Real estate, post level 4

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2345 posts

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#3154137 31-Oct-2023 17:47

let me put it this way.

nz housing stock is worth about 1,680 billion $$. if housing prices where to match 70's (ish) in affordability then todays housing stick should be worth 560 billion $ (roughly).

if it wasn't for the housing market nz economy would have an extra 1120 billion $$ in circulation. in fact it would be more because of the interest we would not have paid.

the market ties up a huge amount of money so people can think they are wealthy while they starve to death.

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Handle9

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#3154138 31-Oct-2023 17:50

tweake:
let me put it this way.

nz housing stock is worth about 1,680 billion $$. if housing prices where to match 70's (ish) in affordability then todays housing stick should be worth 560 billion $ (roughly).

if it wasn't for the housing market nz economy would have an extra 1120 billion $$ in circulation. in fact it would be more because of the interest we would not have paid.

the market ties up a huge amount of money so people can think they are wealthy while they starve to death.

Oh dear. It’s really not possible to have a reasonable discussion with you if this is how you understand economics. It’s not a zero sum game.

mudguard

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#3154139 31-Oct-2023 18:01

tweake:

let me put it this way.

nz housing stock is worth about 1,680 billion $$. if housing prices where to match 70's (ish) in affordability then todays housing stick should be worth 560 billion $ (roughly).

if it wasn't for the housing market nz economy would have an extra 1120 billion $$ in circulation. in fact it would be more because of the interest we would not have paid.

the market ties up a huge amount of money so people can think they are wealthy while they starve to death.

NZ's population in 1970 was 2,8M, it's now 5.2M so there's also that to consider, smaller families=more housing required.

I agree in that fundamentally more than a few businesses are secured by domestic property. It seems unfair that someone with a good idea will generally find funding more easily for a house than a business. But then that's the risk component.

Business tips over and there's usually no money left. Whereas land, well there's always land. Mostly.

Handle9

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#3154186 31-Oct-2023 18:23

mudguard:
tweake:

let me put it this way.

nz housing stock is worth about 1,680 billion $$. if housing prices where to match 70's (ish) in affordability then todays housing stick should be worth 560 billion $ (roughly).

if it wasn't for the housing market nz economy would have an extra 1120 billion $$ in circulation. in fact it would be more because of the interest we would not have paid.

the market ties up a huge amount of money so people can think they are wealthy while they starve to death.

NZ's population in 1970 was 2,8M, it's now 5.2M so there's also that to consider, smaller families=more housing required.

I agree in that fundamentally more than a few businesses are secured by domestic property. It seems unfair that someone with a good idea will generally find funding more easily for a house than a business. But then that's the risk component.

Business tips over and there's usually no money left. Whereas land, well there's always land. Mostly.

The fundamental error is that there is an inelastic supply of money and it either goes to one place or another.

If someone gets wealthier it doesn’t necessarily mean that other people get poorer. If the property you reference goes up in value that doesn’t mean the money is stolen from the business.

The biggest issue with housing is the supply of houses, which is complex and not just “me rich me keep all money.”

tdgeek

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#3154199 31-Oct-2023 19:39

tweake:

let me put it this way.

nz housing stock is worth about 1,680 billion $$. if housing prices where to match 70's (ish) in affordability then todays housing stick should be worth 560 billion $ (roughly).

if it wasn't for the housing market nz economy would have an extra 1120 billion $$ in circulation. in fact it would be more because of the interest we would not have paid.

the market ties up a huge amount of money so people can think they are wealthy while they starve to death.

I can see your point, I think. But you are way off the mark. The constant use of "profit" is one example.

For "this" post, lets say we dont have a housing market. Cool, lots of cash in circulation. (If you look at Money Supply, M1, M2, and M3, thats actually a problem)

So we have no housing market, great. No housing crisis by default. Where do people live? In rentals. That are owned by someone. Who charges rent based on year on year variables. But if those "tenants" bought a home (and yes I know not everyone can) then while their mortgage interest is at the year on year rates, the principal isnt. So they can get ahead. Retirement, they paid the house off, they can downgrade the 5 bedroom to a 2 bedroom, possibly and likely a bit further out, so even cheaper. Retirement fund. Later, inheritance for the next generation. I cannot see an issue wth that. But please remove the excessive use of profit.

tweake

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#3154207 31-Oct-2023 20:21

mudguard:

NZ's population in 1970 was 2,8M, it's now 5.2M so there's also that to consider, smaller families=more housing required.

rough figures based on affordability, which is average wage compared to average house price, so most factors are built in automatically. in fact i was being generous because i don't have current figures. homes today are somewhere between 3-4x higher than "affordable" which also happens to be the value of 1970-80's era homes. gone from 3x average wage to 9-12 times. with current price drop and wage increase i went with the low figure.

