8 ms·

Melbourne is not much different in that regard (geographically massive with a relatively sparse population for a city of its population size). Sydney too. Melb

by tmnvix 9y ago

Melbourne is not much different in that regard (geographically massive with a relatively sparse population for a city of its population size). Sydney too. Melbourne is also experiencing a housing crisis similar to Auckland's due to a boom in prices. So should Melbourne also pull out all the stops to encourage new building? Interestingly, Prosper Australia has been tracking Melbourne's true vacancy rate for over a decade now, publishing their findings in their Speculative Vacancies Report[1]. Before you look at the report, a couple of questions: 1) Do you believe prices are being driven up due to a shortage of homes? (Your comment suggests you do.) 2) If prices were being driven up due to a shortage of homes, would you expect the areas that experience the highest capital gains to have the lowest vacancy rates? (I think most people would agree with this.) Now, the most interesting finding from the Speculative Vacancies Report for me was that in fact, contrary to what most people would expect, areas with the highest capital gains correlate strongly with those areas that have highest number of empty dwellings. My own suspicion is that the demand that is driving up prices is not demand for homes, but demand for investments. A speculative boom creates extra demand. In 2007, the Irish thought they had an undersupply of housing. A short time later it was revealed that they actually had a massive oversupply (once investment/speculative demand was removed). The RBA in Australia is pointing to the same thing in Melbourne (Docklands has a vacancy rate of ~25%+, other sought after areas are approaching 15-20% according to the report mentioned above). The best thing that Auckland can do to tackle house prices is to address the demand side of the supply and demand equation. There are tonnes of options for doing this but mostly this is an issue caused by easy credit and tax incentives for investing in property. That's the place to solve this problem. It would be folly to encroach on green areas or otherwise spoil our environment in a mad rush to build. If we do that... Ireland here we come! [1] https://www.prosper.org.au/2015/12/09/speculative-vacancies-8/ https://www.prosper.org.au/2015/12/09/speculative-vacancies-...

