The average value of New Zealand homes is down $73,975 since the beginning of the year, according to the QV House Price Index (HPI).
The average value of Auckland homes has declined by $131,005 over the same period.
According to the HPI the average value of NZ homes peaked at $1,063,765 in January, and has fallen in every month since to hit $989,790 in July. That's a drop of $73,975, or 7%.
It's the first time the average value of New Zealand homes has been below $1 million since September last year, and means all of the capital gains the occurred last summer have now been wiped out.
In the Auckland region average dwelling values peaked at $1,541,168 in January and declined tp $1,410,163 in July.
In the Wellington Region average values dropped from $1,092,965 in January to $960,004 in July, down by $132,961.
In Christchurch average values peaked at $801,614 in April, dropping back to $774,566 (-$27,048) in July.
In Queenstown-Lakes, where property prices have been the most buoyant, the average dwelling value dropped back from the record $1,690,835 in June to $1,652,464 in July.
According to QV, what it's describing as a "housing market correction" is now starting to bite across most of the country.
The biggest decline has been in Wellington City where the average swelling value has declined by $130,000 in just the last three months, with suburban areas such as Porirua and the Hutt Valley recording 7% to 9% declines over the same period.
"While those numbers seem jaw dropping, it's no surprise that the areas that saw the fastest gains towards the peak of the end of 2021 are now seeing the fastest declines," QV Operation manager Paul McCorry said.
"Locations such as Wellington, Palmerston North and Dunedin, which saw such meteoric increases in mid-to-late 2021, have had those capital gains wiped out and are now into negative growth over 12 months, the first time in a decade this has happened in Dunedin," he said.
The table below shows the average dwelling values in the main urban areas and their percentage change over three months.
The comment stream on this story is now closed.
QV's full report with regional commentary is available here.
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169 Comments
Yet prices are still stubbornly high. The only houses that show on my price bracket are leaky homes and neglected houses. And a mortgagee sale, might attend this auction.
Agree that prices are still stubbornly high and only leaky or neglected houses have dropped slightly but if one adds up the cost to fix and renovate will be much higher. FHB are been tempted and many may not realise that the cost of fixing on a million dollar house could be as high as $250000 - colleague was talking about a townhouse in east Auckland near ferry term8nal - excellent location but has asbestos all over the house along with some interior and exterior moisture issue and not to forget is full do up property and should cost buyer anywhere between $250000 to $300000.
Looking for some buyer who may not realise the danger as is being downplayed and cost involved in removing and fixing the asbestos.
Fall may be larger than recorded
"Goodall said he has spoken to realtors in the Hutt, who said homes were failing to sell even when priced 20% below peak prices."
https://www.stuff.co.nz/business/129470098/hundreds-of-wellington-first…
Perfectly on track for -30% Crash in Home Prices by December !
KiwiBank selling 6.99% Mortgages . Its getting close, who will break the seal of the scroll first ?
No question that houses have fallen more than 10% in Wgtn, but they need to fall much more to become anything like 'affordable.' Would be nice if there were policy-makers who recognized that housing costs dwarf other expenses for most NZers, that is, those who rent or pay a mortgage. In a well-regulated society, NZ house prices would be at most half of what they are now. And I say that as someone who is fortunate to own a good family home.
The commoditisation of housing has been a disaster for NZ. Especially those at the bottom. Maybe if we gave everybody the chance at a stake in society then there would be less ram raids. You can bet the parents of those doing it don't own a property, much less a portfolio of properties.
Well guess what... Neglected homes used to be the territory of humble fhb wanting to get themselves a home. Not saying this is you, but now it seems that many just want glamour and high spec otherwise not interested. And then they say that homes are too expensive.
Homes aren't supplied to the market in a do-up state. Once people buy them and flip them, they're no longer do-ups.
Also this stopped working when the land became worth 5x what the house on top of it was worth.
Which really puts to bed the assertion that young people should just buy an old do up at the bottom of the market. What, the area giving the investors the biggest returns?
That and a 'do-up' these days being a meth-house that needs gutting or a leaky building that needs to be torn down, never mind the hugely increased compliance costs and delays for a 'do-up' compared to when they were being plundered for tax-free gains by Gen-Xers.
Man the amount of nauseating crap that some spout... I guess they are wiser than the rest of us stupid people who just jump in and get going. And do well along the way. Having a do up isn't easy but it provides a focus, vision and target. Better than lying on the couch which is what I am doing right now lol.
Our first house was a do up, bought in 2017. We were lucky at the time the market we purchased in wasn't overrun with equity leveraging DIY'ers.
There used to be the correct price differential between a 'do up' and a new house so that you could buy it, do it up, and then put it on the market at the price point required so it was competitive with a new build and you still made a worthwhile 'do up' margin.
You can't do that, that easily anymore due to restrictive policies that cause a supply shortfall and now make a 'do up' almost the same price as a new build.
The differential is now, not between new vs old, but between the number of buyers vs the number of houses for sale, irrespective of whether they are new or old.
A simple analogy would be due to food restrictions people were starving and the only choice you have is bread at a high price, not whether the choice is also whether the bread is fresh or stale. You would find there would be very little price differential between the two.
Realistically, a 'do up' should be negative value -> as you're talking about people doing probably much-needed maintenance. Maintenance only adds additional value in a scarce market by way of differentiating from the unmaintained.
