The housing market is having a disastrous summer with sales falling through the floor, prices on a slippery slope and a mountain of unsold properties sitting on the market.
February is usually one of the biggest months of the year for residential real estate but the latest figures from the Real Estate Institute of NZ show that just 3964 residential properties were sold in February, down 31.1% compared to the 5750 properties sold in February last year.
In the country's largest market, Auckland, sales were down 41.4% compared to February last year.
As sales decline stock levels are ballooning, with the REINZ recording 29,083 residential properties for sale across the country at the end of February, up 5813 (+25%) compared to the same time last year.
That increase in stock levels came in spite of the fact that the number of new listings received in February was down by 29.5% compared to February last year.
That is also reflected in the length of time it is taking to achieve a sale, with the median days to sell stretching out to 60 in February, up by 18 days compared to February last year.
The median selling price was $762,000 in February, down by 13.9% compared to February last year, with substantial annual falls in Auckland -15.2% and Wellington -20.6% (see the chart below for the regional figures).
The REINZ's House Price Index, which adjusts for differences in the mix of sales each month, is now down by 14.2% compared to February last year.
In Auckland the HPI was down 17.1% compared to a year ago.
The graphs below show the regional trends in median prices and sales volumes since 1992.
The comment stream on this article is now closed.
Volumes sold - REINZ
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Median price - REINZ
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Median house price growth
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178 Comments
The stupidity of the 2% lolly scramble is unwinding...fast.
The US banking system is getting a lesson in liquidity right now. If you cannot exit incorrectly marked assets (over valued) you can be wiped out in 24 hours when depositors act in mass. Death by cellphone transfer.
Asset buyers vanish, and rates continue to climb destroying price leverage. Unfolding today in a street near you.
Disastrous? Sounds like a much needed rebalancing to me
Not disastrous for everyone of course, but it's disastrous for:
FHB's as affordability is at all time lows due to the high interest rates
Investors whose cashflow is turning deeply negative
Any professions related to property transactions with much less work (agents, lawyers, valuers, maintenance…)
Sellers in a must well situation due to divorce, ill health, relocation etc...
Any home owners who have to renew their loans this year at much, much higher interest rates
Highly leveraged house owners who see their equity disappear with the worry of being in negative equity
I also wonder how many retirees have reversed-mortgaged their home only to find the equity evaporating and the interest rate cranking upwards...
Yes, it would be interesting to get some data around this.
Worth keeping in mind too when someone suggests we use a land tax to slug Granny for living in a home outright but kindly offering them the option of settling upon sale - which is forcing someone to take out a reverse mortgage effectively for the pleasure of living in their own home.
I would expect (and hope for) a similar arrangement to Council Rates at the moment. The elderly can choose to defer payment until after death/selling a property if they don't have the cashflow, and the Council takes a chunk of the sale/inheritance.
Or TOPs socialist envy theft of private property could be stopped.
Most developed nations, regardless of socialist/capitalist leanings, have some combination of Property Tax, Inheritance Tax, or comprehensive CGT.
NZ is the outlier here.
Other nations also have much lower housing costs, much more generous tax treatments on super schemes, huge carve-outs or roll-over relief on inheritance taxes so that they have a limited impact on people who aren't plutocrats and adjust their tax rates more than once a decade.
If you just point at taxes and say "other people have them, we should too" without looking at the context or details, it just become an exercise in extracting money from people in as many different ways as possible. The problem is people can only live off the bits they have left over - in which case the details become somewhat important.
Name one nation doing this that has solved their housing issues.
..puts hand up to show he doesn't understand.
"Only by abolishing private property in land and building cheap and hygienic dwellings can the housing problem be solved."
Sound familiar ?
VL Lenin
Sounds a long way from what anyone in NZ is proposing. Except the second half, but are you really suggesting building decent and affordable houses is the exclusive preserve of Communists?
Many grannies live in mansions and for this purpose I'll lower my own mansion definition to >150m2. Grannie needs to sell up and live in an 80m2 or smaller place.
I live very close to half a dozen schools/preschools, in an area with houses on decent sized sections. In my daily walk to and from school with my daughter, I rarely see any other children walking from the surrounding properties. Instead, it's a flurry of double parked cars for a couple of blocks.
Based on observations when walking the dog most evenings/weekends, is that a very high number of these properties are "empty nests". A difficult conversation to have though. "As much as you love this house you've owned all your life, we need to you move on". Certainly highlights inefficiencies though, putting aside emotional factors it just doesn't make sense to have families living kilometers away from the school meanwhile a pensioner couple can jump the fence and they're at the primary school gate.
Glendowie... people love it don't move out.
These things move in cycles. Once the oldies move on, young families move in (assuming affordable). School rolls expand then decline as you can't expect people to sell up the minute their kids leave home..
