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Topic # 229040 5-Feb-2018 00:32
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A discussion about job descriptions went a bit off topic, so starting a new thread here.

 

@Technofreak:

 

@mattwnz:

 

Theoretically wage rises and house price rises should be similar. But the last few governments  have allowed house prices to get out of control, without suitable controls being put in place. I don't even think now, enough is being done.  It has been fueled by cheaper and cheaper credit, and interest rates are only contining to drop.

 

 

Getting a bit off topic here with the house price V wage issue, however since it's been raised I will comment.

 

I don't think you can solely blame the governments for house price rises. The price of something is based on supply and demand. Prices go up when supply is less than demand. Yes the government has some control over demand by controlling immigration but they have a much more limited control over supply. Local government and other factors tend to control supply and supply is where a lot of the issues lie.

 

Cheaper credit has a zero sum effect in my view as credit can be used to buy existing or build new.

 

If it's cheaper to build new then by and large a new property will be added to the housing pool. Therefore the prices of existing houses is to a large extent determined by the cost of building a new house. The other main factor in the price of an existing house is it's location and the desirability of that location. The government has very little say on that.

 

If we put to one side the effect location has on house prices then the main factor setting the price of houses is the cost of building a new one. Why has the cost of building new houses risen so much?

 

I would suggest there are several reasons.

 

  • The inherent value of the land, in other words what can be produced with that land. If farming/horticulture is providing good returns then land values go up. Where that parcel of land is located and it's terrain etc also affects it's worth as a potential housing site. Land values have definitely risen over time.
  • The costs of developing that land, application of local government rules etc. Over the years the overheads of developing land have increased enormously due to RMA and new council rules.
  • The compliance costs involved in building. Local body rules and regulations along with HSWA rules have had a significant impact. One example, in the past you could move into a partially finished house with all the sanitary requirements satisfied and then complete it as finances allowed, now all the wall linings etc etc must be complete. This is a financial barrier for some people, they have to find more money right at the start of the build process and have to probably pay rent for a longer period.
  • Compliance costs have skyrocketed. The number of stage inspections have increased dramatically. In some some cases we are now paying the price of previously inept council oversight which resulted in a myriad of new rules. The old rules were quite adequate but since some councils were inept at monitoring them problems arose, ergo in the eyes of the authorities the rules were inadequate and new rules are needed. Once again the consumer pays.
  • While there is most certainly a need for rules and guidelines the costs of many of the rules and regulations is way out of proportion to the value the rules are supposed to deliver. For example I don't think anyone objects to paying for an inspection but the backroom overhead costs of providing that inspection can be a bit over the top. Councils are very much cost plus organisations. They don't seem to realise that over time a dollar here and there adds up to many many dollars. They are not good at controlling costs.

I guess to sum up we need to realise the government on it's own has very little to do with house prices. We as consumers have very often welcomed the new rules and regulations as we expect to get a better product. Whether or not we do is another story. There is a price for all of this "improved" regulation and we are paying for it in increased house prices

 


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IcI



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  Reply # 1951668 5-Feb-2018 00:42
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Technofreak:

 

I don't think you can solely blame the governments for house price rises. ... Yes the government has some control over demand ... Local government and other factors tend to control supply and supply is where a lot of the issues lie.

 

... The other main factor in the price of an existing house is it's location ... The government has very little say on that.

 

... I guess to sum up we need to realise the government on it's own has very little to do with house prices. ...

 

I think we disagree on the amount of control government has on these factors. Please remember that local government / councils are still government; maybe not national govt, but still.

 

The govt are the ones that decide where a road should be built. They decide how to zone certain regions, they decide what amenities should be available. The govt set a lot of rules which shape the market.


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  Reply # 1951672 5-Feb-2018 02:07
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In short, since NZ doesn't have a constitution, Parliament can make any law that it sees as necessary. (or at least it can when enough politicians agree). So any silly rules enacted by busybody councils can be very easily overruled by central government.

But the government won't fix high house prices. As they know that the older you are, the more likely you are to vote. So they are appeasing the baby boomers and retirees. And since this group is more likely to own their own homes, and they have made lots of money from rising house prices, that they then want to cash out. And / or making money by owning rentals, which they can get a rent rise each year, without needing to improve the property. And without having to pay tax on their investment gains.

Even Labour haven't said anything (that I know of) about lowering house prices. Only that they want to build more houses.

Don't expect much to change until millenials + gen X become a big enough voter bloc to force some change.





 
 
 
 


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  Reply # 1951673 5-Feb-2018 02:22
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As for the actual rules. Main problem is the Resource Management Act. Just look at the rate of increase in house prices before and after it was enacted.

