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NZ won't see same housing crash as in US, but market's 'second wind' likely to peter out, Westpac says
In Westpac's latest Bulletin, economists Brendan O'Donovan and Sharon Zollner compare New Zealand's house price boom and subsequent fall to what was seen in America over the last decade. They argue that although New Zealand's boom was more extreme in terms of the rise in house prices than in America, it will not experience the same crash as seen in the US since 2006.
O'Donovan and Zollner said they expected the New Zealand housing market's 'second wind' to peter out before it came to much, but that the Reserve Bank was right to keep a close eye on it. They concluded saying they expect only slight rises in New Zealand over the next 18 months, particularly now longer term interest rates had risen.
This conclusion is quite different to a recent forecast presented by Infometrics that house prices could rise 11% in the year to June 2010 and 24% over the next three years. Also, here is a link to Bernard Hickey's piece on why he thinks prices will only fall 15% from their peak instead of 30%.
O'Donovan and Zollner conclude (full paper is in Srcibd below):
Was a US-style bust ever likely in NZ?
Only if access to credit was shut down. This was a real risk when international funding markets were at their wobbliest, with NZ banks sourcing around a third of their funding offshore due to a dearth of national savings. But now that risk seems to have dissipated, the NZ housing market is on a firmer footing.
The US housing market featured much easier credit, higher loan-to-value ratios, greater incentives on both sides to foreclose when things started to turn to custard, and a much greater supply overhang depressing prices. Essentially, houses were sold to a lot of people who could not afford to pay for them. This is a recipe for a massive bust.
New Zealand lenders have behaved very differently from their US counterparts, partly because of tighter regulation, and partly because our financial sector did not go down the path of securitising mortgage lending to the same extent "“ less than 1% of NZ mortgages are securitised, versus around 75% in the US. Rather, NZ has retained the tried-and-true system where the organisation that decides to lend the money takes the risk.
Related Topics
Although mortgage foreclosures are rising in NZ in step with unemployment, there is not a huge number of homeowners who can't realistically afford to pay the mortgage, as is the case in the US.
Although the NZ housing market still looks "overvalued" relative to historical price/income ratios, there is no reason to conclude it will rapidly revert. Historically, this doesn't tend to be the case, and there is in fact no theoretical reason why it should. House prices will be determined by a multitude of factors that affect demand and supply, not just incomes (tax structures, credit availability, average inflation, interest rates, demographics, immigration...) And in New Zealand, housing demand is rising thanks to the net migration turnaround and a drop in interest rates versus a year ago, while supply growth will continue to be constrained by tighter credit and general nervousness about the economic situation.
But it would be a brave person who predicted an imminent NZ house price boom starting from the current stretched levels of affordability, and we are predicting only slight rises over the next 18 months, particularly now longer interest rates have risen.
It doesn't matter if my
It doesn't matter if my properties grow only 1% in 18 month time.
1% gain in house price = about 5-10% after loan leverage. That is not bad at all, don't forget it is tax free!
and don't worry about the interest payable, I will off-set the interest by getting tax benefits from "losses".
I won't even worry about a CGT (if Nat has the gut to introduce one, anyway), as I won't sell in any near future, so there won't be any capital gain. ---- my cash flow comes from re-finance and income tax rebate, oh, and Working for Family, too. I will even be entitled for unemployment benefits if I do it carefully.
Good for you Chinese Cash
Good for you Chinese Cash Buyer, how about posting the National Party guide to rorting the state. We know it's doing the rounds of the rumpers. Once we set our systems up to avoid the CGT, life will be back to normal. Where's the Party holding the xmas bash this year? I hear tell John's invited us all to his wee pad in Hawaii.
Chinese Cash Buyer, Change your
Chinese Cash Buyer,
Change your name, if you are leveraged you are not a cash buyer. If you are leveraged you will also be making a large cash loss on your property, even after tax breaks it is still a loss - please explain how you can turn a negative cash flow into positive cash flow via tax breaks????. Will the 1% offset your cash loss. I doubt that very much.
