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Opinion: BNZ sees 'long slog to sensibility' for house prices, farm prices and commercial property prices
Bank of New Zealand's economists have published a detailed research report questioning the still-high valuations of residential, rural and commercial property in New Zealand.
BNZ said prices had fallen in some cases since 2008, but remained significantly above their fundamental valuations when compared with inflation adjusted trends, price to income multiples and yields.
"While a good amount of adjustment has been made to date, a greater sense of realism may yet be required," BNZ said in the report available here titled NZ Property Markets Yielding to Fairer Value.
It said property prices last appeared grounded in reality back in 2003 and had become unhitched since then.
However, property buyers were beginning to become aware that conditions had changed and valuations may still be stretched, it said.
"There are signs already that the populace is completely rethinking what constitutes fair value for a property, of whatever sort, especially on the growing realisation that credit channels will not be as open-ended as had become accustomed to," BNZ said.
It said many investors were beginning to consider risk adjusted yields again after years of being blinded by the prospect of capital gains. It warned of a potential for a long grind lower of values.
"As capital-gain pretensions peter, beware a long slog to sensibility," it said.
Here is the full report below.
NZ Property Markets Yielding to Fairer Value
All manner of New Zealand’s property markets have struggled over the last couple of years. What’s going on, where are we in the process and what does the future hold? Well, while a good amount of adjustment has been made to date, a greater sense of realism may yet be required. How will we know when we’ve found a base? Well it will probably be when valuations are based on decent risk-adjusted running yields (remember those?), as capital gain expectations rightly fade from the equation.
Perspectives, Please
To get a handle on what’s playing out we believe it’s essential to step back a bit in time. Indeed, probably back to circa 2003, when property markets last looked well grounded in their fundamentals. From around that point something seemed to be unhitched and everything was pretty much off to the races from there. Just a couple of years ago, of course, the NZ economy was incredibly over-heated. It seems like a distant memory now. But resources of all description – whether plant, premises or staff – were stretched to breaking, meaning core price and wage inflation was bursting its banks. But property prices had become even more inflamed. And we’re not just talking about houses.
Land prices mushroomed. Commercial and industrial property prices soared at double-digit rates. New Zealand’s biggest asset price cycle over recent times, was arguably in farms. Collectively, it was probably the broadest and biggest property price “boom” the nation has ever experienced. It was also, however, mainly bubble and bluster associated, as it was, with a rapid accumulation in debt. So those expecting a reversion to those heady days, even something resembling it, are fooling themselves. What we’re actually aiming for now, across the range of property markets, is a return to reality.
A finding of one’s feet.
While virtually all of New Zealand’s property markets became “richly priced” in the few years to 2008, it’s unclear as to how much of the requisite rebalancing has transpired to date. This opaqueness is essentially because of limitations in the available data. Nevertheless, the following are our general impressions. We can start with oft-overlooked farms. Having burgeoned in price over 2006-08, their subsequent correction seemed an obvious reaction to the way international dairy prices essentially halved between early 2008 and early 2009, during the global recession. However, despite world dairy prices having reclaimed broad robustness over the last twelve months or so, farm prices have failed to rebound much, if any.
In any case, how much of a price cycle have we really seen in farms, and in which farm types? The Real Estate Institute’s rural statistics show the simple median sale price of all farms dropped more than 40% between mid- 2008 and mid-2009, and has gone about sideways ever since. That gives the appearance of a complete pruning of protuberance. However, how much of this is real as opposed to just reflecting the type and size of farms being sold. This is where the Quotable Value NZ rural price index comes into its own, as it attempts to control for farm-type, size and quality. And this index slipped just 15% between 2009 H2 and 2008 H2, to rest comfortably above the level of 2007 H1.
The QVNZ indices also questioned the notion that it’s been dairy farms that have swung and suffered the most. The dairy farm price index (to 2009 H2) fell 15% from its peak – bang in line with the overall rural index. The price of fattening land actually dropped a greater 23%. And while the price index for horticultural land had fallen about 11%, we suspect its viticulture sub-component fell by much more than this (such are the travails of New Zealand’s “overgrown” wine industry at present).
It is also difficult to get a good fix on commercial and industrial property price adjustments to date. While there has been plenty of anecdotal evidence of big price falls (especially in lower-grade premises), the last “official” nationwide data point we have is the QVNZ indices for the second half of 2009. And these registered an 11% fall in respect of commercial property and 13% for industrial, from 2008 H2 peaks. Residential property price indices have also not looked as bad as some of the stories, and earlier prognostications, were pointing to.
Again, with reference to the quality-controlled QVNZ measures, we note that their reading for the March quarter of 2010 was about unchanged from the previous quarter, to be 6.4% higher than a year ago. The most recent level was down just 4% from the late-2007 peak. So, can we really say there has been a generalised property price slump across homes, business premises and farms in New Zealand? Not by the look of some of the key evidence available.
But might this simply mean we’re not getting a clear read from the data (perhaps because of sales illiquidity?) such that a more noticeable correction is yet to be registered? That is the question.
Ongoing reservations
Accepting the accuracy of the QVNZ property price indices at hand, as a good example, what’s clear is they still look high when set against their long-term trends. As an expositional device, the various indices in real (inflation-adjusted) terms show that property prices in the latter half of 2009, although down, were still well above any reasonable trend, having last looked “about right” back in 2003. Incidentally, we can even throw residential land (“section”) prices into the analysis here.
While we’re not aware of any QVNZ measures on such, we do note that the REINZ median sale price measure took off like a rocket from about 2003. And while it has come off the boil over the year to July 2010, it remains well north of trend (which, by the by, is part of what’s stymieing a bigger recovery in new home building activity in our opinion). We get a similar impression of over-altitude by looking at other rough valuation metrics. Farm prices, for example, while off a bit, still seem lofty in relation to pastoral export receipts (especially when excluding the less-stretched looking dairy farm valuations). Commercial property prices appear high compared to the rents they are getting. And home prices are still very much on the high side relative to household disposable income and rentals.
Groping for Decent Yields
This, of course, is another way of saying that property investment yields remain implicitly low (albeit not quite as low as they were at the height of the property froth).
Sure, yields of all description, including wholesale and retail interest rates, are cyclically depressed. However, it is inaccurate to say that they are low, absolutely. And interest rates, as a general rule, can only tend to rise in line with (presumed) economic recovery. It’s all about normalisation. So those wanting to guard against miscues in property markets over the coming period will do well to;
• Take Government/Rating Valuations (which are only ever crude historical distribution devices) with more than just a grain of salt If one must use historical comparisons, try to go back a number of years – with, say 2003, serving as a much sounder reference point than two or three years ago, when things were frothy
• Most importantly, bring everything back to yields – explicit or implied – and risk-weight these yields for things like tenancy duration/health and renegotiation risks on rents. \
• Compare these risk-weighted yields to market “riskfree” interest rates (recognising the latter are probably biased to rise over the coming years, meaning debt rollover issues need thinking through).
• Benchmark these yield-based valuations to what has “normally” prevailed since the early 1990s (the approximate start of New Zealand’s inflation-tamed environment, following the inflation blow-outs of the 1970s and 1980s).
This general emphasis on (risk-adjusted) yield is only reinforced by the likelihood that capital gains will be far from assured over the coming years, with even ongoing risk that further price correction might be needed in some property markets before a solid footing is found. We would certainly put housing in this camp. This, of course, will be a complete reversal from the “boom times”, when many property buyers would seem to have been tolerant of unusually low yields (and negative net returns in the case of many housing investors) in the presumption of strong capital gains.
Sure, this strategy, worked out for a while – for houses, for land, for commercial and industrial premises, and for farms. But it’s now reversing, as such things invariably do. Easy come, easy go – but the higher debt loads remain. Indeed, there are signs already that the populace is completely rethinking what constitutes fair value for a property, of whatever sort, especially on the growing realisation that credit channels will not be as open-ended as had become accustomed to. In the rural area, for example, it’s interesting that there are few signs that farm prices have bounced back to any discernible degree, even though commodity prices certainly have. In the realm of commercial and industrial property, effective yields are backing up.
