HOT TOPICS:   Election 2014  |    Fonterra   |  Home loans                                      RESOURCES:    Economic calendar   |  Credit rating explained

The comment stream

Reader poll

Not until some time next year.
36% (25 votes)
It won't, this tightening cycle is done and dusted.
32% (22 votes)
Before the end of 2014.
32% (22 votes)
Total voters: 69

Older polls

Join the Interest community to be a registered commenter so you can:
- Edit your comments
- Avoid the CAPTCHA
- Vote on comments
Register Here

Already registered? log back in here ..

Forgotten your password? No problem! Click here

NZ house prices to rise 24% in next 3 years, Infometrics says (Update 4)

Posted in News

House prices in New Zealand will rise by 24% over the next three years due to low interest rates and a shortage of new housing, Infometrics has predicted in a report prepared for mortgage insurer QBE LMI.

(Updates 4 with report comment that prices could be overvalued by near to 30% by June 2012.)

Prices could grow by as much as 11% nationally in the year to June 2010, the report said.

"This positive growth is expected to moderate over the following two years as residential   construction activity regains momentum," QBE LMI CEO Ian Graham said.

"On average, property is now also taking a shorter length of time to sell. The median length of time for sale has improved from an average of 58 days in July 2008 to 41 days in June this year. The level of competition among buyers has increased as financing costs have fallen and the number of properties on the market has dropped away," Graham said.

"Although residential building activity has been at very low levels over recent months, residential consent numbers are forecast to climb back towards 1,500-1,600 per month by the end of this year, and hold in the 1,700-1,800 range throughout 2010.

Further growth in building activity is expected in 2011/12," he said.

"Housing affordability has improved on a national level and the level of demand amongst buyers has increased.

With improved credit conditions and record low interest rates, the motivation for first home buyers and investors to enter the housing market have never been more compelling."

"With a lack of available finance for developers, a significant shortage of new housing is arising in New Zealand and is expected to continue into 2010. The underlying demand for new houses is sitting at 21,000 per year which is strongly driven by an increase in net migration and a reduction in New Zealanders moving overseas. This undersupply of new dwellings, will contribute to an increase in property prices over the next three years," Graham said.

The report said that although house prices were still lower than a year ago, some upward momentum looked to have appeared since the start of 2009 and that further improvement would be consistent with the trends in sales activity and the rate of turnover.

Infometrics based its forecast rises on the average median house price from the three months to June 2009. The national median is forecast to rise to NZ$419,400 by the end of June 2012 from NZ$339,200 this year.

One of the key factors influencing the outlook for house prices is the supply of new dwellings being built. Building consent numbers have fallen to very low levels (just 14,000 over the year to June 2009), and activity is being constrained by the lack of available finance for developers. With underlying demand currently sitting at about 21,000 new houses per year, a significant shortage of new housing is arising. This institutional impediment to activity is putting a floor under property values and is expected to lead to a significant rebound in house prices over the coming 12 months. By June 2010, house price growth is forecast to have lifted to 11%pa. Price growth is expected to moderate over the following two years as residential construction activity regains momentum, but by June 2012, house prices are still expected to be 24% higher than they were in June this year. After adjusting for inflation, this lift represents a 17% increase in real property values over the three-year period.

Of the main centres, the report forecast Auckland house prices to rise by 26% by June 2012, Wellington prices to rise by 22%, and Christchurch prices to rise by 25%.

The Auckland property market probably has one of the most critical housing shortages in the country, as building activity in the region has fallen to very low levels over the last five years. House sales activity in Auckland has shown definite signs of improvement over the first half of 2009, and this upward momentum is expected to feed through into higher prices over coming quarters. Over the three years to June 2012, house prices are expected to rise by 26% (a 19% increase in real terms). The Wellington housing market is currently performing patchily, in part because of uncertainty about public sector employment levels under the National government. This uncertainty is likely to gradually dissipate over the next 18 months as government spending continues to grow. With job security in the region slowly improving, house price growth will generally keep up with the national average, and property values are expected to rise by a total of 22% over the three years to June 2012 (a 15% lift for real property values). People selling property in Christchurch appear to have been more willing to lower their asking price than in other regions. As a result, the correction in house prices in the region over the last 18 months has been greater than in New Zealand's other major urban areas. House prices are likely to rebound strongly over the coming year, and by June 2012, prices are forecast to be 25% higher than in June 2009 (an 18% rise in real terms).

The report noted that inflation-adjusted house prices were currently 15% above their long-term trend-line but could get toward 30% above the trend by June 2012.

Despite a relatively soft outlook for house sales in the near term, the outlook for house prices is more positive. The lack of new residential building activity has put a definite floor under property values, and strengthening population growth will maintain buyer competition across what is expected to be a constrained supply of housing available for purchase. Inflation adjusted house prices are currently an estimated 15% above their long-term trend line (down from 36% in mid-2007), but could climb back towards 30% above the long term trend line by the end of the forecast period. Nationwide house price growth is forecast to average 8%pa over the next three years.

We welcome your comments and insights on the full report below. Lmihousing Outlook New Zealand August 2009_email

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

207 Comments

If this is true, we

If this is true, we are doomed.

That will be a disaster,

That will be a disaster, if cash that would be far better emplyed in productive wealth creating business ends up in speculative housing investment.With that and the strong kiwi dollar it isnt a good look for unemployment figures

Let the panic buying begin.

Let the panic buying begin.

Bugger ! Any chance of

Bugger ! Any chance of weaning Kiwis off their property fixation will be stuffed, yet again.........Forget production, the consumption circus rolls on........Any possibility of some fresh ideas from those in Wellington ?

A house price rise is

A house price rise is based on people actually purchasing houses at this rate. In my 26-36 yr age bracket of first home buyers, I don't see anyone willing to pay 24% above today's current prices. If it does go this high, I imagine Aus will be the way to go.

Wow! - That's great news.

Wow! - That's great news. I will hold off listing my house for a year or two!

Matt S: Nothing like the

Matt S: Nothing like the fear/greed combination to instigate illogical actions.

if this is true then

if this is true then why fight it, we cant change what might happen short of getting elected into government.
Make some money on this while you can get as close to freehold as possible then if it all turns to custard a few years later who really cares- if you own your home outright then what will it matter? atleast you should be in a safe position to ride out the storm when the big crash comes and you lose your job you can still get $715 p/w from the govt.

With cash returns so low

With cash returns so low and wealth trainers like Robert Kiyosaki saying "cash is trash"; and with bonds and equities historically underperforming the NZ property market the answer is simple - invest in PROPERTY. Where else do you turn to if you don't want to be one of the 37% of kiwis that earn more than $15,000 per year aged 65 years old.

Property is easily the safest asset class over the long term - banks know this and learned lessons from heavy lending losses to businesses in 1987 and again in late 2007-present. That's why they will lend heavily on property. The fact is whether we invest in rental property, or our turn equity into cashflow, by getting loans against our own homes to fund our retirement - we can do this best through property. In addition if a Capital Gains Tax is ever brought in we can avoid it by not selling, and simply gearing and gearing more against our homes & any investment properties and converting that equity into cashflow.

If you want to stop property being chosen as a preferential asset class try banning LAQC companies instead or limiting tax deductibility of PAYE earners to say $15,000 maximum deduction of their own income per year. Just watch out for the rents to rise, and massive pressure to increase government spending on housing so we don't have 6 people living in a carport in the streets of South Auckland, Wainuiomata, Flaxmere etc...

Hogwash.

Hogwash.

I think its a load

I think its a load of cobblers.
Not even Mr Alexander is talking about such gains!!!

Whilst they have a point that supply will be constrained in the next year or two due to the lack of new building, the counterbalancing forces of unemployment, reasonably low immigration and the lack of ability of FHB's to actaully be able to afford higher prices will, in my opinion, counterbalance the supply issue. Over 3 years prices might go up a bit, but I personally very much doubt 24%

that scenario MUST be just too far removed from fundamentals. The median salary at best might grow 2% per annum over the next 3 years. A 24% growth in house prices just creates too great a divide between incomes (the ability to pay for houses) and house prices

Alex said... <i>House prices in

Alex said...
House prices in New Zealand will rise by 24% over the next three years due to low interest rates and a shortage of new housing, Infometrics has predicted in a report prepared for mortgage insurer QBE LMI.

Alex, does Infometrics reveal how they do their forecasting? I mean do they tell the QBE LMI, the algorithm they used in their forecasting ? There are many types of forecasting algorithms available today, I myself have developed and used about 14 different types and their forecasting outputs could be different (ranging from a small gap to a huge one) given they run on the same input dataset.

One of the reasons that the members of the general public sometimes distrust economic forecasting is because of the perceived inaccuracy. But I see that Infometric's report is mean for a client of theirs which is private, but I wish they can state publicly what their forecasting methods are, so that their critics can see why they reached their conclusions via using certain methods.

I frequently see in the media that some economists slagging other economists for making inaccurate forecastings. This infighting could be avoided if they state the methods they used in their forecastings. This is not to say they reveal their proprietary developed algorithm, since 98% of forecasting methods are derived from existing ones (they do vary in their error rates - ie, error in fitting the models to the time-series data - which in turn may have any relevancy at all to the main driver of the economic variable being forecasted).

A recent trend now is to use many forecasting techniques at once and then poll them at the end, via majority votes. The predictions that are most common amongst the many algorithms used, is chosen as the final outcome.

IMO, I don't put too much weight on long term forecasting at all. The longer the time-steps into the future that you run your forecasting, the error increases, which means more inaccurate.

It looks like Infometrics have

It looks like Infometrics have been Smoking some "Green Shoots".

In their previous report for

In their previous report for QBE in November 2008 infometrics said:

"Nevertheless, housing will still be overvalued in two years' time. Infometrics estimates that, at the end of 2007, real property values were around 42% above their longterm
trend. It is forecast that strong consumer price inflation, combined with falling house prices, will see the extent of the overvaluation quickly drop to 17% by mid-2009. Over
2010/11 and beyond, house prices are likely to rise more slowly than the CPI, and the real value of property will continue to be eroded. By June 2013, real house prices are forecast to be 14% below the peak reached in 2007."

Given that infometrics is a Gareth Morgan business I wonder what Gareth would have to say about this latest forecast of a 24% house price rise?

I said... <i>which in turn

I said...
which in turn may have any relevancy at all to the main driver of the economic variable being forecasted

but meant to say:

which in turn may NOT have any relevancy at all to the main driver of the economic variable being forecasted

all i can say to

all i can say to this report is to quote the fact that 83.47 percent of statistics are made up on the spot.

Matt in Auck- you're probably

Matt in Auck- you're probably right but if it did happen what happens to those that are saving their deposit based off todays price? surely this will put their first home further out of reach so would it not be wise to try and get in now with as little money as possible of your own keeping x amount spare to cover your higher outgoings for the next few years and ride along, atleast then if this growth does eventuate then you will get your deposit back and a strong return on your investment which should hopefully put you in a better position than you would be in now.
if you can save $200 per week thats $31,200 before interest over 3 years, if you gained control of a $300k house and got 24% growth over the same period you now have $372,000 to get their might cost you $200 p/w on top of what you would have had to pay in rent, I know what scenario I,d choose saving can be hard for alot of people but when its got to be paid to the bank each month thats a whole other story.

NZ house prices to rise

NZ house prices to rise 24% in next 3 years, Infometrics says (Update 3)

Investing is all about risk = reward

If they believe that the prices are set to rise 24% in the next 3 years, then they must be able to admit that the prices can in reverse reduce by 24% in the next 3 years.
There is no such thing as a free lunch.
Cmon people, anyone telling me that the share market will increase by 30% over the next year has to tell you that it can quite easily do the opposite - the housing market is no different. It has it's cycles.

Get over property NZ

Don't worry Falafusu Fili, we

Don't worry Falafusu Fili, we skipped the stuff that came after "algorithm"

A median house price above

A median house price above $400,000 by 2012 may seem optimistic by many, but considering affordability has only been better than it is now in 8 out of the past 35 years and that supply of new housing is at record lows and financing for developers virtually impossible then it should be of no surprise.

It is a shame that anyone who listened to Bernard at the start of this year and held off purchasing a home because they were trying to predict the market bottom have missed out entirely.

Not only because prices has risen since January, but moreover because they missed the bargain 5 year interest rates of a lifetime. Fixing for 5 years today will cost an extra 12% of the total mortgage over the fixed term, add on the lack of choice of property available and you will find that in some sectors of the market, for the property you really want, you may be paying 10-15% above the price you could have paid six months ago.

All this just because you were hoping for a further 10% price fall - and somehow the commentators on this site thought that an inflation time bomb was going to cause house prices to fall in nominal terms??

Anyway enough Bernard bashing.

(Regulars may recall my "buy now" comments I posted back in Feb/March which received a flood of derision).

The real problem now is that the banks have tightened funding for developers to such an extent that there will be very limited new supply.

