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Locked Out

6:45pm tonight at the AMI Netball Centre Northcote there is a housing affordability debate with some interesting speakers, head along:

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71 comments to Locked Out

  • James B

    Will this be streamed or recorded. I’d be interested in going but can’t due to writing essay on British imperialism in Africa.

  • Mel

    Will it be online streamed here

  • Kirk

    No sorry. We tried but couldn’t get the equipment together to do it properly.

  • As TBlog just retweeted,

    Twyford has just come out and said that the Urban Boundry should be removed,,,,

    Well given that the Nats hate the RUB already, I think the days of Auckland Council keeping it are pretty much numbered.

    Sprawl is back

    • Matthew W

      Good news. Lets hope they do something similar for density restrictions in the existing urban area too.

      I might even vote for Labour with such a policy.

      • Waspman

        I’ve got no issues with no urban boundaries so long as it is done with foresight. Develop around existing railway, set up stations for PT so road usage is minimised. Tuakau, Waimauku north, etc, etc establishing industrial/commercial centres in those areas. If it simply spread outwards with laisseze faire planning then it will create more problems than its worth.

        • Matthew W

          Well it is going to be up to those who agree with you to substantiate those costs and compare them to the huge real costs we have now as a result of a lack of housing, high prices etc.

          • JBM

            The cost of sitting in traffic in the morning commute from the Coromandel will be quite easy to quantify once it happens.

    • JimboJones

      Or not:

      “The cost of new infrastructure must rest with the property owners of new developments to prevent the ratepayer carrying the can for expensive infrastructure investment in places where it’s too expensive to build. Labour proposes using bond financing paid back by targeted rates over the life of the asset. This can range up to 50 years in some of the jurisdictions using this mechanism,” Twyford said

    • Angus Robertson

      Scrapping the MUL in that fashion will result in less sprawl than the Proposed Auckland Unitary Plan. The PAUP is a multi-billion dollar subsidy to sprawl in exurban Auckland, the PAUP creates more over all sprawl in 30 years than Auckland would have grown naturally in 40.

      Scrapping the MUL and rewriting the PAUP in this fashion is a great way to reduce sprawl.

      There is no downside.

    • SDW

      If it goes watch the proliferation of prohibited and non-complying residential activities under various rural zones. Will be hard to remove those without wholesale change of the RMA.

  • Bruce

    There is no one single magic silver bullet however the biggest single thing that should happen would be to ban foreign ownership of NZ property. This would then decouple the NZ property market from the international property market.
    I’m sure there will be a few comments relating to the shoddy stats just released that say only 3% of the market is foreign buyers (virtually everyone knows that the horse has already left the stable in this regard and what is left in the barn is the horse shit not the actual horse! Numbers were estimated to be at least 10x that amount (ie 30%) prior to the IRD requirements and the Chinese Governments own crackdown on money flowing out of China).

    Introducing a 40% equity requirement for rental investments will also help to reduce the domestic investor levels (although apartments should be exempt for new built apartments below 90sqm as we need more of these).

    There should be a 1% land tax on all property in NZ with exemptions for land that is not designated for housing over 10ha in size to protect rural areas. Vacant/unoccupied land in urban areas should be doubled to 2%. This would help reduce land-banking and NIMBYism while providing for increased density in our cities.

    The government needs to investigate and do something about the cost of building materials in this country – they are very expensive adding tens of thousands to the cost of building here. Likewise they need to sort out the costs and ineptitude in permits/inspections etc. They add a huge amount to costs directly and indirectly due to delays waiting on inspectors etc. There are a lot of things which could be given a blanket compliance permit for at the point of manufacture improving productivity.

    The brightline test/capital gains tax needs to be extended from 2 years to 5 years to discourage speculators.

    Immigration into NZ needs to be reduced to more manageable levels (particularly restricting unskilled migrants from non-western countries).

    • Frank McRae

      You forgot to mention housing supply. Speculative elements may boost the cost of buying a home but they don’t affect rents. And while renting is proportionately cheaper than buying, rents are rising fast and we already have an affordability problem with renting.

    • ” restricting unskilled migrants from non-western countries”
      What about unskilled migrants from western countries, are they ok?

