It's a bit like traversing a valley in a car. On the flat then a ,say, 9.3% decline; then flat at the bottom before going back up again. Half way down the descent the rate of decline reduces to 0% change. It doesn't mean that the car has stopped going down. It's only when the rate of change is positive that you can say you are climing back up to the flat; only to be back at the level that you started of at!

QV says, "Property prices are now down 9.6% from their peak in January 2008, QV said."

Is that when they peaked? I thought the peak was November 2007?

The only thing which would prevent property prices falling back to pre bubble levels would be govt Rudd style intervention and if we get so much as a sniff of that sort of stupidity in the budget then this country is stuffed for all time. To date we have had little in the way of comment from the govt on the disturbingly high unaffordable nature of housing in the country. The question out there is whether English and Key see more political points in porking the building sector with public money, than in leaving the sorry inflated property mess to the mercy of the market.
Thankfully we have S&P in the Cabinet room keeping an eye on the direction of policy and the govt will not find it so easy to flood the market with borrowed loot to buy themselves a second term.
That said, the garbage coming out of QV and various self interest groups including the media which depends on property activity for a wad of revenue, is best ignored.
The recession/depression has years to run and the second great crash is setting up now in the States with mortgage resets and higher taxes and a collapsing currency.
But we will continue to see the banks reel in the mortgage fodder customers with these short term low rates. Pity the poor sods when they arrive at refinance time with property having fallen another 20% and unemployment near 10%.

Exactly, Wally.
I see a $600k Ferrari sold for $280k recently. I actually couldn't affford the $120k, 20%, deposit when it was full price, but maybe if I'd borrowed 80%, $224K, of the sale price I could make money when I sell it down the track? The fact that I couldn't afford the new depsit of $56k either doesn't matter, because when the market turns around.......
Oh, I forgot! This example a car, and only houses go up in value....

It seams most of posters here agreed that the house prices still have a long way to fall. So it will become the reality because the house market will follow people's confidence. Is everyone here playing waiting game? And how long are you going to wait?

Five years is my waiting time strategy at this stage - the huge (unsustained) boom we've come out of will take a long time to rectify. Five years might not be long enough but thats when I'll start looking at the supporting fundamentals - employment and strength of exports/ diversification of exports - including tourism. Some show of strength to support a realistic house price - - - and no signs of 'irrational exuburence'.

Depending on how painful it will get I would imagine 'irrational exuberence' will be a few decades away - in the next cycle

thank you janet,
another way of understanding it is that when you jump out of an aeroplane you soon reach terminal velocity and stop falling towards the ground more quickly, but you are still travelling downwards very quickly.

To clarify the dates and peaks for each of the measures:

1. QV average price(3 month moving average) - Oct 2007 @ $406,176. The current avg for April $372,981 so an 8.2% decline from peak

2. REINZ median price - Nov 2007 @ $352,000. The current median for March $335,000 so a 4.8% decline from peak - we will have to wait until later this week for their April stats.

3. It is not possible to define the peak of the QV valuation index that this month shows a 9.2% decline. You could say that in Aug 2007 it stopped rising when it hit 13.3% year on year growth, it then fell through zero to a valuation decline in July 2008.

how can prices stabilise when unemployment rises are just beginning and interest rates will start rising again soon? Add to that the greatly reduced revenue coming into the country from overseas (there aint huge money to be had in London, and all those smart city types with houses and margin lending facilities arent looking so wealthy any more. They may well decide to come home, but they wont have as much cash as previously). Ditto for all the foreign investors.

Even if they stabilise, buying is a not financially worth it. Houses still cost a lot more to own than rent and thats including artificially deflated interest rates.

i point out the 90/10 rule, or the 80/20 rule, or the 99/1 rule, it exists for a reason

i also am in the minority on this web site suggesting this could be a good time to be looking around educating yourself in the market you wish to buy in, so when you see a property you can afford, you know you can, without the input of the greedy agent or commissioned mortgage broker.

if you know your stuff, times haven't been better, but you need to see what the majority miss. OPEN your eyes people. buy raincoats in summer and sun hats in winter, people will think your stark raving mad, but that is when the things you need are at their cheapest...

