Hard News by Russell Brown

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Hard News: The Boom Crash

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  • Hebe,

    Insane. Christchurch is similar in its own smaller way: we’ve not had the great booms of Auckland until the last three years. Now whoosh. (We also broke the CCC website when the new values came out this year.)

    The effects of this paper wealth are that my kids are seriously at risk of not being able to afford live in their hometown. When will the very simple tax changes be put in place that return housing to its place as a basic right rather than a way of making tax-free profit? A simple brake (which I benefited greatly from when I rented out a house for two years moons ago) is to make mortgage interest payments non-tax deductible.

    The tax system is structured to make letting out a house or two attractive rather than housing as a human right.

    Having said all that: we bought this shack in a quietly-quaked area five years ago; the latest valuation is 50% up on the purchase price; and going by recent sales close by it would fetch near double the purchase price. Damn silly.

    Christchurch • Since May 2011 • 2896 posts Report Reply

  • Russell Brown, in reply to Hebe,

    The effects of this paper wealth are that my kids are seriously at risk of not being able to afford live in their hometown.

    It may actually make sense for us to cash up and leave Auckland when the time comes.

    Auckland • Since Nov 2006 • 22756 posts Report Reply

  • Shaun Lott,

    I haven’t looked, but I’m guessing our early 60s house on a section in ‘Tattoo North’ will be $1M+ Insane indeed.

    This can’t go on, surely.

    For quite a while, yes. See: Manhattan

    Waitakere • Since Aug 2009 • 111 posts Report Reply

  • Adam H,

    An extreme version of what our future may hold:

    http://thewireless.co.nz/themes/change/living-in-an-ageing-society

    Look at all those empty houses...

    Auckland • Since Oct 2014 • 26 posts Report Reply

  • BenWilson,

    The ideal Auckland property investment strategy seems to be living in a shoebox and trying not to mess up the expensive dirt underneath it.

    LOL. Indeed. As with cars, renovations are seldom worth the money paid for them, so if you're a miser like me, you let other people do the renovations and then buy them for a big discount.

    ETA: By "worth" I mean their sale value. Of course their worth to people who get new rooms and other improvement to their houses are heaps.

    Auckland • Since Nov 2006 • 10641 posts Report Reply

  • Zach Bagnall,

    All rather worrying sitting here in London, paying over 3k NZD per month in rent + bills + c/tax for a 2brm in Clapham.

    Munich is starting to appeal more than a return "home" to NZ.

    Colorado • Since Nov 2006 • 120 posts Report Reply

  • Steve Curtis, in reply to BenWilson,

    As with cars, renovations are seldom worth the money paid for them,

    Its not a real valuation, done by a site inspection and measurements by an experienced valuer. Its a computer model which is then used to divide up the 'value' into a theoretical empty section and improvements.
    For rates purposes its good enough but dont be fooled by its relationship to what an actual sale will be. In those circumstances improvements will allways get a higher price than an unrenovated place of the same floor area.
    Then there is the valuation for insurance when a total rebuild is required.

    As you see the different numbers are unconnected, so its best to ignore the councils unnecessary division into land and improvements which never makes any sense

    Auckland • Since Nov 2006 • 314 posts Report Reply

  • william blake,

    Set up a co-op with your mates, all sell up and move to a bit of provincial Newm Zealand. Be cash and asset rich, work the internees, the land, your mind and your soul.

    It will be good for the provinces and if enough people do it house prices will fall. In fact better do it before everyone else and the market collapses.

    Since Mar 2010 • 378 posts Report Reply

  • Paul Campbell,

    Won't someone think of the children? after all if they'll be spending all their money on real estate and none on taxes to support us in our dotage, it's not going to be good..

    Really I blame corporatised governments, ones that see no benefit in thinking a decade or two ahead and value short term monetary measurements over long term social good.

    Well that and the inability to see beyond the edges of Auckland and see that Auckland's property market is starving the rest of the country of investment capital - if you want a cheap house, less traffic, a more relaxed lifestyle, fewer dirty politics, and none of the Auckland part of the Nats and their shenanigans we all have it right here, anywhere else but there. I know it's usually a joke but rumblings of succession seem to have grown recently, those halfway funny jokes about cutting the cable and letting that fish float away seem to happen more often these days.

    Dunedin • Since Nov 2006 • 2608 posts Report Reply

  • Dastardly Bounder, in reply to william blake,

    Set up a co-op with your mates

    I've been wary of cooperative land or lifestyle groups, mainly because I've seen the results of failed 70s communes and business ventures started by friends. When things go wrong the fallout can be quite spectacular.

    Saying that... I recently found this fellow in Christchurch who is an urban planner. He's put together a guide for cooperative land purchase and development.

    I'd like to think it could work.

    Auckland • Since Dec 2012 • 61 posts Report Reply

  • BenWilson, in reply to Steve Curtis,

    In those circumstances improvements will allways get a higher price than an unrenovated place of the same floor area.

    For sure, and it's not even true that renovations are worth less than what they cost, on the whole. I was being glib.

    Painting would typically be a renovation that is worth more than it costs, because it adds considerably to the impression whilst costing very little. This goes on cars too. If all it takes to get a WOF for you car is to fix a flat tyre, then that's a $30 repair that would add a fair bit more than $30 to the sale price.

    But it's quite common to overvalue other improvements. A new paint job on the car probably won't add that value to a cheap car. Changes to the structural nature of the house could cost a great deal, but they'll be compared to something that was built that way in the first place so the cost isn't even considered. Essentially, a three bedroom house with an added room is worth what a 4 bedroom house is, all other things being equal. It's not worth the cost of a three bedroom house plus the expensive renovation to move the walls around.

