There was a big decline in the volume of homes sold in April, with median prices also falling in most parts of the country, according to the latest figures from the Real Estate Institute of New Zealand.
The REINZ recorded 5845 residential property sales in April, down 32% compared to March and down 31% compared to April last year.
Median prices fell in 11 of the REINZ's 16 regions around the country. The biggest fall was in Auckland, where the median dropped $50,500, or 5.6%, from the record high of $905,000 achieved in March to $854,500 in April. But it remained up by 3% compared to April last year.
Big fall on the North Shore
Within the Auckland region the biggest drop in the median price occurred on the North Shore where it fell by a staggering $115,000, dropping from $1,080,000 in March to $965,000 in April, which means it is also well down compared to the median of $1,050,000 in April last year.
After the North Shore the biggest falls occurred in the central suburbs that were previously within the boundaries of the former Auckland City Council. Median prices of homes sold in these suburbs in April dropped by $90,000, falling from $1,050,000 in March to $960,000 in April.
In Manukau the median dropped from $895,000 in March to $830,000 in April, in Waitakere it fell from $785,000 in March to $758,000 in April, and in Rodney it dropped from $867,000 in March to $835,000 in April.
However median prices rose on Auckland's southern fringe, with the median in Papakura rising from $660,000 in March to $680,000 in April, and in Franklin it increased from $610,000 to $670,000.
April's median prices also dropped back in Northland, Bay of Plenty, Hawke's Bay, Manawatu/Whanganui, Taranaki, Tasman, Nelson, West Coast, Canterbury and Southland, compared to March.
But median prices set record highs in each of the five areas where they were up in April compared to March: Waikato ($489,200), Gisborne ($289,000), Wellington ($537,000), Marlborough ($400,000) and Otago ($381,000).
Kapiti the outlier in the Wellington region
In the Wellington region median prices rose in all districts except Kapiti.
In Wellington City the median increased from $661,000 in March to $685,000 in April, in Lower Hutt it rose from $470,000 to $487,000, in Upper Hutt it was up from $426,000 in March to $448,000 in April, and in Porirua it rose from $546,600 in March to $570,000 in April.
In Kapiti it dropped from $492,000 in March to $481,657 in April.
REINZ chief executive Bindi Norwell said the market was reasonably stable in April, despite factors such as severe weather and Easter being in April this year rather than March.
However the Auckland market appears to be more adversely affected than other parts of the country.
Just 1775 homes were sold in Auckland in April, compared to 2655 in March.
It was the lowest number of Auckland sales in the month of April since 2010.
The total number of homes available for sale continues to increase in Auckland but is falling in the rest of the country.
In Auckland the total number of homes available for sale in April was up 39% compared to April last year, while inventory declined in Waikato (-12%), Wellington (-13.2%) and Canterbury (-3.2%).
The REINZ's full regional report for April is available by clicking on the following link:
Median price - REINZ
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292 Comments
You're taking the proverbial right?
Four months out from an election which National might or might not get back in but will certainly be gutted from its strutting rooster like arrogance at the moment is no time to be thinking of buying.
Wait for the blood on the streets.
I see no reason to recommend that FHB take on large debts in a market with falling prices. They are better off saving an even large deposit and there will be a point where the prices are low enough and the deposit large enough that they can buy at a sensible price point.
Don't buy now or you'll get the largest case of buyers remorse you could ever imagine.
It's not important. Managing the size of debt is more important. Whether house prices go up or down a mortgage is denominated in dollars.
The Fed is slowing their current QE. The bank run starting in Canada may be contagious. People may say prices are up 6% year on year but who cares if your financial system is collapsing.
https://www.macrobusiness.com.au/2017/05/canadian-bank-run-contagion-be…
What's important is that people look out for themselves and their family rather than trying to give commissions to a RE agent and property speculator.
https://vignette2.wikia.nocookie.net/walkingdead/images/3/3f/Shut-up-an…
I fully agree that people should look after themselves and their families.......I don't agree with wage/salary earners paying rent as being good for them short or long term....hence I'd rather encourage this group to get a roof over their head.
If you can claim some of the rent annually then it is likely a different story but I'd still own property somewhere for some balance in any portfolio.
There are people on here who think there is some kind of property correction armageddon going to happen and this is highly unlikely.....houses can't crash to nothing, the economy doesn't stop unless of course there is some catastrophe like nuclear war or some other heinous activity that wipes us all out and if that happens - well there'll be no one left to worry about anything.
You are missing the point there is a financial event going on right now. It's best not to be trying to buy a house right now in the middle of an event is foolish. If people are ready to buy and can't wait 6 months for things to calm down then they shouldn't be buying anyway. Buying a house isn't an impulse purchase. Six months of rent is nothing compared to a problem with the financial system or a drop in house prices.
Houses don't crash to nothing but in the sub-prime crash people bought houses and then the value dropped to less than the value of their mortgage. People ended up stuck with a house they couldn't afford to sell. If what's going on in Canada spreads to NZ why would you want to buy a house and then find there's no longer any work where you just bought and you need to move?
FHB in Auckland should hold back for 3-6 months at least and see what happens. Being patient and calm rather than buying the first house you see is always going to leave you better off.
Umm... yeah there kind of is.
There are now two bank runs on two of Canada's biggest sub-prime mortgage lenders and a pension fund has attempted to bail them out. So not only are people going to loose their homes but investors are going to loose most of their pension fund savings as well. That is what we call killing two birds with one stone.
Bank runs because of subprime mortgages??? Of course it's easy to owe more to the bank then what your house is worth if you bought a house with hardly any downpayment! any small correction could plunge your asset "under water". In NZ we need to fork out a 40% deposit, or a 20% for FHBs. The only time that our houses will ever be worth less then the mortgages we owe is it the prices drop 20-40% and that's only for the people who purchased recently. So I REALLY doubt that we will have a "housing armageddon" here. But of course, never say never. There is always a chance that the sun might not come up tomorrow morning.
I agree with your first paragraph.
I have to correct you on your second paragraph though. I don't think anyone here is expecting a property correction armageddon. Most people would be happy if house prices fall back to sustainable levels, which is 3 to 6 times median income (or if you want specific Auckland numbers maybe around $500k to $600k median). Prices have skyrocketed the last few years mostly due to China capital flight, and this is a global phenomenon as evidenced in Sydney, Vancouver, London etc. THIS HAS NOW STOPPED. It may not be a nuclear catastrophe, but it is a monetary flow catastrophe (for investors).
So when all is left in the market is NZers with NZ incomes ... guess what happens next?
If prices fell back to $500k-$600k that would be considered a "correction armageddon".
That would mean that the vast majority of FHBs in the last 2 years would be in large negative equity positions, not to mention a number of property specu-vestors.
Credit would come to a grinding halt.
Agree with everything else you've said though.
The marginal bidder from China has gone, that will have a massive effect.
House prices will never fall in NZ.
We have an open door immigration policy, an actively financed by Govt
and supported international student population, open door foreign investment and foreign property buying settings, a warm climate, beautiful environment, low population, distance from the worlds problems, rule of law, democracy, heritage of human rights/values, etc etc,
At worst house prices may flatten. Temporarily.
Remember all the doomsayers predicting house price falling in 2009/2010?
Do you think the Govt and RBNZ and banks will preside over their prized assets deflating? Nope.
But those other countries don't enjoy all the wonderful benefits of NZ.
