Why housing costs are so ridiculously high

[Winston001]

Banks don't actually create money, there is a thing called fractional reserve. It's not nearly as scary as the idiot who created this thread thinks.

Here's a way of looking at it:

1. You have $100,000 in savings that you put into the bank. On your balance sheet now you have a $100,000 cash asset (e.g. cash you have access to any time you want it)
2. The bank's balance sheet is now a $100,000 credit (liability), cash it owes you. It also has a $100,000 debit (asset), being cash in its own accounts.
3. Now I come into the bank and ask to borrow $50,000. No problem, because the bank has your $100k in cash sitting in its trading account. The bank lends me $50k, keeping the other $50k in its trading account as a "reserve". Governments mandate how much reserve the bank has to keep. The bank's balance sheet is now $100k liability (your deposit), $50k debit cash reserve, $50k debit loan assets.

The effect of this really is that the bank created money. Just because the bank lent me $50k doesn't affect your $100k deposit as far as you're concerned. So the system started with just $100k in it, and it now has $150k - your $100k plus my $50k.

Ok, but as I understand it, the borrower pays $50k to a builder who then deposits that amount in the bank. The bank now has my $50k reserve plus $50k from the builder sitting in the accounts doing nothing. $100k. So they then lend $25k from each account =$50k to another customer who wants to open a shop.

The bank is relaxed because they know the first borrower and the second borrower will do their best to repay the loans. Plus they hold $75k in reserve....but hang on - how'd the $50k suddenly become $75k?

[TheDemonLord]

I'm a younger person (less than 30) yet I bought a House, in Auckland.

I must be doing something wrong.....

[awayatc]

What a load of croc.........



bad tempered grumpy cold blooded bastards those crocs

[mossy1200]

I'm a younger person (less than 30) yet I bought a House, in Auckland.

I must be doing something wrong.....

Get a deposit and buy a house in your price range?

[TheDemonLord]

Get a deposit and buy a house in your price range?

Something like that, I did have to do some fancy bits of banking for the deposit - but nothing overly complex

[Voltaire]

In Auckland:
There are less apples than apple buyers.
Apple buyers who used to go to Aussie to get there apples are staying here.
There are more apple buyers coming into NZ than leaving.
Lots of the overseas Apple buyers want to live in Auckland with all the other overseas apple buyers.
The Govt makes it so hard for the apple grower he grows less apples.
Apple prices go up.
Parents are now lending money to kids to buy apples.

Having to lend ( give) your kids money to make up the 20% is just wrong, This happened in Ireland in the early 2000's and that ended badly.

Keen to hear what I can do to stop it though....

[swarfie]

In Auckland:
There are less apples than apple buyers.
Apple buyers who used to go to Aussie to get there apples are staying here.
There are more apple buyers coming into NZ than leaving.
Lots of the overseas Apple buyers want to live in Auckland with all the other overseas apple buyers.
The Govt makes it so hard for the apple grower he grows less apples.
Apple prices go up.
Parents are now lending money to kids to buy apples.

Having to lend ( give) your kids money to make up the 20% is just wrong, This happened in Ireland in the early 2000's and that ended badly.

Keen to hear what I can do to stop it though....

Seems logical to me....Get out of the apple orchard?

[nodrog:Me]

In Auckland:
There are less apples than apple buyers.
Apple buyers who used to go to Aussie to get there apples are staying here.
There are more apple buyers coming into NZ than leaving.
Lots of the overseas Apple buyers want to live in Auckland with all the other overseas apple buyers.
The Govt makes it so hard for the apple grower he grows less apples.
Apple prices go up.
Parents are now lending money to kids to buy apples.

Having to lend ( give) your kids money to make up the 20% is just wrong, This happened in Ireland in the early 2000's and that ended badly.

Keen to hear what I can do to stop it though....

maybe people should forget about apples and maybe try coconuts, they can always plant an apple tree.

[swarfie]

maybe people should forget about apples and maybe try coconuts, they can always plant an apple tree.

I thought Dorkland already had enough coconuts.....

[Voltaire]

They say a house in Auckland is $700k, there was a 'do up' ex state one near me that the Agent said was going to be $720+

so 20% deposit: $140K

at 5.5% : $39600 PA interest

$761 per week.

Whats the average salary? $50k?

[sidecar bob]

In Auckland:
There are less apples than apple buyers.
Apple buyers who used to go to Aussie to get there apples are staying here.
There are more apple buyers coming into NZ than leaving.
Lots of the overseas Apple buyers want to live in Auckland with all the other overseas apple buyers.
The Govt makes it so hard for the apple grower he grows less apples.
Apple prices go up.
Parents are now lending money to kids to buy apples.

Having to lend ( give) your kids money to make up the 20% is just wrong, This happened in Ireland in the early 2000's and that ended badly.

Keen to hear what I can do to stop it though....

Now I see the problem, we are living in apples, not peaches.
I once read about this kid that lived in a giant peach & it worked for him.

[Oscar]

Banks don't actually create money, there is a thing called fractional reserve. It's not nearly as scary as the idiot who created this thread thinks.

Here's a way of looking at it:

1. You have $100,000 in savings that you put into the bank. On your balance sheet now you have a $100,000 cash asset (e.g. cash you have access to any time you want it)
2. The bank's balance sheet is now a $100,000 credit (liability), cash it owes you. It also has a $100,000 debit (asset), being cash in its own accounts.
3. Now I come into the bank and ask to borrow $50,000. No problem, because the bank has your $100k in cash sitting in its trading account. The bank lends me $50k, keeping the other $50k in its trading account as a "reserve". Governments mandate how much reserve the bank has to keep. The bank's balance sheet is now $100k liability (your deposit), $50k debit cash reserve, $50k debit loan assets.

The effect of this really is that the bank created money. Just because the bank lent me $50k doesn't affect your $100k deposit as far as you're concerned. So the system started with just $100k in it, and it now has $150k - your $100k plus my $50k. Banks don't literally have authority to create money - the government decides how much reserve banks need, and they can't just create money. Only the reserve bank can print money, and it does so by issuing debt to the government.

The system is simple enough to grasp, but complex enough to make it challenging to fully understand. Most people here have the brain capacity to understand this system if they chose to. The moron who started this thread lacks that brainpower, and the unfortunate side effect is that he ironically thinks he's smarter than everyone else.

You forgot the 50k liability on your balance sheet (the loan which you are repaying).
No money has been "created".

[yokel]

Why do the gummint want people renting?

tax is one reason

[Oscar]

tax is one reason

How so?
Rental properties tend to be geared heavily resulting in tax losses.

[nodrog:Me]

They say a house in Auckland is $700k, there was a 'do up' ex state one near me that the Agent said was going to be $720+

so 20% deposit: $140K

at 5.5% : $39600 PA interest

$761 per week.

Whats the average salary? $50k?

How much is a house in otara?