Property costs in NZ - the heart of evil

[Winston001]

We seem to have an environment where the money supply favours speculation, as opposed to favouring backing business people who will do something that is actually productive and usefully employs and rewards people to assist in such endeavour.

True but our current attitudes exist for a good reason. Up until the 1970s most people could buy a basic house if they wanted to. They could also start a business with some confidence. Money put away for savings generally kept its value.

Then in the 70s we experienced the first oil shock, we lost our export markets to the EEC, and inflation of our money supply ran wild. You'll recall annual inflation rates of 12 - 15% and mortgage interest (as Scummy said) of up to 22%. Businesses failed, savings shrank to nothing...but the one constant was that house prices boomed. Owning property was the only safe thing to do.

I have long advocated investing in business but after 30 years of watching (and suffering) NZ business failures (which includes finance companies wiping out our parents savings), I no longer trust business investment. By comparison, a house might lose value but it won't disappear unlike say, Feltex.

[Indiana_Jones]

Might take a look at one of these

http://www.welcomehomeloan.co.nz/

"It’s not what will stop you getting a home loan, but what will start you.

The problem with getting a normal home loan is, for many people, finding the deposit. The Welcome Home Loan removes that problem."

See I have the other problem, the deposit isn't really the issue so much as opposed to being able to service it.....

-Indy

[mashman]

Merv is onto it - Mashy, we didn't have so many 'things' back them - but the whiteware, TV's etc cost heaps (i.e. a mate scored an almost new VCR for 'only' $1,200 when they were $1,400 at the time) and in '84 I was paying 22% interest on my mortgage.

A 13" radial tyre was $33 when my off-season income was $60 a week.

And so it goes on...

I'm not saying he isn't on to it, but as he says, somewhere along the lines house ownership has become unaffordable for some reason where everything else seems to have fallen in price by comparison. That sort of cash doesn't just disappear does it, certainly not when it's a new phone every year (free with plan), or a new TV every year (hundy a month) etc... Of my friends grown kids I don't see them spending their cash on these items, yet they can't afford to get a house and they're by no means frivolous.

In all honesty I'd be more interested in what Indy's take would be in regards to what he thinks he's overspending on as he's the one unable to get a foot in the door.

[Indiana_Jones]

In all honesty I'd be more interested in what Indy's take would be in regards to what he thinks he's overspending on as he's the one unable to get a foot in the door.

lol my one vice for bleeding a bit cash has been my classic car, but in the grand scheme it hasn't been that much.

I don't by new phones every 6 months, I get a new one when the current one gives up the ghost and only get average ones etc. I've only just bought a TV last month actually (haven't had one for nearly two years!).

-Indy

[Winston001]

I'm no expert Mashy, we need to read the Productivity Commission's report to understand why houses cost so much.

http://www.productivity.govt.nz/site...Report_0_0.pdf

It appears to be a mix of expensive building materials, council charges, RMA costs, being a very small market in a long skinny set of islands, earthquakes, insulation, lots of red tape because of the leaky homes fiasco, the cost of building new streets and pipelines etc etc.

Plus a simple box is no longer considered an adequate home.

But as I understand it, even if you built a simple box the cost would be way out of proportion to the same house in the 1970s. That needs to change.

[Winston001]

On tv a few weeks ago a council chap from Rangiora? was showing temp housing built after the earthquake. He said it simply wasn't economic to build. Say wut??

FFS - NZs big dams were all built using working mens camps filled with huts plus temporary houses for families. That's the only reason Twizel exists today - and it was nearly demolished by NZED. Cromwell is twice its original size now as a result of the construction of the Clyde dam.

Quite why the government refuses to create housing in Christchurch is beyond me.

[Ocean1]

It appears to be a mix of expensive building materials, council charges, RMA costs, being a very small market in a long skinny set of islands, earthquakes, insulation, lots of red tape because of the leaky homes fiasco, the cost of building new streets and pipelines etc etc.

So, ask yourself how much of those building related costs are actually physically contributing to the building of a house. And how much of it would the average home buyer choose not to spend, had he the choice.

Example 1: Most NZ residential buildings are now required have double glazing. It's been available for decades, costing approximately $4.5k more than standard glazing, but very few people elected to choose it. Nonetheless, knowing full well that people didn't want to pay the extra, govt, (pushed by various lobby groups) decided that we had to pay for it. It's just 1% of the cost of a new home, but it's one of literally hundreds of building costs that didn't exist a decade or so ago.

Good mate of mine is a building inspector. Asked by a mutual friend why council compliance costs were so high, he explained that the council doesn't actually make anything from the service, so it can't be that expensive. It's a peculiarly bureaucratic mindset, he genuinely can’t see that the client might not agree that his services are worth the price. We don’t talk work.

Existing house prices are governed, more than anything else by the cost of building new. If you started dismantling any monopolies relating to the cost of house building you'd damn soon see a dramatic drop in house prices. Start with central and local govt, they contribute fuck all to the value of houses.