eecc 9y ago
Very well argued, bravo! I was about to suggest the same but had no data to support this interpretation, just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all over the world
- alexasmyths 9y ago
  " just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all over the world" If there is excess capital, it's the fault of the central banks. No. The issue is corruption and lack of distribution of surpluses in developing economies, specifically China. Think: China is poor on a per-capita basis. So why are so many Chinese trying to hard to get their $$$ out of there? Mass corruption etc.. Westerners send a lot of $$$ to China - and if there were labour laws, environmental laws (i.e. democracy) then those surpluses would be spread more evenly across China. 'Regular' chinese people want to buy a home, a car a TV - but since the money is so heavily focused on a small portion of citizens - they have 'mass surpluses' and want to get their money out. So it comes back to the West. You mentioned 'lack of investment' - this can't be the case - as there are still hundreds of millions of Chinese people who still don't have proper homes and are way behind in terms of material standards of living. If they were paid more - they'd have more surplus $ to spend on 'homes and stuff' and guess what? Local investments would make more sense. We can't have free trade with nations that regulate their economies in fundamentally different ways than ours. If a country for example, allows mass pollution - well - that externalization is a massive economic advantage, kind of like a 'government subsidy'. The best way to deflate the Western housing bubble - and to fix the internal problems in China is to spread the wealth in China. Arguably US needs a little more of this as well.
  - Retric 9y ago
    It does not matter if houses are priced in dollars or donuts, they are increasing in value because of an oversupply of capital sloshing around looking for investments. Wealth is not currency wealth is things of value, and we have systemic issues with profits from investments being reinvested instead of being spent, as everyone is looking for returns. This inflates the value of things that create future income streams.
    - alexasmyths 9y ago
      No, not an 'oversupply of capital' , rather a lot of capital in the hands of a few. And low interest rates. It only takes about 5% of home buyers to be foreign buyers who are 'price inelastic' (i.e. they will pay above market/any price) to create a housing bubble. If the capital were not in their hands, but more distributed through the NZ economy, I suggest that capital would be deployed differently than just in real estate.
linkregister 9y ago
The OP is hardly advocating encroachment on green spaces. The OP was pointing out the folly in attempting to mitigate one class of house buyers, when the zoning is egregiously sparse for a metropolitan area. Auckland is adding apartments, albeit not at a sufficient rate. Their rents are high enough to make building them profitable. What does that say? It means that local resident demand is high enough to support investment of high-density residential areas. Auckland's demand is significantly fueled by speculative investors, to be sure. What props up the house prices are the Kiwi families moving to Auckland for better work opportunities. What Sydney and Melbourne are experiencing is a lack of rental support for their high house prices. That cannot be sustainable.
mistermann 9y ago
Very nicely argued. Has that specific angle been covered by the mainstream media? One aspect missing from that analysis that I'm curious about is demographics and immigration vs domestic population growth. Let's say there is major demand due to immigration - is that immigration needed, and I mean really needed? And does the value of why it's "needed" exceed the "cost" incurred by turning the marketplace of the largest single investment of most people's life into a f*cking Casino on steroids? And are you being honest about the numbers? Are you measuring it in an open and cooperative manner on an ongoing basis, or are you still working off of projections, perhaps because actually measuring performance would be "so racist". And then cherry picking from those estimates and presenting the preferred narratives that might serve the needs of a different set of entities, perhaps persuasive corporations with deep pockets and "public relations" agencies on their payroll, more than the needs of "the general public". (Pardon the horrendous sentence structure and run on sentences.) Nah, an idea that crazy has to be a conspiracy theory. I mean, if you published reports that were so obviously based on cherry picked subsets of data, comparing apples and oranges, mismatched timeframes, why the propaganda would be so obvious, then general public would be outraged. Outraged! You'd have to be a real nut to believe something that outlandish.
- icebraining 9y ago
  Has that specific angle been covered by the mainstream media? I don't know if it has been covered specifically about NZ, but otherwise yes, many many times. For example: http://www.nytimes.com/2011/07/07/nyregion/more-apartments-are-empty-yet-rented-or-owned-census-finds.html http://www.nytimes.com/2011/07/07/nyregion/more-apartments-a... https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreig... http://nymag.com/news/features/foreigners-hiding-money-new-york-real-estate-2014-6/ http://nymag.com/news/features/foreigners-hiding-money-new-y...
  - mistermann 9y ago
    > I don't know if it has been covered specifically about NZ, but otherwise yes, many many times. I'm still curious whether it has been covered in NZ. Canada, like NZ, is also a commonwealth country, and it's only recently that it is even remotely common that "reasonable people" dare broach such subjects. I find it rather interesting that my comment was heavily downvoted and flagged, as if there is an initiative to silence any voice that dare even suggest immigration may not be absolutely necessary. Is it truly possible that all countries on the planet need more immigration, and in all cases the need is greater than the associated harm? Was Hans Rosling also a "racist"?
mattnewton 9y ago
Why not tax vacancies then? Do we know how that has worked in places like Paris or Vancouver?
- baud147258 9y ago
  Considering a) the price b) the number of empty flats bought by foreigner that stays empty most of the year c) the available supply I don't think it works
jaredklewis 9y ago
