There's a steady increase in the percentage of residential properties selling at a loss, according to property data company CoreLogic.
In the first quarter of this year 6.1% of all residential property resales fetched prices below their purchase price, leaving their owners with a loss, according to CoreLogic's latest Pain & Gain Report.
Perhaps not surprisingly, most of the properties resold at a loss were purchased within the last two years, while owners who had held their properties for longer than that were generally still making a gain on the sale.
According to the report, the average time loss-making properties were owned by their vendors was 1.8 years, while the average time properties sold for a profit were owned by their vendors was 8.3 years.
"There was a tendency for recent loss-making property resales to have been originally purchased around the first half of 2021, when the market was very strong and looked different than it does now," CoreLogic NZ Chief Property Economist Kelvin Davidson said.
"Presumably, many of these resellers had intended to hold for longer, but perhaps had to sell due to changed personal circumstances, such as the impact of rising interest rates," he said.
The median gain on the properties that sold for a profit was $305,000 while the median loss on those that sold for less than their previous purchase price was $60,000.
Apartments were the most likely property type to be sold at a loss, with 28% of the apartments sold in the first quarter of this year selling for less than their previous purchase price.
The average loss on apartments that sold for less than their purchase price was $67,500,
Homes in Auckland were more likely to sell at a loss than those in other parts of the country, with 13.2% of the sales recorded in Auckland in the first quarter of this year selling at a loss compared to their previous purchase price.
After Auckland, the areas with the biggest percentages of loss-making sales were Hamilton 8.1%, Wellington 6.3% Dunedin 5.3% and Tauranga 5.0%.
The report also shows that the likelihood of properties selling at a loss is increasing.
Between the fourth quarter of last year and the first quarter of this year, the percentage of properties sold at a loss increased from 4.0% to 6.1%. The median loss increased from $45,000 to $60,000, and the median gain on the properties sold for a profit decreased from $440,000 to $305,000.
Looking ahead, Davidson said house prices were likely to remain lower than previous peaks for a few years yet and there may well be further weakness for the performance of resales themselves too, with more pain and less gain to come.
"The growing uncertainty around the [official] cash rate ceiling could also impact these figures in the months ahead if the Reserve Bank hikes again," he said.
The comment stream on this story is now closed.
CoreLogic's full Pain & Gain report is available here.
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122 Comments
Is that true? Who said that FOMO certainly proves Darwin's theory as true.
Just makes me feel so sad that in a beautiful country like NZ we have so many who still fall below the threshold set by Darwin's theory.
So many bent on cutting the branch they are sitting on. Use a sharp axe to cut their own feet.
How can be there so many with below average intelligence?
Realtalk: How long have houses been "overvalued". How long is it realistic for people to sit on the sidelines after all the central government and RBNZ signalling that they would not let prices drop, either through huge market intervention or passing comments from senior cabinet ministers. And that's before all the smoke signals about negative interest rates.
So, with all due respect, you could have considered all of the above and thus actually have been extremely well informed about how likely you thought it was that prices would actually ever be allowed to drop, and be forgiven for thinking that this kind of walkback would not be allowed to happen.
And frankly, it's a little repugnant to put the onus back on individuals to simply know better after that kind of political and institutional failure and the total lack of accountability that flows from it.
What I wrote is my view. But yes everyone has a choice and what they choose then they reap the consequences of their choice.
Just out of curiosity "GV "are you a real estate agent or been in the past? Your words sound like coming out of the thinking of an agent who wants to make a sale asap.
GV is probably just someone who isn't smug and using hindsight to make out like they are the smartest person in NZ.
Out of curiosity Nguturoa, where do you fit in all of this? Home owner, renter, investor?
My guess is someone that purchased many moons ago, reaped the benefits of the low house prices, declining interest rates, and successive governments making home ownership as easy as possible. Someone who is now happily throwing stones at anyone getting burnt by a government and reserve bank seemingly at war with them, when they are just trying to put a roof over their heads.
If only everyone was as smart as you bro!
To answer your incredibly baseless but entirely on-brand assertion:
No.
Honestly sounds like someone who waited a long time because prices were insane and in the end decided they don't want to get old without a home and a family and decided to buy at the wrong time
And even if this isn't exactly GV27's case, it surely is for FHBs from 2020-21, and will become the case for even earlier FHBs in the near future. And it's sad and a total failure of several governments, starting with the Clark one and amplified by the Key government's tone deafness* around the problem and finally Jacinda's "I want to see steady continuous growth to infinite" ignorance
(*) I would argue JK had a pure spite towards anyone who didn't own a home and didn't hustle for a living, but maybe that's just me
While it started happening under Clark, there was no real benefit of hindsight at that time. Key and Ardern both had the benefit of hindsight, yet prices continued to balloon under both.
Only under Ardern did prices start falling, although I suppose people will credit that to other forces.
