10% interest rates here we come. Cant wait. Starting to get some semi decent TD rates at last. Might move out of the share market again in the next little while. Then buy a house in 3 years after prices have completely tanked. Rent at half the cost in the meanwhile.

Yes Jimmy, one of your more reasoned comments. I still don't think house prices will "completely tank" though, more likely to drift sideways a few more years. They "tanked" a little bit between 6 & 12 months ago, which led to a collapse in construction (new supply), which along with falling interest rates and falling emigration helped prevent further falls. This is one of the many things I like about property - when prices fall a little construction dies off and interest rates generally fall, both acting as built-in "stop losses".

National won't be wanting a house price crash before the next election either, and will see to it that the (supposedly independent) RBNZ won't let it happen. By law the RBNZ must operate monetary policy to "maintain price stability", though arguably they didn't do that very well during the last boom... ;)

Jimmy; How can we make the housing Tanked? lots of people selling and no many buyers.

Guys,

Housing was tanking. Lets face it, the only thing that reversed this trend was stupidly low interest rates. Its clear what will happen once they rise again.

OMG there are still people who don't get it...

air, food, clothing, water, shelter....

air and water being the two most think of least but need the most, then we all need food to keep going, clothes to keep warm, and finally a place to take shelter - not just from the weather but from the mundaneness of life - we need somewhere to escape to at the end of the day, sure we can live in a cardboard box but at the end of the day, if you have a family it is not an option anyone would willingly choose - therefore property will continue to keep its worth - end.

would you rather have crayfish and caviar sitting in a rental, or baked beans on toast in a house you can call your own. (let's not go into borrowing against your home to buy the launch and craypots in this thread, as always, including buying a house, only spend what you can & need to spend)

Ludwig Says:
"Wise thinking, Jimmy. However, 10% interest rates might be looking on the low side"¦"

Not really, common sense, and lets face it this was discussed here near on 2 yrs ago...
And the time frame discussed is pretty close too....

Affordabilty....I think one will find that the type of house the mean ave used to refer to is very different type of house today....
The 1st home buyer type home couple yrs ago has dropped below 280K now
The mean ave price doesnt take into account the type of house of house has changed.

I'm happy for jimmy to be saving plenty as well. He's gonna need it.
The reason that renting is a lot cheaper than owning on a per week basis is the same as the reason a prostitute is one heck of a lot cheaper than a wife on a per bonk basis. Renting and using hookers are an expedient quick fix. Marriage and property ownership can be expensive and require planning and committment, but the rewards can be huge and span generations.
It pays also to remember that the rental market can turn on a dime. Seen it happens heaps of times over the years. Seems to be happening right now in the more desirable suburbs of Auckland with less than half the number of properties available as last year.

Not all houses appreciate in value. Jimmy's landlord's house might be in a neighborhood that goes down hill, but Jimmy doesn't have to worry about any of that"” he also doesn't have to pay rates or insurance.

Peter,

iHmm - your analogy is amusng but a little bit flawed. Maybe stick to something more relevant - eg if you could rent a car for 10 bucks a week, would you pay 100,000 to own it???? The wife/whore analogy also depends on how how much their respective costs are. I'm not an expert but I reckon they could vary enormously.

jimmy - "Election year is irrelevant as its the RBNZ who sets rates" - as I said the RBNZ is only "supposedly" independent, in reality they are a puppet on strings controlled by the government at arms length. Remember it is the government who sets the guidelines for the RBNZ to operate by. You are correct that interest rates aren't directly linked with the housing market, however they are used as a blunt weapon to control inflation. Rising house prices generally lead to rising inflation and rising interest rates as retail spending, construction and many other parts of the economy also rise on the back of house prices. Conversely, falling house prices generally lead to lower inflation, a weaker economy and lower interest rates. Yes, interest rates will head up next year, but this will be due to increased inflation and anyone that thinks increasing inflation = cheaper houses is deluding themselves. I agree with your points 1 - 5 of your next post, point 6 however won't happen, prices will just stagnate a few more years yet.

