The housing market is in the doldrums with sales volumes and prices down sharply over recent months.
However spring is just around the corner and typically banks and real estate agents strive to spruik housing market activity as the days get longer. According to the Real Estate Institute of New Zealand (REINZ), seven of 16 regions recorded record median prices in September 2021, and nine did the same in September 2020.
Although the market is currently very weak, inflation high and the Reserve Bank is hiking the Official Cash Rate (OCR), banks have recently been trimming some mortgage rates after a sharp rise from July 2021.
So what will this spring bring? Keeping in mind the latest monthly REINZ figures, for July, show REINZ's House Price Index down 11% from the peak last November, sales volumes down 37% year-on-year to 4,678, the median number of days to sell up 16 to 47, and inventory up 108% year-on-year to 26,358.
Speaking to interest.co.nz after Kiwibank posted its annual financial results, CEO Steve Jurkovich suggests there may be a pick up in activity in spring, but not at the levels of recent years.
"I do think there's something that happens around people feeling a bit better about themselves with warmer weather and a bit of sunshine, and getting out and seeing properties that have been prepared for that time. So I would expect an uplift. [But] I'm not sure it's going to be the same as over the last few years," Jurkovich says.
"We will see, I think, peoples' confidence come back. I think people will look around and say 'there's pretty good overall support, there's good employment, yes interest rates are higher than they were before but actually if you have been around a while they're probably more normal than not, so actually let's get on with life'."
Asked if Kiwibank has a spring lending push planned Jurkovich says the big push for the bank is growing its advisory network.
"We've added 80 new mortgage broker advisory groups over the last 12 months, we're looking to add more than 250 next year. So I think the way we look at the market is actually customers are choosing to use advisers when times are a bit trickier, whether that be through regulation on CCCFA [Credit Contracts and Consumer Finance Act], or whether that be about market conditions and interest rates. So we think we can increase our reach and be in front of customers, even if those customers choose to be in front of a broker," Jurkovich says.
"Yeah, we are pretty active but it's really about a doubling down on that commitment, that we will partner to grow."
Jurkovich notes that, with the Reserve Bank having increased the OCR by 50 basis points to 3% on Wednesday, Kiwibank's set to review its serviceability test rate, the interest rate it uses to stress test mortgage applicants' ability to service their loans. It's currently at 7.25%, and may be increased, potentially to 7.45%. A higher test rate will typically reduce the amount of money a bank is prepared to lend to a borrower.
ANZ, the country's biggest mortgage lender, currently has its mortgage serviceability test rate at 7.95%. ASB CEO Vittoria Shortt recently told interest.co.nz her bank's one is at 7.85%. ASB is NZ's second biggest mortgage lender.
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145 Comments
Yes I think that unless you have lived outside NZ for a reasonable period at some point over the last 15 or so years, you can be unaware of just how toxic the property investment culture has become in this country.
By slowly boiling the frog, a lot of people seem to be unconscious of just how bad it has become - it’s been normalised and yet it’s caused so much damage.
... it's kind of like a financial version of Stockholm syndrome .... the citizens actually believe Ashley Church & Nikki Conners ... they really truly think that a $ million for a house is normal ... when the same house anywhere else in the world would be half that , and better built ...
It’s become like a political cult. If you read the comments and views of many on the property investment pages many seem to have lost their minds and ability to think rationally. Reminds me of Trump supporters before the Jan 6 insurrection. No matter how you try to rationalise with the people, they’ve been brainwashed by property investor association in the same manner that Trump supporters were by Republican Party views that had turned toxic.
I often wonder if they can’t see the selfishness or if they just don’t care. When they cry about tax changes do they really think people feel sorry for them?
I know some fairly nice normal boomers that have got into property, man they hate Labour with a passion, it’s all they talk about. I can’t be bothered causing an argument so I just nod along: “sure it is terrible that the government took away your tax advantages”, “yes you are just trying to save for a decent retirement”, “why shouldn’t you be allowed to get ahead”, etc.