And while home sellers are holding out to achieve “recent valuations” buyers are only prepared to pay what they think is a “reasonable price”. There’s a big gap between the two. This price-discovery process will continue. It could yet surprise people in how drawn-out it is and where it gets to in the end. There are some big questions rightly being asked. While we can’t be sure of the results, and timings, we do think the best compass will be a decent risk-adjusted yield in respect to whatever property market you are dealing in.
202 Comments
This clearly means prices
This clearly means prices will plummet and you're an idiot if you say otherwise!
No they wont! You're an idiot!
Yes they will idiot!
Right now we've got that out of the way - anyone got anything interesting to say on this site?
Love your post
Love your post Paul....succinct...yes indeed..!
But there are other things worth discussion round these parts...it's just that many of the types (no pun intended) that frequent property blogs don't seem to want to read anything that may be a little involved or detailed.
It's a fair reflection on our instant gratification society.....make it quick ...make it tasty...and set the polarity to minimum energy expenditure.
la la la tra la la la......it's Friday
Yep. A quick glace at the
Yep. A quick glace at the watch tells me that we should get the latest missive by Olly N any second. That should set the groundwork for the weekends fivolities.
indeed nonny indeed. Ole'
indeed nonny indeed. Ole' ....Olly
BERNARD.........Get this twat
BERNARD.........Get this twat off........ lincc282...........all over the site selling shit.
Jus that when a Bank actually
Jus that when a Bank actually admits the obvious..We should be wary as the massage might get a bit painfull.
I note with interest that
I note with interest that Tony "the bull" Alexander's name isn't associated with this report. How can a bank be so misaligned with the information they provide the market from different sources within their own organisation.
Tony's perma-bull views were
Tony's perma-bull views were getting to be an embarrassment, he's been told to STFU
KiwiD....he may yet unleash
KiwiD....he may yet unleash lassie...a.k.a ..Mark H. he popped out of the woodwork on the SFC blog .....I think it was....gone to ground again.
oops mate I didn't pan
oops mate I didn't pan down......Bingo guess whose here...?
Golly, Batman ! I've just got
Golly, Batman ! I've just got to re-read that! Was it really by a bank, the BNZ, of all ?!
Ah come on Bernard this
Ah come on Bernard this article was just designed to stir up your posters... ;-)
Tim, You read me like a book
Tim,
You read me like a book website ;)
cheers
Bernard
a price discovery
a price discovery process!!!! based on 2% inflation prices are still way to high. crystal ball anyone.
Extrapolating that graph, it
Extrapolating that graph, it looks like keeping the cash in the bank util 2018 is the go.
BH has said as much in an
BH has said as much in an article a way back.
Even worse, what if we slip
Even worse, what if we slip into deflation? the graph reverses and that gap just gets wider....
regards
The scenario put out by the
The scenario put out by the BNZ just confims what many have been saying on this site of late. A steady and long drop in prices over 5 to 10 years as debt is deleveraged out of the whole system. The economy is in dire straights and there is no sign of it improving fast. Where the economy goes the prices of housing go. NZers in general are consolidating and just coping with their basic daily costs and are not interested in taking on more debt unless they really need to.
It seems even bank economists
It seems even bank economists are eventually capable of elementary deduction. Wonders never cease.
Very first graph....an upward
Very first graph....an upward slope, assuming BAU....
ho hum.
regards
It is obvious that valuations
It is obvious that valuations for commercial and farm land are too high based on yield/return - indeed, in regards to farm land, outside of dairy I would guess that even 2003 levels were too high, but I question the notion that house values are over-valued.
Ignoring domestic rentals which are a minor part of the housing stock, value is not based on yield, but replacement value surely? The value of the existing housing stock is now below replacement (a long way below in some cases). Due to an excess of regulation and bureaucracy in the housing build sector still ever increasing the costs of holding and developing land, and of building, it is now cheaper to buy a house from the existing stock than it is to build one. Given the dearth of building currently, and in the future on the fall of the finance company sector, then it must be supposed we are heading for a housing shortage at some stage, so assuming an increasing population, plus no decrease in over-regulation surrounding this area, then the present value of the housing stock is arguably under-valued?
It seems to me the main determinant will be population growth (or not); and feeding into that the effects of the baby boomers selling out of the existing housing stock. If build costs remain where they are, or inflate further, which is most likely, then once a housing shortage starts to come into play, values will rise quickly. I would rather have some deeper analysis of that, in respect of housing only, rather than these biased anti-property sweeping generalisations and assumptions as to a bubble still unburst. (The real bubble here, left, is bureaucracy and red tap, and that has had no air released from it whatsoever. This does not ignore the easy credit bubble that previously fed house prices, this at the feet of the central banking system).
And builders margins
And builders margins are?
Family member build a house recently, the work quality wasnt that hot, it took longer than expected, basically because it seemed the labour was not there that often and infact the builder and the labour just stopped turning up to finish the house near the end....more profit elsewhere it seems.
and placemakers margins are?
I was doing house improvements up until 5 years ago. Personally I know look at what Placemakers want for materials and just dont bother it makes little sense to improvethere is not much return and Im using my free labour....so I just maintain....
Is this costing across the board? not sure, again from personal experience, 2 years ago I got an alternator repaired for <$500 as a new one was >$950...it failed in Feb and a new one was now $708....so I saved for 6 months, bought it 2 weeks ago for $588...
For me this comes back to not just looking at houses being over-valued in isolation....I seem to hear ppl saying they have to charge such and such because that's what it costs them, so lets look at the inputs....one of the biggest is [servicing] debt and the other energy...private businesses are from the data heavily indebted.....I wonder if it isnt crippling them...and forcing them to have higher prices than needed....
Is regulatuon to high? not convinced its significant, sure its higher, but who's insisting it is? why the ppl often they want protection from the sharks. You and other libertanz seem happy to say this again and again, do we have some independant research showing these increase in costs? because I have no context.
Also lets be serious Mark as a Libertarian you have a pathelogical issue regarding anything that comes from a Govn....planning, regulation etc etc so we just have to question your deductions in that light.
regards
... I'm currently having a
... I'm currently having a house built for me at a very competitive cost (compared to other building firms). I could buy a similar house in the area for less (quite a bit less) - I won't go into why we're building anyway; that's immaterial.
That's my one anecdotal, but significant data point. Now forget the politics: what happens when we get to a housing shortage, and it costs more to build new housing stock than to buy from the existing stock? Values will come up surely.
Analysis of population projections vs greying of population would seem to have more influence of housing valuations than other factors.
(I'm still thinking on the 'ratio' post below this).
You've proven your own point,
You've proven your own point, sir. If you can build 'below cost' ( as I did in Chch, saved me $100k off the price of a mass builder), then those prices will compress. There's plenty of excess to come out of houses, at every turn.
Mark Isn't the missing link
Mark
Isn't the missing link in the argument about build vs buy the price of residential sections?
I agree the cost of building and building consents is inflated and an artifificial floor of sorts.
But one of the reasons for the recovery in building activity in mid 2009 was a sharp drop in residential section prices.
Surely land prices are still over valued and when they come down that will fire up construction again and bring down overall prices?
However, I agree there's some 'red tape' built into land prices given the 'smart growth' policies of some councils and the land banking that goes on.
But at some stage gravity will kick in to land prices...
cheers
Bernard
Bernard - it's not artificial
Bernard - it's not artificial - it's structural.
Hey ...who gave you that
Hey ...who gave you that point....no cheating....now you just take that off right now mister....that's got something to do with conflict of interest or something hasn't it..?
Did you notice Marks little gag ..? he even announced it .....?...eh ...huh..?
Go someplace where they can
Go someplace where they can barely even give land away now.
