Yes , Wally , she is a thing of beauty , that chart . Man , anything climbing that high and steeply oughta have a stewardess on it . Are the banks pricing in an increasing risk premium on longer fixed rates 'cos they think we're heading for a moment of ............. crunch , here in God's pavlova and quarter acre section paradise ? The unmitigated bounders , how dare they suggest that we have an unbalanced teeter-tottling economy ( and the good thing about blogging is that no one can see the smirk on yer chops , when you write this stuff ! ) .

Nice poem Wally.
Your last sentence Roger Witherspoon: how long will that take? And will it actually happen or will we sheeple make the same mistakes given the opportunity?
Regards
Baa

Roger Witherspoon...above poster

not too sure how alan bollard would feel about your comments indicating that he "has problems with his tool due to the fact that it's rusty and doesn't work very well?"

Yeah certainly doesn't sound right when the shoes on the other foot. Property owners should not have there hard earned capital gains eaten into by higher interest rates, there investment should be risk free with huge returns, as this is how real estate is in NZ, we are special and different to the rest of the world and can defy all fundamentals.

@ Roger

"Secondly, in my book short term interest rates should be less than long term ones, that is normal and sensible. We have been in an upside down world where long term was less than short term, this should only happen rarely and for short periods as it is abnormal."

Agree entirely and this is what is happening but ...

@ Craig
"Is it not just a case of banks expecting an environment of higher interest rates all round in the future, say 2 years plus down the track, as central banks tighten money. They dont want to be in a position where everyone has fixed 5 years a 6% when in 3 years time the banks could be paying that or more on there own funding.

I thinks its dangerous to say "˜now NZ has lower variable rates than fixed, so lets all float', when in a year or two the variable might start ramping towards 10+ with all the fixed even higher than they are now on 9+, making a fix now still the best option."

This is the issue, banks are placed a bet that the world economy is going to pick up and we are going to enter an environment of increased inflation and higher interest rates 2yrs down the track so they are factoring that in now by increasing medium to long term rates. Achieves two things (1) scares people away from fixing longer term at really cheap rates, they think they might as well stay floating or fix short term and reap the benefits - again as you rightly point out this seems a very short-sighted approach because if you do so and the banks have bet right you are caught by the goolies when the short term and floating rates start rising; which in turn means (2) in x years time the banks aren't in the position where everyone has fixed 5 years @ 6% and the banks are paying x% more on their own funding and they stand to make a killing as people panic and start moving to fix again.

For me the key unknown is whether the recession is coming to an end or not right now and whether the world economy can return to the growth figures it has previously had over the last 20+years - I really doubt it. I suspect that there is a hell of a lot more doo-doo to come in the next 2-6mths and the world economy is in for a period of extremely slow growth for a number of years and so I am picking that we are going to see low short and floating for some time yet - at least the next 2-3yrs.

Just reiterating my comment on Rogers post above, historically NZ short term rates have been less than medium and long term rates - the last 7 or so years are an anomoly - better to stay floating I say and go with the flow - trying to pick the market is always a sure fire way to fail and get burnt accordingly.

Funny you should mention 1998, Ive been looking at some graphs which show a similar dramatic drop in interest rates, which caused a small 'bounce' in prices similar to what we are seeing now. Prices then flattened and fell in real terms untill 2002.

http://img32.imageshack.us/i/housingfactors.jpg/

What we are likely to see this time i think may be a tad worse...

Thats what I was trying to convey in my last sentence - my house appreciated very little from purchasing in Aug-98 to when I sold it 2.5yrs later. I suspect we are heading down the same track now e.g. small bounce then stagnant / slight fall in prices for the next ??? years. Question is will we get the blast off and upwards in prices that we saw in 2002 in 2013 or are we in for extended slow almost painful growth for the next 5+yrs in everything, house prices included or even worse deflation? Interesting times.

Yea, I think the economy is the determining factor as to whether we get another pickup in 2015 or after similar to the 2002 boom.

Unemployment was decreasing and overall very low during the entire 2002-2007 period.

When you think that a 2% change in unemployment is approx. 70,000 more (or less) people working you can see how this impacts the demand side of things (bigger than the 20,000 new immagrants that people make such a fuss about).

I think affordability would have to be re-set to the 2002 levels also before another boom happens, so wage inflation on the back of real economic growth and productivity which is a big maybe at this stage.

CBS68...Wat dose that stand for by the way ? Maybe your name and when u were Born ?
Ans: Guess you'll have to listen to the song like everbody else.

Yeah - this is hilarious
Can't wait for families to be worse off
Fools bought a house
Should have invested in a finance company or the NZX

I'm going to point and laugh
At the poor in the street
I'll feel so smug and superior
I can hardly wait
I, I, me, me

Maybe my neighbour will kill himself
How his children will laugh!
Maybe then his wife will notice me
Like in my fantasies
I could write her a poem
And knit her flowers from copper

This is so good for my ego
No longer just another
Fat hairy ears and back
Middle-aged man ignored by fun

I know someone who has several properties bought a house for recently for 395,000 (cost "600 to build -distressed sale) but is hanging out for more work as needs x for the mortgage as he owes x,y and z on his several porperties (if you follow). I was quite surprised as his wife earns a bomb and seems well healed. What it shows is people like him are in a timewarp?

yes, I think we are looking at a new reality and a change in peoples thinking is required but like any change it is going to take time. I reckon the thing to do if you have investment property is get out ASAP - which may mean taking a loss - but a loss now will be better than the stress that you're likely to incur if you hold on plus the fact that the loss is only going to get bigger in $$ from here on in.

I hate to advocate taking advantage of others but there is a sucker born every minute so one sort of positive to those looking to sell out is that new reality's take time to actually become the norm so there will be punters out there who will not realise or not accept that the paradigm has changed and they will be keen to get in on the investment property scheme - while those punters are learning the new reality there will be opportunities to offload investment properties. I'm picking that window of opportunity will last from now into early 2010 - while floating and short term interest rates remain low.

.... the more I think about it the more I reckon we might be going to see the dreaded "deflation" in the world economy sometime soon - a la Ireland currently leading the way

Wally, you're a cynic about govt aren't you? Can't say I blame you too much, it's not all pretty. But someone's gotta do it; can't say I envy the chaps.

Perhaps I'd better look for a spare room after all, to let out.

That's a VERY good point though... A lot of emphasisi has been put on every household needing a house... but there sure are a lot of spare rooms around, if these are filled up... well, there goes the housing shortage and reasoning for a property boom (bubble)