Hmmmm so my take (with a question ont he end) on this, right here,: radionz.co.nz/news/political/258480/rent-subsidy-will-address-poverty-pm , Gos a little bit like this: We have an overvalued property market due to distorted returns in comparision to alternative investment markets due to preferential treatment of property as an asset. Cool, accept this as fact. This leads to overinvestment and over competition for the assets in the property market sooooo bid bid bid bid bid we keep feeling rich yay. Cool. But then we need the returns on our overpriced assets; but the people who dont own the houses cant pay it, cos house price inflation > the increase in the wage rate. Uh ohs. So we intervene to create further distortion by adding unnatural levels of return through rental subsidies, paid for by everyones taxes so those who own the mutiple houses get income top ups from everyones taxes. Seems legit. But the subsidies will be run by the govt. As we know govt not so good at this type of thing (determining market prices). And so, we place profitability distortion on top of structural and demand distortion and further asset inflation happens (all the while kicking anyone who applies for thier handouts - purely for PR reasons you understand). So we make our bubble bigger, get super duper returns for those who are invested in multiple assets in the housing market (in the short term), and the feeling of wealth for those in owner occupier status for the same duration. All the while kicking the can down the road until the bubble bursts....so my question is, with all this market intervention, where did the real National Party go? What happend to the invisible hand yo? Remember the invisble hand?
Posted on: Tue, 04 Nov 2014 20:22:22 +0000
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