Our PM Jacinda Ardern (and the government)

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#2890581 23-Mar-2022 12:35

Rikkitic:

I'm sorry for your speech impediment but it is not hard to process that you live in a New Zealand populated by a range of people with a range of ideas and also a sense of humour.

Thanks. Good to know I should take all your postings in jest then.

🤭

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#2890582 23-Mar-2022 12:37

GV27:

Luxon has just given an interview this morning where he says that accomodation costs of 30% to 40% of someone's income is 'ideal'. We're past that point now with low interest rates. It's going to get a lot worse. 50% will be closer to reality for people with large mortgages coming off fixed in the next 12 months.

I have posted my thoughts in the National thread, but I despair how much we have normalised circumstances that we all know just ends up with Kiwis going backwards, and the death of accountability that goes along with it.

What's the magic solution here? Increase wages? Then costs go up. Government reduce tax on petrol? Petrol companies take advantage.

Unless you intend on regulating everything, which hasn't worked well in the past and I doubt this government could competently oversee anyway....

Covid and supply chain issues and weather and everything else has created a perfect storm. The reality is the world is likely going to be worse off for a while, until some things start to normalize.

It wouldn't surprise me if there is a global financial crash in our not too distant future which may force a bit of a reset.

JPNZ

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#2890587 23-Mar-2022 12:44

GV27:

Luxon has just given an interview this morning where he says that accomodation costs of 30% to 40% of someone's income is 'ideal'. We're past that point now with low interest rates. It's going to get a lot worse. 50% will be closer to reality for people with large mortgages coming off fixed in the next 12 months.

I have posted my thoughts in the National thread, but I despair how much we have normalised circumstances that we all know just ends up with Kiwis going backwards, and the death of accountability that goes along with it.

They should be happy they have a mortgage and an asset that has increased in value considerably in the last 2-3 years. Imagine if you are renting and paying 50% of your income?

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#2890638 23-Mar-2022 12:46

networkn:

What's the magic solution here.

Leadership. Following through on policy. The actual thing people voted for you to do.

We have now had 14 years of government where the electorate specifically voted for meaningful housing and tax reform from two major parties, and haven't got it. At some point that's going to severely undermine the credibility of our democracy.

The actual hard decision was, in the face of Covid, to allow the housing market to take a soft landing. Targeted assistance for owner-occupiers facing negative equity and recent FHBs with investors left to take the hit.

Instead we now have an insane situation where the investors got bailed out, have been able to cash in their stimulus-underwritten gains, and will now benefit from the interest rate hikes that we need to cool the market down on the other side - and owner occupiers get to take a hit in living standards as it costs more and more for them to keep the same roof over their head.

We had a chance for real, structural change, but we blew it.

GV27

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#2890643 23-Mar-2022 12:54

JPNZ:

They should be happy they have a mortgage and an asset that has increased in value considerably in the last 2-3 years. Imagine if you are renting and paying 50% of your income?

What do you think is going to happen to people with mortgages coming off fixed in the next 12 months? We now have stonking house prices and rising interest rates, not one or the other.

The asset increasing in value doesn't mean anything unless you're in a position to realise it; i.e. you can sell down to move to the regions or downsize. If you're buying and selling in the same market then you're probably taking on even more debt if your next home has increased in value faster than the one you're in.

For an example; adding a bedroom used to mean adding $50K to our mortgage, now it would mean doubling it. My ability to service that level of debt hasn't increased by the same amount. So while the number might go up on homes.co.nz, rising interest rates and a lack of purchasing power means the reality is very different, and the flow-on effects of reduced spending that will flow from it.

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#2890650 23-Mar-2022 13:12

GV27:

The actual hard decision was, in the face of Covid, to allow the housing market to take a soft landing. Targeted assistance for owner-occupiers facing negative equity and recent FHBs with investors left to take the hit.

Thats happening now, prices are decreasing, FOMO is being replaced by INPT (Im Not Paying That) Negative equity is no real issue, banks wont foreclose if you live in the same house and pay the same mortgage. If you bought in the last year or two, you bought on a rising market, equity will catch up, and you knew low interest rates was not going to be a long term thing

Had all govts been on the build build build plan two decades ago that would have helped immensely but no one did

JPNZ

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#2890653 23-Mar-2022 13:15

GV27:

What do you think is going to happen to people with mortgages coming off fixed in the next 12 months? We now have stonking house prices and rising interest rates, not one or the other.

The asset increasing in value doesn't mean anything unless you're in a position to realise it; i.e. you can sell down to move to the regions or downsize. If you're buying and selling in the same market then you're probably taking on even more debt if your next home has increased in value faster than the one you're in.