"But I worked hard and scrounged to get where I am" they say. Ok gran, I'm sure the 6 houses you own and have made multitudes of capital gain as well as rental yield from for decades due to favourable economic conditions can be classed as 'hard work'. More like take on debt, sit back and at your popcorn while the money rolls in
Yea I'm not sure the elderly living in family homes they've lived in for decades is a scourge of society to the extent it warrants tilting the entire tax system to the point where they can no longer afford to live close to family, friends, medical care or their extended support network.
"Come on kids, it's family Christmas at Nana's this year. Yes, it will be twenty of us inside the an apartment the size of a council issue wheely bin because nigelh thinks Nana is a parasite for wanting to live in the home she's lived in for decades and needs to be taken down a peg or two. So no complaining this year, okay?"
It's funny how people's idea of 'fairness' in the tax system seems to involve taking money from people to give it to people who won't work while designating those who are too old to work as economic drains to be taxed out of sight and out of mind with as much zeal as one can muster.
Stawman.
No-one is forcing Grandma to move, she can stay in the area in a smaller house. All 4 of my grandparents did this.
Having a massive house that can accommodate 20 people just so you can have a family get together once a year when there are families living in cars is peak privilege.
Granny says "if you can read my Private Property sign you're within range"
Grannies hands shake so much that her handwriting is illegible. I doubt shes a great shot.
You can find some data in Heartland's most recent results, as of December 31st 2022 - they are a (the?) major provider. Weighted average LVR for reverse mortgages in NZ was 19.7%. 97.7% of loans had an LVR of under 40%. No loans with an LVR of over 60%.
These mortgages are quite conservative - I think a maximum LVR of 30% when issued. I haven't read the fine print, but I believe the worst that can happen is there's no equity left in the house to pass on to the kids. A great way to release some money from a property to actually enjoy life, if you don't want to downsize or move to a cheaper region.
And what Heartland Bank's exposure is to declining collateral.
I've been thinking the same re the bank of mum and dad. If M&D refinance $100k as a deposit for their kids house, that is likely now gone and their remaining equity fallen as well. Hit twice as hard. Fortunately in MSM many claimed they never expected the $100k to be paid back, but they may have different feelings about it now they're paying interest on it.
Awww diddums.
Stop framing it as bad for FHB's in a lame attempt to create FOMO, it's a godsend. All they have to do is NOTHING and get out of the way while it all rapidly falls over. Fantastic for FHB's.
Amazing you think anyone would find investors falling over disastrous.
But I do agree, those who genuinely just wanted a home or fell into unfortunate circumstances is a real shame.
I imagine finally for many (trumpism for sure) renters things are beginning to pick up - rents down in real terms due to increasing wages. Money in the bank saving for a deposit increasing as a % equity of their future home at an alarming rate. Their concern is purely food on the table at this point and the rest will take care of itself.
Agreed.
It's going to be interesting watching the affluent underwater owners switch positions with those who were once considered lower class renters.
Popcorn.
Wishful thinking.
I recall dismissive naysayer comments like this in 2021.....
You don't understand, affluent people are not affluent because of external circumstances, affluent people are affluent because they adjust to circumstances and make the best out of them.
Much like high earning renters making the most of a crippling housing market?
Sort of, but not really Malamah. Counting on the housing market going down, is indeed depending on external circumstances. On the other hand, selling a house and then rent, that is adjusting to circumstances and making the best out of them.
lol ok. “Renters won’t be more affluent than us if we ARE the renters!”
Solid plan. Hope the population is taking notes.
Lol he's incredulous at the idea of renters buying up over valued shacks for half price.....
Oh but we do understand Yvil.
So you're saying that purchasing a house in the knowledge that not only NZ's but the global economy /assets are caving is a smart move when you could rent and build cash reserves while the market demonstrably continues to destroy itself (rapidly) and buy at the bottom is not?
Affluent people are affluent because they make informed probability based decisions at the right time. (In / Out of markets)
Right now, betting against debt, there has never been a smarter probability based move, especially for those disenfranchised FHB's.
Don't be mad just because the music stopped and there are no chairs left.....
No, that's absolutely not what I'm saying at all. Maybe it's what you think I mean, but you just really, don't understand. Please stop putting words in my mouth.
Please enlighten us then.
What a crock of shit Yvil. There are plenty of people who are affluent because they inherited so much money it's almost impossible for them to fuck up enough to lose it all and stop being affluent. The affluent love to say they gained their wealth through hard graft but luck plays a very important part.
It is definitely the case that if they hadn't worked hard they wouldn't have become affluent but it is also equally the case that someone can work just as hard or even harder and not become affluent.
It is a well known psychological phenomenon that people attribute their successes on their own efforts and failures on bad luck.
I think maybe you have an overinflated opinion of your own abilities and project that onto others.