None of my flipper friends ever added anything new - it was always a kitchen and/or bathroom reno + fresh coat of paint - perhaps plumbing/electrical/roof if required. But nearly all covered under the umbrella of maintenance rather than value-add.
I've often wondered how much of the money they made from flipping was purely due to the rising market whilst they held the house, rather than anything they'd done.
To answer your last question first, somewhere from 50 to 100% of any increase is due to rising restrictive market value, ie only up to 50% was from any value added.
But you need to redefine your definitions. a 'fresh coat of paint.' ie a new coat of paint,' is by definition adding something new, that has a cost to it and if you know your market its value needs to be at least equal to the cost, otherwise don't do it. And that value will be determined by someone that comes along and pays you more for that house because of that coat of paint and was willing to do so, not just because they could afford to, but also because they wouldn't have bought the house at a lower price without the new coat of paint.
A well-maintained house offers two types of 'best of' value in a more well-supplied market, ie it is more sellable than an unmaintained property, and you can generally get more for them than an unmaintained property. And of course they are more liveable for the present inhabitant until they are sold.
The reality of course is many new coats of paint are just putting 'lipstick on a pig,' but if there is a market for that, then so be it.
Also if you are talking about 'negative value.' as being less than the value they sold for, then that is what I was explaining in my first sentence.
"In the Auckland region average dwelling values peaked at $1,541,168 in January and declined tp $1,410,163 in July."
By what standard 1.4 million plus average is positive ( Trend can be positive but still a long way to go). It only reflects, how big the Pyramid Ponzi was and still is.
That's what you get with inflationary fiat money controlled by bankers.
Add in a dash of very favourable tax privileging, welfare subsidies, and restrictive zoning...and we get prices nowhere near where they should be in a more free market.
Yet prices are still stubbornly high.
Indeed - and, sadly, they're destined to remain that way.
As we've learned over the past century, house prices in New Zealand are sticky-down.
Keep savin'. 🐿
TTP
Yes, just like your excellent prediction in Nov 2021 that Wellington, Auckland and Palmerston North were the best places to invest and PN prices will continue rising. Exactly the 3 regions that are actually experiencing the biggest falls. Muppet
https://www.interest.co.nz/property/112996/new-listings-realestateconz-…
Wellington and Auckland remain excellent choices for property investors.
But don’t dismiss the provincial cities - especially progressive centres such as Palmerston North. Well-located sections in PN are fetching premium prices - such is their scarcity. That’s an indication that PN house prices will continue rising.
TTP
He is right about sticky prices though....only low quality circumstance and property fall in the short term.
"only low quality circumstance and property fall in the short term"
Rex Pat/Ex Pat might be at odds with your view for starters.
by Rex Pat | 9th Aug 22, 6:47am
According to the Bank app valuation our Auckland home is down $440,000 (13.5%) since November 2021.
The more expensive they are, the harder they'll fall.
That is a valuation app based on an algorithm, explain to me how that is an actual market sale.
It is an algorithm but how else should I value my property? The tide lifts/drops all boats. I could live in a fantasy world where my property is unique or accept that buyers see a range of properties and look for relative value.
Hi Miguel and assorted other DGM,
For sure property remains an excellent investment. You only have to look at the capital appreciation rates/levels over the past century. And then look at rental returns if you're still not convinced. But, for sure, markets are cyclical - so we can expect corrections from time to time, such as currently. Now's a good time for counter-cyclical strategists.
Certainly, I back Auckland, Wellington and Palmerston North - as they're all hubs of population growth and relatively strong levels of economic activity and diversification.
In five years time, the Doom Goblins above will be moaning and whinging - wishing they'd bought a house five years ago when prices were cheap.
Mark my words - put a ring around it. 👍
TTP
But Tim - People have Marked your words and re posted them. You have been found spinning BS. Here is another.
Article written 10 years ago. Really dredging up the past to try and win a point...
Maybe TTP Tim is now a changed man ? or should I say the Reverend TTP Tim ?
This one is half as old, does it still count ? or does it have an expiry date after 4 years ?
https://comcom.govt.nz/news-and-media/media-releases/2017/property-brok….
Hey 2022, what's up with you and TTP? Do you know him? Why the antipathy? Let us in on the secret....
The Prophet is no longer. But from what I understand Prophets can sense lies and manipulating deceivers from a mile away and it really annoys them. I do recall The Prophet saying something about working for Tim in the Napier office, but not sure if that was a joke or for real. Many thought 7% interest rates this year was a joke, and look how that is turning out.
Be best to wait the five years will hit bottom around that time. What ever you do don’t buy now and lose deposit by this time next year.
A very salient point. Very hard to wait and keep ones powder dry though. My son in Wellington seems to have the right approach. Wait until 2023. Hope the Wellington prices continue to fall dramatically. I feel sorry for those who bought at the peak. A brutal life lesson. I can only hope they are not forced to sell by future financial circumstances.
Will suit me, hopefully get the business going which was financed from selling house at peak, wait for the drop, while business is picking up steam and I can get 2 for 1 deal, not to mention a business thats very scalable and virtual. Work from anywhere in the world.
Why would I mark your words? You made a horrible prediction, got called out on it, and instead of having the humility and honesty to own it, you instead attempt to deflect and reframe your prediction.
At this point no one really listens to you. I’m not sure why you keep trying?
The “sticky down” idea says people will refuse to sell if they can’t get the price they want. Even with that factor in effect prices are still falling each month at an annualised rate of around 20% pa.
