt first home buyers from GST on a new house.

This would save a wopping $75,000 on a $500,000 house ( if you can find one)

There would be conditions, of course, such as an upper price limit, exceptional circumstances, a minimum holding time etc.

Something like that is done in Australia where stamp duty is exempt for new home buyers on properties up to $500,000 but full paymernt if the sale price is over. However stamp duty there is on any home purchase, new or second hand.

This puts a real lid on affordabe housing as first home buyers crowd in under the $499,999 limit.

The only problem is that as soon as you exempt one class of purchase from GST, every man and his dog will want the same for some other pet deal or another.

Olly newland covered this well in his blog on his website

http://www.newlandburling.com/main.html

and this should become compulsory reading for everyone.

by two otherguys | 10th Sep 13, 12:40pm 1378773600

BD: wont work as an exemption. Would have to be done as a cash-back rebate.

by Brendon | 10th Sep 13, 1:37pm 1378777045

by Brendon | 10th Sep 13, 1:35pm 1378776955

Possibly to first home builders only, who are NZ tax residents. To minimise the tax losses whilst maximising the benefits to the targeted beneficiary group.

I think on new builds the banks expect you to have a deposit of 25%. If the first home builder can get 15% from the GST refund then they only need a 10% deposit of the current build cost.

So this policy could have a big impact on the housing market.

by two otherguys | 10th Sep 13, 1:44pm 1378777467

Agree with you completely. Essential point is "NZ TAX RESIDENTS" only. And you only get one bite of the cherry. Can't come back for second helpings. And have to live in it for 5 years. Otherwise give it back.

by Brendon | 10th Sep 13, 2:06pm 1378778787

Not sure about the need to live in it for 5 years. I think the one bite of the cherry factor is enough to stop people from abusing the deal. Sometimes things happen and people have to move -they get promoted elsewhere or they lose their job. They get divorced, seriously sick or their partner dies etc.

Simple rules work the best.

by Exponential Naivety | 10th Sep 13, 1:05pm 1378775133

Well Big D if it works in Aus then it would work here, seeing as we are such a microcosm of our larger cousin.

In fact the world usually looks to us for leadership when it comes to regulation and the implimentation of strategic economic/fiscal and regulatory processes that can enact change.

Due to our streamlined and open governance we are seen to provide guidance on many levels that could possibly be adopted in their own countries.

The problem now is that I'm not so sure our government (red or blue) is actually serious about implementing real change for first home buyers otherwise they would have made steps like this before. A tax grant for 1st home buyers hmmmm!? How easy!

Oh wait...sorry....our politicians atm don't DO easy...they TALK easy!!

by rastus1 | 10th Sep 13, 2:32pm 1378780366

house prices have galloped..wages have not.

those who can afford these prices must be in the market already, have cash from overseas, or are married professionals/high eaners.

at some point those missing from the market (i.e joe average on joe aveage salaries) must have an impact on prices. Surely the market cannot be pumped forever ..at some point it need to be based on the income levels of joe.....or am I mistaken?

by Machiavelli | 10th Sep 13, 3:13pm 1378782819

rastus you would think so. But in what major city around the world can joe afford to buy a house with land within 10-15kms of the cbd? Auckland is ranked very highly in global quality of living comparisons.

The sooner the public transport system in Auckland is improved the better. We still need to get the plebeians into the cbd to do the menial jobs after all.

See Bernard's top 10 for today - 3. The rich feel fantastic - The poor not so much.

by speckles | 10th Sep 13, 3:23pm 1378783399

Ipsos top city index brings Auckland just into the top twenty, think it is one of the better surveys, i would say the problem is the plebs can get similar pay on the outskirts of the city with less travel...so what is going to happen to the Auckland CBD after the historical overhang?

by Machiavelli | 10th Sep 13, 3:30pm 1378783814

There's no shortage of unemployed plebs, but there is a shortage of jobs for them. I don't think they are fortunate enough to be able to pick and choose where they work.

