‘Auckland market ‘ponzi scheme’ – economist’

36 Responses to ‘Auckland market ‘ponzi scheme’ – economist’

1. Cadwallader says:

   April 8, 2015 at 14:54

   I am not so sure. In AKL there is a definite and real demand for housing by various types of new entrants ie those from off-shore, those from other parts of NZ , first home buyers, retirees from farming regions. I suspect SYD has a similar buying group. This is not speculation but diverse demand generated by the desires of people to live there. If AKL had static population growth, the rises would be unsustainable but that is not so. If the attractions of AKL were dispersed throughout NZ the pressures in AKL would not be as intense. The market will cool eventually and maybe even retrench for awhile but grow it will. History is as usual the blue-print for the future. My concern for AKL is it’s apparent lack of planning by its Council.
   • KG says:

     April 8, 2015 at 15:35

     Well, I’m no expert – far from it.
     Somebody once said that if all the world’s economists were laid end-to-end they couldn’t reach a consensus.
     Nevertheless, it’s seemed to me for the past ten years at least that Kiwi house and land prices were seriously out of whack with most people’s earnings.
     The telling comment from this article is where Auckland house prices stand on a world scale:
     “New Zealand was second only to Norway for high house prices compared to incomes, he said.”
     • Cadwallader says:

       April 8, 2015 at 15:40

       Well…AKL is a damned sight cheaper than Perth WA!
       • KG says:

         April 8, 2015 at 15:46

         Perth WA prices are very much part of the mining boom and are beginning to be pegged back, Cad. Compared to incomes was the interesting part.
     • Warren Tooley says:

       April 8, 2015 at 22:20

       Aw, yes KG, if you have 5 economists in a room, you will get 6 answers, 2 from Mr Keynes, John Maynard Keynes.
2. mawm says:

   April 8, 2015 at 15:45

   It doesn’t help that the city council keeps on increasing the rateable value (CV) of the land and ‘improvements’. Aucklanders are used to getting more than that for a house when they sell it. This last burst of house price increases has followed the large increase in the council property valuations (to help pay for Lyin’ Len’s spending).
   • Warren Tooley says:

     April 8, 2015 at 22:23

     Aw yes, Mawm, the higher the price, the more rates you pay. So the fact that banks are happy to lend on houses, but no so happy to lend to businesses, means they are actually subsidising bad bad Len Brown (remember bad bad leroy brown the song).
3. KG says:

   April 8, 2015 at 15:58

   Graph of Median House Prices ($ thousands) in Australia’s Major Cities 2004 – 2014
   Perth: $538,000 and beginning to level off.
   http://www.livingin-australia.com/australian-house-prices/

   New Zealand’s median house price has risen 3.6 percent over the past year, led by Auckland where the median house price jumped 14 percent to $675,000. (and still rising. kg)

   http://www.3news.co.nz/nznews/auckland-median-house-price-up-14-percent-2015031215
4. mistress mara says:

   April 8, 2015 at 17:17

   I do not foresee a slump in Auckland house prices. Chinese people are steadily moving to or investing in property here, and they have $$$$$. Last I heard, China is not short of people. I’ve been a home owner in Auckland central for over 20 years, been a real estate agent and know what is happening. Like many others, if I had to buy my house now, I would not have a dog’s show of affording it. Ok it’s not only Chinese. Much of the World is now a shit-hole; where do you think those people would like to live? I am an immigrant to NZ myself and sometimes wonder if I am suffering from the “pull-up drawbridge” syndrome. But not often.
   • Darin says:

     April 8, 2015 at 18:01

     That’s my answer to all the lefties here who think China is so great.I ask them,if it is the Utopia they claim it to be,then why as soon as the Chinese have the bucks they jump ship and move to another country? (insert Crickets chirping here)
     • KG says:

       April 8, 2015 at 18:32

       Another interesting question is this:
       Why does a savage and repressive communist government, which controls every aspect of the people’s lives, allow them to do it?
       We have to conclude that they’re being encouraged to do it, as a means of colonising certain Western countries.
       • mistress mara says:

         April 8, 2015 at 19:47

         Look at the pacific Islands. China is buying them up like sharks feeding in a fish tank.
         • KG says:

           April 8, 2015 at 19:53

           Yep. And the Key government seems utterly unconcerned.
           • Warren Tooley says:

             April 8, 2015 at 22:30

             Well, this brings up another issue. Free trade originally meant, exports equal imports. You sell $1 billion of exports you import $1 billion. You produce what you are efficient at, they sell what they are efficient at. But here’s the thing, if they are buying $1 billion of property, that means you can import $1 billion of Chinese goods without exporting $1 billion of goods.