So what happens when those people who refused to meet the market find that prices have fallen even further when they try to sell later? What happens if they reach negative equity, and/or they roll off the emergency low rates and can’t service the debt?
The sticky down theory suggests prices won’t start falling rapidly - yet prices ARE falling rapidly.
Certain houses and certain areas have fallen, others have actually increased. Aggregation of statistic does not show this fact. Perhaps its your bubble that has burst. The idea that the tide rises or lowers all boats is simplistic when we are talking real estate markets, does not reflect the full market and should be kept to nature. I know who said it and it was a different context.
We current do not have a fully functional market and people that last year gained finance now cannot not at the same level if at all. Part regulation, part economic cycle. Mainly distressed sales are occurring currently.. people that cannot wait, that defines the marginal sale. It is as distorted as the super higher seller last year in your suburb.
Sticky prices are occurring and psychology being ignored is plain silly.
You can't just go out, secure a quality listing which show up once every 12 plus months or so in certain areas in NZ and expect to get it at 10 % discount on last years value..it simply does not happen.
If you are talking the spec junk in Auckland/Wellington sure.. still just one micro-market...
They are not property investors they are property speculators.
Keep saving then just buy outright after crash is complete.
According to the Bank app valuation our Auckland home is down $440,000 (13.5%) since November 2021. I’m happy to see the same again if it leads to a change of Government in 2023.
Vote Vision NZ in 2023? 😝
Not sure who they are. I’ll vote for ACT. How crazy is it that our household received > $10,000 in government payments in the last 6 weeks? 2x$521 for KiwiSaver, 1 x COL payment and 1x Clean car rebate. We need less government in our lives and we certainly didn’t need Kiwispray. We will use the COL for a nice bistro meal in Paris.
As a NZ tax payer that doesn’t receive the COL, if you don’t need it, donate it to charity rather than spend it on yourself when you clearly don’t need it.
I heard the Labour Party was looking for a cut of the COL but that’s not happening with ours. We will continue to support some of the people left behind by this Government with koha and school camp fees but the $350 won’t specifically go to charity. I’d like to spend it outside the country to reinforce to myself what a stupid policy Kiwispray was.
I can recommend Effective Altruism NZ - your donation will be funneled without costly friction to the most deserving cause worldwide, in terms of bang for your buck. Going through EANZ gives you access to NZ tax credits.
I have an automatic payment each pay day and it's a fairly trivial calculation to work out how many lives you are saving per year. May be a longer lasting legacy than a nice lunch.
I prefer the immediate pleasure of seeing a child able to go to school camp or get some boots for winter sports.
You didn't receive it all from the government. Some nice person in a gas guzzler gave so you wouldn't have to go without.
I'll vote for those who managed to bring down house prices after years of talk.
"managed" thats an interesting word
Here it is in a sentence for you,
"I "managed" to buy 7 homes. The young folk could learn a thing or two from me. National's new leader Chris Luxon, who owns seven properties, "wouldn't want to see house prices fall dramatically" but recognises prices need to "stabilise".
Baywatch, you're clearly more informed than the rest of us - can you find an example of Ardern saying house prices need to come down? All I can find is her saying people expect their house prices to keep going up, albeit slowly, and the government would support that.
ShoreThing...
Adern end of 2021:
"We need [the market] to stop heading in the direction it is," she said. "Even if you saw [prices] come away, in many cases it would be bringing [them] back to levels that we were at only a year or two ago."
Ardern stressed she did not want the market to collapse.
"The reason that we cannot afford to have a housing market collapse is because, of course, this is the most significant asset that most New Zealanders have.
https://www.rnz.co.nz/news/political/457683/ardern-wants-runaway-increa…
Baywatch - Are talking about that party that doubled house prices and now they've dropped back 5%-10%?
Proof is in the pudding lads...
The pudding shows that the country has become a far worse place in the five years since they lied their way into power.
"lied their way into power..." emotive BS there I think...they have won an MMP election & then showed they could win a first past the post election with their last victory...
Feel free to head to your local library and dig up the Labour 2017 election manifesto. You'll find it in the fiction section.
BL,hmmm,have a look at JK's manifesto...no tax increases...raises GST....raise NZ'ers wages to match Australians...I guess given that you are heading over there,we know how that 'dream' went'...
Please point me to where I have ever said anything positive about John Key or National.
I am just pointing out that you are naive to think everything in a manifesto will be carried out verbatim, especially with MMP,where the old saying "If you lie down with dogs, you get up with fleas"...welcome to politics...you need to relax or you will go crazy in Oz,corruption and dirty politics is endemic over there...and I say that as a born Australian...
You seem to be upset that somebody has called out the government of the day on their track record of empty promises and lies.
It has not yet occurred to you that you are playing this silly tribal Blue vs Red game all by yourself.
DP
He’s right
LOL...why are you still hanging around then .....????
BL is probably waiting for Prime Minister Ardern to negociate a better deal for kiwis over in Oz...she is achieving more in that space than any previous leader.
Irrelevant to those that hold multiple citizenships.
But most kiwis abroad will have long memories about how Ardern's tyrant government treated them outside the bounds of the law during the pandemic.
Why does it matter. They can't vote anyway.
What has she actually achieved? Pray tell.
BL,the irony is,your timing is impeccable,just as NZ looks to possibly returning a right wing government,you are heading to Australia which has just elected a Labor government...just quietly,I think you quite like left leaning governments...
I have no problem with competent left leaning governments. The point you are trying to make is not clear.