I have edited this comment. A gentle reminder to all not to use abusive language or say anything that might be interpreted by a money-hunting lawyer as remotely defamatory cheers/bernard
Be polite Jimmy ^_^ If
Be polite Jimmy ^_^
If you would like to fix a loophole you'd better understand it first, ask me back to China won't fix it. Most people doing this are actually kiwi, kiwi invented this LAQC system and I am just a student. Ask them to go back to England won't help either.
This is how it works:
You lose 10k on interest (actually it is interest - rent), and you claim a 20k depreciation on the house. So that you make a 30k lost on paper, and you will be entitled for a 30k x 39% tax rebate = $11700.
Correct me if I was wrong.
Hi Wally， I am sure
Hi Wally，
I am sure you would do better than me if you were in the game. it is not complex really, The system has been there for years, every body can rort it. (is "rort" a bad word in English by the way?)
If the Govn is going to fix it, they will always let us know first so that we can escape in the last minute....
The question is: will they fix it?
Yeah I agree Jimmy, I
Yeah I agree Jimmy, I am sick of immigrants ripping Kiwis off, rather than contributing anything positive to NZ.
We don't need them, whether they come from China, the UK or Timbuktu
Yeah most people who know
Yeah most people who know and 'rort' the system generally dont tell people in public, so respect for that CCB. I think there's a feeling of 'this is too easy, when will the gravey train stop' from most property investors, and it will stop with either policy change or credit rating change which ever comes first. And I for one would not like to be holding a few million in NZ dollars let alone property when the latter happens
Actually, a lot of Kiwis
Actually, a lot of Kiwis rip other Kiwis and immigrants off. A lot of Kiwis dont make positive contributions. A lot of immigrants make great contributions. Bashing immigrants wont solve this country's problems.
matt in auckland I am
matt in auckland
I am an immigrant as well. I have lived in rented houses( all newzealanders owning 3-10 houses and NZ born) for more than 10yrs. never thought about investing in property and have been paying 39% tax for a long time.
There is some brazenness in Chinese cash buyers tone. But there is lot of truth in it. It is the system at fault. i was stupid and naive in believing my job as a health professional was my biggest assett. I have not got anywhere financially in comparison to people whose only productivity was owning houses to rent claiming losses against taxable income.
Chinese cash buyer- If the govt is going to fix it they will let us know. If this is arrogance i see the funny side, but if it is true god save the poor working on 10-15$ per hour whose tax prop up "investors"( the very people who will not be able to buy anything)
Chinese Cash Buyer, you obviously
Chinese Cash Buyer, you obviously have less to do with either China or cash than I do, and that's not a small feat. But thanks for the peetake.
CGT dues can be triggered by different events without having to wait on the end sale, eg. on the next government revaluation.
But you do correctly point out that some of the WFF criteria and absence of tax ringfencing arund every particular industry/asset class are loopholes waiting to be abused by locals and foreigners alike, and it takes a half naive, half vested society not to get rid of WFF and spreading of tax losses. Come to think of that, half-naive, half-vested is not a bad description for Kiwiland in general.
And yes, where there's easy tax avoidance to be done, everyone's keen to jump on regardless of their gender, sexual orientation, political views, disability status or ethnicity.
CCB, the tax credit from
CCB, the tax credit from depreciation should not be included in your calculations as it's only really a loan from IRD and when you sell the property this money will have to be repaid
How many investment rental properties
How many investment rental properties do our MP's or their trusts collectively have?
In that answer you will find indicatons of what is likely to happen.
Fair points, I wasn't implying
Fair points, I wasn't implying that all immigrants were bad, I was meaning we don't need the immigrants who do rip the system off - like Chinese Cash buyer
And of course we don't need the kiwis who rip the system off either
Chinese Cash Buyer is a
Chinese Cash Buyer is a troll (and a regular poster, if I had to guess), just ignore.
