By Bernard Hickey
House sales rose to a four year high in Janaury and prices continue to warm up in most big cities as limited supplies of waterproof and undamaged properties in Auckland and Christchurch were snapped up by firm demand from migrants and first home buyers confident about low interest rates for longer.
However, prices and activity were more subdued in provincial areas and remain well below their 2002-2007 boom levels.
Government owned property valuer Quotable Value (QV) released its monthy survey of property value nationwide showing values are have risen 1.1% in the last three months and are up 2.7% from a year ago.
The Quotable Value index, however, remains 3.3% 2.7% below its late 2007 peak and prices are falling again in provincial areas, QV reports.
REINZ reported a flat median sale price in January, but said sales volumes were up 25% from a year ago at four year highs, with a limited supply of listings in Auckland and Christchurch. See more here in Gareth Vaughan's article.
Quotable Value's measure of house values is different from the Real Estate Institute of New Zealand's (REINZ) measure, which is a simple median of house prices transacted in any one month and can be skewed by more activity or bigger price moves in different parts of the market.
The QV measure compares the prices transacted of the same types of houses in the same areas to try to compare apples with apples. REINZ figures for January are due within days and will be closely watched as they are seen as the broadest and most up to date figures, although more volatile. The REINZ figures also show levels of activity in terms of sales.
Auckland's largest real estate agency group, Barfoot and Thompson, reported figures for January showing Auckland Central house prices up 9% from a year ago with sales activity up around 21% from a year ago. See our report on Barfoot and Thompson's figures here.
“While national values are continuing to increase, this is not universal across the country. While the combined main urban areas and combined rural areas have increased over the past few months, the combined provincial areas have begun to slide back again” said QV.co.nz Research Director, Jonno Ingerson.
"There appears to be a little more market activity since the New Year, with signs that decisions made over the holiday break are now being put into action. However potential buyers remain cautious and calculated and are often unwilling to commit quickly," Ingerson said.
“The increase in values in many areas, particularly central Auckland, can in part be attributed to a lack of supply, with a shortage of desirable and well presented properties for sale. When quality properties come up for sale in these areas they are in high demand which is tending to push the price up," he said.
The combination of the Barfoot, REINZ and QV figures paint a picture of a two speed market, with stronger activity and prices in central Auckland and Christchurch, where waterproof and undamaged houses are selling well. Prices on the fringes of the major cities and in provincial areas are more subdued, given supply shortages are less acute and both internal and external migration are reducing demand for property.
(Updated to show the correct reduction in value since the peak in late 2007, of -3.3%.)
Here is more detail below from QV on value trends in various areas:
Auckland
Values in the Auckland area are increasing the fastest of any of the main centres, up 2.1% over the past three months and up 5.1% over the past year. Values are above the previous market peak by 1.9%.
The old Auckland City continues to be the strongest performing area within Auckland, up 2.7% over the last three months, up 7.2% over the year, and is now 4.4% above the previous market peak. North Shore has shown slightly slower value growth but is still up 4.0% over the year and 0.9% above peak. Across the rest of Auckland values are up over the last year by between 2.5% (in Franklin) to 3.2% (in Waitakere) with the exception of Rodney where values have been volatile over the past few years and now sit 1.6% above last year.
Hamilton
Values in Hamilton have once again stabilised in the past few months in what is probably a long-term trend. This follows a slight short-lived recovery in late 2011. Values are now 0.5% above the same time last year and 11.0% below the 2007 market peak.
Tauranga
In general, Tauranga values have been increasing very gradually over the past year, up 1.1% over that period, but remain 10.9% below the 2007 market peak.
QV Valuer Shayne Donovan-Grammer said “Tauranga has started 2012 well with a good level of activity in the market. This is perhaps even a little more than expected but in line with what has happened this time of year in years gone by. While activity has improved though, prices have remained stagnant”.
Wellington
Over the past year, values in the Wellington area first fell a few percent, then recovered most of those losses since mid 2011, leaving current values just 0.4% below the same time last year and 6.2% below the 2007 market peak.
“Despite increased market activity, prices are generally quite static throughout Wellington. Properties in the lower price brackets are meeting the greatest demand although it is still important for all sellers to present their properties well and to price them sensibly” said QV Valuer Kerry Buckeridge.
