Just Thinking

Since writing my blog entry The Benefits of a Stable Population in Housing I have come across a number of other people saying many of the same things that I said. My blog also links to a PDF paper also called Benefits of a Stable Population in Housing (450 KB pdf file).

Dr Clydesdale, who lectures at Massey’s Department of Management and International Business in Auckland, is researching the economic effects of New Zealand’s immigration policies. The following is from him and Massey University:

"New Zealanders should be questioning the rationale for current immigration policy according to a Massey economist.

Immigration puts heat on housing market - Massey economist

An extra $3600 a year in your pocket, or more immigrants ?

The question is one New Zealanders should be considering because it sums up the relationship between rising mortgage interest rates and our current immigration policy, according to Massey economist Dr Greg Clydesdale.

The arrival of more wealthy immigrants is contributing to the increasingly inflated housing market, and attempts to control it led to the recent hike in interest rates from 7.25 percent to 7.5 percent, he says.

He estimates that anyone with an average $160,000 fixed mortgage would be $3600 a year better off if interest rates had remained steady. In January 2005, the interest rate was at 5.0 percent. Since then, the Reserve Bank has increased it ten times.

“Of course immigration is not the only force driving inflation, but we only need to get inflation down within a limited range to stop the interest rates increases.”"

That is an accurate statement as far as I am concerned.

NZ Pays High Price for Fame appeared in the Sunday Star Times on Sunday, 8 April 2007 and asks "Are immigrants the cause of skyrocketing house prices? Tim Hunter investigates the financial impact of New Zealand's global popularity." before concluding "If, as seems likely, immigration is fingered as a primary engine of house price inflation, prospective home buyers should take heart. The immigration effect will tail off and the relentless competition for housing should ease."

Well that is true, but I like to consider the deeper causes and try not to go through those phases periodically.

NZ is not the only country where this is being recognised. UK house prices pushed around by population movement gives good statistics and clear scientific evidence:

"The extra demand for housing that migration and immigration cause explain much of the regional difference in house price performance around the country, according to our latest research.

Propertyfinder.com looked at regional population changes brought about by both internal and international migration and compared them to house price changes.

There is a 73% correlation between regional population growth and house price growth. Regions with the highest inward migration have seen the highest house price increases, while the least popular regions have seen house prices underperform. Exclude the North East, an exception to the trend, and the correlation is an astonishing 94%. Warren Bright, Chief Executive Officer of Propertyfinder.com said:

The overall level of house prices depends largely on the wider economy. However the relative strength of regional housing markets is very clearly due in large part to population movement. Whether it is people wanting to buy their own home to live in, or investors providing rental accommodation to newcomers, demand for housing in the most popular regions has caused prices to rise the fastest. While these population trends continue, our research suggests that the best performing regions which have been attracting the most migrants will continue to see house prices outperform over the medium term."

Dr Alan Bollard, Governor of the Reserve Bank of New Zealand made a speech What's happening in the property sector? in Rotorua.

He showed the big surges in demand:

Figure 7. Estimated annual demand for dwellings from migrants
Number of dwellings (calculated as net migrants/average persons per dwelling)

and resulting activity:

Figure 6. Indicators of housing activity
Annual percent change

as well as a lot of other material.

It is very strange that the Government seem to be saying that they don't think that migration is a major factor in housing price increases.

The following is an exact copy of a message that I posted in a flickr group called Renaissance Man (or Woman). The photos are all clickable to view larger versions and additional comments in flickr.

While I was intending to start a discussion on Fibonacci / Phi ratio in plants already, I decided to include intelligent design in the one topic as a result of Cryptia's remarks in this photo:

I made a couple of comments there, but want to expand here as it didn't seem right to do a great discourse in her photo comments. As well as the subject raised by Cryptia of the "clever" dispersal mechanism of the dandelion seeds, I would add the "clever" arrangement of them so as to fill the space around the seed head evenly.

I use the word "clever" as a loaded word, suggestive of design. Equally, it might be stated to be "effective", a word that would suggest that it worked well but not suggesting any motive in it being that way. These are two very different ways of looking at things, and people may be predisposed towards one or the other way of seeing the world. Before Darwin, only one of these ways was at all common.

Darwin's insight was to see that small variations did occur in species during his travels and to think about the consequences of this over huge periods of time. A new way of looking at things emerged, one in which design played no part, but which still got a result that was effective.

I fancy that I can possibly see fibonacci spirals in Cryptia's photo, but they are clearer in a pinecone...

... or a palm tree trunk ...

The nature of these spirals and how they increase in number while never being other than Fibonacci numbers is dealt with in this thread:

www.flickr.com/groups/emergence/discuss/72157600010225959/

But back to the arrangement itself. Mathematically it is true that if a tree branch grows leaves at some regular angle from the previous one (as seen looking down the stem) then there is one and only one angle that has a very special result, and that angle is 360 degrees times 0.618034.. (or phi) or the reverse of that. The special property is that every leaf is put in the largest remaining space (angle wise) which is clearly an advantage when we think about the "purpose" or "function" of a leaf which is to catch sunlight. So the fact that very many plants use this angle shows that nature has by design or accident found the best solution.

If a plant was able to make a consistent angle, then natural selection would eventually lead to the angle that most plants use.

See also Fibonacci Spirals.

The New Zealand Government are holding an Inquiry into housing affordability in New Zealand and invited submissions from the public and interested groups. The price of houses in NZ has risen spectacularly in the last 5 years and young families trying to buy their first house must feel that they are getting further from their goal.

I have made a submission to the NZ Government, making a few small alterations to a paper that I wrote a couple of months ago and then sending that. My paper is called Benefits of a Stable Population in Housing (450 KB pdf file) and looks at wider issues than those that the Government is looking at. There would be many additional benefits including assisting in sustainability which the Government has also stated as a major goal this year. This is to assist in achieving out objectives under the Kyoto Protocol, and also reflects the delicate balance in NZ Parliament after the Fields affair, and the possible dependence on the NZ Green Party.

From the paper:

"This paper suggests that existing economic wisdom, particularly with such measures as GDP, does not recognise the huge benefits to all people living in NZ of limiting the rate at which the population grows, even apart from fixing population limits. It is suggested that large net immigration flows since 2000 is mainly responsible for the huge house price increases in the same period.

The main benefit of limiting population growth rate is the large reduction in costs of providing adequate capital intensive resources including housing, business premises, schools, hospitals and distribution systems for services such as electricity, water and sewerage. To make the case for such benefits the following matters will be addressed:

1. The disproportionate extra costs of a growing population.
2. Statistical evidence of the detrimental costs of population growth.
3. The capital drain of people reaching adulthood.
4. Past population growth bursts as the cause of depressions.
5. The inappropriateness of measures such as real GDP per capita.
6. Is a stable population bad for business?
7. Relationship to other policy areas.
8. Suggestions for practically implementing the policy."

I make the claim that if NZ had a policy of limiting nett migration to 5,000 people per year for the last 5 years this would have assisted in the Government inflation objectives and also meant that house prices would now be 40% lower.

For more information on the Government inquiry and other reactions, please see the Scoop article Inquiry into housing affordability in New Zealand.