             So, when they lend, or buy our property, this affects the exchange rate so that we import an extra $billion worth of Chinese goods in exchange for more property. This was not what free trade was originally. But people have conned into it.
           • Warren Tooley says:

             April 8, 2015 at 22:31

             That’s because people think its free trade. Please see next comment.
       • Cadwallader says:

         April 9, 2015 at 11:04

         Good question, the msm portray China as an amalgam of free-market/communism but without defining the ratio. It seems from here that China is totalitarian at both ends of the arc. Perhaps it is free-market outside China while a commie tyranny within?
5. Brown says:

   April 8, 2015 at 21:06

   The Chinese govt doesn’t let them do it (I think $50,000 is the limit) but its easy when you are corrupt as a start point and desperate to get your money out of China. Those suitcases filled with money stories are not rumors. China is heading for a big adjustment just like they have encountered before. They may be an old civilisation but its been a boom and bust cycle over the thousands of years with millions of dead along the way.
6. Wombat says:

   April 9, 2015 at 01:19

   Real estate act: 2015; The primary occupier of any residential property must be its owner or owners.

   Any property not occupied for a period greater than six months shall be put to auction.

   Easy.

   Amazing how the beneficiaries of fiat currency driven cheap credit can simultaneously enslave themselves to the banks and their tenants to themselves, eh?

   Perhaps if houses once again became homes rather than retirement schemes we the market might actually reflect something resembling common sense.
   • KG says:

     April 9, 2015 at 05:45

     “Perhaps if houses once again became homes rather than retirement schemes we the market might actually reflect something resembling common sense.”
     YES!
7. Flashman says:

   April 9, 2015 at 06:32

   Suppose you owned property in a Auckland (e.g. through a bequest) and you received an insanely stupid over-the-odds offer from an estate agent acting for a Chinese principal; one that made your eyebrows head for Toronto. Would you say “No, no. I want to sell, but only at fair price that’s affordable for a Kiwi family”?
   • KG says:

     April 9, 2015 at 06:38

     No, of course not. But that scenario is a symptom that has f…-all to do with the causes of the problem.
     • Flashman says:

       April 9, 2015 at 13:58

       Maybe…maybe not.

       Housing supply in Auckland falls below demand, ergo prices bottlerocket. At the margin the market price is always set by the last price offered and accepted. And thus in the case of Auckland, buyers are offering active sellers stupid amounts of money.

       So, suppose for whatever reason one had a house in Auckland that one wished sell. What asking price would go on the estate agent’s blurb? A dollar figure reflecting an anticipated strike price for the area…or something well below it, but “affordable” in the sense it reflects what a buyer might have paid five, ten years ago before the bubble? One pays: one gets to play.

       Now let’s say one boxes clever and goes to auction. Now you have chance to draw in the big-spenders…theoretically uncapped dosh. What reserve does one set? Ah! Same deal as the above.

       Bottom line: One either takes a “principled position” and sells for below market value…thus ensuring the new buyer is effectively subsidized and can gleefully flick it on for its true value next week. Or you can cash in…like everyone else.

       No one can foresee a time when acceptable-quality-plus housing supply in Auckland will exceed demand: no matter what government or the city council do or don’t do. It’s no different from other in-demand metropolii elsewhere in the world: London, Sydney, etc..
       • KG says:

         April 9, 2015 at 14:11

         “No one can foresee a time when acceptable-quality-plus housing supply in Auckland will exceed demand”
         Because no one can foresee when the government will stop importing the solution to it’s rotten economic management and will stop placing unrealistic constraints on land supply and builders.
         And I see you haven’t addressed the rebuttal of your false claim that houses in Perth are far more expensive than in Auckland, Cad.
8. mawm says:

   April 9, 2015 at 08:00

   “Perhaps if houses once again became homes rather than retirement schemes we the market might actually reflect something resembling common sense.”

   Perhaps if one was not taxed as heavily during one’s working life AND not taxed as heavily on one’s savings, AND if politicians defended the buying power of one’s dollar, one would be able to retire in comfort without having to resort to becoming a landlord.
   • Warren Tooley says:

     April 9, 2015 at 08:11

     In that case Mawm, how bout no taxes on your savings. People invest in housing partly for the capital gains that aren’t taxed. So how bout savings don’t get taxed, so that it makes savings more attractive.
     • The Gantt Guy says:

       April 9, 2015 at 08:18

       I’ve always advocated that. If our society insists on the insidious practice of taxing earnings, it should cease from taxing savings (which is a tax on already-taxed income).