What you find are a bunch of PI/speccer types clinging forlornly to the belief that it's still 2007.
Show any interest and they immediately go into ultra-greasy uber-PI mode, and then look shocked and perplexed as you walk away laughing uproariously at their asking price.
The ones who are over-extended (most of them) will be forced to sell by the bank, while those who don't will withdraw their sections from the market and sulk about "clueless cheapskates".
bernard blows
bernard blows
The old stock will tend to
The old stock will tend to rise in value all else being equal...however and its an interesting point, if new houses are for sake of argument $450k and an old one is 400k but by that ratio 40% over-valued then new houses are even more over-valued....so the Q is why? Sure land prices have increased, the other costs are compliance, materials, professional fees and labour.....The big two in that are labour and materials....Also there is a % for newer houses being better eg insulated and having a longer lifespan...(again all else being equal) so buying a 40 year old house should reflect 3rd? of its life is used....has that been allowed for? not sure. If the difference is just GST then that is only 12.5% v 33%...
"Greying population", indeed plus youth are less and it looks like way more heavily indebted..v maybe an increasing population......which will win out? Take Japan's youth it seems more of them are staying home for longer, they have paid for their educaion but cant get a good job to re-pay it....and in fact looking at Japan's aging problem there is discusion that this is one of the primary reasons for Japan being in such a dire position for so long....and indeed houses are apparantly depreciating in value year on year. We can look at Japan and consider that is probably our future...
I have not read yur thoughts on ratio....will catch up.
regards
Build cost will not remain
Build cost will not remain the same.
They will be lower, and by a goodly margin.
Demand driven by lower incomes.
I know, I went there.
"...it is now cheaper to
"...it is now cheaper to buy a house from the existing stock than it is to build one..." That's why it's not based on replacement price. Once 'new' gets beyond the $ capacity of the traditional new house buyer, they revert to older, and older, and older..... We have heaps of older stuff that will be dwelling ratio'd up (?). At 2.55 per household ( that's not many!), just upping the ratio to 3 gives us 100,000 houses of all types in oversupply.
And reading the trends youth
And reading the trends youth will have more debt, less likely to get a decent job and hence probably leave home later in life....aka Japan....
That ratio climbing doesnt look that improbable (Ok 3 might be a bit much....
Its one of the things I have problems with, trying to forecast/plan the future 2% growth for the last 10 years does not mean 2% growth for the next ten...however trying to plan is way better than doing diddly.
regards
Just getting Dad to live with
Just getting Dad to live with Mum and the kid(s) = 3, would be a good start!
as they lent upto $7800 a
as they lent upto $7800 a cow, 'holy cow batman" our rural lenders got a bit carried away there
Whats a cow worth? $600?
Whats a cow worth? $600? $1200?
regards
Isn't ironic that the banner
Isn't ironic that the banner on the RHS of this website is the advertisement for Roost mortgage broker !!!!!
Well one of the weaknesses of
Well one of the weaknesses of the BNZ’s analysis appears to me to be that they have failed to take into account the cost of new builds, whether it is for residential, retail or industrial properties. It's all very well saying commercial properties are over valued wrt to yields etc., but if an average 7% yield values a modest commercial property at say $300,000 but it costs $550,000 to build it new, then, Houston, we have a problem. Obviously the cost of building the damn thing (or replacing it/ renovating it) must also enter into the equation when figuring out a properties true value, and determining whether it’s over valued or not, and by extension, the whole asset class. If building cost is ignored and values are pushed down to make more satisfactory yeilds then there would be little incentive for building any new buildings.
And we know what shortage of supply means………
What about if the cost of
What about if the cost of building and the materials are way to expensive?
regards
You jump away from demand too
You jump away from demand too quickly DB....the public are voting with their wallets that new builds are still cost bloated...so the demand has buggered off...and the skilled labour that supped on bloody hefty hourly rates for 5 years are without work...off they go to aus and as they depart so to does another chunk of demand. You think 'shortage' of housing when you should be thinking 'shortage of demand'.
Apart from some kitchen deals and whiteware sales..care to point out any reductions in the cost of materials. Wood...concrete...steel...labour...glass...gib....???
There is absolutely no
There is absolutely no shortage of commercial or industrial space to rent anywhere in new Zealand . We over-built in the boom years and its going to take years to sort out the oversupply . New building costs are not going to be a factor in pricing existing builidngs for a good few years.
David I think the key issue
David
I think the key issue is the cost of land.
cheers
Bernard
which reminds me, someone is
which reminds me, someone is conspicuous by his absence, this week.
Fell through the cracks?
What I want to know is...why
What I want to know is...why would a bank report the truth...when to date they have run with BS.
Are we witnessing a strategic positioning to generate activity by booting vendors in the bum with a dose of reality finance....an effort to speed up the price decline...to hasten the death of the bubble?....it stands to reason that this is what the BNZ is on about...the demand for credit has gone bush and they want it back...fast!
Ha you have it!..We were date
Ha you have it!..We were date raped on easy credit, the promise of a never ending good time.The only problem was that when you got off the bed the next morning. The pain in the nether regions proved you had been well and truly done over...But couldn't remember if you had actually enjoyed it. Which was a shame because the ongoing Veneral Disease would have been easier to bear if you knew you had a good time. Hows that for an Analogy?
Showing your age. It's called
Showing your age. It's called STI these days.
I am so full of Rich Mastery
I am so full of Rich Mastery I think I'll have a ROOST before i gear my self up to my gonads.
By the way any bidders yet on the Beige VW , one cafeful owner , Comes complete with finance company. Big End blew last week.
Am also waiting for lolly for ollie to appear
Interest rate increases will
Interest rate increases will speed up the house price adjustments. The OCR has to rise , as it bears very little relationship to the Banks Weighted average Cost of Capital , and the Reserve Bank runs the risk of becoming irrelevant in its attempts to influence Monetary Policy .
Last week we saw a NZ Treasury Bill issue fail , what does this tell you ?.... simply that rates are too low to attract buyers of Government Debt , and that the market is expecting rates to rise, soon .
As interest rates increase , so the property values will adjust to realistic levels. At the September OCR , Dr Bollard should do as he has promised for the past year and increase rates . This will give savers a better yield and re-build his war- chest should he need to have QE2.
The other thing that could bring down commercial property values is desperation on the part of landlords . Vacant comm and Industrial buildings litter Auckland and there are no new takers , just some musical chairs with existing tenants moving to cheaper rentals. This will influence capital values in the medium term .
We recently completed the
We recently completed the build of two mixed use commercial properties in East Tamaki.One let before completion and the other within three months of finishing becuase the products match the tenants requirements.So to say there are no takers is not true.
"...no new takers..." Were
"...no new takers..." Were you tenants part of the churn that the earlier poster mentioned? That may answer your question.
"and the Reserve Bank runs
"and the Reserve Bank runs the risk of becoming irrelevant in its attempts to influence Monetary Policy"
Bollard's policies made this happen many years ago!
The cost of building won't
The cost of building won't get any cheaper because Fletcher's and Carter Holt pretty much have the building products market sewn up. From the foundations to the roof! Anyone who has lived offshore and purchased building materials will know how badly we are ripped off for building materials. Robbed blind actually.
Exactly, Dave D. As I
Exactly, Dave D. As I mentioned to Mark Hubbard, above, there is excess to be driven out of the property market at every turn, the suppliers being just one.
yes I agree, that has some
yes I agree, that has some follow on impacts,
Any debt Fletcher has is going to be more difficult to service...that will impact their share price and earnings....but this will be felt industry wide IMHO...so shares in anything with a lot of debt and exposed to a drop in descretionary spending is not something I'd ant to own.
This also then follows on to forestry...$90 a log? try $40..
etc
regards
an interestig observation DD.
an interestig observation DD. i had a friend who was offered a contract to import a French made gib board product that would have retailed for $18 a sheet. Gib here costing 5 times that. Beauracrats killed the deal somehow, i'm not sure how.