NZ is a tiny country with a beautiful climate and landscape with a great human rights environment which is being completely swamped and inundated by millions of tourists, hundreds of thousands of immigrants, hundreds of thousands of international students, and no restrictions on thousands of foreign or foreign-related property buyers.
On top of all that there is the minor issue of the 4.5million NZers who still have some ability to buy homes and work in their own country. Unemployment is low despite low wages and high interest rates, so FHBs are still active.
So house prices will never fall in NZ - its impossible.
I can never say never again.. but its possible, a time when credit will eventually reach "saturation" point, where banks can no longer loan and hyper inflation takes money, it will transition to blockchain so dont panic...
Then we will see what houses are really worth.. They are the best asset class by a country mile, so i dont blame peeps for investing, but some are too greedy and housing is a human need, it should not be a financial noose.
RB still has 7 OCR cuts up its sleeve to drop to 0%.
NZ hasn't even started QE yet - so that's still an option if necessary.
Most mortgages can be dropped to interest only if necessary.
Immigration can be increased.
Real estate fairs/exhibitions can be expanded to more countries than current.
If the Big Four won't lend, then plenty of new substitutes appearing instead.
Etc
QE will erase all of your hard earned dollars invested in your Kiwisaver fund through inflation caused by a currency devaluation and you will still get taxed on it. If QE goes ahead in NZ, your pension funds will be worth almost zero by the time you get to take it out. Best you buy Australian bank shares, because the Australian
government still insure their banks in the event they fail, therefore the Australian tax payers will pay for the mess, just like the Americans are still paying off their banks after the GFC.
So the ghost houses don't cont, why.
"hey, you know I cant eat your ghost houses bro'
Anyway - think fundamentals. It's not all supply side. There's demand side too mate. The # of houses is masked by the larger size and multiple dwellings on a single title - eg granny flats. Given more people can fit into the house, and the complete lack of sense in buying Akld houses, the demand is dropping. Therefore prices drop... add to that the lead in time on existing new builds in play, and easily could get to oversupply. People disappear to Melbourne where you'll get paid more and buy a $550k house (remember everyone here can move there).. and whammo, oversupply and lower demand. It's not outside the realm of possibility.
Actually there is a lot of precedence for 'Armageddon' with house prices falling by 40%, and very commonly this follows the market conditions in Auckland. That said, I am picking a slow decline rather than a fast drop. The key issue is that when people understand that prices aren't going up for a decade they get quickly tired of a weekly rental subsidy and cut their losses.
Even if prices will not go up for a decade and even if the yield on an Auckland property is only about 4% it is still better to invest the money into an Auckland property rather then keep it in the bank where it returns only half as much. No? There are cashed up buyers out there who would rather choose to purchase a property then do nothing with their money hoping that the property prices will come down. Whether prices will come down or not and by how much, that's hard to predict exactly. What's much easier to predict is that a time will come when Auckland houses will cost twice as much as they do now. That's what most investors realise and hope for. But when will that be? no one knows exactly. Time will tell.
".I don't agree with wage/salary earners paying rent as being good for them short or long term....hence I'd rather encourage this group to get a roof over their head."
Wait, what? Renters dont have a roof over their heads?
Do the maths - there are plenty of circumstances (especially in Auckland) where paying rent is better value - definitely in the short term - but maybe even in the long term. There are other asset classes that deliver better returns and are not an all-or-nothing bet.
@ Yvil: As an educated guess I'd wait until prices return to more affordable levels at the $500k to $600k mark for the Auckland market.
It's also looking like the Foreign Buyers are probably not going to return to their previous levels for quite some time as their Government is very keen to keep a lid on capital flight. Plus they have a new city they're building next to Hong Kong, so it's more likely that they'll want to invest closer to home.
But we really should have a Foreign Buyers tax in place to deter this kind of crazy Non Resident Speculator behavior that puts our whole economy at risk.
What amuses me, is how the paper millionaires seem to think that they're not going to be effected by the lack of top end buyers. They're the ones that are at high risk.
Our tax agreements do not allow foreigners to be treated differently to locals. So any tax implemented will affec locals as well. Adding taxes adds to the end price......I think you should look at China's capital controls having more of an effect than anything any bureaucracy has implemented!
Surely foreign investors who think NZ is a great place to invest in are sending a good signal on their opinions of the NZ economy. Just remember if our economy tanks many of these foreign investors will take a haircut as well.
Tax agreements can be changed especially when one of the main influencing parties doesn't even allow foreigner to purchase property in their own land.
To allow Foreign Buyers to get away being tax free in NZ and asset strip properties from the local population, destabilize our economy is total insanity. Not to mention completely disregarding and neglecting your voting public.
We shuld have some protection.
Because we have already proved our tiny economy cannot cope with demand side pressure. I.e. we don't have the capacity or systems to increase supply in a meaningful way. Also because if we don't do something we are will be simply waiting for the Chinese government to decide it is economically convenient for money to be allowed out. And thridly because we care more about the real welfare of our own citizens over the so-called wealth affect.
I am in favor of the Australian policy of foreigners or residents being allowed new builds only.
LOL, government have been making stuff up and believing BS for years
http://southpacificpictures.com/productions/details/359/Spies-and-Lies
FHB who buys now and the market continues to fall even slightly will be worst affected. Better to wait and watch.
People who bought earlier will have some buffer to protect themselves unless it falls drastically.
This election we will see new government in power in NZ. Number of reason for national to go irrespective of what polls and media may suggest but the under current in NZ is for change.
"a great city for long term investors"
Ah...it's a rainy, Friday, and I know we've all seen this a thousand times, but from the 3 minute mark is always dramatic, no matter how many time you watch it....
https://www.youtube.com/watch?v=gomuMVbIc_4
Even if the market does go sideways - the average person has to weigh that up with what they are going to be paying in rent........even if the market does drop in some areas it will not drop below replacement cost unless of course the politicans and bureaucracies abandon the RMA, the LGA, the Building Act amongst other things which have significantly increased prices.....
"the average person has to weigh that up with what they are going to be paying in rent"
The average person also needs to weigh up what they are paying in interest.
You are better off paying rent on a house yielding 2% gross than you are paying 6% interest on a house you own with no capital gain.
Better to pay the rent on a similar house and put the additional 4% into a diversified equity portfolio.
"even if the market does drop in some areas it will not drop below replacement cost"... what??? That makes no sense.
People have to do their own maths for their own circumstances......Of course the interest is important.....but if someone is paying off their home loan then they are also changing their cost structures along the way.
When I say a property won't fall below replacement cost - well the building side speaks for itself......but the land price now has significant bureuacratic costs built into it as well.......there is a lot of people on here who want cheaper houses....and that is fair enough......it is also human nature to want the best deal........but it is pretty obvious to me that very few commentators here actually know what it costs to build........builders and others involved won't be building houses to sell them under the cost of production for that is financial suicide.........
You don't think demand falling off a cliff might reduce the cost of tradies and materials? An out of work plumber will be a lot cheaper than one with work coming out his ears.
Replacement cost will fall but yet house prices can and do fall even below that. How much do you think house builders in Dublin had to sell their brand new houses for when no one wanted to buy? How about all uncompleted housing projects. Why did they stop mid build? Surely because the houses would be worth less than it cost to build them
12% fall? Didn't notice that really.
So, NZ does not currently have an oversupply of houses?
Only overpriced houses - well, sure.
So what was the desperate govt measure? You mean the RB interest rate cuts?
