Lower selling prices are causing property values to fall across most of the Auckland region, according to the latest figures from Quotable Value (QV).
They show that the average residential property value in Auckland was 0.9% lower in February than it was in February last year.
It was the third consecutive month that the average value in Auckland has been lower than it was 12 months previously, suggesting a definite trend of declining values in the region.
Compared to February last year, average values are now lower on the North Shore (-2.0%), in Waitakere (-0.8%), central Auckland suburbs (-0.5%), Manukau (-0.7%) and Papakura (-0.8%), while the average value in Franklin was unchanged from a year ago. (See the table below for the average values and quarterly and annual changes in value in all districts throughout the country).
Rodney was the only district in the Auckland region where the average value was up (+0.9%) compared to a year earlier.
However while values may be falling in Auckland, the size of the decline remains small.
Since the average value in Auckland began declining in December, it has only fallen from $1,050,647 (in November) to $1,044, 576 in February, a decline of just $6071.
So although average values are declining, they are doing so at a snail's pace. So far it has been a minor easing in values rather than a dramatic collapse.
Values may also be on the verge of easing in Christchurch, where the average value was $495,089 in February, up just 0.1% compared to a year earlier. However compared to three months earlier, the average value in Christchurch was down -0.1%, and both the annual and three month growth rates in the city were lower than they were last month. That suggests average values in Christchurch may also be about to slip into negative territory.
Wellington & Dunedin, yet to peak?
It's a different story in Wellington and Dunedin with average values in the Wellington region up 8.6% on a year ago and average values in Dunedin up 14.3%. And the rate of value growth is also increasing in both cities, suggesting their property values are yet to peak.
Around provincial centres, average values are still rising and in many cases that growth remains quite strong. But the rate of growth is slowing in several of them, suggesting a slow cooling in those markets as well.
For example in Tauranga the average property value was $725,113 in February, up 2.6% on a year earlier and up 1.6% on the previous three months. But in January the annual growth was 3.3%, and the the three month growth 2.0%, which suggests that although property values are still rising in Tauranga, the rate of growth is slowing.
Other major centres showing similar trends are Whangarei, Taupo, New Plymouth, Whanganui, Nelson and Invercargill.
"Our latest figures paint a bit of a mixed picture," QV General Manager David Nagel said.
"On the one hand, we've got more affordable, smaller provincial towns that are still in their upward growth stage, while the likes of Auckland are much further down their growth lifecycle and are now seeing values flatten after a period of sustained growth.
"The rate of annual growth, nationally, has dropped from 6.5% to 3.0% over the past year, which does suggest that the heat has certainly been taken out of the market," he said.
| QV House Price Index February 2019 | |||
| Territorial authority | Average current value | 12 month change% | 3 month change % |
| Auckland region | 1,044,576 | -0.9% | -0.6% |
| Wellington region | 699,183 | 8.6% | 2.0% |
| Total New Zealand | 686,050 | 3.0% | 0.7% |
| Far North | 448,667 | 5.0% | 2.2% |
| Whangarei | 541,694 | 6.1% | -3.8% |
| Kaipara | 542,765 | 6.9% | -1.1% |
| Auckland - Rodney | 959,939 | 0.9% | 1.8% |
| Rodney - Hibiscus Coast | 931,246 | 0.1% | 1.1% |
| Rodney - North | 988,380 | 1.5% | 2.3% |
| Auckland - North Shore | 1,206,744 | -2.0% | -0.7% |
| North Shore - Coastal | 1,369,329 | -3.1% | -0.9% |
| North Shore - Onewa | 967,352 | -0.5% | -1.2% |
| North Shore - North Harbour | 1,203,893 | -0.8% | 0.8% |
| Auckland - Waitakere | 818,788 | -0.8% | -0.9% |
| Auckland - City | 1,232,811 | -0.5% | -0.5% |
| Auckland City - Central | 1,076,069 | 0.0% | -1.3% |
| Auckland_City - East | 1,556,954 | -0.6% | -0.1% |
| Auckland City - South | 1,096,311 | 0.1% | -0.1% |
| Auckland City - Islands | 1,135,530 | -3.9% | -3.1% |
| Auckland - Manukau | 896,625 | -0.7% | -1.1% |
| Manukau - East | 1,141,641 | -1.2% | -1.5% |
| Manukau - Central | 699,066 | -0.3% | -1.1% |
