The Dim-Post

October 7, 2013

Undesirable plot

Filed under: economics — danylmc @ 9:31 am

I didn’t pay much attention to the Reserve Bank’s LVR policy. I’m sorta inside a bubble in which everyone I know has equity in a home in a nice part of Auckland or Wellington.

So I had a good laugh at Labour’s case study: some 23 year old trying to buy a $500,000 investment property. It’s not until you talk to people outside that bubble who are trying to enter the property market – trying to buy a fix-er-up house in an outer suburb of Wellington for $350,000, say – but now can’t because they need to save a deposit of $70,000 on average salaries while still paying rent on their current accommodation, that you understand the magnitude of the RBNZ’s policy.

Wheeler explains that policy here. I guess it makes sense to him from his 20,000 feet up perspective, but to the people affected – prospective property owners on low and medium incomes – it seems like the government is deliberately locking them out of the market. It seems unfair. And it is! And when the government does stuff that seems really unfair to tens? hundreds? of thousands of people, opposition parties get to oppose it. Right?

Here’s John Armstrong on the subject:

 . . . some kind of consensus between the two main parties would be of considerable assistance to the Reserve Bank if they stopped questioning its efforts to cool a dangerously overheated property market as it sees fit.

The central bank has put its credibility very much on the line as to whether its swingeing intervention in the home mortgage market will work or not.

It could do without political parties – most notably Labour – making promises that would sacrifice the bank’s flexibility solely for naked political self-interest.

The Conventional Wisdom is that the Reserve Bank MUST be independent, because the Reserve Bank must be independent. It’s sacred! But when you see the Reserve Bank pursuing a near-zero inflation policy at a time of high unemployment it does make you wonder why an independent central bank is so vital. And now this! It’s like the RBNZ is handing left-politicians a gun and begging them to shoot them.

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63 Comments »

  1. Except as far as I can see from actually reading the policy statements from the RB this has nothing to do with inflation or the price of houses.

    The measure introduced by the reserve bank is to reduce the number of low- equity mortgages and thus reduce the risk that banks will go under.

    Comment by Socrates — October 7, 2013 @ 9:43 am

  2. “It’s like the RBNZ is handing left-politicians a gun and begging them to shoot them.”

    Indeed, agreed. The RBNZ is playing a dangerous game with its independence by trying to stretch their own mandate.

    Just one clarification though:

    “But when you see the Reserve Bank pursuing a near-zero inflation policy at a time of high unemployment it does make you wonder why an independent central bank is so vital.”

    This isn’t true. They have been trying to hit 2% the whole time, but things turned out more negative than they expected – if they had known what was going to happen overseas, they would have loosened policy further. This tells us absolutely nothing about the important of their independence – so this comment is a non-sequitur. Of course, this also illustrates that the Bank should be spending more time trying to communicate its primary role – rather than messing around with other things it finds interesting, but which do not sit neatly in mandate of an unelected body!

    Comment by Matt Nolan — October 7, 2013 @ 9:46 am

  3. “Indeed, agreed. The RBNZ is playing a dangerous game with its independence by trying to stretch their own mandate.”

    But it’s not. Part of the RB’s mandate is to monitor the banks so they don’t do anything too stupid. This measure is independent of inflation and house prices and about reducing the risk banks are exposing themselves to. (off course I could be completely wrong there but I don’t think I am)

    “Of course, this also illustrates that the Bank should be spending more time trying to communicate its primary role”

    Agreed – in the sense that the bank could be doing a better job of articulating what they are actually doing..

    Comment by Socrates — October 7, 2013 @ 9:53 am

  4. The RBNZ is playing a dangerous game with its independence by trying to stretch their own mandate.

    Matt, for a smart guy, that’s a pretty dumb comment. The Reserve Bank has THREE objectives:
    1) Low and stable inflation via monetary policy
    2) Financial Stability via prudential policy
    3) Maintain the supply of physical currency

    Just because all the pundits and politicians bang on about #1 doesn’t make #2 (in particular) any less important to the functioning of the RB, and that’s where LVR policy fits.