Well, plenty of scope to cut from 1.75% currently as well.
I'm not sure that is true. Ireland was building a vast amount of new apartments at the time and a large part of its economy was geared toward housing construction.
Up to 12.6% of the Irish workforce was employed by the construction industry.
Up to 9.4% of Irish GNP was dependent on construction. Of this new residential housing construction made up nearly 7% of GNP
Notaneconomist, prices on the Kapiti Coast for less than 10yr old brick and tile homes, sold below replacement cost from 2009 to 2014. You cold buy a 210sqm brick and tile home on 700sqm flat site for 400-450K. The replacement cost of the house with driveways etc was approximately 400K, and the raw cost of creating a section was approximately 75-125K. Giving a replacement cost of 475-525K. The reason I know this is I was buying these properties, because it was a no-brainer to buy given a rising population. And remember these are middle class decile 8-9 school areas.
I remember that time also. The Kapiti coast had a huge speculative bubble and it was the fastest growing area in the country with new builds and then it crashed and yes houses sold for far less than the original purchase price because people couldn't afford to pay the ever increasing house prices. So they turned to the next speculative area which I believe was Tauranga. Sounds an awful lot like Auckland. Same story, different area.
Capital gains on Auckland property has been the talking point for some years now.
REINZ Regional Commentary for Auckland: Compared to April 2016 the median price rose $24,500 (+3%).
Before Auckland mortgage holders take heart from this 3% increase, the reality for most there has been no capital gain as interest payments will have offset this increase.
For the immediate future, the likelihood of downside in prices (don’t scoff – the sharp decrease in sales volumes support this let alone the added factors of the onset of winter, coming election and increasing interest rates) there is likely to be significant capital losses for those FHB and investors who have entered the market in the last couple of years.
Measuring YOY (year on year) gains is deceptive to most of the public reading that because they only see the 3% number which falsely indicates that Auckland houses are still increasing when in fact they are decreasing at an alarming rate. YOY is a measurement that changes at the end of each current month and includes only the immediate 12 months prior. The current YOY stats are for the period March 2016 to April 2017 when house prices were still rising right up until November 2016, but after November prices started stalling. Next months YOY will be for the period April 2016 to May 2017 and so on.... Are you with me so far?
Do any commenters on here own property in the Greater Wellington region? If so, what has the market and capital gains (if any) been like pre-2016?
I'm potentially looking at Masterton/Carterton as a first buy in a year or two when I have enough capital and a new job.
I would look at the Kapiti coast. The roading changes will make places like Raumati/Otaki feel that much closer to Wellington. You should also buy small because the demographic change in Wellington (and anywhere outside Auckland) is a massive shift in the number of 1-2 person households, and substantial drop in 3-5 person households which will increase demand for townhouses/apartments over the traditional family home.
http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&obj…
Wellington has higher average salaries then Auckland, with half the cost of housing. This is attractive to people. Who would have thought!
So the places that caught the bubble later are still going up (Wellington, Malborough, Otago etc) which follows the pattern of other bubbles which during the end phases expanded outwards when it could no longer expand upwards.
I wonder what will happen to these places housing markets?
Hamilton had 580 lisitngs trademe 7/11/16, reached 659 1/12 then was mostly under 600 throught to March. Trended up since, tooday we have 649. Rentals stable.
As night follows day, the regions will follow Auck. As they must -Ham also had bus loads of foreign buyers touring the streets (even thought the Nats didnt notice).
Wellingtons problem is lack of supply, due to a lack of land being released near the city. Satellite cities such as the Hutt are therefore getting a lot of buyers, and developers have been building a lot of new builds. It is the easy/ lazy option for many to just buy something new, and get a mortgage package deal with the house. Problem with some is that they are build so close together, you can literally pass your next door neither a bag of sugar through the window.
But people still want to live in Wellington to be in the right school zone, which is somewhat elitist, but is certainly occurring. . Getting rid of school zoning houses could fix at lest some of the problems.
Are you sure about that Rob? I read the article below which said that neither Wellington's population or employment opportunities had increased, which would suggest that there shouldn't be a supply issue.
It might turn out to be the case that specuvestors have moved into Wellington (and other regions) when they became priced out of the Auckland market and will disappear again once the capital gains ceases in Wellington along with everywhere else.
http://www.newshub.co.nz/home/money/2016/08/watch-out-wellington---valu…
People turning up to our rural area from Auckland, building $2 million houses. So are house prices really going up here or just the value of houses being built? You can still buy 100 acres not very far from town for 2 million. I wonder what the value of these houses will be in twenty years time, it won't be like Auckland where the section contains a big part of the value.
This do-nothing, lets-wait-and see government has nothing under their control.
The state of the housing market is simply responding to the Chinese capital controls, the increasing realisation finally by the NZ electorate of the damage that National has done to NZ society and especially Kiwi youth and the expectation that the Ponzi that they have created with their immigration / housing monster is not self sustaining indefinitely into the future.
Key and his lackeys have had their 9 years, wasted most of it and it is the kiwi way to give someone else a chance after such poor performance.
Oh the impact is very clear indeed. No coincidence at all the prices are falling away in line with the Chinese govt's clampdown on capital outflow.
Outright lies and denial from our govt.
Drops fairly in line with what I was saying 2-3 months ago, although Manukau has dropped a little less than I thought, and the Shore has dropped more than I thought.
More falls to come. Could be a crash too, although I think more likely is drops of 10-20% across Auckland on average.
No government is responsible for banks creating competitive lending policies that greedy speculators are more than happy to sign up to. We have a free market which is good and the government has no business sticking it's nose into it by trying to fix it. In fact the National Party and John Key specifically warned people not to expect house prices to keep rising and banks to keep lending, but nobody pays attention to news that doesn't fit into their own personal views. Perception is different from one person to another and there have been far too many inexperienced speculators who have been blind sided by the good times and are about to have their own very face palm moment. We don't have a nanny state government, we are free to make choices even if they are sometimes really bad ones.
Some are saying we need to wait and "time" the bottom to buy again, can someone please advise when that will be...... If everyone could time the bottom of a cycle they would all be speculation millionaires!
There is never a bad time to buy pending you are buying for the right reasons home or investment. Look at the trend on the above graph over a long term period seems to be up. Short term speculators will get caught though, long term family home or investment will always be a good option.
After the Despair Stage, silly! We are at the, what, Fear Stage? Perhaps not even that; the Return To Normal Stage then....
http://tinyurl.com/ksp84es
(PS: I've seen the Despair Stage in the property market - London, 1991, and yes it's miles higher now, but property investor friends I knew at the time where besides themselves; bailing out left right and centre at whatever price they could get. And guess what? That.... was A Bottom!)
I strongly disagree... there are sometimes very bad times to buy. The home I sold in US back in 2006 is still worth less than the price it sold for, more than a decade later. I did well via renting for a decade instead of owning a home. The housing market here in Hawkes Bay had been flat for a decade, and the landlord I was renting from was earning less from his specuvestment than what I was earning via term deposits. Good thing I became a homeowner again at the beginning of 2016 (see the Hawkes Bay chart above for edification).
Sometimes one can profit from market timing...
Here's what happened in Perth:
https://www.bing.com/images/search?view=detailV2&ccid=PxdInLno&id=FB1F9…
So you might see flat house prices in Auckland for the next decade if we don't experience a blackswan event and see immigration reverse suddenly. If demand drops, who knows, we could do a Dublin and see prices drop 50-60% over a few years. Now is not a good time to enter in the market....renting would be the way to go if you can stand it.
