January might be the start of the calendar year and the time when the business world heads back to work, but it's not a particularly good month for trying to pick where the housing market is likely headed for the rest of the year.
That's because the real estate industry remains in its Christmas/New Year slumber for the first half of the month, when virtually nothing happens. This is why January is usually the slowest month of the year in terms of sales.
Even so, it's probably worth having a look at the month's trading numbers to see what we might glean from them about the likely trading patterns over the next few months.
The first thing to look at is sales volumes.
The number of sales is by far the most important indicator of market health. Much more so even than price, although prices get far more attention in the public arena.
It's sales volumes that are the main determinant of industry revenue and keep stock flowing through the market. And January's sales weren't too bad, for a January.
According to the Real Estate Institute of New Zealand, there were 3774 residential sales in January. This was up 17.5% compared to January last year, and was also the highest level of sales for the month of January in three years. However, there's still quite some way to go before they get back to the pre-Covid level of January 2019 when there were 4459 sales.
The really big activity in January is listings, as vendors sign up with agents and get their marketing plans underway ready for the big sales months of February and March, usually the busiest months of the year for residential real estate.
And last month's listings didn't disappoint.
According to Realestate.co.nz, 8904 residential properties were listed for sale in January, up 21% compared to January last year.
That was the largest number of new residential listings to have come onto the market in the month of January in the last 10 years.
That pushed the total stock of residential properties available for sale at the end of January to 32,412. That was up 19% compared to January last year, which also puts it at a 10 year high for the time of year.
That in turn pushed the overhang of unsold properties at the end of January up to 25,704, or 19%, compared to a year earlier.
That mountainous stock of unsold properties would have been even higher were it not for the 2196 properties interest.co.nz estimates were taken off the market in January, up 21% compared to January last year.
That's the highest number of properties withdrawn from sale in the month of January for six years.
That leaves a lot of grumpy vendors sitting on the sidelines, waiting for the market to finally wake up to what their property is really worth, so they can receive the money they deserve for it and indeed, are properly entitled to.
132 Comments
Fully expect the average home price to retouch the lows of 2012 to 2015, before this once in a lifetime NZ Property Crash bottoms out, in the next 2 to 3 years.
Buyers should only offer within these old values, as being Negative Equity is not a place to be, for what could be many years of Buyers Remorse and sustained, low price pain.
Massive unsold stock overhang, is heaping the withering hot sauce, on overleveraged SpecuVestor/Vendors....
Have a relly trying to sell for about $850k, down from $950k 18 months ago.
I've always said it was actually only worth $500k , about what it cost to build plus land 15 years ago.
So from your comment I checked the CV from 2015,..... $485k.
I'm hoping for their sake they sell, but I do think I'm realistic.
End of 2021 I expected falls to possibly reach 40% in real terms (not necessarily on the national scale). Lately I have the feeling that a reassessment is in order. In many cases properties are already down that 40%. Trouble is, I can't see anything but further downward pressure from here and haven't yet seen the moment of capitulation - though it's closer than ever. That will almost certainly show up as a sharp leg down.
I would not be at all surprised to see some properties/areas down even 60% from peak within the next couple of years. My initial assessment was partly gut feeling, partly based on seeing other crashes play out (US, Ireland, Spain, etc), and partly based on simple ROI providing a floor (i.e. yields for investors) as capital gains moved further into the future and out of the realms of short or even mid-term possibility. Trouble with the ROI part is that as things get worse, some of the yield variables (rates, maintenance, rents, ability to maintain full tenancy) are getting worse - dropping that potential 'floor'.
For those that think things will 'get back on track' in the near future, I think you may be severely underestimating just how much prices have been driven by the potential for capital gains (much, much more so than any demand driven by a housing shortage, immigration, etc).
Some people are already suffering, but the hardest part isn't even here yet in my opinion.
I hear ya @earnedincome, however, I wouldn't be looking at only one side of the coin here as you do. Building materials and builder's/architect's fees are increasing too therefore the cost to build a house is likely to keep increasing too if everything else will be going up in price, while lower interest rates will make it easier to afford RE. There are forces that should help with the "floor"too. Got to look at "both sides of the coin".
I've been actively looking in Chch (attending maybe 8-10 open homes a week). Some observations from my end - purely anecdotal here.