As for Key, I voted National at the time because I thought they were the most competent party to fulfill their election promises but was left with a sour taste, so switched to ACT.
Realtalk: while no individual FHB who purchased an insanely overvalued house is to blame for the reasons you mentioned, a Ponzi scheme is nothing without a constant inflow from the bottom. And FHBs as a whole were gullible enough to buy into the narrative
Had the FHBs been better financially educated, they would've seen the enormity of the Ponzi scheme for what it was, staying away and letting it fall onto itself. Some decided "well, the mob is too dumb and they will just bite the bait", which is fair enough and the best strategy in the moment, but the real problem was that the mob was biting the bait like there was no tomorrow
So FHB must obtain a Finance Degree before they take out a mortgage? Gotchya.
Does the same apply to other trades too? Do we need to obtain electrical/plumbing tickets before we engage relevant tradespeople to oversee their work? Or is it only mortgage lending where the institution involved carries absolutely no risk or responsibility where their services result in losses to their clients?
These are good arguments
In my view borrowing a mortgage differs from hiring someone to do work for yourself in two fundamental ways:
- taking a mortgage is a huge financial commitment, of more than 10 years household income in Auckland (note: pure income, not disposable). The stakes are too high to just shrug the risks off to: "I expect the mortgage broker to genuinely care for my financial well-being 5 years from now"
which segues into
- mortgage lending institutions don't have a charter to care for their borrowers' well-being, not that I know of. They do have a charter to make the largest profits they can make. And somehow 2% of 1 million proved easier to sell than 10% of 200k for reasons that are beyond me. And has the added bonus that going from 2% to 4% later is easier to sell than going from 10% to 20% interest rate. So here we are
Replacing the roof or rewiring a house is also a huge financial commitment.
Does the insurance company have the right to not pay out if the registered electrician (who for arguments sake is now out of business) uses the wrong type of wiring and the house burns down? The "individual" should have known what type of wiring is needed, they should have known the 64 year old electrician might retire next year etc etc.
Since the bank is making the assessment (test rates), they've taken on that responsibility on behalf of the individual. If the borrower were assessing their own loan application, then I agree it's on the individual.
Borrowers are assessing their own loan application - they are after all the ones making it. If they assessed it as untenable, they wouldn't have made it in the first place!
Applying for a loan and not knowing if you can afford in the future, is just gross recklessness. It's all well and good to scapegoat "but Jacinda told me house prices always go up - Tony Alexander told me house prices always go up - the banks said low interest rates were a permanent fixture for the next 30 years" - all of these are simply abdicating responsibility for their own decisions. And guess what - none of those people or their ilk actually care about your financial future - they just want to take as much of your income as they can on the way.
I hear what you're saying and agree to a point. However, who sets the mortgage rates? The banks do of course! Writing a loan and not knowing if the borrower can afford it in future is gross recklessness. Let's agree that both the banks and borrowers have an equal part to play then, even if it's the bank that makes the final call.
What if a borrower were prudent, tested themselves at a 10% rate and then for whatever reason interest rates hit 15%. Is that also gross recklessness? Where do you draw the line? Like I said, the line is drawn at the bank making the final decision.
There's no argument that the bank should have a duty of care to their borrower's and have some liability for what you correctly infer amounts to proffessional negligence.
The fact is, they don't, and the consumer is aware of this. That's where your roof analogy falls down. When you hire a roofer for a big job, you know that there are numerous legal avenues to pursue financial reimbursement if they do a poor job or act negligently.
Do share brokers have to pay for their clients losses if they buy a very risky share portfolio? (say shares with P/Es of 50....)
Why then would anyone be responsible to people who buy houses (other than themselves) when the price to income ratio is greater than 6-8?
NZDan, you didn't need a finance degree to see that the New Zealand property market was massively overvalued. There were many, many reports out there saying so. I'm pretty sure back in 2010 the IMF was warning how overpriced New Zealand properties were.
I don't blame the people that bought, it was their choice. I definitely don't buy their explanation that their choice was between buying and putting their life on hold. You do not need to live in the house you own to live a decent life. They decided on balance that it was less risky to buy than rent in terms of financial stability. They also were prepared to take on that financial risk to get the benefits that howe ownership brings. Some will still be happy with that decision some not. Financially speaking though, it was probably the wrong decision and they were more influenced by the spruiker narrative than the conservatives.
That's all well and good. You and I read up on here daily and take a general interest in finance/housing. Not everyone has the time to fit in housing and macroeconomics into their busy schedule. You'd be surprised how little people actually understand mortgage rates, house prices etc and rely on the experts writing them a loan to do so responsibly.
You'd think that if there were so many reports out there, the banks would be the first to respond to those risks and make borrowers aware? Nah, leave it up to the individual....Why does everyone have Stockholm Syndrome for the banks?
No we just need to put better boundaries on brokers, banks and RE agents so that they don’t feed misinformation to FHB.