Trending back to reality, but lots of movement yet required. Lets face it this could be put down to investors trimming the poorest performing assets dragging the average down in order to get their equity positions back up to 40% as their loans head to renewal. Crappy leaky stock in unattractive locations will be the biggest decline over the next year.
New LVR rules can be applied when the banks are being forced to raise capital in order to maintain a safe level of risk in the event of a bank run. Therefore when your existing fixed loan is due for renewal and re-negotiation, the bank will dictate to you what your new repayment terms are, depending on how much they are being squeezed by APRA and the Australian Government because our banks are Australian owned and they are already repatriating large sums of profits back to their country of origin. It is all about saving the Australian economy now I'm afraid.
Sorry, patently not true in this instance.
The LVR rules have nothing to do with bank capital adequacy. Investor loans can move from bank to bank just like high LVR loans can and as long as they arent increasing, they are exempt from limits.
Now, the capital will affect the PRICE you might have to pay, based on the risk, but nothing to do with LVR limits. Zip, nada.
You forget that as depositor funds are moved from bank to bank, this also affects individual bank margins and their asset books. For example if one bank offers the lowest term deposit rate and the other three are still offering a higher rate, then that one bank will loose term deposits to those other banks, which in effect will affect their asset book and they may suddenly be outside their LVR limits imposed by the RBA and APRA and now will also be hit with an extra tax of 0.6% per annum by the Australian government if it causes them to exceed their 100 billion liabilities target. That rule apploes from July 1st.
I havent forgotten that at all. It's just not relevant to LVR limits. I agree with most of what you usually post, but, unless we're talking at cross purposes - you may need to read up on what the limits are and are not. The RBNZ speed limits are purely new business related. There are no APRA or RBA LVR limits related to NZ businesses. Deposits movement have nothing to do with asset books, outside of the normal funding requirements. The Australian tax has no connection either with speed limits - which was the point of my post - that investors bringing LVRs down before renewing mortgages has zippo to do with RBNZ limits.
All fair points that you are making, but I can't help but think that because our banks are owned by their Australian parent banks, that our NZ subsidary banks are most likely to be impacted also over the longer term. Our banks have been repatriating large sums of profit back to their Australian owners by order of the new restrictions that APRA has enforced. I mean specifically to ensure they increase their capital to protect against any unforeseen future event, such as property prices plummeting. It's all a bit scary how interwoven they have become.
What? Good time to buy in Auckland? Really? What a silly thing to say. Now is the worst time to buy in Auckland. Never be caught trying to catch falling knives. We've had what, a solid 6 months of slow but decreasing house values. Winter coming up, elections after, possible RBNZ changes in October, all while mortgage rates are increasing bit by bit. And on the background is the after-effects of the sudden stop of capital flight from China. Now is the worst time to buy. Completely missed the point on that one!
Good for long term investment? We're facing possible stagnation in prices for 10, 20 years until incomes catch up. If you're a 65 yearn old Boomer, can you wait until you're 85 years old to enjoy your money?
And what do people think is going to happen if our pollies are right and it's a 'supply' issue? So now we BUILD, BUILD, BUILD to rectify the perceived lack of supply. Investors release the capital gains game is up. No point keeping that interest only mortgage. Best to sell up. So we could have investors leaving the market at the same time as we build, build, build. Perfect...But prices will continue to go up wont they....
Governments are notoriously slow at organising new builds and it takes months to years, but rest assured that they have already released large amounts of land and are locked into the new build process so it may look like they are doing nothing but in fact these new builds are unfortunately going to flood the market at the worst possible time and will only put more pressure on existing over-leveraged property investors and owner occupiers. Auckland will get its housing supply alright!
March/ April stripping out the easter effect .Y/Y volumes sold down 26 percent Y/Y down 100 million in real estate commission. Other than 2010, lowest April Auckland volumes since 1998. Auckland now accounts for just 30 percent of total sales down from the heady 46 percent of two years ago .Price was always an opinion, the debt is real.Consumer spending may head south as well as confidence.
A straight line through that graph is still only going one way and that is up.Its going to take months to form what is a downward trend and don't forget this country ALWAYS stalls 6 months out from an election so IMO nothing is changing. When National get back in watch it take off again and make up any losses. Too many people on here get excited at the prospect of a huge crash, its not going to happen.
Carlos I find it difficult to take your posts seriously sometimes. If you put a straight line through numerous markets throughout history during a bull run, sure you'd say there's the trend and what we've experienced recently will continue into the future (try that for the stockmarket in 1928, 1999, 2007 for example). But a line on the graph isn't reality.
We simply don't earn enough money and banks can't provide more debt to allow housing to become more expensive....If we allow it, at some point we're going face a whole bunch of pain, which I think we will anyway.
Exactly, I have no doubt housing prices will be higher in 59 years than they are today. However, that doesn't guarantee they will be higher tomorrow or higher in ten years. That straight line you talk about is also likely to have a gradient significantly lower than we have seen in recent years. With the stock market in USA it was flat for much of the 2000s and fundemanetals caught up with exuberance of the 90s. I expect the same with the Auckland housing market except the period of flatness will likely be longer since shares have a higher long term rate of return than property. I hope someone questions that last sentence.
Indeed - Robert Shiller put together inflation adjusted returns for all assets classes in the US over a 100 years and the return on property was horrible. Like 1-2% p/a horrible. The fact we've had 10,15,20% over the last 5-10 years doesn't bode well for the NZ housing market over the coming decade/s. Xmas has been and gone now - infact all our xmas's have come at once, yet we find ourselves further in debt. Go figure....
I think specuvestors should go an buy up Property Trusts and let the residential market return back to a point where average kiwis can buy the average house without the need to break the bank (excuse the pun). If property investors are truly that, investors, yield is what you should be looking for - commercial property should be the way to go.
Oh dear Carlos. Clearly you don't accept that busloads of foreigners pushed the price up (ably assisted by Kiwis on the bandwagon and our merry banks) and that this has now done a 360?
Double wammy in fact, specualtive foreigners gone and credit gone/going (in fact triple wammy as winston's kingmaker role emergesl).
There is only one outcome and it will not take months.....it's now..
It's almost funny, if it wasn't so pathetic how poor Anne is trying to put a positive spin on the data:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…
The Herald has fully lost it as far as I can see. Their daily barrage of misinformation regarding immigration is a new low. That Mike Hoskings was on the other day saying even a reduction from our current (highest in the world) immigration levels would "bring the economy to its knees"'. Many serious individuals, even the Treasury and reserve bank have expressed significant concerns about our current policy but you would never know from reading the Herald, never any counter view or actual discussion of the facts even.
Its gone beyond anything normal and is looking like a deliberate campaign to alter public opinion AKA propaganda. Makes you wonder who or what is behind it all.
if you take anything mike hosking rants on about then you are just a sheeple, he jumbles up the facts and stats then comes out with some end result that has no logic to it, he is true PR
they should bring back the puppet like mike at least that mike was funny when he talked his nonsense
It was either DGZ or ZS that recently posted that Mike Hosking had purchased a house in his area a few months ago, in Mt eden I think it was. If that's true then his reporting will be even more biased than usual.
DGZ's post was in response to my observation that Auckland houses are unaffordable to upper quartile New Zealand earners. Lol where's Hosking's salary on that bell curve > 99.99% id guess.
