NZ 1st homebuyers are ScReWeD...

[FTG]

The US median house prices figures to June 30 were reported overnight. With the continued & massive pumping of the FED's Balance Sheet I'm disappointed to report that there are NO surprises. Just like NZ, the US residential housing market has been running away.

The trailing 12 month increase was 23.4% (NZ 28%). Across the border in Canada....26%!

The sobering fact is house prices in many big cities & countries across the globe are showing trailing 12 month increases of >20%. As much as some here would try & lead you to believe, "first home buyers being ScReWed" isn't a problem exclusive to NZ. It's an issue across the globe.

As in life generally, effective long-term problem solving requires one to first understand the real & fundamental CAUSE of the problem. As you correctly point out Bjauck, applying Band-Aids to something that requires surgery is short-sighted & unintelligent. That is only going to suppress the issue for a period, until inevitably the cancer will actually come back even harder. It's tinkering at best.

Imposing CGT, Wealth Taxes, Inheritance taxes, and on the other side of the ledger, strategies like FHB grants & subsidies are all just political Band-Aids & suppressant Drugs to the cancer of an artificially & unsustainably booming housing market. Some would go even further & say it's akin to "an Ambulance at the bottom of the hill". Yes, additional taxes and/or subsidies MAY have impact for a period, but the real CAUSE is not actually being properly addressed. A demonstration of this point is when looking at top 15 countries on the chart for Median House Price to Household Income Ratio. NZ is currently 14th highest on that chart (SBQ, FYI: Canada is 7th). Every....single....country, but 1, for the 13 countries on the list above NZ has a CGT. So the claim that having a CGT or similar regime implemented is a long lasting solution to the housing pricing problem is patently not the case. It could also be easily argued that doing so creates poor investment investment behaviours & further market distortions, hence creating unintended negative outcomes, e.g. moral, social & economic problems.

So, coming back to diagnosing the condition, the question is, "what is the real & fundamental CAUSE?" Some of the more learned contributors on this thread have reminded us of a basic principle re how pricing of ANY market is ultimately determined....

"The Law of Supply & Demand".

Posters here have then gone on to present & debate over the impacts of a multitude of supply & demand inputs for NZ. Examples noted include, high net positive migration numbers, foreign buyers, ghost houses, super slow RMA process, high building costs, skilled labour shortages, FHB grants, Taxpayer partly funded KS deposits, SHA's, no CGT etc etc etc. IMO each of those inputs do contribute to varying degrees to the crazy house pricing problem NZ has. However.....

The REAL underlying cause is a far bigger, uglier & hence harder one for us all to confront & tackle head-on. Plus, it too obediently abides to the Law of Supply & Demand.

So, have you some thoughts to what that Elephant in the room is that I'm referring to?

[ynot]

No. Buy more $4mil hotels but pay $8mil for them.

Yes ! unbelievable incompetence by this government.
Don't start me on the police minister. Totally out of her depth.

[FTG]

The REAL underlying cause is a far bigger, uglier & hence harder one for us all to confront & tackle head-on. Plus, it too obediently abides to the Law of Supply & Demand.

So, have you some thoughts to what that Elephant in the room is that I'm referring to?

Not a single well-considered & reasoned thought?

My my, seems like some folk (SBQ, looking at you especially!) have run for the hills, run out of huff & puff, lost your tongue & slunk away.

Which then naturally asks the question; what was the real purpose/agenda of certain blame pointing perpetrators ranting & raving all about? ;-)

[fungus pudding]

Not a single well-considered & reasoned thought?

My my, seems like some folk (SBQ, looking at you especially!) have run for the hills, run out of huff & puff, lost your tongue & slunk away.

Which then naturally asks the question; what was the real purpose/agenda of certain blame pointing perpetrators ranting & raving all about? ;-)

Town planning, or the RMA, is the biggie, but that's often mentioned.

[SBQ]

Town planning, or the RMA, is the biggie, but that's often mentioned.

Yep changes to the RMA has often been mentioned. Even from an outside perspective, they imply changes to the planning & use of land which would add more supply to NZ's housing problem. But instead, our gov't is choosing the "lack of infrastructure" excuse of why there's no real supply. Have a look abroad, see how major cities are built and planned. Look how new residential sub-divisions are built and see how existing city corner blocks are knocked down (increase densification), to be replaced with multistory complexes everywhere. Then compare that to how NZ builds things. The conclusion is clear, NZ's RMA has stifled urban living and the NIMBY stance. Most of the new houses I see being built are nothing more than a 'dog box', VERY expensive single story boxes that offer little practicality. We are not improving NZ's standard of living by offering LESS of a house.

