Although normally mild mannnered, I felt my bloody boiling in response to this Herald article:

1. First paragraph:
"If you are secure in your job and have enough money saved, now is the time to buy a house, say real estate experts."
- Ummm, haven't 'real estate' experts been saying this for ever? Especially over the last year.

2. "As long as I figured on keeping my job I would be out there actively looking for a property at the moment,"
- Correct me if I'm wrong but I think most people this year who lose their jobs will 'figure' they are secure now.

3. I love this one:
"Economists had proved they could not pick the top of the cycle, so no one should expect them to pick the low point, he warned."
-Says the BNZ chief economist in an article titled 'Nows the time to buy a house'..

His advice at the end of the article is mixed and contradicts many of his previous points.
All in all an appalling article with little or no merit.
Disappointing journalism.

Regards
Paul

AMAZING! People, turn on your your BS detector immediately!!

Quote:

"An online survey of 2852 New Zealanders this month by the Business Council for Sustainable Development found nearly a fifth of them feared they might lose their jobs this year.

Those on low pay and those making more than $100,000 a year were among the most worried."

...and would Peter Alexander fall into above category? Here he goes...

"As long as I figured on keeping my job I would be out there actively looking for a property at the moment."

Well, anyone also noticed the 'would', 'could', 'may' and 'should' terminology?

But wait, there's more!!

"But as I wait for this rate, I'll become increasingly prepared to accept something just below 6 per cent just in case the world suddenly looks like a brighter place"

Unbelievably desperate, from both the Herald and the BNZ and anyone else feeding from the Real Estate market.

AGAIN, PEOPLE WAKE UP, SMELL THE BULLSHIT, BE CRITICAL AND START THINKING WITH YOUR OWN BRAIN!

Tony, Rodney, Keiran etc are dead right - in fact the market has already spoken in February with a huge lift in activity and figures to prove it will be available next Friday from Barfoot and Thompson.

If you journalists actually went and had a look around some auctions during the week or open homes this weekend you will see that the experts are only stating the obvious. House buyers are in a frenzy especially on the North Shore Avondale to Te Atatu and Mt Wellington through to Howick.

Rental Investors are right back into it and as it is now possible to buy a cashflow positive flat they are like pigs in muck locking in a low interest rate and buying at a discount. It's just the climate they have been waiting for.

Would you believe a journo or a Strategic Risk anlayst like Rodney Dickens? He has been quite negative in the past but even he can now see that the tables have turned and now we have Bernanke in the USA saying the second half of 2009 will level off and 2010 will see the recovery well and truly underway.

Rodney Dickens says its worth having a look. hardly a glowing endorsement to get stuck in like a pig in muck.

And Good on ya, emcd!
You did what everyone must do. Do what's right for you, and be happy about it. It doesn't matter to you now whether prices go up or down, and you can leave it to the rest of us to debate the topic.

aj, discuss?

yields v servicing costs v d/e ratios?

I'm with the Bank Manager. This is certainly the best time to buy. Once the tide has turned you have missed your window of opportunity. I know a number of Real Estate agents working on the North Shore and they are flying. One office on the shore has seen there turnover increase by 25% from 2007 to 2008.
We were short of houses during the boom and they have all stopped building them now which will only increase demand.
I do not agree with Bernard with his 30% drop. It is a pipe dream!
I am smiling and just waiting for all these doomsayers to begin to see the increase and start writing about how smart the ones were that brought despite the doom.
You know if you study history .... It has always been that way....Why don't we learn?
Finally if you want to make real money from property. NEVER talk to a banker. Talk to those that have shown by there track record of success that they know what they are talking about. MOST of them may be to busy as they are currently out buying!!!

Matt - if prices drop another 10% but fixed interest rates go up 1%, your mortgage will cost you more than it would currently - something to watch.

Bernard - I agree as an investor going in at 30% below 2007 peak, but these will be the exception rather than the rule. We bought several around year 2000 at 40% below 97 peak, yet the median only dropped 5%. The only people selling at 30% discounts will be those that HAVE to, and the majority of people don't have to.

Thanks Gavin - the Bank Manager is always right!

alistair not sure how accurate an indicator of future sales online viewing is. i look online a lot but simply to see which houses are still unsold and which are droppiing in price. it's like rubbernecking at a car crash. i have no intention of buying yet. while my example is a sample of one, i'm sure plenty of other people are curious for the same reasons.

pjimmy summed up things well re the herald article. but i'd go further - this article would be funny if it wasn't so dangerous. to quote real estate vested interest shills as experts and then to try to encourage people to take on huge amounts of debt in a bubble market near its recent highs when we are just at the start of a period of huge economic uncertainty is just plain reckless.

one more thing. when asset bubbles burst they do not and never have had v shaped recoveries. real estate markets do not bounce they splat. prices will scrape along a bottom for years. so to say that anyone might miss the bottom of the mkt is blatantly misleading. it's the same shill mantra: when prices were increasing, it was get in before it's too late! and now prices are decreasing, guess what? it's get in before it's too late! an emotive sales ploy based on fear. well fine, then i predict that people's fear of losing their jobs, their income, their ability to maintain a decent standard of living or indeed keep their heads above water will trump any notional fear of missing out on the chance to buy an overpriced house. this time this stupid sales play will not work because their are bigger more important fears out there than whether or not you own your own house.

I just hope people buying now don't cry out for help when/if conditions get worse!!!! I don't want my tax money helping people that buy on the way down (includes 2008). As long as a buyer is happy to take the loses over the coming months/years (which some will be) then I can't see why buying is a good idea.

Nothing bad has even happened to our economy yet. How can people expect it to get better from here on in????? I would expect more news like F&P over coming months, and that doesn't include all the little SME's falling over. Predictions have employment ranging from 6% to 11%, all well above now. Even the optimistic forecasts of employment are worrying, because as yet almost every forecast has not been as bad as the actual.

I see that weather you buy a house or not. We are all in for a few hard years. But why increase your debt now???

Lets make up a nice future.... Employment tops out at 6% and house prices stablise 5% down on now within 6 months. Even this nice example of the future it still says hold off. (may I add a future this nice will not happen)

But people will buy as most just don't understand. This is good for the sellers that do understand. Many bogging here are not the normal buying public. But blogs like this help those willing to look around and research an investment.

I smell the phrase 'talking their book' in a lot of comments on this thread.

Agree that the number of new builds has slumped disastrously - we should be putting up around 30-35K units pa, rate fell under 20k last year. This may affect things.

But I'm with BH on this one, and tend to disregard the data cherry-pickers, because there are always enclaves where markets are just different. Old rule applies: be wary about generalising from the particular.

And the age-old household income/house price multiple still applies. We're nowhere near affordability using That surrogate.

Gavin,

History tells us that history doesnt repeat and that past trends have no bearing on the future.

Especially as the current global asset deflation cycle has only just hit half way.

People should look at the market and go in with firm no negotiation offers at 45% less than Nov 2007 prices.

