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  • Tinkering

    If a bare section of 400 square metres in Flat Bush sells for $800,000, no amount of tinkering with free school lunches and free period products will make any significant difference to the stress which very large numbers of New Zealand households are under – both those who are paying rent and those who are trying to service enormously large mortgages and who are terrified that interest rates might return to more normal levels.

    HOUSING STILL THE MAMMOTH IN THE ROOM (bassettbrashandhide.com)
    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

  • #2
    Originally posted by PC View Post
    If a bare section .. sells for $800,000, no amount of tinkering with free school lunches..... significant difference to the stress... households .. paying rent and those who are trying to service enormously large mortgages ...interest rates might return to more normal levels.

    HOUSING STILL THE MAMMOTH IN THE ROOM (bassettbrashandhide.com)
    Did you have a plan?
    A short term, or long term plan?

    What would you change, and how much and how fast.

    (Or what, "Quality, Quantity and Rate", (as reason considers any such thing).

    Comment


    • #3
      Interesting article and some good comments as well, this one being one;

      Originally posted by brentonbeach

      The problem with this Government is that they are trying to have their cake and eat it, which is contradictory and may undo them.

      Firstly, they want to keep their core base of traditional lower socio-economic constituents with sops that make little real difference to their condition, while maintaining their new Covid voters in the Middle Class by making them feel prosperous with rising house prices. Of course rising house prices are not a creation of real wealth but only a rise in the price of an asset class that does not produce anything meaningful.

      Secondly, the rising house prices are in the interests of their other constituency, the highly educated snobbish so-called chardonnay Socialists who inhabit the Party hierarchy and Caucus. They own houses and also want the prices to rise and really don't give a toss about the poor and their plight. It is for these that Cindy speaks when she says that she wants house prices to rise, but more slowly.

      And lastly, is the shear incompetence of this Government. Cindy refused to adopt the Christchurch solution to freeing up land offered by the Leader of the Opposition, and Robertson ignored MBIE advice that pumping extra liquidity into the economy would lead to drastic house price increases. This Government has no idea what it is doing and has no real idea on how to fix it - other than bromides attacking landlords and investors.

      Why is this rise in house prices occurring? To my mind it is because there are no real alternative investment vehicles in NZ that are relatively safe and offer an adequate return on money. Hence property is the only alternative, and therefore the excess money pumped into the economy, in the absence of alternatives, naturally flow into housing. If private firms do not provide these alternative vehicles then it is incumbent on the Government to do so - until picked up by the market. This has been done in other countries - such as Germany, so why not here?

      Comment


      • #4




        That's a nice article.

        Quite a lot of nice ideas. Poor critical thinking by the author though. I won't go through and pick all the holes it it. Lets just take the last point for example.

        "Why is this rise in house prices occurring? - because there are no real alternative investment vehicles in NZ".

        This is true. but it's a possible solution, not the immediate cause.

        The immediate cause is the QE.
        Alternative destinations for the QE money, would stop it all pooling in the Real Estate sector.

        PS
        I just have to pick one last hole in the main premise.

        "The problem with this Government is that they are trying to have their cake and eat it, which is contradictory"

        Yes you can keep your cake and eat it too.
        How?
        Just eat a little bit of the cake.
        Put the rest in the fridge till later.
        Avoid diabetes and tooth decay, heart disease.
        Avoid all the ill's that come with overindulgence.
        Still get the sweet taste, while it's at it sweetest, that first bite.

        Hint, hint, people.

        Est modus in rebus
        Last edited by McDuck; 23-02-2021, 09:09 AM.

        Comment


        • #5
          Originally posted by McDuck View Post
          [...]

          The immediate cause is the QE.
          Alternative destinations for the QE money, would stop it all pooling in the Real Estate sector. [...]

          OK, but was that not covered by "and Robertson ignored MBIE advice that pumping extra liquidity into the economy would lead to drastic house price increases. This Government has no idea what it is doing and has no real idea on how to fix it - other than bromides attacking landlords and investors."?

          Comment


          • #6


            I saw that.
            That's just not right.
            The Reserve Bank is an independent entity.
            They are totally responsible for the price of debt, and therefore the price of real-estate.

            I recall the Deputy Prime Minister going to the Reserve Bank late last year, and asking them to back off accelerator a little.
            A request that was snubbed.

            One other thing.

            Some say the MBIE are very very guilty in the supply/demand equation.
            Being involved in immigration.
            (They are just letting anyone in, without considering the effect on housing).
            Some would also say that they are guilty of short sited selfish action, at the expense of the harmony of the whole economic picture.
            And that they had best just button it up, if they know what's good for them.

            While they arguably have stuffed the physical side of the equation,( Ie, number people vs number of houses).

            Many say that the price model has been stuffed by the RESERVE BANK alone.
            Last edited by McDuck; 23-02-2021, 05:12 PM.

