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It is not valid to extrapolate recent falls in house prices in Australia into the New Zealand scene, BNZ chief economist Tony Alexander says.
In his Weekly Overview Alexander explains significant differences between the NZ and Australian house markets.
"Forecasts of a collapse in New Zealand house prices have been made repeatedly since the 1980s and were most prevalent during and immediately after the GFC," he says.
"None of these forecasts have proved correct.
"Average prices fell only 11% between 2007 and 2009 and have risen 88% since then.
"Nonetheless, focussing on a comparison with Australia, since 2003 while Australia’s Capital Cities House Price Index has risen by 90%, NZ’s nationwide index has risen by 150%. New Zealand ranks as one of the world’s least affordable housing markets."
He then, however, goes into detail about the differences between here and Australia.
He says one reason for the difference in price growth since 2003 is that although Australia’s 27% population growth since 2003 exceeds NZ’s 22%, Australia’s housing stock has grown by 30% versus just 20% in NZ. In NZ there is a housing shortage which is getting worse, whereas in Australia there is a (temporary) oversupply.
"In the past five years NZ’s population has grown by 458,000. At an average household occupancy rate of 2.7 people per dwelling, this required 170,000 net extra houses to be built. Actual dwelling stock growth was only 126,000. The NZ housing shortage is growing and will continue to do so as net migration flows are remaining high near 50,000 (1% of population) per annum."
Another difference is in debt and debt servicing. Alexander says between 2003 and 2019 the household debt servicing ratio in Australia rose from 8.2% to 9.1%.
"NZ’s ratio has fallen from 9.1% to 7.6%. Australia’s household debt to income ratio has jumped from 134% to 190%, NZ’s has risen from 130% to 164%."
And then, foreign buying: Alexander says there has never been as great a level of foreign house buying in New Zealand as Australia.
"The official NZ data start only in 2016 but show average non-resident buying of 2.5% of all sales, falling now to 0.6%. In Australia, according to an NAB quarterly survey, foreign buying peaked in 2014 near 16% for new properties and 9% for existing ones. Fewer than 4% of existing dwelling sales now go to foreigners and 5% of new dwellings."
Another difference Alexander points to is that there have been far more apartments constructed in Australia - and these show greater volatility in price.
"Since 2003, 67% of dwellings built in Australia have been in multi-unit developments. The NZ proportion is just 26%. Prices for apartments have historically shown greater volatility than prices for houses."
Alexander says in New Zealand there was no surge in people gearing compulsory superannuation money into housing as occurred in Australia, (given the absence of self-managed superannuation funds) and therefore no recent strong downward pressure on prices from the cessation of bank lending for such.
He says there are no stamp duties on dwelling purchases in NZ therefore there is an absence "of the recent depressing price effect" in Australia from states introducing and still increasing duties and levies on foreign buyers and owners.
Then there is interest-only lending. Alexander says in 2015 in Australia nearly 40% of lending to households was interest only. In NZ at the same time the proportion was 28%. Due to the imposition of new restrictions this ratio in Australia now stands near 20% versus 26% in New Zealand.
And finally, there are construction constraints.
Alexander says the most recent annual number of dwelling consents issued in NZ is 34,500 or 1.8% of the housing stock.
"In Australia the number is 190,285 and the proportion 1.9% - still greater than in NZ even after a fall from 230,000 a year ago. There is a shortage of builders across all trades in New Zealand – partly because shortages offshore have attracted some Kiwis away for higher incomes and opportunities."
127 Comments
The debt to servicing ratio is bunkum. It is a ratio across all households when actually the concentration of debt is on just a third of households that actually carry a mortgage.
Mr Alexander is always best when he's on stage as the back end of the pantomime horse..
https://youtu.be/A-psmZvMT3M
Because it's not like Tony Alexander might have a vested interest in credit growth via house price increases right?
Honestly, all statements the these big bank chief economists should be taken with a grain of salt, they all have an agenda to push just like real estate agents associations and the housing speculators/investors.
Perhaps I was a bit unfair to Mr Alexander, but the clip I attached of his speech a couple of years ago is relevant to why bank economists need to be reigned in a bit in NZ. To be fair he's not been quite as ridiculous as the forecasting of 7% annual house price rises next year that Westpac's economist was spouting recently... in stark contrast to what their CEO was saying last year. (Mr McClean knows that the bubble is cooked).
