Solving the house price problem should be easy!

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#3100777 6-Jul-2023 22:13

mudguard: And in the meantime house prices will continue outstrip median outcomes regardless of moving from primary producers to tech society.
There won't be anyone left to foot the bill for an ageing society.
We can fiddle around the edges but it won't actually change anything now. Sadly. Teachers and GPs are about to retiree en masse and we'll have to find overseas workers just to replace them.
If house prices are ten or eleven times incomes what is the point of even trying? A friend of mine earns reasonable money is in this position, deposit requirements are outstripping his ability to save for it. So he's just said stuff it. I'll enjoy myself. Short of meeting someone with more substantial means, that will be his lot.

No they won't.

A large part of the problem was due to the global financial crisis and covid leading to a highly unusual period of low interest rates.

A person I worked with sold his rentals for various reasons for $1Million, big number.

But at a 1% interest rate it was making him $10k less tax a year, not enough of an income supplement to live on.

A lot of people were in this situation, their bank investments no longer gave them enough to live on, so they took the money out of the bank and invested in the next thing they understood, housing.

Now interest rates are rising they will slowly sell the rentals to have the money back in the bank, having a viable income supplement and not have to deal with all the issues rents have.

With the ageing population more will sell to go into retirement villages, and/or die.

Its not the instant gratification people want, it may take 10 years or so, but it will happen, naturally without artificial market distortions.

gzt

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#3100780 6-Jul-2023 22:22

sir1963: We do not value success in NZ, in fact those who do better get abused, called greedy etc, tall poppy syndrome at its best

Imo this point is overstated by most and we are no worse than anywhere else in this aspect. In relation to to the back and forth I can definitely see where you're coming from though, in this and similar housing related topics.

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#3100792 6-Jul-2023 23:14

@sir1963 things are seriously out of balance in NZ and the world. Wages, house prices, war, politics

The general principal is that house price inflation should be in-line with normal inflation. and like inflation target is 1-3%, we can set a simple range for house prices as well. and set cash rate for new housing to stimulate a balanced market.

Its about setting some aspirational goals, as this won't be an overnight fix. eg like an avg family being able to purchase house & paid off by retirement. so we don't need to be giving accomodation supplement in retirement.

I agree with @mudguard, some people give up..as owning a house is near on impossible.. apart from generational wealth.

But if the government gave RBNZ mandate to control house price inflation, and send a signal to market that your money would be better invested in more productive businesses, rather than the speculative house market.

the IMF say "Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates" which is why I say house price inflation should also be a consideration for RBNZ

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#3100796 6-Jul-2023 23:38

Normal inflation is bad. And you can see impacts within months. House price inflation impacts just take longer to show

I would go as far to say it can even have impacts on social environment Eg more crime, depression, lower birth rates

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#3100824 7-Jul-2023 07:10

gzt:
sir1963: We do not value success in NZ, in fact those who do better get abused, called greedy etc, tall poppy syndrome at its best

Imo this point is overstated by most and we are no worse than anywhere else in this aspect. In relation to to the back and forth I can definitely see where you're coming from though, in this and similar housing related topics.

Try this then.

Name 3 top NZ sports people

Name 3 top NZ business people

Name 3 top NZ musicians/bands

Name 3 top NZ scientists

Name 3 top NZ engineers

Name 3 top NZ historians

See how many you have to google.
Now think how the "average" person would go with those questions.

tdgeek

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#3100826 7-Jul-2023 07:14

sir1963:

Worse is that we are having more broken families, so that "family" of 4 now consists of two houses of 1 adult and 2 shared kids.

On the flip side is we have an ageing population who will start dying off, taking a lot of pressure off the housing market.

That's a great point. While some will move in with the new squeeze, many will be two homes per one family

Ageing population yes, but it depends on birth rate, which I imagine is lower and later these days

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#3100828 7-Jul-2023 07:26

Eitsop: Normal inflation is bad. And you can see impacts within months. House price inflation impacts just take longer to show

I would go as far to say it can even have impacts on social environment Eg more crime, depression, lower birth rates

I agree, but simply targeting landlords because they have done well does not actually solve any of those problems.

Lets change the "item" in question

Lets make it Kiwisaver.

There will be those who have saved nothing and there will be those who saved a lot. Do those who saved nothing get to blame the people at the top for their situation, are this at the top "greedy", should they have some of their savings forcibly removed from them though things like Wealth Tax, Capital gains tax, or any other taxes some party comes up with to "level the playing field".

When I became a landlord there was no kiwi saver.
I had seen my mum lose a lot of money in the sharemarket , goldcorp, brierlys, etc
So I invested in what I understood .
Have I done well out of it, I guess so, but I am certainly not on the pigs back, I still have to watch personal spending, do without, etc

There are plenty of poor people and rich people ho commit crime, the majority of people in all walks of life don't.
Depression is an interesting one We have high rates on depression throughout society for a variety of reason, farmers for example have high rates of depression and suicide compared to the average.
Lower birthrates are also tied to education. The better educated people are, the better income they have, the fewer children they have.

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#3100829 7-Jul-2023 07:29

Eitsop:

@sir1963 things are seriously out of balance in NZ and the world. Wages, house prices, war, politics

Nailed it. Its not a NZ issue its a global issue, what's the common denominator? The standard Human Being. All life is selfish that's how life survives, ensuring each organism's needs are met. While I won't blame newly working young adults needs to buy the latest iPhone every year instead of saving for the first home, as the core issue, IMHO, that is one of many factors that has been lost in recent generations.

