Average residential property values are slowly but steadily declining in Auckland and Queenstown, according to the latest valuation data from Quotable Value (QV).
QV says the average value of homes in Auckland has declined every month for the last seven months, from $1,050,647 in November last year to $1,027,113 in June this year. That means it's now 2.7% lower than it was 12 months ago.
The drop in values has affected most parts of Auckland, with average values in June lower than they were 12 months ago in all city districts except Papakura and Franklin.
The biggest annual declines in values occurred in North Harbour -4.9%, followed by Central Auckland -4.7%, Coastal North Shore -4.2% and Gulf Islands -3.6%.
Compared to June last year, average values were up in Papakura +0.9%, and Franklin +1.6%, although those gains were modest.
Queenstown-Lakes has followed a similar trend to Auckland, with the average value there falling for each of the last four months, from $1,204,828 in February to $1,173,692 in June, which was down 0.1% compared to June last year.
There are also tentative signs of property values beginning to ease in Wellington City, where the average value has fallen for the last two months in a row, from $831,614 in April to $827,125 in June, although values are firmer in the Hutt Valley, Porirua and Kapiti.
Around the rest of the country average values are mostly continuing to rise, although the rate of increase appears to be slowing (the table below shows the average property value and the three month and 12 month percentage change for all districts throughout the country).
The average residential property value across the entire country was $687,021 in June, up just 2% compared to a year earlier.
"Overall the New Zealand property market remains quiet with value growth continuing to slow," QV said in its June report.
"The rate of annual growth nationally dropped from 3.5% in June last year to 2.0% at the same time this year.
"The rate of quarterly value growth has dropped to 0.1%."
QV General Manager David Nagel said there was a lack of impetus in the market, as expected at this time of year.
"Demand remains steady and listings relatively low, resulting in stable market conditions but subdued value growth," he said.
"We anticipate this will continue over the coming months, with supply remaining fairly constrained and demand either staying flat or dropping slightly in many areas."
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| QV House Price Index June 2019 | |||
| Territorial authority | Average current value $ | 12 month change% | 3 month change % |
| Auckland region | 1,027,113 | -2.7% | -1.2% |
| Wellington region | 709,803 | 7.9% | 1.0% |
| Total New Zealand | 687,021 | 2.0% | 0.1% |
| Far North | 434,354 | 5.7% | -2.6% |
| Whangarei | 548,223 | 3.6% | 0.4% |
| Kaipara | 553,496 | 2.5% | 4.1% |
| Auckland - Rodney | 943,814 | -1.3% | -1.0% |
| Rodney - Hibiscus Coast | 916,817 | -1.8% | -1.3% |
| Rodney - North | 969,958 | -0.9% | -0.8% |
| Auckland - North Shore | 1,177,454 | -3.9% | -1.7% |
| North Shore - Coastal | 1,343,601 | -4.2% | -1.4% |
| North Shore - Onewa | 945,038 | -3.0% | -1.9% |
| North Shore - North Harbour | 1,149,620 | -4.9% | -2.6% |
| Auckland - Waitakere | 814,012 | -1.5% | 0.0% |
| Auckland - City | 1,207,580 | -3.3% | -1.9% |
| Auckland City - Central | 1,046,191 | -4.7% | -3.7% |
| Auckland_City - East | 1,531,894 | -2.4% | -0.6% |
| Auckland City - South | 1,073,126 | -2.9% | -1.9% |
| Auckland City - Islands | 1,116,389 | -3.6% | -0.7% |
| Auckland - Manukau | 889,363 | -1.5% | -0.4% |
| Manukau - East | 1,135,413 | -1.7% | -0.1% |
| Manukau - Central | 687,217 | -1.7% | -1.2% |
| Manukau - North West | 776,791 | -0.6% | 0.0% |
| Auckland - Papakura | 709,445 | 0.9% | 2.6% |
| Auckland - Franklin | 672,649 | 1.6% | 0.1% |
| Thames Coromandel | 752,046 | 2.4% | -1.8% |
| Hauraki | 421,355 | -1.6% | 0.9% |
| Waikato | 490,079 | 1.9% | 0.5% |
| Matamata Piako | 491,033 | 10.7% | 3.0% |
| Hamilton | 585,264 | 4.7% | 0.9% |
| Hamilton - North East | 731,945 | 2.7% | 1.3% |
| Hamilton - Central & North West | 539,740 | 5.2% | 0.9% |
| Hamilton - South East | 539,041 | 5.4% | 0.7% |
| Hamilton - South West | 520,948 | 6.8% | 0.3% |
| Waipa | 577,565 | 5.4% | 1.4% |
| Otorohanga | 362,612 | 27.0% | 2.2% |
| South Waikato | 257,829 | 22.2% | 2.5% |
| Waitomo | 227,797 | 8.7% | 1.3% |
| Taupo | 519,763 | 9.2% | 0.9% |
| Western BOP | 679,914 | 8.9% | 5.0% |
| Tauranga | 743,978 | 6.3% | 1.5% |
| Rotorua | 472,497 | 11.3% | 0.0% |
| Whakatane | 465,040 | 7.3% | -3.1% |
| Kawerau | 268,491 | 27.5% | 10.0% |
| Opotiki | 319,605 | 17.7% | 3.1% |
| Gisborne | 352,586 | 14.0% | 3.6% |
| Wairoa | N/A | N/A | N/A |
| Hastings | 522,306 | 15.4% | 2.0% |
| Napier | 558,000 | 8.9% | 0.6% |
| Central Hawkes Bay | 388,872 | 14.3% | 2.5% |
| New Plymouth | 463,472 | 2.9% | 0.4% |
| Stratford | 283,969 | 6.3% | 5.2% |
| South Taranaki | 243,401 | 9.4% | 2.7% |
| Ruapehu | 220,366 | 12.7% | 6.5% |
| Whanganui | 290,509 | 13.9% | 7.2% |
| Rangitikei | 234,397 | 14.7% | 1.0% |
| Manawatu | 394,079 | 16.4% | 9.6% |
| Palmerston North | 445,586 | 14.0% | 2.3% |
| Tararua | 245,853 | 24.2% | 7.9% |
| Horowhenua | 377,029 | 18.5% | 11.1% |
| Kapiti Coast | 601,223 | 7.8% | 2.5% |
| Porirua | 598,270 | 6.8% | 0.1% |
| Upper Hutt | 562,771 | 15.0% | 3.8% |
| Hutt | 596,737 | 11.3% | 3.6% |
| Wellington City | 827,125 | 6.0% | -0.2% |
| Wellington - Central & South | 817,716 | 5.7% | -0.6% |
| Wellington - East | 883,480 | 6.2% | -0.8% |
| Wellington - North | 758,916 | 7.5% | 0.1% |
| Wellington - West | 940,910 | 4.1% | 0.3% |
| Masterton | 385,213 | 11.3% | 1.9% |
| Carterton | 433,488 | 10.7% | 2.0% |
| South Wairarapa | 504,572 | 4.9% | -1.9% |
| Tasman | 611,397 | 5.9% | 2.1% |
| Nelson | 624,307 | 7.1% | 1.2% |
| Marlborough | 488,970 | 5.2% | 3.0% |
| Kaikoura | N/A | N/A | N/A |
| Buller | 196,518 | 4.3% | 2.6% |
| Grey | 219,620 | 1.7% | 2.3% |
| Westland | 254,041 | 5.5% | -3.1% |
| Hurunui | 386,968 | 0.5% | -1.8% |
| Waimakariri | 450,548 | 2.4% | 0.6% |
| Christchurch | 499,934 | 1.0% | 0.5% |
| Christchurch - East | 377,834 | 1.5% | 0.7% |
| Christchurch - Hills | 678,967 | 1.0% | -0.3% |
| Christchurch - Central & North | 589,618 | 1.2% | 0.5% |
| Christchurch - Southwest | 474,624 | 0.5% | 0.6% |
| Christchurch - Banks Peninsula | 522,414 | 0.2% | 0.4% |
| Selwyn | 557,014 | 1.7% | 0.7% |
| Ashburton | 358,188 | 1.6% | 1.5% |
| Timaru | 366,103 | 1.9% | -0.8% |
| MacKenzie | N/A | N/A | N/A |
| Waimate | 270,052 | 10.2% | 10.8% |
| Waitaki | 320,901 | 5.5% | -0.5% |
| Central Otago | 531,832 | 6.8% | 2.2% |
| Queenstown Lakes | 1,173,692 | -0.1% | -2.2% |
| Dunedin | 460,448 | 12.2% | 2.0% |
| Dunedin - Central & North | 476,285 | 10.9% | 2.1% |
| Dunedin - Peninsular & Coastal | 414,883 | 9.5% | 0.6% |
| Dunedin - South | 442,031 | 13.8% | 2.3% |
| Dunedin - Taieri | 479,561 | 13.5% | 2.5% |
| Clutha | 228,196 | 11.0% | -1.1% |
| Southland | 318,578 | 14.1% | 0.7% |
| Gore | 236,227 | 8.2% | 0.4% |
| Invercargill | 300,130 | 13.3% | 3.3% |
| Main Urban Areas | 790,389 | 0.7% | -0.3% |
202 Comments
Given that Auckland house prices increased by 93% between March 2009 and June 2018 [Source: NZ Listener; August 18, 2018] the recent decline reported by QV is minuscule.