Top twenty. That's right up there!

by scarfie | 10th Sep 13, 8:20pm 1378801221

Hmmm, there was commentary on that issue about a year back. The surveys are from those the fly in and fly out not those that live here. Rose tinted perspective you might say.

by Brendon | 10th Sep 13, 3:25pm 1378783553

No you are right. Eventually the bubble pops.

But if we follow the UK example, which I think we will because we have many of the same ingredients, with so many policies to restrict supply, then the post bubble floor will not be as low as the previous floor. See the graph here, ( just close the login and you will get a black screen, then scroll down).

Note that the logic behind this is that the demand curve for housing is flatish -elastic. We all have to live somewhere, so we pay what we need to pay for a roof over our heads and adjust our needs accordingly -less space, defer maintenance, reduce spending on optional items, delay buying a home etc.

While all these restrictions on housing -Urban Growth Boundaries, high density only allowed within the growth limit, while ultra low density only allowed outside of it -mostly 4 hectare lifestyle blocks. Except for the occassional slightly lower priced existing satelite towns or villages (no new ones to be created though). Create a very steep supply curve -inelastic supply.

So any shocks to the system such as increased demand from immigration -Auckland, earthquakes -Christchurch and cheap credit means the flat demand curve moves up across the board and the clearing price for housing is a new high. Often causing a mad dash into property before the prices goes even higher, but in fact reinforcing the initial price hike. This can lead to overshoot and the bubble pops.

You can take away the demand by restricting credit -what the reserve bank is doing with tighter LTV retrictions or by restricting immigration. Or you can change the mix of who buys what property by favouring one group over another -Capital gains taxes for those who buy and sell property, rules on developers sellng some proportion of housing as affordable to the deserving poor. But ultimately the best solution is to flatten the supply curve -making the rules of the marketplace easier to supply new residential land at rural prices.

by Exponential Naivety | 10th Sep 13, 4:34pm 1378787648

Summed up in a coconut shell Brendon...because we're not talking peanuts here!!

You're right...we all know a correction is inevitable...the post bubble floor is seldom lower than the starting point... unless we are talking speculative building for building's sake...Boom that is, followed by a loud Pop!.

But Auckland is not Spain.... if it was 1st homers would be having a party with games of pass the hat to see which house they draw just for the fun of it!!

And renters would be having parties playing similar games....

There are no house parties in Auckland atm - except from those who have managed to close the door on a sale...but many of them are tinged with trepidation and the angst of having over-committed...no real fun there!!

by steven | 11th Sep 13, 6:58am 1378839498

The last US recovery was a house building boom, it still popped to the tune of 30~40% and I dont think thats over yet.

There are "easy" things a Govn could do like banning foreign ownership, cutting immigration by half.....but it seems no one is willing to go near things like this....

regards

by speckles | 11th Sep 13, 7:24am 1378841053

They can't cut immigration as the economic stats would crash, we would have a confidence/credit even...however the real problem for the pollies is that would lose votes!!

by steven | 11th Sep 13, 8:23am 1378844637

Which stats? and Im not saying stop it, just severly cut it. Would they lose votes? all the ppl looking for work, I mean we have 6%+ un-employed and we still need to bring this many ppl in?

We just allowed a semi-skilled cook with health issues from SA to stay another 23 months. I mean a cook? why FFS? are we really saying there is no NZ born capable of flipping a burger in chch?

regards

by Gummy Bear Hero | 11th Sep 13, 7:05am 1378839945

www.macrobusiness.com.au/2013/09/growth-man-hockey-looks-to-building-boom/

... as a comparison with us , newly elected finance minister in Australia , Joe Hockey , has big plans to get infrastructure spending rip-roaring along ...

And we wonder why our economic performance is a pale shadow of Australia's .... sometimes you gotta cut through all the bureaucratic rubbish , roll yer sleeves up , and just get on with it ....

by steven | 11th Sep 13, 8:17am 1378844235

The last US "boom" was housing led, followed by a 30~40% price collapse...so its failed once, so you ant to repeat it?

Isnt doing the same thing over and over again a sign expecting a different result a sign of madness?