The only bank economist who holds any weight for me in NZ, because he doesn't predict the ridiculous, is Mr Kerr at Kiwibank.
https://www.interest.co.nz/property/93884/westpac-nz-ceo-david-mclean-c…
"The debt to servicing ratio is bunkum. It is a ratio across all households when actually the concentration of debt is on just a third of households that actually carry a mortgage."
Agree with you that the household debt servicing to income ratio is very misleading statistic and can give economists a false sense of comfort. That ratio is done on a nationwide basis, and compares households in debt with all household incomes in NZ.
Property prices in free markets are set by the marginal buyers and marginal sellers. There only needs to be a sufficient number of marginal sellers that sell which then becomes the most recent comparable market price for other properties listed for sale.
For example, the current market price for a property is based on all comparable transactions for that property in the last say 3-6 months. In the last 6 months there have been 9,868 property transactions in Auckland. In the last 3 months, there have been 5,352 property transactions in Auckland.
FYI, in 2008/2009 GFC when Auckland property prices fell 8-11%, the number of transactions in Auckland when prices went from their peak to their trough was 12,710.
The magnitude of any large price changes will be dependent upon what the banks do with financially stressed borrowers. Will they
1) work with the borrower to assist them (such as go from P&I payments to IO for a period of time) or
2) will they play hardball and insist the owner sell their property to repay the debt, and if they don't do so, the bank will enforce their rights under the mortgage?
The banks may choose to treat owner-occupiers differently to non-owner occupiers.
It is ludacris to compare New Zealand with the Australian housing market. New Zealand is much more like Hawaii while Oz is more akin the US mainland. Look up what home prices in Hawaii did in 2008. Not much. We are residing on an island boys, whether you like it or not.
I know that there seem to be a lot of apartments being built here - especially in Auckland and Wellington - but the numbers are small relative to Australia.......
And thank goodness for that!
Apartments have a multitude of difficult (often insoluble) problems - especially the high-density, CBD developments. They're a blot on the city-scape - a damned nuisance.
I say avoid apartments like the plague.
Stick with fee simple / freehold. It's far less perilous than leasehold, company shares, unit title, strata title etc.
TTP
FFS. Take a random sample of 1000 of those 458000 new arrivals from the past 5 years. Ask them how many people are currently living in their dwelling. I bet the average would be 4. So 458000/4= 114500. So we are currently at least 12000 houses over built. With more new builds coming onto the market every day. The only thing that is masking it is the number of empty houses and apartments. If there was a housing shortage then every new build listed on trademe would be snapped up in hours. Not languishing on there for months.
So what your saying WestieAJ is that it is also reasonable to assume that 2.7 people or parts of people could never occupy a home. Conveniently Mr Alexander uses the stock number of occupants per dwelling when it is the flow that matters and that is dependent on multiple factors. Although Mr Alexander uses the past five years to put forth his shortage meme,as that is when migration has been strongest, over the past ten years New Zealand's population has grown by 656000 individuals,(a much slower rate ) during which time their was a net increase of 213000 dwellings , which is the equivalent of 3.1 individuals or parts of individuals per dwelling , which is consistent with a long term trend .
Yes but the catagory of migrants over the past five years would be occupying dwellings at a higher density than the national average. If it's 2 people sharing a 30 SQM shoebox in the CBD or 6 people sharing a 3 bedroom house and garage in Mt Roskill. It still averages 4 per dwelling.
I agree with your comment that do not assume, at least take a large enough sample to inform you better. However, you then throw an assumption that NZ immigrants live four at a house. I am an immigrant and know at least 100 other immigrants (not including students). The average that I have is 2 or 3 per house (i.e. a childless couple or a couple with one kid). Again this is not statistic. I am just sharing this to say your assumption about immigrants may not be as accurate as you think. Depends who you have met i suppose.
I actually have access to the Nielsen database, (which is on par (or better than) census data) so looked this one up.