Murray if you are right regarding low yeilds becoming the norm and stagnating prices why would anybody even consider investing in property? especially with the tax advantages coming to an end in the next few years. Its easier to put your money in a fixed interest investment (or shares) and get a higher income without any of the hassles that come with being a landlord. I can't see any prudent investor buying a property earning only 4-5% yeilds when interest rates are 7-8% If investors do start demanding higher returns it will only happen by buying at lower prices because rents won't increase without incomes increasing. Prices always go back to fundamental value eventually (and thats still 30% below what they are now) succesfull property investors like trass, jones, newman all say you make your money when you buy (and that includes long term investors) it also includes first home buyers and owner occupiers because its still a big investment with opportunity cost.

ruru : Warren Buffett says the same thing . Buy well . Get a quality asset at a cheap value . Remembering that " price " and " value " are not equal terms . Bernard was right that fundamentally , NZ house prices are 30 % above their fair value . That is not to say , however , that prices will suddenly fall . But the likelihood of them going up much from here , is diminished ............. If you're feeling ignorant , have a gummy bear , I do . Am getting through truck loads of them !

RT: Thanks. Yes, of course. Best area, good site, worst house, well below the going rate sort of thing. I suppose gummy bears are good for when you're grinding your teeth in frustration at the greenshoots brigade (I think they are convolvulus tendrils getting ready to strangle us all).

By they way, did anyone else notice Brian Gaynor scything through Katmandu and PGGW in the NZ Herald today? Seldom have I seen such scathing assessments in the mainstream media (he must have run out of gummies) http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1060...

Add to the above Jan Cameron playing scary monsters in the Press by threatening to open a discount chain of outdoors shops

http://www.stuff.co.nz/the-press/business/2996271/Kathmandu-faces-compet...

Steptoe,

i dont deny there are benefits to ownership, more so when you have a family. But there are also disadvantages, and for me the MASSIVE premium you need to pay for owning v renting does not justify it.

By jeeze, Kiwis have become a wimpy lot.

People I know email me photos of the furniture they're buying for their kid's bedroom. Like they think I care. Others spend hours online chatting about bathroom colour schemes. These aren't the usual housewives, or effeminate Ponsonby designer types. They're people who used to be men. Now they are obsessed with houses, displaying the nesting instinct of some clucky newlywed wannabe mum.

Seriously guys, HOUSES? They're wooden boxes on a patches of dirt. Leave agonising over the frilly bits to your wives. Or is it too late now, and you'd sooner spend your free time scouring 'Better Homes and Gardens' for ideas for the ABSOLUTELY FABULOUS little breakfast nook you've always wanted so badly?

Harden up, girlies.

Mate all you and your friends on this site have done is rabbit on about how home ownership means being "free to redecorate your kitchen" and the like. I can't remember a time when so many so-called males have devoted so much time to simpering about houses.

When my wife and I bought our house years ago it was a place to raise our kids. If she wanted new wallpaper, she sorted it out. If she thought the furniture needing flashing up, that was her job and I left her to it because I didn't give a stuff about rubbish like that. What I did was pay off the mortgage and all was good. Our house wasn't an investment, it was our home. It was where my kids grew up and lived and played and slept. It was a place for me to come home to at night.

One thing MEN never used to do was simper on about houses. A house was just a house unless it was your home, in which case it was the house you and your family were in for the long haul. You clowns spend all your time trying to sell houses to each other and you try to make that sound important and clever. But it all sounds a lot like "multi level marketing" to me.

Some Guy :
I think , like the concept of sharing time with your wife deciding what the partnership wants for their home....just goes right over your head.

If I left my wifes kitchen bench to her we would have had some imitaion marble thing...
Instead I aked her what is your dream bench..." one of those genuine soldid dark timber ones"
"OK lets see what we can do"
" I have looked at them, we cant afford it"
"What about a solid heart rimu, not recycled?"
" Look at that, Definately cant afford that!!"
"OK lets see what WE can do"

What has she got? Well a new solid rimu bench top, matching chopping baords, custom rimu rolling doors....for $350 (not 12 grand).....why?, cause we built it TOGETHER....