Well, I don't have any connection in real estate industries, any banking institutions, or having any investment property or even looking to buy one. But judging by my own experience.. driving home from work everyday I am noticing a quite number of sold sign along the way. much more so than previous months. My neighbour put his housr up for sale - last week he had over 30 groups went to first open home. Are they all nosey parkers????

Expat ,Where is the risk in buying positvely geared investment property with an increasing demand on rentals?

I personally have purchased over $4.5 million worth of commercial and residential property over the last 6 months and am continuing to buy.Things have never ever been better.

Well on the positive side of the argument in some areas it is now becoming cheaper to buy rather than rent, so doesn't that make economic sense? Why keep paying the landlord if you can own your own place with mortgage repayments less than current rent? Even some investors are recognising the positive cash flow available now which gives them a better return than a bank deposit. The difficulty, particularly for investors, is securing the required funds in this difficult market. The scarcity of credit is what will keep sales volumes low.
While there may be further turmoil to be felt from the credit crunch it is hard to see 1 in 5 people lose their jobs as a recent survey has suggested. We as humans tend to worry a lot about what "might" happen, but in most cases our worst fears don't actually eventuate. Sure there will be some job losses, but there are many sectors where they will be relatively unaffected. Why shouldn't these people buy houses if they can afford to?
Will house prices drop much further? Well who knows! They might, but then again they may well have reached the bottom now. We won't actually know where the low point of the market is/was until we have actually passed that point. But the more we get people standing up and saying prices are going to crash by 30% to 40% the more fear we instil into people which will certainly slow down any sort of recovery. Now of course on the other hand a Real Estate agent always paints a rosy picture as he/she is only interested in completing a sale so we probably should rely too much on their predictions. But when I look at the successful people I know most of them generally have a positive mindset. They recognize the difficulties, yet also the opportunities and so are prepared to carefully move ahead.
This type of mindset is what built our country, let's not lose it.

Matt would you like to come on a property tour with me and I will show you that the bullshit is in fact gold

Need to get some of your guys to run the stats on rural and comercial property as in number of mortgagee sales, as you do for residential. This will give a different slant of what is happening down on the farm, in retail and commercial. Numbers and trend of commecial lease vacancies etc.
Just a thought,
oh I think the lower they push the OCR the higher our long end interest curve will get.

I reckon we are close to 30% off peak price in our area, but very low sales fail to reinforce this, and very slow reporting of sales.

We will wait for a better buy @ 45% off peak during the "over correction" part of the cycle (next 3 years)

Fascinating really that the bank's seem so desperate to get people borrowing again - stating it's a good time to buy and implying that this could be the bottom in terms of house price asset deflation - yet they still want a 20% deposit.

Actions speak louder than words.

If I might paraphrase Mr Alexander;

"Buy now - put 20% down, lock in a five year fixed rate, lose your job in another year, we'll sell your property out from under you and you'll still owe us money + interest on your loss."

Bernard, I agree with you completely and would add that financial illiteracy and innumeracy will be the undoing of the property perma-bulls. They simply don't understand where the credit has come from to finance the property bubble.

rising population AK, low interest rates, few new building permits, tax cuts, little new land, some sales probably 30 per cent below what a builder could bring a new house to market, what else is safe to invest in, one of the interesting points in Greenspans book was the speed with which model markets recover from drops- media focuses attention and future inflation guaranteed, no crystal ball but better buying than in 2006

We have just purchased a property in te atatu sth, we started looking last year, small family, nice 3 bedroom family home, 20k down from asking price picked up for 400k, could we have got them down more, possibly, but we may have lost the property as well, which was the worse option for us.

if like some suggest, we tough out the next couple of years and keep saving, we would waste yet another 20k per year on rent, when it could have gone on the house, how does that make sense?

i understand not buying at the top of the market, but that top is well gone, we are now I believe nearing the plateau, so, heck, if it goes down another 5% in the short term, and in 5 years it goes back up to 15-20%, you cant lose.

a good time to buy, is a) when you can afford it, b) when your employment is reasonably secure (and noone ever knows that) and c) when you find something you can add value to long term.

there was heaps of buyers looking in January, most places we saw (decent ones), all had contracts on.

we were able to get 90% mortgage with no dramas, money is still available.

John is onto it quite clearly he knows what he is talking about. I think most on this site don't.

John asks, "what else is safe to invest in"?

In my opinion safe investments these days are in those things you can purchase outright, without incurring debt.

Any investment at the moment which requries borrowing is not an investment at all - it's a noose around your neck.

Witness the massive deleveraging occuring around the world. It just amazes me why anyone would think now was a good time to borrow!

yes. nobody knows so...

Mike

.. it's like walking on the tennis court and the opponent says " I hate playing in the wind" ... I love it

You are right . You are your own market buy what works for you. Find the opportunity. That takes alot of work.

Most people don't understand the fundamentals of property investing.

Like all business it's about the margin, the cash flow and balancing risk and return

Residential property investing is damn hard work. It's about finding the opporunity, being creative and managing the risk

Commercial is smarter but riskier.

Let's wait and see how all the " owner occupiers" fare in the next 2 years.

Home ownership is separate from property investing. The best time to provide a home " nest" is when you need one. Homes have intrinsic value. You can't put a monetary value on that. Sorry to sound boring but the memories your kids will have of the tree huts and cricket games are priceless.

Most people don't understand the fundamentals of investment. If Cash is King then cashflow is is the jewels.

Sorry but when did these threads become a outlet for real estate manure. There is no way, I repeat no way that house prices can stabalise and then start increasing next year. The world is in meltdown and we are not immune.

House prices, like shares, like any income producting asset shouldhave their value based on fundamentals. If prices have gone up 100% over the last few years and only gone back 5-10% then are the estate agents/bank manager suggesting in a few years we will be at 110% or 120% of prices in early 2000, when incomes have barely changed. Really?? Lemmings that's what we are.

Yep buy now and repent later. Nothing like a nice house which has devalued by 20% (or say $60k on a $300k property), and you are facing unemployment, or the bank won't renew your mortgage at those low interest rates because you are now in negative equity.

Does anyone really think that during a credit crunch and recession that borrowing hundreds of thousands of dollars to purchase an overpriced assets is the way to go....

Lemmings!!

"picked up for 400k... we would waste yet another 20k per year on rent... if it goes down another 5% in the short term, and in 5 years it goes back up to 15-20%, you cant lose."

We really have learned nothing in the last few years, have we? Simple maths question for you, "HappyNewHomeowner", what's 5% of $400k? How much are you going to spend on interest, rates, maintenance, and insurance every year? What if prices go down another 10-20%, and stay there for 5-10 years? Can you lose then?

In sales they say that 20% of the salesforce will produce 80% of the results.

Share all the wealth of the world evenly amongst the entire population, let them all loose and it will be back in the hands of 10% within 3 years.

Reading the differenace in the above comments it certainly makes it very clear why that is!

