The chill winds of winter continue to whistle through the real estate auction rooms, with more agencies consolidating their auctions because of the lower number of properties coming to auction.
That means some agencies that have been having weekly scheduled auctions are now consolidating them into fortnightly auctions.
That could make the weekly auction result figures more volatile over the next few weeks.
However it doesn't appear to have had much overall impact on the auction numbers for last week (21-27 July), with interest.co.nz monitoring auctions for 127 properties, compared to 122 the previous week and 140 the week before that.
Of the 127 auctions monitored, sales were achieved on 47 properties, giving an overall sales clearance rate of 37%, compared to a sales rate of 40% the previous week.
However prices appeared to be a weaker.
Of the properties that sold, 43% sold for more than their council rating valuations and 57% sold for less, compared to 57% of sales that went for more than their rating valuations the previous week.
Prices were weaker in Auckland than in the overall market, with just a third of the properties sold in Auckland fetching more than their rating valuation.
However there was virtually no difference between the sales rate in Auckland where sales were achieved on 38% of the auctioned properties monitored, compared to 37% nationally.
Details of the individual properties auctioned and the results achieved are available on our Residential Auction Results page.
The comment stream on this story is now closed.
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121 Comments
Moral of the season is : Market is Falling on a weekly basis.
Wait and Watch : Where will it stop ?
Bank Control to Leveraged Tom
Bank Control to Leveraged Tom
Take your blindness pills and put your helmet on
Ground Control to Leveraged Tom (Ten, nine, eight, seven, six)
Commencing shutdown, engines off (Five, four, three, two)
Lowering rates, may Bankings love still be with you (Two, one, fallout)
This is Bank Control to Leveraged Tom
Our lazy lendings really made the grade
And the papers love to record how great you are
Now it's time to look at risk if you dare...
Sometimes I feel I've got to
Run away, I've got to
Get away from the pain you drive into the heart of me
The dosh we share
Seems to go nowhere
And I've lost my light
For I toss and turn, I can't sleep at night
Once I ran to you (I ran)
Now I'll run from you
This tainted bread you've given
I give you all a boy could give you
Take my tears and that's not nearly all
Tainted stuff (oh)
Tainted stuff
Now I know I've got to
Run away, I've got to
Get away, you don't really want any more from me
To make things right
You need someone to hold you tight
And you think love is to pay
But I'm sorry, I don't pay that way
Once I ran to you (I ran)
Now I'll run from you
This tainted cash you've given
I give you all a boy could give you
Take my tears and that's not nearly all
Tainted stuff (oh)
Tainted stuff
Don't touch me, please
I cannot stand the way you tease
I love you though you hurt me so
Now I'm gonna pack my things and go
Tainted stuff(oh)
Tainted stuff(oh)
Tainted stuff(oh)
Tainted stuff (oh)
Touch me, baby, tainted stuff
Touch me, baby, tainted stuff
Tainted stuff(oh)
Tainted stuff(oh)
Tainted stuff
Tainted stuff
I think I saw someone post this at the end of last year. Apologies to the previous author for repeating his ode to the missing billions of foreign money. ‘I’m going down, since you ain’t around, my whole worlds upside down!’
Hilarious. Good effort!
This must be the burgeoning NZ poetry revival or maybe plagiarism lol
Yep quick glance through the 'Sold ' auction prices and hardly any of them have struggled above the 2017 RV peak price. Lets hope that prices gradually reduce to more affordable wage earner levels.
Spring is going to be very interesting. We’ll really be able to tell if the slide continues and indeed gathers pace, and starts to spread throughout the country. My money is on that happening. We’re following Australia down now, and Vancouver as well - all markets that kept climbing post-GFC to form big bubbles. Big correction is inevitable.
The really interesting observation is the psychology, & confidence of the public that fuelled the property price rises in Auckland to current price levels.
1) remember in 2016, news reports of the fierce bidding competitions at property auctions? Remember how confident buyers were and how pleased that the buyers had successfully purchased the property, whilst there was disappointment by those who lost out in the auction as their bid was topped by another bidder? Property price momentum was upward, and there was a fear of missing out by property investors & owner occupiers and expectations of future property prices in Auckland were of higher and higher prices. Property was a very common discussion topic in many households in Auckland. It is interesting to note the many justifications / rationalizations provided as to why house prices in Auckland were going to continue to rise. Also interesting that property price warnings by informed insiders such as David Hisco, Don Brash, & Arthur Grimes were ignored, as well as comparisons of the elevated Auckland property price levels compared to other markets internationally and other historical property price bubbles. That was when it was a seller's market.
2) contrast that to current conditions and market sentiment. Transaction volumes have fallen. Property prices in Auckland have flattened out and started to experience some price falls. Buyer confidence overall has fallen from their previously high levels. Media stories now commonly report of small price falls in Auckland which has changed property price expectations of some. Instead of fear of missing out, potential owner occupiers are now taking a wait & see approach which has led to fewer active buyers in the market (despite the reported housing shortfall in Auckland, and continued high levels of immigration which would result in strong demand)
3) if property prices in Auckland fall significantly, it will be interesting to watch how sentiment of the public in Auckland changes again. If you want some history as a guide, then look to Sydney or Perth currently, or to the Auckland property market in 2008/2009 where there was unemployment rising, fear of job losses, and mortgagee sales. At that time there were stories in the media of financial difficulties being experienced by households. If the property price fall is significant, the mood and confidence of households in Auckland will likely be worse than experienced in 2008/2009.
