More than one-in-six of the Auckland residential properties sold in the September Quarter of this year (Q3) were sold at a loss, according to property data company CoreLogic's latest Pain & Gain Report.
The quarterly report measures the percentage of residential sales in each major urban area that were sold for less than their previous purchase price, leaving their owners with a loss - which is the pain part of the report.
Across the entire country, 9.8% of sales in Q3 made a loss, while loss making property sales ranged from 2.5% of total sales in Queenstown-Lakes to 16.6% in Hastings. The table below shows the regional figures
The size of the losses were often substantial, with the median loss ranging from $10,000 in Gisborne to $106,750 in Napier.
Those losses will be magnified once selling expenses such as agent's and legal fees, and potential moving expenses, are added.
Of course if 9.8% of the properties sold in Q3 went at a loss, it follows that 90.2% were sold for more than, or at least as much as, their previous purchase price - the gain.
The report says the percentage of properties being sold for a profit is declining, while the percentage of loss-making sales is increasing.
"While most sellers are still making a profit, the balance has shifted in favour of buyers, giving them more leverage in price negotiations," CoreLogic NZ Chief Property Economist Kelvin Davidson said.
"These figures reflect a changing market, with buyers now holding the upper hand as challenges persist," he said.
"This follows a prolonged decline since the extended peak in 2021, when 99% of resales were profitable.
"Given the recent weakness in the wider housing market, it's not surprising that both frequency of profitable transactions and the size of the gains has decreased," he said.
The main determinant of whether a property sells for a profit or a loss is the length of time they have been owned by the vendor.
The median length of ownership for properties that sold at a loss was 2.9 years, while the median length of ownership for those that sold for a profit was 8.5 years.
However the type of property being sold also made a difference, with apartments much more likely to sell at a loss than houses.
In Q3, just over a third (34.9%) of the apartments sold made a loss, compared to just 8.9% of house sales that were loss making.
The comment stream on this article is now closed.
| CoreLogic Pain & Gain Report | ||
| Q3 2024 | ||
| Residential Properties Selling at a Loss | ||
| Per cent of total sales | Median Loss | |
| Whangarei | 7.5% | -$45,250 |
| Auckland | 16.1% | -$69,500 |
| Hamilton | 10.6% | -$47,000 |
| Tauranga | 8.8% | -$75,000 |
| Rotorua | 5.4% | -$35,500 |
| Gisborne | 3.9% | -$10,000 |
| Napier | 10.8% | -$106,750 |
| Hastings | 16.6% | -$76,498 |
| New Plymouth | 6.4% | -$30,000 |
| Whanganui | 3.0% | -$98,674 |
| Palmerston North | 6.4% | -$67,500 |
| Wellington | 9.9% | -$93,575 |
| Nelson | 8.1% | -$72,500 |
| Christchurch | 4.4% | -$30,000 |
| Queenstown-Lakes | 2.5% | -$20,000 |
| Dunedin | 8.1% | -$32,500 |
| Invercargill | 4.1% | -$16,000 |
| Total NZ | 9.8% | -$55,000 |
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149 Comments
Safe as houses, just not these ones......
Nope, but the other 90+% are, even after the worst downturn in 40 years.
Since the birthrate is way below a sustainable level, only through mass immigration can property prices (in real terms) be sustained. (Of course, your demographic is replaced, but welcome to the brave new world of globalization!)
If you look at population projections, stats NZ thinks we will get that mass immigration.
I do agree though, the big risk in property investment is low population growth. But you can find similar possible risks to all forms of investment if you try and predict the future.
A lot of the migrants that are coming arrive already in debt. They are the equivalent economic impact of a Gen Z with a student loan. Buts it's worse because third world loan sharks don't lend interest free. They may aspire to own a house one day. But it will be a long road of hard work to get there. They can only stimulate rental demand for now. But the household sizes will be larger so dwelling demand will be less. Considering that they are replacing downsizing or dying boomers and younger family units emigrating.
Great point on the baseless claim of cashed up migrants arriving in the country.
Also, Asian work experience is still to an extent considered inferior in NZ, so many skilled, experienced workers have to start out in lower positions here and take several years to find stable footing in the job market.
The high value jobs can be done remotely we are importin mainly jobs where you have to be in attendance, IMHO these are not going to sustain Auckland Average prices.
The average number of occupants per dwelling is decreasing. Not increasing.
The average is not a good metric.
Over 100,000 households, or around 1 in 16, experienced crowded living conditions in Aotearoa New Zealand in 2023. In 2018, around 1 in 17 households were crowded, up from around 1 in 20 in 2013.
https://www.stats.govt.nz/news/more-than-100000-crowded-households-in-n…
you got any other straws to clutch Baptist?
After? Are you sure?