For instance the business / agri banking arm of the one of the big four banks introduced new lending policy last week, requiring 3 times interest rate cover on new lending and those increasing total lending by more than 30%. That compares to 1.2 times cover that they used to accept for property backed lending. Our bank manager told us that he did not have a single client who met the new criteria. Essentially business banking is closed for new customers as the bank tries to meet credit rating agency requirements.

What's the solution?

Prevent such violent swings in lending standards. Maybe a job for the RBNZ? Perhaps that would have prevented the mortgage lending lolly scramble of 2005 - 2007.

Very well "spotted" Lara.What has

Very well "spotted" Lara.What has changed in the last two years that could make this much difference. I thought most changes in the economy have been negative. But somehow their fancy computers can say there is going to be approx 40% swing
( -20% to + 24% ). As they say "pigs might fly"

Yippee, giddy up I say.

Yippee, giddy up I say.

If there is ever a downturn in economics they can easily pick up some climate change forecast work. It will get a few on here choking on their corn flakes just for added amusement.
What total clowns and well done Lara on your post, classic stuff.

I don't quite buy their

I don't quite buy their analysis from a quick skim.
They are talking about significant rises in unemployment.
They also rightly talk down the impact of net migration increases, as I have done here since the start of the year.
They place a lot of weight on undersupply of housing.
In my view they haven't appropriately balanced the supply constraints with the demand constraints ie. supply may be becoming constrained but demand will also be constrained due to a number of factors ie. unemployment, fairly low immigration, the still unaffordable nature of housing for many FHBs etc, rising interest rates .

I'm not saying prices won't go up in the next 3 years, but what I am saying is I doubt there will be a 24% rise

"People selling property in Christchurch

"People selling property in Christchurch appear to have been more willing to lower their asking price than in other regions. As a result, the correction in house prices in the region over the last 18 months has been greater than in New Zealand's other major urban areas."

Funny. It's all a matter of perception. I was saying to my wife the other day,
"All this house price dropping stuff must be happening somewhere else in NZ, because from what I see prices in Christchurch haven't changed at all"

11% next year, my @rse.

11% next year, my @rse.

Wally said... <i>Don’t worry Falafusu

Wally said...
Don't worry Falafusu Fili, we skipped the stuff that came after "algorithm"

Hehe, you're right there Wally. Here is my advise to people who rely on economic forecasting. When you see an expert on TV or read on the paper about trying to predict the future, then here is what you should do.

- Turn the TV off, or change channel
- Flip the pages of the newspaper

I myself don't take these economic forecastings seriously at all. The best thing is to ignore them altogether. Don't listen to these economic psychics (unless you voluntarily paid for their service - its your free choice then), since it has the potential to wreck your wealth, just use your intuition. They're useful but not accurate. Inaccuracies override its usefulness.

This is going to be

This is going to be a self-fulfilling prophecy :) People reading the news is going to think that price is going to rise. This would cause them to be more willing to buy now and be willing to pay more, which of course would lead to higher prices. Talk about hyping the market !!

No chance, no way of

No chance, no way of 24% growth (unless its 24% inflation driven). While I agree with a number of points, the old supply deamand equation only works if there is real demand. That is money behind the purchase. Interest rates are going up, employment is going down, exports are trashing (and have been for years). Sooner or later the NZ credit card will reach its max, or the bank(s) will pull the plug.

You can't have a champagne lifestyle on a badly brewed beer budget.
And prices haven't gone up 5% since January, its all about when the stats are taken from. Anyone who really thinks residential property is still going to defy gravity have a read of the lastest Irish budget to see what happens when things get out of whack....and don't think it can't happen here. The welfare red ink monster is coming.

"...in a report prepared for

"...in a report prepared for mortgage insurer QBE LMI."

I wonder how their business looks if these gains don't materialise?

Wow, what a brilliant prediction!!!

Wow, what a brilliant prediction!!! I assume of course that these geniuses took into account that THERE IS A CREDIT CRISIS!!! Where are all these first home buyers who shall take advantage of these record low interest rates going to get their 20% deposit from??? From the jobs they possibly shall lose from the projected increase in unemployment??? Perhaps you have projected an increase in Scratch-and-Win takings in the Generation Y demographic???
The US of A, to overcome an economic crisis in which there was no more credit due to the fact that they had provided too much credit brilliantly obtained more credit. There has been little healing of the wounds to stop the bleeding - just more blood pumped in. And soon, those kind folk from the Chinese Blood bank are going to want their blood back, plus interest. Lets add two wars costing trillions, increased spending on unemployment benefits, more government bailouts and a huge health plan... well I'm not claiming to be the Oracle, but my guess is that credit shall become rather hard to come by. So if you want credit, it shall cost more - ie you shall have to pay higher interest.
And it is from these folk that our banks obtain their funds to lend to us.
Hence, in conclusion to your wise words, I strongly suggest the authors of this 'dribble-drabble' follow their own advice, invest every cent they have ever earned and every cent they can borrow, and buy every house they can find. Then come 2012 they shall be basking in the glory of the 24% increase in capital they would have obtained. Or be living in a box.

At the risk of repeating

At the risk of repeating myself-"Look behind the headlines to see who benefits them!"Tony Benn(UK Labour poltition,who gave his title and wealth away)!!

Aha, I can see that

Aha, I can see that Infometric is using PCA (Principal component analysis) as one of their forecasting methods, which is briefly described on this Infometric page.

Here is what I say about PCA. It is useful, but if I hear someone telling me that he did economic forecasting using it, then I would run, fast and ignore this person. It is the same technique that was used by Prof. Mann who claimed that his Hockey Stick graph is a proof of man-made global warming and the IPCC used it religiously to say, man is responsible. The Hockey Stick of Prof. Mann et al, was later dismantled/dismissed by others ( McIntyre, Steven; Ross McKitrick), which they found that the Mann's analysis of using PCA was bullsh*t (ie, inappropriate & inaccurate).

"Aha, I can see that

"Aha, I can see that Infometric is using PCA (Principal component analysis) as one of their forecasting methods, which is briefly described on this Infometric page."

We don't use PCA for house prices. Also we only use it to estimate shares, not levels.

FYI everyone else, the 24% prediction isn't based on long-run fundamentals - I believe the report says that this keeps property about 30% overvalued. The persistence of the over-valuation in property prices is part of the "structural issues" focus in our recent forecasts.

Also for people wondering what has changed over the last two years to make house price growth stronger now lets say that the intense lack of building, extreme loosening in monetary policy, lack of movement on structural imbalances, and sharp increase in net migration are pretty significant factors ...

Have to say ....What Matt

Have to say ....What Matt Nolan just said makes good sense to me.
Having said that, we live in volatile times...
I never expected the strength weve seen in the last yr... and I was one of the ones that laughed at this forecast when it came out...

I still can't see the upside...

Matt here is a question... What do u mean by extreme loosening of monetary policy...???? M3 money has actually shrunk since Oct 2009..

Cheers Roelof

As is the lack of

As is the lack of credit to pay for your boom...

Crap. Woudl ove to see

Crap.

Woudl ove to see our current account deficit if this takes hold. And what about our rising interest rates and unemployment. We do have horrendous govt policy, but 24%???? COME ON INFOMETRICS, pull your head in.

I am really looking hard

I am really looking hard to see the logic, all I can come up with is that the model used is very limited in its parameters...based solely on the current realestale market over a very short term (months) and no consideration to such factors that they could very well be a blimp in a longer term down slide...

The only way such an increase could occur is a dramatic inflationary period similar to the reaction after the crisis in the late 70s...the Muldoon yrs...which is very likely.

So besides that Wally describes well

"Hogwash."

Sounds to me like QBE

Sounds to me like QBE LMI CEO Ian Graham has misinterpreted something that Infometrics has projected. " Wrong end of the stick" comes to mind...

It's brilliant to be honest.

It's brilliant to be honest. To be able to convince mortgage insurer QBE LMI to pay for such drivel is really staggering. Wonder if they put a clause in the contract to avoid paying for any losses the silly insurer could end up with as a consequence of taking this 'advice' seriously.

Matt Nolan, You cant be

Matt Nolan,

You cant be serious. How about rising interest rates, unemployment and most importantly the reduction of speculators via credit tightening (we will NEVER return to 2007 credit policies but these are priced into the current market). What about the premium from immigrants being massively reduced via a "stronger" currency and loss of wealth overseas. What about the fact that houses are already obscenely overpriced - how do you stretch further from an already obscenely stretched position. What about the fact that the RBA has clearly stated it does not want to see house prices rise rapidly again - even they wont be dumb enough to sit idly by (even if the govt does think a further reflation of the bubble is a great idea).

The last thing we need is commentators giving crap information to send FHBs to their financial death. Who is paying you??

"As is the lack of

"As is the lack of credit to pay for your boom"¦"

Well given that credit aggregates are improving sharply it isn't clear how binding the credit constraint will be going forward.

"The only way such an increase could occur is a dramatic inflationary period similar to the reaction after the crisis in the late 70s"¦the Muldoon yrs"¦which is very likely."

The report says 24% in three years - it isn't per year, this is the cumulative increase. Compare this to the 24% lift in one year over 2003, or the 62% increase over the three years to 2005, or the 91% increase over the five years to 2007.

Remember the report isn't saying that house prices should be 24% higher, it is saying that given structural factors in the economy Infometrics can see prices heading 24% higher and remain outside their "fundamental value". Again, this is part of their concern regarding the structure of the economy.

According to QV, my sh*tty

According to QV, my sh*tty concrete block flat has risen this much since March. If only I could find a buyer ..........

"considering affordability has only been

"considering affordability has only been better than it is now in 8 out of the past 35"

care to explain this rubbish?? We are not even close to the 40% income that is considered the average affordability

@Falafufu <i>Don’t listen to these

@Falafufu Don't listen to these economic psychics

was that a dig at Bernard?

The trend is your friend.

The trend is your friend.

Whilst a disaster for NZ, you can profit individually.

A funny thing though, first interest.co.nz link quotes low interest rates as a main driver, the next link refers to the fact that interest rates have risen again.

We will inflate our way out of this yet, as long as nominal prices are rising the 'sheeple' wont worry about real pricing.

Clearly they didn't phone Queenstown

Clearly they didn't phone Queenstown to be told ""Council has assumed that it will not receive any proceeds from the Lake View project during the next ten years because of the worsening global economic climate." NBR

Hi Jimmy, "How about rising

Hi Jimmy,

"How about rising interest rates, unemployment and most importantly the reduction of speculators via credit tightening"

Interest rates will rise, from a currently very low level. Unemployment will rise, definitely, but in three years time I have no doubt the labour market will have improved.

Credit markets will not be as loose as they were in 2003-2007, but they have loosened significantly in recent months. And on the speculator side, low interest rates (which is what we are looking at for a while according to the RBNZ and international monetary authorities) make investment in housing and stocks more attractive.

"What about the premium from immigrants being massively reduced via a "stronger" currency and loss of wealth overseas"

We are talking about house price growth averaging 8%pa, or about 6%pa in real terms. We aren't talking about a huge migrant flow driving up the capital cost of housing like in the 2003-2005 period, we are just talking about underlying pressure.

"What about the fact that houses are already obscenely overpriced - how do you stretch further from an already obscenely stretched position"

It was stretched out beyond this level other times. It isn't a good thing, and there are structural issues driving this "wedge in return" between housing and other assets.

"What about the fact that the RBA has clearly stated it does not want to see house prices rise rapidly again - even they wont be dumb enough to sit idly by (even if the govt does think a further reflation of the bubble is a great idea)."

Well the RBNZ hasn't been saying this - they have been saying that they want to keep interest rates down for a long period of time.

This is a croc -

This is a croc - its an insurance company trying to protect itself from the insurance outcome of defaulters requiring a top up due to negative equity

What i dont understand is why articles do not publish unbiased opinion or atleast point out such conflicts in interest.

The other issue is if you pay to much now with low interest rates you can expect to loose your home when they rise again.

Watch this space.

Matt Nolan, best not to

Matt Nolan, best not to pay too much attention to the RBNZ. Wheels within wheels!
For the others out there, there is a different angle to this drivel from infomet. They may have decided the only way to shift English off his bum and bring about some much needed changes to credit supply regulations, is to poke a stick through the window on the 9th floor of the Beehive and stir the hive into activity now that spring is here!

Matt Nolan, Is your data

Matt Nolan,

Is your data for the report available ?

All seems a bit odd

All seems a bit odd when Gareth Morgan was saying the other day that house prices still had 20% to fall. Doesn't he own Infometrics ?

To JE, That has never

To JE,

That has never been infometric's core view. But Gareth M does still have a minority stake in the company.

Have infometrics taken into account

Have infometrics taken into account the fact that in the last year PI's have not had an extra 100k of equity gifted to them by increasing house prices, which they then flood back into the market buying another 5 properties? Cycles happen because going up leads to more going up. When it stops, the going down leads to more going down. Update your algorithms with this factor and see where prices are and WILL end up going

So many assumptions....so much rubbish....

So many assumptions....so much rubbish....