And all of the other rules that have sprouted from the RMA. Especially the failed social experiment that is the urban rural limits. For example in Albany you have terraced houses and apartments almost next door to lifestyle blocks. With lifestyle blocks becoming the new urban sprawl. And lots of commuting traffic winding along rural roads, going between small towns and the big city. As housing in those small towns is the only affordable housing.

The town planners wet dream of a small compact city, is a complete lie. As council rules mean that lots of existing built on properties are uneconomic to redevelop.And the fast rising prices, mean that in some cases. The owner makes more money by not developing the property.





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  Reply # 1951674 5-Feb-2018 02:29
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Other effects of the high house prices:

A lot more traffic congestion, as people struggle to afford to live close to their work / education / family etc.

More money spent on housing means less money available to spend on local businesses. Meaning those companies struggle to afford to increase staff wages. And capital expenditure.

Higher government welfare payments. The accommodation supplement being the obvious one. But also more student loan and allowances. More demand for state housing, as well as a bigger gap between income related rents and market rents charged to state house tenants. And now the winter energy payment as well.





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  Reply # 1951683 5-Feb-2018 07:28
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Aredwood: 

But the government won't fix high house prices. As they know that the older you are, the more likely you are to vote. So they are appeasing the baby boomers and retirees. And since this group is more likely to own their own homes, and they have made lots of money from rising house prices, that they then want to cash out. And / or making money by owning rentals, which they can get a rent rise each year, without needing to improve the property. And without having to pay tax on their investment gains.

 

I see this sort of thing being quoted all the time. Where's our proof? A significant number of the millenials in my extended family own houses, so to say the government is leaving the housing prices alone to look after the baby boomers isn't true.

 

I'd like to hear what you think the government could do to reduce house prices.





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  Reply # 1951728 5-Feb-2018 08:46
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IcI:

 

Technofreak:

 

I don't think you can solely blame the governments for house price rises. ... Yes the government has some control over demand ... Local government and other factors tend to control supply and supply is where a lot of the issues lie.

 

... The other main factor in the price of an existing house is it's location ... The government has very little say on that.

 

... I guess to sum up we need to realise the government on it's own has very little to do with house prices. ...

 

I think we disagree on the amount of control government has on these factors. Please remember that local government / councils are still government; maybe not national govt, but still.

 

The govt are the ones that decide where a road should be built. They decide how to zone certain regions, they decide what amenities should be available. The govt set a lot of rules which shape the market.

 

 

I agree.  Not only those direct controls on what might be called "planning" be that local council or central govt, but prudential regulation, taxation, immigration, welfare accommodation payments / subsidies etc etc.

 

It never ceases to amaze me that some people seem to believe that "the market" dictates pricing in a vacuum - ie the market isn't operating in a created environment of controls, policy, and regulation.


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  Reply # 1951730 5-Feb-2018 08:55
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Aredwood: But the government won't fix high house prices. As they know that the older you are, the more likely you are to vote. So they are appeasing the baby boomers and retirees.

I've heard this a number of times. Sorry but I regard this as more or less a conspiracy theory. IME this group is just as concerned about the situation as anyone else. In some cases more so due to concerns about the younger generation.

The only sensible solution is an increase in supply.

The secondary issue is a lot of existing stock is low quality. Imo on this basis there is some catching up to do.

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  Reply # 1951866 5-Feb-2018 10:53
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Government can affect it but I can't see it happening in a meaningful way in NZ for various reasons.

Anyone who has been to the UK may be familiar with Milton Keynes. That is an excellent example of central government town planning. Here is Wikipedia's entry

"In the 1960s, the UK Government decided that a further generation of new towns in the South East of England was needed to relieve housing congestion in London.


Population trend of Borough and Urban Area 1801–2011
Since the 1950s, overspill housing for several London boroughs had been constructed in Bletchley.[5][6][7] Further studies[8][9] in the 1960s identified north Buckinghamshire as a possible site for a large new town, a new city,[10] encompassing the existing towns of Bletchley, Stony Stratford and Wolverton. The New Town (informally and in planning documents, "New City") was to be the biggest yet, with a target population of 250,000,[11] in a "designated area" of 21,850 acres (34.1 sq mi; 88.4 km2).[12] The name "Milton Keynes" was taken from the existing village of Milton Keynes on the site.[13]

On 23 January 1967, when the formal new town designation order was made,[2] the area to be developed was largely farmland and undeveloped villages. The site was deliberately located equidistant from London, Birmingham, Leicester, Oxford and Cambridge with the intention[14] that it would be self-sustaining and eventually become a major regional centre in its own right. Planning control was taken from elected local authorities and delegated to the Milton Keynes Development Corporation (MKDC). Before construction began, every area was subject to detailed archaeological investigation: doing so has exposed a rich history of human settlement since Neolithic times and has provided a unique insight into the history of a large sample of the landscape of north Buckinghamshire."