    • Bruce there is plenty of evidence that unskilled migrants, especially refugees, make great additions to their host societies. The vast strength of the US, for example, was built on on huge waves of unskilled often illiterate migration from what then were considered ‘non-western’ countries. The mechanism of this is that these people make a commitment to the new place, having no or little ability or desire to return from wherever they escaped, they often work extremely hard in unpleasant jobs often sacrificing their own lives for the advancement of their children.

      In contrast people who have made some kind of fortune in their home country are often make tentative commitment to their new land, as it is often not possible to reproduce their businesses in the new place.

      It is great to get people with skills from other places too, but it certainly isn’t clear that the unskilled are a poor addition.

      Also, I have to say, your line about ‘non-western countries’ is a fairly audible dog-whistle that we can do without on this forum.

  • The Real Matthew

    No speaker from Auckland City Council?

  • Lets hope Phil Twyford stops whining long enough to say something constructive. I’m suprised he’s going to Northcote, a community where he reckons many have names that make them foreign investors.

  • I can’t attend unfortunately but look forward to watching. The thing bugging me at the moment is that I don’t see a clean way out – there is no way to drop prices now without huge collateral damage.

    Dropping property values (which often seems to be called a ‘correction’) by 30-40% sounds good for the next generation of buyers, and probably wouldn’t hurt most older people who have very small mortgages (by any modern measurement) but rather the current generation (mine, as it happens, ~30 these days) who would end up getting doubly screwed – being stuck with the massive mortgages on properties now worth less. I’m sure most have little sympathy for the investor class, but they stand to lose significantly less than what would amount to debt slavery for a large number of my friends and colleagues. That is, of course, no excuse for wishing for rising prices forever, or suggesting that the current situation is fair to (even) younger people, or ones who cannot afford anything now.

    Another aspect is new apartment builds. Quality ones, ideally. Auckland has a massive undersupply of housing and is on the cusp of a Melbourne like apartment boom. But someone has to build these, which means someone else has to put their neck on the line and buy off the plans. 6 months prior to completion, the bank does an assessment and decides if they will provide a mortgage on the property (this is after you’ve put down 10%). If the market is moving downwards during that time, every buyer risks a big shrink in deposit from selling their current property and the bank denying the mortgage because the as built value is less than you paid for it, meaning you lose your 10%. That’s a quick way to scare people off and to squash any new developments, especially larger or higher quality ones that take 2+ years to construct. I’m one of the people who has their neck on the line to house 200+ people in a quality building within walking distance of the CBD. I’m not in it to make a profit, just a place to live. But I don’t want to lose a very large sum of money for trying to do the right thing (by my measurements, anyway)

    We desperately need the certainty that prices will not drastically drop off to fund new apartment buildings, and we need new apartment buildings.

    So now you have a new apartment shortage, more suburban sprawl (short build times = less risk) and a whole generation locked into debt slavery. Good job? And we still won’t have enough houses/apartments, which will continue to drive prices up, out of the hands of the average income, creating a structured class divide (be it by purely $ amounts, or lending restrictions). Raising incomes just push up prices (looking at you SFA).

    Does Melbourne solve this by tinkering with monetary policy and lending ratios, or did they build so many apartments that there became a glut which restricted prices? The Unitary Plan needs to be far beyond what has been considered so far, new (well designed, transit oriented (hah)) suburbs need to be built too. This is the only way out in the end – everything else is just causing another temporary dip in the cycle, with the human pain and suffering that comes with it. As long as there are not enough houses, prices will stay high. Pushing policy hard, when there are not physically enough bedrooms just puts people in garages or tents.

    Sorting out rental laws would help a hell of a lot too – renting should be made as appealing as buying (certainty, mostly) and at some point admitting that buying a house in Auckland is just not feasible for some people (assuming that rents are under control)

    Ensuring that more houses can be built, where people want to live, is the only way to solve this. Everything else is pain and failure.

    • Angus Robertson

      The world is in the midst of global apartment/condo boom investors are funding apartment builds at rates typically 3x, 4x, 5x faster than Auckland. There is a surplus global massive demand for apartments. If we were to cause a correction by restricting this investment flow, then yes all that you are saying is likely to occur and be horrible.

      But don’t worry, a correction is not going to happen to apartment prices, if we merely open up more land for Auckland and correct land prices. The cost of land will go down and not apartment prices – apartments occupy very little land so apartments are priced almost entirely on their value. All we are doing is creating a massive cost/risk reduction for an apartment build and therefore will get more apartments. We are currently utilising our very cheapest land to cater to the top of the market – the $900,000 – $1,000,000 apartments we are building currently will remain that valuable, because they are that valuable. If land price falls we will be able to build more apartments, catering to a wider section of the market.

