ASB, ANZ stop high LVR lending; Govt spends $1b on emergency housing; China eases Covid quarantine rules; Bank profits running at 2% of GDP; Watchdog sees Auckland rail loop cost of $5.53b
“NZ economy is a housing Market with a bit tacked on. “You have said it before many times and it is true Bernard. Can you hammer this a bit more please and release to all. Home owning voters are worried yet again by their property values falling and will even elect a fascist government if they think it is going to continue. Good luck.
If we stopped collecting houses would there be a supply issue?
If we can't sell CGT or wealth tax then what about stamp duty on 2nd and 3rd properties?
I can't believe the cost of rent in Porirua. Just saw it. I grew up there and I'm telling you, that should be the cheapest! Is it high because everyone bought rentals there with big mortgages?
I think I can see why the G7 are not capping the price of Russian oil. If it was decided to, say, set a cap of $80 per barrel to punish Putin, then what would the usual importers of Russian oil do? Pay Putin $80 or buy oil on the open market at, say, $120. They'll be buying as much Russian oil as they can.
Any cap would need to be quantity based, not price based. With that quantity limitation being a sinking lid: - if Russia was exporting x barrels per day and cut some of that amount (y) to punish someone then the new cap of Russian oil becomes x-y barrels, even after the 'punishment' is over.
Excellent summary. At some stage please set out your assumptions about 'population growth', particularly in metropolitan areas. It seems to me the recent HBA for the Wellington Regional might be worse than useless when it comes to addressing the issues you have emphasized including those in other comments on this post.
Jun 28, 2022·edited Jun 29, 2022Liked by Bernard Hickey
As much as homeowners have benefitted from our ridiculous economic situation, the major banks have far, far more. There's plenty of moaning about the supermarkets making "a million dollar profit each day". And yet, big shopping bills are an actual crisis largely because of the hundreds of household dollars each week that go into exploitative profits on mortgage interest (which then flows into rent and house price expectations), and other bank debt.
The latest bank profits mean the Australian banks (who, incidentially, employee 1/3rd the number of staff of the supermarkets, and have closed around 50% of their local branches in the past 30 years) are making $19.3m profit every day!
This is no accident. Their lending interest rates have consistently crept higher relative to the OCR in the past 30 years (the gap has roughly doubled since 2000). Our local fixed rates are also consistently around 1% higher here than they are in Australia (and a sub-3% floating rate is still very available there).
Because most NZers fix their mortgage rates, they only really notice them once every 2 years or so. This means we collectively have noticed these billions of dollars less than a 50-cent increase in the cost of butter. But surely it's time we started asking how banks are allowed to get away with taking in nearly a million dollars in profit *every hour*, when it's clear they are an integral factor in our so-called "cost-of-living" crisis.
Bernard, I'd be interested in your view if you are for or against immigration for NZ? It seems like NZ needs decent positive immigration inflows to achieve its potential. The restricted immigration of the last few years has pushed average wages up and likely domestic inflation too. But service levels are awful, (look at shortages at hospitals, schools, almost every industry). Infrastructure needs to match as well which we don't do well. Keen for your views?
