The neoliberal NZ experiment has spawned a baby boomer subdivided middle class whose only illusion of wealth is the increasing property valuations generated by unfettered over seas buyers and slum lord property speculators.
Bernard Hickey gives a damning perspective…
Imagine what a political party designed to represent New Zealand’s young renters would do if it got into power in Auckland or Wellington.
Let’s call it the Generation Rent Party.
Wooing the young and disenfranchised vote certainly won United States President Barack Obama his second term, but it was clear after last year’s election that no one has managed it in New Zealand.
Let’s imagine if they did. What policies would they pursue?
First, they would try to make housing affordable again for first-home buyers who want to start a family before they turn 40 without having to beg parents and grandparents for money.
Or they would at least try to make rents consume less than 30 per cent of their disposable income.
House prices in Auckland are rising again at double-digit rates and rent inflation is accelerating into the higher single digits.
The median house price in Manukau was 25 per cent higher in January than a year ago.
Record high net migration, heavy buying by property investors pumped up with interest-only mortgages and unfettered buying by non-residents has combined with chronic under-supply to pump up prices.
…those forced to pay for their own education and their own retirement are finding it near impossible to enter a housing market dominated by those who haven’t. Even the Reserve Bank is realising greedy NZ property speculators are the problem…
The Reserve Bank is looking at tightening up on how much banks can lend to residential landlords.
The central bank has confirmed it is consulting on new rules for residential property investors, opening the door to new requirements for owners of rental properties.
After months of of speculation, the Reserve Bank said it was looking at creating a “new asset class treatment for mortgage loans to residential property investors” within its capital adequacy requirements.
The issue of residential property is increasingly political, with critics claiming the loan to value ratios established by the bank last year may have made it harder for first time buyers to get on the property ladder, but not for those with a portfolio of rental properties.
As Key looks to test 5000 state tenants to throw out onto the streets, the reality is we need less market forces and more direct State investment.
20 000 new state homes with new loan schemes to allow beneficiaries to buy their state houses alongside a capital gains tax, land tax and property speculators tax is what is needed, not slum lords and overseas speculators. 4 bedroom Apartment buildings for first time home owners in central cities would allow Gen X and Gen Y entry into the property market and a vast new building program would connect our forestry industry to training schemes and work programs.
The current plan to gut the RMA so that 500 year old tress can be cut down for more urban sprawl subdivisions rather than central city and central suburb intensification rely on cheap immigration to keep pushing prices up. This is bubble building economics designed for short term political gain at long term social damage.
We require new law cementing in long term tenancies with rent controls and the promotion of ‘ethical landlords’, people who refuse to squeeze every last drop of money out of their tenants for needless greed.
Our social inequality demands solutions, renters rights and affordable housing is part of that solution.
Be careful what you advocate. At present there is a shortage of Landlords, this is because many people are getting out of this industry as there is just too much negative sentiments about landlords. This is carefully manufactured by MSM as landlords are generally just mums and dads not corporations. (hence fair target to undermine as not donating on mass to the National party).
The capital gains tax which Labour fell for thinking there was wide spread support for it, failed, come election time. Remember all the articles in MSM about how this was needed to control investors! Nothing about building material monopolies or how new houses being built are $850k+ in Auckland, well out of both 1st home buyers reach.
Bernard Hickey should be held to account, for years he told young NZ do not buy a property as prices are about to crash. Those youngsters taking his advice are now priced out of the market as prices have risen strongly, now Hickey is advocating more measures on landlords, again as there is a huge shortage of landlords advocating more constraints will not exactly help the situation and make it worse. Even the salvation army is not that keen to be a landlord.
Yes agree, some terrible landlords out there, but equally there are terrible tenants too. Having your place trashed, turned into a P lab and rent unpaid with very little really you can do about it, can be a risk too much for many people.
You can get situations with rent controls like in Sweden where it is very hard to get a place to rent. No one wants to be a landlord or rent out places there. Those with a flat just sublet they can’t afford to leave it because they will never be able to get another one so cheap.
