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Posts Tagged ‘Auckland Housing

A plague on both your houses!

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The discussion of our terrible housing market – especially the massive and relentless rise in house prices over many years now – is one I’m used to hearing often from the friends of my kids. In fact one of them joked a year ago in Wellington that when she’s at some party and doesn’t know anybody, a sure-fire conversation starter is to talk about how her Generation, Gen Z, may well be screwed when it comes to buying a house, especially those who lack the Bank of Mum and Dad.

Yet as is often the case, it takes the perspective of a foreigner to really bring home the news of just how bad things are. In this case via a Canadian who tried – and failed – to get a foothold here in NZ, New Zealand shows how a housing crisis can become a catastrophe:

I arrived in New Zealand’s capital of Wellington in early 2020 with my fiancée, a New Zealander, to buy a house and start a family. We knew that the Pacific country’s overheated housing market would be a challenge, but we’d lived in Toronto and Vancouver. We considered ourselves prepared. We’d soon learn that New Zealand’s housing problems are similar to Canada’s, just much worse.

Having scrimped and saved for years in Canada, and with a slightly stronger currency to exhange, they decide to have a crack at $750,000 place, all 800 square feet of it with a miserable commute, no backyard, no parking spaces, no grocery store and in one of our worst areas for socio-economic deprivation.

An adviser looked at our bank balances and asked if we were expecting a large donation from family. Our smiles faded. Without at least 20 per cent down, the bank wouldn’t even look at our application papers. A year later, we tried again with the help of a mortgage broker. The result was the same, but house prices had soared by 50 per cent. We started packing our bags for Montreal, which still has relatively affordable homes.

Admittedly he’s a journalist so no great loss for New Zealand, but there are plenty of brighter and more valuable people – and ones younger than him – who are making the same decision. As he puts it:

When my fiancée and I decided to announce we were leaving New Zealand toreturn to Canada, I prepared myself for awkward conversations. I needn’t have worried. Most of our friends beat us to the punch with their own plans to leave, turning the first months of 2022 into a long going-away party. For those who remained, the conversation boiled down to one question: “It’s the housing, isn’t it?”

For those who love history, here’s the bipartisan aspect to this disaster.

Yes, I know that John Key and National were stymied over changing the Resource Management Act by Peter Dunne, but I’ve always had three problems with that excuse.

First, that attempt was not made until late in the Key Administration. A government of National and ACT alone (National/ACT had 63 seats between them) could have made the changes in his first term as PM between 2008-2011.

Second, Key worked on Wall Street and made a fortune. He also ruled the National Party well (preventing Jamie Lee Ross incidents or killing them off quickly if they did happen, re Richard Worthless). Yet we’re supposed to accept that that he didn’t know how to apply a blowtorch to the soft and squishy lower reaches of that preening wanker, Peter Dunne, and others?

Third, in any case the housing crisis is driven by more than just one factor in the form of the RMA, and none of those others were addressed by National either.

In 2017 I thought that Labour’s Phil Twyford had some good ideas for getting the housing market to work better, especially the parts that have driven city land prices, which is the primary component of the overall house price insanity.

But those ideas all vanished and he was left holding a typical Labour/Left Big Government solution in the form of the ill-fated Kiwibuild.

I suspect that the real reason that National and Labour are so helpless in the face of this market failure is that house values now constitute such a part of our “wealth” – feeding our consumerism via increased borrowing against the rising value of housing – and are the only investment in New Zealand that’s “safe”. Dropping those values to levels that are more affordable for young people, let alone crashing them back to where they should be in terms of wage and salaries, would incredibly economically damaging to too many people.

Especially the people who got on board this gravy train years again, like the Boomers and Gen X’rs like me. People who vote. BY contrast this is what our kids and grandkids are facing, courtesy of Michael Reddell’s updated analysis of housing costs in New Zealand, especially in relation to incomes and Price/income ratios, with the key insight:

At best, it takes 33 years for price/income ratios to get back to three – the sort of ratio seen in large chunks of the US, in cities large and small. At best, it would take almost a quarter of a century to get back to a price/income ratio of four.

Frankly I can no longer see this being resolved, given that, as Michael Reddell points out, both the leaders of the National and Labour Parties have said that significant price drops – say 25% – would not be acceptable.

Why? It would simply put us back two years. Although buyers in the last two years would be looking at negative equity, that’s a temporary situation that can be worked out of and has been in the past.

