The Reserve Bank is looking suspiciously like it is running out of ammo as it faces up yet again to a stampeding house market.
That's the conclusion I draw, anyway, from having a glance at the RBNZ's consultation document released last week, which outlines the central banks plans to tighten the loan-to-value ratio (LVR) restrictions.
Our central bank has been here before.
In 2016 as the market got its third or was it fourth wind, the RBNZ didn't appear then to have options. In what looked like desperation it launched a salvo against the housing investors, forcing them to have 40% deposits. It worked. The housing beast backed off.
The same but different
Assuming the latest proposals from the RBNZ go ahead as it intends, the LVR settings will be exactly the same as they were after the mid-2016 changes. That is, investors will have to find 40% deposits, while in terms of owner-occupiers, the banks will be limited to advancing no more than 10% of new lending for mortgages that make up more than 80% of the value of the property.
It's the latter part of that sentence that is the change. The so-called 'speed limit' for lending to owner-occupiers is being cut from 20% to the new 10% setting. And 10% of course is what the limit was set at when the LVRs were first introduced by the RBNZ in 2013.
The big difference this year in comparison with 2016 though is that the 40% deposit rule for investors - which made such an impact in 2016 - is ALREADY in place from earlier in the year. And while it has for sure caused investors to back off, owner-occupiers have happily taken up any suggestion of slack in the market. And the market has kept roaring.
Remember also, that back in March we had the Government’s housing package, which included the nuclear option of removing tax deductibility on interest expenses for investors, and an increase in the period covered by the ‘bright line test’ - the capital gains tax that dare not speak its name - to 10 years from five.
So the heavy artillery had already been unleashed and I would summarise the impact thus far as having brought the market down from a fast boil to a vigorous simmer.
As I’ve already opined, I actually think it's very likely the vast majority of first home buyers looking for mortgages WILL be able to get them once the new, tightened LVR rules are in place, for the reasons explained in that article, that I won’t labour over again.
New weapon
So, the RBNZ’s out of ammo. Time for a new choice of weapon. Well, right, the RBNZ is now going to be able to get the long sought after debt-to-income measure. That will make a difference, but we probably won’t see it till at the earliest the second quarter of next year.
Which in the meantime leaves higher interest rates - the weapon that is targeted at inflation but which also works remarkably well against the house market. The banks have already been putting in some lifting in that regard and the RBNZ was all set to come to the party with a hike in the Official Cash Rate before Auckland decided to have a Covid outbreak of the Delta variety.
If the RBNZ does go ahead with an OCR hike before the end of the year - and it has two more chances to do so, in October and November - then that should begin to have a dampening impact.
As I look around me at the moment though, I see an oddly defiant mood. There appears now a view that the housing market has somehow transcended everything. No rules apply to it any longer. Just keep buying. The prices will keep going up. They will never fall.
I think the 30% price rise we’ve seen in the past year will in future be viewed as a pivotal moment. I think it means everything. Just don’t ask me what exactly. I think we’ll have to wait several years and maybe more than that to truly find out.
It's years into the future we need to worry about
The Reserve Bank, having been utterly wrong in expectation that house price growth would evaporate in the second half of this year has now bravely, and with more than a suggestion of jawboning intent, forecast actual house price falls beginning from the end of next year.
To be honest, I don’t think it's this year or next year we have to be worried about.
Somebody, and it needs much more talented government than we’ve had, needs to properly take the housing issue in hand and really think about where we want to be in 10, 20, 30 and more years’ time.
The real problem we have is that the perceived route to riches for New Zealanders, THE investment of choice, is houses. But houses are also means of shelter.
So, people seeking shelter are put in auction rooms with people seeking to get rich. One person’s necessity is another persons means of investment income.
People who simply want a roof over their heads are therefore cast into what is effectively a sharemarket for houses.
Our housing sharemarket
Until we can find some artful way of separating this, of stopping our housing market being like a sharemarket - with investors clambering over each other - then we’ve got a problem.
