Median house price declines over the past year are now being measured in hundreds of thousands of dollars in some places

I prefer the term "price discovery" to 'property cycle'.

Wow. We 100% agree for once.

The perfect time to introduce policies to stabilize the housing market and take away the ability to speculate with non-value-added price increases will be at the bottom of this cycle.

While that would solve the housing affordability crisis, it will open up another one, namely, all those people with lost equity, many still paying off the debt on that lost equity, will have no ability to go back to the roulette wheel to win lucky with another housing boom before they retire.

The NZ economy is going to look as pretty and as productive as a farm that, as the flood waters recede, is left covered in silt and forestry slash.

We shouldn’t base any public policy on junk behavioural economics, whether it’s the wealth effect or loss aversion. It doesn’t replicate. (At least Kahneman is intellectually honest about this).

Unfortunately, many public sector agencies have been put through a one day nudge course, so this nonsense is getting institutionalised.

Yup, the market will have gone through a sustained period of winter carnage before a possible Nat-ACT govt takes charge.

Ive been a big critic of the current Labour govt but truth be told, I'd rather have Chippy on the wheel come Oct trying to rebuild our economy with something other than housing speculation and ultraloose migration.

According to the figures in the above table, the median (literally, in every sense of the word) Wellington house we sold just under 3 years ago is just $30k above its 2020 sale price now, which after inflation represents a real drop. That sale was just before everything started to go crazy(er), so it's lost a paper $270k in the past 2 years.

Prices in Wellington still need to drop another $200k for a median house to get into the definition of affordable territory.

Why are you so interested in the "specuvestors", rastus?  Are you an investor as well?  If not, then why?

We know rising interest rates has drastically reduced what people can afford to pay. This has been reflected in the sales prices decreasing but also sales volumes reducing to record lows.

But we are yet to see the full impact on existing owners, as only a portion of the rate rises have flowed through. If the RBNZ predictions are correct (not that their forecasting track record inspires confidence) we will see interest rates remain high, as unemployment rises substantially. 

 

So we run the real risk of an increasing number of “motivated” sellers at a time when there is a lack of buyers who can afford to borrow enough to pay current prices.

You might need to buy something with a high fence with razor wire, security camera system, and guard dogs if we extrapolate the past 12 month price movements over the next few years.   

I am still picking 2027 as the bottom

Lucky you, to know when the bottom is (not in hindsight) VM.  Would you be so kind and share with us who don't own a crystal ball, when that is?  Much appreciated!

Yes. Looking stable. But avoid rivers and beaches: high ground,  but not too high.

Hamilton pretty much ok. If it wasn’t for the news I’d be wondering what the fuss was about. Non event in our household.

just need to sort out the ram raid industry. 

I wonder if his basement boys got flooded?

Yes, I can’t open the property report but lately it’s been less than 10 sales per month. But we never hear about them even asking the agents outright, not many prices published and homes.co shows Wairarapa steadily increasing in price since 2021, list prices are mostly 2021 prices. Everyone thinks their modest lifestyle block is worth $2 million.

You do know it's possible for an existing building to cost less than a new one, right? Kind of like how new cars are generally more expensive than second-hand ones?

It hasn't been that way for a while, I'll admit, as specuvestors kept buying existing stock displacing FHBs into new builds, pushing the price of existing stock up. Until you see 'investors' return to the market in droves - possibly tied to interest rates and credit availability - expect to see the price of existing houses continue to drop.

What happens when prices approach the cost of building?

People stop building.

What happens when prices approach the cost of building?

The construction industry collapses, which will happen later this year and in 2024

So they are still 300k up so still high and unreasonable.

Depends how quickly you can realize that gain. If you can it all. Arguably you're worse off because of 2nd-order effects, such as the destruction of the wealth effect. 

See my post above - our house sold 3 years ago was the Wellington median price (and house). It's now only $30k off the 2020 sale price. That's a 4% gain over 3 years if there's been no improvements to the property...

If you bought before that $600k rise, then you're sweet.  But for the market to measure a rise of $600k, there needs to be corresponding sales.  It's those purchasers that have lost $300k.  

20% of the houses selling are down 15% on the index.  80% of the houses are not selling and thus aren't measured.  So one can only assume that 15% is best case.  

Imagine if we could pair pre-approvals data (amounts + maximum deposit) with HPI data.  

Fun rationalisation, but market statistics aren't based on what people wanted to happen, but what did happen. 

Trying to account for everyone that didn't sell/list because prices were too low is as meaningless as accounting for people that didn't buy because prices were too high.

Note that those numbers (though lower) aren't trivial, still enough to be representative.

Yeah… ‘whip back’ suggests a rebound, something noticeably stronger than what I, for one, thinks will occur ( which is eventually a stabilisation, then small incremental gains)

I think if you could buy an auckland rental for $600k it would still be a lousy investment when compared with putting the deposit on a good term deposit rate

the tide has gone out on this one

40% falls won't be enough

its a long way back until the investment spits out an actual cash return each month that competes with a term deposit, considering the capital risk and hassle

without capital gains there is no reason to purchase

game over

... Though regions that didn't have the bad weather also experienced the slide.

Real estate, conveyencing, mortgage brokers, builders, tradies, developers ... and related industries are all seeing the start of the quietbust cycle.

Its great you can dedeploy staff. Orr wants to see layoffs in significant numbers..  these industries and then retail are the likely ones to provide them

I think it's easy for people to dismiss.  As you say, Auckland down 21% so far.  Does it feel like it though?  Not really, the rain's still wet.  The sun shines.  Wind blows.  It's only when the bank starts knocking on their door that it effects them personally and it becomes "real".  

Why do you think the bottom is 6-9 months after rates stop rising?