Does anyone really think there is a problem with families and parents particularly being obliged to supporting then helping their kids get educated, housed and to flourish? It is the law after all. I don’t think they do given the unreliability and scarcity of Government standards and services in NZ. The issue is the Government isn’t a reliable partner when people don’t do this and never has been. Making human rights to home and care and services will help but can’t really be a replacement for parental and familial obligations in law. Not many men want to take responsibility is the problem and tries to offload all responsibility to women and Government. To not have housing to raise children and the financing necessary is when a country hits the bottom of the barrel in terms of standards and individual obligations in society and an easy fix too. Like most little boys the establishment will try to obfuscate and avoid responsibility, blameshift rather than getting on with enforcement, provision of services and facilities people are entitled to by virtue of paying tax, working and reproducing and that Government are paid to do. It’s pathetic to watch them fail to adapt and get things both new and done before, which they know work for QOL, going round and round in indecisive circles. Waiting for permission? It’s their job to lead. We all appear to be trapped by these irresponsible irrational, monstrous institutions protecting a failed and inequitable system. All short term and silo thinking. The solutions are all there but there is no courage. Just hot air and big splashes. The narratives put forward remain absurd and self serving to those in power to continue to exploit everything and fail in duties they have to the well-being of their part of and in society. Private extractive Banks (money is a social construct) cannot be allowed to dominate our private lives using our Government to do it and putting barriers to our human and legal rights including those of our children and their future. They are all paid by us. Of course some will use their wealth to help their kids if forced to due to a failure in governance and law. This failure has been evident for decades and enabling it simply encourages more of this bad behaviour and violence both literal and figurative. Rampant misogyny and male violence both individually and institutionally is the problem. Women and children are second or third class citizens whilst performing most of the critical labour mostly low or unpaid …and covering multiple roles It’s always annoyed me! 😀 It needs to stop. But no one even wants to acknowledge it let alone pay for the inequities and that’s the bottom line. Men are terrified of losing their privilege and may lose their Mummies./slaves. Not sexy. Not grown up and that’s who is in charge or the women they choose who have so much internalised misogyny they hate other women and themselves and won’t challenge the orthodoxy or demand women’s rights including their and their children’s rights to support and privacy. Without control or a loss of human and legal rights. The law is settled and long-standing. Just get on with the job. People need homes to live in end of and they shouldn’t be taxed on a human right. That’s more massive Government overreach into people’s lives. (Fascism).
I'm very puzzled about what the endgame might be. My two grown capable responsible sons and one grown capable responsible granddaughter, none of whom had available money from parents here, have all set themselves up overseas with jobs that pay well enough to buy a house and make a family. One is in Australia, one in Canada and one in the US. Why are we bringing up children who need to make their lives elsewhere. I guess there is some logic here somewhere but I can't see what it is. Help.
Hi Bernard, re: $1B on emergency housing. You are on to something here. For $1B you can build brand new 5000 units on land you already own@ 200K each. There are 8000 in emergency housing according to the link. Perhaps this was a way to bailout the hotels during covid times?
regarding "home-owning median voters who make more income tax-free from their homes than their jobs" - not so much. It's a good sound bite, but unless you're flipping or a serial mover, you make nothing from owning your own home. So you're talking about "on paper" which isn't income, and you know better. homeowner here, who would be happy to pay CGT.
When you mention the house price drops around the country, is this evenly occurring across all housing or are particular types more affected such as the big family homes vs small appartments. Surely different buyer groups are affected differently by tightening credit conditions? I might be on my own here, but when I hear ‘Auckland City’ I think of this meaning Auckland but it’s actually only referring to the small central area of Auckland, largely the CBD and surrounding suburbs, which has a high proportion of appartments being built compared to other areas. Could we be seeing along side everything else going on, an artificial lowering of the price in Auckland City e.g. if a lot of 1-2 bedroom appartments are sold vs expensive 3-4 bedroom homes, with the remuerites and ponsonbytes (they probably don’t refer to themselves this way) staying put, that will drop the average house price in the area much faster?
Great Dawn Chorus, Bernard. I would just like to mention that although Labour and National are addicted to the easy votes that come from propping up house prices for home owners (and may the devil take the hindmost!), there is one party that now has a policy of introducing a land tax. Such a tax would disincentivise land banking and house hoarding and encourage the productive use of land. And the result would be more affordable houses that are within the reach for first home buyers. As you well know.
Going offshore to get ahead, as one previous poster noted.
I'm in that bucket now. Ten years away, between UK and Dubai. Mid 30s, in a secure financial position, with more than one home, no parental help, while my nearest and dearest friends in NZ, mostly in their mid to late 30s, run on a hamster wheel of mortgage payments, taking one overseas holiday every 18 months if they're lucky and getting paid half what many of us offshore are being paid.