One hears various suggestions of what might happen in the housing market. That there might be a collapse in house prices. That there might be a long drawn out period of little or no price growth, that will enable wage growth to ‘catch up’.
I would suggest another possibility. What if once the Covid curse does start to recede in the background we have a government that again opens the floodgates for uncontrolled migration? And maybe this time the target is well-heeled ($10 million in the bank or don’t bother asking) investor types who can easily afford to splash for mansions and land?
In such an instance the social inequity that we are already watching rapidly develop in this country would explode. With what consequences?
Priced out of our own country?
Do we want to start pricing our own people out of our own country? It could be done you know.
That 30% house price rise in the past year has given us a big problem. And it won’t be fixed overnight. And we shouldn’t be focusing efforts in the next year or so.
This is a long term problem we now have. And it really boils down to what sort of country we want this to be in 10, 20, 30 years and beyond. I don’t profess to have the answers. But we really do need the discussion. And make an earnest attempt to find some answers.
113 Comments
"Do we want to start pricing our own people out of our own country?"
Its already happened. Myself and many other Kiwis I meet in Australia moved because they couldn't afford to live in NZ anymore. The country of my birth, and of 6 generations prior, is not affordable for me to live in. In Australia I can actually have a life.
Stats sort of show that the average 30 something is as likely to own their own home in Australia as they are in NZ (around 40%).
So if you are a better worker and saver than the average Aussie (but a worse worker than the average Kiwi) you should crush it.
Oh but you don't get the same health and social security entitlements there.
Welcome to late stage capitalism.
Simply not true.
Kiwis in AU get the same health benefits - actually the situation is better over there, as they have much more access to leading edge medicines and cures.
Yes you don't get the dole, but if you are somebody who works and contributes to society you will have no problem.
House prices always seem to go crazy under Labour.
But the solution is supply and getting down the cost of building houses.
The compliance costs and red tape and stupid council rules combined with health and safety adds about 50% to the cost of actually just building it.
Look how fast and cheap you can build a house in USA.
Yeah na on ausie, prefer steak not shrimps on the barbie.
"Do we want to start pricing our own people out of our own country?"
I don't even understand how blind people need to be to ask this question. NZ is "sustainably" turning into a 3rd world country where children can buy properties only if they have rich parents and all others (including medical, education, police and other professionals ) CANNOT , and this is how bribery and corruption starts . And this is vicious cycle , it won't be stoped easily.
https://www.stats.govt.nz/news/homeownership-rate-lowest-in-almost-70-y…
"The proportion of people living in their own home was the lowest in almost 70 years at the time of the 2018 Census, and homeownership is becoming much less common for younger people, Stats NZ said today. (Dec 2020)"
'Do we want to start pricing our own people out of our own country? It could be done you know.
That 30% house price rise in the past year has given us a big problem. And it won’t be fixed overnight. And we shouldn’t be focusing efforts in the next year or so.
This is a long term problem we now have. And it really boils down to what sort of country we want this to be in 10, 20, 30 years and beyond. I don’t profess to have the answers. But we really do need the discussion. And make an earnest attempt to find some answers.'
Personally I'm a bit bored of the housing issue, but I can't shake it completely, as the issue is of such profound importance to the present and future state of this country.
We live in a democracy, and democracy has given us this problem. So we're collectively responsible for it. Many people have, consciously or unconsciously, bought into the government policies that have got us to this point:
- Mass immigration since 2000
- Liberalization of lending regimes
- Short-sighted monetary policy
- Restrictive planning regulation
- Selling off of state housing
- Lack of state house building
Going forward, each of these factors need to be redressed. But this redressing will simply be damage limitation.
At this point, there is complete market failure. The only way we'll get semi-affordable housing back on the table is by doing an Ireland - a massive, and expensive, program of government house building. At least 5 X what they are currently doing.
As well as state house building, there will need to be lots of shared equity housing, as per the Irish. Shared equity housing will be the only way of delivering at least some degree of affordability. I'll turn off the moment I hear libertarians saying massive planning reform will solve the problem - it might have if it was done 10-15 years, but it's far too late now. And it's politically unlikely, anyway.