The correction of that scale was a result of Central Bank cheap debt stupidity. Anyone thinking the activity fueled by 2% borrowing was "the real market" was deluded. Smart money used this point to bail out.
Anyone thinking the activity fueled by 2% borrowing was "the real market" was deluded.
Reminder of the following economic conditions in 2020 (when stress test rates got as low as 5.8%):
1) deflation (i.e falling prices)
The country's set to see its largest quarterly fall in inflation for at least five years, but possibly the biggest fall since 1998, when Statistics New Zealand unveils the June quarter Consumer Price Index on Thursday (July 16). (For the record a -0.5% fall would be the biggest quarterly drop since the fourth quarter of 2015, while -0.6% or more would be the biggest fall since the fourth quarter of 1998.)
2) Expectations of a double dip recession
ANZ economists are raising the prospect that the country might see a 'double-dip' recession from the end of this year and into next year.
3) OCR at 0.25%, talk of negative OCR due to a possible double dip recession
"If New Zealand enters a dreaded double dip recession, or W shaped disaster, then negative rates may go from being possible to probable."
4) mortgage interest rates of 2.55%
When a value is imputed for rental yield (or avoiding rent through living in the abode) then the 10% group will have done better than the analysis indicates.
And then there are the intangible / non-monetary benefits of house ownership which are many and varied - and vital to home owners. They must be factored into the equation for the analysis to be robust.
The vast majority of property owners will remain unperturbed.
TTP
You also need to factor in interest and paid out to the bank and all other associated costs.. if we're being robust.
At sale price only..
But nobody ever counts the expenses, or REA fees from experience
Or, it seems, the tens or hundreds of thousands of dollars people pay as interest on their mortgage. This never seems to count in "profit" discussions of house buying and selling which I find simply mindboggling.
Yay I sold my house for 300k more than I bought it for ....but spent 250k on mortgage interest ...
Add inflation to the mix and factor increase income level across the life of the mortgage, with inflation adjusted also and the real number is revealed.
I was thinking the same, but without the sarcasm. One of the worst house price "crashes" we have ever had, the first significant downturn in decades, supposedly worse than the Irish crash, and the end result is 10% lose a bit of money (which they will probably make back). Compare that to a share market crash / Bitcoin crash / Finance company failure which happen much more frequently and many people lose almost everything, housing really is a very safe investment. (by the way I don't own investment property)
"Compare that to a share market crash / Bitcoin crash / Finance company failure which happen much more frequently and many people lose almost everything, housing really is a very safe investment. (by the way I don't own investment property)"
They didnt however lose a place to live....nor did overvalued equities cause substantial portions of society to struggle....the speculation was limited to those with excess 'capacity'.
"housing really is a very safe investment"
This is the underlying belief that led to the property price bubble under the following conditions
- upward rising house prices, with little to no house price falls experienced in recent memory
- a wide spread focus on capital gains
- a willingness to take on high levels of leverage
There are very few reports in the mainstream media of loss making vendors as there is virtually no incentive or public interest to do so. Most of New Zealand aren't even aware of the few news reports or have tuned them out.
Here are a few who may now be revisiting that belief in light of their own lived personal experience:
1) https://www.stuff.co.nz/business/property/301009099/new-zealands-unluck…
2) https://www.stuff.co.nz/life-style/homed/real-estate/301022869/40k-paid…
3) https://www.oneroof.co.nz/news/s-we-cant-afford-this-homeowners-fear-th…
the facts:
The average annualised return of the NZX 50 for the past 10 years has been 8.99% — more than 3.5% higher than New Zealand's top term deposit interest rates for 5 years.11 Oct 2024 Zooming out, the average annualised return of the NZX 50 for the past 10 years has been 8.99% —
The return for the US is even higher.
In addition you can sell anytime you like and get your money in two days.
I am not saying property is a bad investment, it is just illiquid and moves generally altogether in one direction.
Even in a bear market some shares do well and continue to pay dividends.
One of the worst house price "crashes" we have ever had, the first significant downturn in decades, supposedly worse than the Irish crash, and the end result is 10% lose a bit of money (which they will probably make back).
We haven't had the crash, we are crashing, it is still crashing. The end result will not be known until after the crash. How long did the Irish crash take to fully play out?
