By Bernard Hickey
The Real Estate Institute of New Zealand (REINZ) has reported there were 4,502 properties sold in February, which was up 38% from January but down 10% from February a year earlier.
The median sale price in February was NZ$350,000, which was up from NZ$340,000 in January, but flat from a year ago.
The median number of days to sell rose to 58 days in February from 51 days in January and was up from 46 days in February a year ago. During the boom from 2002 to 2007 the median days to sell in February were around 32 days. The record high days to sell was 64 in January 2001 and the previous high was 62 in February 2009. The median days to sell in Northland was a record 111 days.
The REINZ described the sales figures in February as showing a modest recovery in housing prices and volumes. It said volumes were up 45% in February from January once sales in Canterbury/Westland are excluded.
“Overall, the data is a bit of a mixed bag,” said REINZ CEO Helen O’Sullivan.
“February’s transaction volumes were always going to be an improvement on January, but the improvement in the raw medians in most districts as well as in the stratified median prices is a positive sign," O'Sullivan said.
REINZ's stratified median index is compiled using methodology specified by the Reserve Bank to remove the skew from more sales in one price band than another. See our interactive chart here and below.
It shows the index up 2.3% over the last month, but down 0.9% over the last 3 months and down 0.7% over the last year. It remains 5.6% below its peak and compound annual growth rate over the last five years was 2.3%.
“The recovery in transaction volumes in Auckland and Manawatu/Wanganui is encouraging, with both areas recording higher numbers of transactions in February 2011 than in the same month of 2010. In fact, Auckland’s transaction volumes were marginally higher – by just one transaction – than in February 2009. On the less positive side, the overall transaction numbers are still 4.3% below the February 2010 level, and median days to sell increased nationally and in most areas," O'Sullivan said.
REINZ said reports from its members indicated that although rents are rising in key urban areas and there was a continuing shortage of housing stock, particularly in Auckland, buyers were still being cautious.
"This is evident in the increased days to sell, which measures the time between the property being listed and an unconditional sale being completed. Equally, vendors are not under pressure to sell and landlords are successfully increasing rents, albeit by small increments," REINZ said.
O’Sullivan said the Reserve Bank's cut in the Official Cash Rate last Thursday may provide some encouragement to buyers.
"Equally however it makes it easier for current owners to hold if they don’t see the pricing they expect. We would be really pleased if the rate decrease had a positive impact on the construction of new housing stock, especially in the Auckland market.”
Canterbury earthquake
REINZ said the Christchurch earthquake on February 22 had hit sales volumes in the area.
"A small percentage of Christchurch offices were unable to file returns for February and some sales reported as going unconditional in February may not complete if there has been substantial property damage," it said.
"Future sales are likely to be conditional on structural and geotechnical assessments, which will take time to complete. However, inability to procure insurance cover is currently the single biggest impediment to transactions in Canterbury."
ASB economist Chris Tennent Brown comments:
The housing market had a small recovery in turnover, and prices are holding up reasonably well according to the REINZ nationwide housing report. However, average days to sell have extended to 48 days, which is the longest time to sell recorded since March 2009. A separate report from realestate.co.nz shows the amount of inventory on the market remains reasonably contained, which is supportive of prices. Based on the two reports for February, the ratio of inventory to current turnover suggests there is currently 11.2 months of inventory on the market, which is the lowest level in 9 months.
Prices have been going sideways for most of 2010, and are currently down 4.9% from the 2007 peak according to the stratified median house price index. We expect this to continue over the coming months at a nationwide level. However, there are a number of regional influences in effect.
Auckland agents noted signs of investors returning to the market because of increasing rental returns. This is consistent with other anecdotes and reports of a relatively tight rental market in Auckland at present. However, this investor interest does not seem to be spurring an overall pick-up in activity. Auckland’s days to sell lengthened significantly over the month, but nonetheless remain below the nationwide median.By removing Canterbury from the data, the pick-up in turnover from January improves from +2% to +6%.The property market continues to remain subdued. Buyers will feel in no rush, given the lack of price appreciation in the market over the past year. The market remains tipped in the buyer’s favour, evidenced by the long number of days to sell a property at present. We expect prices to remain down around 5-6% from the 2007 peak over the coming months. We also expect prices to hold up better in the regions with stronger population and wage growth over the year ahead.
The RBNZ has cut the OCR to 2.5% following the Canterbury earthquake. The RBNZ has recognised the economy was already tracking considerably weaker than expected prior to the quake. In particular, the RBNZ noted the continued caution in the household sector and weak residential investment. We expect household caution will continue over the coming months, and expect the OCR will remain on hold until March 2012.
