Solving the house price problem should be easy!

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Forums › Politics › Solving the house price problem should be easy!

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2245 posts

Uber Geek

#3100728 6-Jul-2023 19:12

Eitsop:

Some ideas for solving house problems are

capital gains tax, like Labour had proposed
land tax, like TOP party
rent controls, like greens saying 3% rent increase cap
national I don't think has any ideas, other than blocking the above ideas
We need to step back and ask what we are NZers want for our population

affordable houses
that everyone in NZ should be able to buy a house
that people should be able to pay off their mortgage by the time they are retired
house price inflation should be inline with normal inflation
If the above is correct, then the answer is as simple as

changing the mandate of RBNZ to also control house price infaltion to the same target as normal inflation
giving RBNZ more tools to control inflation, eg

interest rates are great to control house prices,
Other tools to control normal goods and services inflation
While the above is simple, no government or political party will do what's right.. they only do what suits the people that get them into power. So we flip-flop between left and right politics, which most of the western world is suffering from. When will we get leadership that can combine both left and right sides of government to get meaningful long-lasting change.

Why do political parties believe they have all the right policies? its like waring factions believing god is on their side.

True Leadership would consist of having referendums on what the public wanted NZ to be like.. and executing that. This was clearly done with the right to die referendum.. and while the cannabis referendum showed a divided public for a decisive change.. it did indicate something could have been done.

We should be voting in people that execute a framework of results from referendums

So I open the floor to your views.. will they be left or right.. or middle of the road

I have a disabled son. Please explain how he will be able to buy a house.

The rest was just junk.

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sir1963

2245 posts

Uber Geek

#3100729 6-Jul-2023 19:23

mudguard: It would be interesting to compare demographics over that building boom in the seventies.
Say how many houses were built from 1970-1979 and what did the population grow by?
If we've added 800,000 in the past ten years and that kind of growth holds steady instead of increasing, could we even keep up?

Per head of population I believe we were building twice as many homes in the 1970's as we do now.

HOWEVER

They were not double glazed, not thermally broken.

Insulation was crude

Seismic standards have increased

No ensuites, family rooms, plumbing and electricity was significantly simpler than it is now.

No environmental management done back then.

Health and safety was nil, I remember as a 7 year old walking across the roof trusses on my dads build sites, no scaffolding back then.

Kitchens were MUCH cruder, no dishwashers, wine racks, etc etc etc back then. Cupboard doors were painted, hinges exposed.

Houses were smaller

Services like water, sewerage, storm water were significantly cruder. I remember watching the Army helicopters being used to put a roof over the towns water reservoir , until then it was just a big open tank.

etc etc etc
All of these things have added to costs and are "expected" as a minimum these days.

sir1963

2245 posts

Uber Geek

#3100733 6-Jul-2023 19:34

tdgeek:

Eitsop:

Supply is part of the issue.. the other time house prices stagnated was the 90's when everyone went to Australia... but demand can be constrained. Which is why right now with high interest rates, demand has tapered, and if it increased more, we would see even less demand in market.

Demand might taper but that's demand to buy a house. The other way to look at it is that the population grows. Is houses per capita remaining stable or is it dropping?

Immigration less Emmigration

Natural growth of births exceeding deaths

There is the change in the sizes /make-up of families

5 million people with a family size of 2 adults and 4 kids requires less housing than 5 million people of 2 adults and 2 kids.
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.

sir1963

2245 posts

Uber Geek

#3100741 6-Jul-2023 20:08

Eitsop:

tdgeek:Demand might taper but that's demand to buy a house. The other way to look at it is that the population grows. Is houses per capita remaining stable or is it dropping?
Immigration less Emmigration
Natural growth of births exceeding deaths

We give RBNZ to maintain inflation, independent of government in place

We could give RBNZ ability to

maintain house price inflation by way of cash rate
incentivise new house builds by way of cash rate discount, so banks need to give discount for new builds
use KiwiSaver as a tool to maintain inflation for goods and services..

