Although the real estate industry remains in partial lockdown, the first green shoots of activity are starting to reappear, with apartment specialists City Sales holding an online auction of two Auckland apartments this week.
The auction was live streamed on the Gavl online auction platform and the first offering was a 40 square metre, one bedroom unit with a balcony in the Q Central building on City Road, just off the top end of Queen Street in the Central Business District.
This was a leasehold unit and was rented at $410 a week on a periodic tenancy, although the auctioneer said the tenants would be happy to stay.
Leasehold units have been out of favour with many investors over the last few years, although their prices have dropped so much that there is now a market for them, particularly among investors chasing cash flow.
After allowing for outgoings such as ground rent, operating expenses and rates, this one was producing free cash flow of about $800 a month or around $10,000 a year.
According to QV.co.nz the apartment had been purchased for $106,800 in January 2017.
Bidding opened at $70,000 and there were three competing bidders, all bidding over the phone. The auction was paused when bidding stalled at $90,000, while the agents consulted the vendors, who were based in Wuhan, China.
It must have been a difficult discussion because the auction was put on hold for an excruciating 30 minutes. When bidding was reopened a further bid was received for $91,000, but when it would go no higher the property was passed in.
The second offering was a 46 square metre, two bedroom unit with a balcony and a car park, in the building at 188 Hobson St in the CBD.
It was offered with vacant possession.
According to QV.co.nz it had been purchased for $503,600 in April 2017 and had a current Rating Valuation of $510,000.
When there were no opening bids on the property the auctioneer attempted to kick start proceedings with a vendor bid of $350,000, but there were no bids after that either so it was passed in without receiving any bids from potential buyers.
The auction highlighted the difficulty both vendors and buyers (and their bankers) are going to have trying to establish market values over the next few months, when sale numbers could remain at low levels and caution is likely to be the prevailing sentiment.
Because there were multiple bids for the leasehold unit you might assume its value could end up somewhere in the low to mid $90,000s, which would suggest a discount of somewhere around 13% to its 2017 purchase price.
But with no bids received for the Hobson St unit, the market is still to determine a value on that one.
Interest.co.nz is starting to post results on our Residential Auction Results page and our Commercial Property Sales page again, as they come to hand.
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78 Comments
Our beloved NZ MP’s prefer property and loads of equities. LATEST REGISTER OF PECUNIARY INTERESTS:
https://www.parliament.nz/media/6387/summary-report-2020-final.pdf
The very reason no politicans wants the ponzi to stop.
Labour just after winning election was carried away and introduced FBB but soon realized their mistake and backed out of CGT (which by any argument is just and in most countries) as many in Labour had either upgraded their existing house or added to their portfolio as a result understood why no previous Ministers introduced any law/policy contain speculation.
Exactly right. This housing Ponzi scheme has been sustained for too long. This is now the time for this real estate bubble to burst and to come down to levels that make economic sense. Too many resources have been diverted for too long away from the real economy.
If left to politicans would have never happened but the external Corona Virus has and will reset lot in the economy and also geo political relations.
Obligatory reminder that some (including Simon Bridges) appear to be still hitting up the taxpayer to subsidise mortages on properties via private superannuation schemes, a loophole that was not closed when the trust one (that Bill English of "douple-dipper" fame and others used) was closed.
a Herald investigation of politicians' property records finds six Govt MPs are using their private Super funds to own properties that do not need to be disclosed, claiming up to $78,000 a year to pay off mortgages
And
MPs generally use these super-exclusive super schemes to buy a property they can then rent to Parliamentary Services as their Wellington residence, said Prosser...
An MP's accommodation allowance – currently $28,000 a year – can be legally paid to the super scheme as their landlord.
Sources:
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11154765
https://www.stuff.co.nz/business/money/101854679/private-super-schemes-…
I would suggest if MPs have genuine concern for the plight of the New Zealand taxpayer, they show it.
The double dipper of dipton....we should also talk about the accomodation supplament that winz pays to the strongly National Party biased landlording sector. No ones brave enough to take that on either!
Yes can we just start calling National the 'Property Ponzi Party' because I'm not sure what else they actually represent or stand for.
