Disagree.
As I have commented many times here ( I feel like a broken record!), whilst the net migration gains are relatively significant, as ANZ economists have pointed out, whilst increases in raw net migration data is obviously better than flatness or decreases for the housing market, one needs to be cognisant of the composition of that migration.
The flood of cashed up returning expats and new immigrants is a myth, the increase in net migration is largely due to fewer kiwis leaving, many of whom would be younger kiwis who would have traditionally gone on their OE. Many of these young kiwis will live at home or with mates, they will have minimal impact on increasing housing demand.

Also a significant proportion of the increased immigration is a result of increased numbers of international students, which likewise has minimal effect on housing demand. Further, some data came out a month or two ago (sorry don't have reference) that said the wealth characteristics of immigrants today is much lower than in the early 2000s.

Furthermore, Rodney reverts to the old cliche of - "well, 7% of the workforce may be unemployed, but 93% aren't". I would suggest that the confidence lowering effects of the 7% or whatever figure far outweighs its quantum. Anyone who has lived in countries with 10%+ unemployment (hey thats still 90% employment!) will understand that, its not rocket science!!!!

Remember too that plenty of companies are reducing staff to 9 day fortnights or 4 day weeks, employees in these situations won't be officially unemployed, but the loss of income will have significant effects.

Very questionable piece

Dave - very good point, thats an odd statement

The average Kiwi shifts every 7 years

Yet only approximately 5-8% of houses transact a year (not 15%). Curious (or wrong).

The problem I have with this research is that it seems to be backwards looking....making assumptions on the future based on histroric simularities....right now I think we are in such a different state that using historic data is risky....it might well pan out....but I suspect it probably wont....even if it does will this projection by right for the right reasons or the wrong ones?

When B English says 5 years I think he really means a flat 5 years....then we are at 2014 and oil supply will then be a real issue....but that time scale is outside of this time scale....anyway I think the OCR is going to remain low for those 5 years....it will be interesting to see what the difference in floating v fixed is....and if there is a housing recovery.....I dont see it....

regards

Very sensible post by Rodney and he calls it as he sees it - he was very negative on houisng last year.

A net migration gain is still a net migration gain whether its people coming here or nobody leaving.

IanC,

"The average Kiwi shifts every 7 years
Yet only approximately 5-8% of houses transact a year (not 15%). Curious (or wrong)."

good point, I suspect that not all of these people that shift actually own a house. Another fine example of misplaced stats from "the bubble pumpers"

Where do we start.

Firstly 7% unemployment as we all know doesn't mean 93% with jobs. Silly I know but its quite bit lower. i.e the rate is based on those able and willing to work, quite a bit different. And as rates get higher, unemployment gets hidden with some people opting out of being classed as unemploymed, return to study or other such definitions. Also partners don't get the unemployment benefit if their spouse is employed...

Second as most of the posters here have pointed out net migration is being driven by less kiwis leaving. Big difference from that usual. Large numbers of 20+ year olds staying home won't drive the housing market. Maybe the rental market if you are lucky.

Third, its expectations of interest rates that also drive housing decisions. Short term rates may be low, but the overall expectation is still they will head to their usual levels (8%+) which will keep a damper on things. No point in trying to get a bargin now if you suffer later.

Lastly would that global recovery be one where airlines are going to lose $14 billion this year, where 2 of the big 3 american car companies have just filled for bankruptcy and the effects are still to flow through. Where the big banks still have lots of hidden toxic debt, and businesses are still suffering low sales and restrictive cashflow. The same recovery where Japan, Germany and most of the exporting nations and their key export companies are losing billions of dollars as demand collapses?

Like the Tui ad, Yeah right.

Good thing I don't pay for Rodney's advice....not worth the paper.

sorry caffeine rush is kicking in, another point.

Rodney says:

"The Westpac economist, Dominick Stephens, is quoted as saying, "We expect a return to low sales volumes and falling prices in the second half of 2009." Irrespective of whether Dominick's views are well founded he has done a good job for his employer (i.e. got Westpac's name splashed across the media)."

Actually Brendon O'Donovan, the Chief Economist at Westpac, also had his name as co-author of the Westpac housing report. Rodney has written this patronisingly like its the views of some junior at the bank.

Also, I know there is a saying that goes "all news is good news" but lets get real here. When has it been in bank's interests to talk down the market?

Or maybe Westpac sense that people are getting fed up with Tony Alexander's constant spin on housing and that disillusioned BNZ customers like myself might move to a bank whose economists don't talk crap?