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  Reply # 1952130 5-Feb-2018 18:19
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IcI:

 

Technofreak:

 

I don't think you can solely blame the governments for house price rises. ... Yes the government has some control over demand ... Local government and other factors tend to control supply and supply is where a lot of the issues lie.

 

... The other main factor in the price of an existing house is it's location ... The government has very little say on that.

 

... I guess to sum up we need to realise the government on it's own has very little to do with house prices. ...

 

I think we disagree on the amount of control government has on these factors. Please remember that local government / councils are still government; maybe not national govt, but still.

 

The govt are the ones that decide where a road should be built. They decide how to zone certain regions, they decide what amenities should be available. The govt set a lot of rules which shape the market.

 

 

The high cost of building, and the lack of competition in the building market also have a lot to do with high housing prices. And that is due to the central governments lack of regulation and having polcies that encourage more entrants into NZ. For some items you find when building, that although it appears their is competition with different companies selling competing products, those companies may all be owned by the same parent company, they just operate under different brands and sell exclusive branded goods.  Some things just so expensive in NZ when it comes to building, even when compared to Oz. The RRP on many items is also often huge compared to the price you can get it for if you negotiate.

 

The less local government have any control over, the better IMO. The huge variances in policies, fees etc just creates so many problems. That is why for some things, the government have had to bring in national standards for councils.


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  Reply # 1952131 5-Feb-2018 18:25
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gzt:
Aredwood: But the government won't fix high house prices. As they know that the older you are, the more likely you are to vote. So they are appeasing the baby boomers and retirees.

I've heard this a number of times. Sorry but I regard this as more or less a conspiracy theory. IME this group is just as concerned about the situation as anyone else. In some cases more so due to concerns about the younger generation.

The only sensible solution is an increase in supply.

The secondary issue is a lot of existing stock is low quality. Imo on this basis there is some catching up to do.

 

 

 

At some stage supply will catch up with supply. Whether there is some form of market crash from developers not being able to sell those houses, I don't know. But at the moment we are importing a large number of buyers from overseas into NZ. But Labour are supposedly going to reduce the historically high numbers. We do still have a  lot of leaky buildings as well, but people in Auckland have benefited from the huge price rises on their properties, so they are likely to end up being far better off anyway, just based off their land value.

 

The downside with their escalating house prices, is higher intensification, and now you are getting a lot of complaints from people that they are getting multilevel flats being built next to them, that is blocking light. That is just one of the downsides of your property increasing so much in value, as much of that value increase, is in the actual land. It is then better value for developers to build high density housing on it.


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  Reply # 1952177 5-Feb-2018 21:24
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I read an article here

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11702585

Which says building materials are a whopping 60% more expensive than the USA....





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  Reply # 1952199 5-Feb-2018 22:27
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@mattwnz: At some stage supply will catch up with supply. ...

 

foot-in-mouth


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  Reply # 1952200 5-Feb-2018 22:30
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Five years ago, Tauranga seemed to be the new & upcoming place for cheap(er) housing. Now I've heard whispers about Napier / Hastings.

 

Anybody got ideas where the next place will be? I want to get in there!


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  Reply # 1952201 5-Feb-2018 22:33
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On a more serious note:

 

While are many things to complain about, is there actually something we can do? Individually or collectively?

 

  • Write a letter to our local politician
  • Lobby who for what?
  • Start a strike?

Any ideas on how to make it better for people who feel the pinch like us?


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  Reply # 1952210 5-Feb-2018 23:01
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IcI:

 

On a more serious note:

 

While are many things to complain about, is there actually something we can do? Individually or collectively?

 

  • Write a letter to our local politician
  • Lobby who for what?
  • Start a strike?

Any ideas on how to make it better for people who feel the pinch like us?

 

 

 

 

I think it might actually be possible to build a house by having someone in the US crate the materials, ship them here AND send the builders over to do the work as a holiday job and still have it work out cheaper and faster than doing it the normal way.

 

 

 

One thing I thought of. In the UK, if you build a house you can apply for a refund of the VAT (GST) even if you are a private individual rather than a building company. Perhaps that is one suggestion we could make to those in power when we have the opportunity? It would reduce a new build by the owner by 15% and since they will probably be borrowing to build, they won't be having to borrow 15% to just give it away in tax.






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