Posts by Jim Cathcart
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Hard News: Housing, hope and ideology, in reply to AndrewH,
Yes, of course, which is why I made reference to Sekisui. I believe they are at the forefront of building materials for residential housing. But if this publically funded, there is no need to deal with the private sector middleman in NZ. Go straight to the source in Japan. As the yen disintegrates further, the cost benefits are huge right now. Furthermore, Seksui already possesses the housing design and can construct on a huge scale far more effectively than NZ companies can.
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Hard News: Housing, hope and ideology, in reply to Lucy Telfar Barnard,
It's rather ironic that you say cost isn't the issue. Anyway, the supply of building materials exists (think Sekisui) and the world is awash with skilled labour if it doesn't exist in NZ. But once again, these are non-issues, and without any political will, don't expect anything to change, whether they wear red or blue pajamas.
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Hard News: Housing, hope and ideology, in reply to Lucy Telfar Barnard,
OK, that's fine and I agree with you to some degree, but that goes back to the point that I was trying to express: If you want a paradigm shift and the government to provide social housing, the general population is going to have to wear the consequences. The idea that the government cannot build enough housing for everyone is garbage. Of course they can. What it will mean is that the public deficit will explode, but it can be done. NZ is a sovereign nation with its own currency.
As for property investors being responsible for their own actions, sure, that's a fair point...if property investment wasn't jury rigged by a construct of risk-weighted bank policy, tax policy, and restricted land supply. Investors are in the game because our institutions have geared the system to become what it is. They're getting feel mighty aggrieved if that is taken away. And the implications are huge for an economy where demand and spending is driven to a large degree by asset prices, not by what people actually earn. Disagree with me? Then explain why household debt is among the highest among developed countries.
I very much doubt NZ is ready for self-sacrifice to ensure social housing, including those at the most benevolent end of the political spectrum.
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Hard News: Housing, hope and ideology, in reply to Lucy Telfar Barnard,
So, off the top of your head, you believe that micro-managing supply "should mean" that you can control price rises keeping everybody happy. You would be popular in a Len Brown regime, but I think that's an unrealistic claim, even if you have the econometric modelling to support you. In fact, it is that mentality that has got us to this point that we're in now. And I will call you on it.
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The damage had already been done by the time the GFC hit. QE, the pervasive carry trade, and the freewheeling banks have enabled the scenario to get worse.
In Australia, the major banks hold about $10 of equity capital for every $100 of business loans they make (so they are circa 10 times leveraged) For housing, they can have as little as $1.50 of equity for every $100 of home loans financed (thereby permitting 67 times leverage). I cannot quote for NZ but you should expect the same.
Can you seen an issue here if property values fall and we experience an external shock to the banking system?
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Hard News: Housing, hope and ideology, in reply to linger,
The 5th Labour government (1999-2008). You know, the ruling power that sat through one of the most destructive credit bubbles in human history and let the FIRE industry fuel the fire without any thought to how it might impact NZ into the future.
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The model for income-based rental housing exists in Japan. But the issue of affordable housing is confounded by that NZ's private savings has been heavily invested in the existing housing stock. The problem with this is that with so much of the country's wealth wrapped up in houses, any social housing initiative is going to potential stymie the whole mechanism by which NZers have lived and saved for financial independence. House prices relative to income are so high now that people will feel aggrieved if the "price" of their houses fall or go through a period of deflation as witnessed in countries that have suffered through property crashes.
The irony is that investors often suggest that negative gearing is a subsidy for renters as opposed to a tax benefit for the landlord (no evidence exists to suggest that it is. Rents cannot rise above the ability to pay).
To blame Key and the National Government for this mess is short-sighted. Sure, their support base is likely to be negatively affected by a large-scale social housing initiative, but the problem started with the liberalization of finance for people to invest in the existing housing stock. There is little to incentive for the private sector to build new housing. It doesn't make economic sense. The Labor Government was aware of what was happening in the 2000s, but it was far to easy to keep the punters happy with rising house prices and shifting the onus of debt burden from the public to the household.
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Hard News: The uncooling of the inner West, in reply to BenWilson,
Why is it not going to happen? Because it hasn't in the past? How about Japan where it has happened in the most densely populated cities on the planet? One of the issues is that nobody has any idea what will happen. One of the issues with house prices is that they're now so high relative to household income. A fall in values of up to 20% caused by a financial shock (such as a GFC MKII) followed by 10+ years of flat prices or deflationary pressure would bury the NZ economy and the banks. Interest rates would be close to zero and the dollar would be under pressure (OK, good for exports but hellish for imports).
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Hard News: The uncooling of the inner West, in reply to Amanda Wreckonwith,
That hardly seems a coherent tax policy – central government lets people off a tax because local government imposes costs on them? Sounds like more manipulation to me.
If you don’t like capital gains tax then just say so – there are more valid reasons than the ones you give.
Not that I agree with them ;-)No, I'm suggesting that why should old-timers and existing house purchasers get off scot free when those who actually produce something have to pay. Surely incentives should come in the form of tax deductions. People who invest in or buy existing homes are in a much better position. I'm not against capital gains tax if it applies to people sitting on fat capital gains just because they were in the position to purchase before others were able to or before they were born.
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Hard News: The uncooling of the inner West, in reply to Amanda Wreckonwith,
No capital gains tax is not tax minimization. However, it would be good to see people who build new houses to not have to pay capital gains considering the upfront development costs that Auckland City Council reams them for. As for those who have purchased existing homes, capital gains taxes should be imposed considering that the owners have sat back and benefited from a system that obstructs a minimum cost opportunity for accommodation.