Property remains a premium long-term investment. The combination of rental yield and capital gain is hard to beat.
TTP
To date, a specuvestor will have lost about 10% of their potential profit since the peak.
The combination of dividend yield and capital gains of the share market has soundly beaten the property gains over the same time period. A nice thing is that shares do not require annual expenses such as rates, insurance, and maintenance costs, all of which reduce the returns available. They are also considerably more fungible, and you don't have to give a significant portion of your gains to an agent.
Tell me again about the wonders of property? My utility stocks are up more than 30% since the start of this year, which is a bit silly as I own them for the outsized dividend. Well, at least the dividend used to be outsized prior to the capital gains. Still is though based on purchase price. 12-18% annual yield based on purchases price with no annual costs, what is not to like?
Hi Yankiwi,
Shares are an inherently risky/volatile investment - in a way that property is not........
For a gamble, I prefer Lotto, Bitcoin and the neddies.
TTP
Both shares and property can be great investments, or bad ones, it depends how you go about it.
Now that is truly a reasonable comment VoR.
(It took me 3 years of losing $ before I finally admitted to myself I was no good at share trading)
that's why a lot of people get into rental properties, don't need any knowledge and can make mistakes and still be ok
shares are just as easy but you need to know the difference between investing and trading, ie hold for at least ten years,
also you need to learn how to read reports and obtain information needed to make an informed choice.
I am teaching a fellow collegue who has invested in two shares and is 10% up already in two months BUT has a ten year time line with a goal of growing it enough to pay down the loan on the rental home he owns
MARKET CLOSE: NZX50 tops 10,000, growing 284% in past decad
Tuesday 23rd April 2019
The S&P/NZX 50 Index broke through the 10,000 level for the first time today, and has climbed about 284 during the past 10 years.
The benchmark index rose as high as 10,036, and ended the day up 45.22 points, or 0.5 percent, at 10,004.84.
Sharetrader, you say:
"get into rental properties, don't need any knowledge and can make mistakes and still be ok"
Sorry but I strongly disagree with that statement. Buying a property and hoping it will go up in value is not investing, it's speculating. I will only ever buy a property if I can increase its value by min 20% in the 1st 3 months and since I put 20% of my own money in, I effectively double my money. That's what I like about property (residential but especially commercial), I can influence the value of my investment, which I cannot do with shares. If you're good at share trading, good on you.
Yvil, yep, if people are not interested, I mean REALLY interested, in individual stock analysis (which takes time and effort), dollar cost averaged index investing is definitely the way to go with sharemarkets. After about 300% gain in NZ and US indexes in the past 10 years, I'm not sure how long this current bull market has got left in it (a real estate market slide would end it in NZ), but there'll be plenty of opportunities over future years.
Indeed, I thought I was so smart when I was up over 50% with my shares in the 1st year, then even more in the 2nd year, the 3rd year the share market crashed, I held on to my stocks far too long and lost more than I had earned in 2 1/2 years. I realised it's very easy to think you're a smart share trader when the whole stock market goes up, reality bites when it goes down, which have not experienced in the last 10 years
"I realised it's very easy to think you're a smart share trader when the whole stock market goes up, reality bites when it goes down"
When the whole market is rising, investors think they're investment geniuses. It's when the market prices fall, that reality bites. Some people only learn through personal experience. Know of numerous examples with so many different investment assets.
Applies not only shares, but any other item with free market prices - there are many examples:
1) bitcoin & other cryptocurrencies.
2) rare and precious metals - such as silver, gold, platinum, etc
3) commodities such as oil, natural gas, iron ore, coal, copper, tin, etc
4) agricultural commodities such as wheat, corn, soybeans, palm oil, cocoa, coffee, sugar, cotton, pork bellies,
5) tulips
6) pieces of art
7) rare baseball cards, rare comics, rare books, etc
8) financial securities - bonds, mortgages, collateralised debt obligations, preferred shares, options, warrants, contracts for difference, common shares (such as the internet bubble in 2001, or the GFC in 2008/2009), structured financial products, etc
9) foreign currencies
10) real estate - raw land, farm land, commercial real estate and residential real estate
Each new generation of adults who enter the workforce and do not have any investment experience, need to learn the investments lessons, and normally they learn it through personal experience. They would be wiser if they heeded the wisdom of the adage - "those who fail to learn from history are doomed to repeat it".
Even when people study history, some people learn the wrong lessons from history - one such example is the extrapolation of past market prices, despite the common investment warning from regulators of financial products that past performance is not an indicator to future performance.
Indeed personal experience was a far, far better teacher than all the books I had read on trading the stockmarket
An investor who has only had success in an upward moving share market isn't much different to one who has only had success in an upward moving property market.
The good investors are the ones who heave weathered crashes without losing everything, surely. So suggests Nassim Nicholas Taleb.
Best way to survive a car crash is to not be in the car.. same with a stockmarket crash.. So it depends on why they got out of the market.. if they foresaw the market turning to custard and jumped off the bus before it crashed, thats a smart move. If they avoided it by dumb luck, its just luck.
Taleb's approach was essentially to invest in a way that would not result in massive losses should a rare event occur. Didn't look as spectacular in the short term, but worked in the long term.
So more books is your answer RS & Pragmatist
You were citing your own experience. Taleb's own lifelong experience also seems valid, unless we're to go all "Boooo, hissss, books! Intellectuals!!"
