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German savings – not wasted in state imposed housing bubbles

  • January 27th, 2015

A report placing responsibility for the US sub-prime mortgage crisis (and thence the GFC) squarely on the regulators,  coincides with intriguing dinner table conversation with three young German friends for whom we’ve been a base for exploring New Zealand this summer.

I asked how they felt about being expected to fund Greek fecklessness and corruption? Where would young Germans now put their famed savings, with the EU’s money printing threatening them with negative interest rates? Would it go instead into more lavish housing and consumption ‘squandering’?

They say there is not much discussion, even in social media, about the financial situation. Most attention is on the challenge to the orthodox view that it is improper to express anxiety about Islam. And patiently they explained  again (because we’ve explored this curiousity several times) that few have expectation or desire to buy a home “because it is bad investment”.

Pressed they agree “We do not expect to sell houses for more than they cost us. Building a house and keeping it in repair will mostly cost more than you can sell it for. So why would we save that way?”

They tell us that in rural areas people customarily own their own homes because they own land anyway. I ask how it is that population growth has not produced capital gains for housing renters. They see it as simple “Because people will build more apartments, and we like to live that way. There are social housing providers which provide inexpensive apartments, but also there are companies. Where there are one-story places will become multi-floor apartments”.

They are young teacher and psychology graduates, so cannot tell me how the notorious German penchant for regulation has managed to avoid regulating building intensification and land supply into housing shortages and booms and busts. But their account chimes well with Oliver Hartwich’s urging that we should examine and compare the incentives on local government in Germany, and here.

German local governments automatically share the benefits of growth in local economies. That counterbalances Nimbyism.  Not such natural predator keeps in check the RMA powered Knights of Ni nicely identified by Bernard Hickey.

Instead of wasting our time with amalgamation proposals a useful Local Government Commission (and badly orchestrated “Better [X, Y, Z]” campaigners) should be pressing for effective local government reforms.


  • Mark
  • January 28th, 2015
  • 7:09 am

NZ Councils are “rewarded” via Development Contributions from growth. They have used them as a large and unaccountable funding stream for many years. Projects identified for “growth” are often not delivered, and also hide huge organisational overhead recoveries.

The continuing, unsubstantiated attack on “NIMBY’s” is taking the focus away from Council restrictions and social engineering attempts re transport and anti greenfields.

It pays to remember that a builder/developer following the District Plan rules is a “permitted” activity, and requires no consent, and the RMA doesn’t even apply. Key rules of height to boundary, lot size are well established, and are either basic property right rules, eg not being shaded by a building, or in-fill infrastructure issues.

It is when additional floors are applied for etc that a few consents are notified, that neighbours can have input – in my experience the response is usually very practical effects based eg shading, noise etc – again, property owners protecting their own property rights to the protection of their own property.

  • Jan
  • January 29th, 2015
  • 9:17 pm

Dear Stephen,

you might find the explanations / information on the following websites useful, although Hamburg is certainly no example for rural Germany (and not quite as large as Auckland either):


  • Stephen
  • January 30th, 2015
  • 2:24 pm

The worst nimbyism is in the rules that prevent intensification in existing favoured areas.

  • Stephen
  • February 16th, 2015
  • 9:07 am

Fascinating – thanks Jan

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