"a reduction in New Zealanders moving overseas" that's because they cant get jobs overseas....so what makes the ppl who wrote this think they will in NZ? What does over-supply of labour do to wages? force it down....or at least stay flat....while housing and interest rates climb...ihousing is already un-affordable for many, so the mad speculators will rush in....and if (I expect when) it collapses there will be blood on the floor.

"Property is easily the safest asset class over the long term", 2 years ago they said shares were better than bonds, long term....that one has been killed stone dead circa end of 2008, 10~15 years of share growth wiped out. Choosing to get into "something" and get out before it collapses and move on is the solution, but timing is the hardest thing of all and in reality just does not happen.....Looking at housing and like the share market looking backward is no guarantee of future performance....its gambling....now if you want to gamble fair enough....

Nick: "getting in now" look at the people who have the neg equity and who are suffering the most......being forced into mortgagee sales etc.....the first time buyers are alwys those at greatest risk and pain...given the volitility and unkowns its gambling pure and simple.....just get a handle on the risks and losses.....

regards

Matt Nolan says "And on

Matt Nolan says "And on the speculator side, low interest rates (which is what we are looking at for a while according to the RBNZ and international monetary authorities) make investment in housing and stocks more attractive."

Hang on buddy. If you look at Aussie, in the space of three months the yield on a one-year government bond has risen from 3% to 4%. Longer bonds, such as the five-year have risen from 4.38% to 5.57%.

What on earth are you talking about?

"Is your data for the

"Is your data for the report available ?"

Sorry, the client owns the report. If they release it they release it.

"If you look at Aussie, in the space of three months the yield on a one-year government bond has risen from 3% to 4%. Longer bonds, such as the five-year have risen from 4.38% to 5.57%."

That is stemming from:

1) Rising inflation expectations,
2) Rising demand for long-run credit.

Asset prices have an advantage in terms of rising inflation expectations - as the inflation component is untaxed. Furthermore, the reasons behind the rising demand for credit are probably related to factors that will drive demand in housing.

Sorry I can't really go into much more detail - as this isn't something we've released.

Sarah "affordability has only been

Sarah

"affordability has only been better than it is now in 8 out of the past 35 years"

I went to some effort to explain this in comments on a previous post (July 23 12.49):

http://www.interest.co.nz/ratesblog/index.php/2009/07/22/too-many-rental...

As I have stated before,

As I have stated before, the absence of a 'sound money' system makes all rationale planning impossible. What is particularly offensive is that young people, who may already be carrying high levels of student debt, are expected to further enslave themselves - in order to pay through the nose - for some pile of 'jerry built junk'. Perhaps we should remind ourselves of the tragedy that is playing out in another small country - Iceland. Are we also being deliberately 'geared' in order to be 'busted' some time hence?

http://www.globalresearch.ca/index.php?context=va&aid=14683

This smacks to me of

This smacks to me of a typical report report generated on behalf of a body with a vested interest in the area / outcome by "professionals" ...eg the Real estate brigade and housing. So what is it for? PR? marketing? plop this down in front of perspective punters and get them to jump on board the band wagon?.....I wonder what the legal liabilities are for this? ie could punters who get badly burned sue? Personally I think they should be allowed to sue....that way the writer(s) bear responsibility for what they provide.....they are after all professionals.

regards

Craig said... <i>Cycles happen because

Craig said...
Cycles happen because going up leads to more going up. When it stops, the going down leads to more going down. Update your algorithms with this factor and see where prices are and WILL end up going

What you're describing is dynamic analysis, but I think that Infometrics are using static analysis techniques, unless I am corrected here by Matt Nolan. Feedback effect is a dynamic mechanism, which is not covered/captured in static analysis. The bull & bear movement of the stock market is a classic example of an evolving dynamical system , where it always changes at every time instant. This is the reason that forecasting further into the future such as 3 year period time-step is not to be trusted, because the dynamics could change (either internally via emergent/self-organized or externally an unexpected/unforeseen shock/driver) between the starting point and the end point. I am not discouraging anyone here from using Infometric's services , since I see that they have some best of minds in the economic profession who work there, but I am just contributing here from what I know about these types of analysis.

Malcolm: Agree totally....this is not

Malcolm: Agree totally....this is not a sound or rational financial, business or retail situation. I think this stuff is potty and I further think without any legal restraints ie its all buyer beware its going to carry on and just get worse....ppl will be burned and its most likely it will be the younger ones, who will in turn just give up and leave NZ.... the greedies and in-competents are bringing the house down and are perfectly happy to do so as long as they make their $.....the cost to others does not matter...

regards

Hi Disagree with this, immigration

Hi

Disagree with this, immigration numbers are only starting to pick up, but I wonder where all these new immigrants will find jobs?? what with unempoyment on the rise. With the Australian economy seeming to fare better than ours at the moment and foreseeably into the immediate future would we not see the normal exodus of Kiwis back to the land of OZ again, reducing pressure on Housing?

Houses in NZ are still fundamentally expensive compared to incomes and at some point the majority of the population just can't keep on affording to buy.

It's amazing to see the totally different views of so called experts. The Reserve bank has been predicting a 20% fall in house values for some time now. If only one had a crystal ball!

Let's start getting serious and introduce capital gains tax on investment property. That'll slow the housing market down no end I should think and hopefully direct money into something more beneficial to the economy such as the equity markets.

24% in 3 yrs... that

24% in 3 yrs... that is a big call..... I would be really surprised..

Things that concern me... :

Americas debt position... The "cash for clunkers" , for me, sums up the mess they are in.... America is a bit of a clunker... YET it is still the biggest economy in the world.
Its' debt issues are profound.. trillion dollar deficits... !!!!!!!

In NZ.... National and deficits.... Will they sit on their hands or will they "tighten the belt"... When they do decide to address the "structural deficits".... how will that impact on confidence and consumer spending..??
They will be having some major bond issues.... ($50 billion domestic bond issues over 4 yrs.??)

Considering the extent of deficits that western countries are running ..I would guess that the secular trend in long term interest rates is UP....

About supply/demand imbalances ....
Supply is the easy part to determine..
Demand is far more difficult.... The demand metrics that Info-metrics uses can "turn on a dime"..
It would not take much , in todays climate, to turn sentiment and demand down again....

2001 (in hindsight) was an easy call for real estate... The undervalued $NZ made NZ houses an absolute bargin for overseas buyers... Not now though.

Very "ballsy" forecast... I will follow with interest...!!!!

Matt Nolan.... Are you taking Wagers..??? :)

There was an economist/author named

There was an economist/author named Peter Schiff who told the US government and media back in 2006/2007 that the credit crisis would occur. In the exact way it did. He was literally laughed off the microphone.

http://www.youtube.com/watch?v=WPmdzKcDe-s
http://www.thedailyshow.com/watch/tue-june-9-2009/peter-schiff

As one of the few who was actually 'right' before the crisis, I think his predictions now carry far more weight than your nonsensical crystal ball gazing.

And let me get this straight - you suggest there is a housing shortage, so to solve this problem you encourage everyone to withdraw their properties from the market by stating their values shall be 24% higher in a few years. Brilliant!!!

Matt Nolan says "That is

Matt Nolan says "That is stemming from:

1) Rising inflation expectations,
2) Rising demand for long-run credit."

"Asset prices have an advantage in terms of rising inflation expectations - as the inflation component is untaxed. Furthermore, the reasons behind the rising demand for credit are probably related to factors that will drive demand in housing."

"Sorry I can't really go into much more detail - as this isn't something we've released."

OK, but isn't that a double-edged sword?? If interest rates are destined to rise, but the attraction of the opportunity of property investment is low interest rates, hasn't the opportunity canceled itself out by default? It sounds like a contradiction to me.

How can infometrics come out

How can infometrics come out with this report when they said in November 2008 in a report for the same company "By June 2013, real house prices are forecast to be 14% below the peak reached in 2007"

Someone from interest.co.nz should interview Gareth Morgan immediately and see what the true personal view is on his own companies report - c'mon Alex or Bernard - video interview Gareth asap and put some balance into this ludicrous prediction.

News of this 24% house price predicted increase is now all over the radio network - headline item at 1pm on ZB and no doubt will be main item on TV news - end result people will hold off selling and price rises will become a self fulfilling prophecy.

http://www.gmi.co.nz/pages/content.aspx?PID=17

http://www.3news.co.nz/Video/CampbellLive/tabid/367/articleID/71977/Defa...

Matt Nolan Can you please

Matt Nolan
Can you please explain to a non-economist (but someone who has undertaken a lot of economics reading and works in the housing area) like myself how prices can possibly increase by 24% over 3 years when wages are likely to only increase over that same period by 6-8%???
Who is going to be able to afford such prices?
Me and my middle class mates can't afford a median priced property now, we'll be even less able to in 3 years if your predictions materialise
I struggle to see the logic in this, if high income earners can't afford median priced properties now....
Net migration is higher but immigration is low, that is correctly acknowledged in your report.
And Matt please explain previous statement : "By June 2013, real house prices are forecast to be 14% below the peak reached in 2007"³

My view is that although there may be supply side pressures, there will also be demand side pressures (ie. demand will be relatively subdued due to a variety of factors)

Ah well, thanks at least

Ah well, thanks at least for fronting up and engaging in the debate. It is pretty cool that people can engage with the authors of reports like this.

John P You express the

John P

You express the majority view well:
"Property is easily the safest asset class over the long term - banks know this and learned lessons from heavy lending losses to businesses in 1987 and again in late 2007-present. That's why they will lend heavily on property."

I can't really argue with it. Until it isn't the safest class. A few US banks took the same approach. It did not end well.

"The fact is whether we invest in rental property, or our turn equity into cashflow, by getting loans against our own homes to fund our retirement - we can do this best through property. In addition if a Capital Gains Tax is ever brought in we can avoid it by not selling, and simply gearing and gearing more against our homes & any investment properties and converting that equity into cashflow."

Dear John Key. Please read the above. This is what we're dealing with.

To all - Do you realise this obscene focus on property will drive our debts so high and keep our real incomes so low that all we'll achieve is to drive our children away to live overseas? Do we really want to become a nation of landlords who watch our grandchildren grow up by Facebook?

cheers/great debate
Bernard

Matt, "Asset prices have an

Matt,

"Asset prices have an advantage in terms of rising inflation expectations - as the inflation component is untaxed. Furthermore, the reasons behind the rising demand for credit are probably related to factors that will drive demand in housing."

Inflation only favours property when debt is low - a sudden spike in rates also means a suden spike in mortgage repayments which is magnified by the size of the debt. Past experience re housing and inflation has only shown proeprty to be a great inflation buster when debt is low. Certainly not the case now.

Steven: Thank you for your

Steven: Thank you for your comment. As you suggest, the likely consequence of further 'exclusion policies' in respect of our brightest and best young people will be their departure elsewhere.

Fascinating place New Zealand. For a brief while, when I came here around twenty years ago, it still had an outsiders chance to avoid the disaster that is unfolding in Europe. One suspects that chance is now gone, and Kiwis need to understand that the 'banksters' are on the prowl - busting anywhere like Iceland, Ireland, & Eastern Europe where a hint of independent thinking and traditional values endure. Iceland's situation is simply appalling - a great little country (even if we Poms do think they nicked our cod). Property 'perma bulls' beware - how quickly the euphoria of illusory debt built wealth can fade!

Moreover, one of the key facts in the desperation to reflate nominal property values does not seem to have been mentioned - local authority incomes. This is one of the big potential 'shoes to drop' because a failure to re-ignite house prices could play havoc with their 'quasi capital gains tax' formula for levying rates.

Chris_J and Sally, And read

Chris_J and Sally,

And read the comments below Chris_J's argument which clearly showed his position to be absurd.

Bernard "nation of landlords who

Bernard

"nation of landlords who watch our grandchildren grow up by Facebook?", This whole assumption is based on the fact that when you did your OE the grass was greener, however this assumption may or may not be correct in the near future, Labour also benefited from the boom of the last 2 decades but the reality may be that slaving in NZ is just as rewarding as freezing in some London squat

Neven

It's not just the youngsters

It's not just the youngsters that will be going, Malcom. I like you, came here with my family 18 years ago, with significant capital derived from real effort, not illusory gains, and have to say ,we are now looking for an alternative domicile. This was to have been my enduring home. I am a New Zealander. But when all about is failing, it's time to leave. The Andrewj's of New Zealand will be left here to work their hearts out, to no avail.

Anybody hear a comment from

Anybody hear a comment from the Beehive about this prediction and the headlines doing the rounds? Has Key or English bothered to voice their opinion? NO. Silence. Not a peeeeeeeeeep from the 9th floor. Man, they really are so concerned, so determined to put right the financial stupidity prevading this nuthouse. I can hear the tune on the fiddle from way over here.

"I am not discouraging anyone

"I am not discouraging anyone here from using Infometric's services , since I see that they have some best of minds in the economic profession who work there, but I am just contributing here from what I know about these types of analysis."

Falafulu Fisi, maybe that's why a lot of global financial firms are starting to employ more engineers and fewer economists. Modelling systems is what engineers have been doing for years and its not surprising that they'd do a better job than people who have been schooled only in economics

Simple solution freeze all bank

Simple solution freeze all bank lending for one year ,no more mortgages,cash buyers only,the property market values will fall like a clapped out space station.

