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House prices seen rising for first time in 18 months in ASB survey
Confidence about the house price outlook has improved substantially in the ASB's quarterly survey of housing confidence. Results for July showed more people expected prices to rise than to fall, the first net positive result in the survey for 18 months, ASB said. "Housing confidence continues a lift that started a year ago, with a clear majority of respondents seeing now as a good time to buy a house. However, the most significant shift in the survey results is a noticeable uptick in house price expectations," ASB said. "After over a year of expecting prices to fall in the year ahead, respondents have a more neutral outlook. In fact, a month-to-month breakdown of results shows expectations are back into net positive territory," it said. "Another change in the survey results is that on balance respondents expect interest rates to rise, no doubt reflecting the upward trend of long-term mortgage rates since early 2009," it said. "The latest survey reinforces that confidence is building, along with a sense that price falls are coming to an end. However, we continue to expect the next house price cycle to be very weak compared to the extraordinary boom of 2002 "“ 2007." Over the full 3 months to July a net minus 4% saw house prices rising, although that number was positive for the results in the month of July, the first monthly positive figure in 18 months. The previous quarter showed a net minus 45% saw prices rising.
The net balance of respondents who said it was a good time to buy increased again. "The level of optimism is now similar to that seen when the last housing boom was just getting started," ASB said. 64% of respondents said now was a good time to buy, up from 59% in the previous survey. "Interest rate expectations have changed considerably, back to an even split between numbers expecting lower rates and those expecting higher rates. Since late March long-term fixed mortgage rates have risen substantially, and the RBNZ has halted its OCR cuts." A net 3% expected higher interest rates, compared with a net 30% expecting lower rates in the previous quarter. "One contributing factor to the reduced supply of homes for sale is no doubt the shift in migration flows, with substantially fewer people leaving the country. The most immediate effect of the shift is fewer homes than otherwise will have been put on the market for sale, with the same applying for the supply of rental property," ASB said. "Low mortgage rates have undoubtedly had a huge impact in driving sales turnover. Furthermore, fear and caution have abated since the first half of March: globally investors' risk appetites have been recovering." "Ironically, the lift in long-term fixed mortgage rates spurred some fence-sitters into acting before interest rates rose too much further." ASB said it expected housing turnover to broadly hold onto gains made in the first half of the year through the rest of 2009 and "possibly grind up further." "House prices themselves appear to be bottoming out and could even lift slightly later this year. After a period of weak building and a fairly swift reduction of available stock on the market, the current migration-led lift in population will put some pressure on the market," ASB said. "However, we expect the main release valve from growing population to be a recovery in construction activity over 2010, rather than prices. Notwithstanding the past year's fall, house prices remain high compared to fundamental factors such as incomes (ability to pay) and rents (cashflow on any investments). And, unemployment will continue to rise," ASB said. "The last 2 years have been a sharp reminder of several home truths some property investors either overlooked or were prepared to ignore. House prices can fall, and cashflow "“ not expected capital gain "“ is what pays the mortgage." ASBHousingConfidenceJul09
Migration flow inward has only
Migration flow inward has only been brought about by the recession. I expect when we return to just above neutral growth the outflow will be strong, especially if we see house prices increase.
the reason why these banks
the reason why these banks and their pundits such as tony alexander and jane turner try to spin the market as upwards, is to herd people into taking out mortgages now whilst they're low.
they know that the rates are going to cimb back to "06 levels in the next year and that the punters won't be able to afford to get into housing so the banks are talking up the market now to scoop up some mortgages.
the laws of cause and effect will control the housing market ; not the spinmeisters or the "sheeple".
it's up to you to interpret the dynamics for yourself.
i'd wait.
a good measure of nzers
a good measure of nzers stupidity - not even vain hope can push prices up
Seems to be working though
Seems to be working though Rob. The banks of course will not be so consumer friendly when punters cant afford a few mortgage payments and the equity starts to disappear.
Hardly a scientific poll also, 200 in Auck at 6.9% margin of error.
Also done before the last unemployment figs were released.
rob of the north, I
rob of the north, I disagree, although you are correct in your detail.
I firmly believe that the fear and greed drivers detach the residential housing market from the laws of cause and effect.
It is insanity to pay 8.5 times your wage and live in poverty for a leaking wooden tent, but hey everyone else is onboard so watch out or you'll be left behind.
The greatest of all ponzis is even more so, because if it looks like it will collapse, it will simply be reinflated (immigration, inflation, bailouts).
I bet your grandchildrens livelihood on it.