A new survey has shown that 1 in 5 in the workforce are not confident of keeping their jobs also those investors that bought rentals in 2006-7 will have lost all their equity by now so will be incapable of buying and how many first home buyers are there with $65,000 deposit sitting in their bank and a stable job? not many, People who are capable of going out and buying a house today are the smart ones bright enough to know Tony Alexander is nothing but a PR person for the real estate industry. They also know that buying into a falling market is what dumbbums do, why would anybody want to lose all their hard earned savings? Good try Tony but those with common sense can see right through you.

Realist - that's right - and what really annoys me is that Tony Alexander and the RE industry are not targeting their message at seasoned property investors (they aren't borrowing and for good reason!), they're targetting the type of buyer Kiss refers to above - appealing to the notion that one cannot put a value on the family "nest" - and your kids game of cricket will be so much more "memorable" and meaningful if played on "your own piece of dirt".

Point is - it's only "your own piece of dirt" when you own it outright. Up until then, you are simply replacing the landlord with the bank, but you are 'owning' the depreciation/losses.

Could this be New Zealand ?

Saw this article by david mc williams here's an extract
Just replace Iceland with New Zealand

The first stage is the looser credit stage.

All booms start by a change in the credit regime which allows interest rates to fall and liquidity conditions to ease. In Iceland, this happened with the lifting of exchange controls in the late 1990s. This meant that anyone who liked could invest in Iceland and Icelanders could invest anywhere themselves. This allowed investors to take advantage of Iceland�s stable relatively higher interest rates, which gave the Icelanders money to play with. The stage was set for Kindleberger�s cycle.

Stage two � euphoria - happens shortly afterwards, when asset prices begin to rise and all the boats start to lift on the tide. In Iceland�s case, this was mainly evidenced in the Reykjavik housing market.
Everyone becomes delirious, with easy money being made, and suburban Donald Trumps strutting their stuff.

The third stage is the gearing stage.
This is where the banks begin to get in on the act and offer equity release facilities to anyone with a piece of property. We have also seen this in Ireland. Recently, my father � a pensioner -was solicited by one of the largest banks in the country challenging him to �liberate� equity. The man is 75, in no need of the cash and with no visible or prospective means of paying the money back. Yet the bank feels it prudent that he leverage himself up. The gearing stage leads to an avalanche of credit dumping down on the economy and it, in turn, causes values to rocket up further.

The fourth stage is the mania stage, where the euphoria gives way to a type of messianic behaviour where people begin to queue overnight for apartments and all pay homage to the might of the property ��god��.

The fifth stage is the bubble stage, where the pseudo-psychology of the euphoria and mania stages is fuelled by the liquidity of the gearing stage. Prices rise to ridiculous levels and investors start to buy trophy assets rather than sound investments.
At the top end of the market, the big beasts of the market outbid each other publicly for assets they would not have touched at that price only a few months previously. At the lower end of the market, the bubble stage sees investors buying at yields that just about cover the cost of borrowing.

The sixth stage is the distress stage, where income from the asset - whether it is rental yield or dividend yields - begins to soften. Savvy investors start to get out in the distress phase. They see little underpinning the market and, as a result, take profits. Initially there are sufficient buyers to take up the slack, but in time, sentiment begins to turn and the overhang of supply on the market makes it impossible for yields to rise.

Kindleberger�s seventh and final stage is when everyone realises that there is no value in the asset. This is what happened in Iceland last week. The rating agencies have downgraded Icelandic debts, money is flowing out and interest rates are rising in response. The currency is falling in tandem with the panic, and share prices across the board are falling.

Silly me, "HappyHomeOwner", I thought you were trying to make an argument based on cash. Instead you're now coming out with the same old sentimental flannel that estate agents relied on to keep the buying frenzy going during the boom, when they couldn't justify the house price based on common sense.

expat - "just face facts - all markets are so full of volatility you'd be mad to be in anything".

One thing I CAN guarantee you, if you invest in nothing in the future you will have nothing :)

dave - exactly, Alexander has no credibility as far as I am concerned
Actually, houses fell more than 5% before the global recession started
As you quoted Alexander from Feb 08 he seemed to imply that a drop nearing 30% could be possible if a major recession hit and unemployment soared more than 1.5%. And now it is yet for some reason he now thinks house prices have bottomed out
He's contradicting himself again

the sold signs that are appearing only indicate vendors that are stressed or becoming more realistic...not some sort of boom !

i viewed an upmarket, north shore house last week assisted by the two, BMW- convertible driving agents.

it was a great home, 4 bdrms, 12 yrs old, distant ocean view and was being billed as "realistic vendor" which was true...the house was reasonably priced at 550K.
a year ago it would have been around 650K, i would assess.
i was told the vendor had a conditional offer for the 550K based on offerer selling his property....sounding familiar yet ?

the agents told me that i could probably get the home for 500K as i'm a cash buyer having sold my house 2 years ago.
i figured all this was indicative of vendors getting out of the " mexican standoff" and getting real so i'm going to continue trawling along, whilst i rent my townhouse by the beach.

i would say spring this year would be a good time to get really serious if buying but until then just keep sniffing around and if you see a house that you reeeeeeeeeally like at a fairish market price then offer them 10% lower, thereby pricing in any future downwards drop .

then you have a house that will have some cap.gain over the next 7 years which will allow you to buy another very attractive home in a still stagnant market.

CASH IS KING!

Managing money is maths ... keep it simple stupid.

e.g. imagine you have $500,000

Option 1: 4% pa return in bank = $20,000 bt profit (guaranteed)

Option 2: $500,000 rental investment = $20,000 rent (over 48 weeks a year "“ not guaranteed). At 7 "“ 8% loss in capital over the last 12 months = $35,000 to $40,000. If you need a mortgage at 6% = $30,000 (understated including principle), probably more like 7 "“ 8% including principle. Total cost (based on best case scenario) = $75,000, which is a $55,000 loss or $15,000 loss (without mortgage). That's a difference of $35,000 from Option 1 (without a mortgage) and a huge $95,000 difference with a mortgage compared to Option 1. Under an LAQC one might claim back 2000 to 5000 from taxes depending on income and total loss, but not significant really considering total losses.

And now we didn't even know where house prices are going. Three years ago the 6-month to 12 month forecast could be taken with 90% confidence. Now one might find it difficult to predict the next 6 to 12 days!

Option 3: Same as for option 2, except the total loss is $75,000 pa (with mortgage) or $35,000 without one (on 7% property value drop).

Option 4: Wait for property to stabilize. Have CASH in online/ call saving account making a small profit (not losing capital). It is better to see the property market start to bounce (or at least appear more stable) and then buy, than try too pick a bottom. We are not in a "normal" recession!

Option 5: Equities. Not stable either. There was an opinion early this year that shares had accounted for any further loss in value (by over-correcting in late 2008). And just over the last 8 days, the NZX50 had lost 9%, slightly back (1%) now but overall looking dodgy. The DOW even looks worse, 15% down in 2009. There has been 11 false-starts to a rebound in 6 months. Howz your risk appetite?

Conclusion: Options 1 or 4 at this stage.

CASH IS KING!

Hi... there seems to be a new Brent blogging, I will remain as Brent.