    Comment by Phil — October 7, 2013 @ 9:56 am

  5. Actually i am wrong – I just went and read the latest explanation. *sigh* ignore me.

    Comment by Socrates — October 7, 2013 @ 9:59 am

  6. Maybe you are looking through the wrong end of the bubble
    The Reserve bank is doing these people who lack cash a favour
    Rather than allowing them to tie a massive mortgage around their neck (and keep up your values) it will make them wait to the day when the Left take over. They are promising to drive down the price of housing (check Bomber’s “Cunncliff’s first 100 days”) which will allowing these young people to get their homes much cheaper
    Win for everyone except those in the bubble

    Comment by rayinnz — October 7, 2013 @ 9:59 am

  7. “The Conventional Wisdom is that the Reserve Bank MUST be independent, because the Reserve Bank must be independent. It’s sacred!”

    No, nothing so silly or shallow or cartoon-ey.

    The reason it should be independent is simply because NZ’s experience of having monetary policy set by the government of the day was a magnificent case study in what happens when you put a bunch of obese sufferers of Type 2 diabetes in charge of a Heards factory.

    This ain’t just about the Muldoon bogey. Holyoake ran a far too loose monetary policy in the mid-60s and ran into an economic crowbar at the end of 1966, something which tends to be forgotten.

    There’s also been a one bonus of having RBNZ independent: it acts as a useful economic referee on the government of the day. There’s been several occasions, starting in 1990, when the RBNZ has been critical of loose fiscal policies (these include not just spending policies but a fairly aggressive tax cutting policy in 1996 which was fairly ill timed given the inflationary surge under way).

    Matt’s right about the muddled messages at the moment now though. It isn’t that monetary and prudential policy aren’t both part of the RBNZ’s role – the problem is the RBNZ talking about using prudential policy to achieve not only monetary policy goals but, at least implicitly, also wider policy goals around housing supply.

    Comment by Rob Hosking — October 7, 2013 @ 10:44 am

  8. Why do you talk about a first home buyer being someone trying to buy a fix-er-up in an outer suburb of Wellington for $350,000?
    There are any number of three bedroom, one bathroom houses on flat sections available in Wainuiomata for around $225,000.
    That is an outer suburb of Wellington if you want one. It is probably a 30 minute drive from the CBD. It is, or at least was while they were playing for Wellington, the home of Piri Weepu and Tana Umaga so it has some famous sons.
    People who seem to regard $350,000 as the minimum for a first house are dreaming. They are the sort who regard four bedrooms and two bathrooms as the absolute minimum for civilized living. Why won’t they get real?

    Comment by Alwyn — October 7, 2013 @ 10:52 am

  9. There are any number of three bedroom, one bathroom houses on flat sections available in Wainuiomata for around $225,000.

    Dont be silly, Alwyn.
    White, DINK, Gen-Yers with post graduate degrees in Public Policy dont want to live in Wainui. That’s for poor people with no prospects.

    Comment by Gregor W — October 7, 2013 @ 11:15 am

  10. “Just because all the pundits and politicians bang on about #1 doesn’t make #2 (in particular) any less important to the functioning of the RB, and that’s where LVR policy fits.”

    Hola Phil,

    I don’t disagree with targeting financial stability, and clearly communicating that. I have written oodles of words saying similar things.

    But talking about how your policy will then improve housing affordability and can “control the financial cycle” is beyond this – and this is indeed stretching their mandate.

    Originally I just thought it was a bit of muddling about communication. But in their latest paper on prudential policy they stated that financial market policy can be “more ambitious” than just financial stability. Through their attitude to macroprudential policy, RBNZ actions are becoming more discretionary, and are having a greater impact on the distributional issues than are the role of other parts of government.