The shortage of homes on
The shortage of homes on the market, in central Auckland suburbs at least, is the worst I have ever witnessed since 1995.
Right now there is only one redecorated home www.realestate.co.nz/1120049 available on a large full site in the whole of Pt Chevalier - a suburb containing 2,400 homes and in total as of today there are only 9 properties available for sale that are not already under contract!
Average number of sales in Pt Chevalier per month over the last 10 years has been 15 per month so we have less than one months supply left on the market. If we could get another 25 to 30 homes in the $450,000 to $750,000 range we could sell the whole lot in a fortnight as we have almost 200 registered cashed up buyers in that price range!
Prices still have to be realistic as the median price in the Pt Chevalier area is approximately $90,000 down on the 2007 peak so that is a major factor with buyers wanting to take advantage of better prices and improved affordability with lower interest rates than 18 months ago.
Over 70% of homes sold by my office this year have received multiple offers and most have sold within 3 weeks of listing for sale - a totally different situation to last year when most had little interest and time to sell was closer to 4 months!
It is looking like spring and summer will still see very little available on the market as the appraisals that we would normally be doing by this time of the year are very low in numbers compared with previous years. So stock looking forward will remain relatively low if appraisals are thin on the ground.
We are even offering a prize of a new Mazda 2 Sporthatch to all those who list with us by the 31st of October but even that does not seem to be making much difference to selling intentions despite the fact the odds will be pretty good!
The few that do want to sell are waiting for better weather and daylight saving to kick in so should have a few more listings later in September but suspect total available stock will still be well down on previous years.
Ross, good comment. Is the
Ross, good comment.
Is the lack of listings ,sellers waiting for prices to rise, in your opinion?
If that level of listins is indicative of the whole market, info on median prices will be skewed/worthless.
Ross is only correct on
Ross is only correct on the statistical part....low listing. There may be numerous reasons for this..higher expectation than realiseable etc etc.
The main point is still at this level, a mortgage is only possible if serviced with sacrificed in living standards (already low as it is) and high risk on default if anything goes wrong with emloyment status etc etc. The gearing in the longer run is unsustainable, unless the mortgager is willing to fast to death paying his mortgage. Sooner or later it has to break. It happen in the US even with prime borrowers...are Kiwis really that different??
Yeah Right !!
We are seeing more and more banks reducing LVR because of business competition...
(not because they are being nice) this means there are less and less business to go around with the high deposits that they had initially demanded. sooner or later the point is reached when they overextend themselves.
We are already seeing bubbles being created in most parts of the world...the biggest being the Chinese Stock and equity bubble (up 100% in 4 months?) Bubbles in commodities and metals are already forming (some minerals has gone up more than 100% the past 3 months) so it's not too strange to see a small bubble in NZ housing begin to start...infact I would say we are a little late in this bubble creation cycle.
But then, we all know what happens to bubbles ultimately....
I am at a complete
I am at a complete loss to make any sense of this "confidence" survey
-potentially another 40-60,000 jobs to be lost
-interest rates very likely to go up by 2-3% because of the money printing and imminent credit downgrade
- NZ dollar flying towards 70UScents( 1 cent rise is 10 cents off milk payout and 4.55 was based on 59USc) and certainly not good for tourism.
-higher cost of living from higher commodity prices due to USD weakness
-govt borrowing 150million dollars a week which means it has to shed more jobs or raise taxes
- no pay rise for most people
-health sector spending set to increase exponentially along with burden of superannuation at 65( we will just keep borrowing)
maybe these insignificant factors will have no influenze on house price as people have to get the dream house now even if they have to go without anythinh else in life.
Fairfax - earlier in the
Fairfax - earlier in the year many sellers and those wanting to cash up rental investments decided to refinance and keep them and many I know of took the 5 year fixed rate that was on offer at 5.95%. Several others just missed that rate and took 5.99% for 3 years fixed.
This eased the cashflow and although I have gone back to many of them to say we could sell now for more than they would have got earlier in 2009 they are happy to keep them or in the case of owner/occupiers stay put in the same house. (example - we had a home that was asking $599,000 earlier in the year and couldn't even get offers at $550,000 yet it has just sold for $607,000)
Another factor is that people do not want to sell then get stuck unable to find an alternative to purchase and if they already have a long term low rate mortgage they can't afford to go renting and lose that rate. They will sell if we can find them something to buy but that too is a tricky situation as there are too many cashed up buyers so it is hard to secure an offer "subject to sale".