I agree, but sadly no major party has had the balls to stop this housing Ponzi scheme and focus on the real economy instead. This includes Labor and NZ first. And the RBNZ has been a willing accomplice in this mess.
I voted for them in the past!
I did too...
IO, can you squeeze "China" somewhere into that name? Just so Jian Yang doesn't get too homesick..
.
Welcome to the property cycle. Rich foreign thieves pay too much for foreign assets, then sell back to locals for half price when times get tough. They then buy them back for full price further along the cycle. Has been repeated for many, many turns of the cycle. As a Queenstowner, I shall be looking forward to taking part in the near future.
Wait, why are they thieves if it was permitted by law? And "buying at full price and selling at half", I think they might be smarter than you imagine them to be
Hi blowjoy,
Am afraid you have to get used to all the emotive language that the DGM bring here.
The DGM compete amongst each other to see who can offer the most gloomy-doomy perspective.
I know it's tiresome but you just have to put up with it.......
TTP
TTP, would you recommend Palmerston North as a place to buy right now?
PN is known as a waiting room city..
Doom and Gloom for hardworking renters is when they get told house prices are getting further out of reach so they are destined to rent from greedy landlords for eternity.
.
DGM, is that short for "Debt Grafting Middleman"? No shortage of them on here saying how great everything is.
Yes T I too am interested in your opinion on if now is a good time to buy in PN? Please do reveal all?
There he is! TTP! The guy we're supposed to not know who he really is.
Buying high and selling low? That’s an interesting approach to thieving...
AKA Trump's Art of the Deal.
Rinse, repeat, bankruptcy, lending, bankruptcy, no bank lending, borrow from Russia, yada yada yada.
Ah so that is what I have been doing wrong...
"Buying high and selling low?"
From a non resident buyer, who is a net payer of cash into NZ, isn't that a donation to the NZ economy?
(Net payer of cash to NZ economy - as they take less cash out of NZ than they put in, due to the loss on their property investment in NZ)
Yes it is a donation. To whatever country they park their money in. If it is stolen from their own country, and they still get to keep half, they are still doing alright.
Meanwhile in doing so dragging all other participants along with the ride (if they're prevalent enough that is).
No one in the real world buys then sells at a loss.Lets stay in reality please.
Buying high and selling low is a famous tradition. Using other people's money which will never be paid back is the trick. Us honest folk are just not used to how people from other cultures do their business. I steal from my fellow Elbonians, get the money offshore, buy whatever I can find, whereever I can find it, and create empty house suburbs all round the world. Then when times get tough for me, I sell it for half price, which is still a lot of money, now mine.
You can check it out how well your local electorate MP’s wealth when compared to last year
Still as per Barfoot email : Property Update - Auckland Property Market Bruised But Stable
May be trying to sell as much as before the real data starting to flow after the lockdown (Fall was also freezed during lockdown) and now being fully aware that going future market will tumble are trying to sell as much as possibly by creating false narrative.
I guess the NZ property market has finally been turned upside down. ( ͜。 ͡ʖ ͜。)[̲̅$̲̅(̲̅5̲̅)̲̅$̲̅]. I bet the apartment overseas Vendor from Wuhan will have wished that they accepted the bid offer, Tenants usually start to look for alternative accommodation when they know that their Landlord is keen to off load them. And there's going to be a lot more properties to choose from in the near future.
Is Wuhan not in China.......
Would you prefer me to say Wuhan in China next time Richard? I think most of us know where Wuhan is, can't quite put my finger on as to why we know that. :)
Everyone knows where Wuhan is now, which seems to be the birth place of Corona Virus but my asking was to highlight that despite denial by politicans of all breed, China was a major player in housing ponzi :)
And it is not only in NZ but even in Australia, Canada and other countries.
Time to Reset.
Ahh I see. Yes I do agree with you on that point "China was a major player in housing ponzi, And it is not only in NZ but even in Australia, Canada and other countries."
It's easy to view now since the flow of dodgy money has been mostly stopped here in NZ with the FBB and Anti money Laundering rules. Yet surprised that Australia and Canada are still very dependent on overseas money from China, well at least Canada has taken some tax measures.
The new market is now firmly in buyers hands.
From personal experience this week FHB are still keen as mustard.
FHB who are friends, family, colleagues? Or clients?