Plus it seems that "PPP partnerships" have a new term for the disaster area that they are "innovative capital markets"

And the old mantra is rumbled out, he's a failure before he starts,

"But in the short-term, the Coalition’s spending cuts are likely to hit growth, just as they did when the Howard government came to office in 1996.

Mr Hockey, however, dismisses such simplistic links, known in economic jargon as the Keynesian multiplier. He said the Coalition’s drive for greater efficiency would make spending more effective.

“You have cut the waste. If you cut the waste you get the best productive value out of each dollar of government spending. When you cut waste and reduce bureaucracy they all deliver a better productive output,” he said"

Clueless, blinkered and thick, how else can you take someone who ignores the recent evidence. So it seems we need yet another repeat of the austerity for growth experiment after the failure that is the EU, well, we get to watch close by....too close by.

regards

by Brendon | 11th Sep 13, 10:33am 1378852407

ZZ I think you will find that Steven selectively uses facts to support his preconceived argument -that we are heading for a green armegeddon in the near future. So all discussions with him have this ground hog day feel, because he always turns the debate to justify his viewpoint. He wilfully ignores all facts that are explained to him that do not fit his view of how NZ is going down a greenie gurgler in the next few years.

by Exponential Naivety | 11th Sep 13, 10:22am 1378851732

Plus...(steven et al) ...a country needs population growth to increase, or at the very least maintain economic growth.It's not just about housing everyone!!

The current situation with the housing stock is just a result of a combination of unfortunate factors playing concurrently to create a perfect storm

- short sightedness by respective authorities (not future proofing housing availability)

- manmade disasters (poor compliance management ie: leaky buildings)

- throw in several eartquakes

- throw in a massive world recession and the resultant building melt-down

- throw in systemic low interest rates to entice people to buy

- and yes, also throw in the foreign interest to purchase a house in NZ

- throw in returning expats

Not enough houses/apartments/town houses being built in conjunction with those factors and it's a no brainer why there's a housing shortage in Auckland and why the situation will remain so for many years to come ...despite the government's attempts to play catch up.

Catch up??! Isn't that what Oracle tried to do this morning?! The housing ship sailed away years ago!

by KH | 11th Sep 13, 10:33am 1378852420

But think Expo how it would be if the New Zealand population would decline somewhat.

No tears in Auckland about unable to buy a basic house
No tears in the rest of the country about paying for Auckland Infrstructure.
More snapper to catch for each. ( we will have to sort out the rapacious fishing industry first - but we will anyway)
Aucklanders have some cash in pocket for the first time.
Rest of us have more cash than we used.
End of youth unemployment - the most pernicious social ill we have
Plunge in electricity prices because of static demand..........no hang on.
And on and on and on.

by Exponential Naivety | 11th Sep 13, 10:58am 1378853914

How do you figure that would help KH? Population decline is inevitable through attrition of our work force by death and retirement. At some point the economy would stall without continued population growth...I'm not talking about gazillions like Mexico...but our country can easily accommodate further population growth.

The reason everyone is on the immigration case (i'll rule out zenophobia here!) is because there is a chronic housing shortage. So you and others say well lets stop people coming in and the problem is solved.

It won't solve the problem...There is a chronic shortage point blank!! Because of all the factors above and I'm sure there are many others.

Now everyone wants to play catchup and we're screwed because the planning/regulatory frame work hasn't been placed there in time and now we couldn't build quickly even if we wanted to.

Because now we have a chronic shortage of builders and tradespeople because they all left and we screwed up the apprenticeship structure. So what will we do ...we'll have to bring in tradespeople...yes KH more immigrants! And I say bring them in and let's sort this shit out!!

by steven | 11th Sep 13, 12:21pm 1378858915

Actually I dont agree on the population growth bit....we eat fossil fuels, when that goes un-affordable we will be back to organic farming techniques so our food output will be a lot lower. A person is alive for 70 years, oil peaks inside 5 if it has not already and its all gone by 2050....38 years away...1/2 a lifetime. So how do we feed more ppl in 10 years time let alone 30?