Thats funny I inherited 7% of my wealth, there are IMHO way more self made out there.
affluent people are not affluent because of external circumstances, affluent people are affluent because they adjust to circumstances and make the best out of them.
I think you'd count learning to read and write, a healthy home life, inheritance as external circumstance?
Have a look at the paper linked to from https://www.imf.org/en/Blogs/Articles/2020/11/30/how-the-rich-get-richer.
Amazing you think anyone would find investors falling over disastrous.
And the same for agents and other ticket clippers! 😂
I said, it's disastrous for these people, do you not understand how this is different from you, failing to see how it can be hard for others?
It's a sad mentality, "I don't care about other people who are different from me, let them suffer"! (as long as I'm ok)
I think it is disastrous for a society if educated people leave valuable professions to become real estate agents. I'm thinking of all the articles we've been bombarded with over the past few years of teachers, nurses and even one doctor (I remember the guy being a surgeon who also had a Master in Health Science) who became real estate agents, apparently with the aim of reaping huge financial rewards in a role where skill, intelligence and education are certainly not prerequisites.
Would it be awful if real estate agents need to start thinking about getting themselves 'real jobs' in future? Nah! Fingers crossed at least some end up in jobs that will actually benefit society.
And cry me a river if investors need to put in some honest work in future if they want to follow their obsession of 'getting ahead' of everyone else.
"Must Well" WTFs that . Can't spell, Gramarly, moron , idiot, blah blah blah!
yvil how does it feel?😂😂😂
.
I can't hear you bro!
Good!
(also I'm not your bro)
Whilst Yvil and I haven’t seen eye to eye over the years… I don’t like to see disrespect aimed at him like this. He’s a decent commentator (as are most).
And handsome!
Thanks Tom.
Tom Tom Tom, get in the fame .
Yvil aka evil, Bagged me first regarding a few spelling mistakes and my grammar. I'm just returning the compliment... with interest!
Yvil you're right...you're my bitch!
You must be having a hard time at the moment given the level of pettiness coming out on this article. I hope your life improves soon
Those who were over-zealous during the previous housing market upswing must accept the consequences. Allowing oneself to become intoxicated by the lure of cheap money (as in 2020/21) means that, inevitably, a period of hardship will follow.
It’s called market discipline - which is a normal/healthy market process. There’s nothing new about.
If you can’t learn from other people’s mistakes, then at least try to learn from your own mistakes.
TTP
My how you have changed your narrative 😂😂😂
Hi MouseHouse,
Where have you been the last 6/7 years?
I’ve contributed umpteen versions of the above post to this blog.
Clearly, there’s not too much hope for the likes of people like you. 🙄
TTP
😂🤡🤡🤡🤡🤡
Looks like we've seen the end of "Be Quick". The end of an era.
I have sympathy for the others you list, but zero sympathy for the investors / professions.
Anyone who was on to it, prudent and ‘savvy’ should have known 1-2 years ago that this crash was coming.
If you were a stretched investor you should have sold.
If you were one of those professions you should have saved a decent chunk of your huge profit for the rainy day that was always going to come.
FHB unaffordability is due to high interest rates, not due to house prices coming down. In fact house prices coming down makes them more affordable for the same interest rate
Exactly. If fruit and veggies ever come down we don't call it 'Disastrous'. Same should apply to housing - prices come down, we should be relieved, something to celebrate, as it's a win against the cost of living.
High priced veggies mean the veggie growers make more money. This creates a wealth effect as these veggie growers now spend money into other parts of the economy creating wealth for everyone.
donny, donny, donny.
If someone mentions trickle down or wealth effect again, I'm jumping off a bridge. Fruit farmers can't even offer a decent wage to attract fruit pickers, instead, go and grizzle to the government to import cheap labour. Everyone knows the wealthier someone gets the tighter they get, profit goes straight into asset accumulation (property, land etc). The wealth effect is total BS.
Trickle down, wealth effect.
Make it a low bridge, I don't want you to hurt yourself
trickle down only works in a multi deck sheep transporter......
Some German guy who lived in London in the 1800s wrote a very long book about how the system sucked wealth upwards not trickled it down...
In my experience the wealth effect is not about paying the same people more.
Instead they do tend to want to scale up, employ more people but pay them the same or less.
Not sure if its a good thing or not, just what I have observed.
Not. They are smart and save money for rainy day!... Unlike Labour!
You think that the government should keep a portion of taxpayer money saved for a rainy day?
We do. Well, Labour do. The Nats suspended payments at great cost to our future selves.
Labour reinstated at a far lower rate % to GDP compared to when National stopped it in 2010.
Was 1.2% of GDP in last full year (2009). Now has ranged between 0.2-07% of GDP since 2018.currently 0.7%
Labour would need to find at least another 1.5 billion to get it back up to the same level as 2009
National could have got it back making payment after GFC earlier
Wonder if they have reworked the burn rate on that fund on the basis of yesterdays lolly fest. I am sure previous projections to date were based on 0-2% CPI.
