Barfoot & Thompson's sales report for February was a mixed bag, with a substantial increase in the number of properties sold compared to February last year, while prices weakened from what was being achieved over the previous few months.
Barfoot reported sales on 665 residential properties in February, up 19.6% compared to February last year but still well below the volumes that were achieved in the boom years from 2012 to 2016.
The average selling price was $919,454, down from $934,753 in January and $25,120 below the average of $944,574 achieved in February last year.
The median selling price was $820,000, down from $830,000 in January and unchanged from February last year.
Barfoot's average selling price peaked at $968,570 in March last year, while the median price peaked at $900,000, also in March last year.
Barfoot and Thompson managing director Peter Thompson said a feature of February's trading was the relatively high number of properties selling for under $500,000, accounting for 19.1% of all sales.
"There is a growing acceptance that where prices are at presently is likely to be the benchmark for the remainder of the summer/autumn sales season," Thompson said.
While the number of sales was up, the number of new listings was down, with Barfoot signing up 1747 new listings in February, down 23.9% compared to February last year.
However Barfoot's inventory, the total number of properties it has available for sale on its books, has continued to rise, with 4648 homes for sale at the end of February, the highest it has been at that time of year since 2012.
The latest figures are good news for buyers, with rising inventory levels meaning they will have plenty to choose from and not feel under pressure to complete a sale over fear of missing out, while the generally softer prices means vendors would be foolish to refuse a reasonable offer.
Barfoot Auckland
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226 Comments
here we go again ..
http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=120…
FYI - the graph shows that Average and Median prices are both UP Since JULY 2017 according to B&T sales ... the July bottom so far stands
When that chart above called "average price growth % year on year" actually starts trending along the zero line, THEN B&T could reasonably call prices as being stable at a "benchmark". Until then, that's most definitely a downward trend in price growth, with no floor at zero.
TTP, stop throwing your toys! Just because I won't conform to your Real Estate Agent ethics does not make me unpatriotic. I couldn't care a less what the spot value let alone future value of my home will be. I have owned and lived in our rimu weatherboard home for nearly 21 years. We timed the purchase of our home well, the midst of the Asian Financial Crisis. We bought it outright. Against the advice of friends and family, we saved hard whilst living frugally in a 1 bedroom flat for 7 years. We were both on very good incomes with regular overtime.
TTP, never underestimate the power of compounding interest, especially in times of house price declines.
Hi Retired-Poppy,
If you were true to your word (and had a gram of credibility) you'd sell up and rent.
But will you do that? No way! Why? Because you know with Auckland property ownership, you're onto a good thing.
R-P: you've blown your cover, via your inflated ego.
TTP (the insightful)
Eh? People who say "don't buy" aren't saying "don't buy EVER", they are saying "don't buy NOW". We are at the apex of the biggest credit bubble in NZ's history. Seems perfectly reasonable advice to me. The balance of risk seems pretty well weighted in favour of wait and see. Little upside in buying at current prices, lots of downside.
People are saying dont buy now wait till its cheaper how is that helping Retired Poppy when they have a house and they dont want to buy. It devalues their house, so as far as I can see its more altruisic then you who just wants prices to increase so you have more value in your property.
Home ownership rates lowest in 66 years according to Statistics NZ
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=117…
It doesnt make sense to want it to grow in price unless you have house investments. You need your house to live in. If you want to upgrade to a better house, all houses will increase in value along with your house. So you can only upgrade to a house that you could upgrade to if prices didnt increase anyway.
I have a house I prefer if prices dont increase as I want my kids to be able to afford a house. The way its going my kids are stuffed. Its very greedy and narcissistic to want house prices to increase so other people cannot afford property.
Retired Poppy, one thing I detest is a hypocrite. You bought your home "Against the advice of friends and family". You are now that person dishing out contrary advice to others.
I'm also surprised. It seems to have taken you too long to have woken up to the importance of owning a home. "I have owned and lived in our rimu weatherboard home for nearly 21 years." You must have been well into your forties 21 years ago
You say you couldn't care what's the value of your home then or now but tell us you "timed the purchase of our home well". Perhaps you have changed but perhaps you are actually very interested in what your home is worth.
Houseworks, I speak the truth. I did not buy the family home to make money on it. It got me out of paying both rent and interest - that's it. Friends and family advised us to buy NOW or you will miss out.
Timing IS everything, why should anyone buy at the top of a market and risk lining the pockets of the greedy - I worked long hours for what I saved. Purchasing additional property doesn't interest me.
Unless you have something kind and supportive to say.........your sounding like a sad and jealous little troll.
Although, to be fair to them, their prediction ('growing acceptance that where prices are at presently is likely to be the benchmark") only goes to the end of May or so, so their crystal ball has a fairly limited field of view. In retrospect a fairly carefully crafted statement, me thinks
So, just as anticipated, the Auckland market has gone into a stable holding pattern - following the upswing of 2014-16.
The crash that so many contributors here have been craving - and declared would happen by now - has not eventuated.
Neither are there any signs that a crash is about to happen.
So, it's business as usual...... albeit in a relatively flat market.
TTP (the voice of reason)
love the new name TTP ...:)
Very true - B&T now believes that new valuations are making the basis of market prices - proof? the increasing numbers of sales at sustained and appreciating average and median prices.
New Listing has already started to shrink and this month will follow suit - people who are spoiled for choice have a good chance to buy now or wait another year ...
Eco bird did not plot the above graph , neither contributes to its data, Eco Bird is just an observer ..... What I decide only affects my own business, what I say is a word to the wise ...so don't shoot the messenger ...:)
It takes a lot of wisdom, faith, research, and common sense to ride on the back of the property market whether buying own home or investment .... So watch the graph and tell us next year if someone who have bought today would be better off this time next year ....
30% ? .. yeah sure, why not, everything is possible .... realistic? ..No way
the precious advice by BH back in 2010 to hold on buying a house comes to mind, he predicted that markets will fall 30 % in 2008 , when that didn't happen , he predicted another 15% ? ..... so those who followed that valuable advice would have missed out on more than 100% appreciation in value or completely shut off the market since ...lest we forget !
http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&obj…
While falling short of housing is obviously awful for those who end up homeless etc, does having less houses than people mean that there is more available credit per person to pay increasingly inflated prices? If so where is the money coming from? Point is crashes are about credit availability more than anything else.