"How long did the Irish crash take to fully play out? "
Also look at other property price bubbles
1) Japan 1990's
2) Switzerland 1990's
2) US 2006
3) Spain 2006
4) Hong Kong 1998
5) Singapore 1998
Time periods for real estate market prices (nominal) that are yet to recover to peak price levels in some residential real estate markets:
1) Japan: 33 years and still counting (peaked in 1991)
2) Russia: 18 years and still counting (peaked in 2006)
3) Kazakhstan: 17 years and still counting (peaked in 2007)
4) Cyprus: 16 years and still counting (peaked in 2008)
5) Spain: 16 years and still counting (peaked in 2008)
6) Italy: 13 years and still counting (peaked in 2011)
7) Saudi Arabia: 10 years and still counting (peaked in 2014)
8) Qatar: 9 years and still counting (peaked in 2015)
9) Macau: 6 years and still counting (peaked in 2018)
10) Hong Kong: 5 years and still counting (peaked in 2019)
For the 36 year period from 1955 to 1991, nominal house prices grew at a rate of 13.1% per annum. A house price extrapolator may have expected this historical rate of house price growth to continue into the future. Or being "conservative", they may have used a annual rate of growth of say 8% p.a (5 percentage points below the 36 year historical average, 39% lower than the 36 year historical average)
What was the actual nominal house price growth for the following 33 year period from 1991 to 2024? (-0.8% p.a for 33 years)
https://fred.stlouisfed.org/series/QJPN628BIS
A reminder for price extrapolators of the general investment warning: Past performance is no guarantee to future returns.
Owner occupier buyers: CAVEAT EMPTOR
Not to mention additional costs along the way... more like 40%
Yeah true, if you added inflation into the mix, the losses would be much bigger.
It will all come right soon.
Yep, she's on the way up, 10% in 2025.
There are a lot of properties coming on the market of late. This summer ("Selling Season") is going to be very interesting, one way or another.
Markets are no longer pricing in deep rate cuts, which means the end of the tunnel is a bit further out for the NZ economy.
I doubt young Kiwis will be rushing to take on a multi-decade mortgage in such an uncertain environment.
Down down down...in ponzi town.
Buyers market in preak spring selling season. Clearly sellers were all short term speculation purchases. Roll the dice and get double 1s. Snake eyes.
A relative is looking for a place in centralish Auckland at the moment. The agents are trying invoke FOMO to push things along 'this starts with a 2, and will sell', 'you're dreaming', 'you've missed the market' are all statements that have been made at open homes.
Are these statements usually absent?
Agents and their silly games are indeed tiring. That said full section houses in attractive school zones are still holding up fairly well from what I can see.
The current stats re prices going up or down don't seem to reflect what is happening on the ground - at least in Auckland. Open homes are (mostly) rather busy at the "average price" and a little above level of the market; and a number of my friends are constantly missing out at auction with the prices paid on most properties way over expectations. Quite hard to get in at around $1m - $1.4 on anything decent. It will be interesting to see what the data for the next Quarter looks like it could be very different.
Interesting. What area of Auckland?
Central and North Shore
I agree about central (excl townhouses); there never will be an oversupply of detached houses, particularly around the $1 million mark. In fact the townhouse boom has meant many have been demolished. I don't know much about NS, although I suspect it is similar.
No worries mate we'll make sure your anecdotes are looked at ahead of any factual statistics we get going forward.
The current anecdotes make up the future statistics! It's always been that way.
I'm hearing anecdotes of mass layoffs in professional firms. Quite a while before these will hit the stats. It's pretty grim out there.
Or perhaps just head out to some open homes and attend some auctions so you can see for yourself.
Or perhaps realise that 250 people could go to an open home/auction and if nobody buys it, it doesn't matter.
Looks like getting a bit carried away there with italics! My point is that my friends and I are attending open homes and auctions. And they are selling. For mostly quite a lot more than expected. As I said - go along and take a look for yourself.
People's desperation to find assets that will outpace inflation long term have led to this rampant speculation in housing, pushing them to ridiculous levels. Even at current prices the actual utility value of these properties (to live in as a home) is nowhere near 1-1.4M dollars. When the average household income in Auckland is only around $160k, the value of your time that has to go into paying for that property is insane. We have lost our minds.
The multiple in NZ is 7 times salary. Same as Canada. US and UK a bit higher, and Australia higher still. Two other random examples are Norway 8.2 and Netherlands 10.5.
Affordability of houses is a worldwide problem and NZ is not alone (although the situation here is better than many Western countries).
So many on this forum seem to be under the misapprehension that this is a NZ problem, rabbit on about the ponzi scheme, etc etc. We are not different to the other Western countries which is probably why we suffered such a big fall after the Covid run up in prices.
True, we did reach 10 at the peak though in Auckland. When a multiple of 3 is the accepted definition of 'affordable', yes it's not just us who have gone crazy. Housing has just become a proxy for storing wealth.
Almost all home owners have a big mortgage at the start, to exclude interest rates from the affordability equation is nuts. Multiples of 3 existed when interest rates were double digits. If we still had a multiple of 3 when interest rates were 2.5%, the weekly mortgage repayment would be super affordable, but it couldn't happen as no one would build new supply at that price (* unless we get population decline)
"If we still had a multiple of 3 when interest rates were 2.5%, the weekly mortgage repayment would be super affordable, but it couldn't happen as no one would build new supply at that price"
1) would residential dwellings in the existing dwelling market also be priced at 3x if only owner occupier buyers were allowed in that market?