Completely ignores the imported inflation for building materials as well as for machinery to manufacture materials etc for new houses. If existing houses are forced to remain price stable and new build cost twice as much no one will build, creating an even WORSE crisis.

Why and how would banks "give a discount". You will just end up with the situation that first home buyers can not afford a new home and then not be able to afford the higher interest rates for an existing home.

What defines a "new build", for how many years/owners is it a "new build". Then you run into the bright line test for capital gains taxes.

How many years does the discount go for, 20 years, the length of the mortgage ?

What about immigrants, are they better off leaving their money elsewhere at a higher interest rate and get a "discounted" rate here for a new home build ?

If new homes due to all sorts of reasons (building costs+ compliance , etc) is much higher than existing homes how would this "discount" have any impact. I am better off staying where I am and making improvements. Real estate agent fees + legal fees etc would come close to the same cost of me double glazing my home, why build ? Likewise a first home buyer would be better off buying something existing too.

New houses are on much smaller sections, why would I sell and build ?

Cash rate impacts all of commerce, will it be OK to stop businesses from growing or forcing them to close to maintain house prices ?

Kiwi saver and the amount people put into kiwi saver is not compulsory , will you change that ?

You are just creating a different set of market distortions which will have their own "unintended consequences"

Rule 1. People will not do what you want them to do

Rule 2. People will not behave the way you expect them to do

Rule 3. The more you try and force 1&2 into compliance, the more people will resist in unexpected and unwanted ways.

We have laws, the fact that you find the consequences of breaking those laws unpalatable as well as having a moral aversion to breaking those laws anyway does not mean we do not need prisons. The fact that you can not fathom someone else's reasoning (or lack there of) does not change the fact that they will do as they do. The USA has the death penalty, yet their murder rate is higher than here.

You make things too regulated and it will put off all sorts of other investment which will have consequences for the economy.

This is NOT a "simple problem" with a "Simple solution", we are now an active art of the world, we ned the world for exports and imports, we can not regulate the world in the way you would need to achieve your "simple solution", you will just create shortages in materials and that will flow into all areas of the economy.

Eitsop

539 posts

Ultimate Geek

ID Verified

#3100746 6-Jul-2023 20:17

sir1963:I have a disabled son. Please explain how he will be able to buy a house.

I was too broad.. every family should be able to buy a house in NZ

sir1963

2245 posts

Uber Geek

#3100747 6-Jul-2023 20:26

Eitsop:

sir1963:I have a disabled son. Please explain how he will be able to buy a house.

I was too broad.. every family should be able to buy a house in NZ

So not the disabled then.... do you consider that discriminatory ?

The disabled already have a much harder life than anyone else .

Perhaps by taxing families more he can be given a house to own and the families can continue to pay his expenses (rates, insurance, maintenance , etc)

And how do you define "family" ?, are separated families only entitled to own one house ?

Thats the problem with "simple" and regulations, they very quickly become habit holes to get lost down.

I disagree with the libertarian world view, but the only time equality happens is when everyone has nothing.
50% of people in every human endeavour are below average, and you can not fix that.

mudguard

1726 posts

Uber Geek

#3100748 6-Jul-2023 20:26

sir1963:

Cash rate impacts all of commerce, will it be OK to stop businesses from growing or forcing them to close to maintain house prices ?

Surely this underpins a big part of the problem? How many business loans are secured by houses? House prices shouldn't affect commerce in the first place. I've no idea if non secured lending costs have risen or dropped in the past ten years but realistically it's the ones that have the debt that should bear the brunt.

Now I've no doubt repayment increases won't be absorbed by the owners of properties and will be passed on as higher rents. But surely in a perfect world, that's the owner's problem. Not the tenant. Kind of how I wonder if the accommodation supplements have pushed rents higher than what they should be.

I certainly agree that homes being built are not the same as what were built in the past, and nor should be. I have a couple of cars, thirty years apart in age, and I know which one I'd prefer to spend more time in, and which one I'd rather be in, in accident.