Sadly, I'm pessimistic. The Labour Party is a joke, and don't have anywhere near the ambition, social conscience, or competence to do what is needed.
Meanwhile, the Nats are also a joke for many of the same reasons. Further, philosophically they will never entertain the mass government house building program that offers the only way out of this.
Whichever party is in power, doesn't matter. They are different shades of the same colour. We'll continue to get tweaks here and there, frowns and head tilts, to look like they are doing something.
So what about a property crash? It's quite likely to occur in the next few years, but even if prices crashed 20-30% it only brings us back to the already exceedingly unaffordable prices that we had 2-3 years ago. And then, slowly but surely, inexorably the market will reinflate....
I'm not convinced there will be a crash because the government will step in to stop it happening. If it's looking bad they will boost the first home owners grant in the name of helping young people get into housing. Australia did it during the GFC and it worked brilliantly at boosting property values. LVRs can be removed again too.
Yes. Maybe not as extreme as South Africa, but likely to be as bad if not worse than the USA.
Everyone knows that with growing inequality comes growing crime, violence, social problems etc.
I wish I could be optimistic. But I'm a realist.
This country needs to have a good hard look into its own soul. But it won't.
Looking into the soul of the typical NZ'er is fraught with danger....
Having discussed the housing issue with thousands of kiwis over the last 10 years, after witnessing the US market cash and seeing its impacts first hand, I've realised there is a serious darkside to New Zealand's collective personality. And you can see that playing out in our depression and suicide stats. We want to think we're 'nice' and 'kind' but in many respects, we are the opposite of this. We're fearful and greedy and we don't want to make short term sacrifices that will make the future better - the greatest generation did many good things to set society up for boomers and gen x from the 60's onwards, yet those same generations have collectively reversed that in order to make things better for themselves at the expense of everyone else.
https://www.youtube.com/watch?v=meF7NmfnXZ0 for a good comparison...
If trends continue, you'll have landlords and serfs. Landlords parasiting off the working class who generate goods and services (GDP generating activities that in theory improve living conditions) and pay taxes. Landlords, well I'm not quite sure what they'll do with themselves, other than make sure they vote and pay bribes to maintain the status quo and take all of the benefits of the work done by the serfs. We've come so far, yet not very far at all.
Perhaps Marx was right after all?
I take it you don't know many people under 40. We are well aware of the fact that despite, for the most part, having more qualifications and higher paying jobs than our parents did, we will not get 'more' than our parents did, or even similar opportunities in terms of wealth building than our parents. To get something even vaguely approximating what our parents had we know that we will have to live in smaller houses, further away from job opportunities, have fewer children, and forgo the luxury of having one parent be able to stay home for more than the first six months of their children's lives and then maybe work part time when the children are young.
Great article but the bottom line is it is now all to late, higher house prices are here to stay. The fact is the government is just sitting on its hands and faffing about with Covid, they seem to not be able to multitask and somehow all that Covid data has just buried them. House prices are STILL increasing rapidly and even if they now fall to "Only" the current rate of inflation they are still out of control.
"The Reserve Bank is looking suspiciously like it is running out of ammo as it faces up yet again to a stampeding house market."
It had ammo (LVR's) but it decided that it was going to wave the white flag in 2020 take that ammo out of circulation. The enemy swormed, took the front lines and now the RBNZ want their trenches back. Good luck to you....fools I say.
The median Sydney auction house price hit 1.9m in August, up over 30% for the year.
Auckland is actually looking quite cheap by comparison.
The RBNZ is over estimating its ability to have any real effect on the market in NZ. The only way that they can bring prices down (but why would you) is to ramp up interest rates but that will screw the economy. Checkmate.
The cure for high prices is high prices - lots of construction going on.
I wish the government would just get out of the way and let house building ramp up.
