The Eye of the Fish

Maximus
March 7, 2009

Recession – pah! Ride a bike instead!

Aren’t you bored with all the talk of the recession / depression already? No one knows what’s going on, no one knows whether we are coming or going, down or up, or just remaining to go sideways. Our NZ press is woefully ignorant, having sacked anyone capable of independent thought, and just fill their pages with articles taken straight from overseas journalists. One minute we see a headline saying “Is the Recession over yet?” and “Housing Recovery Seen” and the next minute headlines claim that we are next in line to Iceland for total bankruptcy, and hence just about the worst place to be in the world.

Its all poppycock. New Zealand doesn’t need to have a recession, but I’m sure we can talk ourselves into it if we really feel like it. We have had a marvelous few years of boom, as have most countries in the western world, but our boom was less, and so in theory our fall should be less severe as well. Although America is the cause of this massive global melt-down, and all blame can be laid squarely at their door, if the crash really affects China as well then expect an even more massive global crash to affect the whole world. If that happens – good grief – we may even have to start making things ourselves again.

We all know that in the construction world, it’s the design end that comes to a sticky end first, and so architects laying off staff is the first sign of a bleak future for the rest of the country. There are murmurings in the industry of some NZ practices having a bit of a work squeeze, but I haven’t heard anything about full-on lay-offs in NZ just yet. Not so overseas: in the UK, Rogers just laid off 35 staff, with a beautifully worded letter to its employees (makes you want to work for such a nice friendly employer, just so you can get laid off with such grace), Zaha is letting staff go (bound not to be so friendly a farewell, methinks), and Fosters have just laid off 300 or 400 staff in the most callous and ghastly manner (as befitting all the nasty rumours I’ve heard about that practice), sparking the BD magazine to note: “After Foster’s, no one is safe“. It’s certainly a big change from late last year, when Foster claimed that the recession would have no effect on the practice (note: no longer his – he sold it for hundreds of millions last year). Even Foster off-shoot Make has had a haemorage of staff, closing their Edinburgh office and making 40 staff redundant, but then supporting 7 of them to pop back up in a new practice called 7n.

In the US, there are also massive redundancies in the architectural world over the last few months (with 650,000 new unemployed in the last month in the US, I’d suspect that not all of those are architects!). Gehry has cut his office staff by 50% (but I’d argue that’s because he is a crap one-line joke, and his supporters have tired of hearing the same line again and again). But in true American style, people are rising to the situation, and have produced a helpful action site on Recession and Recovery for those recently laid off. SCB, like others, is looking to the East (near, middle, or Far – i suspect they’ll all be the same) for more work, although stories of expats cars being dumped at the airport in Dubai (mostly it seems by broke Indians going home), seems to indicate that the boom in ghastly architectural porno-smut in Arabia may be over.

dubai-archiporn

To get back to NZ, what are we doing about the coming wall of doom? Fresh from the much-lauded Jobs Summit, where the idea was meant to be that people would all get together to find ways of stopping people losing jobs (but the opposite seems to have happened – in the week following the jobs summit, it seems most NZ manufacturing has shuddered to a halt). There were 2 ideas that got a lot of press – a possible 9 day fortnight, and a cycle path throughout the length of New Zealand. Seeing as that’s going to involve a lot of trucks full of concrete, then perhaps buying shares in Readymix would be the best response to that: while I thoroughly support such an idea, unless it is going to be dug by hand by unemployed architects, I can’t realistically see it making much of a difference to the unemployment rate. We have the problem that our manufacturing base is so small in NZ, putting people to work digging roads won’t really make much of an improvement to the overall productivity rate, although it may move them from the official government unemployment list, onto a government sponsored employed list – either way, we’ll still be paying for that out of our taxes. And speaking of which, while I’m on a roll (or a rant), if the government takes this moment to stop paying in to the Cullen fund then it shows they are even more of a pack of idiots than could have been thought possible. Seeing as our sharemarket has fallen by half, and the value of the fund is down 20 or 30 % at least, then now is the absolutely perfect time to be buying into the market to even out the losses. If they took this time to sell out of the Cullen fund – well – worst thing to do. Ever. That’s the best way to go and cement those losses for all time.

DeepRed
8 - 03 - 09

According to the venerable sharemarket analyst Brian Gaynor, a similar incidence of abandoned cars bought on credit was happening in Dublin.

