By Bernard Hickey
The Real Estate Institute of New Zealand (REINZ) has reported property sales volumes rose 5.6% in seasonally adjusted terms in December from November.
It said the Auckland market was strongest with its best sales in December since 2006 and the house price index for Auckland rising back to all-time highs.
REINZ's monthly figures are the most comprehensive set of sales figures nationwide and give the most up to date measure of where house prices and volumes are, although they are considered more volatile than nationwide house value figures published by Quotable Value (QV).
The pattern of data from QV, Barfoots and now REINZ shows the Auckland and Christchurch housing markets are the nation's strongest performing with a lack of new building supply in both and the pressure of migration (both internal and external) keeping prices firm in Auckland. The rest of the country remains subdued at best, with some parts of provincial New Zealand seeing price falls from a year ago.
The 'other North Island' category, which excludes Auckland and Wellington, has prices down more than 11% from their 2007 peaks. Auckland is the only region with prices above their 2007 levels.
REINZ reported total property sales in December of 5,316, which was up 21% in raw terms from December 2010, but down from 6,008 in November. However, seasonally adjusted figures show an increase of 5.6% in December volumes due to the usual Christmas holiday related slowdown. See Gareth Vaughan's January 10 article on QV's figures.
The median house price fell to NZ$355,000 in December from the record high NZ$367,500 in November, but remains 0.8% above the NZ$352,000 reported in December 2010.
However, the REINZ Housing Price Index, which is compiled using methodology supplied by the Reserve Bank and strips out the 'skew' associated with more houses selling in certain price brackets, showed prices falling 0.1% in December from November nationwide. The nationwide index has risen 3.1% since December 2010, but remains 2.4% below its November 2007 peak.
REINZ pointed out though that Auckland's Housing Price Index hit an all-time high in December and was 1.3% above its July 2007 peak.
Auckland recorded its strongest December sales volumes since 2006, with six regions (Waikato/Bay of Plenty, Manawatu/Wanganui, Taranaki, Nelson/Marlborough, Canterbury/Westland and Otago) recording their strongest December sales since 2007. Two regions (Hawkes Bay and Wellington) had lower sales volumes than December 2010.
For December, Central Otago Lakes recorded the highest lift in prices for the month (+7.4%), followed by Taranaki (+4.6%) and Wellington (+1.0%). Compared to December 2010, Central Otago Lakes also recorded the highest lift in prices (+8.7%), followed by Canterbury/Westland (+6.6%) and Auckland (+6.5%).
“December has been a strong month for real estate sales in New Zealand, with this being the strongest level of transaction figures in December since 2007, and Auckland having its strongest December since 2006”, said REINZ Chief Executive Helen O’Sullivan. “Across the country sales volume is up by over 20% compared to December last year with some regions such as Manawatu/Wanganui and Taranaki reporting increases of more than 40%," she said.
“While the number of transactions is rising, prices have eased back from last month’s record highs, with some exceptions in parts of Auckland and the Canterbury/Westland region.”
ASB reaction
ASB Economist Christina Leung said the REINZ data showed a continued improvement in housing market activity with a 5% improvement in nationwide turnover on ASB's seasonally adjusted measure.
"The result is in line with RBNZ mortgage approvals data showing a surge in approvals over December," Leung said. See the RBNZ stats here and see our interactive chart of those figures here.
Mortgage approvals topped NZ$1 billion per week for the first three weeks of December, which was the first three consecutive weeks of approvals over NZ$1 billion since December 2007.
See Gareth Vaughan's December 16 article here on mortgage lending with loan to value ratios (LVRs) rising NZ$800 million over the last three months.
"Against this backdrop of higher housing turnover, the housing market remains tight, although there was a tick up in the median number of days taken to sell a house," Leung said.
"Recent housing inventory data have pointed to continued supply constraints in the housing market, and this is underpinning a recovery in house prices with the stratified measure of prices increasing 3.1% over the past year," she said.
"Today’s result points to a continued gradual recovery in housing market activity taking place. This is in line with other recent housing market indicators. We expect the recovery in house sales to continue over 2012, which is likely to underpin a further modest recovery in house prices," she said.
"Nonetheless, the recovery in the NZ economy remains gradual, and against the backdrop of ongoing uncertainty offshore there remains little urgency for the RBNZ to raise the OCR. We expect the RBNZ to remain on hold until the end of the year."
See REINZ's regional commentary below:
Northland
The Northland region saw an increase over December 2010 volumes of almost 19%, although the Whangarei City and Kerikeri areas recorded decreases. Across all areas volumes were lower in December 2011 than in November, as is usual with December’s shorter trading month.
Prices also eased across the region with the Northland region reporting the second largest fall in prices compared to November. The number of days to sell for Northland eased by one day to 54 days in December compared to 53 days in November, however, the number of days to sell improved by 34 days compared to December 2010.