The price of rents is driven by the price of houses and the price of maintaining a house and demand. Building materials, council consents, insurance, rates etc. All these have risen very strongly. Likewise as houses are upgraded the rents start to rise. There is a catch 22, situation. Like with the salvation army to bring state houses up to modern standards can mean $10,000+ in investment. What do you do, put the rent up? People just can’t afford it.
Housing supply’s main problem is overseas and ex pat investors coming back and buying houses. There are very little constraints for overseas investors many of whom chose not to rent investments out, but just leave them empty. I won’t even mention the money laundering via property in this country. Nothing to see here, move on…
Anyway houses are a whipping boy, and slight of hand with National. Talking about changing the RMA to create affordable housing and opening up green field sites to development. All that will do is to further enrich their landholding mates, and reduce building amenity standards and increase traffic flows.
Great then we can build more roads without public transport!
You make a lot of great points. Bashing landlords is not a solution to the problem of a lack of affordable housing.
Also I wonder if the same thing is happening in Auckland, as is happening in London: http://www.dailymail.co.uk/news/article-2978719/How-London-safe-haven-money-laundering-Thousands-homes-bought-capital-anonymously-offshore-companies-hide-corrupt-money.html
No wonder National doesn’t want to have a proper catalogue of who from where is buying what in Auckland.
In most regions the housing market is stagnant.
Yes we built our flats in 1980s to supplement our income in the east coast area.
Now retired we found we are sliding backwards and have no cash flow only a pension so many 70 yr. olds are also suffering outside Auckland Christchurch Queenstown etc.’
The NatZ loss of taxable depreciation on property hit us all hard as this was our cushion against us all being forced to keep our rent low during this current recession/depression.
Auckland is doing good for investors but the rest of us are suffering.
You raise some valid points, yes, but re the Capital Gains Tax, it was simply rubbished by some key media reporters and commenters, and David Cunliffe stuffed up with not being able to deliver clear legal guidelines, and not being able to give some figures. That alone gave the public a bad impression, as Labour had not done their homework and study of CGT and how it could pragmatically and effectively introduced.
So that does not mean the CGT has “failed”, it was never given a chance here in New Zealand.
The problems are manifold, they are a duopoly or oligopoly of building supply traders, neglect of construction over many years, qualified builders having left the country, leading to a shortage of qualified workers, some uncertainties in regulations and planning (Auckland Proposed Unitary Plan in process, with much zoning still up for final discussions), and above all, unrestrained immigration, leading to high demand, and also no significant restrictions on offshore buyers.
Indeed the housing situation is in the crisis regions like Auckland and Christchurch getting so critical, only state intervention will resolve the challenges and issues. Hence Martyn is right, a large scale construction plan to build more social housing, to offer also rent to buy homes for those who can save and pay it off, and large scale projects completed by engaged industry, under strict agreements to deliver and perform, will solve the whole mess we now have.
The regions face different problems, and as with the Loan to Ration Lending restrictions, we can see the limitations of the Reserve Bank intervening.
As immediate action government should introduce a house ownership register for the whole country, to see who owns it and is a local or not a citizen or resident, they should stop non resident overseas purchases full stop, and also cap immigration, and the pressure will get less.
Having “housing” as an investment option is not ideal, as Bernard Hickey and others have frequently stated, especially as it means Kiwis go up to their eyeballs into debt and pay off for decades, with high interest, just to afford a roof over the head, all to foreign owned banks.
At the same time there is often insufficient in funds for other things to invest in, and that also hampers local business and development. All this has been discussed for years, but most carry on as usual, go into debt and waste tens of thousands in high interest (to come back to bite eventually), and live off toast and spread and little else.
We need to start somewhere, first a change of government is needed, as the present lot want nothing of what I suggested, they love to cater for their private investor, speculator and developer supporters, also the large corporate banks, all keen to make money, at the expense of the rest.
If you really want to see the dark side of humanity become a land lord, man there are some scum tenants out there.
About 40% of people we have come in contact with over the years are utter bastards.
