Tauranga City Council has just completed its latest housing valuations from which it will determine the rates we pay for the next few years. Our personal house and property value jumped a massive 22 percent from the previous valuation. Only 28 percent of that increase was improvements to the house; the majority can really only be ascribed to the interest of Auckland property investors in the Bay of Plenty housing market.
Property valuations are based on property sales. Higher sale prices drives higher property values, which in turn will drive higher sale prices. The average value in Tauranga Moana rose by 19 percent, a little higher in poorer neighbourhoods. We live in Merivale, a lower socio-economic neighbourhood with houses that have long been of lower value. The explanation for the increase is “value movements generally at the higher end reflecting the market pressure on properties in the lower value ranges”; which is to say property investors buy cheap houses to rent at large amounts to maximise the money they can make.
We received four pages of information about our new valuation and the rates collected in Tauranga. Only one line provides any hint of warning or caution: “your new valuation will probably not reflect the actual market price of your property today.” That is to say if you want to sell your house, you’ll probably get more. The issue, just like Auckland, is we are not having the conversation we need to have in Tauranga: do we want property investors to be in the driving seat? Is our rental market affordable for the workforce we need? Are our houses affordable for new and young families to invigorate our city? It appears that Tauranga has learnt nothing from the Auckland housing bubble except that we want a bit of bubble here.
Tauranga has a poor history of urban development. Indeed, property investors have dictated terms for a long time. It is only in the last few years that Council has tried to put some controls around the infrastructure provided in subdivisions once they realised that those flash streetlights that developers put in become their problem to replace once they break. Only a few years since they became a bit more prescriptive about property sizes so developers couldn’t include one shared driveway as part of the property size calculation in four different properties at the same time. Only a few years since they cracked down on the random Floridian names developers used to make their subdivisions sound more tropical. Our Council has a very poor history of making decisions that are about what is best for the community against what developers want.
Meanwhile, the media in Tauranga act like the housing market is some kind of natural event over which we have no control, as if the market is not a result of people with money buying houses to make more money, but rather a storm of money that rolled in and dumped itself on a whole lot of poor neighbourhoods. People buy houses; some people buy more than a few houses to make money for themselves. If you want to control housing prices, you need to restrict the activities of the latter group of people. You would want to do that because your port, horticulture and health care industries – that is your largest industries – rely on people with low to middle incomes who can’t live in tents and caravans year around.
The reason none of that will happen is because the people who sit at our Council table and our members of Parliament are all people who buy more than a few houses to make money for themselves. There is no incentive to represent a group of people who are not like them and are not very good at voting, so they don’t matter. Money is also a fantastic substitute for blinkers; you don’t need to see what’s happening around you when you are looking at the comfortably muted colours of cash. The problem with blinkers, of course, is that you may not see the disaster coming; but you’re still plodding towards it.
The disaster that approaches is likely another Global Financial Crisis like 2008. This has been predicted by those left wing loonies the International Monetary Fund, Yale University economist Robert Shiller and the Bank for International Settlements. The debt levels, the inflated housing prices, the speculation combined with a coming energy crisis and a variety of geopolitical crises are all contributors that could lead to our bubble bursting very soon. Then all those people who played the market in Auckland and now Tauranga are going to be left with debt they can’t service and houses they can’t sell for the prices that they bought them at. We are quite capable of mitigating a problem created by us now with legislation in Parliament matched by local government action. But hey, who wants to do that when you can roll the dice one more time to win big.