Only if access to credit was shut down. This was a real risk when international funding markets were at their wobbliest, with NZ banks sourcing around a third of their funding offshore due to a dearth of national savings. But now that risk seems to have dissipated, the NZ housing market is on a firmer footing.
This is, by the way, a good justification of Bernard's view on the size of house price fall here at the time he made it.
All the Westpac article says to me is that we're currently exposed to an adverse set of circumstances, currently undefined and not necessarily going to happen, which could crush the housing market.
A quick note to everyone.
A quick note to everyone. Let's be aggressive and determined and detailed in our posts, but not abusive or call people names. We have fun talking about economics, interest rates, taxes, house prices, banks and finance companies. We're not like some of the other sites where name callers and abusers dominate. Let's respect each other people.
cheers
Bernard
Seems like a well bounded
Seems like a well bounded forecast to me. My question is how to price a house value to make an offer? If a house has a late 2006 RV of $260,000 and no changes have been made what should it be worth? What % are prices up from late 2006? 5%?
Houses in Nelson seem to be expecting 20-30% price increases from 2006 RV's, and people are paying it. Seems crazy to me, but while people pay it, it won't change.
@ IanC Call me Brian
@ IanC
Call me Brian if you want.
I enjoy reading everyone's post here and didn't mean to offend anyone.
@ Matt
Someone sets the rules and we follow, that is not a rip off nor crime. Some may receive $900 perk / week legally using another approach but it is same in nature.
@ Bernard
I like the way interest.co.nz is differentiated with other sites. I would love to hear more from you on how a land tax is going to work and how would it benefit the country.
Let me get this straight:
Let me get this straight: Westpac more or less admit there is a housing bubble and that housing is "over priced" but on the basis that we assume things will stay benign economically it won't burst.
I suppose I have to agree - if you assume good housing conditions (interest rates stay low, unemployment stays lowish) then prices will stay flat.
But if you admit there is a bubble then sooner or later you have to expect that something will come along and prick it.
"Although the NZ housing market
"Although the NZ housing market still looks "overvalued" relative to historical price/income ratios, there is no reason to conclude it will rapidly revert. Historically, this doesn't tend to be the case, and there is in fact no theoretical reason why it should."
Which if thought about...it does still fall into line with Bernards and other Doomsters prediction a long time back...Althu Bernard did not use the long term (30yr ave) ..ave time goes on the ave goes up, and values either contunue with little rise or a few small zig zag busts over the next few yrs will bring it back close into line.
Which based on that (and mentioned serveral time over the last yr or so,) comes back to near on doomsters predictions.
All the predictions where based on a U shaped drop, which some how people very easly forgot that part.
I get the feeling CCB
I get the feeling CCB was deliberatly stirring the pot, which he seems to have done quite well, at least he is honest. The only problem with maximizing your losses is it makes it very hard to refinance. Also high leverage is a two edged sword a 1% drop in prices would be a 5-10% loss instead and would probably mean a total loss of your equity or negative equity, a big gamble. Also theres a very big probability interest rates will be higher in 18 months time making your loss even bigger. I find it amusing that some people think they are cleaver making a big loss. Smart investors are the ones who make a profit and pay their taxes.
I have previously commented on
I have previously commented on this blog that blaming certain sections of populations eg baby boomers, property speculators/owners, etc would not fix the problems, the game rules are the problems ,do not expect a change in behaviour unless the system is changed to reward or deter behaviour. Like Chandra I am an immigrant working as a health professsional and have been paying 39% tax for the last 15 years. I personally know Kiwis ( not immigrants)who use every dirty trick to rip the state off ,so my point is attack the issue not the people and look for the real cause rather than the red herrings. I think it is unfair to overgeneralise.
ni hao CCB thank you
ni hao CCB
thank you for clearly spelling out how you can rort the system.
it's a well-known fact that our dear Deputy Leader and Minister of Finance, Bill English monitors this site so i'm sure he will be grateful when he reads your comments, when his minions present them to him.
it all goes towards helping him prove the need for a Capital Gains Tax.
it may not happen overnight ,but it will happen.
xiexie
Westpac's track record for predictions:
Westpac's track record for predictions:
March 2007: "The rental property market is not overvalued or in a bubble.... The rise in house prices was an adjustment to a new set of fundamentals, not a bubble.... House prices appear to be roughly in line with the fundamentals."