“there was unemployment rising, fear of job losses, and mortgagee sales. At that time there were stories in the media of financial difficulties being experienced by households.”
Yes, I’m fully expecting that to happen. NZ will be fortunate if it escapes a severe downturn after the bubble we’ve had. Irrational exuberance, as you outlined there, is followed by the opposite, which in our capitalist system is where the bargains are. The doom and gloom and fear and economic hardship at that point prevents most people from buying at that point where it would be best to. As the Warren Buffett quote goes, be fearful when others are greedy and greedy when others are fearful.
ICYMI, cause of the housing and credit bubble in US
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 doom and gloom and fear and economic hardship at that point prevents most people from buying at that point where it would be best to"
One of the market dynamics that is overlooked is when there is economic hardship, previously active demand is no longer active, and may become active supply of properties to the property market.
How might this happen?
For example, take a property investor (let's call him John) who is building a property investment portfolio in Auckland in a bull market - they are active buyers. Let's say John manages to buy 4 residential properties - one in which they live in and 3 investment properties (all of which are negative cashflow). When there is economic hardship (such as a recession), John is unable to get financing to purchase more investment properties, so they are no longer active buyers in the market. Then John loses his employment. Then what happens?
Read the story of John Lamb.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10…
- 4 properties came onto the market for sale in the secondary market.
Your most relevant reference is dated 4 April 2012, goodness.
Thank you for your comment. If you consider the example irrelevant, dated, or obsolete, then please feel free to ignore the post. As you are a property investor in the residential real estate leasing business or property trader who buys below market value from "keen" sellers and adds value, the above example may be less relevant to you.
The comment is intended for potential and existing owner-occupier owners in Auckland to illustrate what can happen in an economic downturn, so they can make a fully informed decision and reduce the risk of being collateral damage.
P.S. economic downturns don't happen every year.
A lamb to the slaughter poor old john....As you're a commentator thinking the world including the property world is collapsing here is the balanced fact. "Mortgagee sales remain low in sign of housing market's health
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
The comment is intended for potential and existing owner-occupier owners in Auckland to illustrate what can happen in an economic downturn, so they can make a fully informed decision and reduce the risk of being collateral damage.
After all, owner occupiers should be prepared to hold on & maintain mortgage payments under ALL economic conditions. If they are unable to do so, then they may be forced to sell or downsize in a weak market (i.e a buyers market) and may realise a loss on their equity deposit. Look at the owner occupier casualties during 2008/ 2009 like John.
There was a story about a 60 year old who was forced to sell his owner occupied property and still owed $800,000 to the bank. He lost all his life's savings and lost financial security for his retirement. It took not only a financial toll, but likely also a psychological one on him and his family. Frequently financial stress can lead to mental health issues - the most extreme cases can lead to suicide, which obviously takes it's toll on family & friends. Those who have known anyone affected by financial stress / bankruptcy or mental health, will know the impact on families. This is the reason for posting comments here, so that owner-occupiers who are less financially literate can make fully informed decisions to reduce their risk of getting into financial stress. I have no financial interest whatsoever from property prices rising or falling in Auckland, unlike many with vested financial interests.
Thank you for sharing the statistic on the most recent level of mortgagee sales. If you wait until mortgagee sales are at peak levels for the economic cycle, it would likely mean that the property market would be a buyers market, and prices are more likely to be lower. Good opportunities for property buyers, unattractive prices for desperate time constrained sellers ("keen sellers").
Take a look at one savvy Auckland owner occupier who sold in September 2017, who has a background in financial markets - they subdivided their Parnell property and sold the majority of the land for a reported $20,000,000 - the name of the seller? Mr John Key.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11…
Surely people are aware by now of the leverage trap ?
Bubble is bursting all over as now even low interest rate is not something new to stimulate the market (Though may delay) as low interest rate has been the norm for number of years, now (earlier when had fallen from 10% / 8% to 5% / 4% was news but now from here will it be much) . Any further fall of 0.1% or 0.3% is not going to determine or motivate to buy house or make much of a difference , when everyone knows that it is a bubble and is bursting.
Earlier GFC could be controlled by reducing the interest rate - but now What ?
For mid-winter in a flat market, three years after the most potent upswing in living memory, the Auckland housing market continues to display remarkable resilience.
Those here (like alittle above) who continue to yearn for a “bursting bubble” will continue to be dismayed.
TTP
TTP, your first paragraph there is what I’d write if I were an agent (or other industry professional), rather than an investor trying to look at the market more objectively.
Exactly. I think he's a broker.
A true long term investor wouldn't be that worried if there was a 10-20% drop in prices.
Yes, I stil own 1 property in Auckland but I’m ready and positioned to take the big hit on capital value, as looks very likely. Looking to buy more later as the market bottoms in a few years. Other investments are better in the meantime.
How long have you had the property? If more than 5 years you'd still be well ahead even with a 20% drop
In Auckland since 2011. Downsized significantly and took profit in 2106. All good to weather the storm. What we have left in Auckland is primarily a home not an investment.
Geez 2106 already, how the years fly!
TM2, they do, and the dollars have been better allocated elsewhere since then.