Here is the REINZ's regional commentaries.
Northland
The median price for Northland rose modestly between January 2011 and February 2011, but the results within Northland were mixed. Whangarei City recorded solid gains in prices, however, these were offset by falls in Whangarei Country. Volumes improved significantly compared to January 2011, but were down by a quarter compared to February 2010.
Northland’s days to sell reached 111 days, up 15 days compared to January 2011 and up more than 60% compared to February 2010. Northland’s days to sell have set a new record, beating the old record of 96 days set in October 2000 and again in January 2011.
Auckland
Strong growth in prices in the North Shore in February 2011 compared with January 2011 were offset by falls in the outer parts of the region and Rodney District. There was modest price growth in Manukau City, but Waitakere and Auckland City did not register any significant price movements between February 2011 and February 2010. Across the Auckland region, price movements were modest. There is some indication of investors returning to the market to acquire well priced rental properties as a result of increasing rental returns.
Volumes were up strongly in February 2011 compared to January 2011, however, Waitakere City recorded a comparatively modest rise. Compared to February 2010, North Shore recorded strong volume growth, but Rodney and Outer Auckland both recorded significant falls. The number of homes sold in February 2011 is also very similar to the volumes in February 2009.
Auckland’s days to sell increased from 41 days in January 2011 to 50 days in February 2011. Days to sell were also 41 days in February 2010. Auckland’s days to sell at 50 days is at the upper end of February results for the past 10 years.
Waikato/Bay of Plenty
Prices generally fell modestly across the Waikato/Bay Of Plenty region during February compared to both January 2011 and February 2010, although there was some positive price movement in Taupo. Compared to February 2010 medians dropped noticeably in Waikato Country and Mt Maunganui/Papamoa; however, given the relatively small data set medians need to be treated with some caution.
Volumes were up strongly compared to January 2011, but compared to February 2010 the picture was more mixed. Taupo’s volumes were markedly stronger as a result of vendors being more willing to accept the current market pricing. Waikato Country and Rotorua recorded noticeable falls in the number of sales, while Mt Maunganui/Papamoa recorded a noticeable increase.
The median days to sell jumped to 79 days across the region, compared to 66 days in January 2011 and 62 days in February 2010. This is the longest median days to sell for the Waikato/Bay of Plenty region since January 1992 and exceeds by 1 day the previous record set in February 2009.
Hawkes Bay
The median house price rose noticeably in Napier between January 2011 and February 2011, but recorded a 5% fall compared to February 2010. Hastings recorded no change between January 2011 and February 2011, but a slight modest increase compared to February 2010. Across the region the median price only moved modestly between January 2011 and February 2011, and no change was recorded compared to February 2010.
Volumes were stronger in Hastings, but weaker in Napier compared to both January 2011 and February 2010.
The median days to sell was 60 days for February 2011 compared to 55 days in January 2011 and 45 days in February 2010. 60 days to sell is at the upper end of the medians reported over the past ten years.
Manawatu/Wanganui
The Manawatu/Wanganui region recorded a very mixed result for both median prices and volumes for February 2011. Changes to the median price were modest for Palmerston North compared to January 2011 and February 2010, but volumes were very strong across the same time periods. In comparison, Wanganui recorded an increase in medians, but weak volumes. Overall, the regional volume growth was largely driven by Palmerston North, with Wanganui providing the median price growth.
Indications are that well presented properties in the $200 - $300,000 range are attracting both first home buyers and investors, however, buyers are undertaking plenty of research and are not being rushed. The median days to sell increase to 65 days in February 2011 compared to 52 days in January 2011 and 53 days in February 2010.
Taranaki
The median house price dropped noticeably in Taranaki Country between January 2011 and February 2011 and fell by more than 11% compared to February 2010 – however, the data set is small and medians need to be treated with some caution. Volumes for Taranaki Country also fell markedly compared to February 2011. New Plymouth City recorded a recovery in volumes during February 2011 compared to January 2011 and the volumes are in line with February 2010.
Across the region prices rose modestly between January 2011 and February 2011, but were flat compared with February 2010. Across the region the lift in volumes in February 2011 compared to January 2011 was significantly weaker than the lift in volumes across the rest of the country (excepting Canterbury/Westland).
The median days to sell in Taranaki reached 64 days in February 2011, compared to 54 days in January 2011 and 49 days in February 2010. The median days to sell is back at the same level recorded in December 2010.
Wellington
The median house price for the Wellington region increase 10.4% between January 2011 and February 2011 with strong growth reported in Hutt Valley and Central Wellington. Compared to February 2010 the median price rose strongly in Hutt Valley and to a less extent in Central Wellington. Across the rest of the region results were mixed.
