Housing train wreck decades in the making

Gareth MorganEconomics43 Comments

For many years now some of us have been banging on about the fundamental policy bias that has led to an over-investment in property. Still on the political front nothing material has been done to deal to this cancer because of fear by politicians of the personal political cost to them.

While there is a generation of new economists and financial sector commentators banging the drum on the housing market disequilibrium, the messages are very similar to ones I and others started sending back in the 1980’s – when the ratio of the median house price to median income first started lifting beyond the 2 to 3 times range (note that 3 times is the international benchmark for “affordable”). Now they are up around 6 nationwide, and over 9 in Auckland. With National and Labour both denying house prices need to come down, that means even if we keep house prices constant we face decades of unaffordable housing while incomes catch up with house prices.

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The problem in this market is demand not supply – although of course if demand keeps growing then slow supply growth will exacerbate the problem as will boosts in supply alleviate it – for a while. But fundamentally what has and continues to happen, is that demand grows to levels totally unrelated to the demand for accommodation. Unlike successful economies like Germany that have prevented this type of entrenched disequilibrium from distorting investment patterns in its economy, New Zealand’s property market is absolutely a slow train wreck. And I mean slow – we’re talking decades, not just the latest cyclical extremes.

To recap there have been two persistent policy settings that have generated to artificial elevation of demand. They are:

  • The Reserve Bank instructs the commercial banks to treat property as a lower risk form of lending than all other types. So naturally those banks do not need the same amount of capital to grow their mortgage lending as they do any other form of lending. This practice originates in what has been convention from the Bank of International Settlements (BIS) standards. Anyone versed in economics knows that if you create a market distortion like this, which amounts to manufacturing a profit opportunity, then the market will respond. In fact the market will respond until the day that it ensures the contrivance no longer holds. That is until the day when the last cargo cult investor wakes up to the reality that no asset class is necessarily less risk prone than others, that there is no “natural” law that says its so. Every asset class has limits that turn it from moderate to extreme risk – markets continually are searching out those limits. The Reserve Bank appears to be waking up to this problem with the restrictions it is now putting in place (loan to value ratios and possibly debt to income also) but it is too little, too late.
  • The second policy-induced distortion to the property market is the lack of tax on the full return that property owners enjoy. Yes they are taxed if they rent their property out. But they are not taxed on the benefit they get from enjoying the use of the property themselves – and that is a massive benefit that becomes even more massive if part of it manifests in long-term (also tax free) capital gain. The Government Statistician recognises (as all Government Statisticians do) that the benefit you enjoy from owning your own property is income – as much as income you enjoy from earning interest on a bank account is income. The latter is taxed, the former is not. Which is why some of us have been pushing for the imputed rent on owner occupied assets to be taxed – each and every year.

Now some countries try to deal to the second issue by having wealth, stamp duty, property or capital gains taxes. None of these are done well actually but some have been more or less effective. New Zealand is noticeable in having none of these. In combination, the two policy-induced distortions to the property market are totally toxic and are what’s driving decade after decade rise in the ratio of house prices to income.

I have argued with too many Reserve Bank Governors and Finance Ministers on these issues than I care to remember, but the answer from the incumbents is always the same. The Governors say they’re doing no less than what other RB Governors do as per BIS so they don’t take responsibility – and of course the Finance Ministers all say they have their political careers to think of. I know of no other country that boasts the combined policy negligence in this area to the extent New Zealand can.

So it’s nobody’s fault apparently. The intergenerational damage and the unnecessary exacerbation of inequality not to mention the lost opportunity from misallocating investment to generation of income as opposed to generation of redistribution is just inexcusable.

A plague on both their houses.

Housing train wreck decades in the making was last modified: August 17th, 2016 by Gareth Morgan
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Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.

43 Comments on “Housing train wreck decades in the making”

    1. A country with a depopulated countryside, a laughable density of inhabitants per km2, a running social change problem because of the disproportionate birth rates between its different ethnic and social groups, an internal market that because of its small population is too small to support any kind of heavy industry by internal demand, …problems that all of them can only be addressed by immigration, and by immigration alone…a country with ample energy, water and ground to farm and built for easy 4 times the population it has now…. can a country like this really have excessive immigration? Wondering.

      1. We had an internal market in the 1960’s when NZ was the 3rd wealthiest county per capita in the world. Our politicians have with great neglect led us to I think 26th place 🙂

        Mostly by grabbing though as many taxes as possible as much money from folk as they can. It killed the internal economy not totally. But nearly.