    Remember, the goal is supposed to be getting financial institutions to take into account systemic risk and hold sufficient capital – but for some reason this is warping into directly channeling investment, and picking who should be credit worthy. These even as a massive cynic I can understand why it makes the electorate and politicians uncomfortable.

    http://www.tvhe.co.nz/2013/09/26/thats-it-im-done-rbnz-takes-the-path-of-discretion/

    Accepting the RBNZ’s “financial stability” role does not mean accepting everything they put under that label – even if it makes me sound stupid ;)

    Comment by Matt Nolan — October 7, 2013 @ 11:25 am

  11. Gregor W at 11.15am

    You are right, it isn’t a suitable place for our would-be rulers.
    They have much higher standards of acceptability that us commoners. There was an article in the Herald a few days ago on what various politicians first houses were like, David Cunliffe described his as being a “modest little house” on what he called the “Johnsonville-Khandallah border”.
    He lived in Maldive Street which is in Khandallah, and would be at least a kilometre from what anyone would call Johnsonville. As for being a “modest little house” it is a half million dollar property. (It has a QV of $480,000). I guess he would see the aspiring property investor as being quite reasonable in his ambitions wouldn’t he?
    Incidentally Cunliffe, who would have been about 23 at the time, put his occupation down in the 1987 electoral role as being a “diplomat”. A very junior public servant would have seemed a much more appropriate description.

    Comment by Alwyn — October 7, 2013 @ 11:49 am

  12. They have been trying to hit 2% the whole time, but things turned out more negative than they expected – if they had known what was going to happen overseas, they would have loosened policy further. This tells us absolutely nothing about the important of their independence – so this comment is a non-sequitur.

    Actually, it does. It tells us that the RBNZ tends to over-emphasise price stability, and also sometimes makes mistakes. Which tells us a lot about the importance of their independence.

    Comment by Keir Leslie — October 7, 2013 @ 12:08 pm

  13. As it stands, the RBNZ is looking at the demand side of the equation, as are proposals to clamp down on absentee foreign buyers. On the supply side, those burnt in the 1987 Crash have put all their eggs in the property bubble basket, to the point where it’s basically become like a property cartel, and any attempt to boost housing stock like the Unitary Plan is a dire threat to that cartel.

    Comment by deepred — October 7, 2013 @ 12:10 pm

  14. And here’s me thinking it was only because they didn’t want terrace housing across the road from their nice villas.

    Comment by Peter C — October 7, 2013 @ 12:40 pm

  15. Snippet from Wheeler: “Some suggest that loan-to-value restrictions should be applied regionally, especially around Auckland… However, regional restrictions would be hard to administer and would shift housing pressures outside wherever the boundary is drawn.”

    Would increasing demand outside of Auckland (and Christchurch) actually be that bad of a thing?

    Comment by Auto_Immune — October 7, 2013 @ 1:03 pm

  16. “Actually, it does. It tells us that the RBNZ tends to over-emphasise price stability, and also sometimes makes mistakes. Which tells us a lot about the importance of their independence.”

    Hola Keir,

    It doesn’t tell us this at all. They were forecasting unemployment easing back and inflation to 2% the entire time – then things happened that were worse than they expected.

    Remember, prior to the crisis inflation was running above the target and people were widely complaining that they felt they were having to work too many hours – that was in an environment where everyone, including the RBNZ and Treasury, kept being surprised on the upside.

    In this context, what we are really being told is that it is incredibly hard to “predict the future” and pick perfect policy conditional on this – their independence simply implies that they will do the best job they can to manage demand ex-ante, not that what happens ex-post is all roses and gravy. To think they could manage things perfectly is to massively exaggerate societies, and macroeconomists, ability to predict things!

    For a little more jargon, the RBNZ explicitly states that it targets inflation (expectations) subject to future inflation being due to the output gap (where the output gap is a function of the unemployment rate) – when they are targeting future inflation, they can’t be “over-emphasising price stability” in the sense of purposefully keeping unemployment “high”, this would only make sense if they were targeting the price level instead!