Your argument is they should be better educated than the banks who had billions of dollars and the central govt and institutions who have armies of advisors at their disposal who all failed to do their jobs before it even gets to the individual level.
Just so we're clear, that's the extent to which we're fetishising individual responsibility to the point where you think we could have even done something about it?
See my reply to NzDan above, but basically assuming lenders "all failed to do their jobs" is a false narrative. Their job is to make money, and money they made - see their latest profits results. As for the government, while you'd expect them to care for individuals well-being, turns out they do care more about getting elected. And while paper gains turn out to be a hell of an election aphrodisiac, and renters seem to fuel the self-fulfilling prophecy of "elections do nothing for me so I won't vote", governments will continue to side with ever increasing paper gains. The international monetary environment allowed them to hide behind the perfect excuse of "well the whole world (read: Anglosphere) is in the same boat"
Don't hate on me for the situation being what it is, I dislike it as much as you do. All productivity wasted on playing a Monopoly game means we're all worse off as a country. The question is: what can we do about it? IMO understanding why we're here and what interests those who have a meaningful impact on our lives have is a prerequisite. I'm not saying I agree with them, but that shouldn't stop me for seeing them for what they are, instead of what they should be
They 100% failed to do their jobs as responsible lenders when they reduced the test rates to 5.8%, only to find less than 12 months later the lowest carded mortgage rate was above 6%, so they hurried them back up to 9%.
Why are the test rates, which are supposed to benchmark long term, so volatile?
"Oh they're only there to make money". That's the problem. If the banks were testing all loans at 9% since 2008, then would we have this mess?
Jesus the way some people will contort their narratives to match their beliefs.
Here's a question for you. Do you believe we should have a big government bureaucracy that imposes strong regulation in all aspects of society? Or are you one of those people who constantly calls out wasteful government spending, red tape and useless bureaucrats and then complain when private interests take advantage of the people?
We currently do have strong regulations. E.g. Go and buy a dirt cheap fridge from a retailer with a 1 year warranty, it breaks after 14 months, you're covered by the Consumer Guarantees Act. The individual should have known a cheap fridge won't last, but they're still covered because it's not "fit for purpose".
Likewise with the test rates, a mortgage product sold with a 5.8% test rate may be found to be not "fit for purpose" if people start defaulting when they go to refix above the rate they were benchmarked at. But that's different?
How is a Real Estate agent different to a trader. Traders have very strict rules about how they inform investors. They cannot lie or provide hyperbole or I suspect quote Tony Alexander ( have had numerous do this). Surely if we want get the housing market in order a first step is to change how advisors ( banks/ brokers/ RE agents) operate within the market.
The person I least trust to make good decisions are the ones who want to make money. Would most people do bare minimum so they increase profits, absolutely. Should there be more regulated environment maybe. DTI may help, better stress testing may as well. But absolving people because they want to make money, sounds like a way to absolve criminals or anyone else that cut corners to make money. That sounds like some of the US politicians lobbying for guns and increased war expenditure, ah its OK people die we are joining the best country club.
I'm often surprised by these views when people say things like (from the above):
- prices would actually ever be allowed to drop
- this kind of walkback would not be allowed to happen
- a little repugnant to put the onus back on individuals
I'm sure you're a nice person GV with good intentions. But these comments always sound highly naive to me about how the state/government work (and in whose interests).
But these comments always sound highly naive to me about how the state/government work (and in whose interests).
OK, so here's my question: why even try?
If you want an explanation of youth suicide figures in this country, look no further. Why even bother when someone will always have a finger to wag in your face, or call you naive even when you point out the truth, just because people are uncomfortable or because it makes it harder for them to play the blame game. But there's always something, isn't there?
If the aim of the game is endless flogging on young Kiwis, then I admit it - you got me good. You played us all. But I genuinely do not think I have any more meaningful contributions to make on this website anymore.
The finger wagging towards young people is very "damned if you do, damned if you don't".
To be honest, it's just a hobby or a means to fill a void from the sociopathic older generations. The laziest way to put oneself on a pedestal is to incessantly run down everyone else around you, and young people are the easiest target.
Even the more reason not to play the victim card - but that is very popular these days. "Everyone look at me, I'm so oppressed!"
I would tend to agree. I'm a "young person".. althought not kiwi, so perhaps that it what gives me a different perspective.
It was immediately obvious to me on arriving here that the price of housing is grossly decoupled from it's intrinsic value.
Taking on a million dollars of debt for a massively overpriced asset certainly doesn't seem like the best way prepare for a potential recession..
Anyone who made/makes that decision is a victim of their own poor judgement.
Not everyone is born equal and common sense is not common. Plus, as seen on here people would sooner step on you to make a profit.
Have you ever read Frankl's book "Man's Search for Meaning"?
If you have, and comprehended its meaning, you will realise how silly it is to pose the question "Why even try?"