May 2007: "A couple of months ago we published research that ... suggested that the house price increases of this decade were not a bubble. But that was then and this is now. ... There will be a notable absence of investors from the market, and house sales will slow. Rents could rise more quickly. House price inflation will slow, perhaps in the second half of the year. If interest rates remain at their current levels for a long time, or go higher, houses could fetch less than they are selling for now, especially at the lower end of the market."
Nov 2007: "We expect house price inflation to wallow a few points either side of zero, with prices in five years' time similar to today... We are forecasting 6% per annum rent increases, which is very strong."
Dec 2008: "We expect New Zealand house prices to decline by 5% in 2009 after falling 8% in 2008, with an eventual total price decline of 15%... the crux of the matter is that house prices got well ahead of themselves over the boom years of 2003 "“ 2007"
Chinese buyer, you have a
Chinese buyer, you have a cash defecit of 10k which you cover with your tax loss at the end of the year, no mention of course of maintenence, rates, insurance, property manager, accountant. So your surplus of 1700 once a year is probably a 5k loss but never mind.
You claim 30k back in depreciation that you have to pay back when you sell. 30k depreciation so your house must be worth around 450k. Ouch when you sell and have to pay back the IRD seeing as you had to use the money to cover your tenants.
With 95% leverage (common in fantasy land) and the property prices coming back 8% last year you have suffered a huge loss and you have to subsidise a tenant by $200pw.
Back of the envelope you lost around 46k last year in real terms but if you get 1% growth next year and the year after you should break even in around 5 years time (as long as your house is not used to make P or is trashed) when you will probably need to spend a goodly amount of money repainting etc.
With 95% leverage not only have you lost your deposit but wiped out the equity in your own house as well.
BTW nobody believes you are real.
The report is not persuasive
The report is not persuasive to me. Why do they comment that "The US looks to have gotten a rough deal, and NZ a surprisingly good one." That is, what are the advantages to NZ of prices staying at high multiples of income? Their argument [for no crash in NZ] amounts to, "It's different here" - and yet some of the differences are that things are actually _worse_ here than in the US. There are any number of factors that could lead to a fall in house prices that they do not mention. For example, the high mortgage debt is contributing to a stubbornly high current account deficit - the only other countries as high as us are basket cases...
"Although the NZ housing market still looks "overvalued" relative to historical price/income ratios, there is no reason to conclude it will rapidly revert. Historically, this doesn't tend to be the case, and there is in fact no theoretical reason why it should."
Unfortunately they don't provide a reference for this. Then they go on to mention extremely short-term factors like immigration and interest rates.
Here is a graph for France, showing repeated reversion to the mean income multiple of 2.9:
http://www.objectifliberte.fr/articles_in_english/
One version of the data for the UK is here:
http://tech-singularity.blogspot.com/2008/03/uk-house-prices-as-multiple...
shows 4 instances since 1953 of reversion to the mean. (There is also a graph on an even longer time scale, but I can't find it now.) Data for the US shows the same thing.
After the crash in the US, UK, Ireland, Spain, etc etc is complete - and who knows when that will be - that will leave NZ and Australia as the only developed countries in the world with such unaffordable housing. Oh yes, we are fortunate indeed.
Simon Laten-bold - you can
Simon Laten-bold - you can stipulate the value of depreciated assets when you sell a property to an unrelated person or entity. This reduces the cost that the purchaser can claim depreciation on and means you can keep the tax you have claimed in the past. If you sell to a related party then it has to be at cost and you have to depreciation recovered to pay tax on.