Auckland Region
Compared to December 2010 sales volume was up strongly at almost 28%, with all parts of the region recording noticeable increases in sale volume, and Auckland’s transaction numbers were the strongest they have been since 2006. Volumes were lower than November (as expected given the shortened working month) and were down by almost 20% on an unadjusted basis; however, on a seasonally adjusted basis (taking into account factors such as Christmas) sales volume was up 2.4%.
After hitting a new record high median house price in November, prices eased back in December with the median house price falling $5,625. Most parts of the region also saw an easing in prices, however, Waitakere City saw a noticeable increase in the median price. Compared to December 2010 prices across the region increased by 6.5%, giving Auckland the third strongest lift in prices over this period.
The number of days to sell for Auckland improved by two days to 31 days in December compared to 33 days in November, and also by two days compared to December 2010.
Waikato/Bay of Plenty/Gisborne
Compared to December 2010 all parts of the Waikato/Bay of Plenty region saw noticeable increases in sales volume. Volumes would generally be expected to drop compared with November given the shorter working month and this effect was evident in some areas. Surprisingly though some areas – notably Rotorua, Taupo, Eastern BOP Country and Gisborne City - recorded noticeable increases in sales volume over November figures.
The median prices eased across the region, with a $5,000 drop compared to November and a $10,000 drop compared to December 2010.
The number of days to sell for Waikato/Bay of Plenty eased by four days to 47 days in December, compared to 43 days in November, and improved by six days compared to December 2010.
Hawkes Bay
Sales volume in Hawkes Bay eased by almost 15% in December, after a strong lift in November, with noticeable weakness in Hastings City. Hawkes Bay was only one of two region to record lower sales volume compared to December 2010.
The median price for the region eased by almost 6%, also after a strong increase in November, with the median price falling by $17,000 compared to November and by $13,250 compared to December 2010. Hawkes Bay recorded the largest fall in median price compared to December 2010 of all regions in New Zealand.
The number of days to sell for Hawkes Bay rose by 18 days to 61 days in December, compared to 43 days in November, and rose by 11 days compared to December 2010.
Manawatu/Wanganui
The Manawatu/Wanganui region recorded a relatively modest drop in sales volume in December compared with November, although on a seasonally adjusted basis sales volume increased by 12%. Of more note is the change in sales volumes compared to December 2010, where the region reported the largest increase in sales volume for New Zealand at 45.8%.
The median price for the region eased in December, although there was a modest increase in Palmerston North. Feilding’s median price eased back after rising in both October and November, while the rest of the region reported mixed results. Compared to December 2010 the median price across the region has increase by just $750.
The number of days to sell for Manawatu/Wanganui improved by three days to 41 days in December, compared to 44 days in November, and improved by 12 days compared to December 2010.
Taranaki
Compared to December 2010 the Taranaki region recorded the second largest increase in sales volume across New Zealand. Along with all other regions in New Zealand region reported an easing of a sales volumes in December (which is to be expected given the shorter working month) following on from a solid increase in November, although Taranaki Country recorded a noticeable increase in sales volume for the month.
The region also recorded the second largest increase in the median price across New Zealand with a $12,500 increase compared to November, and a $17,000 increase compared to December 2010. Throughout most of 2011 the results for the region have been rather ordinary, however towards the end of the year the Taranaki market appears to have come into its own.
The number of days to sell Taranaki remained steady at 48 days in December compared to November, and improved by 16 days compared to December 2010.
Wellington
The Wellington regions sales volumes for December are something of a mixed bag with sizeable falls relative to both November 2011 and December 2010 in some parts of the region offset by noticeable increases in others. Western and Northern Wellington reported relatively strong results, while Eastern and Southern Wellington reported noticeably weaker results. Wellington was only one of two regions to report lower sales volumes in December 2011 compared to December 2010.
The median price across the region increased by $3,750 compared to November, but eased back by $13,000 compared to December 2010. Eastern Wellington and Northern Wellington reported lower median prices, while Western Wellington, Upper Hutt and Wairarapa all reported lifts in the median price.
The number of days to sell for Wellington improved by one day to 33 days in December, compared to 34 days in November, and improved by five days compared to December 2010.
Nelson/Marlborough
Sales volume in the Nelson/Marlborough region were 28.3% higher than December 2010, and eased back after increases in October and November. All parts of the region saw increased sales volume compared to December 2010.
The median price across the region rose modestly by $1,500 compared to November and by $4,500 compared to December 2010, with the only drop in prices coming in Nelson City.
The number of days to sell for Nelson/Marlborough improved by one day to 37 days in December, compared to 38 days in November, and improved by five days compared to December 2010.
Canterbury/Westland
Compared to December 2010 sales volume was up in all parts of the region other than South Canterbury, with Rangiora, North and Mid Canterbury all reporting substantial increases in sales volume; due no doubt to earthquake related relocations. Christchurch City has also seen an increase in sales volume with 14% more sales in December compared to 12 months ago. Sales volume across the Canterbury/Westland region eased in December compared to November, although far more modestly than most regions in New Zealand.
The region saw a 6.6% increase in the median price ($20,000) compared to December 2010, with most of the increase coming from Mid Canterbury, Timaru and West Coast. The increase in median price in Christchurch City has been relatively modest in comparison.
