Residential property values are continuing to rise in most parts of New Zealand but not at the hectic pace of last year, according to Quotable Value.
The average value of NZ homes was $1,063,765 at the end of January, up $10,450 since the end of December, according to the QV House Price Index, with both figures based on sales over the previous three month periods.
However the growth rate of property values slowed to 6.1% over the three months to the end of January, down from 7.8% in the three months to December.
Only three regions had lower average values at the end of January than they did at the end of December - Nelson, Queenstown-Lakes and Dunedin, with all other regions showing gains. (See the chart below for the average values in all regions).
"We saw spectacular value growth throughout 2021, with increases we'll unlikely see again for a generation," QV General Manager David Nagel said.
"But with interest rates on the rise, tightening credit conditions and supply pressures now easing, we'll likely see a property market return to a more sustainable level of growth.
"We've seen house listings surge in many locations where previously there was an acute lack of stock, and with the banks tightening their lending criteria in response to the new legislation, we've noticed a real falling off in auction and open home attendance.
"We're not seeing the double digit quarterly value growth we were used to seeing throughout last year," Nagel said.
However he is not expecting any major declines in property values either.
"If the floodgates were to open again to new migrants and returning Kiwis at the levels last seen in 2019, then we could see some strength return to the property market as demand for housing increases," he said.
"But more likely we'll see a gradual decline in the rate of growth, as interest rates rise and tax deductibility rules take effect for investors, with only a few locations showing any significant reductions in value."
You can read QV's full House Price Index report, which includes regional commentaries, here.
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179 Comments
So, this time it's diffrunt?
There's extenuating circumstances. Money got cheaper, we're part way into a decent de-urbanization and relocation of boomers, the population can basically only spend money and exist domestically, and also arguably a level of mania brought about by living through a pandemic situation.
A typical boom bust cycle is a bit more boring.
What is different right now is that we are coming off record low interest rates. Price to rent and price to income ratios are at historical highs and inflation is now forcing the RBNZ to raise rates in a way we haven’t seen in decades.
Anyone who thinks this is just the “same old” scenario has their head in the sand.
CWBW and Carlos67 are our resident ostriches.
I think even Yvil thinks house prices will fall :)
Sure prices will fall but its still going to be an overall gain for the year.
On ya
Pretty much inline with my punt of single digit house price growth for 2022. People are expecting a crash but the only crash this year will be Labour's poll numbers.
I don't think so - the ass has fallen out of the bottom end of the market thanks to investors being on the sidelines and FHBs reducing their budget due to rate rises or lower approval limits thanks to CCCFA. Look at the clearance rate in South Auckland. If upgraders can't sell then its a domino effect for the rest of the market. I also have a family friend that sells home and land packages on the outskirts of Auckland - he hasn't done one deal so far this year and is contemplating looking for another job.
CCCFA might get resolved as a road-block this year sometime / soon ... and then we have the ol' pent-up demand again, sigh.
The RE industry and mortgage brokers have this wishful thinking........
Good ol' housing market......
Despite all the talk of doom and gloom (see comments above and below) it's still romping along.
TTP
You told us a year or two ago that you'll soil your undies if Tauranga passes the $1M mark.
Did it happen?
Was that directed at me CWBW ? No I have only been here since Sept 2020 and predicted my house would hit the $1m by the end of last year and it went well beyond that. I don't recall a change of undies were part of that prediction. Tauranga has just turned into a suburb of Auckland house price wise. Not really a big surprise.
The housing and traffic of Auckland, without Auckland's energy, culture and diversity...
Plus “5.9%” Inflation is starting to wipe out the value of your mortgage. Interesting ride ahead.
That would be true if wage increases were matching.
Agreed. If it's just rising costs and no wage increase then its stagflation. Which is the worst outcome.
No. It depends on the differentials between cost and expenses.
Engineers usually smell the money at about the same time economists and the finance folks does.
That's cute.
I'm an engineer. We just got a company wide pay rise equivalent to half the minimum wage rise, so effectively a pay cut.
Maybe my sense of smell doesn't work anymore.
It's not 5.9% inflation, everyone knows its double digit inflation and they are letting it have a free ride to eat into the massive debt the government has created.
It's eating into household budgets more than our mountain of debt.
How could we manage if we didn't have the best democracy money can buy?
Yeah, but your costs are rising too. And those of your prospective tenants, if you’re a landlord.
Best way to deal with debt (apart from paying it off) Inflate it away!
It is also making new houses more expensive to build, which ultimately helps to push house prices up.
