2014 New Zealand Election thread

[Flem274*]

Good points in there, but because our main issue is under supply of houses which makes prices rise and not a YOLO attitude to handing out home loans which caused the GFC, aren't we quite a different case? We have demand for housing and interested rates can be altered from floating to fixed, and when interest rates go up buyers will go for fixed rates.

The author compares it directly to the GFC but the GFC was caused by giving people who couldn't really afford them a home loan and banks, companies and people fluffing around with mythical intangible assets. Houses are tangible and in demand assets here and the lending criteria is becoming stricter and stricter. I'm not sure how that makes our risk a similar chain of events to the US?

Also his statistics are skewed by including major cities and everywhere else on the same house price graph when there is regional variation, not to mention the selective use of when the graphs end (January 2013 was quite a while ago).

Lastly

I am an analyst and anti-economic bubble activist who is currently warning about growing bubbles in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more. I believe that the popping of these bubbles will cause the next financial crisis.

Did the ideology or the data come first?

 

[hendrix]

yeah that's a largely rubbish article.

The housing bubble popping will be a good thing for NZ's economy, not a bad thing. Of course, he could be meaning bad for foreign investors in the housing market, but I don't particularly care about that.

 

[HeathDavisSpeed]

Haha. In the long term, maybe. But if the housing bubble pops and a decent part of the population gets stuck with negative equity in a rising mortgage rates environment, then all hell will break loose in the short term. Happened in early 90s UK, albeit the interest rates were much, much higher.

 

[hendrix]

It would just mean that people who'd prospective purchased with the intention of flipping wouldn't be able to do so; it wouldn't effect actual home owners in any direct way. And frankly, house prospecting does nothing good for the economy anyway.

 

[BeeGee]

It would just mean that people who'd prospective purchased with the intention of flipping wouldn't be able to do so; it wouldn't effect actual home owners in any direct way. And frankly, house prospecting does nothing good for the economy anyway.

Their mortgage rate will go up and their house value will go down.

 

[hendrix]

by home owners I mean people not intending to sell.

Their mortgage rate will not go up.

 

[HeathDavisSpeed]

by home owners I mean people not intending to sell..

So, if you need to relocate for work, you'll be forced to retain possession of your current home because the sales price no longer reflects what you pay for it. There's a lot of healthy reasons for trade in homes, property speculation is not the only reason for housing transactions. If there was a way to dull down property speculation without impacting on a reasonable trade in homes (CGT being one example) then perhaps we should do that rather than being happy for a lot of people to be locked into a debt which exceeds the value of their home.

 

[hendrix]

So, if you need to relocate for work, you'll be forced to retain possession of your current home because the sales price no longer reflects what you pay for it. There's a lot of healthy reasons for trade in homes, property speculation is not the only reason for housing transactions. If there was a way to dull down property speculation without impacting on a reasonable trade in homes (CGT being one example) then perhaps we should do that rather than being happy for a lot of people to be locked into a debt which exceeds the value of their home.

In such a case the value of their home was clearly over-inflated. I'm not saying that house prices should be made to artificially go below their true value (which I'll admit is not fixed and a somewhat arbitrary figure), but it's an inevitability that the popping of a bubble results in some people having over-paid for their houses.

They made the decision to buy based on what they could afford. The value was relative to them. If they can't sell that's the reality of buying something that's overvalued.

 

[hendrix]

Basically it comes down to this:

A) Protect the profit-making ability of someone who's bought a house in an overvalued market.
OR B) Protect the ability of people to buy their own house.

You must always protect the consumer in this scenario. It's not a right to always make a profit on an investment.

 

[Flem274*]

In such a case the value of their home was clearly over-inflated. I'm not saying that house prices should be made to artificially go below their true value (which I'll admit is not fixed and a somewhat arbitrary figure), but it's an inevitability that the popping of a bubble results in some people having over-paid for their houses.

They made the decision to buy based on what they could afford. The value was relative to them. If they can't sell that's the reality of buying something that's overvalued.

Sorry but I find the government intervening to pop a bubble knowing it will hurt ordinary people who were buyers in the wrong place at the wrong time completely unethical.

This is why I support homestart. I'd rather chip in with some cash for those at the bottom rather than play God with the housing market.

Question for economist types - is the difference between a bubble and a real inflation/economic boom/new status quo only ever known with 20/20 hindsight?

 

[Flem274*]

Basically it comes down to this:

A) Protect the profit-making ability of someone who's bought a house in an overvalued market.
OR B) Protect the ability of people to buy their own house.

You must always protect the consumer in this scenario. It's not a right to always make a profit on an investment.

You can do both though with a government handout like homestart. Whether it's enough of a handout to make a difference is up for debate, but you can protect the consumer without screwing over everyone else.

 

[hendrix]

Sorry but I find the government intervening to pop a bubble knowing it will hurt ordinary people who were buyers in the wrong place at the wrong time completely unethical.

No it's frankly not. They screwed over themselves. You don't get a guarantee on an investment. It's extremely dangerous to remove responsibility from individuals.

You can do both though with a government handout like homestart. Whether it's enough of a handout to make a difference is up for debate, but you can protect the consumer without screwing over everyone else.

No you can't, and homestart is a ludicrous plan that doesn't address anything.

