The downturn in the Auckland housing market is becoming more severe, with Barfoot & Thompson's median selling price now $30,000 lower than it was a year ago.
The agency's median selling price was $810,000 in July, down $30,000, or 4%, compared to July last year, and down $90,000, or 10%, from its peak of $900,000 In March.
The average selling price was $908,319 in July, down from its peak of $968,570 in March, but still ahead of the July 2016 average of $867,681.
Barfoot & Thompson is the largest real estate agency in the critical Auckland market by a substantial margin, and its latest results suggest that prices have not just stopped rising in Auckland, they are now in retreat. Thus instead of reaping capital gains, buyers could be facing a period of capital losses.
The decline in prices comes against a background of an even bigger fall in the number of sales, with Barfoot selling 747 residential properties in July, down 28% compared to the 1034 properties sold in July last year.
Last month's sales was the lowest volume the agency has sold in the month of July since 2010.
New listings were also down to 1173 in July compared to 1426 in July last year.
July's new listing were the lowest the agency has signed up in the month of July since 2011.
However the total number of homes the agency had available for sale in July was the highest it has been in six years, with Barfoot having 4088 residential properties available for sale at the end of July, up 36% compared to the 3012 it had available for sale in July last year.
'It will it will take some time for both buyers and vendors to navigate the changing market'
The combination of rising inventory levels, falling sales and falling prices suggests the market is continuing to weaken.
"Without question it will it will take some time for both buyers and vendors to navigate the changing market," Barfoot and Thompson managing director Peter Thompson said.
"Opportunities for vendors to sell are still plentiful, however sellers need to be willing to set themselves realistic expectations and listen to what the market is telling them.
"Vendors are less likely to see quick sales and significantly above average price increases, in the short term at least.
"However this is still a good time to buy and sell in Auckland, given what are relatively small market movements.
"In this type of market, people are motivated by the more fundamental reasons to move house such as a growing family, change of job or downsizing.
"This could be seen as a return to house sales being influenced by those more traditional factors," Thompson said.
Barfoot Auckland
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287 Comments
Apparently it's just the winter blues and school holidays keeping buyers and vendors at home :-)
http://www.scoop.co.nz/stories/BU1708/S00103/mid-winter-chill-keeps-auc…
Household affordability, LVR limits, rising interest rates, clampdowns on Chinese capital, and the bursting bubble of irrational exuberance have absolutely nothing to do with it.
Hang on a sec there. If "nothing is selling below 750k" how is the Median Price going to hit 780k?That requires 50% plus 1 more to be priced between 750 and 780. That is a really tight range for half the market plus 1.
To be clear I agree with you that prices will drop. Just not sure how you are getting to your Median number.
Why do they keep quoting median price, and not the mean / average price? If few houses are sold the median price can vary significantly. Whereas the mean is across all houses sold, and is the average sale price. The median is just the middle price of a group of them.
Woah, easy on the MBA bashing there nymad. You seem to equate an MBA with having poor ability to analyse an investment decision (whereas a good MBA teaches good investment analysis skills).
Is a real Masters by thesis only?
Aside from all of that, I'm pretty sure I was taught mean, median, mode, standard deviation etc either in primary or intermediate school??? If someone can get the hang of it there, their tertiary education is probably irrelevant.
MBAs were created for one reason and that is to be a money spinner for the institution.
Sure you improve your skill base in various areas, but the level of content is far from Master's level.
Mainly, I just get sick of the off the bat comment of "oh, you don't have an MBA. I've got one."
As if it means something.
An MBA today (at least in NZ) will entail a significant research thesis component...obviously the quality will vary, depending on the student. But not necessarily more than your run of the mill masters, and an MBA class is likely formed of quite high performing people already, rather than folks who did a masters because they didn't want to hit the workforce just yet (as a few might be).
You're wrong, there.
MBA research projects are of similar workload to Honours projects/dissertations but with a ,generally, lower bar.
That is nothing like a research Masters.
MBA classes are generally full of pretentious, self important middle aged people - They are the type that sign their name exclusively with MBA.
They may have high level professional jobs, but that doesn't by any stretch of the imagination make them high performing.
Having taught MBA classes, I am well aware of the academic standard and sense of self worth that MBA students have.
I've read a fair few theses from both types, and PhD theses. It seems our mileage varies. I've read a few very average general masters theses, and some very good MBA ones.
I've also only really seen people in HR listing their MBA on their business card (at least in New Zealand), in among all the other letters that litter an HR business card.
Out of interest, do you mind sharing what you taught? And did you teach in NZ?
MBAs were created for one reason and that is to be a money spinner for the institution.
Sure you improve your skill base in various areas, but the level of content is far from Master's level.
Mainly, I just get sick of the off the bat comment of "oh, you don't have an MBA. I've got one."
As if it means something.
Ridiculous comment. I looked at a house the other day that had not had anything done to it.. sold at the peak of the market (March 16) for 1.30m. Sold 2 weeks ago for 1.71m. No negative equity for that seller. With most buying with a 20% deposit, very few will have neg equity. And what is the point in the comment anyway. I think NZ and Auckland especially needs a quick sharp correction. But Im not going to rub those peoples faces in it who are affected if it happens
My understanding is the deposit has everything to do with it - if you buy with no deposit (100% loan) then any drop leaves you with negative equity. If you buy with a 50% deposit (50% loan) then you are sheltered from negative equity until prices have fallen by >50% as the value remains higher than your liability i.e. you have positive equity.
It's not great to be losing money from your deposit, but there's the particular issue in negative equity that you can't sell and move as you have no deposit left to raise a new loan.
Wow. Thanks for spelling your incorrect assumption out there champ. What you are referring to is a loss on your capital, which could also be referred to as your equity moving in a negative direction.. but the term "negative equity" refers to a person that has an asset that is worth less than the associated loan against it. In the current environment, many people who have bought in the past 12 months would have indeed lost some money.. but they would not be in negative equity. Important that you understand that crucial difference. You have spelled it out yourself which is a little worrying with your cute Asset/Liability/Equity example. Until prices drop 20%, pretty much everyone will still have positive equity.