- Available listings seems skewed by the number of "undesirable" new build townhouses. These seem to be some sort of joint venture scheme to get people investing via 'property coaches' e.g. Opes into Wolfbrook/Williams type townhouses, getting you leveraging your existing home to buy a couple of 3 bed no parking $hitters to rent to new arrivals to NZ.
- Lots of choice in the newer subdivision areas e.g. Prestons/Marshlands, new Halswell etc with some big price cuts. E.g. got a txt from an agent last night informing of a 'dramatic' price cut - best part of $100k off original asking price at this point. However, problem with these areas is there's always another newer, better house springing up next door, the sections are typically crap in size, and in the case of Halswell there are no shops or anything nearby. If you just want a nice house for reasonable $ and don't care about future resale too much, I guess not bad buying?
- Lots of done up formerly as-is-where-is or EQ damaged places. Most done to a poor standard. The ones done to a great standard the vendors seem to want far too much and as a buyer it's extremely difficult to judge the value of the upgrades (e.g. looked at a place that sold for $850k in very tired condition, has been totally transformed to an amazing standard but vendor wants $1.4m and wont go a dollar below according to the agent). The problem is I'm guessing they want to at least double their money on the upgrades. I'd buy the place for $1.2m - right at the top of my range - as I'd never need to buy again but my perception of the upgrade value and the vendor's is very different.
- Most of the desirable stuff seems to be going to auction, so may have to get over my aversion to this - at least it seems more honest than deadline sale somehow. Might just set myself a limit of say $5000 to spend on builders reports, DD etc across different properties.
- I understand now why all my friends are moving out to Lincoln, Prebbleton etc. The buying is just so much better and the traffic is now so bad everywhere you may as well be in the car coming from a nice house for reasonable money as opposed to coming from a crap house for unreasonable money. If I knew I was always going to WFH I'd just go out there at this point.
As a side note, property purchasing would be a much more pleasant experience if every listing had to have an asking price, or otherwise be listed as an auction where at least you can understand where the market sees value. Pain in the proverbial when you are in a position to buy but every shifty agent refuses to give you a clear sense of what's required to get a deal done, except on asking price listings. Deadline sale is crap as a buyer, particularly for these done-up places that are hard to value.
Auction my big issue is where the agent says "we expect in the $900k-950k range" and then within 30 seconds the bidding is up over $1m and you've done your dough on inspection, solicitor work etc as it flies past your approval limit despite the aggressively-financed Audi driver of an agent having told you you'd be in the wheelhouse. This has happened about 5 times to some friends of ours and they are thousands out of pocket, having been used as cannon fodder to juice the vibe of the auction room.
If the auction is an honestly presented one - i.e. the bidding sits in the range you were expecting going in - then that is presumably an accurate reflection of where the market values the property. No issues with that if one wishes to participate.
Deadline really is crazy, when you think about it. We live in a country with relatively strict laws around pricing (not saying they are always enforced, but I do recall at an old employer having to surrender information to the ComCom because management had engaged in some dubious pricing practices). It is mental to me that you can list something for sale - unless it is an auction where there is information symmetry in the sense that all auction participants can see the price action in real time - without a clear price.
Even the likes of PB Tech - famed for their iffy pricing practices - aren't allowed to list the latest tech gadget and say "tell us what you think it's worth, and you might get a chance to haggle for it if you're the most willing to overpay".
If I set the agenda, I'd ban on the first day any listing without an asking price or auction.
You should know before going to auction, what you expect the selling range to be. You gauge this by following the sale results of similar properties in the area. There should be no surprises. (the exception is if there are Asian bidders in the room, dont bid against them, they dont care what they pay they just need to win). You should be prepared to put 3-6 months groundwork into research before even starting to offer on properties.
An auction is really no different to a deadline sale. You know what you are prepared to offer, and your job is to figure out which houses will sell for that amount. Dont go chasing houses that you think will sell for more, regardless of what the agent tells you.
At the end of the day, only the most desirable houses go to auction, so competition may well drive the price higher than you expect. However, this would have occurred in a deadline sale as well, only then you would have no visibility of what the other buyers were prepared to pay.
