Two headlines, same news outlet, today:
‘Can’t afford Auckland? Move on
Aucklanders are flocking south, seeking to escape skyrocketing house prices in their own patch.’
and
‘Chinese property investment ‘just beginning’..’
Kiwis are all excited about Chinese buying up properties, but none have been able to explain to me why this is a good thing.
This is a task of measuring short term gain versus long term national interests. If I had a rush of blood and decided to sell-up (not happening) and move overseas I’d certainly not care who came up with the cheque on the day. Similar thoughts would pertain if I was terminally ill i.e. sell up and forget tomorrow. The problem with this debate is that it generally leads to ill-informed claims of xenophobia if one resist selling to an offshore purchaser. The Aussies have a policy where foreigners can’t buy established homes and can only build new ones. If I was selling in the Peoples Republic of Western Australia I’d be very peeved if a slice of potential buyers were precluded from the market. I don’t know what the answer is.
I think the Aussie idea of ‘new homes only’ goes some way towards limiting the impact on domestic home buyers and renters. And it creates employment.
Mmmmh the most telling factor for youngish first home buyers in the NZ market (Auckland possibly excepted) is their inability to save for a 20% deposit. Many times parents lament that their children believe they have a right to begin adult life with the same accoutrements their parents have taken 30+ tears to acquire.(New everything and a trip to Europe each year.) I think the Aussie idea does at least promote new home construction but in NZ the actual % of offshore buyers is in single figures.
My first home had a first mortgage from T&G* Life and the company insisted I had a 1/3 deposit and a current life policy with the company. It was effing tough but put me on the lowest rung of the ladder.
*= Temperance and General. I must have been the General half as I have never followed temperance.
“I must have been the General half as I have never followed temperance.”
You’re right about young people expecting to have it all at the beginning of their working lives. It’s as though they’re unable to prioritize.
Why is it seen as a good thing? Because of people’s view of what free trade is
. Originally free trade meant take off the tax on imported goods 
. The idea if you make something at a cheaper cost, you sell it around the world 
. Why should they pay more than the cheapest cost 
.
But then what happened is people integrated the free flow of investing and finance into so called free trade. So now if you say, we shouldn’t sell property to overseas people say that’s anti free trade
. Really, and what about the fact that in parts of Asia you can’t buy their property. Its all a terminology mix up, and it is the complete opposite of original free trade.
David Hume said that if a country imports more than it exports, it must pay out gold. Less gold means prices and wages go down. Lower prices and wages mean next year, you sell more, as your prices are now lower. So you gain back your gold, and prices and wages go back up. In essence you don’t export enough, less money for you, and a corrective mechanism is in place, to make your exports go up. But what we have here is no corrective mechanism, it means you don’t need to export, you just sell and borrow. The way free trade is defined now should be called traitorism
.
” But what we have here is no corrective mechanism, it means you don’t need to export, you just sell and borrow. The way free trade is defined now should be called traitorism”
And that’s pretty much how I see it, Warren.
There is a solution but you may not like it’s implementation. Texas home prices have not increased anywhere near inflation – due to the Texas property tax which is 3x the Kalifornia prop 13 version. Of course, Texas has lots of land, doesn’t force people into densely populated areas for political reasons and also doesn’t have any income tax.
Thanks KG, we’re definitely on the same page. I can’t believe how simple minded some people can be sometimes. When free trade can only work with a gold standard. So the terms I use, is I believe in free market trade, where exports equal imports, not so called free trade.
K2, this brings up another issue. The left’s only solution, is just give people a tax on their appreciation of the value of property. At the same time, hey if they don’t have an income tax, people have more money in their pockets to pay the other taxes. The thing that bothers me about the left is their solution is always another tax. We don’t like you consuming cigarettes, alcohol, or sugar, we’ll just put another tax on you. We don’t like pollution, we’ll just another tax on you. Going back to Texas. In the original constitution their were only 3 taxes, property, domestic made goods and imports. And the only time they had deficits was in time of war, while they kept to these three taxes.
I think you folks in New Zealand and Australia are not looking at the “Big Picture” in regards to the rising Chinese Empire….
CHINA MOVES SOUTH:
http://www.americanthinker.com/articles/2014/12/first_job_for_the_zumwalt_coming_up.html
Clearly, this would be the time for the allies of South Asia and the Pacific to start counter measures against the CHICOMS but nothing is being done.
1941 repeat
I’m actually very conflicted over this one. I firmly believe in the concept of completely free trade, but I’m not at all convinced of the benefit to New Zealand overall of the FTA with China. This notwithstanding Milton Friedman’s very compelling argument from the TV series ‘Free to Choose’ back in the ’80s.
