The housing market has been on a fairly wild ride so far this year, and there's at least a reasonable chance this could continue into spring and perhaps even beyond.
Prices have certainly come back down to earth with a thud since the Real Estate Institute of New Zealand's national median price peaked at $925,000 in a fit of irrational exuberance in November 2021.
By July this year it had dropped back to $753,000, meaning it had declined by $172,000 (-18.6%) over that 32 month period.
The price falls haven't let up over the latest autumn/winter season either, with the national median price falling steadily from $800,000 in March this year to $753,000 in July, a drop of $47,000 (-5.9%) in four months.
In the market-leading Auckland region, the median price has declined by $350,000 from its November 2021 peak and by $120,800 since March this year.
One of the main drivers of the big price falls over the last year has been a surge in the number of properties for sale.
Normally, stock levels peak over summer and then fall away over winter. But in the last 12 months there was an unusually high surge in properties for sale over summer and the numbers remained elevated over winter.
At the end of July property website Realestate.co.nz had 30,556 residential properties for sale, up 32% compared to July last year.
And last month the REINZ reported just 5806 residential sales nationally, which meant there were more than five properties for sale for every one that sold.
The result of this has been a large overhang of unsold stock, tipping the market firmly in buyers' favour.
With so many properties to choose from, buyers can afford to be choosey and strike a hard bargain when negotiating a price.
That means if vendors have wanted to achieve a sale they have had to cut their asking prices to meet the market, and that's exactly what they have been doing.
Since February this year the average asking price of residential properties listed for sale on Realestate.co.nz has dropped from $927,312 to $816,797 in July. That's a drop of $110,515 in five months. The average asking price peaked at $994,885 in January 2022, so its down by $178,088 from its peak.
So in a natural progression of cause and effect, high stock levels have led to lower asking prices and in turn, lower selling prices.
But is this cycle likely to continue as we head into spring and summer?
Firstly it's likely the volumes of both sales and listings will start picking up over the next few months because even when the market is soft, it still follows seasonal trends to a greater or lesser degree.
So there's likely to be some increase in sales activity over the next few months.
How that affects prices will largely depend on what happens to the big overhang of unsold stock currently weighing on the market, and that in turn depends on the relative strengths of supply and demand.
That is, the number of potential vendors who have been sitting on the sidelines for one reason or another who could take the plunge and list their property for sale in the next few months, compared to the number of potential buyers who might also be ready to dive into the market.
One thing that might influence the balance between buyers and sellers is interest rates.
Some market commentators would have it that mortgage interest rates have a much bigger influence on the housing market than the laws of supply and demand.
In which case last week's decision by Reserve Bank to cut the Official Cash Rate by 25 basis points should signal the start of increased turnover and rising prices in the housing market.
But the fly in the ointment of that argument is that mortgage interest rates rates had already been falling for seven months before the Reserve Bank cut the OCR.
The average of the two year fixed rates offered by the major banks declined steadily from 7.04% in November last year to 6.72% in June this year, which suggests a lower OCR was already priced into mortgage rates in anticipation of last week's cut by the Reserve Bank.
Further cuts in mortgage rates will likely reflect the banks' expectations about the extent and pace of future OCR cuts rather than what has already happened.
While recent declines in mortgage rates probably had some effect at the margins of the market, it obviously wasn't enough to lighten the load of unsold properties weighing on the market and pushing down prices.
Which suggests we will need to see a much greater downward movement in interest rates before there is a significant shift in the balance between buyers and sellers and a corresponding reduction in stock on the market.
So if you are contemplating the road ahead for the housing market it may be best to fasten your seatbelt and hang on - the rough ride of the last few months probably isn't over yet.
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148 Comments
Indeed, house values will not increase over 2024. The OCR cuts are too small so far, and the economy too sick.
Forecasting is an easy game with hindsight
-10% Dec 23 to Dec 24
So you agree with my call made at the beginning of January 2024.
Give yourself a high five
Thanks HO, it is indeed good to reward oneself for making good calls. Good on you for writing this post without sarcasm or envy.
"the economy too sick."
Yes, it is, and has been for some considerable time. And the cause is not the price of Debt, but the amount of it on Private Balance sheets. Just imagine what the average family could do with half of the mortgage Debt they have today; if they had $350k of Debt rather than today's $700k - spread over a lifetimes work effort, regardless of the % rate.
Thank you bw.
Your comments continually add more value to this site than the green tick brigade and authors with their narrative that 'high' interest rates are the problem and higher house prices are desirable.
Debt is a symptom of a problem, or a sliding scale of problems. (You sound like the guy railing about lung cancer but never mentions they've smoked for over 30 years.)
How about some insights as to why debt is higher than you believe it should be, bw?
I can think of many. How about we have 5 from you? Perhaps even in order of greatest effect?
These still massively elevated market prices for NZ housing, require mortgage rates of around 3.5% to be sustained or grow marginally.
Until then, its look out below, the building bricks are falling.
-40 to -60% REAL losses will be the reality, come market bottom in 2026/2027.
