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.

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.

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.

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.

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.

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?

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.

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.

All property taxes do is raise the price to the buyer.

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.

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.

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.

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)

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 .