ASK ME ANYTHING: 'Generation Rent' author Shamubeel Eaqub — your questions answered on NBR Radio

Shamubeel Eaqub in the NBR Radio studio with Andrew Patterson: "I'm scared witless. Auckland is in a massive bubble"

Special Feature: NBR Radio host Andrew Patterson puts your questions to Shamubeel Eaqub.

NBR Radio on-demand content is subscriber-only. To build your own NBR Radio playlist and enjoy instant on-demand access to any audio, sign up for our FREE smartphone-only subscription to NBR ONLINE.

After moving from Wellington to Auckland, controversial economist Shamubeel Eaqub has found himself caught in the housing affordability crisis he comments on.

Last year, he hit headlines with his book Growing Apart and the attendant controversy as he coined the term "zombie town."

Now he's back with a new book, co-authored with his wife Selena (also an economist) that's set to spark more debate: Generation Rent: Rethinking New Zealand's Priorities (click here for an extract).

The Equabs argue there is "a generation facing a market in which housing costs have soared relative to incomes, making the pervasive dream of owning a home either impossible, or blighted by life-long slavery to mortgage debt."

Generation Renters are not just "property orphans" but "cultural orphans," they argue. Impacts of the housing affordability crisis will include increasing inequality and ‘ghettoisation’.

Their work is made more poignant by the fact that they, after arriving in Auckland, are renters themselves.

Shamubeel Eaqub is principal economist at the New Zealand Institute of Economic Research, a leading independent economic research house. Previously he has worked in both the public and private sector as an economist and statistician, most notably at ANZ Bank in both New Zealand and Australia, Statistics New Zealand and Goldman Sachs JB Were.

See readers' questions below, and click the NBR Radio box to hear NBR Radio host Andrew Patterson putting them to Mr Eaqub.

See previous installments of Ask Me Anything by clicking the AMA tab on our menu bar, or bookmarking nbr.co.nz/ask-me-anything.

Special Feature: NBR Radio host Andrew Patterson puts your questions to Shamubeel Eaqub.


33 · Got a question about this story? Leave it in Comments & Questions below.

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33 Comments & Questions

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Hi Shamubeel, last week I was reading a Metro article on Auckland house prices, hoping for answers, only to find it quoted an exchange between us from last year. 

You and Selena were still in Wellington at the time. I asked if you would rent or buy when you moved to Auckland.

You replied: "We will be renting. We have found a good range of houses to choose from. Typically with a rental yield of 3%. We are saving and investing the rest."

You also said, "There is a shortage of houses for investment, but not to live in. Rents have not gone up with house prices - unlike in the immigration boom of the early 2000s - which caused a physical shortage of housing."

That was July last year. How did you go finding a rental? And are Auckland rents still lagging behind Auckland house prices? Does NZIER have stats? 

Thanks,

CK

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Hi again Shamubeel,

Last week you and Selena had your first child. Congrats.

In January, the Herald reported you might abandon renting and look to buy a house in Auckland after your child arrived.

Is that correct, and why?

And whether it's correct or not in your case, it's definitely a fact that a lot of people buy a home for emotional security. How can The Dismal Science allow for the emotional and psychological factors that drive a lot of people's activity?

Thanks,
CK

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After a freak electrical storm alters their brain activity, John Key and Len Brown appoint you Auckland Housing Czar, with complete power to implement any legislative or regulatory measure you like to address house pricing. What do you do?

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Will property investors be able to use friends, relatives, trusts etc to skirt theh "brightlining" and foreign buyer registration measures announced in Budget 2015?

Assuming for a moment the measures are mostly effective, what impact will they have on Auckland house prices?

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Today's NZ Herald shows an expensive Auckland house put up for sale within days of buying it as personal circumstances changed. As it was not bought to sell at a profit but to live in at time of purchase, are they exempt from 33% tax on the profit if sold before October?

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Hi Shamubeel
I live in Wellington and have noticed that most of the “good” properties that are being sold are always being purchased by investors, which sometimes are a good 10-20% above the RV… which makes it almost a financial crisis for first time buyers to afford considering the banks will only fund up to 80% of the RV.
Personally I would say there should be a curb put onto investors as to how much (money or quantity) of houses they should be allowed to buy and rent, but I realise the political situation will sway between parties (that makes or breaks their political futures).
In your opinion what are primary influencers as to why we have “Generation Renters”? Is it due to employment, climate, social, political or others?
Also can you predict what the future of New Zealand will be like if this situation continues for the next 10 to 20 years?
Thanks

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Shamubeel,
- How effective do you think the Govt's revised LVR restrictions and IRD registration requirements will be on Auckland housing demand come October?
- Do you anticipate a surge in demand prior to this date?
- Clearly the lack of infrastructure greatly impedes Auckland's ability to accommodate significant population growth. Do you think inbound migrants should be required to lodge capital solely into Government infrastructure bond products?