Credit is available and more so than in past months but I think its reasonably clear that people are wary of buying at these prices. As an example at the lantern festival i overheard a young lady say there will be a big crash soon. Im skeptical of a big crash but even though credit is available im not sure that will translate in to rising average debt any time soon. Psychology still matters.
Laminar, I also can't see it crashing unless there is some sort of trigger that interrupts the flow of finance. The difference these days, the chances of a trigger have never been higher. In the meantime, I can see prices continuing to drift south much as they have done in the last twelve months.
I suggest, the next crash will leave central banks with zero solutions and that's the concerning part. I think there is no harm in building contingencies for such an event.
Interesting...we as a country need to borrow money from overseas to fund our consumption, housing, budget etc. At the moment we get a pretty low rate of interest because everywhere is low.
Meanwhile, the US is unwinding its quantative easing and raising its central interest rates. When the US puts up its interest rates, will investors prefer US debt or NZ debt at the same price? If it's US debt they prefer at a given pricepoint, I guess we'll have to pay a bit more again to borrow.
Yup fair enough the tap hasn't been turned off. Concern is those over at the Fed seem to have twitchy fingers and have been unwinding asset purchases. This doesn't seem to have flowed through to mortgage rates here just yet but it's worrying times when interest rates are at lows, and seem to be growing again.
Its quite easy really! The housing market is solely related to those who are actually buying and selling houses. The vast majority of those who are homeless or sharing a house with 10 other people are not looking to buy a house and therefore the shortage means nothing
There is 13000 homes for sale and rising and buyers (and there banks) are reluctant to meet the asking prices which equates to a buyers market.
This Feb is still B&Ts second worse Feb since 2011
There maybe a housing shortage but there sure isnt a shortage of houses for sale
You have to look beyond such a simple demand Vs supply view. FWIW I don't think there will be a serious price correction but to fail to take into account factors such as interest rate moves, credit availability changes, currency fluctuations etc and their potential impact on the market is a very blinkered view.
Why do I have too keep repeating myself
The Question was explain; what would cause a "Serious Price Correction" because everyone say the sky is falling then complains there are not enough houses being built and the shortage is getting worse.
I think houses prices will see flat or sublet fall for the next couple of year. I've been posting that on here for about a year now. Does no one get this is the correction. Its probably going to be long and slow. Sorry it's not a mind-blowing catastrophe everyone was waiting for.
Yes there has been significant increases in demand for housing as accomodation. The best proxy we have to measure that demand is rentals, which represents housing demand stripped of credit growth (people don't borrow to pay rent). I believe in Auckland over the last 5 years nominal rents have increased by 25%, more or less. That's about 4.5% compounding. Inflation has been at about 1.8% compounding. So the increase of rents in excess of inflation has in my view been material but not significant. The increase in house prices in this period and the preceding period has been well in excess of rental and income growth. This excess represents not occupier demand but speculative demand arising from a disproportionate increase in credit: people have bought investment properties not for yield but for capital gains (is this news to anyone?!) Rentals yields at this dismal level only make sense if they allow a purchaser to capture future capital gains. Absent capital gains, at 2 point whatever yield your return on equity is zero or negative. Yes there is elevated demand for accomodation, but if you look at rental yields that demand comes nowhere near to supporting prices at current levels.
If you were to apply historic average required rental yield (4-6%?) to current rents, this implies a drop of 30% or so from current prices. To me it seems perfectly conceivable that investors yield expectations could increase from their current level to the lower range of the long term average. If they did, there would be a material adverse impact on the price of investment properties.
I would also note that comparing current prices to long term average rental yields indicates that current prices are 100% or so overvalued as against that long term average (I think this was the conclusion of the OECD), but I fear your head might explode.
So you saying as an investor I should sell my property at a 30% to 100% loss because for the next 2 years I'm only going to 0-2% real return which isn't up to my high standards?
Yeah that not going to happen.
As I keep saying. Something has to make people sell AND there is a shortage.
Even if you sold at a slight discount (which is what you are implying) what is the alternative, Shares (which are over valued)? Bitcoin (which everyone on here hates)? Cash (which yields about the same)? Bonds (adding to the debt bubble)?
TTP - would you agree that the market doesn't look bullish? And if it's not bullish and 40% of buyers into the market the last few years were investors, that are now, without capital gains, and receiving very poor yields, might in time decide that the risk isn't worthy of the rewards they are receiving?
Are you open to this idea at all - or simply closed minded because you've already decided what the market is going to do?
A kind of small South African antelope with corkscrew horns.
Possibly not according to www.dictionary.com, so maybe you should check there, rather than taking my word for it.
To FHB:
Many FHB expressed frustration over the last year that house prices were out of their reach.
You have not lost out by waiting. I am sure that the $25,120 fall in average prices would go some way to covering your rent and you have not had the expense of mortgage interest, rates and repairs and maintenance.
There is still no rush. The last paragraph can be summed up as it is now a buyers market and increase in prices are unlikely in the short and probably medium term. Prices to income and rental yields mean that houses are still over valued.
So, take your time, look around to get something that really suits and don't be scared to put in a low ball offer even if you are prepared to go higher. And don't let the agent start to condition you by talking you upwards without first presenting your offer to the vendor and getting the vendor to put in a counter price.
Think about what has happened over the last 12 months, and given current conditions, the outlook is the same again for at least this year.
First Home Buyers: WARNING
The best time to purchase a first home is now.
Not only are there financial benefits of owning your own home, there are many intangible benefits as well.
If you tally up ALL the benefits of home ownership, then you will almost certainly find a solid case for going ahead with purchasing sooner - rather than later.
Be very cautious of the people here who urge you to delay purchasing your first home. Many such comments are made by those who have never bought a home - and have now become a sad mix of disaffection and regret. Learn from their mistakes.
TTP
For balance, I would like to challenge TTP on the flip side of his comment....What about the tangible risks of buying a house at the peak of the market, and there being no increase in the value of the money you invested in it for year upon year (should the market remain static as TTP suggests), or worse still, you buy and then go into negative equity. What does that do to a family? The money that would be spent on mortgage interest is looking very comparable to the money spent on rent for many. So what is the value of buying over renting in that climate? Just the smugness of being able to tell people you are a home owner?
Or the tangible risks of taking on a ridiculously giant mortgage (DTI) that could spell financial ruin in your economic future should the housing market, NZ economy or your own personal finances falter?
By all means, if you are a first time buyer and can buy a house within a sensible affordability measure (say around 3.5 x your income), then the same risk won't apply to you. But in reality, that is not the DTI that most FHB's would be considering.