Christchurch
Values continue to increase in Christchurch, as they have been doing since just after the February 2011 earthquake, and are now 3.7% above the same time last year and just 0.7% below the 2007 market peak. The areas immediately surrounding Christchurch have continued to show strong value growth, with Waimakariri District 10.5% up over the year and 5.2% above the 2007 peak, and Selwyn District 8.7% up over the year and 5.3% above the 2007 peak.
QV Valuer Richard Kolff said “areas like the north west of Christchurch continue to benefit from good demand from purchasers. Open homes are busy and resulting in a multiple offer situations for the vendors. This is particularly the case for houses in under $400,000 with demand being fuelled by a steady stream of payouts to red zone home owners”.
Dunedin
In Dunedin values have been increasing since August 2011 and are now 3.4% up over the past twelve months and 4.2% below the 2007 peak.
QV Valuer Tim Gibson said “the Dunedin property market is seeing increased outside investment due to the affordability of Dunedin values. Buyers are becoming more active and we are seeing some multiple offer scenarios occurring. The lower to mid bracket properties are the most popular with increased demand stimulating the growth shown”.
Provincial centres
While values for the combined Provincial areas have slid back over the past three months, there is variability between areas. Towards the end of 2011 values appeared to be increasing across most provincial centres in line with the main centres. However in the last few months values have begun to drop again in Whangarei, Rotorua, Gisborne and Wanganui. Values have stayed more or less steady in Napier, New Plymouth and Palmerston North over the past three months, and increased over the same period in Hastings and Nelson. Nelson also differs from all the other provincial centres by being only 0.3% below the previous market peak. This is in contrast to 5.7% below peak in New Plymouth through to 17.0% below in Queenstown Lakes, 17.5% below in Whangarei and 22.3% in Gisborne.
(Updated with regional details, charts)
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92 Comments
The pending predictions of a property crash
If you read the following thread carefully and pay particular attention to the posts by "waymad" you will understand what happened in the period of 2001 through 2003. Had Bernard Hickey been aware of this (he was overseas too long) and had the benefit of waymad the "greyhaired man-in-the-cupboard" he may never have made such predictions.
WAYMAD 05 Feb 12
http://www.interest.co.nz/property/57746/department-building-and-housing-recommends-policy-changes-make-it-easier-build-medium
Made by people who believe in fundamentals, and value. Thats old school thinking. The only things that matter, and that are worth watching are M1, M2, M3 and what the Central Bankers are doing. Free Markets have been broken, prices are being set by the banks, and they only want rising prices (called "price stability").
You only have to look at this chart;
http://www.interest.co.nz/charts/interest-rates/mortgage-rates
to get a feeling why predictions for significant near term house price drops didn't materialise.
Recall fixed interest rates were between 8-10% back then - and lots of folks broke fixed terms to take advantage of the rapid decline in the floating rates.
Then you only have to look at this chart;
http://www.interest.co.nz/charts/real-estate/median-house-price-growth
to see that since 2008 prices have remained much the same (in inflation adjusted terms slightly backwards).
And this chart sums up why;
http://www.interest.co.nz/charts/real-estate/volumes-sold-reinz
10989 house-sales transactions in March 2007
When a 3 year fixed interest rate = 8.4% and floating = 9.64%
Compared to 5848 house-sales transactions in March 2011
When a 3 year fixed interest rate = 6.95% and floating = 5.78%.
If we haven't managed to light a fire under the housing market whilst borrowing has never been cheaper (and the 95% LVRs have been reintroduced) - what might happen when/if interest rates rise in a similarly short timeframe (i.e. as rapidly as they fell back those few years ago).
So in summary, either a big price decrease at some stage, forecast by many, and after adjusting for inflation some would say thats happened to some degree,
or
rents will continue to climb to reduce the gap as predicted by others (who have so far been on the money with predictions).
I fear residential rents will climb faster than the rate of inflation - especially if the government doesn't come up with some kind of plan of action to do away with Accommodation Supplements (AS).
For example, the govt could announce a date in the future by which time all ASs cease. They could offer a one-off grant to cover moving expenses for tenants needing to seek lower priced rental accomodation in the lead up to the cessation date. Those costs could include moves to provincial centres where rents are much lower.
Whatever they do - they have to find a humane way out of that $billion+ (and rising) cost in terms of housing assistance.
Yes rents will definitely keep rising in central Auckland, but nowhere near the silly olly prediction of doubling within a couple of years. The investors will greet this of course but it will do no favours to the real economy as more money is sucked away from saving and consumption.