The number of days to sell for Canterbury/Westland improved by two days to 29 days in December, compared to 31 days in November, and improved by seven days compared to December 2010.
Central Otago Lakes
The Central Otago Lakes region saw a modest increase in sales volume for December, the only region to record an increase in sales compared to November. Compared to December 2010 the region recorded an almost 30% increase in sales volume, including a near doubling of sales in Central.
Central Otago Lakes also recorded the strong lift in median price compared to both November and December 2010, with a $30,000 increase compared to November and $35,000 increase compared to December 2010.
The number of days to sell for Central Otago Lakes eased by eight days to 59 days in December, compared to 51 days in November, and eased by 15 days compared to December 2010.
Otago
Sales volume in Otago fell only modestly in December compared to November, but also only rose modestly compared to December 2010. Whereas most regions saw sales volume increase by more than 20% compared to December 2010, Otago increased by just over 5%.
The median price across the region held steady at $245,000 compared to November and managed a $10,000 increase compared to December 2010, with North Otago reporting a slight easing in the median price.
The number of days to sell for Otago eased by one day to 31 days in December compared to 30 days in November, and improved by seven days compared to December 2010.
Southland
The Southland region recorded a drop in sales volume in December in line with the New Zealand market compared to November, although there was a modest increase compared to December 2010. Southland recorded the third weakest change in sales volume compared to December 2010.
The median price across the region eased by $500 compared to November, although it increased by $11,500 compared to December 2010. The median price in Gore fell away noticeably.
The number of days to sell for Southland improved by 10 days to 30 days in December, compared to 40 days in November, and also improved by 10 days compared to December 2010.
(Updated with Housing Price Index details and chart; REINZ's regional details; background; ASB reaction)
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114 Comments
Updated with regional details and my overview:
It's a real two tier market.
The pattern of data from QV, Barfoots and now REINZ shows the Auckland and Christchurch housing markets are the nation's strongest performing with a lack of new building supply in both and the pressure of migration (both internal and external) keeping prices firm in Auckland.
The rest of the country remains subdued at best, with some parts of provincial New Zealand seeing price falls from a year ago.
cheers
Bernard
"The rest of the country remains subdued at best, with some parts of provincial New Zealand seeing price falls from a year ago."
Errr hang on a bit...isn't there supposed to be a bonanza of commodity incomes taking place across provincial NZ.....does this not ring alarm bells anywhere...
My guess is the banks have prodded the RBNZ into allowing another credit fueled property binge using this supply of cheaper euro ECB newly printed money through the covered bond scam route...a repeat of the flood of loot several years ago. This will have the full support of the govt because it allows them to kick the debt can down the road again....
The unbalanced property based economy is getting another shot of the credit drug.
"My guess is the banks have prodded the RBNZ into allowing another credit fueled property binge using this supply of cheaper euro ECB newly printed money through the covered bond scam route...a repeat of the flood of loot several years ago."
At the end of the day Wolly how is this money any more dirty or dishonest that that already in circulation? It is all created by the same process and permits property investors to carry on their criminal behaviour with this fraudulent and leveraged money. There is nothing but toxic debt backing this money and therefore our entire real estate market if filthy and stinking. Only the morally and ethically bankrupt would participate.
I agree....it is the utter lack of prudent management that stinks...saving to buy a house went out the window on the Terrace and now everything floats along on credit...plus a healthy dose of BS...Silly Kiwi being sold a debt lemon that keeps the banks fat with profits sucked from the property economy.
FYI updated with comment from ASB's Christina Leung:
"Today’s result points to a continued gradual recovery in housing market activity taking place. This is in line with other recent housing market indicators. We expect the recovery in house sales to continue over 2012, which is likely to underpin a further modest recovery in house prices," she said.
cheers
Bernard
The key word being "modest".
Bargain basement interest rates and sickly construction is certainly giving solid results for akld.
But sorry for being a broken record, but at some point this year layoffs in retail, construction, architecture, engineering, finance and hospitality are going to kick in, the only thing that will keep prices steady is the low interest rates and construction.
With regard to the latter, i feel that is a major issue. Akld has reached an impasse where major structural issues (lack of building sector capacity and competitiveness), have combined with land supply and planning barriers, and the collapse of funding options for developers.
These things won't be solved for Years, in the meantime that spells big pain for construction, engineering, surveying, architecture, planning professions etc
Good to see that strong rise in turnover - will be quite a relief for all those many related businesses and industries which have been hit hard by lack of construction.
At least people moving house are buying paint and installing kitchens.
The 'poor old lawyers' will have noticed more conveyancing work across their desks.
(not to mention the long suffering real estate agents...)
I meanted some time ago about the market changing in different price brakets, which not long after Stats then where adsjusted for such an anomly.
This time in lower 'rental' 1st home buyer areas over the last 18 months there has been a huge increase in speculators /investors buying up run down, under priced rentals in the low to mid 200K range, spending doing a quick do up then flicking off in the low 300K range.