2) If existing dwellings were priced at a multiple of 3x, would land prices be cheaper?
Why stop at 3? Why not 2 or 1 or even 0? We can get to 0 by not allowing any buyers.
Is 3x still affordable in Turkey where interest rates are 50%? You have to pay 1.5 times your salary each year in interest!
The 3x rule is utter rubbish. Its the mortgage repayments that dictate affordability, and that is mostly due to interest rates.
Interesting and thought provoking thoughts. However the above response didn't really address my questions above.
Do you mean a country with no rentals? Or only state owned rentals?
"Do you mean a country with no rentals? Or only state owned rentals? "
Only the original premise "If we still had a multiple of 3 when interest rates were 2.5%,".
No other assumptions are made about the potential consequences of the above premise on the rental market.
Lol where did this factor of 3 actually become “the thing”?
I would be buying hundreds of properties if That was happening!
If we banned investment in existing homes then multiples of 3 would be real.
Maybe. Just maybe, we should removing homes from investment portfolios.
"If we banned investment in existing homes then multiples of 3 would be real. "
Policymakers can choose policies that reduce buying competition in the existing dwelling market for owner occupier buyers vs non owner occupier buyers.
Policymakers could look at policies that make the new build market more attractive than the existing dwelling market for non owner occupier buyers.
E.g allow interest deductibility only on new builds
Stamp duty on existing dwellings for non owner occupiers in line with Singapore's rates of stamp duty.
Need to examine the unintended consequences of those policies.
How many of these losses involved peoples hard saved deposits.....
and how many of these regret voting Labour
Don't you mean for the current incumbents?
Nope the ship went down quite literally on Labours watch. Adern abandoned ship early, it was a captains call "I'm first in the lifeboat, bye"
Meh it's really the population behaviour to blame, governments can only try to change that, but buying houses is a tough one to shake.
My theory is that the ease of access to the share market, and growing awareness of it, along with some fringe incentive changes that have already taken hold will be the biggest drivers away from frothy housing markets in future.
How many of these properties were also tied to a business loan ?
Consider ...the 'value' of the NZ housing market is currently around 1.6 trillion NZD and comprises around 2.1 million dwellings....what else do we have/do that provides that capacity for 'growth'?....and then ask what will occur if that value continues to increase at the long run average of 7% for the next decade?
Something's gotta give.
Whoa...are you saying we should do something to stop the model were Banks and risky speculators make profit at the expense of the rest of NZ tax paying citizens...?
LOL....Im simply observing that the load bearing capacity will be exceeded (indeed already has been)
"what will occur if that value continues to increase at the long run average of 7% for the next decade?"
For the 36 year period from 1955 to 1991, nominal house prices grew at an average rate of 13.1% per annum. A house price extrapolator may have expected this historical rate of house price growth to continue into the future. Or being "conservative", they may have used a annual rate of growth of say 8% p.a (5 percentage points below the 36 year historical average, 39% lower than the 36 year historical average)
What was the actual nominal house price growth for the following 33 year period from 1991 to 2024? (-0.8% p.a for 33 years)
https://fred.stlouisfed.org/series/QJPN628BIS
A reminder for price extrapolators of the general investment warning: Past performance is no guarantee to future returns.
Owner occupier buyers: CAVEAT EMPTOR
"For the 36 year period from 1955 to 1991, nominal house prices grew at an average rate of 13.1% per annum."....Matched by wages.
The same cannot be said of the period 1991- 2024...wages compounded at half the rate of housing.
Current house price to income ratios
1) Tokyo: 15.5x
2) Kyoto: 15.0x
3) Fukuoka: 14.8x
4) Yokohama: 9.5x
5) Osaka: 7.4x
So we are headed for prolonged zero interest rates?....where then carry trade, Mars?
I wondered what the resale profit was ....
The median resale profit fell to $269,000 in Q3, down sharply from $305,000 in the previous quarter. Mr Davidson said this is a significant drop from the highs seen during the post-COVID housing boom when the median profit peaked at $440,000 in late 2021.
As well as investor activity .....
The proportion of investors selling for a loss climbed to 11.1% in Q3, up from 8.5% in Q2 and the highest level in a decade. In comparison, owner-occupier loss-making resales rose to 8.8%, highlighting a slightly widening gap between the two groups.
There will be greedy vendors out there still with considerable equity who consider selling a dwelling for anything less than what it could have got in 2021 as an inconceivable loss.
With risks of increased interest rates, it's entirely understandable if bag holder anxiety is abound given the ongoing state of the market/economy.
- Bloating inventory
- Low sales volumes
- Low new lending volumes
- Rising unemployment
Indeed. So blinded by their own greed they cant grasp that mortgages under 2% rates are different to mortgages under 6-7% rates.