The govt should be building more social and affordable housing, because the private sector won't be able to deliver
if they build enough they should be able to achieve economies of scale.
the private market can't deliver the housing necessary for many reasons, which I've discussed ad nauseum
Raise income tax and build more bloody housing! It would create heaps of economic benefits
It's not rocket science
Govt departments are the most inefficient builders I have ever come across. Projects cost way more and take much longer than private developer projects. Theres no way economies of scale would balance the costs of project managers and govt bureaucracy - the bigger the scale the more the bureaucracy, the more the cost.
Why couldn't private sector deliver affordable housing? (Other than the District Plan RMA process - only reason private developers not buildingCBD apartments right now is PM2 and the vast increase in development contributions in 2006, both of which govt would have to contend with if they were the developers too).
Its far more than planning restrictions Bob. The NZ building industry is too small and uncompetitive. Liberalising planning controls would help, but wouldn't solve the problem.
Here in Adelaide development works because planning rules are more liberal AND building costs are much lower. Check out the developments on this website -
http://www.devine.com.au/south-australia.aspx
Brand new houses selling for circa 250-300K, in suburbs 30 to 45 minutes drive from Adelaide's centre. The developers get costs down because they can create smaller lots - circa 300 sqaure metres (rather than 400-500 square metres plus in NZ typical) , and build generous single storey houses on these smaller lots (50% site coverage allows 150 square metre house to be built on 300 square metre site)
Sure these aren't architectural masterpieces, but they are tidy, comfortable and new houses
You say it's far more than planing restrictions and then illustrate with... planning restrictions.
In terms of the NZ building industry being too small and uncompetitive whether the NZ government or NZ private sector builds they are both in same industry so I don't get why you're so convinced government could build cheaper - they never have.
I have designed 100's of buildings for private developers and government - for the cheapest house I would go to a private developer every time. For a government organized build I'd budget from an extra 25%
OK I checked out your link.
I see that http://www.devine.com.au/house-and-land-packages/south-australia.aspx has an 'Orlando 179' and land package for A$403,900.
A similar group build 30-45 mins from Auckland...
http://www.trademe.co.nz/property/residential/for-sale/auction-434299079.htm is NZ$600,000
The NZ one is 20% more house and 35% more land. So the Australian one at same size would be A$484,000 (based on 20% more house) or A$545,00 (based on 35% more land). In NZ$ that would be $624,000 to $703,000.
So actually the Australian house has more expensive metre rates than the Auckland house.
In total terms it's cheaper because it's allowed to be smaller - so obviously the cost is in the planning requiring big house/land not the building costs which from your example are higher.
I have meantioned this before..
The area I have been monitoring since 2006, shows over the last few months around 15 to 18% of total sales are quick flicks resales....buy a house in need of a bit of superfical maintance, If a 2 bed move the wash house into the garage and re sell as a 3 bedroom.
Which means around a 8 to 10% nett increase in the sales price.
QV introduced adjustments not long after it was pionted out as different sections of the market becomes prominent in the stats they become distorted....
Now the market has changed again, with a large proportion being re sales, distorting any stats that claim to increase in the market.
A couple examples
House sold in Oct for $330K , bit of maintance, resold few months later...with tenants $382K
Another sold $230K re sold 3 months on $290K again a quick flick.
And it is interesting to note the number of resales in recent months, down -40K, -90K, -24K..From the 2006 to 2007 period....Still interesting to see the minus numbers from around the peak...not comparing similar properties but the same properties.....And this is consistant.
These stats increases just dont represent similar or same property, and there are a handful of speculators who know this....What one sees sitting at a desk and what one sees when one is out from behind the desk are once again 2 very different things.
We bought our plot in 2008 at GV - the new GV on the land is now $40K less. Having run a small business in the construction industry for the last 15 years and having all the contacts, we were able to build for approx. 15% less than Joe Public. On completion the GV was $825K. 18 months later GV was slashed to $745K.
House has been on the market for 8 months - auction, private sale, then another agent who was able to sell it to Joe Public for $680K. According to DBH calculations, this home would cost approx. $662K to build plus land purchase - a total of $862K+. Our total loss, including agent's commission is approx. $80K.
Out here in the regions, construction has taken a severe hammering. Most of the trades that worked on our house are either now in liquidation, bankruptcy, have moved to Australia, or are borrowing up to the eyeballs because they think things are going to get better.