As Alastair's statistics show, NZ house price have not fallen nearly so hard and fast as some other countries, say USA and UK. And as Phil notes "prices should stay low for a reasonable while." That sums it up for me. Buy if you need a house. Look elsewhere if you want an investment. Rent if you are disciplined enough to save any surplus cash.

Actually, my friend has a raincoat to sell; and his friend has 10! The only person I know who wants to buy one is my 25 y.o. nephew ( "I don't want to miss out on the next move up"), but he has a large student loan, and will have to makew do with his sunhat..........

@ Roger Thompson
@ Philly
@ janet

Roger - I agree 100%, couldn't say it better myself, except to add the banks might change the rules, hence the window of opportunity

Philly - you are just being silly

Janet - I must say I do like your sense of humour...

Thanks Alistair and Dave - I get it now (I think)....

The highest average price achieved over a three month period was $406,176 (QV report for October - December 2007, reported by QV in January 2008) - whereas the highest median price for a single month was $352,000 reported by REINZ for the month of Nevember 2007.

Is that about right?

The reason I ask is - I believe we are getting more than 12 months out from the 2007 peak - and I'm most interested in the fall from peak - as opposed to the fall in the past 12 month timeframe.

must be a spruiker : the 31 % drop is only an opinion by "experts". Banks won't panic, unless it becomes a fact. The fact they will look at, and Lord knows it is a pity that the US and UK banks forgot this, is your ability to repay, here and now !

And yes, real estate agents collect a fee in falling and rising markets. Perhaps there is less action, or turn-over, in a falling market. So they want to russle up some life from the dead autumnal leaves of this economy.

The price drop is amazingly slow in our housing market. A blessing to us, as both owners and financiers are not panicked into rash decisions based on short term metrics. ( Hope this is of some use for you.)

@kate there are two different values that QV report: the 3-month average of all completed sales in that period, and the QV index which is based on the calculated value of all properties. See here: http://www.qv.co.nz/faqandsupport/infobasefaq/default.htm#E3

I was quipping with The President of Property on his 1.24pm post, Rod. But I still believe that people should make their money out of work, rather than "the bigger fool" theory. Your work is property developing; you actually 'make' something new to sell. That's where the money should come from in property market. Not from just buy/hold/sell without financial rationale.

Roger most of the mortgagee sales are for half built projects or finished ones not many for bare land.

@ janet - i too believe in financial rationale, hence our portfolio is still afloat, being cashflow positive - hence being very much a property investor not really a property speculator. In business the numbers have to work and so does the owner, it aint no easy street but it is something i do know fairly well - a cross between a slave and guru... but when people are putting off buying a home, because speculators make them nervous, it just plain right annoys me, because owning a home and trying to make a fast buck are two totally different things. this is when i would buy a home now if i didn't have one already, it is also why i am looking forward to finding some rentals that stack up numbers wise... ones that suit my requirements...

if only.......

I still reckon prices will drop 5-10%
Even if they don't drop that much I don't think they will be going anywhere but sideways the next year or so. Even Tony Alexander doesn't think they will rise much

With interest rates unlikely to rise much at all over the next year or so I think it pays for prospective home buyers (like me) to wait another 12 months, get that deposit up from around 10% to 15-20%

Worst case prices won't go anywhere and we'll have a higher deposit, best case prices will fall another 5-10% and we'll win on both counts

How can convince all would-be seller to put their market on to the market and meantime to convince all would-be buyers to wait for another year or two? Bernard, It will help if you are on the medias talking your 10 reasons again, again and again. First thing first, anyone reading this forum should stop going to open home and convince everyone your know that the house price will be crash soon.

mattinauck, so the much maligned [by you] Tony Alexander finally agrees with you although it is interesting to note that he is not the one who has changed his ground, you have!!!!!!