I take all the points on
I take all the points on residential and rural land. But with respect to Commercial and Industrial assets this report is far, far off the mark.
Cripes Big B looks like you
Cripes Big B looks like you get your weekend off after all........some big guns come out to play.....ya young scamp.
i just wish the property
i just wish the property market would hurry up and crash.!!
i sold my house in 2006 for 150% profit on purchase price and have been renting in paradise by the beach ever since.
now.. i want to buy another house...well, to be truthful i actually want to get another dog and rentals don't allow that.
i'm happy to spend around 600K but until these deluded buggars who overpaid in the last 2 years get real on their prices my only hope is the likes of the starship troopers on here (who's comments are read far and wide.) casting the voodoo and scorning or glamming the market down to reality?!
keep on rockin' team...donald needs a dog...not some trousers?
In 1990 you could build a new
In 1990 you could build a new single to $2,500 per m2.
The margins on building materials in NZ are massive - in the vicinity of 25% to 30% between builder and building supply company and even more between manufacturer and building supply company.
You only have to compare the costs of bricks, roof tiles, pipes or timber between Australia and NZ to see how much of a rip off rort is going on in NZ.
Various major manufacturers of gib, timber, bricks, tiles etc and others have a monoploy in NZ and control these massive margins.
And the gullible public pay the price for the new house.
hence why i dont do serious /
hence why i dont do serious / heavy renovations any more prices dont make sense ....not only that the quality of the wood they sell is now so bad, on occasion I go back and forth for weeks waiting for them to get decent straight lengths.
I dont know what the margins are in nz, but in the uk when i worked for a large FM company the discounts were 70% off plumbing and related goods....It was so ad I asked my dad to ship boxes off 50s in copper fittings to use up.....from the UK...
regards
Check out this Canadian
Check out this Canadian outfit...
http://www.viceroy.com
A Canadian guy in my small town recently imported a full kitset home from them.
It included everything except the whiteware (it's an option, but he already had his as he brought it with him).
Total landed cost (excluding labour and floor, which he did himself) was NZ$800 per sq. m.
Had a look at the place last weekend and the quality is staggeringly high compared to the usual NZ-built crud.
No cheap shite radiata, all spruce and cedar and other kinds of timber, a lovely shingle roof, lots of nice touches.
A magnificent place and really opened my eyes to what can be done here once you abandon the 'Kiwi Godzone Best In The World Eva!!!!!' myth.
Oops. When I said "excluding
Oops. When I said "excluding floor" I meant the slab and piles, not the floorboards and things...they were included (and are beautiful).
I've mentioned before, I did
I've mentioned before, I did $370/sq.m. in 2004-5.
Gotta think outside the square.
TS --you sure on your
TS --you sure on your $2500?---that,s $375000 for a 150m2 house in 1990---seems a bit on the high side.price,s at present for a average 150 m2 wit out too many bells and whistles running at around $1300---$1500p/m2--do your own numbers
http://www.dbh.govt.nz/Utilities/calculator/QuickCalculator.aspx?CategoryId=4&SubCatId=14&SubCat1Id=21&SubCat2Id=31&SubCat3Id=187&ArticleId=805&Version=1.0
also are bunnings having an impact?----they did in australia
Bunnings, yes some...i
Bunnings, yes some...i usually go there now...usually a 5~10% saving...
regards
Yes, the banks do seem more
Yes, the banks do seem more prepared to allow their back room boys out on their own these days.
Presumably they were aware of the same data when things were really overexcited but were a) ignored b) told to shut up and stop whining and c) threatened with decapitation if they breathed a word of it in public. Banks have internal politics too I believe.
Be nice to them, they have been in the dark for a long time.
Couple of points: The cost
Couple of points:
The cost of land tends to be the big factor in higher value locations. In lower value locations, the cost of the building assumes more significance.
I am looking at the possibility of a small site in a high value Auckland location. The site area is about 300 square metres - a rare find. The price is just over 300K, might be able to get it for 300K.
Only a smallish townhouse (circa 100 sq.m) will fit on this site and comply with planning controls - also I only need /want a townhouse of this size.
With an efficient and economical design, this could be built for around 200K. With some site contouring landscaping lets say 520 K all up.
Now tell me where else can you get a 3 bedorom (albeit compact), brand new, detached townhouse in an upper end Auckland suburb for that sort of price?
This is only possible because of the smaller (and therefore cheaper) site, and the use of a smaller and more economic building design.
So the answer lies in:
1. Getting land cheaper by freeing up planning controls
2. People being more economic with their home design and choice. Note too that compact well insulated homes will also use a lot less energy, which also helps affordability
Roger - the backroom boys
Roger - the backroom boys have been liberated!
TA's weekly report hasn't been out for 2 weeks - maybe he's got the grumps :(
I miss it - its always amusing reading his property spruiking rants :)
TA is on holiday leave til
TA is on holiday leave til the end of September.
his perm caught fire whilst
his perm caught fire whilst shooting a pepsi commercial !
Sorry that should be 1900
Sorry that should be 1900 $500 per m2 and 2010 $2,000 to $2,500 per m2 for a basic single level house.
So cost per metre to build up by 4 or 5 times in 20 years.
Matt would that include
Matt would that include fences, driveway, blinds, curtains/drapes, carpet?
Has Olly hung himself yet?
Has Olly hung himself yet?
As an investor with a modest
As an investor with a modest number of rentals that unfortunately have probably too much debt on them I must say after reading this and a number of other articles of late I am definitely going to try and sell the rentals as soon as possible even if I make a small loss on them. Where I live in a provincial NI capital it has really slowed down a lot in the market and I have just had one too many bad experiences with tenants who I assume think I am a rich prick. I would rather live debt free in my own home with hopefully a little bit of money in the bank after selling down than have all the debt and the hassles. At least I am better off than the poor investors in Christchurch some of whom I think must have some big problems to deal with.
"Where I live in a provincial
"Where I live in a provincial NI capital..."
How many times are you going to post variations on this fantasy? It's getting very boring.
Jeepers the PIs are getting
Jeepers the PIs are getting few and far between these days but you can hardly blame them as the news is getting worse by the day for them. And when they come out to play they are crude, rude and downright fearful. Too dumb to sell at the top and take their profits and now it is sliding away from them month by month by month. Just goes to show only those with brains and the ability to get the timing right make the good coin.
Not entirely true, when
Not entirely true, when someone invests for cashflow then it doesn't matter that the capital value goes up or down, as long as you are cashflow positive you just ride the market, bank the surplus, smile and wave
Not entirely true, when
Not entirely true, when someone invests for cashflow then it doesn't matter that the capital value goes up or down, as long as you are cashflow positive you just ride the market, bank the surplus, smile and wave
Sorry the Man. I have never
Sorry the Man. I have never met a PI who is in it for cash flow. We are all in it for capital gain and unfortunately that is not going to happen for some years. Quite the opposite is going to happen.
You are Right Bernard, the
You are Right Bernard, the cost of land is the problem. I am a Valuer and Developer so I know. There is room for Builders and contractors to cut back on margins as they took advantage of the boom by putting up rates. Build costs are up around 30-40% from 2003 levels, and you cant blame the Chinese demand for all of that. I reckon that land is overpriced by around 25-30% and there wont be a lot of developers getting back to business until that problem is fixed, OR prices for completed projects need to rise about 10% to make it profitable. Take your pick, what do you think is more likely???
It wasn't a boom, it was a
It wasn't a boom, it was a bubble.
Not "was a bubble"...........
Not "was a bubble"........... it bloody well is a BUBBLE.
A burst and slowly collapsing
A burst and slowly collapsing bubble.
"Build costs are up around
"Build costs are up around 30-40% from 2003 levels" - Not surprising is it, since the price of existing house has gone up by at least that since then. Who on earth would want to pay more for an old item than for a new one, especially when the new item also has better features (in the case of houses, insulation, double-glazing etc)? No one would do so for a car, TV etc. Why should houses be any different?