The news will shortly surround the number of young kiwis leaving for overseas - either (1) because the economy offers little prospects for them and houses are expensive or (2) if the economy rebounds without house price controls - and they leave simply because the housing is too expensive relative to salaries.
We are competing with australia and other countries now for talent. so its our living standard vs the their options (i mean the smart kids who build economies, keep key services operating, and pay most taxes) overseas.. and other countries WANT our talent.
The problem is the huge number of boomers retiring have created the situation via greed -> and will now rely on the next gen of taxpayers to sort the mess they created and pay and staff public services and infrastructure updates and maintenance. but the next generatioin will simply continue to show the finger to the oldies and simply exit nz. the more that go - the less will ever come back.
House prices have to fall and the economy has to change for us to have access to the skills we need in volume.... i read a report in a UK newspaper recently highlighting the number of departures of kiwis due to our cost of living and economy.
fascinating problems the boomers have created -> based on a take take take culture without consideration for the future and their long term quality of life.
our own daughter is in her mid teens.. her and her mates are all almost expecting to goto Oz and settle post Uni.
kind of karmic.
The boomers didn't create this situation out of greed. It has been a collective brain fail by voters to listen to some who had a solution.
Gareth Morgan's efforts one case in point. Rubbished mostly based on fear of change and a lack of understanding of our tax system. Those that did understand tax and the implication of his approach didn't want a bar of it - as they were benefiting so much from the current system.
So the uniformed went with the flow...believing it was to their downside - when it was the opposite.
NZ is generally a capital-shy country layered with tall poppy syndrome. We want all the goods, services and wages of a first-world economy without contributing the capital (and skills) required to build it. As a result, our homegrown talent and entrepreneurs are forced to relocate to places where their economic contributions are better valued.
We won't even let elected officials invest on our behalf either constantly second-guessing all their decisions, which is why we alternate between governments that cancel each other's infrastructure efforts. We the NZ voters are no less than drunk backseat drivers.
No coincidence that every market that tends to be human and/or financial capital-intensive is broken - fuel, electricity, supermarket, banking, insurance, housing, etc.
ANZ says the big banks can't afford to be New Zealand owned
Not so sure Rastus. Boomers are unfairly blamed for a lot, however the one criticism they are directly accountable for is the lack of a capital gains tax on residential investment property. This change would go some way to fixing a number of problems we all highlight.
No it wouldn't change a thing. Since when does yet another tax fix anything ?
Its not designed to "fix" anything. It's there to direct investment flows to more productive uses and to redistribute wealth.
Name another country that doesnt have it (outside petro states)
What are these 'productive uses' you refer to?
Plenty of people have been emptied out investing in so-called 'productive uses'.
My wife and I just turned 40. Im a professional Engineer and shes an industrial project planner. OldSkoolEconomics I think your paragraph is bang on. We have 3 children and are starting to encourage them to leave NZ after they finish university or a trade and go to Australia. As you say the country has been hollowed out and there is now not much left for us or our children.
So ironical, we were "world leading" for a while, look where thats got us. In the end the rhetoric and idealism exposed how little we have
For goodness sake this is nothing new we all leave after university for a decade or so then guess what? We decide we want kids and a family and we almost all come back. Sydney and London are fantastic when you’re a DINK that changes very quickly once you have kids and are just part of a massive rat race. We are blessed to live where we do in Auckland the lifestyle is not attainable overseas without being extremely wealthy and we probably couldn’t have achieved it by staying put in NZ.
oh dear, I can see people bickering again on this thread again.
No Bickering at all, the future is crystal clear.
-40 to -60 reset down by 2027.
you must have a very good crystal ball for guessing future.
As do those who keep claiming ‘this is the bottom of the market’
Thank goodness I can buy more houses (only joking probably wont however don't let my point be lost on you) and have a better ROR - not easy making money now - You see NZGecko - I know a couple (i'm single dad) with much bigger disposable income and they have not bough a house - prices are tumbling and still they don't buy - they really complain but don't buy. My guess is even if house prices go down another 40% they wont buy. Careful what you wish for :) It might also be that they get divorced and both have to buy a house however they might just keep renting.
Made that point on here before, if houses dropped 50% tomorrow, the same people on here would be complaining yet still would not buy.
No, they wouldn't.
A 50% fall from today would start to bring New Zealand property into the realm of reality when you compare it to alternative destinations. It would also allow a lot of people who can't access credit. If property prices fell 50% tomorrow a lot of people on here who currently don't want to or can't buy would buy..
Zwifter at 50% and an 8-9% clean yield I will back the truck up, safe as houses if the yield is solid
and I will only buy things I can add value to. DGMers not property haters they are bubble haters
True. It's difficult for an average person to go against the trend. When house prices are declining the mindset is that they will keep declining. with a 30% drop many (if not most) people will wait for a 40% drop, with a 40% drop they'll wait for a 50% drop, etc.
Instead they will pile in when house prices will start increasing and when at least some FOMO will kick back in. It's just human nature.
this is why the bottom looks like a valley on a chart, its called the accumulation phase of a market.