How long before there is political consensus on raising the retirement age to 67 and gradually to 70?
$17b+ and rising annual non-means tested superannuation spend suggests that should have happened 40 - 50 years ago.
Wealth effect only works when money has velocity. If the additional revenue gets siphoned off into an investment portfolio or bank account, velocity is zero and there is no local wealth effect
Rebalancing and re alignment and engine rebuild....
Recession!!! Soon to be depression!
Labour are about to make the rich richer and the poor poorer!
Nice one 🤠
$ell buy $ell buy... $$$$$$🙏👏✔️
Looking forward to the HPI data and report. I thought 2022 would be the big losses and 2023would see the bottom of the market and some stagnation. 2022 is now looking like the aperitif with the main course still to come.
Thank you Malamah!
Wunderbar!
I wonder what proportion of sellers have recently had their fixed mortgage payments increased to unsustainable levels to the extent they have to sell? They are the real victims of circumstances. Losing their deposits and perhaps still owing the bank after sale. One would think these people are the tip of the spear so to speak when it comes to price setting.
Probably about 1% at current interest rates. However with 2 million homes in the country that is still 20,000 on the market that have to sell.
~40,000 listings on trademe, clearing at ~4,000/mo. 10 months of inventory. If you add 10 to 20k listings which have to sell, new pricing will be found.
This is just the beginning. There is a long way down to go before houses in NZ get down to a sustainable level in synch with economic fundamentals.
2023 is going to be the year of the great rebalance of the NZ economy away for parasitic housing speculation and into the real economy.
Bring it on.
You need people to be able to spend in a 'real economy'. They can't do that if they're underwater on their houses and wallets have been slammed shut.
Not to say it shouldn't happen, but it's something that needs to be engineered, as opposed to just leaving recent and new FHBs as bag-holders while the investors and others who piled into the market get to sell down, samp the market and then get the benefit of chunky term deposit returns while ordinary families flounder. That's a bad deal. We should be smarter than that.
I agree. When the GFC hit in the US, many people who hadn't missed a single mortgage payment were foreclosed on simply due to being underwater. Our government does really need a plan for this. In the US, there was no government plan - foreclosed houses were re-sold to other banks and vulture capitalists. The case study is there for everyone to see. I'm hoping NZ learns from it and is 'smarter than that'.
There is no social benefit in adding yet another family to an already overcrowded demand-side rental market.
Thats because banks did not own the MBS in the USA, they had been sold off balance sheet. NZ situation is very different with the vast vast majority of mortgage lending here being kept on balance sheet. It's not in the interest of a bank here to close a capable payer out at a loss..... though it may be in the interests of a borrower to close out at a loss if the future payments do not make financial sense.
In NZ in 87 the banks knew a bunch of the speculative would never be able to pay anything, so choose to shoot those underwater that could pay something. Even if you were making your payments. This made events much much worse at that time.
In the GFC it didn't matter if you were underwater as long as you met payments. A very different approach.
As always timing is everything. This wave of stupid debt has been building for some time. Every lever available since the GFC has been pulled to avoid reality. The US is more or less bankrupt, giving it very few options to continue to avoid reality. Accordingly a return to debt needing to be supported by income is inevitable.
That....is a long way back for the speculative.
I've had enough of engineering - it's been a shit show. Give me chaos.
When you look at the history of other bubbles unwinding over the last 30 years, you see they all ended with price-to-income ratios below 3x household incomes. Applying this to NZ, and assuming 7% income inflation for the next 2 years, would give us:
Nationwide: average hh income ~$127k, DTI 3 => average price 381k, vs current 762k or an almost exact 50% further fall expected.
Auckland: average income ~$183k, DTI 3 => average price 540, vs current 1009k or 47% further fall expected.
Will we be different? Only time will tell.
My guess is that prices will settle somewhere between $540k and $1m.
While I agree the 3x income figure is historically about right - my view is that our perceptions have changed and banks are now much more comfortable with 4x income or even more.
Enriching bankers & those with mega-money (but not the ordinary savers) has now become the 'new normal'.
For people not to fall into this debt trap we need people to fully understand that a) 30 year mortgages are bad and b) maxing out what banks will lend you based upon the mortgage repayments you can afford is daft.
Use the Full Function Mortgage Calculator (https://www.interest.co.nz/calculators/full-function-mortgage-calculator) and people will get this ... Eventually. This stuff should be taught at school!
Agreed.
And to be fair, I should've probably applied it over a longer term, as most bubbles took 4-5 years before they bottomed out, which gives more room for wage inflation to arrest the falls.
Though 7% pa is a stonkingly high wage inflation.
It really depends on the trajectory of interest rates. If the OCR hits 7 or 8%, then I can't see how house prices stay above 5x the average household income. At the moment we are at 7.53.