| Manukau - North West | 778,224 | -0.1% | -0.7% |
| Auckland - Papakura | 696,415 | -0.8% | -0.3% |
| Auckland - Franklin | 673,782 | 0.0% | 0.3% |
| Thames Coromandel | 754,853 | 6.0% | 0.0% |
| Hauraki | 416,927 | 7.9% | 0.7% |
| Waikato | 487,503 | 3.3% | 0.7% |
| Matamata Piako | 479,696 | 10.2% | 4.8% |
| Hamilton | 580,233 | 5.8% | 2.5% |
| Hamilton - North East | 722,658 | 4.0% | 1.8% |
| Hamilton - Central & North West | 537,091 | 7.7% | 3.9% |
| Hamilton - South East | 535,262 | 7.0% | 3.0% |
| Hamilton - South West | 517,794 | 5.3% | 2.1% |
| Waipa | 566,217 | 6.2% | 1.1% |
| Otorohanga | N/A | N/A | N/A |
| South Waikato | 253,817 | 12.4% | 3.5% |
| Waitomo | 218,868 | 8.1% | -0.8% |
| Taupo | 511,679 | 9.6% | 4.0% |
| Western BOP | 652,132 | 4.8% | 1.8% |
| Tauranga | 725,113 | 2.6% | 1.6% |
| Rotorua | 456,816 | 9.4% | 4.2% |
| Whakatane | 464,556 | 11.1% | 0.5% |
| Kawerau | 244,455 | 28.5% | 1.0% |
| Opotiki | 307,271 | -0.9% | 2.8% |
| Gisborne | 333,631 | 10.5% | 3.1% |
| Wairoa | 201,419 | 27.0% | 1.2% |
| Hastings | 511,442 | 13.2% | 9.9% |
| Napier | 549,207 | 12.5% | 5.2% |
| Central Hawke's Bay | 371,586 | 17.2% | 6.0% |
| New Plymouth | 458,367 | 4.3% | 0.4% |
| Stratford | 270,719 | 7.7% | -0.1% |
| South Taranaki | 235,449 | 7.8% | 2.8% |
| Ruapehu | 217,444 | 21.3% | 8.3% |
| Whanganui | 271,483 | 14.3% | -1.7% |
| Rangitikei | 220,021 | 14.1% | -6.5% |
| Manawatu | 361,311 | 11.9% | -0.9% |
| Palmerston North | 434,362 | 14.2% | 3.6% |
| Tararua | 224,524 | 21.3% | 2.5% |
| Horowhenua | 346,858 | 14.5% | 3.9% |
| Kapiti Coast | 584,139 | 6.9% | 1.9% |
| Porirua | 590,928 | 8.1% | 1.0% |
| Upper Hutt | 540,836 | 13.9% | 5.7% |
| Hutt | 574,738 | 9.1% | 0.4% |
| Wellington City | 824,029 | 7.9% | 2.3% |
| Wellington - Central & South | 825,748 | 8.2% | 2.9% |
| Wellington - East | 874,158 | 6.3% | 1.0% |
| Wellington - North | 749,548 | 9.2% | 2.0% |
| Wellington - West | 937,733 | 6.7% | 3.4% |
| Masterton | 376,287 | 11.9% | 3.7% |
| Carterton | 415,497 | 11.3% | 2.4% |
| South Wairarapa | 509,868 | 10.1% | 1.5% |
| Tasman | 598,945 | 5.9% | 2.2% |
| Nelson | 612,081 | 7.8% | 2.4% |
| Marlborough | 473,176 | 4.2% | 0.6% |
| Kaikoura | N/A | N/A | N/A |
| Buller | 193,524 | 4.7% | 0.8% |
| Grey | 213,144 | 0.8% | 0.9% |
| Westland | 256,035 | 7.9% | 2.6% |
| Hurunui | 386,778 | 0.3% | 1.2% |
| Waimakariri | 450,191 | 2.7% | 0.8% |
| Christchurch | 495,089 | 0.1% | -0.1% |
| Christchurch - East | 374,931 | 0.8% | 0.0% |
| Christchurch - Hills | 665,411 | -0.7% | -0.3% |
| Christchurch - Central & North | 583,404 | 0.0% | 0.3% |
| Christchurch - Southwest | 472,543 | 0.0% | -0.4% |
| Christchurch - Banks Peninsula | 516,187 | 0.8% | -2.1% |
| Selwyn | 554,157 | 0.8% | 0.5% |
| Ashburton | 356,555 | 1.7% | 0.5% |
| Timaru | 368,291 | 3.5% | 1.1% |
| MacKenzie | 502,767 | -6.1% | -6.7% |
| Waimate | 247,669 | 6.1% | 2.6% |
| Waitaki | 315,005 | 4.4% | 3.2% |
| Central Otago | 523,218 | 9.8% | 3.8% |
| Queenstown Lakes | 1,204,828 | 8.1% | 2.6% |
| Dunedin | 449,023 | 14.3% | 4.0% |
| Dunedin - Central & North | 462,675 | 13.6% | 2.3% |
| Dunedin - Peninsular & Coastal | 406,636 | 12.8% | 2.3% |
| Dunedin - South | 429,080 | 14.9% | 4.3% |
| Dunedin - Taieri | 469,903 | 15.0% | 6.1% |
| Clutha | 218,630 | 2.3% | -1.3% |
| Southland | 305,939 | 8.0% | 7.1% |
| Gore | 236,756 | 6.7% | 2.9% |
| Invercargill | 287,719 | 10.7% | 1.8% |
| Main Urban Areas | 792,992 | 1.8% | 0.3% |
146 Comments
-0.9 In AK and +3% NZ. Some crumbs for the doomie gloomies, enjoy fellas.
If there's a doom and gloom scenario, we're currently in it.
Unless your'e so overexposed that a Sydney style correction would spell doom and gloom for you.
What is your definition of a flat market?
Why do you think Auckland house prices dropping is doom and gloom?
What kind of job do you have and what kind of mortgage do you have? Are you in trouble? How much of a mortgage rate rise could you deal with? Are you bank rolled to an extent by mum and dad? You strike me as one of those "self made" people who lived with their parents in their 20s and didn't pay board.
Tell me about your life.
I think lusting after a 30% drop is doom and gloom. Nosey bugger aren't you. My day job is infrastructure related. Why would you suspect I'm in trouble - interest rates are low and rents are high. I haven't done the math, but no holidays or coffees for me if interest rates went above 7.5%. But by the time that happens, rents will be considerably higher than they are today.