Good article. There is a glut of recently finished townhouses on the market in Auckland with more to come. This type of housing is relatively new to New Zealand and is already affecting the old brick and tile housing stock prices. Sales appear dependent on location and quality of build. There is a likely concertina effect coming where developers cut their loses due to money supply issues. It will be difficult to see however due to the lag in publishing of sale prices. (is there any legislation that requires publishing those ?)
The future value of this type of housing is unknown. We have seen apartment recent values showing the greatest losses.
Is there anyone focusing in on data for this type of housing ? It will need tracking
Is there anyone focusing in on data for this type of housing ? It will need tracking
The short answer on this is no. With recent figures released that 45% of new builds being townhouses, its pretty obvious that this drags down the figures when it comes down to average house prices. The market will always price an individual house as to what it is worth so as you pointed out its now all about the build quality and the location. Decent houses are continuing to go up in price and really the stats now need a breakdown by build type.
This is an excellent point. On the flip side you now have a lot more luxury apartments on the market that lift average prices prices somewhat.
Hmm not sure townhouses will necessarily increase the prices of existing stock.
On thebDevonport peninsula, a whole bunch of new townhouses are coming online. They may not be everyone's cup of tea but you can get a spanking new, 4 bed with off-street parking on a ridgeline with unobstructed views across the Shore for under a million. I think the immigrants coming in to NZ who are more used to living in townhouses will see that and might think it's a better option than the $1.3M old 3 bed villa on 300m2 partially shaded section (new baseline set), that is not developable. Especially as capital gains based on land prices are pretty much dead in the water.
I think the increase in supply will bring all property prices down. There will be the odd outlier that will still go for silly money because there are very limited supply and money isn't really an issue for the super rich (waterfront, etc...) but overall townhouses will exert downward pressure on all property, even the better ones. The zoning changes allow load more development so if prices start going up supply can increase to address it.
Agnostium, have you got a link for those townhouses? 4 bedrooms with sea views, in Devonport, for under $1 million sounds unlikely to me. I would have thought $1.5 million, absolute minimum
Here you go, Devonport peninsula not Devonport proper (although I'm still not sure where Devonport ends and Bayswater/Belmont/Narrowneck/Cheltenham/Stanley Bay begin and end. On the Bayswater ridgeline.
https://www.trademe.co.nz/a/property/new-homes/new-townhouse-terraced/a…
The HPI accounts for different building types. Unlike the average price data.
’Decent houses are continuing to go up in price’ - that’s a big call. Certainly some will be, but some pretty good evidence that it’s often not the case
On the REINZ HPI report page it says they drill down to compare building types (houses, apartments, numbers of bedrooms) and suburbs, regions etc and that you can make a request to get that information from them so that could be a source for that type of information. Has anyone requested that detailed data?
Well if that information is available and is accurate, then interest.co.nz should start using it rather than some generic figure they think covers the whole market.
Some market commentators would have it that mortgage interest rates have a much bigger influence on the housing market than the laws of supply and demand.
Well, interest rates PRECEDE supply and demand, so, yes, in a way, they have more influence.
Let me explain. When interest rates rise, like they have been over 2022 and 2023, less people can buy, and more people consider selling, so there is less demand and more supply which leads to more stock for sale. The opposite is obviously true when interest rates fall. Most people understand this, but what many fail to fully grasp, is the long lag between interest rate change and the following supply/demand change, with an even LONGER delay for price change.
For that reason, house prices today are still responding to the INCREASE in interest rates that occured over a year ago, and will continue to do so well into 2025. The current start of the lowering of interest rates, which I expect to intensify, will only have a real effect on prices in 2026, which will only then, start to rise again.
I agree - though I would argue that the availability of credit is more influential than solely interests rates, and partly why there is the lag effect. An interest rate of 5% could be listed today, but how accessible is that interest rate to the population who are currently losing their jobs, holding an asset that's depreciating in value, closing their business etc. I believe we have an overhang of both stock and potential buyers (biding their time). But that potential buyer pool may run out before the stock clears, or vice versa.
Yes, the availability of credit is also very important.
Demand is turned into action by the Capacity to Pay.
Let's say the OCR goes to 0% tomorrow, but the amount of equity any future buyer has to have to secure a property goes to 50%. What happens then? Two things. (1) The ability to stump up the deposit for many buyers is unreachable - no sales there, and (2) the ability to save for that deposit at 0% gets even harder.
Demand without the ability to pay remains Desire. Only the Capacity to Pay turns it into a transaction.
Yvil I'm almost proud of your turn around.
For that reason, house prices today are still responding to the INCREASE in interest rates that occured over a year ago, and will continue to do so well into 2025. The current start of the lowering of interest rates, which I expect to intensify, will only have a real effect on prices in 2026, which will only then, start to rise again.
Exactly. We have a long period when house prices, and retail spend will continue to fall. The question is how low house prices, retail spend and GDP will all get, how high unemployment will rise and how many desparately needed young kiwis will leave during that period... if i was in my 20s or early 30s - i would be off for sure. And how that will then impact the next economic upswing.
We have relied on immigration and housing to drive our economy for a long time. if both start to falter it will be interesting to see what happens and its impact on the nexxt cycles.