Anyway, I think Bernard Hickey is just stroking himself in the wrong places. He goes back to the date of his early predictions then uses events that are now current to attempt to re-give his weak arguement strength.

I gain some of the information from Tony Alexanders weekly overviews - which are free. For those interested in a professional opinion (which yes is always only an opinion) here is the subscription cut and pasted out of an overview.

The Weekly Overview is written by Tony Alexander. The views expressed are my own and do not purport to represent the views of the BNZ. To receive the Weekly Overview each Thursday night email me at tony.alexander@bnz.co.nz with "˜Subscribe" in the Subject line.

If BH was really up with the play he would know that TA wrote that article some time ago. Just because the NZ Herald was slow to pick it up doesn't make him look any smarter being even slower.

To those that think Bernard is correct, don't change your mind, less competition makes life easier and cheaper for me and what I do...

PS: To those that have purchased - as long as you purchased wisely - WELL DONE!!!

CCC ppl are putting thier $$$ where there mouths are!

By buying property or not ... this is the real test. Not betting on blogs. Some will lose, others gain. It's all a game of Monopoly with real $$$.

James - your response in obvious and I should have covered it off but is irrelevant because you have missed the point. What I am saying is wouldnt it be interesting if we could all state our positions clearly, track positions as individuals over time, and understand our consensus as a group.

When Tony Alexander makes a "prediction" such as this - it is a pity his employers the BNZ dont at the same time do the honourable thing and announce to the public that they will now engage in "non recourse lending".

There have been technical difficulties (now resolved) with respect to my article yesterday on this website "Housing Bubbles: Learning from Houston" - with further comments - which I would suggest people read closely.

http://www.interest.co.nz/ratesblog/index.php/2009/02/24/opinion-housing...

I do hope the media in New Zealand asks Mr Alexander if his Bank will allow "non recourse lending" - so that the Bank bears the risks. And if it is not prepared to bear or share the risks - why not?

Hugh Pavletich

http://www.kitco.com/charts/livegold.html

Demand might be 200% for GOLD, but the 1-year yeild is approx. 0% and supply is huge. In September 2008, the IMF sold approximately one third (50 million ounces) of its then-existing gold holdings. And GOLD value dropped about 20% as a consequence.
http://www.imf.org/external/np/exr/facts/gold.htm

Notice the 10-year chart, looks like a bubble too!

People (or Groups of People) can quickly sell GOLD, so it has it's own set of risks. Although, I'm not against commodities, they too are another option, just like currencies.

I guess my position is that GOK (God Only Knows), best wishes to all and I'll see you at the bottom (or top or somewhere in between)!

BTW, Bernard is there a commodities link on your website?

Yes, you can find the Gold price, along with other precious and semi-precious metals, here >>> http://www.interest.co.nz/charts/gallery0-40.asp

If house price are going to rise in the next few years where is the money going to come from to pay for that?

Are incomes going to rise significantly or are foreigners going to feel safe to lend us even more money?

I don't think either are very likely

'artificialsm' is the state of mind where you believe in fantasy because concepts of reality are not understood....hence small children believe in the Easter Bunny and Santa.
The reality is the fantasy money has vanished....wake up to the reality santa does not exist....

Correct my memory, folks, but I recollect that residental property is normally priced at a multiple of 3 - 5 times the median wage. That puts us, as a basket lot, at 6 - 7 times, currently. So, as Bernard says, property is over-valued here in Godzone. That does not imply that prices will fall directly. There may be a crab market, as per much of the 1990's. Inflation over the duration will effectively bring prices back into the fair-value range. Just to add, in USA, the median house price is $US 170 000, a fall from $US 210 000, just 6 months prior. If any-one starts spruiking the merits of property, do check their credentials ( and sanity ! ).

To all
What a fantastic debate. A real eyeopener. Plenty of passion and insights.

CCC
I love the idea of a consistently run 'wisdom of crowds' series of polls on the topics you suggest. We can run them monthly. Any other suggestions for topics?

Couple of points to all.
I've stuck with my forecasts because the basis for making those forecasts have not changed. We've always focused on our home loan affordability series. http://www.interest.co.nz/HLA/HLA-NZ-February2009.asp The news since that March 2008 forecast has simply been noise helping the fundamentals realign themselves.
There's plenty of noise around at the moment.
BNZ's CFO says there isn't much demand for NZ banks' government guaranteed debt on international markets. This means all that foreign debt will be expensive and difficult to roll over. That means long term interest rates are likely to stay at or above 6%. Unemployment is likely to rise 8%. Bank policies on LVR will get tougher.

cheers
Bernard

Dave - many thanks for drawing to my attention the differing views of Toplis and Alexander of the BNZ. There is massive constructive debate globally with respect to the training within economics profession. I touched on this within the January article "Housing Bubbles and Market Sense".

And the economics profession should be commended for this. Its long overdue the planners and valuers / property appraisers did the same thing.

As a former property development practitioner - I dont think the economics profession - at this stage - has much of a clue about the impacts of inflating and deflating housing bubbles on economies. Thats why - within yesterdays article I drew attention to Oseki' of Pimcos comments in this regard.

I do wish too - that the New Zealand media would draw peoples attention to the yesterdays report from the United States National Association of Realtors - and secondly - to the California Building Industry Association release.

In dealing internationally with these issues - I am of the view that (a) Kiwis are the best informed with respect to housing market realities - the comments on Interest Co NZ and the NZ Herald illustrate this - and (b) politically, we are currently the most advanced in dealing with the real structural issues - unlike the Obama administration in the United States, Rudd in Australia and Brown in the United Kingdom - throwing money down a big hole and avoiding the real issues at national and local level.

This is why New Zealand is the best country in the world - in all (fake) humility!!!

Hugh Pavletich

Wow what a response !
It seems we are all investing, speculating, servicing and dealing. Who in this country is producing/ manufacturing- exporting? Where does the (our) money come from? What is the next danger for our economy - hyperinflation - why ?
Well- time to join the vicious cycle and buy another house, before money gets burned- crazy!!

The guy in the video is a blowhard but he presents a history of bullshit from the US RE industry. Short: "Always a great time to but or sell real estate." Or not.

http://www.youtube.com/watch?v=-89orGT8pP8&eurl=http://lawrenceyunwatch....

Following a boom, everything drops.

Struggling to pay my current mortgage, scared might loose my property cost of living is so high.

Hi,
I don't and won't even attempt to predict the future price of housing. Economists etc predict the future values of a whole host of economic statistics but it would be interesting to evaluate how accurate they were over a long period of time (I suspect they would not be very good at making accurate predictions, and I mean accurate predictions, not they were "about" right. I think I would have better chance using a dart and dartboard ). The exercise is about fear, uncertainty and doubt (FUD) and how people want certainty in an uncertain world. It's more about human nature and psychology, than if the price will go up or down. It's just mental masturbation.

Edmund

Marie, W.Kunz - I'm in tertiary education. The lower dollar has seen a 50% increase in overseas enrollments yoy 2008-2009. I sure hope someone from our sector is at the jobs summit pointing this out!