"But it's only 4%! 4 is a small number."
"I remember when we had 22% mortgage rates back in the 80's. 6% is nothing."
Reply to the speaker: "Remember when you could afford a house on one income and still afford to have 2 or more kids while paying it down?" Watching their faces contort at comprehending this realisation it always amusing.
It would be interesting to see what % of homes are selling for a loss if real estate fees were deducted from sale price when comparing to previous purchase price.
Generally when you purchase, you don’t pay fees. You sure as heck pay fees when you sell though.
Dont forget to deduct interest paid on the mortgage as well. Plus any maintenance, repair and renovation costs. They all get added to the "cost" of the house.
Hopefully majority are the greedy speculators
as buyers drive prices down
oh boy, that's a sentence you don't hear everyday.
One of our current problems is many New Zealanders expect property values to go up based on recent history.
No one is explaining the risk to new buyers of overpaying. Before this was justified because house prices went up. Now if you buy it’s unlikely you can on sell and recoup your interest expenses. (I’m pretty sure the profit calculations in this article don’t account of interest spent)
The old argument that by buying you’re saving on rent is a fallacy
It depends on when you bought. We bought our house because even with rates and insurance we realised we would break even on a pox-ridden rental let alone a liveable house. That was 11 years ago.
"No one is explaining the risk to new buyers of overpaying."
There are no vested self interests in explaining or highlighting those risks to buyers publicly in the media. There are no marketing budgets or marketing dollars to inform potential buyers of house price risks. That is how property buyers can become collateral damage in a property price bubble. There have been warnings by commenters on interest.co.nz who can see the risks that most don't see for quite a few years before the peak, yet those with their vested financial self interests have attempted repeatedly to discredit, negatively label and villify those commenters and their warnings.
The vested financial self interests are in promoting property transactions and receiving the financial revenues associated with that economic activity. Some vested self interests and their vested financial self interests:
1) media - advertising revenues from property and construction sector
2) property mentors & seminars earning revenues
3) real estate agents earning their commission
4) mortgage brokers earning their commission
5) property builders, property developers - property sales
Those with vested financial self interests with their large marketing budgets and repeated and frequent messaging in the media can drown out the low profile risk warnings given by those without marketing budgets.
Owner occupiers: CAVEAT EMPTOR
"The old argument that by buying you’re saving on rent is a fallacy"
Likely repeated very frequently by those with their vested financial self interests.
When a mortgage on our home would be three times what we pay in rent (plus owning costs), we are very happy renting to save on buying.
Buying a house is not the only way to financial success. People just need to learn that renting (and investing) is a viable long term option that gives you much more flexibility and a lot less stress. Especially if you don't have children which is more and more common. We've almost tripled our net worth since the 21 peak of the housing market.
As my very smart financial whizz friend said 20 years ago about rent being dead money "What do you think interest is?".
The knack is in calculating the opportunity cost to the best of ones ability
"No one is explaining the risk to new buyers of overpaying."
The risk of overpaying.
1) Peaker
The median house price at the peak for Auckland was $1,300,000
With an 80% LVR, this is a mortgage of $1,040,000
The 20% equity is $260,000
2) Buyer Today ("BT") - Sept 2024
In 2021, the buyer who waited, deposited the same $260,000 equity into a bank deposit earning interest. Also BT would rent an equivalent house and have still saved money due to the rental being below the monthly P&I mortgage payments of Peaker - in 3 years the savings would have been about $20,000 annually. So a Buyer Today would have an amount of $340,233 to use as a deposit.
The current median house price for Auckland is around $950,000
Equity deposit of $340,233
The mortgage at this purchase price would be $609,767 (an LVR of 64%)
The Peaker has a mortgage which is higher by $430,233 (mortgage of $1,040,000 for Peaker vs $609,767 for BT). BT's mortgage is 41% lower than Peaker's mortgage.
Assuming BT, pays the same exact dollar amount each year that Peaker pays for their mortgage, as a result of that additional borrowing, Peaker is paying $1,232,229 more over the 30 years than BT (This is due to higher borrowing amount of $430,233, and total interest on this of $801,996 over 30 years). BT is mortgage free by the year 2037, whilst Peaker continues to pay their mortgage until 2051 (14 years later) - so after the year 2037, BT can save all that money that Peaker continues to pay on the P&I mortgage.
Assuming same incomes, and same living costs (food, travel, etc except mortgage) , BT can save the total $1,232,229 in payments that Peaker is paying. If BT invests the annual P&I payments that Peaker continues to pay after the year 2037 at 4.0% p.a, then in 2051 this amount will grow to $1,401,500.
Remember that at the end of 30 years, the house price will be EXACTLY THE SAME for Peaker and BT.