All seems perfectly consistent with the OPs point to me. Speculative real estate investment is a direct result of restrictive zoning. Consider for example an already developed area of a city that is zoned for single family residential. This makes it illegal for a developer to increase supply in this region by building, say a duplex. A developer is allowed to rebuild a house, but not increase supply. So of course there is speculative investment! Owners have a legal guarantee of resource scarcity. It’s the reason governments everywhere try to avoid deflation; it causes everyone to hold onto their cash. Now contrast the situation when a developer can turn a house into a duplex. Supply is elastic. There’s no legal guarantee of scarcity. Of course real estate is still an investment vehicle, but there is no longer the artificial constraint on supply. I also think it’s weird to lump this in with environmental protection. Preserving natural areas is an unassailably important priority for any nation. What does that have to do with home owners that feel they have a legal right to not live next to a condo? I don’t think the parent (or really anyone here) is advocating we develop undeveloped land. Finally, I wonder if this is all moot, because the issue at hand is a restriction of foreign ownwers. Won’t native NZ real estate companies be glad to step in to fill the void? Can’t these companies then just shell shares to international investors?
- camelite 9y ago
  > Speculative real estate investment is a direct result of restrictive zoning. By definition, it's not. It's a term coined to separate out the impact on prices of people buying-to-live vs people buying-to-sell/rent-and-profit. And if foreigners are more likely to buy for speculative purposes, barring them from doing so will decrease speculative increases in house prices.
  - jaredklewis 9y ago
    Right, but things with fixed supply make perfect investment vehicles, and when people investment in real estate that is speculation. Imagine if the stocks of public companies were not fixed in supply. The company at any time could simply decide to have shares for 200%, 300%, or 1000% without compensating existing shareholders in any way. If that was the case, stocks would be total garbage as an investment. Prices would plummet to 0. The reason metro real estate is so attractive as an investment is because supply is inelastic. If we want to encourage usage, as oppose to hoarding, we should do like we do with fiat currencies and allow more of it to be made. Banning foreigners might have some tiny effect, but honestly seems a bit like arranging deck chairs on the Titanic. We can check in after a year, but all my money is on Auckland continuing to have an expensive housing market (unless they allow more rezoning). Further, banning foreigners of course is also banning a valuable export and will cut off a stream of foreign money that was previously flowing into the local economy.
aplummer 9y ago
> Docklands has a vacancy rate of ~25% I'm amazed it was that low. I was inspecting recently and I was blown away, it was like a ghost town. I checked out the carparks of these massive buildings and they were basically completely empty, it was crazy.
- tmnvix 9y ago
  This data is more accurate than the typical media-reported 'vacancy rate' arrived at by surveying real estate agents and asking "what percentage of the properties on your books are currently vacant?" - which usually results in a figure somewhere around 3%. The methodology of the Speculative Vacancies Report involves gathering water usage data for all properties. That can mean that if a property is occupied for a single month it isn't counted. A lot of the Docklands apartments appear to be not only vacant investments, but also short-term rentals and 'city pads', so I'm not at all surprised that it appears more like a ghost town than the figures suggest it might.
eoincathal 9y ago
And now Ireland is experiencing a housing shortage, with rental prices soaring and house purchase prices heading in that direction. Market failure, policy failure, awful planning. Living here, it's hugely disheartening to see a similar pattern emerging so shortly after a massive crash. I live in Cork, population ~200k. In 2012, I rented a 2 bed apartment in the city centre for €750 a month. Now, I would be lucky to get a decent 1 bed apartment for €1000. And because bank lending rules tightened after 2008, opportunities to purchase a house/apartment have narrowed. Therefore, those (and families in particular) who cannot purchase have been on the receiving end of the spiraling rents. It took the government till late 2016 to put the brakes on the rent increases by creating "rental pressure zones". https://www.reuters.com/article/ireland-economy-housing/ireland-aims-to-end-housing-shortage-by-doubling-output-by-2019-idUSL8N1A540X https://www.reuters.com/article/ireland-economy-housing/irel...
- adriancooney 9y ago
  Wow. I had no idea the prices had increased so much. I'm paying just under double what you paid in 2012 for a 2 bed in the city centre.
conanbatt 9y ago
Thanks for putting the report. Oversupply is a problem for owners, not for renters and newcomers. The very people buying property and parking it are not making a sound investment, and they will naturally pay the price for it. If what is happening is that speculators are dumping all this cash to make properties, then the best course of action is to do nothing. Eventually they will lose, but the buildings are still there. And there is plenty of space to build around. Housing is not a limited asset like its often portrayed. Its truly unlimited, thats why you can find land almost for free.
- tmnvix 9y ago
  My main concern is that all of this is setting us up for an even harder correction, and that the people currently taking great speculative gambles are prepared only to own the reward but not the risk - we will all end up paying for that.
  - conanbatt 9y ago
    If properties crash, how do speculators not lose money?
CalRobert 9y ago
Ireland built a bunch of single family homes a million miles from anything with no transport connections bar already crowded roads. Now (for Dublin at least, where I live) rents are extremely high in the city centre and along the Luas and Dart, though I generally try not to mention too loudly that it still feels reasonable compared to urban California. There are still cheap homes in the middle of nowhere with shit transport connections, tbf (also Tallaght, which has other problems). It's a real shame they didn't try building housing that wouldn't effectively destroy the cities with cars. I'm not a big fan of Leo but hopefully relaxing height restrictions will help with getting more flats built. Homes in Dublin under €175 (asking, at least) http://www.daft.ie/dublin-city/houses-for-sale/?s%5Bmxp%5D=175000 http://www.daft.ie/dublin-city/houses-for-sale/?s%5Bmxp%5D=1... Also, green space is nice but it is worth considering that the actual natural environment of this island was lost between 1000 and 500 years ago. It used to be nearly all forest, but grazing animals are death to forest as they eat the saplings.
- njarboe 9y ago
  I like forests also but Ireland has never had a natural (free of human intervention) landscape since it was scoured down to bedrock by glaciers about 15-20,000 years ago.
  - CalRobert 9y ago
    Naturally occurring glaciers presumably?