Yvil,
Indeed. Fortunately I learned that as long ago as the early 70s in the UK-there was a major stockmarket crash then-. and have stuck to my dividend guns ever since. I never buy shares for their growth potential and hold no non-dividend paying shares. I concentrate on good quality companies with strong cash flows and have seen many market crashes come and go. I have been increasing my cash in anticipation of the next one. When it happens,share prices are very likely to fall far more than dividends and i will be happy to sit out the storm,before picking up some lower priced stocks. The NZX 50 has risen by some 110%-including dividends-over the past 5 years and i think it's overpriced.
I prefer shares to property though I have had one rental at the Mount for over 19 years,but clearly many Kiwis are more comfortable with property and that's fine.
Well done linklater
Property is also an inherently risky and volatile investment in a way that shares are not... everyone has heard about horror stories of bad tenants. It seems almost every seasoned investor has their own story to tell.
Shares and property can each have their place. You may rate them differently than I would. I am comfortable with my demonstrably higher returns with lower risk as compared to the equivalent property investment over the past decade.
It's not really fair to compare shares with Lotto, Bitcoin or neddies though is it? Unless you're day trading them or into derivatives it's not like gambling at all.
It’s only like gambling if you are speculating rather than investing. Yes, buy low, sell high (or hold forever if it’s a great company), is easier said than done. Also, in NZ, we are likely about to see that it’s true that property values can go down significantly. In bubble situations, the timing of when you buy does matter. Ask Japan.
If you had bought bitcoin at a random time in the last 10 years, there is a 99% chance that you would be in profit, probably around 1000% or so on average. Show me a lotto ticket with those odds.
Can't believe TTP's and Yvil's tunnel vision mate. I am in REIT's (mix of commercial and residential), receiving dividends (rent) without fixing a toilet at midnight. Best of both worlds!
Good one ha ha.
So are asset classes that are highly leveraged and well above long term trends. And property in NZ ticks both of those boxes.
Yankiwi
To be fair my Auckland property doubled in price from what I paid for it
NorthernLights,
I've been investing in the share market since the late '80s, and have seen quite a few bear markets. The '87 hiccup was shortly after we started investing, and for us it was a serious buying opportunity that paid very well within a few years. My first serious funds shift was in the early 90's, where I went from index funds to bonds for a period of time. The indices dropped about 10-15% and the bonds gained 15%. Shifted back to index funds after only a few months. That was a very happy and quick cycle. At around 2000, went defensive again, and missed the dotcom crash. This time I waited a couple years for the market to bottom out before returning to growth funds. In late 2007 I went to cash and bonds. At that point, return of capital became a much higher priority than return on capital. Less than 20% of our saved wealth is now in the share market due to our present risk averse position. Of course, a half dozen years ago, we were at less than 10% of our saved wealth in the share market... We don't need any real returns for our money to outlive us even if we live another 40 years (this assumes that life on this planet continues somewhat normally with only the usual "interesting times" happenings). Hence the current risk averse investment portfolio.
Yankiwi …Great insight into your past investing
Just as an aside are you an American as I presume ?
I think you are because you gave a response without the traditional Auckland itching
In the NZ of 1986 they were great times with economic reforms ( sadly curtailed further ) Chase & Equiticorp & Goldcorp lol
As for the current US sharemarket it’s built on over exuberance & corporate share buybacks financed by Trump gifting huge corporate taxcuts ( silly really because if he’d given the biggest taxcuts to wage earners they’d all have spent it resulting in improved corporate earnings )
However the pension funds must make 7% a year return & they’ll find a way or go bust
Can you imagine the mayhem when large numbers of people are forced to live off vastly reduced pensions
That storms to come
First 45 years was in US. Been a dual citizen for about a half dozen years now. There are some very bad times ahead for many public pension funds, primarily from the over-exuberant pension promises from politicians buying votes. There are quite a few states in the US that are bankrupt due to outrageously extravagant pension obligations. I did my retirement evaluations assuming that my pension would go bust (along with social security and super). It appears that this was a bit on the conservative side. I may even get to collect some funds before things go awry. My pension is a private company pension, and to date they are quite solvent. Social security, it seems that this is not the 800 lb gorilla in the room. Instead, what is likely to detonate the US govt deficit is medicare spending growth, which has been growing at double digit rates for decades.
As to US sharemarket, I've been out of that market for the last dozen years. It was a good time to exit (10/2007)... After exiting the index funds, I was cheeky enough to short the market for about 1.5 years. I felt guilty making money when the market was declining...
Toothy I could not find your source, but appreciate you are widely read and always are factual in your postings. I looked at Interest.co, as it also is a good source of hard data, and found the following. Mortgage debt ( nationally) has risen 66 percent since March 2009 , which almost mirrors , the national median increase in house prices of 71 percent. ( unfortunately I am unable to separate the regional differences) At the same time our Reserve Bank has helped our Australian banks and our nations GDP growth , by reducing the OCR in half and the widely used 2 year fixed mortgage rate has fallen by 64 percent. I tend not to use hairdressers often, but my vet mate tells me that there is no correlation, and there is no concern about the continued rise in house prices and our nations growth, as someone will always buy housing at a higher price.
I long for the day that houses are no longer referred to as "investments" especially when multiples of them are concerned. They are for people to live in and make homes in and the sooner we get back to that being what we refer to them as, and they no longer appear on pages such as this, the better.
Ahem how do you think your landlord views the house you live in. No maybe dont answer that. If the roles were reversed pocketaces and you were the landlord how would you refer to yourself, investor owner or friend who gets taken advantage of.
I don't think you quite got what my comment was about.
PS what landlord?
Strange I am sure you said you had a first home somewhere around clevedon but you sold it (25) years ago and regret it that you are now renting.
So true.
A big by-product of neo-liberalism. The state didn't want to provide rental housing anymore, so set up a regieme where it would be attractive for private market to provide.
Like many things in neo-liberalism, it's failed.
Fritz don’t neglect the fact the J Key Govt allowed open foreign speculation in Auckland home market for tax free profit which took years before the National Party even admitted the loophole
PA, so who will provide rental houses to tenants? (and please don't reply all tenants will just buy the houses they now rent, that's just not realistic), the government (make no mistake the government = us tax payers)
According to Stats NZ
From June 1998 to June 2018:
Owner Occupied Dwellings went from 1,002,400 to 1,169,000 (an increase of 17%)
Rented Dwellings went from 391,200 to 630,100 (an increase of 61%)
Are you saying that the massive increase in the ratio of Rented Dwellings is people choosing to rent over Home Ownership? And not due to an increase in the number of simpletons recycling equity to buy low end property on Interest Only terms, displacing the next generation out of home ownership?
No I'm not saying that at all NZ Dan, now who would provide rentals if there are no landlords?
There have always been some landlords not like now where every man and his dog aspires to it
More people will provide housing for themselves like 20+ years ago, with the Government picking up the slack via social housing. Yes, social housing is right mess at the moment but when you go from 65,702 state houses in 2015 to 62,221 in 2019 what is expected?
Rented Dwellings increased 61% between 1998 and 2018 whereas Owner Occupied increased 17%. Our population increased 24% but private dwelling stock increased 27%, so we've got more houses per capita today than 20 years ago. In my opinion we now have a surplus of Landlords.
Agree with you in part Pocket Aces.
Your first house is your home - the prime reason for buying it is for you and your family to live in. It is not an investment that one seeks a return or income from, nor to sell in the short to medium term to realise any capital gain. If you sell it, you will be looking to another home on the same market.
