A block of six flats in Otahuhu sold for $1.616 million at Bayleys' latest Auckland auctions, providing the new owners with a gross rental yield of 6.2%.
The block (pictured at right) was a standard concrete, brick and tile block on a flat 865 square metre section, and the flats all had two bedrooms and a carport.
Another highlight of Bayleys' auctions this week were a 90 square metre penthouse apartment with a balcony and views overlooking Albert Park in the character Westminster Court building behind the High Court, which sold for $820,000.
Prices of individual homes ranged from $680,000 for a 1930s bungalow at Birkdale on the North Shore, to $1.262 million for a three bedroom brick and cedar house in Milford.
To see the full results of Bayleys auctions this week, with photos and details of all homes offered, including those that didn't sell, click on this link.
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16 Comments
Serious question: What if the NZ property market collapsed?
I am not asking if it will ever collapse and I'm not looking for the usual spin from spruikers about how it can never fail, or the same old end of the world stuff from gloomsters. My question is "What will happen IF the NZ property market collapsed in a major way?"
Just how much is NZ's economy really dependent upon residential property valuations and prices, and all the rest that goes with the housing market? Will it be just a minor recession event even if the property sector was to implode, or would it be rough enough to lead to a Depression situation? Can the other parts of NZ's economy keep us afloat and essentially unscathed, or would such a collapse overwhelm everything?
As I said, this is a serious question, not trollbait. I know there are those who want to believe property is immortal and bulletproof, just as I know of many who pray it's the opposite and await the property apocalypse. But what is the truth?
This may be a question for the likes of the Interest.co.nz 'economists' such as Bernard or David, etc.
Thanking you all in advance, as I'm sure the replies will be most interesting!
depends on how far it collapses. If it collapses enough to make the banks insolvent then they go bankrupt and an OBR event occurs. I would suggest we have a "house of cards" ie you cannot consider just housing failing, its more likely there will be a whole raft of competing events going on.
BI, your Q is not silly and you are not the first to ask it, SL and I had a contest here over it a few weeks ago. The Reserve Bank Act 1989 charges the RBNZ, among other things, with keeping "stability in the general level of prices" (s8) and "undertake prudential supervision of registered banks" (s67). I say it has failed miserably in this since 2002 and as all bad things are likely to compound once a trigger sets them off, great risks are now run. The counter argument went something along the lines that our political leaders (and Bollard and Wheeler) are really very clever and the risks are well managed. Well I worked through the 1987 share crash and the subsequent property market collapse and know what a close run thing to disaster that was: private debt levels were paltry then compared to now and we did not have Covered Bonds or the OBR to deal with. And I know that our leaders are only clever at looking after themselves and their mates. Time will tell whose right because you can be sure there will be another crisis - it's just a matter of when. I will be very happy to be wrong.
Ergophobia
Same as capital gain, Capital Loss only comes to pass when property is sold. If properties are retained and mortgage payments made everything will continue as it was regardless of valuation. If the payments stop the banks get in and flog it off to get what they can salvage out of it, this will happen to those over committed, whose income cannot support the minimum payments. As these properties hit the market and are sold at distress levels, other properties will not be sold at the premium expected, the nervous will drop what they have in fear of a crash and the bubble will return to mean. Those without a seat when the music stops are out of the game. The banksters will set fire to their junk and walk away as the shareholders burn to start another bank just over there to accomodate the next generation of mortgage slaves.
Um, no, I dont think so. If the asset that the bank holds as a guarantee on its books is now worth less than the mortgage against it the bank is technically insolvent and bankrupt as its debt owing to others exceeds its assets. Not to mention covenants etc, plus of course some mortgages wont be being repaid....no job, no income no pay.
only occurs when there is a revaluation incident - and if you sell the money comes off mortgages first (bank mortgages in NZ normally span across all mortgaged properties, effectively pooling them.) Dispose one property, the proceeds go off the loans of the others not into your pocket.
But unless QV or council revalues the area (eg for rates purposes) then the capital value on the books doesn't change. And if your property is pooled, its packetted anyway, so it only affects each packet minorly. So even if Chch property goes through the toilet, the Wellington and Auckland prices that contribute a % of their value to that packet will keep it from crashing too quicly. It's when we take a national or global devaluation that there's no offset and we get a GFC effect.
One thing we know will happen is anyone in parliament with investment property (in other words everyone in parliament) will quietly pass backroom law changes to bail themselves out first. Then they will bail out their mates in business and farming. It won't be a nats vs labour thing - they all stick together when every pollie is facing the same threat.
The people who will suffer are mum and dads at the lower end of the socio-economic scale. The Mike Hosking/Paul Henry types will be fine, even if they have a bit of debt - politicians take care of their rich mates. So if you aren't in the 'elite club' but you have a mortgage and other debt there's a very good chance you'll be left holding the baby. There's no way any pollie or rich-lister will do it for you or even help you out.
So the guts will drop out of the part of the market that can least afford it. People will lose everything and have to move back in with their elderly parents - if they're lucky. NZ may end up with a homeless problem like the yanks have, with Nick Nolte types down and out in Remmers and Paratai drive. The abandoned houses will be sold by the banks to - you guessed it, the pollies and the rich-listers, just about all of them being babyboomers of course. They always are, aren't they?