Worst case scenario for you is that so far you have got nothing right and chances are your track record will continue

Touché

whoops - sorry realist, that was out of character - appologies...

Hi All,

Here's a home owners view and by no means an ecomonist.
We sold our house in Remuera in May 08. Sold for a great price and very happy.

We have been looking to buy since mid 07 and have seen BIGl changes in list/sell prices and methods from vendors/agents. And real changes in mortgage rates. This is no new news to anyone.

Where we are good product sells quick and poor presentation simply does NOT and takes a hammering often.When we looked on 07 most properties were selling within a week or so-multiple buyers-20 to 40% above CV. Good list of stock.

Now there is very little stock, good stuff still selling well but scarce and poor property sitting ! Vendors now meet the market and over Xmas and before there was a Mexican stand off between the two-and stressed agents everywhere...

Property is now selling bout CV, thereabouts as a rough guide. Price has come down a lot... Bargains are there but you've got to be on the cusp of information and trust agents who now are so professional !! NOT many but some vendors are distressed ! We observed a 5 bed,2 living room bungalow with pool sell for $900,000. CV was $970,00 and agents thought min 900s....at least.

Banks are more diligent and competition more firece. Some banks more flexible than others-do not look just at rate...sometimes flexibility is cost saving too... remember term and rate is impt-not just rate.

Cheers and find the opportunity in the current market !
Carpe Diem.

@ Matt in Akl : 100x2x2x2-10%=?

President of Property, I know a number of housing stock have been taken out of the market just waiting for spring. The volume of sales and the number of listings are very low. This means that the market has not normalised yet. The current price is not indicative of the market flattening out because the number of listing/sales do match up. The lower interest rates may help some owners to hold for a few more months and take a chance. I think this gamble will blow out in spring. The current activity is only on the lower side of the market. The top end market will fall have to fall, if not the lower end. Why would one will be paying a premium for the top end when there is little chance of house prices going up in the next 2-3 years.

mattinauck, you asked on another thread what my predictions were, they are a matter of record and for the record they have been more accurate than yours so far,maybe its luck, maybe I just have more experience than you or maybe you just cheated on your well publicised I.Q. test.

As for balls,boyo,I showed mine when I bought in the last downturn in '98, 15% off the gains I made is chicken feed, now you show your balls or eat some chicken feed,

here chook,chook,chook

Another recession will be on the card in 24 months because the interest rates will be over 10%. Then interest rates will be drop again to 6% to 7% in 30 months. That is cycles.

Agreed,pjimmyinahouse. Sometimes one go isn't enough! Also my Internet Explorere keep failing on first go at interest.co.nz. Seems to have started stopping when you went to Trademe? But, of course, could be my computer in the cold south.....

Walter K : good point. There is a big world out there. And what are they doing that may wash over us ? For one, the USA is reinflating it's economy with a multi-trillion dollar package. Fine if it works. But it also risks a burst of inflation at some juncture. And that may impact us too. Ergo, the property spruikers and Tony Alexander may get it right, and the rest of us nay-sayers are going to look like silly tits !

Quote from John Maudlins news letter:

"It has long been my contention that we are entering an extraordinary period of time in which using historical analogies to plot market behavior is going to become increasingly problematical. In short, the analogies, the past performance if you will, all break down because the underlying economic backdrop is unlike anything we have ever seen. It makes managing money and portfolio planning particularly challenging. Traditional asset management techniques just simply may not work. Buy and hope strategies may be particularly difficult to navigate.

Part of the reason we are co challenged in our outlook is that we are experiencing a deleveraging on a scale in the world that is absolutely breath-taking in its scope. And to balance that, governments are going to have to issue massive amounts of sovereign debt to deal with their deficits. But who will buy it, and at what price? And in which currency?"