Bernard : We " the

Bernard : We " the great unwashed " appear to have a grip on the issues that beset us as a nation. The need to re-focus toward production, and away from consumption. What do we have to do to get the Gumnut to take notice ? I suggest we re-enact a 400 year old English solution, and stash 100 barrels of gun-powder under the Bee-Hive, and stand around outside with matches at the ready........Labour.........National, the colour of their coat doesn't matter, they aren't listening, either of them.

Roger old bean, the Beehive

Roger old bean, the Beehive is not Parliament! It's also built to withstand a force 8.2 earthquake, while Parliament will collapse in a heap of rubble at anything over 7.

Roger you are good fun,

Roger you are good fun, but especially today. Always like your comments- special- precise.

Why not include Banks -the colour of their coat doesn't matter.

Oh yeah Chirs_J, just read

Oh yeah Chirs_J, just read the figure YOU MADE UP using POOR TECHNIQUE to justify your outrageous claims on home affordability.

This post below yours sums up your failings the best:

"Chris J, you can not include "˜number of workers per house hold' in your affordability calculations.

As soon as you do you are not comparing apples with apples. All of a sudden it becomes how affordable is a single house for 1.5 ppl to own rather than for a person to own.

Affordability has to be in terms of what a single person can afford. Consistency in methods must be maintained to allow comparable results. "

Household income to house price ratios are currently well above long term average, and no chris_J you can't figure out household income by taking median wage multiplied by average number of incomes per household it does not work that way

I've had a large dose

I've had a large dose of deja vu today.
Its feeling like Spring 03/04 all over again.
Talk of booming house prices again, developer clients talking about projects, a sense of confidence and desperation....

Maybe Infometrics should read this

Maybe Infometrics should read this and then explain how the NZ economy has somehow found a turbo charger to take it away from the rest of the world.

http://www.reuters.com/article/ousiv/idUSTRE5745JP20090805

Sarah, Agree re Chris_J. I

Sarah,

Agree re Chris_J. I think the biggest flaws in his analysis is to

1) compare existing peak affordability with a time when int rates were around 20% (1986)
2) neglect previous periods such as 50s and 60s when rates were a lot lower
3) Not allowing for the major differences between Now and the 80s. We are in a HIGH debt low inflation environment now, a lot harder than a low debt high inflation environment that Chris_J compares us with. During the period 1986 (the MOST unaffordable by his analysis) to 1991 we saw a near doubling of incomes and a near halving of rates. So mortgage payments would have dropped by two thirds in real terms in 5-6 years. Affordability is a LONG TERM concept, not simply a point in time.

Wally : How much gunpowder

Wally : How much gunpowder to get a 7.0 earthquake equivalent ? You are right, of course, Bee-Hive / Parliament : What a wally I am. Cheers !

Walter : Think " Banks/ Politicians / Emissions/ et al " : You must laugh, to hide the pain. Ooh the pain, the pain of it all..........Ooooooooooh !

What's that Big Black Van,

What's that Big Black Van, that's just pulled up outside your place, Roger... ( again !!)

All this talk is just

All this talk is just driving me nuts. I've been following all the property reports/speculation/comments etc and reading everything for a good couple of years now. This "full-on" upcoming boom report just beggars belief. I reckon I might just switch off and wait until housing is affordable again (based on house/income ratios) and then buy a house, rather than get suckered into a lifetime of debt on an overpriced shambles. If it never happens then so be it and i'll continue to rent and save. But we should always keep in mind the theory of mean reversion and, that basically, as the sun sets, the sun also rises. No market defies the cycles forever and ever and ever and ever.

didnt we slow house buying

didnt we slow house buying in 08 because prices where to high along with mortage rates ?

It seems to me that if prices do increase as this predicts and rates continue to climb we will be back in the same postion again where people realise it just aint worth the bucks they want for it.

G Says, "we will be

G Says,

"we will be back in the same postion again where people realise it just aint worth the bucks they want for it.
"

we are still in that position as houses have not properly crashed yet - if prices increase as predicted we would be in a much worse position.

It strikes me as an

It strikes me as an extremely extreme prediction. Think I might toss this prediction in the nonsense basket.

@ G - you are

@ G - you are correct

@ jimmy - agree with you
"we are still in that position as houses have not properly crashed yet - if prices increase as predicted we would be in a much worse position."

... so I am hoping that house prices do move up in the next 1-2 years as this article says because that will give me the opportunity in the next 12-18 mths to hock off my "investment property" in Tauranga to some other poor smuck looking to get rich through property investment.

From negative 30% to positive

From negative 30% to positive 24% in the blink of an eye........ Doom, Gloom, Boom!

Well I heard a quote

Well I heard a quote form Professor Bob Hargreaves on national radio where he referred to the prediction as"very optimistic" in light of growing unemployment here and a stronger economy in Aus luring kiwis back there again, together with rising interest rates
reading the report again, it mentions negative counter balancing factors such as these but then almost seems to ignore them
All the large bolded quotes focus on the positive aspects, none of the negative factors are highlighted
very odd
is it a case of the "expert" telling the client what they want to hear???

sorry to be fair they

sorry to be fair they did highlight the growing unemployment rate in quote, but seem to have largely discounted this influence

This is hilarious. The reaction

This is hilarious.

The reaction to anyone daring to say that house prices are going to go up is always massive, almost like people who hope like hell it isn't true think they can stop it being true by saying it isn't.

Infometrics is dead right. It would take a major policy change by government to prevent this rise, which I can't really see happening.

Anyway, who says house prices are over-inflated? The number one measuring stick is the average wage, and I say that if NZ's productivity improved, it would result in an increase in wages without a corresponding increase in house prices, therefore making houses more affordable.
Why always concentrate on one end of the equation?

TumteTum - I think the

TumteTum - I think the point isn't so much that they have said prices will go up, it is the QUANTUM that they are talking about which seems really unrealistic with all the other factors at play
Property expert Bob Hargreaves has called the prediction "Very optimistic" and even the always bullish Tony Alexander is being very cautious regarding the scale of increases

"....I say that if NZ’s

"....I say that if NZ's productivity improved"
And how is that going to happen if we have to pay more in interest to overseas lenders to pay for the $40bn extra in borrowings to finance the increased 24%??

I think the Infometrics projections

I think the Infometrics projections are probably correct - however what clearly comes out of this report is that as NZ's housing bubble hasn't yet burst AND all of the structral issues are present to help it inflate further - inflate it will. Personally I see this as a warning to sell not buy. NZ has been lucky so far and lessons have not been learnt from other countries. Will NZ remain lucky in future? .... probably not. The mess will just be bigger when the inevitable correction comes. I wonder if the much touted 'responsible 4 pillars' of banking will continue lending though - that's the only wild card that could prevent this scenario becoming reality. Images of Gollum spring to mind.

TumTeTum said: "This is hilarious".

TumTeTum said: "This is hilarious".

It certainly is hilarious - for the banks and other vested interests - because they have a whole load of mugs bidding up the price of some un-productive and often poorly built asset. Yet how can this be? Does 'Kiwi Joe' have another twenty, thirty, forty or fifty grand he can whip out of his pocket to pay for the price increase? Somehow I doubt it. So what drives the new higher price. Of course, the bankers - who have now got some unfortunate individual or family, paying years of additional interest, to buy something whose essential utility is 'worth' no more than it was before the price increase. Housing really has become the biggest heist in history and it is conceivable that it is going to literally bankrupt this country.

i've seen infometrics get it

i've seen infometrics get it wrong before and will no doubt do so in the future.
no matter how many headlines are put out there the actual personal wealth of each kiwi will drive the market ..for better or for worse!
now here's something fresh in from Australia for you all to chew on !
there was a preamble.. but the gist is the Oz banks doing the same there as here by fuelling the property market with low int. easy loans...BUT they are still doing multi-million dollar capital raising efforts to bulk up their reserves.....read on

"The question remains why the banks feel the need to shore up their capital. As we mentioned above, we've been told ad nauseum that Australia's banks are the strongest in the developed world.

Why on earth would they need more capital?

The answer is simple. Like a bear stocking up for winter, the banks are stocking up for the Property Winter of Discontent. You see, it's like this...
Despite what the deflationists have argued, interest rates are on the rise. In the space of three short months the yield on a one-year government bond has risen from 3% to 4%. Longer bonds, such as the five-year have risen from 4.38% to 5.57%.

Is it any wonder that Commonwealth Bank have upped their fixed rate mortgages again?

Do the banks want to raise rates? Probably not. Not when they know the fragile state that many of their borrowers will be in once rates really start rising.

The fact is they've got to. With all the debt floating around on the market, and more to come, the competition for debt issues will be even fiercer this time next year.

Banks will have to offer higher levels of interest in order to attract funds. That will have to filter through to their borrowers. There's no question about that.

The ability to move on interest rates has been helped by their little PR coup on bank fees. It's much easier for them to take a small hit in the pocket now on fees knowing full well they'll have an easy excuse to increase interest rates regardless of what the Reserve Bank of Australia (RBA) does.

Even until recently the economists at the major banks were still singing from the same hymn sheet - "interest rates will fall further." Most of them were calling for a drop to 2% as they told us not to worry about inflation.

All the while the banks were helping to fuel the hot air keeping the property bubble in the air. They've succeeded in suckering in hundreds of thousands of property buyers on the back of artificially low interest rates from the RBA.

Extraordinarily, not a single one of the expert economists at the banks have considered this to be a problem. How could they possibly ignore it?

After all, the low interest rates and government cash bribes have given the property sector a three-in-one boost. A boost that can only result in a bubble.

This triumvirate consists of: people who would have bought into the market now anyway, those that have been delaying a purchase, and those that have brought forward a purchase.

The simple laws of supply and demand tell you that if you're grouping together every potential purchaser from the last five years, today, and the next five years, it has to have an impact on prices.

When demand rises, prices rise. We're not talking a complex scientific formula here.

But still the mainstream media largely ignores it.

The big problem for the banks and the property sector could come as early as next year. With interest rates even 1% higher than today, and no government incentive payouts there will undoubtedly be fewer buyers in the market.

That will be bad news for the banks, especially if home repossessions continue to rise. Don't forget, even in this ultra-low interest rate environment, home repossessions in Victoria at running at over sixty per week.

Think about what it'll be when rates push higher and the cost of servicing loans also increases.

All we can say is that it's a good job the banks are stocking up the cupboards now. We may soon find out whether they've kept enough in reserve to last through the Property Winter of Discontent or not."

that was from our Australian cuzzies....sound familiar.?
i'll bet the room on there being a further upswing and then the whole house of cards will coming sliding down like a bad dream around March next year...round about the time a second global bear market and slump roars out of it's cave!

rock on elves!

You read an articles like

You read an articles like this, then you offset it with something like this one attached (Readers are pushed and pulled by the press, who have a feild day in this kind of economic chaos) A bit of light reading for you all. A slightly different horizon to ponder;

http://seekingalpha.com/article/153555-five-reasons-the-market-could-cra...

@ Jill A clapped out

@ Jill

A clapped out space station remains in orbit from centrifugal forces, our property market is created from frugal forces, hence it will continue - more like the always expanding big bang theory, rather than a bubble pop or what goes up must come down theory. Plain as day just like air, water, food, SHELTER, clothing

From Wikipedia, the free encyclopedia
Frugality is the practice of
acquiring goods and services in a restrained manner, and
resourcefully using already owned economic goods and services, to
achieve a longer term goal.[1]

<i>I say that if NZ’s

I say that if NZ's productivity improved

I actually LOL'd. Increasing productivity is not something we've been troubled with in a long time, certainly not enough to surpass the forecast house price increase.

I think G makes a very valid point - house prices had already got a little wobbly as high interest rates combined with high non-discretionary inflation (fuel and food) in late 2007. Infometrics forecast a return to those high interest rates, which absent a miraculous change in wages should make achieving their forecast house prices essentially impossible.

Prediction strikes me as not

Prediction strikes me as not dis-similar with James Glassmans 'fine' work Dow 36,000 published 1/2000....................

It is usual for optimistic and inspiring predictions to appear between the 1st and 2nd leg down of a collapsing bubble.

I just feel sorry for 1st home buyers being encouraged to buy with prices still beyond economic sense, and evitable interest rate rises on the (near) horizon.

And as an architect, I

And as an architect, I find this nonsense absolutely absurd.
We are paying absurd money for:

1. properties built up to about the 1980s that were generally poorly designed, built and insulated, and will in coming years require a lot of maintenance

2. properties built between the 1980s and 2003 which were often leaky (and we've only touched the surface of the problem)

I would only enter into property if I designed and built my own house.

11% growth in prices over

11% growth in prices over jun 09 - jun 10?

Anyone at infometrics fancy a wager?

Best article of the year

Best article of the year so far. I have not seen comedy like this for a while.

Better realise that NZ works

Better realise that NZ works for our 20 and 30 somethings and our exporters or it works for none of us.