Volumes were up strongly in February 2011 compared to January 2011 except in Western Wellington. This part of the city also recorded the weakest volumes compared to February 2010. Volumes compared to February 2010 were also weak in Eastern Wellington, although there was very strong growth recorded in Upper Hutt.
The Wellington region’s median days to sell fell from 60 days in January 2011 to 49 days in February 2011, but this was up markedly on the 32 days recorded in February 2010.
Nelson/Marlborough
Median price movements across the Nelson/Marlborough were modest in February 2011 compared to both January 2011 and February 2010. The volume lift in February 2011 compared to January 2011 was less than half that recorded nationally (excepting Canterbury/Westland), while the drop of almost 21% compared with February 2010 was the weakest of all regions (excepting Canterbury/Westland).
Somewhat unexpectedly Nelson/Marlborough was the only region to record a drop in median days to sell, with February 2011 recording 48 days compared to 57 days in January 2011 and 55 days in February 2010.
Canterbury/Westland
The Canterbury/Westland results have been impacted by the February 22 earthquake, which means that the results should be treated with caution and cannot be relied on as an indicator of trends. A small percentage of Christchurch offices were unable to file returns for February, and some sales reported as going unconditional in February may not complete if there has been substantial property damage. Normal confirmations of sale were interrupted following 22 February for obvious reasons, but also because a large proportion of legal firms were unable to access their premises. Some of these transactions may be reflected in March figures instead.
Future sales are likely to be conditional on structural and geotechnical assessments, which will take time to complete; however inability to procure insurance cover is currently the single biggest impediment to transactions in Canterbury. All insurance companies are imposing stand down periods, with the minimum reported period being 21 days.
March will also be impacted by the lack of availability of media advertising anywhere in the city until around 9th/10th March, nearly three weeks after the quake. Transactions, which are conditionally concluded in March, are unlikely to complete in that month due to these limitations.
Central Otago Lakes
The median house price rose noticeably between January 2011 and February 2011 in Queenstown, although the median price in Central only increased modestly. Volumes in February 2011 were also up significantly compared to January 2011, but were down markedly compared to February 2010.
The median days to sell for the Central Otago Lakes region increase from 52 in January 2011 to 67 in February 2011, similar to the 66 days recorded for February 2010.
Otago
The median house price for Dunedin and the Otago region rose noticeably in February 2011 compared to January 2011 and modestly compared to February 2010. Volumes were up strongly across the region between January 2011 and February 2011, and Otago recorded the 3rdstrongest movement in volumes compared to February 2010 of all the regions.
The median days to sell only increased modestly compared to most other regions, with the median days to sell rising only 2 days between Januarys 2011 and February 2011 to 57 days. The annual change in median days to sell between February 2010 and February 2011 was only 6 days; from 51 days to 57 days.
Southland
Median house prices rose noticeably in Invercargill and across the region generally, but there was a significant fall in the median price in Gore. Volumes were up, in line with the national movement in both Invercargill and Gore in February 2011 compared to January 2011, but elsewhere in the region volumes were noticeably weaker.
The median days to sell for February 2011 was 52 days, an improvement on the 57 days recorded for January 2011, but significantly weaker than the 32 days recorded for February 2010.
(Updated with interactive chart, regular chart, detail on Christchurch sales, ASB economist's comment, REINZ Regional details)
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105 Comments
Duke,
if you really knew anything about property you would be aware that the market is subject to very strong seasonal influences
comparing Feb prices to Jan prices (or volumes for that matter) is ridiculous
you should also be aware that the average (i.e. mean) price is a very unreliable guide
try looking at the stratified price
Whatever effect the 'quake has had, it doesn't show ( as the figures for Christchurch etc. appear to have been excluded). But how is that right? If, as we are told, Christchurch people are leaving the city and buying in, say, Timaru, Dunedin or Auckland, those centre's figures are included and will show an exceptional activity there, that is not offset by the exceptional decrease in Christchurch? The figures are therfore skewed?
@Snarlypuss ... Somehow , I doubt any Chch people are buying anything right now , even the very wealthy would be adopting a wait and see attitude, until insurance pays out , and decisons are made about the re-build , etc .
Those that I know (albeit only 3 families ) that are now in Auckland are staying with family (in the case of 2 families) or renting a backyard minor dwelling ( the other family)
Errr....it's not us guys 'excusing' the figures...."The REINZ described the sales figures in February as showing a modest recovery in housing prices and volumes. It said volumes were up 45% in February from January once sales in Canterbury/Westland are excluded." And, hey; they're in the business of putting the best light on the figures! So they must be underlyingly...awful.