The second (and any subsequent houses) are an investment. You expect a return or income, and depending on market circumstances, possibly sell it to realise capital gains. If you sell your rental, you don't need to reinvest in the same market and can look at other options.
Sadly many can't get their heads around this concept. This is especially so for those who scaremonger FHB; as long as FHB can service their loan (and the outlook is for mortgage rates in the medium term is positive) then they have little to worry about in terms of short term market fluctuations.
Six month or year from now - for FHB the most important thing to them is that the mortgage payment is likely to be the same (or possibly less), and whether the market goes up or down is irrelevant, if they go outside and look at the house, it is still the same home. The 73,000 FHB who have bought in the past three years will realise this.
Hallelujah P8, very well said
I keep hearing this same point repeated, but it can only be considered reasonable advice for those with a sizeable deposit who can afford a property they will stay in for the medium term.
The reality is when 42% of FHB are buying with less than 20% deposits (likely more as gifts/interest free loans are being used to avoid LMI). A lot of FHB I know have been buying starter properties as its all they can afford. These aren't the property they want to hold and live in for 10+ years.
Any price fall become extremely pertinent if you don't have a buffer of equity, or you can't afford a property that meets your needs for the medium term.
Miguel, you are correct regarding FHB buying starter properties. It is a step on the property ladder and not a life-long commitment - from a long term memory, the average length of time a mortgage / house held is seven years.
In my instance, from memory I held my first house a little over three years, the second seven years, the third six years, twelve years and then my current house. The reasons for selling and buying were varied - firstly a shift from Auckland due to promotion, life stage including that of children, trading up a house, separation (she thought she traded up for something better, I subsequently definitely did), another life-stage related to retirement and travel.
Over the forty years I experienced property price gains each time - you may say I was lucky but that is the long term trend (ever since Adam and Eve shifted cave).
So what of your fear in the event of a property fall over a 5 to 10 year period?
Firstly, I don't know of any authoritative property investors predicting that far out due to the so many unknowns (e.g. What will the immigration rate be in two years time?).
Secondly, I feel quite strongly that over that period it is more likely to be upward movement in property prices (due to inflation of building costs, increasing land shortages, increasing wages etc) so I am working here with a scenario I don't agree with with.
But lets do the maths for an extreme (but I think) unlikely 10% drop in six years time.
Property A is the first home you buy. Property B is the ideal and desirable house that you will be looking at in seven years time.
2019: Property price of A is $700,000, but ideal house B is $1,000,00. Price differential is $300,000.
2025: Property price of A is now $630,000 but ideal house B is $900,000. Price differential is $270,000.
Hey, is that price differential to trade up less? Smile!
OK the doom and gloomers will be screaming "but, but, but .....".
What of your equity in A and ability to buy house B. Well a few things are likely to happen over six years; you will have paid down some of your mortgage (with current interest rates I would be paying down more than minimum while the sun shines), your wages are likely to be higher, and you have probably saved a little more especially for that better house you are desiring.
Remember at the moment banks are leading of the assumption that you have the ability to meet your mortgage if rates go up to something like 7%.
If you have meet your mortgage payments - and a little more over - over six years, then you are a customer who banks like and will be wanting to keep so in a worse case scenario where you have had to shift due to work and things weren't too flash in terms of equity they are more likely to be more tolerant when it comes to LVR ratios.
Are things certain - of course not. Nothing in life is certain, but act prudently and don't go around thinking the worse case scenarios.
.
You seem to be glossing over the main point about buying with extreme leverage. Lets assume a 100k deposit (14%) on a $700k property leaving a 600k mortgage. This would not be uncommon for FHB in big cities. If the price of the property drops to 630k, suddenly that equity shrinks to 30k + principle repaid (lets say 60k). After transaction costs, that would leave maybe 7% deposit towards the 900K property.
Like I say, I wouldn't say the original advice is necessarily bad for people who have a 25%+ deposit who can afford a property that they won't quickly outgrow - as it allows a bigger equity buffer. But this isn't the reality for most first home buyers, which is why this blanket advice to "just buy now, falling prices make no difference to homeowners" is both wrong and irresponsible.
Agreed Miguel if you are selling it next day.
However, the average period of home ownership is seven years (and in providing my situation I was illustrating that this could vary and for a variety of reasons).
You have taken a simplistic view that is not necessarily a reflection on reality. In even five years you would have paid off some of the mortgage - and I have always advocated in postings that currently FHB should be paying down their large mortgages while interest rates are low - and I would expect that if you are serious about looking to trade up at sometime you should be looking towards saving towards that goal.
The situation may seem daunting, however keep in mind that over the five year period your wages are also most likely increase.
One thing that has surprised me in life is that when you commit to something worthwhile - such as a house or an overseas trip - and that you feel that you are going to be stretched, usually this doesn't prove to be the case. One tends to modify one's spending behaviour, and without effort, one tends to cut out or reduce unnecessary spending.
And don't get me wrong that life is about total commitment to saving and buying a house - I have always been an advocate of enjoying a balanced life as unfortunately I don't believe in reincarnation so need to make the most of this one.
I think I understand your fears - I have been there. Following my separation I bought the family house for my children's stability, committing to a very very large mortgage to buy my wife out of both the house and my work-based superannuation scheme. Despite a reasonably-paid job I was that nervous checking my bank account daily and watching my spending. However, I was surprised how quickly things came right. I actually started believing that there was a god; that was 2001 and house prices took off following buying her out, however, that increase - or decrease - in value was irrelevant as it continued to be same house, same mortgage. House prices in the Hawke's Bay did decrease in 2007 (by around 10% of CV) but again same thing - same house, same mortgage.
The old story - you have nothing to fear but fear itself.
Huh? My example was 5 years of paying off a 30 year mortgage @ 3.9%.
Either way, I'm not describing my situation, so I'm not in need of a pep talk, but thanks anyway ;)
One thing that is almost certainly guaranteed, is that rents will go up. If interest rates to go up it will become more difficult for a Home Owner to service their mortgage but how many Landlords have mortgages? There will certainly be further upward pressure on rents.
But, if everything went tits up I think I'd rather be evicted from a rental than go through a Mortgagee sale process if I were a recent FHBer in Auckland.
Hi NZdan
Not necessarily. See my comment below. Stock of available rentals is rising across the country and is considerably higher than during 2018. Possibly the result of sellers failing to sell and becoming ‘accidental’ landlords instead. This is happening before the glut of new builds hit the market - (particularly Auckland, Hamilton, BOP, Christchurch) Rentals are actually very likely to become less expensive too. I believe you have pointed out before, that there is no housing shortage and in fact there are more homes per 1000 people in NZ today than there was back in 1998, when the words ‘housing crisis’ had yet to be fabricated by the banks, media and Believed by the speculators.
Rental yields (like in Vancouver, Melbourne, Sydney. London between 2008 and 2014) are very likely to reduce as prices do and more people, trapped by equity positions have to rent because life moves on and they can’t sell.
You may want to repost your data on housing stock again to make it clear for those that should be considering their leverage risk with no negative gearing.
JW
Oh, you mean these numbers?
According to Stats NZ:
In 1998 we had a population of 3,815,000 and 1,440,000 private dwellings (377 dwellings per 1000 people)
In 2018 we had a population of 4,758,000 4,929,700 and 1,885,000 private dwellings (396 382 dwellings per 1000 people)
There are the numbers... Housing crisis? Or credit bubble?