You are fundamentally misunderstanding what negative equity is, making a loss does not automatically mean you are in a state of negative equity.
https://en.wikipedia.org/wiki/Negative_equity
If you had put in a $180k deposit, borrowed 720k to buy a 900k property which was now worth 810k, your equity is 810k - your mortage of 720k = 90k.
90k is a positive number, i.e. you are in positive equity.
If the price fell to 700k, your loan is still 720k, your equity is now -20k. This is negative equity.
Mecheng I think the fools don't understand what equity is !
They believe if they keep the house they haven't lost equity !
Even worse the funds tied up are lost opportunity to earn elsewhere
Those who were smart sold at or near the peak.
Of course it's easy to fall into the psychological trap that Auckland is different and property will never decline in value. Yet it is doing just that .
Where does the saying "building equity" come from ?
The whole idea is to build your equity in property by not only your payments made toward your loan to reduce your debt and increase your equity but you also are hoping for increasing value of the property over the years.which also may improve your equity.
That's why I was told by my accountant to buy up rentals for retirement back in the 80s
The same accountant is wasting his life away dealing with tenants and I'm on the beach in Montauk
Debt or Equity the idea is Profit......has not The Profit made it to NZ tv yet?
I would like to sort of come to Mecheng's defence here. If someone had a mortgage free family home back in March and they used that as equity and raised a 100% loan to buy a rental property then the 90K drop would feel like your new venture had gone into negative equity. This would be the case anyway, even without a correction, as there would be a considerable cost to sell the house. Usually the first year or two of capital gain merely covers the cost of selling the house. Again, we must stress, it is generally a long game.
From the university of the Post & Telegraph worker ups pole comes Zach explanation !
Audacity to put down Mecheng !
Try learning the word Profit Zach and learn to sell property at peak then buy at lows just like BlackRock the US hedge fund did because they're in it for Profit$
Royal "We", NorthernLights, you must have heard of it. Anyway thanks for the advice about selling high and buying low. I can't really do that as it would mean evicting tenants and feeling bad for the next buyer. I'd rather weather the storm myself and sell during a stable period because I take great pride in being noble.
Actually what you say "believing in fairy tales........" Is misguiding others, you are totally wrong. I bought my first house 46 years ago with a deposit of 500 pounds, I have turned that into $2.7m. I am not a developer or anything like that. The reality is that time and inflation does the trick, yes I now inflation is low now but in 5 years...... You have no clue what house prices will be like in 6 months, you are just guessing. If any young people out there are reading this just ignore these silly comments and get on and buy as soon as you can, in 5 years it will look cheap.
When we bought our first house for 5,000 pounds in 1971 everybody thought we were mad paying so much, nothing much has changed as all generation have negative people saying don't buy.
Just to clarify our house purchases, our first house we only had for one year and actually swapped it for our second house. The second house we had for 11 years, the third house we had for 11 years. We then had a gap of 4 years without a house as we were living in Japan. We moved to NZ in 1998 and still live in the house we bought then. We have had a couple of other 2nd homes in NZ. We have just bought another house in Eastbourne and plan to move there after we sell our Kerikeri house.
What is the best way to make money on property? Well it is hard work improving your home by extending and modernising. But the best advice my years as a property owner is to buy as soon as you can afford to. We have all had down times in the market but over time there is no better way of making money.
You make it sound easy, but without even realizing it you've greatly benefited from financialization of the economy, and from fiat decoupling from gold in 1971. One time only events which have run their course. The only way to get stupendously rich from property now is to inherit it.
Rubbish, you have no idea what you are talking about. If you go back any time in in the last 150 years you will see the same result, gold standard or no gold standard. We lived through some really hard times after the war but still property kept going up in value.
Three years ago when the site was talking about a drop in prices I pursuaded my son to buy a do up. He paid $550k for it. I have spent a lot of time upgrading his house, probably spent $60k and it is now worth $900k. Going through that process taught me that young people are not interested in do ups. I think the excuse is that they don't have the time or skills. Building is very easy and you even have You Tube to show you. My observation from my own kids is that you spend far to much time on computers and social media.
I used to work 56 hours a week in my twenties, more in my thirties and forties but I still worked on the house in the evenings and weekend. It was very hard going but we got there and I even managed to retire at 49.
We never had any money left us just did everything myself and worked hard. Incidentally the house we just bought in Eastbourne which is a very large house we have completely furnished to a high standard on Trade Me for less than $10k. I expect to up its value by 50% within 2 years by doing the work myself and I'm an old fella. If I can do it so can anybody else if you are prepared to put in the work and hours.
So you young ones out there you choose to follow somebody who has been there done that or follow all the negative people on this sight who use stupid excuses like "gold standard", it a new excuse I give you that but it's still silly.
Great story Keriwin and Greater advice .. if only the young ones would listen and learn !! there has been so much BS filling their minds and ears until they became totally dependant on the State or someone to make it easy for them - - the ones opposing this advice today will bite their fingers and toes in few years just like some did in 2010 and 2006, and 2002 etc ... thank you for sharing your thoughts.
@kirwin, Sorry to see all your hard work go to waste in refurbish a property that you think is worth $900k. I would check your 2014 CV price because that's whst it is probably worth if you try to sell this Spring.
You forget the one off event that caused our property prices to increase so rapidly in recent years particularly for Auckland. The Chinese buyers are gone never to return with the capital strength they had, their Government saw to that.
Residents Investors aren't able to help you out either our banks saw to that and with good reason considering that the silly money has gone from Foreign Investors. You might get lucky and find a money launders interested purchasing it, though they usually go for new builds.