In 2017, TTP commented several times it's never a bad time to buy the first home of your dreams. Moving on, homes here in Auckland's lower quartile have since dropped -5% or more. It seems TTP and others here couldn't give a REA rats commission if it all tanked. Its the voice of greed, not "reason"
For those getting on the ladder first time, it now unfortunately comes down to timing and patience. There are many dream homes out there for sale and there will be many more. There is no hurry.
Advice to FHB, your deposit was hard saved. Homes are not for speculating on, they are for living in. Do not risk lining the pockets of the greedy. Make it work for you! Wait for the greedy to find they have over indulged in debt, their equity is declining. Its a precarious situation that can easily become a stampede to deleverage especially in light of global instability we are now witnessing.
TTP is right, the best time to buy your own house is always "now" (since we can't buy a house yesterday).
FHB, don't listen to people advising to "wait" to buy, this advice is written by people who have been waiting for the last 10...20...30 years and will wait forever.
Good luck! I’ve been through a few rounds of musical chairs while our company was owned by an American Corporate so i can sympathise. Once they got tired of that they sold Australasian operations to a private equity firm, ran us for 6 months then broke NZ off and sold us to one of the large private nz steel companies.
We were a part of Tyco and then Pentair took over and that’s when things really got fun. Our logins changed from first name last name to an employee ID “E1167764” I guess it made it easier for anyone with half a conscience when they started closing down production and customer centres laying people off in Australia. Was good for short term free cash flow so the board was happy.
Yep - if its your home for you to live in - and you can afford the payments +1.5% rise in rates - the answer is always buy -
$500 a week rent - $26,000 a year - pays a lot of mortgage at current rates 380K at 25 yr or 580 interest only
count the emotional cost of the lack of security - not being able to improve your property - make changes you want - plan for the long term - and then the costs associated with moving house - again emotional / time / financial - ...
You don''t even need to look hard - simply ask all your friends who own a house how many regret their choice and would sell tomorrow and rent again - ........the more friends you have that own the more conclusive you will find the results - virtually nobody who owns regrets that choice!
Now ask all your renting friends - how many used to be owners .....
Very well put ... I shall add, that if buying a house and concerned about failing to meet its ongoing commitments is worrying someone, then they better save and invest in some better ROI funds or shares ...that way they are always liquid and will make much more money than what they pay in rent ... returns of 10-15% pa in some investments are quite normal nowadays ...
It is all an age thing, people starting a new family will have a big lifestyle change - Its main pillar will be stability and growth - schools and other essentials come to play, and jumping around changing rentals becomes very undesirable.... So it not just about money and a Home is much more than a financial investment.
Classic TTP rubbish
Its a terrible time for FHBs to buy (in Auckland) prices are falling especially in the lower quartile that most FHBs enter the market.
To buy now would risk whittling away the value of your deposit as values fall unless you manage to get a real bargain.
I think most find that they can realistically buy when they can afford the mortgage (tragic events aside). But taking on debt that leaves a couple financially tight & unable to finance the mortgage is never a good idea, in both a rising or dropping market not being able to pay the mortgage will always be the more major concern. House prices going up or down while you live in the home is less important than living in the home. Feasibly given the restrictions and risks of rentals making it unsustainable for families long term the better solution is to buy a home when they can afford it regardless. But for most FHB they cannot afford it at all. Hence the housing shortage is not a shortage of houses but a shortage of affordable housing. There is no perfect rental landlord that let's damage by children slide, or long term tenancies for decades at the same prices (even HNZ increased payments to the market or demanded families move in less than a decade later), or flexibility on pets, or even allows for housing modifications as life requires them. Most landlords do not even perform substantial upgrades decade on decade (HNZ included). Hence for any family the better solution is a house of their own, (children can remain in the same schools, the family has flexibility in house modifications, price stability and long term security etc).
Should they buy now? if they can easily afford it, sure. Should they have brought 5 years ago? if they could have afforded it, yes. Should they buy in future? if they can afford it yes. What people might hope for is that the new housing stock might be built within the affordable bracket. But if it is anything like the SHAs, new small attached houses were going for 1 mil plus and the handful of mandated affordable homes can only be obtained through lottery under severe conditions (a minimum requirement for x number of affordable homes in new SHAs was removed in later plans). If FHBs could see the existing housing stock beyond their reach and the new housing/land stock beyond their reach they are not in a position to buy anything. Advice to buy now, or to wait is completely lost. Expecting costs to decrease to an affordable level again is not going to happen, even the GFC did not reduce them to a level NZ families could handle easily. We would need housing reductions of a couple of decades back. Fat chance of that happening even during another global financial crisis. Not unless it was the crisis to end all crises; at which point worrying about a house would be far beyond anyone's affordability. They would be lucky to have jobs & savings still.
FHBs should face it. They need to game the system as much as possible. Waiting for affordability to reach them is always a losing proposition.
@ttp
Wow you really have proved that you're an Real Estate agent this time. :)
Ttp Everyone knows that the market is going to drop further especially in Auckland.
Labour have just taken the census in case you hadn't noticed and we all know that prices are unaffordable to FTB's so that alone is enough of a reason why the can enforce the Foreign Buyers ban. This is to allow the market to drop to affordable levels which is important to allow businesses to thrive and people to live here rather than use Auckland as a Swiss bank account.
Printer8
After umming and ahhhing that is exactly what we have decided to do. We had seriously considered buying a house over the last few months, mostly for emotional reasons tbh. But then decided we'd be nuts to buy now when there is no sign at all that prices are going to start rising again any time soon. So we just put our money in Term Deposits, which quite possibly might do better than housing inflation would over the next 12-18 months anyway. We had a few twinges of FOMO here and there over the last 12 months, but that has dwindled to almost nothing now. We're feeling pretty good about waiting and betting on the opportunity for prices to decline.
well good luck to you - and you clearly have a well thought out plan - but dont believe the doomsayers about a huge price drop - many many people missed out after 2008 - when they waited and waited for the drop only to discover that suddenly the prices were rising faster than a hot air balloon and before they knew it - 100K + was added - deposits were out of range and the same people are looking at paying 2-3 times more now - hoping for a 25% drop to compensate for the 250% rise they endured!
There will be plenty of pretty good deals to be had in the next few months - finding the right house and the right seller - plenty of both at the moment - but they tend to vanish a lot quicker than they appear!
happy hunting
Hi gingerninja,
I'm sorry to know you didn't purchase that house in Brooklyn, Wellington that you mentioned a while ago.