I think you concept of hubby works, wifey stays bearfoot and pregent tied to the kitchen sink....is just a cop out of being married to your best friend.
This is not new new or modern concept either....good marrages have been doing this for 1000s of yrs

Bottom line, I feel sorry for you........ and your wife.

PS took 3 weeks part time to build the bench top, thats not saving, that earning 12K tax free I dont have to go out and work for...think about it

PS Im not an investor or a speculator

Good work Malcolm but im sure that would only be a coincidence ?????
Check out youtube the new movie released 3 days ago Its no 1 on youtube
The Fall Of the Empire By Alex Jones
Baz

Malcolm,

i like the "opium of the people" analogy. Very true. Its the "thought" of increasing riches (as opposed to the reality of daily grind of mortgage payments) that drives most households economic outlook. I will use this in future discussion with mates.

Gordon Ramsey is a pussy. Personally I find his whole hard arsed approach more than a little tiresome. Its like anything Roger, even if something is a littel higher quality, its not worth going on about it if you look like a tosser. Not denying a good brew of coffe is a good thing to have, but dont toss on about "ewww, i have to get my coffee fix from this place because they get their beans from the blah blah blah" or "their barista has a real smooth touch". A decent brew will get you 95% of the way there, the rest is just pretensious shite. Its a drink for pete's sake, not worthy of over analysis. the same goes for piss. I went to a work do last week, and half the guys were drinking wine. I asked them if they would be retiring to the lounge bar for a sherry. Poofs the lot of them.

"Its a fair call that many NZ males are being de-manned,"
yeah I go along with that...
How many still mow the lawns, or can...get out in the SHED and knock together a go kart for the kids, put a veggie garden in, build a kitchen, or build Old school Hot Rod..
No, they prefer to go shopping on a Sunday aftern0on and pay some Chinese slave to do it for them...and call themselves men...

And who is to blame?
no ,not ms Clarke...she is just a sympotom of the reason
This is a world wide issue and it is NZ that is the cause....
We (NZ) gave women the vote and its been down hill all the why from there lol

Got to go ......quickly...can hear the wife coming ......lol

Interesting commentry gentlemen, de-railed slightly by "some guys" testosterone fuelled outburst against human evolution.

Back to housing, specifically the affordability of - in Auckland

I have a question, how does a large building company, with interests in building materials in large scale as well as construction capabilities assist in the provision of "Affordable Housing"?
The term Affordable Housing is quite generic, especially based on the value put on land and construction now, compared to 10 years ago ,(relative to income etc), if the term were defined as its most widely understood interpretation, which is basically, and respectfully, "low cost housing for low income earners, or cheap housing for poor people" then how is it going to be possible in the next 10 years time to provide this demographic with a place to call their own without creating the perceptual slum?
Land prices are at an all time high, and is it realistic that any substantial value will be taken from that land when it is always going to be at a premium in Auckland?
Infill housing isn't going to work, local and central govt pay the Affordable housing crisis lip service at best, they have strangled the release of new greenfields land and the effect has been that demand has exceeded supply and prices have skyrocketed and hence made the kiwi dream for the grafters even harder to achieve....in reality, intermediate income earners are now starting to lose the ability to get into their own homes, the low income earners appear to have been givin up on..
so back to my question, how does one of NZs biggest companies help to address this downward spiral of affordability in Auckland?

Can it?....

i'm scratching my head... i cannot find any ways in which it can happen without a major shake-up of govt strategy and hence a great reduction in the value of land in Auckland....whats the liklihood of that happenning....

Jimmy sais: Gordon Ramsey is a pussy
I agree totally. Mr Gordon Bleu has a lot more paff.

@ Fletcher : Lots of nil !

Admittedly, economics wasn't my strong subject at school. It was a time for daydreaming. Mathematics appealed more. Earth would orbit the sun, just as it had done for millennia, neatly in accord with the mathematical equation for an ellipse. Totally oblivious to the folly of man: his cyclical emotions of fear and greed.