"Real Estate giant Ray White is cutting the number of its Christchurch offices by about 40% in expectation of a considerable drop in the city's population and business." That's probably an anecdotal indication of how much is missing from the figures.....
Thing is meh...the vested interests would claim as a positive house prices averaging a ten million dollars per box of shite....and if you think that's just poop for the scoop, consider what a Kiwi peasant circa 1880 would say about house prices reaching an average 175000 English pounds by 2011.....they would say you were mad.
Debasement of the Kiwi$ is about 4%pa.....40%plus in ten years.....do the math on a lifetime of 80 years and see what you get.
A Chocolate fish in 2091 will cost you $100 each.
This has always been my point about analysis whose job is determined by how well their market is going. The spin will never be negative. Much like the analysis during the first Tech Bubble where all the analysis where never allowed to say “sell” they could only recommend a “hold”. And everyone knew with a “wink wink nudge nudge” that a “hold” really meant “sell”. This is the type of analytical data hocus pocus that is really the definition of Caveat Emptor.
Hay Bernard,
Is it possible to have a graph that we can change the vertical axis on so that it starts at zero? With the way its set up now it makes the market look like its fluctuating wildly.
Check the scroll bar at the bottom where the graph does start at zero. Notice the insignificance of the change in the property market since the peak when looking at it that way. In fact the index has dropped less than 6% between the most recent point and the highest point.
Does 6% even count as a crash?
"Marlborough Civil Defence head Ross Hamilton says it is difficult to imagine what the next phase in the rebuilding of Christchurch will be, and what it may mean for Marlborough.
But he believes builders and building inspectors would probably be in heavy demand in the coming years.
Some builders from Marlborough could be lost to the Christchurch demand, causing the region's building market to slow, he said."
Chch will lead to two things....a big rise in building costs plus gst....and a decline in the building sector in all other regions bar Auckland which will remain in a bubble as north island labour floods into the city.
The much touted export sector rural splurge will not take place. The regions are set to display the worst impacts of the recession. They must also deal with the real rate of inflation.
I expect the exodus of the mobile from the regions to gather pace.
It had been a nice little dead cat bounce.
But like all property bubbles, the worst is yet to come:
23 years ago I moved to a 2 bedroom flat next to the UK embassy in Tokyo, it was valued at over US$1million. The palace acros the road that I could run around in 45 minutes was said to be worth more than Califonia. All this happened because the Banks and Corporations joined in the buying spree. When it all went belly up in 89 allthe banks and corporation were broke but could not admit it so the government and banks have been playing a game to show they are ok ever since. that is why Japan remains in the poop.
On the earthquake, my main office was at Honda's Tochigi plant north of Tokyo, 3 peopl were killed in the office. Japan will have a major problem feeding themselves now as their silly agricultural police says they must produce !00% of their rice and other local produce are heavily subsidised. Where will there food come from?
Deflating property bubbles.
Japan had the most well known property bubble that deflated through all of the 90's and into 2000s.
An inexperienced country like NZ can gain a lot from looking at data from other countries who have already gone through similar phases to what we are going through.
"The Japan and NZ situations are not similar."
I agree.
When I first started to follow this blog three years ago, I was pretty much excited by the predictions of 30% drop.
3 years on that still has not happened, nor do I believe it is going to happen. As opposed to Japan, we have a trans tasman agreement, which results in vendors not wanted to sell their property way bellow RV, putting it up for rent and then rush to Australia.
However to be fair to BH, they have not risen also dramatically, which goes against the core belief of who follow the "Religion of property"
I personally believe that the market is stablised now, and it is going to be flat for about many years to come.
I hope to purchase a property soon, and I do intend to give the fair market price, not the lala land price that vendor that some people still live in.
Try this one then, we're just past the bull trap..
Make your own minds up, what will happen will happen whether you agree with it or not...
The Return to Mean Phase starts after the Mean has been undershot ( I can't think when NZ housing was last under mean!) As Simon indicates, we are far more likely to be at the Capitulation Stage, that comes before Panic and Despair. Stages. We haven't had anything remotely approaching those here...yet!
Ahhh there goes my favourite word, "Capitulation".
It is what happens to those that are not only greedy, but don't do their homework. They will all learn it eventually.Haha.
Went to a work reunion in the weekend and caught up with some guys I have't seen for 20 years. One guy always thought of himself as a big time investor, but didn't get out of shares in 2008 when overbought signals were telling him to do so. He hasn't been back in since.