And of course if there is an opportunity to make more money, the businesses involved will take it so I'm not overly surprised that "they took advantage of the boom by putting up rates".
Yep, land is definitely overpriced. Looked for a section in Chch for a long while and the price per m2 was stupid. We didn't pay a lot less where we are now but we have 50 times more land to show for it (which in turn can provide resources, eg food, if not an income)...and free-range kids.
Land price dropping... here
Land price dropping...
here comes deflation.........
the land component is so
the land component is so expensive due to the council charges associated with subdivision of a section are extortionate. $25k before you even start to do the infrastructure, and this doesn't include the resource management malarky. So before you even start the cost to develop a section is in the order of 125k
Point taken. We Valuers have
Point taken. We Valuers have been trained to call it that.
It's not pedantry or a minor
It's not pedantry or a minor nitpicking point. Bubbles more often than not generate genuine wealth and positive growth, whereas bubbles do not. One is healthy growth, the other is merely cancerous.
"It's not pedantry or a minor
"It's not pedantry or a minor nitpicking point. Booms more often than not generate genuine wealth and positive growth, whereas bubbles do not. One is healthy growth, the other is merely cancerous."
Sorry. Fixed that.
I went to a BBQ the other
I went to a BBQ the other day, and all the anti-PIs were in the middle talking loudly and looking to see if everyone was watching. I just smiled and watched. This time it is different ... for them
The difference is that
The difference is that "anti-PIs" (ie, those who see what delusional PIs choose not to see) aren't selling anything.
PIs had a vested interest in talking-up the market: Capital Gains.
The rest of us could see the damage being done by such stupidity and commented on it, and how it was not sustainable in the long-term.
We were correct.
A little self-congratulatory back-patting?
Not really, because we were right about things being bad, and getting worse.
Not much to feel pleased about there, besides the impending cull of vast herds of greedy and selfish PIs.
By all means build....for
By all means build....for 500k.
I hope you intend to use your OWN money.
Otherwise it is not 500K.
Bernard/web guys, the PDF
Bernard/web guys, the PDF link to http://www.interest.co.nz/sites/default/files/100910_PropertyBNZ.pdf is giving a 404 error, would really like to read this report so please fix?
Can't post the link due to
Can't post the link due to the spam filter but if you go to research.bnz.co.nz, Research, New Zealand you will see this report there.
Finally, a Bank report
Finally, a Bank report focusing on the real fundamentals of housing and historical trends unlike other bank economist who focus on short term affordibility stats like interest rates and immigration.
BNZ deserves a medal for this
They deserve a bloody bullet
They deserve a bloody bullet for the YEARS AND YEARS they greedily and cynically encouraged and nurtured the bubble with unsustainable lending practices.
Amen to that
Amen to that
TV1 'business' interview
TV1 'business' interview minutes ago (sat am)....informative...NO....detailed...NO.....useful ...NO!
It went something like this..
"So what's happening out there?"
"Err buyers ummm errr I think that errr arm well hopefully"
"And will the spring bring a change?"
"Well it errr vendors ummm maybe but there is hope errr spring umm"
"Well thankyou for that...it's helped heaps...now to the banking sector"
I'm amazed he didn't yell
I'm amazed he didn't yell "Look over there!" and run away.
The spring "Mortgagee
The spring "Mortgagee Massacre" approaches.
Some wild variations in build
Some wild variations in build costs being quoted. $2500m2?
I worked for a major house company turning out good quality homes for around $1100/m2 that's floor coverings, appliances etc., ready to move in. Section and driveway, service connections etc. excluded. So the median type home - 3 bed with garage, single level 170m2 on a concrete slab comes to under $200,000 inc GST Good sections are available for $100,000 or less depending on your area. You can have a far better home than the used market home @ median $340,000 if for no other reason than it's new.
Have a close look at some of this junk. A lot of these homes built in the last thirty years have major expenses looming - if not nearing the end of their useful life. Kitchens, bathrooms, roofs, floor coverings, decks and joinery are either stuffed or have maybe ten years left in them.
I agree with Elley, comparing replacement cost as a justification for high secondhand prices is misleading - same as for a car really.
Fair comment Kiwidave
Fair comment Kiwidave but ..... is a cheap new home a better buy than a 1920s expensive build, that remains a rigid frame of heart native timber with a heart Matai floor and roofing steel several times as thick as the 'new' stuff....Include modern plumbing and new wiring....insulate the ceiling and the inside of the exterior walls and the under floor....that only leaves the windows...not that hard to upgrade to 'double glazed'. Fit a logburner with a wetback and slap a solar water unit on the roof. The house was built on piles well above ground to start with and so no worries with airflow. Any crook piles can be replaced.......what do you think?
Build a new house
Build a new house properly.
Do some research. (And I don't mean looking at colour samples!)
Don't accept "standard" materials and methods.
Don't roll over and play dead for the builder.
The only reason Kiwi houses are half the quality and size of, say, decent American houses while being two or three times the price is solely because of the Kiwi mindset and attitude.
True enough Wally, some of
True enough Wally, some of the stuff built many decades ago will outlast some of more recent vintage. Not to say that the modern timber framed kiwi home isn't a great concept though (see how they came through the recent earthquake) and if it's well built and maintained shouldn't easily double the fifty plus years minimum standard requirement.
However a lot of this secondhand stuff is poor value and not a valid comparison with good quality new homes built under the current regulations IMHO.
I prefer the pre WW2 houses
I prefer the pre WW2 houses not just because the construction and materials are better, but also because they're available in the small cottage sizes that stupid councils won't allow any more.
Tell you what KD....if our
Tell you what KD....if our useless media ever got off it's arse and bothered to send a film crew to a Scandinavian country to do a series on what a proper wooden home amounts to.....your Kiwi families would spit their dummies with anger at the shite they are sold.
Go take a look at quality........ http://www.slcd.co.uk/
Then look at the prices....... http://www.slcd.co.uk/index.php?main_page=index&cPath=77
Walls 245mm thick...have a gork at the Talltoppen 120.
And it's not Pinus Radiata shite either.
Karelian pine
This link was posted earlier
This link was posted earlier and it suggests much the same as your own, that we are being horribly conned with overpriced rubbish.
www.viceroy.com
So we are trapped into a
So we are trapped into a system that bloats the cost of building rubbish...bloats the cost of land...oh wait...we don't have to buy new houses do we!...other options: living on a boat...in a big old bus....a tent in the bush.....under a bridge.....sooo many options.
Or just import one of those
Or just import one of those kitset homes. Apparently it's NOT difficult or expensive to do. They pack them into a few containers which get unloaded and unpacked at your nearest port and then it's all dropped off at the site with a hiab.
Of course if everyone wakes up to this and starts doing it the govt will protect their building industry cronies by mega-taxing the importation of owner-assembled kitset homes, or just banning them altogether.
Give us a link to someone who
Give us a link to someone who has done it please anon....help us all out mate.
A link? How many people
A link?
How many people create websites about their new house?
With the level of
With the level of house-obsession over the last few years it wouldn't surprise me. Have certainly had to suffer through a lot of photo-albums full of riveting pictures of drying concrete and piles of dirt.
Have heard a lot of sneering and snobbery from people over kitset houses, as though they're too trashy for their precious subdivisions.
And yet clearly the kit set
And yet clearly the kit set homes advertised on the websites of various overseas manufacturers and sellers are CLEARLY superior to the cheap-yet-expensive rubbish foisted on Kiwis by local suppliers.
Clearly. But I've seen
Clearly. But I've seen control-freak lawn-nazi types literally wrinkle their noses in disgust as if kitset homes were the equivalent of living in rusty caravans in the front garden and cooking hedgehogs over open fires.