Auctions are great, I do my own property inspection and last time didn't even get the solicitor to check it out so had I lost it wouldn't have cost me a cent. I would suggest you need to look at property in your price range, don't rely on an agent to tell you what's its worth, you should know what its worth before bidding.
In my area (top school zone) family homes are selling at ever higher prices and selling quickly. Which is to be expected, as there are now less and less of them as the older ones get bought up and turned into blocks of townhouses. Consequently there are over 100 new build townhouses in the suburb trying to find buyers (and failing). A recent sale that I was following was a 90s home that was purchased for $910k last year, given a full reclad and renovation, then sold last week for $1.6M.
Investors seem to be back buying the lower priced older 2 bedroom units, as these go pretty quick as well. Which is not surprising as the yields on them are far better than the new townhouses. This is showing up in the rental market as there are now a lot of older flats for rent, whereas previously there were very few. This is helping lower the average/median rents for the area. Rents for new build townhouses have been stagnant now for 5 years, and will probably have to come down eventually as tenants exercise a preference to live in a much cheaper, older but renovated unit with a proper kitchen, backyard and garage, and only one or two immediate neighbours instead of six (or sixteen, or sixty).
There also appears to be a fair bit of renovation going on - I think people are choosing to spend the money on modernising the home they've got rather than pay big money for what is now scarce, a better home. People cant afford to upgrade - this is why the market has stalled. Those who got on the ladder with a $500k house with a $400k mortgage 5 years ago, which is now worth $800, cant afford to upgrade to a $1.2M house with an $800k mortgage. They are now stuck where they are.
I'm guessing you are in around St Albans type area? I'm amazed at how many townhouses are there - it's quite the juxtaposition seeing some nice old villa and then 20 Williams Corp $hitters rammed in next door.
I've seen a couple of reclad jobs but don't know enough to be confident buying them. E.g. there's one on St James avenue that seems fair money for the area and size but I'm not knowledgeable enough to know whether it is done well.
I do agree that good family homes in top school zones are selling well, as far as I can tell. At the very least the open homes are always full and plenty of offers coming along. Areas like Burnside and Avonhead are also very popular with buyers of seemingly certain "demographics" (you alluded to this in another comment above) who just seem to be able to produce an extra $100k cash like it's nothing.
I think you might have commented on one of my posts the other day about school zones - we are lucky that the kids are very little so still a decade before worrying about high school zones.
If you take the example above, I think you would be better off buying a post EQ build for the money, than a reclad renovated pre-EQ property. You just dont know whats below the floor.
A few years ago I was looking in Bishopdale for a renovation project, but half the suburb got rezoned into the Burnside school zone and prices jumped $200k almost overnight. Burnside is the preferred Govt school for Asian kids, due to the accelerated learning and scholarship classes and things like music school. Watching two Asians bid against each other was quite a spectacle, although the record in paying a stupid price went to Kainga Ora who outbid the last Asian bidder. Even the agents were gobsmacked at the price paid by KO, and it was the talk of open homes for weeks afterwards.
If you want to be in zone for Papanui High, I would be looking at Casebrook. Its still pretty cheap and there is a lot of development in there so you can buy a brand new 4 bedroom home for $800kish close to the posh areas of Prestons Park and Northwood. Also easy access to shops in Papanui, Northwood and Redwood.
BHS is a desirable school no doubt. Loved my time there (especially in the music department although electric guitar and synthesizer wasn't the normal "fare") and I believe I could not have had a better education had my parents been willing to pay for private school. If I had a time machine I'd go back and relive it all again, it was such a nice and formative time in my life.
It's a shame I realistically won't be able to offer my kids the same without going into truly ruinous levels of debt!
Rolleston is ultimately much better buying (house-wise) than Chch. I personally like it the least of the three main Selywn 'commuter towns' - Rolleston, Prebbleton and Lincoln - but it has a lot of amenities, shops etc and my friends who live there all love it and have much nicer houses than me with great space for the kids and comparatively manageable mortgages.
I just don't like the feel. Lincoln is my preference as it has a nice village feel. There is also the cycleway that runs from Lincoln through Prebbleton to Chch. On my eBike I can get from Lincoln to CBD in about 40 mins - roughly 20km distance. My wife took longer than that the other day to drive across Chch CBD.