Anyone that thinks Labour have been ineffective should talk to a property investor. There is a reason they all hate labour so much, it’s because only labour have done anything at all to stop the rort .
https://www.youtube.com/watch?v=50FHR7h3k8A&t=1701s&ab_channel=Newshub
Start at 28:00. We got what we voted for
I’m happy for interest deductions on debt used to create or improve a business, but not for that used to buy an existing business. Whether that distinction can be applied for normal businesses I don’t know, but it can for property.
I also think deductions should be in real terms (inflation adjusted), and this should apply to tax on savings interest too. If you have $1 mil in debt, interest at 2.5%, and inflation at 7%, you are currently gaining 4.5% in real terms, so a lot of property investors should actually be paying tax on their debt right now.
You're assuming people farming (oops I mean landlording) is a normal business. It isn't. Doesn't pay commercial interest rates like others. Sells a product that for anything else the fair trade act would apply to, customers can't just up sticks and move out because that .house down the road is on special this week, provides no security of tenure.
Exactly. What normal business can lock in a single customer for 2/3rds of the median wage in payments for 12 months? Most normal businesses employ people, collect and pay GST, PAYE, ACC Levies, commercial rents, regular advertising costs. Most normal businesses also don't displace normal families from the joys of home ownership by rent seeking.
You often have a convincing argument nzd but not this time matey
Firstly many people want the freedom of not owning a home so they can choose to upsticks when it suits. Then, I would say that those families who want to own a home have already displaced themselves and are dreaming once the kids and the costs arrive. However young couples do not plan ahead when they're on two incomes probably thinking they might not make it that far. It's an upside down world.
More could follow your lead and did what you did. Buy a do up in a smaller centre and work up
I think the only one who has lost their mind here is yourself. Words like political cult, brainwashed, and comparing mum and dad investors looking to save something for their retired to trump supporters storming the capital is beyond ridiculous. The only surprise is that you having pulled out the whole comparison to the nazis. Here's a fun fact for you when you're looking to associate a property investor with a cult, or a frenzied murderous mob, did you know Helen Clark owned 5 investment properties when she was PM . I'm sure though that you wouldn't be using those terms about her though.
https://www.nzherald.co.nz/nz/perks-and-properties/EROSEPSVX6RSSLG6JMJA…
We've gpt people who will likely never own their own homes, reduced to renting under tenancy laws designed for a time when people went flatting for a while before they married and soon purchased their own, by and large.
I saw coming back in the 80s at the dawning of the now leeching rentier class
Ha, funny how the people who bag the housing/property industry are ..
1. Just jealous that they didn't " haul their lazy arse's off the couch" and use their brains to invest in the best and only real industry that, for hundreds of years, gives great returns.
2. Losers that, instead of saving for a house, wasted their money or earning capacity on crap!
3. Are current home owners that cannot see how a rising property market " lifts all ships" ... From the poor guy in Northland who worked his ass off to get his first house and now has equity! .. to the rich guy who houses many people and employees many more
4. The useless idiot who mortgaged himself to the Max just to buy at the top of the market and is now moaning about negative equity
FFS, for the majority of kiwi's, we don't give a flying fart about the loser wingers that post here about how ," the property market has screwed them"!... That's their pathetic life management skills and not my problem that I got with the ", program " , worked hard, and brought a house or two!
In life their are winners and people who complain about winners ( losers).
Anyone complaining here is a loser.
I’m pretty optimistic about 2023. I don’t see a lot of forced sales in the property market. Tourism is back and our exports will hold up ok, although off a bit.
There is really just a hangover to play out after COVID but I can’t see any sort of economic crash in the developed world. There will be a few well publicised casualties in the developing world.
people often seem to lean to the pessimism side of things on this forum. Somehow it always sounds wiser to predict a bad outlook also.
But we all need to ask: is the pessimist outlook actually going to happen? I think not and those that buy into it too much will miss out on some fantastic opportunities to improve theirs life.
