Solving the house price problem should be easy!

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#3101034 7-Jul-2023 17:35

mudguard:

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.

Not a dig, but who's fault is that?

tdgeek

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#3101035 7-Jul-2023 17:37

mudguard:

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.

Im not disagreeing but as per my last post, who is at fault?

tdgeek

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#3101037 7-Jul-2023 17:40

quickymart:

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.

Yep.

Its been creeping up forever. The mantra was they double every 10 years (not linear). They do. Wages grew too. Fine. But NZ loves the low wage economy, so wages have fallen behind the past norm, that is the issue, and successive Govts know that, but..........

ockel

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#3101047 7-Jul-2023 17:57

tdgeek:
quickymart:

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.

Yep.

Its been creeping up forever. The mantra was they double every 10 years (not linear). They do. Wages grew too. Fine. But NZ loves the low wage economy, so wages have fallen behind the past norm, that is the issue, and successive Govts know that, but..........

Doubling every 10 years is 7.2% CAGR. Sounds appropriate for the risk profile.

Bearing in mind its a deprecating asset except for the bit underneath the house. The land has value, the building on top not so much.

People say they want to own a home. That's disingenuous, they actually want to own the land as that's the bit that has value.

Sixth Labour Government - "Vision without Execution is just Hallucination"

tdgeek

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#3101050 7-Jul-2023 18:08

ockel:

Doubling every 10 years is 7.2% CAGR. Sounds appropriate for the risk profile.

Bearing in mind its a deprecating asset except for the bit underneath the house. The land has value, the building on top not so much.

People say they want to own a home. That's disingenuous, they actually want to own the land as that's the bit that has value.

Dont quite follow that. OLD houses last (better materials, better workmanship), new houses last (ok materials less workmanship but better technology) , none of these will crumble

ockel

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#3101053 7-Jul-2023 18:59

tdgeek:
ockel:

Doubling every 10 years is 7.2% CAGR. Sounds appropriate for the risk profile.

Bearing in mind its a deprecating asset except for the bit underneath the house. The land has value, the building on top not so much.

People say they want to own a home. That's disingenuous, they actually want to own the land as that's the bit that has value.

Dont quite follow that. OLD houses last (better materials, better workmanship), new houses last (ok materials less workmanship but better technology) , none of these will crumble

A house is worth only it's replacement value, and that's assuming it's been well maintained.
It doesn't appreciate in value.

It's all about the land, which has location value, higher/better use value. Coastal property vs 3 streets back = land value. Its scarcer and more coveted = greater value.
The CVs that are issued are flawed and lazy. Market value less assumed value of improvements = implied land value. A building blocks approach would be better.
But the value uplift when they do CVs us all about the land.

Sixth Labour Government - "Vision without Execution is just Hallucination"

mudguard

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#3101055 7-Jul-2023 19:13

tdgeek:
mudguard:

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.

Not a dig, but who's fault is that?

Probably no one person or party. Thirty years of various factors?

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sir1963

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#3101062 7-Jul-2023 19:44

mudguard:

[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.

I WANT us to switch to a high skills economy, but we won't , the likes of groundswell want us to become peasant farmers.

After Fontera, high tech is NZs 2nd largest income earner, more than meat, more than wool, more than wine, more than tourism.

gzt

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#3101076 7-Jul-2023 20:37

sir1963:
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.

Imo the average person like myself has no problems with the first three. The last three categories definitely a little harder. In NZ there's practical crossover between science and engineering. That was definitely challenging. Pure science was the hardest one for me. I'm not sure I succeeded.

sir1963

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#3101216 8-Jul-2023 11:49

gzt:
Imo the average person like myself has no problems with the first three. The last three categories definitely a little harder. In NZ there's practical crossover between science and engineering. That was definitely challenging. Pure science was the hardest one for me. I'm not sure I succeeded.

THAT is the problem, we do not celebrate academic success, and yet everything in people lives are totally dependant on them.

Bill Pickering
Alan Wilson
Lord Rutherford
Sir Paul Callaghan

We should celebrate people like these

How many know about

Tait Communications
Rakon
F&P Healthcare
Gallagher
Hamilton Jetboats
Xero
Magritek

Do people know that the "Glaxo" part of Glaxo-Smith-Kleine started in Bunnythorpe just outside on Palmerston North
Do people know that Seismic Dampers were developed by the DSIR in Wellington
Ever hear of the "Poly" computer

Are kids taught about the Game Development Studios we have here in NZ ?