I still firmly believe the primary cause of Auckland’s (and, this can be applied across most of New Zealand and Australia) house-price rocketing is an artificial constraint on the supply-side. We all know of the motives and goals of UN Agenda 21 and the ICLIEI; they are documented and indisputable. Were New Zealand to repeal the 2002 Local Government Act and the Resource Management Act tomorrow (and of course remove the racist mana whenua provisions of the Auckland Plan), and allow the owners of property to deal with their property the way they choose, the supply-side constraint would disappear and prices would level off, if not fall. Of course, that will never happen because escalating house prices gives the sheeple the illusion of wealth. Many are using their capital gains like an ATM, which keeps cash flowing through the economy. Remove house price escalation, and people will have to do something that actually does something (produce a product, deliver a service) that creates value.
Also (Cad), I’ve heard it said that foreign purchasing of houses is in single figures. I heard a figure of 8% the other day. But, I’m calling bullshit on the number, and here’s an anecdote that explains why… I work with a young Chinese girl. She’s come here as a student, earned her degree and decided to make her life here. She has permanent residence and is well on her way to full citizenship. A month or so ago, her parents came for a visit. They saw a house they liked, gave her a hefty deposit towards it, and she has now bought it. Having purchased, they’re now going to start the immigration process. That wouldn’t count as “foreign” ownership, yet – apart from the name on the title – there is little to do with New Zealand.
Ronbo, my post on Dec 6 21:28, is all about the big picture. What’s going on, is the Chinese are lending us money and buying our property. What effect does this have? This Chinese money is good for one thing and one thing only, buying Chinese imports.
This is why our imports are greater than our exports from China, because some of those imports are from borrowed money. And today they call it free trade. In truth the people who came up with the term would be shocked by its use
. David Hume defended free trade by saying if a country imports more than it exports, it will have to pay out gold. Less gold means prices and wages go down. Lower prices and wages will make exports more competitive. This means the country will gain its gold back, meaning prices and wages go back up.
So when the world’s money was backed by gold we had no problem, Chinese imperialism didn’t exist. Where does the idea of a central bank come from? The 5th plank of the communist manifesto. So their is a solution, and its about redefining free trade, as where exports equal imports. Until this happens, we will continue to lose our sovereignty. This is the big picture, and this is where I did get my idea of free market trade means exports equal imports. And what about the fact that the Chinese are protective over their land being bought. Yet if we are concerned, we’re called Maori bashers and racists.
Interesting: One enquiry though. What year were NZ’s imports from China greater than our exports to China? I have previously understood that, at least in oct years, the trade swing is in NZ’s favour. BTW: There is a mechanism whereby you can obtain a perpetual lease of land in China, which while not a fee-simple estate, does provide rights of ownership of the land infinitely.
I guess the lease is terminated when the secret police turn up and shoot the lessee in the back of the head?
I wonder of John Key has noticed that there’s currently a massive purge going on in China, a purge as drastic as the Gang of Four days?
The chinese invasion of NZ is okay as long as our dear leader Jon Wong Kee is comfortable with it.
Cadwallader, to answer your question. I was with a political party called Focus NZ. One of the key things was the exchange rate. Julian Fairlie, who was on the board in our debate said that over the last 50 years, 47 of those years have shown a trade deficit.
Another friend I know, said that NZ has the biggest merchandise trade surplus, but we import so many services, that it completely absorbs our surplus, and turns it into a goods and services deficit. He was thinking banks and insurance.
And finally, in 1971 Richard M. Nixon, cut off the ties of $35 US being exchangable for an ounce of gold. This is when we started our floating exchange rate, that can change any second. So that’s 40 years ago. And in the book ‘the undeveloping nation’, the author says that until 1973 we usually had an embarassingly high surplus. And of course in the 80s we sold some of our service industries to overseas.
So although that doesn’t give you a very pinpointed detailed specific answer, what it does say is ever since the world went off of the gold standard, it really hasn’t helped New Zealand. Now if you think this Julian Fairlie focus thing is a con.
Just type this in: Focus_NZ and wait for the wikipedia listing.
You’ll see that they were a political party that didn’t win. So unfortunately their site doesn’t exist no more, as they have very little money. Anyhow Gantt guy knows something about them, as I talked to him a few months ago while we were blogging on the NZ conservative, and he thought that although their was room for improvement it wasn’t a bad party. So gantt guy, please verify my statement, I’m counting on you
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Interesting and informative. Thanks Warren.
So verified, Warren. In fact, I think we agreed that absent something tangible to back it, an economy is guaranteed to collapse in on itself.
Thanks Cadwallader, I trust I’ve answered it to your satisfaction.