What a great emotive debate!

I have to agree that a significant uplift in February House sales seems likely. The heavily publicised, plunge of interest rates has surely driven a few punters to open their wallets.

However our economy is undeniably contracting. We can physically see this in the dropping demand for NZ products and the steadily growing number of unemployed. NZ'er simply won't have the money to spend "“ so to expect them to pay more and more for housing seems a little absurd. Especially when:

-They might lose their job. Low interest or not "“ good luck paying the mortgage
-Overall the market is overpriced (historically for NZ AND comparatively to the OECD)
-The bank asks for a much larger deposit "“ which for many, they won't have (especially if they're under 30 and still paying off your student loan)
-The price has started falling and the see the risk getting burnt (falling knife effect)
-World economies are now intimately linked. It just takes time for everyone to catch the cold and exhibit similar symptoms.

I'm looking forward to reading about the resurrection of the housing market in the Sunday paper. But perhaps this is an "˜interest rate induced dead cat bounce' rather than a second coming.

Housing capital loss is here. It's time we all work in actual jobs to get wealthier if we can. I fear it's too late ... this leaking bubble is being puffed up by very dumb people. We were once a smart, productive company , whoops - I mean Country. Now we are just like americans.

Josh's words "leaking bubble" made me think of the leaky building issue. We shouldn't underestimate how big a problem that is. I have a friend who specialises in remediation (great area to be in!) he reckons we have only touched the tip of the iceberg.
this wil be another factor that places downwards pressure on house prices

Josh - I don't get your meaning?

Why recommend a free person to work for the government? saathi is better off in the long term in agriculture, and then if motivated, to learn the arts of money in the wild.

I love you Kate.

http://online.wsj.com/public/page/news-economy.html

Just when one might think the market is going back up ... check out this bar graph from the US re-sales (month by month). Do we have something similar to look at in NZ?

Just because one month showed a positive increase, then a drop, then an increase... but the overall property values have been continuing down (for now at least).

Also, all the info that we get today is actually yesterdays news/ facts.

What is more difficult to know about is what is happening now! The facts are changing as we speak...

Also using mortgage listings are a bit misguided, b/c they include ppl re-mortgaging (so those who already had a loan and are just re-structuring). Need to consider the "new" loan starts ONLY.

Every blog is superb with not much reward to the blogger .If i was judging logic i would give the prize to JAMES FEB 26 12.25pm.He sums things up in a LARGE NUTSHELL.James take a bow.

What the article is suggesting is that cash flow positive buy and hold investing is possible. If your intention is to create wealth through passive income rather than focus on capital gains, then it doesn't matter if the marker is set to drop somewhat further. As long as there are renters and you can secure a longish term interest rate and the numbers are good, it makes sense to buy if you can.

"Who produces,manufactures,exports"

while the borrowing rates are so low I'm spending a bit on a builder/painter to do some fix up work on one of my rentals,see this as a long term investment and also as a way to increase yield by attracting better tenants,even if they don't pay more right now they may stay longer.Also considering some green based improvements.If Oil and related technology got they world out of the 30's mess,it may be that green technology will be the driver for this one.When energy rating on homes kicks in I'll be ahead there.I know of one "green" company that is growing at the moment.

The Equity allowing me to borrow exists because i purchased according to positive cashflow not potential capital gain.The tenants are not paying huge rents,some of their money comes to me ,some to the bank, some to tradespeople and nz based technology ( the hrv guys ) oh-and wool insulation.Sure i couldn't get the money back right now if i sold but over time i will-or my children will.Saving for them and providing work.

How is this a dumber thing to do with my money than buying a lump of gold which can only return for me if the price keeps going up.And what exactly does gold produce after the money used for purchase is circulated ( or not ) the interest i pay is also circulated ( or not ) along with the purchase price, along with the builders family spend.

Investment in Housing Un-productive?

I am not an economist so if there is an elephant in my room would someone please show it to me

So 'The Bank Manager' admits that they haven't made a sensible contribution to the thread.

Bank managers have a lot to answer for in this current credit crisis - if I were one I'd lie very low right now.

There must come a time when real estate agents decide to bandy together and infiltrate websites like this in a desperate hope to convince people that "property is still great!"
hmmm, I feel a tui billboadr coming on:

"Property is still a great investment"

Yeah right

Bernard, you stick to the 30% drop forecast and I'll stick to my 50% drop, let see how it pan's out.
(Note to Editor, please link my comments from stuff.co.nz: http://www.stuff.co.nz/blogs/showmethemoney/2008/02/11/dont-panic-captai... to back up my comments here.)

The main stream media is basically a joke, the business sections of the morning TV shows are pathetic, seems to be the way in the western world now. Bank economists are almost always wrong. I expect housing to fall 50% (Inflation adjusted) Most people would say I'm crazy but I have data and logic to back it up. I just updated my M3 vs. Valve of Housing stock chart: http://farm4.static.flickr.com/3592/3312372716_9b5ce8160e_b.jpg
For those that can't see housing dropping to this extent, stop for a minute and think logically about this, instead of thinking of all the reason why housing can't fall, think why not. We thinking in terms of supply and demand but people must consider that buyers must have money to create a demand, simply needing something does not mean one can have it, if you live under a bridge you may want a house but if you don't have funds to buy it, you will not add demand to the supply and demand equation. See my post here to explain this further: http://goldmeasures.com/2008/05/why-real-estate-can-fall-for-many-years.....

Buying gold / silver is not about making money it's about preserving stored effort (Capital)

a fly who had been sitting on a wall in the morning meeting of Barfoot and Thompson's head office this morning has just reported back to me his findings:

"Manager Dave told his Senior Staff Helen and Mike to monitor house price related comments on interest.co.nz, and blogs on nzherald.co.nz . Helen was charged with posting pro-housing responses on interest, and Mike was charged with posting on the Herald blog."

Matt,

"a fly who had been sitting on a wall in the morning meeting of Barfoot and Thompson's head office this morning has just reported back to me his findings"

It has been obvious for a long time now that there are plenty of RE trolls doing nothing else, since they don't have anything else to do anyway...

If the people at the job summit today had any sense one of the things they would be talking about is fast tracking changes to planning controls.
One simple change would help encourage new house building - introduce "dual occupancy" rules that allow 2 small to mid size dwellings to be built on a site only otherwise allowing one house. All the major Aussie cities have dual occupancy
Another simple change would be to offer development fee reductions on smaller dwellings like they do in Christchurch
but we can't expect anything practical can we?

Totally agree Matt, our whole "suburban" housing and lifestyle model is a due for the bin.

There are REAL ESTATE agents in my town who cannot even sell their OWN place.
There is JUSTICE.
There is IRONY,
There is a Reality ESTATE.

Kate - the problem with the local democratic process is that NIMBYism usually gets in the way of sensible rules and the bigger picture, such as the short and long term housing needs. What they did in Aus was at State level they mandated that all local Councils must allow for dual occupancy. Local Councils were still given some freedom about how and where they actually applied it (eg. it mightn't be applied in heritage areas)

My view is that we are so outdated in our thinking in this coutnry. Auckland is pretending to be a large-ish city, yet most of its citizens are acting like we are a little town.