        Equal pay hurt to. They siphoned off from males so much that a male and female now cannot afford to bring up a family. A single person male or female needs others, they cannot afford to live on their own.

        So as a country we had less to spend. Three guesses as to how the economy responded?

        For an insight have a look at ex NZ companies like NZ Steel. NZ refinery, pretty sure it isn’t ours now. Even the government press. NZ rail although we bought it back it had been well stripped of assets.

        Cheers

        1. It’s called neoliberalism Bob. or filter up economics. Sell public assets (some neo’s are even trying to hock off US public parks, watch this space here for the future, Mt Cook, Aoraki corporate park inc, subsidiary of China steel) strip the remainder of funding and then say corps would do a better job, while offering them lower and lower tax rates.

          1. The problem I have with most sales. Is no one seems to realize if someone wants to buy then it has just as much value to be kept.

            The other problem I have. If a flag is worth a referendum surely other items are worth a referendum too.

      2. Who depopulated our countryside? A low population density(of humans I presume, because if cows are accounted for, we already produce 100million people worth of s…) for heavy industry? Do we need heavy industry? Perhaps you can go live down wind of a Chinese coal power plant, where you can enjoy the benefits of heavy industry! I’m curious about exponential growthists like you? Why would you stop the population at 20 million? Why not go for 100million or 500 million?

        1. Sorry for having shortened my argument to “heavy industry”. What I meant is a decent secondary production sector. The issue with population is an absolute number of people. 4.6 Mio. is just not enough to generate enough domestic consumption to make it worthwhile to manufacture certain goods inland. The Netherlands (about 20 Million), Australia (25 Million, if I am right) are above the line for a self sustainable population. NZ is not. NZ has the living standard and technical equipment of a first world nation, without being one in own domestic market or integration in a larger one (as Switzerland for example). It has MUCH less industrial output than Singapore with a similar population, but better integration in their much larger regional markets. So, why are very simple things like white ware for your bathroom a multiple of the price than they are in Europe? Because everything has to be imported a long way. My argument is nowhere for economical growths, it is for sustaining the standard of living NZ currently has. This is only sustainable at the moment by having tourism as the largest economy (which precariously hangs on the cost of air travel and Asian, us and European consumers having the money and time to travel) and diary, fish and timber. Not too bad, but if you want to pay for all these technical gadgets, a little problematic mid term. To retain a 1st world standard of living with an economical Basis in the agricultural sector mostly, requires some tuning. Getting Population to form a domestic market that makes inland manufacturing a reasonable option is one long term goal. Going up to 10 Million Inhabitants in 30 Years would make NZ more stable in any thinkable way. I personally can weep, if I drive through the wast depopulated NZ countryside. Contrast that with Bali for example, same steep hills, same abundance of water, reasonalbe soil, NZ needs people who like do revive the farming, quite obviously. It obviously does not need more people who want to open another Chinese or Indian take away. But NZ has the power to choose, whom they want. That is what I am arguing for.

          1. Someday you may be thankful the neoliberals that run NZ were unable to cram as many people as they’d like into NZ. The effects of climate change, energy decent, peak global debt and a decline in the availability of essential resources mean NZ is better placed to maintain some the best of it’s quality of life for some time yet. Of course we will be a destination for refugees, but that’s not the same as deliberately compounding the problems a large population cause, for an abstract economic theory!

          2. NZ in the 60’s was 3rd place holder in the wealth per head of population. 2.5-ish million people.

            Last year I think it was 27th with 4.5-ish million folk.

            The big difference is in disposable income. It’s shrunk. So you need more folk earning stuff all to make up for less folk earning enough plus a bit.

          3. You got it Bob. A finite resource divided between more and more people = a declining share! Eventually you end up sifting trash in a Manila slum, unless you belong to the privileged few that is!
            Remember when we had parity with the $US? Now countries compete with each other as to who can trash their currency fastest! So much for working hard and saving. Those virtues are a historical oddity now. Now we are told when we spend our hard earned money on a hard asset, before it becomes the pacific peso, we must also pay tax on the enjoyment we receive from not being in perpetual serfdom. Seems exorbitant rates are already enough of a land tax to me!

