Housing Affordability
The focus recently has been on housing affordability as our three major cities have been found to be amongst the most expensive in the world for buying a home. The rule of thumb is three times the average household income and we are around six times the average household income.
Now a number of people, including international experts, have said the best thing you could do is free up land for urbanisation more quickly. The artificial scarcity of land is one of the biggest contributors to pricing it is thought, and it is simple supply and demand economics. Now this isn’t about putting highrises on the town belt, but merely speeding up the consent process for areas where houses will eventually be built anyway.
Jordan has another proposal though. To introduce a capital gains tax. Now such taxes can be devastating as they can tax you on paper profits you don’t have. Let’s look at two scenarios.
The first is where you get taxed every year on your capital gain. Now let’s say your household income is $80,000 and you have purchased a $300,000 house. Now let’s say it increases in value by $50,000 over the year. Bang on capital gains tax of 39% and bang you have to pay Dr Cullen $19,000 or so extra tax. Never mind you don’t have the $19,000 – you have to mortgage your house some more against the extra value. Oh yeah and no family holiday.
The second is where you get taxed only when you realise the “gain”. Now let’s say this family buy the house for $300,000. And six years later it is valued at $550,000 which they sell it at. If the CGT is at the top tax rate of 39% then bang Dr Cullen takes $100,000 off them. And here’s the problem. They are about to have a couple more kids and were moving into a bigger house. That bigger house costs $700,000. They could just afford the extended mortgage but now Dr Cullen takes $100,000 off them for the increase in their house value (yet doesn’t give them anything back to compensate for other houses increasing in value) they can’t afford that new bigger house for their kids. So the kids get no backyard.
So the average family gets pretty rooted under both scenarios. But the good news is Dr Cullen gets a lot more money to bribe people with.
January 25th, 2007 at 1:05 pm
Of course a Capital Gains Tax might only apply to investment properties and not your primary place of residence (as is the case in Australia) and your scenarios are meaningless.
January 25th, 2007 at 1:10 pm
David, that’s a fairly spurious argument you make. In Australia there is not CGT on the primary family residence therefore there is no $110 grap by The Cullender if the same simple system were used here.
January 25th, 2007 at 1:13 pm
i think realisation on sale would be the only fair way..
and..as the aim is to reduce the appeal of speculation..
perhaps a model where exempting upgrading the family home is allowed..
but..in the meantime..
how about fixing that g.s.t. ’scam’ property developers/speculators run…?
(that one they chuckle/laugh about in disbelief…(that they can get away with it…)..when no mug-punters are around..
(i’ve been there/heard them do that..!.)
and of course..that ’scam’ skews the market even more in favour of the speculators..and against those who would like to purchase their first home..
and are finding it increasingly impossible..
and your scenario of 39% is perhaps a tad ‘rich’..eh..?
and david..do you think the status quo should be retained..?
if not..what is your model..?
phil(whoar.co.nz)
January 25th, 2007 at 1:27 pm
CGT is another form of income tax (The incease in the value of your home is seem as income).
The lack of tax on this form of income does distort the market.
However, instead of adding on a CGT, how about removing income tax altogether…
Increase GST to compensate (or not… govt already take much more than they need).
Then people who are saving for a home can save more quickly (no income tax and restrict spending so lower tax overall) and buy a home faster.
There’s more to this idea around getting rid of company tax as well and replacing it with a turnover tax.
January 25th, 2007 at 1:28 pm
OT (but still about tax) – the short sighted, greedy and just plain stupid decision to prevent Kathmandu founder Jan Cameron from donating more than $1800 a year to NZ charities without being taxed on it (thus forcing her to Australia, where there’s no such limit) is a shining example of tax law stupidity even amongst the volumes of other examples.
And what does my favourite principled politician have to say? “A spokesman for Revenue Minister Peter Dunne said he could not comment on individuals’ tax affairs”.
Since taxation rulings are almost always made as a result of some individual’s circumstances needing interpretation, brave Petey has found himself a way out of ever having to comment on anything in his portfolio. More time to finger-wag at other pollies over how many times they say naughty words in Parliament, and all the other really important stuff Dunne spends his time on, then.
Full story here.
