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@voodoo said in Housing hornets' nest:
@reprobate said in Housing hornets' nest:
@voodoo said in Housing hornets' nest:
Whatever the solution, I think that property deserves it's own special set of rules, it can't be left to the market and shouldn't be seen as just another investment class.
I kind of agree it should be different due to the right for shelter and the fact that investors are subject to different rules than owner/occupiers - but to be clear it is not a free market that has caused the recent issues, it is deliberate manipulation of interest rates by reserve bank / govt, i.e. the exact opposite of free market forces.
Interest rate management is certainly a factor in rising house prices, its obviously made borrowing more attractive, across the investment spectrum. But it's unfortunately the tool used traditionally to manage broader inflation. RBA doesn't really have many other levers. It can be decoupled by regulatory bodies (like APRA did here forcing banks to ask for higher deposits etc), and I don't think in Oz the RBA has deliberately kept rates low to drive up house prices. Can't speak for NZ.
In most Anglo Saxon economies the historically ludicrously low interest rates have been THE factor which ignited property prices.
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@nzzp said in Housing hornets' nest:
@reprobate ... and none of that fixes the problem of building more houses.
Getting land zoned for houses and the infrastructure in place is hard. Really hard. Labour found this out with Kiwibuild, which was a great ambitious programme. Deliver that, and you have a material effect on house prices.
Was just in Christchurch for a week. Canterbury is an incredible place, but they also have properly low house prices compared to the rest of NZ. Why? Supply - they've built shedloads of housing after the quakes. I'm convinced teh supply side is the issue - otherwise you're just stuffing around with who gets the limited stock, without materially affecting demand.
Anyone know what the average number of occupants per household has done in last 30 years? My guess is that it’s fallen dramatically.
There would be a case for taxing low (and zero) occupancy housing.
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@snowy said in Housing hornets' nest:
@reprobate said in Housing hornets' nest:
Actually it's worse than that though, because in NZ they dropped the LVR too, immediately, then took months of consideration while the problems were blindingly obvious to bring it back.
Dropping the LVR was a fuck up in terms of managing prices for sure. I can only assume that they were trying to get more first time buyers in the market that didn't have large deposits. Which of course has the consequence of increasing demand and therefor prices which pushes them out anyway. As discussed.
The only solution is to increase supply. Was very pleased to hear that a couple of large building companies are going big up here (and now switching from Resene which is a marketing company IMO, not a quality paint supplier, to Dulux product). I guess the issue will be location, jobs / commuting and travel times due to our shit roads that might put people off purchasing up here. A supply increase none the less.
@reprobate said in Housing hornets' nest:
It's a huge factor, and more so for housing than anything else in NZ, cause that's where the lowest interest rates are. It's not that I think that crazy house price inflation was their goal, it's that I think they ought to have been able to see it as a logical consequence of their actions and done something about it - they were warned, and ignored it.
What you are saying is no doubt true, and it is logical and apparent, but I am interested as to the "doing something about it". I've got nothing except increase supply, reduce building costs and the red tape involved in creating new housing. All of which takes time. What would you suggest?
Solving problems is a lot more fun than complaining about them for me and I only see one answer.
@reprobate said in Housing hornets' nest:
You drop interest rates to prety much zero, and don't tax property as long as your 'intention' is to rent it out. What are people going to do, leave their money in a term deposit?
Plenty of other options out there which is why I sold some residential rental (low yields regardless of interest rate reductions of which I had none) and moved money. Getting a decent ROI is definitely tough at the moment so some innovative thinking required but it is out there.
I get the feeling that you can't get a foot in the door and want the government to help you to do it? That is not a criticism but current macro economic factors will over ride that I think from our esteemed leaders. I would love to see more people be able to afford their own home but I also don't want to see people living in cars because there is no rental stock (we have had two homeless folk in our area recently).
So whatever the plan is it isn't working.
Dropping the LVR was dumb - why you would assume that was targeted at first home buyers I don't know, but the consequence has been a larger proportion of investors purchasing than first home buyers, on a historical basis - and with a larger percentage - might have been up near 40% from memory - doing so on interest-only loans. That is where the demand increase is, that and then you get desperation purchases from first home buyers who think it's now or never as they watch their savings be eroded by house prices rising by more than they are saving on a weekly basis. The worst part is the RB's uregncy to act in removing it, and then their dithering to bring it back. Idiocy. Given that it exists to ensure people have more equity in their homes to promote economic stability, it would seem pretty stupid to be dropping it in a situation where unemployment was feared.