There is another group who still have say a year or two to go at 9% plus fixed and who do not want to pay the high break fee so are also staying put. Most of them made the mistake of fixing for 3 years at the start of 2008 - but at that stage there was an expectation that rates would go over 10%.
The last group is those you refer to who genuinely feel that the market will improve over the next 12 months and are more likely to stay put until summer 2010/2011.
Many people I deal with have owned homes since 1995 and have enjoyed the capital gain of two major booms and are not under any mortgage pressure at all. For example if you bought a house in Westmere for $160,000 in 1995 it would now be worth around $750,000.
I think median info is probably still relative with say 6,000 sales across the country per month which is not too far below normal market volume averages, however a few high price sales in a low volume suburb could easily skew it.
With banks now freeing up the finance for those with less than 20% deposit we may see the median fall due to the composition of sales including more entry level homes than we saw last year and in the first 6 months of this year.
I have always found it is easier to get a gauge on the market by only looking at homes that have been re-sold this year and that were purchased in 2006, 2007, 2008 and especially if nothing has been done to them in the intervening period. But with low volumes even this is difficult.
Timing is everything for example a home that was purchased early in 2006 has just been resold for $55,000 more than was paid for it, yet another that was purchased in mid 2007 has just resold for $70,000 less than was paid for it. In both these cases nothing had been done to the properties in between sales.
I have sold over 500 homes in the area so have a pretty good feeling for where things sit.
kin - the one factor
kin - the one factor that people fail to acknowledge in these discussions is that not everyone has a mortgage. The census data shows that a large percentage of households have no mortgage.
A large percentage of homes are owned by retired people usually with no mortgage.
Those that purchased their first homes in the early 1990's will have enjoyed the gains from subsequent booms and in many cases now have zero mortgage. Obviously many also used that increased equity to fund further purchases, business opportunities etc and probably made even more capital gains and profits from doing so.
Not every buyer is a first timer or entry level buyer with a 20% or less deposit. So the focus on multiples of income and LVR is in my opinion overdone and only relates to a small percentage of the market.
You can still buy a reasonably priced home in Auckland at less than the NZ median house price - for example a family home on a large full site in say Takanini for less than $300,000.
Another distortion is that you could have a home owner with say a $700,000 family home with say a 100% mortgage but this is because they purchased two rental properties and borrowed $350,000 on each of them secured against the family home, however true LVR over all three properties is 50%
Trying to make sense of the housing market, why people react the way they do etc, etc is never easy and none of us have seen such volatile economic times as we have witnessed in the last 18 months. The market just happens, nobody has any control over it and I guess in 5 years time we will all look back and reflect on the outcome and take lessons from it.
very good info there, ross
very good info there, ross brader.
congratulations on telling it without the hype.
here's something fresh in to check out...interesting graph on this URL.
Home loan rates start moving up sharply
Home loan rates have suddenly started rising, and quite sharply, after many weeks with no changes.
http://www.sharechat.co.nz/article/d365e923/home-loan-rates-start-moving...
chandra - Ludwig von Mises
chandra - Ludwig von Mises reminded us, many years ago, that their are only two ways an illusory boom based on credit can end. Either there must be voluntary repudiation and liquidation - or the artificial stimuli must continue with the ultimate collapse of the currency system involved. One suspects it is the latter upon which our esteemed leaders have decided and, in theory at least, this will ultimately deliver hyper-inflation. The critical consideration of a hyper-inflationary outcome is that it is a currency event, unrelated to the push/pull of supply and demand. That is why I have commented before that the billion dollar Kiwi house is not inconceivable and, paradoxically, this is made more likely by the averse conditions you describe. Why, because they are precisely the deflationary circumstances in which politicians (commanded by others) print money. We saw more of this in the U.K. overnight. Nothing, in my view, can prevent the collapse of house prices in real terms - but Joe Public does not care about real terms. All he wants is the nominal value of his property inflated so he can feel good and boast to his kids about 'how much he made'. Meanwhile, the concomitant inflation can be blamed on things like oil prices, food prices, copper prices etc. As Keynes famously noted, the arbitrary theft of a nations wealth through inflation is something 'not one man in a million can diagnose'.
"Trying to make sense of
"Trying to make sense of the housing market, why people react the way they do etc, etc is never easy and none of us have seen such volatile economic times as we have witnessed in the last 18 months."
It's the onward march to grow the economy: New Zealand needs many more pepole to be a viable society. This is the preparing the soil stage but in the future a beautiful (unique) plant (Nouvozealandae future economus) will sprout and we will all enjoy a high standard of living.