You'll know when it happens. It will come as an awful realisation in your soul. That's the Fear Stage. Then it's up to you whether you get in early or late on the Capitulation. The sooner you do, the less deep the Despair Stage will be. What will make 'it' happen? Lots of people realising at the same time that the game is over. You're right about 'the next cycle' though; but this current one hasn't completed yet.
Simon's graph is an illustration of human behavior patterns. We all behave similaly. That's where the 'buy when others are selling' and 'be fearful when others are greedy' sayings come from; trying to anticipate herd movements. We always behave the same, given pretty much any set of circumstances. It doesn't really matter what the market/asset is; when herd behaviour patterns come into play, as they are doing at the moment with listlessness in the property market here, the market can move fast and hard. And I wouldn't want to be long property, other than my home if I can afford it, here.
A whole raft of possibilities....for instance Greece, normal bond interest rates are under 3%, Greece is flying at 12% odd....Portugal, 7%, Ireland take a look.........Many of the US states close to bankruptcy, oil at $110+USD....
GFC over, no, it has been delayed by massive stimulus to try and stop the second Great Depression, and lots of bank collaspes the news is still awful so there is little I can see that signals back to growth and teh good times...
By all means [dis]miss the fundimentals, you may do well.......or you may lose 50% of your investment or maybe the lot.....
Big hits, no not really, massive fraud and Govn support not to take them......so many banks are realy technically if not legally insolvent its not funny...
regards
What will cause it?
Banks and large scale investors
They're the ones sitting on all the property. Whether it be in mortgagee sales waiting to be drip feed or investors who have built up portfolios with 100's of properties, generally neutrally geared so overall tax expense is minimised.
When the dump of property on the market occurs, either forced or otherwise, we will begin the next phase
Banks have overlent, they are over-exposed with long term lends and short term borrowings....I guess when you loose a hand to a chainsaw its hard to know which tooth cut first....the thing to remember though is your hand just fell off and you had better stop the bleeding fast.....just what caused the last one no one is that sure, my take is the price of oil....then we had the multipliers....here we are again back at a high oil price and no one has fixed the bnaks crazy gambling, in fact they are gambling harder...
regards
if you want to get an almost up to date indication of what the market is doing, look at the Housing Loan Approvals data from RBNZ - they are published less than a week in arrears.
The latest set (for the week ending 4 Mar) indicates that the number of loans approved is starting to track below the depressed 2010 levels, but that the total value of loans is around the same as in 2010.
This indicates that the market is going nowhere, and that most of the action (such as it is) is at the upper end.
Last weeks data is due out on Wednesday
I bought a property back in '05 and had it sold before I'd even taken it over ( granted, it was bare land)! It happens.....And what about ' off the plan'? That's sold before it's even built! Maybe Bob's done a pre-sold conversion..?There's lots of reasons that a property sells in short order. And as we don't have Stamp Duty here ( yet!) it doesn't cost all that much to turn it over.
Duke,I think your comments on this thread are completely offensive, and your arguments, if they could be labelled as such, are not given any more weight with the ad hominem abuse. You do make a good case, unwittingly so, for a www.interest.co.nz moderator though! Bernard is that possible?
Some other blogs do this successfully and most posters watch what they type, or they're out for 7 days, politeness reigns and the standard of debate improves.
Duke ....... some advice..... don't type what you might not wish to say to someones face. And don't post if you're on the turps if that is the problem.
Ironbank on K Rd lost an anchor tenant last month, is nearly empty.. other than an Indian restaurant and a record company..Friedlander is offering rent deals....so what's the moral in that story, Duke...more ill-informed crap?
and again commercial, not residential..!
You're talking rubbish Duke..i actually had a drink with Jim Kirkpatrick and his gorgeous wife Gilda last week and ,yes, he has bought some commercial props. of late as he has always done.. but this blog today is about residential property and he definitely hasn't piled into any of that..i know, he told me...stop bullshiteing.!
more evidence of the Dukes ill-informed knowledge of the market..here you go, duke, fresh in an hour ago..and ,yes, it's commercial prop. seeing you're so transfixed and off topic:
"The nation's largest listed investor in prime and A-grade commercial office property AMP NZ Office Ltd (Anzo), says its earnings will drop significantly next year."
bugr ,eh, duke...off you go and do your homework!
Here are some anecdotes(yes, not very scientific) from my property hunt this weekend.
Went to a Auction(my first time) for 3 bedroom cross leased property in browns bay. Was nicely renovated. RV was $340
Bidding started at $360, but the same bidder went up another 40K to "meet the vendor". Although I found this strange since he was the only one bidding. Still the reserve price was not met. I reckon it got sold for #395 but I did not stay to find out
Went to another open home for 3 bedroom house in glenfield, which was also nicely renovated. This was the first time I saw my name of page 3 of the visitor book. Apparently 25 groups had come through. I contrasted this with another property a month ago which was of similar condition and there were only 3 groups(including myself).