It such a shame you are so negative. I didn't say the QV was $550k, I said that's what we payed. The lesson I'm trying to give you youngsters is to buy do ups for below QV. It does mean that you have to work your butt off to increase it value and that is where youngsters fall down as they are to "busy". Strange how we found the time. Why would my son want to sell, it's his home. We are talking about using his equity to buy a 2nd house which we will also make money on. Funny I've just been reading about China and how much money they will spend in the future on foreign homes
Anyway you stay negative, it must be your natural state. We meanwhile will continue to do what we have done for 46 years and make money on property.
I would suggest that you do more research on how and why the Chinese have changed their strategy on foreign property investment and they're certainly not investing in property here.
Don't take the simplistic approach with the blind belief that property prices always increase it will bite you in the butt in the end.
Who do you think advised me to sell at the peak of the market, yes it was my Chinese friends who also sold to capture their gains. :)
China’s PBoC Announces An Army of Over 400,000 To Prevent Money Laundering
https://betterdwelling.com/chinas-pboc-announces-an-army-of-over-400000…
China’s Massive International Real Estate Buying Spree Is Officially Dead
https://betterdwelling.com/chinas-massive-international-real-estate-buy…
China’s Army of Global Homebuyers Is Suddenly Short on Cash
https://www.bloomberg.com/news/articles/2017-01-26/world-s-biggest-real…
https://www.squirrel.co.nz/blogs/mortgages/housing-market/auckland-hous…
Why don't you post Bernard Hickey post on 30% drop in prices he posted a few years ago. He is also supposed to be an expert.
The Chinise site I was looking at was not talking this week next week or next year. The Chinese love property and they will be back before you know it.
And we will also see the Brits and Americans coming back whenever the exchange rate changes.
Ha ha keriwin, keep dreaming. And I find it hilarious that your so stupid to believe that property prices will always go up based on foreign buyers always being there when clearly they are not.
In case you haven't noticed there is currently a GFC that still grips most Western economies and China is more interested in investing in its self or business ventures especially for tech for the long term.
So you know what, I'll leave you to your crash and burn fate. And good luck convincing the Brits to buy their more screwed then you are.
Some home truths:
1. Chinese capital flight has hyperinflated the prices of many Auckland suburbs over the last 7 years leaving them completely unaffordable, even for high income earners.
2. Even if you can raise the 200-300K deposit, you’re putting yourself at tremendous risk because of the gross value of the loan relative to your income, and possibility of job loss, interest rate rises, or % price declines.
3. It’s not really possible, in Auckland at least, to live in the house that your own for tax deductibility reasons.
Look – I would love to repair my own house, it’s my dream to mow my own grass but it’s not really possible these days for the aforementioned reasons. I’m good with money too! I do all my own rental repairs, taxes etc. I’m so tight my friends call me dimes because (as they told me) if they shoved coal up my arse it would turn into a diamond! I take that as a complement. I’m always berating them for spending to much money on rent and other stuff. Every single cent I earn goes into productive assets and real estate, and yet I doubt I’ll acquire the same wealth as a boomer. I don’t think you’re seeing things clearly. You baby boomers spent the last 20 years sleeping walking your way to extreme wealth. I suppose everyone attributes their own good fortune to themselves.
Firstly good on you for saving. If you did what I did you will get the same result. NZ is a great place and people want to come here to live and that alone will keep prices low. Have you thought about buying a house somewhere else in NZ to get you on the ladder and rent it? You can buy in Auckland later when you have made some equity.
As for sleepwalking to extreme wealth, I wish.
The first house we had I extended the kitchen and modernised it. That was when I was 21. We only had that house for one year as some won knocked on our door asking if we would swap houses with a small payment to them.
The new house was a huge do up. Within 1 month I knocked all the chimney breasts out, made the two rooms downstairs into one, put a new wooden ceiling up in the new lounge diner and re-did all the plastering(that was fun learning to plaster. I then extended the kitchen and built a conservatory. We then bored some more money from the bank and I built a third floor which added 2 bedrooms and a additional bathroom. I had the roof off in the worst July rain in living memory. I can still remember running around on the roof trying to lay tarps.
We had 2 children at this house and we used these extra rooms to take in students to pay for private schools for the kids. We lived there for 11 years.
Our third house was a real risk and challenge it was a derelict huge Victorian house that stretched us to the limit. My salary was lower than the mortgage payments but we managed to fiddle income letters to get the loan. I had 6 weeks to get it up to liveable condition as we had 6 students moving in to help pay the mortgage and school fees. I added a third floor to this house. After 5 years I could have retired and lived on the income from students but I loved my job and it became "normal life" to come home from work and do a few hours on the house.
We left the house after 5 years as I was posted to Japan, we rented it our for 4 years before we sold it.
All the work we put in in the UK set us up for life.
We moved to NZ in 1998 and bought an old house and orchard. We have turned in into a luxury estate with private park. I can say I have worked almost everyday doing this work myself. So if this is sleepwalking I'm guilty.
Most of the building work you are talking about you couldn't do today without at least a builders sign off, not to mention a permit and associated costs.
In the early 90s I took out load bearing walls, put in a flitch beam, changed plumbing and wastes, external windows and doors moved and removed, all unpermitted. It wasnt an issue back then, we live in a very different world Im afraid.
History has always shown a positive return and I see no reason for that to change. It could go down in the next year or two but we really don't know and does it matter, get a do up, roll your sleeves up and in 5 years you will be laughing. Read my response above for positive news.
By every metric prices in Auckland are grossly overpriced and we are in a grotesque credit bubble. It may be that bubble is now starting to unwind. Surely any rational person would estimate the outlook for prices in the next 12 months is negative. Buying a house now is absolutely the worst thing a FHB could do. Just rent the damned thing.
I too have been advocating do ups recently, especially for FHBs. Find a weatherboard home with a tin roof and get painting. YouTube is a fantastic resource for learning how to do things. For example I wanted to paint a large area of trellis and discovered on YouTube that using a mini paint roller was the way to go - almost made it enjoyable once you got the technique right.