One guy owed us about $700.00 on a 125 pw rental and he took all the light bulbs when he left. Several have moved in via a social welfare deposit, and that has been all the rent we have had out of them, always leaving unpaid power bills.
This from a ‘good’ land lord)
Well, there are some bad tenants, I admit, but they often are the small minority, as far as I can see it. Some are from poor socio economic backgrounds and know nothing else to struggle from day to day. They may have been treated like crap at jobs they had, by other landlords they had, yes, they may have grown up feeling treated as such all their lives, so they have lost all respect.
But the reality is also, when a tenant leaves with unpaid rent, with damages not repaired, with other issues, that will leave them less options to move elsewhere, as they will not get a good reference, which many landlords like to get.
So they end up with Housing NZ, and also there they will have to live up to standards, and show respect to neighbours and the property they live in. I am sure you are simply one who has had the misfortune to have had bad tenants, but now tend to put too many into the bad drawer, where only few fit in.
New Zealand tenancy law is not the worst, but not the best either. It has flaws and generally tends to favour the landlord, but the Tenancy Tribunal is at least an institution keeping a check on this.
Having informed myself about tenancy law in a few places, I have come across German tenancy law as being the better kind of law there is, actually somewhat favouring tenants, which should not surprise, given they have a high number of renters and tend to have long term tenancy agreements.
Perhaps New Zealand lawmakers can learn something from them, if they want to encourage people to rent. What we have at present is more and more New Zealanders FORCED into renting, simply because house and even apartment prices in places like Auckland and Christchurch (a large part of the market here) have become unaffordable for most living there.
With more intensification being planned, and likely more renting to occur in future here in NZ, we need reforms, for sure, and have a look at the following, to just get a first glance of what things look like in Germany:
http://www.expatica.com/de/housing/Renting-a-German-property_103803.html
“Tenancy agreement
Minimum tenancies can be long in Germany where it’s not uncommon for a landlord to request an initial lease period of two years. Make sure the lease agreement includes all the relevant details, and that you understand the conditions for breaking the agreement before the end of the initial contract period.
Most tenancies are unlimited, which means that once the tenancy has begun, the landlord can only end it by evicting the tenant through the courts or giving at least three months’ notice. This notice can be contested by the tenant, and will usually only be accepted where the landlord has a good reason for the notice being given. Likewise, rent increases should be justified, unless they follow a scheme laid down in the tenancy agreement.”
Also this:
http://en.wikipedia.org/wiki/Rent_regulation
And property “speculators” and “investors” do not like German tenancy law, as the following website post states, guess why:
http://www.globalpropertyguide.com/Europe/Germany/Landlord-and-Tenant
It is common in Germany that tenants turn their flats into really nice homes, as they have incentives to renovate, which they must do anyway, every so many years, by law. But as there is security, there is a motivation to do so.
Also are rents in Germany a fair bit lower than in the large cities here, and that makes life as a tenant also rather affordable and more pleasant, with money being left to spend on other things, than just falling into the pockets of landlords.
This is not the case in New Zealand, hence there are many run down homes that are let to renters. A shame really, but New Zealand has a lot to learn. The landlords will mostly not want a bar of it, and as the National Party and ACT Party are their favoured parties, now still in government, we can only dream of better law and conditions to come, one day, hopefully.
As long as the property owners, speculators and “investors” run the show here, offering also funds to National Party and ACT, and lubricating the useless media with “favours” here and there, a change of government will not be easily achieved. But the challenge is there, it must be taken, and progress may one day come.
I personally still support a capital gains tax, any kind of investment except property that returns a gain on your capital is taxed as income. Why should property be any different. “Mums and Dads” pay tax on any savings they might be lucky enough to have.
Property maintenance costs can be offset against tax on rental property if you register your property business for gst.
Sorting our the rip off by building materials/ supplies corporates is another matter and nothing to do with Cap gains tax. But it needs sorting out as well.
For the purpose of providing family stability, a sense of belonging and community, a family deserves the right and opportunity to buy a home. Bring back family benefit, cheap loans (chop down the odd Kauri tree if necessary) but supporting families is a must
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