Increasing supply via incentives, reducing red tape, local council crap and building costs is necessary, and great. But that's not the only issue. People are buying homes they don't need, and that is forcing prices through the roof. - they're doing this because it is incentivised. Remove the favourable tax treatment to stop people pouring their money into the unproductive economy. Remove the interest only loans available. Get more people into their own homes. Don't allow people to burden themselves with massive debt when their incomes can't sustain it if interest rates go up - and then using this as an excuse for not fixing the system.It's pretty bloody condescending speculating about my situation, and saying that I want a government hand-out (totally wrong by the way), but sure let's get personal and have a closer look at you.
Your 'I just work harder, save harder, invest smarter'. earlier. What a load of typical 'buy less avocados' shit. What was the house price to income multiple when you first purchased? If a young Snowy was trying to do now what you did then, could he? Being equally smart and hard-working of course - things have changed, and to sit there going 'well I managed it' is just nonsense when house prices have outstripped wages for years. The system is broken, you acknowledge it is broken - but like most of those who have benefitted from it, you need to justify your own situation to yourself, so you want to blame it all on the supply side - when it would be quite possible for us to have the same housing numbers/shortage without the excessive prices, if investors would bugger off and stop driving up the prices of (your words) a human right to unachievable levels for young people. You've even said that you didn't buy when you knew the people you were bidding against. Is that because you realise that there is something wrong about it when you know the people being shafted?
You're happy to talk about your limited rental yields, but a bit less forthcoming on the capital gains you've realised... How can you say that you would love more people to be able to afford their own homes, when what you have been doing - buying more houses than you need is a major driver of making houses unaffordable for those who do need them? You know what else is better when house prices are low due to reduced demand? Rental yields. Which is surely what you would want, if you were worried about supply of rental property for those poor renters who can't afford their own homes of course. You do want that, don't you? -
@reprobate I was simply guessing about your situation trying to understand where all of your vitriol comes from.
Yes, I would have been able to do what I have done. It cost me 28 years overseas and away from my family in one of the most overpriced property markets in the world. I lived on a boat for 4 years because I couldn't afford a property.
I'll address some of the rest of it later.
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@pakman said in Housing hornets' nest:
In most Anglo Saxon economies the historically ludicrously low interest rates have been THE factor which ignited property prices.
That and the propensity of credit suppliers to lend against property at ever increasing prices.
Both parties of it no doubt. Many other factors though. For example, the rise of the double income family. I think that's been a huge part of it. A willingness of parents to fund their kids into property has also played a part.
If you're a single person on average wage with family who can't help, it really is tough to get in at all.
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@snowy said in Housing hornets' nest:
@reprobate I was simply guessing about your situation trying to understand where all of your vitriol comes from.
Yes, I would have been able to do what I have done. It cost me 28 years overseas and away from my family in one of the most overpriced property markets in the world. I lived on a boat for 4 years because I couldn't afford a property.
I'll address some of the rest of it later.
Guessing at my situation is condescending, as if my disagreeing with your opinion on an economic/political matter must be due to some sort of personal situation, rather than my position being based on economics and logic - which it is. You stick to debating the economic points and I will happily do so too.
Saying I want a government handout is absurd (and rude). My whole point is that the government ought to be supporting those who need it (which is not me), and the productive economy. Not supporting 'mum and dad' investors to be able to get tax free gains at the expense of the young, and at the expense of families who don't own property. That is subsidising the wealthy via policy, and it creates and perpetuates inequality - which is terrible for NZ.You seem to take my 'vitriol' personally. It's really directed at successive governments on both sides of the 'spectrum'. I don't expect the public to not invest in property when the system incentivises it - but if people want to argue over whether it is incentivised, or that it should continue to be so, then I will argue those points - I feel strongly about it.
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@reprobate You did call all property investors c*nts and scum. I happen to be a property investor. Happy to move on though.
Anyway the government are also c*nts and scum apparently (as if we didn't know):
I suppose they have to do this to stop the situation that I have been describing with private investors pushed out and no rental stock. Not fixing the problem just shifting it sideways.
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OK, this is a serious question.
I can understand the position in countries with high populations densities and expensive housing materials, buy why is it that a country like NZ, with plenty of land and building materials seems to have a shortage of affordable housing?
What's driven this in the past and what is driving it now? If there is a demand and there shouldn't be a supply problem, what's stopping the demand being filled and housing being provided?
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@victor-meldrew there is definitely a supply problem.