This isn't a brag and nor is it just about money. Nor is it about a disdain for the current Govt.
I am a Labour/National/TOP voter in the past... Labour last time round, I think. Unsure about next year.
Quality of life, particularly the provision of public and essential services, has us worried about any near-term return to New Zealand. Yes, the OECD and other research places us high on scales of quality and happiness. But when you're based offshore, as many in this thread will have been, it's much harder to see that reality.
What some may label trivial things, like Christchurch Stadium, are an example of New Zealand's inability to make decisions, look beyond an election cycle and/or think outside the box. Let's hope Rob Campbell's appointment to look into the health system brings some recommendations that we might act on in the near future in that sector.
Coming back to housing, what's sad in these challenges NZ faces is that highly educated, degree and trade-qualified young New Zealanders, particularly those in their 20s now or younger, have a single critical factor dictating whether they will or will not own a home in their lifetime - whether they can get parental help for a deposit.
And if that deposit isn't available, as it won't be for many, particularly Maori and Pasifika whose parents haven't got the equity to shift over to their brood, where does that leave us? Deeper in the cycle of division or waving more Kiwis goodbye at Auckland Airport for a OE or likely a longer stint overseas to get ahead. We cross our fingers they bring those skills home.
I own homes in NZ as it's an easy road to capital gain. On the side, I invest in other things.
BUT, I wholeheartedly support the continued tapering off of house price growth and would support a sensible discussion on further capital gains taxes or other measures to steer Kiwis' into productive investments and out of property. Make it hard for me to justify sinking money into homes and doing very little with them.
This was a very depressing read. If National or Labour are unwilling to tackle the problem by a capital gains tax or whatever it takes, It would appear we are be locked into this scenario for ever. Is there another political movement on the horizon that have some answers and would they ever get elected in a way to create some change. I do not want to live in a country with an underclass locked in poverty with all the poor outcomes you describe in todays dawn chorus.
“NZ economy is a housing Market with a bit tacked on. “You have said it before many times and it is true Bernard. Can you hammer this a bit more please and release to all. Home owning voters are worried yet again by their property values falling and will even elect a fascist government if they think it is going to continue. Good luck.
Patrick Medlicott
If we stopped collecting houses would there be a supply issue?
If we can't sell CGT or wealth tax then what about stamp duty on 2nd and 3rd properties?
I can't believe the cost of rent in Porirua. Just saw it. I grew up there and I'm telling you, that should be the cheapest! Is it high because everyone bought rentals there with big mortgages?
I think I can see why the G7 are not capping the price of Russian oil. If it was decided to, say, set a cap of $80 per barrel to punish Putin, then what would the usual importers of Russian oil do? Pay Putin $80 or buy oil on the open market at, say, $120. They'll be buying as much Russian oil as they can.
Any cap would need to be quantity based, not price based. With that quantity limitation being a sinking lid: - if Russia was exporting x barrels per day and cut some of that amount (y) to punish someone then the new cap of Russian oil becomes x-y barrels, even after the 'punishment' is over.
Excellent summary. At some stage please set out your assumptions about 'population growth', particularly in metropolitan areas. It seems to me the recent HBA for the Wellington Regional might be worse than useless when it comes to addressing the issues you have emphasized including those in other comments on this post.
As much as homeowners have benefitted from our ridiculous economic situation, the major banks have far, far more. There's plenty of moaning about the supermarkets making "a million dollar profit each day". And yet, big shopping bills are an actual crisis largely because of the hundreds of household dollars each week that go into exploitative profits on mortgage interest (which then flows into rent and house price expectations), and other bank debt.
The latest bank profits mean the Australian banks (who, incidentially, employee 1/3rd the number of staff of the supermarkets, and have closed around 50% of their local branches in the past 30 years) are making $19.3m profit every day!