Unless you're in the position where you can relocate or you're downsizing, then all that's happened is you need to borrow more to afford your next house, because it has probably gone up in price faster than the one you live in now. So while you make a $$$ gain on paper, for most it will mean more debt at a time of rising interest rates, which means either spending much less or working much longer.
There really are very few people this whole saga has worked out well for.
Banks and Real Estate Agents: Hold my beer.
Good to see you back Zaphod. And as flatulent as ever!
Gangstas and fleas
Yes but what matters is that the owners FEEL wealthier. That means they spend more and happily have more debt and push up inflation which is great. Isn't it?
That doesn't work if inflation and tax bracket creep is mopping up their net pay. They can only spend what is left over, or go into debt trying to preserve a lifestyle that doesn't work anymore. And like I say, many are realising that the wealth is an illusion, and it's only real if you are downsizing or fleeing to the regions.
There's a high chance more and more people will just keep tightening their belts.
There was a small amount of sarcasm in my comment.
Sorry, I require Janeway-esque levels of caffeination to function these days. If I drink it at work it's free. I only have to drink another 39 free coffees today and I'm on track for my house deposit savings goal.
2021 was delayed catch up, some areas had no or little price growth 2010-2015.
Almost 40% gains since Covid hit seems a bit beyond "delayed catch up".
Presumably we'll have a decade of wage catch up next.
If so, then you could see continual price increases
More inflation, did you mean? Yes probably. It sounds like a death spiral.
It sounds like the late 1970s/80s. Guess how I know.
In real or nominal terms?
Yes and the best we can hope with is a nice sideways drift in values, but somehow I don't think this will be the case
Great for those that capitalized, pity those that were hoping for further gains
The housing disaster is a generation wrecking event. But it's not a force of nature. It was engineered by Orr and Robertson.
But with some of the pre-conditions also set in place before that.
KeithW
Absolutely, it was already bad. But most of the price explosion of the last 18 months is down to Robertson's economic illiteracy and Orr's recklessness.
They have ruined the lives of so many people it is beyond belief.
It’s a funny thing being a reserve bank governor. Your main job is to stop bad things from happening. Of course you can never be measured by the things that didn’t happen. We can never really know we what would have happened if during the pandemic they didn’t lower interest rates , or quantitative ease.
... or remove all loan to value restrictions and promise not to re-instate them for a year.
No point in bringing up past faults. We can only realistically have a say via our next vote with the current leaders.
The current govt swept to power using this as its main rallying cry, and the have instead overseen the biggest sustained jump in house price inflation in nzs history.
No one wants to be the one that topples the apple cart. I get that, but at a basic level, we've massively over cooked the pandemic response and not done enough to suppress obvious the rampant house inflation that was to follow.
Wasn’t just nz, this was a global phenomenon.
Rubbish. It started well before Orr and Robertson. It was becoming noticeable under Clark and Cullen, so started before then. Orr and Robertson are complicit because unless they were remarkably stupid, they came into Government knowing it was a serious problem, but had no ideas and no plan to address it. They just picked up on what JKs government dreamed up even though that had already been proven not to be effective.
Yes agree. It's generational and cross party. Easy gpd gains based on immigration and housing are just too tempting..
As long as people believe that GDP growth is good for them, they won’t question the model that produced the ‘rock star’ economy.
i don't claim to be an expert in this stuff, but surely a system which has essentially prevented anybody under the age of 30 from buying house and forming a household needs to be held to account? a country does well when the middle class does well, not when the over 50s create a landed gentry for themselves and their progeny. Its disgusting and both governments are culpable! Good on you New Zealand, we are more divided than ever - Go team of 5 million (500k rich old people, 4.5million, maori, poor young folk and immigrants)
RBNZ has overshot the inflationary target for quarter after quarter now. There are no consequences for the political manager class. They get their handsome six figures whether they succeed or fail. Accountability is not a thing that exists for our decision makers.
Good luck, no government or system will be held to account. No one should get their hopes up only to be inevitably let down.
They all want the ponzi to keep going, it's in their best interests to. And all 99% of politicians really care about is their own self interest and survival.
I voted for Ardern as I had some belief that she was genuine about trying to fix the mess. How wrong I was. I don't think I will ever vote Labour again, they have betrayed my trust.
I don't care for National either, but I will probably vote for them as a protest vote, effectively.
Better off voting TOP if you want a protest vote housey, that's my thinking at least.
Voting for anyone else is a vote to continue kicking the can and further screwing our kids over (for those of us with young kids).
Unfortunately, I think TOP is a bit of a wasted vote, but if you vote in terms of 'policy purity', sure.