I know someone who purchased a property in Brooklyn a few months back and apparently the suburb currently has among the highest capital gains of anywhere in Wellington - with few houses coming on the market there. I understand that Brooklyn is close to the CBD and that quite a few properties get spectacular harbour views. Clearly, those are major draw-cards.
I suggest you reconsider your decision. You won't lose on a house that's close to the CBD in Wellington.
Best wishes,
TTP
TTP I think it was a section in Brooklyn I mentioned wasn't it? Anyway, it's still available and has been reduced in price too, so doesn't really fit your narrative. No house has come up to tempt us if it had, we might have bought.
We actually want to be a bit closer to the city than Brooklyn perhaps but will think about it again in a few years. At our current saving rate, we should be able to buy a house for cash by then whether prices go up, remain the same or decrease, so will have zero regrets about not buying now if the market is flat or falling. If it turns out that we timed the market badly, then so be it, it's our loss but on balance, like almost every bank, RE agency and economist has said over the passed 6 months, the days of notable capital gains are over for now.
Hi gingerninja,
Ok - sorry - it might have been a section (which would paint a different picture).
I'm not really au fait with the Wellington housing market. But I reckon with TD interest rate returns (after-tax) I'd sooner have my money in well-located property. Remember, the only parties that do well out of TD's are the banks, whose (huge) profits go largely to Australia - which doesn't delight me.
Anyway, do what you think is best for you (and your family) in your particular circumstances.
Keep up your contributions here - which I do enjoy (and learn from).
TTP
TTP IMO there are times when property will amplify your wealth and times when it won't. Long term obviously, you're better off buying a property to live in, but that isn't the only factor. The timing of the cycle is hugely significant.
If we were at the beginning of a property cycle, or even mid cycle, we would have bought without question. We do want a home, but we just don't want to buy right now when the cycle has clearly peaked. We're betting that in the short term, property won't be a good buy. But we still want to remain liquid with cash available to take advantage of any opportunities that some along, so TD's are good for us.
Many factors have changed in the last 6 months and it will be some time before we see any ramifications of all that.
Another commentor here recommended a way to time the housing market optimally;
-wait for several consecutive months when TOM decreases
-wait for several consecutive months when inventory decreases
-wait for several consecutive months of auction clearance rates improving
If these factors pick up momentum, this is an early sign that the market is heating up again. Obviously it's not a perfect formula, and you might be slightly too late and miss the very best prices, but it sure as shit beats paying peak prices in a buying frenzy, fueled by FOMO and dodgy RE behaviour. There are exceptions of course, and good buys can be had from the beginning right through to towards the end of the cycle, but buying at or around the peak of the cycle, especially when it is accompanied by the peak of a credit cycle and ugly household debt ratio weighing on the economy is NOT A GOOD TIME TO BUY if your aim is to grow your wealth in the short to medium term. Long term, eventually even a badly timed house buy will come right, but the opportunity cost on that money is huge.
Hi Gingerninja,
One of the distinguishing features of property cycles in NZ is that prices don't fall much (or at all) once a peak is reached.
Prices tend to plateau after a new peak is reached and remain at that level until the next upswing occurs.
I'm not an expert on Wellington - but I'd be really surprised if prices fall much below their current level.
Also, once you purchase a house, you can put the stress behind you. You don't need to keep looking at houses and "angsting" over whether prices are on the rise again. And within a few years, you're really pleased you purchased.
The reality is that if you don't buy you take the sizeable risk of getting further and further behind.
Enough said!
TTP
TTP i'm going to have to disagree with you there dude! As our esteemed writers on interest.co.nz have illustrated property inflation has not always actually been that exciting over the last 50 years and there have definitely been times when values have dipped and *not* just plateaued when adjusted for inflation (60's, 70's 00's), and as inflation is hugely relevant to growing your wealth, it shouldn't be so cheaply dismissed;
https://www.interest.co.nz/property/87961/adjusting-inflation-gains-hou…
I also would be surprised if Wellington values fell massively, but there are so many other factors. In the GFC prices in Wellington fell but the fall was not even across the suburbs, the North of Wellington only fell 5-10% and then recovered relatively quickly before an almost decade long plateau. However, when you are talking about a million or more dollars, 5-10% is still a huge amount of money. And could otherwise be working much harder for you in another investment that is outpacing inflation.
Personally, we're not losing any sleep over becoming homeowners in a few years v's now. There has been some angst over the last 12 months but we have felt that same angst about any big purchase, so it's not necessarily exclusive to the the issue of buy-or-not-to-buy but which house to buy. Especially in earthquake prone Wellington!
Good luck ginganinja, the Wellington market is even more diverse and risk prone than much of Auckland, Hamilton etc so I can appreciate you have far more concerns to worry about than most NZders and even myself (bit multi region but with family in Wellington the times and accessibility are tough there for them). You must need to look much more carefully at the geotechnical & infrastructure provisions and for long term decisions it is very hard to plan in Wellington. At least even in the Auckland market, (where the housing crisis hit all time insanity), it was pretty similar decade to decade for a suburb for housing quality & stability, (many still in sleepy nappy valleys pretty much unchanged for a few decades). Christchurch was understandably rapidly changed to a point it is beyond repair in many places which highlights how much housing & infrastructure stability are worth it long term. Unfortunately Wellington has more designed inaccessibility coming into play rather than natural disasters. But still I am glad I am not in your boots looking in that market.
Pacifia.. ain't that the truth! We like Thorndon but it runs along the fault line, we like Aro Valley, but it is prone to devastating slips, we like Island Bay but it's in the tsunami zone. We like views, but with views comes heinous winds battering you from both sides, avoid the winds and you often have damp, we like character homes, but what about bora and earthquake risk?
We're so glad that we didn't try and buy when we first moved to Wellington because getting to know the city and its unique features and risks is extremely complex. I don't think we will ever regret just taking our time and developing a deep knowledge of the city and our own needs within that.
Allow me then, just check out those yields, sexy eh????
Bhuahahaha!! US billionaire threatens to halt NZ expansion plans if foreign ban passes - this is exactly how our new Labour government want it
http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=120…
"Prospective future developments akin to Tara Iti that I am presently considering investment in, that by their nature result in a small number of premium home sites and guest cottages, are now being reconsidered due to the small potential purchaser pool that the bill will allow to purchase such properties."