But lately, I'm pondering our financial system of things, and in particular how it seems to have so ferociously turned on its makers - us! Perhaps someone can help me out here. I see the obvious merit in money as a means of bartering. But today it seems that far too many want more than their fair share of the stuff, and in return contribute very little back to society in respect of the essentials of life: food, shelter, clothing, etc. Is it a coincidence that these essentials, such as housing, are increasingly unaffordable?

Meanwhile, unproductive speculators and pleasure makers (e.g. sportsmen) grow fat.

Christopher,

You are right. the more detached money comes from tangible reality the more amenable it is to manipulation from evil beings. Certainly removing it from the gold standard, and continual relaxation of capital ratios etc are to blame. How much would a house cost if you had to pay for it with potatoes or wives? I read somewhere that over the last 30 years financial services indusstry hase grown 3* relative to gdp. Funnily enough so has household debt. I'm thinking the 2 are related. Their gain, our pain.

Fletcher, presuming that low income earners continue to be housed, and that they are a growing demographic, it follows that mid and higher income earners are a shrinking demographic. It may be a consequence that the tipping point is in the value of the housing stock per se, or at least a downward widening of the price spread - particularly if occupancy rates per dwelling increase. It would not take much of an increase in occupancy rates to turn under supply into oversupply, thereby bringing down land prices. Would that give you more options?

Martin, under sane conditions I would agree 'oversupply' would bring down land prices. However, the sort of hyperinflationary event that is possible - and that I believe those who really run the show want - would explode land 'prices' irrespective of demand. This is the critical thing with any hyperinflationary event - it is immune to demand 'push-pull'. Indeed, the worst episodes of this kind (with the Weimar disaster being the pièce de résistance) occurred during atrocious economic conditions - when all logic suggests that things like house prices and land etc should have collapsed. The whole essence of this matter turns on whether the authorities accept Ludwig von Mises 'voluntary abandonment' of our credit based illusion of prosperity - with concomitant liquidation of debt - or whether they press on and ultimately destroy the currency. If the former land prices will collapse. If the latter land prices could soar to unimaginable nominal (emphasis nominal) highs before some new currency is introduced and holders of the old unit find themselves largely 'wiped-out'.

Malcolm, Big thanks for link.
Andrew

There is very little comment about how the leaky house crisis affects the housing market in NZ. Nobody I know (except builders) will go near leaky type houses, ie monolithic cladding or flat roof. There are many many thousands of these houses and apartments in NZ so has this gone some way to contribute to the housing shortage if buyers are avoiding them? Has our leaky house crisis lessened what was predicted as a 30% drop in prices because people are staying away from these buildings?
I welcome your thoughts.

Martin, the 'objective' of hyperinflation is twofold. Firstly, it allows for an effective default on debt because repayment thereof is achieved using dramatically debased dollars, pounds, Euros etc. Clearly, this is 'attractive' to politicians because it allows them to accumulate massive liabilities - in order to purchase votes - and to then fleece their creditors. Secondly, by destroying the middle class, it removes the repose of functional democracy - and anyone studying the political topography today would struggle to offer a persuasive case that politicians are committed to democracy.

Certainly, if there is hyperinflation, then an argument can be advanced that mortgage debts will be inflated away. However, would this not be offset by horrendous property taxes etc? Moreover, wouldn't such an event destroy the nation's remaining capital? In sum, I would suggest it is something to be feared. Not sure about rents in Weimar Germany but I believe people got very enthusiastic buying pianos amongst other things! Fundamental problem in hyperinflation is that people lose confidence in the currency so even if demand for something is not that great - unfashionable trousers perhaps - why would you swap them for millions of bits of paper that no-one else wants? Better to swap them for something tangible and, in Weimar Germany, as in Rome's hyperinflation crisis centuries before, people got by through bartering.

Malcolm, I did not mean to suggest that hyperinflation was a good idea, just trying to understand the practical implications!