          4. The stupidity of it though is by making the west poor. It keeps the east poor. All but a few end up with less.

            All those businesses that went rushing off to cheap wage countries. Took the wealth generation of their home country with them. Now the customer base they were relying on to buy the product is on the dole or the other countries equivalent.
            With less money than they need just to survive. Let alone buy a new Fisher and Paykel short life fridge or washing machine. With its 5 year warranty. To replace the old one that folks got 30 years plus out of.

            Yet for most of it’s history Fisher and Paykel did very well in NZ. As there was enough spare money around to keep the business ticking over. Now most if not all is foreign owned. And they have a crap product compared to earlier products.

            F&P are the ones who came to mind. Not trying to pick on them for more than an example.

            Wash and repeat for all the other companies that have left home shores for cheaper wage climes. All they have done is guarantee they will fail i the end.

            But with it we all fail. Rich and poor. Just the poorer you are the closer to it you are. But given enough time the rich will run out of rich and get there to.

            Cheers.

      3. If you want NZ to look like every-other country ,If you want NZ to be a clone , If you want NZ to be a paradise lost .

  1. Having worked in some former Soviet and Yugoslav countries, I have to say that real state housing seemed to work. Even in Qatar, housing (at least for public service workers) was allocated (to a major extent). It seems to work (they are fairly derelict since the collapse of the Soviet empire on the outside but people still treasure their apartments, albeit with strong steel doors). Anyway, the point is until a major change in our thinking occurs, we’re going to equate housing with status and this is going to be ballooned by debt. Make housing free, dispense with mortgage debt. If that’s too radical, then stop the banks from creating money, M3 has grown exponentially and it’s become heroin to everybody. Property ownership, when it collapses is a path to war/revolution, I can’t really think of another release valve. Can you?

    1. Hi Bernard,
      Only the government should have the ability to create money. Based on the value of the country. Banks if need be should borrow from the government. Banks being able to create money from what depositors have put into them in my books is wrong. If they stuff up the depositors lose out.

      Cheers.

  2. …”nothing material has been done to deal to this cancer because of fear by politicians of the personal political [and financial] cost[s] to them.”…

  3. “the benefit you enjoy from owning your own property is income – as much as income you enjoy from earning interest on a bank account is income.” Taxing my enjoyment of life? Hmm, I guess that means economists would live tax free, being such miserable …….. Perhaps that’s what’s being argued here?

    1. Sorry clicked the wrong bit to reply hit your vote down :-(.

      Most folk don’t go out with a wad of cash to buy their home. They pay it off over many years. A better form of paying rent until; you have paid it off and the bank no longer owns it, the folk do. This bit seems to be missing in the whole discussion.

      Yep some folk do pay cash. But none of the folk I know 🙂

      Buying a house is a gamble. Admittedly not a big one. They don’t lose value most of the time. But They can.

      With a bank account the interest is paid each month. It’s yours. Not many if’s or bur’s. Yours. Earned. You pay tax on your earnings.

      Shares you pay tax on earnings. When it’s earned. Not on the value of the shares. As that is a gamble. I’d say earnings on shares is also a gamble. Because you do run the risk of getting nothing. In some cases you end up having to put more money in to keep the business afloat or lose your dough.

      Like lotto and other gambles you are not taxed on winnings. Just on what the winnings earns after you win it.

      Housing no matter if you own it or rent it. Should be tax deductible at least in part as a work expense. So should food and clothing. You need a place to recover after work. You need food to fuel you for doing work. Not many of us go to work naked. 🙂

  4. Gareth – you might want to compare your graph above with the cost of energy trends. Basically once Oil extraction started getting more expensive, debt levels started climbing. The graph clearly shows the mid 70s oil crisis , a gentle slope till the early 2000s when ERORI started to deteriorate. Oil is the economy, and debt has been used to keep it going. This points to where we inevitably headed, failure to continue debt growth means no Oil and no economy.

  5. Sorry Gareth. If you sell your house fifty years after you bought it your going to pay the same amount to get the same house back. Sure the dollar amount may be considerably different from the purchase price. But the old purchase price is irrelevant.
    The reality in an apples for apples case, there will be no gain.
    Sure you can go to a different suburb where one may be cheaper. But that isn’t apples with apples.

    Secondly home owners pay rates. So again in reality they never own their home. Are rates tax deductible? Renovations and repairs are they tax deductible?

    We have 1.7 million folk now born overseas. Is it really a wonder we are short on housing?