BT will have more money available for retirement than Peaker. Conversely, Peaker will have less money than BT at retirement.
That single decision to buy in November 2021 would have cost $1,232,229 extra to buy the exact same house for Peaker compared to a Buyer Today.
Note: as at September 2024, equity position
1) Peaker: NEGATIVE $90,000 (based on interest only and no mortgage principal payments) - a loss of over 100% of their savings
2) Buyer today: $340,244
A repeat of previous warnings given.
A reminder for all potential owner occupier buyers and current owner occupiers - choose your scenario and act accordingly.
Which will the owner occupier regret most:
1) missing out on future potential gains in equity?
2) potential loss of their savings invested as the initial deposit for purchase of the house or even potential negative equity?
For owner occupiers, a reminder of the impact of leverage (it amplifies property price changes both on the up and down):
Scenarios of financial impact of leverage on equity, assuming an 80% LVR for owner occupier, for a recent $1,000,000 property purchase, $200,000 initial deposit, mortgage $800,000. (simple round numbers used for illustration purposes)
A) Scenario - property price rise:
1) property price rises 5% to $1,050,000, mortgage $800,000, equity $250,000, so 25% gain in equity value from $200,000.
2) property price rises 10% to $1,100,000, mortgage $800,000, equity $300,000, so 50% gain in equity value from $200,000.
3) property price rises 15% to $1,150,000, mortgage $800,000, equity $350,000, so 75% gain in equity value from $200,000.
4) property price rises 20% to $1,200,000, mortgage $800,000, equity $400,000, so 100% gain in equity value from $200,000.
5) property price rises 25% to $1,250,000, mortgage $800,000, equity $450,000, so 125% gain in equity value from $200,000.
6) property price rises 30% to $1,300,000, mortgage $800,000, equity $500,000, so 150% gain in equity value from $200,000.
7) property price rises 35% to $1,350,000, mortgage $800,000, equity $550,000, so 175% gain in equity value from $200,000.
property price rises 40% to $1,400,000, mortgage $800,000, equity $600,000, so 200% gain in equity value from $200,000.
9) property price rises 50% to $1,500,000, mortgage $800,000, equity $700,000, so 250% gain in equity value from $200,000.
10) property price rises 100% to $2,000,000, mortgage $800,000, equity $1,200,000, so 500% gain in equity value from $200,000. (i.e if they believe that the property price doubles every 10 years)
Remember, the owner occupier must be able to hold on under ALL economic environments (including any potential significant reduction in household income).
B) Scenario - property price falls:
1) property price falls 5% to $950,000, mortgage $800,000, equity $150,000, so 25% loss in equity value from $200,000.
2) property price falls 10% to $900,000, mortgage $800,000, equity $100,000, so 50% loss in equity value from $200,000.
3) property price falls 15% to $850,000, mortgage $800,000, equity $50,000, so 75% loss in equity value from $200,000.
4) property price falls 20% to $800,000, mortgage $800,000, equity is ZERO, so 100% loss in equity value from $200,000.
5) property price falls 25% to $750,000, mortgage $800,000, equity is NEGATIVE $50,000, so 125% loss in equity value from $200,000.
6) property price falls 30% to $700,000, mortgage $800,000, equity is NEGATIVE $100,000, so 150% loss in equity value from $200,000.
7) property price falls 35% to $650,000, mortgage $800,000, equity is NEGATIVE $150,000, so 175% loss in equity value from $200,000.
property price falls 40% to $600,000, mortgage $800,000, equity is NEGATIVE $200,000, so 200% loss in equity value from $200,000.
Equity means nothing for the BN person. They had their house and lived in it. Even if their equity fell, as long as they stayed, they'd have been OK (and mortgage free in 13 years)
"Equity means nothing for the BN person"
What is the BN person? Are you referring to BT above?
If so, BT has more money at retirement than Peaker - that is the point of the example in not overpaying.
If BT and Peaker have to sell in the year 2051, (downsize at retirement, health issues, move closer to family or the property is sold when they die and the proceeds become the estate of Peaker / BT) Peaker's value is below that of BT, by $1,232,229 in the year 2051.
Peaker is free to pay an extra $1,232,229 for the same house as BT. There are consequences to Peaker by choosing to pay an extra $1,232,229 for the same house as BT that Peaker is likely to be totally unaware of. (e.g. Peaker has to work longer because they don't have sufficient funds for retirement, whilst BT can retire earlier)
People are free to choose, however people are not free to choose the consequences of their choice.
Well - I feel this really justifies a good 0.75 OCR cut - That will get things going again :)
If protecting the ponzi at the expense of all savers in NZ is your only focus. Prices eroding another 20% would be good for the overall economy and retention of young people. Lets remember, today's cost of debt is only at the lower end of long term normal. Look here.