What a hero mecheng is that he realised he misunderstood a bit and deleted his inaccurate comments. By far the majority of people on here stubbornly insist they are right even when confronted by new information. But this guy actually listed. #Hero Society needs a lot more people like mecheng
Even allowing for the bias in their data, a 10% fall seems more consistent with the increases in stock of houses for sale than we are seeing from the QV data. While I appreciate there is a large lag in the QV results as they are based on settlements, I can't help but wonder if QV's assessments are a little captured by their own interpretation, which sounds a lot like what we hear from vendors.
The critical phase will be when the election is over and spring listings hit the market. If as suggested anecdotally, people have withdrawn listing because they couldn't get their price there could be a major flood of properties on the market.
"In their enthusiasm to attract Chinese investment, local policymakers have not stopped to ask basic questions about who these people are, what they are offering and whether this can actually be delivered,"
http://www.afr.com/business/agriculture/the-chinese-billionaire-who-tri…
Real Estate in another guise. It's all about financial manipulation - all of it. From suburban blocks in Remuera to Life Style Blocks in Christchurch to farms in The MacKenzie Country ...all of them.
The Chinese billionaire who sought to sell vast Australian farmland before purchase just another example we hope NZs govt should learn a lesson from.
I do hope Auckland property prices do not continue to fall & trigger a surge in sell offs by speculative foreign purchasers
If you were a foreign purchaser it would surely make sense to get whatever you could and get out? If you bought a few years ago you would still be up. At the first sign of serious trouble, these guys will be gone. When they bought I suspect the only thing they knew about the market was "its going up". Their knowledge of and willingness to stay in the market is probably pretty limited.
$90,000 is a good start but it's only a small step towards affordability.
What we really need are measures in place that keep housing affordable for future generations. Possibly introducing things such as land-taxation, or anything that incentivizes densification.
It's been too attractive to invest in property in recent years, so you can't blame anyone who has. However, it's not too late to change this image so that property becomes much much less attractive. Then we might see some more capital flow to productive sectors including innovative technology startups, general research and development.
.. and what about the RMA ... we've had so many promises from the pollies over the years that they'd turn the spotlight onto the RMA , and still nada , zilch ... no acrtion there ...
Yet some economists recently calculated that the RMA's meddling construed 56 % of the average OrcLand house price ... helping to pump up the section prices 200 % or a whole lot more ...
... currently , I live in a dump ... very happily so ... and previously , in Adelaide , I lived with factories on two sides ... I was as happy as a pig in poo .... there's nothing like seeing the cut and thrust of industry all day , the trucks zipping in & out with goods produced and gear imported ...
Only National Pollies, reality check National found it didnt have the %s to turn NZ into a cesspit like say it would have liked to,
This has all the dynamics of a deflating asset price bubble. This isn't about "affordability" of debt service, its about why people invest in property, its capital value. It's about people now expecting that prices will fall. Buyers will want to hold off, as they think houses will fall further, so why not wait? Vendors will want to sell now, as they can see capital values will slide. Early ones out get the most money in a falling market. And lenders will be more and more conservetive in their lending. I think the spring market has the potential to be a disaster for vendors.
"Barfoot & Thompson's median selling price now $30,000 lower than it was a year ago."
But compared to 2 years ago; 5 years ago; 25 years ago, they're still up. Comparative Analysis is all about the terms of reference. As we all know, buy the time the trend is established.....it's too late.....
Do you ( 2nd person plural) have any idea what the Spring Selling Season is going to look if this trend keeps up - AND the 'public' find out? It will be horrific. I've seen it in action in the UK and the desperation that overwhelms the economy is profound. Frankly, I hope we avoid that, because it wrecks lives, and no one deserves that. But all the signs are there.....
Correction. As of aug 17 forty percent of new mortgage lending is being made to people taking out interest-only mortgages. I understand 16% of interest only are to owner occupiers. 28 percent of banks' existing stock of mortgages are on interest-only payment terms.
I think the 28% total lending on interest only is the key figure. Seems a pretty material number. Close to 30% doesn't seem small.
B&t are getting are a little worried.....they have now turned to fhbs trying to keep the party going.......it's just getting a little shameful and pathetic.......the sediment is set and the prices just have to meet the market...this is just the start......just be careful right buying property the world financial system is very shaky
Thanks for bringing that up NZ United. It largely went uncommented on but B&T have been sleazing around trying to get the rules changed to suck in more FHBs; obviously more than a little worried.
"Auckland's biggest realty firm is holding high-level talks with the Government and Reserve Bank over proposals to help more young families into their first home.
Barfoot & Thompson wants to exempt entry-level buyers from tough lending restrictions by allowing them to purchase houses with less than 20 per cent deposit, provided the properties are below a $600,000 threshold."
A couple of side issues; how come they get access to high level talks and who are they pretending to represent first home buyers. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11897658
Q. "How come they get access to high level talks and who are they pretending to represent ...."
Didn't you know Peter Thompson had John Key on his speed dial and John Key had Peter Thompson on his speed dial - you'd have to go back a couple of years when Peter Thompson was issuing monthly epistles - and if you followed the comments
New boy Billy Blunder only does business with people on his speed dial - hand-balled from JK
There was no concern for FHBs a year ago and now B&T are predicting alot of houses under 600,000 ripe for FHBs,
It looks so self serving to reinvigorate a portion of the market but ironically it could save a total crash buy having a subset of buyers ready to pounce on anything at the 600k mark would create competition in that bracket meaning that this will be as low as a lot of houses would drop..... possibly
When the bubble pops maybe, but we still have low interest rates and a good economy. The bubble isn't likely to be popping anytime for a year or two. Which means the regions probably have 20-30% more growth to go, before they drop back to just ahead of where they are now.
Meanwhile Auckland is losing money today and will also lose money if credit contracts. Investing in the regions seems significantly better than in the Auckland market.