You can either buy a much nicer house in Rolleston for your $ vs Chch, or buy a similar house for a lot less $ ... depends on your preference I guess.
My view with these Selywn towns is you may as well buy the nicest house you can that will last as long as possible for your needs, as selling will be more difficult than Chch (from what I've seen) due to the ever-expanding nature meaning more choices.
If you are happy with the place and don't mind the commute to Chch, or you WFH or work in the area, then it's comparatively good buying.
TBH if there was some form of commuter rail in from Selwyn to Chch I wouldn't even bother house hunting in Chch at this point. The buying is just so much better in Selwyn but you do risk car dependency.
No worries. I think if you want a nice house with a decent sized section that is post-quake, cheaper rates (for now) and still decent amenities, then the Selwyn towns are good - Rolleston the best in terms of the amount of shops, restaurants etc. Prebbleton is the most convenient to Chch - it really is more like a suburb now - but has the least amount of "stuff". Lincoln is considerably further but has the most pleasant atmosphere and vibe of the bunch.
However, you need to DYOR into schooling if that's a factor, and if you have a job that requires regular commuting into town at normal commuting hours, traffic could be a right pain. Getting to/from these towns outside of peak hours is no big drive at all, however.
One other thing (and I don't know how true it is) but somebody once told me that Rolleston is the most indebted place in New Zealand relative to incomes. I know from anecdotal experience it's not uncommon for people to have everything on tick - from the house, to the cars, to the boat, to the electronics in the house.
Every so often a house sells at a high price and the entire suburb of sellers points at it and beleives their house is worth that metric, during the boom this was simply a price per Sq m metric, or % to CV etc.
The difference back then was the next and the next house sale continued the trend, now sales are slow and patchy and metrics are all over the place and falling.
There effective price discovery, leaving a large gap between bid and ask.
I think this is more likely to come next summer now not the next few months
Would need HUGE volumes over next few months (being seen in listings) but not sales.
And they keep pouring daily onto the market where I live. What surprises me is the number of expensive homes that are being listed. People want big dollars for them. Can they not see the expensive homes are not selling and some have been on the market for a year or two. Some have been taken off the market with the hope that they will get their price when they relist.
Loved that Heavily spread Sarcasm `That leaves a lot of grumpy vendors sitting on the sidelines, waiting for the market to finally wake up to what their property is really worth, so they can receive the money they deserve for it and indeed, are properly entitled to."
When it's " Tens of thousands of , withdrawn listings,off- market listings,would be listings " if only LOTTO $$$ , could be achieved, it's a market still ,largely in delusion. Capitulation phase still far ahead, maybe in the 2027 winter. This is a long , slow , grind down.
Agreed. It took the USA 6 years to return to 2008 levels. (caveat emptor - the NZ market is much weaker than the USA).
The 1989/1990 Canada market collapse took a full 10 years to return to inflation adjusted 1990 prices.
Boomer beware, a significant portion of the boomers won't be around in 10 years' time, so they don't have the luxury of waiting for those sweet and juicy tax-free capital gains. All the while collecting their benefit (superannuation) and using the health system that they voted to underfund throughout their entire working life.
"Most international collapses take 6-7 years minimum"
The bigger the party, the bigger the hangover.
The value of residential dwellings in NZ has fallen over 70% of GDP. Housing is the largest asset class in NZ. When was the last time an asset class in NZ fell over 70% of GDP?
One place - 4bd, large section with very modest potential to subdivide - in an inner suburb of Wellington that I've used as a gauge of homes.co.nz estimates was (according to them) worth 1.6m at peak. Now 0.85m. Purchased in 2018 for 0.95m. Apply inflation to those numbers and ouch! All hypothetical of course (aside from the purchase price).
"That's the bank of mum and dad closing"
Many of those in the bank of mum and dad who borrowed from their own owner occupier residence and lent money to / co-invested with their adult children to buy at the peak, may have less money to finance their retirement.
That property purchased at the peak, may have experienced a price fall that has resulted in a substantial fall in the equity value (some may now be in negative equity)
I've previously tried to explain how the Homes algorithm works and can be manipulated by real estate agents to keep suburb values higher than they are.