      Lowering land costs will reduce apartment construction risk. Auckland has a land cost higher than Sydney, this is a correction risk that is putting of apartment builders from acquiring land in Auckland. Everyone knows land cost in Auckland is going to correct – sooner or later – and buying land for a two year project is risky. Only speculators can thrive in our market, because they can sell the land overnight.

      • Peter Nunns

        As usual, you wildly overestimate the amount of land it takes to build an apartment – it’s around 25-50m2 per unit for a 4-8 storey apartment block. If you wanted to knock $300,000 off the cost of such an apartment by reducing the price of land, it would mean reducing land prices by $6,000 to $12,000 per square metre.

        There is almost nowhere in Auckland where land is that expensive. Even in the inner suburbs it’s more in the range of $2-3,000/m2. In other words, you’re predicting that inner city land values would be substantially negative in the absence of an MUL. That seems optimistic, to say the least.

        A more realistic estimate would be that inner city land values *might* be, say, $500/m2 lower – assuming that the observed land price discontinuity at the MUL were translated to all other parts of the city. That would lower the cost of a midrise apartment by $12,500-$25,000.

        Conversely, I’ve been looking at the cost of building height restrictions for a paper I’m writing in my spare time. My current estimate – which has support from both models and empirical evidence – is that limiting inner suburban building heights to an average of ~3 storeys adds perhaps $100-150k to the cost of each apartment. That seems like a much more substantial barrier to apartment development.

        • My points remain though, regardless of the minor details: what is the way forward?

          The best I can come up with is to hold property prices steady while inflation and wages catch up.

          • Matthew W

            David, why are home owners screwed? After such a correction they still have exactly the same house (which they need to live in) and exactly the same mortgage. What’s changed? Anyone investing in property right now is betting against the govt fixing the problem. It’s a bet I would like them to lose.

          • Matthew: inability to sell, inability to react to changes in circumstances. It can be life ruining.

            And all my points about getting apartments built.

          • Matthew W

            That’s the risk that comes with property investment. If you don’t want to risk losing all your savings don’t invest them in an undiversified highly leveraged equity investment. You can’t expect upside return without downside risk. In any case, in that situation they could still move, they just can’t sell. But you could rent your house out and rent one where you need to be. Acually they probably can still sell, but they will end up with an ongoing debt they need to service to cover the difference.

            As for apartments. If the price drop is due to a supply increase then by definition we have moved into a situation with more supply. If market uncertainty curtails development, then it will also curtail the cause of the market uncertainty. Lots of oil producers have hit the wall in the recent past – because we have more oil. This leads to reduced future supply and eventually prices will. But we can’t simultaneously have too much and too little of something.

          • You’re missing the substance of my point. Supply side issues are the current cause, but many wish that policies be put in place by govt/rbnz that would attempt to force down prices in an unnatural (in terms of supply/demand) way. This just feeds the supply/demand issue in the ways I tried to lay out.

            Your assumption that housing is only ever seen as an investment says more about you then me though – go on trademe and see how many decent 2 bedroom, 2 bathroom apartments with a car park and decent patio within walking distance of the city you can find. They don’t exist. New builds are the only way to get that (without getting hit by the investors flipping them for profit as soon as the current batch are built in 2018). It perhaps looks like investment to you, but it’s the place I’ll be living for the next 20 years.

          • jezza

            David, anyone who has bought a house to live in in the last few years in a rapidly rising market should have been aware of the obvious downside risk in that sort of market. If they blindly believed that prices would only go up then I struggle to have much sympathy. Panicking first home buyers are just are responsible for the current boom as speculators.

          • Again, you’ve failed to address the actual problems I’ve presented about the supply side – scapegoating and patronising diatribes about risk don’t seem to solve anything, oddly.

          • Matthew W

            David,

            Sorry, I see what you are saying and I agree. Yes if you try to force down prices by demand side measures this will potentially be very counterproductive. But if you do it via supply side measures (i.e. by increasing supply) you wont have this problem.

          • jezza

            In fairness you haven’t actually addressed the problems you have listed in your long comment above either. As far as I can tell you want supply to increase but only to a level that keeps the current level of prices, so that people of your generation (which is also mine) don’t loose out, but at the cost of people younger than us who still won’t be able to afford houses. But I could be wrong, that might not be what you want at all.

