“Market failure” or failure to let the market work

[Viking]

“Market failure” or failure to let the market work

But what struck me was the claim that the Productivity Commission’s report “is unequivocal about the fact that we are dealing with market failure here”. Where, I wondered, was the evidence of the market being allowed to work? One might more accurately sum up the Auckland property market as the most probable outcome of two sets of government policies. Restrict the supply of land, and at the same time actively take steps to maintain rapid population growth, and what would one expect but high land prices? One might more accurately call it “policy success” (predictable outcome of deliberately chosen measures, if anyone had actually done the analysis) than “market failure”. But surely no politician was ever dumb, or venal, enough to have wished for the sorts of outcomes we’ve seen in Auckland in particular in recent decades?

http://croakingcassandra.com/2015/06/19/market-failure-or-failure-to-let-the-market-work/

[elguapo]

The 'market' is controlled from top to bottom by government, there isn't any market to actually work in any sensible meaning of the term.

[Eugene]

New Zealand has been ranked third in the Index of Economic Freedom for 2015.

New Zealand had moved up in the index due to improvements in management of government spending and monetary freedom.

(New Zealand's) economic development in the past few decades is built on the principles of free trade and an open market.

http://www.ibtimes.com.au/new-zealand-named-third-freest-economy-world-australia-ranked-fourth-1416193

[eri]

^

much much much

to the annoyance

of the very few

very vocal

hard lefties left in nz

they think

only people who think like them

are fit to control

the apportioning

of the pie

[elguapo]

New Zealand has been ranked third in the Index of Economic Freedom for 2015.

New Zealand had moved up in the index due to improvements in management of government spending and monetary freedom.

(New Zealand's) economic development in the past few decades is built on the principles of free trade and an open market.

http://www.ibtimes.com.au/new-zealan...fourth-1416193

If you polled the Auckland City Council planning department on what they think of the principles of economic freedom and the Heritage Foundation, what do you think the response would be? Afterall, freedom is all about people making their own decisions for their own reasons and the whole concept of city planning is to prevent this.

[Wayne]

freedom is all about people making their own decisions for their own reasons

And their reasons may be very selfish - that is the free market.
Land banking is a case in point - why release and use the land when you can make big gains just sitting on it.
Now if you were to rate the land on land value rather than capital value you get an incentive to use it as the holding costs go up.

[elguapo]

And their reasons may be very selfish - that is the free market.
Land banking is a case in point - why release and use the land when you can make big gains just sitting on it.
Now if you were to rate the land on land value rather than capital value you get an incentive to use it as the holding costs go up.

Of course, enlightened self-interest is the heart of freedom.

The only reason land banking is a 'thing' is the regulation makes it so hard to develop, why take the risk when you can profit just as much sitting on it? LVT would, to some extent, address that.

[Wayne]

Hamilton still has 'land value' rating - sitting on land can get costly with nearly full rates charged once re-zoned.
I believe it was done many moons ago to stop land banking.

[Maccachic]

How do they define land banking. What if you family lifestyle block has been built around and you have no desire to turn it into a development.

[Wayne]

How do they define land banking. What if you family lifestyle block has been built around and you have no desire to turn it into a development.

They don't define it.
If you large peice of land is now in Hamilton City you get rated.
If it is zoned residential you get rated residential based on the land value.
Obviously if a peice of land could support 10 sections with development you wouldn't get rated for 10 sections as it isn't developed.
But the rates would be a lot higher than if it was a peice of farm land outside the city.

[Damap]

Which eventually forces people to sell. Happens in Auckland all the time as areas urbanise.

[speights boy]

Charge tax based on the rezoning.
Rezoned, revalued, given a tax bill on the increase in value.
Exempted if sold within 3 months.

[Davo36]

Look just zone enough land and it will be worth less since lots of land can be developed for houses.

Simply Economics 101 Supply vs Demand

[speights boy]

Westpac economists say the moves to free-up Auckland's housing supply regulations are actually helping to drive land prices higher

http://www.interest.co.nz/property/7...s-are-actually

[Damap]

It will never work Davo. The truth is they can't build faster. Nobody knows how to scale development up and prices down so even if more land was available the devs would simply hold out for the best locations to maximise profit and all this cheap land would sit unsold until the devs needed it which will be years.

The BIG problem is we have no problem.