It’s not all bad

March 25, 2020

The tourism slump could provide an opportunity for would-be renters:

Property investors are pulling properties from Airbnb to offer as long-term rentals instead.

New Zealand’s tourism industry has come to a standstill as the country responds to the spread of coronavirus.

A spokeswoman for Trade Me said usually 6 per cent of Trade Me rental listings were offered furnished. But since March 14, when the self-isolation rules were first announced, that number had increased to 11 per cent.

“This puts the total number of fully furnished rental listings at double what they were at the time last year,” she said. . . 

Economist Benje Patterson said huge number of Airbnb units had been put back into the rental market in Queenstown in particular. . . 

One reason for a shortage of rentals and homes to buy has been the number of properties being used for holiday rentals.

Landlords have been able to make more money with fewer hassles using the likes of Airbnb than they could with renting longer term.

“There are also large numbers of houses becoming available as people who have lost their jobs have moved out of rentals or have left New Zealand to head back to their home countries. I have seen reports of landlords throwing their hands up in the air and letting people break leases, rather than being stuck with someone who can’t pay rent. In other cases, there is evidence that tenants have done a runner.”

He said it was worrying because a big drop in yields for investors would push some to sell.

“A flood of forced sales, at a time when confidence to purchase a home is low, could cause severe instability to pricing. There is likely to be moves by the government over the next week or two to implement mortgage relief in order to prevent such forced sales. The last thing the government wants is for a mass rush to the exit push other homeowners into negative equity and compromise financial stability in anyway.” 

There probably wouldn’t be a lot of argument against mortgage relief for homeowners.

There might be more argument if it is extended to property investors especially when so much has been said about escalating property prices and the difficulty people have buying their first homes.


Why not more of what works?

February 24, 2020

Leilani Farha, UN Special Rapporteur on the right to housing, visited New Zealand and left us with several recommendations including a rent freeze and capital gains tax.

I have yet to see or hear what the visit cost us, but the government that invited her, could have saved all that by asking Steven Joyce who has much better recommendations

. . . Before we embark on another “housing crisis” complete with politically partisan policy ideas that turn out to be mirages (come on down Kiwibuild), let’s have a look at all the housing policy changes that have occurred over the last decade and assess what practical lessons they provide about the New Zealand housing market.

The first is that land supply is hugely important if you want to build more houses.  . .

The price of houses is a reflection of demand outstripping supply and one of the reasons for that is restrictions on where people can build and the cost of developing new areas for housing.

The premier case study on land availability is post-earthquake Christchurch. Pre-earthquake the local councils developed a “smart growth” plan where they agreed what land around the city would be released for housing progressively over the next thirty years. Then, alongside the lives tragically lost in the earthquakes, massive numbers of houses were made uninhabitable virtually overnight.

After the quakes, amid dire predictions of skyrocketing house prices, Gerry Brownlee took the radical decision to release the whole thirty years of land at once. There was much sucking of teeth at local and central government, but it was the right call.

As the result of competition amongst developers tens of thousands of Christchurch families were able to use their insurance payouts and reasonably priced new home and land packages to successfully re-establish themselves. Christchurch house prices have since been some of the most reasonable in New Zealand. 

The second lesson is about the availability of finance. The Global Financial Crisis dried up bank finance and laid waste to non-bank lenders. The lack of finance for new builds crippled the building market and it took years to recover. That’s a cautionary tale for the Reserve Bank, whose heroic new bank capital ratios will reduce available bank finance, albeit more gradually than previously proposed.

The more banks have to hold, the less they will have to lend and the more expensive the lending will be.

The third, and arguably biggest lesson from the last decade is the now obvious role low interest rates play in driving high house prices, and indeed all asset prices. Every time interest rates have got ridiculously low, house prices have shot through the roof as people bid up prices to the limits of the mortgage they can now afford. This price inflation seems fine if you already own a house, but it perpetuates the wealth gap between those that own houses and those that don’t.

Lower interest rates allow people to afford bigger mortgages, that enables them to pay more for houses and that feeds price increases.

Ultra-low interest rates are driven by governments worldwide contracting out wider economic management to central banks, which then have to compensate for poor microeconomic policies flattening growth. You might not think an oil and gas exploration ban, poor quality government spending, and backward-looking employment policies lead to ever higher house prices, but indirectly they do.