Personally, I think NZ would be headed towards an Icelandic default if it takes money out of opportunities to bolster innovation and the sharemarket, and giving it to people to help them keep up with the Joneses and further dig deeper in the hole known as the current accout debt. It’s all well and good for people to say it’s their god-given right to keep up with the Joneses – unless of course, the Joneses have just been visited by the repo men.

Maximus
9 - 03 - 09

We’re right about the headlines. Paper today says “House Prices Down, Sellers ‘Realistic’ ”
http://www.stuff.co.nz/business/industries/2129966/House-prices-down-sellers-realistic

Wellington QV spokesman Kerry Buckeridge said…….

“The property market will need a considerable lift in sales-volume before any price recovery can commence. We don’t expect to see such a lift any time soon, given domestic job-security issues and the international economic situation.”

starkive
9 - 03 - 09

Over here in the not-for-profit (no, really) sector, the outlook is doubly confusing. We have all the usual market entrails to sort through and cash-flow worries to sleep with, but what to make of highly mixed government signals like “value for money” posses operating under an assurance of “no cuts for the cultural sector”?

rondo
10 - 03 - 09

The papers today say: ‘Flood of cheap flats’ as values fall.
http://www.stuff.co.nz/editors-picks/2205756/Flood-of-cheap-flats-as-values-fall

Auckland’s inner-city property market is about to be flooded with up to 1000 cheap apartments, with distressed owners having to sell for half the amount they paid little more than two years ago, a real estate agent warns. Real estate advertisements declaring “city steal … vendor quits”, “downtown waterfront suite abandoned”, “vacant and abandoned” and “mortgagee wants this gone” indicate the state of the market.
……….snip
“The banks are being very, very cautious,” she said. “They are pessimists, they believe the prices are going to fall even further.”
………snip

All of which is very interesting, in terms of the complete reversal from a year or two ago, when it was argued that small cheap flats were the answer to NZ’s housing woes. Its very noticeable that the owners clearly don’t want to have to live in these squalid little holes themselves.

starkive
11 - 03 - 09

I spent most of my 20s living and working in the CBDs of Auckland and Wellington in an environment which was largely swept away by the 1980s destruction of their pre-1950 building stock. An environment where it was possible for small businesses to thrive in cheaply rented units off long corridors in masonry buildings – the kinds of suites where once you went to the dentist or to have your taxes done. People made clothes, films, magazines paintings and photographs; designed buildings; fixed musical instruments and shoes; played at being private eyes for all I know.

After the Chase bomb went off, all those eminently subdividable buildings were gone, replaced with open strata office blocks where 500m2 was a small tenancy and the niche enterprises were sent packing to the suburbs.

Perhaps now we will see a genuine urbanisation of our cities as the market is flooded with these latest real estate mistakes – small, cheap and well suited to 1, 2 or 3 person enterprises. The downsizees likely to be cast loose by the atomisation of corporate culture might colonise the speculators’ hulks to our mutual benefit.

maximus
11 - 03 - 09

You may be right Starkive – it would certainly be good to to see the “mass of tiny apartments” type blocks be adapted for something else, but there are changes that have happened to the Building Code that may stop that happening.

Where there is a Commercial building, and a head lease, and therefore lots of smaller sub-leases, property is easily changed and adapted as you say, providing perfect breeding grounds for small innovative businesses. Much of Hong Kong is still like that – and its a hotbed of activity.

We won’t have the same thing going on with ex-Apartment buildings, however, including the monster going up next to you. In a strata-titled apartment building, knocking down walls and changing use to Commercial is all very much more difficult, if not near-impossible. Change of use conditions and requirement to get approvals from 75% of the Body Corporate will make it awkward to say the least. That, i suspect, is why owners of shitty flatettes in Scene 1, 2, 3 (Auckland disaster projects, as far as I understand), etc, can’t sell their properties.

No one wants to live in them, and banks now won’t loan on them, and so the market will keep on going down until someone comes along, buys the whole lot, and either demolishes internally or externally by having the majority shareholding in the Body Corp.

Which is why some people have been ranting on about them being such a bad idea… and why the WCC should not allow them to be built in the first place.

jayseatee
12 - 03 - 09

Hey! When’s that 20 under 40 competition that I keep seeing signs for? I have a really good idea for it.

guy
12 - 03 - 09

save it for next year ! its all over, rover! check out the arch centre website to see who won.