    Figures came out this week in the last year we had 70,000 come into the country. Some may notice that since housing became a hot potato the numbers of immigrants has risen from 45,000 a year through 60,000 to this latest figure. What I think is happening, is the government see’s immigration coming to a head and they are trying to get as m,any here as quickly as possible.

    And once more I’ll repeat. The government is the only body with the keys to our door. Even though this week a politician inferred they didn’t. They get voted in to run the country. They refuse to ask us what we want. So our democracy is dictated to us. They carry the can. And the buck stops at John Key the PM.

    As long as government brings in immigrants house price will rise. 14,000 houses in a record year. 9,500 houses built last year. 60,000 plus immigrants two years ago plus 70,000 immigrant in the last year, to live in them.

    The longer the government can fob us off the more folk we will get here.

    Personally I’d like to see those in government charged with sending these folk home out of their own pockets. Plus compensation for getting them resettled. It’ll never happen I suppose. But it should. For the amount of folk brought into the country Kiwi should have had the right of refusal before the governments took it into their own hands to dictate it happening without consent.

    Cheers. Have a good weekend all.

    1. true, that a hypothetical income generated by inflation should not be taxed. But the same is true for any sales of goods that you stock some time, or machines. Taxation should not be on Sale price contrasted to book value, but on Sale price contrasted with the cost of getting the thing back at the same time. What works for the usual trade, never worked for the sale of investment goods. Most tax systems get that wrong. But the idea, that if an economy is not capable of providing some 10.000 houses to willing buyers, to solve the problem by deporting the buyers is plain fascist thought. Sorry, but this has to be said. And it is economically unreasonable. If Buyers come, hell, lets sell them something. This is, what this country lives off, after all. Or should we start deporting Tourists, if the Hotels are overfilled in the peak season? In a free country with an equitable market if demand builds up (and it does so slowly and foreseeable in NZ) than the question is, why the providers of the goods, do not provide more, when there is certainly no shortage of space to build on. The answer is certainly multi fold and partly in Gareth’ argument (the rich in NZ simply do not need to sell their sections, they rather speculate, because the cost of keeping land is negligible) partly bureaucratic (the process and cost of splitting a section or getting a building consent in NZ is worth than in Germany… and that is bad enough there…). …. I remember when in communist east Germany, the eastern Germans wanted the poles deported, because they bought their consumer goods, leading to no bread or bananas left for the Germans. Don’t fall into that pit. If Customers come, get more goods to sell them, the outcome is more profit for all in an open society.

      1. Hi Tilman, no one told you I suppose. But there is so much money out there that if you opened the doors completely we as kiwi would not own a thing not even our rich. they just aren’t rich enough. China for one has 3 trillion in United States Dollars. You have any idea what would be left of NZ after they spent some of that here? It’s bad enough that in the cases they push the price up so much they are guaranteed the only ones in the race. And China will need food lots of food. So letting them in and allowing them to setup companies here is one way to ensure we become serfs in our own country with the backing of our politicians to China doing it. Not to mention once the foothold is strong enough China will only deal with Chinese companies. Many of the Chinese/Kiwi partnerships in NZ only have the Chinese left in them now.

        Every tourist coming into the country brings foot and mouth one step closer. What was the name of the kiwifruit lurgy that came from China? The growers are just starting to recover. So at what cost Tourism?

        You noticed how many Brisco sales are on and how frequent? Noticed Noel Leemings selling goods that you don’t have to start paying for until next?? With Noel Leemings I call it forward selling. They are actually selling good today they hope they will get paid for starting in three month or so. So after that time rolls around they are forward selling again. There is only one reason for this. Folk are not spending money today. Because they don’t have it. It is not the sign of a healthy economy. It is the sign of a sick one.

        While I may appear to be anti immigrant. It is mainly because I am pro Kiwi. And we are a dying race. Literally. But before we die out we will be a minority in our country of birth.

        I have lived happily with immigrants all my life. But 1.7 million is not the number I wish to see. That is over 50% of the Kiwi population. Since 1974-ish 42-ish years. In another 30-ish roughly we will be the minority. I’ll be dead :-). But Kiwi are so unique it will be a shame to see us gone. And the last of the number 8 wire will breath a sigh of relief.

        PS sold some Aus currency when is the transaction completed? When I buy it back? Or at the point of selling? In trading it is generally seen as when the cycle is completed. But if you are forced to take a loss. You don’t get tax refunds. 🙂

        Have a good one.