This is no accident. Their lending interest rates have consistently crept higher relative to the OCR in the past 30 years (the gap has roughly doubled since 2000). Our local fixed rates are also consistently around 1% higher here than they are in Australia (and a sub-3% floating rate is still very available there).
Because most NZers fix their mortgage rates, they only really notice them once every 2 years or so. This means we collectively have noticed these billions of dollars less than a 50-cent increase in the cost of butter. But surely it's time we started asking how banks are allowed to get away with taking in nearly a million dollars in profit *every hour*, when it's clear they are an integral factor in our so-called "cost-of-living" crisis.
Edit: bungled the decimal place (fixed above)
Bernard, I'd be interested in your view if you are for or against immigration for NZ? It seems like NZ needs decent positive immigration inflows to achieve its potential. The restricted immigration of the last few years has pushed average wages up and likely domestic inflation too. But service levels are awful, (look at shortages at hospitals, schools, almost every industry). Infrastructure needs to match as well which we don't do well. Keen for your views?
Re LGWM. What are the financing options being proposed? Land tax, value capture or another PPP?
Does anyone really think there is a problem with families and parents particularly being obliged to supporting then helping their kids get educated, housed and to flourish? It is the law after all. I don’t think they do given the unreliability and scarcity of Government standards and services in NZ. The issue is the Government isn’t a reliable partner when people don’t do this and never has been. Making human rights to home and care and services will help but can’t really be a replacement for parental and familial obligations in law. Not many men want to take responsibility is the problem and tries to offload all responsibility to women and Government. To not have housing to raise children and the financing necessary is when a country hits the bottom of the barrel in terms of standards and individual obligations in society and an easy fix too. Like most little boys the establishment will try to obfuscate and avoid responsibility, blameshift rather than getting on with enforcement, provision of services and facilities people are entitled to by virtue of paying tax, working and reproducing and that Government are paid to do. It’s pathetic to watch them fail to adapt and get things both new and done before, which they know work for QOL, going round and round in indecisive circles. Waiting for permission? It’s their job to lead. We all appear to be trapped by these irresponsible irrational, monstrous institutions protecting a failed and inequitable system. All short term and silo thinking. The solutions are all there but there is no courage. Just hot air and big splashes. The narratives put forward remain absurd and self serving to those in power to continue to exploit everything and fail in duties they have to the well-being of their part of and in society. Private extractive Banks (money is a social construct) cannot be allowed to dominate our private lives using our Government to do it and putting barriers to our human and legal rights including those of our children and their future. They are all paid by us. Of course some will use their wealth to help their kids if forced to due to a failure in governance and law. This failure has been evident for decades and enabling it simply encourages more of this bad behaviour and violence both literal and figurative. Rampant misogyny and male violence both individually and institutionally is the problem. Women and children are second or third class citizens whilst performing most of the critical labour mostly low or unpaid …and covering multiple roles It’s always annoyed me! 😀 It needs to stop. But no one even wants to acknowledge it let alone pay for the inequities and that’s the bottom line. Men are terrified of losing their privilege and may lose their Mummies./slaves. Not sexy. Not grown up and that’s who is in charge or the women they choose who have so much internalised misogyny they hate other women and themselves and won’t challenge the orthodoxy or demand women’s rights including their and their children’s rights to support and privacy. Without control or a loss of human and legal rights. The law is settled and long-standing. Just get on with the job. People need homes to live in end of and they shouldn’t be taxed on a human right. That’s more massive Government overreach into people’s lives. (Fascism).
Admits to having outsourced the dog pedicure duties, 40Kg of non cooperative apex predator requires a professional or someone is going to lose a limb
I'm very puzzled about what the endgame might be. My two grown capable responsible sons and one grown capable responsible granddaughter, none of whom had available money from parents here, have all set themselves up overseas with jobs that pay well enough to buy a house and make a family. One is in Australia, one in Canada and one in the US. Why are we bringing up children who need to make their lives elsewhere. I guess there is some logic here somewhere but I can't see what it is. Help.