The other difference this time around is that in 18 months time or whenever the lag effect of interest rates would normally kick in is that it will be after a catastrophic crash in prices which not many people in New Zealand have ever experienced.
The narrative that prices only ever go up will have had 5+ years of being proven to be wrong. A whole bunch of our young people will not be here anymore and would have settled in OZ, Europe, US and Canada. The spruiker narrative that was behind a lot of the irrational exhuberance to overpay for a house will be goneburgers.
The decimation of public services that the coalition is currently orchestrating will be fully apparent.
I don't see how the spruikers re-ignite the ponzi, not ruling it out but struggle to see how prices suddenly start exploding after what would have happened in the preceding years.
Yes this is the cause of the 18 month lag from cuts to bottom
You make it sound black and white, x happens y follows
Fyi house prices were rising along with interest rates until the mid 80s, same in the 90s and noughties.
Yes rising some years and falling others....YET AROUND THE SAME AS WAGE RISES!!
Then at just after the year 2000, it detached from earnings reality and the NZ Housing Superbubble was born.
Its current and dramatic implosion (except the Riverhead Stilt bogs) and have it sinking the required -40 to -60% is a wonderful thing.
Yes we realists hate the bubble and hope that other Kiwis can have home ownership, like I enjoy.
Heartless home Hoarders, find a new financial asset to trade amongst yourselves and good luck with the coming property investment losses. They will be the tales of woe that last a generation or two.....
Interest rates does have the biggest influence in the housing market. and key question is what is the neutral interest rates for the market.
I'd pick 4.5%, which means the current interest rates are still tight, and a long way too go.
Yip if this is true and what Yvil says above is correct (that interest rates have a significant impact on the housing market) then our housing market is going to stay in the hurt locker until the OCR drops substantially (like way back down towards 2% - ie if people think we are going to surpass the 2021 peak again in the next 5-10 years then we are going to need a very low OCR again - but for the OCR to be extremely low it means the economy is a complete train wreck eg high unemployment, deflation, business failure - but these aren’t good conditions for house price growth either…so go figure..). We lived in a goldilocks period for house price growth for a few decades but it doesn’t appear to be true anymore.
A lower OCR used to mean rising house prices, but now it means destruction of the real economy (which is bad for asset prices).
on a positive side of things to the housing market, average kiwi's income is steadily increasing. I'd say house price will go up gradually. but forget about 20% jump in one year, it'll never going to happen again for a long long time.
If incomes are increasing then the OCR should not be going down (and if incomes are increasing because productivity is up then we must have a strong GDP figure…but we don’t!)- it should be level or rising. The reason the OCR drops is because incomes must be contracting (eg via job loss, deflationary forces). What you say is talking about the goldilocks period returning - falling rates while incomes remain steady.
What you are saying has a lot of cognitive dissonance. Ie there is no need for the OCR to drop if our collective incomes are increasing (because this would mean everyone is doing fine). What you are taking about is creating more private debt to artificially stimulate the economy but this doesn’t fix anything..it just makes our problems worse. Eg a repeat of the 1990 - 2020 period (falling rates with generally rising wages = goldilocks period for asset prices).
House prices will decline further over the next 6-12 months with the lag effect, and the time it will take for lower rates to transfer to lower test rates freeing up lending availability. Yeah I agree that the insane spikes won’t repeat but I also agree that steadily increasing prices are coming form late ‘25-‘26, it would be great if we could get house prices to plateau at a number lower than wage growth over the longer term. Unfortunately I can’t see enough being done to make that happen, lowering the OCR needs to happen to get things moving but more needs to be done to protect the current transformation in house prices.
IO: "A lower OCR used to mean rising house prices, but now it means destruction of the real economy"
That makes it sound as if a lower OCR is the cause of a sick economy. This is clearly not the case, the lower OCR is a result of the sick economy, not the other way around.
Dropping the OCR causes our private debt vs GDP to rise = sick economy.
So we think the solution then is to drop the OCR some more so we can load up on more private debt = sicker economy.
The illusion has been that everyone thought we were living in a rockstar economy when in reality all we were doing was raising private debt vs GDP = sick economy.
"Dropping the OCR causes our private debt vs GDP to rise = sick economy. "
Something a sweeping statement there, don't you think I_O?
Even that 0.25% cut has stopped $3 billion pa being funneled overseas to those that lend to us.
Dropping interest rates to stimulate the economy is like smoking, you eventually get cancer..(the cancer is the high private debt that makes the economy sick).
Really? Sounds like Pa1nter logic.
In one set of circumstances LIKE NOW 'Dropping interest rates to stimulate the economy' is a good and a necessary action.
In another set of circumstances LIKE AT THE BEGINNING OF COVID 'Dropping interest rates to stimulate the economy' is a stupid and an un-necessary action.
(edit: And I should add that with an OCR still at a contractionary level your fears are nonsensical. Maybe driven by lower rates on your TDs? Don't know. Don't care.)
This is your logic in a post above. Reflected it back at you to see how you would react.
Deflection is not an answer. Why not just admit you posted nonsensical b.s. and change it so it makes sense?