Wage inflation is the key. It always has been. We haven't had it before and what we've got now is only just cutting it.
But is "average household income" the right measure to use?
What I mean is that many of the "average households" are happy or forced to rent - and move back in with family.
Once this group is removed the "average household income of those able and looking to buy" increases quite a bit even if the quantity of them is less, and as you say, expands and contracts as i-rates fall and rise.
I think this has been true in the past, FHB jumping at the bit to enter the bottom of the market. You only have to write a yield equation to see where the competitive bid lies, and anything above that is fair game for the FHB and OO. At the moment, it really is quite low. Ultimately agree that the average income of buyers will be higher than the national average. Looking at current statistics, the average income of buyers is increasing at a rate much faster than wage inflation, so we're still in "exceptionally marginal buyer" territory. I'd expect this to at least flatline or lower before we reach the bottom as more buyers are able to enter the market at lower prices before the yield equation makes sense and investors slowly start to return.
She's a long way off increasing at a rate greater than wage inflation.
The use of household income now underestimates the unaffordable measure in the ratio.
For example, a ratio in 1980 of say 3x median household income ratio mainly consisted of one income earner working a 40-hour week.
Now a 3x median income ratio could easily be two working partners working 60 to 80 plus hours a week.
But even at the increased number of hours worked the ratio has blown out to 8 to 10 times the median income multiple, and the average house size has gotten smaller.
I'm not sure where you get that 'banks are comfortable at 4x median multiple,' given they have been lending to buy up to 10x median income.
Banks would be horrified if it went as low as 4x, given that income inflation won't account as much for the fall in the median income ratio as does the fall in house prices.
Meaning that banks would have lent on mortgages that were now higher than the sale price.
It would trigger all types of financial ratio breaches.
Ask yourself, what would prevent house prices from dropping to that level? Then secondly, is the answer to that within the control of market banks?
Not suggesting that's where things are heading, I have no idea. But the argument that bad things are scary becomes less and less an argument and more and more a statement the more you think about it.
My point was to the phase, 'banks would be comfortable at 4x'.
In the right circumstances (and getting more right by the day), then yes it could go to that level. But the economy would have collapsed. Not forgetting of course it was the excess boom that help start the uncontrollable fall.
But the banks are only comfortable when there is a large margin between what you owe them and the sale price, and you pay your ever-increasing debt on time and at the highest rate you can afford.
Ireland reserve bank cam out withan interesting idea. FHB could have a max DTI ratio of 4.0 - every one else was linited to 3.5.
The only problem here is with new home building costing upwards of 400K + land that would kill the new home market if inflation keeps zooming.
we need people to fully understand that a) 30 year mortgages are bad and b) maxing out what banks will lend you based upon the mortgage repayments you can afford is daft.
It is beyond me to comprehend how we ever got into a position where people did not understand this!
A lot of people forgot, a million bucks is a million bucks. It was all about ability to service a payment. Its now unaffordable, and that 1m is still 1m.
It's Debt to income, not house price to income. So unless you think everyone will be borrowing 100% with no deposit you need to adjust your assumed house prices.
And within one cycle the term "usable equity" will vanish. Property investors will be those with cash and income to support the debt. Those with no cash deposit will be priced out at the cost of the extra 25% leverage. In short, they will be priced out by FHB with 20% cash down payment and an income to support the 80% debt. The investor using "usable equity" will be taking 100% debt, and needing an income stream to support it.
So the answer lies between the two - while cash poor investors will be locked out, would the FHB compete enough against other FHB to keep prices 25% above what your neighbour the property investor can afford? If not, then the answer is closer to house price to income ratio in a competitive market.
DTI is the maximum they can take out if they choose to, in the past FHB have had to maximize debt if they were to buy, will this be true over the next 5 years?
1. You're confusing metrics. DTI is a measure of debt servicability, price-to-income is a measure of housing market affordability.
2. As per that, I shouldn't have used 'DTI' in my examples, rather 'PTI' - however, readers will have understood what I meant, and the point of the examples remains unchanged.
Whether any of the local distortions (FHB start grant comes to mind) has any major bearing on where we head up remains to be seen - I'm of the opionion that once speculators are out of the market, it will have neglibile effect as all it does is reduce the savings required to meet deposit requirements. (It creates a potential floor of $100k, but we're not getting there anyway).
Others have also noted there are cultural differences as well, such as the proclivity to work more hours per household. But that produces diminishing returns, and I'd have to guess that we're probably pretty close to the limit already. Besides, price-to-income doesn't care how many hours were worked to achieve that income.
REALITY CHECK for all those doomsday merchants, and there are many lurking and constantly blowing their trumpets on here.
You really think another 50% more decline in values... based on the old median myth argument eh?
It's ridiculous that myth still exists.