If you are asking that question honestly, then it is likely you don't know your own meaning and principles, or why you even live.
Find that, and you will look at this post above and realise it is a little silly.
And this isn't meant to cause offence, but to realise that you are now asking existential questions, when we are talking about corrupt systems of society - which is a reality of human nature right throughout history.
Which oppressed part of society, throughout human history, do you wish to compare your plight with? Black slaves, jews during the holocaust? Jesus? Gandhi?
Is buying a house at (potentially) the wrong time really that bad in reality when you ask 'why even try?
There may be many reasons why people have to sell at a loss. I really feel for the owner occupiers in that situation as they were told prices only ever go up, and the reserve bank, JA said that NZers want house prices to continue (or words to that effect). I’m not too concerned for property investors because that was just a feeding frenzy……seemed everyone was just buying everything they could.
Did the government actually say that houses only go up? Or that the government would prevent house falls? I remember a bunch of weasel words but I think that people might have read too much into them, heard what they wanted to hear.
Yes as per GVs comment above
Does GV work for the government?
I think it's wrong to blame people for their situation. You can only act on the information you have, and when you're being told by all and sundry that getting your foot on the property ladder is a guaranteed path to financial independence, it's the only realistic one to take.
That said, I suspect the current generation of first home buyers will be the last one for a while to have their parents pushing them into the market. Those parents are only basing their advice on their own personal experience, which as shortsighted as that may be, holds a lot of weight when it's someone you trust. I don't think we'll see people rushing back into the property market in quite the same way again for another generation or two, once the lessons of today have been well and truly forgotten.
I am not so sure. People have short memories.
There’s potential for the nonsense to start again in a couple of years*, then FOMO etc kicks back in.
* moderate nonsense. I doubt we will see the same silly housing boom again
I disagree. At the end of the day you have to apply critical thinking and be prepared for different situations.
I would never base what is possibly going to be the biggest financial decision of my life solely on soundbites from politicians or anyone else. Yes, you listen to advice of others and take that into account but in the end it's your decision and it's your skin in the game - no one else's. We like to think we know what is going to happen and yes we can make projections and forecasts but they are always based on guessimates, assumptions and what actually happens is not always going to be similar.
This isn't a pair of shoes or small piece of furniture we're talking about, people should be thinking about the 'what ifs' and have a plan and prepare for curve balls. I purchased my home when interest rates were not much more than 4% but I made sure if interest rates went up or my Wife or I lost our income for a time we would still be OK. You can only plan for so much of course (if we both lost our income then my plans won't be worth a damn) but interest rates going up and down is something you can and should plan for.
Owner occupiers that bought at the height in 2021 shouldn't be needing to sell due to interest rate increases alone. If you're an owner occupier then it doesn't really matter what the house prices are doing, it only matters when you sell and if you're needing to sell less than two years later then something has gone wrong or you've made some poor choices.
People are free to choose, however people are not free to choose the consequences of their choice.
All of these points were relevant when house prices raced away over the course of the previous decade and not only did no one do anything, the people we elected specifically to do something about it then made it clear they would not do anything about it.
Whether I can see something is bullshit or not does not change the fact that I am somewhat unable to influence the entire political structure of the country. Your choices are 1) wear it, deal with it and do your best, or 2) leave.
As for 'interest rates going being something you should plan for': that would hold some water if the banks stress tests were not below what retail rates are now offered at. Banks are banks. This is what they do. Joe Citizen does not have the same resources available as a bank. If you want Joe Citizen to cop it for their shortsightedness, then where to even begin with how the problem became theirs in the first place?
Oh, I don't disagree with successive Governments absolutely failing to rein in runaway house prices over the years - even the ones elected on campaign promises and speeches referring to a housing crisis and then achieving little to nothing. My complaint list on what Governments have and have not done is long and varied! I was very disillusioned with house prices raising relentlessly, seemly against all logic. I would look at a house and openly wonder why anyone would want to pay one million dollars for a run down shack of a building. I thought it was bad enough in 2016 when I bought a house, I saw my sisters buy their houses in later years and was even worse.
None the less I'm not going to rely on Grant Robinson or Adrian Orr or any of the other thousand nameless bureaucrats / bankers in between to make my individual situation better. Yes, they absolutely have a responsibility to address the systemic issues but when it comes to the decision to buy a house or not, it's mine.
My comment was directed at the line "I think it's wrong to blame people for their situation." - if folks are being forced to sell less than two years since they bought their house and it's solely for the reason that interest rates have increased then they have made poor choices somewhere along the line. Now if rates had zoomed up to 20% or something ridiculous I would agree folks were just caught out by an extreme situation but rates knocking around 6-7% shouldn't cause folks that much trouble that they need to sell the house.
You mention the banks using a stress test rate that is lower than today's rate, bit of a fail on their part for sure but as someone else pointed out that stress test rate is not for my benefit or yours, it's for the bank - they use it to test their risk of you failing to pay the mortgage.