I favour of stamp duty
I favour of stamp duty payable by the buyer rather then CGT as it is easier to administer and applies to everyone and you can structured it to make lower value homes more attractive. Might not keep property values in check, but it will at least result in some tax being collected. First home buyers could receive a grant to help cover it giving them an advantage over investors.
Well done Dave, you exposed
Well done Dave, you exposed these fools for what they are. Had a long chat with the cat and we agreed the answer to all the govt problems is to ask Beijing for a bailout.
If that brings only screams of laughter, we could offer to rent out the Auckland islands to the Chinese as a Naval base. This would bring a rapid visit from Obama and an offer to rent the same said islands for a US Naval base. John could put the site up on Ebay and see what gives. Should be worth a few hundred million a year plus he gets a tourism boost for the R&R as well as all those orders for grub and grog.
As I pointed out in
As I pointed out in earlier posts.
Make interest not deductable for tax and not taxable for income.
Gearing would come to a complete halt.
The cost of finance (after tax) would go up but if the project/ business was good enough it would be able to pay for the finance and wouldn't rely on the tax benefit.
Maybe the economy would be better if money was directed at better investments not better tax 'investments'.
Most commodities prices are raising
Most commodities prices are raising - people are financially stressed but certainly in a grinding scenario - with uncertainty on the job/ mortgage front - unemployment is rising still. Especially in the next two months internationally we may well see negative surprises - even turmoil. Private and the nation dept is raising. All this could have drastic consequences for most Kiwis. So, how can house prices go up with the general public living under stress. It is not logic - even a mystery !
Yes- my question, who are the m(i)stery buyers ?
What if you pull the
What if you pull the place down and build units? Only worth land value? TV 3 said Bill English purchaced property in wellington for $800k few years back and valued it at 1.2mil, thats some serious capital gain to tax :-)
CGT wont apply to the
CGT wont apply to the 'family' home buyerinchch.
I wouldn't listen too much
I wouldn't listen too much into a bank's prediction, nor REs. But this time I agree with Westpec.
@Kieran
I think you made some good points there. However make a gain from a loss is much easier than making it from a profit. Not everyone has the talent to make a profit, but
everyone knows how to make a loss. That is why NZers love property.
@Rob
Ni hao! (Bill if you see this please forgive me, hey I voted you for PM last time)
if a CGT is really going to make the country better than I will certainly show my support here. But good intention doesn't always lead to good system, I've seen so many badly decided system here.
CGT won't solve the fundamental problems we have in the housing market, because where there is loophole, there will be people rorting it. Yes CGT makes it fairer for other investment options, but other options will never entitle me for tax rebate or WFF.
I will escape from the housing market only when
1. LAQC is void ; or
2. it is too expensive / too difficult to access bank loans
For instance, the Chinese Government makes 40% deposit compulsory for second house, and I notice that they slashed banking lending for quite a lot just days ago. Something like that would make enough hurt, i think.
---However I don't think National and Labour have the gut to learn from we Communist.
Suckers, not one Nat will
Suckers, not one Nat will have to pay one penny in cgt on their property deals. Only the peasants will get socked with it. The nats will move on to the next loophole. As for the gst rise, look for a dramatic growth in the black market. Now who wants a dozen eggs for a bag of spuds?
It'd be interesting to see
It'd be interesting to see what the pollies are doing with they're property portfolio's, - would be the perfect indication on where things are heading.
The image of rats leaving a sinking ship comes into my head for some reason. Although that might be a little bit insulting to the rats.........
^Paul^ thats why mail gets
^Paul^ thats why mail gets sent to the rental before its sold eh
Considering property investors have dominated
Considering property investors have dominated the 2002-2007 boom as seen from the decrease in home ownership (i.e more properties owned by fewer people), then changes to the tax related to rental properties may have a sizable impact on property prices.
