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Maimai reflections – RMA reform remote

  • June 14th, 2012

Bill English's gloom about our prospects suggests he may have lost some Cabinet battles to his wet colleagues. I was upbeat only 6 weeks ago. Not now, not after watching their inability to hold the line and sell obvious reforms.

In a maimai early in May my apple grower host wanted to know what "Wellington" was doing about the exchange rate that was killing his profit as an exporter. He was courteously trying to find something I could be good at, since I could not hit ducks  ( I don't really like cartwheeling them out of the sky anyway).

So I pontificated on the then recent QV report of a firming in property market. I said that Finance Minister Bill English would support Nick Smith's RMA reform programme , perhaps mentioning it in the Budget, because it is critical to the productivity growth that will alone end our debt dependence.

Alan Dormer's imminent report could propose to drag the dead Council hand off land for housing. But even if he does, I doubt the government will get there. The government will puncture Auckland's dopey cordon on development but inaction in Christchurch is telling.

In the result there was nothing in the Budget on land prices, and the latest QV report shows the bubble has lift-off. Judging by what I hear from people with money the greenest shoot in our stagnant economy will be a fresh  property boom but little increase in supply. The speculators' comfort is built on confidence that National's caution (in the vain hope of retaining poll support) will chime with the 'useful idiot' green hostility to developers. They see a guarantee of good exit prices for property with low interest rates long term, despite the gloomy Economist  insight that houses are passing out of reach of ordinary workers, especially on one income.

I doubt now that we'll see a real reform. The Reserve Bank has been warning the government for months that they could have to crucify the rest of the country to stop another borrowing boom in Auckland, but our leaders are dithering. I've heard bankers warning of the catastrophic consequences of a house price correction.

Hah! New Zealand is among the best placed country in world for a 'get it over now' pricking of the land bubble. Our banks are mainly overseas owned, and not guaranteed by the state in any form. They've funded this nonsense. They'll find ways to survive a correction.

I fear that our banker PM may be too readily influenced by banker warnings about the morale effects of a loss of housing value. So we'll resume exuberant borrowing (from overseas, through the banks) to fund our consentable property bubble. For a time we'll all feel more rich as we drive up the nominal value of land assets. 

 And so our cycle goes, a festering complicity of  the old who own, the left and the greens who are the planner's allies in locking out the kids who would like to have at least the housing standards of their parents.

Needed – a great upwards jolt in land supply (in Auckland most of all), producing a downward trajectory in new housing costs.

Method – protect land owners who are willing to intensify existing urban land use, from the veto of their neighbours. End planners powers to stop both densification, and subdivision that carries its own utility costs.   

Comments

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  • Colin
  • June 14th, 2012
  • 2:37 pm

Unfortunately your views are correct the housing situation in NZ is alarming it is a total disgrace. It is rapidly becoming one of the countries most important issues an underlying cause of major social problems along with related welfare costs.
The negative economic costs are massive I suspect a highly overvalued housing market is a significant contributor to our balance of payments problems via interest payments and the wealth effect.  A couple of months ago residential mortgage debt reached $180bn this massive debt in is a non productive dead weight on the economy. In NZ the housing stock on paper is worth over $600bn or around 300% of GDP. Historically in the US the housing stock is worth around 85% of GDP I believe currently in the US it is still just over 100% of GPD in spite of the slump. The sooner this bubble is lanced the better however with the average MP reputedly owning 2.4 houses change internally is unlikely. External events will end up doing it for us possibly sooner than many of us think.

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here are you instructions Stephen,
never give up being the hero for New Zealand's  recovery.
always speak

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