Anyone on this forum is too smart or anti loading up on more private debt.
2016 mortgage rates were in the 3% range. Any price increases since 2016 remain on thin ice, as long as the OCR remains above 4%.
Higher wages have offset this a bit..but if what Huttman says is true that incomes are still increasing, then there is zero justification for the RBNZ to be cutting the OCR. Otherwise they are just creating more of the problem (why give people more access to debt when their incomes are fine to service the debt they already have?)
Surely it’ll be a fair while before we see widespread wage growth, but I’d imagine out of sheer panic they’ll create more of a problem by cutting too deep, RBNZ seem to have a heavy foot regardless of the direction.
EDIT: I support rates cuts, we need it to breath life back into the place, and to change sentiment out there…a lot of people are hurting, I’m just concerned they’ll panic and slash. Hopefully they can use other tools well and reduce slowly with some patience.
I agree 4.5% is probably close to neutral. But will investors and FHBs wait until neutral rates and moderate demand, or take advantage of the current low demand to get a bargain? I don’t know the answer, but I suspect the latter.
"Interest rates does have the biggest influence in the housing market."
Okay. Can you prove it?
(Leave out the extremes of very low, or very high, that are short lived phenomena. What about rest of time?)
"I'd pick 4.5% [as the neutral rate]"
Fascinating! You throw out a number and everyone commenting agrees with you ... without question.
Okay. How did you get to a neutral rate (where the interest rate is neither contractionary, nor stimulatory) of 4.5% when the RBNZ has it 2.75%?
If you cannot control the creation of credit (or offshore investment and capital extraction) then you cannot determine the neutral rate of interest except in hindsight....such is the RBNZs dilemma.
I wonder if we'll be seeing similar headlines here soon.
https://www.theguardian.com/business/article/2024/aug/19/interest-rate-…
They cut and the bank revised their forecast 200bps upward. We cut and banks revised their forecast 200bps downward. We are not the same, suggests that maybe their economy is now in a better shape than ours. 2.2% inflation would back that assumption up. But then is this just an ad for the banks? Who really knows, I think Yvil above is how I see it playing out.
Reads: "Buy now or everybody will miss out because prices will rise so fast while everybody is buying!" - true spruiker paradox.
And if this happens and housing becomes even less affordable relative to incomes more young people leave and we replace them with immigrants and we see more of the social decay that has been making headlines across the western world.
Reality:sink holes
Polished tone: pot holes
Kiwis are sheep... as soon as the herd think it's a good idea to buy, they will all start to follow. Sentiment is a big driver... alongside FOMO.
Sentiment needs to be backed by money and ability to borrow.
Tell that to everyone who is losing their jobs or packing up for Australia.
That's part of the lag effect that Yvil mentioned. But there's another class of people - those who are cashed up with money in term deposits. As interest rates drop some of them will be tempted back into the property market and eventually a new equilibrium will be reached. Will that be in 6 months, 12 months, or longer? Who knows? I think by Spring 2025 price will be on the up.
The Bank of Mum and Dad may start dishing out money to the kids again too...
The Bank of M&D, has less reserves today than 3 years ago.
Really? Haven't alot of Boomers been stashing cash in Term Deposits etc... Perhaps down on equity, but doesn't really matter when existing borrowing is typically low/zero for the owner occupied home.
I guess some boomers have been enjoying international travel again & spending it up..
What's with the "Boomers".
Yep my parents have done pretty well, live pretty simple lives in NZ and then spend big on pretty elaborate overseas travel each year. Great trickle down economics happening there...
Can you tell us how you know that?
Or is it another 'reckons'?
(From what I can establish the 'Bank of M&D' has been doing just fine restocking their coffers while their kids have held off buying.)
Greg, such a great article and summaries so well what the majority of commentators on here ‘ really’ believe the current state of the housing market to be. I don’t feel it’s directed at a specific group or has any bias other than taking facts into consideration and explaining in good old fashion logic. I read the REINZ monthly report yesterday and when you consider the resource and tools they apply I’m left speechless in terms of their summary of the market. Well done you and a learning for REINZ.
Using the handy-dandy mortgage calculator on here:
If the average family only had $350,000 in mortgage Debt today at 5% over 30 years instead of $700,000 that family would have an additional $22,560 a year to allocate to other spending in our economy, instead of making monthly repayments of $3,760 to the Bank they would be $1,880.
And not much further than 10 years back, that was possible. You know. Back when Sir John told us that even then, house prices were unaffordable.
It's the Amount of Private Debt we have that's the problem, not the Price of it.
I agree completely - the cause of our problems is our private debt vs GDP. Ie we have too much mortgage debt relative to our incomes. The only way to fix that is through lower house prices.
bw: "If the average family only had $350,000 in mortgage…"
Most of your posts are hypothetical. "If… such and such" "should be", "could be", "Imagine…". Why don't you deal with reality, with what is, rather than with what "could, should be" in your eyes "If….."
Possibly because bw thinks, like I do, that there is a brighter future available for people living in NZ than the current reality. Do you accept the reality of crime and not hope for improvement there also?