Smaller potential purchaser pool? does this mean less demand?? They said foreign buyers weren't affecting the market!!!
Of course the headline is misleading. He said that his developments are niche and for them to be worth doing requires foreign buyers (not enough NZ billionaires). Hardly, threatening - it's called economic reality.Also, I am not sure if this is the type of development that should be stopped if our aim is to reduce house prices.
And good on them - he's not filling a local need by his own admission;
"The bill's restriction of potential purchases for premium properties created from such developments creates an unacceptable level of risk and reduced economic return."
He's building specifically to fill an offshore purchaser demand - it's hardly the type of housing development that we want the limited number of local tradespeople we have in this country working on, is it?
Locals building for locals is what we need more of.
What? We're not banning visitors to NZ! Queenstown has the nation's worst accommodation problems for locals - too many non-NZers buying up residential property and letting it as short term AirBNB and the like. In fact this foreign buyer ban if it goes through will go a long way to SOLVE that problem - a problem that manifests itself in a shortage of local workers to service the booming tourist trade :-).
Or perhaps I misunderstood you? Why will a ban on foreign buyers of residential housing crash the tourist market - I'm really curious.
A few large higher sales to overseas people a happy bouncy property market does not make. Forget the leafy burbs, look at the next couple of rings out that are all leveraged (specuvested) against the leafy burbs. Recent Herald articles have reported bankruptcy's for people who speculated, and are now walking away leaving the bank hanging, and the recent case of mortgage fraud again leaving the bank hanging. While the banks are enjoying record profits, I wouldn’t be surprised if the Banks are making provisions for more of this thing.
Even with all the supporting foundation of council stupidity, materials monopoly, and immigration volumes, it is kinda impressive to see the prop bulls continue to barrack that everything is fantastic, and there will be no decline.
As a question to the property bulls, what events/criteria would actually make you accept that a decline or return to more normal debt to equity will or is actually happening?
Glad I got out March 2017, my purchaser wanted my cross lease in order to do a development.
I had a little place, one of four, built on to the back a Big house on a corner. Nice deal, private sale. Sometimes the hochpotch cross leases turn up trumps. If some party gets over committed and has the $$$. Stuff owning for a while yet.
Interest rates rises are now my mate. You won't see tears from moi.
Reality is that owning a home is by far the best investment you can make.
Firstly it is no dearer to own than rent and you have the pride of ownership thing and can pass the house on to your kids when the time comes.
Geez your property you are renting when you pass on doesn’t really have any value!!!!!!
Your equity in your home you can use to leverage to buy assets that produce income and Banks won’t be interested in you at all if you are a renter.
Just remember that the housing market is just not Auckland with the low yields.
Interest rat3s aren’t going up anytime soon.
Reality is that owning a home is by far the best investment you can make
Not necessarily. Scaleable investments are far better if they work in your favor. Secondly, buying a home at the top of a property bubble is quite possibly the worst investment you could make. When bubbles pop, you want to be as protected as much as possible.
Don’t agree at all.
Rent is wasted money that you will never get back.
Owning gives you stability for yourself and any family and generally you will be a more stable person as we all know that many tenants have no self responsibility.
Forget about bubbles, top of the market etc. there are always great buys in any housing market, you just need to have the knowledge and foresight .
Interest payments are exactly that, interest!
Positively geared aNd interest payments are an expense so deductible.
Depends on your ability to invest as to which way you invest.
It works for us extremely well And sleep well at night knowing that it is a safe and sound strategy.
" In the decade ended December 2017, the NZX had the highest return of the six asset classes in the accompanying table, with a gross return of 107.8 per cent. The next best performing asset classes were Auckland houses, with a 95.8 per cent return, and New Zealand bonds, 95.5 per cent."
I have posted this b4 , but I guess it does fit this conversation :
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119…
Rent is totally lost money, Interest payments is an investment in Holding an asset ( which will come back in CG - long term) , just like interest paid on margin lending ( assuming that it is used to invest and buy more shares) ...
First home buyers would be silly to be currently buying in Christchurch where rents are dropping and house prices are surely but steadily dropping also. Rent is peanuts. Losing tens of thousands after buying can be difficult to deal with especially when it is borrowed money.
I have been watching this site and articles for some time now and I would be interested in commenters views on my present situation. I am a millennial with a young family. My husband and I are professionals with good incomes, albeit currently reduced by mat leave and part time hours while the kids are small. We currently pay 35% of our take home in rent, enduring 6 monthly increases over the last 2 years or so. The landlord is getting a 3% yield based on homes.co valuation, due to it being a small house on a large section. With some good decisions and better luck have amassed a deposit equal to 20% of the median home in our area, which are uninspiring but adequate at best and depressing at worst. Everything is woefully overpriced, and family homes that appeal are out of reach. I am terrified of buying now and facing negative equity in the coming years, unable to leave the adequately depressing home we bought out of necessity just off the top of the peak. Some say it is never a bad time to buy your own home, but is that really true???
Baitsman, I think you should consider West Auckland. I started out as a Westie. An easy do up would be what I would look for. Something that requires just a bit of painting, carpeting and refreshing of kitchen and bathroom. Nothing too horrendous and something you can live in immediately. A garage would be good. Something in the 600-700k price range is entirely possible.
Here is the cheapest I could find but no garage. I lived around the corner from this place when I was in my twenties.
https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
Your interest cost would be about $330 a week currently.
Hi Baitsman,
Yes for once Zachary has given some sound advice. I would also recommend West Auckland if you don't mind commuting though they do have good rail transport connections there. Since you have small children I would recommend Titirangi and Laingholm (with surrounding suburbs). Which have excellent primary schools, more affordable property prices and good communities.
Hi Baitsman,
Yes for once Zachary has given some sound advice. I would also recommend West Auckland if you don't mind commuting though they do have good rail transport connections there. Since you have small children I would recommend Titirangi and Laingholm (with surrounding suburbs). Which have excellent primary schools, more affordable property prices and good communities.
Hi Baitsman,
Historically, the first few years of home ownership have always been tough - with sacrifices having had to be made.
The rewards come further down the track - but are typically large.
Personally, I know of nobody who has regretted purchasing their own home (and that's out of several hundred home owners).
Remember: the longer you leave purchasing a home, the harder it gets.
TTP
The only people I know who regret buying a home are my parents, who timed it very poorly and paid more than they could really afford, the result of which was mortgagee sale and near bankruptcy from which they never recovered. However, I try not to let that put me off!
