The RBNZ? The banks? Landlords? First home buyers? Councils? The RMA? Labour? National? Building materials makers? Builders? Real estate agents? Landbankers? Noone in particular. Just voters generally
1) John Key who gave his now infamous pre-election opposition speech in 2006 about how it was a supply issue and when National became Govt. they would fix it, yet when in power and having the perfect time to implement change at the trough of a recession DID NOTHING. And then the gall of it all he is on the AM show this morning saying supply is the answer.
2) Phil Twyford who knew what to do, then only put the plan half together and then miserably executed even that half.
I'll give Phil Twyford a nod for at least making an effort. One gets a Knighthood for doing nothing, the other gets demoted for a half-arse attempt. There is probably a lesson for all kids there.
And your solution. The $50,000 ha price you quote is Dairy farm rural land price, so you have doomed most of the higher density horticulture to going residential.
But what makes residential land higher than the best horticultural land? It's a lack of supply caused by restrictive zoning.
Protect the elite soils and environmentally sensitive land, etc., and remove all other restrictions for everything else, both up and out, to be a presumptive right to build. This would reduce the price of raw fringe development land (which sets the price for all land going in) to its next best economic cost, and then leave plenty of money left over for the true cost of infrastructure to be paid and be borne by the individual development.
That's what jurisdictions do that have truly affordable housing.
Thanks Dale. I think Key gets off too lightly in the historical blame game, while Twyford paid a heavy price for no clear way through the local govt-central govt standoff on infrastructure financing. cheers
Government and big banks have access to Orrs money printer, but the people should still be subject to higher taxes and rates. So, more socialism for the rich. Got it! Just say MMT is here and level the damn playing field already
Finding a solution is better than finding fault. Your 0.5% tax sounds okay but what about a levy on ALL ratepayers. After all they are the ones that have benefited from the foolish policies of the last 35 years. And while we are at it we could add another levy to all Insurance premiums to pay for St Johns ambulance. Of course for all MMTers none of this is necessary but that is how it could be done for all those non believers!
The evemts of 2008 and the collapse of the $8 billion Finance Companies hit the income-chasers hard. What do you think was going to happen when $200 billion of savers (retirees) got wiped out by the RBNZ and the Banks
Most of NZers were protected from the 2008 crash due to the financial management of Cullen (I would think Clark and Anderton also had axsay in this). It was fuelled by subprime mortgages and other risky lending/investing and the like, of which NZ had regulations to restrict. There were a few wealthy enough to be affected but mostly those prepared to take high risks. The biggest effect for most NZers were more newspaper articles to read encouraging fear of investing in productive industries.
Thanks Debbie. I have a different view of the GFC and NZ. We dodged a bullet because our banks are simple and didn't get involved in the crazy mortgage derivatives business in financial markets. I think that was more of an accident than good planning, although there are a few bankers who have claimed credit since for stopping dodgy deals in 2005-07. We were also lucky China and Australia barely had recessions, largely because China immediately pulled the infrastructure lever, which required a lot of iron ore and coal, and our Government didn't do the silly thing of slashing Government spending. We were also 'lucky' in 2011 and 2012 because of all the post-quake spending. cheers. Bernard
Agree re lucky re postquake spending, however, if we had a govt committed to rebuilding rather than enriching a few, the quakes really could have had a silver lining. Handing a corporation a monopoly on such a grand scale could never have a sound economic foundation.
This is the most sensible article I have seen in a while regarding our broken housing market.
Here are four other possible fixes:
1. Set am immigration tax for those coming
into the country so that cost of added need for infrastructure is paid for by those causing the need.
2. A surtax for all non productive (measured in employment terms) investments. If this tax was set at an amount that would disincentivise renting property and incentivise investing in the likes of building companies, it could be quite effective.
3. Confiscate any property sitting empty that is owned by non NZ citizens and add to public housing stock or auction off to raise funds for public housing stock.
4. Means test the superannuation benefit with exceptions for those investments where there is proven productivity measured in employment terms. This will increase supply of for sale houses almost overnight and make prices better reflect true value.