I certainly dont say that totally stopping ppl coming in is sensible, what I do see is they are not helping with Auckland's mad price rises today. The way around that is to take out such small %s taking care not to crash the market.

regards

by rastus1 | 11th Sep 13, 12:35pm 1378859721

Eh what? You are joking aren't you?

At some point the economy would stall without continued population growth

Great...so lets increase Working For Families to get everyone pumping out some more kids.

Take a look around the world....underneath the apparent political/religous disputes the battles raging are due to too many mouths to feed. Fewer and higher educated persons are the answer...not more.

by Exponential Naivety | 11th Sep 13, 3:14pm 1378869298

Wow Rastus, are you implying we should start a whole process of doctoring our population to suit our needs...you know a selective environment where maybe we can weed out the unproductive , the sick or unsavoury ...maybe compulsory sterilization fro those deemed to be "social risk factors"? Hmmm.....could work....I think Hitler and a few others had similar ideas!!

by steven | 11th Sep 13, 11:07am 1378854434

To start with, growth by defination cannot continue forever on a finite planet.

Second a nation's true wealth is measured per capita, more ppl less true wealth per person, so called GDP is a crock of lies.

So really this is your opinion.

Thirdly economic growth is underpinned by cheap and bountiful fossil fuel, we have or are passing peak oil output, so with no more energy available per day we cannot grow anymore....and as oil output declines so will GDP. Not to mention is ever increasing cost and probably severe shortages within a few years....we cant afford to pay for its extraction.

regards

by Exponential Naivety | 11th Sep 13, 11:40am 1378856421

Trust you steven to use any angle to canvass a macro view of pending and imminent implotion of the global economic system via peak oil theory etc etc. Not that I disagree.

Look I'm open to all theories, possibilities and probabilities regarding the direction our world is heading - and on our 10 acres and in our location there is plenty of scope for surviving alll the social anarchy, food and material shortage that any disasters may bring (haven't built a bunker yet though).

If you and KH will note my angle is on a much more specific micro level targetting the issue of housing in Auckland (mainly) and why we find ourselves where we do.

The resultant issues have become an addendum and peripheral to the core problems.

As I opened in this discussion, my beef was with inept housing ministers attempting to white-wash the systemic and chronic problem we are facing, with shallow and bland "solutions" that don't even go near to addressing the problems. Problems that were there and evident well into their first term in office and which they chose to ignore hoping what?....that it would go away?

by steven | 11th Sep 13, 12:13pm 1378858397

The macro problem is one of building castles on quicksand, it might be a fine castle, the best ever, but its not going to stay up long. Systematic/chronic is what energy will be...time is gone now to solve the "housing crisis".

I agree on the "inept housing ministers" but then just look at what else they want to do like knee cap the RMA. This is really nothing more than lets exploit the limited one off resources all for the 1 or 2 generations today and leave a cesspit behind for our kids tomorrow. So per capita is the way to think IMHO, but across future generations not just us.

I dont think you can unduely blame National. They walked into a situation where one wrong step could have sent us crashing into a major recession, that didnt happen. The blame really fully lies with HC and brigade IMHO. The RB was complaining long enough and hard enough that it was forced to put up the OCR to combat houses prices....it was in HC's court to solve and she failed NZ miserably IMHO. Now if it had been a Shipley or Donny Brash Govn I dont think it would have been any better....not for one instance, in fact maybe even worse....we'll never know on that one.

regards

by Brendon | 11th Sep 13, 12:20pm 1378858846

I have tried many approaches with Steven. I have discussed Jeremy Grantham who basically agrees with Steven but thinks the fact global population is beginning to stabalise and solar power prices are dropping like Moore's law that we might be ok.

So disaster is not gauranteed.

I have tried the approach that this fixation on housing density is illogical because in the world he envisions growing your own food will be more important than being able to walk down to the shops. Something that PDK agrees with but Steven keeps forgetting.

I have tried the historical argument, comparing NZ to 1840s Ireland which is smaller than NZ and had 8 million people. It had a famine because their potato crops failed (resource collaspe), there was mass death and migration. The big but being though is throughout the whole famine period Ireland was exporting enough food that could have fed the starving.