I am a proud Real Estate Agent and I sell property.... oooooooo scary stuff in here but as always I look forward to the replies, taunts and outright slagging from all the "experts" in here who hate property or anyone like me (scum of the earth to them) who dares comment with a different view to them.

It has been quite a while since I have had a good look at this site or the comments (been busy selling houses, sorry) and funny enough it's the same old doom and gloom merchants are pushing the same old message and they are STILL offended whenever someone dares disagree with their "expert" predictions. And the point is... that is all they are...predictions, just like the one Bernard made in regard to a 30% drop, aaaaa I still have a good chuckle about that one while looking forward to my bottle of Sav from him.

Just quickly to Mattinauckland, have you moved to Aussie yet. I recall you saying NZ was a hole you can't stand to be in a minute longer....no, so you continue to be full of it and your posts are the first I skim over as you have no credibility at all.

I am happy to report from the Wellington City Market loads of activity, especially from buyers. We have seen a return to getting multiple offers on many properties (probably 2 out of every 3 deals) and sales levels well above a year ago, thank goodness. Looks like Vendors are also starting to come back into the market as the general feeling is that we have levelled out and it looks like a return to business as usual, wait and see.

If I could add one comment to all the calculations, graphs and links that all the "experts" in here keep refering to. Buying a house for MOST people is an emotional purchase (hard to graph), done for many many different reasons. MOST people are not speculators, MOST people live in a house for an average of seven years or longer (read between the lines, prices 7 years ago V's now).

I will freely admit that I do not know what is going to happen to the property market over the coming months or even years, however I can tell you (from the coalface) things are really not nearly as bad as many in here desperately want it to be that's for sure.

Ah well that being said I've gotta go... lots of appointments with buyers to do, I will check in later to see the reaction so as usual don't hold back LOL.

This is a bull trap and nothing more. NZ property is completely unsustainable with pathetic paying jobs (40k average salary??) and houses that leak. All this spurt is is cash buyers thinking they have a found a bargain. Mark my words, 20% down from here.

Glenn Stewart,

I think we should all reserve judgement until mortgage rates are back above 8% and unemployment hits its peak (add another 2.5%). Dont you??

Politicians at number 39, down there in the scum at the bottom of the pond. Wonder why! Surprising to see real estate lot so high up the list George!

Glenn
What a tosser. And by the way, I place real estate agents at pretty much the bottom of the heap in terms of repute, you are down there with used car salemen and developers. Apart from the odd reputable one, you are pretty much a bunch of lying, uneducated, greedy scumbags
Mate, once National get around to cutting loads of those socialist waste-of-space bureaucrats in that windy, grey, claustrophobic hell hole called Wellington, as they WILL HAVE TO DO, then your market is really going to struggle.
And no I haven't moved to Aus, as much as you would wish me to. So do you keep written records of these things "Matt said on INSERT DATE that he was going to aus?"
Pathetic.
By the way if you actualy read what I had to say you would see that I have never forecasted massive plunges. I was always in the order of the 15-20% fall camp, we've hit 10%, I'm still expecting a further 5 % fall.
thanks for making my day

now that I've finished slaggin off an agent who slagged me off, I'll add something constructive
Saw a graph in the Herald today from Crockers, showed average house prices across Auckland and other parts of the country. It was interesting because although it showed the big drop in prices from Nov 07, it showed that for this year prices have remained flattish / slightly dropping.
I say "interesting" because much of the hype has been about prices having risen 4-5% over the last 4-5 months
I do appreciate however that this is only one real estate company, however still interesting

This article is nearly 3 months old, so I'm not sure why it's suddenly come alive again!

Matt - the 4 - 5% increase this year is in the median REINZ figure, which is what was predicted to fall 30% and what has always been debated here. If we start breaking it down in to smaller areas then there is always going to be somewhere up x% and somewhere down x%.

