Barfoot and Thompson reports 'extremely active' November; sales volumes up 23% from October and average prices up 2.5%. Your experience?

Of course its extremely  active , we have the lowest real interest rate in the history of New Zealand . Money has NEVER been so cheap.

In New Zealand and Australia, the unbridled greed of the few property speculators has resulted in great damage to our economies and society. They say no good deed goes unpunished, and the reverse seems to have happened here. Their bad deeds have been rewarded with bailouts, blame shifting and bonuses. It makes me sick.

I wonder about the psychology of Aussie and Kiwi property bulls and property investors in this environment. Do they really think this is a new paradigm where housing bubbles never burst. Reading the spruikers comments below, you'd have to say so.

Property spruiker psychology - what's going through the bull's minds?

If these people are still living in such a world of delusion, what hope is there for society. Can the 'Occupy' protests ever change the minds of people who are that sure the bubble is a myth? Let's hope we can change their outlook. For if we can't, Australia and New Zealand are both doomed!

Updated with this:

Figures from Barfoot showing sales and prices by suburban area show volumes and prices strongest in the wealthier areas of North Shore, Central Suburbs (Remuera/Mt Eden/Epsom/Parnell/St Heliers) and Pakuranga Howick.

The average central suburb price rose to NZ$705,906, up 14.3% in November from November a year ago. The North Shore average price rose 4.7% to NZ$610,713 and prices in Pakuranga/Howick rose 12% to NZ$631,045.

Prices fell in South Auckland and Central Auckland (Apartments)

The number houses sold for more than NZ$600,000 rose 38% to 299 in November, with 10 properties sold for more than NZ$2 million, double that of a year ago.

The number of properties sold for more than NZ$1 million rose 52% to 76.

Will be good to see all the many housing related businesses pickup on the back of this increased activity.

Did anyone notice that Alistair Helm is selling his house? I think people with expensive houses and those in the know, are looking to cash out while they can. If houses were a stock, they would have a "Sell" recommendation. 

And of course the Barfoot house on the water in Auckland sold a couple (few?) months ago as well. 

Yes Mae - you could be right - this data bespeaks of imminent collapse doesnt it?

No, just the best opportunity to sell at the best price. Otherwise, you'd hold.

What is it that those 'in the know' actually 'know'?

Oh, I'm not going all conspiracy theory on you, SK. Just saying that I think people who follow the financial news closely and actively manage their money/investments, may think that it is a good time to sell. Times are uncertain. It may be good to cash out. 

how does one go about doing that?

Cashing out:

Europe is obviously the huge elephant in this room - but I think most people who try and time the market and cash out - in the end are not any better off - and often worse off.

To all the property pessimists out there...like me....you've got to admit, Auckland property has been remarkably resilient...almost as if we are decoupled from global events...but how much longer?

I don't think Nic A will agree with you, "property investment is so last decade"

I am a property optimist.  However, I think these rises are peculiar to Auckland and not common to the rest of the country.  There is more stock on the market, which will be good for sales in time as any property increase has to start from the bottom.  The fact that most of the rise in Auckland is with bigger properties is odd.  i still think it is just a bounce and the next few months may be a lot slower.  But as said before money is cheaper than ever and there is no excuse to wait much longer.  You can't live your life thinking tomorrow could be the end of the world so I will wait.

Speaking of NickA - notable in his absence these days.

Also - havent seen bigdaddy along to condescend to everyone!

(although he has been and continues to be quite correct much to the chagrin of many of the inhabitants of interest)

You could buy 20 average properties in Detroit for just $240,000nz...or 40 for the price of one cheapy in Auckland......go figure.

What the 'market' is doing is dependent on where you look. Outside of Auckland, it's been hammered, coastal property in particular, down massively. Inside Auckland, the mid to upper socio economic areas have done well, the rest not that great, but not awful either.

It seems that there are really 2 markets, Auckland and everyone else.

FYI have added this link above for detail on Auckland regional sales

http://barfoot.co.nz/Info/Market-Info/Analysis/November-2011-Market-Ana…

cheers

Bernard

FYI from a reader via email:

Hi, I have been reading articles on your site for about 3 months now and it has been very beneficial so far and even saved us money by making the right decisions. I am still confused about property though, its a big topic on your site and there seems to be so many conflicting ideas that I (financial noobie) am still left scratching my head about what to do. We are a young couple, who moved from a small provincial city to a larger one for a secure job in an engineering/architecture firm. We bought a house in the larger city with a unit in the back yard and were able to keep our existing house in the smaller city.