Whether cap. gains compulsory for all rentals (think at the moment there needs to be intent to make profit from cap. gains before you have to pay tax, which ofcorse no one admits too), or ring-fencing rental losses so they are not tax deductable (prob the most scary prespect for property investors), something will come from the current tax review.
I am actually impressed at the measures underway already with the productivity workforce and tax review team, lets hope they have the guts to make the tough calls that will put NZ in much better shape going forward
Capital Gains Tax will not
Capital Gains Tax will not prevent House Price Inflation as Dr Russel Norman (Green Party Current Co-Leader) thinks. Spain, US, and Australia all have a big Capital Gains Tax and they certainly had huge house price rises and indeed falls. There is a property cycle irrespective of CGT in every property market in the world. CGT doesn't make housing any less affordable either.
The issue is that we should save and not be able to have tax distortions. Perhaps the issue is not CGT, but the extent of negative gearing.
CGT punishes only unsophiscated investors trying to save a bit more for their retirement. I went to the NZPIF Annual Conference 2009 over the weekend. It woudl have had over 300 investors from around the country attend and was very professional with John Banks, Phil Heatley, Liz Harris, Martin Hawes, Olly Newland, David Whitburn, Mark Withers, Martin Dunn and a few others presenting). Whitburn (APIA Vice President) was rather thought provoking and said that around 60% of Kiwis earn $15,000 or less in their retirement.
Assuming that this is correct then we as a nation have a lot of work to do - it is nigh on impossible to live paying power, gas, phone, internet, accomodation costs (rates/loan/rent) in Auckland or Wellington. Lets not focus on those savers that choose property. At least they are saving. Lets focus on getting Kiwis to minimise credit card debt, hire purchases, personal finance and the "I want it now" mentality.
As Chinese Kiwi says you can just borrow against your ever increasing equity and do not have to sell property. You create cashflow from debt - and as long as the capital growth over time rises more than the interest you service and live off, why in earth would you sell your properties if there was a CGT?
gosh ..that was easy! spun
gosh ..that was easy!
spun the blogs over to talking about CGT instead of Westpac predictions as originally posited !
must be that CGT is more scary than a housing price rise or fall?
rock on elves... p.s ...and where's matt of auck. tonight with a voice of reason?
chandra - Been there, I
chandra - Been there, I left.
NevilleWC - Exactly right!
NevilleWC - "Make interest not
NevilleWC - "Make interest not deductable for tax and not taxable for income"
On the outset this is an interesting idea! Encourages people to save but does discourage borrowing to invest. Hourse prices would crash for sure......
Would be interesting to see further analysis.. Even on the impact to Government tax take. Personally I'm a flat rathe tax fan also.
" The truth of house
" The truth of house prices going forward is that it lies somewhere between Bernard's 30 % fall in house prices.......And Infometrics prediction of a 24 % rise.... ... ... Alternatively , it will fluctuate outside of these parameters " . ( Guys , I'm practising for a career in politics , how're I'm doing so far ? ) .
personally, I don't really rate
personally, I don't really rate Westpac. They've been all over the place in terms of house price predictions, and terrible with exchange rate predictions. They seem to ignore the impact of planning regulation and a comment like this is just bizarre:
"It is also notable that the areas with the largest increases in
housing supply were the areas with the largest increases (and
subsequent largest falls) in house prices"
Centres like Houston in Texas have had high growth and corresponding high growth in housing supply, yet their prices never went crazy (contrary to what Westpac say above). why? Because their planning regulation is liberal, allowing supply to respond to demand.
I still only rate ANZ in terms of Bank Economists
Roger - With comments like
Roger - With comments like that you would make a great polly! :)
Robert Prechter is concerned ,
Robert Prechter is concerned , still...