Yeah, that's kinda true, but only if everyone that wants some actual change thinks like that and votes gnational or act...
Respectfully that's a load of BS. A wasted vote is voting for the same (National / Labour) while expecting things to change. Clearly the major parties are only going to tinker as things crash and burn. We need a party like TOP to shake them out of their complacency.
Realistically they would need to be hitting at least 8-10% support to have any sort of influence.
I would love them to be doing that, but can't see it.
Given that, I will enjoy taking my revenge out on Labour for their broken promises and abysmal delivery.
At least with National there's no idealistic policy promises to fall down from, in terms of expectations.
Well, maybe there will be - maybe they will come out with a housing plan that fails miserably, too.
Why would the party (National) that represents the very people benefiting from asset inflation actually do anything productive about it? Talk about turkey's voting for Xmas....
Personally I'm hoping TOP gets enough votes that the major parties need it to form a government (a bit like NZF did in the past). This would give TOP slightly more leverage to implement some of their policies. The other advantage is this would enable the major party to introduce unpopular but necessary policies under the guise of being TOP's, that way they can avoid the fear of fallout should the policies upset the current benefactors.
Agreed. Any vote for either National or Labour is essentially saying you are happy for “more of the same”.
A vote for TOP, even if they aren’t elected, is a signal that people are tired of the same old failed policies.
House prices doubled in the last 5 years from the day Labour comes into power.
Still, Jacinda wants a sustainable increase in price & it seems like she will come again in 2023, either we people are not thinking straight or this is the new normal designed by financial architects.
We are hearing slow-down crap for last 6 months but it's breaking new records. Inflation is so bad that you get surprised every day & RBNZ calculates it as 5.9, it is a new form of corruption.
And how to you explain every reserve bank in the world drinking from the same punch bowl.
Massive QE and cheap interest
Because the US is dying as the world power , and in their final desperate attempt to maintain power, they print money to finance their deficit.
Everyone follows the Fed..it’s just that we are property nuts have put all the cheap money into residential housing (non-productive).
Trying to dismiss it as normal isn’t true…we’re witnessing a one in a hundred (or 75ish) year event. It’s normal if you are thinking in time scales of hundreds of years, but it’s not normal in terms of 20 or 30 years which has allowed people to be delusional with recency and confirmation bias.
Nothing generational wrecking.
The people who got on the ladder in the same generation are winners- it's a matter of viewing whether the glass is half empty or half full.
Sad to see you sitting on the fence waiting for a discount for years.
I cant believe anyone still supports the govts heavy handed covid framework. So many other countries have relaxed the requirements and opened the international border as they know that omi is basically a flu. But oh no not us we have to endure Chippie telling us "dont panic". In other words, princess Jacindy wants to maintain her spell over you with her (we are looking after you) safety mantra
Is this site supporting the printing of BS misinformation now? ".....as they know that omi is basically a flu" is about as bad BS as it gets.
I'm assuming you web surfing while camped on the grounds of Parliament in wellington with all the other village idiots. Omicron is anything BUT a flu. It leaves lasting organ damage. An article I linked to two days ago published research that investigated 150,000 recovered COVID cases and found a 55% average increase in the incidence of severe cardiac issues. The flu does not do that ever! It is true a small number of vulnerable people die of flu every year, but there are clear reasons for this. COVID damages everyone.
So that 55% increase in the incidence of severe cardiac issues was from 0.00010% to 0.00015%?
And those 150,000 cases studied were omicron cases?
For the vast majority covid does nothing and omicron does even less.
unlikely that they were Omicron unless it appeared more than 12 months ago, but you have evidence that Omicron doesn't do that?
Mate. You are posting hysterical gibberish. Get a grip. The original poster is correct.
You have no evidence whatsoever to support your claim that Omicron causes "organ damage". Neither does the OG covid in the vast majority of people.
You should consider writing a scientific paper challenging these authors Brock. Granted this is probably an earlier variant but I don't think you can make broad assumptions about Omicron yet.
https://pubmed.ncbi.nlm.nih.gov/32720678/
Background: Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) has spread worldwide and has the ability to damage multiple organs. However, information on serum SARS-CoV-2 nucleic acid (RNAemia) in patients affected by coronavirus disease 2019 (COVID-19) is limited.
Conclusions: In this study, we provide evidence to support that SARS-CoV-2 may have an important role in multiple organ damage. Our evidence suggests that RNAemia has a significant association with higher risk of in-hospital mortality.
I don't need to write a scientific paper challenging these authors. That's because somebody with an IQ above room temperature would read the synopsis that states:
Patients who were admitted to Zhongnan Hospital of Wuhan University with laboratory-confirmed COVID-19.