[flyingcrocodile46]

i didnt read it,only small peices and looked at some graphs...seems things changed somewhat about 2002

I know that both the Building Act and Resource management Act added shitloads of additional direct cost to building and development processes but my gut feel is that even more has been added at the front end through indirect costs/risks associated with the resource management Act.

The press often run articles about massive delays in processing building consents, but as usual they are clueless cunts and have got it wrong. The majority of applications are combination applications for resource and building consent together and I know for a fact that nearly all delays (well over 95%) are related solely to the resource consent, not the building consent.

The resource management act introduced the template for thousands of previously ignored compliance issues around environmental sustainability and correctness which have been over scrutinised and complicated by rampant enthusiasm for political correctness at the expense of common sense. It took some years for the template filling process but by the time the dust settled new subdivsions sprouting up all over the place had become a thing of the past.

People considering investments in land for development purposes now have to contend with (and financially plan for) protracted periods of time being chewed up by way of compliance requirements that see them spending hundreds of thousands of $ on consultants that write reports that are literally unreadable by laymen and paying back handers to local Iwi and the like, together with protracted legal battles costing further hundreds of thousand$. One unreasonable and active dissenter can cost a developer hundreds of thousand$. The risks outweigh the rewards unless they jack the prices up to cover all contingencies. Less people want to develop their land because of this and it results in less availability and premium prices.

Once you have paid your $250 to $500K for your section you then need to consider maximising your capital gain to recoup costs. You can't do that by building a budget home so instead you end up paying $1500 to $2500 per M2 to build a house that will return the best price 5 or 10 years down the track.

I believe we screwed the pooch when we introduced the Resource management and Building Acts circa 91 and have largely made them worse with each successive change to them.

It's all good and well to want to attempt to raise the standard of housing/living/health etc but not when it comes so highly priced that half the population can't even afford to get to the first rung on the ladder.

We need to start shooting people who promote political correctness. It just ain't right.

[flyingcrocodile46]

So, ask yourself how much of those building related costs are actually physically contributing to the building of a house. And how much of it would the average home buyer choose not to spend, had he the choice.

Example 1: Most NZ residential buildings are now required have double glazing. It's been available for decades, costing approximately $4.5k more than standard glazing, but very few people elected to choose it. Nonetheless, knowing full well that people didn't want to pay the extra, govt, (pushed by various lobby groups) decided that we had to pay for it. It's just 1% of the cost of a new home, but it's one of literally hundreds of building costs that didn't exist a decade or so ago.

Good mate of mine is a building inspector. Asked by a mutual friend why council compliance costs were so high, he explained that the council doesn't actually make anything from the service, so it can't be that expensive. It's a peculiarly bureaucratic mindset, he genuinely can’t see that the client might not agree that his services are worth the price. We don’t talk work.

Existing house prices are governed, more than anything else by the cost of building new. If you started dismantling any monopolies relating to the cost of house building you'd damn soon see a dramatic drop in house prices. Start with central and local govt, they contribute fuck all to the value of houses.

Good post. Monopolies fuck our pricing. Look at Gib board for example. Rikki Merchants started importing a substantially superior product back around the mid 90's and Winstones kept running to the commerce commission complaining about unsustainable pricing of the product, that our market was been dumped on to kill it off. The commerce commission introduced additional levies on at least three occassions (each followed by winstones undercutting of Rikki Merchants pricing). They were and are nothing more than lying sacks of shit who have (since the times of the business round table) duped the NZ govt and public into paying more for their products than they charged their overseas customers (incl delivery costs). We were bled to make these fat cunts even fatter.

[flyingcrocodile46]

Might take a look at one of these

http://www.welcomehomeloan.co.nz/

"It’s not what will stop you getting a home loan, but what will start you.

The problem with getting a normal home loan is, for many people, finding the deposit. The Welcome Home Loan removes that problem."

See I have the other problem, the deposit isn't really the issue so much as opposed to being able to service it.....

-Indy

A maximum of $350k? The target market for such schemes is incredibly small (particularly for housing under $350K in Akld). People earning less than 42.5 K pa but whom have managed to save 22.5k (half of an annual salary which isn't enough to live on even if you use all of it) just don't exist. You would have to have saved the money on a higher income then swapped your job for a low income one in order to qualify and even then, you wouldn't be able to make it if you were supporting children. It's a typical govt Claytons mortgage scheme for the poor. Still, just like lotto there may come a time when we hear of a rumour about someone who knows someone who actually managed to make it work for them.

[mashman]

lol my one vice for bleeding a bit cash has been my classic car, but in the grand scheme it hasn't been that much.

I don't by new phones every 6 months, I get a new one when the current one gives up the ghost and only get average ones etc. I've only just bought a TV last month actually (haven't had one for nearly two years!).