There is a lot of snobbery
There is a lot of snobbery with kitset homes, primarily because of the likes of Keith Hay and A1 homes etc and a lot of subdivisions have covenants against them. The truth is with most framing being made to order these days just all homes are pretty much kitset to certain degree.
I like the look of those posting Wolley, nice work.
Dunno Wolly. Our previous
Dunno Wolly. Our previous place was built around 1970 and we did do a number of these things: new bathrooms, new modern kitchen but kept the old joinery cos I loved the rimu (used the opportunity to insulate the walls in those areas), insulated the ceiling & HWC, put in new aluminium-frame double-glazed windows everywhere (not hard but expensive), new heat pump and still, it was so damp and cold and mouldy. We found that retro-fitting and renovating was way more expensive than building new, the result was a patched-up house and quite frankly, it showed (in the sense that it was no way as good as if it had been properly designed to start with). Insulating all the walls would have involved a complete reclad/regib and the cost of doing that would have been prohibitive.
In comparison, the new place is, well, hardly comparable in terms of warmth and comfort. One thing we couldn't do in the old house was changing its orientation: they clearly hadn't heard of passive solar heating in the '70s, which also means that solar panels wouldn't have been very efficient (as an aside, I'd love to have a rotating slab that can be moved a few degrees to one side or the other - would require flexible pipes but I'm sure it's do-able!). So yep, the lower quality of the wood is definitely a negative in new builds but I still wouldn't move back into an older home.
Bad move that alloy
Bad move that alloy Elley...stuff acts like refrigeration bars...wiped out any gain from the DG.
The makers used to produce an extrusion with a thermal barrier but some burke decided it should stop.
Plenty of options and ways to insulate an oldy but the key is the initial cost of the joint. Done properly they are great homes that will outlast the new stuff by a century at least.
I'll bet you the owners try dam hard to recover as much of the hardwood from the Dean homestead. You won't see that being dumped. Some fine massive beams are being torn out of those buildings being demolished in the city. You can bet the demo blokes will be separating them out for later use.
You don't get much for that
You don't get much for that price though. The quality of residential houses in this country is appalling.
Whingers r having a party
Whingers r having a party thinking that PI's are dying They show great stupidity. Whingers dont know big dfifernce between houses and commercial property. Commercial property makes heaps. Beat bank deposits all ways Also has big tax depreciation on top.
NZ Herald Sept 11: "Direct office retail and industrial produced average return of 10.8% from 1994-2009 whch was better than bonds average 6.5% " (Independent Property Databank) (IPD)
Commercial 1. Whingers nil.
Fear rules your life.
Fear rules your life.
They're not whingers for
They're not whingers for nothing bigdaddy, its an inherent tall poppy thing called jealousy, and NZers need to get the hell over before our country will be back ontrack. There's a lot of people on this site who relish the fact that some people took a punt and are about to wear a rather large hole in their pockets because they gambled rather invested in property. However for every one of those gamblers there are 2 or 3 successful property investors who will ride out the rough times and be all the wealthier for it. The difference being that the ones able to ride out the bad times used their brains in the good and selected their investments based on some fundamentals, or they had in place debt management plans to minimise the downside.
What the whingers really should be doing is looking at their own situation and deciding how they can educate themselves to mprove their financial acumen so that they also can come out the other end in a better position for their own family's futures. But most won't. They will go like cows to the milking shed that is the managed funds industry, and wonder where all the money went when their retirement comes around.
"Acumen"? Where? You mean
"Acumen"?
Where?
You mean willingly being utterly suckered by the laughable hype about how "YA CAN'T LOSE WITH PROPERTY!!!!!11" and "YA GOTTA BUY NOW, BEFORE IT'S TOO LATE!!!!!!", then racing out and going into mega debt to buy shitty junk at peak prices, only to discover you can't actually service the mortgage and are now going broke at a horrifying rate?
Acumen.
"However for every one of
"However for every one of those gamblers there are 2 or 3 successful property investors who will ride out the rough times and be all the wealthier for it."
Please be so kind as to let me know how your year on year equity change has looked recently and i'll show you mine from retained cash and careful selection of equities.
Agree that managed funds are for muppets as the only winners are the fee takers who risk no capital what so ever.
Kiwisaver is the biggest con this country has ever seen.
A successful property
A successful property investor is one who hasn't yet declared bankruptcy.
BigDaddy, I can tell you some
BigDaddy, I can tell you some horror stories about commercial property, not for the children.
How you get to think that commercial is safer than residential I have not a clue. Tenants evaporate when companies become insolvent,contracts not worth the paper they are written on, empty commercial buildings re-value very fast. Ive been there done that, now its someone elses turn, careful its not you.
"...careful its not
"...careful its not you."
Whoops.
Too late.
BigDaddy, mort, and all the
BigDaddy, mort, and all the other usernames which mysteriously appears at the exact same time and from which messages are posted at the exact same time is in fact none other than 'The Man'.
It's an obvious Poe -
It's an obvious Poe - occasionally he slips up and the parody shows through.
quietly joins the storytime
quietly joins the storytime circle
Tell us a scary commercial property horror story, please.
There is an Aussy site,
There is an Aussy site, Morning Money/Morning Weekend run by a Kris Sayce, that puts this one to shame. If you want really negative people, go to that site, many negative types here on Interest.co.nz are quite positive by comparison! If you read the Sayce one you might think Australia is next to a Third World country at present. At least nobody, incuding Wolly, has even remotely suggested that NZ is like that, have they?
Here's why you're in so much
Here's why you're in so much financial strife (and may not even realise that): You cannot differentiate "Realistic" from "Negative".
To clowns like you, thinking happy thoughts will make you rich, while sitting down and doing the sums will make you a loser.
There are a lot of people around like me with no debt and money in the bank who sleep easy at night because we aren't worried about scary letters from the bank, because we don't get any.
And there are a lot of people like you out there who loaded themselves up with colossal property debt in the belief that you couldn't lose and that property prices always and only go up, but are now watching themselves racing into negative equity territory while their mortgage interest piles up and up and up.
You know, I love being a "negative type", because that's just idiot-speak for a realist and a winner, with no debt, lots of cash, and a bright future.
CHEERS! :-)
They still think empty
They still think empty used-house-salesman hard-sell slogans actually mean something, bless their hearts.
Quit right,and because of the
Quit right,and because of the current financial state of affairs ,the money will not be used on even a calculated risk.Just about every venture is doomed to failure.The timing is all...and this non release of private money,is scary.
Many clever people make big
Many clever people make big money from horror stories . More horror makes more money for people who not whingers. Smart investors making heaps. Whingers losing heaps. Soon smart people have all the money . All others just workers. 40 years work for peanuts and then die.
Smart people 1. Whinger workers nil
Hey 'The Man', what about all
Hey 'The Man', what about all those non-working "Smart people" with massive debt and rapidly devaluing property?
How about all the "Whinger workers" with no mdebt and piles of savings and non-property investments?
Smart people bankrupt. Whinger workers laughing.
"..we can guarantee that if
"..we can guarantee that if you’ve been bitten by your own snake there’s no way you’re going handle anyone else’s – even if they claim it won’t bite."
Someone above mentioned the Money Morning articles on property out of Aussie. I had to laugh at this comment from yetsterdays' report, on the CBA doing a road show to purport that the "Aussie R/E market is not overheated"
http://www.moneymorning.com.au/20100910/has-commonwealth-bank-deliberately-misled-investors.html
And yet I know people who
And yet I know people who tried to stave off financial disaster caused by stupid property investment by trying to invest in more property.
Stupid people do not learn from their (stupid) mistakes. That's the definition of stupid.
That's like trying to pay off
That's like trying to pay off gambling debts by putting money into the pokies.
There was a TV show in One(?)
There was a TV show in One(?) last year that had 'financial advisors' recommending that the way out of a property debt problem was to buy another investment house and wait for the capital gain to repay all the debts! ( Sheep and lamb stuff, I guess!)