    Comment by Matt Nolan — October 7, 2013 @ 1:24 pm

  17. but to the people affected – prospective property owners on low and medium incomes – it seems like the government is deliberately locking them out of the market. It seems unfair. And it is!

    it’s the RB not the govt doing this – Key made it clear he would have preferred the RB make exceptions for first home buyers.

    But what remedy for the housing market would be fair to all? Leave the LVR as it was and then have higher interest rates later?

    The main reason for having an independent RB is to prevent politicians using it as a vehicle for short term electoral gains.

    Comment by NeilM — October 7, 2013 @ 3:12 pm

  18. I thought the whole first-home-buyer mortgage thing would be a huge winner for Labour. Then to illustrate it they wheel out some 23 year old who wants to be a property investor. Would it really have been so hard for them to find a couple of 30 year olds with a young kid, ideally in unsuitable rental accomodation?

    Comment by helenalex — October 7, 2013 @ 3:32 pm

  19. Would it really have been so hard for them to find a couple of 30 year olds with a young kid, ideally in unsuitable rental accomodation?

    Oversight or freudian slip?
    I want to give Cunliffe (or more accurately, Cunliffe’s staffers) the benefit of the doubt, but this is such a rookie mistake, it’s pretty hard not to see it as a result of the Thordon Bubble.

    Comment by Gregor W — October 7, 2013 @ 3:54 pm

  20. Lots of baby boomer crocodile tears in the media on behalf of first home buyers. One suspects what they’re really concerned about is the RBNZ destroying their equity.

    RBNZ estimates this will knock 4% of house prices this year. That’s tens of thousands of dollars taken out of the greediest generation’s hands and transferred to first home buyers. And there will be more to come once the impact spreads. Already they’re cancelling auctions in Auckland.

    Labour is on the wrong side of this one. The speed limit is Wheeler’s gift to the under 40s.

    Comment by peg — October 7, 2013 @ 4:16 pm

  21. NeilM: Key made it clear he would have preferred the RB make exceptions for first home buyers…

    So, as ever, Key is powerless / clueless / has no responsibility for anything that the government does? Let us know when the responsible adults are back on the treasury benches.

    NeilM: The main reason for having an independent RB is to prevent politicians using it as a vehicle for short term electoral gains…

    Perhaps in theory. But in practice, the main reason is so that the RB can enact policy that benefits a narrow elite regardless of whom the government is.

    Comment by RJL — October 7, 2013 @ 4:19 pm

  22. I love Rob Hosking’s comment at #7. You can always spot the serious commentary on economics by the way it has to resort to cheap food-policing shots at people with a serious illness.

    Comment by QoT — October 7, 2013 @ 6:22 pm

  23. But in practice, the main reason is so that the RB can enact policy that benefits a narrow elite regardless of whom the government is.

    My own cynical view is it’s a job creation scheme for the middle class.

    They can only ever have a minor positive intended effect on a complex system.

    Unintended effects are generally larger and don’t deserve renumerstion.

    Comment by NeilM — October 7, 2013 @ 6:23 pm

  24. It is precisely the “investment” type buyer that keeps the housing prices up.
    Either housing is a commodity or it is not. That is at the heart of the affordable housing for kiwis.

    Comment by peterlepaysan — October 7, 2013 @ 7:25 pm

  25. At least there is an unlimited supply of buyers from China. They seem to have plenty of dollars, dont need
    a mortgage, and keeps the market ticking. The fact that their money is often dirty (laundered) matters
    not a whit.

    Comment by bosun — October 7, 2013 @ 7:43 pm

  26. Investers are the new Kulak

    For a lot of people Grey Lynn is a desirable place to live and they have the money, or the ability to borrow, to live there.

    It’s unfair that some people bought there in the 80s and sit on a million dollars by sheer chance, it’s unfair that before that Polynesian families moved to Mangere and missed out.

    But then Mangere Bridge now has million dollar homes which means now someone else is unlucky because someone got lucky.