Thanks Debbie. Couple of issues with these ideas. It's often hard to know who is immigrating here and who isn't when they arrive. Some are students or temporary workers who will go again. Some are backpackers who eventually stay. The surtax idea would be very hard to administer and easy to game. Let's say, for example, I built an online business for managing property that was very innovative and productive, but was still in the real estate game. I'm not a fan of confiscation, and it's pretty illegal. Meanstesting Super would also be very messy and politically difficult. I'm much keener on a simple land tax. Low rate, impossible to avoid, fair and doesn't have the collateral damage effect that a Capital Gains Tax would have on real businesses. Cheers Bernard
A surtax for all non productive investments would capture all private houses . How do we decide what is an investment? Is your car , your watch, your furniture.
It would be quite easy to define non productive investment. Anything invested in that increases in value or generates an income, but is not used personally by the owner.
If you sold a cake that you baked for profit, you would likely sell it from a bakery or farmers market or some such thing therefore you would pay taxes. If it was something along the lines of a garage sale, the admin costs of taxing would outweigh any tax recoverable.
Blaming is pointless..Tax solves nothing. Scrap the RMA = it was intended as a development handbrake and over my entire adult life it has been a curse. .so it has to go. Govt needs to reform Works..and become large scale land buyer/ developer entity we need tens of thousands of acres throughout the country to develop sections and..even new towns...the sections should be sold to the public direct who then contract builders themselves....govt could further help by incentivizing build cost under say 300,000. We could build a massive kitset plant in bay of plenty.. to offer self build options..All to get the new build cost down and the market will not be able to go silly then. We need a limit on immigration..we had a surplus of 80k to June 20...it is madness to keep pumping people into nz jto grow our GDP while transferring the cost and pain to the working poor who are being displaced . The only other lever I think that can be pulled..is access to credit..we could turn it off to investors somewhat...although if we did the Govt would have to rethink immigration and social housing policies entirely..
The RMA was not intended as a development handbrake, but rather developed to address those who were treating the environment purely as a resource to be exploited. Without it, we likely would not have grown such a successful tourism industry. If the RMA impedes a development, it is possibly not good for the environment. Imagine if we lost all of our pristine waterfront vistas because of mankind needing to deface each and every one with houses.
Any govt land used where it could be sold on, probably needs to be checked regarding history or purchaser further down the line may find they are receiving stolen property.
I've been rethinking this Bernard...still I think it wrong to point fingers, but I have come to the conclusion that it is fundamentally a problem that is structural (as in it is something to do with our deregulated banking system, and the untethering of the Reserve Bank that allows credit to flow freely). Which leaves our Government looking rather impotent
Add to this the addiction our governments have had to high immigration to support GDP growth and the complete lack of will between them and local government to overcome the regulatory barriers that they created over the last 30 years to fence in development. The calls for higher LVR's are a joke given that the Reserve Bank has already moved and created 20% more equity for investors and existing home owners and CGT is a tax meant only for curbing unchecked speculation - it does nothing to dampen demand for houses anywhere where it has been applied. To me CGT is just about making the government the beneficiary of asset price inflation - and probably they will be addicted to that revenue stream in time.. so the reality is that the poor people who pay the CGT will the very first home buyers who have to stretch and borrow the funds from the bank to buy at inflated prices all because the government controls the levers and is happy to take the cash and use it to fund social programs. I think it is wrong that .we are planning to make everyday Kiwi first home buyers the cash cow. . Access to credit needs to be restricted - but carefully.. there are properties that are multi unit investment rentals - and these aught to be funded, so should new builds...perhaps the answer is to restrict credit to investors of what are essentially existing freestanding homes first home buyers are seeking? Yes it is playing favorites but I guess the present Government has already made that clear.
Bernard - the attached link to a 2013 Reserve Bank paper is I think still relevant and makes a most interesting observation - 'An additional net inflow that adds 1 percent to the population causes an 8 percent increase in house prices over the following three years.' Reasonably accurate comment I would have thought :-)
Based on the latest inflow of population into NZ the house price rises appear predictable. The following Reserve Bank report models house price rises associated with population increases. The reports modelling remains valid in my view. Not sure if you have seen this report Bernard. But essentially it predicts an 8% house price rise for every 1% of NZ population increase. So if we take the Salvation Army population inflow numbers for the year to June 2020 then we haven't finished with house price rises yet...... Cheers https://www.interest.co.nz/sites/default/files/RBNZ%20migration%20and%20housing.pdf
Final comment from me is that stats and percentages can hide the magnitude of change to NZ. If you accept that we are at 5 mil people (I think in reality we are likely more like 5.5 to 6 mil if you include people hidden in the immigration NZ visa varieties) and started from a population point in March 2013 of 4,242,048 people than we have increased the NZ population by over 108,000 people every year for the last 7 years.