We are moving to another region, a career change from self-employed to employee, but are grateful to have a job that covers rent and expenses. We will be waiting until the market really bottoms out (6 - 18months in our guestimation) before we purchase again - unfortunately we will be taking advantage of those who thought things were going to get better but have left it too late.
In the meantime the reduced capital we do have will be invested in a bank that is not at the mercy of the OBR's overnight haircut and funds freezing scheme.
On the flipside, we do understand that main centres, particularly in Auckland, are experiencing near record highs - probably because there are many jobless from the regions relocating there for work, and those with savings are investing in property to avoid OBR haircuts, and the obvious one - housing shortages.
Just our experience SK, and our scenario is a common one in the "exclusive subdivision" that we are exiting. We don't believe there will be a cyclical upturn as you put it - not in the regions anyway.
Feeding frenzy in Epsom
http://www.propbd.co.nz/afa.asp?idWebPage=8338&idBobDeyProperty_Articles=17275&SID=1016828612
Olly Newland was right as usual. 100% right.
He said rents would rise dramatically in the main centres and then spread throughout the country and they will over the months ahead..
Those who listened to him rather than the gloomsters are doing very well - thank you very much.
Read his latest article on his website titled "The Mood of the Market 2012" and weep at the opportunities lost.
And if to emphasize the point:
Bob Dey Report
Forget recession talk, good residential properties have been selling fast in recent months. But Barfoot & Thompson auctioneer Murray Smith thought this one last week took the cake.
The house didn’t make it to auction, but to what’s called a “pre-auction sale”. That’s when an offer has been made on auction terms (ie, unconditionally) at a price the vendor is prepared to accept.
Barfoot & Thompson then notifies all other buyers who’ve registered their interest in that property and invites them to attend the auction, whose date has been moved forward. They know the property will be sold as the pre-auction offer becomes, in effect, the reserve. It’s become quite common - Barfoot & Thompson, which runs auctions daily, had 30 pre-auction sales last week.
The one that impressed Murray Smith was for a house at 2 Dunkerron Ave, Epsom, taken to market through the agency’s Remuera office: “We had an offer of $880,000 through our Greenlane office. When I arrived at the Remuera office, there were too many people to hold the auction in the office, so it was held on the street.
“The auction lasted 35 minutes - there were more than 250 bids after the bidding reached $1.2 million, and the final sale price was $1,339,000.”
That wasn’t all. Mr Smith said it showed the importance of registering interest and the value of the agency’s network – although the auction was in Remuera and the offer that triggered the pre-auction sale was through the Greenlane office, the eventual buyer was introduced through the Mt Albert office.
Published 13 February 2012
You never replied to me on my response to property investing essentially being a criminal activity, if not in law then certainly intent. I have put this to you numerous times, your lack of response means you have no credibility.
Property investment utilises a faulty and fraudulent money system personal gain at the expense of future generations. It is predatory and anti social behaviour.
So come on here and spruik all you like. It doesn't change who you are or excuse your activity.
There are also risks...most NZ property allowing for inflation over the last 4 years has not reached or past the 2007 peak...and there is still a huge risk of a downside....
So what you are saying you have invested and made a small % maybe with the downside risk you could lose a lot.....and you justify that by showing limited and possibly one off examples to justify a rent boom.....yet this is a purchase and not a rent income....
For instance in such booming areas are rentals that common? Would most buyers in thet area be buying a 1.4Million property to rent out? ....I wonder....
Then you go on to speculate that rent rises will spread....I think disperse is more likely.....
You link an increase in house prices in some areas to a increased rents yet if we follow this and house prices are dropping in the rural sector then so will rent.....
Finally, many ppl are just not seeing a wage increase and are paying more for other things above the core inflation rate...so rents booming? I just dont see it.....careful investment is certain areas yeah sure....Nationally, no.
regards
Ok scarfie.
As you are obviously a paid up member of the lunatic fringe please advise:
(1) What exactly is "criminal" about investing in property?
(2) If it ever became a "criminal activity" what would you replace it with?
(3) What in your view, is fraudulent about the money system?
(4) What in your view, is predatory and anti social about personal gain?
(5) Would you unilaterally give away all your assets today as proof of your beliefs. ( please answer "yes" or "no" and if "yes" please supply list)
We await your reply with eager anticipation.