FACTS beat your emotive cries of another 20-30% fall in prices in Auckland.
Did you know that multiple myth of 3 to 5x MEDIAN incomes and MEDIAN values (ie not averages) was established by the World Bank in the early 1990s when mortgage interest rates were 15% per annum? i.e. not the 7% we now have.
Did you know the median multiple right now in Auckland is 6.9 and fully justified with interest rates at 6.5%.
Property in AUCKLAND is nowhere near as unaffordable as you think, and is actually quite affordable providing you have the 20% deposit.
i.e. AUCKLAND Median price $1,009,000 versus AUCKLAND Median Income $146,000 = 6.9 multiple and at current mortgage rates on a 30 year term repayments are 42% of the median gross income. Banks will lend based on repayments of 40% of gross income...
SO Auckland property is actually quite affordable at current levels.
If you buy an entry level property for say $750,000 and you have the median household income of $146,000 thats only a multiple of 5.13!
and repayments are a measly 31% of median gross income
Auckland average or even median house price $540k... in your dreams!
Best be quick then.
Be quick for what exactly? Typical sidestep comment to attempt to deflect from facts.
I'm not saying rush in and buy but pointing to facts.
If you were interested in the facts, you'd be looking at the median income of non homeowners. I think you'd find that to be lower still. The median income of home buyers has sky rocketed, and the number of new mortgages plummeted. We're still in discovery regardless of whether the prices are deemed affordable at some multiple. Aside from that, debt servicing is at it's least affordable still with upside risks on interest rates due to persistent high inflation and account deficits both threatening to debase our currency. Not to mention the impending mortgage roll over, brightline rollover and election. When speculators realise the tenant tax reversal has nothing to do with falling house prices, I wonder what their approach to further investment will be.
We can't print our way out of this one, though we may try. Then the median multiple will become irrelevant as workers will be more interested in putting food on the table than paying off somebody elses retirement. Meanwhile our core funded industries are in turmoil due to being severely underfunded, education, emergency services, healthcare - strikes after strikes because they can't afford this country anymore.
Though I see what you're saying re extreme views, there is very little in the way of support for the housing market looking at the facts. So we will step our way down as a nation until we find out where prices really are.
Maybe look at past instances where housing markets have crashed, for example Ireland. Why did their house prices fall 60%+ when interest rates only hit 5.51% in 2008?
The mortgage interest rate rose from 3.49% in 2005 to 5.51% in 2008 and then dropped sharply to 3.46% in 2009. Over the following four years the rate gradually increased to 4.36% in 2013 followed by a drop to 3.28% in 2014.
Our first year falls are faster, our interest rate hikes are considerably more. But it couldn't happen here aye?
https://www.cso.ie/en/releasesandpublications/ep/p-mip/mip2014/economy/….
It would be a brave person holding fletchers shares at the moment, or any other listed co relying on housing.
Wait for the job losses to start. It’s going to be very tough for some.
Fletchers certainly won’t be immune….
I understand they are preparing some big plan changes, possibly to improve the value of their assets (rural to urban rezoning, value uplift)
Did I say it couldn't happen here?
For more on the Ireland property bubble see https://en.wikipedia.org/wiki/Irish_property_bubble
"The introduction of the single currency (Euro), with European Central Bank interest rates being lower than what national interest rates would have been had Ireland not joined the Euro, meant that those buying property were encouraged to borrow larger amounts of money... Over time, the scale of residential mortgage debt reached a proportion that greatly concerned the Irish government because of its effects on the Republic's economy. The increasing cost of property and the need to borrow money to acquire property in Ireland resulted in substantial increases in the total level of private sector debt. This became of increasing concern to the Irish Central Bank, which had issued many warnings in an effort to affect consumer behaviour, but which signally failed to use any micro-economic tools such as prudential limits on lending or deposit requirements. Inflation was higher in Ireland than elsewhere in the Eurozone."
Before you point to NZ's heavily indebted public on housing debt it's interesting to note NZ has $1.6Trillion of residential property and an overall LVR of just 21% i.e. $340Billion (Corelogic and RBNZ).
I take it you have properties to offload then?
I still don't think people quite grasp this. Too many think that this is just the COVID froth blowing off.
Yup. I think people underestimate the systemic issues to the housing markets that are created by quickly rising interest rates. Our experts need to read more Freidman.
Friedman's models and narratives bear little resemblance to the realities of how real people make choices, but are great for enriching international pirate oligarchs raiding countries' natural and social capital
The average number of mortgagee sales listed on trademe during the last 3 years is 18. It has recently increased to a peak of 37.
Not sure where you get that number. May be valid for last 6 months, but not in 2020.
I tracked this fortnightly had between July and October 2020. Minimum 21 and max 33 resi mortgagee sale listings nationally via TM. Realestate.co.nz had a 16 to 27 across that same timeframe.
