Southland most affordable

Following the previous post on Queenstown Lakes being the most affluent district in the country, a related report  found that Southland had the most affordable property.

The most important measure of affordability is to compare house prices with income levels. . . (then)  we took our top 20 performers and scored them against the primary measure of house price v. income levels.  But then we also looked at each place and awarded further points based upon how well they ranked against:

   *  Rent / income levels

   *  % of people living in crowded dwellings

*  Unemployment rates

   *  % of people living in owned homes

* % of people living in high deprivation deciles

And the top 20 most affordable places in New Zealand were:

 

1	Southland District
2	Selwyn
3	Timaru
4	Waitaki
5	Ashburton
6	Waimakiriri
7	Manawatu
8	Invercargill
9	South Taranaki
10	Waikato
11	Masterton
12	Horowhenua
13	Waipa
14	Wanganui
15	Gisborne
16	Franklin
17=	Upper Hutt
17=	Rotorua
19	Palmerston North
20	Dunedin

 

Snapshots:

House price / income ratio
Best	Southland District	3.6 times income
Worst	Tauranga	8.1 times income
Rent payments / income ratio
Best	Southland District	12% of income
Worst	Dunedin	28% of income
% of people in crowded dwellings
Best	Southland District	3%
	Selwyn	3%
Worst	Manukau	25%
% of people in the 3 highest deprivation deciles
Best	Selwyn	1%
Worst	Far North	63%
% of people unemployed
Best	Southland District	2%
	Queenstown	2%
Worst	Whakatane	8%
	Far North	8%
% of dwellings owned
Best	Waimakiriri	71%
Worst	Auckland	42%

 

Dunedin’s poor showing in the income to rent ratio is easily explained by the high proportion of out-of-town students who live there in rented flats.

And Selwyn which was the second most affordable district was also the 6th most affluent which is a happy combination.

Queenstown Lakes most affluent

 

If affluence counts then Queenstown Lakes is the jewel in New Zealand’s crown.

This was the finding of Stephen Hart in a study commissioned by the ASB.

We looked at the average sale prices of residential homes in over 70 territorial authorities from all over New Zealand.  We then took the top 20 highest priced places and dug beneath the surface to see how they stacked up in the affluence stakes.

We didn’t just consider house prices; we also examined:

* Households earning more than $100,000 a year.

* Homes least likely to be in deprived areas.

* Percentage of residents who have a degree.

* Lowest unemployment rates.

* Residents who are Chief Executives, General Managers or Legislators.

Points were awarded based on performance across each of these criteria, then added up to create a league table of New Zealand’s Most Affluent Places.

And the winner was Queenstown Lakes. 

That’s not just the town of Queenstown, it’s the whole district which includes Arrowtown, Wanaka and Hawea and all the land in between including farms, ski fields and wineries.

Queenstown Lakes scored well against all of the set criteria, especially in terms of jobs; its unemployment rate of 1.7% was lower than any of the other contenders.

All places have some degree of socioeconomic deprivation, it’s measured in deciles with 1 being the least deprived and 10 being the most deprived.  On average 30% of New Zealanders live in deciles 1 to 3.  Not so in Queenstown where more than two-thirds of residents live in the top three deciles.

Back on the jobs front; Queenstowners are a well qualified bunch with 19% possessing a Bachelor’s degree or higher, the fourth highest in the country.  Queenstown also came fourth in terms of its percentage of population who are in the top occupation category of Chief Executive, General Managers and Legislators, only surpassed by Rodney District, Auckland and North Shore Cities.

It’s hard to know which is the cause and which is the effect but higher property prices can only be afforded by people on higher incomes and people on higher incomes can afford higher prices.

The top 20 most affluent places were: 

1	Queenstown Lakes District
2	North Shore City
3=	Wellington City
3=	Auckland City
5	Rodney District
6	Selwyn District
7	Franklin District
8	Porirua District
9	Manuaku District
10	Tauranga District
11	Tasman District
12	Central Otago District
13	Waitakere City
14	Kapiti Coast District
15	Thames Coromandel District
16	South Wairarapa District
17	Lower Hutt City
18	Taupo City
19	Christchurch City
20	Nelson City

Negotiating from position of strength

Reserve Bank governor Alan Bollard is urging trading banks to pass on reduced interest rates to customers.

That could require negotiations with bank managers and it’s important to do that from a position of strength:

(The cartoon is from Jock’s Country Life by David Henshaw, published by Allen Calendars 2007.)