January 25th, 2007 at 1:38 pm
I have posted on this on jordans blog. Land is not an issue, building consents down this year compared to last year. There is still availible land in our cities.
http://www.stats.govt.nz/NR/rdonlyres/7A7AAFA8-D24A-4A3A-8852-713E12C9749F/0/buildingconsentsissuednov06hotp.pdf
Property prices have had an amazing run up ivalue due to cheap money, cheap money allows us to borrow more. This in turn drives up prices of assets like housing, because production is very slow to react to demand.
We have not had a doubling of average wages or our population, but house prices have doubled. They have also doubled in many places around the world.
I belive housing will revert to a normal price/affordability ratio via wage inflation or a financial crash and or credit crunch.
There is nothing rational to explain the doubling of house prices almost simultaniously across the developed world, because land scarcity is a real issue here and the UK but not Australia or the US!
To all please let the market decide because over the long run price affordability will return to an average!
January 25th, 2007 at 1:40 pm
Over at Sir Hump’s a review of Green tax policy showed the Greens were not averse to applying it to owner occupied homes as well.
What I can’t believe is that the correlation between local authorities and RMA issues hasn’t been talked about more.
Doesn’t it worry you – the mentality : that there isn’t a single problem this government can’t solve with more tax.
I can smell the tax on your breath Doctor Cullen!
January 25th, 2007 at 1:43 pm
“But the good news is Dr Cullen gets a lot more money to bribe people with.”
I’m still waiting for my bribe. I’m open minded.
January 25th, 2007 at 1:43 pm
Over at Sir Hump’s a review of Green tax policy showed the Greens were not averse to applying it to owner occupied homes as well.
What I can’t believe is that the correlation between local authorities and RMA issues hasn’t been talked about more.
Doesn’t it worry you – the mentality : that there isn’t a single problem this government can’t solve with more tax.
I can smell the tax on your breath Doctor Cullen!
January 25th, 2007 at 1:44 pm
My posts on Just Left about how we actually have a de facto CGT seems to have dried up responses. If anyone cares to respond here please do.
DPF-you are way off with the above. Have a rethink.
Phil: What GST scam? They have fixed the Nigel Ashby mechanism already.
January 25th, 2007 at 1:51 pm
DPF, would your figures change if the capital gain was included as ‘income’ and then taxed from that? One could then apply tax deductions against that income to reduce the tax liability. I’m too lazy to do the math.
Nick
January 25th, 2007 at 1:52 pm
Over at Sir Hump’s a review of Green tax policy showed the Greens were not averse to applying it to owner occupied homes as well.
What I can’t believe is that the correlation between local authorities and RMA issues hasn’t been talked about more.
Doesn’t it worry you – the mentality : that there isn’t a single problem this government can’t solve with more tax.
I can smell the tax on your breath Doctor Cullen!
January 25th, 2007 at 1:53 pm
Phil:
This is how the GST ’scam’ works.
Buy house for $100,000.00 claim GST, $12,500.00 refund.
spend $10,000.00 on improvements claim GST $1,250.00 refund.
Sell house $200,000.00 pay GST, $25,000.00 that is a $13,750 paid to the govt not scammed from them. If you know a better way of claiming the GST my boss will gladly pay you a consultant fee!
January 25th, 2007 at 3:00 pm
andy, or buy land for $2 million with long settlement and claim GST of $250,000.00 immediately and then run away.
January 25th, 2007 at 3:01 pm
andy, the “scam” phil is referring to is where buyers go uncondtional on a Sale and Purchase agreement, then claim the GST before settlement.Some keep the money and dont settle. Others use the money as a deposit. The main case on this was Nigel Ashby, Ch’elle Properties and others. The IRD has closed the gate on this and Banks now usually make borrowers sign a declaration they wont claim GST and if they do they have to give it to the Bank to reduce debt to preserve the Lending ratio approved.
You are right on how it works now.
Also house prices in Auckland have doubled every seven years for the last 99 years.This is not a new thing and didnt prevent our parents or ourselves from buying property.
Jordan is more banging on about “affordabilty” which is income related rather than the price of houses. All this discussion points to really is that labour has failed over the past 9 years to actually increase peoples incomes in NZ.
January 25th, 2007 at 3:06 pm
But the good news is Dr Cullen gets a lot more money to bribe people with.
Doesn’t it worry you – the mentality : that there isn’t a single problem this government can’t solve with more tax.
I can smell the tax on your breath Doctor Cullen!