"So forget all you've heard about recovery and inflation, "we've only seen the first phase," of the downturn according to Prechter. Next to come, is "a credit implosion" that will once again destroy the value of stocks, commodities and especially real estate. "The biggest area of overvaluation because of credit extension is the real estate area,"
http://www.fundmymutualfund.com/search?q=prechter&x=17&y=10
Matt in Auck- You may
Matt in Auck-
You may be interested in this article about why Vermont and Texas didn't have a housing bubble. (not what you think- tho land use restriction probably plays a part too)
http://baselinescenario.com/2009/08/18/vermont-texas-and-subprime-loans/
http://www.stuff.co.nz/business/personal-finance/2765843/Time-to
http://www.stuff.co.nz/business/personal-finance/2765843/Time-to-be-more...
From that item:
"Then there are those who predicted house prices would fall 30 percent or 40 percent. Actually at their worst house price were down 10 percent and have in fact risen 2.2 percent on average nationwide over the past three months.
The less silly of these people have now stopped talking altogether. But some still predict falls in house prices of 40 percent, while others are now trying to cloud the issue by referring to "real" as opposed to "nominal" house price declines."
The answer seems easy to
The answer seems easy to me, just change the rules so that res property cannot be held in LAQC just Ltd company, you still get a tax loss but have to do something PRODUCTIVE to recognise it.....
appeal will disapper for mum and dad, but smarter long term landlords will see the appeal of the tax loss credit agaisnst other income derieved from productive investment.
the debate is too political, we all know that
LAQC tax arbitrage must stop (its taken 100k houses out of FTB reach so far ....)
Welfare must be welfare, not a way of life... it should catch you and put you back on your feet only cases of people on dole for 15 years are a rort... there have been immigrants coming in to pick fruit, what NZers too lazy to work now?
work for dole anyone?
An LAQC simply means individual
An LAQC simply means individual PAYE earners get the same tax treatment that companies get. I think it would completely suck if companies again got more beneficial tax treatment than PAYE earners. Your suggestion that PAYE earners don't do anything 'productive' is bollocks.
Lara : I am glad
Lara : I am glad that you are wrong , that " the less silly of these people have stopped talking altogether ." I for one , happen to enjoy Bernard's comments . Rock on , B.H. !
Capital Gain Tax will not
Capital Gain Tax will not change anything, people. Look what we have in Australia. CGT doesn't affect price rises. It'll just satisfy renters envy and make Government reacher.
And from people from the
And from people from the Government I know how they mis-spend our tax money.
"Actually at their worst house
"Actually at their worst house price were down 10 percent "
So you think we have seen the worse? This is a pretty brave prediction in itself.
If prices hover around these levels for the next 3-4 years then that will be 30% loss in real terms. The only difference with NZ is we had warning to see it coming and slashed interest rates which will only result in the 30% drop happening over a longer period of time.
Real terms means you take into account the fact that 200k 3 years ago is only going to be worth around 180k today, so unless your house values going up then you are lossing money
I love it when comparing
I love it when comparing NZ/Aus with the US analysts seem to miss out the MOST important factor in any bubble ie what price is the thing in question. In the US, median house to income ratios were 4.5 at the PEAK of the bubble. NZ was around 7, Aus almost 8. This is despite the US traditionally having interest rates lower than us. So when you analyse the supposed differences (demand, immigration, strong banks who are only strong because consumers are up to their eyeballs in debt etc etc blah blah) do we think there is enough to bridge the gap between 4.5 and 7?????? And this is just to bring us in line with US peak prices. They have dropped 30% from that point, so am guessing the ration is now around 3.
Which brings me to the next question - are we really better off than the US just cause our headline figures seem to promote this myth. An American family is in a much better position to afford a house than NZ/AUS. Why should we be happy about that. Frankly I'm quite happy having weak banks if it means households are paying less in duty each week. Lets face it, even though our banks are supposedly strong and bleeding us, they are ALSO GUARANTEED BY THE TAXPAYER. WHAT A RORT!!!!!!!!!!!!!!!!!!