Crappy houses still not get many goups, so my guess is the lower interest rate is going to push the prices of nice houses up.
I'd suggest many, if not most, people in 'the book' were doing the same as you? Checking out the market. And many of them would be nervous vendors. After all; we do have a large supply, seen and unseen, of property on the market for this time of year. (NB: It's easy to get one of your friends to bid up your house, if they know what the reserve is! It's 'against the rules' I know; but do you really think it doesn't happen? Just like TradeMe!)
"After all; we do have a large supply, seen and unseen, of property on the market for this time of year."
From my observation of the number of houses on market and the number of sold sticker is fairly good. North Shore seems to be doing pretty ok. The average price from my own reserach is still around 90-110% of RV for 2-3 bedroom houses/units. Time of selling for most houses seems to30-45 days. However BH may have more detailed figures
" It's easy to get one of your friends to bid up your house, if they know what the reserve is!"
Yeah I think that would work in case of multiple bidder. However in this case there was only 1 guy bidding against himself (which I personally found strange). Maybe the guy really wanted the house and wanted to make money from rent. (400-500 per week based on rental appraisal)
Makes you wonder if the bidder was genuine or not...
Friend of mine auctioned her house on Saturday, she's owned it since 1982, a cliff top property in Torbay, Auckland. She got one million for it, whereas the real estate agent had consistently told her that 1.3 million would be the minimum they'd expect it to go for...
There is a lot of talk on here of houses having to meet the 3 x earnings multiple...apparently this was the norm until the 70s/80s...
Can someone please explain why this should still apply when the average house size has increased by something like 50% since those days.
Would that not indicate a multiple of 4.5 x is more appropriate, and unlikely to reduce until the size of houses reduces ?
Or have I missed something ???
Odd as this may sound , there is no relationship between the size of the house and the ratio of afforadbility measures .
The avaerage Kiwi family living in average Kiwi house should not be spending more than 33% of their income on housing , and as a rule of thumb an average house should not cost more than 3x times the annual average salary .
My beleif is that in some provincial towns , the ratio may well be in kilter
However , its simply not prudent to be as indebted as many Aucklanders are , when you have a mortgage of 7x times your annual income, thats just dumb .
If something goes wrong it ends up a mortgagee sale, you have a negative credit record or become a bankrupt , and its a disaster for you and your family
The easy credit over the past few years is to blame for this, but not inisolation . Local authorities have made land so expensive to subdivide its ridiculous.
It is what you can afford....is a bigger house that much more? or really just a bigger box enclosing a bigger space....
Houses have got bigger because thats how builders make a bigger %....it costs them little more to build a house a bit bigger but they get a much better return, so they do....
Also with new building techniques and materials are houses more expensive per sq m to build than old ones? remove inflation and you might find not...
That 3:1 seems to be pretty cat iron IMHO.....right now we see a boom fired by very cheap interest rates, I dont think we have ever seen it before....the problem I have is if we get deflation, that will not only mean the bubble bursting but that 3:1 mean drops away as wages drop...housing than has to drop to catch it....
Depends on your appitate for risk.......Im not a kamakazi....
regards
We have somewhere around 1.7 million houses in NZ
We are selling around 50k a year, or around 3%.
If 30% are owned by investors (approximated using statsnz), then it only takes 10% of investors to want out before inventory doubles which will start some decent price falls, then fear will do the rest.
Would it be fair to say 10% of property investors got in after prices started going up, with goals of capital gains?
The overall sector is negatively geared, so cashflow is secondary to most property investors.
How long can they put up with zero cap gains?
They've prob seen the new ad on TV for Gold, and looked at some charts, and thought its the new big thing, getting in late on this bubble just as they got in late on the property bubble.
Auck prices are trending up year on year if you look at the stats this article refers to.
So there are in fact small capital gains being achieved - meanwhile rents are also increasing.
Along with inflation - these factors are moving the market up to its new equalibrium.
The same applied to Christchurch. Read Chris_j's post on the other thread. Soon, even Auckland and Wellington, will be seen as a place that many would rather not be unless they have no other choice.
You mistakenly assume there must be a shortfall - not everyone is as bad at investing as you!
You assume tax breaks are needed to make the investment viable - not everyone relies on such fickle legislation to make an investment work!
It's a rort?
Actually it's providing people with a basic need!
Cheers!