Sarah and Jimmy Both of

Sarah and Jimmy

Both of you seem to have blinkers on - anything not in line with your world view is rubbish is it?

There is no question that current affordability IS NOT EVEN REMOTELY as bad as Bernard and you make out it is. Even if you assume that average household income is still only one average income (which Stats NZ data clearly states that it is not) then current affordability is still better than average over the past 35 years, I clearly outlined this on the previous post and won't bother arguing the point with persons of dubious mathematical ability.

I would have to say that most of the contributors to this post are an absolute bunch of WHINGERS, unable to understand that inflation will always on average be positive. Everyone here seems unable to comprehend that an economy cannot function if there is any prolonged period of deflation - people won't spend money on durable goods if they expect the product to be cheaper next week!

Even if the 24% rise is in the correct ballpark, real house price inflation will only be about 0.8% PA over the five years to 2012, as opposed to an average of 2.6% PA since 1962.

A few of you seem intent that a huge fall in real terms will occur as per the late 1970s. Unfortunately at that time 40,000 houses were being built a year for a population of under 3m and there was mass emigration to Australia occurring simultaneously. Today we see house construction at about 14,000 or less for over 4m residents and positive immigration - it's certainly not the same scenario!! (Note that there were nominal price rises over this period anyway).

I'm not sure why all you gloomsters out there get so hot under the collar as soon as anyone mentions property and profit? If you missed the perfect entry point at the start of this year you might be a little angry (you should really be ANGRY AT BERNARD who misled you) but you should try to get on with it rather than try to blame everyone else (property owners, governments, infometrics or whoever) for your own financial problems.

Now just to rub a little salt in the wounds of those who criticised my comments earlier that if infometrics are right I will make just under $3,000,000 tax free between now and 2012 (that's only if I sit on my hands though!) Not Bad.

Good on ya, Chris-j, And

Good on ya, Chris-j,
And where will you have made that money from, or don't you care....
On that day you will realise that we are ALL only here once. On that day you will recall this site.

Chris_J, you say that inflation

Chris_J, you say that inflation is always on average positive.

I wonder what he Japanese would have to say about that generalisation?

Cheers

Chris_J, your previous analysis was

Chris_J,

your previous analysis was roundly thumped in the other blog, no point flogging a dead horse I guess, you appear to be of small mind.

And to rub my salt in your wound - my index funds have gone up 30% in the last 6 months ... hows property done?? And guess what, it was positively geared from day one, and guess what again, the yields outstrip the borrowing costs AND there is no maintenance, agents fees, rates, insurance, building reports ....... Property is a loser game right now, NZ is full of lemmings, and thats why I and my money has long left the country. Good luck being heavily exposed to an obscenely inflated asset class in the most fragile economy in the OECD!!!

Expat - yeah I would

Expat - yeah I would favour a wager with Infometrics on that prediction too
Matt Nolan - what do you think?

My mind was made up today - approached to buy shares in my company which are averaging a 15% return over the last 10 years
now thats what I call a good investment, forget the "at best" scenario of 5% in property

Here's a thing, Chris-j. If

Here's a thing, Chris-j.
If property increases by 24% the $12m you have in equity ( a guess) plus the $3m = $15m will buy $11.4m of property in today's money ( 76% of $15m). Who's the winner there ? Look like you will have lost $600,000 of purchasing power in the market? Inflation....love it !!

Chris J Here's a link

Chris J
Here's a link to our housing affordability reports
http://www.interest.co.nz/HLA/HLA-NZ-July2009.asp

cheers
Bernard

Chris_J said: "Everyone here seems

Chris_J said: "Everyone here seems unable to comprehend that an economy cannot function if there is any prolonged period of deflation - people won't spend money on durable goods if they expect the product to be cheaper next week"!

Chri_J perhaps you can explain for us the benign deflation of the Victorian era? Could it be, that off an admittedly low base, real incomes rose because Britain was becoming wealthier. In consequence a good or service required less 'units of work' to be affordable. Perhaps you can also explain for us why John Maynard Keynes, in words he attributed to the socialist madman Lenin, pointed out that inflation is the ideal mechanism by which governments can arbitrarily confiscate the wealth of their citizens?

By the way, if the re-inflation trade comes off - and this is by no means certain - I suspect you are being far too conservative with your 'just under $3,000,000 tax free between now and 2012'. (Although it won't be tax free because government will introduce a capital gains tax, by which they will rob you of your actual - but declining general income - to pay for a mere nominal gain on your properties). Within this I think I am alone, in posting at this site, that "the billion dollar Kiwi house is conceivable". The problem is the overall conditions that would unfold in such circumstances do not bear thinking about. Perhaps I can commend to you the seminal classic "When Money Dies: The Nightmare of the Weimar Collapse" by Ian Fergusson. Although long out of print the text is available from the Ludwig von Mises Institute - a must read for the inflation lover!

In conclusion, the western world has built the largest situation of credit dependancy in recorded history. Central to this was the seduction of the gullible via the apparent 'easy riches' of real estate. Under cover thereof it has been possible to launch a huge assault on civil liberties, transform the demographics of Britain, the United States, Europe, and elsewhere, and enslave entire populations to the banking system. Within this the underlying financial pathology must be deflationary - but it looks as though those in charge are going to give Weimar a go. All I hope, and as a migrant I don't have the same attachment to New Zealand as those who were born here, is that you pull back from bankrupting your country before it is too late. A while back the real estate men of a small and very prosperous country had a hugely confident air. People concerned about debt - laughable wingers! Well those attitudes have cost the good people of Iceland their country - don't let it happen here!

Not sure how some of

Not sure how some of you do you math -heard you say 100k deposit matt?, 100 down on a 500k house with 24% growth = 120k profit in 3 yrs, might reconsider that 5% eh

It's easy making "money", buyerin

It's easy making "money", buyerin chch. And in 3 years time what will that $620k buy you. Answer: the same house, except it's older. Malcolm has expressed it far better than I am able, above. Money, in itself, has no value. It is merely a mechanism for the exchange of goods and services.

Jimmy You would need to

Jimmy

You would need to be completely financially illiterate to believe that a 30% gain over a 6 month period is a return that is likely to be repeated by an index fund over another 6 month period any time soon.

Positively geared - I hope you haven't leveraged yourself into an index fund!

I'm also afraid that a few fools making negative comments about statistical facts doesn't disprove them!

However it amuses me that you think that passive managed funds are your path to riches. I think you know that I was previously an investment analyst at a large multi-national fund manager (I mentioned it on a previous post), so it's definitely not that I think equity investment is bad (you've got to remember a good chunk of your equity portfolio is probably invested in commercial property anyway!)

All I can say is that you (and others) just don't understand why people buy property as an investment.

Huge capital gains can be made buying the right property at the right price even if the market is falling. I've had properties increase 10,000% in value over the boom. But even properties I purchased in 2008 are up 50%. On top of that they produce regular income which is essentially inflation indexed.

If you can make your fortune in a passive index fund (the investment of choice for old people who know nothing about investment markets) then good luck!! However I would be surprised if you have enough income from your investment to retire by the time you are 65 if you are relying entirely on managed fund returns.

For those of you who are not aware, I deal in my property businesses, so I am probably biased, but I am not aware of many other industries where you can have high 7 figure net worth by the time you are thirty without doing anything unique.

30? A long way to

30? A long way to go from there, Chris-j. And it's not down hill. Good luck. ( seriously)

Bernard I've done a similar

Bernard

I've done a similar calculation with numbers back to 1974 (as on the other post I linked to earlier in this blog).

Making comparisons over such short time frames, as you have done misses the point that 2001 was a time where properties were exceptionally affordable relative to the past 35 years which is why the boom occurred when it did.

Real house prices have been growing at around 2.6%PA for 47 years - why would there be any expectation real returns will turn negative?

And even if they were I would still be better off owning property assets than not owning them - by the time I reach retirement age inflation in the RBNZ's target range would've nearly tripled prices! (Or cut my debt by 65%!)

I find it curious that

I find it curious that this Infometrics report has come out making these claims when one of the company's senior economists Gareth Morgan has been talking doom and gloom for property for a while now...
how does that stack up???????????
Answers please

Matt Nolan Says: Also for

Matt Nolan Says:
Also for people wondering what has changed over the last two years to make house price growth stronger now lets say that the intense lack of building, extreme loosening in monetary policy, lack of movement on structural imbalances, and sharp increase in net migration are pretty significant factors "¦

before the last election this is what "the landlord Says noted

"Meanwhile the National Party released its immigration policy. You may wonder what this means for the property market. It is clear from research that immigration is one of the key drivers of house price growth.

The logic is simple. If you import more people into the country, then you need more houses. Supply and demand means that prices are then pushed up, this is particularly so in Auckland.

While the latest immigration numbers show the number of people coming into New Zealand is starting to rise, the Nat's policy looks like it wants to increase immigration levels even further. (Although it is unclear what sort of number they are targeting.)
This policy is, arguably, a plus for people who want house prices to rise. (But may be not so good for first home owners wanting to buy.)

My guess has always been that property investors lean heavily towards the right rather than the left. (This was made clear in an email newsletter I saw from one developer this week.)

The two policies out this week do nothing to change that view."
http://www.landlords.co.nz/blog/heat-rising-in-housing-policy

Never heard of Tony benn , but I looked him up:

"Five questions Benn insists should be asked of any powerful person: "What power have you got? Where did you get it from? In whose interests do you use it? To whom are you accountable? How do we get rid of you?"

Harriet Not sure that your

Harriet

Not sure that your maths is quite right - on your theory purchasing power should be the same (divide by (1+0.24) not multiply by (1-0.24)).

But anyway I will be better off because even if we assume that I pay off no extra mortgage (which I will since I'm fixed at under 6% and the portfolio returns about 15% cashflow at present) then my mortgage will be the same but total assets will be up $3m, hence my equity is up $3m.

So the way I look at it I'll be up the $3m.

Chris_J, I think you are

Chris_J, I think you are to be commended if you have done well for yourself in property. Yet, herein lies the problem. As Keynes noted, inflation is a process that impoverishes many whilst enriching some. I don't do 'the tall poppy syndrome' but I am an advocate of sound money - which must mitigate against the 'riches for all from property mantra'. Also, I think it is essential to understand that the abandonment of sound money is, in effect, an assault on property rights. This is disguised by the illusory - and temporary - prosperity that appears to flow from the new ability to will 'house price elevating money' into existence. Yet it is the thin edge of the wedge. Your property rights - substantially established by England's King Alfred the Great - repose upon a very different set of values (including the specific proscription of usury) than the ideas that are emerging today. Middle class incomes have been literally plundered via taxation etc in recent years. What will bankrupt governments come after next? I conclude with some Keynes - the inflator's friend!

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity (or fairness) of the existing distribution of wealth.

As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of Society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose".

Malcolm I'm not an expert

Malcolm

I'm not an expert in economic history, but clearly the industrial revolution could be responsible for periods of deflation in the Victorian era, much like production improvements deflated the cost of electronic goods, motor vehicles and air travel etc over the past 50 years.

In reality with central bankers having control of money supply today, it is unlikely that deflation would ever be allowed to occur over any prolonged time period. Indeed with the RBNZ required to keep inflation above 1%PA, I can't see how anyone expects that house prices have reached some historic peak from which they will now fall in real terms.

Obviously I don't think Weimar inflation follows from talking about 1-3% CPI inflation.

Prices will rise, inflation will be modest but will enrich those with debt (slowly), equity assets will grow with inflation and those with cash assets will be no worse off than they have been by investing in this asset class over the recent past.

The sky isn't about to fall in.

I would like to know

I would like to know what the contract is in cases like this.

If I buy a TV and it's no good in 6 months, I ask for a refund.

What's the situation in this case?

I think we'll all remember

I think we'll all remember this blog as the day Infometrics mislead the country.

A 24% rise in property, all be it over three years, at this time is as likely as ....... we'll I say it's unimaginable unless Infometrics knows about a series a nuclear power generators blowing up over europe forcing mass relocation of a population.

Reality is clear and this is a carrot leading the donkey fable.

"no good"? I think they

"no good"?

I think they probably have the option of fixing or replacing the product unless its not fit for purpose then you'd have a claim to a refund.

Try Consumer magazine.

Chris_J: The thing to remember

Chris_J: The thing to remember about the Weimar experience is that it was a currency event - as hyperinflation always is. I guess the fundamental question for New Zealand is will foreigners continue to support our excess of spending over productive output indefinitely - or will great nasties happen to the currency at some point? I certainly hope the benign scenario you suggest plays out - better for everyone, but I am suspicious we are being set up for an Iceland/Ireland/Latvia situation. Can't help thinking there is the smell of desperation over this property 'reflation issue'. Bit like the Bank of England with all that quantitative easing. All logic leads me to conclude that we are going to see inflation - but the ideas of the deflationist Robert Pretcher nag away at the back of my mind! Time will tell I guess - certainly no point losing sleep over it but I think it is always worth considering the alternative commentators point of view.