Comparing those born in NZ v those not born in NZ, by number in household
NZ born
1 - 9.8%
2 - 27%
3 - 17.6%
4 - 21.5%
5+ - 24%
Immigrant
1 - 5.7%
2 - 22.3%
3 - 20.6%
4 - 25.9%
5+ 26.7%
Conclusion: Immigrants defintely do live in higher density households than those born in NZ
There are two types of immigrant and they are as different as chalk and cheese: the high paid and the low paid. The former would average about 3 to a 4-bedroom house but the low paid and those on work visas will be living 4 or 5 to a medium size apartment (see Hobson st for examples). The high paid pay taxes that cover the costs of the infrastructure plus training of more teachers, nurses, doctors etc that they need. The low paid are subsidised by the average taxpayer.
Indeed CJ. Don't you love averages? Such a good way of covering up what you don't want to look at or admit to.
Would be nice if one of the Polyannas gave their reason for Auckland sales falling 23% in last 6m compared to 2018?
Is it because interest rates are lower? Or immigration?
Why is it that sales over $1.2m are doing so much worse than under $800k?
They never say. All we get is "market is good if prices go up". That is price. A market is buying and selling. Fewer buyers and fewer sellers ain't a good sign, whatever price is.
Only for a short time though Nzdan. If these sales volumes were to go even lower than the stats Mikekirk is reporting and this occurred around the country, then it would have a devastating impact on the credit growth the economy needs to keep ticking. That's why the regions have been the focus of attention for all the propaganda over the last 2 years.
That point in particular seems rather dreamy. It's also a purely national figure he refers to, only measures 2016 onwards (of course), and misses the PTE visa mill entry point (a route that just like "foreign" buying is likely to have been affected by China's clampdown on capital outflows).
Flat? Sales for residential down 23% in a year. apartments down 45% on 6m comparison. According to latest from RE NZ asking prices down 7% in last 3m in Auckland. Median cited by REINZ is not the Godhead you know. Try asking what medians are in different parts of Auckland. As an Agent I can tell you that Auckland is not "flat" it is still descending. Look at how many real listings are houses and townhouses for instance, in Auckland. Yesterday they had 5904 officially. Except a quarter have not been built yet. Bit deceptive isn't it? So, in reality there are about 4430 for Auckland, OTM. For a 1.7m population?? Not exactly jumping is it? And to reiterate, no good counting the 1878 apartments because firstly, more than a third of those ain't built yet and more relevant still, they are selling 45% fewer than in 2018 - ie they are not wanted. this cycle is headed down and will continue to do so until late 2021.
100% agree that the upward phase of this cycle is due 2021/22. Look at the REINZ HPI and median for Auckland and the rest of NZ. Auckland is flat (DGMs would be quick to point out that a 3.5% yearly gain would be nothing in the big scheme of things) and the rest of NZ is rising. I care what my property portfolio is worth and am much less interested in how many properties are selling. But with you being an estate agent I can understand why sales rates and volumes are the center of your universe given that commissions are in the doldrums.
Perhaps on the basis of the long term historical property price cycle. Refer
1) https://youtu.be/5P573EqMZYE - (refer video at 1:00)
2) https://www.youtube.com/watch?v=Agp9xFWoBX4 (refer video at 3:49)
Property prices double every 10 years ...
It's going to be incredibly interesting to see how things play out this time around. Don't think we've ever seen NZ facing the same combination of factors it has in recent years, most especially the injection of foreign capital that seemed to stop dead when China clamped down on capital outflows.
Some people learn the incorrect lessons from history:
1) In Ireland - https://www.independent.ie/business/irish/there-is-no-property-bubble-t…
2) in Australia - https://www.smh.com.au/business/nsw-housing-shortage-at-unprecedented-l…
It's complete rubbish.
He's comparing apples and oranges.
Irish Household Debt to GDP peaked at 117% around 2010
Household debt to income peaked at 212% around 2009
https://tradingeconomics.com/ireland/households-debt-to-gdp
https://tradingeconomics.com/ireland/households-debt-to-income
NZ's houshold debt to GDP is 94%
Household debt to income is currently 163%.
Both the highest on record and not as far away from Ireland as DD makes out.
Also Ireland's peaks occured *after* an economic downturn (i.e. when GDP and incomes fall but debt remains unchanged).