The economy, esp. the low unemployment numbers, had been driven by this credit bubble. When it deflates, which means people deleverage, that growth will disappear in a puff of smoke. The "good economy" is a mirage created by the tsunami of debt that had washed over nz. Migration has had sod all impact on the per capita GDP number, so that too is a mirage. All we will be left with is low interest rates. Good luck with that,
.
Yes, when it happens. But Janet Yellen is still cranking the gates wide open, the credit flows freely. In NZ all of the country (except Auckland) is positioned to take advantage of low interest rates.
Why would anyone deleverage and then park their money in some extremely low interest rate account?
lol, did my comments struck a nerve ?...Oh sorry, chill man, you are getting too excited and worried for nothing, just be patient, you might learn a thing or two ...
Lol, Ireland and USA in the GFC? Again??... seriously? Are you a historian or what?.. seems like you enjoy horror movies and thrillers too much ... :)
Nevertheless, what you posted before was utterly ridiculous and wrong.
Who? which grown ups? the ones that are spreading BS around here ... and exposing themselves as fools ? the illusionists who dont know dough from clay?
I am possibly just about twice your age and 4 x more experienced than you could ever imagine ...lol...however, if you are suffering from the HEAT, get out of the Kitchen ...:)
Yeah we might not own shit (aside from shares, productive investments, and more in the bank), we're waiting for you folk to go to the wall. You'll need to cut back on your smashed avos and Sky TV for a looooooooooooooooonnnnnnnnnngggg time. And seeing your attitude towards those who don't own a house, you'd better hope we're kinder to you than you have been to us.
Regions have peaked now and are declining. That is where the real bargains will be. I well remember last time this happened I bought 4 sections in a small subdivision near lakes and ski fields for $150k and sold them 3 years later for $429k. If you want an afordable property look at the regions.
http://www.interest.co.nz/property/86771/auckland-housing-market-verge-…
by Anonymusse | Thu, 30/03/2017 - 08:55
up1
You can check my comments on articles 3 months back
I said prices were going to fall back 1 year.
And I still say prices will continue to fall another year, back to 2015 (that's the plateau price)
Prices won't fall further down from Oct/Dec 2015.
I said.
To maintain its collateral margin for that borrower. If the ratio falls below a certain level, a bank will require a repayment of debt. For the average property investor that normally means selling one of the properties. The only person being shot in the face is the investor.
That isnt how banking works, banks do not need to update the value of the property that secures a loan. If it does it still doesnt ask for money to be posted, its not like trading stocks on margin. Forcing defaults when prices are down is shooting themselves in face and they dont do that.
It IS how banks work. It's how they manage their collateral coverage. If you have 4 properties, and prices fall to the point where the aggregate value ratio is breached, then as a commercial matter the lender may ask you to restore the banks coverage. This is whether or not debt service is being covered.
Yes I agree forcing sales in a slump is pro cyclical but banks still do it. Banks behaviour normally is pro cyclical, on the way up and on the way down. Banks will not sit there with unacceptable coverage ratios. They will be actively managing those customers who have significant property exposures.
They are not forcing defaults, they are forcing disposals. The investor is the one who gets shot, not the bank. The effect on the market may be marginal, the effect on the investor may not be. Who cares, they are risk capital.
This idea that banks can force you to post collateral is false. There is nothing in bank contracts that can force that and it is not how bank security values are managed. Banks do not actively manage people with high property exposures who are not delinquent on payments. Further because a bank loan is a 'held to maturity' asset, the bank does not mark to market. You're making things up.
Err, no I'm not. I have 20 years experience in banking and finance in London and Asia. Unlike many others on this site, i am not making stuff up,
If you owe the bank $2m, and you have exposure to a sector that gets into trouble, they will let you know. $2m is what, 4 investment properties in Auckland @ average $1m? There will be plenty out there like that
Bobster is correct. I have had commercial clients that have been in a bad position. They were asked to correct that position, it took 9-10 months before the bank hassled them again (their position was still not good). That second call the bank told them to sell a property.
People may claim it doesn't happen here but they are incorrect.
In relation to the bank contracts you should read the mortgage contract for ASB Bank. That one says they can sell the property whenever they want and they don't even have to have a reason to sell it. The contract is brutal but is designed to stop any nonsense that would block them from selling.
Of course the banks forcing too many sales would turn into a disaster but that didn't stop them from screwing up in the US. They had an additional problem of the credit rating agencies continually downgrading assets which made the problem worse.
The money for the house was loaned based on the VALUE of the house. When the value drops, the banks balance sheet drops (security) and risk rises for the bank. The bank has obligations to more important people than the house owner. i.e shareholders and other lenders from overseas (The bank raises money from overseas too...)
So to the ignorant it may seem that the bank is shooting itself in the face when in fact it is shooting at you instead.
I wouldn't say the value of the security is on the balance sheet, but yes when the value of the security for a loan drops that decreases the bank margin of safety on a security enforcement, so yes the bank will want that margin restored (normally by repayment of debt).
Well I guess I'd like a definitive answer to that because I am pretty sure you are wrong, it indeed is.
On top of that the RB allowed up to 10%? 15%? of these mortgages to be put into a ring fenced pool such that the investor was guaranteed a return if those mortgage values no longer cover this pool more can be put in (or swapped)
Houses over which a bank holds a security are not assets owned by a bank and do not appear on its balance sheet.
Impairments to loans which represent an actual or projected shortfall of recovery will appear in a banks accounts, but that's a different issue. Value of security sssets do not in themselves appear.
Balance sheet is irrelevant. The risk has changed ie the banks value margin on a security enforcement has reduced. If it reduces below a theshold, they want that margin restored. It's not a regulatory or capital issue. It's a purely commercial issue. And it's banking 101.
@OnwardsUPwards The property is not on the banks balance sheet. Banks suffer losses from impaired loans not from changes in property prices. If a property drops the banks do not call in loans, as that would cause a default and sale of the asset in to an falling market, that can result in genuine bank losses. Further more there is not even the contractual ability for a bank to call in a loan, loans are singed for a term and that term can not be broken at will by either the borrower or the lender.