Stats NZ infoshare says NZ's population passed 4,758,000 prior to Q1 2017 and the number of private houses did not pass 1,885,000 before Q4 2018.
Good point! I must have pulled some dodgy stats from Google. I've now used the 4,929,700 population figure for year ending December 2018, and we still see an increase in the number of dwellings per capita.
For the period 2008-2018, the figure goes from 395/1000 to 382/1000 - which is the period of the housing crisis.
Hi Nzdan, just wondering if the type of dwellings made over those years might create misleading numbers. A larger number of new dwellings might be 1-2bdrm apartments in Auckland, rather than a more historic average of 3-4?
NZDan, when it comes to renting vs owning we quote far too many stats. In reality, mentality, upbringing, courage, risk aversion are bigger factors to determine whether one will rent or buy.
My parents rented the apartment I grew up in. (they are still renting now!) I would have never had the courage to buy a house if I didn't meet my wife who comes from a much a family who is much more open to risk taking...
So you bought a house through courage alone? Did you not look at any stats before you chose to make your purchase?
Seriously, honestly, no, not at all. I just wanted to own my own house, it's very easy to find excuses not to buy if one lacks the courage to take the plunge; houses my drop in prices, we are about to have a child, maybe we want to travel overseas etc etc...
Well done! It's even easier to find excuses these days unfortunately. I took the plunge, upped and moved from Christchurch to the Wairarapa 3 weeks before Christmas with a pregnant wife and a carload of belongings.
Lived in a bedroom at the inlaws and spent most weekends over the next 6 months going to every open home and putting in offers. We low ball offered an accidental Landlord who had a bad experience (before the property went to market) and got our first place with a mortgage smaller than many Auckland FHBer's deposits.
Congratulations NZDan, perfect attitude, I think you'll do really well in life. RESPECT
Also NZDan, I had no deposit at all, the bank lent me 80% and I got the other 20% form the vendor as vendor finance in exchange of paying full asking price
Having more than one house is quite a recent phenomenon. I was certainly an adult when that began to change.
Nah these days you just need any sort of roof over your head and hopefully a massive high fence around your dwelling too. We're all living our lives connected through social media now. Who needs physical communities when you can join any virtual community in the world you want to?
"Premium long term investment" but most 'investors' are totally ignorant to the drivers of that yield and capital gains.
What allows you to extract that return?
Magic?
Good news for FHBs and other non-speculator Kiwis overall though, with the average now following the REINZ HPI downward.
Sure, folk born at the right time have enjoyed golden times, but at least affordability is improving for average Kiwis.
RS, don't you think we were all born exactly at the right time?
God works in mysterious ways, eh Yvil.
I'm an atheist.
Accept what we cannot change (when we're born) and focus on what we CAN change
We agree on all counts.
That has zero bearing at all on some having been very fortunate in the timing of their birth and policies then and since. The "all being born at the right time" was not particularly meaningful in that regard.
Yes, the declines have barely begun. When we track past -40% it'll get interesting.
Aucklanders always wanted to have the worlds longest slide, they might get one in a different form..
Hi Greg,
Noticed that Auckland region's average value for June 2019 appears as $1,049,689 in the table and $1,027,113 in the text???
TTP
They'll only get a long slide if they are exceptionally lucky.
Of the main centres Dunedin came out on top with a gain of 10 percent followed by wellington 9 percent, and HAMILTON almost 6 percent. Not baddd.
And Palmerston North is up almost 12 percent.
Palmy North is a goer!
TTP
Palmy North, main centre? But well done to those with foresight who bought 12 months ago in palmy (nth) esp first home buyers securing their futures
Hi Houseworks,
Correct - Palmerston North isn't a main centre......
But it is the centre of the Universe.
TTP (-;
with 90k population, add feilding and you have well over 100k population - As big as 'Napier-hastings' and dunedin
PN up 14%... up from 11% last year.. very solid
Not bad at all, but this is the tail wagging. They’ll follow Auckland, down, so that needs to be accounted for. Notice Auckland and Queenstown are leading the slide, with Wellington looking to be similar.
Wait, is this table correct? For example "The biggest annual declines in values occurred in North Harbour -4.9%, followed by Central Auckland -4.7%, Coastal North Shore -4.2% and Gulf Islands -3.6%." - but it shows coastal north shore in the positive, at 2.3%
Agree lonewolfnz,
As I indicated above, there appear to be anomalies in the text/table.
I expect that Greg will look at it very soon - and get things sorted.
TTP
Well spotted Lonewolf. The table was incorrect. We will have a corrected version up asap. Cheers.
I was wondering about that too. Is it last year's stats?
Welcome back Zach and top of the morning to you.
Haven't heard from you for a while.
TTP
Thanks TTP, I read the articles and comments daily although things have become a little repetitive and I find there isn't much new to comment on while we are in the doldrums. I 'circled my wagons', kept my powder dry and prepared for the worst but things are fairly unremarkable.
The table is fixed now. Sorry about that everyone.
Strap yourselves in, especially if you are highly leveraged, we’re likely to be joining Australia in their slide. Next up, oh there isn’t really a housing shortage in Auckland, it was just a speculative affordability issue.
"values sliding in Auckland"
Entirely as predicted, patient first time buyers who are saving hard are gaining valuable ground at speculators expense....
There is no hurry.
At about $10k per square metre (current asking prices) in central Auckland (apartments), we can expect a lot more sliding.
Noted that localities where FHBs commonly purchase homes continue to rise in value.
Add savings (from avoiding paying rent) to long-term capital appreciation and it’s a no-brainer for FHBs........
Unsurprisingly, FHBs are now a very active segment of the housing market.
TTP
First time buyers need to factor in dead money forked out in interest, rates, insurance and maintenance on an asset that's sliding value. Renting whilst savings us a no brainer. Values in cheaper areas have fallen to.
Again, Spruikers and Agents are biased one trick pony's, they know nothing more than borrowing and gambling on future gains. There is no hurry...
If the RBNZ is preparing contingencies for for increased possibilities of a one in 200 year event then we all should.
Hi RP
If we are getting alarmist and live in fear of the NZRB one in 200 hundred event, then we should be all out of here. It is far, far less likely than a major earthquake, flood, or severely damaging tropical cyclone. Oh, and Auckland - it is probably not too far off the same likelihood for a volcanic eruption.
P8, your complacency laden assessment of risk is amusing and a timely indicator there.is indeed trouble ahead:)
Thankfully the powers that be are taking increasing global risk seriously.
You need to read John Maulden and his Great Reset series to get an accurate handle on reality. It was posted on this very site.
The alarm bells ARE ringing. By choice, many like yourself have selective hearing...
Hi Retired-Poppy,
We’ve watched you becoming excessively anxious over the last few months, with your anxiety often spilling over into anger.
I guess this is at least partially due to the savage fall in bank term deposit rates.......
Have you contemplated your strategy if interest rates reach zero - or go negative??
You would then need to pay the bank for holding your capital..........
Oh dear.
TTP
Funny:) my house value is sliding too. My term deposit isn't.
Why am I angry when I expected much lower rates? See my NY2019 forecast of 1% OCR by year end.
Nice try.
Hi Retired-Poppy,
What rental yield would your house generate?
Can't understand why someone who purports to be knowledgeable about investment would forget something so fundamental as yield??????
TTP
REA-TTP, sometimes I wonder if I'm actually communicating with a jellyfish. You seem totally oblivious to the receding tide. Maybe I'm the fool.