Eitsop

539 posts

Ultimate Geek

ID Verified

#3100750 6-Jul-2023 20:36

sir1963: Completely ignores the imported inflation for building materials as well as for machinery to manufacture materials etc for new houses. If existing houses are forced to remain price stable and new build cost twice as much no one will build, creating an even WORSE crisis.

Why and how would banks "give a discount". You will just end up with the situation that first home buyers can not afford a new home and then not be able to afford the higher interest rates for an existing home.

What defines a "new build", for how many years/owners is it a "new build". Then you run into the bright line test for capital gains taxes.

How many years does the discount go for, 20 years, the length of the mortgage ?

This is NOT a "simple problem" with a "Simple solution", we are now an active art of the world, we ned the world for exports and imports, we can not regulate the world in the way you would need to achieve your "simple solution", you will just create shortages in materials and that will flow into all areas of the economy.

Stable.. I mean, inline with normal inflation, so it should stay in line with imported inflation etc

Good questions, I am putting it out there to come up with a solution. what would you suggest?

Just like RBNZ varies the cash rate.. the discount rate could vary.. so while the cash rate maybe 5.5% the discount rate could be 3.5%. but when we have better conditions.. the discount rate, could be set to same as cash rate.

And the discount rate would be void when once the house is sold.

Doing something is better than putting hands up. the RBNZ tool is too blunt..and we get boom & bust cycles..

Any constructive feedback, and ideas can be incorporated..

Eitsop

539 posts

Ultimate Geek

ID Verified

#3100752 6-Jul-2023 20:42

sir1963:

So not the disabled then.... do you consider that discriminatory ?

The disabled already have a much harder life than anyone else .

Perhaps by taxing families more he can be given a house to own and the families can continue to pay his expenses (rates, insurance, maintenance , etc)

And how do you define "family" ?, are separated families only entitled to own one house ?

Thats the problem with "simple" and regulations, they very quickly become habit holes to get lost down.

I disagree with the libertarian world view, but the only time equality happens is when everyone has nothing.
50% of people in every human endeavour are below average, and you can not fix that.

Dude.. do you only know how to shoot down ideas?

My brother is disabled as well.. do I have a solution for him... no..am I only self centred thinking of myself and my own family.. no..

a general principal is that a family on average income, should be able to afford a house and pay it off by the time they are retired. they way house prices are this can't happen..

sir1963

2245 posts

Uber Geek

#3100755 6-Jul-2023 20:54

mudguard:

sir1963:

Cash rate impacts all of commerce, will it be OK to stop businesses from growing or forcing them to close to maintain house prices ?

Surely this underpins a big part of the problem? How many business loans are secured by houses? House prices shouldn't affect commerce in the first place. I've no idea if non secured lending costs have risen or dropped in the past ten years but realistically it's the ones that have the debt that should bear the brunt.

Now I've no doubt repayment increases won't be absorbed by the owners of properties and will be passed on as higher rents. But surely in a perfect world, that's the owner's problem. Not the tenant. Kind of how I wonder if the accommodation supplements have pushed rents higher than what they should be.

I certainly agree that homes being built are not the same as what were built in the past, and nor should be. I have a couple of cars, thirty years apart in age, and I know which one I'd prefer to spend more time in, and which one I'd rather be in, in accident.

House prices DO impact commerce, for a start it governs how much spare money people have for other things, that is the whole point about raising interest rates, it removes money from the economy causing it to slow down. And certainly interest rates have a huge part to pay in commerce , buying a new CNC lathe for example could cost $100k and more, they will need to borrow to buy this. If interest rates rise the costs go up, but then the risks of reduced work because everyone has higher costs and the price of jobs will increase will mean the risk may be too high, so we get loss of expansion and loss of productivity.