Reverse all the stupid tax laws such as not being able to claim interest costs as a business expense. Get rid of the bright line test. Get rid of GST on new builds. Get rid of the RMA, dont make it worse as they appear to be doing to an even worse one.
Anyhow, the adults are not in charge, so expect a bigger mess.
Who said you need to take interest rates up and over the point they will screw the economy ? We were at 1% a year or so ago and was the economy screwed ? Would the economy really be screwed if it was 1.5% ? I think not but it would sure slow house price growth. The problem here is that house price growth is seen as a roaring economy and as you pointed out, we don't have adults in charge.
The "median sydney auction house price" is a useless metric. The median sydney dwelling price, which is comparable to what is reported here has only just crossed a million.
Source:
https://www.news.com.au/finance/real-estate/buying/median-sydney-house-…
While Sydney is very expensive, it's also a superior city and has significantly higher salaries. It is one of the most unaffordable cities in the world and it is more affordable than Auckland.
From the SMH yesterday
Sydney’s median auction house price has soared to a record $1.92 million, up an astounding 32.3 per cent over the year and 11.8 per cent in just one month.
Australians continued to buy property under the hammer at record rates during August, according to the latest Domain Auction Report Card, despite the protracted lockdowns in its two biggest capital city markets.
In the depths of lockdown — and winter — Sydney’s clearance rate of 77.3 per cent was the highest for the month of August since Domain records began.
The median auction price for units hit $1,113,000, also a record high.
The huge price of those inner city suburbs in Sydney and increase in price is exactly what is starting to occur in Auckland.
With the removal of interest deductions and the brightline going to 10 years more money is/will be pumped into the family home to cash in on tax free capital gains as is occurring in Sydney.
Unintended consequences of our nieve Government.
This is the Median Auction price- not the Median price. Few of the houses in sydneys southern, northern or western suburbs are auctioned. Auctions are mainly used in the inner city - where houses go in the millions every day ie Darling point has an average house price of $7.6M- double Bay $4.6M.
Meanwhile there are plenty of houses outside the city centre going for not much more than $700K - you cant even get houses in Wainuiomata in Wellington for less than that.
The latest from Australia https://www.corelogic.com.au/news/august-2021-home-value-index and outlook
https://www.finder.com.au/rba-survey-7-september. As Brock notes, Australia is not quite as deluded
Everything David says here is true; and it could have been said a year ago, or five years ago, and been as true then. The social dislocation isn't new at all, it's just become more obvious.
The biggest problem is political. Our politics is dominated by two parties; one of them is the party of property owners almost by definition, and the other is Labour. Jacinda and Grant, despite having an almost unprecedented degree of political freedom, have literally said that they don't want house prices to fall; they would rather publicly humiliate themselves by stating obvious nonsense (housing can become more affordable without prices falling) than risk alienating property owners.
So there will not be any meaningful help from the government. They have said they don't want a correction, and there's no reason not to believe them. External factors forcing a credit crunch could topple the market. Otherwise, it's wait another decade or two until renters are not just a demographic majority (as they already are) but have somehow translated that into political influence. By which time, all of the housing-related problems we have (inequality, mental illness, crime, ethnic division, poverty...) will all be much worse.
Not sure if you've watched the 'Princes of the Yen' - as was the case in Japan, government, central banks and commercial banks were all complicit in creating the debt bubble. Yet nobody at the time was willing to say - 'hey you know what, this is actually f#@#'d and unless we do something dramatic now, that is likely to piss a bunch of people off, our country is going to stagnate and suffer significantly in the future'. Those in positions of power to do something, knew there was no short term benefit to themselves to do something good for the longer term benefit of the many.
It sums up the last 20-30 years in NZ really - and in general the boomer and gen x generations. Self interest is more important than society.
Not sure if you've watched the 'Princes of the Yen' - as was the case in Japan, government, central banks and commercial banks were all complicit in creating the debt bubble Yet nobody at the time was willing to say - 'hey you know what......