It's a robust lockwood with great tenants and the demand for rentals in that price range is huge. The house is worth $240k, we owe $160k and it is being rented for $280/wk and as it is a no ceiling, no carpet lockwood, it is almost maintenance free. We can easily afford both houses at the moment, and my income is expected to increase as I gain more experience and become registered.

My question is; are we really going to lose everything like the gloomers on here are saying? Are we going to see a huge property demand like others are saying?

A big Q...and one you have to answer for yourself IMHO.

Im a gloomer, for me its clear, a 50%+ loss in property value is certain, I think that will be realised by 2021 ie this decade.  Now if like me you bought for 170k and today its worth 400k, a 50% loss drops you to 200k.....I am still ahead, Ive lost paper value Ive never seen, but I have my own home Im in control of.  If on the other hand you bought it for $400k 2 or 3 years ago at a 95% mortgage then the equation is way different when you consider the potential size of the loss.

If I was really brave of course I'd go short....ie sell now hoping to buy back later at 1/2 the cost and have 200k in the bank.....but I have a family these days so its not just me.....and with such a low mortgage compared to the high rent I would pay and the risk of losing my deposit if the banks fold its a hard call IMHO, day to say safety v capital gain.

If the rental is well cash positive and you are happy that a decent rise in un-employment NZ wide isnt going to impact the income then maybe its worth keeping.....my choice would be to sell...but thats my call.

On the other hand you can listen to bigdaddy and SK etc....and "prices will just continue to climb"........look at the reasoning/logic I'd suggest.........

regards

When I think of Auckland, all I can think about is Vancouver  great blog of the unraveling of real estate in Canada

well got to hand it to SK, akld property is holding up well, at least for the moment.

Was back in Akld in the weekend, had a look at the property press, it was the thickest I'd seen it for a while. Prices are still ridiculous IMHO relative to quality

Also read the North and South article debunking the myths of property spruikers. thought it was a good article, quite balanced between the bull and bear positions 

I still can't see any sustained comeback for AKld house prices though given the underlying weakening economic fundamentals. Whether the underlying weakness sees house prices fall or only stagnate / gain a small amount is hard to call though

Friends selling property in outskirts of Auckland - no takers.  It's excess to requirements i.e. not a family home.  Not desperate, so waiting for their asking price. 

There is a lot of property for sale right now, and a lot of rentals advertised.  Is the market really 'hotting up'?  I don't think so. 

Does anyone know who the buyers are?  Is it new people into the area or people who sold expecting a property crash sick of renting and deciding to get back into the market?

I've just sold my house in Central Auckland, was in the over $1m bracket. We sold as we live outside NZ, we dont expect to be back soon. We can't see any chance of getting work that pays any thing like what we earn here. There just is not many opportunities for high level management jobs in NZ. 

We could have kept it, we do have a rental property which we have kept, but I think that the current level of property value will not last, so we thought lets sell get rid of the mortagage.

I expect we will also move the money we have from the sale out of NZ also, we are considering our options about what to do next. For what its worth, I am very bearish on NZ and most western world countries. I think Europe including the UK and the US will try to print their way out of the debt hole they are in. For me the question I have been asking since 08 was how will there be a recovery when consumers are in debt up to their neck, the access to cheap money has gone. Spending equity is generally, a thing of the past. For my money real economic growth will not come until after a bust.

Lastly I must add it is very disappointing that NZ has gone and is going into debt at the rate it has done. I didnt vote this time, first time ever for me. I usually vote Act and was keen on Brash, but Banks... He's a croney capitalist, he has no credability. He ran Auckland City into bigger debts while claiming he kept rates down. I could go on but whats the point..............

I'm not about to slit my wrists, I am just preparng my self for what will be a bumpy ride!!!

We live in Europe and work in the pharma/food industry. I am not an expert, but I cannot see an industry in NZ that is going or likely to go very well. The dairy industry may well have record payouts currently and they may continue, but in 1996 the payout was in the vicinity of $4 dollars a kilo. Its doubled in 15 years, what happend to inflation? I would guess its more than double farm input prices.

Having debt in inflation could work, but have you have to pay the interest, I did pay 20% on a mortagage once its not fun! 

If Europes banks do start falling over, and thats really what the worry here is. The French or Germans don't care about Greece or Italy going under, its their own banks going bust and needing bailing is their motivation. The Germans will not let the ECB print, they remember the Weimar hyper-inflation. Austrity will not work, every time they cut spending and increase tax the economy slows so debt problem get bigger. In fact scince the Brits introduced austrity their government debt has only bigger much biger than they planned for. There is no easy way out.