Eighty-five patients were included in the analysis.
Then they would reason that using a small sample of the very sickest people who ended up in hospital (from the original Wuhan-lab strain) is not representative of the vast majority of people.
The vast majority that had the original Wu-Flu are perfectly fine. I'm one of them. We also know that Omicron is significantly less pathogenic and mostly infects the upper respiratory system. For all intents and purposes Omicron for anybody young, or for anybody vaccinated, is just a cold or a nothing at all.
It's time to put on the big boy pants and drop the hysteria. The rest of the world is laughing at us.
My 13 year old daughter has just had another national sporting tournament cancelled, bloody disappointing.
murray86 "The flu does not do that ever! It is true a small number of vulnerable people die of flu every year, but there are clear reasons for this."
About 500-600 people die of flu every year in NZ.
The flu does not do that ever! It is true a small number of vulnerable people die of flu every year
The flu can and does cause severe disease, including organ damage. The flu also kills young and healthy people, not just vulnerable people. It’s why it’s good if people get the flu vaccination annually.
When you talk like this you sound just as bad as those people who write off COVID as just a cold. Your words are misinformation too.
You are also wrong about the severity of infection with Omicron. What we saw with Delta, is just not happening with Omicron, e.g. presentation requiring oxygen, artificial respiration, etc. I suspect future variants will continue to be more transmissible, but less pathogenic. It’s time you calm down and carry on, the end is nigh for COVID so you ought to put away the hysteria.
We have like 165k people who are eligible for the special 2021 resident visa, most of them will call NZ home. INZ is going through the applications slowly and steadily as we speak. It's something predictable on the demand side.
I agree that these 165K people will be very keen to get on the property ladder and off the renting roundabout.
My own perspective is that we lured these people here with the prospect of long-term citizenship and we have moral responsibility to now follow through. These are real people that we have left in limbo.
But we need to be very cautious about continuing with the process of encouraging more and more people to NZ simply to balance self-inflicted short-term labour-demand imbalances in a broader context of infrastructure insufficiency.
KeithW
HM posted a very good explanation yesterday, as to why demand for existing housing stock will continue to rise. Add to that 165k permanent residents a resumption of immigration, reopening of the borders, a massive shortage of emergency housing with people still shacked up in Motels.
by HouseMouse | 10th Feb 22, 11:00am
Those building consent numbers are a mirage, Greg.
Who's going to be buying all these little 2 bedroom shoeboxes at 800-900K, with rising interest rates and stronger barriers to lending? The answer is: much fewer FHBs, and much fewer investors.
Not to mention a number of building companies are teetering.
Dwelling construction is going to fall off a cliff later this year, we'll probably see it starting proper around the middle of the year.
Yes, CCC numbers generally track building consent numbers quite closely, but that is in good economic times.
Go back to 2006-2008, you might see quite a different picture.
The people eligible for the special residence visa are already in this country and most will have been here for well over two years. All that will change is their visa status, it won't affect the number of people living here. So I don't see how it will have any impact on current levels of housing demand.
That befuddles me,Greg. Dim as I am, does it not mean that instantly ,165000 people who could not be owners before,as they were excluded by "non residency/ overseas buyers ban," - being on temporary work visas ,of whatever duration,suddenly become legally able to purchase? 165000 ,newly created buyers?
What Have I Missed?
Don’t tell the people farmers that 165,000 of their surfs might be eligible to buy their own homes and will leave their rentals.
Your focus is on housing sales, but I think you need to understand what does "housing demand" mean in Greg's comment.
Sure, some will probably move from rental accommodation to become owner-occupiers. But in doing so they free up their rental unit for someone else and the overall demand for housing hasn't changed.
Assuming closed borders?
Careful Greg, apparently owner occupied properties hold less people than rented properties. 1.4 renters will be made homeless if people start buying their homes, or something like that?
That's a bit of a myth:
“Data from the 2013 Census shows that an average of 2.6 people lived in housing that was owned by the household or the household held in a family trust, and an average of 2.8 people lived in rented housing. Based on these 2013 Census figures, every time a rental property is sold to an owner-occupier, on average 0.2 tenants still need a home to rent.”
From https://blog.andrewduncan.co.nz/property-investors-impact-on-housing-si….
Remember that little ban on overseas buyers? Once they have residency they can buy instead of renting.
.
They are already here, so demand impacts will be limited. Sure some of them might buy, but I bet not many. A large proportion of them are on low-middle incomes.
"A large proportion of them are on low-middle incomes." - this is the interesting bit, is it a fact or assumption/perception?