        Cheers.

        1. Dear Bob,

          a consumer retail that operates on credit is unhealthy, the same in the US, in Europe or here, but that has hardly anything to do with Immigration, does it? By no means I would applaud if the NZ Government would open the door to say 400.000 Immigrants a year, THAT would be a problem for integration. But -especially compared to the European problem and given that I have gone through a pretty tough immigration process here- I feel the NZ Government does a pretty good job in deciding whom they let in, and whom not. You only get to be an immigrant if you have solid family bonds in NZ, or if you have a capability that is needed or if you bring enough money and a biz idea, that is needed. Hell, this is how you do it. NZImmigration sees for it, that for the most part only healthy, wealthy, capable and english speaking Immigrants are accepted. And, given that there are still more that would qualify than desired, they still cap it and you are have to be up on the points system as an immigrant to make it. This all is so much better than what I have seen, it makes me want to weep at the low state of national self esteem where I come from. So, I see the same thing as you in this respect, but from another angle. I totally disagree with your feeling that there is such a thing as a Kiwiism, that has to be protected by forcing imigration even lower down, than it is today (compared to how many people would want to live here). NZ has ALLWAYS been a country of immigration. Most of the time, the Immigrants outnumbered the People whose Great Grandfathers lived here already. That is part of the vibe. Your own life experience might vary a little, depending on your year of birth, but that is arbitrary. The Maoris immigrated (and I guess the first wave was not too happy about the newcomers). Than the Pakeha invaded. Guess you are not a Maori, other than that your argument would sound pretty funny, imagine a Maori would use exactly your reasoning…. make the government to repatriate all but a “healthy” amount of pakeha to bring maori to pakeha to a politically desirable 1;1 Ratio as it was back in desirable 1845? Oh. Well. Depends on what Kiwi-ism you belong to. All a question of the Standpoint. But the universal doctrine of morale as laid down by Kant gives, that a thing is only good, if it is good, regardless of the standpoint. I truly love this country, my daughter was borne here (the first borne Kiwi in the family) and damn, I want to preserve it as it is. Or maybe better, as it was in the 80s (but then, I like the Cafes and international Kitchen…). Without Immigrants there would be no Wine making and a lot of other businesses would be lacking. Now, given the very different birth rates of the various social and ethnic groups in NZ, take away immigration, and it will change faster than with the -right mix of- immigration. I really share your “Angst” of loosing what is to me the Kiwi Identity, friendly, relaxed, tolerant, curious, helpful. But I do see the right mixture of Immigrants as a solution to the Problem, not as a threat. I hope I get my point over? 😉 Cheers.

          1. When I was a kid at primary school there were a couple of Chinese brother and sister. And a couple of Scots brothers. They ended up integrated. As I grew up I met more and more. All were integrated. I should say all the kids were integrated and became as kiwi as me.

            These days we have suburbs around Auckland where Kiwi English or Maori isn’t spoken. This lack of integration worries me.

            Also what is happening in Europe worries me to the point I don’t want to see it here.

            Timely immigration I have no problem with. Immigration to the point where kiwi born cannot afford to live in NZ does worry me. Because strife is guaranteed when it gets too much.

            70,000 in a year when we built 9,500 homes for the newcomers. They are going to be very crowded and very unhappy. 7.368 per house.

            Got a wonderful tandoori restaurant here. Actually we have so many I don’t know how they survive. The staff speak great English. So much so I tried to joke with one. It was a dismal failure. Soured things for a while. He just didn’t get it. And I couldn’t explain it so he could understand it.

            So now I don’t try to treat them like one of us. Which is a shame.
            I haven’t met a foreigner I don’t like though.

            But I do value what kiwi used to mean when I was a kid. And what will be snuffed out as kiwi are swamped with cultures that exist elsewhere in the world take over here. And kiwi disappears. Wonder if it’ll get a footnote somewhere?

            That saddens me. Because being Kiwi is unique.

            Rumor has it they want 15 million here. Yeah the invisible they. One of the immigration programs that were put on a few years ago.

            While we may have room for that many we shouldn’t try to bring them in overnight. And if that or any other number is the aim. Then get the infrastructure in place first. Not after they arrive.

            Cheers.