Chandra Having been tied up
Chandra
Having been tied up in a Council hearing a couple of weeks ago, I can tell you that most of the NZ public are very intellectually challenged. They are emotive, illogical and blinded by their own expectations and wants.
So I take very little from these public surveys.
Ross, "The market just happens,
Ross,
"The market just happens, nobody has any control over it"
Rubbish - the govt has a lot of control, so does the reserve bank. They have the ability to influence the herd. Their policies seem to be aimed at keeping house prices high.
"and I guess in 5 years time we will all look back and reflect on the outcome and take lessons from it.
"
We should have been reflecting on this 5 years ago when houses were already grossly overpriced, then we could have put in decent measures to encourage savings and reduce borrowing and consumption. The time for reflection has long passed and we need ACTION now from govt to stop our debt induced train wreck that is EXCLUSIVELY a function of high borrowings from overseas to fund house purchases. This means:
- reduce immigration NOW
- scrap red tape on development
- remove taxes on savings accounts
- remove ability to negatively gear tax rates
- raise the OCR
We are already in the poo. Lets not sink further.
And Ross, Price rises have
And Ross,
Price rises have occurred because higher and higher debt has been taken on by those entering the market and those upgrading. Whether there are plenty of people with paid off mortgages or not is irrellevant. If a FHB can no longer afford to pay a high price due to int rate rises, then the outcome is obvious. Prices fall!!
Jimmy - you aren't James
Jimmy - you aren't James from Victoria re-incarnated are you?
yes Paul, we meet again.
yes Paul, we meet again. Paul from the NZ Herald??
Thanks Ross, for providing what
Thanks Ross, for providing what appears to be honest and insightful comment from Real Estate perspective.
I agree, that there is a lack of quality housing stock. I have been looking for years and not found many properties that I would call good value. Unfortunately, due to wages and the lack of wage increase, I do not think prices can afford to skyrocket again. There is simply a price which buyers will not purchase, and it will cause demand destruction. With housing, there may not be a true demand destruction - but people will come to their senses and realise that it makes more sense to rent and more sense to save for a larger deposit. Otherwise, they will have to shift further out from the city, or move out of the city altogether. Both of those have been on my mind.
I think that some Banks and Real Estate companies have been talking up the market too much, and that it will do them harm in the long run. An affordable price level will bring more transactions for real estate and better quality mortgages (assets) for the banks.
Is is morally correct to limit rich investors from buying any number of properties as they please? Banks will always find a way... Is it the right thing to do, to free up more land for building houses? (I think there was a risk of creating rich suburbs etc). Can we reliably use cheaper and better materials? Is it fair on house owners and buyers to have their land appreciated each year by ridiculous figures so they need to pay more in rates, but have a higher 'value' of their property? Will a house 'warrant of fitness' be enough to help credibility? Could we have a Ministry devoted to making housing better and more affordable - or do we have that already? Will housing continue to put us into massive debt levels like it has historically - locking us into poor quality of life and exporting this money into the hands of our Australian Banks.
I hope Mr Brash and his team come up with some good ideas and I hope the govt can follow through.
Yep thats me! Good to
Yep thats me! Good to see you've kept the faith!
Bevan, Excellent points. The sad
Bevan,
Excellent points. The sad fact is that the govt and RBA are in a posution now to directly redurce the speculative impact that has helped push house prices too high. There is no rocket science to it - compare property and savings One is taxed, the other is not. One benefits from artificially low rates, the other is harmed by low rates. One benefits from high immigration, the other loses purchasing power as a result of imported inflation.
Sadly, it all comes down to vested interests wanting the gravvy train to continue and the govt not having the will or the balls to change that. The only solution then appears to be a calamitous crash brought on by events the govt cant control (eg downgraded credit rating on NZ, creditors forsaking us, interest rates rising etc). The time for action was 5 years ago. The crash will hurt some, but ultimately benefit most. Better sooner than later.
Malcolm- Hyperinflation, I hope does
Malcolm-
Hyperinflation, I hope does not happen, but everything as you said points that way. would that not have the effect of leading on to a vicious cycle of wage rise and more price rise.
paul volcker and interest rates of 17% comes to my mind.
"The crash will hurt some,
"The crash will hurt some, but ultimately benefit most. Better sooner than later."
It will hurt everyone with a house or mortgage and only benefit first home buyers who keep whining they cant get into the market - they can get in they just want the best house in the best area for their first home.
I read this site alot, and its always got good arguements, very rarely does any of it get positive and most of the time we hear from people that want the housing market to crash so they can "finally" buy. If they wanted to buy, they would, they would sacrifice lifestyle, as everyone who bought a house before them has. Yes houses have gone up, deal with it, its the way it is.