For me I take the approach that you do your best with the hand of cards that you're dealt, I rely on myself first and foremost, I might take advice from my bank but I treat it as that, advice. You don't need to be fantastically accurate with interest rate predictions or anything. I simply used one of the bank's calculators and had a look at what my repayments would look like at 8%, 10%, 12% and had a think about what that would mean for me and my family and what I could do if repayments were at that level.
Personally I don't think it is up to the banks to decide if I can afford a mortgage or not, I think I'm the best person to determine that for my own individual situation.
The banks stress tests have nothing to do with your personal welfare. They are there to protect the bank. The bank does not give a shit about you, it is there to maximise profit for its shareholders. Surely you were not relying on the bank looking out for your financial well-being????!????????!!!!!!!?
The sooner that borrowers learn this, the better.
CAVEAT EMPTOR
Immigration numbers through the roof, inflation looking more entrenched by the day, a Govt spending like a drunken sailor, and a RB Governor trying to engineer a recession...........what could possibly go wrong.
News that more houses are selling at a loss is not surprising if you have been following this slow motion train wreck that is the NZ Property Market, and despite more and more commentators claiming "Interest rates have peaked" and "Poverty prices have bottomed out" we have a long way to go yet.
There will be a lot of people sweating over the RBNZ decision today. Ironically many of these people wouldn't have even known what the OCR was when they purchased their property 2 years ago and were told "Houses prices never go down".
Yep Smudge. Add to that giving a multinational 140 mil whilst our hospitals are in dire shape, our fire engines are predominantly either at the end or past the recommended replacement date and national infrastructure is buggered. Not to mention the increasing numbers not willing to work, and paid more than ever to stay at home getting high and letting their offspring run amok.
The whole country is tracking in the wrong direction where we could/ should be leading the world. need to stop the virtue signalling on climate change, use our natural resources to beneficial effect and enter into long term intergenerational projects that move this country forward without a political bias. Comparisons to Norway etc are a joke.
Our country is one sick joke right now.
Permanently removing 800,000 tonnes/year of C02 is not virtue signaling. That investment will cost $6.73/tonne between now and 2050. Show me another investment that will give that return.
Did you all see Tone to Comb on TV today?? My god he is a tool. Telling people now is "probably the best time to buy". "Buy now and be quick" megaspruiker!
He is akin to one of this Russian commanders on the Ukrainian front.....not caring for his own guys and forcing them over the trenches to take certain and obvious gunfire in open grounds. Just so the Commander can tell his higherups that they at least held their positions for the last week.
Never mind the 1050 dead soldiers laying around shot to pieces......
Did you all see Tone to Comb on TV today?? My god he is a tool. Telling people now is "probably the best time to buy". "Buy now and be quick" megaspruiker!
But what if he's right? The guy was a high-profile economist of one of our leading banks after all.
I’m not a DGM or a spruiker (as it seems you get labelled one or the other on here!) and I despise the OneRoof part in puffing up the industry/ tabloid reporting BS but there are a number of factors saying that we could actually be in for an upturn in buying activity… seems we learn nothing and keep repeating the same mistakes
If he said now is a good time to buy if you're able to secure a place at more than 40% off the peak price in a good location not subject to flooding, slips or other climate change impacts, then he might be right.
But talking about buying for the sake of buying is spruiking 101
Are there any signs that KO are easing back?
Spoke to an ITM yesterday (Auckland North) and they said that builders doing KO builds are the main thing keeping them busy… that might slow the game of musical chairs.
KO is only about 5-7% of all builds, so nowhere near enough to rescue the sector.
They are also very short on funds.
KO will soon find it so much cheaper to buy up mortgagee sale houses or those that just cant be sold.. than commissioning any new builds.
Not many agencies or people will be able justify building over buying given the liklihood of growing stock of cheaper houses for sale that can be moved into immediately (cutting emergenxy motel stocks).
There doesnt seem to be a 'housing shortage' anymore.. more a surplus of ever cheaper houses.
Their funding is in strife. They have had to borrow more just to keep their current build programme afloat.
There’s no chance they will be buying up hundreds and hundreds of distressed new builds. Remember they have grand ‘community building’ objectives with their own land.
KO will soon find it so much cheaper to buy up mortgagee sale houses or those that just cant be sold
KO buying houses off future Tenants?
I spoke to an agent last week who was involved in the selling of some units in the Northcote redevelopment. It’s a very well done scheme but the contingent of KO tenants have really taken the gloss of it (including some of his friends he sold units to!) why would you want to spend 7-900k on a new unit when you could have complete lawlessness next to you???
KO's (and also the emergency housing provisions) primary purpose has moved from providing accommodation to the needy, to supplying self-monitored Home-D centres for the criminal.
I feel truly sorry for the people that actually require their services due to hardship. They have little to no chance of any useful support.