Expect the same to occur here.
https://tradingeconomics.com/new-zealand/households-debt-to-gdp
https://tradingeconomics.com/new-zealand/households-debt-to-income
No, sunshine, I said private debt not household debt.
Why don't you just admit that you confused household debt with private debt and incorrectly claimed I was talking rubbish? Would be less embarrassing for you if you just own it.
You seem like you'd do well with pictures. Here's a couple of graphs. This info is available online, multiple sources, just Google it.
https://croakingcassandra.files.wordpress.com/2017/11/credit.png?w=700
https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcR3FstMjsKDKke_ank…
https://www.google.com/amp/s/croakingcassandra.com/2017/11/17/56061/amp/
https://tradingeconomics.com/new-zealand/private-sector-credit
Ireland currently has a private debt to GDP of 400%, but in 2007, at the time of the crash, it was 200%.
But its probably best to look at household debt, otherwise corporate debt interferes. At the time of the crash Ireland had a household debt to gdp ratio of around 90%. New Zealands current household debt to GDP ratio? 94%
I'm not sure if you are dishonest or just have an inability to understand/analyse data accurately.
No, my core argument is that this time isn't different at all, and that the property market cycle will continue on as it has done for the last 40 years. 10 year cycle, 5 years from peak to trough, only modest decline or flat over downward phase, 80%-90% increase per cycle (which is less than 10% per year, so not an astronomical return on investment, particularly when adjusted for inflation), current cycle peaked in Auckland late 2016, bottom due in 2021/22, at which point the upward phase begins.
What a coincidence, your "core argument" is a mirror image of Ashley Church's.
You're either a great disciple of his... or...
So the property cycle operates entirely independently of:
- Monetary policy? - Which is reaching/hitting the zero bound limit in markets across the globe after progressive loosing, coincidentally over the last *40* years;
- China's economy? - Which is hitting the skids due to the trade war and the fact the gig is up on fictitious growth figures, again coincidentally after *40* years of the most miraculous economic expansion in history;
- Australia's economy? - Historically our largest trade partner which has, wait for it, coincidentally has enjoyed 27 years of growth without recession but whose economic prospects are now firmly under a cloud;
- Global credit markets? We'll just keep adding to household and consumer debt ad infinitum without consequence. Deutsche Bank, with the world's largest derivatives book, can fail and the NZ property market will truck along, like it always has;
- The US Economy? - US national debt stands at $22 *Trillion*. More than twice what it was at the time of the GFC. Its Debt-GDP ratio has increased from 30% to 110% in the past 40 years. But that's nothing to do with NZ property right.
- Foreign flows of capital? Related to China's economy. Foreign capital has had no influence on this last cycle, NZ property is going to steam ahead without it - double in 10 years amirite??!!
Yes, the NZ property market is different isn't it.
It exists in its own parallel universe unaffected by outside forces and just follows a natural cycle every 10 years, like clockwork, according to you and Ashley (or maybe that's just you?).
I'm saying far stronger cycles are coming to the party and Ashley's quaint, but terribly ignorant/naive/myopic/*dumb* (take your pick), theory doesn't factor them in.
This time those cycles won't be different.
The fact he claims to have any "certainty" whatsoever about what will happen in a few years time is just beyond laughable.
It's dangerous.
The man is a fraud.
Believe it or not, mike kirk is an agent but not from a well known firm. It seems to be the same person. I guess that vendors see through his "THE SKY IS FALLING - FONGO" sales pitch and they dont buy that line because he hasnt had any recent listings. As for buyers, no agent in their right mind would express to them the thoughts that mike does here.... I am not saying he doesnt :)
Here's what TradeMe is saying:
"Winter fails to take the heat out of the property market"
and here's the link to the article:
https://property.trademe.co.nz/market-insights/property-price-index/jun…
What they were saying about Auckland was the point, though. The article you've linked to says:
“The only regions to experience the winter blues were Taranaki (down 3.4 per cent) and Auckland (down 2.4 per cent).”
And
While most regions saw year-on-year growth, Auckland’s average asking price fell to its lowest since September 2016 - dropping 2.4 per cent year-on-year to $887,950 in June.