Lots of my friends in OZ would love to buy, but its too expensive, those that have, have bought further out and drive for 1-2 hours to get to work, if we do that in NZ then youll get a nice house for a great price - but o no, that wont work, its tooo hard.
suck it up.
It's not about "sucking it
It's not about "sucking it up" ----> new house buyers today must sacrificce considerably more lifestyle than previous generations.
Plus, prices clearly retain some element of bubble. Bubbles don't ever last forever. Some people recognise that. We may even be entering another one before this one has been fully pricked here in NZ - doesn't change that its a bubble which will one day be pricked.
@interestedfollower - You say a
@interestedfollower -
You say a crash will "hurt everyone with a house or mortgage"
I think you mean house AND mortgage - though even that's debatable.
I have a house - no mortgage - and it wouldn't hurt me personally at all. Why? Because my house is a place to live in, not an investment. I really don't care what it's worth - I just care whether it's a good place to live. And I intend to live here as long as possible.
That's the difference between the people who would be hurt and those who wouldn't - whether you see your house as a place to live or as an investment.
Well said Gail M. If
Well said Gail M. If I was in your shoes I'd say the same thing. It provides you with a place to live - rent and mortgage free - and you'd think most people would be happy with that.
interestedfollower "If they wanted to
interestedfollower
"If they wanted to buy, they would, they would sacrifice lifestyle, as everyone who bought a house before them has. "
The point is that a far greater sacrifice is required today than previous. We need to ask who benefits from the sacrifice? Banks, REAs and proeprty investors. The next question is can we change it? We should not be expected to tolerate a situation that we can change through better policies. (As outlined above). I feel sorry for your friends who bought 1-2 hours drive from the city - they have brought the housing con hook line and sinker. The banks are laughing and lets face it, they rely on good little borrowers toiling away so they can get their dream ... albeit 1-2 hours drive from the city. Our pain their gain. You may be happy with assuming the position, I'd rather agitate for change, or at the very least cheer on the crash from the sidelines.
and a crash would not
and a crash would not only benefit first home buyers. Other beneficiaries are:
1) those upgrading from a cheaper house
2) the productive economy with more money avaiabel for investment
3) our current account deficit position and by default our rates should fall
4) rate payers
5) NZ employers, as they wont be so many employees heading overseas so they can earn enough cash to live in NZ
6) cities who use essential services (eg fireman, teachers, nurses) who have NO HOPE of buying a house in a major NZ city.
.. the list goes on.
Jimmy re "compare property and
Jimmy re "compare property and savings one is taxed, the other is not" - could you please advise where I can invest my savings and not have the interest taxed? I haven't heard of that until you mentioned it?
Jimmy, your question "who benefits"
Jimmy, your question "who benefits" you left out MPs. This is why National will not raise a finger to drive down the prices. They stand to benefit twice by doing nothing. The bank profits will mean fatter party donations and these MPs have invested in property so they stand to lose on their gambles if prices drop. It matters not a stuff what is good for future Kiwi families to this lot. I am sorry to say the mortgage misery is here to stay. That said, the so called 'strategy' the govt is on about is just pure BS and the Brash idiocy is a payback. This is no place to hang around if you are young and skilled.
@Wally, well said dude, agree,
@Wally, well said dude, agree,
http://www.interest.co.nz/ratesblog/index.php/2009/08/05/have-your-say-h...
http://www.interest.co.nz/ratesblog/index.php/2009/08/05/have-your-say-h...
Lara, "could you please advise
Lara,
"could you please advise where I can invest my savings and not have the interest taxed?". Nowhere, thats my point. Savings is disadvantaged relative to property.
Hi, have read on here
Hi, have read on here many times, lots predict a crash in house prices, I don't understand how that would be possible with replacement costs at an all time high? Wages and materials, and land values have stabilised in the main centres. Properties of quality are comparitive to new builds which are built often at over market value. Most of these clients don't care what the end result is worth, they just build for their dream house to live in? Hardly see these people cashing up at a loss to go renting as some see as the most economic option??!
@ Wally: "This is no
@ Wally:
"This is no place to hang around if you are young and skilled."
It's no place to hang about if your old and cashed up, either ! Our dollar is about to but us much less if I read the situation correctly. US$.50 =NZ$1; petrol at >$2.50 p/ltr etc.
I wouldnt count on a
I wouldnt count on a USD0.50=NZD1 any time soon. More likely to be 1:1 before this is over