Kate,I think in the end it comes down to balance and common sense. And my viewpoint is that if you have a 600 sqaure metre site and someone can build a large 4 bedroom house as of right, why not also allow someone to build two smaller 2 bedroom dwellings? If you control the bulk of the buildings the impact of the 2 small units will be very similar to the one large house in terms of traffic generation, wastewater etc

the problem is if you try to introduce this at the local level you'll get the usual NIMBYists screaming "high density, high density" when of course this form of dual occupancy development is still very much low density

Thats why I believe a higher level mandate is required from government as they have done in Aus

What a frightening lot of economic ignorance.

The whole Western world has had an economic crash that stemmed from housing bubbles; NZ's housing bubble is one of the three worst along with Spain and Ireland, NZ's per capita private debt is the second worst after Iceland; and people rabbit on about our housing market being different to the rest of the world, exempt from the normal laws of economics?

BAH. We deserve every bit of what we are going to get.

yeah exactly Dave and don't you just despise his regular use of the pompous phrase "We Economists"
Add to that, if "them Economists" look at the bigger picture, what is there in that bigger picture that is making him so confident on the housing market?

Who cares about the BIG pictures...

I'm in the detail!

If there is anything I have learned in almost 20 years of very active property investiment it is that "New Zealand does not always follow world trends". For several months we have heard a large mass of "experts" shouting "the sky is falling, the sky is falling!"

Is it?

I have a large portfolio of rental property in the city area. Rent is slowly going up to curb the extreme demand that seems to grow weekly. Interest rates are falling to 3% below what I have many mortgages fixed at. This will substantially lower my cost of ownership, and increase my net profit substantially. Since all my borrowing is in NZ dollars, does it matter if the dollar drops to 40 cents to the USD? Of course not. And foreigners with USD's will come to NZ to live part of the year because it is so cheap. This rental demand will make the rent go up further.

As I am in the business of making rental profit, I do not plan on selling bulk amounts of property in the near future. But, if I were to sell a quantity of properties, what would suggest that the selling price should reduce? It would be like saying, "my business is making more net profit than ever due to the economic climate, so I think I'll sell it at a reduced price." Makes no sense at all.

I agree with the theme of the Herald article, but would add that it very much depends on the type of property. Luxury, high end homes in exclusive areas that require major amounts of commuting are going to be kicked in the guts as far as price value is concerned. At the other end, the people that lose their houses will be moving to apartments across the road from where they work as they no longer have the Merc and BMW to drive to get there. With almost no new apartments being built at this time, all indicators are that there will be a shortage within 2 years in downtown Auckland. If rental yield is going up and up, does it make any sense to sell at a reduced price? The cause of "reduced price" at the moment is more likely to be related to "other issues" like finance availablilty and income stability of the particular owner selling. From a "purely investment" standpoint centred around rental yield, it is an EXCELLENT time to buy a cash positive property, and very likely the opportunity is going to dissappear soon, as to expect the prices to fall further when rental demand is high and interest rates are low is wishing a bit too much. But, again, each deal and property has to be analyzed for what it is.

If you're already in the market and looking to buy and sell in the same market, I guess there's not as much of a problem unless you lose your job. If you were shrewd, you could look to sell now and move into a cheap rental for a year before buying again, but realistically that's not for everyone.

If you're first-time buying however or looking to purchase for investment reasons, I'm still not convinced that it's a good time to buy. Give it another year perhaps, save some more money, keep an eye on the market and your job. Recessions happen slowly (despite a lot of urgent and alarming language used in the media) and can linger for years. There's no rush.

We've been in a local recession for about a year now (a lot of people didn't even seem to notice until recently) and are only now starting to see the effects of the global crisis, which by all accounts seems to be getting worse. Our state of recession still seems to have no end in sight.

In my opinion, at best we'll just see a continued slide in property prices and rise in unemployment till the end of 2010, then things will maybe flatten out for a few years before growing again. At worst, the global economy will totally collapse due to all the nonsense bail-outs and money printing going on at the moment. And what would that mean for NZ? No idea, frankly, but I'm sure it won't be pretty.

What would happen if you threw somebody a greased rugby ball unexpectedly - say at a dinner party!? You can visualise the scene - unless they're a professional athlete, they jump out of their skin, grab it, it pops out of their hand, they grab at it again, it bounces into the air, they fall off their chair, manage to bat it into the air again, then they pull the dinner off the table into the host's lap whilst the ball smashes the TV and finally falls to the ground.

I've just got this gut-feel that the world governments are still in the process of staggering around trying to catch a greasy economic ball. Unfortunately, they're not athletes, they've not played rugby for decades and never had their eye on the ball in the first place. Now, as far as I can see, they're doing all the wrong things, boogying and flailing around trying to bat things up into the air at all costs. In my opinion, and it is just that, they are going to do more damage than if they had just let that economic ball drop to the floor in the first place, picked it up afterwards and told the kids to go play outside.

There's a danger our dinner's going to end up on the floor. And it's this danger, this level of risk that is contributing to people's reluctance to making the biggest investment decision of their life - property. Which is why prices must continue to fall, etc, etc, etc...

Hail Bernard.

Great time to go fishing:)

My first impression is that that piece of writing should be included in the letters to the editor where opinionated drivel is usually located but then it occured to me that many out of luck real estate agents will be looking for new jobs and it looks like this one found an opening at the herald.

They should at least state the conflict of interest at the start of the piece instead of the end so people know what to expect and don't waste their time reading it.

the Herald's actions in even publishing this drivel make me sick James
We really are a pathetic small minded little country at the bottom of the world
See you NZ, I'm off to Oz - I've had enough of this little village

MAtt - its worse in Aus. The press there are far more "bullish" about Australia being different and their govt is subsidsing buyers even more. I actually think the NZ herald has been putting in a lot more realistic articles over the last year - in balance the general sentiment portrayed has been negative, which is what it should be. What is lacking is driving home the message that house prices falling is a GOOD thing. GOOD for the economy, GOOD for fairness, GOOD for first home buyers budgets, GOOD for a moral lesson on greed. We need a concerted effort from teh press to drive this home, cos the govt will only open its eyes when the electorate forces it on them. There was an excellent Bryan Gaynor article the other day re NZ needing to get over its housing obsession - more of this is required. http://www.nzherald.co.nz/business/news/article.cfm?c_id=1501241&objecti....

the following quote sums it up:

"The state of the residential housing market has been primarily dependent on the availability of credit. The market boomed between 2003 and 2007 because our banks imported massive amounts of credit.

This money is fast disappearing as the credit boom of the past decade has turned into a credit crisis and our banks will not be in a position to maintain the same level of house funding as they have in the past because we don't have sufficient domestic savings to meet the demand for housing finance.

This shouldn't be viewed as a negative development because we need to generate far more wealth from productive, foreign exchange-earning activities and reduce our dependence on residential housing, which is mainly fuelled by unsustainable overseas borrowings.