            To be honest the market is so high relative to incomes at the moment, it could easily fall without any intervention at all, whether we like it or not.

          • Jezza: I don’t have any real solution – all I proposed was one that would cause the least immediate harm to a certain group, with no consideration for the wider economic impact of high prices.

            I don’t want prices to stay so high, it is madness and unfair to current and future generations, but supply side can be the structural deconstruction rather than a semi-controlled demolition. THe fault lies in the Auckland Council and government for things getting this way, punishing individuals at this point just seems unfair though.

            As I started with, there is no clean way out of this.

          • Angus Robertson

            David,

            Apartments are priced to value, as in how much people value living there + the value of the building + the value of the land. As we lower the cost of land this has next to no effect on the price of an apartment, because land price is such a small component. The value of the building and the value of living there are much bigger components.

            For a long-term resident like you plan to be, you want to have more apartments built. The way to do this is by reducing the costs of building apartments whilst maintaining or increasing the value of apartments. This means a high value demand side and a low cost supply side. Everything you say makes sense, except you don’t need to worry about land cost falling having much effect on apartments.

          • jezza

            Yeah, definitely not an easy one to solve, someone will take a hit at some point, personally I’d crank up the supply side, whether it’s increasing land supply, removing construction red tape, or a straight out Kiwibuild policy like Labour have and see what happens. One thing for sure though if this was to coincide with a drop in net migration, an increase in interest rates and the growing boomer generation downsizing/moving to the Coromandel things could get messy.

          • Angus: it’s a fair point – I just did the maths and council value of current site is 4.3 million vs ~100 million in sales off the plan, land value not terribly relevant overall.

            Jezza: my building is mostly boomers moving into town away from the suburbs – we were ~25 years younger than anyone else there. I don’t think enough people are going to be leaving auckland to make the dent if the trend continues.

        • Brendon Harre

          Great Peter, the vertical growth boundary is hard to define, so it is excellent that you are doing that work. I heard Phil Twyford say he wanted AC to remove restrictions on going up too and that CG had an obligation to future residents to ensure this could be done as affordably as possible -or words that effect. It would be good to find a link.

          Did you see Arthur Grimes comments at Interest.co.nz?

          “There are two urban growth boundaries in Auckland. One is a horizontal one and one is a vertical one, and it’s important to get rid of both of them,” he said.

          Grimes said he opposed the recent practice of progressive extensions of the RUB, which simply gave land owners serial monopolies on land that pushed up land values.

          “The way it’s been discussed in the draft Unitary Plan really shows a misunderstanding of basic economic principles and is almost designed to give people their own specialised monopoly for a while that forces up the price of land.”

          • Matthew W

            “The way it’s been discussed in the draft Unitary Plan really shows a misunderstanding of basic economic principles and is almost designed to give people their own specialised monopoly for a while that forces up the price of land.”

            That is exactly it. It’s all very well saying we have enough supply for the next few years, but if it is only just enough then every in zone land holder holds the balance of supply and has a lovely monopoly on their hands. Hence why land banking is so popular – it’s very low risk.

          • Peter Nunns

            Yes, that’s good phrasing from Grimes.

            I wasn’t an enormous fan of Twyford’s announcement, to be honest. Bits of it are good, but I think the absence of equally clear language about removal of barriers to vertical growth is a serious error. Land supply is part of the picture, but it can’t carry all the weight because we simply can’t build enough infrastructure fast enough for it to be effective. (And if we tried to, it would end up undermining attempts to get better transport/land use outcomes, as the busways and rail extensions would go into the “nice to have but unaffordable given all the roads we’ve got to build” bucket.)

            As a back-of-envelope take, Auckland Council’s future urban land supply strategy identifies around 110,000 homes in greenfield areas that would need about $17bn in bulk infrastructure, about 2/3 of which is water and transport infrastructure. That’s enough for about a decade of growth. If we wanted a competitive land market on top of that, we might have to service 50-100% more land. So figure somewhere in the range of $25-34bn in infrastructure that we’d have to build in a hurry. That’s equivalent to around 10-15% of GDP, which is large.

            Looking at that, if you want a more competitive development market, liberalisation of zoning regulations *within* the city is going to be pretty essential to achieving it. So it’s baffling that wasn’t more clearly communicated in the press release.