It's a slightly informed, observational assumption.
All of them were on work visas right, which would mainly be people working in retail, hospo, tourism, agricultural- or so I would think.
But no, I don't have data to back it up. Is there any data out there?
I am happy to be proven wrong :)
Even if many of them are on middle incomes they will struggle to buy in Auckland with current prices and rising interest rates.
I don't know if there is any data either, hence asked :)
My own observation is that a large proportion of them are Indian, Chinese, Filipino, South African and English. The Indians, Chinese and Filipinos will work three jobs, 18 hours out of 24 and get together with their relatives to get into whatever house they can. The South Africans and English often have money they can bring over. So some of them may be low income but many immigrants see large opportunities available here that are just not available in their homelands and will do what it takes to get there.
Home ownership in a Western country that is enforceable in a Western justice system is actually a privilege that a minority of the world's population enjoy. In most countries ownership of land is only as stable as your contacts with the clan, area commander/party commissar or regional government are.
The Greens proposal to use the Public Works Act to take peoples land, houses and assets away from them and give them to iwi would take New Zealand out of the Western world and into the world where commercial success is dependent on political power and where commercial contracts are not worth the paper they are written on.
Anybody paying attention would notice New Zealand is well down the path of being taken out of the western world.
Anybody paying attention to anything other than our hopeless local news would see the rest of the world turning to shit quite quickly and are glad they are living here. I guess the true measure will be what happens when the border reopens fully, people can vote with their feet.
How sheltered you are makes me laugh Carlos. Keep up the good work.
Not really Brock, done plenty of travel and always couldn't wait to get home to NZ. I have dual passports and could choose to live in multiple countries but no regrets living successfully in NZ.
Indeed. Those who are sheltered will always want to get back home.
My observation of around 5 South African households I know who have immigrated in the last 2-3 years is they can't afford to buy.
Admittedly anecdotal.
Once in a life time event to set you up for the rest of your life financially. One or two chances happen during one’s life time be it a business opportunity, property, dream job, won lotto…and for some it’s better luck next life.
""we'll likely see a property market return to a more sustainable level of growth". (GM of QV) With property already grossly over valued and unaffordable how can you possibly have a more sustainable level of growth?
Isn't a major correction required to restore some sanity and to stop the next 2 generations from being screwed over?
This is the type of rubbish commonly espoused by those in the property sector.
It also mirrors a quote 'more sustainable growth' from non other than Jacinda Ardern.
No wonder we are screwed.
Nice comment and really sums up all the wish for a property crash on here. they keep at it day to day…they know they are screwed if it does not come back. The catch is, Applying basic economics, I don’t see it helping them out either way.
In Australia they are predicting significant falls in Sydney and Melbourne with minor increases in mortgage rates come 2023.
But New Zealand (which has far higher median multiples) is diffrunt and immune to price drops.
Who are 'they' ?
To quote the colour commentary from NHL 2002
They're me Jim, every last one of them
Big four bank economists and most of the usual economic commentators.
No they're not, you love your hyperbole Brock. There are several fringe forecasters who have come out, but most have pretty rubbish track records. Show me a reputable economist or bank that has forecast significant falls in Sydney or Melbourne.
Feb 4, 2022
House prices across all state capitals will fall in 2023 on NAB’s view, with Sydney and Melbourne leading the charge lower with drops of 11.4 per cent in both cities.
The Commonwealth Bank of Australia has also begun tempering its expectations for the house price growth, noting the moderation in monthly gains. CBA has previously forecast a lift in prices of 7 per cent this year, before a fall of 10 per cent in 2023.
https://www.afr.com/property/residential/house-prices-to-fall-11pc-in-s…
Double digit falls predicted by the biggest banks in Australia.
Consider yourself shown, Te Cooties.
Haha classic retort to one of our resident spruikers.
"If the floodgates were to open again to new migrants and returning Kiwis at the levels last seen in 2019, then we could see some strength return to the property market as demand for housing increases," he said.
This is such small town NZ thinking (i.e. everyone wants to move to NZ because we're 'world beaters'). If anything migration flows are likely to go in the other direction.
I think most in small towns are way more intelligent than that. It's more big town thinking that growth is endless.
The linked report is dated Feb 2021
Thanks bste108. Fixed now.
Can't wait for the rest of the country to catch up.
Be quick!
I don't necessirily agree with housing price crashing per se.
Even with a 10% drop , it will only go back a few months, 40%drop will take you back to pre covid.
So those hoping for a bargain are been led astray by so called doomers.
Same doomers who said dont buy few years back to FHB. How many are still waiting after all these years ?