Hi Retired-Poppy,
Yet again you (conveniently) forget to include the rental yield - and yet again you've been caught out.
Ignoring the rental yield completely discredits you....... It's a very crude attempt to mislead and deceive people.
You have pulled the trigger on yourself - or, in other words, shot yourself in the foot again.
TTP
Why on earth would I be concerned about yield in my family home of 22 years?
Show some spine admit you've got it wrong and move on.
Anyway, investors are also shunning houses because of the paltry yields. They are being replaced by naive FHB's
Agent then proceeds to throw his toys.....
Hi Retired-Poppy,
The reason why rent/yield of the home you reside in is critical to investment analysis is it’s a measure/imputation of opportunity cost......
It should be obvious to you that if you didn’t live in your own home, you’d have to pay its rental value to rent an equivalent house elsewhere.
Opportunity cost, is central to ALL investment analysis - be it CBA, CEA, CUA or any other form of investment/efficiency evaluation.
Retired-Poppy - with all due respect, you ought to do a basic course in microeconomics.
It’s not about getting angry: it’s about getting accurate (and not misleading other people).
TTP
Smart first time buyers such as Commentator Milkyone are leaving it to the Speculandlords to sweat it. FHB's have time on their side. Right now it pays to rent as explained right here; https://www.interest.co.nz/property/rent-or-buy
One reason investment property is falling out of trend is low yields here; https://www.noted.co.nz/money/property/property-investment-residential-…
Hope this clarifies my standpoint. You seem rather confused.
Hi Retired-Poppy,
Rental yields (net) in Auckland commonly exceed term deposit interest rates - and while the former are rising, the latter are rapidly falling.
Add to yield, the capital appreciation of houses over the last few years, and you will understand why not too many property investors come here complaining!
TTP
...so are you implying that Greg Ninness indepth research into rent vs owning is flawed?
Gross rental, before expenses such as interest, rates, insurance and maintenance is the more transparent comparison. There are many negative geared speculords sweating now that capital gains are gone. What is their nett yield after said expenses? Gross yields are simply too low to attract investors in historic numbers now.
As rental yields are as good as they are is very much the reason why you persistently choose to ignore/dismiss them! (Your bias is blatant.)
When longer-term capital appreciation is added to rental yield, your argument for bank term deposits becomes very weak - and you lose credence.
TTP
(eyeroll) "When longer-term capital appreciation is added to rental yield"
Is that guaranteed is it - lol! Now your shifting the argument towards something that's not even guaranteed. Why am I not surprised ;-)
No, I didn't think you'd have the balls to argue with the findings of Greg's research. You've yet again put up a poor counter argument to substantiate an outdated (due to ring fencing) investment strategy.
Hi Retired-Poppy,
Recent investigations here - and elsewhere - have shown that residential rental yields are predominantly positive and better than many people (including me) had supposed. (I recall commenting on a quite recent item on this website.)
If you continue to ignore/dismiss yields (be they negative/zero/positive) in your writings here, then I will continue to "poke you with a stick" each time I catch you doing so.......
That's to remind you that your approach is invalid.
You seek to mislead and deceive others, which is unethical and unprofessional.
TTP
You say"I will continue to poke you with a stick each time I catch you doing so......."
Who do you think you are? I am entitled to my opinion on an open forum as much as you are. REA-TTP, if you choose not to back your information with facts (links) you can expect to be a magnet for criticism.
Get over your apparent embarrassment and move on buddy.
Hi Retired-Poppy,
You say you are "entitled to [my] opinion".
The problem with that is that your "opinion" happens to be a dishonest interpretation of facts.
At the very least you're being disingenuous.
You're not as ignorant as you've been trying to make out. (You know very well why yield is critical to robust [property] investment analysis.)
TTP
...like I said get over your embarrassing gaffe, you're only human. Life goes on.
Hi Retired-Poppy,
You're being disingenuous again.....
You know well that you've blundered today: you won't get away with dismissing the relevance of yields as long as I'm around.
TTP
TTP you're forgetting the laws of logic. As house prices fall and become more affordable so to rents. Old supply and demand, watch and learn.
Ahh you're hilarious Ttp. Even reading your comments it's obvious to anyone that you're the one becoming excessively anxious. :) Look house prices are falling to wage earner levels get over it.
The choice of where to place your funds is not a binary Term Deposit vs Property.
Instead of putting it in the Bank you could hold equally secure Bonds - you're not paying anyone to hold them and they would have appreciated in value as yields plummet.
Yes RP
I look forward to the sunshine each day but are prudent enough to ensure that I do have a raincoat if need be.
However, I don't go around each and every day wearing my raincoat.
P8, fair comment. Hasn't the weather been fantastic up till now? Its been an epic ride for me too. Up till Jan 2018, I enjoyed the returns of high risk funds. TD"s are my thing for now :)
Cheers :)
Interesting comment re TD - with cut in OCR and other central banks’ similar actions, what are you doing when they mature (from what I remember you have a year or two to maturity) and interest rates well under half what you last posted.
Month back I shifted a TD to KiwiSaver balanced fund as returns for TD look sick and with cheap cash equities looking a more positive.
I appreciate global slowing and trade wars and Brexit not resolved but where are people putting their cash and this could outweigh the negatives. Australian TD rates currently under 2% (prior to RBA cut).
The difference is deafening, RP argued with TTP five times since your post P8, but no reply to yours
P8, sorry only just now seen the question. I honestly have no idea, nor am I yet concerned about it. I guess that one will be decided closer the time. One thing is for sure if I rollover TD's on maturity, rates will likely be a lot lower than the rate I'm currently getting. The prevailing weather and future forecast would play a major part in deciding :-)
Yvil, why are you counting my posts? It's a pity that, like yourself, REA-TTP still can't come up with any verifiable counter arguments when 40% of tax paying landlords are claiming losses from IRD. REA-TTP resorting to guaranteeing future capital gains as being part and parcel of net rental yields is one such example of sheer desperation. You suggesting the bank has no rights of the mortgagor is yet another. These outrageous mistruths do the Spruiker movement no favours whatsoever :-/
Hi RP
First home Buyers should also be looking at the increasing amount of rental stock in Auckland that has steadily risen from 4000 homes to rent (pretty consistent last year) to 4799 (trademe) today and using the extra stock - there will be lots of empty new builds to add soon, to negotiate hard on their rents and keep their costs down - time to negotiate hard with the landlords that just need some money in.. and save some extra for when the market starts showing it’s ‘bottom’. AND to remember that the tide has only just started to go out a little so far, shoulders are being exposed, but bottoms are some way away from being spotted yet.
How many of these additional landlords wanted to be landlords? Are we seeing the rise of the ‘accidental landlord’
Addendum
It’s happening everywhere, rental offerings nationally have also risen considerably over the last twelve months from just over 8000 to 9468 (trademe) today.
Consistent with a chat I had with my agent last week. Top end Auckland is overflowing with property. Few people can / willing to pay over NZD1,500 a week. Places are sitting unoccupied for months now. His guesstimate rents at the top end have fallen 10% in the past 6 months.
Plenty of Spec Home cum Rental Properties out there? Those Carters building supplies invoices won't pay themselves, need cash flow.
That's certainly what I'm seeing.