Jordan’s prosal, not Cullen’s!
Just a question, what would a blanket CGT do to inflation?
January 25th, 2007 at 3:12 pm
Gooner: GST claims on property over a certain amount trigger an automatic audit now, in most cases!
CC. You are correct and my argument stands, the current situation will revert back to the norm for affordability.
I am not to sure if it is just Labours fault for raising income. We now have to deal with global wage arbitrage, mostly in manufacturing from china and commodities. This keeps our wages low as well as bad policies!
Any tax on residential property will have an unitended result in chasing more marginal people from owning a house due to extra costs!!
January 25th, 2007 at 3:24 pm
I agree with you David. We would not want either scanario that you outline. But ss Rocket Boy points out a capital gains tax would not apply to first homes, but investment property. So neither of your scanarios would apply under a capital gains tax.
A capital gains tax would do two things – it would encourage people to put investment into other investment areas (i.e in NZ Businesses and term investments), and secondly free up property for first home buyers.
And I want New Zealanders to be an ownership society where we all have a stake.
The only people who would disadvantaged (I may be wrong) are people who currently own more than 1 property. Of course you could give a 2-3 year lead in period so that those people are well aware that the changes and can alter their investments accordingly.
Politically it is a very difficult sell however and I can’t see it happening any time soon.
January 25th, 2007 at 3:24 pm
How about enforcing the current tax law on trading property for income? One reason there is more speculation on property in NZ than on shares is that it’s clear that only really outrageous cases of trading property for profit are treated as income. So you have people ostensibly treating their properties as ongoing rental businesses for tax purposes, claiming deductions and losses etc, but actually planning to sell at a profit.
January 25th, 2007 at 3:28 pm
I cant wait for a CGT It will force up the prices of houses even more. Lovely Jubbly.It was also see the government that introduces it condemned to 20 plus years in the wilderness.Same goes for those who seek to screw with Trust law.Political suicide and they know it.
January 25th, 2007 at 3:40 pm
It will have exactly the opposite effect, driving people who currently make money through property speculation to invest in other areas.
January 25th, 2007 at 3:41 pm
There is a problem and the Labour Party have no answers except to propose a tax which seems to be their answer to everything. They do no analysis, they ignore the market, they have seen this boom occur and then they panic. So they propose a tax.
January 25th, 2007 at 3:57 pm
Isn’t there usually an option to apply CGT to realised capital gains instead of appreciation on paper?
January 25th, 2007 at 4:03 pm
Peter Dunne has imposed a capital gains tax on the capital value of shares in overseas companies. This will likely lead to the repatriation of capital to New Zealand much of it being likely to be invested in housing and other property. Cullen may feel he needs to impose a similar tax on housing. He wins both ways. Savers and Investors the losers.
January 25th, 2007 at 4:07 pm
We have a pseudo Capital Gains Tax now. If you are trading properties (speculating), when you sell and realise the gain, the IRD taxes you on the basis it is income. Also if you are claiming depreciation and interest on your LAQC, when you sell the IRD claws back those deductions.
Jeez, talk about thick socialists trying to fiddle with laws they know nothing about.Usually I am bemused when a socialist tries to pick my capitalist brain but this is silly.
The whole point about them thinking about CGT is to try and stop houses going up in price.
Pissing in the wind as other reasons cause houses to go up. Also this whole thing about affordibiltiy is a non issue. If it was an issue NO houses would sell. But they do-ergo, people can afford them.
The CGT in Oz is a total failure. What has happened is people just hold long term and dont sell! This restricts supply even more which makes the problem worse.CGT has not made prices drop in Australia.
Danyl,as ive explained above the speculators get taxed, its actually the middle class who invest in renters and only because its one of the few ways they can create an offset of cost against their income and reduce tax paid.
If we removed that incentive and let Renters attract investment on pure yield alone(on average about 5%) then the money would naturally flow to other areas.
Rather than try and complicate the system with another tax they should simplify it by removing the anomaly LAQC’s create.
January 25th, 2007 at 4:13 pm
Here we go, its all Labours fault again.
Speculators should be charged a capital gains tax, and no others.