Might as well get to the nitty gritty... So what is the end-game? If the GFC is being engineered, is it a power play by the elite - manipulating the banking system to vacuum up real wealth through taking ownership of productive capacity, assets and materials, or 'just' a get-out-debt-free scheme for western governments?

It is hard to envisage this resulting in a one-world set-up as China and the oil rich nations, who I presume are the creditors who would be well and truly fleeced, would be looking to repossess some tangible assets in lieu. (Apologies if this is a bit simplistic). To what extent is the west actually borrowing money from countries with surpluses, and to what extent just printing (inflating) it?

The consequences of the QE game will be higher priced commodities and residents in the QE countries having their savings and asset values slashed due to the devaluation of their currencies. The Chinese will lose a large % of their US investment wealth in the process and they can do stuff all about it. They hold so much, to sell will collapse the value of the bonds yet more. They are set to be the chumps. A bond bubble collapse will happen anyway as the market wakes up to the game being played by the Fed and the Treasury. The exodus into commodities is well underway. This is why the Kiwi has risen. Not because of any security in our economy. We will get the inflation, but with some protection from the higher Kiwi. However rates will still rise because the price of credit overseas will rise. That's due to the fall in US$ value. Investors want more please!....Then we have the massive fiscal borrowing bomb going off....that's the other dagger set to be thrust into the mortgage market. There is NO escape.

Read this...a bit long winded, but apt perhaps in today's environment.

Sorry cannot link to it.

No caps, no shouting, no puns, no biting at other bloggers. Maybe a little common sense for our leaders to read. They are not GODs and prove it daily.

Just look up Warren Harding on Wikipedia. The first entry you will find is not the 29th president of the United States of America, but a rock climber with the same name. But what do you expect? History is nothing but a long list of disasters in chronological order. Historians love calamity. And they reserve their highest accolades for those who cause them. The same is true in financial history. Those who make it big are those who make it worse.

It is safe to assume that no one working at the Federal Reserve or at the White House has a picture of Warren Gamaliel Harding over his desk. Yet, if American presidents were ranked on the basis of how well they faced up to financial disaster, Warren G. Harding might be somebody. His handsome face would be carved on Rushmore. His likeness would grace the $100 bill. Harding was the last American president to deal honestly with a major financial crisis. Every president since has tried to scam his way out of it.

By the time Harding took office in "˜21 the Panic of 1920 was taking the unemployment rate from 4% to nearly 12%. GDP fell 17%. Then, as now, the president's subordinates urged him to intervene. Secretary of Commerce Herbert Hoover wanted to meddle "” as he would 10 years later. But Harding resisted. No bailouts. No stimulus. No monetary policy. No fiscal policy. Harding had a better approach; he cut government spending and went out to play poker:

"We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity...it will be an example to stimulate thrift and economy in private life.

"Let us call...for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic."

Within a decade, Harding's views were collectibles. But in 1921, he still saw the economic world as a moral world ordered not by man, but by God. This was not the result of long study or deep reflection on his part. He was probably the dummy everybody said he was. As Keynes pointed out, politicians are always in thrall of some dead economist. At least Harding was in thrall to the good ones.

"No statute enacted by man can repeal the inexorable laws of nature," he announced. "Our most dangerous tendency is to expect too much of government..."

Harding was not the first to see the economy as a "˜natural' order...one that you disturbed at your peril. A Taoist named Zhuangzi, who lived about the same time as Alexander, observed: "Good order results spontaneously when things are let alone."

Later, economists of the Scottish enlightenment, notably Adam Smith and Adam Ferguson elaborated. Smith, like Harding, saw the economy ordered by the invisible hand of God. Ferguson saw markets as a "˜spontaneous order,' which were the "result of human action, but not the execution of any human design".

The same basic insight led Irving Fisher "” the greatest economist of the 1920s "” to come up with his debt-deflation theory of depressions. After people had borrowed, they needed to pay back. Busts followed booms; there was no getting around it.

Warren Harding may never have been the brightest bulb on the White House porch, but intuitively he understood that proper macro-economic policies were more the product of virtue than of genius. Debt led to trouble; that's all he needed to know.