Looks like a couple of things could have happened to explain the dramatic falls:
- Agents have worked out that in a stagnant market with overpriced houses and sellers in denial, entering lower priced sales promptly is actually a good strategy as it lowers the suburb values and resets vendor expectations which then helps with sales, ergo commissions
- The situation is so dire that even 'hiding' the poor sales is not enough to prop up the suburb average
Yeah, we've been over this. You never answered the question I put to you on how you think the algorithm is set. You also struggled to understand basic arithmetic so when you are able to answer that question come back and we'll talk. Until then 🥱
Out of curiosity, what explains these massive recent falls in Homes estimates according to your expertise in how the algorithm is set.
The Homes algorithm is clearly pretty stuffed these days. Considering that everything selling down here is going for at least RV, they would be better just setting that as the valuation right now. Huge difference between Homes and One Roof so somebody is wrong. Homes is now too low.
Im not the one making claims that I know how the algorithm works, that's you. But you don't actually have a clue, you're just making up whatever fits your theory on why one tiny suburb isn't behaving the way you want it to.
I suspect it is a hedonic algorithm, classifying properties on various factors and weighting those based on sales results.
What massive falls? Round my way it's steady as she goes, up a bit one month, down a bit the next.
Eg. https://homes.co.nz/address/auckland/glen-eden/1-113-glendale-road/RzOzY
And no, my basic arithmetic is fine, you just have weird theories on how unsold houses should affect the values on homes.
They are now known in Auckland as hot houses in summer, possibly unable to sell these with out that being fixed first...
Will see price carnage before you see wholesale clearance
many who bought sites to put town houses on, thought they could build and exit flat , but there is no sales now, if they sell here they are probably 40-50% down as the house is rubbish (they sought these sites in the first place).... painfull IMHO they would sell about 45% off right now
Personally I think this is good news - more houses for sale and well no one is buying = less houses to rent - lets keep our fingers crossed that immigration does not pick up - all good - should you buy please try and get a freestanding house - its getting more and more difficutl remember its the land appreciating.
Please read my comments above UB, in Glendowie I think you will see about a17-24% fall in new CV, even then some are selling below that, its incorrect to say.
Nice wee bungalows on decent sized sections aren't falling
They are, what your concept of through the floor is ? some of these 5-600k
Just not seeing drop in prices in Christchurch.
The online valuation company mentioned is just not worth reading now!
property in ChCh is selling generally $100k or more above their stupid guesstimates.
If buyers in ChCh are expecting to purchase property at what homes.co says then they are going to never buy.
Nothing surer than prices in Christchurch are on the rise.
If the public doesn't want to buy townhouses in Christchurch (can't blame them). And the developers are sitting on mountains of inventory, then maybe the crown could buy them? Is this socialising the loss? Crown could buy for the build cost and the developer makes zero.
If the public doesn't want to buy townhouses in Christchurch (can't blame them). And the developers are sitting on mountains of inventory, then maybe the crown could buy them? Is this socialising the loss? Crown could buy for the build cost and the developer makes zero.
Let the market determine the market price by allowing non Crown entity buyers and developers to transact.
If there is no existing underwrite by Kainga Ora or any other Crown entity to buy, then the best financial deal for the Crown would be to buy them from the receiver or liquidator at a low ball bid. Perhaps another buyer might emerge and bid higher - that would be the market setting the market price. The Crown should not be bailing out developers who bore the benefits of profits and the risk of losses. Taxpayers should not be bailing out developers.
What is the public interest in bailing out developers? Shareholders of developers who chose to take the choice of seeking profits and risks of losses should bear the consequences of that choice.
Financiers of developers chose to take the choice of seeking profits and risks of losses by lending to developers should take the consequences of that choice.
People are free to choose, however people are not free to choose the consequences of their choice.
Capitalism without bankruptcy is akin to Catholicism without hell.
The bigger the party, the bigger the hangover.
"I agree, price discovery is best."
The statutory manager of Du Val group still has properties owned by the Du Val group listed for sale. These properties can be found on trademe.co.nz.
Will be interesting to see the prices at which the Statutory Manager is willing to accept.
"I wonder how many more developers will tip over."
Will be interesting to watch.
"Homes just dropped my online valuation by $200k when I know for a fact that it would sell for more than the old online valuation"
Is this the similar perspective of vendors who currently have their properties listed for sale?