A residential property market collapse will mean vastly increased stress on WINZ and that means more stress on 'middle-class' NZ because they are the ones who pay the taxes. Many of them will no longer be able to meet their tax obligations with their mortgages now costing them far more than their property is worth, and with the large number of 'middle-class' and 'lower-middle-class' having lost everything. The rich-listers and pollies will find more ways to avoid paying any tax at all, so the pain and suffering of those who have to pay it for them will be terrible.
Anyway, it will be a wonderful time to be a rich-lister property investor because they will have been bailed out by govt and there will be a ton of property to snap up at literally give away prices, ready for the nxt bubble. They can rent it out to all the people who lost their homes and who are now on benefits paid by the middle-class who managed to keep their almost worthless houses and whoppingly high mortgages. Bad times for those who lost their house and bad times for those who are just barely hanging on, but great times for the babyboomer rich-listers and pollies who will be creaming it courtesy of everyone else.
It won't be an end of th world situation for the NZ economy over all but it will be for the bottom and middle of NZ society. For them it will be, as you said, a lot like an apocalypse. The rich will get much much richer though, so things will stagger on like a zombie. House prices will be back to 1990's levels for a while before the rich-listers and pollies start bidding them up again as they try to own more than each other. Incomes won't improve and may even fall. Those who lost most will likely head to Australia and elsewhere if they can afford to, leading to probably the greatest ever migratory loss in recent NZ history.
No doubt other factors will hit home as well such as inevitable unemployment. Business owners will say "Oh, times look bad, I better lay-off staff to keep my margins high." If enough people leave business may actually suffer instead of imagining it and so the lay-offs/redundancy/unemployment spincycle will go into overdrive, just to compound the misery. It won't be rich-listers or pollies losing their jobs, so again the burden will fall hardest on the people who have already taken the beatings.
This will be a pretty severe recession like the early '90s or similar. We'll see the usual opportunist rabble cashing in on the misery, and not just by gorging themselves on cheap houses. There will be the inevitable new laws rushed in, while it's possible to rush them in. Laws like the Employment Contracts Act and other slave-making legislation favouring our rich-lister and pollie friends at the top and caning everybody below.
As I foresee it, NZ will survive, but it will hurt and the country will be a far uglier place for it. The things that made NZ's low income economy almost tolerable will be largely removed from the grasp of 'ordinary' Kiwis and a huge number of us will ship out for lives overseas, probably never to return. The worst thing? I believe this is inevitable, so I'm not going to LOL this time.
Indeed. The middle class in NZ has already been pretty much eviscerated. I remember in the early 2000's the old Papatoetoe township. It represented (to me anyway) the aspirational lower middle class. St George Street back then was lined with hanging flower baskets. It had a thriving mix of eclectic shops banks, a grocery store and a community police station. Fast forward to today, and old papatoetoe is basically a ghetto. The police station has long since closed down, and I believe the bank was robbed last week. Ghost like figures roam the streets begging for money while searching the pavement for cigarette butts. All the hanging baskets are gone as are most of the old businesses which have been replaced with liquor stores and $2 shops. the place now "feels" dangerous. The busiest store is of course the WINS office.
I could tell another story about my hood in Kohimarama. It suffices to say that if you walk past the fish and chip shop in Melanesia road you'll likely see Maserati, Mercedes etc. parked outside. You can almost smell the money here, it's everywhere. The median house price around here has increased by over 300K since 2009, and the upper quartile has gone stratospheric.
Its all quite sad really. I see massive social problems down the road.
One area you missed is that middle class will tank, and all their income will go to deleveraging and ending up in the bank just to keep their investment over their heads. Those at the upper middle will do so desparate to hold on to their small holding investment whose overall yield has gone bad.
That means they won't be spending into the economy, so businesses will feel the pinch as their loans and wages eat them alive with not enough cash across the counter.
In response no wage rises and more budget cutting.
That much you got but the bit you didn't mention:
The government tax take will also drop with job loses and small businesses making less profit. But the government wages won't drop. Just like in Greece, the government employees and police will still get their mortgages paid. And the burden passed to the shrinking middle and growing lower classes.
By moving things like prisons to Auckland and associated jobs, they are just creating more demand on houses in Auckland, fueling the prices. The number 1 reason house prices are so high, is that people need to work, and the jobs are in Auckalnd. Move jobs around NZ, and that will move peoples housing needs away from Auckland.
The problem is that if there is a housing crash, due to the Auckland bubble, banks won't lose out, it will be savers in those banks that will take a haircut.
but yeay agree with LOL
Highly leveraged, negatively geared investors loose their equity and their assets are dumped on the market
Rich investors (not by income as the Gov define them but by assets) pick up those assets
Working families who hold onto their jobs are stuck in a negtive equity situation - e.g. a lot of Europe right now - Can't move
Economic acitvity suffers, more and more families loose a mortgage sustaining job and are forced back to renting, loosing their equity
Net result; consolidation of assets for the rich. Everyone else wishing they had some nest eggs other than housing equity.
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