Dominion Post Column - 3rd April

Affordability

Last fortnight’s column should have had the desired effect. I have completed a four night stay in one of Wellington’s finest hotels. It may not be one of the finest at the time of writing but it shall be after preparation for my arrival that included a staff meeting to discuss aspects of the content of my work. Yes, the column is mightier than the law. It’s a shame it doesn’t pay as well.

On these two topics I shall give my thoughts on housing affordability.

I live in one of the most expensive locations in the world for housing; renting, purchasing and hotels. Hong Kong is experiencing a little boom where people are tipping money into property. It’s all interest rate driven at present. With literally no return at the bank, like lemmings people here are basically being paid to buy property. The “lemming” makes it a terrible time to buy anything near that cliff. Renting is bordering on impossible, prices are close to 1997 levels. It should be all doom and gloom but it’s not. Why? Because Hong Kongers are paid big in times like this. The market rent of my apartment has shot up 50% in two years. Thankfully my take-home pay and bonuses have increased much more and the Government here keeps giving wads of tax back, but I still feel queasy about the July 2008 renewal date where my 570 gross square foot cube will be priced equivalent to a larger Manhatten slab of real estate.

New Zealand doesn’t have the padded luxury of its high-taxed and regulated employers being able to dip into their pockets. So all of a sudden we have a much hyped “housing affordability” issue. The answer from the geniuses in your city, Government provides “affordable” housing that no one it seeks to help seems able to afford.

Affordable

I have never owned a “home”. I don’t feel much poorer because of it because I have provided myself with alternative savings avenues and can go buy one whenever I feel like it which is of course when the price is right. I don’t do lemming very well. So why is the taxpayer suddenly subsidizing many of those in exactly the same position I was when I left University? The same people it paid for an overly expensive University education, for them to breed and now a house? Horrid middle-class welfare at its worst. Most homeowners would like the taxpayer to finance them into an Aston Martin but no one is jumping up and down about “Aston Martin Affordability”.

Fucking Sexy Car

Housing “affordability” is a current Western phenomenon. No one in Asia appears too concerned that they will never be able to buy their own cube. If people of equivalent wealth were subsidized into their own home here at the expense of those not eligible to have such privilege, there would be an outcry. Tipping taxpayer money into middle class housing does one thing, it sends a signal that there is no risk in the market. And where there is no risk, there comes no incentive to make rational decisions.

What is owning your own home? If you borrow 100% or 95% it’s not really your “own” home. It’s the banks. The warm fluffies in New Zealand about home ownership is really a thrust for taxpayers to have tax-free capital gains rather than working. So you can have Westpac as your landlord or Mr Brown. There is no difference if in any market there is a boom and a bust.

Hong Kong people know the housing market crashes. There are no guarantees and no Government hand-outs. People go broke, banks become the largest landlords in town and Hong Kong people do not learn their lesson.

They wait and do it all again when they judge the price is right. Because their attachment to real estate is a rational one, not a love affair with a concept of owning a “home”. Real estate is a tradable commodity and very few people get rich in Hong Kong through turning up to work. It’s accepted that wealth is created through flicking and acquiring property.

And heaven help any Government that gets in the way of that.