It's just the beginning if parasitic house speculation bro. The buyers like me are waiting to buy from the morons that brought high with a mortgage because of FOMO. FOMO that was spun by the RE wankers and idiots like "most of so called fiscal gurus " eg tony Alexandra
Would you include the PM, Finance Minister and RBNZ Governor in there too? Because if you were a fully informed FHB trying to secure a family home, you would have been left high and dry by listening to the key political and institutional leaders at the time. Bit hard to justify a logical rational choice as 'moronic' at that point, isn't it.
Bollocks. You heard what you wanted to hear. The PM, Finance Minister and RBNZ Governor all said house prices were too high.
Yep, again, 2023 will be worse than 2022!
Appreciate the new "From Peak" column REINZ now includes in the HPI table
Yes, that's quite surprising!!
Do they have a "from trough" table as well?
Where will it end? Already we have the property perma-bulls claiming the time to buy is now.
Not so fast ... Use the "Median price - REINZ" graph above. Select Auckland. See the flatline between 2016 and the COVID inspired silliness? I've mentioned why this exists for Auckland and nowhere else. Problem is ... "nowhere else" is now just like Auckland.
So ... Further falls coming. And no significant re-bound once interest rates come down a bit.
If prices do drop 40-50% from here, then the vast majority of investors that are in the 5th year etc of a 25year mortgage, with current tax situation, will bail........ the immediate loss is better then the future forecast cashflows.
DTI limits is the coup de grace, eliminating any chance of recovery unless we accept inflation at 5%
the immediate loss is better than the future forecast cashflows
100% agree.
All these loving words from the banks about how supportive they'll be is just a con to ensure their future profitability while the poor buyer gets right royally screwed waiting for their property to claw its way back to break even. (And for 'investors' who have lost their rights to claim interest as an expense ... even more so!)
Blinkers are still on for sure, anecdotally - speaking with a housing investor friend recently, still renting, owns investment property but looking to buy their own home. Prices will be back to new highs in 2025 apparently, just have to ride out the storm. Meanwhile their usable equity is about to hit negative.
Wow! 2025! Love their optimism!
Were they able to provide coherent reasons?
Disastrous ??! Prices have not even reached pre-pandemic level yet. Before pandemic happened, NZ housing market was already in bubble. The propping up of property market which started in 2008 cannot just revert back by few rate hikes. We have long way to go before even we start calling it a correction or a crash.
Agreed.
If we are to reach pre-pandemic levels in Auckland it'll be back to the flatline that started in 2016 with the new Unitary Plan.
So somewhere around the $850k mark? Another $159k to go then.
Who else is starting to notice for sale signs on properties sold 2021?
Yes we are starting to see this in South Auckland. One roof and others are starting to report on properties selling at a loss...
Noticed one recently, asking price $400k below what was paid in 2021. I wonder if it will move.
In my market the Eastern Bays of Auckland. If the sale is a half decent price you get an email, text message and phone call telling you the sale price. If it is bad it sits at TBC for 6 months.
Seems to be quite a few stalled build sites around too.
Places where foundations have been laid, or materials on site, or surrounding fences erected, etc. but no action by anyone for months. One is a 1000 sqm sold by me mum for $4k/sqm which has foundations and then was sold on but nothing has happened for almost a year. And adjacent, another similar site is being used to store materials and has done so for over 2 years.
Methinks we just at the beginning of the mortgagee sale deluge.
Probably land banking with some who has plenty of cash.
Sounds like penny has dropped for many on this website, house prices will continue to fall until average wage couples can afford to buy a home while still being able to feed family. The government then needs to take out speculators and make sure any increases in the future are not above inflation people should be able to have a place to live with family at the moment people who don’t own a home have no chance of buying.
Agreed.
Labour (under Chippy) seems to be reading the room well and trying their best (bless them) to transform our country a bit. Some signs of drive away from property driven economics - towards a focus on on business, climate, infrastructure etc.
National are still living in 2008 and selling people the dream of owning fast growing investment properties and low taxes
Disastrous? By that definition the food price inflation reported yesterday means the food market is record-smashingly successful.
https://www.interest.co.nz/personal-finance/120289/food-prices-surged-a…
Something something...
The real kicker in all of this is how alarmist CPI inflation is made out to be, however HPI inflation was celebrated. All I see is a reallocation of funds, this will cause pain so long as budgets tighten between the two, in the long run CPI will take a larger portion of income, and mortgage payments a lower portion at a higher rate
.
Doesn't always work like that.
If each supplier is supplying less, then their profits could be identical to when they had greater supply but sold at a lower price.
59 percent is a pass mark as we all know.
The report will say "Could do better"
Could also do a lot lot worse.
Are you talking about a 59% clearance rate in Auckland compared to a year ago? At prices down ~17% yoy according to HPI. We're talking less than half as much money flowing through in sales. Back to work.