For an example; adding a bedroom used to mean adding $50K to our mortgage, now it would mean doubling it. My ability to service that level of debt hasn't increased by the same amount. So while the number might go up on homes.co.nz, rising interest rates and a lack of purchasing power means the reality is very different, and the flow-on effects of reduced spending that will flow from it.

At the end of the day interest rates were at an all time low, everyone knew it wasn't going to last. You have to remember those people have a considerable amount of equity in their home they wouldn't have had before. I do understand the ability to realise the position though. Interest rates starting with a 7.x will be the new normal as between 6-7% historically is where rates should fall.

House prices should begin to fall but hyperinflation may have something to say about that. I can't remember who said it before but there is a very real chance of a correction whether that's on a global or local scale remains to be seen.

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GV27

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#2890660 23-Mar-2022 13:30

JPNZ:

At the end of the day interest rates were at an all time low, everyone knew it wasn't going to last.

The problem is we'd been saying that since the GFC and prices largely just kept going up. Then Covid came along and they +30%'d in 18 months. You could have spent a long time on the sidelines waiting for something that was long overdue, and the government sent really, really strong signals that in no circumstances would it let house prices fall, having chosen not to expend political capital on meaningful action at every turn.

My partner and I ended up buying a few years ago after realising Kiwibuild was going nowhere. I shudder to think how much worse we would be if we'd waited any longer, but the flip side is that we are now stuck in our starter home and face the prospect of having the deposit we saved wiped out if there's a serious correction beyond what was racked up in the Covid response - and that's after years of struggling to get a deposit together in the first place as a white collar DINKY couple, which was more than my parent's house cost in total when they bought the house I grew up in.

A big part of me thinks this isn't really the New Zealand I knew as a kid and I genuinely have to wonder if it's the best place for us to bring up my child. I'm a sort-of-okay-paid white collar professional. If this is getting out of reach for me then I have genuine fear for the thousands upon thousands of people who have it worse, and how they will react in the face of little chance of real improvement.

For context, the portion of my mortgage that is coming off fixed this year was at 2.7x%. It's not hard to see that doubling or even more by the time that rolls around. Forgive for just being so totally overwhelmed by the simple act of trying to keep a roof over my family's head.

gzt

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#2890664 23-Mar-2022 13:36

GV27: The policy was totally unrealistic, the costings were out of date, they rebuffed any suggestion of it during the campaign and then months after forming a government, updated the target prices for Kiwibuild because it turned out the costings were out of date. So yea, I feel like 'Bait and Switch' is the appropriate term here. When you campaign on 'transformational' change and deliver muddling nonsense, that's going beyond 'failed policy implementation'. How many 'failed policy implementations' would they have to rack up before you accepted that their 2017 campaign manifesto was perhaps unrealistic?

We first need to ask what the policy was/is. I found this in a 2019 newshub article:

Newshub: The plan was to build 1000 homes in the first year, 5000 in the second, and 10,000 the year after. The promise was to have 100,000 houses built within the decade.

This is proportionate to the house building programme undertaken 1937-1949 by the first Labour government in New Zealand. The conditions are very different and the mechanisms chosen for delivery are very different. The 2016 campaign promise itself was not unrealistic. The mechanisms chosen were clearly not capable of delivering in the timeframe. Imo the government genuinely thought they had chosen the right formula. They got it wrong for delivery in that timeframe.

There are examples of governments promising stuff they have no intention to deliver. This is not one of those examples.

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#2890668 23-Mar-2022 13:38

GV27:

My partner and I ended up buying a few years ago after realising Kiwibuild was going nowhere. I shudder to think how much worse we would be if we'd waited any longer, but the flip side is that we are now stuck in our starter home and face the prospect of having the deposit we saved wiped out if there's a serious correction beyond what was racked up in the Covid response - and that's after years of struggling to get a deposit together in the first place as a white collar DINKY couple, which was more than my parent's house cost in total when they bought the house I grew up in.

IIRC (and I apologise in advance if my memory has failed me) in much earlier posts (possibly in another thread) I believe you were one person (among a few) who were all for a market correction, or for serious intervention of the Government to bring house prices crashing down significantly. This would have advantaged you significantly as a buyer, but now you are saying you are worried if there is a big correction, as an owner.

You can't have it both ways. You either have to be happy to take the hit in one place or the other, not neither. I don't mind if our house price doesn't continue to rise. I believe it's already way over what it should be, if it dropped a couple of hundred grand, the only impact would be that my rates would drop.

As someone who has family and friends living in Australia (if that was a location you are thinking of an alternative), they are pretty much in the exact same boat as any Kiwi's I know trying to buy houses right now.

The problem is largely that there is more demand than supply. In actual fact, pretty much every problem facing the world right now can be boiled down to too many people.

