REINZ index down 1.5% in Jan and 2.7% below peak; Biggest falls in Auckland City, Papakura, Porirua, Wellington; Most home-owning voters oppose falls; Govt set to reopen credit taps
In January 2021 our lending was approved for a mortgage on an off plan investment property in Hamilton. At that point, the approval took us a reasonable period past the estimated October completion date. When the completion date moved to late February (our build was hit by COVID and supply problems like everywhere else) the bank waved through an extension. This was November 25th, just before the CCCFA. Now that completion has been further delayed to the end of March, CCCFA rules mean we need to make a completely new application at a bank we have been working with for many years - despite Code of Compliance being issued and the only hold up being the time required to issue title.
I am confident, but not positive that we will be approved. If we are not approved, we will need to hope our builder is benevolent enough to come up with a reasonable arrangement for returning our deposit! At the same time, there is a very real prospect that we will move bank. If we need to completely restart our application then we might as well look for the best deal!
To change the topic back to the protest, why do the police not seal it off to stop anyone returning or arriving at the site? It may be a bit leaky in that determined people can probably find a way in, but this would seem to be the way to stop food arriving at the site, stop those who pop over to their cars at whim and those who swell the protest at weekends. It would seem to have little downside, apart from the number of police required. No one would be stopped from leaving the site.
To what extent is tweaking the CCCFA actually going to turn the tap back on though? Isn't a much bigger constraint the combination of: the hugely elevated price levels we currently have; increased interested rates; and most peoples' (I imagine) expectation that interest rates will increase further. Chuck in the huge amount of supply coming online and you have the recipe for a correction (however long that may last) - even if the CCCFA is tweaked would banks want to lend into that market to people at the margins.
Overton Window thinking makes for gloomy reading about getting Big Issues resolved but the exceptions names demonstrate that apparently stuck windows can be moved.
Feb 16, 2022·edited Feb 16, 2022Liked by Bernard Hickey
I don't think people oppose price falls at all. It depends on the way the question is asked clearly. The true question, the one that hasn't been asked is:
"Would you like all house prices to fall, yours included"
The first survey seemed to leave out the second clause, and this latest survey has left out the first clause.
The point is that people don't want a drop in their own homes RELATIVE value, but they do want the whole damn lot to go down together.
Feb 16, 2022·edited Feb 16, 2022Liked by Bernard Hickey
On the lighterside of life...
If it's a Wellington sash window, there is hope. When you listen closely enough, on a typical Wellington day, you can hear the faint howling and feel the draft of the wind. No matter how air tight the homeowner has tried to make the windows, the wind will find a way. Relentless the wind is. Determined.
Bernard, you are the howling wind metaphorically. Keep that gale force rolling.
While not directly affecting the window, are the moves for 'off balance sheet' activities creating a de facto opening? Three waters reform will allow a much higher leverage as well as requiring cross subsidies to provide affordable services and meeting quality, community and environmental outcomes. Special Purpose Vehicles can levy home owners for infrastructure funding and financing - effectively increasing revenues off balance sheet. Value capture mechanisms could enable an effective wealth tax. The review of spatial planning etc could enable growth to be funded from the ratepayer base rather than the developer - who will pass this on to new home buyers.
Start adding in a social discount rate for public investment and the frame could move rather quickly.
Hi Bernard, you've mentioned that governments/central banks would likely step in to prevent a major stock market crash. However, some would say this time is different due to historically low OCR and record inflation levels. The focus would have to be on addressing inflation in the real economy.
Outside of REITs, etc. where would NZ housing sit in this scenario?
Why on earth would a responsible Government prioritise the profits on banks (particularly offshore banks) over the well-being of its people when it all money is issued as debt and private banks use our dollar and currency to to do it out of nothing and for nothing by our own Treasury and Reserve Bank. They’ve certainly conned us all into believing this is all they can do despite what’s been historically successfully done here before and makes better sense for the country to fulfil its duty of care and obligations to uphold the law and rights,haven’t they? Not very “kind” is it?
And now they’re hair splitting and distracting to distract us all from that systemic and structural FAIL.
The people who don’t mind if their house falls in value are those who see it as a place to live. If they had to move they recognise they would buy on the same market or even a falling one. Those who see houses as devices for accumulating unearned profit feel threatened by the prospect of a fall, especially if they have borrowed speculatively to acquire them.
If I’m not available tomorrow, I reckon NZ Inc. COVID response is serious enough to treated like war. With a multi party bi partisan Parliamentary response. And if that makes sense with COVID why not with The Housing Catastrophe and Education and Health?
We could have an internationally unique form of Govt for major, wicked problems.
Here's a fun example of the CCCFA in action.
In January 2021 our lending was approved for a mortgage on an off plan investment property in Hamilton. At that point, the approval took us a reasonable period past the estimated October completion date. When the completion date moved to late February (our build was hit by COVID and supply problems like everywhere else) the bank waved through an extension. This was November 25th, just before the CCCFA. Now that completion has been further delayed to the end of March, CCCFA rules mean we need to make a completely new application at a bank we have been working with for many years - despite Code of Compliance being issued and the only hold up being the time required to issue title.