How many Mortgagee sale house will be up to KO standards? Unless they were purchased as new builds they might require bowling then building new on the land.
Sometimes you need to break something before you fix it. There should be pressure for the over-leveraged investors to sell rather than squeeze shortfalls from rental income.
Not a very informative article given 18 months of property value decline that will continue likely through to at least September. Not up to your usual high standard Greg?
According to homes.co.nz we're up 20% on our 2021 purchase. Meanwhile our latest ANZ bank valuation has 23% down on purchase.
It wouldn't surprise me if people are using Homes.co.nz for the basis of their home valuation BBQ talk.
"Don't believe me? Check this out Dave." *pulls up homes.co.nz while the wives "tut tut" and shake their heads*
Homes and other "sales" websites are too influenced by agents to be reliable these days.
The landing page should really just be one giant disclosure about how it is manipulated.
Homes is only really accurate if the house sells. Suddenly the price on homes changes to the sell price. The longer the house has remained unsold the more the price variation changes because it then is just based on what others are selling for in the neighbourhood relative to things like the RV. I find Homes pretty reasonable for where I am, its a solid neighbourhood with practically all the houses built at the same time in a similar style. When the neighbours house sell you pretty much know what yours is worth in the current market. Guessed my last sale next door to within $20K before the sell price finally came up.
I think homes is broken. In our small area ( same as Nzdan) there are too few sales and the algorithm seems to just tick the value up in the absence of any nearby sales data. Thus our homes estimates are just constantly ticking up and are often several hundred thousand $ out.
It's worse than that. When it actually sells for much less than the estimate is classes the sale as an aberration and outlier.
So many people living in cars,emergency accommodation in old run down motels two or three families in one house, the government would do well if they started a huge house building projects up and down the country then renting them out at low rates. People need a home or society will breakdown.
We have enough houses, just in too few hands. Society is breaking because of this
In 1991, there were about 1.28 million properties and a population of 3.53m, which equated to a property to people ratio of 0.361.
Thirty years later, in 2021, there were 1.87m properties and a population of 5.1m, which was a property to people ratio of 0.367.
We don't have enough housing?
In 1992 there were 1.31m private dwellings. In 2022 there are 1.98m private dwellings. A 51% increase.
In 1992 our population was 3.5m. In 2022 it's 5.1m.A 45% increase.
This is exactly right, plus our houses have got a lot bigger. If you were to do a person per sqm analysis or person per bedroom, it would look even worse.
There's nothing wrong with that, as such. There's so much bunching around 1 - 2 bed prices that the leap to 3 or even four is punitive, even if the rooms are tiny. That's really where we've gone wrong - we've supplied too many smaller builds to the market at higher price points and it's pushed the price of everything with a better spec through the roof.
^ this.
So many developers got in with builds that had no practical need, because it was cheap and they were being bought by speculators.
I mean... I dunno if I agree? We are building a 4 bed house, the difference between a 2 bed and a 4 bed house would have been a cost increase not equivalent to the extra sqm. We were quoted for a 2 bed at something like 850k while a 4 bed was 1.1m, but almost double the size.
Which makes sense when you think about it, we needed only one more of the expensive bits (bathroom) but not the kitchen/lounge/laundry etc, they just went up in size.
Who wants to sell at a loss? Que the distressed selling wave....
Local interest rates appear still locked in an up trend and retail Term Deposit rates are 6% for 15 months. This is not looking good for house prices in the medium term at all. What will it take for Term Deposit rates to return to near zero? I suggest a crashing stock market combined with collapsing employment and house price capitulation at around 2014 levels would be enough to do it!
What are the chances of that happening?
Some people selling for a loss will be doing so when upgrading to the house they wanted but previously couldn't afford.
In that case, after the agents and legal fees are taken into account for such a short term window they are better of renting?
Maybe that's why its better to house hunt with more patience and less emotion...
Note, it's only selling for a loss from the purchase price - some may have [though I doubt it] paid down some principal, so the loss might not be so painful as made out.
As prices roll back further, the owners are better positioned to take a loss from purchase price that isn't actually a loss. This is part of what makes me think the housing market could fall quite a fair way before too many people are in trouble. Unless, of course, they spent the paper equity on toys..
How is that less painful?
And be prepared for the RBNZ to be stupid again today and continue hiking us into an economic doom loop because they act today for the future, based on 6 month old reporting that covers a year in the past, with a tool that takes 6-9 months before its effects show up.
50 basis points today Orr we will still be talking Inflation in 6-9 months time.
Looks like he hit 0.25% on the office dartboard. Perhaps he listened to someone smarter than him to take a breath and let the previous actions show themselves through the market. He has already put numerous builders out of business...
100% correct.
If the RBNZ raise 0.50% today I will vote National just so I can see National sack the whole of the MPC and make Orr walk naked through the streets while young families with bigger mortgages throw rotten fruit at him. (That last part in jest and a reference to the Game of Thrones ... Actually, it's almost all in jest as voting for the Landlord Party is one of the reasons why we're in this mess. Mind you, the alternatives are just as hopeless!)