@averageman - thank you - i am not sure you can save yourself to wealth
"i am not sure you can save yourself to wealth"
Has any commenter on interest.co.nz said that?
Has anyone suggested that people should rent for the rest of their entire life?
What many commenters are saying is that people can choose to rent now and buy later (when prices and returns are more attractive). Property is not attractive under ALL conditions. Under some conditions, it is better to rent now and buy later.
@CN your comment sounds reasonable - I'm not sure "if anyone" "if no-one" calm yourself - if you need to rent, I have your back - if you want to buy now is a good time. i feel we aligned
Indeed. I would counter that requiring debasement of debt just to prop up those who paid to much for housing is not the answer either. All the spec crowd go on about how they are running businesses. As a business owner if you make a bad decision you should wear the outcome. Bad decisions should not be socialised to the rest of NZ taxpayers (majority) thru increased inflation bailing out the speculative (minority).
Paid to much...sell at a loss, or let the inevitable Bank managed exit take place.
Retention of young people because of housing costs is no longer a serious argument (might have been in 2021). NZ multiple is 7 times earning, same as Canada. US, UK, Norway more. Australia more again and places like the Netherlands 10.5.
It's not all about housing, although it's good you're able to recognize the precarious state of the market. That said, and with recent events considered, I think a 0.75% cut is now more likely that ever to send our currency tumbling than not, then send inflation soaring.....
Ignore happenings in America at your peril.
@retired - we agree on at least half your message - personally (this is just an opinion) I am looking forward to world peace (in regards to America comment) - that will stabilise markets and we can all get on with they neighbour - :)
Can you elaborate on the world peace issue?
Nope, you can't lose with property.
*EDIT to include sarc/. Sorry though this was obvious.
Err....this article is about people that are.
You need the SARC tag
I thought that was obvious (edited now)
And a leveraged loss too.....
You should not lose with property !
The ones that do lose, are clearly not that great at investing or havent sought advice from the ones that have been financially successful!
Not everyone is as good as you at investing. As you remind us of so often.
You should not lose with property !
The ones that do lose, are clearly not that great at investing or havent sought advice from the ones that have been financially successful!
Even the property industry professionals have lost with residential property
1) However, it wasn’t all good news as Rawson had still taken a massive hit on the development project overall, which had cost him a total of $2.35m including the $1.332m he paid for the undeveloped property back in 2021.
https://www.oneroof.co.nz/news/cheeky-buyer-offers-real-estate-boss-6-f…
2) https://www.rnz.co.nz/news/thedetail/529730/the-detail-the-billion-doll…
Most owner occupier buyers are novices in the residential property market (perhaps 1-3 purchases over their entire lifetime), and should not be compared with property industry professionals (property developers, builders, traders / flippers, etc).
Yawn that's what happens when you only stay in the place for 3 years after buying at the peak. New Zealand is hopeless, probably the fastest home turnover rate in the OECD. The average must be 5 years or less. My first place was 15 years, lost count the number of times the neighbours changed.
Yawn that's what happens when you only stay in the place for 3 years after buying at the peak.
Zwifters message of sympathy to the financially and emotionally distressed forced to sell at a loss. Who enjoys selling at a loss Zwifter?
Who said they were all financially stressed ?
Why else. Surely you are not suggesting people sell at a loss for fun...?
I've heard rumblings about "rare" cases of narcissism in the community. Perhaps this is one of them....
People sell for all sorts of reasons, better schools, better jobs or like most are saying on here they are off to Australia so yes many people would take a hit up front to move onto greener pastures.
"Of course if 9.8% of the properties sold in Q3 went at a loss, it follows that 90.2% were sold for more than, or at least as much as, their previous purchase price - the gain."
This comparison is between those who bought in the property price bubble and those that bought before the property price bubble.
To get a true sense of the property price bubble, need to also look at all the buyers from 2020- 2023 who are still holding on as long term owners and where the property is substantially unchanged (i.e no "add value" work done) to see how many have experienced an increase in the market value of the property. This data may not be available.
Correct I purchased late 2020 and am still way ahead by $100K plus the $50K a year in rent savings so that's $300K.
Add back rates, insurance, repairs and maintenance and lost income on money put into your home.
Did you not require a mortgage? Or are your mortgage payments $50Kpa less than your previous rental outgoings?
No mortgage and rent is $750 a week down here now so that's $1K a week of your earnings plus. That all money I don't have to stump up each week these days.
How much was the house? If it was $1 mil and you had put that into S&P 500 on 20 march 2020 (at 2304), it would now be worth $2.6 million (at 5983).
Of course I picked my dates to include the bottom of the market for dramatic effect, but had you invested in the S&P on 14th Feb 2020 (before the Covid drop, at 3380) it would now be worth $1.8 million (at 5983).