Playing cowgirl at Dome Hills

We were among the people invited to listen to then Otago (now Waitaki) MP Jacqui Dean declare the lodge at Dome Hills  open on a perfect autumn day.

Since then visitors from thoughout New Zealand and overseas have enjoyed a taste of life on the high country station in the hills between North and Central Otago.

Among them was NZ Herald writer Joanna Hunkin who wrote about her experience playing cow girl  on the winter muster.

Treasury BIM links economy to quality of life

A question from the floor at a public meeting in Wanaka three years ago asked then National Party leader Don Brash why he always talked about money and the economy rather than things that mattered like health and education.

He responded that a growing economy was the means to provide better social services.

This is echoed in Treasury’s Briefing to the Incoming Minister of Finance  :

Future gains to economic growth will need to be driven by increases in productivity growth. Improving productivity will have benefits for individuals, businesses and for society as a whole. A more productive New Zealand will offer our people opportunities to earn world-class incomes without having to go overseas to achieve this. It will allow New Zealand businesses to provide sophisticated products to the world without having to relocate their head offices. Higher incomes will underpin a public sector that can provide high-quality services, which will lead to improved social outcomes in crucial areas such as health and education.

Higher productivity will make New Zealand a more attractive place to live, work and do business with and from.

That reminds me of this quote from Margaret Thatcher:

No one would remember the Good Samaritan if he’d only had good intentions; he had money as well.

This is a simple concept but achieving the economic growth we need to provide the standard of living and social services we want is more complicated and we can’t leave it all to government.

They can implement policies which enable and encourage improved productivity but they can’t create wealth, thats up to people and businesses.

Ag commodities down but will lead 2009 rebound

The ANZ Commodities Price Index fell 7.2% in November, contributing to a 21% fall in four months.

Prices for dairy products fell 12% and have almost halved from their record levels a year ago. Prices for pelts tumbled 41%, the biggest decline among products tracked in the index. Beef, wool, lumber and aluminium all fell more than 10%. Seafood prices dropped for the first time in 18 months, sliding 0.6%. Lamb rose 4.3% and kiwifruit gained 0.3%.

Producers were cushioned from the slide in commodity prices by the weakening New Zealand dollar and the ANZ New Zealand Dollar Commodity Price Index was down only 1.8% in the latest month.

“Although the currency softened further in the month, it failed to match the drop in value of the commodities that we monitor,” ANZ economist Steve Edwards said in a statement. “It is clear that a weaker currency is acting as a buffer to falling commodity prices.”

Prices in yesterday’s on-line auction by Fonterra continued to slide with an average price of $4203.50 ($US2223) a tonne, 14% lower than last month’s auction and a fall of 49% since July.

Fonterra commercial director of GlobalTrade Guy Roper said the economic crisis had resulted in a significant drop in the demand for dairy commodities and a continued decline in prices had been expected.

“There will continue to be downward pressure on prices, until either the supply of product declines, or buyers have confidence that the global economic situation will improve,” Roper said.

Fonterra has been criticised for its auction which some feel is leading the market down. The Bull Pen disucsses that here.

However, the news isn’t all bad. Stock & Land  expects agricultural commodities to rebound next year.

After the dust settles from the sell off across commodities triggered by the global financial crisis, agricultural commodities will benefit from a secure demand outlook and tight supplies to outperform metals and oil in 2009.
Regardless of the gloomy macroeconomic outlook people still need to eat; therefore agricultural commodities will be more resilient during the economic downturn.

“Demand for agricultural commodities tends to be less elastic, less responsive to economic factors, more responsive to population,” said Lawrence Eagles, a commodities analyst at J.P. Morgan.

 

That’s encouraging because the MAF Briefing to Incoming Ministers warns the outlook is uncertain:

 

Over the next 20 years, New Zealand’s food and fibre producing capability will become increasingly important. Globally, rising population and economic growth is expected to increase demand for agricultural and forestry products. At the same time land and resources, such as freshwater, available for food and fibre production worldwide is likely to decline.

Despite this favourable long-term outlook for New Zealand’s primary production sectors, our industries, environment and broader society face a complex set of challenges to reap future opportunities. These challenges are exacerbated by the current global financial crisis that continues to unfold with uncertain impacts and duration.

Added to that is the growing threat of drought.