Affordability of housing, well to me it hasnt changed since the 60s, I purchased my first home in Grey Lynn for 700 pounds , my weekly wages were 12pounds and that was a reasonable wage for 1966, after living expenses and being a solo guy there was sweet FA left at the end of the week, i remember i could not afford insurance, as wages rose id payed the house off by 1982, I sold my almost new Zephyr for the deposit and biked around for a few years,,
and thats the prob today young ones now do not want to sacrifice any comforts, and they also want a new fridge, WM,LCD TV, dishwhasher, new car, as well as pay the mortgage, its time the youngsters had a reality check.
January 25th, 2007 at 4:42 pm
“and thats the prob today young ones now do not want to sacrifice any comforts, and they also want a new fridge, WM,LCD TV, dishwhasher, new car, as well as pay the mortgage,”
It has always been so with some. However, they’re not all like that, I just sold a 4 bedroom house in a pricey, central city suburb, to a young couple who are making some sacrifices, including filling the house up with flatmates to help pay their mortgage.
“its time the youngsters had a reality check”
Some have, and are resigned to renting for the foreseeable future.
January 25th, 2007 at 6:15 pm
Any increase in the tax take by adding new taxes should be compensated by reducing income tax proportionately. Morality demands it.
January 25th, 2007 at 6:57 pm
Tony Milne, be careful what you say. “But ss Rocket Boy points out a capital gains tax would not apply to first homes”
Firstly, you probably mean the home that the purchaser lives in. Otherwise, David’s example is spot on if it’s their second home and they are upgrading to a third home.
Secondly, it is not a given that the family home would be exempt. It is an expectation. I wouldn’t trust Labour or Greens until I saw it in writing, in the bill. The Greens have indicated they are not averse to a “comprehensive CGT” even on the family home in writing, and say “of course not” in speech.
You could quite well recommend “first home” exemption and go “oops” later. Please, be precise here. It’s important.
In Australia, an investor outbid us for a home. He declared his daughter was living in it to avoid CGT. She dropped in on occasion, perhaps one day out of 14. He eventually on sold it at a huge profit, and presumably avoided CGT.
January 25th, 2007 at 7:24 pm
“I purchased my first home in Grey Lynn for 700 pounds , my weekly wages were 12pounds ”
Your annual income was 624 pounds, so the price was roughly about 1.1 yr of income. An average house is now equal to ~10 years income for a first home buyer (pre-tax).
Housing is a big musical chairs party and first home buyers are not invited.
Having said that, uncontrolled urban sprawl would not drive down prices- why would developers sell below market? It would take a vast flood of new houses to make a dent in the average.
The idea of a tax is a double edged sword- it might put a dent in the rampant speculation, but what about all the jobs in construction that might be at risk?
Far better to just wait out the economic cycle- there will be a crash eventually.
January 25th, 2007 at 7:46 pm
It seems that most other forms of investment carry some form of taxation on capital gains.
Why shouldn’t a property bought as an investment be treated similarly to other investment types?
Looking at it from a slightly different perspective, wouldn’t a CGT on investment properties simply result in a level playing field for different investment types?
Another question that arises is, what does speculative investments in housing do for the wider New Zealand economy, in terms of generating export revenue, or by encouraging investment in R&D or innovation in key industries?
To me, it seems that there is a somewhat undesirable slant taxwise towards what is really quite an undesirable form of investment.
January 25th, 2007 at 7:53 pm
Captain Crab you’re absolutely right about the LAQC regime.
Cullen admitted a few years ago a CGT would be political suicide and LAQC revision would be in the same category.
The solution is very apparent, but it would take a cross-party accord to achieve it.
It’s a bit like MMP, where in Holland, the first time they achieved a workable solution, was when the two main parties formed a coalition.
Good luck.
BTW, I hope people are paying attention to the US property market, that’s crashing at the moment and 2007 could easily generate a credit squeeze because 20% of the mortgage market consists of Adjustable Rate Mortgages which are due this year to be refinanced, resulting in negative gearing due to the falling prices and high interest rates currently being experienced. If you’re not aware you should be .
January 25th, 2007 at 8:44 pm
reid.. i have been writing/noting this for some time at whoar…
you can almost hear the timebomb ticking…
it’s november..i think..it all goes pear-shaped..due to all those dodgy mortgages having to be rolled over..and the houses now being worth less than they are mortgaged for..
it’s gonna be a rough ride…
phil(whoar.co.nz)
January 25th, 2007 at 8:53 pm
One can not state for sure a CGT would not include unrealised gains. Dr Cullen just last year tried to pass a law taxing overseas investment unrealised capital gains.