That 350,000 mortgage was the reality at a point in time, so is the current reality better, worse or the same than back then?
Yip current version of ‘realty’ and ‘wealth’ is an illusion not backed up by real productivity = delusion. All it is is high private debt vs GDP.
Murray: "Do you accept the reality of crime and not hope for improvement there also?"
Yes, I do, but I don't complain daily about crime online and write "If only… could, should etc…". In my eyes, this doesn't achieve anything. IMO, if there is a situation I don't like, I have two choices, I do something concrete to change the situation, or I accept it. But I won't waste my energy complaining about it, that's bad for my psyche and it's a nuisance to others, who don't like hearing people complain about the same situation, over and over again.
In my eyes, this doesn't achieve anything.
Jonathan Swift: “There's none so blind as they that won't see.”
I do something concrete to change the situation
I would argue bw is educating the readers which is a significant value add when we've got article writers that aren't sure whether interest rates or laws of supply/demand are a greater influence on house prices. Granted though, it may not meet your 'concrete' requirement. Did you also scold your wife at the soup kitchen because it wasn't a long-lasting concrete solution to poverty and therefore not worth doing?
I like hearing your views as they often come at things from a different perspective than mine, but I feel you're overreaching with your criticism on this occasion.
bw: "It's the Amount of Private Debt we have that's the problem, not the Price of it."
The amount of private debt is a symptom. Why do we have so much, bw?
Surely the price of debt is a factor? Unless someone's re-written the basics of supply and demand, more gets consumed at a lower price than a higher price?
"If the average family only had $350,000 in mortgage Debt today at 5% over 30 years instead of $700,000 that family..."
Does the average family have a mortgage of that size, bw?
I think you'll find they don't. Those that do are most likely higher income earners and/or investors.
And, bw, let's not forget that the 'average family' probably bought their house quite some time ago and are sitting on nice big chunks of equity and capital gains (albeit those capital gains are being slowly eroded).
Not saying we haven't a problem, but hey, let's keep it real.
Officially NZ has a net loss of population growth. Give it 20 years from now, NZ will have its own version of Akiya!
I don't think so, the rest of the world is turning to shit and NZ is perfectly positioned to be a bolt hole, the rich smart ones have already figured that out and purchased places here. The best we can hope for is that boat loads of illegals do not start coming here because when things get really bad the quality of those boats will improve markedly and be able to make it to our shores.
lol the quality of the boats will need to improve massively. Most of them will be shark food.
We are lucky as hell that we are in the middle of nowhere. We pay for it via imports though
Think those figures have been revised to a small gain. Not to say you aren't about to be right.
Current model /cycle low ocr/ bump values is not sustainable...values reach skyscraper levels and it buckles the economy...good luck with going with what used to work...it will eventually fail every future New Zealand generation that is to come and is very close to that point now.... Driving greed wont cut it...
Is there actually a housing shortage?
Not right now
No.
"Is there actually a housing shortage?"
There is a shortage of AFFORDABLE housing.
There could be hundreds of thousands of multi-million dollar mansions built, and that would not address the shortage of AFFORDABLE housing.
The shortage of AFFORDABLE housing results in
1) accommodation supplements being paid by the government to renters in the private rental market
2) increase in numbers on social housing waitlists due to shortage of social housing
3) rising numbers receiving temporary accommodation assistance (motels)
4) owner occupiers buyers need financial assistance in purchasing:
i) deposits from the bank of mum and dad from those who have access
ii) more than 2 incomes required to service an owner occupier mortgage - co-ownership between 3-4 siblings, multi-generational ownership
Many owner occupiers have been outbid by buying competition from non owner occupier buyers for property use in:
1) the long term rental market
2) the short term rental market (e.g Airbnb)
A shortage of AFFORDABLE housing has many unintended social consequences.
If all the dwellings currently listed for sale were AFFORDABLE and priced at $110,000 (a house price to income of 1.0x), there would be huge demand from buyers and the properties would be selling like a Black Friday sale like this :
https://youtu.be/nhtJfhzM5iU?t=63
An example of how housing has become unaffordable.
Non owner occupier buyers outbidding owner occupier buyers in the ownership market.
Then renting out the property in the short term rental market, resulting in reduced supply in the long term rental market.
https://www.rnz.co.nz/news/national/525599/calls-for-regulation-on-shor…
Will long term renters now
1) need accommodation supplement?
2) if no affordable housing is available, will they need emergency accommodation?
3) if no affordable housing is available, will they need social housing and need to go on social housing waiting lists?
What would happen if owner occupier buyers had priority treatment over non owner occupier buyers?
What if non owner occupier buyers had to pay stamp duty at the same levels as those in Singapore? What would be the potential outcomes of that policy?
https://www.propertyguru.com.sg/property-guides/buyers-stamp-duty-singa…
No but apparently there’s a bank shortage now!
Who likes math?
We can use it to compare the Real Estate Institute of New Zealand's (REINZ) House Price Index (HPI) with the Consumer Price Index (CPI) over the period between 2019 and 2024.