If you’re not willing to unwind a clearly screwed-up marketplace by even a small amount because some recent entrants will feel some (book-value) pain then you’re basically admitting that the current situation of relentless and ever larger price increases will continue, which will lock out a lot more potential entrants, particularly the young. The graph above is a “best-case” scenario if price drops are not permitted – and it shows an awful situation for people wanting to enter the housing market.

In a sense our housing market has become rather like any welfare system or drug addiction: the more people who are hooked on it the less chance there is of changing it. The only difference is that with housing it’s the newest entrants who have the most to lose.

Which means that what we have here is a Ponzi scheme, and they never end well. But they do end, irrespective of the authorities.

Written by Tom Hunter

August 15, 2022 at 4:09 pm

The beatings will continue until lessons are learned!

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I’m sometimes tempted by the thought that a Labour/Green government should be elected in 2023 so that we can really test all their ideas to destruction.

But then I think of places like 1930’s Germany and 1990’s Venezuela where people voted for ideas they thought would be great for their countries which, filled with easily re-distributed wealth and arts and culture, would be secure against policy mistakes – safe in the knowledge that “There is a great deal of ruin in a nation.”, as Adam Smith once declared to a student.

Over the last few years, in my part of Auckland, there has been a lot of new state housing built; solid 1940’s wooden houses on large sections replaced by six or more modern two-story units. They look nice – so far. There are a lot more cars on the road and a lot more people around. All sorts of people. In the neighbouring suburbs there has been a large jump in all sorts of crime. The ram raids, stabbings and shootings make the news. What doesn’t are the “small” crimes involving teenagers and others being held up by knives or fists in the near-East suburbs.

We were aware of all of this via the local Facebook and Neighbourly websites but it really struck home a couple of months ago when the teenage son of our next door neighbour got punched out while walking home on our quiet streets with his girlfriend from a party late on a Saturday night. Two cars pulled over beside them, several guys jumped out and laid into him. They did at least leave his girlfriend alone even as she called the cops and an ambulance, so he was able to find out what had happened when he regained consciousness a few hours later in hospital. Luckily he suffered no major injuries but of course there’s no more such late night walks for him – or for many others of our kids as word spread fast. The attack was entirely random. Nobody has been arrested nor do we expect anybody will be.

People always ask how things like this can just start happening, and in this case I’m sure we’re looking at gang recruitment; “prove yourself to us”.

But there are plenty of examples from overseas, starting with Minneapolis. I knew only one thing about that smallish, Mid-Western city when I was growing up watching American TV in NZ:

Yeah, the hat throw in the intro to The Mary Tyler Moore Show. So iconic that the city put up a statue of it decades ago, which may almost be as popular as the ones for local hero George Floyd. Now the state’s Supreme Court has ordered the city to start hiring police officers to build up to the number legally required by city ordinances to meet legal requirements:

I’ve asked who in his right mind would go to work for the department. The Star Tribune is singing from the Beatles songbook: “Nothing’s gonna change my world.” At least the song comes with a mantra to soothe the troubled soul.

But I was also reminded of the following story from the USA, located in, of all places, a post by retired Law Professor Ann Althouse early in 2021 when she commented on seeing the Oscar-winning movie, Nomadland, “For people whose only home is a vehicle, the knock is a visceral, even existential, threat. How do you avoid it?”.

The movie is about an aging homeless woman who lives in an old van (“I’m not homeless. I’m just houseless.”) and travels around America seeking whatever work and comfort she can find. It was a story from one of her commentators that struck me in its similarities to the worsening crime situation in Auckland:

Until last year I lived in a neighborhood which used to be nice. Then, mysteriously, it began to fill with trash. My wife and I would walk the dog, and she would spend the walk picking up trash. Every day. I gave up.

Drug needles appeared on the ground. Our cars were broken into while parked in front of our house. Our trash and recycling would be rummaged through at night and we’d have to clean up the mess in the morning. Vehicles would park in a nearby side street and sit there until the cops came. They were replaced by more.

Finally, we moved. While our house was on the market someone broke in and left used needles in the toilet. Twice. It’s a great selling point for potential buyers.

In the new neighborhood, my wife doesn’t have to pick up trash on our daily walks. The worst thing we’ve had to deal with was someone leaving dog poop on the lawn. I do not believe in turning the homeless into a class of people who cannot be criticized. There’s nothing about being homeless that requires you to leave trash everywhere. There’s nothing that requires taking drugs. Or breaking into cars and houses.