It takes approx. 18 months to 3 years for forced sales to happen, and then it is normally on the back of someone having a job loss.
But what normally happens is that along as you can feed the debt you do, even f you are in negative/neutral/very poor return on investment for years until the next 'boom'; happens.
And the money to feed the housing debt comes from other areas of your spending like holidays, health, education, delayed retirement savings etc.
What all this means is that none of this ever is recorded in the housing stats, so it artificially makes the downside not look as bad.
The real question is, how long to the next boom, and what if due to changing Govt. policies, or changing world events, there isn't one?
Coerced sales are also not recorded in the housing stats. For example: "Rising interest rates bite: Bank won't lengthen mortgage, distraught owner forced to sell" https://www.nzherald.co.nz/business/rising-interest-rates-bite-bank-won…
And defaults on loans from the bank of mum and dad aren't likely to be recorded either. And that's a pretty substantial chunk of home financing: "Home ownership: Bank of Mum and Dad is the fifth biggest lender" https://www.nzherald.co.nz/business/home-ownership-bank-of-mum-and-dad-…
Plenty going on behind the scenes right now, I would imagine.
Que, what does that even mean?
Bizarre, I import a differentied product into the States I developed myself by looking at a gap in the market, I took the risk, I got the loan, and I did all the leg work. Did I mention risk. To have someone like you who obviously doesn't understand business say something like that, it says it all really where NZ sits. People just take the easy route, but NZ allows you to do it, I really hope there is a crash. Employees expense, that's bizarre.
The definition of an optimist: 'You spend your last $20 on a wallet.'
Seriously though: Facts before feelings in business. There is always a point in jumping over the chasm, a plane about to take off, starting a business etc. that the facts allow you to go forward or stop. But after the point of no return, all you have are your feelings, so they might as well be positive, which the outcome is more likely to be if you had the right data and interpreted it correctly, to begin with.
All the best.
Hi Jamin, congratulations on starting a new business. Please don't listen to all the detractors on this site, plan well, then go for it. I'm in my 50's and if I look back at the best things I've done in life, all have been big decisions, most seemed scary at the time. This holds true for finance but also for personal reasons, like finding the courage to go talk to that girl, marrying her later on, having kids, moving from one continent to another etc...
I wish you the best of luck. (I'm sure you know, the harder you work, the luckier you get)
It depends for me you have a lot of people who always see problems think they are smart yet do nothing, while patting themselves on the back. While you get people who see problems, try to come up with solutions for problems make mistakes, but fingers crossed hopefully make more right decisions then wrong. If you solve a problem you should be right no matter economic climate.
Hopefully you are successful as at least your having a go.
You also have the low hanging fruit grabbers also, which is OK, but not if it wrecks NZ as a whole. Both National and Labour have been poor and prop these people up. But at least now we are seeing a downward direction.
I'm wondering how much truth there was in yesterday's Stuff article: 78,000 people may need to sell houses in the next year due to rising interest costs.
That would be an almost 250% increase in houses available to buy.
Can't see that being healthy for property prices (depending on your perspective lol - still loving the 'negative growth' narrative).
Yip. Property might go up 20% next year.. there again it might just tank 60%.
Personally i think the short term isnt important.. medium to long term we will realise that the smart kids will and are all leaving coz property is too expensive and salaries are too low and stuff like food is way over priced. There are many better places to start a career and raise a family. Governments and rbnz will continue trying to keep the house ponzo going as they are only focussed on getting voted in in a couple years and its all we have left to try to stoke .. and its possible they will manage it for a bit.
All will seem good again until we wake up and realise we have no decent teachers, doctors, nurses, engineers, entrepeneurs left.. crime will be rife (from.the growing huge poor segment of society), healthcare rubbish , infrastructure will be failing, we will have a ton of old people and unskilled young'uns, a massive superannuation to fund from ever deecreasing tax base and no productive businesses left.