by tmnvix 9y ago

eecc 9y ago

Very well argued, bravo! I was about to suggest the same but had no data to support this interpretation, just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all over the world

alexasmyths 9y ago
" just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all over the world" If there is excess capital, it's the fault of the central banks. No. The issue is corruption and lack of distribution of surpluses in developing economies, specifically China. Think: China is poor on a per-capita basis. So why are so many Chinese trying to hard to get their $$$ out of there? Mass corruption etc.. Westerners send a lot of $$$ to China - and if there were labour laws, environmental laws (i.e. democracy) then those surpluses would be spread more evenly across China. 'Regular' chinese people want to buy a home, a car a TV - but since the money is so heavily focused on a small portion of citizens - they have 'mass surpluses' and want to get their money out. So it comes back to the West. You mentioned 'lack of investment' - this can't be the case - as there are still hundreds of millions of Chinese people who still don't have proper homes and are way behind in terms of material standards of living. If they were paid more - they'd have more surplus $ to spend on 'homes and stuff' and guess what? Local investments would make more sense. We can't have free trade with nations that regulate their economies in fundamentally different ways than ours. If a country for example, allows mass pollution - well - that externalization is a massive economic advantage, kind of like a 'government subsidy'. The best way to deflate the Western housing bubble - and to fix the internal problems in China is to spread the wealth in China. Arguably US needs a little more of this as well.
- Retric 9y ago
  It does not matter if houses are priced in dollars or donuts, they are increasing in value because of an oversupply of capital sloshing around looking for investments. Wealth is not currency wealth is things of value, and we have systemic issues with profits from investments being reinvested instead of being spent, as everyone is looking for returns. This inflates the value of things that create future income streams.
  - alexasmyths 9y ago
    No, not an 'oversupply of capital' , rather a lot of capital in the hands of a few. And low interest rates. It only takes about 5% of home buyers to be foreign buyers who are 'price inelastic' (i.e. they will pay above market/any price) to create a housing bubble. If the capital were not in their hands, but more distributed through the NZ economy, I suggest that capital would be deployed differently than just in real estate.

linkregister 9y ago

The OP is hardly advocating encroachment on green spaces. The OP was pointing out the folly in attempting to mitigate one class of house buyers, when the zoning is egregiously sparse for a metropolitan area. Auckland is adding apartments, albeit not at a sufficient rate. Their rents are high enough to make building them profitable. What does that say? It means that local resident demand is high enough to support investment of high-density residential areas. Auckland's demand is significantly fueled by speculative investors, to be sure. What props up the house prices are the Kiwi families moving to Auckland for better work opportunities. What Sydney and Melbourne are experiencing is a lack of rental support for their high house prices. That cannot be sustainable.