House prices may fluctuate a little bit due to all the factors discussed , but If i had 500k - 1M sitting in my bank I know what I would do
You are possibly right, unfortunately not many people have that much money sitting in the bank.
Even if you are right and people should buy if they can, the number of people who *can* buy is shrinking for a range of reasons.
Of course prices are going to come back if people are forced to sell & there are no buyers at the price they want to achieve. I believe we are at the tip of a large iceberg right now. Sure prices are sticky - this is due to the psychology of anchoring but as sellers get more desperate this will change. Oh damn is that a cyclone on the horizon?!
If I had 500k-1M in the bank I might buy, but I sure as shit wouldn't buy right now.
No point timing the market, this is the thing with people who seem to think they know better. Time waits for no one . Time in the market is what it counts.
read bout my post below
You'll be surprise some of the old nicks in here are still sitting on the fence after 10 years.
It always amazes me how can they possibly still go on with their apocalyptic prophecies up till today.
What about flat for 5 years in nominal terms with inflation running at 10%?
Do you view crash per se in nominal or real terms or both?
Please don't start that crap about house price drops in real term due to high inflation IO.
The way people experience the economy is in real terms. And the guy with a Nobel Prize in asset pricing (Robert Shiller), thinks real terms is the best method to measure asset prices (and their booms/busts).
Do you know better than a person with a Nobel Prize in a particular field? (I wouldn't be surprised if you do as this seems to be a common trait of humanity recently....)
Be a bit like saying Einstein new nothing about physics, and they way he viewed the world was crap.
The mortgage is nominal. Just saying.
Food, power, internet, rent, rates…are nominal also.
But they aren’t what they are to what they were last year are they? They have inflated. Has everyone’s wages? A families ability to service the costs hasn’t improved - hence real interest rates are about -5%…
Yet we have the central bank artificially keeping mortgage rates low so the debt bubble doesn’t burst in nominal terms - although given the current settings it could in real terms which is what they want, which is precisely my point, which exactly what you missed.
You assume the central bank will always, at every cost, protect mortgage holders over the stability of the entire economy. But even then if wages don’t increase at the same rate of inflation, everyone is worse off.
Just saying.
Food, power, internet, rent, rates… can (do) all go up in value. So too do wages.
Your mortgage does not go up in value. That's indisputable.
Your mortgage gets smaller relative to your earnings.
You can call it a crash in real terms if you want to. But unless it's a crash in nominal terms then mortgage holders won't care one iota.
Mortgages never go up? Haha ok.
Look at the 70’s-80’s where mortgage rates were far higher than the rate of inflation.
And mortgage rates when up for decades..so yeah guess that’s impossible in your world…but possible in the real world.
Indisputable apparently- or a quick look at history, a fact of life (mortgage rates going up and down..both in nominal and real terms)
I think he's referring to the mortgage balance itself in relation to wages i.e. inflating the debt away.
If inflation is 5%, your mortgage principal payments don't increase 5% per year.
Exactly.
The total mortgage decreases in size as you continue to pay down principal. The loan does not increase with inflation.
No the loan doesn’t but the interest payments do…and at the same time as all of the other weekly expenses also rise…assuming wages rise at the same rate as inflation great…but we haven’t seen that this last year…and then if central banks decide to lift the OCR above the rate of inflation to get it under control (which was my reference to past period of inflation) then mortgage payments increase faster/higher than your personal income does. It leaves you in a worse position to make payments (hence my real vs nominal rates reference), you have to decide whether to consume less or pay less mortgage, and means debt levels need to come down to service new debt costs across the economy as a whole, which means lower prices.
But good luck with your theory.
Interest payments increase based on the interest rate, but the loan payments don't "increase" with inflation. I.e. if inflation is 5%, mortgage rates are 6%, your repayments don't go up 6% per year.
Maybe if you were not making any scheduled payments on the loan, then yes the loan would increase with inflation as loan interest is added to the balance and the required payments would increase inline with inflation.
Deflation will cause your mortgage to go up in value.
As long as you make your regular payments the nominal value of the mortgage will not increase.
I dont profess to know as much as nobel prize winners. None of them have crystal balls.
But experiance this:
some of my best purchases
2009 Purchase Price $370K
now worth 1.8M
2011 PP 310K
now 1.2
2012 PP 285K
now 850k
With inflation factored in…in real terms you would be saying most investments classes will be crashing in real capital terms while investment return per real cashflow will also be sick…it just becomes a relativity difference…
I've bought a few properties every year for the last 10 years. Through credit restrictions, lvr changes, market ups, downs and stalls, bizarre govt policies, wars on landlords, media sensationalism... despite all this the property is the best performer as an asset. Shares are good but I just prefer property.