No need to call me ignorant @OnwardsUpwards and ill pay you the same respect and not call you ignorant.
There's a couple of important points.
To restore a coverage ratio they don't call a default, they tell the borrower what they need and the borrower either refi's them or makes a prepayment. There is always the threat of an acceleration in whole or part, but it never gets to that as the borrower itself makes a voluntary disposal. Or refi's. if it can.
All residential mortgages are repayable on demand, so a bank can at any time accelerate the whole or any part of the debt. If it was commercial and repayable on default there would normally be a LVR related prepayment requirement.
That is completely made up and wrong. Banks can not force you to repay your loan faster than the minimum terms agreed to in the loan agreement, this is spelled out in the contract/master facility agreement. The borrower is the only person that can force the repayment to be earlier than contractually specified and that is because it is required under NZ law in the consumer credit laws
The inner struggle between DGZ and ZS being witnessed live in public...
"No stop it ZS, I don't want to play the happy spruiker one anymore!!"
"Listen DGZ! You have to, we can't share grammatical traits or even appear to share a similar world view! It's the only way!"
"But can't I at least try to use some statistics or something?"
"No! We know how that turned out last time don't we! Stick to level 1 trolling and posting irrelevant listings of expensive property. Leave the level 2 trolling to me. I care about you DGZ, I don't want to see you get banned like I did ok...I love you, you know"
"I love you too Zach. Apart from that time my paper wealth increased by 3% in one month on homes.co.nz, you're the best thing that's ever happened to me"
Naaawww, that was sweet, must be time for a happy song;
https://youtu.be/XB383WkXcqE?t=15s
Its like the inner dialogue of Gollum....no, no, no....it can't be....not in the DGZ......my precious...
What's to be said that hasn't been already...?
I reckon we're around about the middle of the beginning of this.
Lots of Spring listings, a change in Government, another 50bps of higher interest rates, reduced immigration and a foreign buyer ban and I think we could say we'd reached the end of the beginning and move into the correction proper.
If National hold on, and the RBNZ eventually cuts again, and the Chinese loosen their capital restrictions, and National ramp up demand side incentives like first buyer grants, then it's conceivable the party could keep going a little bit longer. But the risks are heavily stacked to the downside.
The problem isn't going to be the few over leveraged who have managed to sell, it's going to be the vast majority who have kept their faith in the God of Auckland property and are still holding on.
Pretty much yes, Auckland is entering property price correction territory now when you weigh up the data from more immediate sources (Those that track prices on a monthly basis). So -10% is a correction, -20% is a crash though that usually takes two years to play out.
The clock has been ticking on the property market decline since the beginning of this year (That's when the restrictions on Capital Flight kicked in and then the banks started to tighten on resident Investors).
Yes, interest rates are low.
However, don't be fooled by 'job growth' or headline unemployment rhetoric.
These really don't mean what the are trumpeted to signal, in the current NZ context.
It's productivity and wage growth that needs to increase in order to sustain high house prices.
Is a crash here?
No, it isn't.
All we have seen is a flattening of prices, and the drop in sales. The housing market is a very different dynamic to liquid markets, and phases like this aren't necessarily as terminal as you think/hope/wish.
However, with BE set to lose another election I'd say things might get interesting starting October.
Auckland has high land costs and practices low economies of scale. As investment moves out of Auckland and into Hamilton or Tauranga productivity on that investment increases. Costs are lower and economies of scale are better outside Auckland, as witnessed by the fact that they have for last few years built more per capita with much less investment.
I did a better comment on my reasoning down below.
lol, Nymad, so you can talk some sense sometimes !! I am impressed ...must have been one of those inspirational moments
I wonder what would happen if WP decided to partner with National after getting sick of contemplating the idea of sleeping with the Greens in the same bed ?? that will be a nice piece of theater to watch... but Yes, October is only 8 weeks away ....and things will get interesting indeed then.
I said it was a crash months ago with the fall in sales. Some people got upset about that, but that's understandable as some probably have a lot of money on the residential property market.
There's nothing fundamental holding up the majority of the prices in Auckland. However the current sales and the increase in mortgage borrowing is still there. I'm just waiting to see if there is a change in the months after the election.
Wow there is no limit to how low the herald will stoop
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…
Quick buy now...
Went to an auction last weekend (West Auckland). The property sold below expectations (just over 900's vs 1.1m expected. Everyone was surprised. Then I was talking to the agent - he said that the prices dropped 10-15% compared to year ago. Vendors are not accepting the fact that the prices from last year are not relevant. So, they are not selling and holding off hoping that situation will improve in the spring. I think good houses will still get the money for it but the crappy houses are becoming crappy houses again that no-one wants and the prices for those are decreasing given the costs involved in renovation ($150k+ for 3 beds)and lack of tradies.
perfectly correct Jerry, crap houses were way overpriced last 12-18 months and was mostly gobbled by chinese speculators ... almost all prop investors and serious buyers avoided them ... today they are only priced what they are really worth 100-150K under asking / purchase prices .... the scene you just mentioned is now a daily occurrence in most auctions ... while good quality houses have gone up and in high demand.
Seriously, all this about dropping prices that has been predicted for the past 5 years or so.
The LVR alteration is the main contributor here.
Reality is though that the seasoned investors around the country are going to have a field day.
Returns in Chch are positive again and great buys are starting to turn up again.
The same old rubbish from The Boy. Starting to get frightened at the data coming out of poor old Christchurch. Fact1. Rents are dropping. Fact 2. Prices are steadily dropping. Fact 3. More listings for sale by the day. How you can say returns are positive again when rents are dropping is just amazing. He said he would not come back to this site but when you see your investments tanking I suppose you can be forgiven.
Just doing a bit of digging around TradeMe reveals that you can buy two bedroom places for around 300K and rent them for $300 a week. That's usually a signal to a property investor that things aren't too bad and that some good buys are likely that you can hold for a while.