I suspect, however, that people who are neat and law-abiding don’t tend to become homeless. I’ve worked a lot of minimum wage jobs and restaurant jobs, and I was always able to at least rent a room. What’s really being pushed by homeless activists is a lifestyle choice where the homeless are free of all social obligations- work, family, and community. It’s an antisocial way of life that harms other people. Homeless people aren’t disliked because they are houseless. It’s the trash and crime they create. They make life worse for the people around them.

But you can’t say any of this in public anymore. If you do, you are a privileged jerk because you want to live in a clean neighborhood while so many people are living in squalor.

Of course the idea where I live is that building lots of houses will obviously cure homelessness and thus reduce poverty and crime. So far the evidence is exactly the opposite. But it’s early days yet. As I said, the new houses look nice. My Chicago-born wife mutters “ghettos” as she drives through the areas.

At the last neighbourhood meeting in our area to discuss further housing developments, both public and private, that will quadruple the concentration of people living there, the authorities present suggested to the people who turned up that every effort would be made to educate them out of their various fears.

Written by Tom Hunter

June 28, 2022 at 6:00 am

The Vax Police

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Since a couple of months ago when a friend sent me an article from Stuff, stating that some 17% of NZ Police Officers were unvaccinated, I’ve wondered what progress the government had made in forcing them to do so.

I very much doubted that we would see the same level of coercion applied as in other sectors, where even doctors and nurses have been dismissed. The government, especially a Left-wing government, may claim that state healthcare is vital, but it is the Police and the Army that all states preserve at all costs.

As it happens there have been some updates:

All police officers and recruits must have had their first Covid jab by January 17 and their second vaccine by March 1 in order to keep their jobs. 

New Zealand Police said 94.1 per cent of constabulary staff have had their first jab, while 89.5 per cent are fully vaccinated as of December 7

Slow progress. It means that around 600 cops risk losing their jobs next month if they don’t get the first jab and another 400 if they do not get the second jab by March.

It’s not something that the Government should take lightly,’ an unvaccinated police officer, who has not been named, told the newspaper.

‘Even losing a couple hundred sworn staff will have a massive impact. There’ll be major ramifications.

‘Skills come with time, knowledge you can generate yourself but there’s no substitute for experience.’ 

Given that crime is increasing, especially in Auckland, and especially with gangs, you do have to wonder what’s going to happen? Aside from the usual Mongrel Mob-Black Power scuffles there have been some very shady incidents occurring recently in the wealthy, Eastern suburbs of Auckland that may be related to the Comancheros gang built on the experiences of the so-called “501” criminals booted to NZ from Australia. Related in that there has been a spate of street robberies and other attacks involving knives that may have been recruitment challenges by the gang for teenage youth.

Since these attacks have been on streets like St Heliers Bay Road and Tamaki Drive, some of the wealthiest areas of the nation, and given that the Comancheros appear to have bought a house in St Heliers, people in the Eastern suburbs are increasingly worried. The attacks it should be noted, rarely appear in the MSM but are seen in online groups like Neighbourly and Facebook suburban communities where residents talk of a son or daughter confronted, threatened and robbed (no rapes – yet) and streams of Harley Davidson’s abreast across Tamaki Drive with not a cop in sight,

With the massive increase in state housing in the area that started years ago under the National Party and focused on near-East areas like Point England and Glen Innes, people are also wondering whether the problems of Kāinga Ora highlighted in other parts of NZ are also turning up here, as well as supplying the gangs with new recruitment pools.

Losing a thousand officers, or even half that number, would not be good in this environment.

I was reminded of all this by the following story from my old home town, Why are Police Officers Refusing the Vax?. It’s not just NZ:

… they question the efficacy of the jab and believe that public health officials and other government officials have simply gone too far. “My body; my choice” has become a semi-ironic rallying cry among those who want to retain their medical freedom — whether its police officers or employees of small and large businesses facing mandates.

One Chicago police lieutenant who spoke to the Chicago Tribune under the condition of anonymity said: “I would sooner resign than be forced to get the vaccine.”

“Last year, when the riots were going on and the city’s burning, they were putting us 50 people deep on a CTA bus and driving us around,” he continued. “They made us work 12-hour days for 40 days straight, with no days off. That’s our job. That’s what we did. And people are now forgetting about that.”