Bit late to sell after markets peaked & gone into trending decline
2015 - 2016 was time to make hay$$$
Now it’s time for those that held to make excuses like “Auckland property only goes up” & “I’m in it for long term capital gain”
Apparently diversified investment strategies aren’t the strong point of the amateur rental property investor at least in NZ anyway
We always buy property to lose money not. Honestly what would you know about the subject fritzy but hey this sort of tosh gets talked everyday here
You sound very touchy. Of course you don't buy to lose money ey. But if you are an investor rather than a speculator then you are in it for the long term, you are looking at yield and you should factor in booms and busts.
If you don't follow those rules I wouldn't call you an investor. So maybe you a speculator?
Btw, I have an investment property overseas, but have no property in NZ. So I am not a totally naive 'DGM' as you would put it.
You say that you're a property investor I dont believe you, you talk a lot of ignorance most of the time. You asked us "How do I sue my landlord to make him/her install fibre?" What the?
You're a nasty piece of (house) works. I feel sorry for you.
I talk a lot of ignorance? Him, ' interesting' statement. Pretty much all my calls on the market have been right over the last 1-2 years. How about you?
Totally predictable backlash. Yes I have flaws too but I am not going about regularly wishing bad fortune upon others investments and homes. What motivates you to do that other than self interest?
"by Fritz | 2nd Aug 19, 10:52am
So there's my 5% drop from peak. Next question is whether the falls remain in the 5-10% decline band, or drop more than 10%...."
Why are you getting so offensive about fritzs prediction? Hes being a realist rather than a crazy spruiker
Houseworks you shouldn't be so sensitive. This world won't wrap you in cotton wool, although the central banks really do try. You have to realize that other people can think objectively which makes this comment section more intellectual. Not every comment in based in self interest.
Totally predictable backlash. Yes I have flaws too but I am not going about regularly wishing bad fortune upon others investments and homes. What motivates you to do that other than self interest?
Why do you seem to concerned over the mere suggestion of a 5-10% drop? How can it be that he is wishing bad fortune on others investments when we have all been told by you (and others) that "price falls are insignificant to investors as they are positively geared" and "property investment is a long term game" etc etc.
As for the "self interest" comment. Yikes, that's a doozy. Most people who comment here, looking to buy, seem to be hard working people who just want a chance to have the security and stability of owning a home, without taking on eye watering levels of debt with the looming risk of seeing their equity wiped out in a correction. All they are asking for is the same chances most generations of New Zealander have had.
These are people who aren't interested in "profiting" off the housing market. I would guess if you told people they could buy a house now at say 4-5 times income, but the value of the house wouldn't rise faster than incomes, they would take it in a heartbeat. They just want a place to call their own. I'm sure you will tell us all how hard it was in your day - ignoring all of the evidence that points how that, by every metric, buying your first home now is more unaffordable than its ever been.
Brilliant
The landlord advertised the property as having fibre broadband. We signed up on that basis. The previous tenant confirmed the service has been dysfunctional. I got some legal advice, talked to the landlord, and got a rental reduction. You can't advertise a property as having a particular feature if it's not functional. You see, contrary to your opinion, some tenants do know their rights and how to exercise them.
So buying at a large discount to the true market value and adding value by renovating the property, adding a bedroom, subdividing & adding an additional residential dwelling to a large backyard, then renting out or selling for a profit. The key is to buy at a discount to the true market value by identifying "keen" sellers like Ron Hoy Fong's 7 D's.
Very different to an owner occupier buyer who typically has many non financial motivations & buys at (or even above) market value.
'Flat' market? Maybe across NZ but not in Auckland. You seem very very convinced there will be no crash.i
Agree that it was good while it lasted and even now FHB and long Term investor should think about entering the market but not in a hurry and definitely not in a falling market, which has just begun.
In future will get more buying opportunity to get more for your deposit $$$$. Falling market will not change overnight to boom and anyone with any sense can say that the next boom cycle is quite a few years away and the price that one buys will determine, how bad or good they will be in future. Even now can be on the look out for deals and if lucky, opt for it or Wait till get one.
Any bubble created has to burst and if one agrees that it was a bubble, it has to burst, how much can be debated (Normally Bigger the Bubble BIGGER The pain).
One has to decide what happened in last few years in NZ housing Market - was it normal or a bubble and plan one's investment accordingly. For I am very positive of investing in housing market but if I feel can get something for $80 in future, will not pay $100 today - as simple as that.
Alittle, many who are commenting that the market is not flat or falling are actually worried for vested interest (Fair enough) and arguing not to convince others but themselves (Wishing aloud).
Any long term investor will not be worried as falling market will give them more opportunity to buy but will they buy now ? Am sure if have been investor in property market for long, can see how the market is behaving and take a call and most probably intelligent investor will wait.
Only people who are worried is speculators (Who bought in last few years for fast money and no deep pockets) and RE Agents (who are not established) as even RE Agents who are established knows that the dream run had to end for now and will be a while before the next bull run starts.
There may be some investors who can jump into a falling market. But given the low yields (particularly in Auckland/Wellington), the reliance on interest only loans, I suspect a lot of investors have only been able to continue to buy properties as prices are rising (by leveraging the extra equity). Are the 2-3% net yields enough to pay down debt to have sufficient equity to buy in a falling market? I'd guess not.
Sure there will be a number of investors with a more cautious approach, or those who have been in the industry for a long time, who will have sufficient equity to spare. I don't know if they are the minority or majority.