    Comment by NeilM — October 7, 2013 @ 8:06 pm

  27. “The Conventional Wisdom is that the Reserve Bank MUST be independent, because the Reserve Bank must be independent. It’s sacred! But when you see the Reserve Bank pursuing a near-zero inflation policy at a time of high unemployment it does make you wonder why an independent central bank is so vital.”

    Perhaps you want to read a little history before you brain fart onto your keyboard next time.

    Comment by Swan — October 7, 2013 @ 8:09 pm

  28. Danyl’s political memory began around 2002.

    Comment by Hugh — October 7, 2013 @ 8:15 pm

  29. Something interesting that was just shared by Bryan Bruce (this guy https://www.facebook.com/InsideChildPoverty )

    “The 59 National Party Members declared interests in
    12 Farms
    24 Commercial Properties
    132 Residential properties
    7 Land

    The 34 Labour Party Members declared an interest in:
    0 Farms
    0 Commercial Properties
    52 Residential properties
    3 Land

    The 14 Green Party Members declared an interest in:
    0 Farms
    0 Commercial Properties
    17 Residential Properties
    4 Land

    The 8 New Zealand First Party Members declared
    11 Residential properties

    The 3 Maori Party Members declared an interest in
    5 Residential properties
    1 Land

    The 1 Mana Party Member declared :
    2 Residential Properties

    The 1 Act Party Member declared:
    1 Residential Property

    The 1 United Future Member declared :
    2 Residential properties “

    Comment by Flynn — October 7, 2013 @ 11:29 pm

  30. So millionaire John Banks is perhaps the least propertied MP in parliament? Odd.

    Comment by helenalex — October 8, 2013 @ 12:09 pm

  31. helenalex – Blind trust.

    Comment by Gregor W — October 8, 2013 @ 12:15 pm

  32. Alwyn: Maldive St is under a kilometre from, eg, Fraser Ave and Haumi St, both of which are Johnsonville (by general terminology for 30+ years, and Wellington City Council suburb boundaries for 10+ years; both were previously “Raroa” in the Council’s view). Maldive St is also the last street in Khandallah before you get to Johnsonville. I think it’s fair to describe it as “on the Khandallah/Johnsonville border”.

    That said the prices are very much on the Khandallah end of the scale than the Johnsonville end of the scale (much of Maldive St has Views ™; much of Johnsonville really doesn’t). The house itself may or may not have been modest, but the location isn’t one I’d suggest for first home buyers because of the Has Views ™ sized prices.

    ObThread: last I knew $350k was about mid-range for property in the greater Wellington market. Sure the cheaper places might not be as desirable to live in and/or McMansion sized. But they definitely do exist. (Wainuiomata, mentioned up thread, for instance was one of those “afford to raise a family in a house you own” suburbs when I was growing up. It’s not super-close to the Wellington CBD. But, eg, plenty of people in Auckland commute much further/longer just to be able to afford to own a house.)

    Ewen

    Comment by Ewen McNeill — October 8, 2013 @ 6:47 pm

  33. Yes, people can buy properties in Wainui, which is the cheapest area in Wellington to buy, largely because of the high crime rate and very long commute times during rush hour. But you still have to save $50,000 to buy one of those homes! Difficult on an average salary. And where are the people on low incomes supposed to buy homes if it costs $50,000 to save for a deposit in Wainui?

    Comment by danylmc — October 9, 2013 @ 8:31 am

  34. Danyl, stop asking such dumb questions! The reason why the current government is doing nothing about housing supply is because the market will take care of it. The market is perfect. If the market is building low income housing, then there is clearly no demand for low income housing. Since the market informs us there is no demand, why waste money public money on building homes for a non-existent problem?

    Comment by Sanctuary — October 9, 2013 @ 9:03 am

  35. Danyl, I should point out that the Welcome Home Loan scheme still exists, which will still allow lower income earners to get a house with a 10% deposit, or thereabouts.