I've found over the years there are tons and tons of people extremely negative or envious about what they haven't done always predicting doom and some calamity. They focus on what their mind and emotions tell them. Reflect what they see rather than step back and look at the bigger picture. They don't use data and research like investors to. They have an opinion but with no substance.
If there's a genuine crash I'll keep buying and the prices will be cheaper, great.
Successful people I know who are focused on an asset for investment block out all the noise of the media, BBQ chicken Littles and anyone else with an opinion. We just keep buying when fundamentals stack up and when we can. It's pretty simple. I had another agent call today to offload a property they can't sell. Just bought one with no competition. Offered on 2 more that had had 100k price drops. Decided against them as found something far better others had overlooked.
If people really want to buy property there are opportunities out there to be had. Sacrifice is necessary especially at the beginning. It's much better to ignore others.
Yep and the ability to say no is important too.
Eg I saw a property for development urban zone. but after it got passed on, it was highest bidder battle it out time. I didnt take part
What do you use for searching propeties, I find its get faster on trademe than realestate.
Last year was clearly a very artificially driven event thanks to the RBNZ's blindness on reduced deposit requirements, and maintaining a very low OCR without justification. Personally would not be surprised if last years frothy property increase is more or less rolled back in the next 12 months. That said the RBNZ could choose to continue ongoing hyper inflation by maintaining interest rates more or less where they are by completely ignoring it's own inflation target mandate. Should they do so they are clearly protecting the interests of global banking over NZ citizens, and should be jailed for treason.
Speculation...a bunch of senior staffers exited last year. What do they know that we don't....?
Commentators have been saying price increases are slowing for over 12 months. Despite bad news like increased anti investor taxes, increased interest and increased properties on the market prices are still going up in Nelson /Tasman. My diversified portfolio has gone up in January and I have just issued $20,000 PA rent increases without a murmur of complaint from the tenants. Still plenty of good things happening apart from 40 weeks delay to buy some building materials.
Rent increases of $384 per week?
He mentions a portfolio so presumably it's across multiple properties.
"Last year's massive capital gains were a once in a generation event, QV says"
It will not be wrong to say that last year's massive capital gains have created the biggest inequality in NZ that may take generation to bridge.
Welcome to NZ as presented by Jacinda Arden to young Kiwi.
They will say that property prices have risen all over the world due to covid. but NZ is one of the worst examples of this. You can't just print all that money and for it not to have some negative effect.
I can't see how they could let property prices drop by that much, espailly as to build a new house is so expensive now, and material prices have risen so much due to inflation. Are material prices also going to drop back in 1-3 years when supply has caught up?
This week the Aussie mortgage debt to GDP to GDP hit 100%. A landmark moment. For comparison purposes, at its peak before the market collapsed in the U.S. prior to the GFC, the ratio for the U.S. market was 73%.
Not sure what it is for NZ but I suspect closer to the Aussie performance.
We appear to be roughly the same if data is correct:
https://tradingeconomics.com/new-zealand/households-debt-to-gdp
Cheers. Remember my comment is purely about mortgage debt. Data validated but not at hand.
"Quotable Value says average property values are still going up but the market is slowing"
So instead of jumping from 50%, is jumping less than 50%, forgetting that after massive 50% even slight rise is fatal for FHB and slowing growth is not going to help except may be give politician a sound byte to hide behind.
Has anyone notices the body language of our PM when she is was not in power in 2017 - at that time even for Housing Crisis was a CRISIS and an opportunity to get power but today .............what a contrast.
Democracy = Power = Corrupt Thinking
Yes the power of 30-40 years of monetary and fiscal policy settings is more powerful than political ideals. Both Key and English and Adern have all flopped on housing.
22/23 of the properties on auctions with Barfoot have been passed in today..
Yes and look at the bidding on the ones that received a bid. Looks like buyers expectations are back at 2020 level. 10-15% drop already?
Well that would make my comment of moments ago redundant already. How interesting.
Furthermore.
The only one that did sell sold for 18.75% lower than its homes.co.nz valuation.
If our home sold for -18.75% of its homes valuation it'd still be 13% above the banks Valocity valuation and 5% above its trademe insights midpoint estimate. Almost twice its 2017 CV.
Point being, homes.co.nz valuations are often completely lalaland material, and should probably be ignored, so 18% off that is not the crash you are making out it is.
I don't disagree with you.