'Save Our Home' presented by
'Save Our Home' presented by matching financial advisor and real estate bimbos? Yeah, would be interesting to see a follow-up on how that strategy is working out for them.
That's the one! I couldn't
That's the one! I couldn't recall the name of the show. Thx.
Just checked to see if it was
Just checked to see if it was still streaming at tvnzondemand, but apparently not. Was interesting that it showed a huge cross-section of people in huge financial trouble from getting sucked into the bubble, from naive Gen Y who swallowed the line that it only goes up, to delusional boomers who were 'preparing' for retirement by running up mortgages.
What could possibly go wrong?
What could possibly go wrong?
If you look at the origin of
If you look at the origin of the mesage, which I think Bernard can do, he may verify that I am not the same person as BigDaddy or TheMan 1, 2 or whatever. I don't sit around waiting for nasty letters from my bank manager either, because I have a positive cashflow from my investing activities, and an LVR of under 30%. Admittedly there was a time when I did push the boundaries, but that was 3 years before the peak, but then I consolidated my position, re-evaluated the portfolio, trimmed what needed to be trimmed, and am now back in the ame because the finance companies are falling over, and the receivers don't give a toss what the accept for good income producing assets, they just the want thing offloaded so they can get their fees paid for and can then fling a few pennies in the dollar back to the investors and get some good cred in the papers. So if I can get a 15%+ yeild, who cares if the market goes down by a further 10%, I would have bought at 30+% below market anyway (or else I wouldn't have bought it- you make your money when you buy, not when you sell!). A deal has to stack up before I will even look at it, let alone offer on it, and I never invest more than 10% in 1 deal. Given that I still like my career, I leave the surplus cash to rapidly repay mortgages. It is quite surprising how quickly with this strategy you can get a $300k mortgage paid off.
as for acumen, I can confrm that I have failed dismally in managed funds, there is nothing left of my Australian Super,it was gobbled by know-nothing fund managers (I should have guessed that would be the case when the board was comprised of Qld Govt officials and Union reps), options trading is a headache not worthy of the returns, the sharemarket is broken in NZ because corporate governance is so woeful, and coupled with government interfernce leads to a devastation in shareholder wealth (e.g. Telecom).
Its like every thing in life if you create some hard and fast rules for your own choices, then as long as those values are well reasoned and not based on fantasy like sustainability or some other mean nothing waste of words then you will find something worthy of your time and/or investment in.
And the real worry comes in
And the real worry comes in when everyone is herded into the one asset class for 'an investment'. By your own words, the others you've ( an other people!) tried have corralled you into property. Come time for an equity release ( that's about here and now for a lot of people) the release is going to prove difficult. Also: 15% yield? That would be gross return on ROI or historical purchase price, I'd guess. Do the sums on current market price, and see what the yeild is! If it's better than funds in the bank, any old bank, I'd be suprised.
gross on purchase price, I
gross on purchase price, I have very tight parameters, so don't buy lots, only stuff that makes money, and yes I do pay tax on my investig activities.
I think the income to house
I think the income to house price ratio is a bit overused as proof that house prices are bubbling. You would have to expect the house price to income ratio to increase as interest rates are down (they are a lot lower this decade than in the past) and more households have two income earners.
A better thing to look at is how much does it cost to SERVICE an 80% mortgage on a median house as a percentage of HOUSEHOLD income. Does anyone have this plotted over the last 50 years?
1. Residential property was
1. Residential property was not undervalued before 2003-2007,
2. Residential property prices were largely inline with average incomes, the CPI and cost-of-living before 2003-2007,
3. Residential property prices dramatically increased between 2003-2007 as a result of a feedback-loop between thed asking prices of vendors, the highly-questionable lending practices of banks and finance companies, and the willingness of gullible purchasers to pay any asking price,
4. Average incomes between 2003-2007 barely increased, if at all, while the cost-of-living grew rapidly,
5. The global credit crisis caused banks around the world to drastically reign-in and tighten their lending criteria and policies, which eventually lead to an inevtiable shortfall in finance available for potential residential property purchasers.
6. Immigration patterns altered as the economic situation worsened, with more leaving to find better-paid work, and fewer arriving.
Residential land and property prices are too high to be sustained by average incomes. The two factors which drove residential property prices to such unsustainable levels - available finance and willing purchasers - are now largely absent.
High prices -> Low incomes -> Buyer shortfall = Low or no sales.
Prices must fall, will fall, are falling.
This state of affairs will continue until the cost of a residential property can be borne by those on average incomes, and so clearly prices still have a very long way to fall.
According to the
According to the interest.co.nz affordability report, "It now takes 59.5% of one median income to pay the mortgage on a median priced house purchased in July". So if you have two median incomes it is about 30% of your income. Hardly unaffordable.
The same report also states "The median weekly take-home pay for a typical buyer was $763.65 in July, up 2.0% from the $748.83 in July 2009. Five years ago, median weekly take-home pay was $620.21.". So saying wages haven't risen is not true.
Spot on Jimbo! Where it took
Spot on Jimbo! Where it took my father 33% of his single take home pay to service the family mortgage, today we now get the little lady to sink her effort into buying the same average home! Oh, and doing the washing, the ironing ( if there's still time to do that!), the shopping and of course the child bearing.....AS WELL!
The cost of living and
The cost of living and property price increases have FAR exceeded income rises.
convince the councils to
convince the councils to lower their extortionate development levies, and have the RMA repealed and that would save 100k per section. By the looks of some of the kitset homes available overseas, if we built more of these the NZ building products companies would drop their prices too to compete, thus causing that correction you people are so desperate for. But I kinda like your chances with the council front, the international kitset option is the free market at work, so is a good one.
Had to chuckle at the earlier
Had to chuckle at the earlier posting by The man is a Schoolkid (appropriate title by the way), who feels that positive people are not realistic as they 'think happy thoughts will make them rich" Well I'm realistic knowing that 3 good quality properties, over and above our own home, with 90+% equity, generates a pretty good additional income, and this situation was not the result of being a negative harper and carper. Sure prices go up and down, but with a bit of effort and positiveness one can make progress. Be positive, be happy!
Looks to me as if you
Looks to me as if you equate realism with negativity. Well I'm negative all right...negative about the self-destructing property market, which is why I have zero property debt. However I do own my own home and have a significant amount of savings. The positive people who believe you can't lose with property are welcome to their huge mortgages and their desperate faith in unending capital gains. I prefer to be realistic. Or is that negative?
The post of the day.....that
The post of the day.....that sums me up also!
If you dont mind me asking how do you have the significant savings invested?
The thing is that you are
The thing is that you are probably just as likely to lose your savings in any other investment. I guess putting your money in the bank is fairly safe, but you pretty much make nothing after tax and inflation (in fact you are probably going backwards).
The most you are probably going to lose in property is 30%. You can lose 50% in shares in a week!!
50% in a week.......now that
50% in a week.......now that would have one sleeping well!
My Abano shares have gone up
My Abano shares have gone up 1800% in ten years. Have a look at the New Zealand stock exchange site to see what I am saying. No tenants,no costs to run,great dividends every six months and now the biggest providor of some essential medical services in NZ and Australia and launching into Asia where is hearing loss is a huge problem. People get so focused on property they miss even better opportunities. The trick is to have a bit of both.
SSSSSHHHHHHHHHHHHHHHH! Here
SSSSSHHHHHHHHHHHHHHHH!
Here in NZ you're not allowed to say anything positive about shares!
It's against the law or something.
Sorry Anon but I just get
Sorry Anon but I just get sick of the rubbish people come out with about shares. They all talk about the 87 crash. All that has happened is that they have missed out on fabulous gains over the last 23 years. Like property you have to do your homework. Abano,Ebos, Ryman and alike. Very good companies all with very little debt unlike a lot of property investors and all involved with a population that is aging and needing their products. There is a time to buy and a time to sell. Now is the time to sell down in property as it has started a long steady decline in valuations over many years as the debt in it is deleveraged out of it. If you were in shares you would understand. No market goes in a a straight line. People need to diversify and have some money in PI and some in shares. Each dog has its day. Property is less flexible to sell when the proverbial hits the fan so not having too much leverage in it is very necessary. Good shares can always be sold. Lastly do not give nay money to an advisor. Buy your shares direct.