Eventually it will crash hard. Personally i hope someone sorts it and we correct things asap... but i doubt it abd am encouraging kids to choose a better life elsewhere :)
Let’s hope so. It does feel a bit like after the GFC where all the fundamentals pointed to a big house crash, but instead people just stopped selling and there was no excess supply. Unless we start to see forced sales it could just stagnate until National throw open the border, whether that is next election or the one after.
Hey Gummy I presume you only watch TV1 or TV3 news ? you know the "Everything is awesome" NZ MSM ? Try watching some actual world news mate, if its not fires, floods or record droughts and temperatures and that's just the weather !!!!!! before you even throw in the wars. New Zealand is looking mighty attractive to anyone with money if you ask me.
Christ.
It's called "negativity bias" with the news Carlos.
It's not actually the apocalypse out there. In fact, it's so bloody normal that people even gave up wearing face nappies out a long time ago.
New Zealand is to the rest of the world as Samoa is to New Zealand. Nice place to visit, but you wouldn't want to live there.
Yeah, Americans that think New Zealand is a woke utopian paradise are a dime a dozen and you absolutely can't blame anybody wanting to escape to anywhere that's not China.
As long as you have the means to not care about the horrendous cost of everything and can bugger off for half the year to escape the drudgery and social engineering, it's not that bad here.
But you're not everyone.
Brock I agree with you on most stuff, but not anti NZ stuff. NZ is awesome. Not triple house price, and fundamentals busting twilight zone priced property awesome. But just great for kids living in the country, going fishing and surfing awesome. Sitting on my porch drinking coffee and looking at view awesome. Pick my son up from school and go fishing awesome. My daughter doing horse lesson awesome.
I lived in London for 20 years, give me NZ countryside and fishing any day. But not at London prices. Which it's not, my friend has 2 bed house in clapham no lawn, no room for guests 3 million NZ dollars and that was 2 years ago. NZ still needs drop in prices, but it's still not bad.
... you need to kill it , of course ... and humanely ... so , play to it one of Jacinda Ardern's speeches , and it'll die of boredom quite quickly ...
Although some say that being forced to listen to Ardern isn't humane , and may breach the Geneva convention .... .... I'm with them on that ...
If nothing else works
From where I am sitting I see a lot of people in New Zealand doing it very very tough. Everything is going up and a lot. Food, energy, petrol, rates, insurances and bank interest et etc. People are trying to cope with it all by buying necessities first such as food first. How some of them are doing it I do not know. I have an association with a large retail shop in a regional capital. They sell what I would call necessities if what you already have in your home fails. Those who run it say the last two months have been absolutely terrible in terms of trading. And it is nationwide. Staff are worried about their jobs. Anyone who thinks it is going to get better in spring is dreaming. We will have higher interest rates than we currently have and the cost of living is not going down for some time. There are rough times ahead especially for those with a lot of debt. People were warned but as always we have to have it now even when we knew we were on emergency interest rates levels because of Covid.
There are two schools of thought: one is that inflation and high rates will be here for a while, and the other is that the high rates will kill the economy, cause unemployment, solve wage inflation, and interest rates will then be reduced to solve the recession that the higher rates caused. I feel the latter is slightly more likely, maybe it all depends on oil prices and imported inflation.
The apparently 'massive' increases in low wages need to be put into perspective. Since 2017, the median rent has increased by 36%. https://figure.nz/chart/azFwYTVvUcrcxT3m-Cn6TyuSQBZ8Kacee
The minimum wage would have need to increase from $15.75 (2017) to $21.42 (2022). Instead it has increased to $21.20. The increases don't look so massive once you realize they are not even keeping up with rent inflation. Especially given that for poorer households, rent often takes up 40-50% of net income.
Jimbo, go walk around Pak n Save and see all the poor people who are surviving on cheap white bread and margarine. Almost empty trolleys, bare foot kids, depressed and sad looking parents.