Every time prices come up on this site there is 100 people on either side of whether prices will go up or down. Personally, I am on the side of slight declines throughout 2018 and little price increases for the decade after that.
What I can say is my experience of price declines. We returned from provincial NZ to Wellington last time there was a bubble in the market. We cashed up and sat, waiting for the market to decline.
We got tired of all the hassles of renting (children in school zones etc, threat of selling under us etc), so we bought the house we were renting. Inevitably prices fell after we had bought - by around 10%. Prices have subsequently gone up - but I did look at houses that went for silly prices after I bought - and I even now think of major expenses like the re-roofing of the property and think that is an expense I could have saved on the purchase price.
My thought is don't be in any hurry at the moment
The kids are just babes at 1 and 3 so there are years before we are fully earning again. We want to lay down roots but not at all costs. Correct we have circa 220k which came from savings pre children and capital gains on shares and a property related investment. My head says it will pay to wait and our equity will lik evaporate in the coming years if we buy now, but as I said it’s time to lay some roots.
Bhuahahahaha I don't think so! The houses are selling fast in my area. This one sold over the weekend... saw them putting up the SOLD sign on Saturday ;-)
http://rwepsom.co.nz/properties/residential-for-sale/auckland-city/remu…
To be clear, it's a signpost to the fact people on this forum take your statements with a grain of salt because of your getting caught out in the past making completely contradictory claims. (Not the only one.)
Not a statement that I necessarily believe your original claims to own that house.
Opportunities are everywhere.Liquid assets are hugely important Children are young, only briefly, they care little about Mum and Dads house (until much later ). Children are expensive, more than any bank calculator suggests. Auckland peaked 20 months ago, RBNZ credit data suggested same. You have no reasons financial or otherwise to plunge into Auckland housing .
Yes I agree with Cowpat, take the plunge now. Kids' education is important so be really careful where you pick to be your first home. Vicky Ave Primary, Remuera Primary, Meadowbank School are all excellent public schools. Otherwise, we have St Kent, Coran or King's School. Take your pick. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120…
Baitsman, commentator Bobster explained it well further up this thread. Houses prices are out of whack with true fundamentals. The housing market has peaked. I suggest leaving the Landlord to shoulder the risk of equity erosion, housing related costs. Keep saving - for now. Those who scoff at savers and the current term deposit rates are still dreaming of double digit house price gains.
There is no hurry in my view. Make use of Kiwisaver with its annual tax credits. Your saving and getting ahead and that's what matters :)
Hi Baitsman - there are ok times to buy , good times and really good times - but if you can afford to service the mortgage - then you should buy - worst case - small drop in value and you are in negative equity for a short period before the market recovers - woopee do - like it matters not if you intend to live in YOUR home - if you fix for a couple of years - you are guaranteed not to have a mortgage rise for that period -
and as life goes on - you earn more and mortgage stays the same - as TTP says life gets easier and easier for owners - but for renters the rents keep going up and the size of deposit only grows.
We all did it tough the first few years - but the reward is there later on - just like studying for a degree and living on very little when your mates are all working and earning - 5 years later you earn twice as much -and still got 20 more years of higher earning potential
if you had bought anytime in the last thirty years - you would be substantially better off - and no doubt able to have traded to the desirable family home you seek -
GL - great time to buy as there are bargains to be had
Hi Baitsman & welcome to this site.
You're unfortunately unlikely to get impartial advice on this site. Commenters who own will tell you to buy, commenters who rent will tell you to wait and rent. No matter the topic, would it make sense to you, to listen to people who already have what you want, rather than listen to those who don't?
There's also a psychological aspect, the longer you wait to do anything, the less likely you are to ever get it.
For what it's worth, I say look at as many houses as you can and "Just do it" take the plunge, buy your own house. It may not be easy but it will make you happy and proud and also, in the long term, you will be much better off. Good luck to you and your family
At great risk Ill weigh in here with a personal story. Have lived the last twenty years across three continents. Have only ever bought and sold in NZ in both the good and bad times. But, I always had a personal benchmark - I would only settle for what I truly wanted i.e. the best I could possibly afford at the time (of course taking into consideration my take home). Once I got on the ladder I simply made sure to never be in a situation where the house become an untenable proposition to maintain - both financially or otherwise. What I learned is that if you wait, within reason, set your sights as high as you can and the rest will follow. Kind of like having family, you will do what you need to to be both happy and secure. Contentment comes later, for now it is all about making your way as best you and yours possibly can.
By the way I completely understand about buying something that, under other circumstances would not usually get a look in. You have, I believe time on your side, don’t be afraid to err on the side of your intuition either. Most often it has been my wife who has put things into action through sheer bloody mindedness and brought my cautious optimism to the fore and lit a fire in the embers of my procrastination. Carpe diem and all that! Be bold, deliberate and saavy.
Hi Baitsman, my wife and I are in a fairly similar situation, albeit without children yet. We have a healthy deposit, but we are choosing to rent which costs us less than what interest + rates + maintenance etc would cost if we purchased.
Of course nobody can tell what will happen in the future, but we believe the risks are stacked to the downside for Auckland property. We don't think there will be a short epic crash but there's a good chance prices will continue to slide for quite some time to come.
If you've waited this long (or missed out so far), why not wait until spring and see how the market has done over winter? Anyone who suggests the Auckland market is about to take off in the next 6 months is dreaming, so your chances of missing out in this time frame are extremely slim.
We haven't based our position on what we want to happen, we've based it on what we think will happen.
A few factors I'm sure you're already aware of:
- Global interest rates trending higher
- Mortgage durations maxed out at 30 years
- Interest only loans limited to 5 years
- Foreign buyers being banned
- Big state house building program in train
- Brightline test going to 5 years
- Negative gearing being phased out
- Immigration to be tightened (well maybe, let's see)
- Income growth pretty timid
It's a wonder prices even managed to get this high, but then we do have some friends who have EPIC mortgages.
Maybe we'd feel differently if we had children, I can appreciate the stability/schools become a factor as well.
Good luck with your decision :)
Hi Baitsman,
I left my comments to last to avoid repeating what others have said ... this is the same advice I lately gave to my FHBs who could be a bit older than you.
TTP and kpnuts advice is very sound ... best to look around and short list houses in the suburb of you choice so you know what you would or not buy...the more you see the better ( min 50 houses).