To: TTP
Please give your definition of "market"?
Does it not mean buying and selling?
"Resilient" - sales down 41% on 2013 and 37.7% on 2016.
Looks more like a collapse to me.
Prices are not a market.
And WHY is it considered such a potential catastrophe for prices to go down? Is this not what makes the market more affordable to people without loads of money? Or do you not believe the Auckland market is "unaffordable" despite the obvious decline in sales when prices shot up?
Prices NEED to go down. All this abject posturing of economic commentators and high priests deciding to defend a given level of price from a proper downturn. market used to mean "free" market - not a gerrymandered controlled exclusion zone for the top 25% sucking up all property for themselves to rent to the poor and those who work but still cannot afford ridiculous levels of debt.
TTP, the upswing in 2012 - 2017 is not "the most potent in living memory", 2002 - 2007 was a bigger upswing
Tvil, maybe in % but not in $$$. End of the day you borrow $$$ not %
The $$$ gains 2012-2017 far exceed the gains from 2002 - 2007
Did you mean "bubble has burst "
Same old same old. A very weak market.
Will there be some kind of lift with ocr cuts and the coming of spring? Maybe stabilization if not uplift?
See above comments by DGM.......
Old DGM hacks are quickly on the defensive, when handed a good dose of reality.
Amusingly, some resort to speculating on TTP’s occupational status.
TTP
My guess is that you are a comedian..
Apparently, some DGM believe I’m an astronaut.
Let them go on speculating: it keeps them off the streets...... and it’s a harmless enough obsession.
TTP
Astronaut? Are you sure the term they used wasn't space cadet? Doesn't quite have the same meaning..
What is the dose of reality you keep talking about? The fact that the housing market nationwide has been slowing for the past 6 months?
I genuinely don't understand what you are referring to.
Hi Miguel,
I don’t believe you’re as ignorant as you try to make out.
TTP
As money velocity is declining, interest rate cuts are declining in impactful-ness and world recession coming, there will be no improvement in sales til recession ends which will be around end of 2021 at earliest. Debt super-cycle is coming to an end and only inflation and default can truly clear the decks, as Mauldin as rightly been writing for a while. What cannot continue will end. Sooner the better, then people can have a sane market back with fairness
$US 100 Trillion is a super amount of debt ... toss into the mix a trade war between the worlds largest two economies ... and OCR levels so low that they're now ineffective , reducing them further just doesn't cut it anymore ...
... we live in interesting times , pull up a chair. . Have a gummi bear ... , and wait . .
Gummi bears and popcorn.
Noted in banks chief economist report. Westpac or ANZ ?
"They think it’s all over ... but it’s not"
The outlook for the housing market is a subject that is never far from the minds of the
general public as well as the government, the Central Bank, the IMF and indeed, those involved
in other sectors of the economy who question if a housing market crash could occur and what
impact it would have on the economy as a whole."
"Risk of severe correction is low - Soft landing in sight"Against the background of such an impressive record, many domestic and international commentators believe that the sector could, or indeed will, suffer a severe correction. While such a correction could have dire consequences for the economy, at least in the short term, the risks are low.
The housing market remains well underpinned by demographic trends and by significant
economic and social change. This is the key to the outlook. Employment growth has been
remarkably robust, enabled by significant net immigration while the population continues to
expand strongly. The level of demand from these and other sources has exerted considerable
upward pressure on house prices in recent years.
Housing market not homogeneous
It is important to remember that the housing market is not homogeneous. It is best seen as
an interrelated series of sub-sectors that each have their own dynamics. Much has been made
of the disappointing results at recent house auctions in the region. However, the
auction market is not the property market. Prices at the upper end of the second hand
market may have become too expensive in general and run into buyer resistance or
affordability issues. However, this segment of the market is not representative of the first time
buyers market or of other parts of the country. The greatest risk of overshoot in prices has
always existed in the second hand market, where there are serious shortages of good quality
family homes to meet demand. This is particularly true of major urban centres .
.Leading to more moderate house price inflation
Looking ahead, more moderate growth in house prices of 3-5% is possible over the next few
years. We see prices in the second hand market stalling over the winter period before
recovering in the spring.
Market now much closer to equilibrium
We are now much closer to equilibrium in the housing market. Demand has been scaled back
as affordability deteriorates, while supply has increased in both the new and second hand
market. However, underlying demand still exceeds supply, with the latter constrained by
planning and other restrictions. Overall, though, the market looks to be cooling
towards the much sought after soft landing.
I still don’t know why many of you are not looking to buy right now?
It is a fantastic time to be looking and if the opportunity is there, then just do it!
Interest rates are so low and likely to remain so, some landlords have been screwed and rental yield are great in many growth locations like Christchurch.
Have had agents ring me with properties recently that they want to offload and represent good investment opportunities.
So you’ve bought recently and believe it’s sunshine and roses and capital gain in the NZ property market during the next few years? Just want to be clear.
Really TM2? You really don't know? Let me try to explain.
Because most of these people are in Auckland, and prices are declining. Not only that, but house prices are still so out of whack with yields here that there is literally no reason whatsoever to buy a property, since:
- if you are an owner-occupier and something happens meaning you can't make your (crazy high) payments, you would either have to sell at a capital loss or lease your home out at a monthly loss and move into a cheaper rental
- if you are an investor, you'll be making a loss from Day 1 and will effectively have to pay for the privilege of owning a declining asset
- as the investor-owner of said negatively geared home, if you decide you don't like making a loss of $400 a month because rents are too low to cover your costs, you will have to sell at a loss (unless you hold for at least another 2 - 5 years).