January 25th, 2007 at 9:19 pm
Dave’s not up to speed on property CGT.
No annual notional gain tax applies anywhere that I’m aware of.
Take buy price from sale price adjust the gain for inflation over the period held and then apply CGT.
In Aust it applies only to investment properties, expect a revolution if ever applied to the personal residence.
January 25th, 2007 at 11:10 pm
If property prices crash in NZ it will be a first.
It may happen on holiday homes but I can’t see it happening in the cities.
Actually a fall in the holiday home market and could shake New Zelanders overconfidence in property without doing too much economic damage.
By that stage New Zealanders may be more receptive to a GGT.
Labour though, has little reason to do anything about declining home ownership since home ownership is negatively correlated with voting Labour.
An ownership society is a conservative society.
January 26th, 2007 at 8:44 am
Before anyone talks about introducing a tax to solve a problem caused by bad law and administration please read the full report by Demographia.
These inflated house prices are caused by artificial strangulation of the land supply by planners implementing an American theory called Smart Growth.
Fortunately in the US different states have different law and those states which do not strangel their land supply all have affordable housing.
There is no shortage of land anywhere – shortages are manufactured by the planners.
How they managed to convince even the Australians they are short of land is beyond me.
But they have. Once Smart Growth is in place it is hard to undo because the people who make the rules and administer the plans are the beneficiaries. Its the young and poor who are hurt because they are locked out of the housing market.
January 26th, 2007 at 9:24 am
ZenTiger I know no more than you do. I’m just assuming that it wouldn’t. And anyway, in my last sentence I said a CGT wasn’t a goer in NZ in the short-medium term – and I stand by that. So the conversation is redundant really…
January 26th, 2007 at 10:46 am
The property market always has a way of dealing with lefty govt. manipulators.
Keating attempted to throttle the investment housing boom in Aust. by declaring interest on such loans non-deductible….voila, the availability of rental housing collapses and his voting demographic are about to sleep in tents. Policy dropped, hadn’t read his Adam Smith.
All property taxes do is raise the price to the buyer.
January 26th, 2007 at 11:03 am
There is a shortage of property close to the city. Land could easily be opened up on the outskirts of the city but it’s unlikely to have a dramatic effect of reducing property prices. There would still be a demand for centrally located property as most people don’t enjoy a 2 hour commute to work.
January 26th, 2007 at 11:04 am
Captain Crab
Owning a rental poroperty 100% in the high income earners name is exactly the same as owning one in an LAQC with the shares held 100% by the major breadwinner.
And, there’s no interest clawback on sale – that was removed from our tax legislation many years ago whether using an LAQC or owning individually.
And, the depreciation clawback (or depreciation recovered) is limited to the depreciation already claimed so isn’t really a CGT. Any increase above cost price on an investment property purchased for long term investment is tax free.
The LAQC regime can be used when restructuring borrowings quite effectively but doesn’t create any magical tax deductions.
January 26th, 2007 at 12:03 pm
People love to blame these massively inflated land prices on all manner of things – interest rates, the tax regime, changing values, greedy developers who refuse to build low cost homes (Carter’s weird favourite) and indeed anything rather than the real cause.
The US is a wonderful testing ground for these theories because the tax regimes are essentially the same, the interest rates are essentially the same and the differrent states cover all manner of demographics and values. (HOwever, Smart Growth tends to take hold in Democratic/liberal states and in leftist regimes everywhere.)
So given that all these factors are the same, the huge difference between US states can only be explained by the different regulatory environments – and they differ hugely from the Smart Growth cities like Portland to the no zoning at all cities like Houston. (in the “zoneland” states or cities the indexes are as high as in Australia and NZ, while in the Southern “flatland” states the index is typically around 2.8 to 3. This means a Houston family on 40,000 income can buy their US quality and sized house for under $120,000. No wonder they can invest in productive investments.
Read the Demographia report.
January 26th, 2007 at 12:17 pm
Jman
Very few people now work in the CBD.
Auckland extends from Maraetai to Wellsford just a few K south of me here in Kaiwaka.
Last count about 4% of all vehicle trips had their destination in the CBD.