In the current Auckland market, and given all the market fundamentals going forward , the best time to buy your first home is Today ... ( assuming that homework is well done)
Regardless of how the Bank calculates your serviceability .. make sure that you will be able to meet payments at the current 2 year fixed interest rates + 2% pa ( so around 6.75 - 7.00%).... that will make sure that you would be safe for the next 3-5 years and that will affect the choice of your new home and the amount to borrow. ( & save the difference in the first 2 years if you can)
Also remember that your first home isn't necessarily going to be your last , so hopefully in 5 - 7 years time you will be ready for an upgrade ( in the next cycle).
Your parents have made the mistake of taking too much risk maybe at the wrong time too ( a gamble) and could not sustain paying its cost long enough when things gone bad...that is not the fault of the housing market or the timing.
Some of us who have bought and invested in Auckland and elsewhere for over 20 years know that waiting the market out isn't necessarily a good thing in both rising and falling markets .. It is not a gut feeling or hunch thing ... so ask around and seek professional advice
Lastly, look at Auckland property price history on this page and others and follow the graph in the last 40 years, I have just posted this link which makes a good read too:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119…
As you might have read here before -- In my view and experience , some old and do up houses in Auckland currently in the 600-800K range may fall further this winter ( anywhere from 5 -15%) but these could also be booby traps as they might need big refurbishment or repairs in the future which does not necessarily add any value -
there are lots of sound houses out there, always have a builder's or leaky report. Cheap houses in Auckland are cheap for a good reason, not because its a bargain or that the market has fallen off ... one has to be very sceptical about low cost compared to others.
Don't buy your first home from an Auction.... I wouldn't.
You can certainly do without the pressure and anxiety of auction rooms.
Good Luck
Secondary advice to the others, if you are thinking of starting a family plan now to have a home to meet the size (basic room number & size), requirements, & school locations. Expecting to move with toddlers, & young kids can be trickier and having a place you can have a stable home life for them is important. Renting though would be a nightmare with young kids. They are mini tornados at the best of times. Worrying to death about the damage they do & being kicked out because of it does not help the stress levels. If anything expect damage with kids, then be pleasantly surprised if the damage is below your expectations. Less carpets & stairs help, also having a bath makes it easy early on. Points in a house that as adults we do not realise until things are smeared on the walls the floors and on bodies & there is a falling risk. Tornados with marmite fingers.
However there are a few FHBs who I have meet who are going the no child route. I guess they truly are lucky being able to live in an apartment style home early on (where noise levels, & size are not as much of a concern).
Is your current rental accommodation "uninspiring at best and depressing at worst" as well? Sounds awful. I'd never purchase anything I considered "adequately depressing". Especially now with a family, you want to live in a place that feels like a home and generates positive memories of your children's early years. Whether you buy or rent, it sounds like you should make a move, and moreover, 6 monthly increases are just plain not on. Don't put up with that.
Frankly, you couldn't pay me to live in Auckland these days.
Our rental is really very nice, much nicer than many of the houses we've seen to buy. That is why we have stayed for over 5 years - probably too long. But I would like a third bedroom and I am weary of dealing with the property managers (working on behalf of an overseas owner). The quarterly inspections are starting to feel too intrusive now and don't get me started on the rent increases! Yes, it is time to move on.
Thank you to those who have taken the time to reply. As expected, the advice is conflicting and sounds much like the voices in my own head. There are many non-financial reasons to buy now, but the wise money says it could pay to wait. I'd say we will try to hang in there a little longer and see what the effect of the upcoming changes is (it couldn't get worse, could it!?). But the deposit is burning a hole in my pocket, our rental is really not suitable for much longer, and we will just have to take the plunge soon, come what may. Cheers!
Good luck Baitsman! Our situation has some parallel with yours but we are probably a bit older (late 30s) and further along financially... our two kids are older and at a primary, but we have a pretty substantial deposit and continue saving around 70% of income every month.
We have been watching the market and economy like a hawk, and thoroughly enjoying the banter and diverse opinions on this website over the passed 18 months. We ultimately decided not to buy now. Our rental is perfectly pleasant, our initial lease was for 2 years so have had no rent increase during that time (there will undoubtedly be one at the end of our 2 years though). We have just decided to park our money elsewhere in the short term and let it work optimally for us, the return is certainly better than the housing inflation forecast during that time. We are going to wait and watch the structural changes to the market play out over the next 12 months and reassess then. If our savings rate continues as it has been, then we won't even need a mortgage when we come to buy in a few years, so risks are minimal for us. Nonetheless, the emotional pull to own a home and the occasional bout of FOMO are not so easily dismissed! So I do feel for you!
Ex Expat, I think you are indeed correct. The following graph clearly shows peak annual change NZ wide of -9% during the GFC. Some cities could easily have fallen 13% or more;
https://rbnz.govt.nz/statistics/key-graphs/key-graph-house-price-values
TTP, hopes this helps with your continued efforts to build valuable insight and make some worthy contributions. There is a lot of interesting information to be found on RBNZ.
Baitsman, look for a property that has plenty of upside and you won’t go wrong.
Personally would move from Auckland if you want a better lifestyle.
Consider Chch as plenty of opportunities, plenty of sunshine, plenty of affordable great homes and plenty of activities
Hi Baitman,
I broadly agree with The Man 2's advice.
For $220,000 you could buy a reasonable rental property in Palmerston North.
It would attract a rent of around $300pw - so a pretty good ROI.
Palmy is tops for investment property - a very transient population of upwardly mobile people, from students and academics to business people on transfer.
Personally, I believe PN is under-rated and will show strong capital gains over the next few years.
TTP
That looks like a good buy. Currently interest cost is about 10k while rent income is 15k. It is quite a small house at 80sqm though. Ideally with 200k you would want to buy about four properties like this with 50k equity in each one. I reckon it wouldn't be long before your 200k was 400k.
Too complicated for a person who just wants to buy/own their own home - as opposed to become a landlord for a living. The thing is as Baitman says above - the home deposit money is 'burning a whole in his pocket'. The better idea is to pay cash for the property in full and just bank the net earnings from the rental - which would be alot higher than interest earned on the $200K+ in the bank!
A very apt analogy here, at least for for the greater Auckland isthmus. When deciding what to wear on a given day despite the best intentions of both the meterological forecasters, teleweather evangelists and armchair prognosticators alike, I still just poke my head out of one my countless windows and thus array myself in the resplendent finery which best suits the prevailing conditions. Same as when I purchase or sell a property. I take into account the immediate conditions with an eye out for clouds gathering the horizon. Then all I have to do is decide whether I should take my convertible or, to reduce the likelihood of an unwanted comb over mishap, the Bentley.