A real estate agency commented that vendor price expectations have risen faster than buyer price expectations. This has led to the increase in the number of properties listed for sale.
That depends. Is the vendor basing their price expectations on what something sold for in 2022 or on what sold last week? In my case, its last week, and all the sales in 2025. Not everyone is doing their market research and is just basing their price expectation on "my mate sold something similar a few years back and got $x"
"The Man3 is standing on his head."
There is a a potential undisclosed vested financial self serving interest, and potential undisclosed conflict of interest.
Everyday, a product seller or service seller practices their ABC.
The product seller or service seller may make unsubstantiated assertions.
CAVEAT EMPTOR
"I'm seeing prices drop in Christchurch, and so does the REINZ HPI. "
The independent objective data seems to negate the unsubstantiated assertions being made by a person who may have an undisclosed vested financial self interest and undisclosed conflict of interest.
I'm also monitoring a regional town. Late last year it was apparent that anything over $900k wasnt selling, and now it appears that even homes (many brand new) are struggling in the $800s. Lots of new 3/4 bedroom standalone builds have now been withdrawn from sale and turned over to the rental market. This has resulted in the amount of available rental stock doubling (whilst still leaving a big shortage of affordable houses and units in the area). The FHB market there (<$700k) is still doing fine.
I expect this pattern is repeating itself all over regional NZ.
Yeah, I've noticed that as well. Been looking around for something to catch my eye in the Otūmoetai general area, but nothing really yet. Most is either shite, or out of our price range vs what we already have.
Had an agent around today for an appraisal. Will be interesting to hear what they think our place is valued at. They seemed to think the market was flat values wise, at best keeping pace with inflation.
Quite a bit of old stuff out that way. When I was looking the whole of Tauranga was an option but never looked at anything out Otūmoetai. Places that came up were the likes of Ohauiti, Welcome Bay, Papamoa and I even looked at a few out at Omokoroa to the point of putting an offer on paper. Has to be a relatively new build, double glazing etc.
True, most are circa 60's to 70's houses. Current place is 60's, but we have added double glazing etc. Schooling is in this area, so keen to stay. Likewise, was keen on Omokoroa about 8 years ago, put in an offer but then decided against it. Glad I did, in light of the traffic. I'm not too adverse to older houses, pretty simple to upgrade them over time.
Um really!
Maybe because some have kids and some of are concerned that our best and brightest are leaving NZ. Some want the next generation to have the some opportunities to buy as we did and without the investors and bus loads or foreigners to compete with.
Does that help?
Not really
Seems very defeatist and entitled to be fair. Why dont you tell your kids to work hard. Its not that hard to save $50k for an entry level house deposit if you let them live with you
Thats assuming they can get a job. Unfortunately jobs are tied to house prices. So the more misery you wish on the housing market, the more misery on the jobs market
Why must you personalise - it is a very week way in which to discuss an issue?
My kids are just fine thanks, as am I. However the young bright ones are leaving in droves. A primary driver is housing affordability. How do I know - because I actually know a large number of them due to having adult children of that same age group.
He might have a fair discussion point though Rastus...how many were leaving during the boom compared to now in the bust, its a legit question, when our economy was pumping (with house prices climbing like mad weekly) were we seeing an exodus, maybe we were but it was hidden by the high immigration numbers? Or were they not leaving in such large numbers?
Apart from the general OE folks it would be interesting to compare, maybe it's as much job opportunities as house prices, devils advocate...maybe the ponzi might've actually helped to keep some here because they were earning more money in a better economy.
I think the "young bright ones" have always kind of left, NZ struggles to offer the same opportunities for career development that they can get offshore (from my uni mates there were engineers off to Singapore, teachers off to Asia and bankers off to London etc.)...interesting thought.
2013, before 20% LVR.
On that note, if the banks hadn't told us we HAD to have 20% deposit in Jan 2023, we would have lost the entire deposit. Just been looking at the homes sales in our preferred area - 30% price drops, and you can see the sales where the vendor capitulated for a lowball offer. One a very cheeky 20% under, lol, but we know the vendors had moved overseas and the property was listed for over 2 years - they got 940k for their original 1.2M ask - and had paid 970k for it 10 years ago.