I heard you, and your mum, were coming to my leaving party.
I'm not sure of the point you are making..
You'll need to read last night's comment section to catch up.
I'm not that interested in points scoring to go reading yesterdays news...
You were interested enough to interject into my response to Aaron's question. Which had nothing to do with you.
You also seem over-eager to tear me down, personally, because I pointed out that Labour lied their way into power with their fictional manifesto in 2017.
I think it's very important in a democracy to be able speak freely and hold governments (of all colours) accountable. It's very sad you don't feel the same way.
I'm not 'tearing you down personally'...just responding to what I see as hyperbole with the term 'lied'...like I said,a bit emotive.There are good and bad on both sides of the fence,but the kiwi way of voting governments out,rather than in really just carries on the cycle.Not all Labour has done is bad,not all that the Nats/ACT propose is good.I for one will be saddened to see the mortgage deduction removal & bright line extension policies reversed,for what purpose I ask?...Obviously in this site,it appears it mostly leans right,so to prevent it becoming an echo chamber of "worst government in living memory",I offer a counterpoint and look for positives as well.As you say,be sad if I couldn't have an opinion...I think I have said before in here,keep smiling,things are never as bad as they seem,summers on the way,fuel prices are heading down,gibs freely available...don't give into the doom and gloom merchants....and remember,"be kind"...cos the opposite is to be 'unkind' and that's not really something to aspire to.I wish you all the best for your adventures going forward,you must be excited.
I agree with you that not every single that Labour has done is bad.
But as Baywatch said, the proof is in the pudding, Labour squeaked into power with flagship policies on housing, transport, immigration and tax reform that they neglected to deliver and instead devoted their energies into implementing warped ideologies and dividing the country along racial lines.
New Zealand in 2017 wasn't great, but it's a dream compared to what it's become after five more years of appalling government.
We'll that will make 3 of us at your do, plus the Samba band.
Which one are you bringing?
The pudding shows that the country has become a far worse place in the five years since they lied their way into power.
If you move to Australia, Brock, things will become a little better here.
TTP 🤭
Excuse me while I pick myself up off the floor. It is a shock to the system to agree with you TTP.
Edit: spelling
Hi Tim The Pricefixer.
Only the Lord knows what passes for logic in your head.
But I don't think losing your skilled workforce and especially those that produce taxable export revenue is going to make anything a little better.
It certainly would be more bang for the buck to send to prison those that engage in deceptive and anti-competitive business practices.
Hi Brother Brock.
I would love to know who bought these 2 sections that Property Brokers just sold for 650K each. My friend tells me he thinks something is not right here and PB refuses to answer any questions as to who bought and when was the contract signed. They give him information on any other property sold, but not these.
https://www.propertybrokers.co.nz/property/residential/sold/hawkes-bay/…
Could be a couple of group home builders looking to build show homes?
No one is doing that with the property market tanking at 1K per Day.
Heard it all before. The country won't notice whether you are here or not.
I thought lower house prices were what the people wanted??Could be a vote winner for Labour & Ardern(still NZ's most preferred PM in the latest poll) if Luxon keeps pushing removing interest deductions for investment properties and mass immigration.It would be criminal if the Nats & ACT light the fire under the property ponzi again. It took a global pandemic and subsequent financial difficulties to finally break the cycle and reverse the property price upward spiral...this once in a generation reset should not be wasted by allowing self interested property speculators to ignite the market again...lets find a way to make housing about providing a home for folk,not turning someones home into an international tradeable commodity.
There's the small matter of everyone who bought houses at the peak getting rekt as they drop further and further, after years of being gaslit by senior Labour leaders about the desire to see prices ever actually coming down.
Not to mention the small matter of peoples opportunity to own a home to house their family being 'rekt' by rising prices...either way there is collateral damage...if the prices are kept on an upward trajectory the number getting 'rekt' keeps on increasing ad infinitum....locking people into a lifetime of servitude working/renting and getting no where...this would be a one off reset,most who are on fixed rates so their day to day outgoings may not be that worse off re their mortgage.Negative equity is not nice,but unless you are forced into selling,it is just a number.If you bought to house your family long term it is not the end of the world,you still have a home which is more than others have.If they bought as an 'investment/speculation' play,then you pays your money and take ya chances,just like the sharemarket or any other investment...plenty of my investments /super has been under water over the past few years,I'm not asking the government to artificially pump up my super cos it ain't where I'd like it.
"Unless you are forced into selling" or need more space for a family, to move to take up a new job or any other reasonable life change. It's life-ruining, fences you in and will end up in split families, divorces and suicides.
Negative equity will absolutely wreck discretionary spending in this country and people who try to minimise the severe stress people faced with it are going through are just as bad as the 'property only ever goes up!' idiots who got us into this mess in the first place. The country needs a better plan than just using one cohort as a whipping boy at every turn and telling them 'tough luck'.
Like I said,either can be considered 'life ruining'...it just seems property owners feel their lives are 'ruined' more...my hope is there is a gradual decline,then a plateau where prices slowly catch up and people stop seeing property as a one way bet...yes,the under water ones will have some of their dreams put on hold for a while,but no more than the dreams of those that were destroyed by rampant price rises,divorce,upsizing,relocation all happen to renters who are trying to get into their first home as well.It may just mean a few more young kiwis see a future in this country instead of trying to protect one cohort of society.
no more than the dreams of those that were destroyed by rampant price rises
Bullshit, sitting the sidelines does not leave you with a 30 year debt that you can't walk away from. That's not 'putting your dreams on hold' or whatever feel-good spin you want to put on it.