Mr Jeffries said Auckland’s property market continues to decline. “In May we saw the largest year-on-year percentage decrease since 2014 at 1.9 per cent. In June it fell even further dropping 2.4 per cent, causing prices to tumble another $13,700 on May.
Look, who is talking.
Earlier house were not 9 or 10 time earning.
Atleast in Australia may be, people on their wages are able to buy million $$ houses but how many in NZ on NZ wages afford even $800000 houses.
This is nothing but trying to influence/boost the market but only if wishes were horses...
Long time taken to say NZ is not Australia and not comparable, for lots of stated reasons.
Agreed, it is not.
NZ has its own problems.
One of which is that bank economists have too much credibility in media.
NZ credit, on which mortgages rest, is granted largely by Australian banks.
So, when those banks get into trouble due to having 65% of their equity in mortgages, it will impact NZ.
NZ falls in equity since 2016 peak will also impact on FHB and anyone having paid over $1.4m in Auckland especially, who are having trouble finding buyers.
House prices rise because (NOT shortage of housing supply!!) banks extend more and more credit at lower and lower rates of interest (which, never mentioned - means longer to pay back - so banks make more over LT)
Lots of borrowing capacity offered by banks because printing means asset prices rise and decisions re investment are distorted. All this is 2008 and after phenomenon.
Prices WILL fall because 2013-17 boom was led by Auckland and due to land Ponzi expansion of land sales and inflows of money from abroad which expanded money supply and velocity of money. This cycle has ended and state of Chinese economy and trade war means it will not be repeated anytime soon. Demographics of 40-47 year olds are also negative for Auckland til 2028, whereas they rose in 2013-17. They have max disposable income. Prices will fall too because there is OVER supply of 4 bed houses and they are still building more, despite sales falling 25% in Auckland in last year. Ditto, apartments, sales of which are down 45% in last 6m compared to 2018 in Auckland. Meaning: lots of surplus supply. And a lot less demand (demand meaning people wanting and able to buy - NOT meaning more immigrants, which is what economists all like to spout. That conflates NEED with demand. Too much supply and less demand =?
On top of that: developers will go under due to rising revolving credit conditions as loans fall due for renewal and lenders see that there is inadequate revenue from sales to make payments, hence risk premia rise. Plus estate agents are taking vendors down when stuff is not selling. Plus GDP is slowing rapidly. etc.
So, plenty to analyse instead of this fatuous "NZ ain't Australia " truism trope.
Well said. Demand for people looking to buy housing can’t be done by just looking at the total population. You need to look at the portion of the population who have access to the necessary income and capital to fund a purchase.
If the number of houses and our population was the same as it is now, but the average price of properties was $10 million, what would happen to prices?
If the number of houses and our population was the same as it is now, but banks started demanding a minimum 30% deposit (50% on investments) what would happen to prices?
If the number of houses and our population was the same as it is now, but unemployment rose to 15% what would happen to prices?
There is a separate issue of overcrowding and shortage of suitable accommodation that IS directly a result of total population vs housing stock.
Tony Alexander works for BNZ. It would be more than his job is worth to say anything that may suggest the housing market is in trouble.
If he did, the BNZ with its giant residential mortgage book, could be looking into the abyss.
Totally independent views would give a much better view.
One thing is clear. The move to force banks to build up their reserves and the constant slashing of interest rates to encourage borrowing means that someone, somewhere, thinks that it is going to get worse, not better. I hope I am proved wrong.
I find it interesting that when the Banks were lobbying against the RBNZ capital requirements they warned of the impact it could have on interest rates and restricting lending growth.
Yet they don't make any mention of this in their property forecasts.
Are they that confident in their lobbying? Or is it just because they want to keep cranking out those massive mortgages and let the borrowers eat the loss?
They have to keep cracking out those mortgages at a faster rate than money is destroyed by those that pay their debts down... Interest only from here to infinity is what Ashley Church was suggesting on the ASB sponsored 7-Sharp program last week - don't worry about paying it back..
If the mortgage is for your own home, pay it back as soon as possible because you pay for the interest out of your own tax paid income
If the mortgage is for an investment property, never pay it back, go interest only because your tenant or lessee is paying your interest and said interest is tax deductible
Take a look at this chart:
NZ follows Australia!!
https://www.google.co.nz/search?biw=1472&bih=774&tbm=isch&sa=1&ei=01s2X…:
Labour have not delivered on their promise to slash immigration into NZ .... but where they have failed ( once again ) , an improving Australian economy may do the trick ....