    Random musing: If the Wainui tunnel ever got completed, you can be sure prices would jack up there quite considerably.

    Comment by Auto_Immune — October 9, 2013 @ 9:27 am

  36. But you still have to save $50,000 to buy one of those homes!

    No, you don’t HAVE to save that much. Banks are still allowed to, and will continue to, lend over 80% of a properties value to a borrower. The only difference now is the RBNZ is stopping them from going a bit mental and lending over 80% to everyone.
    Also, as a potential home buyer with less than a 20% deposit, you could go to a credit union or building society, for instance.

    Comment by Phil — October 9, 2013 @ 10:27 am

  37. No, you don’t HAVE to save that much. Banks are still allowed to, and will continue to, lend over 80% of a properties value to a borrower.

    Sure, but now it means that they are looking for stuff like equity in additional properties. For example, my partner and I are looking at buying some property at the moment, and the bank is in fact still willing to loan us essentially 100% of the value of that property. But only because of the equity we have in other properties.

    Which is great for me, but doesn’t remotely help a typical first-time homebuyer.

    Comment by RJL — October 9, 2013 @ 11:41 am

  38. “The reason why the current government is doing nothing about housing supply is because the market will take care of it.” says Sanc @ 34
    Actually, aren’t the govt considering going all centralist and mandating changes to local zoning/land use?

    No one here has mentioned the effects of school zones on property prices.

    Comment by Clunking Fist — October 9, 2013 @ 12:20 pm

  39. “Danyl, stop asking such dumb questions! The reason why the current government is doing nothing about housing supply is because the market will take care of it. The market is perfect. If the market is building low income housing, then there is clearly no demand for low income housing. Since the market informs us there is no demand, why waste money public money on building homes for a non-existent problem?”

    Lol Sanc, The issue with this particular market is it is probably the most heavily regulated market in the country. All supply is at the whim of the local planning office. The problem isnt the market, its the lack of a (free) market).

    Comment by swan — October 9, 2013 @ 12:29 pm

  40. “Danyl, I should point out that the Welcome Home Loan scheme still exists, which will still allow lower income earners to get a house with a 10% deposit, or thereabouts.”

    In fact, for properties up to $200k, no deposit is required with the Welcome Home Loan scheme. A mortgage broker will look at each case on its merits but a mortgage broker I recently spoke to said they can do 90% mortgages for properties over $200k.

    The new LVR policy will have little or no effect outside Auckland and may have little effect there too.

    Comment by Ross — October 9, 2013 @ 1:05 pm

  41. I really don’t think that the government is trying to lock first-home buyers out of buying a house. What both major political parties are working towards is making it more unattractive for people to invest in properties, apart from buying a family home. National are making it hard, though, for current home owners that are also solo parents because of the introduction of charges on legal aid debt. So if you have a caveat attached to your family home because of a legal aid bill you tacked up in a divorce several years ago, you will face non-compounding interest of eight percent per annum starting next year and you only have six months to pay off your bill before it begins to accrue interest. Personally I think that the people affected should have one year to pay off their bill, because these are people on low incomes and the typical bill is around two to three thousand dollars, and I think that the interest should be set at a sensible rate, possibly no higher than five percent per annum and no higher than three percent per annum.

    Comment by Dan — October 9, 2013 @ 2:28 pm

  42. What both major political parties are working towards is making it more unattractive for people to invest in properties, apart from buying a family home.

    I’m not sure that they are given that a vast number of their constituency – certainly in National’s case and ‘centrist’ Labour voters – do pretty well out of the status quo.

    If either party were serious then you would expect some combination of the following to be applied: (i) CGT (ii) purchasing and loan criteria would be strengthened in particular for non NZ residents (iii) property apart from the family home would not be allowed to be entrusted (iv) either interest on investment property would not be tax deductable or a level playing field for owner-occupiers would be applied (v) a significant stamp duty would apply to purchasing non-domicile residences (vi) the accomodation supplement would be abolished, forcing both rents and prices down for investment property.