So the problem wasn't resources but a lack of democratic freedom and equality. Could this happen here?

And I have tried to do what you are doing, by concentrating on one issue at time. In our case housing.

None of this has any permanent effect on Steven.

by steven | 11th Sep 13, 12:40pm 1378860007

Brendon at the end of the day we clearly do not agree....settle for sitting back and seeing who's right...I think we are both young enough to watch the next decade unfold.

Jeremy Graham is being circumspect I suspect and not wanting to look like a "nutjob". I think he's being daring just by saying what he does given his position. Sure population is showing signs of stablizing and declining, not fast enough though to match oil output decline, 4% per annum is probable within 5years.

I have no fixation on a particular housing density. This is because Ive seen no one model/discuss just how energy price and scarcity will play out, ie its dynamic and far reaching and I dont know the end point we will be at. Simply put HughP's model such as it is is just more of the same aka the US surburbia and thats looking very dodgy. He doesnt get it and he doesnt care.

Historically, we have no precident for peak oil except maybe the maya civilisation and maybe the roman empire, they both failed despite their best attempts not to.

Ireland and famine is a fasinating viewpoint of history....Ive said before we will be robbing peter to pay paul. In fact we have a closer in time example, the US turning corn into ethanol leaving mexicans less to eat.....

Maths Brendon....science...Ive been studying this peak oil subject 7+ years now....you have yet to put up any argument thats justified and provable against the huge weight of stuff I have read.

So now you turn it around and try and claim its me thats the issue?

Maybe you should consider how your sanity is standing up....

http://www.peakoilblues.com/reactions.html

Disater is not guaranteed, go take a look at limits to growth re-visited....do nothing and that outcome looks more and more probable....we are determined to do nothing......enjoy.

regards

by Gummy Bear Hero | 11th Sep 13, 1:05pm 1378861547

... " settle for sitting back and seeing who's right " ....

Can we place bets on it ? .... if you're right , we're all screwed , and I won't collect anyway , from my heavily armed fortress in the hills , amongst the tin-foil hats & tofu supplies ...

... but if Brendon's right , I'm on the money , life is good , and I collect on the wager ....

Hmmmm , decisions decisions ..... who to back ? .... hmmmmmmm !!!!

by Brendon | 11th Sep 13, 1:30pm 1378863016

Maybe something like a bottle of single malt whiskey that is bought now. Nice to have if I'm right and things turn out okish and even nicer if Steven is right and we are buggered : )

by Gummy Bear Hero | 11th Sep 13, 1:46pm 1378863960

Something peaty and crafted with care from the Speyside , maybe ... a Benromach single malt perhaps .... nice !

.... but if steven is correct , we are indeed " Catholic choir boys " ....

by Exponential Naivety | 11th Sep 13, 12:47pm 1378860425

Well Brendon, I am firmly in the camp of the "anything is possible", but you always hope for the best! Hence my pseodonym !!

by steven | 11th Sep 13, 12:58pm 1378861099

PS you cannot concentrate on one issue at a time (at least to the extent you are trying to) or rather determine a course of action because of the interdependancies/externalities.

The classic on this is HughP saying build further out. 30 years ago with cheap energy that was a valid short term solution in some ppls, eyes I suppose. A house however last 90+ years yet the economic model to pay back the mortgage on it is 25 or 30 years, yet we have 5 maybe 10 years.

regards

by Brendon | 11th Sep 13, 1:24pm 1378862660

Depends on the nature of the 'sprawl'. Self sufficent eco villages or villages capable of being self sufficient should last indefinitely so will have no problem repaying their debts. Especially if they were affordable to start with.

Your analysis rests on the fact that NZ society and economy will self destruct in 5 to 10 years time and as I say below I don't believe the 'maths' for NZ indicate that will happen.

by KH | 11th Sep 13, 12:54pm 1378860899

Lumped in with Steven ! noooooooo. Steven makes his own argument. Nothing to do with moi

Anyway my point is limited. We can't afford the dollars for what we are doing now housing wise. And we can't afford to meet the demands of population growth. Again dollarwise. So just think that maybe it might make economic sense to rethink the population increase thing.

by steven | 11th Sep 13, 1:00pm 1378861234

yep, yep, yep yep and yep and welcome to my exclusive club...and yep.