Chicago’s crime is on a different scale to Auckland of course, but as I’ve pointed out, the same ideological ideas about “reforming” our systems of police and justice that are driving the rapidly increasing rates of violent crime in the US, and especially in Deep Blue cities like Chicago (which are basically One Party places), are appearing here in NZ, from pressure for reduced charges to light sentences to reduced prison numbers.

The numbers of unvaxxed cops are similar also:

Since Mayor Lori Lightfoot’s directive went into effect, 84% of Chicago police have reported their vaccination status on the city’s official portal. The anonymous lieutenant is among the 23% of who reported they are not fully vaccinated.

I fear that the phrase I may hear from this government at some point will be that of the Pentagon, that the goal has been achieved with “acceptable collateral damage“.

Inflation heading this way in 2022

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In effect we’ve already been seeing inflation in New Zealand for a year now, as the huge flush of government created / borrowed money, designed to keep businesses and people afloat, has flowed into a New Zealand economy that could not absorb it thanks to lockdowns and other restrictions imposed by the government to fight the great Chinese Xi Snot pandemic. It’s just that our inflation has mainly been in the form of insane increases in house prices across the nation, none more so than in Auckland (Refer to the chart at the end of this article).

But in the US inflation is not showing up in house prices – yet. Over there it’s crashing into people’s consciousness in the prices they’re paying for everyday products.

Inflation hit 6.8% for November, which is the worst mark since 1982 when the country was still recovering from the Jimmy Carter years.

That’s just the generic figure and its calculation quite deliberately misses some everyday things. For ordinary people the following is the real inflation they’re facing.

Incidentally that article points out that this shocking piece of economic news is the likely reason why the following happened…

Earlier in the week, news broke that the White House had been colluding with mainstream media outlets in order to change the narrative surrounding Joe Biden’s fledgling economy. That collusion quickly produced results, with outlets such as CNN, MSNBC, and CNBC complaining that the administration was being treated unfairly.

Inflation for some of these things are already flowing into NZ, starting with the price of petrol. But the rest will be along soon enough to add to our already unaffordable homes, as pointed out by Mr Reddell at Croaking Cassandra:

If house price inflation slowed to 1 per cent per annum, year in year out and incomes rose by 2.6 per cent per annum, in 20 years time the nationwide price/income ratio would be 5.85.

And if by some chance you think a price/income of 6 doesn’t sound too bad. well (a) you’ve just too used to latter day New Zealand, and (b) check the table on page 15 of the Demographia report for the metropolitan areas (most of them) with ratios lower than 6, in lots of cases much much lower. New York – never really thought of as a cheap place to live – shows at 5.9, Montreal at 5.6, Manchester (UK) at 4.8, Nashville at 4.2, Edmonton at 3.8, and on downwards.

Graph from an older post, A Distorted Economy:

Written by Tom Hunter

December 11, 2021 at 5:00 pm

The Bitcoin House

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Read an interesting article today on the news out of the USA that some 30% of men are not employed in that nation.

What was unusual about the article was that it decided to ignore the usual angle of exploring why this is the case, instead focusing on how all these millions of American men actually live without a job.

One section looked at investments and aside from a doubling in retail stock market investment accounts there was also this:

Now crypto. You can laugh all you want, but the simple fact is that the price of bitcoin is up from $4,861 on March 12, 2000 to $47,763 today, or basically up 10X, (and remember it even hit $64,888.99 this spring).

Hmmmm. That’s an annual increase of 11.49% per year over twenty one years. Not bad.

The other day I checked out what our house is worth and was shocked and appalled to find out how much it’s increased in value in just the last year.

I’ve known for some years now how crazy things have been with NZ housing. I’ve been saying for a decade that this could not go on. Yet it has and although I thought I knew how crazy it has become I was still under-estimating the insanity.

Moreover when I ran the numbers over time I saw that our “investment” in house has increased by 11% per year on average for twenty years.

Written by Tom Hunter

September 19, 2021 at 5:23 pm

More Insanity for your delight

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Well you may not be delighted at the first item, especially if you have kids looking for a house in New Zealand.

I’ve removed the name of the real estate company as I see no reason to give them free advertising after they dropped this through our mailbox the other day.

A 71% increase above the CV. Obviously the house and other structures on the site are worth nothing.

This is not a flash area, even by the moderate standards of Glenn Innes in Auckland, yet this is what’s happening even there. They’re also quite open about land banking and development, as if things like the “brightline test” and no longer being able to deduct expenses as a renter just don’t amount to a speed bump.