"

The problem is convincing those who already have skin in the game. Never an easy task.

Bought a place last night at an auction - Ellerslie. there were about 8 bidders and bidding was spirited (esp at the lower levels!). Vendor was realistic and sold at a price we were happy with, and significantly lower than if they had sold 18 months ago. However they are buying and selling in the same market so it doesn't matter.
We got something we like for a price we think is fair. We know a fair price when we see one as we have been looking solidly for the last nine months - since getting back from Sydney.
We wouldn't go back to Aus. Its heaps better here eh. Especially if you've got tamariki.

Ray - sorry that is a highly simplistic viewpoint - please see my post on Bernards immigration thread

If National get rid of a few more bureaucrats then Wellingotn will drop more

Heh, I just went to that calculator and it told me to buy (I think - I found it hard to understand the results to be honest).

Sam M - yep, are you looking at a relatively small mortgage (<$200K), but presently paying upwards of $300/week rent?

and a further point.

Something I noticed which illustrates bubble folly, is that if you accept the real capital gain of 3% a year, the home owning equation becomes better as the purchase price increases DESPITE rent staying the same (and therefore yield getting worse). This shows up in a funny way how bubble logic works - ie its better to pay a higher price, because if you are guaranteed good capital gains then the gains are amplified, and this offsets the worse yield. Of course the reality is different, because the worse the yield, the worse your capital gains are likely to be in the long term. This is where we need to be careful using a calculator like this. If you purchase at peak, your long term gains will ALWAYS be worse than if you purchase at the bottom and DONT LET YOUR REAL ESTATE AGENT TELL YOU DIFFERENT!!!. Right now, 0% after inflation gains are a reasonable input into the equation. When property drop back by 30-40%, then 3% is a reasonable input. But not before.

Remember - its TIMING that counts, NOT TIME in the market.

What if the house is of poor quality (most old weatherboard homes are) and the tenents go hard on the property? Rental houses depreciate a lot, sometime more than the capital gain. A property investor will look for 8% return given our high long term interest levels.

briliant (not) stuff from Westpac in the Herald this morning:

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10563209

that example they quote is only offering a return of 3-4%! hardly stacking up!!!!

good on you Hugh for your fothright comments in the article!

To; Matt in Auk

Haven't you left yet... You seem to be good telling everyone what to do but do not seem to be able to actually get up and go (all blow no go). Please do so sooner rather that later as hyper-negative people like you with no idea what they are actually talking about are welcome in Aussie, you will fit right in I'm sure.

Reporting on the Wellington City & Suburbs market... Strong interest from many many buyers, lower levels of stock coming to the market than previous years.

I remember back to third form economics...demand is high and supply is lower...think about it. We are also pleased to report multiple offers on many properties again so the 30% drop in prices pipe dream is still just that (in Wgtn anyway).

As I have said before people have to live somewhere, first home buyers are out of the loop still due to the size of deposit needed to get finance, investors are making a pig of themselves due to prices being low and the threat of longer term interest rates rising again. Yes the ability to speculate and make quick money out of property is well gone but 80%+ of the market have and always will buy and sell (or vice versa) and the price of the current market makes no matter.

Sorry Bernard but i reckon that Bottle of Sav is heading my way in about 9 months as time runs out for your 30% drop prediction.....mmmmmmm lovely Sav

yes you did Kate, if you are buying and selling it makes no matter...read the context ;) it is just like a commentator to only quote the bits that suit you.
I am an agent at the coalface and talk to real house buyers and sellers each and every day so that is my qualification, what would your be ?

Glenn, my qualification is as a real buyer and a real seller - we buy when it makes sense and we sell when it makes sense. Now is generally not the time to buy - depending of course on what the seller is selling for. The market is uncertain and the current average prices still too high in relation to likely trends/future economic outlook.

Indeed, I would venture to say, in this market - the ONLY thing that matters is price!!! Interest rates change - the initial capital outlay does not - and the market is moving too slow to guarantee a reasonable ability to liquidate the asset in the event of a change in circumstances, particularly for those people borrowing to invest.

Glenn, the market is not a goody. As noted time and time again, its all about fundamentals and if the fundamentals don't stack up without capital gain (which isn't going to happen) then prices must fall.

And please all those investors, real estate agents and what have you, do you really, really believe that if house prices have gone up nearly 100% in the last 5-6 years, and have only come back 10% that we will once again see the upward trend?? Really. What without incomes have kept pace....

Not without rampanent inflation we won't. Prices are headed down and will stay down...don't delude yourselves.

Ironic to think is some cases you now have bank economicst talking about possible capital gains and a good time to buy, while another part of the bank is saying via their actions "80% loans only" because they are worried about asset depreciation....

Here's the latest missive from Harcourt's. Ignoring the spin how happy they were at a lift in sales in February the salient points are:

Average price changes over the past year:

Christchurch down 18%
South Island provincial down 19%
Central region down 26%
Wellington down 7%
Northern region down 9%

http://newsroom.harcourts.co.nz/webpage/newsletter/MarketWatch%20March09...

And from the text:

""As for the rest of 2009 our expectation is for a slow lift in the number of sales transacted and for prices to remain stable at best, with both buyers and sellers needing to ensure they have market relevant price expectations in order
to achieve success.""

If even the ever bullish Harcourts people see ''prices to remain stable AT BEST'' you can see why it might not be the best time to buy, LOL.

Latest loan stats are out from the Reserve bank- instead of continuing to fall the number of loans approved have surged again. I know many people here want to believe this is a dead cat bounce and the market will tumble later on this year but I am really not so sure.

Oh I dont doubt that sales in March will have been (relatively) good (and thats with the emphasis on 'relatively'). There was enough carry over from February to maintain that. However 'later in the year'the market will be dealing with unemployment at least 50% higher than where it is now (see the surge in companies laying off people in March alone here - http://www.interest.co.nz/joblosses.asp), a global economy still in recession, and longer term interest rates continuing to climb (Bernard has already highlighted 5 year rates have climbed 0.75% in a matter of 6 weeks). I struggle to see that environment as one under which housing will prosper.........

A brief word about unemployment. In practically all the markets I follow around the world (the US, Europe, Asia), economists and commentators have consistently been behind the curve in forecasting the rise in unemployment and its extent (you can check this if you like by looking at global data on forexfactory.com - expected and eventuated unemployment data is produced there for all important nations). A typical example would be the US - where only 6 months ago pundits and the administration were indeed picking some rise in unemployment - but what has then eventuated has been far, far in excess. We see the same pattern in the UK, in Canada, in Japan, in the European nations. Note also that in many of those nations unemployment has risen from rates which in 2006 and 2007 actually reached 20 year or longer lows. I mention this because again I hear it being trotted out today that NZ is favoured 'because unemployment is rising from rates that were record lows'. THAT WAS PRETTY MUCH THE CASE IN MOST OF THE TOP ECONOMIES OF THE WORLD - and it is doing absolutely nothing to hold back the subsequent surge in unemployment in those nations. I think pundits/politicians here have become inured to unemployment because in the first mild downward leg of our recession (which to my mind morphed into a serious major recession in Q4 of 2008) it was largely a paper tiger.