To put that in proper perspective, NZ has added a city of new people the equivalent of a Lower Hutt every year for the past 7 years. It really is sobering.
I make it a minimum increase of 757,952 extra people since March 2013. That figure is conservative given we had hundreds of thousands hidden in the temporary work visas category used not just in agriculture but in the likes of the IT world as well.
It appears to be a 2.5% annual population growth. Little wonder NZ ran out of housing stock.
Lets give all those property investors a break. They didn't cause this massive increase in people living in NZ. If anything thank god we had private property investors to help house and mask the massive planning disaster that is NZs unplanned population explosion. This is a central government planning disaster that is unparalleled in NZs history that I can see and that now impacts the poorest communities disproportionately. The responsibility belongs nowhere but with the central government's belief that they can welcome the world to our shores in this extraordinary scale without the need for associated pre-planning. I don't recall any election rhetoric even mention the intention to unleash this scale of rapid population change.
In the 50's 60's and 70's certificates were not needed to do work on a house. The certificate requirements have reduced the available workforce, resulting in a shortage of houses.
If a rental is treated as any other accomodation business where people are hired regularly for servicing rooms etc and taxes are accounted for as a usual business, then it would easily be considered productive, but this is not often the case.
So whose fault is it? There are two culprits.
1) John Key who gave his now infamous pre-election opposition speech in 2006 about how it was a supply issue and when National became Govt. they would fix it, yet when in power and having the perfect time to implement change at the trough of a recession DID NOTHING. And then the gall of it all he is on the AM show this morning saying supply is the answer.
2) Phil Twyford who knew what to do, then only put the plan half together and then miserably executed even that half.
I'll give Phil Twyford a nod for at least making an effort. One gets a Knighthood for doing nothing, the other gets demoted for a half-arse attempt. There is probably a lesson for all kids there.
And your solution. The $50,000 ha price you quote is Dairy farm rural land price, so you have doomed most of the higher density horticulture to going residential.
But what makes residential land higher than the best horticultural land? It's a lack of supply caused by restrictive zoning.
Protect the elite soils and environmentally sensitive land, etc., and remove all other restrictions for everything else, both up and out, to be a presumptive right to build. This would reduce the price of raw fringe development land (which sets the price for all land going in) to its next best economic cost, and then leave plenty of money left over for the true cost of infrastructure to be paid and be borne by the individual development.
That's what jurisdictions do that have truly affordable housing.
Thanks Dale. I think Key gets off too lightly in the historical blame game, while Twyford paid a heavy price for no clear way through the local govt-central govt standoff on infrastructure financing. cheers
Government and big banks have access to Orrs money printer, but the people should still be subject to higher taxes and rates. So, more socialism for the rich. Got it! Just say MMT is here and level the damn playing field already
Cheers Tim. Can see your point.
Finding a solution is better than finding fault. Your 0.5% tax sounds okay but what about a levy on ALL ratepayers. After all they are the ones that have benefited from the foolish policies of the last 35 years. And while we are at it we could add another levy to all Insurance premiums to pay for St Johns ambulance. Of course for all MMTers none of this is necessary but that is how it could be done for all those non believers!
Thanks Patricia. That 0.5% tax would cover all ratepayers who own land. MMT an interesting set of not-very-new ideas who's time may have come.
The evemts of 2008 and the collapse of the $8 billion Finance Companies hit the income-chasers hard. What do you think was going to happen when $200 billion of savers (retirees) got wiped out by the RBNZ and the Banks
Most of NZers were protected from the 2008 crash due to the financial management of Cullen (I would think Clark and Anderton also had axsay in this). It was fuelled by subprime mortgages and other risky lending/investing and the like, of which NZ had regulations to restrict. There were a few wealthy enough to be affected but mostly those prepared to take high risks. The biggest effect for most NZers were more newspaper articles to read encouraging fear of investing in productive industries.