The District Plan caused housing

The District Plan caused housing shortage in Auckland is understated:

Apartments are now unbuildable in CBD (until prices rise over 50%)
Apartments are now unbuildable in Newmarket (until prices double)
No development allowed in Res 1 or 2 (being most residential land within 3 km's of CBD)
Infill housing now against Council policy
Council expect major future residential development to occur in the new Res 8 zone with a notified Resource Consent - which I don't believe anyone has yet been rich or stupid enough to attempt.

Population increasing - new dwellings banned, of course prices will go up.

"Prudence, indeed, will dictate that

"Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."

I have to say I think the Declaration of Independence beats the c#%p out of Te Tiriti o Waitangi as a founding document for a nation. Seems about time Kiwis woke up, got a bit grumpy about the parlous state of things and got ready to kick some a@#$ down in Wellington. If ever there was a time for some real leadership this is it!

"but I am suspicious we

"but I am suspicious we are being set up for an Iceland/Ireland/Latvia situation."

Yes it is a thought that has crossed my mind also. Only needs a Soro's to take a position and I would not be confident of NZ weathering that kind of storm.

I still believe that any popping of the NZ credit/property bubble will come from off-shore origins as property is so ingrained in NZer's minds that its not something that is going to be given up or forgotten.

Chris_J said... <i>I’m also afraid

Chris_J said...
I'm also afraid that a few fools making negative comments about statistical facts doesn't disprove them!

So, I am one of those few fools, huh? Let me explain, this. Lots of analysts (including yourself, when you were a fund manager) use commercial tool for analysis (perhaps Excel or something else). All they require to know is what data to throw in (input to the model), then press a button and there pops the outputs. Ok, may be the analyst fiddles around with certain model parameters (tuning), but it wouldn't change the fact that the analyst knows nothing at all of how the output was computed. He/she knows the model name/s which they're available in the user-guide that came with the software tool, but still knowing the model name/s doesn't mean that they know how those models do their calculation (since they're often very complex).

Here are some statistical facts, which probably elude you (even though you have been working with a statistical commercial tool all your life).

#1) Most commercial tools only have linear models available , so many analysts thought that there is all to it. Sometimes (or most of the times I say), the analyst isn't aware that there is such thing called non-linear relationships and the real world of economics/finance is non-linear and this is fact. Linear models work to a certain degree (good approximation at first), but they largely fail due to its inability to capture non-linear relationship in the data. So, when you see statistical so called facts produced from linear models one shouldn't endorse it in a religious manner.

#2) There are different linear algorithms & techniques that are available today in the literatures and some analyst know only 3 or 4, since those are the ones available in their tools. Those techniques will have different predictive capabilities, where if you feed in the same dataset, each will produce different outputs. The ones with least errors are the best ones. But these advanced techniques still eludes most analyst and that's Ok, since their job is to analyze data using a readily available (commercial) tool, rather than implementing new techniques of their own which are more accurate. There is exception here for some research economists, where they develop their own algorithms themselves. The technique that I mentioned in a previous message, named PCA which is one of the techniques used by Infometrics and it is a linear technique. I would use it for simple data-analysis, but I wouldn't use it for forecasting because of its limitation. There is a non-linear version of PCA (NL-PCA) which is more accurate than the linear PCA and I am not sure if Infometric is aware of the existence of NL-PCA. There are also tons of non-linear analytical methods which are available today from the literatures.

#3) The model is only good as the analyst's assumptions of what economic predictors that drive an economic response variable. You make wrong assumptions and your model outputs produced questionable results. Again, if you feed in the model with irrelevant variables that shouldn't be included, then you get questionable results. Similarly, if you missed including a/some variable/s that is/are suppose to be influential in driving the economic variable you're trying to model, you will then end up getting questionable results. So, you get questionable results despite they're being produced by the model and made out as statistical facts.

#4) Most commercial tools only have static analytical techniques available. The real world is not static but it is dynamic, so this is the shortfall of static data analysis which is prone to errors. Static analysis cannot capture the nature of evolving datasets (economic data is evolving - ie, they're time-dependent) , so feedback effect cannot be modelled at all.

Statistical facts are not the same thing as model inaccuracies or model deficiencies. One can still get statistical facts by using inaccurate models and I think that this is reason why some on this thread are raising doubts, not because they know modelling but because they feel that something is not right about the report. Readers are correct to be concerned.

fella fulla fisi that was

fella fulla fisi that was potentially the most boring post I've ever read on this site.

Another malcolm- I agree, interest

Another malcolm-

I agree, interest rates can only go up from here to attract offshore funding for the NZ debt mountain and with it the dollar will stay high or even rise (and fall). Making for a high $ that reduces the competitiveness of exporters and reduces the number of dollars coming back into the country to pay the pipers.

A breeding ground for currency speculators playing the volatility of the countries economy via the currency, who knows we may see the dollar bought higher as in 2007/2008 and then dumped which reduces liquidity and confidence in the country and currency.

IMHO, there really is no realistic scenario where interest rates stay low and credit is easy

But hey, what do I know?

Ben said... <i>fella fulla fisi

Ben said...
fella fulla fisi that was potentially the most boring post I've ever read on this site.

You know how to skip reading a post don't you? My reply to Chris_J and not you. He raised some doubts about other doubters about him and I corrected him.

and another thought- Whats the

and another thought-

Whats the probablity of 11% growth Jun 09 to Jun 10 (even if you assume that June 09 was 'the bottom' and that there will be positive but sub 1% growth each month for 12 months)? Can't be too flash.

Then over the next 2 years a growth rate of just shy of 6% is needed to hit 24% by 2012.

Effectively this must be the best case scenario where there is a rebound this year and then flat for 2 years.

The worst case scenarion must start with a continuation of the current downward (albeit decelarating) trend for this winter with a flat spring pre xmas sales season.

Another jawboning of the market by the industry by the industry.

It would be interesting to see if Infometrics produced different scenarios with probabilities attchaced to each.

Wonder if the client will release that info?

Anyone willing to ask them? Alex, Bernard?

so, -5% this year, 3%

so, -5% this year, 3% next, 3% the year after brings the grand total to about evens 2012.

Chris_J "You would need to

Chris_J

"You would need to be completely financially illiterate to believe that a 30% gain over a 6 month period is a return that is likely to be repeated by an index fund over another 6 month period any time soon."

Kind of similar to believing that it is possible for household debt to triple again relative to inflation to give property similar returns over the next 20 years??? I'll tell you what, bet you the ASX index fund goes up another 24% before property does (except of course the property that you made 10,000% on - lol. Are your stats to back this up as good as your ones on the other blog?????? ha ha).

"Positively geared - I hope you haven't leveraged yourself into an index fund!
"

Why not - they are relatively free of the "fees for nothing" gravvy train that is the funds management industry that you claim to have been a part of. They are also very easy to trade, I can sell them straight away if i want. Property investment is for old timers, those who enjoy making big cash losses and nill capital gains - after all its bricks and mortar and you cant go wrong. I have also had some excellent results on individual shares, especially being able to take advantage of capital raisings that allow an immediate 20% gain based on the discount prices. (I am now positioning to buy a few shares for 500.00 each that a reliable source tells me will be lookign to do some capital raising over the next month ... I cant tell you which ones though Chris, its a secret of the pros.)

Wouldn't it be great if

Wouldn't it be great if those producing all these report and giving this great advice could also disclose their vested interest in the property market.

At the bottom of these report it said..."report produced by xyz - $1.4 million presently invested in property with only $300k equity", or "ASB Economist - ASB has 1.6 zillion invested in NZ Property."

Would we them consider them impartial?

Bit like signing their own death warrant otherwise.

Scream all you like but

Scream all you like but the govt will not lift a finger to prevent families being sucked into debt due to unaffordable property. The media by and large are also keen to pork another bubble to cream off extra advertising cash. The RE liars are in there boots and all. The banks learned NOTHING from the last 5 years and once again display a 'couldn't give a stuff' attitude about family debt levels or the NZ economy. Infometrics report is being used already to pork another bubble. Bollard has said nothing. Key has said nothing. English has said nothing. Get the message?

Some light relief! The number

Some light relief!
The number of people with something to say about house prices rose by 15% in July, according to a report by the Institute of Chartered House Price Opinion Surveyors.

(IMG:http://www.thedailymash.co.uk/images/stories/graphx.jpg)
House price opinions rose sharply in early July after everyone finally agreed that Michael Jackson was just a sad weirdo
According to the report the most popular opinion about house prices is still 'of course, it was bound to happen', said in a knowing tone by someone with £250,000 worth of negative equity.

But running a close second is 'property will always be a good investment', currently being offered by some f...er sipping Chablis who has decided it is okay to start sounding smug again.

House price opinion consultant Peter Stamp said: "This is welcome news but we do really need some new points of view if the house opinion market is going return to 2008's pinnacle of meaningless bullshit and wishful thinking.

"Personally I'd like to see more people saying things like 'the way forward is to buy bungalows made of pork', or 'I think prices are driven by the mating habits of cockles'."

He added: "It's these kind of fresh perspectives which, while still total bullshit, are slightly less face-meltingly tedious than the current offerings being touted at semi-ironic North London fondue parties."

But despite the encouraging figures, many would-be first-time house price opinion holders believe the government should do more to help them onto the first rung of the property opinion ladder.

Teacher Mark Scholes has been trying to think of something to say about houses since last June. He added: "I've been renting 'buy-to-let is still pushing up values' but I think it's time I had my own thing to say about house prices.

"Unfortunately my bank manager said I don't earn enough to qualify for a valid opinion."

Chris_J: "All this just because

Chris_J: "All this just because you were hoping for a further 10% price fall" I think thats in-accurate and un-fair....its not a case of "hoping" its a case of examining the fundimentals and concluding the market is over-priced, there is therefore a risk that there could be a 40% fall to take it back to the "magic" 3.5 earnings ratio. This I believe was not "hope" on Bernard's part, certainly not mine, its risk management....spot the risk, quantify it and decide how to respond/act....its like gambling you bet on which horse is going to finish 1st....just because you won does not make your pick correct in terms of logic or risk....you were lucky....and as with luck sooner or later you lose.

Also I think the projection is/was greater than another 10%, in effect it hardly dropped......

I still think the market is insane....and by this I mean not just the housing market but the financial as well....I'd suggest a history course on the Great Depression, briefly everyone madly bought shares as they "could not lose" so the market went up and up until it collapsed and what a ride down that was.

People gambled and bought, a mortgage is for 25 years not 5.....its quite probable that sometime within the next 10 years we will see mortgage rates above 15% possibly 20%......will people be able to finance a mortgage bill 3 times what they are paying today? Rents right now hardly cover the interest rates...what about when the rate is 18% and not 6%?

To me running on luck over a protacted period with likely high inflation and energy shortages in that time frame is insane.....

regards

Isn’t it sad that we

Isn't it sad that we don't have as much to say on real issues ... like the number of children that die in NZ at the hand of their care-givers/parents - or their silent but watchful neighbours. Perhaps all NZ's social problems could be solved by unravelling the logic of house prices. You'd certainly think so judging by the "˜concern' expressed here.

Sorry SharonV, housing affordablity is

Sorry SharonV, housing affordablity is a VERY REAL issue
If prices go up significantly again, major centres like Auckland will struggle to attarct necessary workers like police, firemen, teachers, nurses. Thats a very real issue.
Not to mention the potentially catostrophic economic effects that could folow another housing bubble crash.
Remember too that exorbitant house prices place great pressure on households and marriages, this is hardly discussed, I'm sure its a factor in high divorce rates

sharonv - I agree, 144

sharonv - I agree, 144 comments thus far, I'm always surprised how passionate people get with opinions on house prices and not other matters.

and now for my two

and now for my two bits anyway.....

I'm not saying it would be a good thing, but people saying it can't happen need to remember the median house price is already up 5% for the first half of this year, 2 more years of that and you'll have your 24%. First home buyers at around 10% of the market don't make a big enough impact for their affordability levels to control things, otherwise prices would never have got to where they are already.
After a 5 year boom, I was expecting 5 years of sideways movements, but then as I've mentioned before, immigration & population growth (demand) didn't go negative for 3 years like last time and new house starts (supply) have got far worse than last time. In this regard the credit crunch may end up having the opposite effect to what most people were predicting.
Sure, unemployment may hit 8%, but it was coming off historic lows and was still at 4% at the height of the last boom. It maybe adds another 2% to the 10% of FHBs that have affordabilty issues, but still not a huge impact. Most of us still have incomes and/or equity and can easily buy another property if we wish.

Murray &amp; Sharonv, to a

Murray & Sharonv, to a large extent the consequences of massive household debt for families, contributes to the violence and problems you both alude to. Sadly we now know this govt has no intention of being proactive in saving families from the dire consequences of huge debt burdens. It will be left to the banks to harvest the profits from their 'investments' for the next fifty years and for Kiwi families to struggle on or die. I suspect we are not far off seeing a violent response from some of the worst off.