;]

regards

by iconoclast | 11th Sep 13, 1:32pm 1378863165

Exponential:

specific micro level targetting, resultant issues, addendum, peripheral to, core problems, systemic, chronic problem, ineptitude, social anarchy, pending, imminent implosion, macro view

That is an intellectual mouthful of verbiage

Inclined to agree with where you are going with this .. and this topic has been going around the dance floor here for 4 years and not going anywhere .. time to cut the crap .. what would be more to the point is this ..

There are two broad components to this problem

causes
solutions

It would be really helpful if you could offer up (to begin with) your assessment of an itemised list of the causes of the problems as you see them, ranked in order of severity with a ranking value from 1 to 100 with 100 being most severe

reduce complexity with Problem Definition

Einstein said given a problem, he would spend 55 minutes defining it and five minutes solving it. He believed the best problem solvers were those who could define problems in new ways. Polaroid inventor Edwin Land said If a problem can be defined, it can be solved.

by Exponential Naivety | 11th Sep 13, 3:43pm 1378871021

iconoclast:

Thanks for the challenge and giving me the job of solving in 5 minutes a problem that I only have 55 minutes to define. I'm really flattered!

I don't know what to say....I really don't think I can help you as I don't have Einsteins intellectual capacity. If we could apply his singular approach though to this complex and collective problem it would be great.

I agree we have been going around in circles for a long time...that's my point...those who sit in higher places with greater knowledge of the causes and potential solutions have been sitting on their hands for far too long.

by iconoclast | 11th Sep 13, 4:50pm 1378875050

Expo

First

This discussion has become tiresome - lotsa words - lotsa gloriously long-winded comments that talk all around the issue but un-willing to cut-the-crap. An un-willingness that is the vacuum that allows the lever-pullers to shrug and do nothing

Second

Wasnt challenging you to re-invent the theory of relativity or come up with a new-fangled version of E=MC2 just asking you to come up with a simple list of 10 of "the most important" items on the causes list plus a severity rank. Some of the work is done up-thread courtesy of yourself and KH

Third

I have posted the following twice now - no takers - if no one wants to bite the lemon then why keep talking about it

http://www.interest.co.nz/opinion/65418/opinion-better-information-needed-what-exactly-causing-current-overheated-conditions-h#comment-744465

by Exponential Naivety | 11th Sep 13, 6:22pm 1378880557

Thanks iconoclast for the physics lesson.

1 to 100 in order of severity was your initial request ....I never claimed to have any answers to the problems that have evolved and compounded .over time .

Language is a tool of communication... I don't judge you on your choice of vocabulary.

And I agree THIS is tiresome...sorry you got no bites on your posts.

by Brendon | 11th Sep 13, 8:10pm 1378887032

Iconoclast I think I described the supply and demand situation quite well up thread

by Brendon | 10 Sep 13, 3:25pm

On reflection I don't think the demand curve is flatish, but it doesn't change the analysis a lot. Note this is a dynamic rather than static look at how the marketplace works.

So cutting through crap -the solution is to flatten the supply curve for new housing. To make the supply response to increased demand be, more houses not higher prices.

How to do that?

1. Decrease up front governmental charges on building new houses, -GST could be refundable to first home builders, development levies could be limited and more transparent and in general a switch to a pay as you go system that historically we have used.

2. Create a system that new residential land can be purchased at rural prices, either by liberalising the planning regulations so landbankers can be bypassed (Hugh and Phils argument) or by state compulsory purchase -we did this in ChCh post WW2.

3. Introduce more competition into the building supply industry by breaking up the current duopoly or by adding another countries building regulations to ours and allowing the importation of materials and prefabricated houses. (The Japanese solution -they added Canada's building rules decades ago).

4. Shorten and simplify the land development process so non-profit organisations can do it - eco communities (co-housing and eco villages), religious groups, even extended families and thereby compete against developers.