I think the valid point made is thst a crash is not 'doom and gloom' for everyone. It would be for some. For others it would offer the opportunity of home ownership.
For many, the status quo is 'doom and gloom'
I think lusting after a 30% drop is doom and gloom.
I think lusting for unsustainable bubble prices to be the new normal is doom and gloom.
Show me a graph for ANY investment class ever, that has shown out-sized, well above average gains for 10 years or so and then shows a nice gentle leveling out, in to a flat plateau for a couple of years before moving up again.
I didn't think so.
Eventually the doom and gloomers will be right timing is the tricky part. Unless human nature changes and I see little evidence of that happening.
Look at a graph of NZ house values over the last 30 years, it's exactly as you have described!
Touche, you are correct
https://www.properazzi.co.nz/articles/the-property-market-cycles-of-the…
Interesting how volatile it has become in the most recent part of the cycle.
I got nothing really, perhaps NZ housing is a bullet proof investment........
S4AUH, Like Sydney, there are a lot of people in that situation in Auckland who’ve bought with large mortgages in the past few years. The current Sydney situation is a cautionary tale for Auckland, as the price to income ratio is similar, and most thought it would not drop so much.
Good news , still a long way to go to see real value tho
Coastal North Shore down 3% in 12 months
$30,000 on a mill down
I’m in LV as I write & here we call that losing
On a brighter note NZ is doing well A stable country with good laws little corruption & great climate
NZ compared to UK USA Canada & Australia is looking supremely good overall in my opinion & I do considerable traveling
NZ is pretty special
The Auckland City drop is so minuscule.
All we need to do is get your basic, entry level house, valued at around 700K in Auckland and get mortgage interest rates at about 2.95%. This way mortgage interest will be significantly cheaper than rent and there will be opportunities for people to pay the mortgage capital.
We're actually almost there with even more value outside of Auckland.
700k is still over 10+ of the Auckland average wage, classed as unaffordable by most measures, we need 200k wiped from that to get back to a more affordable measure,
in saying that a slow decline in house prices and some wage growth for a couple of years will get us there
@sharetrader .......I honestly dont think a $200k drop will happen ............ largely because the costs of new builds is so high , its propping up the prices of older houses
Sharetrader is right, you only have to look at this years auction results for Auckland to realize that there's been a huge drop in the number of sales in the expensive central suburbs. That's largely due to the AML regulations that were enforced a the end of January this year.
So a $200k from on a multi million dollar home is nothing really, wait till they drop say by $500k. May be then will you wake up to the real world.
Sharetrader
Just remember Zachary was a post & telegraph worker who gravitated into computer / server hardware & rental investments He reads a little & likes to quote in his pieces here
As a boy he would sit in front of the families black & white tele & watch Lost in Space
He idolized the dastardly Zachary Smith
He is a baby boomer
He is heavily committed in the popular belief that property made him wealthy so anyone should be able to do the same
I think he’s done very well financially & probably deserves congratulations
I just wish empathy came with his responses more often
A more rounded response perhaps
Millennials deserve a break they have tens of thousands of student loans to contend with & a low wage economy I have family knowledge of the pathetically low wages / salaries NZ youth are paid in demanding vocations.
If the Government were actually serious about Kiwibuild, aside from addressing the red tape/building supplies monopoly side of things they would offer 2% "State Advances" mortgages to First Home Buyers fixed for a minimum of 5 years. The house has already been built, paid for, from the government coffers. Why not cut out the middle man and have the home owner pay the Government instead of a bank?
Yes, I think that has to happen for KB to be a success.
Kiwi build will not be a success because there isn't actually a shortage of housing. So building many more houses won't fix anything.
And you keep referring to numbers. If this is that % and that is another % then people will be able to buy, theoretically. Unfortunately people are not rational when investing. Once a market has turned it doesn't matter if they can or can't theoretically buy a house, they won't, because sentiment will be a against it and it is very hard to go against the herd.
That is why there aren't plateaus in investment returns. There are just booms and then busts.
Exactly!
Zachary, and that 700k home could be back to under 500k in a few years, when the bubble bursts. A -10% a year drop for 3 years is very possible.
For a sense of perspective, note that Auckland house prices rose by 93% between March 2009 and June 2018. [The Listener, August 18, 2018]
In this blog, there's been a great deal of hope and hyperbole over the last few weeks about a sizeable drop in Auckland house prices.
The reality, however, is that a flat housing market (as the Auckland market has been for more than two years) doesn't mean house prices will slide - or crumble - even after a lengthy market upswing.
The Auckland housing market continues to show resilience or - as economists say - prices have a strong propensity to be "sticky down".
TTP
The reverse of a 93% rise is a 48% drop. If prices were to fall 35% like they did in Ireland after their 10 year doubling period, then your 93% decade gain turns into a 25% gain (2% p.a.).
At one point, Dublin was down 56% from peak, however I concede that this isn't Dublin it's Auckland so it'll be different.
Yep, we are all trying to read the chicken entrails here.
I maintain we will see mean reversion simply because that's what you almost always see in investment classes that have experienced extraordinary gains.
Apologies as I don't have the exact figures but the long term gain in property values is typically around the inflation mark. That put us at about 3-4%.
If we take 4% for the 9 year period, the "normal rise" should have been around the 36% mark. That means the other 57% represents froth.
So if we mean revert some 50 odd percent needs to be corrected for. However prices seldom just mean revert, they normally go below the mean by some 10-15%. This gives a 60-65% fall from top to bottom.