          2. Kia ora Tilman Walk for highlighting the obvious irony of anybody talking about Kiwiness as though there is universal agreement on what that means. Goibg waay off topic here but I would absolutely support your suggestions that the appropriate number of Pakeha (or immigrants who arrived after my Polynesian tipuna) in our population should be no more than the number of Maori in our population. I can already hear the howls of outrage but my reasoning is no less valid than the idea that we must somehow protect our Kiwiness. I just have a different view on what Kiwiness must be protected.

          3. even at the current rate of immigration, NZ Population would only double in about 35 years, right. And then, immigration demand will not allays be at the same levels. Given the abundance of land, natural energy (harvest-able at the current technological level) water and (still….) enough good top soil, NZ could probably support much more people. Mid term, overpopulation in some parts of the world and gross under population in others, will not be defensible. So better dress the scales as long as there is time. And with a larger domestic market, it would be worth while to produce more technical items that now have to be imported, straining NZ of capital . Re, what Saywaat said, yes, thank you for your support, but than how about some genetic testing, which Maori belonged to the first wave and deporting a proportionate amount of those who arrived in subsequent waves… I feel, the whole argument defeats itself, there is no end to “original” as in the end, no human being was in NZ “originally”. I can’t help a grin, when I read DOC statements about Pest control. The worst pest that ever immigrated into NZ from the standpoint of all native animal and plants where certainly humans. I find it problematic to try to turn back history. The whole problem with immigrants of whatever denomination needs practical and kind solutions, there is simply no space for principles if you look at it with my kind of logic 😉

          4. It’s an age thing. When Maori and Pakeha didn’t exist. There was just us. All young kids learning together. Knowing we could do anything provided we had some number 8 wire and maybe some pliers :-).
            Where on the weekends all of us would fill our pockets with stones. Shanghai in hand, head off into the swamp’s around town. To shoot birds and rats. And maybe find some treasure like the old pushbikes with two stroke motors on the wheel thrown out down the tip. We’d take it home and get it working.

            Yep, good old nostalgia.

            But none of us had learned we might be different. So we looked at each other as if we were all the same.

            Cheers.

  6. Notice the climb on the graph began during the 1980s. One thing that happened in the Rogernomics years was the change from Land Value rating to Capital Value, and the 2% land tax on the value of commercial land over $160,000 was taken off at the rate of 0.5% per year from 1988 to 1992. The result is that vacant or underused land is taxed very lightly; helping the speculator, and rewarding those who would keep land idle.
    Arthur Grimes of the Tax Working Group pushed for a 1% tax, but went to the government proposing a 0.5% tax. The government did not accept it, but to cover their deficit raised the GST by 2.5% to 15%.
    A 1% tax will lower land values by 18%. Taken to its conclusion, a 5% tax would just about take all the revenue from land which at the moment is going into private pockets. The selling price of land is the land rent capitalised.
    Were a government to take these ground rents for revenue then the GST (A regressive tax and a tax between a willing buyer and a willing seller) could be abolished, and income and company taxes lowered.

  7. I have a problem with this analysis
    NZ houses are terrible – the only way I have found to get a well designed well insulated house here is to build it yourself (well get somebody to build it)
    BUT
    Once built it is “worth” about 80% of the “cost”
    Now that applies to a house with additional insulation – but that was only 5% of the cost
    If I had built a Kiwi house it would still have cost me more than it was worth
    This is in Southland – in other places the house values are higher
    BUT not that much higher!

    A lot of the increase in cost in that graph reflects an actual cost to build increase –
    nothing to do with regulation – materials here are bloody expensive

    How much of our housing problem is because a small number of big companies import the vast majority of our materials???

    1. 100% support. Start building houses like they do in the Netherlands and much of the Problem evaporates. The answer to the housing bubble could be lower immigration (which in my book will cost NZ much dearer) better tax regime (which should be done anyway) and better way of building. Hey, if this government is capable of record low pharmaceutical prices via Pharmac, why are prices for simple building materials a multiple of what the same shit costs in the german aquivalent of Mitre10????