I will answer that: (No offence Scarfie)
(1) It's a ponzi scheme supported by a ponzi scheme
(2) Replace it with legislation that taxes property hoardiing. Having a place to live OR own at reasonable cost (under a BS system of monopoly forced privatization) to bring up a family is either the highest of priority or kiss good bye to 'civilized society'
(3) It's a ponzi scheme.....duh
(4) Healthy Society is not about the health and wealth of the "individual" .
(5) What assets? REAL ones? Like "family", "health", "knowledge"?
(Edited for abusive language)
The whole system is all buggered up. It is unfair, causes missallocation of resorses, a mel-incentive to work harder, and flucuations in various asset classes and forces the payback onto future generations.
However its not fair to hammer those that are doing their best within the system to benifit themselves and their families, if being part of the property game works for them good luck to them for seeing an opportunity and exploiting it.
Not to say the whole monetary, tax, benifit, regulatory systems need to be wiped and started over again, that is what we need to be focused on.
Now you are a lunatic also Justice:-P Thank you for that response, I don't think I can do any better, but I will address the core issue.
Big Daddy I bet if you went to the main street of any city in New Zealand as asked 100 people what they thought money was, I bet 99 of them would give you an answer that is wrong. That 99 would have no idea that all money is introduced as interest bearing credit, and then it is further diluted via fractional reserve banking.
Of the three functions required to qualify as money our currency is missing two. As a unit of account and a store of value the fact is that it is constantly eroded by inflation. 99% of people have no idea that this is happening.
If something purports to be something it is not, then it is fraudulent. \
(Edited for abusive language)
A warning to all on this thread.
Be careful about the tone. We don't allow abusive comments.
Anything close to that line will be deleted.
Just imagine you were having this discussion face to face with fellow commenters over a beer/coffee.
Ask yourself: would you say this to someone face to face? (and not expect to be hit ;))
cheers
Bernard
Bernard I can handle a little abuse, although I accept you do need to keep some decorum here. You will notice that I most times take care to address the behaviour not the person, which includes the word you deleted the other day.
I don't mind the personal attacks because they without fail come unsupported by any argument, that lets me know that they don't actually have one. I have won the argument by default. I suspect the point I make is cutting a bit close to the bone with some.
I have been posting my criminal behaviour comment for nearly a year now and it still goes unrefuted, the silence is a marked presence amongst the abusive noise. There is a certain degree of frustration with this constant side stepping and I may slip with my language from time to time, but I intend to keep leveling the accustation as I have firm grounds to believe it is sound.
PS: I might actually enjoy the opportunity provided should one to two around here take a swing at me:-)
Scarfie,
I can understand.
The problem for us is any deterioration in the tone of the joint makes it difficult for advertisers and sponsors to feel comfortable having their billboards up outside the joint.
Unfortunately, due to the complaints of our advertisers and sponsors, we are having to take a tougher line.
We need this to be a robust and polite discussion with plenty of information and points of view rather than invective, otherwise we'll have to turn it off.
cheers
Bernard
LOL, Water off a ducks back Scarfie. Your arguments are sound and based in fact which has become increasing apparent in the world economy but STILL you will get 'deniers' who will hurl abuse thinking they can win against simple truths. Wolly has the same problem.
The monetary system is a sham, proven to be a sham and will no doubt end in tears for many people around the globe FAR BEYOND what they are currently experiencing.
If they think this is as bad as it will get HERE and abroad then they obviously never took history.
Take care
Out of interest do I fall into your assessment of mankind as I have choosen to invest in Commercial property so those who produce Goods and Services for others to consume have somewhere to base themselves?
Are you comment just restricted to residential property or every one who owns more than one property?
Or would it be okay as long as I had no debt against it?
I guess if there is no debt there would be no need for any savings?
Your answer lies within the response by Justice above. It is a ponzi on top of a ponzi, by having no debt you only eliminate one of the ponzi's, but to be fair it does take away the 'intent' of using the banks leveraged money. You have to analyse the argument well, and then your own intentions, if you want to sleep straight at night.
Surely if there is no debt then savings would be mandatory in order to purchase a big ticket item?
I guess what is someone willing to pay (Interest) for savings if there is no ability to get any return (by lending it out).
I guess we will end up like Switziland and Japan where you get charged interest and fees for having money.
If you have to pay to have money in the bank wouldn't you then turn to income producing assets like entities and property as there would be no Bonds (as that is debt)
personal gain per se is not an issue. Personal gain at the expense of others and wider society is. Many business people make personal gain without costing society. The property investor makes gain at the expense of society. Property investment diverts investment away from productive economy. Rising rents and house prices drains the economy.