That’s because these are companies with teams of lawyers and accountants, and there is no limit to how “money” can be shuffled around to avoid the prescriptive revenge of Leftist governments.

Friends of ours, a Russian immigrant family we met twenty years ago when they landed in NZ at the same time we did, lived in this very street until last year and after years of scrimping and penny pinching, did well enough out of this insanity to be able to buy a section not far away and build a new house. Given the racism from their neighbours that they had to put up with for years they were glad to go.

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The second item is something we all try to avoid, getting tangled up in government bureaucracy – and death.

Many years ago I laughed at one of the crazy stories from the book Catch 22. One of the characters, Doc Daneeka, is gaming extra income by getting flight pay via signing up to fly on standard shakedown flights of bombers that have been repaired. A quick flight around the base and it’s all good, but Daneeka doesn’t even want to do that and the pilots let it slide. Then one of these bomber flights – with his name on the roster – crashes into a nearby mountain in full view of the base. “Poor Doc Daneeka” says one man, even as the Doc, standing beside him, is saying, “but I’m right here”. He ends up living in a ripped up tent on the edge of the base, stealing food wherever he can. Even the amoral capitalist genius of Milo Minderbinder and the evil bureaucratic genius of PFC Wintergreen, cannot resurrect him. It gets to the point that people ignore him when he speaks to them. He also just vanishes from the story eventually, his true fate unknown.

Meet the modern French version of the Doc, Jeanne Pouchain, and marvel at real-life insanity.

‘They said I don’t exist. But I am here’ – one woman’s battle to prove she isn’t dead.

The letter informed her that a lawyer in a court case relating to her cleaning business had told the court that she had died, aged 53, in February 2016. Somehow, this unverified claim – there was no official death certificate, how could there be? – was allowed to go unchecked and unchallenged.

The thing that really gets me is that a relatively minor court could let this happen, but somehow higher courts and supposed authorities can’t seem to reverse the process:

Several courts, including the Cour de Cassation, the highest in the French judicial system, have examined the case and conceded there appeared to be “irregularities”, but deemed it was beyond their competence to bring Pouchain back from the dead. So who can? Pouchain’s local MP’s office tells me they have taken up her case. The MP, Valéria Faure-Muntian, told Pouchain she has spoken to the justice minister, Éric Dupond-Moretti, who is a member of the French bar and will keep a close eye on the case.

Aside from frozen bank accounts and not being able to access the French healthcare system, there’s also ordinary things like not having a passport and a driver’s licence, which crimp your lifestyle to say they least, although when I read this bit …

Then [the gendarme] looked on the central database and he said, ‘I wouldn’t drive if I were you, because you don’t exist. You don’t have a licence.’”

Ok. So what happens if they arrest her for that? Or for anything really? How can you charge a dead person with a crime, convict them and send them to jail? Perhaps she should have tried getting the system to fight itself to a resolution.

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The last concerns the hopeless story creation in Hollywood in the last twenty years, with a seemingly endless line of re-boots, sequels and super-hero movies being made – and starting to sag in box-office returns.

Somebody on social media decided to spark some ideas using merely the photos of two actresses.

Written by Tom Hunter

July 11, 2021 at 4:00 pm

A distorted economy

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Two graphs that summarise where we are economically as a nation, and without even looking at the tourism numbers, which are bad enough on their own.

First up, real estate prices for residential properties.

Those increases, in one year, are staggering. In dollar terms they exceed any “help” that any government, even one as spendthrift as Labour, can give to young, first-time home owners.

The price to income multiplier increased during the “nine long years of neglect” of National from 5.05 to 6.08. Under Labours stewardship it’s now at 8.61.

It’s been common wisdom for twenty years now that Aucklanders were cashing up and heading to the Waikato and Bay of Plenty. But since when are retired Aucklanders or Wellingtonians cashing up their houses and moving to Gisborne (almost 50% increase) or for that matter the West Coast (33.6% increase). There will be specific reasons for this inflation but they all boil down to factors driving the basic economic law of demand exceeding supply.

In Auckland those factors have been population growth increasing faster than homes can be built – which in turn is based on government immigration decisions on the demand side vs. building regulations and costs, and even more so the land-banking of city planning causing huge lifts in the cost of land, far beyond the increase in house value itself.