  8. Dear Gareth, I fully subscribe what needs to be done in NZ (some modest taxing of capital gains from Real estate), with the exception of taking Germany (which is where I lived my first 46 years, making my money as chartered accountant and beinga tennant, home owner and landlord) as “a successful economy that has prevented this type of entrenched disequilibrium”. Let aside that Germany is economically mainly successful because of the artificially distorted Value of its Currency which alone makes it competitive and is certainly less fair than the NZ economy, NZ Rates are on Average MUCH higher than German communal tax on property. And long term investments (longer than 10 years) are tax free as in NZ too. And this is still a relatively new rule, it has been 2 years for long before. And affordability of a home is certainly much worse in Germany than in NZ. Let alone the evil of a stamp tax, that regulates down necessary mobility. As much as NZ needs to do something about the distortion of taxing the very same sort of income from different sources, as little is Germany a role model for a better way to do it.

    1. What is a “sustainable” population for NZ? The Australian Conversation Foundation has been asking this question (for Australia) for many years. Shouldn’t we be trying to make NZ work better for the people who already live here, and the environment, rather than using immigration as a way of generating short term “economic growth”? What % of immigration is for genuine skills shortages? Why aren’t we training people to get decently paid jobs rather than importing skilled people? (because it costs money to train people and governments want to be popular by having ever lower taxes). I’m not anti immigration per se. I am anti the growing numbers of people relegated to the underclass in NZ and I am anti NZ’s inaction on climate change and developing a sustainable economy. As sea level rises NZ will have a responsibility to accept climate refugees, for now we should be doing our bit to make NZ a better place for ALL of our citizens and do our bit to reduce climate change.

      1. Growth is treated as some sort of goal in itself.There can never be a limit to grooowth. I don’t know what the witch doctors of the dismal science will turn to when the volume of humanity has filled the known universe? Probably wouldn’t take as many doublings as one might think, not that it’s a question any neoliberal Friedmanite ever asked himself. https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem

      2. A sustainable population for NZ? Without oil or phosphate, lower than most people imagine. It depends how many serious pests and diseases we introduce, that effect future food production, without petrochemical solutions available. We are introducing them at an incredibly rapid rate right now!

      3. The issue is an absolute number of people. 4.6 Mio. is just not enough to generate enough domestic consuption to make it worthwhile to manufacture certain goods inland. The netherlands (about 20 Million), Australia (25 Million, if I am right) are above the line for a self sustainable population. NZ is not. NZ has the living standard and technical equipement of a first world nation, without being one in own domestic market or integraton in a larger one (as switzerland for example). It has MUCH less industrial output than singapoore with a similiar population, but better integration in their much larger regianal markets. So, why are very simple things like whiteware for your bathroom a multiple of the price than they are in europe? Because everything has to be imported a long way. My argument is nowhere for economical growths, it is for sustaining the standard of living NZ currently has. This is only sustainable at the moment by having tourism as the largest economy (which precarciously hangs on the cost of air travel and asian, us and european consumers having the money and time to travel) and diary, fish and timber. Not too bad, but if you want to pay for all these technical gadgets, a little problematic mid term. To retain a 1st world standard of living with an economical Basis in the agricultural sector mostly, requires some tuning. Getting Population to form a domestic market that makes inland manufacturing a reasonable option is one long term goal. Going up to 10 Million Inhabitants in 30 Years would make NZ more stable in any thinkable way. I personally can weep, if I drive through the wast depopulated NZ countryside. Contrast that with Bali for example, same steep hills, same abundance of water, reasonalbe soil, NZ needs people who like do revive the farming, quite obviously. It obviously does not need more people who want to open another chinese or indian take away. But NZ has the power to choose, whom they want. Thats what I am arguing for.

        1. Forget about your tech gadgets. They are toys that add nothing to your quality of life, in fact they distract you from life!

          1. yeah, right, who needs radios, navigation, hospitals, computer, internet, pumps and all the civilizational rubish. Dying at 45 on average is natural after all. If NZ wants to keep the civilizational standard of the US, it has a choice, either get to be part of a larger entity, or grow to a size, where inland manufacuturing makes sense.

          1. certainly not, nobody wants to live in an overpopulated country (thats one of the reasons why I made a choice to live here instead of in europe). But NZ has the opposite Problem. Drive from Taupo to New Plymouth on secondary roads and look at all the ghost towns on the way. NZ is countryside looks like dying to me. Am I wrong?

          2. Rural depopulation has many reasons, not the least farm amalgamation and automation.

          3. “nobody wants to live in an overpopulated country (thats one of the reasons why I made a choice to live here instead of in europe)” are you serious? The hard country between Taupo and New Plymouth should never have been cleared in the first place. Productivity is low. Most of it should be left to revert. The colonial mentality was cut to it down and burn it regardless.

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