    Comment by Gregor W — October 9, 2013 @ 2:51 pm

  43. my partner and I are looking at buying some property at the moment, and the bank is in fact still willing to loan us essentially 100% of the value of that property. But only because of the equity we have in other properties.

    You’re part of the problem, RJL!!!

    Comment by Phil — October 9, 2013 @ 2:53 pm

  44. I agree with Swan. The solution is to do away with all that nasty nanny-state rubbish like building standards and instead allow property developers to cream it by building unsafe ghettos for poor people.

    If the poor don’t want to live quake-prone, under-insulated substandard housing then they can just vote with their dollar. If they can’t vote with their dollar then it’s obviously their own damn fault for being poor anyway and they deserve what they get!

    I don’t know about you but I’m sick of seeing MY hard-earned money STOLEN by the GOVERNMENT only to see it WASTED on PC regulation bullshit like the “Building Code”, “Food Safety” and “Workplace Safety” standards.

    All hail the infallible and omnipotent market! Praise to the brokers and investment banker wealth-creator gods!

    The deregulated brighter future is coming! Hallelujah!

    Comment by Rob — October 9, 2013 @ 3:11 pm

  45. Rob

    The issue is land use zoning. FYI

    Comment by Swan — October 9, 2013 @ 3:47 pm

  46. See ghettos.

    Comment by Rob — October 9, 2013 @ 4:47 pm

  47. Better no homes than cheap homes eh Rob.

    Comment by Swan — October 9, 2013 @ 6:02 pm

  48. Not sure why being able to build houses to code in a paddock outside the city limits would lead to “ghettos” though.

    Comment by Swan — October 9, 2013 @ 6:06 pm

  49. It’s always been struggle to buy a home, unless you’re wealthy. It’s not some new conspiracy against the less well off.

    And so much has to do with luck and time. Once you’re in then time is on you’re side. If you’re out then it’s not.

    Comment by NeilM — October 9, 2013 @ 7:36 pm

  50. “It’s always been struggle to buy a home, unless you’re wealthy. It’s not some new conspiracy against the less well off.”

    Thing is, it used to be a struggle to do lots of things that aren’t so much anymore. Housing has remained artificially scarce due to restrictive illiberal planning policies. And it is ideological. The Auckland councils entire planning philosophy was predicated on an idea about the costs of greenfield development that were not based on evidence. Appalling stuff.

    Comment by Swan — October 9, 2013 @ 8:16 pm

  51. ” Housing has remained artificially scarce due to restrictive illiberal planning policies”

    And illiberal attitudes that think anything taller than an elephant belongs in Detroit or the Bronx. Lessons have largely been learned from the shoebox apartment boom and bust, so such attitudes are falling behind the times. I’ve said it before, but a great deal of those who want the RMA effectively abolished will immediately invoke it if Manhattan or Vancouver come to their neighbourhood. Which implies it’s less about ‘illiberal planning policies’ and more about market incumbents reinforcing their stake in the quarter-acre cartel.

    What if Syria takes the Middle East down with it and there’s a replay of the 1973 or 1979 oil shortages? Projects like the CRL are intended to be a Plan B for that sort of thing.

    The Demographia housing surveys conveniently neglect to mention that the cheapest areas for housing in the US tend to be Rust Belt cities with double-digit unemployment and crime rates. Even Houston and Atlanta, commonly cited by Demographia as role models, are starting to rethink ‘building fatter’.

    Comment by deepred — October 9, 2013 @ 8:50 pm

  52. ” Which implies it’s less about ‘illiberal planning policies’ and more about market incumbents reinforcing their stake in the quarter-acre cartel.”

    That’s the same thing. Ok that side of it is political rather than ideological but still illiberal.

    The rest of your comment sounds like you don’t think people can make their own desicions.

    As the CRL make no mistake it is a big shiny boondoggle that will cost the public about $20 a trip.