People buying my house. Three good offers well over the asking price, the lowest being $100k over RV.
Wow. Where do you live, if you don't mind telling us?
Probably a 2017 GV, with recent improvements not reflected.
Nope, GV current as at December 2019 reflecting improvements. Large city in the North Island.
So Auckland?
Large city in the North Island
Should grab with both hands. Sell before lockdown ends and real data/ picture starts to flow.
As the house price can only go in one direction - South. It could roll down slowly or jump over the cliff is to be seen.
That will not last long once people catch on they can get it for less they will haggle.
Kiwis are cheap skates and prefer to buy the cheapest thing most of the time i.e Pak and Slave The Warehouse K Mart versus highend retailers.
Eagerness will be based on the assumption of rising prices. Having witnessed the GFC in the US firsthand, watch how interested buyers become when news of falling prices becomes widespread. But then again if FHB want to load up with debt in this jobs market and banks are willing to lend to them, I believe we deserve whatever outcome occurs down track.
It's good to haggle, You should always negotiate to get a much better price from mortgage rates to property purchases other wise you just get ripped off even more. It still shocks me just how naive people are.
Keen is one story, but actually buying will be another story. Most people are buying when the price is going up but if the price is going down, they are keen to buy but not sure they will actually buy, have you talked to some share investors before?
Those sellers that wanted to sell still remember the prices that were available seven or eight weeks ago. The buyers are looking at a very different world and expecting to see significant discounts," he said. "When you've got that big a spread, nothing happens.
https://www.smh.com.au/business/markets/grave-dancer-sees-economy-perma…
Those sellers are like Rip van Winkle.Continue to dream on with their pre-COVID asking prices, esp Auckland properties. When they wake up, they are more likely to find themselves in an entirely new world!
See my comment above. FHB I've spoken to after still desperate to get into a house, and from their stated addresses, nearly all were living in units/townhouses on a postage stamp and an actual yard was really valuable. There were plenty of new build townhouses on postage stamps in the area asking less than we were, and they passed them all over.
Just my personal experience (selling privately), but people promoting medium density housing are ignoring the dreams of people who grew up on something larger than a postage stamp who will pay a premium for space of their own.
Folk are certainly keen as mustard when they've got stable jobs / incomes and no reason to doubt that in future. It'll be interesting to see what happens as doubts start to seep into the situation.
We haven't even seen the insolvencies yet, everyone's still in la la land.
Anecdotal isn't it. I've heard the opposite from many FHB & ones that have just purchased wishing they hadn't. Stats will eventually tell us whats really going on.
As always it's going come down to personal circumstance (job, needing to move etc), assessment of the market, and access to credit. Not a lot of banks lend to people without jobs.
But awesome you're going to be able to sell it for what you want. Congrats.
Exactly and for the same reason FHB should wait for the reality to hit the vendors. Also most houses in the market are those where appraisal was done before the lockdown/ High price.
FHB who will overcome FOMO will get the most for their $$$$$
And so it begins.
Ironic, the vendors are from Wuhan.
Leasehold....The new junk bonds of New Zealand. $410 per week for 40 square meters. A place to sleep after working/studying all day. Tenants will have plenty of options after all the international students/Hospo workers disappear from the rental market. REA's are still listing properties on Trade Me at pre COVID19 prices. Optimistic or just plain greedy?
Willing buyer, willing vendor. They set the market price. Remember Ron's seven "D"s, Elementary economics, invisible hand, etc.?
Another headline to create panic / FOMO
Search for data to find which can be used to suit biased outcome.
https://www.newshub.co.nz/home/money/2020/05/coronavirus-expat-kiwis-ru…
"Search for data to find which can be used to suit biased outcome"
Search for data to find which can be used to suit their own self serving financial interests.
I read this earlier today and thought many could be seeing if prices are falling/have crashed. I doubt many would come back to no job and an expensive house!
But a cheaper house and a growing jobs market sure. But that might be a few years away.
The NZ property market won't start correcting until there is data enough to counter these fluff pieces. There will be a slowdown for now, very little movement on either side while many watch and wait. Some naive FHB will rush in, as they often do. But my guess is that it will be months before we see any significant price depreciation. It will start slowly to begin with but over a 6-12 month period will pick up speed as the pressure mounts on the indebted.
