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Living in a garage, how bad can it possibly be for a family with both parents in full-time employment? Since tackling the housing crisis banks have been made top profits, the rates on housing have been record high. What is the outcomes for ratepayers and taxpayers?

 

Pre-Election 2016

Snatching Voters the Name of the Game

Housing Politics

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Television last Sunday; a family was interviewed about the circumstances living in a garage in  Auckland. Both parents are in full-time employment and still can’t afford a proper lifestyle. That example was to illustrate how bad the housing crisis really is.

 

In the same tone the commentator spoke about increasing numbers of homelessness. It is terrible seeing such social hardship. Why are such stories like crime cases best sellers in the media?

 

Being realistic, if people work below the minimum wages or people on minimum wages can’t make a living then politicians have to meet their social responsibilities by working together on set out priorities, right? 

 

Well, if you follow the debates then you know everything about the shortage of rental housing and greedy landlords. Now, social housing is under government management and is the smallest part of the housing market. Obviously the campaign managers for the election next year use the hardship of working Kiwis emotional to snatch voters.

 

It looks to me that beneficiaries with government support qualify for social housing by being financially better off than families on minimum wages. That is crazy, isn’t it?

 

Regarding the housing shortage, remember the rule changes for investors/developers after the CFG brought all building activities to a standstill. And since revitalizing the economy the imbalance between demand and supply of housing has peaked in cities like Auckland before spreading to the rest of the country. This has already been debated during the last election. Such political debates have actually deepened the housing crisis and deeper economic challenges persist.

 

 

Economic recovery, immigration, supply & demand

 

The adverse trend to eliminate investors might work. But would that improve supply? In the past it did not because of home buyer’s demand by immigrants, offshore buyers and cashed up people returning to NZ. Well, you might think, stop them too. Fine, when cutting off one of the main drivers of NZ’s economy, would you mind losing your job?

 

Have you ask yourself why the OCR is still very low and internationally zero-interest-rates are common? Well, in simple words to avoid a new financial crisis as the global market remains weak, China and US have still problems, and the European Union is fragile since UK’s Brexit vote. Political instabilities in the middle east and now in the EU and US, etc. All those regions are NZ’s trades partner as long as they are functional. 

 

 

What gets on voter’s nerves?

 

Politician’s game is about voters on one front “we did do what we could” and on the opposite ”that went not far enough, we could do better”. The irony is homeowners pay for those games twice; as ratepayer for their own home and as taxpayer for social housing.

 

If you follow the statistics of home ownership rate in New Zealand then you know about the drop below 65%.  True, it is still higher than in most developed countries. How then would you explain why rental housing has been singled out for making changes and not for all substandard houses as strategy to win the coming election?

 

To consider less than 35% are rentals (minus social housing owned by the government) which are owned by investors. Investors are less than 10% of NZ’s population. Makes it sense to hit the minority with a stick only to show “we did something”.  In reality, working families on minimal wages cannot afford a “normal” life in a normal rental property but also don’t qualify for social housing.

 

Winning the polls and election is politic and not about people. That is the tragedy when people end up between front lines as illustrated – where is the responsibility of politicians serving their people, not their own party and career aspirations only.

 

 

The emotional misguided housing market

 

Successful investors do preserve the capital gain by not selling.  That is why CGT would not change anything. Speculator’s profits are taxed like any income.  So, campaigners just don’t understand and send a wrong message to misguide voters.

 

Kiwi investors are not at all well wired to deal with market downturns, up and down cycles. That is logical because the majority of them are working people in a day-job and investing (saving) for their retirement.

 

Some people have developed lots of imagination for resolving the bottle-neck of housing supply. Introducing new tax has many supporters. Also papers have emerged outlining that the introduced rules in 2016 increase expenses, but rents will not be affected. Interesting to see that people believe in turning off economic fundamentals.

 

Not mentioned that landlord’s costs for home improvements have to be capitalized. Those expenses for insulation, heating, double glazing, etc are not rent-deductible, any net losses will respond with insolvency or rent increase. Or, for compensation how far can the OCR still fall further?

 

Increasing supply eases demand

 

Without any line of thought resolving problems hasn’t been offered yet that brings people together for taking personal responsibility, calculated risks and with incentives to break the cycle of living from hand to mouth. Show me one person or business in NZ that does not depend on the property market.

 

A thriving economy pushes prices up (consumer’s demand) and that results in employment and increasing income. That would also answer the question of “affordability”. Social freedom is when meeting the demand like jobs, food and housing.

 

Think about the role of high cost of land, council restrictions for developments and difficulties to obtain finance. The screws have been further tightened for weaker and new borrowers. The here outlined changes are in favor of established property businesses who easily bypass the new lending rules by working with non-bank lenders.

 

To Take Away

The housing market responds due to complexity very slowly. For instance we deal with a lack of new-built homes, which haven’t been built since the last election. So, the changes made mid 2016 and due by 2019 won’t show any effect soon, allowing political games to resume without being questioned. If you do believe otherwise, don’t observe only market values, rents, etc -  look what happened to people’s lives in your neighborhood.

 

Final question - are you associating with the right people and putting the right things in your head?

 

 

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Klauster Blogs lead to a real person who worked as computer network architect for many years in different countries until retiring from IT and mastering a life as property investor and landlord.

 

The passion of sharing experiences comes from turning hobbies into income streams and business.  Helping people to avoid pitfalls and to be free to choose has been satisfying and most rewarding.

 

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2016 Pre-Election

What Housing  strategy wins the polls and election?