Again, people who pretend that there is only upsides to price drops while papering over the huge mental and financial toll people facing negative equity are facing are as bad as the people who insist prices should only ever go up. This doesn't just disappear because you think some other people may benefit and their experience doesn't just evaporate because it's inconvenient for your argument.
I think if you re-read my comment,I never said there is only upside to falling prices...but paying exorbitant rent for 30 years and having no real control over your life or where you live has put as a much mental & financial toll on folk as much as negative equity will.The reality is our country has got into this sh*t show because successive governments have let the ponzi continue,say what you want about this government,but they have had the balls to attempt to slow the pace with mortgage interest removal,ring fencing losses,extension of the brightline test etc...I don't see how anyone in their right mind would want to see these policies reversed.It seems everyone said they wanted prices to slow or drop,but really just meant long enough to get on the ladder,then pull the gang plank up and carry on as you were.
Like I say, there is one side that gets talked about a lot (affordability) and very little discussion about negative equity, even though as price drops accelerate, you will not be able to have one without the other. I am only asking for some modicum of balance, and reminding people that the human cost of houses being more affordable is paid by people who end up underwater, often after years of scrimping and saving to be able to own in the first place.
Sell your bloody house then GV!
You are on here every week moaning about house price falls. Like a man standing in the middle of a busy intersection and complaining about how he is about to be hit by a car.
Anyone who is facing negative equity is someone who has purchased within the last few years.... in the middle of a bloody global pandemic... during the most uncertain economic times of a generation... while interest rates were at "emergency" low levels... and after the kitchen sink had already been thrown at property market bailouts.
Yes, some sympathy for homeowners facing negative equity IF they were simple fools who were unaware of what was going on. But readers on this site ought to have known better, and you can't keep expecting bail out after bail out forever. The crash is inevitable. The moral hazard has to stop at some point. Personal bloody responsibility. Not all investments make money all the time.
It is galling to see you whingeing about price drops, after 40%+ gains in the last few years. You want the gravy train to keep going forever? The ladder to keep being pulled out of reach? Tough luck, it ain't gonna happen.
Personal bloody responsibility. Not all investments make money all the time.
What a shame I can't pay my mortgage with tedious boomer tropes or snark, or else I'd be on easy street. If me 'whingeing' about price drops is so upsetting to you, maybe the internet is not for you. Or you could be less of a snowflake - am I doing this right yet?
But it's wild how you see me not wanting people my age with families to be financially ruined as 'the gravy train going forever'. Sorry for pointing basic reality that people will be badly affected as the underlying value of their home drops, given that we are well past the point where a traditional economic cycle should have ended and the idiots wagging their finger at young people who bought are basically pimping a 'Stopped Clock' approach to something as basic as owning a home. My sincerest apologies for holding the wrong opinion on the internet.
And if it's all the same, I'll refrain from taking advice from someone who can't understand the difference between an unrealised paper gain that disappears with market forces and a huge mortgage debt that does not disappear unless someone pays it back. Seems like something I'd probably make sure I was across before I had a multi-paragraph episode about someone else floating a different point of view in the comments section of a website.
Also, I've been having a perfectly respectful discussion with Veman about the narratives around prices dropping and you've come in with a needlessly personal attack, to tell me I'm whingeing, offer me unsolicited financial commentary on my situation without knowing any of my circumstances and then farted out a bunch of meaningless boomer memes at me without a hint of irony.
If you can't talk like an adult or getting needlessly personal, then maybe comment sections aren't a place where your talents are best put to work.
GV,I do feel for you,I have 3 kids in their 20's,I know it is bloody hard.
I know it will piss some off no end, but I've actually taken reasonable steps to protect my interests over the last year as I could see what was probably on the way, but I have friends and loved ones who did not have the same fortuitous opportunities with loans rolling over etc and I do not want to see them struggle or stuck (after doing the right thing and buying a starter houses and already having put off families to make it happen).
I am a big fan of manually resetting house prices to something sane, but in a structured way that isn't just done by jacking up interest rates and making everyone poorer or killing off discretionary spending altogether. But it would require smart policy and we don't do that because the narrative is "Prices up = good because wealth affect, prices down = good because affordability" and not much thought going into it beyond that.
We haven't had this kind of debt loading before and I don't think we're prepared for what might happen as things start to unwind.
And if it's all the same, I'll refrain from taking advice from someone who can't understand the difference between an unrealised paper gain that disappears with market forces and a huge mortgage debt that does not disappear unless someone pays it back"
I understand the difference. I understand it well. Which is why I am a reluctant renter. Why I didn't buy an overpriced house during peak stupid.
Truely I do feel sorry for homeowners in negative equity. But that is moral hazard for you... many bought because they thought that property was a one way bet, and that the RBNZ had their backs.
You can take my advice, or leave it. But don't stand in the middle of the road and complain about the possibility of being hit by a car.
The problem with claiming 'moral hazard' is that conventional economic wisdom says this should have happened in 2017 - seven years after the peak impact of the GFC. We've been living on borrowed time for close to half a decade now. I don't like it any more than anyone else, but sitting on the sidelines while the PM/Finance Minister/RBNZ governor does all they can to preserve house prices at ever-escalating levels after walking away from tax or state building reform is really pushing the boat out.