My thoughts for maintaining your capital are in the direction of Gold, maybe silver, regions of the world that are undeveloped and have potiential for growth. Maybe utility companies in well managed low debt countries. Any better ideas?

You're definitely working in the right industry.  As you know, trustworthy food sources are well sought after by China, and that is part of the reason Fonterra are doing well.

20% is not fun, and it is possible it could happen again, but dare I suggest the 5 - 7% is probably going to be the new normal for the next 5 - 10 years.

In regards to preserving capital, you have the right ideas. 

Companies for growth to look out for are any business helping other businesses to significantly reduce costs.

In a deflationary environment 5- 7 % would be a very good return. This is what happens when we all rush to reduce costs.

>>>>

However, concern about the inflationary trend continuing into the future is misplaced. That is where we have come from, but it is not where we are going. Simply extrapolating past trends forward is tempting, but does not constitute meaningful analysis and has no genuine predictive value. It is far more important to be able to identify coming trend changes and to understand where these will lead.

 Decades of inflation lie behind us. It is deflation - the contraction of the supply of money plus credit relative to available goods and services - that lies ahead. The threat we are facing is the rapid and chaotic extinguishing of the myriad excess claims to underlying real wealth created during our thirty years of credit hyper-expansion.

Here is another illustrative parable of financialization run amok, looking this time at the real world consequences that follow. Whereas credit expansion pushed up both demand and prices, creating the perception of great wealth in the process, the inevitable bust crashes prices and ruins businesses. The artificial demand boost disappears, but rather than return to its previous level, demand crashes and remains depressed for a long period of time. 

The greater the scale of the credit expansion, the greater the effect of bringing demand forward during the boom years, and the greater the crash thereafter. With little demand, there is no price support at anything like previous levels, so prices also fall and remain low, potentially for years, as we saw in the depression of the 193

Look Back, Look Forward, Look Down. Way Down.

http://theautomaticearth.blogspot.com/

New Zealand homes are overvalued by 25 per cent and the country is one of nine under threat of a housing bubble burst.

The Economist warned that the "bursting of the global housing bubble is only half way through".

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10771182

The average price of an Auckland house dipped two per cent in New Zealand's most active property market as a flood of new summer listings entered the market, according to realestate.co.nz.

The online property portal's latest monthly report showed the mean price in the city dropped to $556,610 in November, compared to $568,778 in October.

The price softening appears to be due to an 18 per cent surge in new property listings in the month, with 4459 Auckland homes put up for sale in November, as sellers, having held back during the Rugby World Cup, now rush to market.

http://www.stuff.co.nz/auckland/local-news/6068730/New-listings-see-Auckland-house-prices-dip

"Housing bubble set to burst: Report"

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10771182

This morning I have discussed this article with numerous people and the result was always the same: those with major property debt aligned themselves with the Thompson and his cronies, while the people with no property debt and with futures not reliant upon capital gains shrugged and said it was overdue.

Robert Gottliebsen at Business Spectator

German-based global giant Siemens is establishing its own bank because it does not trust the solvency of the major European banks. The major Australian banks now have the same rating as some suspect European banks.

Australian banks have been money-making machines because they have paid low rates to bank depositors and supplemented their consequent low Australian deposit base by borrowing between 40 and 50 per cent of their funding requirements from the global wholesale market. (currently 40 per cent). The banks have then used their fund avalanche not so much to support businesses, but to fund houses. Australian dwellings have become among the most expensive in the world because of the widespread availability of bank credit.

http://www.businessspectator.com.au/bs.nsf/Article/Australian-banks-Standard--Poors-SP-downgrade-euro-pd20111205-P8RP2?OpenDocument&src=sph&src=rot 

One static that doesnt seem to be taken into account iis the resale of the house withing 6 or 12months.

The current speculation is pick up the run down house cheap, spend 15 to 25K quick flick and put it back on the market....usually with new tennets in.

In our area in the last couple months just over 30% of all sales are re sales..

I know 1 small 'hobby speculator that has turned over over 7 houses in the last 8 months and is still sitting on 4 houses.

Once again stats are being interpeted at face value rather looking deeper behind them....yes the speculators are back.

Sales up 23%,because everybody wants to leave auckland the ghetto it is becoming.

I am just wondering, how much does the housing market account for the New Zealand economy? And how high would that market be to be considered dangerous? Wolly, you'd probably have a good idea?