You stick with the chicken entrails if you like. Most of us are watching fundamentals.
Whats the point of watching fundamentals? Do you really believe this market (or almost any other one showing historically out-sized gains) has much to do with fundamentals?
This is a bubble, that is pretty long in the tooth. Bubbles arise for a whole bunch of specifically human reasons, hubris, arrogance, greed as well as a long list of conditioning and biases (recency, confirmation, love of narratives) built into each and everyone of us. You will be able to find any number of fundamental reasons why something happened after it happened, but that's not much help when we are trying to predict the future.
Totally agree it's a bubble. It's way outside of the fundamentals.
Different people may be looking at different "fundamentals" which result in different conclusions. What are the "fundamentals" that people are watching which influence your future property price expectations? Here are some. Do you have others?
1) current housing shortage of 40,000 or so dwellings in Auckland (as estimated by economists and town planners at Auckland City Council, NZ government)
2) historical property prices have risen 7.2% per annum historically, so let's extrapolate that
3) house price to household income ratio
4) gross rental yields
5) replacement costs
1) how can an estimate be a fundamental? Sorry I don't read a guess as being a fundament.
2) I assume the 7.2% figure is NZ? I have not heard any investment class having such high returns previously, over a sustained period. That is impressive. However, the past is not a guide to the future. It says so at the bottom of any investment advice. Most of the research I have seen is that shares outperform property by about 1% over the (very) long term. However most of that work comes from the UK, Europe and the US, we don't have such long data trails here, so it maybe different in NZ.
3) I like this ratio, but other on interest have criticised it before and given good reasons.
4) Yields certainly are poor on all investment classes currently property included. Thanks QE. However I don't think gross rental yields are very useful for comparing to say a dividend yield as that is net (aside from tax). There are a lot of expenses in a house.
5) no comment, it's not a metric I would use as normally it is land that matters not the building.....certainly there are a lot of houses going for a lot of money.....but the houses are pretty pants.
6) the ratio between oil price or gold price and property are pretty good metrics historically and interestingly, follow the income ratio metric quite closely.
Interesting post, although I think you made a couple of mistakes in your math:
4% compounded annually for 9 years is about 42% gain (1.04**9)
If we assume the price rise over that 9 year period was 93% then we need a 26% drop (from current prices) to get back to a 42% gain. The calculation being: (1.93 - 1.04 ** 9)/1.93
(Paste that into your favorite search engine)
Thanks House Hunter it's fair to say my math sucks.
35 - 40% fall then by that logic. Though 50% plus still feels right.
I don’t think tothepoint gets abroad much let alone Dublin
I don’t think tothepoint gets abroad much let alone Dublin
The reality is the Auckland market hasn't been flat for a while. Slow but steady decline for the last 6 months according to the HPI YoY comparisons. Whether that turns into a fast decline remains to be seen, although there are signs of acceleration.
I dont disagree its miniscule, but how many people bought specuvestment properties in a short hold plan that were reliant on capital gains to make it work.
When Awk catches cold the rest of the regions follow. Awk has flus symptoms, builder going to the wall left and right, values dropping, agents bailing, development delays creating settlement risk, banks dropping pants to stimulate, bank capital increase on the cards and a capital tax poised like an executioners axe over the speculators.
What could go wrong? Lets hope Sydney is not a forecast.
*ahem*
https://www.irvinehousingblog.com/2008/08/11/timing-does-matter/
It's pretty easy to work out when to buy a house or not as a would-be home owner. There are rent vs buy calculators all over the web and plenty of advice on how to make a more objective decision. That is, if you have enough insight and control of your own emotions and psychology to make an objective decision.
So the rent v buy calculator has told you that it's better to stay renting in Wellington? ..... eh? Wellington values are up EIGHT percent, are the calculators operated by the landlords assn to keep people out of a first home
Shsss, Houseworks, you'll give the game away.
I wasn't referring to my own financial situation.
Everyone needs to do the calculation on their own individual circumstances. But what you state houseworks is that someone should speculate and engage in FOMO rather than an objective calculation. That's just not how I roll.
I don't see how that calculator can possibly work. For one how does it factor in the capital gain let alone the fact you own the asset and can sell it in the end. Renting leaves you with nothing at the finish line. If your paying as much per week renting as you would be for a mortgage its a no brainer, you don't need a calculator to work anything out. Renting with 4 or 5 other people, then sure renting is great when your 20 something, kind of get sick of that by the time your in your 40's.
You guys clearly haven't read the article "Timing Does Matter". Your predictable responses have already been more than answered within the article.
The 'ol "I can't understand it, so it must be useless."
TBH, it is what we have come to expect from these types, though.
These calculators always suggest it is better to rent rather than buy.
No, they perform some calculations on the numbers you put in, and then provide outputs accordingly.
the one i linked below will quite happily spit out answers that suggest buying is the better option.. if thats how the numbers work out. (ie: put in 10% annual house appreciation and it will always spit out an answer like "Your home purchase breaks even in approximately 1.2 years." )
Yeah but people never assume that there will be 10% house inflation. When doing the calculation it is best to err on the pessimistic side and thus it is ALWAYS better to rent.
Right, so the calculators work correctly, but you don't like them because people have to think and put in realistic numbers.. at which point they realise that 7% annual house price appreciation can't go on forever.
How can a calculator ever work correctly if one or more of the inputs are always unknown?
2 + ? = ? Can you answer that question?
I really can't be bothered with this sort of inanity.