The problem is simple; the tax system is overvaluing the housing market. Giving people more money to buy houses does not address this in any way.

 

[Flem274*]

No it's frankly not. They screwed over themselves. You don't get a guarantee on an investment. It's extremely dangerous to remove responsibility from individuals.



No you can't, and homestart is a ludicrous plan that doesn't address anything.

The problem is simple; the tax system is overvaluing the housing market. Giving people more money to buy houses does not address this in any way.

If the government comes in and influences the housing market so that prices decrease then by definition that is government intervention and why should the buyer of a family home who all of a sudden needs to relocate for work (to steal Heath's example) be expected to cop the government influencing the value of their property on the chin? It's unethical.

Is the tax system overvaluing the housing market or is supply? All sections of the political spectrum acknowledge supply is limited and a major reason or the major reason (dependent on your opinion) of price increases.

Giving people money for buying houses helps people afford houses. I don't know how to explain this any further without being a ****. Whether you think it's enough money or the right way to go about it is beside the point. Money pays for houses and a free handout means more money for buying a house.

 

[HeathDavisSpeed]

In such a case the value of their home was clearly over-inflated. I'm not saying that house prices should be made to artificially go below their true value (which I'll admit is not fixed and a somewhat arbitrary figure), but it's an inevitability that the popping of a bubble results in some people having over-paid for their houses.

They made the decision to buy based on what they could afford. The value was relative to them. If they can't sell that's the reality of buying something that's overvalued.

What is the appropriate value? The appropriate value is a house is what a broad section of the market would pay for it in an open sales environment. That figure can move up as well as down. Houses can be appropriately valued today but be inappropriately valued tomorrow due to changes in market conditions. How were people in the UK expected to predict the stock market crash of the late 80s or the fact that house prices would crash substantially. If you can predict that ****, then you you're George Soros and I claim my 5 billion quid.

 

[NZTailender]

The problem is we've greatly overvalued property as a matter of culture. I'm grabbing my tinfoil hat, but I find the whole 'everyone must own a house' dream to be such a 1950s kind of thing, with the hills hoist and perfectly manicured lawn, Then there's the location factor, with being in a better/gentrified neighbourhood, in the centre of a city or overlooking a great view, etc, driving the value of said property higher because it's more in demand. I understand how this works and that it's in part, a natural thing, but I think it's gone too far in the other direction. People want ALL THE THINGS and don't really plan their finances in a responsible way. I cringe everytime I see or hear the 'the bank said no but [name of dodgy loan shark companies withheld as to not advertise their scum] said yes!'. It's exacerbated by mod con consumer goods & vehicles. There's nothing wrong in wanting your own home, a big screen tv, a car for each parent, etc, but people need to learn that getting everything on credit is a really bad idea.

Not everyone is in the same boat, but like a lot of modern life problems, it's all about education. My parents bought a house in Australia in the late 80s with a 17% interest rate, and paid it off relatively quickly. How? Simple financial sensibility. Providing incentives or assistance in buying homes for people who need them is a good thing, the problem is making sure they try and pay it off before they decide to make ridiculous purchases.

It reminds me of our neighbours family back in Australia. One of their children (in their 20s) started a family and didn't earn much, lived in a state home, yet somehow managed to secure a loan for a fully sik Holden Commodore tricked out with spoiler etc, as well as a car for his wife. They were repo'd a few years later. Lesson: people are morons and we're not telling them that they're morons. We give them loans then tell them they're morons when they fail to pay us back.

 

[Flem274*]

So the Greens have prevented National from being able to govern alone (not that it was ever their intention).

Pity the extra seat they nabbed has gone to a moron. Steffan Browning is the complete bundle - he's even anti-vaccination.

 

[hendrix]

yeah he's the exact type of idiot the greens don't need.

 

[wellAlbidarned]

i wish the we could have a new-gen pro-science greens with all the same socialist and environmental values but without weirdos

 

[HeathDavisSpeed]

So the Greens have prevented National from being able to govern alone (not that it was ever their intention).

It has prevented no such thing. That ACT goon is hardly going to vote against the mothership, is he. It's removed the Nats majority in only the strictest meaning of the term. Even if Dunne and Flavell vote against things (e.g. RMA reform) it'll still go through as Seymour is bound to vote for it. If the Nats hadn't rorted Epsom to gain the overhang, then they wouldn't have an effective majority.

 

[Flem274*]

i wish the we could have a new-gen pro-science greens with all the same socialist and environmental values but without weirdos

Hmm nah I'd be much more likely to get behind a centrist or just left of centre Green Party. In New Zealand that would mean retaining the everyone gets a fair go and an equal start (free childhood and secondary state education, public healthcare etc all the things Act hate) but without going as far as the current incarnation does. But that's just me. As I said on their FB wall, they have a choice between setting themselves up as the main opposition or gritting their teeth and returng to environmentalism only and getting off the opposition benches and into power. At the moment they have no influence despite strong grass roots support.

But then you could argue all the New Zealand political parties except for Act and Conservative are socialist by US standards, and possibly to the left of most Australian parties as well (Stop The Boats automatically puts the Liberals more in Winston rather than National territory) but I don't know enough yet about Aussie politics to comment. I'm still learning about them through Dan, Spark, Burgey, Jono, Top Cat, Cribb, Spikey and Dermo posts which is probably an unorthodox way to do it.