Watch for those advertised on trademe for 305K and 315K....then check out the sales history and u will see it was recently purchased.
Unlike the boom heyday not long ago, where the specuator simply purchased, a quick water blast and resold, now it also means dropping a few 10K in.
Of the sales since Nov in the area I have monitored since 2006 over 15% are quick flick resales
So rather than shortage of land demand increasing prices, it is more of 'added value' in this bracket.
How's the brizzy market moa? Very flat here in Adelaide.
Just found out that as kiwis we are eligible for family tax benefits. Even though my salary is about 10% lower than auckland, with cost of living about 15-20 % lower, plus family assistance plus 9% superannuation i reckon we are much better off.
Grand scheme is to save hard and buy a place in cairns in couple of years
Matt,
Brissy housing market is like their new airport runway! Some good buy though, I am in a town houses complex of 5, 4km to CBD. One of them is on the market and sold for 350K, 2 br, study and garage. You certainly wouldn't be able to get it in Auckland with the same location! I am selling up in Auck and hopefully buy a house here, my boy loves his new school so look like we are here for a long stint!
Interesting that you mentioned about salary, I am in IT and took a small paycut here (roughly 10%) but we get 17% super here and on 35hr week instead of 40hr back in Auckland. So overall, the package is a bit better. Only sydney and Melbourne are paying 10-15% higher for my kind of job. Only a very small sector in minings get mega bucks in Australia
I did a simple exercise few days ago on cost of living, comparing supermarket items we are buying in both countries, electricity and running cost, With the slighly lower salary that I am getting, we are still 20% better off here in buying power. Yep, that family assistance. we didn't even know about it until the lady at Medicare gave us the info.. and we are qualify for the 1st home buying assistance but not stamp duty concession..
Just checking the rationale, but do you not qualify for the stamp duty concession because Queensland looks at whether you've owned property elsewhere in the world?
If so, that sucks - in NSW (and NT) they don't have that particular rule, we were exempt from stamp duty in Sydney.
Yep, Queensland's concession looks at whether you've owned property elsewhere in the world. Infact QLD govt nearly wiped out the concession and replaced with a $10,000 grant to ANYONE who buying a new property (yes, investor included). So in theory if you are buying a new home in QLD, you will get 17K as 1st home buyer or 10K for everyone else..
Moa, very similar experience to me. Like you I could get maybe 10% higher salary in Sydney relative to Auckland, but that would be wiped out by cost of living.
As you say, in many fields the pay is actually a bit lower here, but when you factor in all those other things we are better off.
It really hits home how expensive NZ is as a country
Also, like you, I have a shorter working week, and more flexibility. Overall, less stress and more money in the pocket - can't complain!
Public school Matt in Adelaide, but hey that is what I pay taxes for I thought? I also use roads, as well, these are also covered by my taxes.
I have Private Health Insurance just incase I need it.
I do not owe anyone a cent so I am more self sufficent than most. I tell you what, it feels good to, knowing I have earned all I have got. Not 1 cent of state assistance.
I would have thought you being a lefty would leave benefits for the people who really need them. But to expect the Australian taxpayer to help you with your standard of living must be a bit embarrasing to you surely.
If you go to Oz and need to rely on the benefit to have a better standard of living just goes to show NZ is not as bad as you often say it is. And more will be coming your way soon, once Julia gives you rebates to compensate for the Carbon Tax for power/gas use. Carry on at this rate you may become a millionaire one day.
No , they were very courteous to us , and advised we sign for some stuff ..... but we only wanted to get on the jobs link ( job-search sent us to centrelink , and they sent us back to jobsearch ...... such fun ! ) ...
.
..... but so far , the locals and the bureaucracy have been bonza friendly to us !
We moved to Australia for other reasons, I had very good paying job back in Auckland. I would be incredibly stupid to move for this small benefit ! Beside we are working and paying our taxes here. Like MIA I am extremely grateful for it.
Apart from this small benefits, there are few safety net for Kiwi working here. Most of us have to pay our own income protection insurance
Ihave been to 3 open homes lately in rototuna hamilton. All have been advertised as having a double garage.All wouldn't be able to have more than 1 car in the garage.
Prices for these houses are between 450k and 500k.
they are so small that you can shake your neighbors hand over breakfast.
OVERPRICED AND OVERATED.
The point is all the doomsayers keep turning round saying 'one day rates will go up and property will drop again'. Well thank you very much for that expert advice. You don't need to have a crystal ball to predict that. Just as much as the Bulls can say the rates will then drop again and house prices will go up - I do think that all the Bears are really struggling for any little bit of doom nowadays.
People keep hassling Bernard for predicting that house prices would drop 15-30% from their 2007 highs. Outside of central Auckland and Christchurch, where there are genuine land shortages, house prices have dropped at least 15% real and they are still going down. Most people just look at the nominal change in value without considering inflation or opportunity cost.