Of course property investors can't be blamed for all this. There is clearly a problem both at the governmental and industry level. If the public and private sectors can't / won't build houses, then can you really blame investors from enjoying the returns, however parasitic that may seem?
The solutions are not rocket science at all yet addressing the housing issue seems to have been complicated into an impossible mission, probably because it suits vested interests
I love this phrase:
"Property investment diverts investment away from productive economy"
It is always used by the loonie left to rubbish property investment. Trouble is no one has ever said what "productive investment" is.
Put it this way:
Mum Dad and 3 kids have scraped together $50,000 in savings. They can buy a modest investment property, rent to people who need to rent, pay it off over many years for their retirement fund and keep 100's of people in employment in maintenance and repairs over time and have a degree of security all the while.
But no, they must invest in "productive investments" .
Unfortunately the only type of reasonably secure investment that can be bought with $50,000 would be a third rate lawn mowing round, a quarter share in a fish and chip shop or going on Trademe flogging second hand goods.
"productive investment" is one of those wonderful but meaningless phrases such as "global warming" or "sustainable resources" or "women's lib" .
They sound good but at second glance have no substance and even less worth.
Its pretty obvious that that phrase was invented by the economics profession. The looney left is at least as leary of productive investment as they are on un-productive investment, so you are on pretty shaky ground trying to blame left wing politics for the mess which has been made of the economy by right wing market idealist economists.
Seems abundantly obvious you blame left wing political movements for all your problems, which is pretty ridiculus considering how little influence these movements actually have on government policy. I previously asked when the government had ever done anything to pander to the left wing, and the suggestion was something about treaty settlements. Its pretty bloody obvious there are bigger problems in the NZ economy than could possibly be caused by that. In fact considering the present double digits unemployment amoung Maori in NZ, it would seem a bit of positive discrimination would be quite a good initiative.
I can see you odnt undestand what a productive investment is from your examples....no wonder you dont comprehend. None of the endevours you mentioned is productive on a National scale....personal, sure......
The issue with PI is I think is ppl who invest in property purely as a tax reduction exercise and have a neg cash flow, but look for a tax free capital gains at the end.....As opposed to starting a business making a good....Production as opposed to a service....all you quote are services.
regards
lol, You might have a point IF not for the glaringly obvious fact called The GLOBAL FINANCIAL CRISIS. Doesn't seem too productive really does it!
It seems you constantly replace the words 'people with knowledge & ethics' with instead "loonie left" .
I suggest you get some help with the meaning:
How about looking at the major western economies of the world that have been ruined by the distorted economies created by excessive property investment and debt. And you still think an economy dominated by property investment and speculation is healthy and sustainable???
and answer this - why, when most of us think that the rising costs of essentials, such as food, petrol etc are bad for the economy, and detract from people's ability to either save and / or consume (supporting things like retail, hospitality etc that actually employ people), should rising housing costs be any different?
Of course someone as self centred and mean spirited as yourself doesn't care about anything beyond your own bank account
and you resort to simpleton attacks and labels such as "loonie left", because you have very little to offer that is constructive
And I don't think it's just major western economies that have been brought to the brink by speculative property investment - look at Dubai, look at China - madness: the empty buildings and abandoned steel framing when many of the citizenry are impoverished and much of the labour to support the megalomaniac constuction "boom" was imported and exploited - and then left without the financial ability to even get home when it all went "bust".
Think of the energy and resources wasted. And the lives of the investors ruined.
Granted this is a far cry from owning a portfolio of residential rental houses. And no one gets rich collecting rent at a 6% (or thereabouts) return which looks to be about as good as it gets at today's prices. At today's prices, to net even a median income one has to own a portfolio of properties and that many tenancies make for long hours and hard work.
The accumulated wealth in the past has largely come from capital gains and the business model without those capital gains looks much less attractive.
So the bottom has more or less dropped out of the buy-to-rent market. Just ask NZ's ex star of The Apprentice. I reckon he entered around the peak and paid the price. The peak ain't returning anytime soon.
Avg. house prices in Auckland are 200k higher then the rest of the country, or 60%. Are wages that much higher there? Dumb and Dumber.
The queston also arises as to how much the IRD really knows about these overseas owners and whether they are capturing any tax at all.