I am confident, but not positive that we will be approved. If we are not approved, we will need to hope our builder is benevolent enough to come up with a reasonable arrangement for returning our deposit! At the same time, there is a very real prospect that we will move bank. If we need to completely restart our application then we might as well look for the best deal!
Good article on the housing problem Bernard.
To change the topic back to the protest, why do the police not seal it off to stop anyone returning or arriving at the site? It may be a bit leaky in that determined people can probably find a way in, but this would seem to be the way to stop food arriving at the site, stop those who pop over to their cars at whim and those who swell the protest at weekends. It would seem to have little downside, apart from the number of police required. No one would be stopped from leaving the site.
To what extent is tweaking the CCCFA actually going to turn the tap back on though? Isn't a much bigger constraint the combination of: the hugely elevated price levels we currently have; increased interested rates; and most peoples' (I imagine) expectation that interest rates will increase further. Chuck in the huge amount of supply coming online and you have the recipe for a correction (however long that may last) - even if the CCCFA is tweaked would banks want to lend into that market to people at the margins.
Hi Bernard.
Try this for a policy if you wanted to change from unelectable to electable.
The government will recompense any home owner for the loss they make when they sell their home. so ...
a) Unless the drop in prices is "Really Big" it will only affect a small number of recent buyers. But many more home owners will feel comforted.
b) In effect this will give the buyer back the deposit they had saved.
c) For property speculators / landlords; sorry, if there is no capital gains tax then there is no capital losses tax deduction.
Overton Window thinking makes for gloomy reading about getting Big Issues resolved but the exceptions names demonstrate that apparently stuck windows can be moved.
I don't think people oppose price falls at all. It depends on the way the question is asked clearly. The true question, the one that hasn't been asked is:
"Would you like all house prices to fall, yours included"
The first survey seemed to leave out the second clause, and this latest survey has left out the first clause.
The point is that people don't want a drop in their own homes RELATIVE value, but they do want the whole damn lot to go down together.
I'm still grieving at the loss of our forests to Malaysia environmental terrorists, and you want to sell of more our assets. There's no hope.
Let's try stretching the "Hickeyton window"
* Really look into with understanding and empathy the number of people with cognitive decline, early dementia in their late 60's.
* Have a tiny eeny weeny bit of empathy for the sick and abandoned, who don't have your income, wit, able body, and connections.
On the lighterside of life...
If it's a Wellington sash window, there is hope. When you listen closely enough, on a typical Wellington day, you can hear the faint howling and feel the draft of the wind. No matter how air tight the homeowner has tried to make the windows, the wind will find a way. Relentless the wind is. Determined.
Bernard, you are the howling wind metaphorically. Keep that gale force rolling.
While not directly affecting the window, are the moves for 'off balance sheet' activities creating a de facto opening? Three waters reform will allow a much higher leverage as well as requiring cross subsidies to provide affordable services and meeting quality, community and environmental outcomes. Special Purpose Vehicles can levy home owners for infrastructure funding and financing - effectively increasing revenues off balance sheet. Value capture mechanisms could enable an effective wealth tax. The review of spatial planning etc could enable growth to be funded from the ratepayer base rather than the developer - who will pass this on to new home buyers.
Start adding in a social discount rate for public investment and the frame could move rather quickly.
Hi Bernard, you've mentioned that governments/central banks would likely step in to prevent a major stock market crash. However, some would say this time is different due to historically low OCR and record inflation levels. The focus would have to be on addressing inflation in the real economy.
Outside of REITs, etc. where would NZ housing sit in this scenario?
Why on earth would a responsible Government prioritise the profits on banks (particularly offshore banks) over the well-being of its people when it all money is issued as debt and private banks use our dollar and currency to to do it out of nothing and for nothing by our own Treasury and Reserve Bank. They’ve certainly conned us all into believing this is all they can do despite what’s been historically successfully done here before and makes better sense for the country to fulfil its duty of care and obligations to uphold the law and rights,haven’t they? Not very “kind” is it?
And now they’re hair splitting and distracting to distract us all from that systemic and structural FAIL.
The people who don’t mind if their house falls in value are those who see it as a place to live. If they had to move they recognise they would buy on the same market or even a falling one. Those who see houses as devices for accumulating unearned profit feel threatened by the prospect of a fall, especially if they have borrowed speculatively to acquire them.
More detail today from David Clark on quickly moving to reopen the taps. https://www.newstalkzb.co.nz/news/business/david-clark-govt-will-move-quickly-on-credit-law-changes/
If I’m not available tomorrow, I reckon NZ Inc. COVID response is serious enough to treated like war. With a multi party bi partisan Parliamentary response. And if that makes sense with COVID why not with The Housing Catastrophe and Education and Health?
We could have an internationally unique form of Govt for major, wicked problems.