so basically today if your buying a first home your buying the 70's equivalent of 3-4 houses.

tweake

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#3154210 31-Oct-2023 20:32

tdgeek:

So they can get ahead. Retirement, they paid the house off, they can downgrade the 5 bedroom to a 2 bedroom, possibly and likely a bit further out, so even cheaper. Retirement fund. Later, inheritance for the next generation. I cannot see an issue wth that. But please remove the excessive use of profit.

what have we been told for many decades, climb the (property) ladder. ie increase your "wealth" with each step. that is actual profit. the difference between buying and selling. i didn't come up with the term or the idea. oldies did that well before i was ever born.

just look a the article i posted early, lady complaining because the sale got stopped and she would miss out on the extra actual real world money in the bank.

from an ex tradies point of view who used to work on homes, people intentionally bought and sold their homes for profit. i was there. there is whole tv channels on the subject. thats why kiwis only stay for 7 years on average.

sorry but the term profit is accurate.

tdgeek

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#3154212 31-Oct-2023 20:51

tweake:

what have we been told for many decades, climb the (property) ladder. ie increase your "wealth" with each step. that is actual profit. the difference between buying and selling. i didn't come up with the term or the idea. oldies did that well before i was ever born.

just look a the article i posted early, lady complaining because the sale got stopped and she would miss out on the extra actual real world money in the bank.

from an ex tradies point of view who used to work on homes, people intentionally bought and sold their homes for profit. i was there. there is whole tv channels on the subject. thats why kiwis only stay for 7 years on average.

sorry but the term profit is accurate.

Im fortunate to live in an upmarket house in an upmarket area in the Garden City. Yay on me. Its gone up 600k since 2017, sweet. Where is my 600k profit? We still have the same two cars, the same motorbike and the same lawnmower. Where is my profit???

mattwnz

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#3154275 31-Oct-2023 23:53

tweake:

tdgeek:

So they can get ahead. Retirement, they paid the house off, they can downgrade the 5 bedroom to a 2 bedroom, possibly and likely a bit further out, so even cheaper. Retirement fund. Later, inheritance for the next generation. I cannot see an issue wth that. But please remove the excessive use of profit.

what have we been told for many decades, climb the (property) ladder. ie increase your "wealth" with each step. that is actual profit. the difference between buying and selling. i didn't come up with the term or the idea. oldies did that well before i was ever born.

just look a the article i posted early, lady complaining because the sale got stopped and she would miss out on the extra actual real world money in the bank.

from an ex tradies point of view who used to work on homes, people intentionally bought and sold their homes for profit. i was there. there is whole tv channels on the subject. thats why kiwis only stay for 7 years on average.

sorry but the term profit is accurate.

What is crazy in NZ is that most landlords / property investors buy for the capital gains over a long period of time, and that they can make that capital gain by leverage, rather than using all their own money, which has the potentially to gain massive gains in wealth. If the rent they get can cover all their costs inc interest, then they are often happy . But anyone investing in Kiwisaver or shares can't usually make as much gain because they can't generally leverage to buy shares. But with property, they then don't get taxed on that gain, which is unlike most other countries like Oz who charge CGT as well as stamp duty etc when a property is sold. I am not sure why, because most did buy for the eventual capital gain over 20 + years, and potentially reducing the Brightline test to just 2 years will make it even easier for them. Property investment in NZ has so many advantages historically. I understand out tax system was supposed to eventually add in a CGT, but it never happened as it wasn't popular.

mattwnz

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#3154277 1-Nov-2023 00:09

Handle9:

mattwnz: One of the big mistakes NZ made imo was allowing Kiwisaver to be used as a first home deposit. That money should have been for when you retire. It therefore allowed many people who were bad with money, able to buy a house and at a higher price, without needing to specifically save for a house deposit, and potentially pushing up prices even more. But Kiwisaver can't be withdrawn for other things like education or setting up a business which could have far better returns for the Kiwisaver holder. The new government is now going to allow people to borrow from their Kiwisaver account for a rental bond, which they may never get back. Again this helps property investors. I understand they're could also be some other similar changes if lobbyists get their way. It really erodes the value of Kiwisaver and means a lot of people may have less savings for retirement

The purpose of kiwsaver is for people to accumulate wealth. Internationally home ownership has a very strong correlation with overall wealth. This has always been the case.

For many years the government supported this with a variety of schemes. Back when housing was far more affordable familes could capitalise the family benefit to buy their first home. My parents would have been unable to buy their first home without this and even so borrowing money was very difficult.