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Welcome to AKL, great city. I live on a postage stamp sized section in Medowbank - fairly central, house prices souring. Isn't time we cut some muscle and built some nice houses on the large Pony club and the Golf Course there ? Thousands could be housed against the few people in central AKL who own horses or play golf? The rail already runs thru the pony club too.

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Is it fair to say, that when looking to purchase a house in Auckland, one has to compete with overseas money (to which the local Kiwi can't ) and this has led to house prices increasing disproportionately to local income?

Therefore, with the same concept, is it fair to say that local residential rents can't increase disproportionally to local income because the local renter only has to complete with local earnings? Therefore long term rents can't blow out and must stay within a local affordability range which will be based on income? That is, you are one of the top 40% earners in Auckland, you should be able to afford the top 40% of rents? I am keen to hear your thoughts on this.

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Is it frightening to you that Auckland house prices have risen more from their GFC peak than any other large OECD city? Prices while increasing in Australia have not risen as much as Auckland yet they recognise they are in a bubble - what causes the reluctance of the public, media and government to admit we are in a bubble?

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Instead of focusing on capping property prices, if we could increase supply of housing and assist with personal savings with increased pay rate, wouldn't that be a better way of achieving more home ownership?

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You are on record as saying that Northland is like East Timor. Have you actually been to East Timor?

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What changes in tenancy regulations would make the most immediate impact for renters?

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A little birdie tells me Auckland will be much larger in the future. If it can keep its inhabitants living at a growing wage rate, with improving lifestyles, and considering its landmass, what's the maximum population ceiling for this city? While you're there, what's the theoretical population limit for New Zealand?

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If Auckland Council and the govt bumble along pretty much as they are now, only making minor changes to policy and regulations, what are we in for: a hard landing or a soft landing?

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Dear Shamubeel, To some extent the Auckland/Sydney/Melbourne house price escalation is to do with Chinese nationals seeking a safe investment retreat and them being fortified by some finance advantage like very low interest rates. If this is so, how far does NZ and Aus go to solving what is essentially a Chinese made problem. Is Nick Smith going to find enough spare government land to solve a Chinese problem?

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Excellent to see this query. A lot of NZers want this answered.
And they also want to know when there is going to be a limit put on how much of our actual land, including farmland, scenic assets, etc. can be sold to far wealthier foreigners - particularly those forming the largest exodus in history from communist China.

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Dido...

Key recognises this. Hes not that stupid. The overseas money lender are doing quite nicely out of this, and his past and present links to them is my theory on why he doing nothing about it.

Regulate to limit housing stock to residents only would solve the problem, but...
Increased prices means increased lending opportunities for his overseas mates.
It would be all right if it was good debt, but investments that are not cashflow positive are bad debt and just increase NZ inc overseas deficit.
Keys a great salesman. Unfortunately, its at the expense of the locals, who are seeing their assets stripped by foreign investment; who care little for the welfare of the locals.

Time to get real NZ. Funding super in its present form is unsustainable; especially with the current level of youth unemployment. People over 65 still working and collecting super shouldnt be entitled to super. Not only are they taking current wealth away from the next generation (assets sales are funding super) but they are taking jobs away from the youth. Theres not the level of jobs, due to efficiency, there use to be.

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Would a tax on foreign buyers and/or requiring them to build new homes rather than buy existing homes, help to cool the market?

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Would a true, red-blooded capital gains tax help to cool the Auckland housing market? And would it be good or bad for NZ’s economy overall?

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National has mulled the idea of awarding more points for potential immigrants who pledge to settle outside Auckland. Do you see this working?

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At the end of the day are we mainly dealing with a cultural issue? That is, most Aucklanders still want a standalone house with a bit of land, and just refuse to accept that the economics of a city with 1.5 to 2 million simply demand a lot of people live in terraced housing and apartments?

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Thanks everybody. The session is now closed to new questions. Hit the NBR Radio box in the story above to hear Andrew Patterson put your questions to Shamubeel.