I mentioned elsewhere the "hot money" coming out of India (and presumably Asia in total) that probably does not require a tax benefit to make it viable as a low yield investment if the gains are OK.
Pushing hard to lower the NZ$ would make us less attractive. RB could lower the OCR and put on an equivalent tax to compensate.
BB3: NZ is a fly-by-night heaven with immature controls and yet to be implemented money-laundering legislation. 10 years behind. Pushing the NZD down makes it more attractive to the slow-starters yet to come, but dangerous to the early-birders already here. I have posted a number of times regarding this matter. No traction. Big business. $50 billion per day of hot-money passes through. If it doesnt touch the sides it isnt noticed and doesnt matter. It should, because the main "sticky" conduit is "property". But, heck, why kill the golden-goose.
Here is what is really happening to house prices in New Zealand. Do not believe the spin. Note the graph of house prices v gold ounces.
http://goldsilver-money.blogspot.co.nz/2012/02/new-zealand-house-prices-to-go.html
Not actually a ponzi scheme, even if you think they are overvalued, holders of precious metals still have their gold/silver even if there is a major pullback in price.
If you are refering to ETF's thats a different story, I am sure there isn't the underlying asset in these funds to cover the claims they are selling on them.
Anything that is bought with a view to making a capital appreciation with no underlying benefit produced is a ponzi scheme to my mind.....then throw in the specualtors buying....etc etc.
If there is a major pullback in price, well thatt against something, ie cash...so if you were in cash you realised no loss.
ETF's is leverage and probably fraud...as yes i really dont think there is that much gold....
regards
'Anything that is bought with a view to making a capital appreciation with no underlying benefit produced is a ponzi scheme to my mind...'
Somethings are bought with the view of just preserving capital/savings steven. I would say that in itself is a worthy benefit, especially to the one who gave up current consumption to provide security for themselves and their family.
Since gold is priced off the EFTs (namely GLD) - which readily admits they don't have the gold to cover all outstanding contracts (infact they admit to only having around 3%) you are in essense agreeing physical gold is actually way underpriced....? If there is a major pullback in price (very unlikely) they are only selling 'paper gold' that never existed in the physical in the first place.... One day these EFTs will eventually blow up, people will dump 'paper gold' and go physical. MF Global and other paper derivative traders are only the tip of the iceberg.... many central banks have leased out gold to the big bullion banks - who then onsold into the market - they will never see that gold again...
I am a property investor (had a new home built and put tenants in it - and I would count this as adding many thousands in benefits actually and so would past and present tenants). I also invest savings in precious metals. Over long periods of time land and gold tend to keep their value (gold more so). There is no way out but to print, extend and pretend for many countries and NZ is not isolated, (although way behind the pack). So where does one put their hard earns savings? In a finance company? - wouldn't touch them. In queenstown property - and take a punt on the descretionary tourist trade - too risky, in wellington property - not likely - eventually the government will have to cut costs, in shakey CHC? - too risky.... in commercial property? - a business that goes under needs nowhere to live, unlike someone who looses their job....[that really only leaves Hamilton to Walkworth]... in a bank that heavily borrows from overseas? - not really secure - all our big banks are owned offshore, even deposit insurance can't cover a systematic event collapse... - not worth risking a lifetime of saving and inheritence on....???? In the end printing will prove a disaster as real investors mainly look for preservation of capital above return on capital... it is the same accross the world... and its real investment that creates real wealth and real benefits.... or perhaps I should just spend everything I earn and if something goes wrong rely on the taxpayer to pay my bills, and the taxpayer/government to borrow more and more and more and give it to me?
Not actually a ponzi scheme, even if you think they are overvalued, holders of precious metals still have their gold/silver even if there is a major pullback in price.
If someone has paid cash for their rental property then they would still have that property just like the person with the gold? The house doesnt disappear and they can still rent in out for an income. Sorry, can't follow your logic here.
Yes they would money man, but rentals require maintance and up keep, rates and insurance, accounting, carry tax risk (CGT, depreciation changes), and a tenant that actually has income, and they are pretty illiquid in a slow market and have high transaction costs and require large sums of capital to invest at all.
Precious metals just don't have most of these problems/risks.
Yep. There is risk whatever you hold your wealth in to some degree. Many times cash in the bank doesn't give you a real income either (interest less withholding tax and less inflation) - infact many times cash in the bank returns have been negative. Although over the last 11 years the gold price has risen on average well into double figures - some would call that an 'income' or at least the equivalent of. Gold mining stock does provide an income from gold/silver. Some miners pay a monthly dividend and have done so for years.