Correct. In fact, most Western experts couldn't explain the Japan bubble, except for a few outsiders. Now, if you speak to a Kiwi expert from the suburbs, they will say "oh yes but Japan has bad demographics". The problem with this is that the Japan bubble popped in the late 80s. Everyone was aware of Japan's future demographic projections at that time. Never prevented the bubble from happening.
There are many NZers are experts on everything, particularly Covid and why NZ is not in a bubble.
It's a Mike Hosking syndrome.
"Jacinda and Grant, despite having an almost unprecedented degree of political freedom, have literally said that they don't want house prices to fall; they would rather publicly humiliate themselves by stating obvious nonsense (housing can become more affordable without prices falling) than risk alienating property owners."
POWER CORRUPTS. Empathy queen realized as soon as she tasted power that have to go after national vote base to remain in power and who cares..........is their a difference between democracy and dictatorship as In both they do anything and everything for power be it Jacinda or......
Jacinda and Grant said they don't want a correction, but this is not up to them. RBNZ has already admit that "the risks of a housing market correction continued to rise." This shows how these politicians are not reliable. They were either lying or just completely incompetent.
https://www.stuff.co.nz/business/300402279/reserve-bank-cracks-down-on-firsthome-buyers
WoW , despite being in middle of panademic, majority of Ne Zealanders are concerned about housing crisis than conoravirus or anything else and STILL Robertson and Orr are not bothered and when under pressure are forced, try to tweak being fully aware that tweaking at this stage will not help.
https://thekaka.substack.com/p/delta-two-dawn-chorus-nzers-more?token=e…
What is it that will force this patriarch of housing ponzi to come out of hibernation and act (Not tweak), are they waiting for ...........hope is not bloody.
I've called 5-10% increase in the median house price from September to April.
I would be surprised, but not shocked, if it was more than 10%.
I would be surprised, and somewhat shocked, if it is less than 5%.
I take your points in terms of bullishness, but I tend to think the absolute madness is behind us. I think we'll see FHB's fall away a bit, due to the growing unaffordability as well as interest rates nudging higher.
You think there will be price falls in the next 6 months, using conventional metrics?
Not what I said. I said I 'would not be surprised.' As for 'conventional metrics', most people have no idea how hedonic house price indexes work. For example, if sales volume is low, how that impacts an index depends on the methodology. It's completely different to how say a stock index works.
Yep, and spring/ summer is usually more buoyant.
I also think we will see median price rises because of simple math - as I have said before, with the Homestart cap at 700k in Auckland, and developers struggling to deliver 2 beddies for any less than 720k, we will start to see a fall away in FHBs and the construction and sale of housing at this price point.
This will push the median up.
Thus, and for some other reasons, we will see the median rise a fair bit more than the HPI.
Well first off there is a big difference between 'median' and 'average' house prices
Median is typically used because its simply the middle number, not the average - agents like to spiel this because it is typically higher than the average cost and pushes people to bid more
If you want to make housing more affordable you need to tackle the foundations of what underpins high prices
Supply + demand
Credit availability and foreign capital
Migration or population growth which is being mitigated through COVID
Tax benefits
The legal process to sell a home
Valuation companies who have a direct conflict of interest with people paying them directly and not through banks
Rubbish, Auckland is not cheap.
Also to what extent will people want to come here once poverty and crime continues to grow? And once our social services get further run down? NZ is no longer the safe country it was, or was perceived to be.
Heck we have terrorism now!
Yeah, totally agree. Those people who still think Auckland as major city and houses are cheap clearly haven't been to other major cities around the world. It's just incomparable when it comes to infrastructures and social services development based on how much population we have right now.
According to the 2021 Demographia survey, there are precisely three cities that are more expensive thsn Auckland - Hong Kong, Vancouver and Sydney. So no, Auckland is not cheap compared to major cities. Every single city in Europe and the US is cheaper. And that doesn't even take into account housing quality.
Hi David,
LONG COMMENT / OPEN LETTER
Many have commented number of times on what Orr and Robertson are doing or not doing and is now so obviously see-through that they now stand exposed.