Arguably we've been in a state of 'Peak Stupid' for a long, long time now - an awful long time to sit there renting waiting for the market to come back to it, or the people you elected to intervene to actually do what they said they would, and a long time to be paying someone else's mortgage while you fall behind. You just have to get on with things at some stage.
Yes, you are correct. I've put forward many ways over the last decade that other jurisdictions have used to prevent the boom from happening, but I know of no jurisdiction that has shown a way to 'gracefully' fall without any damage.
The reality is they are two sides of the same coin, ie there was damage done in letting a boom happen, and it can only be balanced out by counter damage on the way down.
The only places where no damage was done, are where they had policies that prevented the boom and then the counter-bust, ie they had stable prices which only increase with the general rate of inflation, but most importantly keep a low stable median income mutliple.
We are now in 'smoking gun,' 'catch falling knives,' territory for politicians. They were happy to take credit for the artificial boom in house prices, but are deliberately stepping back as it falls to give the impression it has nothing to do with them.
When good luck happens they call that good management and when bad management happens they call that bad luck.
The real question now is not so much how far are we going to fall, but what policy changes are we going to make so this boom-bust cycle does not happen again?
Agreed. Best hope I can see for those left holding the bag is that the obsession with property ends, some rollover relief on mortgages comes from the banks and everyone ends up better off as money that would be spent on houses flows into businesses and other productive investments.
The banks won't and can't provide any relief to carry the level of bad debt that would be required, but Govt. could. IE they could get the banks to transfer that debt to a special ringfenced portfolio, which then allows the holders of that debt to pay it back over time, so they are not let off any Moral Hazard but are not forced into bankruptcy either.
However the last time Govt. tried this type of thing, ie South Canterbury Finance, they were so inept that it just allowed the Directors of SCF to lend more recklessly in a double-down strategy to try and recoup present losses, but knowing that any future losses were underwritten by the Govt. This is what exactly happened with them losing even more.
This is a notable comment, all the debate here ignores time waits for no one, i would say it more like ten years rather than five with the population run up...
Hey Fitz, buy a house before mid 2023 and the prices are rising again..
With regards to people buying in the last few years,we should not be blaming the government solely,but more of the onus is on the vested interests in the 'property industry' with no moral compass...from the banks,the 'property experts',the media like One Roof who only put out good news stories...not one of these groups came out publically and espoused to folk that they should consider their position carefully,be cautious or as Fitzy says above that the world was in turmoil.Folk were bombarded with good news stories,it became like a gold rush fever...and the most galling,is many of those spruiking were selling at the peak and now rubbing their hands together at the possibility of big price falls so that they can re-enter the market if Nat/ACT get in and ignite the bushfire again.Hence why I think it would be reprehensible to reverse any policies that have been brought in around property investement.The best thing I ever did for my son was talking him out of going into a property with a mate last year...
National don't seem to think they have to win votes from normal people anymore so I'm not sure your objections will even be noted.
What people want is for housing to become more affordable which is a relative ratio between what you earn and the cost of the house.
Since incomes have lagged between house price increases, ie an artificial boom in house prices, the only way for the correct ratio to happen is by dropping house prices.
People are only now in the main supporting Labour because they have been a beneficiary of bad policy, ie need Govt support because they cannot afford a decent lifestyle, or they have an artificial credit in the overpriced value of your house and are afraid of losing it.
There is nothing good about what is going to happen for many people in the short term but is absolutely necessary for the long-term benefit of all.
National need to fix the rules for investment housing as what has happened in the rental market is a calamity on a scale never seen before, all as a direct result of Labour's policies. Over 32,000 people on the public housing waiting list, 4155 children living in emergency accommodation. Towns like Rotorua being destroyed by the lack of rental housing. The Govt spending billions of dollars on motel accommodation instead of the health system. Old homes are sitting empty because they can no longer be rented out instead of providing cheap rentals to families, or are being demolished to make way for brand new townhouses that rent for 50% more than the home they replaced. More and more low income families are being displaced. Even if house prices drop 50% banks won't lend to people who are not in stable jobs, have health issues, or who have had prior credit issues. Expecting taxpayers to build brand new houses for all these people is a tax burden the country shouldn't have to bear, when money is desperately needed in the health system. Trading future capital gains in return for subsidising cheap housing for tenants was a quid pro quo situation that worked for everyone. Until Labour came along.
Trading future capital gains in return for subsidising cheap housing for tenants was a quid pro quo situation that worked for everyone.
Doesn't work when everyone piles into a market that had limited ability to deliver new supply, all that happens is the prices go up and one section buyers gets the other to underwrite their financing costs.
Sorry, been there, done that, didn't work.
Woop,woop,vested interest alert...Rotorua was ruined for locals by out of town investors coming in and buying up all the cheap properties using cheap money and equity from existing houses to drive the prices up,forcing the locals to become renters rather than purchasers...there allowing tax breaks for new builds incentivises adding to the houses available vs buying and selling existing stock to each other at ever increasing prices.
You've missed the point. The people being displaced from rental homes cant afford the rents for brand new houses.
These people that are being displaced from rental homes, who are they being displaced by? They can't afford the rents for brand new houses, yet someone must be able to, otherwise the rentals will stay empty?
root cause of all this is 1) a lack of supply (being fixed) and 2) soaring rents as investors overpay for houses fuelled by cheap money (being fixed). From where I'm standing Labour seem to have a good grip on correcting the housing crisis. Other things less so ..
National was bad, Labour is worse, at housing policy.