Had an AC guy here yesterday, he asked me how NZ was doing. Apparently a close friend had just sold their 'investment' for a 6-figure loss.
"they got 940k for their original 1.2M ask - and had paid 970k for it 10 years ago."
Over a 10 year period, the owners experienced a loss of 3% before sales costs. So this sales price below their 2015 purchase price.
Remember how property promoters repeatedly told the general public that house prices double every 10 years?
It was more in relation to the Man's understanding of most people's family situation. Not everyone has rich parents who can offer up their house as collateral. That comment reeks of entitlement and privilege and just demonstrates how overpriced the housing market is now.
That the only way you can get on the ladder is to get your rich parents to go guarantor. Maybe The Man is actually Matthew 😜
Sadly the man 3 is the third incarnation (banned twice) of an older gent who used to talk shout himself in the third person.
I used to think he was a troll as some of the stuff he spouts is just contrarian shit. Unfortunately it appears he is just an extremely out of touch old fella talking up his property empire like a cut price gollum.
Parents throwing deposit money at their kids is pretty common, I'm Gen X and now even Gen X friends of mine are doing it. Any Gen X that got married young and has stayed together and bought a house in their 20's and worked hard now potentially has rental properties as well. People keep on banging on about the boomers but things have moved on.
""Its hard to understand"
I don't understand why you don't understand
Do you not think that it's incredibly unfair that some people paid 3-4 times household income for their property years ago and now expect others to pay 8-9 times household income for that same property when they sell it (given that it's an older and a more run down asset now)?. Do you not understand that lower house prices will help those who are dreaming of owning a place of their own? Do you not understand that if house prices will keep increasing faster than salaries indefinitely that could destroy the social cohesion in our society if not lead to an outright revolution (many revolutions throughout history can be boiled down to 'HAVE NOTs' vs 'HAVEs")?
I have done the same and don’t totally agree . It seems harder as the numbers are bigger. The fundamentals are the same though
We think $1m is an absolute fortune, but it’s the same as $300k in 2000
No one was really able to jump social classes because of lower house prices. It’s all relative
Oh god, the salary from my job hasn't increased anywhere near 6x during my "investment career"! :), Even if you include all "passive income". At best my "salary" - ie. the income I used to buy the first property, maybe doubled within that time. That's the income I'd have to use to buy the first property today. Mind you, I don't work 16 hour days anymore, so that might have had something to do with the relatively weak "income from the daytime job" growth.
don't forget though that in 1990 mortgage interest rates were much more than double what they are now, around 14% I think.
It takes 'working hours' to pay back interest on the mortgage as well as principal, therefore you should include interest rate considerations in your calculations.
At 14% interest p/a I am sure that boomers/early Gen Xers have poured more working hours into covering such high interest rate than a young person borrowing today at 5-6%.
Well, I was talking about purchase price, not total price. The fact remains a current purchaser has to work as many hours for their deposit as a boomer did for their whole house. But to humor you:
Assumption 1: Interest rates are eyeballed average of the decade following purchase and don't drop. This ignores the reality that interest rates overall trended downwards in steps roughly every decade until recently.
Assumption 2: Incomes remain static. This ignores the reality that incomes generally increase until near retirement.
Assumption 3: No deposit.
Statement: No one in these scenarios can pay the mortgage back at the recommended maximum 33%.
Boomer, 1981: DTI 3:1, 15% @ 50% income for repayments - 13 years.
Gen-X, 1990: DTI 5:1, 10% @ 50% income for repayments - 32 years.
Now: DTI 15:1, 5% @ 100% income for repayments (*) - 25 years.
(*) Note now requires two incomes to service. Or 50 years of labour!
Conclusion:
Houses are much more expensive now than they were for the boomers who are trying to offload them.
If each were to put up deposits worth identical hours, it's easy to see that the repayment times and overall labour's worth of houses have drastically increased.
So back to my original assertion:
How is it that boomers think these prices are fair?
1981 (average boomer is 28):
Average income 11,000 - but almost half the adults not working (mums & uni students). Source: census 1981.
Average house price: $35k.
Just over 3 years of a households income -> 3,000 hours of a single persons income.
2024 (average boomer is 71):
Median income is $50k.
Median house price is $775k.
Or just over 15 years of a single person's income -> 15,500 hours.
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