January 26th, 2007 at 1:05 pm
Take note of what Owen McShane says.There are plenty os sites in Auckland City that could accommodate more residential dwellings. My family trust owns one such that could easily have two more in addition to the one already there.The land value is 80% of the total value.But the ACC wont allow the property to be subdivided under its rules.So two families are missing a chance of owning their own homes.So as it is the land value keeps on going up and up.Smart council not.
January 26th, 2007 at 3:14 pm
I think it is a mix of money- large loans with little deposit – and land rationing
One thing not mentioned is the cost of construction. It may be Owen that mentioned it in an article, but I read the actual physical cost of a house has not increased unusually in the last 10 years or more.
If the dwelling cost hasn’t increased but the property price as a whole has it means that demand for that type of property and the land it sits on must have risen.
If it were lifestyle driven, there should be big variations as some areas will be more attractive than others but all areas seem to be booming to a greater or lesser extent – rural and city price changes seem to be more aligned than out of line. I saw in the paper nice but nothing grand homes in Feilding going for >350k which seems bizarre for a rural town.
I don;t believe there are that many big spending immigrants to significantly impact the overall market. Why would they pay more than a local if they have come to live here? Does a small percentage of such sales really drive the market?
Surely we need to use occams razor and focus on supply and demand as the most likely reasons. Supply of money and supply of land. If wages aren’t trending in line with property prices then the balance is coming from somewhere and that is likely lending so there must be some loosening of money supply there that is driving buying behaviour compunded by limited options to buy.
The thing I can’t get is why Auckland is so much higher valued than Wgtn when avg wages are similar. I don;t think zoning is then the issue. Perhaps that is immigration/urban drift driven?
January 26th, 2007 at 4:52 pm
Oh dear where to begin with leftists on this issue.
First the report isn’t produced by a property developer. Here is the website: http://www.demographia.com – look at it and learn.
The purpose of the study is to compare relative ease of home ownership.
The survey shows there is a co-relationship between the cost of housing and land use regulation.
In New Zealand and in Auckland in particular, we have a high degree of regulation over the supply of land and land use. This regulation is getting ever more intrusive (in a country where a mere 1.4% of our land is covered by urban and suburban development). Labour for it’s part has contributed to first home unaffordability by increasing the regulation applied to building, thus making the cost of building a first home much higher.
Returning to the landuse policy – it is called “smart growth” among other names. It is American in origin (which is so strange as most leftists hate most things American) and was the “big idea” in planning. Its’ underlying assumption is that transport choice (public transport = moral as opposed to private transport = immoral) can be determined by restricting the supply of land and densifying sub-urban development (most NZ Cities) to urban development (five plus stories achieved by largely eliminating private open space and provision for motor vehicles). Thus people are compelled to use a moral form of transport as opposed to the deeply immoral and environmentally reckless private car. Thus new buildings are build with discounted car parking, roads are narrowed bus lanes are introduced and road building slowed up. All of this incentivises a more “moral” transport choice.
The policy and its underlying assumptions is a crock of shit. It’s largely pushed by leftwing planners who have no understanding of economics or markets and most local government pols who are not highly ideological. Generally leftwing local government pols like it because its highly interventionist and moral and rightwing one’s don’t generally appreciate the ideological underpinning of the policy and are thus conned by the “we must manage growth” mantra.
What the Demographia survey shows is the where landuse and land supply controls are lightest housing is more affordable. Where such controls are heaviest housing is more unaffordable.
I guess this is consistent with all other surveys that show where the burden of government through taxes is lightest (all other things being equal) people are wealthier as opposed to where the burden of government is higher and the people are correspondingly poorer.
The solution to housing affordability isn’t to increase the burden of the state on the incomes or wealth of individuals. Rather one should look to the underlying policies that are contributing to first home ownership unaffordability – smart growth doesn’t work here (and doesn’t work in the US) it simply needs to be dumped.
I am not suggesting that there is a moral position on density for that would be as irrational as a moral position on people’s transport choices. I simply believe that the role of local government is to respond to how people CHOOSE to live their lives rather than how the SHOULD live their lives ACCORDING to me or any other. The second issue is that zoning controls are by nature conservative instruments – the purpose is to preserve the existing character of an area – that is why it was invented. Now zoning is being used in a radical way to “transform” areas but note the areas being transformed coincide with areas of lower social economic and political clout. Note also those who live in the area being “transformed” are not asked to consent to this they are “consulted.”
