Posts by BenWilson

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  • Hard News: The Boom Crash, in reply to Sofie Bribiesca,

    As soon as you tell someone you sold the house they all start saying ,you could have got more than that now, meaning this week.

    Yeah, never look at the prices just after you buy or sell. What's the point? And I'm sure the money will be nice to have - so you're retiring to the north?

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: The Boom Crash, in reply to WH,

    As Graeme Wheeler implies in the article, discouraging residential property investment may be an important part of the solution to the housing crisis.

    Pity he won't give even a hint of what he thinks ought to be done. That would be committing to something and soothsayers are very careful about that. So long as he can talk about vague unquantified pressures, then he can't go wrong. You can explain everything with "but this pressure was too high, that too low".

    "We have been thinking quite deeply about whether we need to introduce measures to discourage some of those practices", he said.

    Thinking deeply huh? Who knew that you could just think the economy better. How many more decades will this Deep Thought go for?

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: The Boom Crash, in reply to Jim Cathcart,

    Money is essentially printed into existence by a borrower’s future income and repayments, not by an equivalent deposit within the financial system.

    Yup.

    It is indeed time to change the housing market, to create and provide affordable rental and owned homes, so that more investment goes into other activities, that produce stuff that earns a better, more secure living for the future. The state can play a major role in this, also able to afford lower credit interest rates, and in state housing take advantage of large buying power, to obtain cheaper building materials.

    I think we should at least try. I'm not, however, optimistic about the ability of the state to do anything fast. I doubt their ability to even dent house prices with concerted building activity, within anything like our current expenditure parameters. There are 1.5 million households in NZ. How many places do you have to build to drive prices down 1%? Does anyone even know the answer?

    All we get is the old chestnut that increased supply puts downwards pressure on price. But the pressure isn't quantified. It sounds meaningful, like it's analogue in physics. In physics it's force per unit area. Pick your force measure, pick your area measure. You get some choices - SI or imperial(ist), choose Pa or PSI. In prices it's what?

    I really want to know. Is there even a unit for this word that is constantly bandied about like they really know what it means. Because I don't and it's not leaping out from any searching on the net.

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: The Boom Crash, in reply to Jim Cathcart,

    However, your narrative is based on an assumption of property price inflation every 10 years. Why has that not happened in the case of Japan considering the country’s productivity and “developed nation” status?

    Don't know. They operate in a very different way. It's quite a different economy. How do you even compare something of that magnitude with NZ? They reached a dizzying level of wealth and then pretty much flatlined. Flatlining sounds bad, but I'd be happy to flatline with that kind of wealth. Maybe affluence maxes out or something? I don't really know. We're a long way from being anything like Japan.

    we do not have a property bubble as house price inflation was less than 20% over a recent 12-month time frame. What is he trying to tell us? Surely he has a quantitative framework to make this claim

    I'd be amazed if he did. It's all vague bullshit - they pull on a bunch of strings and then make qualitative statements with some numbers to make them sound quantitative. A bubble can only really be clearly recognized in hindsight. If it doesn't burst, then in hindsight, he's right.

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: Garbage in, garbage out, in reply to Tinakori,

    There’s quite a big market for stories about Bad things being done to Good people

    Yes, Fair Go has been around since I was a kid. Was it even the same guys?

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: The Boom Crash, in reply to Hugh Lucero,

    Your story is not just about young adults now. It's the story of my life. The difference is just that it's much worse now, even more starkly clear what's going on.

    There are a couple of things which perplex me about Auckland prices, including where on earth folks get the $ from

    Loans or gifts, for the most part. I'm yet to meet the person who has saved up $100k on a wage/salary, before buying a house.

    A common one used to be parents giving loan security to the bank, against their own houses, something that was typically quite temporary, since price inflation gave the kids enough equity to pay their parents back quite quickly, refinancing once their equity reached the requisite level. Don't know if that still happens, or if it's more common for them just to borrow it against their mortgage and give it to their kids. That's what happened with me. My folks lent me the money, I paid a goodly chunk of it back (but not all). I remember asking the bank whether that was a problem, since one is required to tell them whether any cash you put up is in fact borrowed (you can't, for instance, just use your credit card to come up with a deposit, without disclosing that), but they pretty much said that when it's parents lending the money, they turn a blind eye.

    Of course this solution only works for families in which parents actually can put up a stake of some kind, so it doesn't help poor families at all. And nothing stops the fact that if you borrow half a million dollars, whether with family borrowings "hiding" the borrowed deposit, or not, you still have to pay the interest on half a million dollars, and the house isn't yours until you pay them half a million dollars on top of all that interest.

    But once you're on the ladder at all, the inflation does sort of work in your interests. If property inflation doubles values every ten years, then even you had no equity and paid nothing back on the principal ever, by the end of 30 years you have 7/8ths equity. A $100,000 borrowing is now against an $800,000 house. Which is why actual owners really dig this inflation. It gives the impression of quite enormous earnings just for paying interest that may have been equivalent to rentals anyway. Few people seem to really understand just how it is that such enormous returns come their way, that they are magnifying the returns of the property market through their huge leverage, often 10:1, and as high as 20:1 just before the GFC. This is far, far higher than you could margin borrow for anything in the stockmarket, so property growth is magnified to actual property investors. If property rises by 10%, and you're leveraged 10:1, you actually double your money annually (less interest costs). Which sounds awesome until you realize that it's money at risk too. If property drops by 10% you halve your money, and if it's borrowed money that means you're completely bankrupt and owe the bank heaps. Which is why it's too big to fail. They don't want to bankrupt you, they want you to pay your debts and they just keep extending credit to the maximum extent they're allowed to.

    Loans for extremely long periods are normal now, too. 30 years loans, for instance. If you were in your 30s before you even got the deposit together, you'll be freehold by about the time you retire, presuming of course (and this is nearly universally false) that you never once refinance, reborrow, renovate, or move.

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: The Boom Crash,

    Decent volcanoes are a lot rarer than earthquakes. But they're probably a lot more destructive. If you got one the size of even the smaller cones in the Auckland region popping up in the CBD, there isn't going to be any rebuild.

    We get about one per thousand years, so there's the odds - 1:1000 every year. Eventually, it's going to happen.

    ETA: Happen somewhere in Auckland, that is. Odds of it happening in the CBD are a lot less.

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: Garbage in, garbage out, in reply to Gareth Swain,

    Is there not a mainstream market for proper investigative journalism in New Zealand?

    There's a market, but it's not a mass market.

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: The Boom Crash, in reply to Jack Harrison,

    our combined advanced academic thought of the last 10,000 years

    From neolithic to neoliberal in only 10,000 years!

    Auckland • Since Nov 2006 • 8659 posts Report Reply

  • Hard News: Garbage in, garbage out, in reply to Brent Jackson,

    And I’d wager that there might well be a few more stories to be found in interrogating the data that governments and ministers offer to justify their actions.

    The way you've phrased that sentence highlights exactly what the problem is.

    Be careful calling a wager bollocks

    Auckland • Since Nov 2006 • 8659 posts Report Reply

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