    Auckland • Since Nov 2006 • 10641 posts Report Reply

  • Paul Campbell,

    BTW: remember that rates setting by valuation (in NZ) is a 0-sum game - if your valuation goes up by 50% and the average valuation increase across the city is also 50% then the rates you pay will not change

    (or rather the percentage of the total rates take that you pay will not increase - if they increase the total amount they want your rates will still go up)

    Also remember that when they say that "rates are only going up by 3%" it's cumulative, a bit like compound interest, an exponential thing - that's last years increase plus 3% - ideally rates increases should be quoted against a historical benchmark adjusted for inflation rather than what they soaked you for last year (Dunedin's had a decade of increases over inflation, sometimes 10% per year, while the elderly living on fixed incomes don't see that in their pensions)

    Dunedin • Since Nov 2006 • 2608 posts Report Reply

  • Sacha, in reply to william blake,

    sell up and move to a bit of provincial New Zealand

    providing your aspiration is horticulture.

    Ak • Since May 2008 • 19688 posts Report Reply

  • Kumara Republic,

    Something has to be done. But property speculators collectively in NZ are more powerful than an upper house or senate. A de facto House of Lords, much?

    The southernmost capital … • Since Nov 2006 • 5420 posts Report Reply

  • Lucy Telfar Barnard, in reply to Dastardly Bounder,

    I've been wary of cooperative land or lifestyle groups, mainly because I've seen the results of failed 70s communes... When things go wrong the fallout can be quite spectacular.

    Yes indeedy. However, I don't think the idea of communal ownership should be dismissed altogether. A friend of mine did her MA thesis on Coromandel area communes. As I recall, she found that the ones that survived were the ones which realised early on they needed to have rules and rosters, and clear consequences for breach of either. If you can do a decent job of figuring out a good range of worst-case scenarios, and figuring out what the appropriate response would be, you're a good way there.
    I think of the many company share apartment buildings that manage to tick over nicely, and think if you could take a similar approach to shared ownership of a block of land, with effectively private home ownership on that land (perhaps something in the nature of cross-lease?), it "ought to" work.

    Wellington • Since Nov 2006 • 580 posts Report Reply

  • CRobinson, in reply to Lucy Telfar Barnard,

    Is that thesis publicly available? Sounds like it might contain some useful lessons.

    Since Aug 2014 • 8 posts Report Reply

  • Lucy Telfar Barnard,

    It's pre-electronic, unfortunately, but if anyone's in Auckland and wants to have a look at the University copy (or wants to do an interloan from elsewhere), it's Webb, Larisa, 1999. Living together? : change and continuity of a New Zealand intentional community. MA Thesis, University of Auckland. Library listing here. And I'll ask her if she happens to have an electronic copy at all.

    Wellington • Since Nov 2006 • 580 posts Report Reply

  • CRobinson, in reply to Lucy Telfar Barnard,

    Thanks Lucy, I´ll try interloan.

    Since Aug 2014 • 8 posts Report Reply

  • Sofie Bribiesca, in reply to Russell Brown,

    It may actually make sense for us to cash up and leave Auckland when the time comes.

    This is an almost reality for us give or take a couple of weeks. I can't tell you enough how good it feels. From a small bit of dirt/mortgage with high rates to several hectares of dirt commanding less rates and no mortgage. Free water , free power, (albeit a small set up fee) ,warmer weather. Free TV, free views, peace and quiet and a great sound system we can blast to our ears and hearts content. All this and it comes with friendly neighbours who after special coffees to discuss a couple of days work to finish our build, went home and came back with beers as he noticed we had run out last night and it would be a couple of weeks off for the next brew to surface. What a gem.The hangover is going great guns at the mo.....Is it Monday? :)

    here and there. • Since Nov 2007 • 6796 posts Report Reply

  • Hebe, in reply to Russell Brown,

    It may actually make sense for us to cash up and leave Auckland when the time comes.

    We're thinking the same. Odd as it seems, Christchurch has definitely become the nation's Second City, and the capital of the South Island. The rebuild insurance money looks like it will keep driving the local economy for over another decade, when the downstream second-stage city should kick in. I now see the Chch property market as a smaller version of Auckland.

    Christchurch • Since May 2011 • 2896 posts Report Reply

  • Geoff Lealand,

    If we ran all real estate agents out of town, it would be a good start.

    Screen & Media Studies, U… • Since Oct 2007 • 2539 posts Report Reply

  • Raymond A Francis, in reply to Geoff Lealand,

    Not a bad idea but it is worth remembering that people pay the ever bigger prices not the agents

    45' South • Since Nov 2006 • 576 posts Report Reply

  • Amanda Wreckonwith, in reply to Sacha,

    providing your aspiration is horticulture.

    Or agriculture,
    or engineering
    or accountancy
    or conservation
    or tourism
    or hospitality
    or App development
    or literature
    or teaching
    or painting
    or the many other occupations that my neighbours are employed in, in these dim, dark, cultural wastelands of rural NZ.

    Since Sep 2012 • 171 posts Report Reply

  • andin,

    We broke government.

    Its still broken darn it

    raglan • Since Mar 2007 • 1882 posts Report Reply

  • Cassandra,

    I'm calling myself the fibrolite (1/2) millonaire. Apparently a 2 bedroom 1950's cottage untroubled by the renovator's hand on a small cross lease in a West Auckland backwater is worth a lot! Me and the neighbours have been amusing ourselves with visions of what we'd do with it if anyone was mad enough to pay that sort of money for our shacks.
    Going to object via the official process, just for the fun of it.

    Since May 2011 • 9 posts Report Reply

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