Some people hassled Bernard because he constantly proclaimed that Auckland's increasing house prices were purely the fault of property investors and that by increasing taxes on houses to make them more expensive they would somehow miraculously get cheaper. The notion that a population increasing at a faster rate than housing stock (even in the 2006 boom) was likely to cause prices to rise was completely ignored.
Auckland prices are still cheap compared to replacement cost caused by District Plan provisions. A 2 bedroom CBD apartment can be got for half the replacement cost - the District Plan requires a 2 bed apartment to be $500K and no amount of extra taxes will change that - it's a rule in the Plan.
It's a 70sqm apartment - a 60sqm 2 bedroom apartment is illegal in Auckland CBD (62 + 8 deck minimum). Even if you want one you are not allowed to make that choice.
If you were allowed to build a 60sqm 2 bed they could be 15% cheaper ($425K) and if council removed the extra $50K tax (which gets margined up too) they put on in 2006 they would get cheaper again ($365K).
So two changes to District Plan have increased CBD housing cost 36% - $365K to $500K. Not a single one has been built since PM2 and the extra tax was introduced in 2006.
Yeah - banks have way higher equity requirements if you're buying an apartment (understandably). I don't think developer finance is such a big issue as it's probably mostly banks and more established developers left. The high risk levereged spec bubble developers/lenders/projects are gone
Stop talking nonsense SimonP : When someone as high profile as Bernard makes the claim that Kiwi house prices will collapse at least 30 % within one calendar year , then he deserves all the shit he gets for screwing up .......
....... such irresponsible prognostications may have swayed some investors' decisions , to their detriment .......
From that histrionic forecast , Bernard got alot of publicity for himself & for this website , but at what cost to individual investors who acted upon his advice ......
Moral of the story : Take the Tony Alexander approach ; keep your predictions small , undramatic .... realistic !
The recent revisions of various investments by ratings agencies shows that 'small and undramatic' is not always 'realistic'. Want to see the other side of the coin? Check out Jim Cramer on Bear Sterns prior to 2008,
http://www.youtube.com/watch?v=gUkbdjetlY8
Take it or leave it. As long as Bernard makes a decent attempt to do a forecast he could never be culpable for the results, and its highly debateable his forecast is even wrong. There is literally nobody who lives up to your high standard of 'market Oracle' so what you are essentially saying is all economic forecasts are invalid, more so when done by somebody with a high profile.
How would one measure if a Tony Alexander or Bernard Hickey forecast was more correct in a contest anyway? Or is the purpose of the forecast simply to not scare anybody?
Jim Cramer is famous for his appallingly inaccurate market forecasts ........ he was one of the rah rah squad , prior to the tech wreck of 2000/2002 ....... he forgot that company earnings do matter to share prices . Warren Buffett has been on the money more often than not , and in his unassuming style , been wildly more successful than Cramer ......
....... similarly in NZ , the guys with steady predictions & reasoned arguments have been closer to the mark , than the screeching from the roof-tops , arm flapping prophets of doom , ...... such as Bernard . TA & Uncle Ollie have called it fairly accurately , and not caused any investors to poop their nappies in the process ......
If you need a good dose of scaring , go take a peek in Gerry Brownlees's dirty sox & undies laundry basket !
According to the RBNZ flat property prices since Q3 would mean that in real terms they have dropped by 13.3% according to their inlfation index calculator here .
I think it is quite plain to see (in hindsight) that in cities with limited land supply and good employment prospects prices have not fallen much, but anywhere where land is more plentiful such as rural NZ, or the 'nice to have' market such as coastal property (baches etc), then prices have fallen significantly and will continue to fall.
This is as true of NZ as it is for other countries such as the USA and UK. In the USA New York prices have not fallen, due to the limted land supply (or zero land supply). In London they have fallen a bit but not much in the nice areas, if at all.
Essentially it seems that the worst of the damage has been done. While we have low or negative net migration we are not going to get another 'boom' any time soon. Higher interest rates will come eventually once inflation starts ticking upwards, but in the meantime it seems like low growth for Auckland, Wellington and Chch, and flat or negative growth everywhere else.
The bears were right, property did go down (contrary to popular belief that only goes up), but even the bears would admit that it's not been as huge a decline as anticipated.
West is cooler so it gets more expensive as all the conservative/beige/rich/boring folks move there then the people that make it cooler can't afford it so they go somewhere they can afford - in a few generations Remuera will be the artistic bohemian suburb and Grey Lynn will be full of giant beige plaster houses
The point is that interest rates are only going to start going up when the nascent recovery is definitely underway - and rebuilding in Chch has begun.
At that point:
unemployment will be heading even lower (already low compared to international now)
salaries will be heading up (5% increase already reported by seek.co.nz last week)
housing will not need the support of low interest rates.
Auck is already strong enough to not need the low rates - but you cant jack them up in 1 city only can you?!
SK: That's right, once a recovery (and inflation) is underway, then interest rates will go up, which will limit the amount that property will rise, as people's mortgage repayments soon become unaffordable. even a rise from 5% to 6% in interest costs means that you're paying 20% more in interest to the bank each year. That's a big increase.