No news outfit with any self respect would let Mike Hosking commentate. He is intellectually lazy and his comments are at best accidental misinformation and at worst propaganda. I doubt the later because I don't think he is motivated enough to be invoked in a conspiracy beyond himself.
GM. I watched your link and I really don't understand why you're bagging Anne, she says the Auckland market had a significant drop in value from March, that the market is definitely turning, that sales volumes are very poor. What positive spin are you talking about ?
Savvy NZ-ers need to look outside NZ for less biased news. Look how the Financial Times are reporting on the NZ housing market and NZD;
"The New Zealand dollar is copping it in the neck for a second day, this time as data showed house sales fell by the most in just over six-and-a-half-years.
Sales fell 31 per cent year-on-year in April, from a 10.7 per cent drop the previous month, according to the Real Estate Institute of New Zealand. By this measure, the Land of the Long White Cloud has not experienced positive sales growth since June last year, and April’s fall was also the steepest since October 2010, when sales contracted by 35.9 per cent. The kiwi dollar is down 0.2 per cent at $0.6835 making it the worst-performing major currency by a wide margin for the second session in a row. It is now at its lowest level since early June last year. Yesterday, the currency closed 1.3 per cent lower, the biggest one-day drop since November’s US presidential election, after the Reserve Bank of New Zealand kept interest rates steady but issued a more dovish policy statement than expected. While the interest rate decision was expected, the commentary caught investors off-guard, prompting the severe reaction for the kiwi dollar. Ray Attrill at National Australia Bank said the NZ dollar has struggled to pick itself up off the floor in the wake of the RBNZ’s statement. He continued: The floor is also the place where a fair few analysts’ jaws – including our own – dropped after the assertion of the central bank that it sees none of the inflation pressures that many in the market claimed beforehand as evidence in support of at least a nod in the direction of a 2018 tightening bias".
interest.co.nz and sometimes radio NZ are pretty much the only respectable news sources in NZ.
https://www.ft.com/content/5785e236-0f56-32b0-8dbb-3a60fc1cc3e3
Interesting bet, depends on your confidence about RBNZ's judgment.
What LVR limits have demonstrated is that easy credit is a huge causative factor in the current environment of high prices, low rental yields and high value to income ratios. Recent commentary expressing frustration over LVR limits by investor and speculators seems to suggest that easy credit in the period 2012 t o 2016 might have been dominant over all other factors (immigration, slow building, mortgage application fraud, money laundering, etc. etc).
That is what I am afraid of. The Chinese government has helped us (not our own government by the way) by restriction the outflow of money from China, but then the RBNZ will counteract that by lowering the LVR because, oh my gosh you can't have banks not making a profit and the government will be crying out as the only appearance of keeping the economy afloat is the housing market.
If you look at the stats for the proportion of sales you'll see it was both investors and foreign buyers.
Pre October 2016:
Foreign buyers (non citizen and non permanent resident) accounted for 35% of the market.
Investors accounted for 45% of the market.
Leaving a pittance of 20% of property sales to people who actually need a roof over their head (owners moving house and first home buyers).
Now:
The most recent LVL limits have reduced investor proportion to 30%, and all indicators show foreign buyers as below 10%, so we have a healthier proportion of sales going to people who actually need a roof over their heads 60%.
The government doesn't run the easy credit show, the banks run the show and they call all the shots. Easy cheap credit is over. Call your bank and apply for a new loan and you will get the cold shoulder treatment unless you have huge equity to purchase. It is just a part of the cycle we are now in. The Bull run is over and the sleeping Bear is just coming out of hibernation.
Question - if house prices and the level of sales drop will building costs go down or will inflation just keep costs rising? if costs do go down how long would you wait before building. You can see the bottom of the market on house sales immediately after as prices start to increase but how can you see where the costs of materials and labour are as there doesn't seem to be any easily accessible information available to the general public .
Hope so, looking at some reno, possible project manager is quoting an average $75 / hr for all of his tradies, looking at the figures that will include a lot of timewith them idling in the dismal traffic conditions imposed on us by National's immigration policies.
Building Materials. The Carters/Fletchers/James Hardie monopolies will move on their prices when the market dictates they have to - which maybe never.
Builders - If all said above comes to fruition, and the arse falls out of Auckland. Developers stop building, builders are out of work and Competing for work. Labour costs will drop. Beware the cheapest price.
You were all warned that something like this would happen so don't act all surprised. Ten years isn't that long to wait.
http://www.interest.co.nz/property/86739/only-newland-says-only-invest-…
My view on commercial property is, its got the same road to follow.
PS it was pretty much guaranteed there would be some pull back sooner or later. For me this isnt the main event. I am just watching the oil output per day v demand, as long as people think there is a surplus and it will continue so will this ponzi scheme.
Gordon, you got me to bite.
I will give you the bully, that Chch is the place to buy many properties if you can get the money, but you probably can't because you have your money in shares.
The rental returns on great property is what we want and don't worry about capital increases as that comes automatically.
Chch market is slower as it is a no brainer with the stupid LVR rule the RB brought in around the country rather than just Auckland.
Personally love it when the markets are quiet as the opportunities to grab great buys are present and agents ring us.
Don't say I never told you so!
1) Not everyone wants to buy many properties.
2) Property is only one form of investment; something many NZers have trouble understanding.
3) "If" being the key word here. Not everyone has tens of thousands of dollars of equity or cash to use as a deposit.
4) Unless property gets you a net return of 10% to 25% per annum, I'll stick to shares thanks.
5) Owning shares and owning property are not mutually exclusive.
6) The LVR rule makes perfect sense. Just because you don't like it doesn't make it stupid.
7) I'm glad you're happy with your grossly excessive wealth generated from rent slavery. Not everyone is morally fine with it.
I could buy a bunch of properties in your town however I would not at the moment as the trend in Christchurch is that house prices are slowly but surely going down month by month. Who in their right mind buys property in a dropping market especially if they are borrowing money which by the way you have to pay back and pay interest on until it is paid back to the Bank. You would have to be nuts to do that. I would be better off buying houses in Wellington or Queenstown. You do not show a lot of financial aptitude.
Shares are liquid assets and can be sold within a couple of hours these days via an online Trading Account and the stockmarket is at an all time high, so I am not sure why you think that someone who is invested in shares couldn't sell up in a heartbeat and buy your non-liquid property asset? That aside, property still sucks money out of the owner continuously through ongoing maintenance, insurance and rates etc... Shares are bought and paid for and actually pay you an income via dividends and long term growth and you never need to deal with tenants gone rogue and a court system which always favours the underdog tenant!
Expect no balance in Print media, they are heavily in the pocket of the Real Estate industry - it provides the majority of advertising revenue. Newspapers will be boosting the good-times line from REINZ far beyond the point where there is still anyone who believes them.
In investing terms it called "no bid" the last fool has bought and no fools are left. It also known as copitulation. When desperate sellers have no choice but to get out when there is no bid they or the other owner (the bank) will take the meagre crumbs on offer to reduce their losses any further
Well we kind of do its called the media. But I wouldn't hold your breath on the Chinese Non Resident Investors entering in to the NZ residential property market any time soon, could be a few years. Remember China is completely restructuring their main economies from manufacturing to more modern IT driven innovation.