1. REINZ HPI Increase
- HPI in 2019: 2850
- HPI in 2024: 3400
The percentage increase in the REINZ HPI is calculated as:
Percentage Increase in HPIPercentage Increase in HPI = ((HPI in 2024 - HPI in 2019) / HPI in 2019) × 100Percentage Increase in HPI = ((3400 - 2850) / 2850) × 100 ≈ 19.30%
2. CPI Increase
- CPI in 2019: 1035.3
- CPI in June 2024: 1272.0
The percentage increase in the CPI is calculated as:
Percentage Increase in CPIPercentage Increase in CPI = ((CPI in June 2024 - CPI in 2019) / CPI in 2019) × 100Percentage Increase in CPI = ((1272.0 - 1035.3) / 1035.3) × 100 ≈ 22.87%
Comparison:
- REINZ HPI Increase: 19.30%
- CPI Increase: 22.87%
Interpretation:
The REINZ HPI increased by about 19.3% from 2019 to 2024, while the general price level, as measured by the CPI, increased by 22.87% over the same period. This indicates that house prices, as measured by the HPI, have increased, but not as fast as the overall rate of inflation in the economy. In real terms, the purchasing power required to buy a house has slightly decreased compared to other goods and services in the economy, suggesting that the real cost of housing has decreased relative to the general inflation rate.
Median Household Income NZ:
- 2019 = $91,800
- 2023 = $115,200
- 25.4% increase.
https://webrear.mbie.govt.nz/theme/household-income-median/map/timeseri…
Wow. My household income is almost 6x the median. Great news.
You can buy 6 more houses..
Not really in to houses as an investment. There are plenty better investments than houses. Although seeing as they are dropping in value quickly and likely to continue doing so for the next few years…..I could go for a Bach. Hopefully if returns continue as they have been, I would be able to buy a decent Bach with cash from dividends and other returns in a couple of years time. That would be epic. Free house.
As a proxy for debt servicing, the RBNZ reduced the OCR from 1.75% to 1.00% on August 7, 2019.
Aug 2024 and debt servicing is set at a proportion 5.5%.
So for water cooler purposes, debt servicing has increased 2.14x.
Purchasing power has definitely declined.
That interpretation is pure nonsense (IMO).
All it says is that house prices have increased a tad less than the overall rate at which a 'basket' of other things have increased in price. To see the silliness of this, I could pick any one of the items in the basket that hasn't gone up or down by the same rate and make similar claims about that item.
All things are bought from wages / income, benefits, etc. The best measure of 'increase' is what percentage of income an annual basis is required to buy a dwelling, or rent one.
Only 'investors' would look at other measures, especially 'price' in isolation, (which is where this silliness is coming from, i.e. 'investors' want the promise on an untaxed capital gain).
All things are bought from wages / income, benefits, etc. The best measure of 'increase' is what percentage of income an annual basis is required to buy a dwelling, or rent one.
Correct. Share of wallet. If on aggregate, greater SOW is allocated to shelter, then that's a negative indicator, particularly for a developed economy. Shelter, food, water are the first rung on the hierarchy of needs.
Prices have certainly come back down to earth
What? They're still in the stratosphere.
Back in the 70s we had a prolonged slump / go nowhere in house prices for years and years. What triggered it?
Central government told local government to free up land and change density rules so many more dwellings could be built. And they were. We had a mini house building boom and the early builders coined it (with the later johnny-come-lately's selling into an oversupplied market with some losing their shirts).
And between 2016 and now - the same has happened.
Those expecting (or banking on) the significant capital gains like there was prior to 2016'ish are going to be sadly mistaken. My guess is that unless the immigration floodgates open we'll see near zero inflation adjusted capital gains for 20 years or more.
It is also a factor in why house prices may continue to fall. For example, why would you hold a rental - that was bought for the untaxed capital gain - when there will be none for years and years? And another example, downsizing to a smaller house also means downsizing the costs of holding a larger property for no capital gain.
The writing is writ large people. Although Riverhead will magically buck this trend or so I'm told.
Yip positive cash flow on rentals is still a fair way away yet - perhaps another 12-18 months and who knows what damage may have been done to house prices between then and now if there is no speculative frenzy to raise prices before then (ie people buying those rentals even if they cash flow negative - it would be a massive gamble).
If you look at the 1970-80 period it seems like the closest historical example to today’s market.
The 70 to 80s period cannot be compared as it was a period of capital controls and the Central Bank had far more control of monetary policy than today....whether that control was used well is another debate.
The 'central bank' back then was very different to now. It controlled banks, rather to lenders as it does now. It had little or no control over secondary lenders. These secondary lenders 'made out like bandits' and lent huge sums that the central bank never had a handle on, nor could they quantify. Nowadays 1 property = 1 mortgage. Back then? 2, 3 or even 4 mortgages was not uncommon. And the central bank only had control over the first mortgage.
Those secondary lenders didnt have the ability to create credit.
Retirees will keep them as they give them weekly income to allow a more comfortable lifestyle. Could sell now, but why bother if it means they can live more comfortably and sell when the funds are needed such as for private medical procedures, and they're most likely getting a solid capital gain no matter if the current price decreases, due to the price at purchase years and years ago. Many will also have never discharged the mortgage, leaving a little there so the can claim the interest deductability for tax purposes and to claim expenses for maintenance costs. They didn't get wealthy without knowing the system they dabble in.