Should see visible impact in house price by September/October and that should be the starting point with more fall to come.
Air BNB's in Queenstown may be two for the price of one by then
"The NZ property market won't start correcting until there is data enough to counter these fluff pieces"
Exactly.
Many people respond to recent market price action to derive their future price expectations - the longer that prices have been going up, then there is increased confidence by buyers that prices will continue to rise. Rising price action overrides risk warnings, until price action or conditions change.
Look at how many people changed their KiwiSaver allocations from aggressive to conservative after the recent share price falls. After the share price falls, investors went from greedy to fearful.
Recall risk warnings about price bubbles being ignored in the following situations when prices were rapidly rising
1) share prices during the internet bubble 1999 / 2000.
Rising share prices drove uninformed investors to continue to buy. Then when share prices fell, some were conditioned to buy the dip. Then prices fell further, leading to loss of confidence, and then after large price falls, novice investors capitulated.
Similar with other price bubbles:
2) tulips
3) bitcoin
4) oil - remember when it reached US$140 / barrel in 2007?
5) shares of marijuana companies listed in the US sharemarket
6) various other commodities - silver (2011), natural gas (2007),
7) residential real estate - US, Ireland, Spain, (2006-2007), HK (1997), Singapore (1997)
8) commercial real estate - NZ (1987)
9) shares (1987)
Correct. Things are still in the "denial" stage. That may well be dragged out even longer than usual due to the mortgage holidays. There is this misconception that crashes are just a straight plummet off a cliff. That's not how it works, there is usually at least one significant false dawn before the worst falls set in. The slow turn in the media (a few hype stories mixed in with bad news) is typical of this stage.
The question is... How long will it take?
I am currently renting and have been pre-approved. No point buying right now so just waiting...
That I don't know. That largely depends on what the RBNZ does and how successful they are at supporting the bubble, but it also depends on the international picture which is way too complex for me to want to make any firms predictions about. Don't be surprised if it takes a long time, and don't be surprised if it goes down a bit, back up a bit, down a bit etc because asset price declines don't generally move in a straight line. There used to be a blog called 'notes from the bubble' about the Irish crash, it looks like it's gone now but it was basically a big long string of quotes from people calling the bottom of the market at various times - it ended up taking about 5 years to fully bottom out. I'm in the same position as you. My advice would be look at the fundamentals (employment, bank lending criteria, etc) and psychology (if most buying decisions involve some variation of the logic "I know it's a lot of debt, but it doesn't matter because I'll be able to sell the house for a profit in the future" then you're still in bubble land). I would also be waiting at least until the end of the 6 month mortgage holiday period as that will paper over a lot of the cracks for a while.
Well, that's easy... like any other market price in an auction environment, prices are determined by the bidders...
I think it's clear what the market said during those auctions, but it is only 2 sales - so too insignificant at this point to mean much
Apartment vendor is from Wuhan China
Bit in need of funds there for some reason?
$90k for 40 sq metres leasehold eh?
Cheap as chips ....
What's a "Vendor bid"? I don't get it, isn't that normally a reserve in auctions?
It's a form of seller's remorse.
Kinda surprising how _few_ houses and properties MPs own. Most are 0, 1 or 2, with only a small number of MPs owning multiple properties.
Interesting that many MPs have mortgages to banks. Perhaps MPs are not so different from the rest of us, and if they have any vested interests perhaps it is for continuing financial stability of banks and the rest.
Curios as to where you got that information. Personally would not be surprised if that were true. Find it amusing that people assume that politicians are all wealthy land hogs but where is the hard evidence.
According to https://www.newshub.co.nz/home/politics/2019/05/the-number-of-propertie…
There are 8 MPs that don't own property (1 ACT, 2 Greens, 2 Labour, 1 National, 2 NZ First)
There are 37 MPs that own one property (5 Greens, 19 Labour, 12 National, 1 NZF)
There are 74 MPs that own 2+ properties (1 Greens, 1 Jami-Lee Ross, 25 Labour, 41 National, 6 NZ First)
And I missed one somewhere
I hate it how they pause auctions while they "Seek instructions from our vendor". 30 minutes???
Slows the whole auction process down and makes it very tedious to watch/attend.
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