mistermann 9y ago

Very nicely argued. Has that specific angle been covered by the mainstream media? One aspect missing from that analysis that I'm curious about is demographics and immigration vs domestic population growth. Let's say there is major demand due to immigration - is that immigration needed, and I mean really needed? And does the value of why it's "needed" exceed the "cost" incurred by turning the marketplace of the largest single investment of most people's life into a f*cking Casino on steroids? And are you being honest about the numbers? Are you measuring it in an open and cooperative manner on an ongoing basis, or are you still working off of projections, perhaps because actually measuring performance would be "so racist". And then cherry picking from those estimates and presenting the preferred narratives that might serve the needs of a different set of entities, perhaps persuasive corporations with deep pockets and "public relations" agencies on their payroll, more than the needs of "the general public". (Pardon the horrendous sentence structure and run on sentences.) Nah, an idea that crazy has to be a conspiracy theory. I mean, if you published reports that were so obviously based on cherry picked subsets of data, comparing apples and oranges, mismatched timeframes, why the propaganda would be so obvious, then general public would be outraged. Outraged! You'd have to be a real nut to believe something that outlandish.

icebraining 9y ago
Has that specific angle been covered by the mainstream media? I don't know if it has been covered specifically about NZ, but otherwise yes, many many times. For example: http://www.nytimes.com/2011/07/07/nyregion/more-apartments-are-empty-yet-rented-or-owned-census-finds.html http://www.nytimes.com/2011/07/07/nyregion/more-apartments-a... https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreig... http://nymag.com/news/features/foreigners-hiding-money-new-york-real-estate-2014-6/ http://nymag.com/news/features/foreigners-hiding-money-new-y...
- mistermann 9y ago
  > I don't know if it has been covered specifically about NZ, but otherwise yes, many many times. I'm still curious whether it has been covered in NZ. Canada, like NZ, is also a commonwealth country, and it's only recently that it is even remotely common that "reasonable people" dare broach such subjects. I find it rather interesting that my comment was heavily downvoted and flagged, as if there is an initiative to silence any voice that dare even suggest immigration may not be absolutely necessary. Is it truly possible that all countries on the planet need more immigration, and in all cases the need is greater than the associated harm? Was Hans Rosling also a "racist"?

mattnewton 9y ago

Why not tax vacancies then? Do we know how that has worked in places like Paris or Vancouver?

baud147258 9y ago
Considering a) the price b) the number of empty flats bought by foreigner that stays empty most of the year c) the available supply I don't think it works

jaredklewis 9y ago

All seems perfectly consistent with the OPs point to me. Speculative real estate investment is a direct result of restrictive zoning. Consider for example an already developed area of a city that is zoned for single family residential. This makes it illegal for a developer to increase supply in this region by building, say a duplex. A developer is allowed to rebuild a house, but not increase supply. So of course there is speculative investment! Owners have a legal guarantee of resource scarcity. It’s the reason governments everywhere try to avoid deflation; it causes everyone to hold onto their cash. Now contrast the situation when a developer can turn a house into a duplex. Supply is elastic. There’s no legal guarantee of scarcity. Of course real estate is still an investment vehicle, but there is no longer the artificial constraint on supply. I also think it’s weird to lump this in with environmental protection. Preserving natural areas is an unassailably important priority for any nation. What does that have to do with home owners that feel they have a legal right to not live next to a condo? I don’t think the parent (or really anyone here) is advocating we develop undeveloped land. Finally, I wonder if this is all moot, because the issue at hand is a restriction of foreign ownwers. Won’t native NZ real estate companies be glad to step in to fill the void? Can’t these companies then just shell shares to international investors?

camelite 9y ago
> Speculative real estate investment is a direct result of restrictive zoning. By definition, it's not. It's a term coined to separate out the impact on prices of people buying-to-live vs people buying-to-sell/rent-and-profit. And if foreigners are more likely to buy for speculative purposes, barring them from doing so will decrease speculative increases in house prices.
- jaredklewis 9y ago
  Right, but things with fixed supply make perfect investment vehicles, and when people investment in real estate that is speculation. Imagine if the stocks of public companies were not fixed in supply. The company at any time could simply decide to have shares for 200%, 300%, or 1000% without compensating existing shareholders in any way. If that was the case, stocks would be total garbage as an investment. Prices would plummet to 0. The reason metro real estate is so attractive as an investment is because supply is inelastic. If we want to encourage usage, as oppose to hoarding, we should do like we do with fiat currencies and allow more of it to be made. Banning foreigners might have some tiny effect, but honestly seems a bit like arranging deck chairs on the Titanic. We can check in after a year, but all my money is on Auckland continuing to have an expensive housing market (unless they allow more rezoning). Further, banning foreigners of course is also banning a valuable export and will cut off a stream of foreign money that was previously flowing into the local economy.