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#3100830 7-Jul-2023 07:31

OMG , NZ is at the bottom of this global list of countries (which happens to be a good thing)

https://www.stuff.co.nz/business/property/132492569/nz-slumps-to-near-bottom-in-international-house-price-growth-ranks

sir1963

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#3100841 7-Jul-2023 08:15

Eitsop:

@sir1963 things are seriously out of balance in NZ and the world. Wages, house prices, war, politics

The general principal is that house price inflation should be in-line with normal inflation. and like inflation target is 1-3%, we can set a simple range for house prices as well. and set cash rate for new housing to stimulate a balanced market.

Its about setting some aspirational goals, as this won't be an overnight fix. eg like an avg family being able to purchase house & paid off by retirement. so we don't need to be giving accomodation supplement in retirement.

I agree with @mudguard, some people give up..as owning a house is near on impossible.. apart from generational wealth.

But if the government gave RBNZ mandate to control house price inflation, and send a signal to market that your money would be better invested in more productive businesses, rather than the speculative house market.

the IMF say "Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates" which is why I say house price inflation should also be a consideration for RBNZ

We have always had people who rent and we always will. Not everyone has ever owned a house. The government does not have the money to be the sole landlord.
For the vast majority of the last 150 years or what ever the sharemarket has out performed the housing market.

Housing is about to become irrelevant , climate change is about to change everything, and NZ, like the rest of the world is not prepared. The next great wars will be about food and water as well as refugees from rising sea levels.
We are going to have whole communities being shifted because of this, where is the money coming from ?
The rentals that were destroyed in the recent weather events, will they be replaced ? If it were me in this climate of entitlement I would take the money and run.

Because of ease of travel and migration we all now live in a global economy. If you try and tax your way to equality, the best people will leave, because they can. We are about to try and bring in 6000+ health workers and before the next decade goes by we will need to bring in another huge cohort as 2/3 of GPs will retire. However we are fighting for the same healthcare worker resource as the rest of the world. And in the meantime the governments has steadily been reducing funding to Universities to the point where they are shutting down whole courses.

Do you make housing affordable, or health care affordable ?
Which would you prefer, to own your own home but suffer long term illness and perhaps die, or rent and have healthcare.

Nature is all about boom and bust, in good years rodent populations go though the roof, that in turn means predator numbers rise because their food source has increased, and then a bad year comes along and numbers plummet.

The current problem is that people feel entitled, and they want it all now...its their right, even though it has never been in the history of man.

ockel

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#3100881 7-Jul-2023 10:27

Eitsop:
The general principal is that house price inflation should be in-line with normal inflation. and like inflation target is 1-3%, we can set a simple range for house prices as well. and set cash rate for new housing to stimulate a balanced date to

Not sure why you think house price inflation should be in line with normal inflation.

A risk free rate (approximated by Govt Guaranteed bonds) is greater than inflation. For a single heterogeneous asset like a house the return demanded should be a margin over RFR in basic finamce parlance.

Long run it should be more than a diversified share portfolio not less.

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#3101012 7-Jul-2023 16:21

sir1963:

The current problem is that people feel entitled, and they want it all now...its their right, even though it has never been in the history of man.

Oh come on, this isn't landlord bashing. Housing has increased relative to incomes to the point now where friends cannot save enough to keep up with the ever increasing deposit requirements.

I'm delighted that you think we can switch to a knowledge based economy, but the reality is it's far too late. Changing rules for landlords is simply fiddling around the edges.

sir1963:

A person I worked with sold his rentals for various reasons for $1Million, big number.

But at a 1% interest rate it was making him $10k less tax a year, not enough of an income supplement to live on.

How terrible? What will he do? I guess spending $100,000k over the next ten years wouldn't be enough? That's sixteen years income for median worker.

I think the real worry is if the generation or two behind ever decide to vote, some political party will offer up a land/property tax of some kind and all the renters will say, sounds great. A tick for you.

Perhaps that tax gets passed on, or perhaps a few rental houses are suddenly empty and the owners go, well I really do miss that rent.

mudguard

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#3101014 7-Jul-2023 16:23

tdgeek:

sir1963:

Worse is that we are having more broken families, so that "family" of 4 now consists of two houses of 1 adult and 2 shared kids.

On the flip side is we have an ageing population who will start dying off, taking a lot of pressure off the housing market.

That's a great point. While some will move in with the new squeeze, many will be two homes per one family

Ageing population yes, but it depends on birth rate, which I imagine is lower and later these days

The good news is there will be fewer and fewer people to buy those houses coming onto the market. I think the birth rate dropped below replacement in 2016.

mudguard

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#3101020 7-Jul-2023 16:35

tdgeek:

While I won't blame newly working young adults needs to buy the latest iPhone every year instead of saving for the first home, as the core issue, IMHO, that is one of many factors that has been lost in recent generations.

I think it's worth having a look at the numbers. Would it be fair that a first home buyer should be using the lower quartile price as a target?

In Auckland that's $633,000.

So a young adult, fresh out of studying and ready to take on the world with their first job needs $127K as a deposit

In year one.

I'd have to look at more numbers to see how much that's going up by year on year. My friend who has given up has about that saved now and he is in his early thirties.

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#3101026 7-Jul-2023 16:59

I agree, prices are still way too high. 25% higher than before the pandemic - and they weren't exactly what I would describe as "great" by any stretch of the imagination before coronavirus came along anyway.

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