It seems you just want a sure thing. Just carry on renting.
I don't think it is inane. It just doesn't make sense to have an input for expected capital gain when this can never be known. It could be -30%, -20%, -10%, 0, +5%, +10%, +15%, +20%.
Ditch the calculator and let the force be with you.
Neither can interest rates, house price appreciation/depreciation or rates.. so you are just going to throw your hands in the air are you?
I would use a very simple calculation. If the mortgage interest is less than rent and you have a significant deposit then buy.
Assumes interest only mortgage with not risks moving forward?
Well, the assumption is that Mortgage Interest and Rent are both dead money. The principal you pay back on a mortgage is a form of potential savings, although some might argue the opportunity cost of the PP against what you save in renting and invest elsewhere.
Fully agree. Sorry to say, Pragmatist and gingerninja will wake up sometime and realise they were duped by the calculator. Or did it just giving them answers they want to hear?
Ah, but there are limits to that which those combined capital gain can buy.
And those ARE known.
Shoehorn time......
The question isn't whether there will be the mother of all re-sets, the question is whether the re-set will trash the system. I recon it's been on borrowed :) time since 2007-8
Never use a simple calculation just to fit your bias. This is a sure fire way to expose yourself to financial risk. Use the objective, factual calculation as far as you can. If that is a complex calculation, then so be it. The reality of your finances will bite just as hard regardless of your level of denial or laziness.
In my case, I always anticipate the financial situation being slightly worse than it is too (so I use a higher rate of capital gain assumption and a high rate of rent inflation in my calculations).
Another factor in this is property "churn".
This has been a huge factor for me personally. Selling costs for me would be around 70-80k (which is two years rent) without even factoring in mortgage interest, rates and other ownership costs. If you plan on moving within a few years, or if you are not sure where you want to live and are likely to end up moving or upgrading homes again within a few years, then you should definitely factor in selling (and buying) costs in your calculations.
For instance, I will definitely buy a house, the question is when not if. But as per the article I linked to above, I am definitely a risk averse Trougher rather than a Peaker and I will wait for the numbers to stack up rather than make an emotional decision.
"risk averse Trougher rather than a Peaker"
I would call you a Wannabe, and there will never be a right time in the market that suits you. When you buy a house your life will be much more stable than as a renter. My kids have already set target dates and savings plans for buying their first home on their own.
You have zero evidence to make that assumption Houseworks and simply revealing your own bias.
No there is screeds of evidence for your wannabe title I have read many many of your posts as well as this latest one makes it clear you will never purchase a house. You could have bought in the last wellington trough but didnt or any time since and haven't. By the next trough you wont be able to make your mind up then too.
About my other claim that you life will be more stable once you buy, a lot of the instability comes from being a renter. Look up the empirical evidence yourself. No evidence, my ar*e
What are you on about Houseworks? I moved to Wellington 2.5 years ago. When is this trough you speak of? But honestly, I don't need to explain myself to you. I also don't respect how personal you get and the assumptions your attacks rest on.
He gave you some reasonable thoughtful analysis and you call him a "wannabe". That's pretty weak.
I have been in the same rental for 8 years, feels pretty stable to me. And I certainly would not want my kids making plans to invest in a class of asset some 10, 15 years before they will be in a position to actually invest in it.
There are very likely to be better places to park their money, in terms of returns, in the intervening time. Why limit your kids like that?
"her" not him ; )
The best time to buy a house is about 10 years ago.
The saddest thing in this area is seeing a relative hit their late 50s having rented all their lives, facing retirement renting, even though they both had reasonably good incomes ie a 2 income household. The main obstacle is often the need to go downmarket from the rental to the first bought home.
Never rent a house you can't afford to buy.
Apologies to gingerninja. Showing my ingrained sexism there......
Just like buying always assumed house prices will double in NZ every ten years. Unless wages triple that just cant happen.
Hypothetically it could happen but NZ would have hyper inflation in everything touched by a human hand on it creation or transportation into NZ. Perhaps that's what the debt stacking vesters want to happen. Never mind it would wipe out all the retired in NZ trying to live on their remaining fixed next egg. One thing is for sure all the old people vote, and they wont vote for that.
Calculators would be a poor substitute for wisdom and good judgement.
TTP
Pointless spruiking would be a poor substitute for a reasoned argument.
Found the emotional investor.
https://mortgageintelligence.ca/assets/calculators-mi/CAMortgageRentvsB…
Accounts for all the major items. Just check whether the various boxes are monthly or annual.
I don't see how that calculator can possibly work.
I don't think that's surprising to anyone.
You missed a few things, like rates, insurance and maintenance. Together, they add thousands to the annual cost of owning your own home. Now imagine the renter takes these avoided expenses and invests them elsewhere. Understand why it's not so clear cut?
Certainly depends on the future capital gains on the house and performance of the alternative investments, as well as the unexpected maintenance needs of your house, so it's an educated guess rather than a certainty, but what more can you expect?
You don't want to over-think it.
You don't want to think... you want to sit in your little bubble and pretend everything will go on as it has been regardless of the reality.
Most people do this tbh. It's best to think that things will always get even better and they generally do.
That's just wishful thinking. And entirely illogical. Every rev-up of our species (every Empire) has ended in dust. Every time we over-run the resource-base and crash.
This time we're doing it globally. Can only happen once. No back-casting can forecast that kind of event.
It can only happen once globally. Then we expand off globe and things get better.
You'll be the perfect mind for that.