Thanks Glitzy
And there is also the consideration of our manipulated dollar which the RBNZ can’t seem to influence the weakening of despite their best efforts. Tourist numbers will be a key to the burgeoning number of Air BNB investors from the last few years..... will the occupancy rates keep high enough to keep them away from full rental options as well and higher longer term rental stock availability?
It's interesting, and surely important to examine how the top end is differing to the low end of the market. The sales stats above use average value so one is inclined to assume big changes in the top end are responsible for the majority of that.
At the low end, FHB still hold the view that rent money is dead money and so they are propping up every lower value segment out there.
At the high end, owners and investors have begun to recognize that million-dollar plus prices aren't very real unless there are enough fools out there ready to jump to that level.
The equivalent in rental terms - paying over $1500 a week only makes sense if you believe the hot air from the agent that luxury is in high demand.
Meanwhile the low end remains clearly under pressure, the pressure of finding out just how far you can stretch your tenants. Exactly what landlords are inclined to do when faced with maintenance costs, and the news that their landlord buddies are squeezing more and more.
Another loophole for property speculation is closed. Government has ended negative gearing. The law was passed last week. Now, speculators can not offset their property losses from income elsewhere.
https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/docu…
Cheers.
I still have all my property losses ringfenced anyway because they are in a trust. Going to transfer my bitcoins to the trust and start using them up that way.
I've got no issue with ring-fenced losses.
It's those who offset it against PAYE that irk.
Re: "Government has ended negative gearing". And about time too! They managed to slip that one under the radar without too much noise. Would be good to get further details on the new bill. Hint to Greg and David, for a feature article on this subject and future impact on the property market.
Ah, that's why Business Confidence has dropped....
Yep seems logical, given that so much of our past GDP gains under National as been based on passive income from increasing property prices funded by overseas money that has now gone.
Hey it could be worse, we could be in Vancouver's shoes with house prices falling quite dramatically and remember they don't even have a foreign buyers ban. Oh wait are we falling at the same rate....?
Article Huffington Post: Vancouver House Prices Fall By $7,000 A Month As Sales Hit Record Lows.
https://www.huffingtonpost.ca/2019/05/02/vancouver-house-prices-fall-by…
But it’s been kept so quiet by the press that most speculators probably won’t even realise the legislation has happened until they come to filling in their tax returns.
There was so much media about the Labor party in Australia planning to do this before their election. Amazing there’s next to no media about it here.
you forgot to add that IRD are door knocking on speculators that owe them 80M..
they are either in hiding or have crossed the oceans!!!
'Demand remains steady'. That's simply not true.
The Wellington data backs up anecdotes I have provided in the past month.
Returns through investment advisors over the past few years for managed funds has been pathetic really!
Haven’t got KiwiSaver but returns on them have been pretty much non existent on the investment.
Property is giving us around 9% guaranteed each and every year plus gains on purchase price plus safe.
OK, I'll bite.
https://www.fundsource.co.nz/kiwisaver/performance-tables/
average growth fund has returned 8.6% per year over the last 5 years, after fees but before tax. 'Only' 5.6% over the last year, but expect that to get a big kick next quarter if markets remain close to where they are now. This is for an investment that requires perhaps a few hours work once in your life to select your fund. Any other work is optional.
These returns do not account for the $500 freebie from the Government and any employer matching which many members receive - once they are bundled in Kiwisaver will neatly kick any other investment out of the park.
Between 1997 and 2003 Hong Kong property prices fell circa 65~70%. They then rose 600% from 2003 to 2016.
Timing is everything.
Poor FHB who are rushing to buy in the falling market instead of waiting for a while before buying to get the most for their deposit.
Buy : They must, to own a house for long term but when the market is in such a situation where the only way is down should wait and watch instead of allowing media / RE Agents play with their fear of loosing out.
https://www.newshub.co.nz/home/money/2019/07/auckland-house-prices-drop…
It'll be interesting to see if Winnie the Pooh's antics have an effect on HK prices in future.
Certainly will do if he starts playing soldiers with the PLA garrison.
QV data is old data.. the recent Ocr drops and removal of cgt hasn't filtered through yet.
With what's happening in the public sector Wellington prices today will look very very cheap in a few years time
QV says the average value of homes in Auckland has declined every month for the last seven months, from $1,050,647 in November last year to $1,027,113 in June this year.
Is it a coincidence that Foreign Buyer Ban started from November 2018. Why is this never a reason of the fall..Still in Denial that Chin..sorry Foreign buyers had any role in what happened in NZ
... also AML for real estate agents.
RBA cut their official rate to 1% yesterday and there's talk of cutting it to 0.5% by next year. Australia housing market has always been the leading indicator for NZ... so watch this space. But in the mean time Highbury in Palmy North is a good buy!
We have it on good authority from our 'real estate experts' here that NZ is difrunt, we are somehow immune to what happens in Aus, globally etc., and that prices could never ever drop here in any significant way...
Different except for the all the good things. House prices won't fall like they are in Australia because that would be bad, but the RBA has dropped the OCR so the RBNZ will do the same because it's good.
Auckland starting to look like Sydney 18 months ago....
The drops have only just started, where they will end up nobody knows.
I'm thinking down 20-25% from peak
'I'm thinking down 20-25% from peak'
As a prospective FHB, I hope so.
I still think it won't be more than a 10% drop, though.
But even a 10% drop would be good.
It is already down by 10% Plus in most areas in Auckland, if not much from the peak. High end houses are down by 10% to 25%.
Best to wait and watch as the process has just started and people who were waiting on sideline are jumping but soon will realize their folly
For the record Fritz, I think it will be a fair bit bigger than the drop you are expecting. As soon as first home buyers wake up to the reality of falling prices the ladder will disappear rungs at the bottom, the top rungs are already missing!
I think you're all correct in that we're likely to see the Auckland market slide a bit further and in some areas down to a slow crash of -20% from 2017 peak price. Though, as you can see from the above stats it's the paper millionaires that are going to be hit the most. Perhaps we're in a unique situation, well at least the countries that were popular as boltholes for Chinese money. And as you've pointed out Joe the top rungs of the property ladder are missing, and now that all that overseas cash has gone, that ladder needs to get a lot shorter.
Nah I think the reserve banks in Aussie and NZ are going to prop it up for quite some time.
They'll just keep cutting the cash rates.
We're not allowed to have recessions nowadays.
Yeah, sadly, that's my thought too.
Fritz, you could probably get a 10% discount from peak prices in Auckland now if you fossick around and make a low offer, but I’d wait! I think we’re only getting started...
At least. One that I'm watching is now asking 8.5% less than what it sold for in 2017, and that's immediately after failed auction. I reckon it'll have to come down significantly more before it finds a buyer.
dp
Theglc, at the top end in Auckland I'd suggest that the places which aren't recently renovated and still have the 1980s decor 25% from the top is a minimum.
The issue with these places is that~
1. There is so much development already and with falling prices there is no bid from developers / plot splitters any more.
2. Whilst we are edging toward the end of the building cycle (perhaps 18-24 months still to go) renovation costs are very expensive as skilled labour is still in short supply.
I looked at a couple of these places last weekend. Both bought in 2016. There are no bids in 3 months on either place.
So where does that mean the price is ? Maybe 10/15% lower than 2016 ? It's difficult to say because without a few prints we have nothing to show where the bid actually is.
My guess is these places are now down 30% from the peak but there are so few bids no-one really has much of an idea. I think we will take another 6 ~ 9 months before we really see how deep the market is cutting value as vendor expectations meet the market.
good comment!