The contrast between irrigated and dryland in North Otago increases by the day, showing how badly we need rain and most of the east coast of both islands is similarly desperate for rain.

 

Slogan not logo the problem

My email to the Electoral Commission asking why Rodney Hide’s jacket with an Act logo breached the Electoral Finance Act when Metiria Turei’s bathing suit with a Green Party logo didn’t (three posts back) got the following response:

The decision related to the election slogan on the jacket – not the logo.

I emailed back asking if a decision had been made on logos, I’ll let you know when I get an answer.

UPDATE: Just got an email saying:

There has not been a published decision on logos

 I replied asking if that meant there had been an unpublished decision and if so when it would be published.

Sigh.

OCR down to 5%

The Reserve Bank has announced a drop of 1.5% in the official cash rate, taking it to 5%.

That bank’s media release said:

Reserve Bank Governor Alan Bollard commented that “ongoing financial market turmoil and the marked deterioration in the outlook for global growth have played a large role in shaping today’s decision. Activity in most of our trading partners is now expected to contract or grow only very slowly over the next few quarters.

“Economic activity in New Zealand will be further constrained as a result, compared with our view in October.

“Inflation is abating here and overseas as a consequence of these developments. We now have more confidence that annual inflation will return comfortably inside the target band of 1 to 3 percent some time in the first half of 2009 and remain there over the medium term. However, we still have concerns that domestically generated inflation (particularly local body rates and electricity prices) is remaining stubbornly high.

“Today’s decision brings the cumulative reduction in the OCR since July to 3.25 percent, and takes monetary policy to an expansionary position.

Given recent developments in the global economy, the balance of risks to activity and inflation are to the downside. Thus it is appropriate to deliver this reduction quickly to support the economy and keep inflation from falling below the target band.

“Monetary policy is working together with the depreciation of the New Zealand dollar and the fiscal stimulus now in train, to provide substantial support to demand over the period ahead and to create the conditions for some rebound in growth as global conditions improve.

“To ensure the response we are seeking, we expect financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers. . .”

The silver lining to the comparatively high interest rates we’ve faced is that the bank has had more scope for cuts and it has certainly acted on that since July when the OCR was 8.25% as this Herald graphic  shows:

Graphic / Christoph Lukasser

People on fixed mortgages won’t get an immediate benefit from this but businesses which have overdraft facilities and farms which need seasonal finance ought to get a reduction in their interest rates.

There is a flip side of course in that people who depend on savings and investments will face a drop in income.

Kathryn Ryan discussed the issues  on Nine to Noon.

National good has local and national cost

The Timaru Herald urges people to think of the national good before appealing to the environment Court over the resource consent granted to Meridian Energy.

The fact that a significant chunk of power – enough to run a city the size of Christchurch – can be generated, apparently cost-efficiently, surely deserves strong consideration. Barely a winter goes by without security of power supply being raised as a potential problem, so significantly increased generation capacity must be a positive thing.

I agree but the national benefit isn’t without local and national costs.

The obvious one is environmental from reduced flows but there could be an economic cost too if fishing and boating which bring tourist dollars into the region are affected. And there will definitely be a local and national cost if Meridian’s project threatens the reliability of supply for irrigation.

The Mid River New Applicants’ Group, which represents irrigators on the lower river, wants Meridian to guarantee that reliable water supply will not be affected.

Ensuring reliability for existing irrigators is also something Waitaki Mayor Alex Familton will be watching closely.

He said the NBTC scheme would benefit the Waitaki district in terms of potential employment and an improved infrastructure.

However, he said it was vital present irrigators, at the very least, maintained their reliability of supply and were not disadvantaged by the scheme.

The Lower Waitaki irrigation scheme has been operating for about 30 years, the North Otago Irrigation Scheme is just over two years old and there are other smaller schemes, all of which provide 100% reliability of supply for farmers.

Any threat to that reliability is a threat to farming businesses, it would be a bit like building a hotel then finding that the road to it was only open some of the time.

The MAF Briefing to Incoming Ministers  noted the contribution irrigation makes to the economy:

In 2002/03, irrigation was estimated to contribute around $920 million netGDP “at the farm gate”, over and above that which would have been produced from the same land without irrigation. Since then, the area of irrigated agriculture and horticulture has increased by about 25 percent, from 480 000 hectares to around 600 000 hectares.

Both a reliable supply of electricity and irrigation are important for the economy, the concern is that Meridian’s scheme to increase the former will reduce the latter.