Forbes article: China's Crackdown On Capital Flight Is Claiming Some Of Its First (And Biggest) Victims
https://www.forbes.com/sites/ywang/2017/03/16/chinas-crackdown-on-capit…
Bloomberg: China Overseas Audits Aim to Stem Outflows: Eye on Chinese Media
https://www.bloomberg.com/politics/articles/2017-05-10/china-overseas-a…
Bloomberg: China's Biggest Foreign Acquisition Frenzy Is Ending
https://www.bloomberg.com/news/videos/2017-05-11/china-s-biggest-foreig…
Really have you got any evidence to support that comment BadRobot? Because I can send plenty of articles highlighting how lots of Chinese buyers lost their deposits on overseas property late last year, through not being able to get access to large amounts of low rate credit.
WTF - we are talking about a future event, at the moment the taps are turned off - if they are turned on again who is to say they ( the Chinese ) will re-enter the Auckland property market (if they were ever there in the first place) . I don't see how I can have evidence of something that hasn't happened yet. They may choose to invest in shares or bonds or gold or tiddlywinks
I don't doubt some lost deposits - but what has this got to do with whether the Chinese investor will re-enter the Auckland housing market.
The original comment was
"But how can we know the Chinese capital flight tap won't get turned back on? '
Oil price shock or trade war would achieve that. The former is unlikely given the situation with US shale.
Banks can foreclose even if people are making payments, most people don't know that. If market drops and negative equity occurs banks might panic and foreclose.
You are so right! Australian banks are being forced to raise capital and balance their books. I'm an ex-banker and while it is rare for banks to do this, it can and has happened before in history if the economy gets bad enough. Looking at the amount of private debt out there and an alarming percentage of interest only loans, it is becoming a very real possibility!
With interests rate heading up asset prices are bound to go down or at least flatten. When we get back to normal interest rates - OCR around 4% - then a lot of the heat in the housing market will decline. I think we are at the end of the beginning of the housing crises rather than the beginning of the end.
Studies have shown asset bubbles in the property market, suppress domestic interest rates for approximately 10yrs. So I would not be betting on interest rate rises.
Auckland is probably in recession, a 30%+ fall in property sales will have halved property related incomes (given fixed expenses), plus spending due to wealth effect has just evaporated. Property related incomes are not just real estate agents, think stagers, valuers, decorators, landscapers, etc.
I thought this site was for people to blog that will help people make financial decisions.
It seems that so many are just on here to either run down property investors and gloat that they are pleased that they are still renting!
At the end of the day we all have the ability to make a choice as to what we choose to do with our finances.
However, I personally would take notice of people that have become financial and successful than from people who continually bemoan investors that have acted.
I am eternally grateful that property investors are taking over the reigns from our government as the biggest rental property holder in history right now because it means that as our smart government has finally realised that spending our tax money on renovating meth contaminated state provided houses is political suicide. I would much rather they sell off those state houses to the private sector while land prices are at a premium and at the same time pass on all future responsibility of meth contamination to private landlords. Lets face it, the problem is only going to increase, so why should tax payers fix it when you the landlords can deal with it! Brilliant reform policy at its best and now it is your problem to fix. How is the new insulation rules working out for you?
Maybe it is because property investors are a parasitic drain on the economy, and look to be affecting the financial stability of our economy.
For property investors to win, everyone else has to lose. It is not a productive competitive business like manufacturing or farming, where everyone is better off, producers and consumers. It is gambling with other peoples money, to bid up existing houses, to put houses out of the reach of your fellow countrymen, to force them into paying you rent ongoing.
The higher house prices go, the worse of a place NZ is for everyone but property investors and the banks.
At the same time property investors are gloating on sites like this about how smart and entrepreneurial they are, when making windfall tax free gains in a rising market. But then taking it personally when the market turns, and the majority express their happiness that they might once again have the chance to buy their own home in future.
That is why people are making those comments.
I know hyperbole is 'normal' when making a political argument, but it is not "10-13 times income". The actual rates in New Zealand for median-priced housing is 2.9 to 11.5 times income.
The rates for first home buyer households buying a first quiartile house are lower.
The problem with hyperbole in this area is that some people actually believe it as fact. Let's keep housing affordability discussion grounded in fact and leave the hyperbole to politics.
Outside of Auckland (and Queenstown), the range is 2.9 to 7.2 times income.
My view is that we should never worry about the ratios or prices in Fendalton, Kandallah, or Remuera. It is the ratio for buyers starting out in life that should concern us.
The data is here. Or more importantly, here. Every urban area outside Auckland and Queenstown is "affordable" for first home buyers.
I find it quite an interesting phenomena, that some people will the need to come on here and constantly argue their own personal life, philosophy and investment decisions against no real criticism, why? I assume that most people on here are doing reasonably well in their own right.
Most people on here as far as I can see come on here to simply argue the facts, and concepts, and to gain an understanding of what the world could be. And that is why I come back.
" People that are successful don't rent, they buy!"
This betrays an extreme lack of imagination - buying property is not the only game in town and not the only way to get ahead.
You may also have the causation the wrong way round - successful people tend to have the money to buy houses, but buying a house won't in itself make you successful.
The idea that buying is always preferable to renting and that renting is dead money/paying someone else's mortgage is ridiculous, it shows a complete lack of financial acumen. The decision to buy versus rent is not only a legitimate life decision but a financial one whereby the optimal decision is based on the level of rent, interest rates, maintenance costs, and future capital gains, and expected returns on other asset classes. There are definitely scenarios where a person who rents will be financially better off long term than someone who buys.
Your joking right ? name someone. The only way my parents got ahead was buying a house in NZ. If your very lucky you get a massive head start like my Father did and was given a house in the UK. Its not just a pure financial decision it depends on how practical you are, maintenance costs drop to near zero and the property actually increases in value if you can do the landscaping yourself. The only way renting is good is if your a highly transient individual and need to keep moving all other the place or even country to country or its DEAD money.
Do you even know maths? Your argument is stupid at best if not delusional (and symptomatic of NZ house brainwashing)
Buying a house at X dollars, if it's an inflated asset class might not make sense. For example, if I was to rent a $1.3m house for say $800 p/w... but if I wanted to buy it, the interest alone would be ~$950 a week... before any maintenance, insurance , rates, which would take it up to $1100 at least ... with nothing off the balance of the loan. So, I take that $300 extra dollar per week and invest in blue chip dividend stocks, or TDs, or any number of other asset classes... and we see who comes out on top eh. An ETF will likely deliver 5%-10% returns and can be partially sold off. All studies show equities outperform property on the mid to long term.
Make whatever argument about the pros and cons of having to deal with landlords... but dont make it about the maths. Plenty of Aucklanders are better off renting.
But renters can't really choose to the same degree the style of house or suburb as well as a buyer.
The desirable suburbs are difficult to rent in. Rental houses tend to be basic with no attention to detail or style.
They can't have a dog either.
And in NZ society renters are considered second-class citizens.
Renters pay $1000s in bond, upfront rent, leases, etc.
Just a waste of money & effort really.
People are better to buy and let time do its work.
Who would want to be 70 retired and renting?
"But renters can't really choose to the same degree the style of house or suburb as well as a buyer."
Now I know you're taking the piss. Buyers cant choose to any degree in Auckland. Renting is where the choice is - it's SUPER easy to rent in a nice area as a professional, way easier than buying in that area.
"Rental houses tend to be basic with no attention to detail or style" - wrong. I assume that's the kind of slums you pedal?