Thanks Warren for the interesting approach. It seems to me that as soon as you have a free trade agreement you don’t have free trade – the controls may be less than before but its not free. Free trade would require the govts just stay out of it completely, no subsidising exporters and so on but that doesn’t happen so its a trade off. With China we are getting rubbish in exchange for quality. There may be a buck in it but its not sensible long term because you eventually pay extra in some way for crap. Kiwirail have found that out.
If the Chinese house buyers are not occupiers then their investment sucks despite access to cheap money – there is terrible return on investment unless they sell and pocket the capital gain. I do not see any claim of that happening so they are here for the long haul despite doing dough. It follows that the motive today is something else – perhaps empire building as endorsed by the Chinese Communist Party. I cannot see it as good for us long term as they are culturally and politically very different to us. The genie is out of the bottle and I think the only answer is to buy quality which will exclude a fair wack of their produce and hope they collapse more quickly than they will otherwise.
What Brown said. Exactly.
Thanks Gantt guy, I knew I could depend on you. At first you and I had a rocky start. I remember you saying the problem is too much regulation and too many lazy people. And then I went and talked about the exchange rate, the fact that we are a low capital economy. And finally we came to an understanding. Anyhow Gantt guy I do enjoy being challenged, that’s how I grow. And I haven’t forgot about how we had exactly the same idea with kiwisaver. Put it directly in companies, that will give us jobs. And I haven’t forgot about the that AUT professor getting caught with her pants down about the false gang rape allegation, and how she took it when I confronted her.
IIRC our disagreement was over focus rather than substance; I think we were in violent agreement on the substance. To my mind, were the voting public less lethargic, more informed and involved, these tin-pot corruptocrats we send the Wellington wouldn’t get away with half the crap they pull. I agree with everything you say, but I think it starts with an involved, informed citizenry.
In that case Gantt guy we soon got closer to agreeing. When I was first with Focus NZ, their core policies were a real exchange rate, where exports equal imports, abolish the RMA and the ETS, and have a flat tax. And then later I persuaded them with my kiwisaver idea, to get more money into NZ companies who were going to produce things.
Their motto Prosperity through productivity. And then they softened. They started to talk about free doctor’s visits for the young, a better pension. So when you had a look at it, and saw how they had started to change, that’s when I saw the change too.
So to me its like using real ice cream in your thickshakes. And attracting customers who want ice cream in their thickshakes. And then listening to customers who say its too expensive, so then you do what everybody else does, and use cheap artificial stuff, and then lose your original customers, who bought from you because you used real ice cream. So I still think their’s hope for them, if they’ll just go back to their original motto, prosperity through productivity. But they need to avoid the pitfall, of those silly other policies.
Thanks Brown, I’m glad people are finally catching on. They’re finally seeing that free trade under a gold standard is different than central bank controlled trade. Yes your exactly right, having a gold standard is the only way to be sure we get the real deal.
Having said that, I was with Focus NZ. Julian (a board member next in line to Ken Rintoul) the president was surprised that I understood that we don’t need a low or high exchange rate, we just need our exports to equal our imports, nobody other than Julian or I understood this. So I worked on a paper stating how to achieve it.
We have a world currency called the Special Drawing Rights, if you think I’m having you on, look up currency converter look for the IMF’s currency and type this in http://www.universitypressscholarship.com/…/search:downloadsearchresultaspd…, their currency is the XDR, X meaning electronic. Whenever a country trades, if they import more than they export, they lose SDRs.
So what my paper said, is that when we receive Chinese currency in loans or land buy ups, we should exchange that currency for SDRs, and use that money to pay off our debt. So this way the Reserve Bank would keep the currency where exports equal imports, and any further currency would be used to pay off our overseas debt. The farmer would get his money in NZ dollars as is.
Anyhow so the only difference between this and what I’ve been saying, is that we use the SDR as we would our gold. The SDR was originally called paper gold. But yes essentially if we just go back to gold, that is the simplest and surest way to do it. The government hasn’t done a really good job have they? So why would they all of a sudden do it right.
And yes your right about the Chinese objective. World communism can only be achieved by taking control of other countries financially, and then once their’s no resistance, then they will just stop pretending to be nice people. We have good land, they lack resources, they need to feed their people. They’re not here to help us, they’re here to help themselves.
In regards to the last post, the link doesn’t work. Just google ‘special drawing rights the first international currency’, and what I meant to say is Julian is next to the president.
A similar thing is happening here in Australia, house prices are going up and up, foreign investment is partly the reason. The other reason is that our capitals have so much unused land in the form of national parks and generally useless greenery. If you have too many people wanting to live here and you won’t give them the land to build on, where else is the price going to go.
The foreign investors will keep coming and the prices will keep going up until enough people decide to shove the greenies and other idiots out of the way and chop a few trees down. I’m not holding my breath though.