Be prepared for the RBNZ to further embrace reality, exposing the stupid.
FHBers will be active at mortgagee sales, especially of new builds.
Once this starts we will have price discovery in the market again.
FHBs would be extremely unlikely to get finance for a mortgagee sale.
Maybe a new build? Nope. The "investors" will outbid them with their interest deductibility rights.
However, FHB have tow advantages over investors for new builds: 1. They get an extra $10k deposit. 2. Their deposit requirements are considerably lower).
This is, of course, excluding the cashed up vultures - though I suspect there are less of those than made out.
The unmentioned part here is the downsizing of boomers and gen X preparing to retire. Huge cohort of boomers is retiring, with huge numbers turning 65 soon. Many are exiting while the price is good, unspoken numbers of even older people are struggling away in a place by themselves. I mowed the lawns and helped maintain the gardens of a neighbour woman who is ~75, has no children and who isn't quite up to it all anymore. She had to enter a retirement home recently, No young people could afford her house despite her desperation to sell it to a young couple.
The unspoken part here is once your kids are all gone and you have this huge 4+ bedroom place with too many rooms to clean fully in an afternoon, you want to downsize. But the upcoming families (people having #2 or #3) aren't able to upsize out of their first or second home into that larger place at current prices and interest rates.
So although the people who are having their balls busted by the pain of huge mortgages are these speculative investors and the FOMO fooled FHBs, the market pressure is driven by all these other players who need to downsize or exit properties IMO.
Yes within a stones throw of my current residence there are 5 widowed women in their 70's all living in 3-4 bedroom homes on 500-800 sqm sections (all lost husbands in the last 5 years).
In 5-10 years these houses are going to be far too big for them (if not already) - so changing demographics are going to be a big factor in the near future.
A lot of single men and women from the silent and boomer generations looking to downsize into smaller living arrangements, thus increasing the supply of 'family sized' homes to the market.
Indeed, we are in a leafy suburb. Next to us is a couple in a 4 bed home who are already having mobility issues. Behind us is a woman in her 80s, alone in a 3 bed house which she can barely clean herself and all gardens taken care of by neighbours or a guy she pays. Across the road is a widow in a 5 bed house in her late 70s. 3 doors down is a retired couple in their 80s with a huge section in a 5 bedroom newish house.
Then I know about 5 young people at my work who could never even think about affording these houses, in their 30s, still renting. Hang on though, 2 have already booked one way plane tickets (one a couple) and another 2 have kids already.
Its still very broken out there and the demographics issues will probably solve it, painfully for most.
Even here in Masterton. The demographic is slowly changing, but our leafy area surrounded by schools is still filled with retirees on 1/4 acre+ sections. Meanwhile the streets are cluttered with double parked cars every morning/afternoon as parents drive their kids in from outer areas.
Sure, we don't want to live in a dictatorship by forcing people out of their lifelong homes, but an example of poor land use when family homes are effectively "out of use" for 2 - 3 generations.
We had some friends move in with their grandmother (who was living alone) in one of these huge 1/4 acre sections with their young family in Masterton.
I'm surprised there hasn't been more migration of Wellington's young workers out that way with families given the incredibly affordable housing.
The trains don’t work well enough at present, only a couple of commuter trips then the rest are replaced with a bus over the Rimutakas.
The trains are not terribly bad. 3 in the morning, 3 at night. I only go in once a week now, but was doing the full 5 days for a few years.
Usually running 10 - 15 minutes late, which is not ideal for people who have to be in the office at a specific time.
But yes midday service and weekends are currently bus replacement due to track work.
Lots of people don't like living in the whop whops
LVT is the solution. Will bring land use into the efficiency equation.
So, is it the greed of the retirees who want significantly more for their house than they paid, or the greed of the retirement villages asking more for less?
I'm going to posit .. both.
Most have already turned 65.
If the downsizers live in a single house - on a medium to large section - and section is in an area where either the NPS-UD allows apartment buildings or the MDRS allows multiple houses ... then that's a massive win for FHBs ... Unless some nasty "land banker" buys it.
Or just hold onto the land because you don't want ugly tenement/future slum housing built jamming people like sardines on your land?
So we need to wait for you to die then? Or maybe we hope TOP gets their land tax in place. ;-)
Land Tax would be fantastic, but also why not oppose importing tons of people to run a housing bubble economy?
Lots of people like living crammed in like sardines. I would say that is one of the things that is lacking in New Zealand, even our cities don't offer that option for lots of people to live close by with all the vibrancy, excitement, interest and life that brings. It's almost like we put planning rules in our cities to try to make people live like they are in countryside.