There are lessons out of the rental housing and social housing markets. It is crazy to persist with a single monopoly state housing provider when it has never in its history managed to successfully meet the demand for social housing. It’s also not sensible to let one person have the same state house for life irrespective of changes in their family and personal circumstances. The rapidly growing social housing waiting lists compared to two years ago provide the evidence there. . . 

How can a government that cares let a couple or single person occupy a house with multiple bedrooms while families with several children are homeless?

Then there’s the added compliance requirements and accompanying costs that lead to fewer rentals.

That’s not to say never change anything about residential tenancies, but perhaps don’t whack landlords with a dozen negative changes over, say, three years.

To make housing more affordable, the last decade’s experiences tell us to greatly increase land supply, ensure a ready supply of build finance, put less pressure on the Reserve Bank to lower interest rates to keep the economy going, enlist community and NGO help in supplying social housing, and stop treating the vast bulk of residential landlords like they are pariahs. Oh, and forget a more punitive capital gains tax – countries with one of those have the same skyrocketing house prices as we’ve had.

There are valid arguments for a capital gains tax but reining in house prices isn’t one of them.

If CGTs haven’t worked anywhere else, there is no reason to expect they’d work here.

The high cost of housing is a major factor in poverty and all the problems that stem from that.

Why did the government waste money on the UN expert whose recommendations wouldn’t work, when a local one has a much better recipe that would work?


Govt shouldn’t be competing with private sector

February 18, 2020

Attempts to get onto the property ladder are being made more difficult by a government agency:

A first-home buyer has been left disappointed after Housing New Zealand, now called Kāinga Ora, bought out the apartment development she was purchasing a unit in.

The woman, who did not want to be identified, signed an agreement to buy a one-bedroom apartment in the Onehunga Bay Terrace Development, being built by Avanda.

She paid a 10 per cent deposit, of $54,200, at the start of August last year.

But in November she was told by real estate agents selling the development that the developer had entered into a conditional agreement with Kāinga Ora for it to buy the unsold units in the development. 

She said she was told if that happened she would be given the chance to cancel. She said she requested more information through her lawyer but was told there was no requirement to tell her anything further.

On January 16, she was sent a deed of cancellation by the developer, cancelling her agreement. She was told she would get her deposit back, plus the expenses she incurred in the deal, such as legal fees and the cost of a valuation. . . 

Housing is supposed to be one of the government’s priorities.

It won’t solve the shortage if its own agency is shutting out private buyers.

That’s unfair competition which does nothing to solve the problem of over demand and under supply.

The government should not be competing with the private sector in the housing market.

It should address the underlying reasons for the housing shortage, chief of which is the difficult and expense consent process.

 


Rural round-up

January 2, 2020

Henry’s letter proves a hit – Murray Robertson:

YOUNG Tairawhiti farmer Henry Gaddum penned an open letter through The Herald in mid-November that has gone ballistic as readers nationally picked up on his concerns around the theme of Carbon Credits and Pine Trees.

It has been viewed more than 14,800 times on The Herald website since publication, and has been shared widely on Facebook and Twitter.

In it, Henry voiced his deep concerns, and the concerns of others, about the future of the region when it comes to land use and he wants to do something about it. . .

Year in Review: Hawke’s Bay farmer’s heartfelt Facebook post goes viral :

Year in Review: This heartfelt social media post from Hawke’s Bay farmer Sam Stoddart went viral in September. In it he pointed out the strong connections New Zealand farmers have with the communities around them. It was one of The Country’s most popular reads of 2019.

In September Stoddart told The Country he was surprised by the strong reaction to his post, which at that point had nearly 6000 reactions and nearly 3000 shares.

“For a vent to mates out of frustration on Facebook it certainly has gained some momentum.

I can’t believe the positive feedback though. For over 700 comments only about five are negative. Maybe the rural urban divide isn’t as big as we think. . .

Central housing demand prices worry fruit growers – Tess Brunton:

Central Otago fruit growers say housing could come under more pressure as their industry expands.

A recent Southern DHB report found a lack of housing availability was driving up housing prices in Central Otago, forcing some to live in crowded homes or even sleep rough.

While many orchards have staff accommodation available, some businesses say they’re losing good staff who can’t find a permanent place to live.

Sarita Orchard manager Matthew Blanch said he was not sure how fruit growers would find enough staff if big orchard proposals went ahead. . .

Reflecting on our rural past and building for the future – Nikki Verbeet:

Hope. It’s fundamental to our psychology to have something to look forward to, writes Nikki Verbeet.

It would be fair to say that hope hasn’t been in abundance in our rural sector of late.

