Topic: Why are house prices so high?

Why are house prices so high? 

This article could be interesting. It's from the UK but I think it could apply in some respects to the NZ market also... http://www.positivemoney.org.uk/consequences/house-prices/

Re: Why are house prices so high? 

It is called overvaluation. In NZ about 250 -300 %
Part of the problem is the anglo american monetary and banking system which is like a snow ball system with an ever increasing amount of debt, money printing and speculation with money which is not existing.

Re: Why are house prices so high? 

Building a house costs money, both in time (ie labour) and materials. Note also there are significant costs for consents and such like.

Hence a house ends up costing an amount to build, and perhaps 10 or 15% of this could be saved by negotiating discounts or doing some of the work yourself. ie there are no big amounts to save in the physical building of a house.

The issue surely is the price of land, sections local to me (just outside Christchurch) are around $220,000. Whilst the supply of land to build houses on is restricted the way it is, perhaps $200,000 ends up as pure profit for some lucky person. This has a knock on effect right down to the cost (or price) of secondhand houses.

JK

Re: Why are house prices so high? 

Yep, the good 'ol Fiat monetary and Fractionbal Reserve banking systems are guaranteed to result in overvaluation of everything, it's just a matter of time.
Add to that no tax on capital gain. I always find it ironic that people are prepared to pay a premium for the right to not pay tax!
Guess, can you contact me please...ski@edgetoedge.co.nz

Re: Why are house prices so high? 

It's a double whammy here. Not only are purchase prices high, but the running costs of our houses is also expensive. This is true for us as individuals, paying high utility bills, and also for the wider community where we pick up the health tab for having such poor quality stock.

One theory is the bespoke nature of our houses and the way we customise every single building.

There's opportunity here for good quality, moderately sized, moderately prices housing.

Re: Why are house prices so high? 

It can't be much of an opportunity or someone would have bothered to do it. There would also be an opportunity to sell cheap sections, but for some reasons that's not taking off either.

Re: Why are house prices so high? 

$200,000 profit from a $220,000 section? Not likely I'm afraid.

Subdivision of land is very rarely a permitted activity which means a resource consent is required. This means you need a planning report, landscape report, traffic report, engineering and services report. Then there is all of the negotiations and meeting with Council, land has to be set aside for reserves, plus development contributions and if any of the effects identified by the reports are not allowed for in the long term plan then the sky is the limit for how much Council will ask for.

Then of course the application will probably be notified which typically results in a Council hearing (more consultant and reports). Of course if you have a wealthy neighbour then the environment court is your next stop (yet more consultants and reports plus lawyers this time).

Then Council hits you with the bill for all of the Council staff time spent looking at the consultants reports and writing their own reports.

These are only some of the costs before work starts on-site for the roads, water, wastewater, earthworks, retaining and the like.

I'm not a developer but I do have some sympathy for them. The margins they work with are very tight and I've seen plenty of subdivisions only just break even and a fair few lose money as a result of all of the bureaucracy.

Rant over.

Re: Why are house prices so high? 

I have to agree. I have some friends who have done reasonable sized developments recently here in Chch and their profit on a 200k section are around the 30-50k mark. And thats only if they sell very quickly. everyday they sit unsold is a huge cost. The reserve contributions alone are 10's of 000's.

Re: Why are house prices so high? 

Yep, a friend of mine developed land for an investor into a subdivision and built and sold maybe a 160 houses. He keeps telling me how they would have made just as much money not bothering with all the outlay, if had just sold the land to someone else.