5. In Auckland and Christchurch create new towns some direction 20-40 km from the city with a motorway and commuter train connection using some combination of (2). The Perth solution.

6. Change the culture of Local government so they co-operate with the above measures - create an agreed measure of housing affordability like the Demographia survey and regularly measure all Councils against that -Houston does this -specifically measuring housing affordabilty for medium income workers. Change the funding system of local government so new residents are seen as a good thing, not a bad thing. The Northern Europe solution.

On the demand side I would stop non-residents from buying property and limit immigration. But most other demand measures reduce prices by making it harder for kiwis to buy houses, which is kind of self defeating.

And then let the market work.

by Brendon | 12th Sep 13, 9:44am 1378935852

The culture factor is perhaps the most important, all kiwis came here in the last 1000 years to make a better life for themselves and their families. This translated into a desire for 'independencies' -a farm, a business or a home of your own. This is hard wired into our cultural DNA. That is why unaffordable housing is causing so much angst in our society and the overwhelming majority want housing to become more affordable despite many of them being property owners who will take a one off financial hit if it does so. Laws and public institutions should reflect cultural values and in the case of housing they don't. I believe it will be laws and publics institutions that will change not our culture.

by Brendon | 12th Sep 13, 10:12am 1378937568

Last night on the TV3 housing vote debate, Dunne and Banks thought they had the debate won when Turei said the Green party wanted house prices to fall (qualified in a careful controlled manner). They completely misread the audience with the argument that protecting existing property owners equity was more important than house prices dropping so home ownership becomes more affordable for the next generation.

Now I disagree with the Greens and Turei later comments that the only solution for new urban areas is high density but you have to say in the debate they were more in tune with the people than the government side.

The left seems to get the 'why' we need to do something about housing affordability but not 'how' to do it. While the right understand the 'how' but are ambivalent on the 'why'.

by Brendon | 12th Sep 13, 9:57am 1378936622

See for Gummies 11 Sep 13, 8:59pm suggestion of where to put a new town in Canterbury and the below comments.

It is a cracker of an idea.

by KH | 11th Sep 13, 11:10am 1378854631

My point Expo is that the increasing number of residents cases lot of stress. But like a junkie we are used to it so we haven't twigged it to be a problem.

Take a wee survey. Lots of issues being discussed here on this interest.co. And many of them are dealing with problems of growth. And affording it.

You say "the economy" will "stall" without continued population growth. Thats a big assumption. Or just a language patterm.

Of course there would be an adjustment as people geared for growth will need to adjust.

I'm not on about immigration. Not part of what I am trying to say.

Look at my bullet points above. See if you can think of some more.

by Brendon | 11th Sep 13, 1:10pm 1378861855

Steven I trust Jeremy's maths to yours. I do think it is a possibility that globally we will get a resource overshoot and the issue will be how to stabalise the situation and growth will go out the window.

What does that mean for NZ? I have check with a friend who was top of his engineering class and has spent 20 years in the NZ electricity industry, again someone whose maths I trust more than yours. Basically we have plentiful supplies of energy that could replace oil. There will be diffculties with storage but work around solutions will be found.

I think the Irish famine is a relevant example because if we do hit a global resource overshoot. The question will be do we continue with our agricultural export model and will that mean a significant proportion of NZ suffers like what happened in Ireland. Also it is relevant because Ireland is a much smaller country with much less technology and resources than we have yet it supported almost double our population up until the 1840s.

You never really discuss what you think will happen to NZ. All your maths seem to be globally based. What people here want to know is what will happen here in NZ. If they were interested in global matters they would go to a global forum.

by steven | 11th Sep 13, 2:22pm 1378866123

Not my maths, "limits to growth" I just agree with the work, plus lots of other work ASPO for instance.

Ask your friend if he understands EROEI and the conversion of electrical to transport energy.

If he wants to come on here Im happy to debate, cant really do that 3rd hand. Note he saying 'could" not will.

Globally based, yes and yes I agree NZ should be better. Have you ever come across "swamping a lifeboat"? or drowning person drowning the would be rescuer?