I agree. The natural progression from first home up to large family home is now broken. We bought and sold five times before getting into a large family property. It was cheaper and easier to shift. Agents were helpful, sales commissions less and homes to buy up into were plentiful with current homes relatively easy to sell….. but in a balanced way not too easy to sell. So it was a simple choice to look for a bigger property and then buy with a conditional contract. It all worked, not sure how long it will take before we get back to that. Even if wanting trade up now the homeowner has the big headache of selling their current property.
Economics questions (chocolate fish if you get it right) ...
No doubt most of you are familiar with the supply and demand curves. (I say familiar - as they're actually extremely complex but that's another story).
Now lets say that the supply and demand curves cross at a happy place which means there is no inflationary effect on the price of the goods. I.e. the Goldilock's zone, just enough supply for just what the consumers will pay.
Now along comes a number of events that seriously constricts supply ...
Question 1: What happens?
a) Nothing
b) Consumers won't pay any more so find substitutes (also affected by the supply disruptions)
c) Consumers bid up the price of the scarce supply
Question 2: What should the RBNZ do?
a) Nothing
b) Drop interest rates to near zero so people can borrow more to bid more
c) Raise interest rates to control the near certain inflationary effects
So why am I asking such a questions? Mainly because it serves extremely well to highlight just how bad the RBNZ actions have been when the major supply disruptions started at the outset of COVID ... Late 2019 and early 2020. Irrespective of what the RBNZ does today - they are hopelessly out of their depth.
What happens if supply and demand are equalized, but there's been unfettered increase in market cap prior allowing a large portion of those who have assets to cash in, and thus ignore price increases?
Could you elaborate further? I think I see where you're going but there are multiple interpretations.
Sure. I'm referring to a significant percentage of the population sitting on as-yet-unrealised gains through the holding of say, shared, real estate, bonds, etc. that have benefited from the market caps moving (NZ's housing stock, for example, whilst 'worth'1.7T cost nowhere near that much to purchase) being able to cash in at what appears an equity loss, but still a real gain (inflation notwithstanding - though you'll know I consider this inflation).
I guess this allows higher demand, which in turn may enable higher supply? So it doesn't change the equation, merely shifts the point of equilibrium higher - though we will expect that point to drop as these sources dry up through either realisation or continued decline of the market cap?
Thank for the clarification. This situation existed before the major "supply disruptions" and only got a tad worse after capital asset prices took off. It doesn't affect the multi-choice answers or the questions as I am not referring to capital assets but all goods & services being sold including foods, rents, electricity, water, cars (especially!), overseas holdidays, etc. etc.
Yes, people may have felt richer due to the massive appreciation of many assets due to extremely low i-rates. Once again though - what should the RBNZ have done? Turbo charge borrowing? Or damp it down?
It's interesting that the most likely property type to be sold at a loss is an apartment - do you think that's because investors have realised they aren't a good investment because of reluctant uptake, that the designs are a bit crap and don't meet people's needs, that the centre of cities are becoming ever less attractive, or some other reason?
They are a cash flow yield business, no land for speculation so higher interest rates makes them unviable at current rental yields
No land
One thing against apartments is the general poor quality construction and maintenance where they leak like sieves and have fire issues. Being in the industry, it is widespread and the repair bills are huge, driving the owners broke. This puts a lot of people off, especially hugh rise.
Having KO taking over half the apartment block with ferals and 501s doesn't help either.
The bubble burst 18 months ago and with rates climbing from 3% to 8% many who fixed at low rates will now have to pay a huge amount more and property price’s are down 20% add on top inflation the crap has truly hit the fan. this housing market crash looks like continuing for next few years and when it hits the bottom it will stay there for sometime.
If mortgage interest rates stay at current levels, HOW MANY BORROWERS WILL BE UNABLE TO HOLD ON?
Many highly leveraged borrowers are hoping mortgage interest rates are going to fall.
This is even before any allowance for a rise in unemployment (which is currently near record lows).
Lots of chat and charts of house price declines for the part two years.
Anyone actually seeing this realised? I'm not in a major city, however flick through the Auckland markets every now and then, and yes there has been a decline, however it still appears overpriced for not much or poor quality.
List prices aren’t necessarily representative of sale prices, go to Homes.co.nz and have a look at a map of your area…. You can then select sold properties and it will show recent sales… can take a while for the price to show.
Searching for comment from the Messiah TTP and came up with 0 result.. So disappointed!
TTP and HW2 stay away on the bad days... more and more bad days for Spruikers these days.... cannot wait for this months data after a -2.9% MoM print should see some moderation.... but I am sure its still all down hill.
I've posted this before, but thought it worth re-sharing.
Perhaps we could play headline bingo as this unfolds?
5 Years of The Irish Times Headlines Related to House Prices
The financial system is stable - our banks are well capitalised!
Start here and click through the pages to the current date
https://www.interest.co.nz/property?page=51
Thanks, have watched this a couple of times before. Good to watch while waiting for the OCR announcement.
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