       There again, my going-in position has always been a single, small sales tax and nothing more – government cloth must be cut to fit the amount raised from the consumption tax.
     • mawm says:

       April 9, 2015 at 09:08

       The “capital gain” in reality represents the loss in the value of your dollar.
   • The Gantt Guy says:

     April 9, 2015 at 08:13

     

     Add to that, if other forms of investment (specifically, the NZ stock market) wasn’t a barren desert of government-inflicted death and destruction, housing would be less attractive an investment option.

     And I don’t think it’s right to say “resorting” to becoming a landlord like it’s some kind of 19th century robber-baron profession. Fact is, landlords are providing a roof over the heads of those without the means to own their own property. If private investors weren’t their landlords, the government undoubtedly would.
     • mawm says:

       April 9, 2015 at 09:04

       I used the term ‘resorting’ because of my one and only foray into being a landlord taught me a lot about tenants, an experience I would not willingly submit to again.

       Untaxed investments, or classes of investments would be good but protecting the value/buying power of the dollar is essential. Instead governments encourage inflation as it hides their disastrous fiscal management.
       • Warren Tooley says:

         April 9, 2015 at 09:57

         True, so that’s why people need to hedge against inflation. And when they invest in real estate, they think its simple, this won’t lose value. Now investing in businesses can also do that. Oh but wait, what if the business makes a loss. Not as safe as real estate. And then people also get taxed on the profit of their investments from those businesses.

         So as long as savings get taxed, but not asset gains on property you have the imbalance. Oh their’s another option invest in silver. Oh but wait, the more people put in real estate, the higher the house prices, the more they pay in rates. So investing helps the government, they tax your savings, or its used to make rates go up. Unless you put in silver. Now do you see why all these other things are pushed and silver isn’t.
         • mawm says:

           April 9, 2015 at 11:54

           I prefer gold – less bulky.
           • Warren Tooley says:

             April 9, 2015 at 13:08

             Mawm, when I say silver I mean precious metals. Even copper has value. However, at the same time, silver has many industrial uses. Whereas gold is more for jewellery. Gold is good, but silver is good to, and is more affordable for those who can save less than $100 a week.
9. Flashman says:

   April 9, 2015 at 14:08

   Your average Kiwi capitalist is a residential property investor: and with good reason for where else is there to invest your money in this country and get shot at a decent return? Thus….

   Rich Dad Option
   Form a private company, buy a house, fix it up, put in a vetted tenant, take the tax breaks, hold for capital gains. Sell-buy opportunistically to augment your portfolios of cash (bonds) and property.

   Poor Dad Option
   Put after-tax savings in a building society term investment for 3% after tax.

   Stupid Dad Option
   Put after-tax savings into a private company flogging an exciting new brand of (X) or an investment company providing sub-basement finance for second-hand cars and mag wheels in Otara.
   • Warren Tooley says:

     April 9, 2015 at 14:47

     Flashman, if people want to put their money in the bank or a building society, they aren’t very skilled at investing. Last year, I looked at three investments (and not banks), 2 of which were offering above 8%, and the other 4%. With my financial analysis and interpretation skills I was able to see that one was a fire hazard. If it had $10 million in equity 5 years ago, due to losses it had only kept $2 million of that. In other words if it made another loss the size of the other years, they would be in liquidation selling their assets at fire sale value, and giving only some of that to their creditors.

     Whereas another one, had made as many losses as they made profits over the last year, and their losses were small, and they had lots of equity, which means another small loss, and your money is safe. Now the one offering 4%, had made nothing but profits, and is still standing strong.

     So my point is, yeah banks and building society’s don’t pay much interest, because they require no skill everybody trusts them, except for me. Meanwhile the ones that are more risky pay more interest, and with some of these so called risky ones, if you know how to analyse things financially you can work out which ones have little risk, and maybe get a higher return.

     Then at the same time if you put your money in silver, you are buying a unit of industry, as prices go up so does that unit. Real estate is something similiar, the land goes up, doesn’t wear out. And with silver no one else is getting rich off of you.

     Oh, I nearly became a financial adviser, but I found out through looking at the code involved, you are not allowed to look at financial statements and say, this is this level of risk. Finally those three I was looking at last year have made a profit, and are now a little safer, including the one that was a fire hazard. But ultimately in the big picture of things you are right. People only understand property and banks. And so because of that, that’s why they have these problems. And both make the government rich.
10. Alan says:

    April 9, 2015 at 14:10

    Aucklanders’ are selling up and flooding into Tauranga. I live in a small Street and four houses in it have sold to Auckland people in the past Month. It is pushing up demand and the price increase of dwellings in the Tauranga market.
    • Darin says:

      April 9, 2015 at 15:40

      There goes the neighborhood….