SK You are right .... "not everyone" ... but many have got negative gearing that has to be funded from their pockets. The tax breaks simply encouraged more freeloaders onto the train. I have found over the years that most property investrosare quite clueless, getting into investments with a herd mentality, and stumbling along until they get eaten or starve.
As for me , I have a single tenant commmercial building that I traded from when I was younger . Its cash positive , but I fear losing my tenant in this dreadful economic environment. My house is paid off
This market is still heading for a fall , I saw in before in the early 1980's and again in the late 1990's . In both cases there was ample warning ( when you look back)
Its awful when property loses 30% or more of its value , its scary and depressing , but property, like it or not is subject to all the same ravages of the free market system as any other asset class , and yes property prices can, and do, fall.
I drove through Wanganui and Palmerston North today. Two things were very apparent. The large numbers of houses for sale in Wanganui and the large number of empty shops in both cities. Something is happening especially in retail. People are not spending like we used to. They just are not coping with the increased cost of living in areas of food and energy. Just how they are going to borrow more and push up the cost of houses escapes all logic and common sense. Our son met up with us in Palmerston North. He is in his post graduate year at Victoria.He said a number of his friends were talking about going to work in Australian mines to get some quick money to pay off their student loans. What a pity they think they have to leave our wonderful country to get ahead. Just like the thousands who are currently leaving NZ each month for good as I speak.
What did you see in the early '80's boatman? The early '80's was the start of a recovery after 6 years of stagnation after the '70's oil shocks. Real prices nearly doubled by '87. The late '90's saw a 10% fall after the Asian Crisis, flat until '01 then off to the moon until end of '07. Down a bit in '08, up a bit in '09, flat in '10. When has property in New Zealand lost 30% of it's value and why on earth would you be scared and depressed if it did? Overall, a greater number of people would benefit and be downright chirpy about it. The fluctuations in nearly every other asset class have been huge, unpredictable and generally a pretty wild ride since the GFC. New Zealand property must have had the least action of any asset class anywhere. Commodities, equities, metals even collectables, up down and round and round. NZ property hasn't even managed a 5% move up or down in any 6 month period since '07. Yawn. The obsession with picking the demise that never comes on this board beggars belief.
OK, let's run through the list:
1. Natural disaster dusrupts production in a key global exporter: check.
2. An event which nudges a major economy into financial crisis: check. (If you don't think Japan's economy and finances will be pushed over a threshold by the quake, please be patient.)
3. Ignite a chain reaction of mass movements in a key oil exporting region:check.
4. Supply-demand imbalances in critical materials and grains: check.
5. Central banks and sovereign states addicted to vast quantities of printing-money and credit creation stimulus which trigger rampant inflation in essentials:check.
6. Massaged statistics, channel-stuffing, misrepresentation of risk and unlimited propaganda by a failed Status Quo: check.
Does anyone seriously think the global recovery is still intact? Based on what? Does anyone think that stagnant/declining wages, falling real estate values, skyrocketing prices for materials and energy, and belt-tightening by bankrupt States are ideal foundations for higher profits?
Anyone who doesn't realize the quake in Japan is a tragic load dumped on a fragile addict's quivering back (i.e. the global recovery) will undoubtedly be surprised by how fast the global economy will start unraveling. Anyone who kept their eyes open is only wondering how a debt and propaganda-fueled recovery lasted this long.
http://www.oftwominds.com/blog.html
AndrewJ -
well put indeed.
Quite laughable how some are playing down the eocnomic impact of this tragedy.
One thing that came to mind from this disaster is how vulnerable much coastal property (including suburbs in Auckland) are to tsunamis. We saw the vulnerabililty of "Desirable" clifftop properties in Christchurch
Just had a coupleof interesting discussions one with a local banker who said her job is so bad at the moment as all she does is add to the pile of insolvent businesses. The housing industry here is in a mess sales are strong in low priced brackets under 300 k
1.5 million asking are being reduced rapidly and mortgagee sales for one coastal 5 bedroom will go for 600K built 2007. most sales are knocking 30% of asking and most people selling are trying to get 2010 RV and failing.
Bernard, have a look at www.hotcopper.co.au
They have fairly tight moderation for the obvious litigation concerns regarding comments on ASX listed companies, But also ban o swearing, off topic discussion, personal abuse etc. But it works, the light to heat ratio is better than most share/trading forums... offending posts are just.....blocked out !
Problem I have with "obvious litigation" is that its like gaging orders.....they get abused....