          • Matthew W

            Sure a better announcement would have been better, but it isn’t like he ignored the need to deal with density restrictions. As for infrastructure costs – most of the cost in roads. Do we need them? Who knows, we don’t have road pricing so it’s just a thumb suck. If there is real demand for all the roading, including pricing externalities, (unlikely) then we should be devoting resources to it. Wastewater and water are similarly underpriced so that’s a thumb suck too. I don’t know what the other third is, but for most other infra costs won’t vary too much between catering for growth in outer suburbs or central Auckland.

          • Peter Nunns

            That’s part of the reason why I’m so enthusiastic about congestion pricing – it will help ensure that we don’t build what we don’t genuinely need.

          • Brendon thanks for that, indeed, great phrasing from Grimes. And, of course, the vertical barrier, once lifted, is the quicker one to be able to be built through. That is the one that should be the priority to be changed.

          • Bryce P

            The issue I have is there was no mention of where this liftig of the RUB stops. Or if it is based on transport corridors. Or density in the areas to be developed. Or mention of infra assistance from government. Also, I have a big issue with the targeted rates idea as well. Basically it is saying ‘you new residents can pay for your infrastructure and you can pay for existing infrastructure as well’.

        • Angus Robertson

          Question – You keep on citing the fact that apartments have a very low land cost component, have you ever asked yourself why that is? Why don’t you have lots of examples where land cost is a higher amount? Answer – Apartment construction is very sensitive to land cost.

          We do not need to drop land costs commensurate with a drop in sale price to create a drop in sale price. Because apartment construction is very cost sensitive to land, if we lower the land cost we will get many more apartments. Having more apartments will create competition between apartments, so the apartment construction industry will need to chase more sections of the market and set different price points. Many of these price points will be lower.

          I’m talking about the cbd where the isn’t a height restriction and we are building apartments way slower than everyplace, solely cause the land costs to value doesn’t exist to justify them.

          • Angus how don’t you grasp this!? Land cost is less of a factor per apartment because of the number of units. In fact no one builds apartments until land cost makes it wasteful to spread everything out. Apartments are a response to higher land value. You, consistently, have it backwards!

          • Angus Robertson

            In fact no one builds apartments until land cost makes it wasteful to spread everything out. Apartments are a response to higher land value.

            Patrick,

            Value and cost are different things. They are independent things that in a market operate on different sides of the equation. You seem to use them as if they are interchangeable. This leads you to your very strange back to front conclusions.

            If the land is inexpensive (low cost) and lots of people want to live there (high value) – they all get together and build an apartment block, because that way they can all live there.

          • ‘If the land is inexpensive (low cost) and lots of people want to live there (high value) – they all get together and build an apartment block, because that way they can all live there.’

            No Angus the first part of your sentence is not necessarily the case; or why would any apartment ever be built in expensive places like Manhattan or Tokyo? In fact this combination is very unusual because of the natural dynamics of supply and demand.

            Only the second condition is required, and it will almost always lead the reverse of the former. Let me spell it out for you: if lots of people want to live somewhere, ie inner AKL, then land value will rise. And cost, but so will the VALUE of the resulting dwellings. And by building a lot of dwellings on one plot of land, apartments, the COST of the land can be absorbed and covered by the VALUE of the resulting dwellings and by dividing the high cost of the land among 10, 20 50, 100, dwellings….

          • Assuming land is cheap, if you build your apartment tower, aren’t you going to be massively underbid by the guy nextdoors building his 3-storey walk-up apartments? Or are those low-rises somehow more expensive than a high-rise?

            Perhaps the most defining (and weird) aspects of the housing over here is the lack of variation. You have apartment towers, freestanding houses, groups of townhouses-with-body-corporate, and that’s it.

            That’s a big contrast with Europe. There you’ll see freestanding houses, duplexes, terraced houses, low-rise apartments (these are almost indistinguishable from terraced houses on the outside), and towards the centre, medium rise apartments and smaller terraced houses. You will see the odd high-rise apartment tower, but not as many as here. On the other hand, at least in Belgium I’ve never heard of any townhouse with a body corporate, ever.

          • Angus Robertson

            Because of the higher value of living there – New York is at the centre of the Tristate Area home to 22 million people; Greater Tokyo has 35 million people. The value of living in there is immense to the people living there. These places are great urban centres surrounded by massive conurbations of people and the value of the land drives up the price of the land. You seem to hold this vision that the same value exists here in our tiny little city, it doesn’t – the value of living here is much lower.