Who can say where things are really going..What goes up must come down.. all I know is that since news broke today that current sales prices have dropped to 2016 levels, two lot of friends who bought a year to 18 months ago are chewing their nails and swallowing hard. Fortunately for them they will be able to survive a fall in prices- not that anyone wants to carry the loss of their hard earned dollars. Many may not be so lucky. I hope too many aren't burnt if they can't hold on through the cycle. Interesting times.
Could it be that with the investor LVR dropping from 40% to 35% that this is the reason for more sub $500,000 sales. Perhaps also the reason for lower volume of sales by Barfoots is that they have lost market share as the vast majority of their Chinese sales force are now selling very little. Harcourts now seem to be the dominant agency on the North Shore whereas a year ago Barfoots seemed stronger.
Now hear this:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120…
In particular, I loved this quote: " Call us optimistic, but we see 2018 as a time when the market will return to more "normal" levels. While values may not climb as dramatically as recent years, it's hard to see how "waiting for the market to fall" is a sensible option."
“And in news just in, the turkeys have refused to contemplate the occurrence of Christmas”
The “experts” in point being the heads of various real estate agencies!? I mean, whatever else could they really say?
You are a very sweet old man......but alas very naive...
Do you really expect CEOs of RE firms to say anything else, if one said they expect prices to continue to fall they would lose all their customers to the other firms.
I can guarantee you none of them believe their own words. They are no better than politicians and lawyers ..... cant be trusted.
Cheeky offers order of the day. Market will correct to what NZ market is prepared to pay. No more foreign money, and no more lending to 10 DTI's, higher borrowing costs for banks.
Lawrence Watts: Bidders hold the trump cards
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120…
" On another house, at an auction a few days later, an agent is talking to the bidder behind me, an Indian man in his 60s. The property concerned is a two-storey, four-bedroom semi-detached house in Dominion Rd.
Bidding opens at $800,000, but stalls.
"Will you go to nine?" the agent asks.
"No," replies the buyer.
"So what is your best bid?" asks the agent.
"$830,000," the buyer replies."
The bid is placed, but it is not enough for the seller and the property is passed in. Many auctions continue in this manner. Bidding stalls on the next property......
"Market will correct to what NZ market is prepared to pay. No more foreign money, and no more lending to 10 DTI's, higher borrowing costs for banks."
You've very much hit the nail on the head there, swapacrate.
It usually takes 1.5 to 2 years from when the tap has been turned off for the effects to become real. China clamped on capital flight beginning January 2017, so I would be very wary of the events after winter this year.
The only transactions going through right now are the last of the bigger fools, whether they be amateur investors or folks over-extending themselves, who will be left holding the bag. I am less concerned for those buying a house to live in as surely they will weather the storm. But those who still forged even after seeing all the signs can only blame themselves.
I'm not advocating a crash by any means. What I'm saying is house price levels will (and must) return to levels that local NZers can afford. That's just logic, plain and simple. How anyone can think that house prices will remain at this permanent plateau, when the outside forces that propped it up to this level, is long gone is just beyond me.
And oh, guess what happens when spruikers start making statements about a new plateau?
"At some point statements are made about entirely new fundamentals implying that a “permanent high plateau” has been reached to justify future price increases; the bubble is about to collapse."
https://transportgeography.org/?page_id=9035
Well you can if the prices do plateau at the current level for a few years then begin climbing again which is my prediction. Really its anyone guess what will happen and no ones view is worth more than anyone else's. Reminds me of the election, you can be a political expert but you still only get one vote and Joe Bloggs who knows nothing still gets one vote..
You can say it will increase, but we had commenter on here a couple of days ago who earns 100K plus. The bank will only lend them 400K. Not many people earn 100K plus in good old NZ.
https://www.careers.govt.nz/jobs-database/whats-happening-in-the-job-ma…
So if banks will only lend 400K and houses are worth an average of 800K or more in Auckland who will buy these houses when property increases. In a couple of years interest rates will increase as borrowing costs increase. Interesting how fundamentals are out of whack with house prices.
I think you will find that most investors NZ wide are doing quite well.
Of course there are some stressing landlords if they have borrowed too much and they are propping their properties,up.
The shortfall has to come from somewhere and they will bet sick of propping up the tenants.
However Most investors will,continue with their business and the Banks obviously were happy enough with their customers to lend to them.
If they see an opportunity the canny investors will take it as they always do.
Hi The MAN2 .... Maybe auctions are quieter down there, but auctions recently have been a choker in Auckland and require an experienced person not to be carried away with the scene and pressure .... especially for emotionally charged FHB who are already fed up with so many rejections and disappointments ....
I attended tens of auctions in Auckland, none were a pleasant place to make a decision on the spot...I see the benefit when markets are slow and could hunt down a bargain in some desperate sales .... but you could end up paying a bit more ( or too much) when you don't need to.
Today, Good quality properties will certainly have few interested parties and the price will escalate up by few tens (or even hundreds of thousands) $$s when fear of loss kicks in and bidding becomes red hot .... I see that everytime and people get pushed out of their limits very easily ...
New Zealand currently has 2.7% GDP growth, an increasing population, and low mortgage interest rates. In that environment, property prices in Auckland have fallen 5-9% from their peak based on B&T average / median sales prices with very few mortgagee sales. Meanwhile, household debt to income levels have surpassed those levels reached in 2007 just prior to the GFC.
From memory, property prices in Auckland fell 10% during the GFC when NZ had negative GDP growth and a large number of mortgagee sales (i.e when the economic outlook was much worse than it is currently).
What happens to Auckland property prices if interest rates start to rise or there is another financial shock to the global system which results in rising unemployment and lower economic activity?
We will be completely and utterly screwed. That’s what will happen. When it happens. Residential property is priced for perfection. That’s the risk we are taking as a nation with our one way bet on residential property. It doesn’t seem worth the risk to me, but thats where we are as a nation. The justification doesn’t seem to get much beyond “it’ll never happen”
The US Fed is raising interest rates as we speak and this directly affects our banks because they need to borrow funds offshore to write new bank loans and keep up the payments/swaps with existing debt repayments to these same banks, therefore rosing interest rates will have a direct impact on both new and existing mortgage customers and will also eventually flow onto our deposit savers who will receive a higher interest rate of return.
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