But can those factors be driving demand exceeding supply across the whole nation this time? Immigration has been basically zero for the last year and while land-banking and city planning are a nation-wide supply restricting problem there have not been dramatic changes in those factors in the last year, and some areas have always been more relaxed than others. So what’s driving this recent nationwide inflation?

  • Government changes on investment deductibility and the increased time over which the bright-line test can be applied (basically a Capital Gains Tax) mean that investors are deciding now it’s not a great time to sell, reducing the number of listings (supply)
  • Sensitive people are feeling the breeze of general inflation and take positions to protect their own capital base by lifting those sales from the market, further tightening supply. Better to sit on the potential capital gains, increase the mortgage and use that money to buy a new boat. Notice the increase in prices for second-hand boats, caravans and motor homes.
  • Interest rates pushed down in 2020 as the classic mode of Keynesian response to a potential recession. That increases demand, at least for a while.

The government must be hoping that this is just a one-off and that once the housing market has adjusted to a post-Covid world, things will settle down. We should all hope for that but I see merely the results of a “critical mass” of factors that have finally come together at one point in time rather than individually affecting the market at different times. Even if this spike cools down, the ongoing house price increases will still be greater than we can cope with.

Then there’s this:

That’s Fonterra’s share price in the last three months. An awful drop from $5 per share to $2.82 that exceeds the percentage drop in 2018. That last was caused by financial problems at the company. Problems that, like the housing situation, had been bubbling away for years, but which hit critical mass that year.

Fonterra has since cleaned up many of those problems and was looking pretty healthy internally, with a good payout. So what’s happened?

Professor Keith Woodford is on the case as usual with two articles in May that discussed what might be coming.

You can read the details in those two articles . The summary comes to five points, the first two being around proposals only.

  1. Reduce farmer requirements to own shares, with them needing to hold one share for every four kg of Milksolids supplied, compared to the current one share for every kg of supply. That last is a hangover from Co-op days when the shares were a nominal $1 that never changed as farmers joined and exited co-ops.
  2. Shut down or cap one arm of its two-armed share investors world, the Shareholders Fund. This Fund and the related Trading Among Farmers (TAF) scheme allowed a two-way flow of “units” and shares between the Fund and the Farmer share trades, which kept the price of shares and units within a cent or two of each other and supplied vital pricing information to both farmer investors and external investors.
  3. The Fund allows non-farmers to buy shares and get a dividend but with no shareholder voting. While there was talk about enabling the company to raise capital this way without trying to get cash from cooperative members, the real reason was to remove the redemption risk as farmers exited the company. Under the old co-op model they would not have had the cash to pay them out. The Fund and TAF would shift the risk.
  4. The flaw was that the only way TAF could remove the redemption risk should Fonterra lose a major number of suppliers was by taking on a new risk of losing control of the company to non-farmer investors.
  5. The risk now is not from exiting farmers but from a substantial and ongoing reduction in production, perhaps in the order of 10% to 20%, primarily driven by future environmental regulations around herd sizes. That’s one rock. The other is that farmers still want to control the company.

While only proposals, they did suspend trading before the announcement and they have cut the link between farmer share trading and the external fund, showing the future to investors.

Those investors, the market, have reacted badly to all of this and although it would be easy to say that this is just frippery that ignores the now “healthy” internals of Fonterra, the fact is that share prices tell us what the market thinks of any company’s future.

Clearly Fonterra’s and perhaps the rest of the dairy industry’s future in NZ is not good. What that means exactly for the wider NZ economy is another question, but clearly for some environmental and economic extremists like No Right Turn the message is the same as for the Huntly power station and the fishing industry: Let It Die.

I guess my kids are screwed in NZ

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As regular readers know I focus on the USA and avoid NZ and its politics because there are other writers here who look at that.

But a short while ago a friend of my daughter told me that if she’s at a party where she knows few people and wants to get a conversation going, all she has to do is ask whether anybody there thinks they’ll ever own a house.

Guaranteed conversation starter for the Millennial / Gen Z crowd, with much ironic humour and outright four letter abuse of “Boomers” and the current environment.

Apparently the best that they hope for is that Boomer/Gen X parents will somehow enable them to buy a house via inheritance and/or selling their existing houses to provide the lever into a normal life.

Even renting blows, though they don’t blame the landlords, surprisingly.

Surely it must be due to our very low interest rates, fueling a housing speculation boom while also screwing senior citizens into the ground – at least any of those foolish enough to have left their money in “safe” bank accounts.