Olly Newland said on radio

Olly Newland said on radio this morning that he thinks the turnaround that has happened lately is remarkable - he wrote "The day the bubble bursts" and he had to update and produce an expanded second edition. Perhaps now a 3rd edition with a new cover - "The next property boom is here!"

Even Olly said several things this morning that indicate he feels Infometrics are more likely to be right than wrong. He seems to think high inflation will be a major factor and that interest rates are still low.

Barfoots have 50 auctions in their rooms from 9.30am today - if anyone wants to see how the market is looking that's the place to be today.

The next item on the radio was about increasing interest rates and the expectation that fixed term rates will soon be over 10% - so how can Infometrics prediction come true with interest rates that high and rising unemployment?

"he feels Infometrics are more

"he feels Infometrics are more likely to be right than wrong", if Olly Newland is correct, then this country is stuffed. Even a moron has the intelligence to see the household debt levels must be brought down and investment must be directed into export oriented productive areas. I say again, we are stuck with a govt that doesn't give a stuff about the plight of Kiwi families nor are they in the least concerned at throttling the residential property bubble.
Please, if the ratings agencies are reading this, intervene and do it quickly because our own politicians will not do what must be done.

In all our general equilibrium

In all our general equilibrium simulations, aggregate indebtedness of the economy
declines with the introduction of a land/property tax, essentially because New Zealanders
borrow less to finance domestic property holdings. At a conceptual level, the value of
New Zealanders' housing assets and liabilities fall but, at the margin, the liabilities are
sourced from foreign savers and a land/property tax reduces the amount of foreign capital
that must be borrowed to fund domestic property.

Andrew Coleman & Arthur Grimes*
Paper presented to Tax Session, New Zealand Association of Economists
July 2009

I suspect that anyone who

I suspect that anyone who has their house up for auction today will have called their salesperson and increased their reserve price and the buyers will simply increase their bids to compensate!

These items in this mornings Herald:

"Auckland house prices tipped to rocket"

Infometrics' predictions on Auckland median house prices
* 2009: $440,000
* 2010: $483,200
* 2011: $506,700
* 2012: $553,000

NZ median house prices
* 2009: $339,200
* 2010: $376,200
* 2011: $391,400
* 2012: $419,400

Steven Glucina, a Ponsonby real estate agent at LJ Hooker, said the market was very active. "I sold a two-bedroom do-up villa at 61 Pine Street, Balmoral under the hammer on Saturday for $679,000, which was $109,000 over the council valuation.

"The market in this area is red hot at the moment. I have seen over 1,000 buyers visiting open homes in Pine Street in the past 3 months. I have never been so busy in over 12 years in real estate!"

www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10590127

Matt - I agree totally

Matt - I agree totally agree and as a young person you've got the rough end of the stick. Do we have any other choices but to play the game and not be the last man standing (relying on someone else to take the fall)? NZ'ers more than anywhere else think they're not only good at the game but can win to boot. There is something profoundly disturbing in this.

24% nominal gains in the

24% nominal gains in the 3 years to mid 2012 doesn't sound that disturbing. Given house prices are down 10% over the last 2 years, and assuming inflation of 2% a year, this will mean real prices will have gone nowhere for 5 years. Plenty of time for aspiring FHBs to save up a decent deposit.

Matthew - you are quite

Matthew - you are quite correct with your "real" price calculations, and this is where people get lost looking at nominal values and ignoring inflation.

Real Estate Agent - no one will take you seriously with a name like that ;) but yes, many folks here spend too much time blogging & reading articles and haven't got a clue what's going on out in the real world. Go to some auctiions, go to some open homes, put in some offers (as low as you like!) and then come back and tell me how it's dead quiet and things are plummeting!

Wally - "to a large extent the consequences of massive household debt for families, contributes to the violence and problems you both alude to"

People that bash their kids will do so whether house prices are $10,000 or $1million dollars. They often have no assets so don't give a stuff about asset prices or debt ratios. They also have a house provided by the government, for which they pay 25% of income also provided by the government. I agreed with Muriel Newman when she was with Act, the way forward in that area is to get those people working and having some goals in life - it's a fact that people who are busy working get in less trouble.

That said, I have to get going and do my jobs for the day.....

An economic forecast and what

An economic forecast and what a reaction!!!

Possibly they modelled a dip and then coming back from a lower base with inflation kicking in six months to get the cumulated increase above 20% over three years.

They have a head start with the bounce back this year, with high inflation, which is a fair assumption, it may be possible assuming no ratings downgrade or additional economic shocks.

I would call it an economic shock and aw of the worst kind.

i don't care anymore !

i don't care anymore !

“The market in this area

"The market in this area is red hot at the moment. I have seen over 1,000 buyers visiting open homes in Pine Street in the past 3 months. I have never been so busy in over 12 years in real estate!"

I remember Gareth Morgan saying how property owners had had a wopping (300%?) tax free gain over x no. of years. Some of that has been lost and people at the margins are in negative equity but a lot will be bullish and buying, so we can see home ownership being concentrated in fewer and fewer hands.

This is the time when real estate agents buy iconic properties and take trips on Virgin space flights.

Rob of the North: "i

Rob of the North:

"i don't care anymore !"

yeah I'm starting to feel that way too

Life's too short to worry about this

Young kiwis just need to get resigned to the fact that many of us will be renters, like in Europe

I'll bet infometrics are no

I'll bet infometrics are no longer looking for a re-capitalisation loan......lick lick. Cheap shot I know , but Jeeeeeesus come on how did the stupid media even give that air..? oh that's right , they own property too....lick lick.

Oh and before I get any shite from T.A. lickers I have no shortage of property but still firmly believe a serious adjustment to values was required for the next generations FUTURES sake. ......No apologies for that.

Interesting how all this media

Interesting how all this media hoopla and infomet blah has hit the headlines at the same time that interest rates and unemployment are rising. Just a coincidence, right?
Or is it an organised orchestrated effort by the RE liars and other 'stakeholders' to limit the crash?

couldn't leave you-all without some

couldn't leave you-all without some smoko to chew on so this, fresh in from todays Herald...shudder when you read the laaaaaaaaaaaaaaaast para....oooooooh...scary stuff, investors !

"A tax expert group has been meeting to consider reform of the tax system and Mr English told journalists that he had an open mind.

Mr English said straight cuts to income tax were just not possible in the current economic climate, with the Government facing years of deficit and ballooning debt.

Asked if he might consider raising GST in order to cut income tax, Mr English said again he would not rule it out.

He also indicated he was more open-minded about implementing a capital gains tax.

Mathew "24% nominal gains in

Mathew "24% nominal gains in the 3 years to mid 2012 doesn't sound that disturbing. Given house prices are down 10% over the last 2 years, and assuming inflation of 2% a year, this will mean real prices will have gone nowhere for 5 years. Plenty of time for aspiring FHBs to save up a decent deposit."

This comment makes sence to me. I just want to adjust the inflation rate a bit.
This year the inflation is about 2%;
2010, the inflation will be about 4%
2011, the inflation rate will be roughly 5%(best guess).

That means in three years time, the real house price may not even back to 2007 peak price.

Good debate, chaps and chapesses.

Good debate, chaps and chapesses. Although the usual suspects and dead horses are dragged out yet again. Sigh.

There has been very little said aboot Supply of housing, as a quick Ctrl-F on this thread will show. And the dirty little secret is that one should not regard the existing housing stock as fixed. It is degrading constantly, and quite a percentage will be entering the twilight zone where the rate of degradation is racing well ahead of any reasonable remediation possibilities.

No matter how many Batts one stuffs into the crevices.

And those earnest types who seem to keep banging on aboot 'demand moderation' are making a hell of an assumption: that demand is wholely constrained by local employment conditions, local wages, and local credit availability.

It ain't.

One third of homeowners have zero debt. They could have a rush of blood to the head tomorrow and buy up a hovel or three. Especially if inflation expectations are stoked up by ticket-clippers such as those quoted in the Article.

NZ is a 'haven' destination, which brings many cashed-up people wiv funny accents to our fair shores. Listen to said accents at yer local mall for corroboration of this here statement. A hovel in Kent buys a fine four-bedder here.

So, as in most of life, there are indeed simple answers to complex issues. And, as in life, they're mostly all wrong.

I agree totally with Bernard's warning note above. The real issue is that in securing our futures via a narrow focus on the relatively unproductive investment vehicle of housing, we blow our chances of the top half of the OECD. Or whatever yardstick of the future.

But those who howl fer the pollies to Do Something are equally deluded. Turkeys don't vote for Thanksgiving, and the voting populace at large are well into the Housing Dream. A tweak here and there to lop off the more ludicrous Perverse Incentives, is aboot all we can reasonably hope for from a Gummint.

But y'all may care to hone yer arguments in rehearsal for the upcoming Taxation Review. That will take real dedication and a working knowledge of the nuts and bolts of an Economy.

Because, Rants don't play well in front of Experts.

Waymad.................liked it.

Waymad.................liked it.

"told journalists that he had

"told journalists that he had an open mind" so what? It does not mean he is going to change the tax structure in a way that will hammer the property speculators, especially when most if not all of them are National rump to the core. And how would a CGT sit with the govts prospective wealthy immigrants that Key is desperate to entice out to Noddyland. Dam sure I wouldn't come trotting down here to the 'Ireland of the South Seas' with my capital, knowing a CGT was soon be dumped on me.

Wally, countries don't enter Beauty

Wally, countries don't enter Beauty contests. The game is an Ugly contest. Least Ugly wins. By that score, NZ is amongst the least ugly.

We, unlike the US, don't have a Gummint which is run by a young Community Organiser fresh from the Chicago Democrat Machine. With trillions of freshly minted pesos to spend, but only on the Favoured Classes. And a rampant Giant Vampire Squid on the loose.

We don't have cities wracked by barely contained unrest, like Britain and Europe.

We don't have entire continents run by kleptocrats. Like Africa.

I could bang on, but you may be receiving the point aboot now.

Compared to most everywhere else, we are amongst the Least Ugly. After all, as they used to say aboot the Woikers Paradise (Cuba) - Ok, but which way are the boats pointed?

SharonV - you are right

SharonV - you are right the lower socio's have some very hard choices:

Smokes, wacky backy, Lotto, the pokies, alcohol, food for the numerous bull terriers
or
Weetbix for each kid in the morning, a raincoat, shoes, a cut lunch

It's obvious where many put their priorities - otherwise why did we need to raise $2,000,000 from a Telethon for the items on the second list. www.bignightin.co.nz/programmes.html#raincoats

Housing price increases further separate

Housing price increases further separate the affluent from those at the bottom and is socially destabilizing. That shrinking lot in the middle will spend their lives in servitude. Hardly what could be called human, or sustainable for a society.

Just out of interest I'd

Just out of interest I'd like to hear thoughts on what(in an ideal world) longterm property growth SHOULD be compared to what it has been - i.e is it really that excessive over the last 30 years or has wage growth just been unable to keep up with property growth.

Should be same as inflation

Should be same as inflation as what it provides (shelter) does not change over time.

Any increase over and above inflation in home values can be attriuted to improvements or new homes being built, but if your house remained in the same state over time then you shouldn't expect to get any increase over inflation.

Like a lot of things speculation causes value cycles (look at oil), where the prospect of 20% capital gains makes the price skyrocket (last 10 years), followed by price plunges as the priced in value is lost (next 10 years).

In NZ house constuction has exceeded population growth over the long term, so the idea of shortages based on current levels of construction is not fair.

Prices can still go up for short spells in the next 10 years, but in general property will lose relative value by increasing below the long term 'inflation + improvements' rate.

@ Alex Tarrant Alex can

@ Alex Tarrant

Alex can you find out and come back to us on why the 1 and 2 years swaps have spiked so drastically over the last day in particular? Both swap rates have now exceeded there April highs but I don't understand what would be driving them up like this. Is it as someone said in a previous blog that the banks are somehow manipulating them? Over the last week we have seen two big spike days for these 1 and 2 year swap rates and the latest spike has seen the 1-year close in on 3.20% and the 2-year close in on 4.20%. What gives?

Is something wrong with the

Is something wrong with the maths? If a third of people are mortgage free, mostly I presume older on a high level of fixed income and being hammered by low interest rates; and a third are renters, mostly younger potential first home buyers; why is all the concern by the powers that be directed at the third with mortgages? Is it because so many in Parliament obviously are geared into the property market and is it because the banks know any meaningful correction in property prices will wipe them out like in the US and Britain. Why are not the other 66% of the population on the streets with pitch forks. Maybe a Grey Power riot on the steps of the Beehive or a first home buyers riot down Queen Street is what is needed to wake the the cozy insulated elite in this country up. There is nothing wrong with the property ladder except when the rungs get too far apart and too many can't even get on the bottom rung. I don't know how people live in Auckland on less than $120-150,000 let alone $30-50,000. I bought a 3 bedroom house in Mt Roskill 13 years ago for $120k and sold it 5 years later for $185k, then bought a Ponsonby villa for $400k and thought I was so clever when the price went to $800k in 7 years. But sitting on a property in a bubble market isn't clever, its lucky. I realised how insane things had become when we sold the villa and realised more in tax free capital gains than I got for selling a profitable business that I had worked 80-100 hours a week in for the same time, paid huge amounts of tax on my income and paper profits, and provided employment for 10 people. I sat back and thought after all that work I was stupid. People were making money for nothing on a rapidly rising property market while small business owners provided tax and employment, effectively subsidising the speculators. Thats the problem with the property market and the tax system. It rewards the wrong things. If the government here and elsewhere doesn't make changes to reward the prudent and hardworking, and stop rewarding the rampant speculation and the cronyism, there will be an explosion. If the middle class in this country ever wake up - look out John Key, Bill English, Alan Bollard et al

Steve K, "so many in

Steve K, "so many in Parliament obviously are geared into the property market and the banks know any meaningful correction in property prices will wipe them out "
Yep, that's Noddyland alright. Sure is set for some hum dinger bloody riots in the big cities. Happened in 31 and this time will be a dam sight worse.