Such properties would have huge demand and their prices would increase by 100K. Ollie's calculation stopped a lot of people from making a lot of money.
Also the investor is likely to put in 50-75K so the figures approach Ollie's "rule". That way the property becomes positive with the deposit growing by 10% per year.
So you are saying the current drops are caused by political uncertainty? Isn't this really about the tightening of credit, which is caused by the banks hitting the limits of the risk they are prepare to take on the property market (ie even they can see it's a ridiculous bubble) and by Aussie parents sucking capital out of their nz subs to fight their own fires? None of which have anything to do w political risk? It's all about the credit cycle. We have peaked, we are now going downhill in terms of credit creation. And the pressure from Aussie bank parents is going to get worse, not better. The politics is in my view an irrelevancy. The path in 2018 to me is not an unknown, I think it's pretty clear where we are going.
NZ has run this low interest credit bubble as a 2 zone market. Events should come as no surprise.
Auckland (Len Brown) restricted the land supply to Auckland City by 50%. Creating an artificial shortage and the easiest way to make money ever: buy Auckland land + do nothing = profit. This attracted the majority of investment and created big short term gains as costs skyrocketed.
The rest of NZ didn't do that and participated in a traditional property boom (the type that involves building houses). The boom in the rest of NZ was slower and got delayed by the rush to invest in Auckland. However the whilst the real estate boom in Auckland is an inflation in costs, the boom in the rest of NZ is based on the creation of value - which is much more sustainable in the medium to long term.
So here we are today, the short term of Len Brown's bonanza has ended and the medium to long term is upon us.
It's Stein's Law, folks. https://www.washingtonpost.com/opinions/robert-j-samuelson-is-steins-la…
'If something cannot go on forever, it will stop.'
One of the main reasons the tauranga area has gone up is very large amounts of money coming from Auckland, id hate to count the amount of people who have said there house went to Aucklanders , and this area called papamoa, Aucklanders buying really nice houses and the day after up for rent, lots of new houses for sale and up for rent by the building company, there's more listings in papamoa now then the rest of tga, was a time not long ago you would mainly see these really nice houses for rent but that seems to be slowing and there's starting to get some good deals in tga, I would say the big money from Auckland is slowing but even a discounted Auckland house if the owner still likes tga still gets a really good tga house, if Auckland keeps going down in the end fewer will be able to leave so tga and many other areas will die off, areas out of Auckland are no different than Auckland, the locals can't afford these prices, and there's plenty of land and new and old houses to help prices even lower, normally you couldnt get a price from mostly auctions, that's changed a lot, yip slowly the figures coming out for a correction everywhere else will change to I guess, I just hope the building industry doesn't get hit to hard because the BOP has been building in very large volumes
My T Alexander said history shows that Auckland PIs always always overshoot in the regions before the end of each cycle. Their regional properties dive back to regional averages when prices flatten/retreat because the low average wages in the regions dont support anything else. Watch that space.
The drop could seriously become a rout when Winston kills immigration and stops overseas ownership. Specuvestors better pray that Labour stays where they are (opposition), otherwise promises of higher tax rates, stopping negative gearing, tax loss ring fencing, and compulsory capital gains tax will be the final straw for the stupidly leveraged.
The wooing of Winston left or right as king maker could easily take several months. Gotta call it, anyone that buys between now and actually seeing who is going to govern after the election without a whopping discount on list, is either really really desperate or just stupid.
Check this , 16 Appaloosa place papamoa Tauranga, on trademe, enquiries over $589k, trademe mid $620k, sold in 2008 for $430k, 2013 down to $376k, I would say 3 months ago that house would have easily got $700k, there's heaps of the same thing for sale now for about $650k , these owners only paid $376 and if they sell for not much over that $589 you can see how figures can change real quick, normally a house like that would have been auctioned and gone real quick, has builders report too, I wouldn't be surprised if it's still to much
I had to check to confirm, but was indeed monolithic. Appears to be built early 2000s. You cannot really use monolithic homes in price comparisons, as over the last 5 years people have started to realise most monolithic homes will have issues, even if they have a previously clear building report.
Spectacular Views - Land and Options
Asking price: $5,500,000 anyone?
http://www.trademe.co.nz/property/residential-property-for-sale/auction…
What about this one? What do you think of the amazing presso by this lovely Barfoot RE Agent? Rather persuasive you think?
https://www.youtube.com/watch?v=weBkbxM36EM
https://www.barfoot.co.nz/602174#Video
Seems the land is worth the money (or not worth the money). Its only worth it if you think you can get your money back or you really want to live in Remers at that price. They even said it needs more work.
To be fair, it doesnt really matter if its worth 100 mill. Remers is not what ordinary NZers will look at, and thats who we want to help. Even if Remers, St Marys Bay etc stayed in a bubble all of its own, the rest of NZ and Auckland are starting to move downward. Its starting to sound like a skulling game.
Will the fear of losing money overtake the fear of missing out. We will see.
Vancouver house prices are back on the march
Come on Aucklanders, don't let Vancouver show us up.
Haven't you heard National Bird, that 15% Foreign Buyers Tax is music to most money laundered ears since they can use it as a capital expense to launder money with. That's why other cities like London and in Oz are so popular because they have foreign buyer taxes! Win win! Only little NZ hasn't figured that out yet.