There is no doubt the sector is experiencing rising costs, environmental pressures, public perception issues, shrinking price margins, cash flow challenges and pressure to meet compliance obligations – all of which impact confidence.

Research around mental health indicates that to have hope we need three things: . . 

Rodeo ‘great thing for the community’ – Hamish MacLean:

After more than three decades in Omarama, rodeo is alive an well in the Waitaki Valley town.

Under sunny skies, the 33rd annual Omarama Rodeo drew hundreds to Buscot Station for the penultimate Christmas series rodeo on Saturday.

“You can see by the crowd — people still enjoy it,’’ Omarama Rodeo Club president Jamie Brice said.

“And this is a great thing for the community. It brings money into the wee town.” . .

High country cattle grazing by Victorian family – Stephen Burns:

Grazing cattle in the Victorian high country has been a practice extending over 150 years, but very few families now take advantage of the summer pastures on the Alpine plains.

But the McCormack family from Mansfield, Victoria proudly continue the timeless trek taking three days to drove their Angus cows with calves slowly along the Buttercup Road over Mountain Number Three to the flats alongside the headwaters of the King River. 

Other Mansfield district families have long had an association with the High Country and include the Lovicks, Stoney’s and Purcell’s. . .

 


Labour pains, National delivers

December 18, 2019

National promised eight policy papers this year and they’ve delivered.

The government promised this year would be their year of delivery and they haven’t.

You’ll find National discussion documents here.

You’ll find the government’s broken promises here.

They include: child poverty heading in the wrong direction, the level of homelessness is appalling, elective surgery numbers have dropped, economic growth has dropped from 4% under National to 2.1%; job growth has fallen from 10,000 a month under National to just 3,000 under Labour; per capita growth is only 0.5 per cent a year compared with average of 1.7% a year during the last five years under National; the number of people on the dole is up by 22,000, the number of New Zealanders heading overseas has increased by 10,000 a year, the billion trees promise isn’t being delivered and won’t be, not a single cent of the the $100 million Green Investment Fund that was supposed to kick-start $1 billion of investment in ‘low carbon’ industries has been invested, the  commitment this year to making the entire Government fleet emissions-free by mid-2025 was dropped, the government hasn’t been able to find a credible way to introduce a royalty on bottled water exports without trampling all over trade and other agreements with countries New Zealand does business with, yet another working group was set up to address waste minimisation but hasn’t come up with anything yet, the bold goals for housing have been dropped, The 4000 new apprentices target has been quietly dropped. Only 417 have started the Mana in Mahi programme and 32% of them dropped out . . .

Rodney Hide sums it up saying the year of delivery got lost in the post:

This was supposed to be the turnaround year. Prime Minister Jacinda Ardern declared 2019 her Year of Delivery. Nothing has been delivered. Her promise has proved, like her government, empty and meaningless. 

The tragedy is that we accept it. It’s enough that politicians feel and emote; there’s no need to do or achieve anything. We should perhaps rename the country New Feel-Land. . . 

That’s the Year of Delivery done and dusted.

But there’s always next year. The prime minister has plastics again in her sights. She says it’s what children write to her about most. There are news reports she’s planning on banning plastic stickers on fruit.

I scoffed when we had government by focus group. We now have government by school project. . . 

Garrick Tremain sums it up:

What’s all that hot air doing to our emissions profile?

Reducing those is another failure, in spite of the commitment to reducing them being the PM’s nuclear-free moment, they’re increasing and will continue to for the next five years.

A new government ill-prepared for the role might have been excused a first year finding its feet but there’s no excuse for failing so badly to deliver in on its promises in what was supposed to be its year of delivery.


Home and away

November 4, 2019

More than a third of New Zealanders think the Prime Minister is too focused on overseas.

The latest Newshub-Reid Research Poll asked New Zealanders: “Is the Prime Minister too focused overseas?”

    • Most said no: 55.3 percent
    • But more than a third think Ardern is too overseas-focused: 35.9 percent
    • Even some Labour voters agree: 14.3 percent. . .

One of a PM’s roles is international relationships and overseas travel is part of that.

My criticism isn’t the time she spends away and her international focus per se, it’s that there are too many problems at home on which she doesn’t appear to be focused and which she either isn’t addressing or is addressing poorly.

Here’s just one example:

All her year of delivery is delivering is disappointment.


Red tape rules

October 18, 2019

Louis Houlbrooke tweets:

 

Anyone seeking causes for New Zealand’s poor productivity, housing shortage and high cost of building should start here.


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