Hi Bernard, re: $1B on emergency housing. You are on to something here. For $1B you can build brand new 5000 units on land you already own@ 200K each. There are 8000 in emergency housing according to the link. Perhaps this was a way to bailout the hotels during covid times?
regarding "home-owning median voters who make more income tax-free from their homes than their jobs" - not so much. It's a good sound bite, but unless you're flipping or a serial mover, you make nothing from owning your own home. So you're talking about "on paper" which isn't income, and you know better. homeowner here, who would be happy to pay CGT.
When you mention the house price drops around the country, is this evenly occurring across all housing or are particular types more affected such as the big family homes vs small appartments. Surely different buyer groups are affected differently by tightening credit conditions? I might be on my own here, but when I hear ‘Auckland City’ I think of this meaning Auckland but it’s actually only referring to the small central area of Auckland, largely the CBD and surrounding suburbs, which has a high proportion of appartments being built compared to other areas. Could we be seeing along side everything else going on, an artificial lowering of the price in Auckland City e.g. if a lot of 1-2 bedroom appartments are sold vs expensive 3-4 bedroom homes, with the remuerites and ponsonbytes (they probably don’t refer to themselves this way) staying put, that will drop the average house price in the area much faster?
Great Dawn Chorus, Bernard. I would just like to mention that although Labour and National are addicted to the easy votes that come from propping up house prices for home owners (and may the devil take the hindmost!), there is one party that now has a policy of introducing a land tax. Such a tax would disincentivise land banking and house hoarding and encourage the productive use of land. And the result would be more affordable houses that are within the reach for first home buyers. As you well know.
The party is TOP, the Opportunities Party.
Going offshore to get ahead, as one previous poster noted.
I'm in that bucket now. Ten years away, between UK and Dubai. Mid 30s, in a secure financial position, with more than one home, no parental help, while my nearest and dearest friends in NZ, mostly in their mid to late 30s, run on a hamster wheel of mortgage payments, taking one overseas holiday every 18 months if they're lucky and getting paid half what many of us offshore are being paid.
This isn't a brag and nor is it just about money. Nor is it about a disdain for the current Govt.
I am a Labour/National/TOP voter in the past... Labour last time round, I think. Unsure about next year.
Quality of life, particularly the provision of public and essential services, has us worried about any near-term return to New Zealand. Yes, the OECD and other research places us high on scales of quality and happiness. But when you're based offshore, as many in this thread will have been, it's much harder to see that reality.
What some may label trivial things, like Christchurch Stadium, are an example of New Zealand's inability to make decisions, look beyond an election cycle and/or think outside the box. Let's hope Rob Campbell's appointment to look into the health system brings some recommendations that we might act on in the near future in that sector.
Coming back to housing, what's sad in these challenges NZ faces is that highly educated, degree and trade-qualified young New Zealanders, particularly those in their 20s now or younger, have a single critical factor dictating whether they will or will not own a home in their lifetime - whether they can get parental help for a deposit.
And if that deposit isn't available, as it won't be for many, particularly Maori and Pasifika whose parents haven't got the equity to shift over to their brood, where does that leave us? Deeper in the cycle of division or waving more Kiwis goodbye at Auckland Airport for a OE or likely a longer stint overseas to get ahead. We cross our fingers they bring those skills home.
I own homes in NZ as it's an easy road to capital gain. On the side, I invest in other things.
BUT, I wholeheartedly support the continued tapering off of house price growth and would support a sensible discussion on further capital gains taxes or other measures to steer Kiwis' into productive investments and out of property. Make it hard for me to justify sinking money into homes and doing very little with them.
This was a very depressing read. If National or Labour are unwilling to tackle the problem by a capital gains tax or whatever it takes, It would appear we are be locked into this scenario for ever. Is there another political movement on the horizon that have some answers and would they ever get elected in a way to create some change. I do not want to live in a country with an underclass locked in poverty with all the poor outcomes you describe in todays dawn chorus.