We are stealing education from our kids.

tdgeek

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#3101417 8-Jul-2023 17:36

ockel:

A house is worth only it's replacement value, and that's assuming it's been well maintained.
It doesn't appreciate in value.

It's all about the land, which has location value, higher/better use value. Coastal property vs 3 streets back = land value. Its scarcer and more coveted = greater value.
The CVs that are issued are flawed and lazy. Market value less assumed value of improvements = implied land value. A building blocks approach would be better.
But the value uplift when they do CVs us all about the land.

Your solution?

sir1963

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#3101455 8-Jul-2023 19:40

ockel:

A house is worth only it's replacement value, and that's assuming it's been well maintained.
It doesn't appreciate in value.

It's all about the land, which has location value, higher/better use value. Coastal property vs 3 streets back = land value. Its scarcer and more coveted = greater value.
The CVs that are issued are flawed and lazy. Market value less assumed value of improvements = implied land value. A building blocks approach would be better.
But the value uplift when they do CVs us all about the land.

Every year the cost to replace that house goes up.
And then on top of that the cost to replace is also higher because it will be built to higher standards.

Can we mention how the government took away depreciation for houses from landlords.
The used the CVs to say that houses do not depreciate, yet your argument says they do.

You can of course still depreciated commercial buildings.

JimmyH

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#3103660 13-Jul-2023 14:26

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

None of those will solve housing problems you claim to want to solve. Some of them will actually make the problems worse.

Land tax would add to housing costs, for both owners and renters. Rent controls discourage the provision of properties for rental, including building properties for rental, reducing supply and pushing rents up - plus they can mess with labour mobility. Capital gains tax might actually be a good idea - but for other reasons, it won't reduce house prices and there's plenty of international evidence for that.

JimmyH

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#3103661 13-Jul-2023 14:42

quickymart:

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.

Taking the other side of the argument - are prices actually too high? If so, what is the "correct price" and who decides?

There is a supply of housing and a demand for housing, and (as in any other market) the role of price is to equilibrate supply and demand. So you can make an argument that prices are doing exactly what they are supposed to do, and definitionally the price that clears the market is the correct one. If they price is "too high" then that's not the actual problem - it's a symptom of the actual problem, which an imbalance between supply and demand. If artificial controls are used to prevent prices from doing their job then, if supply exceeds demand at the capped price, some other rationing/allocation mechanism would need to be used. That could be perceived quality of tenant (anyone with a bad credit history need not apply), waiting lists, under-the-table payments, or a government housing commissar (presumably with a peaked cap and gold braid) who gets to decide who is allowed to rent a house that comes on to the market.

Rather than endlessly litigate controlling the symptom of a shortage (price), it's probably better to focus on the underlying problem of demand c.f., supply. The government has levers it can pull to influence supply (e.g., planning rules, tax rules, direct finance provision) and to influence demand (e.g., immigration settings, interest rates, LVR rules).

tdgeek

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#3103669 13-Jul-2023 15:05

JimmyH:

Taking the other side of the argument - are prices actually too high? If so, what is the "correct price" and who decides?

There is a supply of housing and a demand for housing, and (as in any other market) the role of price is to equilibrate supply and demand. So you can make an argument that prices are doing exactly what they are supposed to do, and definitionally the price that clears the market is the correct one. If they price is "too high" then that's not the actual problem - it's a symptom of the actual problem, which an imbalance between supply and demand. If artificial controls are used to prevent prices from doing their job then, if supply exceeds demand at the capped price, some other rationing/allocation mechanism would need to be used. That could be perceived quality of tenant (anyone with a bad credit history need not apply), waiting lists, under-the-table payments, or a government housing commissar (presumably with a peaked cap and gold braid) who gets to decide who is allowed to rent a house that comes on to the market.

Rather than endlessly litigate controlling the symptom of a shortage (price), it's probably better to focus on the underlying problem of demand c.f., supply. The government has levers it can pull to influence supply (e.g., planning rules, tax rules, direct finance provision) and to influence demand (e.g., immigration settings, interest rates, LVR rules).

Agree. Buying a house is easy, building isnt, so some incentive needs to be in place to build. A new build doesnt add demand, it reduces it, frees up an existing house for someone else

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