You forgot to factor in the owner actually getting off his ass and doing all the home maintenance themselves, not to mention the home improvements which increase the value. When it comes to insurance just insure the house not the contents, it halves your insurance. I would concede the calculator may look favorable from this point in time but I'm afraid if used 15 years ago its a fail. The capital gains have been insane. Due to some unforeseen circumstances I have sold and pulled out of the property market, arguably it was pure fate that had me pull out at the right time. Now moved and living in Rodney, an area still going up in value because of the new motorway
So you should buy a house because it gives you an opportunity to work? How is that different to a renter getting a second job and saving the proceeds? Insuring a house itself is still a significant cost a renter does not need to consider.
I agree capital gains have been impressive, my opinion is this makes further huge gains in the near future less likely. I have just bought a house, for psychological/stability reasons rather than financial, which I think is how most people should approach it. Renting was way better for me when I wasn't sure I was settled (and excess cash got invested elsewhere), now I am settled buying is the better option.
Usually rent and cost of ownership (interest, rate, insurance, maintenance etc) come out quite close. At end of the day, there would be no rental if owners make perpetual losses. in reverse, if renting is significantly more expensive than buying with a mortgage, more people will buy.
What is more important is WHAT you can do with the money you are considering to lock in a house. If you can get a superior return to capital gain, then you have to rent. Otherwise if all you do is investing your money in a low rate deposit, you are very likely to be better off buying a house.
Often that's the case, down here in Christchurch the cost of owning is similar to the cost of renting (assuming limited maintenance is needed). I don't think that's the case in Auckland where rents appear to be similar but house prices roughly twice as high. Very hard to make a financial argument for buying in Auckland at the moment.
The fact that prices have been flat for so long has been the actual problem, 'An attack on the Kiwi way of life'. No longer using the house as an ATM, no longer getting builders in to 'add' value to the property, no longer flicking on and dressing up with stuff from the retail shops (which have lost confidence big time in the last 2 years). No longer are these properties (homes) lucrative to hold, even though they cost you till the time you sell... Especially with negative gearing almost out the window. 33000 empty homes in Auckland alone - investors sitting on them to frustrate the market. Imagine, them being flicked onto the market. We don't have a need for extra housing. A myth NZH is still sharing up to yesterdays panel discussion with the 'experts'. Fasten your seatbelts, the fall always starts slow - it never starts with a drop of 10% in one Q...
Are there really 33,000 empty homes in Auckland ?
Where does that statistic come from ?
Government statistics and a little thing called a census from 2013. "In Auckland, more than 33,000 houses were registered as unoccupied in the most recent data from 2013. A breakdown shows about a third had residents away. The remaining 22,152 properties are listed as empty".
Hey we've got the 2018 census coming out really soon, hold on to your hat my bet that figure of 33,000 empty homes in AKL will be almost double.
Time to bring in the Empty Homes Tax.
Did they exclude people's baches? And did that include the area all the way up to Wellsford etc? Both would exaggerate the real number significantly.
Hi CJ099,
You write: "Hey we've got the 2018 census coming out really soon......"
Clearly, you're not up with the play!
The 2018 Census has been a huge disaster. A year after the count (March 2018) there's still no data been released - and no clarity as to when data will be released. There are very serious implications flowing from the situation. (See the front page of today's Dominion Post.)
Clearly, the 2018 Census has been badly mismanaged....... I've heard that heads may roll.
TTP
As they should.. the decision to go online was made back in 2015, they had years to design and test the system, and failed completely.
Nothing to get excited about, just continuation of the gradual decline.
Still doubt we'll see much more than a 5% drop by year's end.
Its not dead...... its just resting.
As a warning to all, in Sydney and Melbourne, its not the low end "subprime" part of the market thats fallen/ing its THE ENTIRE BUBBLE thats deflating, what part of bubble do you guys not get... the GFC in the US was not just Detroit guys, good suburbs all over the US lost 30-40%.
Over here houses have doubled in 10 years , interest rates have halved so mortgage size has doubled.
Don't let the door slap your ass on the way out... the first stop loss is always the cheapest,
After that they get more expensive.
But some suburbs in Sydney and Melbourne are still going up.
Funny how variance works, eh, ZS.
HPI growth is negative in Sydney. It's all good though, because some suburbs are still going up.
Ha-ha-ha :)
Zachary, you need to take your blinkers off. You might be able to find a very few still in positive territory in Sydney, but the worst is -41% in Box Hill, an area with many first home buyers, and close in to the city centre, Gladesville is down -20% in 19 months from peak. Many are down around -20% now. It’s crashing.
The 41% fall has already been discredited as it is driven largely by land only sales. Many parts of central Sydney - where you'd want to live and not 50km out like Box Hill - are up on the year. There is a biblical level of cognitive and confirmation bias amongst the gloomier contributors. How about Central Wellington, are any of you renting there? If so you are roughly $50k worse of than last year, Coromandel as well - in fact most of NZ ex-Auckland
Te Kooti, If you just don't believe the housing market in Sydney is declining steeply with more to come, after all the data over the past year, not to mention the bank practices uncovered in the banking royal commission, it's ignoring to obvious. I'm not disputing other places in NZ are still going up, probably with a bit longer to run before they turn, following Auckland.
Auckland, however, is showing signs of following Sydney, and Vancouver and Hong Kong are showing similar signs (lowest sales numbers for 10 years latest for Vancouver). We're not diffrunt.