Thanks Debbie. I have a different view of the GFC and NZ. We dodged a bullet because our banks are simple and didn't get involved in the crazy mortgage derivatives business in financial markets. I think that was more of an accident than good planning, although there are a few bankers who have claimed credit since for stopping dodgy deals in 2005-07. We were also lucky China and Australia barely had recessions, largely because China immediately pulled the infrastructure lever, which required a lot of iron ore and coal, and our Government didn't do the silly thing of slashing Government spending. We were also 'lucky' in 2011 and 2012 because of all the post-quake spending. cheers. Bernard
Agree re lucky re postquake spending, however, if we had a govt committed to rebuilding rather than enriching a few, the quakes really could have had a silver lining. Handing a corporation a monopoly on such a grand scale could never have a sound economic foundation.
In 1999 housing was removed from the inflation figure. The reserve bank mechanism to slow inflation was to increase interest rates.
Artificially controlled Low interest rates are being used to stimulate demand without controlling housing inflation.
Everyone wants a new house. Put the rates up and watch the demand fall!
Can't recall that 1999 move. My understanding is the value of existing houses has never been in the CPI. Happy to be corrected. Cheers
http://infoshare.stats.govt.nz/browse_for_stats/economic_indicators/cpi_inflation/home-ownership-in-the-cpi.aspx#gsc.tab=0
This is the most sensible article I have seen in a while regarding our broken housing market.
Here are four other possible fixes:
1. Set am immigration tax for those coming
into the country so that cost of added need for infrastructure is paid for by those causing the need.
2. A surtax for all non productive (measured in employment terms) investments. If this tax was set at an amount that would disincentivise renting property and incentivise investing in the likes of building companies, it could be quite effective.
3. Confiscate any property sitting empty that is owned by non NZ citizens and add to public housing stock or auction off to raise funds for public housing stock.
4. Means test the superannuation benefit with exceptions for those investments where there is proven productivity measured in employment terms. This will increase supply of for sale houses almost overnight and make prices better reflect true value.
What are your thoughts on these?
Thanks Debbie. Couple of issues with these ideas. It's often hard to know who is immigrating here and who isn't when they arrive. Some are students or temporary workers who will go again. Some are backpackers who eventually stay. The surtax idea would be very hard to administer and easy to game. Let's say, for example, I built an online business for managing property that was very innovative and productive, but was still in the real estate game. I'm not a fan of confiscation, and it's pretty illegal. Meanstesting Super would also be very messy and politically difficult. I'm much keener on a simple land tax. Low rate, impossible to avoid, fair and doesn't have the collateral damage effect that a Capital Gains Tax would have on real businesses. Cheers Bernard
How do we deal with Maori land if we have a land tax?
A surtax for all non productive investments would capture all private houses . How do we decide what is an investment? Is your car , your watch, your furniture.
It would be quite easy to define non productive investment. Anything invested in that increases in value or generates an income, but is not used personally by the owner.
If I bake a cake and then sell it for profit ,it is not used by me (the owner)
Is this non productive?
If you sold a cake that you baked for profit, you would likely sell it from a bakery or farmers market or some such thing therefore you would pay taxes. If it was something along the lines of a garage sale, the admin costs of taxing would outweigh any tax recoverable.
Agreed---Is this non-productive?
You have not employed anyone else.
I find defining non-productive very difficult.
Landlords are frequently given as an example ,however
they provide accommodation as does a hotel or a motel.
Are they also non-productive?
Blaming is pointless..Tax solves nothing. Scrap the RMA = it was intended as a development handbrake and over my entire adult life it has been a curse. .so it has to go. Govt needs to reform Works..and become large scale land buyer/ developer entity we need tens of thousands of acres throughout the country to develop sections and..even new towns...the sections should be sold to the public direct who then contract builders themselves....govt could further help by incentivizing build cost under say 300,000. We could build a massive kitset plant in bay of plenty.. to offer self build options..All to get the new build cost down and the market will not be able to go silly then. We need a limit on immigration..we had a surplus of 80k to June 20...it is madness to keep pumping people into nz jto grow our GDP while transferring the cost and pain to the working poor who are being displaced . The only other lever I think that can be pulled..is access to credit..we could turn it off to investors somewhat...although if we did the Govt would have to rethink immigration and social housing policies entirely..