Nothing sucks as much as realising every penny of your equity has gone because you bought in a declining market, and knowing that if you'd waited a bit longer to see how things fell into place, you could have owned a significantly nicer home, in a better area, for less money.
That is why many of us are not looking to buy right now. Because we're not all falling for spruiker bs and know the difference between HPI and median values, and we read a bit beyond the Herald's vested-interest headlines.
Did that help?
Really B_D?
So why are investors and fhb still buying in large numbers even if numbers have slowed.
Houseworks, I guess that depends on your definition of 'large'. Large enough to prop up prices a bit more than if they weren't falling for the hype, for sure. Large enough to slow price declines? Unlikely. The numbers do not stack up. Better to wait and see. No doom and gloom here—it's basic maths.
Further to that, Houseworks—FHBs purchasing now will be casualties of this market. The urge to own a home is very strong and I understand that. For many FHBs it's much more than a vehicle for capital growth; it's security, a place to lay roots, the ability to get a pet, decorate the way you like it, add value and know that if you plant a tree, that'll be your tree for years to come, not the tree of the next tenant.
So when you've been looking for ages (sometimes years) and saving and dreaming and saving some more, and seeing nothing but house price rises—when you start to see falls, those prices look comparatively very reasonable. It's hard not to get excited, right? And the media and the agents talk it up and grab every pseudo-sign and call it a gain, when it's actually a decline, because many FHBs have no idea that median doesn't mean HPI, and it's just so tempting to stick to your guns and finally—FINALLY!—buy. And many FHBs have no real conception of what a bubble and a bust look like, and believe they can trust their agent (who may be well-meaning, but it's hard to be objective when your livelihood depends on seeing things a certain way).
So yes, this is why some FHBs are still buying. But the market's not done yet, it's just getting warmed up. Smart investors, at least in Auckland, are watching and waiting. And that's what we all should be doing. There's no rush or incentive to do otherwise.
"... believe they can trust their agent (who may be well-meaning, but it's hard to be objective when your livelihood depends on seeing things a certain way)."
Also the numerous mainstream media appearances by the likes of Ashley Church (a property promoter) who repeats the mantra that property prices in Auckland double every 10 years. Then there are the property mentors such as Ron Hoy Fong who are also repeating the same message to their students. Some of his former students have set up their own property mentoring businesses and the message is spread more widely.
Then you have economists who say there is a housing shortage, and continued inmigration in Auckland so that means property prices in Auckland can't fall. These economists have not made the distinction between underlying supply and underlying demand vs effective supply and effective demand.
These people and their repeated messages, have drowned out the one time warning made by informed insiders such as Don Brash, David Hisco, and Arthur Grimes.
And articles like these -
First-home buyer hotspots: Where to buy
https://www.nzherald.co.nz/index.cfm?objectid=12252281
"And many FHBs have no real conception of what a bubble and a bust look like"
Most people in NZ would not know what a property price bubble looks like. Look at other price bubbles globally to see the rationalizations given to justify their price levels - bitcoin (& other internet coin offerings), internet bubble of 2001, as well as property price bubbles in Ireland, US, & Spain. It was also interesting to see how risk warnings were ignored and people lost out financially. Higher prices fuel a positive price feedback loop.
Residential real estate is most commonly valued using the most recent comparable transactions basis. So when valued using only that approach, people can't see whether the tide is on it's way out, the tide is on it's way in, the tide is out, or the market is at high tide, or the market is at a full moon tide. For most owner occupier buyers, if the property is fairly valued compared to other properties (based on a registered valuation, by a valuation expert), then that is deemed an acceptable & rational price to pay. That is fine for most of the time, but when the market is at extreme price levels (like a full moon tide), there is significantly increased financial risk for owner-occupier buyers. After all a rising tide, lifts all boats.
Most owner occupier buyers are unaware or do not apply alternative valuation measures, which could inform them when the property market is priced at extreme levels to avoid being collateral damage.
Any examples? I'm looking at the moment.
I'm currently cashed up TM2 and looking for a place to buy. What I'm still not seeing is a "Crash" in prices and they are still at 2016/17 RV's or above so thats hardy what you call a crash. Bearing in mind the last RV increase was like a 46% increase over the previous one, one would consider it a "Crash" to go back to 2012/13 pricing. Its NOT a good time to buy. If you have been waiting for years then wait another 4 to 6 months.
A price adjustment to house prices in Auckland may occur in many forms:
1) large price fall within a short period of time - say 1-3 years (i.e a crash like Ireland, US, Spain in 2008/2009, Hong Kong & Singapore after 1998 Asian Financial Crisis, Commercial real estate prices in Auckland in late 1980's / early 1990's)
2) slow grind downwards (like Perth where it has taken 5 years to fall 20%, I believe, so after adjusting for inflation, Perth property prices have fallen even further)
3) property prices stay flat (in nominal price terms, they stay flat, however after adjusting for inflation, they fall - like in NZ in mid 1970's)
4) property prices increase slightly in nominal price terms, however after adjusting for inflation they fall
All dependent upon the underlying economic conditions, financial conditions, & government response to an economic slow down.