[artemis]

No. Buy more $4mil hotels but pay $8mil for them.

There was an an article in NBR earlier this week to the effect that Kainga Ora made an offer on a property $8 million above its eventual sale price. NBR got the information from an OIA request.

Some additional info on the wireless - KO withdrew offer, eventual sale price around $30 million.

Not a trivial overpayment offer, and have to wonder what else is KO keeping under the radar.

https://www.scoop.co.nz/stories/PO21...-reined-in.htm

[Bjauck]

From 2020: NZ is 7th (out of 39) most expensive per Square metre of housing per household income. (UK is 8th, Australia is 16th, Canada is 21st, USA is 38th) Other countries in the top are more densely populated than NZ.

https://www.oneroof.co.nz/news/kiwi-...he-world-38726

[FTG]

From 2020: NZ is 7th (out of 39) most expensive per Square metre of housing per household income. (UK is 8th, Australia is 16th, Canada is 21st, USA is 38th) Other countries in the top are more densely populated than NZ.

https://www.oneroof.co.nz/news/kiwi-...he-world-38726

They have deployed an "interesting" way of measuring housing affordability. I would suggest that it is yet another example of how statistics can be influenced somewhat dependent on what info one uses as the measuring tool and how accurate & detailed that tool actually is. Additionally, in this case the party quoted in the Oneroof article as doing the measuring is "comparethemarket.com.au. Need I say more.

A universal principle of property investment that we should keep front of mind, is that the component that is actually appreciating in value is the LAND. The building on the land certainly won't appreciate as much, and in fact in most cases (both for resi & commercial) will actually depreciate over time. As is often said re land "they aren't making any more of this stuff".

So, when digging into the numbers a little further, we need to keenly keep in mind that NZ still has relatively large section sizes compared to the rest of the developed world. Additionally, market penetration of Apartments (which hardly have any land!) is certainly lagging well behind most other developed big cities/countries. So yes, the Per SqM price of the HOUSING for NZ, which has relatively more land under it, will understandably be artifically skewed to the higher end of the continuum.

Just to be clear again though. I'm not disputing the reality that by most forms of measurement NZ is in the top quartile for housing inaffordability.

[FTG]

Town planning, or the RMA, is the biggie, but that's often mentioned.

Yes, it's certainly not a small one in its own right. Additionally, reasonably recent positive changes to the rules around what does or doesn't require consent for home renovations has also seen a further boom in home reno's (as has Covid impacts) and therefore house values.

However, RMA enforced costs are a tiny input compared to the BIG Elephant in the room that I'm referring to. When it comes to recognising the biggest single real driver of house price affordability in NZ and across the globe what do you think that is?

[Bjauck]

They have deployed an "interesting" way of measuring housing affordability. I would suggest that it is yet another example of how statistics can be influenced somewhat dependent on what info one uses as the measuring tool and how accurate & detailed that tool actually is. Additionally, in this case the party quoted in the Oneroof article as doing the measuring is "comparethemarket.com.au. Need I say more.

A universal principle of property investment that we should keep front of mind, is that the component that is actually appreciating in value is the LAND. The building on the land certainly won't appreciate as much, and in fact in most cases (both for resi & commercial) will actually depreciate over time. As is often said re land "they aren't making any more of this stuff".

So, when digging into the numbers a little further, we need to keenly keep in mind that NZ still has relatively large section sizes compared to the rest of the developed world. Additionally, market penetration of Apartments (which hardly have any land!) is certainly lagging well behind most other developed big cities/countries. So yes, the Per SqM price of the HOUSING for NZ, which has relatively more land under it, will understandably be artifically skewed to the higher end of the continuum.

Just to be clear again though. I'm not disputing the reality that by most forms of measurement NZ is in the top quartile for housing inaffordability.

The appeal of residential housing as an investment I guess lies primarily with the land, its supply or lack thereof, the ability to leverage an investment in it and tax rules surrounding the return from it. The return from renting out a good building is taxed as income. The capital gains return from appreciating land values, which is as you say is what is appreciating in a rising market, is mostly untaxed.

However if you look at housing as providing shelter and appropriate comfortable accommodation for the population, then the cost per sq metre of actual residential building and the quality thereof becomes the most important aspect. And, that is the part of investor residential property on which the tax burden is placed.