            Comment


            • #7
              Hmm. Yes and No.

              That bare section of 400 square metres in Flat Bush which has accreted to $800k has done so for a cocktail of reasons – not just UMP / LSAP / money printing.

              You are starting to get warmer by recognising the contribution of other determinants to the cocktail such as immigration; supply and demand (number of people vs. number of houses); yes that balance is vitally important as to are replacement costs.

              Moreover Robertson's letter to the Reserve bank was a PR stunt. It’s a case of pass the buck (pun intended). Reserve Bank repeatedly warns Government money printing would lead to house price inflation. Subsequently, Government asks Reserve Bank to rein in house price inflation.
              Last edited by Sanya; 24-02-2021, 02:40 AM.

              Comment


              • #8


                Originally posted by Sanya View Post
                That bare section ... for a cocktail of reasons ...
                Agree.
                What do you think is in that cocktail?
                Could you list the ingredients in order of effect?
                And what do you think is the most potent ingredient to price.
                In a real cocktail it's the Alcohol.
                (and like QE, it makes people do stupid things).

                Originally posted by Sanya View Post
                You are starting to get warmer...
                Why thank you.
                I would be very interested in getting closer to identifying the shape of your cognitive model for housing price.
                It may not align with mine, but it's still interesting to me.
                If the final shape of your model turns out to be a bunch of disconnected, stolen ideas, without quantification or relationship, built like a nest around a core of self interests,
                I'm going to be very disappointed.

                Originally posted by Sanya View Post
                Moreover Robertson's letter to the Reserve bank was a PR stunt. It’s a case of pass the buck (pun intended). Reserve Bank repeatedly warns Government money printing would lead to house price inflation. Subsequently, Government asks Reserve Bank to rein in house price inflation.
                Yes, agree, in popular politics, perception is everything.
                Where can I find evidence that the Reserve Bank or MBIE have warned the govt about 20% house price inflation being the natural outcome of QE?
                If the RESERVE BANK are in control of the money supply, why did they simply not drop it back a little?

                You have the floor.
                Last edited by McDuck; 24-02-2021, 05:58 AM.

                Comment


                • #9
                  Before we discuss order of effect do we have agreement on supply / demand side determinants?

                  Below is a possible list. Do you agree / disagree, wish to add to it? The floor is yielded back to you.


                  HOUSING SUPPLY
                  Land scarcity & costs
                  Regulatory - RMA / planning and land use
                  Regulatory – Building regulations
                  Availability of building materials
                  Availability of building labour
                  Construction costs
                  Cost & availability of housing related infrastructure
                  Taxes & levies on new developments

                  HOUSING DEMAND
                  Interest rates
                  Availability of money & finance
                  Number of households
                  Immigration and organic population growth
                  Consumer confidence & expectation of gain
                  Economic growth
                  Real incomes & employment
                  Returns from non-housing investments (i.e. bonds, bank deposits, shares etc
                  Housing affordability
                  Policy interventions (Tax, LVR, DTI, Gov. assistance / subsidies, social renting etc)
                  Housing technology, design and preferences
                  Speculative demand

                  Comment


                  • #10
                    That looks good.

                    There maybe more, but you seem to have the main ones.

                    So, for the first one, could you add a "class layer" to simplify it?

                    Say: Constraints on supply =

                    1. Land.
                    +
                    2. Permission.
                    +
                    3. connection to Infrastructure.
                    +
                    4. Taxes and fees.
                    +
                    5. Materials.
                    +
                    6. Money
                    +
                    7. Time
                    +
                    8 Skill.
                    +
                    9. Number of life forms engaged in the activity.
                    or Number of machines standing in for living things.
                    ( Muscle machines like diggers, and thinking machines like computers)
                    +
                    10 Will, (desire, motivation, spirit)
                    +.
                    11. Harmonious coordination between all the above parts.
                    +
                    12 Luck. (Not getting hit by a meteorite, tidal wav, pandemic, earthquake or revolution) AKA the wrath of the Gods.
                    Yes, that's why there are dice in MONOPOLY.
                    +
                    13 Congestion or competition, ( Sibling entities trying to do the same thing as above).

                    That's quite generic, could it be applied to any human activity.?
                    Possibly any living thing.
                    Except with a plant or bacteria say, you would replace money with energy, like ATP or Sugar.
                    * The permission and taxes only come into play when it's a social creature.-
                    so a pack animal.
                    Although, even with plants, vined species won't attach on to a taken spot.
                    Last edited by McDuck; 25-02-2021, 08:56 AM.

                    Comment


                    • #11
                      In its latest Monetary Policy Statement the Reserve Bank is forecasting a house price inflation peak of 22.4% in June this year before falling to 10.2% by the end of the year | interest.co.nz

                      22.4%!!!!
                      Gotta LOVE this Government.
                      The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

                      Comment

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