Well said steve K. Respect

Well said steve K. Respect to you for earning a living with your business and adding true value to this country that can justify a sustained increase in our standard of living.

And the idea that you got a greater reward for simply buying and holding a property for 7 years shows how far out of wack things have been.

Maybe if government provided huge tax benefits to any business that proved competitive/successful overseas then that would cause some of this manic money in property to flow into more productive sectors.

Modoff lasted 20 years defying fundamentals by collecting/recruiting fresh cash to buy into the concept of high returns:

"Madoff was arrested in December for allegedly running a $50- billion pyramid "Ponzi" scheme, under which he paid handsome dividends to investors over 20 years by continually collecting fresh funds from new clients."

Ponzi schemes only work while the cycle constantly feeds upward, when it stops watch out. It will ofcorse be the new-est, freshest property owners that get hurt the most

CBS68, http://www.interest.co

CBS68,

http://www.interest.co.nz/news/pending-flood-mortgage-fixing-may-drive-r...

They did dip very slightly today by a couple of bps, but...

Swap rates can rise as people move off floating to fixed rate mortgages. Banks move to 'hedge' themselves against this risk - they are now getting fixed income from the customer instead of variable, so they want to make fixed payments to the market.

More people moving to say, two year fixed = more bank demand to hedge via two year swaps = price (two year swap rate) goes up. (increased demand for something pushes the price up)

Cheers

Alex

"But sitting on a property

"But sitting on a property in a bubble market isn't clever, its lucky. I realised how insane things had become when we sold the villa and realised more in tax free capital gains than I got for selling a profitable business that I had worked 80-100 hours a week in for the same time, paid huge amounts of tax on my income and paper profits, and provided employment for 10 people.'

I was surprised to hear the same thing from the ex owner of a smallish transport company in Southland. He said he made more money from selling his house in Queenstown than he ever made from his sheep trucks.

Yes, well said Steve K

Yes, well said Steve K I couldn't agree more.

Meanwhile Gov it's 'Business as usual dispite current difficulties" !

The Government has to check

The Government has to check it out with these people?:

Marian Hobbs

22 September, 2000
Property Council of NZ, National Conference 2000, Tauranga

First, I would like to thank the Council for the invitation to attend today.

Secondly I would like to acknowledge the importance of the sector and the size of the interests that the Council represents;

* 20 corporate members
* $14 billion of assets, and
* Contributes significantly, through rates to the functions of Local Government.
http://www.beehive.govt.nz/speech/property+council+nz+national+conferenc...

"Tonight, a pumped de Roos

"Tonight, a pumped de Roos tells his audience that he wants people to invest in property and write to him 12 months down the track and tell him they've "made one million or three million, or you've got 16 properties, or we're taking six months off because our cash flow now exceeds our outflow!" He says, "I don't know any other activity where the rewards are so huge. If you want to invest a million dollars in the sharemarket, you need a million dollars. If you want to invest a million in real estate, you only need $100,000."

You can buy one property, get it revalued, use the equity to buy another property and then buy another and another. "And you do it all with OPM. Other people's money. OPM. It's like being high on drugs!" What's more, the wonder of depreciation claims on the building and contents means "the government subsidises your investment! It's delightful!""

Other Peoples Money
http://www.listener.co.nz/issue/3314/features/1021/house_of_the_rising_s...

Chorus, THE SAME POINT I'VE

Chorus, THE SAME POINT I'VE TRIED PUTTING ACROSS BEFORE!!

PROBLEM IS: no one listens tell it's TOO LATE !

Sorry gota go work my shift To pay my taxes to support these gready SPI;s @ AGENTS

THAT the gov supports in WRECKING OUR COUNTRY.

Steve K, well said.

Steve K, well said.

@ Liam If that's the

@ Liam

If that's the case, can anyone proffer how far off the mark are we in terms of inflation/average prop values - In say the last 2 decades........

About 30%. <i>One third of

About 30%.

One third of homeowners have zero debt . They could have a rush of blood to the head tomorrow and buy up a hovel or three.

One of the Stats NZ or RBNZ data series has this data. Basically its older people. They'll sell up at some stage (not clear yet who to) to move into as yet unbuilt retirement villages.

If not, they'll gift the houses to their offspring who will, no doubt, squander it.

Hot off the press, Bill

Hot off the press, Bill E concerned about the prospects of a housing boom and thinking of CGT as well as planning reform:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1059...

@ Spidy sense http://www.huljich.co.nz/upimg/news%20article%20im

@ Spidy sense

http://www.huljich.co.nz/upimg/news%20article%20images/nz-real-land-pric...

Here's a graph that shows inflation adjusted house price's.

You can see that from the 70's even up to 2002 house values have remained around the 500-800 points on this inflation adjusted index, i.e not beating inflation by much more than 1% per annum from 1970-2002.

On that rate the index shown in the graph should be around 900 points at present, not 1400 where it is hovering at the moment.

The graph shows how sharply prices have fallen over 2008 into 2009, and so a leveling off is to be expected before further declines toward historically sustainable levels

"A premature housing boom would

"A premature housing boom would not be good for the economy and the Government will consider ideas, possibly a capital gains tax, to avoid one, Finance Minister Bill English says."(herald) this of course does not mean the govt will introduce a CGT, it just means they want the public to think they might! Just like the 'strategy'. It's all spin.

Better be spin.

Better be spin.

NotPC, the inimitable Peter Cresswell,

NotPC, the inimitable Peter Cresswell, says well everything I would want to say:

http://pc.blogspot.com/2009/08/house-price-inflation-on-rise-again.html

Especially re English and yet another tax, quote:

"A premature housing boom would not be good for the economy and the Government will consider ideas, possibly a capital gains tax, to avoid one, Finance Minister Bill English says."

Hey Bill, instead of another bloody tax (remember those tax cuts you once promised?, you thieving arsehole) how about getting rid of those impediments to house prices falling instead?

You know, like getting your Housing & Building minister to get rid of all the gold-plated gobbledygook building regulations keeping prices high and delays extensive?

Or getting your bloody Minister in Charge of the Resource Management Abomination to rein in the town planners who "ring-fence" cities and whack on those ginormous "development levies" that new-house buyers end up paying for?

Or, more radically, sacking your Reserve Bank Governor, closing down his monopoly and letting banks issue their own assert-backed currency?

Why this ever-present leap to a new tax every time your competence is threatened? Is your middle name "Cullen"?

I wish when I was

I wish when I was helping to knock together the Beehive, I had mounted the base on a set of giant roller bearings with field coils and a rotor in the middle. I could sit back now and at the flick of a switch give the fools a dose of spin at least once a day.

At the risk of repetition...........

At the risk of repetition........... the notion that housing/land is worth what the buyer is prepared to pay for it ....... is exactly why we are where we are financially today, with hysterical greed trying to leverage a ten ton truck on a one ton car jack........you'll get away with it for so long.... applies to the money lenders as well.
Don't need to dribble over the math it's a self fullfilling equasion.

Good fun to see all the hysterical estate agents jumping on the bandwagon and feeling a bit of fear in the market for a change.

Good to see English has aknowledged the exchange rate even if he's doin f..k all about it. ..Still now he's on record huh? So Bernard maybe a few questions on the matter.

In the long run all

In the long run all this debate seems pointless to me. We'll have more to worry about than the price of some crappy shack in a dismal NZ suburb.

http://www.theoildrum.com/node/5638

Steve K sums it up.

Steve K sums it up.

Why are people so passionate about house prices? Because the insanity will enslave our grandchildren to debt or bankrupt the country at some point. Most people are pretty passionate about that.

I have a funny feeling messers Key and English have something on the way to combat these outcomes

Steve K - good posts.

Steve K - good posts. Two issues, really: Perverse Incentives (the shorthand for what you have so graphically described) and John Galt: the quiet re-jigging of their affairs by the 'real producers' in order to minimise the dues that they have to pay.

Combine the two, as seems to be the present danger, and we have

Show-Time!

Yeah sure they have Fairfax,

Yeah sure they have Fairfax, like a bun in the oven that looks good through the glass, only to deflate when the oven door is opened. They have had 9 months to come up with something. What do we get? Blah blah blah.

Hey Bill, instead of another

Hey Bill, instead of another bloody tax (remember those tax cuts you once promised?) how about getting rid of those impediments to house prices falling instead?

You know, like getting your Housing & Building minister to get rid of all the gold-plated gobbledygook building regulations keeping prices high and delays extensive?

Or getting your bloody Minister in Charge of the Resource Management Abomination to rein in the town planners who "ring-fence" cities and whack on those ginormous "development levies" that new-house buyers end up paying for?"
==
Given that we have had the second(?) biggest rise in populations in the OECD someone has to pay for new infrastructure and you just have to read Home and Garden to see who our wealthy citizens are: developers.

Developers seem over represented in the Global Warming Isn't happening fraternity, (they seem to see themselves as masters of the environment) hence they build the big houses with 8 car garages.

Edited by Bernard Hickey. We do not accept abusive language. Your argument is strong enough without it.

people can't relate to things

people can't relate to things like inflation eroding their savings, maybe an organisation (like Greypower) could set up an outdoor graphic (billboard -like fire danger or amount of donation received) to remind everyone what the govt/banks are up to.

I am a National voter

I am a National voter and I am very disappointed with the pathetic government we now have. What will we look back and say they have done that has truly made a diffference once their first 12 months has passed - insulated a few houses, anything else worth mentioning? Looks like Ruthanasia all over again!

From Olly Newland: This report

From Olly Newland:

This report may be more accurate than previously imagined. I am in the market on a daily basis and can confirm that there is a strong snowballing of demand for conventional housing which could lead to a second bubble forming.

My clients are telling me the same story of multiple offers, frustrating auctions and rapid sales. Low interest rates encourage people to seek alternative returns and property is one of the most popular.

The huge losses in the financial sector, where money has been lost for ever, also encourages people to safer havens.

Just ask the people who invested in Bridgecorp, Hanover, ING and the like, what they would invest in today if only they had a second chance.

There's a great item on

There's a great item on housing at http://www.nytimes.com/2006/03/05/magazine/305tulips_shorto.1.html?pagew...

This extract should get you all interested:

The house that Pieter Fransz built is a case in point. In 1855, an estate agent named Robertus van Zoelen bought the house for 6,850 guilders. In 1881, his children sold it to a carpenter, Johann Diederich Brinkmann, for 12,100 guilders "” an increase of 93 percent in real terms. But when Brinkmann sold it in 1888, it was for 10,000 guilders: a net loss. The next sale, in 1899, at 9,600 guilders, was also at a loss. Fifteen years later, with World War I looming, a real-estate agent named Georges Jean Josef Salen bought it for 10,000 guilders: again, a loss in real terms. And when, in 1955, a woman named Grietje Uitentuis bought the house, the 15,000 guilders she paid was, after adjusting for inflation, less than what the house sold for in 1855. Over the course of a century, Pieter Fransz's house actually lost 30 percent of its value.

REAL NZ house prices: http://neuralnetwriter.cylo42.com/node/340

REAL NZ house prices:

http://neuralnetwriter.cylo42.com/node/340

ie using what I think is the REAL CPI ;)

Thanks for posting this, lifted

Thanks for posting this, lifted my day.

Property prices drop 20% over

Property prices drop 20% over ten years in real terms...The Equation is simple Inflation is running at over 10% Per Year,

that is 100% increase in ten years. Property is forecast to increase at 24% of three years inflation adjusted 18% that means the forecast increase is 8% per year not adj for inflation over 10 Years that is an 80% increase, therefore properties drop 20% over the next 10 Years in real terms.

Now that is a good Investment.....

Property prices drop 20% over

Property prices drop 20% over ten years in real terms...The Equation is simple Inflation is running at over 10% Per Year,

that is 100% increase in ten years. Property is forecast to increase at 24% of three years inflation adjusted 18% that means the forecast increase is 8% per year not adj for inflation over 10 Years that is an 80% increase, therefore properties drop 20% over the next 10 Years in real terms.

Now that is a good Investment.....

Have a read of some more up

Have a read of some more up to date info. Gerry. Like the statement just out our by Dr. Bollard.