Posssible blinnded, In their ivory tower as they are surrounded by either 'Yes Men' or bureaucrats who advise them to suit their vested biased interest as most of them have multiple properties and this bureaucrats knows how to say and what to say to make this politicians shit and listen to them - most obvious is that this is what Kiwi wants ( Remember Jacinda's quote that Kiwi wants house price to rise though current data released today suggest otherwise) or you will lose the vote otherwise why would it take Jacinda Arden to realize the housing crisis only when she saw an open home near her house despite .........
Mr Orr knows like you and me that their so called policy are not having any effect on housing, so why are they still pursuing the policy of Wait And Watch - playing with time even though house prices as per latest data are still rising by appox $4000 per week and to highlight how serious Mr Orr is can be judged from his / their response that house price will fall from end of next year ( after 15 months) by 5% - indicating that he is fine with house price rising for another 15 months, and his justification is that instead of 35% will rise by 20% and even than he expects a fall of 5% ( after rise of 35% plus 20% does fall of 5% has any meaning). THIS JUSTIFICATION AND ALSO ALLOWING ORR TO HIDE BEHIND TO SAVE HIS FACE WITH SIUCH ABSURD LOGIC IS MORE PAINFUL AS THEY FEEL THAT THEY GOT AWAY AND MANAGED TO FOOL YOU AND THROUGH YOU US - NEWZEALANDERS.
For LVR, if want to control speculative demand can easily raise to 60% - though high but is need of the time. DTI is must to protect FHB buying in extreme under FOMO - Not able to buy a house under DTI will be disappointing but buying and than repenting with even a slight change of circumstances will be a disaster.
Jacinda talks about not having a silver bullet but ignore Interest Only Loan - reason as that will actually contain the ponzi. Appox 35% to 40% are investors and of that 42% fund their activity through interest only loan - means appox 15% to 20% of total transaction is supported by interest only lo and and could be more in Auckland. One need explain how interest only l9an multiple the purchasing power compare to principal and interest loan and it is this 20% who for speculation pays premium on top of premium and thereby establish a price in that street/area as even if one house is sold way beyond that is good enough to establish the price which has domino effect.
FOMO is the biggest reason ( under FOMO when people can fight over toilet paper than for house which is a basic necessity will go to any extreme) and all be it government, RBNZ, experts and media - all adding to FOMO, which can only be controlled when price stop rising and may be fall a little.
For a little fall - PM should understand that if after 30% or 50% rise if the house price falls by 5% or even 8% will not make much difference to house owner ( except flippers who bought to flip instantly but even them as doing number of time will get away with profit made in earlier deals) but SHE JUST HEARC WHAT HER ADVSIOR / YES MEN FOR BIASED INTEREST ADVISE THAT ANF TALK OF FALL AND WILL LOSE VOTE / POWER AS THEY KNOW WHICH NERVE TO PRESS OF POLITICUAN TO GET DESIRE RESULT AND FOR POWER THEY WILL SELL THEIR SOUL SO KILLING THE ASPIRATION AND DREAM IS NOTHING TO .........
Can go on....
How come journalist and media not highlight the absurd reasoning and stupid excuse from......
WOW lot of attention, but you know what, people who can make the difference for next couple of years don't give a sh!t what your opinions are. So sit tight and see this market touch higher highs on weekly basis. About "pricing our own people out of our own country", it seems like the point is a fallacy.
Current Oligarchy policy: This country only belong to wealthy if you are not one buy one way ticket, you don't belong to NZ.
False Hope (Property will crash)
False promises (Affordable housing)
Real emotion (FHB's & young kiwi anger)
"The Reserve Bank is looking suspiciously like it is running out of ammo as it faces up yet again to a stampeding house market"
On seeing this headline Mr Orr will be very pleased with himself and his team as this is exactly what he wants everyone to believe.