One other issue about density. Labour to it’s great shame is assisting in slum building in Glenn Innes in Auckland. High density couple with social disadvantage is a recipe for disaster. Labour of old knew this. They were familiar with high density urban environments coupled with social deprivation that is why most state housing was sub-urban. No high density public housing works anywhere in the world. Yet modern Labour does it here. The modern re-creation of high density urban living for the poor where car ownership is discriminated against simply reduces the options and flexibility for those who need it most.
January 26th, 2007 at 5:13 pm
Property is more than merely a land supply equation based on the need for shelter.
It flourishes as one of the two generally available growth asset classes with extreme tax advantages.
You have equities or property, that’s it for the average citizen.
Property has a psychological advantage in that its price fluctuations are not continuously quoted for all to see. Long term holders feel more relaxed vs equities.
Even depreciating buildings are reassuring…..there is no such thing as building cheaper next year.
The gradual and inevitable destruction of paper currencies by govt over time means real assets are the only protection available and people “feel” that.
January 26th, 2007 at 8:29 pm
I don’t agree that land supply is the key factor at all. Look at the cost of high density housing, which is still pretty expensive. eg Kingsland 2 bed apartments – nice but not amazing for $400K plus. If supply were the key issue surely this type of housing should be pretty inexpensive.
I blame a combination of factors in particular the fact Kiwis don’t understand other investments aside from property, offshore property investment in NZ and the refusal of the gummint to instigate a capital gains tax.
If the wages weren’t good in NZ in the past at least it was cheap to live here, now we have crap wages and expensive living! Nothing wrong with high density if its good, but even thats steeply priced.
January 27th, 2007 at 10:30 am
Squire Giblet
No, your assumptions are not well founded.
First the whole of the Auckland land market is strangled so the price of any titled lot is high. The fees in Auckland amount to more than the price of titled land in Houston.
Then if any titled lot is zoned for higher density then it attracts a premiium because there are more dwellings to share the land price.
So you do not simply divide the single family lot three for three flats. First you multiply it by two and then say divide it by three.
Second, high density housing in NZ is very expensive because we combine high wind load with earthquake load.
Three the Smart Growth policies favour more density than the market and so developers soon twig they can get more dwellings per site and still get consents – even if they cut off the eaves and put decks inside the envelope so they can go right up to the side yards. Then you get leaky buildings and they are very expensive buildings indeed.
When I invented the word “Townhouse” and “Infill housing” when working on stopping the slum clearance in Freemans Bay back in the sixties we all worked on the premise that the only relevance of density was a means of controlling development while increasing choice. We enabled people to build town houses and high rise buildings etc but density was not a goal. the Smart Growth people worship high density because it increased congestion and forces people from cars onto public transport.
Off course it does not work. People migrate to the countryside or to some other country.
But the damage the planners do is enourmous – and that includes our high interest rates and over valued dollar.
In a sensible society they would go to jail.
January 27th, 2007 at 2:03 pm
Squire Giblet
No, your assumptions are not well founded.
First the whole of the Auckland land market is strangled so the price of any titled lot is high. The fees in Auckland amount to more than the price of titled land in Houston.
Then if any titled lot is zoned for higher density then it attracts a premiium because there are more dwellings to share the land price.
So you do not simply divide the single family lot three for three flats. First you multiply it by two and then say divide it by three.
Second, high density housing in NZ is very expensive because we combine high wind load with earthquake load.
Three the Smart Growth policies favour more density than the market and so developers soon twig they can get more dwellings per site and still get consents – even if they cut off the eaves and put decks inside the envelope so they can go right up to the side yards. Then you get leaky buildings and they are very expensive buildings indeed.
When I invented the word “Townhouse” and “Infill housing” when working on stopping the slum clearance in Freemans Bay back in the sixties we all worked on the premise that the only relevance of density was a means of controlling development while increasing choice. We enabled people to build town houses and high rise buildings etc but density was not a goal. the Smart Growth people worship high density because it increased congestion and forces people from cars onto public transport.
Off course it does not work. People migrate to the countryside or to some other country.
But the damage the planners do is enourmous – and that includes our high interest rates and over valued dollar.
In a sensible society they would go to jail.
June 12th, 2007 at 2:08 pm
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