            But value is not the only way you can cause land prices to go up, is it? We restrict supply of land to our city and this causes scarcity costs quite independent of value.

            We are in the a city where we have 1.4 million and land prices higher than neighbouring cities with much higher populations (Melbourne and Sydney). The VALUE of living in Melbourne or Sydney is much higher than Auckland, but the land price is higher here. This is due to scarcity COSTS driving up the price of land, not VALUE.

          • Angus Robertson

            Let me spell it out for you: if lots of people want to live somewhere, ie inner AKL, then land value will rise.

            Let me spell it out for you: the value in Melbourne is higher than the value in Auckland, because the lots of people in Melbourne is 3x larger than the lots of people in Auckland. In Melbourne they don’t do much to constrict the supply of land, so their land is much less costly.

            And by building a lot of dwellings on one plot of land, apartments, the COST of the land can be absorbed and covered by the VALUE of the resulting dwellings…

            Yes, so let’s talk in terms of relative pricing. Auckland has higher cost and a lower value with which to cover the costs; Melbourne has lower cost and higher value with which to cover the costs – therefore Melbourne is more easily able to cover the cost and subsequently Melbourne has a much higher building apartment rate than Auckland.

          • Angus Robertson

            roeland,

            They could, but if land was inexpensive why would they minimise their profits by building low rise? If the low rise and the apartments are equivalent $value, then selling something with 4x$value is going to create less profit than selling something with 50x$value.

            My scenario is just like Patrick’s except under my preferred conditions more money is devoted to constructing the building and less to purchasing the land. Patrick would prefer we waste more money on land and spend less on apartments.

  • Something I forgot to mention re: new builds:

    The developer last night indicated that future purchasers will need to pay more, as building costs have increased substantially since planning began. If Auckland house prices drop, the quality of what is built must drop in equivalent amounts. Building an apartment needs to be profitable, and as such a reduction in house prices in Auckland would mean a return to building low cost, high volume units ala Volt (or none at all)

    There is no easy answer.

    • Angus Robertson

      There is an easy answer – reduce the cost of land. Open up more land around Auckland.

    • Sailor Boy

      “planning began” you solve the problem in your comment but you missed it. Reduce planning. Abolish MPRs, set backs, height limits, minimum lot sizes, and reduce road width reqs in new developments and you can build houses far cheaper. Houses being cheaper reduces cost of land, not the other way around.

      • While I agree with all that, costs here are directly related to construction costs (it’s a large apartment block, setback is 0m, carparks are optional etc – it’s a good result)

        For what it’s worth, the architect informed me that the council gave them almost free range and allowed height and unit number increases on the design that was inherited without any fuss.

  • Demand exceeds supply. No matter which way you look at it increasing housing supply is both costly and time consuming. Reducing demand to a sustainable level is the quickest way to affordability. That said I also think many first home buyers expectations are unaffordable as many wish to live in expensive areas and bypass the affordable areas for a number of reasons (too far, low decile schools, small house/properties, rundown house, low socioeconomic demographics etc). You can still find a number of properties/townhouses in South Auckland $100K cost per property required for new green fields infrastructure. Adding new investor taxes will mean increased rents. Foreign ownership should be banned regardless of the impact on house prices. The 4.5 income mortgage cap takes the majority of investors and home buyers out of the market but does not address the main supply/demand issue of housing the large inflow of new residents.

  • Demand exceeds supply. No matter which way you look at it increasing housing supply is both costly and time consuming. Reducing demand to a sustainable level is the quickest way to affordability. That said I also think many first home buyers expectations are unaffordable as many wish to live in expensive areas and bypass the affordable areas for a number of reasons (too far, low decile schools, small house/properties, run-down house, low socio-economic demographics etc). You can still find a number of properties/town houses in South Auckland $100K cost per property required for new green fields infrastructure. Adding new investor taxes will mean increased rents. Foreign ownership should be banned regardless of the impact on house prices. The 4.5 income mortgage cap takes the majority of investors and home buyers out of the market but does not address the main supply/demand issue of housing the large inflow of new residents.