The only way Labour could be described as having 'a good grip on correcting the housing crises,' would be like having a good grip on the steering wheel of a 1994 SUV with both over and under steer, bald tyres on a slick pot-holed gravel road while driving at 100km - and you have just missed seeing the 'slow down to 30 km' corner sign.
vman I think you have summed up pretty much how many feel. I want right party polices rather than left, however cannot support Nat or Act while they look to re-ignite immigration and housing.
They need to offer something to aspire to...not policies of old that crushed the aspirations of our younger people (children of specuvestors aside).
Luxon should lead by selling off his 7 houses and show he is here to make NZ better for all, not just himself and his friend group.
If he won't do that, then he's no contender for my vote.
Yes,agree,I can cope with either a left or right government that is marginally either side of the centre...and I mean marginally.Housing is so pivotal to ones life that it should be available to most.
National Party leadership is so transient that it wasn't economically sensible to do that before running for the party leadership?
Putting personal wealth preservation ahead of electability. Tone deaf or greedy?
Seems to me "Tone deaf", based on the recent poor showing from Luxon (at least poor enough to allow the media to pile on)
Of course it is. Key was much more savvy and did the blind trust thing. I expect that Luxon feels that his mini property empire is a sign of his success, and something that others should aspire to one day having themselves. Selling or hiding them would mean admitting that there is something wrong in what he has done. He is probably too principled for his own good.
heading back to 2019 values at a minimum
I think we are headed back to 2016 considering the repayments that let you borrow $1,000,000 at 2% will now get you $600,000 at 5.5%.
And inflation, and OCR increase this month, and next month, and the month after, and there will be an announcement for another.
Average earnings up 7% YoY
I don’t see how that will be possible, with build costs up to $4000/sq metre. 800k for a 200 sq house, you’d be basically getting the land for free.
The land has value but it's those cardboard shacks they call houses that are worth nothing.
If no one can borrow the amount of money required to meet the vendors expectation they will have to drop the price if they want to sell.
Perhaps. Imo, it’s more likely that with wage growth, borders opening and interest rates stabilising and then possibly falling, we’ll see another 5-10% price fall and that will be the floor.
Those holding out for a 50% drop will be disappointed when it doesn’t happen.
If there's one thing you can bank on it's policy support for property. NZ's biggest welfare scheme by far.
RBNZ will fight wage growth as much as they can.
In terms if immigration... if you expect only millionaires to come here you might be right, cause nobody else can afford to buy an house right now.
I am expecting people to perform some basic forecasting before expatriating, and what NZ offer currently for new immigrants is not convenient for most.
Wage growth is at 7%/annum. That goes a long way to compensate for higher interest rates. Which are already showing signs of easing, as is inflation.
You don’t need to be a millionaire to buy here - I know plenty of recent FHBs, they just have good salaries and a desire to own their own place.
As for immigrants, plenty of cultures have households consisting of intergenerational living, producing more than 2 income streams. It exists here now, and NZ is still often compared favourably with their current home. And if they choose to rent and the rental market becomes heated again, what will that do to house prices.
How much of that is being driven by the increases in the minimum wage and how many people on minimum wage have mortgages to be effected by interest rate increases?
You need to compare apples with apples here. People on higher wages didn't automatically get pay increases when minimum wage went up.
I think you’ll find minimum wage increases has a ripple effect, preserving relative wages and employers wanting to maintain competitive.
Wage growth is fairly widespread, stats nz has the info.
Even if the hordes of hotel toilet cleaners, old people bum wipers, and kitchen dishlickers arrive here, they are not able to buy houses due to the foreign buyer ban. They will simply add to demand in the rental market, happy to pay high rents and live 4 to a bedroom, displacing even more Kiwi families from rental homes and forcing them into motel emergency accommodation. Which we then pay for via higher taxes or by accepting lower standards of service in other Govt areas, like police/education/health.
Are you Luxons policy analyst?That sounds like National policy,perfect,hoardes of minimum wage immigrants needing to rent driving prices up,only I can confirm taxes will be lowered by slash and burn in the public service we hear so much...and that includes police/education/health on past experience.
we actually need migrants to keep the rental market from imploding, lots of supply out there
I have a feeling that the need for new baristas to make $7 coffees will disappear as discretionary spend tightens
Unless prices drop by 50% huge amount of population will not be able to buy. Average wage couple income 135k per annum at 3 x DTI banks would only give mortgage of 405 k. So in Auckland price’s would need to fall around another 60%. Until average wage couple can buy the bottom of this crash will not be found.
Why would you use 3 x DTI? Even if DTIs are introduced, it won’t be set to 3x. UK is 4.5x as an example.
Average wage figures takes into account those who are just starting their career, who can’t expect to jump into buying a house right away. Even if you take a conservative figure of 150k and a DTI of 4.5, the bank would lend 675k + 20% deposit giving a purchase price of 875k. Enough to get into a first home for sure.
That, and taking into account building costs means we’re just not going to see your 50% drop, no matter how much you want it.
3x DTI was the normal in Uk going back and if you say 150k is average couples income this is different than stat nz say around 59k each, Ben not sure if you understand average. Even if the DTI is 5 still have to come up with 20% deposit so no chance for 50% of population to buy a crap 2 bedroom property in some rundown area in Auckland, you will start to see crash speeding up over next year just facts, I hope it does as my kids and younger generations will probably go to a country where they can buy a property just as we could. New Zealand will end up with just old farts selling house to each other.
Currently the case...