"why would you hold a rental - that was bought for the untaxed capital gain - when there will be none for years and years?"
Many property investors still believe that house prices will grow between 4-6% p.a. These are numbers that are being used in property investment calculations.
Kiwis need to drive harder making offers on property and not let real estate agents 'commission bias' deter them
Not us. But you never know what might happen in our Regions.
"Warning as owners sell despite falling prices....Home vendors in some pockets of regional Victoria are facing the toughest selling conditions in the country as housing stock piles up despite falling prices...Areas dominated by owner-occupiers...topped the most oversupplied markets in the country, where total listings nearly doubled compared with the five-year average."
https://www.afr.com/property/residential/the-regions-where-homeowners-a…
You're going to see property prices edging up before Xmas.
This is a once-in-a-lifetime chance to drive a ruthless deal and get a bargain.
Just imagine how much better off you would be if you had not pulled the trigger last year. Timing is everything.
I pulled the trigger in July 2023, at the very low last year, I got an absolute steal.
Prices reached a low in Q3.
A steal then is expensive now and it will get worse from now. You did the vendor a favour last year. He must love you.
Other properties nearby have sold for a lot more than I paid.
In retrospect, current property prices will be seem a bargain in a couple of years time. I went for a drive to my Riverhead new build today. More diggers , machinery and activity nearby. Go and have a look and report back.
They also paid too much. A fool and his money are soon parted.
I assume you drove there at midday as its impossible to get in or out of BogHead in peak traffic.
Yep, and with all works planned there it's going to a lot worse.
1,800 houses, a massive retirement village, new shopping centre, road widening from Westgate to Kumeu, re-vamped intersections etc.
Stop repeating my prediction Wingman, it doesn't go down well on here.
What a DGM
Don't Get Mugged
Why do house prices have to turnaround at all? Why don't we just not worry about it and start diverting capital to more productive places?
An idea that's simply too novel for most NZers to handle.
More productive places? Like what?
Du Val, or maybe Cannasouth, NZ Coastal Seafood or crypto? Or maybe bonds, which have tanked as interest rates rose.
"Or maybe bonds, which have tanked as interest rates rose. "
You're aware interest rates are falling globally, right? And that bond values are going up.
(But yeah. We get it. Riverhead is unique and special and magical. On a serious note, I suspect you'll be fine.)
The biggest driver of house prices is FOMO/keeping up with the joneses. I don't think any metric captures that well, other than price itself (I guess you could count and benchmark the number of positive or negative house price articles that appear in the usual places). When your neighbour who you know isn't as smart as you starts skiting about how much money they are making in real estate, its impossible for most to resist the urge to participate..and now we are witnessing the reverse is also true of falling markets. Most people are just hardwired to stick with the tribe, even into an unwinnable battle.
Unless you're psychic, you haven't got any idea what's going to happen, prices up or down. I certainly don't, but based on my property experience, which is very long, the recent downturn won't last.
There's a good chance money can be made by doing sufficient homework, selecting the right area and driving a hard bargain. The hundreds of trashy units being built all over the place will probably prove to be a very bad bet.
To any sprinkler advanced intelligence is going to present as magic ….,
Unless you're psychic, you haven't got any idea what's going to happen, prices up or down. I certainly don't
You are on here literally everyday saying that Riverhead is guaranteed to go up in price.
Haha, great call
Not quite everyday, but I'm sure I've got this one right.
I'll tell you who's here everyday banging on about the great kiwi property crash....you guys. Some places might crash, but not all. Maybe where you live.
"The biggest driver of house prices is FOMO/keeping up with the joneses. "
Odd. I thought it was mainly affordability.
yep its credit
And the price of credit.
There's often posts here encouraging us to invest our money other than in property, but none of these posts ever give us any examples of what we should 'invest' our money in.
Got any suggestions?
Talk to your Jarden Wealth Manager, there are so many options including leveraged funds.
Its all about diversification and asset allocation. You do not want all of your money in the same bog.
I've had most of my money in property all my adult life and I've made a lot. I speculated on the stock market with pretty good results for decades, but I'm a bit over it.
I have had a couple of quite risky mutual funds, but I guess after all the fees are taken out and supporting managers on extravagant salaries, customers are never gonna make a lot of money.
The Prime Minister owns quite a few houses....I know why.
That's right, Jarden only deals with poor people who are stupid with money.
Last time I looked thought the PM does not own a helicopter. Maybe he has only done pretty good, not great.
He was my boss for a few years and I can tell you, he's a good guy.
But he doesn't suffer fools gladly, and NZ's chokka with them. Who wants to own a helicopter, they're extraordinarily expensive to run?
Losing my own money can be bad enough, but paying someone to lose it for me would be unbearable. I saw quite a few posts on the internet during the recent stockmarket plunge from people losing fortunes in mutual funds.
As the NZD blasts higher since the recent RBNZ announcement, there'll be some very squeamish kiwis out there.
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