I didn't say it wasn't declining, but it's far more nuanced and far less sensational than the press headlines, or that quoted here ad nauseum. Sydney stretches something like 50 to 75 km S/W/N from the CBD. Speccy developer driven new builds on the outskirts are off 10 to 20%, prime Eastern Suburbs is +/- 5% .
Better to compare Melbourne, where the 20% price falls are in prime inner eastern areas, the equivalent of Remuera and surrounds in Auckland. Cheap FHB suburbs are actually still going up in Melbourne, its the high end suburbs that are being hammered.
I'm stunned by your insight. Where did you get statistics degree from?
Just reading the actual data coming in from Sydney and expecting similar here. Not rocket science.
Nope we are duffrunt..
Aussie is on the ropes...
But...but..but.. we were told that we are now in the middle of the selling season, when demand will be at its highest. Properties should be flying out especially as interest rates are getting lower and lower.
Is that because fewer and fewer people are wanting mortgages?
Is Barfoot's record low monthly sales for February a sign of things to come?
Is the threat of a CGT making people hesitate?
If prices and sales don't dramatically improve by May with the onset of winter, the housing market will be custard. And so will be the construction industry.
I don't agree that the housing market will be 'custard'. I agree that the construction industry could be, however.
I think with the existing house market the Mexican stand-off will continue.
But new builds is a different story. Many will struggle to sell, and prices will need to be slashed, eroding profit margins.
Fritz, you just described a market wading into custard.
Are we looking at the same data, Wolly Noland?
https://www.interest.co.nz/charts/real-estate/volumes-sold-growth-reinz
https://www.interest.co.nz/charts/real-estate/median-house-price-growth
An American Dream.....Maybe you dreamers ought to read it...then maybe ..wake up.
http://articles.latimes.com/2013/jan/27/business/la-fi-calculated-risk-…
Interesting that similar things are happening in Vancouver, Sydney, and Auckland right now. All highly unaffordable markets that dodged the GFC crash. Somewhat ominous.
“In Vancouver, sales of residential housing has reached its lowest level in more than a decade...” - from this morning Interest.co.nz overnight summary
Correct. I was in Vancouver during the GFC. Olympics kept the construction industry going. Zero recession.
What else do they all have in common? Huge capital inflow from overseas that boosted the real estate market beyond local economic fundamentals. That's now dried up. Plus cheaper access to credit.
Obviously, looking at historical figures is great. Property prices have always trended up in NZ. Which is why all of NZ is so bullish on the property and think they'll never lose. Totally understandable.
However, we've never had such an influx of capital from outside the country to create the disparity. Then that capital has been taken away. So the forces are different from the economic fundamentals our country experienced in its previous growth cycles. Vancouver & Sydney are spiralling fast. Glad to be on the sidelines right now. It's an interesting watch.
'Which is why all of NZ is so bullish on the property and think they'll never lose. Totally understandable.' It is understandable but frustrating to see that so many people will likely be caught out, with debt up to their eyeballs. It's a devastating lesson to learn.
Totally agree. Just have to read comments on here its entrenched in the NZ psyche
Vancouver HAS constrained land supply and this is caused by mountains, the US border and the Pacific Ocean - price is very responsive to demand since supply is constrained, goes up and down quickly.
Auckland HAD constrained land supply during the 2010-2016 period of upward surge. This was caused by the delusional planners of Auckland Council. Then in 2017 Auckland suddenly had over supply of land, again caused by the delusional planners of Auckland Council.
If you think Vancouver is exhibiting a fast decline, wait till you see what happens here.
Vancouver does have a land issue close to the city. (plenty of land in the Valley & south in Richmond/Surrey). But does not have a supply issue. They realized they needed to build UP. And have been doing so for decades. With high-quality product. Which we've yet to learn in Auckland.
They built 41,000 new dwellings in 2016 at the peak. For a city of 2.4M people that has a population growth rate of 1% (roughly 24,000 people per year). That's 1.7 dwellings per person being built.
If you are catering to the local market that's an over supply issue in my books. But they were never building for the local market. They were building for the foreign investment market. (same as Sydney). Now that money is gone for now. Hence decline.
But agree, Same forces here & we'll follow suit.
@ Voiceofreason; The only reason why Vancouver, Sydney, and Auckland managed to dodge the GFC is thanks to China who kept pouring money in and that tap has been turned off since 2017. Now they're all feeling the withdraw symptoms. You might want to read this article that sums it up quite well.
BetterDwelling article: China’s Massive International Real Estate Buying Spree Is Officially Dead!
https://betterdwelling.com/chinas-massive-international-real-estate-buy…
Is it just me, or does the Interest.co.nz webserver need a trip to the proctologist? lots of backend issues..
Almost all of Auckland in Negative territory now.
The tide has turned!
So much for all the great signs for a strong selling season as suggested by Bindi Norwell & Mr Thompson...
Might be a good time for investors in the likes of Dunedin to cash in and take one's tax free gains.
I think those buying from now on in NZ areas currently seeing high capital gains will be hit hard, considering the buying and selling costs, and the probable time left before the market turns.
Even IF a CGT comes in gains up to 1 April 2021 will be tax free anyway. And after you convince the valuer to add $200k to your value as at that date you should be right for many years to come in the current low capital growth environment.
Super cheap interest rates around the corner, sluggish current market, many will wait and see I think.