To you think that if Lehman had collapsed our financial system would have acrried on functioning? Im not sure the answer Bollard had was yes, or will be, yes.

NZ's problem is not severe by a long way. My biggest unknown is what happens when the above becomes obvious? will the rich try and buy their way in here? At the bottom end how many boat ppl? How do we or are we willing to stop plane loads of ppl? ship loads and I mean ex-military ships. How do we or will we be willing to stop these if it comes down to it?

So sure you want to know what will happen here in NZ....what will actually happen?

Say 10 years of tough economics and 1? 2? million ex-pat kiwis come home? how do we even cope with this legitimate social load?

Like I said earlier lots of Qs, very dynamic, very uncertain....so stay flexible and nimble....so reaction is possible, ie keep choices open.

PS at least you are listening to Jeremy....

regards

by Brendon | 11th Sep 13, 4:47pm 1378874863

Yes my friend does understand EROEI and I have had discussions about converting electrical energy into transport energy. There is no perfect storage replacement solution to oil but better and better options are being developed all the time.

Of course it is up to him if he wants to come here and debate you, he probably has better use of his time.

By 'could' replace oil he meant various feasibilities studies have been done on all our major waterways for more hydro decades ago, more recently wind and geothermal feasibility studies have also been done. He says Tiwai alone if redirected is the energy equivalent of private (non commercial) vehicle use. So there is plenty of options for expanded electricity production using existing technology to replace oil. This is without considering solar power the big new player given the way panel prices have been falling.

The swamping of the lifeboat might be an issue, but we are a long way from big populations so the poor coming in boats I think will be less of a problem compared to the rich coming here and buying us out. Again the Irish famine example warns us we do not want to beome resource poor 'catholics' in our country while our leaders favour foreignors over kiwis.

This is the part I disagree with you because this housing affordability problem is beggering kiwis and one of the chief beneficiary is our foreign owned banking industry. I have just been reading about Donella Meadows "a pioneering American environmental scientist, teacher and writer. She is best known as lead author of the influential book The Limits to Growth", she was very practical and started co-housing and eco-villages schemes. Why aren't NZ greenies promoting practical solutions to our housing crisis?

I think we can accomadate more people, say population increasing to 6 million before stabalising, but we should keep this buffer for returning expats. So NZ should put limits on immigration and non-residents buying property and farms.

The debt problems is just in our heads. In the end if debts cannot be paid then they can be renegotiated or reneged -formally or by inflation. And in your scenerio NZ would be in a strong negotiating position because we would still be a net food exporter, in a world desperate for food.

by powerdownkiwi | 12th Sep 13, 10:45am 1378939534

Brendon - great post, and yes, your friend is on the money. With the odd caveat, but broadly correct.

You are right about banks, which is why this energy-buff comments here. Donella Meadows is one of my heroes, saw it all clearly, re-checked, then got stuck into being proactive.

Right about votes and house-prices, too. More votes in the existing owners, than in any new. Debt? Depends who gets burned. Given that the older generations have the game to themselves now, younger folk will lose in a scrap. Outgunned, no more no less. So it needs Govt control, not the 'free market'. That's not a right or a left comment, just logic.

The problem is that we also have to be sustainable (the alternative being unsustainable) and get there in the near term. Gonna have to be some clever housing solutions..... (I know one or two :)

by Brendon | 12th Sep 13, 11:14am 1378941274

Thanks PDK, you keep working on your housing solutions. One day when I'm down south I'll come and check them out. : )

by scarfie | 12th Sep 13, 11:45am 1378943153

The housing solutions don't need any work Brendon, they are already there waiting in the wings. They just need the right environment to execute that is all. I could do (and have done) you 100m2 for $50K but there is not really a lot a point when forking out $200K for a section, the banks and countil are still taking their tythe.

There is perhaps a misunderstanding of design in this as well. It isn't so much about designing cheap houses to slap up everywhere, that isn't the way a designer works. You show me where you want the house/s and then I will design it for you to suit.

by Brendon | 12th Sep 13, 9:40am 1378935658

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