Reality is that, if was serious and has intent will go out with Least regret policy like he did last year under fear that house price may stop rising instead of his policy of Wait and Watch when he is fully aware along with you and me that his tweaking are not having any effect so why not act on LVR and Interest Only Loan and do it overnight just like he acted last year and removed all restriction overnight.
David unfortunately reality is that neither Orr nor Jacinda has any intention to control.
When they say that all kiwi wants house price to rise, they look stupid and also creating FOMO. Even normal businesses are either shutting their existing business or hibernating and shifting all focus to housing for easy and fast money with assurance from non other than Prime Minister-;Jacinda Arden.
Good comment (now to be followed by my ramble). I don't really see myself as pessimistic, but whilst having a beer with a mate just before lockdown we were trying to figure out what it now means to be a new zealander. From outrage over Coutts' defection, to everything now being about a 'commercial reality', an obsession with houses and money. I hope we haven't lost our collective generosity and sense of adventure.
oh yes they will....when real interest rates increase
the longer we have low rates and high inflation then the more real interest rates will need to be jacked up to stop inflation
imagine inflation stats running at 4% so they have to put up interest rates to 7% to stop the increase because it has happened so quickly
Rubbish, according to Aljazerra the other day 85% of people rent in Berlin and it's considered "Normal" to rent and rents are expensive. The lower the home ownership rates the more stuffed you are it simply means fewer and fewer people own all the houses its like a game of Monopoly, sooner or later your a loser and your out of the game.
When you rent in Berlin, you're guaranteed a long tenure. Like 8 years. You can do what you want with the property - paint the walls, install a kitchen, whatever. Have a dog. Sublease rooms. It's yours to do with as you please and there are strict limits on how much rent can be raised.
Whereas here you have one year and can't touch a thing. No pets. Can't use thumbtacks, much less repaint. Landlords peeping in the windows to make sure you're keeping the place clean. It's no way to live. It's like living in an expensive, rundown motel, except instead of being grateful for your custom they motelier treats you like a criminal.
There wouldn't be so much FOMO from first-home buyers if renting in this country didn't suck so much.
It is a fustercluck 3-4 decades in the making. Some contributors, commenters can most likely extend the list....
- Land use restrictions via zoneration, district plans and a lack of effects-based considerations. Largely down to Councils and the old Town and Country Planning Act holdovers. When land prices are wrong, so is everything on top....
- Materials duopoly
- BRANZ approval needed for every component, which foobars innovation
- Insistence on one-off designs which tend to act against componentization, modular designs and the lower cost which would accompany these.
- Lack of scale- only 5 or so firms build more than 100 houses per annum.
- Dopey Gubmint 'assistance' schemes which simply set price floors and act as a Universal Pricing Signal.
- Perverse incentives. Tax etc. Doors closing but rat-runs remain.
- Pollies generally invested in the sector so Turkey/Thanksgiving problem, exacerbated by lack of vertebrae and cojones, a fatal combination.
Either my own eyes are lying to me or this supply of land argument is overstated.
I recently revisited Riverhead in NW Auckland - a once sleepy backwater where I last lived 17 years ago. I also drove out to Muriwai beach. To my amazement the whole area has been completely transformed. What once was a pleasant drive through bucolic scenery is now a gridlocked grind past acres and acres of million dollar+ mini Mcmansions, complete with the swinging hot spot (as in the Joni Mitchell song).
And seemingly there is no sign of this metamorphosis slowing any time soon with large tracts currently under development or soon to be.
TBH I couldn't get away quick enough but this was difficult as it was near impossible to get back onto SH16 due to the traffic.
"As I look around me at the moment though, I see an oddly defiant mood. There appears now a view that the housing market has somehow transcended everything. No rules apply to it any longer. Just keep buying. The prices will keep going up. They will never fall"
Yup this nails it.
It is also the key indicator of a peak/top in the market.
Can enthusiasm increase further from here?
No.
This final hurray will be where the last bear turns into a bull. And the buy side becomes spent. Then a 20 year hangover is my best guess.