Meanwhile if you have cash, it is still earning a positive return in nominal price terms and a small positive return (non negative return) after adjusting for inflation.
The least desirable outcome in terms of financial stability in NZ is 1).
Oops, the above passages in my previous comment were written not by Westpac or ANZ economist but were the opening lines of John Beggs, chief economist for AIB (Banks) in October 2006. It was part of a 46 page housing report . Three years later AIB was nationalised by the Irish Government.
I took the liberty of removing one word " Dublin " otherwise everything is word for word.
Very clever - well done!
Interesting the bank economists saying immigration is keeping everything up. Doubly interesting given the recent research claiming a 10% increase in population only provided a 4-6.5% increase in house prices.
Does explain why politicians are so reluctant to listen to New Zealanders and run a lower, more normal (by OECD standards) and more sensible immigration rate.
It seems the doomers have stepped it up a notch recently. Positively in frenzy about price falls and talking them up by the minute in this weeks threads. Anyone else agree? If anything they're doing themselves more harm than good me thinks.
If you are a potential buyer or investor why would you not want prices to fall from these really inflated levels before you buy? Buying cheap assets is good and that’s what I look for! That is not doom and gloom, that is hope for a future healthier market.
"would you not want prices to fall from these really inflated levels before you buy?"
Yes and no, fall by how much? No-one wants a market in free fall, not even fhb or you, because then they lose confidence and won't buy so defeating the goal. You seem to be saying you want to buy a house cheaply and then immediately followed by a healthy rising market, am I right? Is that really a realistic scenario, why not learn to negotiate well in a flat market and therefore make immediate equity.
Why do you believe people want to make money off a house and need a rising market? Most people have something called "jobs" which they use to earn money. A house is a place to live.
That explanation will not bode well with speculators
Hahahaha. The whole country is fixated on the housing market and house prices. If you dont.believe me listen to news reports for frequent property news.
Indeed Houseworks,
A senior newspaper man told me last week that nothing sells newspapers like items on the housing market......
He reckons the demand for houses in NZ is “insatiable”.
And we see the same thing here, with Greg Ninessess’s columns.
While this situation continues, don’t expect too much weakness in house prices.
TTP
Housework, no I don’t want there to be a bubble and for it to pop but here we are. Realistically it is going to burst and it’ll be years before any real upswing again. I’ll invest elsewhere in the meantime, where the situation looks more promising.
Yes. And just as they are too self-confident and simple-minded to learn from past property cycles, they don’t have the capacity to learn from DGMs of yesteryear that were just as clueless. There are more of them these days, but it’s just different usernames same rubbish.
Here’s another beauty from back in 2011 before prices took off.
by Realistic view | 11th Nov 11, 10:37am
“...We have a house price bubble and it is slowly deflating. Imagine a balloon being constantly pricked with a pin and these holes being patched with a band aid, eventually it deflates. That’s your famous housing market.”
https://www.interest.co.nz/property/56675/opinion-olly-newland-says-now…
DD - you don't think it's slightly different today being as prices are literally falling by the month in Auckland, and across the pond they're already in crash territory? No cause for concern there whatsoever? Just buy buy buy, it's always a good time, right?
The factors at play are never exactly the same, but the NZ property cycle is very reliable. So no, I don’t think this time is different. I don’t think the cycle that has been going for the past 40 years (rise/plateau/slight fall) is going to drastically change all of a sudden. I’ve picked bottom of current cycle due 2021/22, but trying to time the market isn’t a good strategy. If you are in it for the long term, it is always a good time to buy NZ property. It always feels like prices are too high, until you’re looking back 10 years later. There will be another recession, but the DGMs on this site have said it will happen every year for the past decade. When it finally arrives they will say “I told you so”, but they will be no better than blind squirrels that happened to find a nut.
Interest.co.nz publishes a housing affordability report - it may not feel like it, but a lower quartile house is well within reach for most couples looking to buy their first home.
The article by olly newland was a good trip down memory lane. Reading it seems more disturbing than what life really felt like, what with the earthquakes and finance company issues which we were not affected by personally. I remember 2009 the property market environment was similar to today, big drop in real estate sales, non-negotiable vendors and asking prices too high for me. Values were dropping a bit and DGMs abounded you will remember. We were after a rental. Then I got a knock on the door, a JW, yet he ended up telling me he had a house for sale and it was just what we were looking for. Small house on full site in good suburb. Very negotiable vendor because he believed the end was nigh. Good affordable deal for us and a new investment journey beginning. That property was probably a springboard, it's funny how life turns. So when commentators ask me whether its possible to buy a house in a falling market and still be better off, there is only one answer.... Y E S !!!!! 2009 or 2019 different year but similar circumstances, just find the right property and right vendor. Would love to hear others real experiences positive and not so positive.
"the NZ property cycle is very reliable. So no, I don’t think this time is different. I don’t think the cycle that has been going for the past 40 years (rise/plateau/slight fall) is going to drastically change all of a sudden. "
Does that mean that residential property prices in Auckland double every 8-10 years (in line with the price history in Auckland for the past 40 years)?
Is it only Auckland? Or it applies to other locations within NZ, such as Wellington, Christchurch, Dunedin, Hamilton, Hawkes Bay, Tauranga, etc? Perhaps if it applies to most of NZ, tell us where it does not apply in NZ
Yep. They double every 8 years because ???, they just do.