Be positive,be happy! sit
Be positive,be happy!
sit back put your feet up and enjoy the crash............
Yawns......
Yawns......
Are we there Houston!
Are we there Houston!
Houston is asleep!.......go
Houston is asleep!.......go for it Billy
I can't believe this is the
I can't believe this is the last night for Billy Connolly and this site will be all so different.
Life goes on Billy.....get
Life goes on Billy.....get over it
so......where's our joke?
Im not sure I feel like being
Im not sure I feel like being a comedian anymore and telling jokes...this is just too much!
Why would Bernard do such a thing?
Maybe he is under pressure to
Maybe he is under pressure to do it Billy!....anyway maybe its a good thing at least well get rid of all the anon's.
Well I dont think its a good
Well I dont think its a good thing and I feel like telling him to stick his site in his ass.
Now Billy Connolly......you
Now Billy Connolly......you listen to me!
Having that attitude and throwing your toys out of the cot won't help.....and you should be thankfull as every other site already has you banned.
Now Billy....the joke
Come on Billy....you can do it!
Think of the enjoyment Dean Leftus will get when he see's it........
OK......Mary you are
OK......Mary
you are right....
The year is now 2020 and the church has been ruptured in the twinkling of an eye and from the heavens above Bernard along with his loyal followers look down with much excitement.
They see things are much worse than before and not only was the P/T lot swimming naked and lost the lot but now they rent from that gossiping old scumlord essence!
Now we all know that Dean Leftus had been in bed with Donna and Mark over at P/T .The site went down with the market and they have now started up business selling water melons on the side of the road. They call it Donna Dick and Mark at massive water melons.They’re buying water melons for a dollar then selling them for a dollar......read it again!......at the end of the day Donna is counting the days takings and she goes” aye,”she says” aye”....”aye aye...weeevv made no money here!...they both look at Dean and he goes.. "yeah I know I think we need a bigger truck”....
Needs a bigger
Needs a bigger truck!........
So funny Billy....peed myself
He is such a donkey isn't he...........what about essance they rent of that!!!! .... LOL!
They must be desperate
Actually essence is doing it
Actually essence is doing it hard also and everyone is behind in the rent.
She has taken part time work at the biscuit factory.
LOL......Let me guess they
LOL......Let me guess they push her face in the dough to make gorilla biscuits?
Anonymous, don't be so
Anonymous, don't be so negative, numerous people who own properties do not have any or much debt, and can handle a drop in prices And don't assume they won't have savings.
Realistically, some people over-rate the good when things are in the up cycle, and over-rate the bad when things are in the down cycle. Human nature seems to be suseptible to 'greed' and 'fear', best to be positive and steer a realistic course in-between.
Positive about doing major
Positive about doing major harm to the economy? Positive about locking much of those in future generations out of homeownership?
When you're a fat 50-something who was handed everything on a silver platter and now expects his kids and grandkids to mollycoddle him to the grave, it's easy to say that those who resent your disgusting sense of greedy entitlement are "negative".
After all, what else can you say? We know you'll never apologise for your selfish troughing, right?
WHAT is TRUE VALUE for your
WHAT is TRUE VALUE for your Property ????????
By how much is your property value inflated ?
10% ,20% , 30% , 40% , 50%, 60% or do you not know ?
Is your morgage more than the TRUE VALUE ?
Is this the realty you do not want to contemplate or know ? WELL IT IS TIME ?
Property in New Zealand is
Property in New Zealand is going to be like Telecom shares when the Government changed the rules ( and to this day, still is!). Those that fail to see the engineered drop in their asset values ( "It will come back again, in time"), wait, and watch a slow deterioration of their wealth. The longer it goes on, the less they can bring themselves to 'get out' ( What if this is the bottom?), and the governmental changes insidiously eat away at their asset values. The global market rules ( finanace availability, etc.) and the NZ Government rules ( taxation etc.) are on the move. It's going to be hard for some to 'get out of property'; but that's the real answer to preserving their 'investment' nestegg money for retirement; otherwise there will be none left~just the debt.
Wow ....I am alone
Wow ....I am alone here......hooooooweee!.... whats this one...? 178 of the property snore for the weekend......? anything resolved yet...?
Monday's Headline ..... Tony
Monday's Headline .....
Tony ..A. and Mark Hubbard go bear on property.
Our page three Alien...this week....The Man's back.
Christov, don't know about
Christov, don't know about Monday's headline, but have you seen Bernard's Sunday one? n Bernard is being less negative now ( see Sunday Herald)
Under the heading, ' Kiwis, count your blessings", Bernard gives 10 reasons to be cheerful after 2 weeks of gloom. Anonymous, as BH now is realising, may they be also 'an antitode for being a permanent harbinger of doom'.
I'll be checking it out
I'll be checking it out that's for sure...ta..
I just run off and watch the AB's again first....ah Sunday....then I've a curry to cook...yum.
I get the feeling the high
I get the feeling the high end of the market is whats propping up the "good news" . When you guys talk of plummeting prices and what-not i think a house in the worst areas of south and west auckland is what your all waiting for. Anything remotely near the inner city seems to be on the up and up. The Herald certainly seems to be in overtime promoting the city centre suburbs like Grey Lynn, Ponsonby, Freemans Bay and cream of the crop Herne Bay. I wouldnt hold my breath waiting for these areas to plummet.....
Come to think of it....if you
Come to think of it....if you were still looking at investing in property a smart move might be to start moving away from multiple homes in the lower average suburbs and get one good one in a high end suburb or would that be too reckless? I know a mate of mine who inherited a property in Ponsonby rented out the place to professionals @ 850 a week for a 4 bedder....that was 5 years ago. Im sure with all the hype and focus on the city centre now he could probably go higher. Best thing about it is he gets the best tenants.
If they do fall 20% on a $2m,
If they do fall 20% on a $2m, that's a loss of $400k; probably equivalent of 100% of a lower area property ( which would still have 80% residual value?)
Thats just it....Herne Bay
Thats just it....Herne Bay has 2 slopes. On the nothern slopes you get the 1m+ and on the southern end you can still come across 9k mark or properties closer to Ponsonby and Grey Lynn prices (700-900K). Thats like 2 homes in Te Atatu or Glen Eden where theres alot of rental activity. Rent averages at about 350 out west so for 2 properties you still wouldnt make as much as one good property in a really good area....
Olly N should be able o put a
Olly N should be able o put a positve spin on this.
Banks are "lending into a
Banks are "lending into a housing bubble" . Research firm warns of a "property bubble burst"
http://www.news.com.au/business/banks-are-lending-into-a-housing-bubble-research-firm-warns/story-e6frfm1i-1225919995729
No worries anon...property
No worries anon...property values never go down in aussie and anyway they have Queen Gillard to run their lives for them now...what could possibly go wrong!
The re-emerging mining boom
The re-emerging mining boom there will soon force the Reserve Bank to start hiking interest rates and that will hit the heavily mortgaged suburban commuter belt.
Big risk that China driven
Big risk that China driven boom idea anon...not saying it's not happening...just that it comes with risks. Yes the RBA will raise again maybe to 5.25 by mid 2011. Bolly's ocr game play cannot save the banks here from an international credit crisis and therefore the move to floating may be a move to float without lifejackets for many. That is the ever decreasing space between the rock and hard place...recovering world growth must bring higher rates....low rates promise endless stagflation. Take your pick. Hey....you seen any sign of the 170ooo jobs English promised his 6 part strategy would create? Another week and another 250oooooo borrowed to pay the interest debt of previous borrowings....noddy noddy on we go.....remember that tune!