"And in NZ society renters are considered second-class citizens." - that's kind of my point. NZers have blinders on that few OECD countries do. When those second class citizens rise up against the landed gentry, then what?
"Renters pay $1000s in bond, upfront rent, leases, etc." - you know bonds are refundable right? a lease is jusr rent ... the only wasted money is the letting fee, but you often dont pay those and they are a drop in the ocean anyway. Owners pay rates, maintenance, insurance, ...
"People are better to buy and let time do its work." in a hot market, time doing it's work means returning to normal levels relative to wages - which means capital loss. That was my entire point. Renters are better biding time, find a good landlord (they are out there) and pocket the difference.
"Who would want to be 70 retired and renting?" who'd want to be 70 and still paying the mortgage? A reality for many buying today.
You forget that renters are extremely mobile and they are fluid, which means they will move cities when it doesn't make sense to pay ever increasing prices. Well the smart renters with uni and trade qualifications can go anywhere and easily get a job and that leaves you with the bottom feeders that can't pay the rents that you are asking. Are you seeing the bigger picture yet? Because the regions are now getting flooded with those smart renters who are now buying in the regions and filling the much needed skills gap and are no longer the lowly renters that you think so little of.
I would beg to differ. The desirable suburbs are hard to BUY in. Everyone I know who rents, rents inner central, in desirable areas, close to work, and lively neighbourhoods, renting places on a shoestring, that they could not dream of affording.
Everyone (young) who buys... lives in the middle of nowhere, hates their life because they're stuck in traffic, and gets to see their dog/kids for 30 minutes each evening by the time they get home.
And you wonder why people rent?
Roll on the Auckland housing crash...
Yes renters cannot see the big picture and are living for the moment with no vision of the future. I finished paying my Mortgage at age 48. What I would now be paying in rent for the house that I live in would now be MORE than the mortgage. If your still renting at age 65 your totally screwed and will not be able to retire. As unfortunate as it is, the main path to wealth in New Zealand has been housing. Had my parents not bought a house and rented, they would still be trying to rent and also I would also be renting as they would not have been in a position to pass on any of the equity. Sure there is money to be made in shares and I now have money to play in them if I wanted to but you cannot live in shares.Absolutely no regrets in my decision to buy. Could the market have changed now ? sure but no one has a crystal ball and everything has risk but if your not over extended and are in it for the long term, then chances are property prices will have doubled by 2050.
Carlos, this is another typically ignorant comment and view that people your age have in this country. I'm almost embarrassed by how financially illiterate a lot of boomers are - and how narrow in view they are. Sure, you had the benefit of being born at the right time in a fair playing field.
This isn't the case now. The NZ housing market is not a fair playing field. And to suggest that all a young person needs to do is buy a house and work hard to achieve financial freedom - well I like your way of thinking and that this should be the case- but it is so far from the truth now. In fact that could prove to be the worst advice if the market crashes and it takes out all if a young persons equity. It would be financially and morally destructive. And you need to start thinking about why this is the case and the causes of the risk. It certainly isn't the younger generation that have created this problem. (Excuse the generalisation on this next sentence) Our older generations in this country are either blinded by greed or are almost completely ignorant.
Most like the fact that houses are so expensive because they think they're rich through buying and selling houses to each other and to any foreigner who is willing to pay a rediculous price. Then you have the ignorance to tell young people to jump and drown in a giant pool of debt - which if interest rates rise could mean they might have to default on their mortgage repayments? Our older generation in this country are at times a joke - so too are our policy makers - and given our poor leadership over the last 10 years where we had ample opportunity to take a different path, we choose not to, we therefore deserve what could well be coming our way.
I agree they may be financially illiterate however you can also over analyse something and go nowhere in life because you don't want to take any risks. The boomers just jumped in boot and all and now when I see them out riding their Harley Davidson's I say to myself "Good on you, you deserve it". All generations are greedy, don't kid yourself if the roles were reversed the current situation would be EXACTLY the same.
That might be where I differ with you Carlos. If my kids were being forced out of the right to buy a home in their own country because of excessive consumption by foreigners and landlords, I wouldn't be out riding my Harley. I'd actually be out doing something about it and trying to leave the place in better shape than I found it.
Carlos in Gen X, indicated by the fact that it took him so long to pay off his house at age 48. Boomers only took 15-20 years to pay their houses off. I'm Gen X too and went freehold at 46. It took me 25 years and I squandered alot of money away on overseas trips at the same time.
Must have been quite a joy buying a well priced house (admittedly at high interest levels) but then to have the opportunity to pay it off with the cheap rates we've had of late.
One can only dream of such an opportunity these days....Its quite possible anyone buying these days will be forced into buying an overpriced house at low interest rates, then get caught out trying to pay it off at higher interest rates. Double whammy....
The interest rate when I first purchased was about 11.50% but houses were only 3.5 times my very average single income, so high interest on a loan size of $90,000 is not the same as having a low interest rate of 5.50% on a $500,000 mortgage with DINKYS as the purchaser these days. DINKYS is a bank term for the perfect mortgage customer (Double Income No Kids). Work out the sums using anyone of the online calculators that the Banks list on their website and you will see that today people are being so ripped off it scares me to death of what crisis is heading our way over the next few years.
if you had put the same $ difference between mortgage and rent in to shares without buying a house over the same time period, you could probably buy two or three of the same valued house freehold today with all the returns you got... but you wouldn't because it would be a bad financial decision, maybe just one so you don't have to deal with landlords. Then if you had leveraged that using margin lending this would be even more (a bit risky for my liking but hey that's what home owners are doing with a mortgage)
Hi thcam4. I did both at the same time because I never put all my eggs in one basket. While I was paying off my mortgage I was also buying shares concurrently. I don't see my house as an investment because it doesn't pay me an income and actually drags money out of my savings in the way of ongoing maintenance, rates and insurance. I see my house as a sort of assurance policy if you like. A place to lay my head down at night and never need to worry about rising rents. Shares are definately the better way to go long term. Buy short, hold long and above all don't panic sell when everyone else gets spooked and dumps their stocks.
Yo Carlos – you're completely missing the point. Big picture is this: the market is about to tank.
I don't need to be told as a renter I'm not thinking about the future – the two are absolutely not mutually exclusive, and it's ignorant of you to assume all renters are "living in the moment". Some of us just don't want to throw all our eggs in one basket when AKL house prices are clearly on the decline in what looks and smells like a housing bubble.
And sure, some renters out there ARE "living in the moment" – week to week actually. Mocking the working poor is just plain mean.
*Big Sigh* ... you boomers are naive. Just because it was cheaper to buy than rent thn, it doesnt hold true in the Auckland market today. It was about when you were born mate. It's 100% true that in Auckland NOW - not in the 1970s or 80s - NOW, it's cheaper to rent than buy. And buying makes little financial sense NOw given correction risk.
"Yes renters cannot see the big picture and are living for the moment with no vision of the future" --- What a dis-ingenuous piece of drivel. I love how boomers think they are financial geniuses b/c they inherited equity and on sold property. Short sighted madness, with no vision for the future impact of todays debt ridden generation.
Hellomatt
That isn't always true. When there is a very obvious bubble that looks to be at near peak, it's a terrible time to enter the market.
I returned to NZ 6 months ago and decided to rent not buy. My money is working very well for me elsewhere and I have property in another country anyway. But there is simply no way I would buy into the NZ housing market at this time. If that makes me unsuccessful in your opinion so be it. But in a year or so, if I find myself in a much better market as a buyer, will I regret renting? Nah.