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#2890671 23-Mar-2022 13:42

gzt:
GV27: The policy was totally unrealistic, the costings were out of date, they rebuffed any suggestion of it during the campaign and then months after forming a government, updated the target prices for Kiwibuild because it turned out the costings were out of date. So yea, I feel like 'Bait and Switch' is the appropriate term here. When you campaign on 'transformational' change and deliver muddling nonsense, that's going beyond 'failed policy implementation'. How many 'failed policy implementations' would they have to rack up before you accepted that their 2017 campaign manifesto was perhaps unrealistic?

We first need to ask what the policy was/is. I found this in a 2019 newshub article:

Newshub: The plan was to build 1000 homes in the first year, 5000 in the second, and 10,000 the year after. The promise was to have 100,000 houses built within the decade.

This is proportionate to the house building programme undertaken 1937-1949 by the first Labour government in New Zealand. The conditions are very different and the mechanisms chosen for delivery are very different. The 2016 goal itself was not unrealistic. The mechanisms chosen were clearly not capable of delivering in the timeframe. Imo the government genuinely thought they had chosen the right formula. They got it wrong for delivery in that timeframe.

There are examples of governments promising stuff they have no intention to deliver. This is not one of those examples.

That's interesting. Over a cold beverage after a squash match in 2018, I was talking to a senior manager at Fletchers. His view was it was physically impossible. He said with every resource available to Flectchers and assuming no supply issue they couldn't do it. He said the Government was told in no uncertain terms it wasn't possible.

GV27

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#2890691 23-Mar-2022 14:29

networkn:

IIRC (and I apologise in advance if my memory has failed me) in much earlier posts (possibly in another thread) I believe you were one person (among a few) who were all for a market correction, or for serious intervention of the Government to bring house prices crashing down significantly. This would have advantaged you significantly as a buyer, but now you are saying you are worried if there is a big correction, as an owner.

You can't have it both ways.

I'm not trying to. I need to be clearer here. When I bought our modest starter home, the idea was build up equity by paying the mortgage down, and then ideally save enough to get a bigger family home. The idea of a huge stonking gain on our ideal first family home never came into it.

The problem with the 'big correction' is that it's coming at the same time as inflation (which central banks ignored for months arguing it was transitory) and the fall in house prices is going to result in people with historically huge loans relative to earnings being hit, effectively, with a double-whammy, after governments and central banks showed little interest in a corrective action doing anything themselves about house prices over a span of many years.

New Zealand will be a crappy place if we keep going with 30 year mortgages on starter homes that cost 10x wages. That needs to change. But treating anyone who (as a function of being a certain age) just had to bite the bullet and buy something over the last three years as collateral damage is something that is going to lead to a lot of bad outcomes, particularly mental-health wise.

Like I say, we had numerous opportunities to engineer a soft landing to protect owner-occupiers. Our leaders chose the path of least resistance. Here we are.

JPNZ

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#2890698 23-Mar-2022 14:39

GV27:

For context, the portion of my mortgage that is coming off fixed this year was at 2.7x%. It's not hard to see that doubling or even more by the time that rolls around. Forgive for just being so totally overwhelmed by the simple act of trying to keep a roof over my family's head.

Be thankful, you could have it a WHOLE lot worse, as you mentioned what about the hundreds of thousands families that the thought of even buying a house is unobtainable.... EVER. Rents go up, the rich get richer and the poor get poorer.

Inequality in this country must be nearing an all time high.

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#2890719 23-Mar-2022 14:59

JPNZ:

Be thankful, you could have it a WHOLE lot worse, as you mentioned what about the hundreds of thousands families that the thought of even buying a house is unobtainable.... EVER. Rents go up, the rich get richer and the poor get poorer.

Inequality in this country must be nearing an all time high.

I am thankful it isn't worse but that doesn't mean I have to be thrilled about the prospect of high interest rates, high inflation and negative equity either.

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#2890808 23-Mar-2022 15:41

GV27:

JPNZ:

Be thankful, you could have it a WHOLE lot worse, as you mentioned what about the hundreds of thousands families that the thought of even buying a house is unobtainable.... EVER. Rents go up, the rich get richer and the poor get poorer.

Inequality in this country must be nearing an all time high.

I am thankful it isn't worse but that doesn't mean I have to be thrilled about the prospect of high interest rates, high inflation and negative equity either.

Higher than the artificially lower rates that you have been able to benefit from up until now.

I mean, I agree you don't have to be thrilled about anything specifically or not, but it's worth putting some of this into perspective so as not to end up in a hot tub with a razer...

Are you really likely to end up in negative equity? I mean it's possible, but certainly not reality, yet at least?

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