That's why if you extrapolate this out, in 50 years time the average Auckland house will cost near 60 million dollars to buy and our average wage should be approximately $150,000. The house price to income ratio will be ~400x - easily doable if people stop buying coffees and SKY.
All sounds pretty plausible if you ask me.
NOT in 1984-92 me thinks .....
" in 50 years time the average Auckland house will cost near 60 million dollars to buy and our average wage should be approximately $150,000. The house price to income ratio will be ~400x"
Based on those numbers, not to mention the required equity deposit for owner occupiers to purchase the house:
1) at an LVR of 80%, and 20% required deposit, that is a $12,000,000 deposit (compared to an income of $150,000 or 80x the annual gross household income)
2) at an LVR of 90%, and a 10% required deposit, that is a deposit of $6,000,000 (compared to an income of $150,000 or 40x the annual gross household income)
3) at an LVR of 95%, and a 5% required deposit, that is a deposit of $3,000,000 (compared to an income of $150,000 or 20x the annual gross household income)
Factors worth noting from the past up until now in regards to the number of household members working, the interest rate levels, the debts levels
Householder workers increased from 1 to 2 people
Interest rates decreased from 10+% to 4-5% today
Mortgage Debt levels increased dramatically
Incomes have only increased gradually over that same time period
We started with :
* 1 household income earner , high interest rates, low debt levels
and then both partners had to work...
* 2 household income earner , high interest rates, medium debt levels
Interest rates then dropped and debt levels exploded....
* 2 household income earner , low interest rates, high debt levels
Other than significant wage increases there is not much left to give.....
Good post DD. Unfortunately heres the up-shot of that ridiculous, head in the sand 2011 post DD, but I'm not telling you anything you don't know :)
"by Big_Data | 3rd Aug 19, 5:28pm
.... So when you've been looking for ages (sometimes years) and saving and dreaming and saving some more, and seeing nothing but house price rises—"
Big_data gives a good description of the problem that fhb face.
Very true. I feel for first home buyers, it’s not easy out there. At least the brave ones have more of a fighting chance with low interest rates and an opportunity to make the most of the current buyer’s market in Auckland.
FYI, there have been some considerable changes in the market environment since 2011, that impact the Auckland property market and make the market vulnerable
Here are a few to note:
1) implementation of tighter LVR rules by RBNZ
2) Healthy Home Guarantee Act
3) changes to Consumer Credit Act - Responsible lending
4) restrictions in buying by overseas buyers
5) requirement of tax number for house buyers
6) bright line test implementation & extension to 5 years
7) ring fencing of losses from residential real estate leasing operations
8) implementation of anti money laundering rules
9) lower mortgage interest rates
10) house price to income valuations are 40-50% higher
1) Set to be loosened gradually. Likely to see further easing later this year.
2) Will impact rents, but affect on house prices likely to be minimal.
3) We’ll have to watch this space. Banks are already being cautious with lending. Costs may be passed on to customers.
4) Foreign buyers accounted for only 3% of sales.
5) Won’t impact house prices at all.
6) Old news. New news is that there will be no broad based CGT.
7) Could impact rents, but effect on house prices unlikely to be profound. Only affects negatively geared landlords. I think you can still claim the losses from further years in which you make a profit.
8) Had no impact on NZ house prices.
9) Will support prices.
10) In 2001 it was lower than in 2011. In 2019 it is higher than in 2011. Maybe in 2029 it will be higher than 2019.
Shortage has worsened and immigration remains higher.
I’m not ignoring the factors you mention above, just not catastrophising.
Did you just swallow a whole lot of helium? All the above points are just fluff and no stuff
Due Diligence,
Thank you for providing your counterpoints. Very interesting points. In respect of point 10 you state:
"10) In 2001 it was lower than in 2011. In 2019 it is higher than in 2011. Maybe in 2029 it will be higher than 2019"
In your opinion, at what level of house price to household income ratio in Auckland would be extreme and unreasonable.
1) 18 (approximately double current levels)
2) 36
3) 72
4) 144
5) can be any number, as long as there is a housing shortage in Auckland, property prices will keep rising.
6) other. Please explain your reasoning.
Agree that people can get a bit excited by some of these news snippets, or by the "certainty" of their own predictions. I even agree with TTP that the Auckland market has shown remarkable resilience thus far. But that's about where the agreement ends :-)
The Auckland market has had small but steady falls over the last year, and there are enough signs that it may continue for the waiting strategy to be perfectly sound for many people. Spring should be quite revealing.
Good luck timing the market. Not an easy thing to do. If I were you I’d visit Rand Rescue, get my deposit together, and make the most of what is currently a buyer’s market.
(DD) Buylowsellhigh, you say "Good luck timing the market" But yet you're spruiking the naive to enter a steadily weakening market based on your flawed assessment as being of good timing? Your judgement of the current economic circumstances is nothing short of hilarious! For starters you, Houseworks, REA-TTP and ilk were not even expecting let alone predicting we would ever return to a "buyers market". Despite high migration and the "housing shortage", house prices are falling in Auckland and now its spreading to other centres. That's another prediction missed. Are you prepared to offer an explanation for making these same "buy" recommendations in 2017/2018 and prices having dropped considerably since then?
There is no hurry whatsoever as this weakness has considerable time to run yet.
I need to remember not to reply to your comments for at least half an hour after you post them so as to give you enough time to edit them umpteen times until they are beyond all recognition.