"Be fearful when others are greedy and be greedy when others are fearful", Warren Buffett. I am a property owner now freehold without any debts and have had an investment property also and I would NOT BUY any property right now and won't buy again until mortgagee sales drive down the prices via the changes in banks lending policies and/or political action which will eventually happen if the socialists get back into power and that looks increasingly likely unfortunately! Shares have been the best performers for me lately. Who knows, I might even sell some shars and buy a cheap property in the next 2-3 years or I will hold my shares long term since they pay great dividends without the hassle of tenants.
Just start by following the business sections and get to know NZ companies really well. Look for innovation and look at charts and long term history. A good example of a solid long time performer is Telecom (now Spark). There share price was originally floated at 2.00 per share a couple of decades ago. They are now worth over $12.00 per share and have paid solid dividends for years all while their share price is worth so much more. Competition hasn't even hurt them that much. They are what we used to call "Blue Chip Shares", solid performer with good returns and little risk over the long term. Also shares can be bought with small parcels of cash over the years, $1000 here, $500 a month later etc.... All the while you are building up stocks and unlike houses where you have to fork out the whole amount in one single purchase even of that house was at the top of the bubble. Ask yourself if you would be happy to invest $500,000 in one big purchase of shares at the risk of the company going bankrupt? Watching the markets is fascinating too and you will learn alot of financial skills. Just start somewhere.
I'm not moving money offshore at the moment because of all the currency wars going on between China and America. It is too risky because currencies are being devalued fast due to all the QE that has been going on. Also with what is happening in Canada right now and their sub-prime mortgage crisis, a few banks might hit the wall and this filters right through the entire global financial system. You could actually loose money via bank bail outs and then again due to the currency falling sharply.
Ah - Spark last traded at $3.745 ( Disclaimer I own Spark shares amongst others) . There are several good websites that discuss shares and the share-market
Oops that was a bad example to use lol. I obviously don't own Spark shares. Air NZ may have been a better example of buying just before the government bailed them out. Their share price dropped to cents in the dollar before a trading halt and bail out happened. Now they are way back up, although it only takes one passenger plane to go down....
also check the CEO and board, they can make a massive difference to company performance or non performance . if they change and your don't like what you see or hear go with your hunch and reduce or get out.
my other advise is use your eyes and ears, it is interesting what you can see or hear about companies that they don't make public. i.e if invested in Auckland airport take a drive around and see all the building going on, that is future income once tenanted
Sharetrader makes some really good points. Reading charts and the business sections is only part of your homework and due diligence. Always keep your ear to the ground and read articles in Foreign Media that you can relate back to how it may affect the NZ markets.
Gordon, firstly I,don't beleive that prices are actually dropping in Chch although there are less sales.
I have heard many times that First Home Buyers are struggling to get finance,which is unfortunate but does mean that there are more tenants floating around.
You for one Gordon should know that if people aren't buying then that is the time to be looking and buying.
Do the opposite to what most are doing and you will do pretty well!
Banks have drastically altered their lending policies because of new regulation being forced on them to cool the housing market. That is why FHB's aren't buying because they have been forced to hold off until prices decline so that they fit within the Banks new LVR limits. So the other side of that ledger results in house prices dropping because of the lack of buyers. I do firmly believe you are right in always doing the exact opposite of the herd but unfortunately you as an investor are actually part of that herd, when you should have run the other way as soon as every man and his dog started buying investment properties to fund their retirement. SMSF or Self Managed Super Funds are so popular that the whole asset class is seriously over-weighted that is going to implode under it's own weight and unfortunately it will wipe out alot of future self funded retirement plans with it.
Forces greater than you tell us Christchurch prices are dropping and we all know why. There are many reasons but the main ones are constant earthquakes, fear of another big one and your dreadful weather. That is why your population is so small and will always be there or thereabouts. You still do not tell us why you would hand someone your cash or borrowed money or both when you know the price you paid will be more than what you will pay next month. It does not make sense. Do you have that much money you can just give it away.
Yeah I like how in the second news link that you posted, They talk about the 'disconnect' between the property market and how it's far exceeds Aucklander's salaries. And then they don't bother to explain the important bit of how it got so over inflated?? No mention of Foreign Investors, nothing to see here... Move along and be content with your lot.
National have to GO!
With prices failing the banks are exposed. Would be interested to understand which banks in particular could be hit. Also with OBR and covered bonds, depositors could get hit in the unlikely event that the govt didn't bail them out. Banks have made a huge amount of profits from Residental and Commercial property lendng, both which are looking to take a tumble....
Well during the GFC, two Australian banks secretly got bailed out by the US Fed and nobody knew about it until about 3 years later. They were the NAB and Westpac, so it is quite likely that at least one or two of the big four will go to the wall if mortgage defaults hit 5%
How about this guy he rents in Auckland, he seems to be doing OK, and finds the Auckland market a bit rich for him..
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…
He doesn't own a house in Auckland but is planning on building many apartments:
"We are uniquely poised for organic growth. We see mixed-use development being integral to get an opportunity to create capital. We could build 2000 apartments at Westgate. The total at Milford will be about 300."
@Zachary: So "Organic growth" is that the new euphemism to suggest growth without foreign investors? Humm.. not going to expect prices to sky rocket any time soon. But just goes to show that apartments are doing better, why because their affordable to the 'Organic inhabitants' i.e; resident kiwi buyers.
Gordon Not going to state how many houses we own in Chch but you need quite a few hands, and none of them were written off.
None required any major foundation work and we have bought since the quakes and no problems with any of them.
Yes some other peoples were damaged badly but the fact that they are still standing shows you that they it would take a lot more than what we have had to do bad damage.
This housing ponzi has sustained till now with support from government and this year being election year are helpless and though not doing anything to end the ponzi but just by not helping has deflated the steam just imagine what will happen when government changes as this election will be for change in NZ.
I'm still picking that National will get back in but this time Winston Peters will be running the show, given that NZ isn't ready for a socialist nanny state full of reglations and silly sugar taxes. Winston Peters is also a naturalised ex-National Party polly and people forget that he was actually Jim Bolgers Deputy PM under both Jim Bolger and then Jenny Shipley. He is shaping up to be our own little Trump.
"The government has a duty to protect the hard-working Kiwis who provide shelter and accommodation for society. You need property investors to provide the roof over your head - that's how it works. The RBNZ must cut interest rates by 50 bps IMMEDIATELY, and increase YOY immigration to sustain the current growth model. This doesn't need to be permanent, but will quell unease and continue the country's economic miracle. Also, people need to stop talking up other electoral parties - IF YOU LOVE NZ YOU WILL VOTE NATIONAL!"
A. Boomer
The thing about the property market is that a rebound always come. If a finance company (or bank) fails, your money's lost forever, but with a property downturn you can choose to hold tight and wait until the next upswing - which is usually not too far into the future.
I can remember back to the early 1980's, when a number of pundits were saying that Auckland house prices had reached outrageous heights and people would be fools to buy. At that time, a reasonable family house in Central Auckland (Freemans Bay comes to mind) could be bought for around $100,000....... Then, just a few years later first mortgage interest rates reached 14-18per cent but with little impact on house prices.
The reality is that people love buying residential property in NZ. And, over the last couple of decades, more and more people from other countries have joined in. It's become deeply ingrained in NZ's national psyche.
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