So what then, would propel a property boom? Only once overall debt levels get down to realistic levels, like people have paid half their house off or something and feel like upgrading, remortgaging etc. If people are mortgaged to the hilt, they can't upgrade. The last boom was driven by 2nd time buyers and speculators, not 1st time buyers. By 2007 I'd doubt that there were any 1st time buyers left, given interest rates were 10% and property was overvalued.
"hmmmm am wondering how long that 'joke' can run for? It's been over 3 years since BH made the prediction and been proved wrong, you can probably let it go now... I think he has acknowledged his error more than once..."
Those who think they keep rubbing it in, thinking they are so damn superior....ARE the joke
I even reconised that the market was 30% over valued, and acted accordingly, on different fundimentals to Bernard...Will I reconise I was wrong?
Hell No, we cancelled a major project and if we had not we would be upto our eye balls in it...just anotherone of those morgee sale stats...And IF most of those who are mortgageee stats, or close to , took notice then they also would be better off.
THe perverbial hit the fan, maybe not quite as predicted 100%....But it did and has hit and is still hitting....justas I and Bernard and other who predicted the perverbial and the fan said it would
The real joke is on those who have been hit by the recssesion and think they are so bloody superior and knock others
A one-income household used to pay 2.5 times the average wage to purchase a house. Then we decided it was a great idea for women to work but that somehow got perverted into 'average household income' because now Mum and Dad are both working. So one would expect the ratio to go down not up, yes? But that just provided an excuse to steadily erode wage and salaries in the name of 'productivity'. Plus we all bought the BS that everyone wins in a housing ponzi scheme, except of course for those who jump on last, and except, of course, the kids of Mum and Dad who are both now working. But worrying about the other guy and their children in this country went out with stubbies. Oh yeah, by the way, those last-on buyers just happen to be the future of the country (along with their kids). Yes, I'm repeating myself.
Housing booms rely for their sustenence on long periods of apathy. Apathy is not a word you'll see much of in the first half of the 21st century. The future of the country is not stuffed. Wages and salaries will simply gain (relative) weight, slowly. So slowly it'll be like watching paint dry. Bernard was right, and then some. He just got the time frame wrong. And to talk in nominal terms seems a bit silly now that we see how many trillions are being printed all across the world.
A fast crash is in nobody's interest and the powers that be will do anything to stretch out the rebalancing. Human beings have to sleep and that's what they're relying on. One day after life has distracted us, we'll wake up and discover that our house is walls and a roof with a kitchen, a bathroom and a few beds in it. When we come to sell, the purchaser will see it that way too. And if NZ is ever going to be an optimistic place again, run by an energetic, youthful population, that's as it should be. Wolly seems to think misleading Jo Public is up there with child molestation, but I don't see any other way. Telling the truth would lead to panic. Panic leads to fast crashes. Fast crashes end badly.
A one-income household used to pay 2.5 times the average wage to purchase a house, and rental yields used to be 25%+. Houses have become an investment asset, no longer just a roof over your head. Many investors would be happy with a 7% yield indexed to inflation.
I have thought about this for a while, and I believe that the value of a house is now priced as an asset, the rapid change in values reflected the transition from being a home to being an investment asset, and also from 20-30% deposits down to 5%. I could be wrong but I see rental returns as putting a floor under the price of housing. If yields went over 10% every man and his dog would be buying.
Comparing housing cost of yester-years and now is pointless. We live in a different time, and argubly a different world, now. Totally agree with houses being an asset and not just a roof over your head, more people value houses than they value companies that bring them jobs and income.
"Comparing housing cost of yester-years and now is pointless."
Well yes and no...
Take the new home upto and including the early 70s...Basically a house on a un devaloped section, not rotary hoed or anything, no paths , no fences, no garage or car port, no curtains , no dishwasher, washing machine, no waste disposal, basic light fittings.
Now remove the modern costs of all that stuff THEN compare afordabity, salary to cost, salary to mortage cost etc...
THEN do your sums....
Also to note permit costs, ARE way out of proportion so 1/2 them..and again do the sums.
We could buy our basic homes, then gradually add that stuff over the next few yrs, Now people have to buy their home, PLUS have their savings of the next 7 yrs to get the addons.
So is the cost of homes the REAL issue or the structure councils and by laws have now put on new homes?
The theory that future house prices can be predicted by statistical analysis of past house prices is flawed (i.e. a house must be 2.5x income because for a specific period in the past that was the case). Doesn't take into account paradigm changes. Using this theory to predict what GST will be in the future based what's it's been over the last 100 years I can predict that GST is going to drop to like 3%. A logger in the 1910's using same theory to predict how much kauri would be cut down in 2012 based on how much was cut down in the 40 previous years would be able to predict so much kauri coming onto the market in 2012 it will be cheaper than pine.
Even if there is a trend over hundreds of years it is only rational to act on the movement in one's economic lifetime. If houses revert to the trend in 50 or 100 years who cares, what they will do in the next 10 is of more interest.