As for all those who think QV is more accurate (usually because the bigger percentage falls quoted fitted their argument better!), they need to realise for a start that QV use averages (which are less accurate than medians), they use historical figures on settlements from councils, they use a 3 month rolling average, and they calculate their index by comparing the relativity between average sales prices and capital values!

I'm surprised after all that "adjusting" that many economists still think it's more accurate than just looking at the raw data (REINZ). I don't think economists like things to be simple (heck, they'd be out of a job!) so they perform all these ludicrous formulas, which might explain how they so often get it wrong.....

as for simplicity murray - i dont think most agents could understand anything more complex than a median, this is why the reinz uses it, not cos its a better measure.

The setting of the OCR depends on the CPI and I don't think house prices are included so doesn't have a direct impact on inflation except indirectly if it leads to changes in household spending on consumer items.
Its funny how because house prices flatten out for a few months it means a recovery is underway and the price correction is finished. Bernard and others are right saying house prices (REINZ & QVNZ) are overvalued by 30-40% the only thing they got wrong was saying it would only take 1-2 years to correct. Putting a timeframe on it was their mistake. The fact is prices will eventually get back to 'normal value' based on rent and incomes, wether it takes another 5 years or 20 years who knows.

Glenn and Matt - Matt has a right of reply to Glenn but come on guys play the ball not the man eh! Glenn probably feeling quite smug right now though as Wellington real estate market is pumping!

My understanding of houses and CPI is that only the costs of building are included, so the main contributer to inflation (rising land prices) is not included. I'm not sure about NZ, I do know that in teh UK they used to use the RPI which included houses, then Gordon Brown in his "I'm in love with the city of London" wisdom excluded houses ... with obvious consequences.

Murray,

"yes, of course you're right, the REINZ decided all it's members were so intellectually challenged that they would stick with medians. Good one." Hmm - it only takes a 2 week course to become a REA - I know a few friends who were/are agents and they did not get past school c maths so I dont think this is an unreasonable conclusion to draw.

"if house prices were to fall further, interest rates (the OCR and floating rates) will remain "artificially deflated". They will only start being "inflated" when housing is heating up again."

Rubbish - Bollard is clear, its not house prices he is trying to save with low rates its the exporters. He will certainly move UP if houses prices take off (no chance), but he is not going to keep low if they drop as comments he has made over the last few weeks certainly indicate he does not like the housing bubble. A drop will be a blessing for him.
In any event, Bollard only controls variable rates - all that money pumping going on overseas will result in higher inflation and rates, and NZ has a real credit risk hanging over it which foreign investors will cotton on to soon enough (eg Fitch downgrade).
If we can be so confident about long term rates staying low, why is it I can get a TD for 7% over 5 years?? And why is it only short term rates that are low?? Clearly the banks are not that confident (not that I trust their judgment that much mind you).

And therein lies my surprise at housing being in the CPI in New Zealand, Murray. As you will recall from earlier posts, the 'you can't eat your house' philosophy is my prefered option. After all, what is " net purchase price"? It can be many things from the gross. Construction day costs should have catured all the CPI componenets.

jimmy - "what percentage of the CPI does it make up?" - as I said earlier, it was 8.5% but revised down to 4.7% in 2006, which to me seemed rather convenient for the RBNZ at the time and it hardly made the news. Sneaky.
What I was implying about interest rates was that if when the OCR returns to "normal" there were signs of a house price crash, the OCR would quite likely dive again, since house price crashes also hit retail sales and the economy in general. Most likely though is that housing has mostly bottomed out this cycle and the OCR will start rising next year and won't be this low again for some time.

George - "After all, what is " net purchase price"?" - according to Stats NZ it is "the full price of a dwelling as being paid for by the purchaser to the vendor".

I expect that by the end of the year QV press releases will state "significant house price rise" or "new NZ record house price set" now that the banks are back into 100% lending.