... if the current flood of immigrants reverses , the Kiwi housing supply shortage is solved lickety splick ..
Actually, the most recent immigration data suggests they might have (sort of) delivered on their promises; the number of net migrants has only fallen slightly, but the number of residency applications approved has fallen to the lowest number in 20 years; the rest of the migrants are on temporary work visas.
Important, because 70,000 immigrants who all have aims to live in the country forever, have a very different demand footprint than 70,000 short term workers.
This is incredibly important. People in Ireland didn't see that they were building too many houses as the population was growing so rapidly. But as a lot of the population growth was for short term workers (not permanent residents) it quickly went into reverse once unemployment started rising.
If we start seeing a notable global slowdown and unemployment rises we could see similar adjustments (granted that I don't think it will be nearly as severe).
All these numbers seem remarkably *similar* to me. They're not exactly the same, but wouldn't it be weird if they were? You could use exactly the same statistics and frame it as 'Wow, we're bound to follow the Aus market trajectory'.
Maybe if more global comparisons were included we could see whether or not we are, in the scheme of things, in fact extremely similar to Aus on these metrics. I suspect we are.
FYI, regarding the cause of US housing bubble.
From the May 2010 FCIC interview with Warren Buffett, a reknowned investor and Chairman and CEO of Berkshire Hathaway
MR. BONDI: As I mentioned at the outset, we’re investigating the causes of the financial crisis. And I would like to get your opinion as to whether credit ratings and their apparent failure to predict accurately credit quality of structured finance products, like residential mortgage-backed securities and collateralized debt obligations, did that failure, or apparent failure, cause or contribute to the financial crisis?
MR. BUFFETT: It didn’t cause it, but there were a vast number of things that contributed to it. The basic cause, you know, embedded in psychology –- partly in psychology and partly in reality in a growing and finally pervasive belief that house prices couldn’t go down and everyone succumbed –- virtually everybody succumbed to that. But that’s –- the only way you get a bubble is when basically a very high percentage of the population buys into some originally sound premise and –- it’s quite interesting how that develops –- originally sound premise that becomes distorted as time passes and people forget the original sound premise and start focusing solely on the price action.
So every -– the media, investors, the mortgage bankers, the American public, me, my neighbor, rating agencies, Congress –- you name it -– people overwhelmingly came to believe that house prices could not fall significantly. And since it was biggest asset class in the country and it was the easiest class to borrow against, it created probably the biggest bubble in our history.
"the media, investors, the mortgage bankers, the American public, me, my neighbor, rating agencies, Congress –- you name it -– people overwhelmingly came to believe that house prices could not fall significantly"
Looking at the posts above, this is clearly not the case here, so are you implying we are safe here in NZ?
Correct.
What Buffett means is that the miss pricing of risk on those mortgage backed securities was really the collective result of everyone buying into that belief that house prices only ever go up.
So in US they did low doc, no doc loans, etc and absolutely none of the dozens of safe guards NZ has implemented over th last 10 years.
US banks leveraged 33:1, NZ banks 12:1. With the governor wanting to make that under 10:1
What completely flawed thinking. The woefully irresponsible lending in the US was sufficient to cause a global financial crisis. No one is suggesting the NZ housing market will ever do something similar.
A housing market correction doesn't require systemic fraudulent lending. It only requires over-confidence in a market to drive prices well above long term fundamentals.
Property prices in free markets are set by the marginal buyers and marginal sellers. There only needs to be a sufficient number of marginal sellers that sell which then becomes the most recent comparable market price for other properties listed for sale.
For example, the current market price for a property is based on all comparable transactions for that property in the last say 3-6 months. In the last 6 months there have been 9,868 property transactions in Auckland. In the last 3 months, there have been 5,352 property transactions in Auckland.
FYI, in 2008/2009 GFC when Auckland property prices fell 8-11%, the number of transactions in Auckland when prices went from their peak to their trough was 12,710.