Michael Reddell gives the lie to that claim

And, talking of the US, this is real house price inflation in (a) New Zealand as a whole (cities and towns and villages) and (b) the 20 or so metropolitan regions all with populations in excess of a million people that had house price to income ratios of less than 4 in the most recent Demographia report. You might not want to live in some or even most of these places, but plenty of people do (from memory, population growth in Columbus and Atlanta for example has exceeded that of New Zealand).

Obviously I made the right decision returning from the USA twenty years ago.

Rewards baby!

Except of course that your bog-standard S&P 500 index or DJ Index fund has returned better than this over that period of time, and without screwing young people into the ground on housing.

The compassionate society.

As usual Reddell nails the key points:

So this should have been perhaps the cheapest time in history (rents relative to income) to be renting – here and abroad – and yet real rents have been rising, and the government cannot even manage a package that they, and their officials, are confident will lower rents. It really is hopeless.

As he points out about the latest “package” and its overseer:

What I found most striking was how this very senior minister, now with 3.5 years in office under his belt, floundered when asked about the effects of the government’s measures. It wasn’t, apparently, for him to say what the effect on house prices would be. Not only that but officials had apparently offered quite a range of views, (if so suggesting they didn’t really know either). He didn’t know what the effect would be on private rents either.

To be fair, no government minister or advisor really ever does have a clue about the impact of government regulations and rulings and policy and decisions on such things. It’s basically a big mystery.

I confess that despite having passed several economics papers at varsity I’m not a big fan of economic models that propose accurate forecasts based on changing, multiple variables. But there is one economic rule that is as solid as the laws of motion:

Supply vs. Demand.

It’s in every Ecomomics 101 textbook, but of course those lovely sloping graph lines should not be interpreted as “Price = X when ….”.

Nobody knows that. But what that most basic law tells us – and yes, it works in evolutionary biology and ecosystems as well – is that when demand exceeds supply prices rise, and when it’s the opposite prices fall.

That’s it. That really is all you need to know.

In New Zealand, for a variety of reasons, our housing supply sucks compared to the demand. Fix that and everything else that is good will follow.

Sadly, Labour, via Twyford, actually had a handle on this in his various policy promotions in 2017, ideas that National overlooked or ignored. Twyford, and Labour, were on to winner. But for whatever reason, Labour did not follow up on those ideas and instead is left with technocratic methods around “helping” home owners, “tamping down” on the greed of speculators and so forth.

Reddell runs the numbers and reality:

If house price inflation slowed to 1 per cent per annum, year in year out and incomes rose by 2.6 per cent per annum, in 20 years time the nationwide price/income ratio would be 5.85.


And if by some chance you think a price/income of 6 doesn’t sound too bad. well (a) you’ve just too used to latter day New Zealand, and (b) check the table on page 15 of the Demographia report for the metropolitan areas (most of them) with ratios lower than 6, in lots of cases much much lower. New York – never really thought of as a cheap place to live – shows at 5.9, Montreal at 5.6, Manchester (UK) at 4.8, Nashville at 4.2, Edmonton at 3.8, and on downwards.

If.

Written by Tom Hunter

March 30, 2021 at 5:00 pm

Phil Twyford, BA

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Phil Twyford’s profile page on the Labour Party website contains this:

After studying politics at Auckland University, Phil worked as a journalist and union organiser before becoming the founding Executive Director of Oxfam New Zealand.

I presume, although I cannot find confirmation anywhere, that he graduated from Auckland University with a BA.

So going forward, I will address him as Phil Twyford, BA.

The BA stands for Bullshit Artist.

Written by Nick K

May 12, 2018 at 3:16 am

Posted in New Zealand

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HDH

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Adolf visited Auckland for a few days last week to attend the funeral of his last surviving uncle who reached the age of ninety.

Before I departed, I was taken for an early morning drive through Hobsonville, Whenuapai and Kumeu to see some examples of high density housing (HDH) and the scope of land about to be opened for subdivision.   There doesn’t appear to be any shortage of land for housing.  Just a shortage of roads to carry all the extra cars.

However I’m bloody glad I don’t live there.  Stacked one against each other for mile after mile, they’ll be slums in thirty years’ time.

I wonder how they’d go in a fire.  You’d smell the stink of roasting pork from twenty miles away.

Written by adolffinkensen

March 21, 2018 at 6:05 am

Posted in New Zealand

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