Reagan, Thatcher et al talked about paradigm changes and look where that got us. Implicit in their support was the idea that later generations somehow possess more common sense and sophistication than their predecessors who flick around on black and white film like spastics at a disco and speak in an unfamiliar, crackly accent. I didn't say that the future can be predicted by the past. I said that the idea that a youthful, dynamic economy can be achieved if old farts like us continue to protect and hoard wealth, employment and influence is flawed. Most especially, I believe that caring overly about what happens to anything in the next ten years (in just about every sector of NZ society and abroad) rather than 50 or 100 is what got us all into this mess in the first place.
With Kodak declaring bankruptcy today, we should reflect that if the Great Depression had happened when digital images and video were available, they would have strung the free marketers up rather than allow them to repeal Glass-Steagall in just the same way that paintball would have allowed WW1 volunteers a dose of reality.
The decline of religion without a replacement has allowed 1 human lifetime to achieve way too much significance. And that from an agnostic. Again, we must try to look beyond ourselves and our own best interests. Wake up and smell the coffee. We're screwing our young families out there. There ain't no NZ Inc. without them.
I'm off to put my crash helmet on.
I don't particulary disagree with anything you've said. I just consider concept that houses should be 3x income max because Hugh Pavlevitch says so a bit scary. He seems to get plenty of publicity as the Herald print any press release they receive as fact - http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10780453 ), which is influential 'cos people believe what they read in the Herald and politicians react to what people think they know even if it's wrong.
To acheive his 3x income houses he wants unregulated car dependant sprawl which, although it might lower capital cost for houses in the very short term, will be disaster in the future as energy costs escalate (there's a paradigm shift - no more cheap fossil fuels). Sure there might be some miracle invention like the electric car that doesn't need batteries that runs on roads not made of concrete or asphalt, but you'd need to be pretty religeous to believe that will happen in the next few years.
Haggis: yep you're right - the correction will be played out in real terms, not nominal, and it will happen via inflation outpacing property prices for some time. You are right, given the money that has been created out of thin air (especially in the US and UK not so much NZ), then the nominal correction could have been way worse.
I think this way of looking at it is backwards. The RBNZ Monetary policy committee determines the interest rates, and they probably don't want to be responsible for crashing the housing market. This means that they are not going to raise interest rates to 10% arbitrarily, so that scenario is not just suddenly going to happen.
If these low interest rates are the new norm effectively then you are saying the housing market will never recover, ever. I doubt thats true, but I think there is a significant chance that rates will stay low for 5-10 more years if there are no other significant changes.
Monetary policy changes are not arbitrary or random though, they are determined by a committee process.
The missing website in this country is the one that enables Kiwi to plan and project manage the building of their own house, or complete their own reno job. Yes all the guff is out there but it is scattered far and wide leaving the average Kiwi at the mercy of the franchise mob.
The first of the big materials suppliers to catch on to this opening in the market...they will reap the trade on offer.
They already offer free quantity survey work and this is great but tis only a start...they need to do the work to boost the service on offer...aimed at pulling in the DIY home builder....link to the skilled trades and the service providers...boost the help on offer. These material suppliers have failed to realise they should be in charge and not the franchise building firms.
"As things appear now we have have the makings of another boom - hard as it is to believe.
It is going to be an interesting year."
January 18, 2012 by Olly N
Olly says:
“Just” 0.9% rise in a month equates to 12% per annum."
This guy is getting senile and deluded.
Firstly 0.9% rise for one month equals 10.8% per annum, Secondly, as we all know, it is highly simplistic to extrapolate a one month result for a whole year, especially given the highly seasonal nature of the housing market, and call a boom.
intelligent, informed people can dissect what this guy says. Sadly, there will be plenty out there who buy his BS hook line and sinker and get burnt
sigh.........
Pah
"Lynas Corporation’s (ASX LYC) shares have climbed 10% in 2 days after the rare earth miner upgraded its mineral resource estimate for its Mount Weld project in Western Australia by 37% to 23.9 million metric tons."
http://www.sharechat.co.nz/article/daa1cde3/lynas-corporation.html
This stock has more swings than a McDonalds playground. You get in, you wait, and then you get out. Repeat as required. Takes you property guys 2 days to dick around getting get a LIM report!
So how has the day been for you SK? Make another 10% ROI, like LYNAS did today for me?
They finished up at AU $1.28, an 11.3% gain for 24 hours. That's on top of the stellar returns over the last 2 days. I closed the position late this afternoon NZ time, but perhaps you missed it, whilst fixing the stove for your tennant BTW, how's that LIM report going, arrived yet has it?
Ha Ha Ha.
OK true, apologies to Olly in terms of the calculation, but thats a side issue! (after all bankers are great with accounting and maths but can't see the bigger picture, nor get their predictions anywhere near accurate). But no apologies to Olly that he simplistically extrapolates one months gain out to a whole year, and predicts a boom
So lay down your views Vera - do you agree with Olly that a boom is coming and we will see big price gains in 2012
SK has laid his views on the line for Auckland in 2012 - 3% (nowhere near a "boom")
I say 0-2% for Auckland
And you?