Home ownership has so many social benefits that most societies recognise that it's worth supporting young people into affordable housing.

Yes that is true. However FHBs were still able to buy houses before Kiwisaver was available for this purpose, and I am not sure if it has made it any easier for FHBs in teh long run. The price they pay is largely dictated by what the market is willing to pay and depends on things such as interest rates. So Kiwisaver FHBs are competing against other FHB Kiwisavers who may have a reasonably large deposit due to Kiwisaver, and many FHBs are in their 30s, 40s and 50s so could have a lot saved.. So Kiwisaver potentially allowed FHBs to have a deposit that was far larger than it would have previously been, if they had to manually save for the deposit themselves. . People used to have to save for a deposit all by themselves, so it taught them good savings practices. Whereas many first home buyers were automatically signed up to Kiwisaver and their Kiwisaver balances automatically grew over time without any real effort by the FHB. So I would argue that Kiwisaver may have increased house prices even more than they would normally be, as the lower end of the market increased by those FHBs.

tdgeek

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#3154285 1-Nov-2023 07:11

mattwnz:

So I would argue that Kiwisaver may have increased house prices even more than they would normally be, as the lower end of the market increased by those FHBs.

Fully agree. More buyers = more demand = higher prices. However, as stated, owning your home is a good social investment. Security, insulated from annual rent increases. Insulated from annual house price increases.

Perhaps Kiwisaver should be limited to new builds. Dampens demand on the current housing stock which is shared between owners and renters. New builds means that dampens the rental market as FHB's move from renting to ownership. I think NZ citizens build 40k or 60k houses over annum? Imagine if that doubled. You would be resolving the demand/supply house inflation in a few years.

Immigrants, maybe they are allowed to rent for 5 years max, then, under the status they were granted residency, they must build within 5 years or buy an existing house that is being sold as the owners are building. Thats probably a little messy, but that type of theme.

mudguard

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#3154291 1-Nov-2023 07:44

tdgeek:

Perhaps Kiwisaver should be limited to new builds.

I think it would result in Kiwisaver being relegated to an afterthought. I think people would start new jobs and the first thing people would do is opt out, or put contributions on hold.

As I mentioned earlier I put 8% in for a long time as I had a specific goal of buying a house. It took over a decade. But if it was locked in until 65 there's no way I'd contribute.

I mean if a government were to change the rules regarding a first home purchase, then perhaps it should be limited to new Kiwisaver accounts, not existing.

johno1234

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#3154299 1-Nov-2023 07:56

Handle9:

The fundamental error is that there is an inelastic supply of money and it either goes to one place or another.

If someone gets wealthier it doesn’t necessarily mean that other people get poorer. If the property you reference goes up in value that doesn’t mean the money is stolen from the business.

The biggest issue with housing is the supply of houses, which is complex and not just “me rich me keep all money.”

Indeed. There isn't anymore land, and what there is often can't be built on due to zoning and suitability. And the zoning can't just change as it would then lack the required infrastructure to support housing and population.

And money is so elastic at the whim of the government that it doesn't even hold value.

Someone who's house is worth double what is was is effectively no better off. They're still living in the same house.

cddt

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#3154331 1-Nov-2023 09:20

mudguard:

NZ's population in 1970 was 2,8M, it's now 5.2M

I think you've identified the root cause of a lot of our societal ills.

The problem isn't a large population per se (after all, what is "large"?) The problem is that this growth wasn't planned for properly, and in the rare case an adequate plan is proposed, it is derided as "too expensive".

Hospitals? Schools? Doctors? Teachers? Nurses? Police? Trains? Roads? Ports? We increase the population by ~2% p.a. but don't have a policy of increasing any of these by a similar proportion. Instead our political leaders (and their cheerleaders in the growth-at-all-costs club) expect to do more with less, forever squeezing more people into the same hospitals, the same schools, the same roads, the same houses until some mythical point of time in the future (sunlit uplands?) when this will make us rich, happy, healthy, satisfied.

Colour me cynical, but the mainstream approach to growth we have taken (and continue to take) doesn't seem to lead in any meaninful way to a more productive, wealthier, and happier society.

mattwnz

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#3154428 1-Nov-2023 14:55

It is not just planning in the past for today population. But also planning in the future for tomorrows population. 100k population growth a year via immigration is a 1million over 10 years, which needs significant investment and increased government spending. There was almost no discussion about this during the leaders debates during the election. eg What is NZs planned population in 10 years, 20 years, 30 years etc. It is really the biggest factor in all this yet noone knows. Do NZers even want a bigger population then we have now, which leads to more problems, more pollution etc.

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