While "The Duke" was an ******* he's pretty rare in here..... and breadth of debate is good, for instance we have ppl with out there liberatarian views but they are generally positive to others....and things are never black and white, there is always a shade of grey.....Generally I think the thinking / observant ppl in here (as opposed to the PIs who frankly amaze me) show a similar theme/concern its just the solutions......vary greatly....
regards
Vera the people who play with shares and commodities are normally only playing with small amounts of money. The problem with property is you are playing with big money and generally a lot of it is borrowed. You talk about 5%. Tell that to the person in Wanganui currently trying to sell his or her rental and they will laugh at the 5%. Then add to it inflation since 2007 when the property market turned and you have some real numbers which are far greater than 5% in real terms. Property is expensive to buy and not easy to sell as a result.
The mistake made by many today is failing to account for the debasement of the currency when determining values and changes over time. So far the value of the Kiwi$ has fallen a good 11% since the start of 08. Property would have to return that loss before any gain could be counted.
There is every chance the rate of debasement will speed up because higher inflation is seen by govt as a good thing.
OK Wally........what have I missed....and where the hell is everybody....and who are all these new people......and where's GBH...Robo......and how did you get on with your rubber thingy...I did notice the Duke got the red card....ah well he'll be back as Ollie in a much nicer dress.
Your point of currency debasement was well spotted ....and I fear this regime has had it both ways for some time now as have had others....the tipping point should not be far and so the ballon may get a little more air than the good Doctor is predicting.
Wonderful things Christov....according to the spin and BS in the poodle media...Chch is on track to start preparing to make a begining on planning the rebuilding process...in about 6 months...which is seen as the time needed for the locals to realise whole suburbs will need to be turned into parks and the home owners relocated to 'Shipleyville'....Key has ordered the whitewash brigade to solve the problem of sweeping the faults under a carpet of obfuscation...the nuclear power industry just solved the problem of deciding what might replace oil..Bollard has deemed it necessary to inject more heroin into the market to boost confidence that the RBNZ knows what it is doing....Solid Energy smells some fat profits on the West Coast....wonderful things as I said.....
Ta for that Wally....I see the tongue is still bulging from the cheek there...and I'm sure John Boy is doing the best job a forex trader could do under the circumstances.....see now I've got a bulge too.
Anyhoo I'll have to wade through the back blogs to catch up on a few things....ya still didn't say where GBH got to......lest where would we be without myrth in all it's variables.
Hello Count : Grand to have you back . And thanks to Ken Ring's almanac of " Goat-gizzard squeezing and howling at the moon " , I lobbed into town just before the 6.3 after-shock . Now for the clean up !
....... and , a group of Filippino friends are heading down to Tekapo on the 19'th , to avoid the big 'quake , that John Campbell's little buddy has predicted for the 20'th . ......... Normally sane and reasonable people , believing that quackster , Ring !
We need you back , Count ........ In your absence " Little Bill " Bernard has been running amok , kicking heads ........ and his deputy , " Typhoon " Tarrant has been haranguing us to behave ! ......... As for the Kaikoura Kid , Walter has totally lost the plot , and embarked upon stalking Gerry " Bubba " Brownlee .......
...... whew , knew we could count on you : Tinkerty Tonk !
Yep Gerry would make a great Bad Boy Bubba( that's one sick vid by the way) I have my doubts Walter will make good on that...he didnt even show on Nov 27th 2010 and left me to charge the stairs on my own......nah
hey speaking of stalkers....my girlfriend is convinced ..she ..is being stalked.!!
Well she's not actually my girlfriend......... yet.........
Hi there Dukey.....don't worry it always takes me a while to get the fly out of the ointment... holes are small n you gotta poke it a few times and try not to leave bits.
Anyways all the best with your chosen career...(not sure what it was)..but my you prosper and share in kindness.
From the report; I think its safe to exclude the January --> February numbers which are obviously seasonal.
Prices are down everywhere in the North Island in the last 12 months, and thats before inflation
Stratified Median pricing over 12 months is a reasonable measure (it takes seasonality into account) -- most of the statistics used by REINZ are not reliable
REINZ Stratified Median Housing Price Index Statistics
Location Index Level 1 mth 3 mths 12 mths 5 yr CAGR From Peak
New Zealand 3192.9 2.3% -0.9% -0.7% 2.3% -5.6%
Auckland 3366.5 1.7% -1.9% -1.6% 2.1% -7.4%
Wellington 3412.3 6.1% -0.9% -2.2% 4.2% -2.4%
Christchurch 2833.7 1.0% 0.0% -0.2% 2.0% -8.4%
Other North Is 3059.6 0.3% -0.6% -4.1% 1.0% -10.2%
Other South Is 3275.8 3.1% 1.4% 1.9% 2.5% -6.6%
Sections 4479.1 -6.0% -4.6% 5.7% 3.1% -16.9%
* CAGR is Compound Annual Growth Rate
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