To argue that the accommodation supplement has cause house price rises is akin to saying benefit increases increase the number of people on them. The AS is a targeted assistance. Taking it away will not change things, they will just do without other things. Good tenants will be unlikely to be paying "market rates", ALL of mine are paying at least $200 a week below market rates.

Further "manipulation" will simply mean I will be forced to increase rents to protect my investment and their financial viability. It is because I have had good tenants that my costs are lower (I have had bad tenants!) and they get that benefit returned to them. But I can only do that when there is stability.

Increased repayments, no matter what business gets passed on, supermarkets, internet, trades, retail, power, gas, manufacturing, food production, etc etc.

I am not sure how you figure putting suppliers of a product (including landlords) out of business by not allowing them to recover cost increases helps anyone, you may as well be arguing that increased costs on employees are not the business owners problem and they should not expect a pay rise.

mudguard

1726 posts

Uber Geek

#3100756 6-Jul-2023 20:56

Eitsop:

A general principal is that a family on average income, should be able to afford a house and pay it off by the time they are retired. they way house prices are this can't happen..

Median income in NZ is $62,000. So where it gets tricky is do you use one or two incomes now? I guess the rose tinted view was buying a home on one income while one partner stayed home full time as long as possible.

An old theory was to not exceed 28% of your income on housing (mortgage, insurance, rates etc)

So for $62,000 that's $1446 for housing per month. I had a look at bank calculator and it allowed for a purchase of a property of $320,000, with a $20,000 deposit.

But critically, that's with mortgage repayments of $2000 per month, so well over the "28"% rule.

I'm not sure $320,000 gets you anything these days, probably not even Westport. Where you wouldn't have a job.

mudguard

1726 posts

Uber Geek

#3100761 6-Jul-2023 21:09

sir1963:

House prices DO impact commerce, for a start it governs how much spare money people have for other things, that is the whole point about raising interest rates, it removes money from the economy causing it to slow down.

It really directly affects home owners with mortgages, they stop spending. That spare money is only there due to lower interest costs. Believe me, the finance sector I work in is fueled by this surplus money. It's the first sector that dries up (the toys). But it's not renters who were buying these things.

And as fewer and fewer people own, the less that will be bothered by rising rates. We are only ageing with fewer young people.

sir1963:

To argue that the accommodation supplement has cause house price rises is akin to saying benefit increases increase the number of people on them. The AS is a targeted assistance. Taking it away will not change things

I can't speak to house prices rising, but it will have increased rents.

If hypothetically you removed the accommodation supplement over night, what would happen? They would not be able to pay rent. Does this mean the rents they currently pay are affordable without the supplement, probably not. I've heard anecdotal examples from colleagues in retail banking about working out rents paid as to what kind of mortgage could be afforded being skewed by accommodation supplements. IE the rent a person currently paid with the help of the accommodation supplement was not indicative of the mortgage that could be paid.

Now on the other side, a first home owner may not be able to buy the same kind of house they currently rent, I don't know, but if they are in area an the average rent is X and the mortgage repayment is similar, they won't get close if they've been relying on the supplement.

sir1963

2245 posts

Uber Geek

#3100769 6-Jul-2023 21:38

Eitsop:

sir1963:

So not the disabled then.... do you consider that discriminatory ?

The disabled already have a much harder life than anyone else .

Perhaps by taxing families more he can be given a house to own and the families can continue to pay his expenses (rates, insurance, maintenance , etc)

And how do you define "family" ?, are separated families only entitled to own one house ?

Thats the problem with "simple" and regulations, they very quickly become habit holes to get lost down.

I disagree with the libertarian world view, but the only time equality happens is when everyone has nothing.
50% of people in every human endeavour are below average, and you can not fix that.

Dude.. do you only know how to shoot down ideas?

My brother is disabled as well.. do I have a solution for him... no..am I only self centred thinking of myself and my own family.. no..

a general principal is that a family on average income, should be able to afford a house and pay it off by the time they are retired. they way house prices are this can't happen..