Keynes came along a few years later. Keynes was a genius; everybody said so. And he had an answer for everything. Nature? Government could do better. Debt? Don't worry about it, he said. Why not just let capitalism sort itself out? Without government intervention, it will only get worse, said Keynes.

But Harding had already proved him wrong. Harding did the very opposite of what Keynes recommended. Instead of increasing government spending, he reduced it. He cut the budget almost in half. He slashed taxes too...and cut the national debt by a third.

Japan at the time struggled with the same downturn. But it had no Harding at the helm. Instead, its masters prefigured Keynes, trying to stay the correction using price controls and other interventions. The result was a long-drawn-out affair that lasted until 1927 and ended in a bank crisis. In America, meanwhile, by 1922 unemployment was back down to 6.7%. By 1923 it was down further "” to 2.4%.

This lesson was entirely lost on the world's economists. When the next crisis hit a decade later, they turned to Keynes. Of course, it turned out to be a moral world after all. They got what they deserved.

My last comment....What do we deserve??.

Kieran - "those trading up would be considered upper quartile" ...hmmmm... my first house was below lower quartile, and I was on to my third home by the time I owned a median priced home. I now own above the upper quartile without a mortgage but it's taken me nearly 18 years of owning properties to get there.
Many in my generation jet-setted around the planet through their 20s - now they're in their 30s and want to buy a median to upper quartile house and are complaining because they can't afford it - it does make me wonder what they've done with their money for the last 15 - 20 years.
I do agree though that incomes, rents & house prices are related and although the ratios can vary quite a bit over time, they can only stretch so far....

I know...LUDWIG, not totally one-eyed.

I have always put my money where my mouth is. and I still say a con is a rort, is a politicians ploy, is a developers bankruptcy, is a tax avoidance scheme, etc.

Same difference, just theft, just a measure of men, by other definitions.

There is no one right answer today, it is a mish-mash of doing the right thing now, BUT, and there is a big BUT in all this, there is a concerted effort to pass the buck onto the wrong people.

The simple fact is we have been systematically rorted by "Finance in particular" and "Governments in general", "Councils in the main", "big Business in intent" and "Developers screwing the Public" at every step of the past decades since the war to end all wars. (Yeah Right).

All thinking they can inflate their way out of debt indefinitely, and on-sell to the next mug and some people fell for it by hook or by crook....mostly crook, but with Politicians turning a blind eye, thinking that as usual they were doing the "Right Thing" it was progress, however, with their own nest to feather and troughs to plunder too.

The simple fact is then crooks screwed the USA and the rest of the world, with their packaging of derivatives and on selling to their cronies and gullible alike, with a view to rorting commissions at every step.

They then started throwing "money' at the gullible and unwise.....all around the World.

Have you seen how many children drive BMWs, 4x 4's etc imported cheap from Japan and on-sold with scary finance deals at exhorbitant rates, here in NZ.

Likewise, easy credit card debt, via Banks and the like. A house is not a home, it is an investment. (Wonder how many are still that).

This accelerated the leverage process exponentially.

Unfortunately it is still going on today with Governments trying to manipulate their way out of this fiasco.

And the crooks are not just the Madoffs of this world. There is now a total concerted effort to put the inflation genie back in the bottle. way, way too late, by creating an even bigger bottle.

Leverage debt up....is magnified by leverage debt down, due to rake-offs, by the above. They all want their "rates' kept up, somehow. though.

Hence 30% on USA credit cards. Escalating Bonuses, huge Council rate rises....etc...

That has how Billionaires flourish ala Maddof and the public loses. Skimming off the top, from the gullible, with con-nivance from the Govts, aided by income-petants here and there thrown in.

Tell me which is worse, theft by design, or a mugging.

Cos there are many, many mugs in the whole shebang.

A bit simplistic, but there that is my two pennyworth.

Hmm % of defaults doesnt correlate directly back to age group to debit per person.
And the thread was mainly about mortgages, not credit cards, HP and the like.

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