From 2015, but the best analysis I've read on this linked to below. Sheets home the responsiiblity to government constraining supply through RMA, and stimulating demand through immigration (and urbanisation).
since the article was written house prices have gone nuts everywhere, but it's still got some great arguments
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While there's a few things I don't agree with him on, I remember an interesting quip from Shamubeel Eaqub about there 'being no shortage at the four bedroom, two bathroom end of the market'.
It resonated with what I'd noticed over the years, I grew up in a 97sqm Beazley home from 1968, and our first home was a 1990 build of 90sqm. But for 20 years I don't remember seeing many/any new builds under about 150sqm. While a bigger home is much nicer, the days of starting out smaller and working up (or renovating/extending) seem to be gone.
Which eventually gets me to my point of - rather than getting over elaborate with Kiwi Build etc - why don't we build a lot more state houses? (with then rent to buy, or whatever, as options while continuing to build more supply).
Especially at the smaller/lower profit margin end of the market. It wasn't lost on me that our first home was originally a state house built in Hamilton just before the incoming 1990 National govt promptly sold them off.
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@donsteppa said in Housing hornets' nest:
It resonated with what I'd noticed over the years, I grew up in a 97sqm Beazley home from 1968, and our first home was a 1990 build of 90sqm. But for 20 years I don't remember seeing many/any new builds under about 150sqm. While a bigger home is much nicer, the days of starting out smaller and working up (or renovating/extending) seem to be gone.
Which eventually gets me to my point of - rather than getting over elaborate with Kiwi Build etc - why don't we build a lot more state houses? (with then rent to buy, or whatever, as options while continuing to build more supply).
... and this comes back to planning rules and district plans. The plans are geared to build standalone houses on individual sections. As soon as you start doing this, with front yards, back yards and recession planes, building the biggest 4 bed 2 bath place you can becomes the only sensible economic choice. So that's what people do.
As for the quip about the shortage - there definitely was a 4 bed shortage in Auckland when we were looking 8 years ago. It was crazy, the number of houses availalbe was low, and the quality was poor (and of course the prices were silly). But the big twist is that it is land that has got expensive, not housing, so all the pearl clutching articles about crappy houses selling for a fortune miss teh point -- you're buying a piece of very very expensive land, with a house strapped to it. There was little to no difference in price betweeen a newly renovated house and a similar, non-renovated house. It was crazy.
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@nzzp said in Housing hornets' nest:
@victor-meldrew there is definitely a supply problem.
Just massively this.
It's really hard to get housing projects underway. Subdividing land is a nightmare so having heaps of it doesn't really help - and everyone wants the same bits (views, etc) so costs go up. Obviously that is outside of the urban areas because most of the available land in them has been used.
I was going to buy a plot in Ohakune a few years ago and build on it. The land was expensive but by the time a house was put on it, it was completely over capitalised as a project. The land is still for sale.Right from zoning, issues are complicated. Council permits' and lack of infrastructure, to the building costs. I know it sounds like we should have all of the building materials but we send them all overseas and then have to import them again (timber in particular). I read somewhere that we are in the top half dozen for building costs, IIRC third in the western world.
We also have too many (and a lot of the immigrants) wanting to live in AKL so there is exaggerated demand there and not much land available. We have to build up, not out, and that isn't what many Kiwis want. They want the 1/4 acre type lifestyle, completely understandable, but not realistic for the urban area of AKL where many people work.
The 1920s bungalow that I am transporting to a block of land is now six months late in arriving just because the whole process is so complicated. Every single item in a build has to be certified and approved by council (you even need to specify the make and model of a bath for example).
Once it is in place you can pretty much do what you like but the initial sign off takes forever. It does not encourage people to build. I just sold a rental to a real estate agent because she knows that it is going to take her over a year to even get her new build started.To answer your last questions simply, it is really bloody difficult and expensive. Which is why the existing stock is rapidly growing in value.
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@nzzp said in Housing hornets' nest:
... and this comes back to planning rules and district plans. The plans are geared to build standalone houses on individual sections. As soon as you start doing this, with front yards, back yards and recession planes, building the biggest 4 bed 2 bath place you can becomes the only sensible economic choice. So that's what people do.
Nailed it again.
The place that I just sold to the estate agent was only a 2 bed 1 bath and around 90sqm. Really cute cottage that had been relocated. One we had completely renovated. That wouldn't be possible now (well not easy) because the land would have to be subdivided. That all gets a bit complicated but council have changed the rules since it was put there.