    Comment by Swan — October 9, 2013 @ 9:00 pm

  53. Arguing with neo-liberal zealots is like arguing about God with the Jehovah’s Witness dude who door stops you at home on a Saturday morning. You’ve always something better things to do…

    Comment by Sanctuary — October 10, 2013 @ 6:51 am

  54. Hey Sanc, that’s your curse – you’re just too pragmatic and ideological to communicate with these raving zealots.

    Comment by Hugh — October 10, 2013 @ 8:36 am

  55. The new LVR policy will have little or no effect outside Auckland and may have little effect there too.

    Well that’s not true. We are in Wellington and currently trying to borrow to about 82% equity so that we can put in a second bathroom. Despite having three high incomes, and 2nd bathrooms adding value, the bank won’t do it. Our mortgage broker tells us we might get a shot in a few months, but that just means one less first home buyer (theoretically) who won’t be able to borrow with less than 20% deposit.

    I realise my story is hardly a tearjerker and society does not benefit from our second bathroom. But if we can’t get this, it must be so much harder for people who haven’t got a house yet.

    Comment by helenalex — October 10, 2013 @ 9:07 am

  56. Meanwhile in other news, the Farrar index of frantic spin indicates the Labour policy of a living wage is ginormous hit with surveyed voters.

    Comment by Sanctuary — October 10, 2013 @ 9:07 am

  57. “Meanwhile in other news, the Farrar index of frantic spin indicates the Labour policy of a living wage is ginormous hit with surveyed voters.”

    You may not get this, but some people act based on principle.

    Comment by swan — October 10, 2013 @ 9:28 am

  58. “You may not get this, but some people act based on principle.”

    Yes, that’s exactly the Impression I’ve got from Kiwiblog….

    Comment by Chris Bull — October 10, 2013 @ 9:55 am

  59. @ Gregor W

    Labour are planning on bringing in CGT and on banning foreign ownership of investment properties except for Australians and this has been their policy for some time. Labour are also planning to build 10,000 compact family homes every year for ten years to substantially increase the supply of housing and they are also planning to reduce the cost of building materials. Most of the points you have outlined are covered.

    National are doing the least out of the two parties but they are trying in their own roundabout way. As I said, they are actually straying from the point by making it harder for solo parents with caveats attached to their homes, charging them eight percent interest from april next year which I think is too high.

    Comment by Dan — October 10, 2013 @ 3:43 pm

  60. “Meanwhile in other news, the Farrar index of frantic spin indicates the Labour policy of a living wage is ginormous hit with surveyed voters.”

    Unlike your jingoistic index of pretentious wankery Sancy

    Comment by toby — October 10, 2013 @ 5:16 pm

  61. The RBNZ must operate a low inflation regime in a constrained economy in order to keep a good sized pool of unemployed people around for the purpose of keeping wages down……in support of National’s policy of higher wages and more jobs.

    Yes…it is scam. It was scam when Bolger / Shipley did exactly the same thing in the 90s.

    But a certain proportion of Kiwi voters love being lied to….over and over…and lack the economic nouse to see it for what it is…..a scam designed to keep wages down for employers large and small…..to maximise their profits and keep workers insecure and compliant.

    Comment by Steve (@nza1) — October 12, 2013 @ 8:40 am

  62. “We are in Wellington and currently trying to borrow to about 82% equity so that we can put in a second bathroom. Despite having three high incomes, and 2nd bathrooms adding value, the bank won’t do it. Our mortgage broker tells us we might get a shot in a few months, but that just means one less first home buyer (theoretically) who won’t be able to borrow with less than 20% deposit.”

    I’d be approaching another broker…or another bank.

    Comment by Ross — October 14, 2013 @ 2:03 pm

  63. “Despite having three high incomes, and 2nd bathrooms adding value, the bank won’t do it.”

    makes you wonder if loan divided by annual income won’t have been more equitable than deposit %.

    Comment by Clunking Fist — October 17, 2013 @ 1:09 pm


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