Another builder in liquidation. I was mocked / ignored when I started saying more than 1.5 years ago that a construction crash was on its way.
https://www.nzherald.co.nz/business/another-builder-fails-25m-owed-nine…
I wonder if we are already in recession
Welcome to my world
Am going on a limb and saying I dont think so
Dec gdp out this week?
Tightly held, deseased estate, by tender, call to action, FOMTMM ( fear of making to much money), urgent sale by tender, or some honesty ..
over priced, shithole, offers over " the top" needed to pay debt!, Owners say " screw them", ....
Sure are!
Housing frenzy Bingo anyone? I'll start you:
Ya can't go wrong with houses - Smashed Avo Losers - Be Quick - Astute Investment - Solid Brick and Tile - Lazy Equity - Interest Only - Leverage Up - 5 Year old investor got his start selling marbles, now he's lost $6M on 30 houses.
"Is now a good time to buy? 9 year old says yes!"
90 year old, whos seen it all before says yes as well.
70 year old tenant says I should have bought a home when I was young. My landlord just gave me notice to leave and I'm too old to move.
Specuvstors bank told them to generate some equity...?
This has been a long time coming.
interest rates have been falling since the 1980s from very high levels to historic lows (+ high immigration + stringent RMA + lack of social housing) so asset prices, especially houses (land price mainly) have been rising in price as they have become a financial asset rather than somewhere to live.
All we are seeing now is a return of interest rates to more normal levels and asset prices are correcting.
Successive gutless NZ governments have failed to put in place capital gains, land and wealth taxes so the financialisation of houses became extreme as money chased low risk low taxed returns.
We reap what we sow.
House prices are falling but are still nowhere near median multiples of 3 which is considered affordable. Eg Auckland circa 11, Christchurch 6 so we have some way to go.
With lower immigration, more supply through the RMA changes and higher interest rates the only way is down.
Median multiple of 3 is a fantasy from another time.
Not true
average rent 550 with mortgage at 2.5% peak stupidity gives $1.14m that can be financed as a house price. Median household income is circa 100k. Median multiple is 11.4
same above but with 7.50% mortgage gives effective house price of 381k and median multiple of 3.8. Not far off 3 already.
I guess I missed the news about median house price dropping to 381K
The calc provided is very simplistic but provided to make a point. It also needs to be done on real prices so you can add at least another 10% to the house prices falls to date to cover inflation.
House prices are sticky and we still have too little supply, otherwise on a real price basis that is where we are headed.
I laugh to myself when I see that so many houses can't sell. That's crap. The prices are too high.
We are not in a Ukraine situation where the seller probably has to pay the buyer to buy it, especially if its in Bakhmut.
There is still a functioning market here.
Yip. If the RE winkers got real and ignored the Homes and One Roof algorithms we'd see an active market....
They will realize this when thier wage packet looks 😭😭😭 sad
Net Migration ramping up to save the day
https://www.stats.govt.nz/information-releases/international-migration-…
Wrong!... It's only up compared to a huge low the previous year .
Go back to before Ardern hated immigration and it's still way down!
Not my view of a disaster - it's all subjective it seems. A disaster for me was having to come up with 20% deposit. An amount that for a long time kept on becoming a larger and larger every single week due to a runaway speculative market. Median deposit at peak was $185,000. Now it's $152,000. In 2016 it would have been $89,000 - still an eyewatering amount of money. All whilst renting and having landlords constantly increase the rents because they 'need to service' and fund their retirements and luxury lifestyle. And the didn't yet have the luxury lifestyle, then they were chasing it. I would like it to keep coming down because my wage can service the mortgage but only bank of mum and dad can come up with the deposit.
Yes, those cash poor Landlords that run up the tab at the bank to outbid FHB like yourself, pushing house prices further out of reach using interest only mortgages and generous tax advantages that are thankfully now only limited to real businesses.
"Sorry rents gotta go up because I borrowed too much" while simultaneously house prices are dropping resulting in smaller loans for FHB and smaller deposits required. Might see a flurry of temporary renters able to move into their own homes or the many chicken coops for sale.
I should say, bank of mum and dad will fund my deposit. That bank owns 5 houses. Despite my more objection to it, my parents have a reasonable answer. They don't trust that by the time they are old age that government will be able to look after their children's health, amongst other reason. I can't disagree with that. Health system is a disaster, like many other public services and institutions. However, I am going to wait it out I don't see prices stabilsing anytime soon. I think it's unfair I can have this support, but that's the world we live in.
Sellers greed reinforced by agents overpitching the price to get the listing is still a real problem. It's almost like they don't realise holding out on a fast declining market is all kinds of stupid.
I thought Interest.co.nz is a financial site, turns out I was wrong. Reading all these exchanges in comments, I thoroughly enjoy the entertainment.
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