Mostly just "taking the mickey" out of the fart sniffers that come here and quote homes.co.nz valuations like they mean anything at all.
However that sale price is still below the other sites too. Food for thought.
Six months ago I was seeing houses sell for close to their Homes.co.nz value at the B&T auctions, but that was when FOMO was in full swing.
Yeah, I reckon their 'estimates' are often about 20% too high.
Either their model sucks or they are spruiking.
Where we live, our townhouse is valued at $1.2 million, but one directly opposite us, exactly the same (and with similar orientation etc) is valued at 875K.
Go figure!
One roofs prices seem quite a lot higher than homes on houses I have looked at. Bu then I look at QVs current estimate on some houses and they seem similar to one roof.
Nice update. Anyone with cash now is sharpening their buying pitch.
Best time to buy a house was 10 years ago, followed by yesterday...
People are assuming a crash and that governments will be responsible regarding immigration, interest rates, money supply etc (for a change...)
They are usually slow to react and use one size fits all approaches which hurt some people while benefitting others, right now - they are preferring new builds...
History says otherwise which is why property will likely eventually continue to go up as currencies are depreciated and the supply/ demand imbalances remain
I'm picking a 10 - 15% dip over 18 months and then flat for 5 -7 years. Relative to inflation prices will decrease substantially but noone (Joe or Jane Bloggs) will notice as the comment from industry/media will always be "property prices holding steady".
It's a guess.
Some posters on here have said to not lock in for too long. What is considered not long? I see TSB has 3.99 for two years; HSBC 4.09 for two years. But reckon some of these banks know that it's a PITA to change banks at the moment, so will probably be playing hard ball with rates. (Also often see reader talking about getting a reduction on the rack rate - but seems those days are gone?)
The decent 3 to 5 year rates have already gone. Now its just a punt on where we will be in a year or two and its pretty much impossible to make the call. Anyone already locked in at 3% for 3 to 5 years has made the right call IMHO.
It all depends of your risk appetite. My mortgage is split into a number of chunks. Between 2 and 4 year terms depending on the rates at time of resetting. My longer term fix is now looking quite a good move as it is around 3%. At the time the broker was recommending a shorter term. I valued peace of mind over a lower short term rate. You may not always win but at least you have certainty.
Personally I wouldn't touch 4% at 2 years.
I think 2 year rates will be back to somewhere between 2.5 - 3% within 12 -15 months. I will lock in then.
But you probably should not listen to me, mine is very much a contrarian view.
You could very well be right. Hence my point about risk appetite. Locking in at 4% gives you certainty for two years, but it may not be the cheapest option in 12 months time. I tend to be cautious. I plan to never be broke but I won't get rich either.
Thanks. I hear ya HouseMouse, but I guess if we have the conditions for 2.5 - 3 in 12-15 months then they may stick around for a while?
I'm kind of like waikatohome on this one - and not just because I secretly bleed red, black and yellow. It is a bit of a middle of the road fix (You could place a plank over my last fix and now and walk a gentle incline over the pandemic glory days) but it gives me a bit of certainty.
'but I guess if we have the conditions for 2.5 - 3 in 12-15 months then they may stick around for a while?'
good point. Fix now for two years, then yeah it might be about that rate in two years. There's a case for the NZ economy not really crapping out until early next year, so by two year's time rates might be back down at about 2.5-3% again.
So yeah, I don't think 4% for 2 years is necessarily a bad call at all. I can't even contemplate it as I am fixed till late November
Locked in 4.99% for 5 years in December. It provides certainty.
Nobody can know with certainty which direction interest rates could go. They could go back down for all we know. But I'd rather be locked long and find myself comfortable paying a little more than if I had locked short, than to be locked short and come out of a fixed term with much larger repayments.
Last year’s massive capital gains were a once in a generation event, QV says
NZ property market replies: Challenge accepted …
The same generation that voted labour on Kiwi build promises
So jumped on the Tauranga City Council website to find out where the bloody hell the new RV's are at.
"The average citywide increase in capital value for residential properties between 2018 and 2021 is 50%. This reflects the buoyancy of Tauranga’s property market over the past three years."
Boom they just hit the market peak and locked it in.
The new RV's are in print if you do a property search, e-mails going out and letters to follow.
We just had the same in Whangarei. Nothing to celebrate that's for sure.
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The gains of last year are as we speak being baked in to some extent by inflation across the board, in particular wages and building materials.
Those who fixed their mortgages nice and long are going to enjoy a 20% reduction in the relative value of their debt.
To "correct" the market you need high supply. Even low immigration has a temporary effect as building will slow until the slack is taken up and people will move looking for work.
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