  • evanjames

    Just out of curiosity, who is going to build these new houses once approval has been obtained. We have a serious shortage of trades people now, so how are we going to solve that. Import more builders, plumbers, sparkies etc? But then there comes a problem with qualifications – do they have any at all. Which leads to what we are seeing in some other industries, people with overseas “qualifications” coming in and walking straight into NZ jobs, it which point it becomes very obvious they havn’t a clue about the trade their so called “qualifications” are for. And they wonder why local lads – and lasses – are not interested in serving several years – five years for plumbers – of apprenticeships.

    • Angus Robertson

      We pay them more.

      Knock $300,000 off the cost of a unit of land (reducing it to 10% higher than Melbourne prices), so we can able to pay our tradies $100,000 more in labour and still afford to get a lot more apartments built.

      • No it is not the price of the land in all cases!
        Take the new Sargeson Apartments in Takapuna on the site of “The Block” on Anzac St. Four houses were bought by a developer for about $6 million. There will be 92 apartments on this land so the average land cost is about 67,000 per unit.
        But the cheapest unit is for sale at $395,000.
        Clearly the land cost is not the problem!!!!!

        Do some more research. and read what Brian Gaynor has to say on the subject.
        The clear learning experience from The Sargeson is how density makes property vastly more affordable. You could have bought the last “Block” house for 1.9 million, but you can buy a new 2 bedroom apartment on the site for about $600k.

        • Angus Robertson

          I’ve done some research.

          I’ve found out that if you increase the costs of construction in an area, this reduces the rate of construction in that area. I’ve also found out that if a decrease the costs of construction will result in a quickening of construction rate.

          Building apartments can be profitable an a way of enabling affordability. Can you see any cost in the Auckland area that could be lowered to quicken the rate at which apartments are built in Auckland?

          • Reducing the number of council inspectors, allowing untreated timber to be used in construction and using low quality imported plumbing fittings? 🙂

    • nonsense

      Skills and technology both things NZ is severely lacking off. I built this house https://www.google.co.nz/maps/@45.9021467,12.1241852,3a,34.8y,267.67h,88.25t/data=!3m6!1e1!3m4!1sVGPpw9ckT32E80O2Or_Ggw!2e0!7i13312!8i6656!6m1!1e1
      in 4 months in 2001. I mean actually with my own hands. I was just the labourer of a 3-4 men building company. With huge reinforced concrete underground garage and party rooms/cellar. Thick 400mm walls. to the highest seismic standards. My neighbouring property here in Auckland is taking 1.5 years for a wooden shack with no roof! FFS

      • How expensive are building costs these days?

        I’ve heard numbers around $3000 $/m² floorspace a couple of times now. That’s a lot. Does anyone actually have some statistics?

        • Depends on the build. The two nice apartments going up shortly are in the 12k/m2 range.

          For reference, sale price on my current unit (built ~80 years ago) is estimated at ~9.5k/m2

          I have no idea about house costs, some family built in Long Bay, a rough estimate would be around 5k/m2?

          • Wait that’s including land cost, right? What if you only include the cost of the build?

          • Yes, sorry, that is very relevant to your question!

            For the house the land value (according to Auckland Council) was about half the cost, so probably more like 3k m2. Only one data point though.

            For the apartment the maths is complicated, but land cost accounts for about ~5% of total costs which means 11,4k/m2 (vs 11.9k/m2 without accounting for land)

            Since I have the spreadsheet, other stats:
            across 104 units:
            Mean: 75.4sqm
            Median: 75.5sqm
            Mode: 80sqm

            Total (private) floor space: 8070sqm

            Council value of current site: 4.3 million
            Scaling up of my unit price/sqm across entire build results in 96million in purchase prices

  • Matt P

    Also more scale and less regulation opens up prefabricated housing as a more economic option. That helps a bit with the tradie issue.

  • Anthony

    Foreign buyers can‘t be banned. The are always ways around these laws, for instance via a business, trust or representative. Note that the data shows while 3% of properties are bought by foreigners, 3% are also sold by foreigners. This suggests we probably don‘t have a problem with foreigners buying up houses.
    Undeveloped urban land cannot be taxed, if the urban boundary is removed.
    About 42% of people rent. Increased costs for landlords (property investors) will be passed on.
    Land costs in Auckland are multiples higher than most NZ cities, while incomes are not significantly higher. This is the biggest problem.
    Building costs and materils are higher than overseas but some of this is justified by market size. Prefabrication or precast aerated concrete could help with this.

  • Jezza

    Hmmm, three potentially quite interesting speakers and… well Phil Twyford. Incidentally did the right leaning speakers decline their invitations?

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