NBR Radio on-demand content is subscriber-only. Hit nbr.co.nz/subscribe to sign-up, or nbr.co.nz/free to score a free Smartphone-only sub.

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No time to listen to NBR radio, no matter how riveting the interview.

Please, can this be transcribed into a click-and-read AMA?

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I can feel with you. Quite disappointing decision from NBR to move the answers into NBR radio. NBR is basically using our online subscription fees to subsidize their new venture NBR radio. First they just took some of our money to provide a service we don't want (and made the NBR online3 content still thinner than it used to be) , and now they even take the information we paid for and move this into a medium we are not interested in using.
Shame on you NBR. Don't expect me to renew my subscription - I shall vote with my purse and my feet.

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Hi there, 

AMA responses were moved to radio to avoid the situation were the subject gives a cop out response then dodges a follow up.

It also stops the self-censoring that occurs when they take a while to type replies (or, in some cases, spin doctor censoring).

It also makes an AMA session more attractive for guests, as it takes a lot less time.

I think the end result is a lot more immediate, engaging and in-depth and I'd encourage you to have a listen. (I do appreciate it can be frustrating if you accidentally close a browser tab without hitting pause and have to start again. We're hoping to add fast fowrard, rewind and tracklist options shortly to make NBR Radio special features easier to navigate).

We've got audio with a lot of stories now. This has been accomplished in part by doubling the size of our newsroom over the past year, which has also lead to more premium articles for our member subscribers.

CK

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Thanks for the answer Chris, but two more questions:

1) Could transcripts be written up? This way readers can click through questions rather than listening to an hour of material they may not be interested in.

2) Is there a plan to reinstate the pay-wall for this type of content at some point? It does seem like the free portion of the site is getting larger and larger and I'm starting to wonder at the benefit of a subscription.

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Hi there,

NBR doesn't have any plans for transcripts. 

I would encourage you to add the audio to your MyNBR Radio playlist (which you can access via the menu bar at the top of our home page). The player there lets you fast forward and rewind.

NBR has doubled the size of its newsroom over the past 12 months, and increased the amount of premium content for member subscribers.

Thanks,
CK

 

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I dont' have an hour to listen to this, but am interested in the Q&A. Come on, NBR, be useful please.

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Hi there,

NBR doesn't have any plans for transcripts.

I would encourage you to add the audio to your MyNBR Radio playlist (which you can access via the menu bar at the top of our home page). The player there lets you fast forward and rewind.

NBR has doubled the size of its newsroom over the past 12 months, and increased the amount of premium content for member subscribers.

Thanks,
CK

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With the radio format, there is nothing to tell me how long this program runs. Maybe you should run this as a podcast. I could play this special at my convenience.

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Hi there, 

NBR doesn't have any plans for transcripts. 

I would encourage you to add the audio to your MyNBR Radio playlist (which you can access via the menu bar at the top of our home page). The player there lets you fast forward and rewind.

NBR has doubled the size of its newsroom over the past 12 months, and increased the amount of premium content for member subscribers.

Thanks,
CK

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Hi Shamubeel,

I know the interview is now long past, but I had to provide my two cents worth (even if it is likely worth even less). While I agree with many of your suggestions for helping to make house buying more affordable for people, I have to very strongly disagree with your suggestion to create more rental controls like in Germany. I might not be an economist, but from first year economics I remember one of the principles was that if you regulate the price and availability of a market (like providing rental protections/controls), you will cause shortages.

I'm a kiwi who has lived in Germany for the past 14 years and been extremely frustrated with exactly those rental protections/controls because of the difficulty it has caused my wife and I to first find a rental property to live in and then to move to another larger one once the kids arrived. Exactly this happens in Munich (where I have lived the last years) and also in other parts of Germany. There not enough supply of rental housing in a time of Munich growing in population exactly because of those rental controls (in my opinion). It is very difficult to remove a tenant even if they do not pay rent (sometimes it can take upto 6 months) and if a rental property is sold, then the existing tenants can have the right to stay for anywhere from 10 years to the rest of their life. What this also means is that as a tenant it is very difficult to more houses/flats since the rent one pays in an existing place cannot be increased (by very much), while new flats that go onto the rental market can be offered for a market rent, which being much higher prevents people from moving. That is if they can find a rental flat at all.. I even write a bit about the frustrations we had finding rental properties in my book (here a little plug ;-), the Soaring Kiwi and the Sauerkraut - www.soaringkiwisauerkraut.com

Probably not worth the two cents, but maybe one cent at least?

Regards,
Phil

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