I should be more specific so I will predict Auckland overall HPI will be down 20 - 25%
so Bernard Hickey's dream of 30% drop is finally here...
From what I can see there is a huge supply of 2/3 bed homes coming to the market. A significant proportion of the new builds are are out of town.
If I were looking at overall predictions I would suggest these new builds away from the city centre will be hardest hit over the coming 24/36 months as existing owners will need to compete with builders to sell.
The other area that will be hit will be the older properties requiring significant investment to bring them up to modern standards.
For both of these I can't see less than a 35~40% reduction from the highs over 2/3 years. If we have "an event" I.e. a proper exogenous shock this drop could significantly overshoot.
The idiot predictions have started again, must be full moon
I think I saw a New Moon the other morning on my way to work. Will explain why my cat is racing around the house at a million miles an hour, diving under furniture and performing jump scares in the hallway.
Nice. Any special breed?
Just your ordinary moggy. Gray with white patches.
Very funny Houeworks
More like 50% at least. Yardstick for home ownership valuation - what is affordable to the buyer? Banks already know the answer to this, which is why they have debt servicing ratios. Anything more than a third of gross income spent on housing gives most people no life to enjoy. As a yardstick, the average Auckland wage is about 60k, two earners in a household is 120k, average property values should be about 3 times that, add a bit of a premium for Akl being the biggest economic unit, and you'd get around 400-450k as an average house price expectation. Thats about half of where prices are at now. Then you have the rental market. What should a fair risk/reward be relative to other available investments for a rational investor? For residential property that should be at least 8%, based on the alternatives and the expense and commitment in holding illiquid residential investments. And rental yields in Auckland are? 3-4% or less on a good day? The yields need to double to justify the level of capital investment (so houses need to half in price), and rents can't be doubled because renters already have a higher servicing ratio than the owners. The maths is simple. Mean reversion happens because in normally functioning markets price discovery ensures risk and reward balance each other. Markets can stay irrational far longer than most can remain solvent, but they do correct violently without much warning. Same story for farms frankly. Cheap debt has pushed capital values up and return on capital to miserly levels (under 5%). Only people winning here are the banks. Who would accept a ROC of less than 5% on any business they might buy, other than specuvestors and farmers? Each of my businesses grows at more than 100% per annum in revenue, and 100s of % in value. Wake up and smell the coffee Kiwis, you are being ripped off.
As an Auckland based prospective FHB, financially in a position to buy the past 2 years, yet who resited the mathmatical illitrates who kept crowing 'now is always the right time to buy!', I am feeling particularly smug.
By waiting, I have saved 4 times;
-The additional deposit I have saved
-The interest I would have paid on the above additional deposit, if I had borrowed that amount
-The decreased price of whatever house I will eventually buy
-And the interest on the difference bwteen the higher and lower purchase price, which I would have to have borrowed.
And of course in the meantime, the sharemarket has gone gangbusters, so my deposit has grown by 20% (which of course are gains I can actually realise today)
And prices are still falling. And I am still saving.
I am very much looking forward to the ongoing commentary from Yvil & TTP over the coming months :)
'I am very much looking forward to the ongoing commentary from Yvil & TTP over the coming months".. Say sorry, you missed out TM2... how could you?
Back in 1997 in HK I resisted buying something as I thought it was a bubble. The place I bought in 1998 was 35% below the top of the market. In 2003 the same place had fallen another 15%.
Perhaps what you are seeing now is the start of the falls in Auckland. I don't think there is any hurry to buy right now.
Whilst in not a FHB I am looking for a place to buy as a home myself and it is at the top end of the market. I'm renting now.
My advice is keep your eye on the market for the next 12 months and research where you want to buy. Price psf. Aspect. Road noise. Direction of plot, facilities, nearest supermarket all that funky stuff. Then figure out what you want to pay and bid accordingly.
You never know where the bottom is going to be so just bid when you are happy with the place and the price.
.
Yep its just more bad news upon bad news for our regular spruikers at the moment :)
Happy realization.
All FHB should control their fear of loosing and wait to get the best for their money.
Yes absolutely, no point in being ripped off and neck high in mortgage debt. Oh and don't forget you risk negative equity if you pay too high a price in a falling market. Leave that risk to the money launders.
I am very much looking forward to the ongoing commentary from Yvil & TTP over the coming months :)
Thanks Milky1, happy for you that your deposit is growing well
Milkyone, what a smart strategy! By practicing discipline, patience and foresight, you will be rewarded for doing so :-)
I'm thrilled to hear people are following this pathway to home ownership.
Average house price falling in Auckland.......
Should one be surprised or is that a fresh news
Yeh stuart786 this is the norm and no more surprising.
Now the News will be when the market moves up................may be after few years
What will be interesting to watch is which stat Bindi resorts to if we get to the situation of HPI (what used to be the best measure, in REINZ eyes), average and median going down in Auckland. Will there be a new measure trotted out?
Pretty good news really, when those markets were way overpriced and just being speculated on like you would at a casino, creating issues in the market for real house buyers.
Banning foreign buyers has definitely made a great difference, the proof is the markets where most of the speculation was going on AKL and Queenstown are the ones most effected by overseas speculators no longer being part of it.
Apparently only 3% of all properties were sold to FB !!
The only person that believed that was John Key, and only because he said it.
And many of his mates like Tony Alexander and all the many other property spruikers.
Interested to see what the setiment will be like if we dip below an average price in Auckland of $1,000,000. Is that the emotional barrier that wil signal to everyone the part is truly over?
i wonder if sections would fall in price also, theres alot of sections on the market
has anyone been observing the Rental market????
There are heaps of properties that are Currently available and the number that have been vacant over 2 weeks are growing..
Ouch!!!! No ring fencing and lost of rental income!!! Ouch!!!
No problem renting property In Christchurch as plenty of demand for well maintained homes!
Property prices extremely stable and will rise as ChCh is going to be the destination of choice for many!
Ringfencing for seasoned investors is not an issue but for the ones that haven’t bought wisely then it could be an issue.
A problem is that if the investor is negatively geared then they won’t want to be doing any improvements on the properties
And that will flow on negatively to the tax take for the country and poorer accommodation for the tenant!
Just curious. Can you still insure against earthquake damage in CC ? If so what are the premiums like per 100k of property ?
Yes you can get insurance reasonably easily depending on the circumstances of where the house is located and earthquake damage.
Have got insurance for 2 houses that we bought “as is where is”.
Depending on company but we are paying on average around $1500 per house some more some less.
I had noticed a surge of 'for rent' signs in the eastern suburbs over the last week or two
The east side of ChCh tends to be pretty easy to find tenants for as the rents are on the lower side.
Have had 2 houses over on the east but on!y have the one now.
Plenty of interest normally but need to do the checks thoroughly
DP
DP
"QV says the average value of homes in Auckland has declined every month for the last seven months, from $1,050,647 in November last year to $1,027,113 in June this year. That means it's now 2.7% lower than it was 12 months ago.
The drop in values has affected most parts of Auckland, with average values in June lower than they were 12 months ago in all city districts except Papakura and Franklin.
The biggest annual declines in values occurred in North Harbour -4.9%, followed by Central Auckland -4.7%, Coastal North Shore -4.2% and Gulf Islands -3.6%."
Remember in Auckland, there is an underlying shortage of housing. So how can there be an underlying shortage of housing in Auckland and yet property prices in some suburbs are falling?
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