Yes there are limited forms you can buy it in - although not hard at all to do either - either the coin/bullion itself or the mining shares outright. In the end that's only 2 ways I suppose. How many ways I wonder can you buy/hold cash?
Compared to the price of gold storage is really low - I have a friend with hundreds of thousands of bullion paying a downtown armed guarded 24/7 access vault $700 a year... not a high cost as a %....
You forget to mention MF Global and co - which is how most people invest in gold (derivatives of an unbacked EFT)... the whole point of investing in gold is to cut out counterparty risk, yes it would be foolish to invest this way correct money man, but it's also relatively easy not to invest this way too.
Here's an update of the graphs with the January figures now included.
http://goldsilver-money.blogspot.co.nz/2012/02/house-prices-in-new-zealand-v-gold.html
No matter what the nutters rant and rave about on this site the masses are voting with their cheque books . Democracy rules - or doesn't that count any more?
"House sales rise, median price stable
15/02/2012
The volume of house sales rose in January compared with the same time last year, and indicates a more positive start to the year, the Real Estate Institute of New Zealand says.
There were 4073 unconditional sales in the month, up 25 per cent on January 2011, the best January since 2008, REINZ said.
The national median house price was $355,000, up 4.4 per cent on a year earlier but unchanged compared with December.
Figures yesterday from Quotable Value showed a national increase in property prices in the year to January, with house prices in greater Auckland outperforming the rest of the country, rising 5.1 per cent over the period."
Link:
http://www.stuff.co.nz/business/money/6421135/House-sales-rise-median-price-stable
Not sure if I'd use the word democracy, but certainly adults do have considerable freedom to profit or perish. The problem I have with the latter is like Ireland I as a voter / tax payer get left paying for those ppls property gambling. I would be very happy if when such an event happens due to my prudence I am not materially impacted....
So if you end up living under a bridge hiding from a man wanting to sell your kidneys to get his money back, not my problem. As things stand you go bankrupt and the bank and the man is bailed is bailed by me the tax payer....this is what I object to.
regards
BigDaddy - Agreed. The volume of ongoing posts denying that fact create so much noise, they reduce the value of any constructive debate on this website. I add that most of those posters have little in the way of constructive comment to add, other than left wing doctrine.
The ongoing fallacious arguments continue. Crime happens under all sorts of politcal systems, what has democracy got to do with it?
Not that we have democracy, but the even democracy fails when the masses become tyrannical corrupt, or criminally inclined. What you need is a rule of law to underpin everything, but even that fails when you don't consider the intent behind the law. Which leads back to property investors being not only morally bankrupt but criminal in their intent.
Sooooo...if nobody likes property investors, who should own the houses. Should investment classes be defined by some sort of charter and nobody may own more than one of any other thing outside this charter?
What should I do with my properties? Sell them at preferential pricing to first home buyers? Perhaps they should benefit from my decision to try and improve my financial situation?
Left-wing doctrine? I think people asking for or expecting market mechanisms to work without government interference, central bank manipulation and media propaganda rather follow good old fashioned right-wing doctrine.
Nobody is condemning property investment. What a lot of people find unfair, however, is that post-2007 market forces were not allowed to work to bring down property prices to a level that can sustain a healthy society in which the younger generations can still afford their own roof over the head without enslaving themselves to a decades-long mortgage.
Of course individual "investors" should not be singled out for criticism. It is the John Keys of this world who are responsible for meddling market mechanisms. But then 47% of voters like that.
So we've descended into typecasting and blaming. Good stuff.
Upthread, what we have is a way of life that existed for a short while, being touted as still viable, by those with vested interests in such being the case. And by those paid by those with vested interests.
It all revolved around borrowing from the future, in ever-increasing amounts, and clearly the future couldn't underwrite that process forever. You had to be some kind of self-deluder to think it could. After all, if it just took money to grow the economy, you could print your way to unlimited wealth.
Even if prices go up for a while, 'values' won't, for the simple reason that when you remove the bubble frenzies, sooner or later the income has to be earned to pay the mortgage. That part HughP and PhilB have right, except that they miss the next phase. Sooner or later, income has to be on the back of real things produced/traded, and that potential peaked a long way behind where we overshot to. So, one way or another, prices relative to incomes will come back.
The Emperor is still naked, despite claims of fine raiment.
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