The magnitude of any large price changes will be dependent upon what the banks do with financially stressed borrowers. Will they
1) work with the borrower to assist them (such as go from P&I payments to IO for a period of time) or
2) will they play hardball and insist the owner sell their property to repay the debt, and if they don't do so, the bank will enforce their rights under the mortgage?
The banks may choose to treat owner-occupiers differently to non-owner occupiers.
I have no idea where housing price will go in future. But there is one thing i know for sure. The construction costs in NZ is ridiculously high. One large item is 15% GST that is added to any figure you built. Labor is expensive. Building material is super expensive. etc. I know land can get cheaper, but with current building costs, how cheap land should get before it makes a difference?
It is so expensive to demolish a house and build a new one. It is so expensive to build infrastructure to add new land to urban areas. It is no wonder that decades old houses can be sold at prices that they are sold. The cost to replace them will be astronomical.
Surely one reason why materials (particularly) and labour is expensive is because debt is cheap. And with regard to materials, monopolistic conditions allow the local mobs to know they can take people for a good amount more than they'd pay for the same materials overseas.
Broadly agree, however real NZ house prices will fall in real terms eventually (unless we all end up living in garages) it will just take longer.
https://www.visualcapitalist.com/mapped-the-countries-with-the-highest-…
The person is either a genius or a fool to feel that in today's world where ecenomies are inter dependent on each other, NZ will be immune to what happens in rest of world including Australia.
Neither genius nor fool, may be just doing his job and who cares about right and wrong / Truth or false propoganda.
Time will tell
Personally don’t believe there is a shortage of houses being built at all!
Shortage of houses that people can afford to buy especially in Auckland.
As we know there are plenty of people living in garages in Auckland and this will continue until such time as the people realise that there is
far better places to live than Auckland, for affordability and liveability.
We all know that most of the growth in Auckland from immigration is from Asian countries and the stats back this up.
Most cities around the world is now experiencing this and while immigration policy allows this, there is no point moaning and groaning.
The Auckland market is flat at best at the moment from what I am hearing with many areas having price drops.
The fact is that there has been a lot of forces at play over the last year or two since the Coalition government came into power, and what is happening is to the detriment of the country.
Christchurch is still rebuilding day by day and more people are seeing the benefits of living here, and will continue to do so.
There has been so much building going on in ChCh over the last few years and plenty into the future with many new subdivisions opened up!
Opportunities that you won’t find in many major cities like ChCh, are still available, so be in quick!
Speaking of Canterbury, how and why is this sort of thing still happening???
https://www.stuff.co.nz/national/114405714/poor-design-blamed-for-depre…
Here's the thing with TA.
In terms of the housing market, he often makes valid points.
The issue is more around what he doesn't say. He's leaving out a number of factors and forces which are pushing down on the housing market.
I really don't know if this is because:
- He's not that clever
- He's intentionally biased
- He suffers severe cognitive dissonance, which might be unconsciously influenced by the fact that he works for a bank.
I suspect it is the latter.
Here's the thing about macro economists working for banks. They don't have the same supervision and compliance worries as stock analysts whose views are genuinely supposed to be independent of the sales/trading function they support.
Now sure, you could argue they need to be independent because they have their integrity but here's the thing. Its pretty rare for a bank economist to call a property bubble and thereby discourage borrowers to take on that mortgage/car loan etc.
So if I were a betting man I would go for b). He's not a dumb guy ~ he's just (as you state) failing to state the some pretty clear cut points about why the Auckland market is currently falling and why it's likely to continue to drift lower.
And why would he do that ? Because he works for a bank, he has a boss. His boss wants him to tow the line, to try to build consumer confidence so the wheel keeps turning.
Doesn't make him a bad guy, just makes him a guy with a message that needs to be taken with a healthy dose of salt.
Yup. It was studied in Ireland post the bubble bursting and they found:
(1) news organisations have multiple links with the political and corporate establishment, of which they are part, thus sharing similar interests and viewpoints;
(2) just like elite circles, they hold a neoliberal ideology, dominant during the boom years;
(3) they feel pressures from advertisers, in particular, real estate companies; and
(4) they rely heavily on ‘experts’ from elite institutions in reporting events.
https://www.tandfonline.com/doi/abs/10.1080/13563467.2013.779652
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