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