Solutions.... excellent
The RMA was not intended as a development handbrake, but rather developed to address those who were treating the environment purely as a resource to be exploited. Without it, we likely would not have grown such a successful tourism industry. If the RMA impedes a development, it is possibly not good for the environment. Imagine if we lost all of our pristine waterfront vistas because of mankind needing to deface each and every one with houses.
Any govt land used where it could be sold on, probably needs to be checked regarding history or purchaser further down the line may find they are receiving stolen property.
Totally agree on all other points.
I've been rethinking this Bernard...still I think it wrong to point fingers, but I have come to the conclusion that it is fundamentally a problem that is structural (as in it is something to do with our deregulated banking system, and the untethering of the Reserve Bank that allows credit to flow freely). Which leaves our Government looking rather impotent
Add to this the addiction our governments have had to high immigration to support GDP growth and the complete lack of will between them and local government to overcome the regulatory barriers that they created over the last 30 years to fence in development. The calls for higher LVR's are a joke given that the Reserve Bank has already moved and created 20% more equity for investors and existing home owners and CGT is a tax meant only for curbing unchecked speculation - it does nothing to dampen demand for houses anywhere where it has been applied. To me CGT is just about making the government the beneficiary of asset price inflation - and probably they will be addicted to that revenue stream in time.. so the reality is that the poor people who pay the CGT will the very first home buyers who have to stretch and borrow the funds from the bank to buy at inflated prices all because the government controls the levers and is happy to take the cash and use it to fund social programs. I think it is wrong that .we are planning to make everyday Kiwi first home buyers the cash cow. . Access to credit needs to be restricted - but carefully.. there are properties that are multi unit investment rentals - and these aught to be funded, so should new builds...perhaps the answer is to restrict credit to investors of what are essentially existing freestanding homes first home buyers are seeking? Yes it is playing favorites but I guess the present Government has already made that clear.
Bernard - the attached link to a 2013 Reserve Bank paper is I think still relevant and makes a most interesting observation - 'An additional net inflow that adds 1 percent to the population causes an 8 percent increase in house prices over the following three years.' Reasonably accurate comment I would have thought :-)
https://www.interest.co.nz/sites/default/files/RBNZ%20migration%20and%20housing.pdf
This should be compulsory reading :-)
https://www.salvationarmy.org.nz/sites/default/files/uploads/2020/Dec/2020_housing_bim_final.pdf
Based on the latest inflow of population into NZ the house price rises appear predictable. The following Reserve Bank report models house price rises associated with population increases. The reports modelling remains valid in my view. Not sure if you have seen this report Bernard. But essentially it predicts an 8% house price rise for every 1% of NZ population increase. So if we take the Salvation Army population inflow numbers for the year to June 2020 then we haven't finished with house price rises yet...... Cheers https://www.interest.co.nz/sites/default/files/RBNZ%20migration%20and%20housing.pdf
Final comment from me is that stats and percentages can hide the magnitude of change to NZ. If you accept that we are at 5 mil people (I think in reality we are likely more like 5.5 to 6 mil if you include people hidden in the immigration NZ visa varieties) and started from a population point in March 2013 of 4,242,048 people than we have increased the NZ population by over 108,000 people every year for the last 7 years.
To put that in proper perspective, NZ has added a city of new people the equivalent of a Lower Hutt every year for the past 7 years. It really is sobering.
I make it a minimum increase of 757,952 extra people since March 2013. That figure is conservative given we had hundreds of thousands hidden in the temporary work visas category used not just in agriculture but in the likes of the IT world as well.
It appears to be a 2.5% annual population growth. Little wonder NZ ran out of housing stock.
Lets give all those property investors a break. They didn't cause this massive increase in people living in NZ. If anything thank god we had private property investors to help house and mask the massive planning disaster that is NZs unplanned population explosion. This is a central government planning disaster that is unparalleled in NZs history that I can see and that now impacts the poorest communities disproportionately. The responsibility belongs nowhere but with the central government's belief that they can welcome the world to our shores in this extraordinary scale without the need for associated pre-planning. I don't recall any election rhetoric even mention the intention to unleash this scale of rapid population change.
In the 50's 60's and 70's certificates were not needed to do work on a house. The certificate requirements have reduced the available workforce, resulting in a shortage of houses.
If a rental is treated as any other accomodation business where people are hired regularly for servicing rooms etc and taxes are accounted for as a usual business, then it would easily be considered productive, but this is not often the case.