-Indy

Did you feel guilty?

I'm no expert Mashy, we need to read the Productivity Commission's report to understand why houses cost so much.

http://www.productivity.govt.nz/site...Report_0_0.pdf

It appears to be a mix of expensive building materials, council charges, RMA costs, being a very small market in a long skinny set of islands, earthquakes, insulation, lots of red tape because of the leaky homes fiasco, the cost of building new streets and pipelines etc etc.

Plus a simple box is no longer considered an adequate home.

But as I understand it, even if you built a simple box the cost would be way out of proportion to the same house in the 1970s. That needs to change.

I know what the problem is $$$$$$$$$$$ ... but some of that was interesting to read, albeit a bit high brow for a lowly pleb like myself, needless to say I cherry picked what looked interested .

I've no doubt that the cost of building materials and labour have a huge bearing on the cost of building the house (anything under $1500 per square being a substandard build in some way or another it seems), but the general cost of living seems to be the biggest thing that has hit us and our only debt is the mortgage, which oddly enough has become cheaper over the last 2-3 years, yet we aren't any financially better off. We frivolous by Indy's standards, but our lifestyle hasn't changed, it's just become more expensive. To the point where we're, well I am heh, thinking about trying something a wee bit different to lower the cost of the build. A large part of that cost saving will be to important certain items from overseas as the equivalent is almost 4 times as much over here as over there .

I guess the land prices really haven't helped, getting more expensive all the time and much smaller. I'll be moving further up the coast as it's getting too expensive to build where we are (230k+ for 600m2, and part of that is bank).

[Indiana_Jones]

A maximum of $350k? The target market for such schemes is incredibly small (particularly for housing under $350K in Akld). People earning less than 42.5 K pa but whom have managed to save 22.5k (half of an annual salary which isn't enough to live on even if you use all of it) just don't exist. You would have to have saved the money on a higher income then swapped your job for a low income one in order to qualify and even then, you wouldn't be able to make it if you were supporting children. It's a typical govt Claytons mortgage scheme for the poor. Still, just like lotto there may come a time when we hear of a rumour about someone who knows someone who actually managed to make it work for them.

Yea the scheme is a bit of a laugh really. As for saving the cash, it hasn't been done in a year and also that includes Kiwisaver and a little help from the in-laws.

Did you feel guilty?

Ever so slightly lol

-Indy

[Ocean1]

The commerce commission introduced additional levies on at least three occassions (each followed by winstones undercutting of Rikki Merchants pricing).

I wonder if you imported NZ made Gib from Perth, where it retails at about 40% less than here, and managed to undercut Winstone's local prices whether the Commerse Commission would admit they'd been had. You'd only have to do it long enough to get a few calls out to the media.

The CC are a fucking joke, monopolies siphon huge quantities of cash from the economy, mostly off shore, and the entity charged with protecting the economy from such underhanded bullshit sits gibbering in the corner.

[flyingcrocodile46]

I wonder if you imported NZ made Gib from Perth, where it retails at about 40% less than here, and managed to undercut Winstone's local prices whether the Commerse Commission would admit they'd been had. You'd only have to do it long enough to get a few calls out to the media.

The CC are a fucking joke, monopolies siphon huge quantities of cash from the economy, mostly off shore, and the entity charged with protecting the economy from such underhanded bullshit sits gibbering in the corner.

Pleased to see that some know the truth about at least one of the many conspiracies that we are victims of. That's right! this shit is a real life bonafide conspiracy carried out by a portion of the minority elite to legally steal money from individuals over a long period of time.

Real true in your face conspiracies like this are all over the place, but when we find them to be real we don't seem to recognise that they are in fact conspiracies, but rather choose to see them as isolated (rather than typical) incidents of morally questionable events or at most isolated incidents of fraud. I put it down to our fear to believe that what we see is only the iddy biddy tip of a very sick system of laws designed to take advantage of the sheeples dislike of confronting bad things

[Brian d marge]

firstly , you cant go talking about , "in my day " we ..... the world fundamentally changed , august 15th 1971 , when nixon started printing money , and again in the late 80 when the financial markets deregulated , 27 October 1986
and The American Dream Downpayment Act of 2003 which implemented many of Bush’s recommendations, and subprime lending, financed by mortgage securities, accelerated.
"The giant pool of money " , indian, chinese , japanese uradashis later on all looking for a good rate of return , had SOME influence on the NZ market ,
House prices shot up , incomes remained static .Yes a few are spending beyond their means , most aren’t ( I suspect)
Also the cost of the goods has dropped ( I think) , I mean a TV was an expensive item , now in terms of a weekly wage, cheap
Cars the same ( someone could clarify this , or check as I HAVE to do some work! )
As well as all the other " stealth taxes" , real income , HAS dropped since 1950

Dont even get me started on "earth ships and sustainable housing ...... thats a county councils nightmare !

why arent they built more !

Stephen