It most certainly is not now - and I think our pundits/politicians have misjudged its rise and depth in the same way there brethren have overseas. Unemployment (with its multitude of knock on effects), will become the major preoccupation of governments and consumers in the rest of the world AND NZ in 2009.

Errr - a couple of things

1) Until someone tells me differently, I am not sure what component of those figures includes people re-mortgaging (which there will be rather a lot of at the moment I suspect). I have always mentioned this caution when addressing these figures.

2) The figures are somehwat higher than March last year - but March last year already represented a month in which the housing market had significantly 'slowed' - after all peak values were hit in Nov 2007 (REINZ), and sales volumes had already fallen (from for example 6854 in Oct 07, and 7837 in Nov 07 to 5129 in Mar 08). Thus last March was already a month which showed the weakness of the market.

3) Compare this to March 07 - when loan approvals were running at 10,000 plus every week and sales were running at 10,000 plus.

Thus you have to be careful what you are comparing here - March 2008 was already weak! If you want to compare it to a 'strong market' then compare it to March 2007.

Also then think that the preceding 6 months were the weakest in volume the industry has had in 10 years - there was bound to be some 'backpressure of demand' which the carrot of ultra low interest rates has flushed out.

I would consign the 'anectodal' stories to the bin if I were you - the RE agents have gone into overdrive in the past month or so trying to flog this particular horse. It is completely unverifiable (and thus manna to your average RE hawker).

Actually I can answer my own question about what is and what isnt included in the mortgage approvals:

http://www.rbnz.govt.nz/statistics/monfin/c16/description.html

So it seems from this that re-financing within the same bank is NOT included, but when someone jumps out of one deal and into another deal with another bank the data IS included as a new loan approval.

Now we know that a lot of this has been going on - Kiwibank for example have been very good at nicking other peoples customers recently.

We also know that many people have been jumping out of fixed rates on to floating (and in so doing they may have jumped between banks).

All of which would be included in these figures!!!

Soooooo........those new loan approvals have to be assessed with a degree of caution, particularly at times such as this, when there is clearly a lot of re-mortgaging going on.

andy hamilton,
in my opinion, one of the better places to get a feel for growth/decline in mortgage activity is to look at http://www.rbnz.govt.nz/statistics/monfin/c6/data.html

I downloaded the historical data in the excel spreadsheet available from that link.

Unfortunately the stats seem to lag by a couple of months compared to the weekly mortgage approval stats. I don't see what is so hard about getting the outstanding mortgage information... However, as Jan 2009 is up now we can look back over the last few years to compare Jan figures.

The interesting stat is month-on-month growth in outstanding housing mortgage debt.

On tab "% change and net monthly change", Column H

Jan 2004 ==> 1,114 Million growth from Dec to Jan
Jan 2005 ==> 1,243 Million growth from Dec to Jan
Jan 2006 ==> 1,197 Million growth from Dec to Jan
Jan 2007 ==> 1,508 Million growth from Dec to Jan
Jan 2008 ==> 1,114 Million growth from Dec to Jan
Jan 2009 ==> 527 Million growth from Dec to Jan

Now if you go and cross reference the housing loan approvals for Jan 2009 to Jan 2008 it may be of interest to see if you can see any correlation. I haven't done that and leave it to whoever may be interested.

For me, it was interesting to review that column from early 2000 through to current and see where the growth in outstanding housing mortgage lending really fell off a cliff.
March 2008 growth ==> 1,148 Million
April 2008 growth ==> 656 Million

housebuyer,
I have no doubt there is increased activity and there is a bounce going on. And I believe it has a bit of strength to it.

The question is whether this bounce is a "dead cat". Or whether it has legs.

If unemployment rises above 8 to 10% then this cat will be squished. My odds on that would be around 90+ percent at this time

If this rally has legs then it truly will have been different here.

Matt

>>Tell me, do you think its rational that someone like me on 110K can only afford a shitbox in Glen Innes?

You are telling me that you will turn your nose up at a half a million dollar property i am assuming from what you are saying?

That says quite a bit about the kind of market forces that keep driving property up.

My 'shit box' in Wellington in a desirable sought after area is valued at 300,000. I am quite happy there although the access is pretty poor - the views and sun are however very very good - for me anyway....and pretty well anybody i would say unless you want harbour views and marina access or whatever.

While people like you are wanting to buy palaces while the rest of us are content to just have a home i suppose property will always be somewhat irrational

One thing that I have noticed about my city is the number of ordinary looking young couples with young children living in pretty upmarket areas. When my children were that young we could never have afforded the sort of houses young families are living in now.I have wondered over the past few years whether the average household income numbers used by some people to calculate the "fundamentals" takes into account Working for Families. WFF has advantaged people with children over single adults in many cases.

Also- here is a look at international housing prices.

http://www.economist.com/finance/displaystory.cfm?story_id=13337869

NZ's housing price rise looks pretty modest compared to some other countries and our prices have already decllined more than many other countries.

I see ASB hiked its longer term interest rates this morning.........

Sorry this is self-indulgent but I can't resist. Here is story about a real estate cheerleader that followed his own advice (in California).

http://lansner.freedomblogging.com/2009/03/25/oc-prognosticator-defaults...

Wiggleit - I'd wait a while mate!!! With all the government job cuts coming now this will negatively impact the capital's property market, I suspect there will be a few more mortgagee sales down there

If you have the money and find the perfect property now is a great time to buy. I looked for 18 months during '01/'02 before purchasing when the boom was already under way, missed out on many ideal properties before purchasing a house 2 hours after it was listed. It wasted loads of spare time and was a risk having to make such quick decisions. We purchased another house last Oct, which I had also looked at buying in '03. Then the open homes were like a party, could hardly park in the street and the house was jammed, last oct we were the only ones at the first open home, and had all the time in the world to make a decision. We brought for 20% under value, and now the interest rates have dropped the property is almost returning a profit. Since then there has been alot of hype around the property market and interest rates, the bottom cant be far off.
Would be interesting to see figures of 'average' house prices with the top 10% and bottom 10% of house sales removed to eliminate the forced sales to give a more true indication of what the average house sells for.

Looks to me like the housing market will now stabilise. I wonder how low the banks will go with their 5 year mortgage rates? I guess if Bollard has to go down to 1.5% or 2% their is no rush to fix and he says OCR will stay at 2.5% or under until the end of 2010.

Hi to all of you extremely interesting posters, I have learned much.

I did the test in the Consumer as Kate suggested and it tells me to stay well away from buying.

Has anyone advice for us please, we have 100 000 cash, no other assets or credit.
No kids either, this marriage the second for both of us.

Should we buy to live in and just keep renting into our old age until some social worker puts us away?

Lara, are you serious or just winding us up?

The market is now getting better. I think buying a house would not be a problem.

I'm guessing Roger is 5ft tall and is suffering from angry short man syndrom

Added to my favourites list and added to my blogroll.