The "shooting down of ideas" is a process to ensure that the ideas are valid. This is called the "scientific process" where you have to cover your A$$ and make sure you have covered all your angles to ensure you idea is actually valid, because sure as eggs someone will find every hole you have left open and make the whole idea look stupid.

I do have a solution for my son in that I have bought a flat for him, and it will be in a trust so he is looked after for life. I get attacked for being a landlord and trusts are being attacked too. One of the unintended consequences for these actions is that my son may be forced out of his home as the costs become too high and he becomes a ward of the state with no security in life once I am gone.
He loses
The tax payer loses

The house prices are not the sole problem
Wages are too low, and they are too low because we keep relying on low wage, low return industries....Primary Produce and tourism.
As Sir Paul Callaghan said " We are poor because we choose to be poor"

The way to "make money" in kids minds is to be an internet star, a sports player, someone famous , they don't have to work.....
Universities are closing down whole subject areas because of gross underfunding. Kids don't want to do science and engineering because it is hard, and to be honest the pay sucks too, more so when you consider the hours worked.The $128 Million promised by Labour over 2 years works out to be $6 million per tertiary institution a year, absolutely pointless when their income has been destroyed by inflation for 20 years.
Senior lecturers used to be paid the same as a Backbench MP, no where close now
Lab Technicians at University can earn more by being a lab tech at a high school
Nursing lecturers can earn FAR MORE by going back Nursing (A Nurse practitioner can make 200K plus a year )

If we want the same standard of living as Australia we would need to double farming or triple tourism. Neither of which is possible without significant degradation to the country. We need to realise that education needs to be rewarded, that science/technology/engineering are the way to improve everyones wages and our GDP.
Meanwhile rockets labs is US owned. Xero is on the Australian stock market, not the NZ one, F&P white ware is now Chinese owned, a Large chunk of Weta is US owned, the All blacks are part US owned, Fonterra was doing a lot of its R&D in Tasmania Australia , Canterbury clothing is UK owned, Kathmandu is overseas owned.
We do not value success in NZ, in fact those who do better get abused, called greedy etc, tall poppy syndrome at its best
Is it any wonder our best and brightest head overseas , they want more than our country is comfortable with letting them strive for.

Kids need to know that they have to work hard at school and education has actual rewards .
I am 60, and I still study to keep my skills up to date, but I am in a job I have been in for about 40 odd years now, because it is interesting, challenging. They pay is not that good but I don't want to live in Auckland even if it meant an extra $50k+ a year.

You think getting rid of successful people is the way forward ?, equality in poverty sucks for everyone.

mudguard

1726 posts

Uber Geek

#3100771 6-Jul-2023 21:56

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.

sir1963

2245 posts

Uber Geek

#3100774 6-Jul-2023 22:04

mudguard:

[Now on the other side, a first home owner may not be able to buy the same kind of house they currently rent, I don't know, but if they are in area an the average rent is X and the mortgage repayment is similar, they won't get close if they've been relying on the supplement.

50,000 home owners get the accommodation supplement.
It allows the disabled to live close to facilities, family, public transport, healthcare
It allows families to live close to work, schools and infrastructure as well as safer neighbourhoods
It allows the elderly to continue to live in the neighbourhoods they are familiar with.

Without the supplement , those that can not afford to own or pay more rent will be pushed further and further into worse marginalised communities.
They will also have far greater expenses for getting to work/school/shops/healthcare financially as well as time wise.

Lets assume based on the average house in Auckland having been $1M

Landlord has 50% deposit, leaving 500K mortgage

At 6% interest that is 30K a year, or $600 a week
Rates are $50 a week
Repairs and maintenance another $50 a week
Insurance another $50 a week

So we are now up to $750 a week in costs, no capital being repaid and no income earned from the 500k deposit.

Average rent for a 3Br house in Auckland is $660 a week according to Tenancy services.

Even if the house prices dropped 40% and the tenant had a 10% deposit, that same house would cost them an extra $200+ a week.

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