And as ex agent said below, add rates, insurance, maintenance, etc and your house has been a terrible investment compared to many other options, probably even term deposits.
But housing investment makes much more sense when you invest the bank's money.
Its not an investment, its a lifestyle and some of you on here just don't get it, its like talking to a brick wall. Hopefully most people on here will end up owning their own home with the mortgage fully paid off and money in the bank and then the penny will finally drop.
I think we get that. I don't consider my own home an investment either. But it seemed like you were implying your house was a good investment...
If only you could raise a family in the S&P 500. Instead of in a rental that could be sold out from under you at any time on the whim of your landlord.
True that. This is how it should be; you buy your house because you want a house not because you want to make a buck.
@jimbojones - and where do you live when you are saving for a house? or like me would like to go and live in France for a year/ or try out Taupo for a year / or go and live in Bali for 4 months? You might not agree and above is not to annoy you its just to point out buying a house to rent out has merrit.
Yes with all that cash tied up in your purchase you are certainly losing a lot of income that would offset some rent. Add back rates, insurance etc I suspect you are close to neutral. In other words there is not much in it.
Good for you. Couple of thoughts. Stability and operation of NZ finance and management is not just about you. Also most don't care about you financially or otherwise. Nothing personal.
Correct I purchased late 2020 and am still way ahead by $100K plus
I call bullshit on that Zwifter. Have you had an offer for that amount or using Homes?
Would be interesting to know if people who lost money on their properties were also buying in the same market. If their new property was 'price adjusted' too then they haven't really lost anything.
Should have bought some BTC it seems.
Or in fact literally the SNP500 which is up 30% this year.
Funny how everybody complains about greedy landlords making too much money when they are losing money faster than ever
I guess the difference is that you aren't going to an auction to outbid all FHBs when you buy BTC or SNP500.
Yes you are! You have to place the highest bid to win the share of Bitcoin!
The winning bidder might stop an aspiring first time Bitcoin or share buyer from getting onto the ladder!
True, except you can't sleep in a Bitcoin. Housing is a basic need, Bitcoin is, um, well, ...
Housing is a basic need, but owning one isn't.
Anyway, seems to be a pretty good market for FHBs now. Can take their time and flick in some lowish offers ..
"Housing is a basic need, but owning one isn't."
Very few people understand this.
Buying an owner occupied residential dwelling in a property price bubble can lead to long term outcomes that are undesirable.
This is definitely not the case in North Shore, 60% of the total sales are above 2021 RV and if we take into count that 10-20% of the properties are townhouses and apartments, this is pretty much amazing news, for house owners of course, not for buyers. Now that the OCR keeps going down, I wouldn't be surprised if by the end of 2025 we might see a 10-20% increase in house prices
Dear John, apparently I'm an over optimistic property spruiker with only the one house but even I cannot see those sort of gains, but market will keep on trucking and house prices will double again in 10 years time.
house prices will double again in 10 years time
Houseworks, is that you? Lets be honest, from 2021, knowing you would have said the same thing back then, a pound of butter is more likely to double by 2031.
Anyway, if like you say "Trump will shag the Global Economy from early 2025" what will higher interest rates do to house prices?
Exactly.
Never ever got close to losing money on any sale in ChCh.
Personally do not know anyone in ChCh that has lost money on any sale either.
Just doesnt make any sense to me with knowing the ChCh market, and there has been plenty to be made over the last decade or so!
Even currently there is profit from sales, so I am at a loss as to how anyone in ChCh has lost money on a sale?They clearly paid too much for what they bought unless they needed a very quick sale?
There have been some good buys by agents underselling properties but the owners still mustve psid too much in the first place!
You make money when you buy as they always say, which is correct!
Of course there are people who make losses. Death and divorce for a start make people sell when the timing is not the best. People want a clean break when divorcing and children want their inheritance when a parent dies. Then of course people become unemployed and there is not the usual income to service the housing loan. Better to sell before the Bank sells it. In saying that there will be less losses than in Auckland for example as more people live up there because of the opportunities and therefore prices are much higher.
Prices are much higher in Auckland but they certainly are not better value than Christchurch!
Of course people often have to sell fir various reasons, but that does not mean you should be selling for less than you paid for it, unless you paid far too much for it.
Yes I have seen many people pay overs for their property but that is their perogative obviously.
Anyway we have to be responsible for our decisions we make whether it is how much we buy a property for or how much we sell for!
What I have learnt over the years is that many people are just not very financially savvy, and that is passed onto future generations.
I have helped many people over the years improve their financial position greatly, and will continue to do so if they ask for advice!
I see a company running a Century 21 real estate office in Christchurch has gone into liquidation. The liquidator said it had been caused by the current tough housing market in Christchurch. Christchurch is not immune from the malaise currently affecting the New Zealand housing market.
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