aplummer 9y ago

> Docklands has a vacancy rate of ~25% I'm amazed it was that low. I was inspecting recently and I was blown away, it was like a ghost town. I checked out the carparks of these massive buildings and they were basically completely empty, it was crazy.

tmnvix 9y ago
This data is more accurate than the typical media-reported 'vacancy rate' arrived at by surveying real estate agents and asking "what percentage of the properties on your books are currently vacant?" - which usually results in a figure somewhere around 3%. The methodology of the Speculative Vacancies Report involves gathering water usage data for all properties. That can mean that if a property is occupied for a single month it isn't counted. A lot of the Docklands apartments appear to be not only vacant investments, but also short-term rentals and 'city pads', so I'm not at all surprised that it appears more like a ghost town than the figures suggest it might.

eoincathal 9y ago

And now Ireland is experiencing a housing shortage, with rental prices soaring and house purchase prices heading in that direction. Market failure, policy failure, awful planning. Living here, it's hugely disheartening to see a similar pattern emerging so shortly after a massive crash. I live in Cork, population ~200k. In 2012, I rented a 2 bed apartment in the city centre for €750 a month. Now, I would be lucky to get a decent 1 bed apartment for €1000. And because bank lending rules tightened after 2008, opportunities to purchase a house/apartment have narrowed. Therefore, those (and families in particular) who cannot purchase have been on the receiving end of the spiraling rents. It took the government till late 2016 to put the brakes on the rent increases by creating "rental pressure zones". https://www.reuters.com/article/ireland-economy-housing/ireland-aims-to-end-housing-shortage-by-doubling-output-by-2019-idUSL8N1A540X https://www.reuters.com/article/ireland-economy-housing/irel...

adriancooney 9y ago
Wow. I had no idea the prices had increased so much. I'm paying just under double what you paid in 2012 for a 2 bed in the city centre.

conanbatt 9y ago

Thanks for putting the report. Oversupply is a problem for owners, not for renters and newcomers. The very people buying property and parking it are not making a sound investment, and they will naturally pay the price for it. If what is happening is that speculators are dumping all this cash to make properties, then the best course of action is to do nothing. Eventually they will lose, but the buildings are still there. And there is plenty of space to build around. Housing is not a limited asset like its often portrayed. Its truly unlimited, thats why you can find land almost for free.

tmnvix 9y ago
My main concern is that all of this is setting us up for an even harder correction, and that the people currently taking great speculative gambles are prepared only to own the reward but not the risk - we will all end up paying for that.
- conanbatt 9y ago
  If properties crash, how do speculators not lose money?

CalRobert 9y ago

Ireland built a bunch of single family homes a million miles from anything with no transport connections bar already crowded roads. Now (for Dublin at least, where I live) rents are extremely high in the city centre and along the Luas and Dart, though I generally try not to mention too loudly that it still feels reasonable compared to urban California. There are still cheap homes in the middle of nowhere with shit transport connections, tbf (also Tallaght, which has other problems). It's a real shame they didn't try building housing that wouldn't effectively destroy the cities with cars. I'm not a big fan of Leo but hopefully relaxing height restrictions will help with getting more flats built. Homes in Dublin under €175 (asking, at least) http://www.daft.ie/dublin-city/houses-for-sale/?s%5Bmxp%5D=175000 http://www.daft.ie/dublin-city/houses-for-sale/?s%5Bmxp%5D=1... Also, green space is nice but it is worth considering that the actual natural environment of this island was lost between 1000 and 500 years ago. It used to be nearly all forest, but grazing animals are death to forest as they eat the saplings.

njarboe 9y ago
I like forests also but Ireland has never had a natural (free of human intervention) landscape since it was scoured down to bedrock by glaciers about 15-20,000 years ago.
- CalRobert 9y ago
  Naturally occurring glaciers presumably?