Finance is the big issue to buy for most people including the established middle class. The market for those where finance is not an issue... is still going along nicely.
Agree Big Ben, there's a lot of people don't seem to realize the fundamental cost structure that has to put a floor under prices eventually... And ask any developer what ludicrous government regulations are doing to the cost of developing sections...
You are right, but for new construction. It should be a premium anyway just like a new car vs an old car.
Good news!
Interesting that the media (RNZ) just today had a so-called expert to tell everyone that this is not heading for a crash because....(insert here what you want). This is so reminiscent of Spain 2005 (or Ireland), the more evidence that we have that the house market is going to pop, the more that they try to tell you that there is nothing to see here.
To directly quote TA "where Akl leads, the rest of NZ follows". There is a lag in the regions on the way up and the way down.
Popcorn.
It's funny people who dispise TA still quote him...
I enjoy is presentations and like his analytic base for comment. Its the endless debt model, and the damage to NZ society that I dispise. The game, not the man so to speak.
No real panic selling in the market yet.
No, people arnt losing their jobs yet.
But they will, alot of the expansion in employment was because of artificially created growth (too much money thrown into the system). when that leaves then those jobs are no longer necessary
At the moment employers are forced to hire expensive locals because the flood of cheap immigrant labour isnt available. This will soon change, and many people will find themselves replaced.
Homes.co.nz says i'm down 200k. Hmm easy come easy go I guess. I hope the council lowers my rates accordingly.
Qv estimate on our house from peak down 390000.
Come on, you know that rates are not set on the absolute value of any individual house, but on the relative difference between each other.
Homes.co.nz has been shown to be anything but accurate or impartial. Its agent paid "increase the AI estimate" borders on fraud. Discount it.
Warnings in the air
https://www.nzherald.co.nz/business/specialist-ray-white-agent-on-mortg…
Mortgagee sales and unemployment tend to lag severe house price corrections. We have had months of vested interests telling everyone “prices won’t fall far because unemployment is low and we are not seeing distressed sales”
NZ Customs passenger date May-July Arrivals 683k departures 714k. Net loss 31k. Lets be generous and say that group of people skews younger. Average 4 per dwelling. That's 7750 less dwellings required at a time when Auckland alone is pumping out 1000+ new dwellings a month at a price point that does not represent value for any potential purchasers with interest rates at current levels.
I have a little spreadsheet of Customs Border Movements from January 2020 to May 2022.
114k Net Loss. But if you take out the January and February 2020 net gains of 42k and 34k respectively which were pre-first lock down, then its a 190k net loss.
There is some good news. Toronto home prices dropped a whopping 3.9% in July. The home price index is now down 13% since March, shedding $178,000 off the typical home price.
So you could argue NZ is holding up well comparatively.
Yep, misery loves company, but only other miserable company.
You know how NZ loves comparing itself to other countries. Partly inferiority complex, partly patriotism. Things are not good but not as bad as in Toronto.
That's the whole point.
It's like justifying the All Black's loss by saying we are not as bad as Italy.
Our aspiration needs to be better than this. If you want to be successful then compare yourself to other successful countries, not other losers.
Incidentally, Canada is a Commonwealth country, and all Commonwealth countries have housing unaffordability issues because they all use the same failed British inherited town and country planning laws.
Incidentally, Canada is a Commonwealth country, and all Commonwealth countries have housing unaffordability issues because they all use the same failed British inherited town and country planning laws.
Yes, but that's only highlighting part of the problem, which also includes credit creation to bid up the prices of housing stock. Without the 'pushing-the-envelope' paradigm bubbles wouldn't happen.
You have completely missed the point with your last sentence, in that Commonwealth countries like NZ, Aussie, and Canada have restrictive land use policies, as does California as they have the same type of policies. and yet other jurisdictions that have less restrictive land use policies have affordable housing, in spite of all the countries mentioned having the same credit creation policies as you say.
IE easy of credit has very little effect on house prices if there are low land use restrictions. The ease of credit only becomes a multiplier effect/accelerant when you have other restrictions to supply.
It's the first time the average value of New Zealand homes has been below $1 million since September last year, and means all of the capital gains the occurred last summer have now been wiped out.
Or, to put it in less emotive language; the price fall to date has simply returned values to where they were less than a year ago. To which the only reasonable response is, so what?
Of course. Any reasonable person would not only be indifferent to a 7% fall in their equity, but excited at the prospect of more to come.
Average house price down but the cost of a new build has risen 75k i read today.Something doesn't seem quite right.
Two factors to consider. One, there is a reasonable length of time between deciding to build a property and selling that newly built property. Newly built properties coming onto the market now were initiated months ago when market prices were more favourable.
Two, take those "cost" figures with a grain of salt. When the property market was booming, everyone wanted a piece of the action. Trades, materials, architects, everyone involved will have lifted their prices because they could - they knew the developer was going to make an inordinate amount of cash, and they wanted a slice. So of course the "cost" of building goes up - one mans price is another mans cost.
Excellent points
Property flipper and his son
Son: (phoning his dad) hey dad you need to come home right now.. I meant right away!
Dad: why? I am at the hospital right now, waiting for my bypass surgery..
Son: mum is about to sell our house for the same price that we paid for it two months ago!
Dad: ok, I will come home now, bypass can wait. Tell mum we need to hold on to it for 7 years 'cos it will be doubled in price!
You wouldn't know it looking at TardMe asking prices! Some dreamers out there think it's still peak market.
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