Posts by BenWilson
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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.
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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?
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Hard News: The Boom Crash, in reply to Hugh Wilson,
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.
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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.
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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.
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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!
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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
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Hard News: The Boom Crash, in reply to Marc C,
How long can people put up with this, I ask?
Well people put up with a lot worse for thousands of years. Which doesn't make it right, it's just a fact about people.
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Hard News: The Boom Crash, in reply to Marc C,
The milk solid auction prices have already dipped, or “crashed”, so when will this “boom” turn to bust, one wonders?
That's the 800 billion dollar question. Been waiting a long time. I think ultimately property is too big to fail. Which sounds like famous last words, but really, once it's the main source of wealth, how can it?
The social issue isn't really whether property will crash causing some terrible catastrophe, but actually what the slow burning catastrophe of it not crashing is. Essentially, wealth is concentrating. Do we move from long-since-egalitarian to outright plutocracy? There are people that rich here now. It's a pretty symbolic shift, to me, that the super-rich banker is the great man-of-the-people.
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Hard News: The Boom Crash, in reply to Dastardly Bounder,
We established that last week didnt we?
It's just something real estate agents have been telling me since I first got serious about buying property. Every suburb is the new Ponsonby. Which has, going on the meteoric growth, actually been true in every case. And since estate agents only concern is the value of property, from their point of view it's true.
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