There is a heap of people doing it very tough right now... and they are all paying something like $700/week to rent a crappy old shack somewhere. No hope of a better life. Minimum wage isn't much when you're paying for childcare and school holiday care.
It is nice for you that you haven't seen how people on the lower half of the "K" shaped economy live. But also quite astounding that you haven't noticed them. Maybe you live in a nice area. Try googling "KidsCan".
He sounds like a typical Labour supporter. Says all the 'right things', but in reality has very little awareness or empathy as to the hardship that is all around us.
I think he said he almost never goes to the supermarket, so he probably lives a very very sheltered life.
Govt paying $350 a night for terrible hotel housing: https://i.stuff.co.nz/national/300661836/doing-time-in-emergency-housin…
Why wouldn’t they build state houses as quickly as possible with such a massive outgoing? Only a government would muck around for decades with such a crazy opportunity cost. Why not buy the hotel even?
I feel the chorus of symphony singing readers of this site feel the need for a crash just to prove a point , what if it does'nt, then would you be happy if property doubles again in 10 -15 Years like it has last 40 years.
I feel sorry for FHB who refuse to buy based on the rhetoric or is because most missed the boat and now wish it crashes is all they can cling to.
Lot to unpack in that. Be great if comment section influenced prices to drop. You do realise if mortgage prices are less then we have more money to spend on other things houses are not the be all in some peoples lives, and the concern for FHB not sure if that is real if prices double from unaffordable to somewhere in the stratosphere and need a loan for deposit. Not sure how prices double if people can't afford to pay, and incomes are low. The math makes no sense.
Again , forget house prices for a minute. There are way bigger problems than house prices
An average family of four in Auckland would need a combined income of around $111,150 annually after tax and Kiwisaver contributions to live comfortably. Including tax, ACC and a three percent contribution to Kiwisaver, the family would need to earn around $162,600 annually.
https://www.newshub.co.nz/home/money/2022/08/how-much-the-average-famil…
Many of the watchers and commenters here have never been in a recession. We will find a better way of doing things. Take a look at the UK during the early 80's for a good guide.Watch some old BBC news footage if you like. The economy will not collapse but changes will happen. Not without a fight tho. Doctors, nurses, police, teachers etc. May strike for better employment and unions will become stronger. Luxury goods sales will decline as will property values.private healthcare will increase. Sheeple will bulk buy supermarket 'specials' and the v8 will get traded for a small economy car. However, there is a lot of opportunity to be had. Innovation and streamlining services will increase ( banks have already begun doing this) and retailers such as frozen goods supermarkets and increased online price comparison will appear. we wil once again exit the global recession first. when this happens, a swathe of poms , safa's and muricans will flood over here. Bringing their offshore money and giving nz a boost. Everybody needs a bed, washing machine and toothpaste...and somewhere to live
I am not so sure. In the uk in the 80's the world was different. This time the good, younger doctors, nurses, teachers, engineers, software engineers, entrepeneurs are simply packing up and moving to better countries. They leave behind the old, the unskilled/poor, and the landlords and farmers. It ill become country of a few 'haves' and many 'have nots', with a lot of crime.
We live in a mobile world, with countries opening their arms, offering warm affordable homes and full wallets to young hard working professionals. NZ's list of attractions is getting very short in comparison. And an unlikely place to attract entrepeneurs.
Some countries will prosper, others not so lucky.
That's a very optimistic view.
Were we as leveraged into property in 2007? I don't think so.
We topped the global ranking of property risk.
https://www.bnnbloomberg.ca/polopoly_fs/1.1782297!/fileimage/httpImage/…
inflation higher than 2007? Yes
That was more than a decade of declining interest rates....and now the trend is up.
The most significant 'sping effect' for the housing market is actually the November surge in listings caused by those wanting to sell before xmas. Last year Auckland had approx 10k TM property listings by the end of the Nov surge. Auckland currently has over 12k listings going into Sept. Ceteris paribas the 'spring effect' is an increase in supply that puts downwards pressure on prices in Nov/Dec.
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