And no-one has mentioned the impact of sea level rises and flooding which will impact most cities and towns before too long, plus the expected Alpine Fault in the South Island, and tsunami / earthquakes affecting more than the east coast of the North Island. That will add further pressures to available and reasonably usable land supplies, for both housing and food supply.
But, a lot of people will lose big when the above wipes out their land value and ability to get insurance. Or will the govt somehow subsidise existing homeowners at the expense of renters?
Low lying coastal houses already struggling to get insurance. If you don't have an existing policy to role over you will find getting one while in the designated council erosion zone quite challenging or stupidly expensive. Not holding anyone back, eg Waihi Beach anyone...erosion front still going for crazy money.
Until we can find some artful way of separating this, of stopping our housing market being like a sharemarket - with investors clambering over each other - then we’ve got a problem.
I think its pretty easy to achieve. If you treat an investment property as a business, and only offer business rates on investments (circa 6 - 7%).
The problem would be over in a heartbeat, albeit with some outstanding collateral damage.
Imagine a new weekly radio show slash podcast where NZ leaders talk about the future of country, specifically 10+ years ahead. Discussing population size, housing for the wealthy and housing for the poor, investment and savings schemes, iwi rights, infrastructure, employment vs AI etc
Without attempting to make promises or catchy sound bites, could they discuss based on principles and goals what NZ should look like?
And not specifically featuring Ardern and Collins, more so a mix of types including future and past leaders, industry experts, real kiwi role models.
"The RBNZ appears to have run out of live ammo to tackle the housing market right now"
David Hargreaves your headline is totally wrong as you are giving clean chit to rbnz by saying that they have done everything possible to control the ever growing house price.
Firstly their is lot that they can do and second they never do it on time and delay to play with time as they actually not in mood to control the ponzi except in paper.
A Question, do you really feel that RBNZ has done all besides government ?
Despite all the promises by both National, Labour / Green and now Labour by itself that they will fix our market nothing has changed. Sure investors and speculators are blamed along with high cost of this and that. The key issue is existing homes will always adjust to the price of building new. If the cost of new is going up then existing will go up. Well I am building a new holiday home on my existing section. Last week I was pleased to get my resource consent as a non notifiable activity. Nothing difficult or unusual about it. One level, 120 sq m, set well back from boundaries and lower than existing house on property. This process took 6 months to approve what? After 3 months of delay the council wrote saying they were short of staff being nine down and there would be delays. The only conditions and questions were are we going to seal our drive and we have to promise to replant any existing decorative shrubs that might die. Why on earth are the regulatory staff worried about my sealed drive and my shrubs. The problems would be 90% fixed if we got rid of the nobodies who want to control our lives. It is my land, my money, my life, my choice. The government has no right to have any say in what I do.
I live in Sydney, I used to live in Auckland.
You cant even compare the two cities, Auckland needs to be compared with Brisbane or Perth (and compared to those cities it is stupendously expensive). Sydney is probably the most desirable city in the world, its an Alpha world city and has the careers and incomes to go with it.
Living costs here are considerably less than Auckland, public transport, infrastructure and quality of life are so far ahead of Auckland its not funny. Will be 27 degrees this weekend, looking forward to going to the beach, access to the outdoors (national parks) is far easier than Auckland too.
I'm comfortable with the Covid situation here, healthcare is truly world class and Covid testing number are painting an accurate picture of the situation (115000-150000 test a day). My understanding Auckland is testing 7000 on a good day - no testing, no Covid I guess.
In terms of housing, yes can be expensive in some parts, in the Northern beaches, where I live, it has had some considerable price increases, there is a reason for that though - it is the most desirable area in the world to live and only a short distance to the CBD.
Across the city there is still reasonably priced property and in decent areas. Houses and apartments seem to be better built here as well.
I only wish I had moved here earlier, its a fabulous city to live in.
NZ is stuffed, the social issues will only get worse and the real economy has been destroyed by successive Governments being asleep at the wheel. Too late for any change without considerable collateral damage. Good luck but I certainly have no reason to come back.
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