HUH?...all you needed to say was "I am void of a factual response" Why don't you whine to interest.co and ask they remove the "edit" button as well.
The good ol tetchy retired-poppy is back. Your posts wind me up but I still cant resist reading them.
Houseworks, looks like (DD) is relying on additional support in addressing my comment. Is this all you have to offer him? Looks as though irrefutable evidence of falling prices has won the day!
Retired poppy, you say "Houseworks, looks like (DD) is relying on additional support in addressing my comment."
Are you speaking from experience, is this something you do? Is it time for you to cleanse the guilt you undoubtedly have and you're trying to transfer to others. Appropriate being a Sunday morning. Have a good day.
Houseworks, I guess you bombed out too.... Its a sad year for the defenceless Spruikers. Many more to follow.
Thanks rp. It has been a good year for us so far, I doubt that is something you can understand
If you really had such a good year, you would be reaping the rewards rather than trying to convince the world..
You, Due Chilli and Yvil are peas in a pod..
Is this a tag team Dgm, when one opponent has thrown a few softening up punches the next beefy boi steps up and has a go. Frankly I think its the negative nancies doing more than the fair share of convincing. You people have an amazing ability to describe white and call it black.
Lol, arrogance is your middle name..
Isn't your reference to yourself and Due Chilli
For sure there's risk in waiting, but actually there is risk in every financial decision.
I have no need for Rand Rescue thanks.
True, and where there is risk there is opportunity, so good on you. Waiting may pay off, who knows. No offence intended regarding the Rand Rescue joke.
If you can time the market, you in ten years time will be stoked. If you buy before a drop, you in ten years time will likely be a bit annoyed that you missed out on some capital gains, but happy nevertheless as house prices will very likely be well above the purchase price in a decade. Rents will almost certainly be well up too. If you don’t buy at all because the big correction that you were waiting for never arrived, you in ten years time will be kicking yourself.
I’ve seen people never get into the market because a fall large enough to satisfy them never came along. But even if a big drop did eventuate, they probably still wouldn’t buy, claiming that it would be stupid to catch a falling knife. Ending up like that is the risk, and I think it is bigger than most people realise.
All valid points. Fortunately I have some experience with this as I managed to buy near the bottom of the last dip in the market. I wasn't desperately trying to hit the absolute bottom then, nor am I now.
I'm similar to Fritz in that I suspect the current cycle will fall to around 10% below peak. Current strategy is to wait until spring and then reassess. If the market is still at the current level or above, or has only fallen slightly, then I'll probably crank up the buying urgency for the rest of summer. If the market is showing signs of panic then my predicted fall may have been too conservative, and thus I may wait on the sidelines for a little longer.
Of course if at any point I see a house I absolutely love at a great price I might just buy it regardless.
I have some experience too, I've always bought when everyone not only not wanted to, but didn't see how the market could ever come back. I did this in the UK in 1996 (9 years after the previous crash), and in New Zealand in 1999/2000, 8 years before crashes and QE. I was also a property Valuer. Valuers always say that valuations are only correct to within 10 or 15%, so a few percentage points here or there don't mean much. I've also been a trader in the financial markets (made a killing in the 08 crash). When your old enough you get to live several careers. This market has crash written all over it. I've never predicted anything. Just trade the trend, up or down. If the trend isn't apparent, put a multi year chart on the wall, and go stand over the other side of the room.
Check this out, Mortgagee sale in St Heliers. Look at the rubbish, and it looks like some roof tiles are missing. I went to the open home for the connected unit in front a few years ago. It was decrepit and hadn't been renovated in 30 years. The agent, from Sothebys!!, was gloating how the owner purchased it in the 70s for a song.
Interesting to see that it's properties in the expensive areas that's starting to show up as mortgagee. There's some in Mission Bay too.
I'd love to know if some of these are being held back to prevent more pressure on the market.
Interesting on how a property owner who has owned residential real estate in a high socioeconomic area in Auckland since the 1970's, and benefited from the significant property price increase, has after 40-50 years of ownership found themself in a position of being unable to repay their mortgage.
Yes according to homes.co.nz that back unit hasn't been sold since it was built in the 1950's. I guess the owner could have used it as collateral for something else.
I just got an email from Trade Me. "A property on your watchlist has just been redued by $41,000."
BuT nEw ZeALaNd iS DifFeRenT.
Just out of interest?
1) Which city or town is that property located?
2) What percentage price decrease is that?
Tauranga, 4.4%.
Same old story around here...this "for sale" sequence is quite common and applied to this property.
Auction
Price by neg
Fixed Price
Off the market for a week.
Listed again as "brand new listing"
Auction again, no bids
Price by neg
Fixed price
Price reduced.
Why prices may not continue to double every 8-10 years...
Factors worth noting from the past up until now in regards to the number of household members working, the interest rate levels, the debts levels
Householder workers increased from 1 to 2 people
Interest rates decreased from 10+% to 4-5% today
Mortgage Debt levels increased dramatically
Incomes have only increased gradually over that same time period
We started with :
* 1 household income earner , high interest rates, low debt levels
and then both partners had to work...
* 2 household income earner , high interest rates, medium debt levels
Interest rates then dropped and debt levels exploded....
* 2 household income earner , low interest rates, high debt levels
Other than significant wage increases or high immigration levels there is not much gas left in the tank.....
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