Toronto housing implodes.
http://www.zerohedge.com/news/2017-08-03/toronto-housing-market-implode…
Tauranga needs Aucklands and investors to hold these prices, the hole country has been hit in a pattern, Hamilton, tga, Queenstown, Wellington, realestate agency's and others have put out heaps of information about it, No tga and others mighted be hit as hard , some smaller areas were late to the party because they weren't the first picked areas so likely the correction will be small, could the likes of tga and Hamilton who say on average only went up about $200000 over the last year and a half loss most of that specially when the supply of houses have lifted and the biggest part of demand with investment gone , id have to say for sure, in fact id say about a 30% drop over the next 2 years, new houses alone in tga will be the first to be hit because that's so large and regular people here couldn't normally afford those houses so what are all those people in the building industry going to do, move back to Auckland, tga and others mighted have pushed house as far as 10x income but a booms a boom and it started with Auckland and will end with the rest of the country, don't forget tho booms and busts aren't a positive and negative thing , it's part of life and depends which side you're on,
Heres a view of average 3 bedroom homes prices compared to July last year from B&Ts own publlished data
Average Price 2017 2016 % CHANGE
Central Suburbs 1,164,719 $1,106,388 +5%
Eastern Suburbs 1,095,600 $1,207,381 -9%
Franklin/Manukau Rural 650,909 $662,276 -2%
North Shore 954,739 $1,070,038 -11%
Pakuranga/Howick 953,611 $1,045,286 -9%
Rodney 799,958 $819,914 -2%
South Auckland 632,098 $799,057 -21%
West Auckland 739,405 $765,305 -3%
Kiriwin , you aren't doing anything any different to most , buying low in the past and sometimes in the past selling high, in a boom your houses would have gone up anyway if you didn't fix them up, even your sons house probably went up most of that because of the boom, paper money u didnt earn, just Johnny on the spot, u r old enough as I that there's alway corrections, u can buy low sell high or buy and hold, yes people make money, but if some less fortunate haven't brought yet and se it as a POSITIVE to wait thinking they might save the same as loose there hole deposit of maybe $200000, let them, it's not costing them much by waiting and why should they bail out the ones that are trying to sell anyway,
It's not non owners of houses faults that the people that do buy and push the market so far into a bubble, then a correction, it's not new it happens regularly, so for those reasons there's always people on both sides, not negative not doom not gloom, just your normal cycles, if u didn't sell I'm guessing u like the property, or a long terma , great,
Well then here's a tip, Grandpa. Bragging on the internet doesn't get you anywhere. So unless you have proof of everything you are saying, all we know is you could be just talking out of your ass. We've had this happen recently with Double-GZ who said he owned a rental in Mission Bay but then the next day retracted and said he got carried away with the story. For all we know you're in a rest-home and just typing up all the "what could have been".
And if all you have said is true? Well that's even worse because it shows the type of character you are. Flaunting and bragging material possessions when we're facing a housing crisis with *some* people about to lose theirs.
Success as an investor comes down to nouse.
If you want to be a part time investor and remain in a paid job then no you probably won't be buying at the mo as you are a passive investor.
If you want to be a full time investor then you need to take more control and do it properly.
Yes I am fortunate that I bought years ago and returns are averageing approx 10 per cent overall but we are professional investors with well maintained property, and vacancy rates are almost nil.
Doesn't affect us but the LVR altering is what is the main thing that has slowed the market nationwide.
There is going to be alterations to it over the next year as the country does need investors and Banks need to lend.
Watch this space
I couldn't care less. Lots of rentals are poor quality houses, so are lots of owner occupied houses. It would be of more value to tenants to focus on tenure issues, such as protection of tenure on a sale of a property. And a move to longer term leases, which I think is something that should be left to the market.
I can't see kiriwins point, some do there own work, some pay others , they could earn good money and like using a tradesman , people buy old houses all the time and do them up, ok he might save a little by doing it himself as long as he was still doing his normal job 100%, so what's his point, he's trying to say a big chunk of his wealth is his doing, rubbish, it'll be one of to things , buy low sell high on a boom, this normally can be done every 10 years or so, or buy early and hold for years , in the end you will pay it off and it'll go up, I do a bit of both, I have a old rental I would never sell and a multi tenanted commercial as my cash cow, other property's gone if there's profit and I move on, it someone wants to buy it good , if not ok, I'll do my own work if I feel like it , that's not the real money that's stopping the misses moaning me sitting around on my ass
Ps I do see kiriwins point, its like many others that are holding property at the end of a boom , they aren't ready to sell or don't want to, trying to keep it going, or others talking it down, as if the small % on here would really make a difference, talking is good to learn,the thing is has the market just gone up or down, up a stupid amount or down a stupid amount, how's dept looking, hows supply and damand going , all the other factors like overseas investors, immigration, affordability , etc etc , you decided , the election, normally tho down turns last 4 years and are hard to stop
This is all very depressing to read!
When did your home become an "investment"? Im looking up at the mountains and after a coffee I am going for a walk on the beach, I dont care what my home is worth it is where I chose to live, it is where my kids stay when they pass through and probably where I will die. I want my kids to buy a home if they want to, when they can for the same reasons I did. Invest by all means, there are lots to choose from including property but leave your home out of it and enjoy life
This doesn't bode well for Auckland either...
Toronto Housing Market Implodes: Prices Plunge Most On Record
http://www.zerohedge.com/news/2017-08-03/toronto-housing-market-implode…
Give it time boatman, we have at least 4 years of this yet, most of the time in these cycles we go up and come back half to even all sometimes , 1998 to 2002 wasn't much of a drop with a good boom on each side, there's a million reasons why these things start, carry on and end, even things like more woman working so bringing more income into the house pushing housing up, 1966 right threw to 1992 was about the same drops as lifts, 2002 and on has been high and lately very very high, pushing a lot past affordability for locals and if a area is relying a lot on locals , well I'd hate to say where this correction will settle
Laminar , I don't know anything about banking but if anyone was that worried if house prices went down the banks probably wouldn't do anything, just keep making your payments, why would they but one things for sure, you wouldn't get more money if the situation didn't change, if a person was that close to the bone, I'd be trying to find a better answer, the stress would be through the roof for a number of years, there's lose of a job, sickness, alsorts
Investors have deep pools of liquidity to draw on if they use negative cash flows, and if they are mom and pop investors they combine income protection with a smaler pool of liquididity. Its rare to catch an investor nude.
As to banks they know some small proportion of property buyers will default, its baked in the cake, they pool that risk and dont act on individual cases until payments are missed, even then they work constuctivly to recover the loan, most deliquint loans are recovered without a forced sale.
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