The relevance to your post is that it was a cross lease which is difficult to do anymore due to the rules and subdividing. So people do just build bigger houses which may not be necessary and become too costly for first home buyers.
My niece (25 year old) has just bought an apartment to get her foot in the door, literally and figuratively, (without help from the Whanau) so it is doable with low interest rates although both her and her partner are earning and they have delayed having kids to do it.
Life choices. I was the same with spending so much time overseas.
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@snowy and really, we should be building 3-5 level walkup apartments; 120-160 sq m, 3bed + study. They just don't stack up commercially, so not built. And then there are gaps in the housing stock.
In Auckland, too, the leaky buildings screwed the market. Our second house should have been a 2000 era house, 10-15 years old, and in decent condition. But nothing existed sensibly between 95 and 05 ... so you were left with new (expensive) housing, or much much older, uninsulated stock.
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@nzzp said in Housing hornets' nest:
@snowy and really, we should be building 3-5 level walkup apartments; 120-160 sq m, 3bed + study. They just don't stack up commercially, so not built. And then there are gaps in the housing stock.
In Auckland, too, the leaky buildings screwed the market. Our second house should have been a 2000 era house, 10-15 years old, and in decent condition. But nothing existed sensibly between 95 and 05 ... so you were left with new (expensive) housing, or much much older, uninsulated stock.
Yes, we should be building low rise places big enough for families. I did a course in ecological design and one of the papers was on urban planning and how that could be done with communal gardens, playgrounds for kids, etc. It has been done successfully elsewhere but we don't seem to get it yet.
I still can't believe the leaky building thing. We have designed houses in a certain way for many many years for a reason. Who actually thought that internal gutting was a good idea? Let's keep the water inside the structure, wtf. Eves may take up some space, but there is a valid reason for having them, along with recessed windows. Some modern architects really lost the plot and some of the comments I made there can be done successfully, but it isn't good practice in my opinion.
The "older uninsulated stock" was good value years ago, I did a reno on a couple to get them up and they became a more attractive proposition to buyers. You really do need a team of trusted tradies to manage it though and you are gambling with large amounts of money because you don't really know the end result in value.
Some people don't like it either because apparently "gentrification" is a bad thing. I don't see it that way because healthy homes are a right, what I don't like are the regulations. I am replacing a heat pump in property today because it is a fraction under the new regs for the house it is heating. It's bollocks. It was the size of pump that was recommended to heat the place. It will now be in landfill. The place even has an HRV and circulates warm air. It is fully insulated. The tenants are warm and happy. The government can fuck off on that on that one. I won't start on the rangehood FFS. Anyway I like that property, the tenants are great so I'm keeping it and I apologise if I make a capital gain, but the yield is pretty shit so I'll take it (if I ever sell it, and an unrealised gain, isn't one).
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@snowy said in Housing hornets' nest:
The "older uninsulated stock" was good value years ago, I did a reno on a couple to get them up and they became a more attractive proposition to buyers. You really do need a team of trusted tradies to manage it though and you are gambling with large amounts of money because you don't really know the end result in value.
Reno with small kids ... ugh. And yeah- you need a good team of tradies. Motivate yours by sudden disappearance of those who don't do well by any chance?
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@nzzp said in Housing hornets' nest:
@snowy said in Housing hornets' nest:
The "older uninsulated stock" was good value years ago, I did a reno on a couple to get them up and they became a more attractive proposition to buyers. You really do need a team of trusted tradies to manage it though and you are gambling with large amounts of money because you don't really know the end result in value.
Reno with small kids ... ugh. And yeah- you need a good team of tradies. Motivate yours by sudden disappearance of those who don't do well by any chance?
Well, that threat was always there.
Yes, that is why other people do the renos, like me. Some people just want to buy a nice house as is. Good for both parties.
Other people don't like it, gentrification, capital gains, etc. I don't invest in oil companies for example. Each to their own.
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Akl Council Chief Economist take on govts latest tinkering
Precis: Rents probably won’t rise sharply, the bright line
tax extension will make little difference, but
interest deductibility will slow house price
growth. -
I've got a builder mate who moved to Bleheim about 4 years ago. He immediately noticed that the local market was out of whack (surprise, surprise) but especially for older folks looking to downsize without going to a retirement village. They are typically living in the statehouse/traditional 3-3.5 bedrooms and 90-110m or so.
He partnered up with another guy and they've been building about 3 smaller houses on larger sections, with a focus on easy access and maintenance. Obviously a different scenario when you factor in city density and RMA.
Housing hornets' nest