@HeavyG you could well be right .... IF and its a big "if" CGT is implemented without modification , then we have 3 plus years to get the structures set up , sky-high valuations sorted , and time to transfer the property to your kids or a new trust at a well inflated price
I would be hesitant to assume cheaper credit is on the way. RBNZ capital changes look likely to be implemented, which makes further rate falls unlikely
As I read this article, the radio in the back ground is playing Paul Simon's Slip Slidin Away.. How ironic!
I wouldn't be driving with bald tyres- I'll be waiting for new ones. The reassurance from someone in industry month after month reminds me of the CEO of Theranos.
Heavy G is correct!
CGT won’t be coming in anytime soon as previously stated!
If The Man is wrong then it won’t be 33%.
Bring it on if you must alabour and watch prices escalate!
Tax never reduces prices of anytime, and not designed to!
CGT comes in and seasoned investors will just do better as they trade!
@ Heavy G "after you convince the valuer to add $200k to your value"
I don't think IRD is that gullible..beside if you get caught it'll be a pain in the backside if you ended up in a prison term.
You ever dealt with IRD? They don't have a clue what is going on. They were asleep at the wheel when billions in property sales went by untaxed as people claimed they were landlords (capital gain untaxed) rather than speculators (taxed). The money that has flowed back to China, India and Fiji in the last 20 years would astonish you.
Talking up your properties' values is part of being a responsible spruiker.
Part of being a registered valuer is having facts to back up the value you arrive at. Just adding on 200K will get them prosecuted and lose your registration.
No it won't, valuation is not an exact science, valuers can easily pick other sales that support either a lower or higher outcome. I doubt you have dealt with many valuers
@Heavy G and @Yvil
I have personally dealt with this issue. When I sold my house in 2006 and filed my tax return in following year, IRD came back and requested more information to support my latest independent valuation. For that the valuer had to supply them the data they used to came up with my value, it was a long list of about 30 similar properties and land size.
So for those who think they can just add another 200K, I'm afraid you are talking horse poo..
Exactly right, my experience is similar. I know of a valuer who had his registration revoked after a bank challenged his valuations and complained to the registered valuers board.
But go ahead Yvil, tell us how your valuer adds several hundred K on to your valuations because you bat your eyelids at him.
Investors don't invest in Ponzi bubbles, punters do.
I just bought a property in Christchurch, and paid the same amount as the vendor did who bought it brand new in 2016. Add in the money they spent on curtains, fences, etc plus the real estate agents fees and commission, and they will make a loss on sale. This is a stand alone house on a freehold section in an upmarket established area, not a new subdivision, and architect designed not a cookie cutter build. The top end of the market is really struggling.
Why did you buy it?
Moving to Christchurch and need a place to live.
Kw, I do not doubt it at all!
There is good money in real estate if you know what you are doing!
Not everyone is successful in property and make mistakes, pay too much etc. that is where the professional investors make the money.
It is not rocket science, you just need to know what you are doing!
True, a real property investor doesn't need the market to go up to make money. If I can't buy a property min 20% under its value, I simply don't buy and I keep looking at another 50 properties, until I find one.
True property investors buy for yield, either buying below the market or because the rental figures stacks up (or preferably both). A sensible property investor will leave themselves leverage breathing room so that they can weather downturns. A seasoned and successful property investor makes sure they have cash to buy in a downturn. We need these investors because they provide rental houses for those who need and want them.
A n00b specuvestor buys even at negative yield, without a get out plan in a downturn, overleverages, is motivated by greed and FOMO and then gets butthurt in comments section because their decisions have been made emotionally.
There are a number of different motivations for property investors such as income oriented investors, capital gain oriented investors, tax driven investors and total return oriented investors (allow for both income and the capital gains)
Capital gain oriented investors develop some expectation of future property prices. If they believe that property prices are continuing to increase, then they may choose to buy regardless of negative yield.
Their expectation of future property prices may prove to be incorrect if it was based on an incorrect methodology such as an extrapolation of recent property price trends (recall that this resulted in FOMO in 2016), or a belief that a underlying housing shortage leads to future property price increases ...
In 2016, there were stories of owner occupiers who had extrapolated recent price gains and developed FOMO and felt that they had to buy or the house price would be higher later on.
It is only when property prices stop rising that some may change their future property price expectations. If property prices start falling then some property market participants may choose to wait and see, or some might even extrapolate recent price changes downwards to determine their future property price expectations.
and then gets butthurt in comments section because their decisions have been made emotionally.
Ah Gingy, so nice to read your eloquent comments. Keep it up.
So finely poised. If you sitting on the fence with 40% equity mocking the poor rwnters and fbb, what event could burn it all down and make you bail?
Agree with the comments around timing, timing is everything. If you bought at the top of the market with a massive mortgage and can't hold it together for the long term, you're in for a soaking. Those that bought a while ago or more recently with a good deposit, you'll ride this out and when you pull out you would've made a healthy 3-5% compounding per year.
Re comments on planning constraining supply, thats a croc. This has just about all been driven by demand. The economics behind it is demand driven - cheap mortgages and immigration. Supply is secondary and together with the meaningless 'red tape' label were the red herrings National kept chucking around to try and disguise the hollow way it was trying to power the economy.
I only buy positively geared property with upside, and undervalued.
Has to be sufficiently undervalued or I just don’t bother!
Have bought many properties without even seeing them and never fallen on my face yet, and don’t intend for it to happen!
Investors that take action and make things happen are the ones who normally do very well, providing they know their stuff!
Sit on your butts and you will achieve very little, and so you should not be able to moan and groan!!
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