SK-
As you know, I'm a moderate on Auckland house prices. I'm not predicting declines of any substance this year, in fact I think it will be flattish.
Interest rates will remain low, and new housing is minimal. Those are factors supporting housing
BUT, countering that is the weakness in the economy, and the likelihood of rising unemployment and minimal wage increases. These, in my opinion, will largely cancel out the supporting factors.
You are predicting 5-10% increases in Akld for this year. Clearly, then, you are not really concerned with the economy and the potential impact its weakness may have on housing.
I'd like your view on why you think the Auckland economy and employment will be robust enough to support 5-10% gains.
Here I'm just passing on some info from the godfather.
Yesterday I wrote this:
The point is that interest rates are only going to start going up when the nascent recovery is definitely underway - and rebuilding in Chch has begun.
At that point:
unemployment will be heading even lower (already low compared to international now)
salaries will be heading up (5% increase already reported by seek.co.nz last week)
housing will not need the support of low interest rates.
Auck is already strong enough to not need the low rates - but you cant jack them up in 1 city only can you?!
IMHO you haven't really convincingly answered my questions about the impact of economic weakness in Auckland
As Aus job market weakens there will be less emmigration out of Auckland. Therefore, it follows there will be more competition for work. Tens of thousands of graduates graduate each year in Auckland. Tell me where job creation is going to come from? In what areas? Job ads are down in Auckland
As far as I can see most key areas in Auckland are still weak. I know plenty of people in development / construction - they are all telling me things look grim for Auckland in 2012. Last year or the year before probably 60% of people I spoke to were pessimistic. Now its pretty much universal. The development-related area alone employs a heck of a lot people either directly or indirectly - builders, engineers, architects, surveyors, planners, RE Agents, valuers, bankers, suppliers etc etc
And the public sector isn't going to come to the employment rescue, like it has in the past. Both central and local govt are shrinking
When any weak recovery comes to NZ, it is only likely to be driven by the ChCh rebuild and the rural sector. These influences will have minimal impact on Auckland's economy. In fact the ChCh rebuild could possibly have a negative impact on Auckland if it drags builders down south, potentially pushing costs higher in Auckland and making development even less feasible
so good for you SK that you have investment in central Auckland - I agree with your views on the buoyancy of that market, and I think you will be well placed. But the rest of Auckland and NZ is clearly different
I hear that there is a similar thing happening in central London. Property there is going quite strong, money is flooding in there from peripheral parts of Europe as things turn to custard there. But much of London and the UK remains in the doldrums
So lets clear things up SK - is your 5-10% prediction for Auckland in 2012 for Central Auckland or whole of Auckland? My flat to 2% increase prediction was for all of Auckland, I'd think a 5% increase for central Auckland
Agreed on the London - and the same phenomenon is occurring in prime locations in New York and even in Madrid and Barcelona - even though according to Bob Jones there are 1.5mill empty houses in Spain - and the country is in dire straits.
The "Flight to Quality" theory.
Ok - barring an EU collapse:
Central Auckland values will rise 8% in 2012
Greater Auckland area 3% constrained by mid to poor areas where the inhabitants are doing it hard at the moment.
Please define Central Auckland. Surely it is only referring to St Marys Bay, Herne Bay, Freemans Bay, Ponsonby, Grey Lynn, Westmere, Kingsland, Mt Eden and Parnell. House prices in St Heliers, Kohi, Mission Bay, Orakei, Remuera and Epsom have gone downhill...may be the prices are overcooked?
Bob said it on this - St Heliers, Kohi, Mission Bay, Orakei, Remuera and Epsom have gone downhill...
Are not desirable for the younger lot with high paying jobs - there is nothing to do in st heliers - its a retirement village.
Hence the out perform of grey lynn and westmere.
No wonder so many St Heliers houses are in the market and not sold...
http://www.trademe.co.nz/property/residential/for-sale/auction-44168143…
MIA, you might be right. I know at least 3-4 people who are trying to sell their home in Highland Park (Howick), Manurewa and Blockhouse Bay. They got bugger all interest !
Like Australia's economy, RE in NZ is a two speed market; one for central Auckland (going at 100km/h) and one for the rest of NZ (at school zone speed limit)
Sure looks like we're in for a boom http://www.odt.co.nz/news/national/194515/drop-real-estate-company-numbers just not a very liquid one...
That Hoamz Otago Ltd mob have a ripper sense of humour ! ...... d'yer think they kept a straight face when they announced that their future lay in the ever-expanding frontiers of that great centre for industry & innovation .... Mosgiel !
....... if it screws up on them , those guy's will make a success as stand-up comedians or poker players ...
I wonder what has contributed to Aukland's high property sales volumes. Though property prices have slightly fallen, they are still high compared to some prices in the past few years. Perhaps the low interests rates have spurned consumers to borrow more in order to finance their property purchases. Will we see an inflationary pressure for property?
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