Realist - quite right, and I think a lot of these Ivory Tower economists have no comprehension of such real world effects, they just look at the "official stats"
good point re: overtime too - a heck of a lot of people have relied on that to get through in recent years

@ Bank Manager:
As the South Africans found out, there's a difference between those who can afford to come and those that cannot afford to go.
"A net migration gain is still a net migration gain whether its people coming here or nobody leaving"

@ Janet ""Rodney is the MD of Strategic Risk Analysis, which prepares and sells reports on housing"
Say no more"¦"¦"

Good point - wonder who pays for the reports and if they are more useful than the opinion pieces here. The recent post about Whitianga real estate was bizarre.

Perhaps he likes to stir the pot, putting an opinion about property on this sire is like lighting the touch paper.

Dave,

Ref. "If the housing recovery falters then look for the RBNZ to cut the OCR further"¦

Why does that follow? Protecting the "housing recovery" is not their remit, and they still think houses are overvalued at current prices (FSR)"

The whole of the banking economy is based on the premise that debt will increase each year, it needs to increase each year to pay the interest on money lent.

If housing values drop significantly, this causes banks to consider writing of the loss , as per America, England and other countries recently.

This is why the RBNZ would look to cut the OCR, because, the one thing worse than an over priced housing market is a house prices collapsing.

Matt, at the time when the RBNZ was starting to drop interest rates the global collapse was in full swing and there was a worry here and in Aus that if housing values dropped the banks would have to write of losses.

This would have caused a real recession here and not the technical recession we are currently enjoying.

The end result is this slow period of re-adjustment as incomes catch up to the current house values, this I would speculate, could take ten years or more unless people vote with their brains now and say NO to the current house prices on mass.

Generation x and y need to take money out of baby boomers pockets if they want to raise families with out taking on to much debt for life (serfdom), saying no to high house prices should be their first standpoint.

Ha ha,

we're already servants, I've herd it quoted in America that 90% of all of the wealth of the nation is held by people over the age of 50. and if it's true there then it's the same here.

Matt in Auck - outline your policy - you might have a sponsor close at hand. Refer UKIP, that is working.

NZ herald had a piece that I saw yesterday where they were commenting that farming was also a bubble ...

To paraphrase - Farmers were making a 2% ROI on their investment through actual farming. Their profits came through the capital gains in rural alnd.

With interest rates heading up, and capital gains a thing of the past for a number of years to come, the farming sector could well implode. What happens to the economy then people?

just to follow up on Marin's point.. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1057...

oh so you just recently bought a house did you Rodney, taking that and your job into consideration, along with you poor understanding of pretty much everything I think i will continue to wait before we jump back in the housing market. J

Houses, as everyone knows, are deflating. There are signs that the fall in housing prices is becoming less violent, but the trend is still down.

This yesterday from Robert Shiller, in the New York Times:

"Long declines do happen with some regularity. And despite the uptick last week in pending home sales and recent improvement in consumer confidence, we still appear to be in a continuing price decline.

"There are many historical examples. After the bursting of the Japanese housing bubble in 1991, land prices in Japan's major cities fell every single year for 15 consecutive years.

"Why does this happen?"

Shiller goes on to explain that housing markets don't adjust quickly. People make their housing decisions years in advance...based on changes in their lives. They may have found a job somewhere...or gotten a divorce...or their children may have left home...or they might just want to live in a different area. These plans take years to come together...and years to execute. They can be reversed by changes in market conditions...but not quickly.

And then, when people are planning to sell a house, they may not be in a hurry. If prices slip, they may decide to hold off - maybe for years.

Then too, decisions about buying or selling a house are often decisions taken by two people together. The husband may be desperate to get out of a sinking housing market, for example, but the wife may not want to leave her home. Even when they must sell for financial reasons, that decision can take months...even years...to reach. Often, they hesitate. The wife expects to get a better job...or the husband expects a raise...or they anticipate some other economic change in their lives that would forestall the need to sell their house.

Then, after the decision is made, there's the actual process of selling a house -- setting a price...and finding a willing buyer. In a downward market, buyers' expectations tend to adjust most quickly. Reading in the paper about a correction in the housing market, the prospective buyer expects a great deal. The prospective seller, on the other hand, tends to deny the severity of the downturn. He reluctantly and belatedly acknowledges that he'll need to lower his price. But as he gives in the market gives way further. The prospective buyer hears about more great deals that other buyers are getting...and he lowers his price targets even faster than the sellers lower their asking price.

Shiller gives another example...

"An elderly couple who during the boom were holding out against selling their home and moving to a continuing-care retirement community have decided that it's finally the time to do so. It may take them a year or two to sort through a lifetime of belongings and prepare for the move, but they may never revisit their decision again.

"As a result, we will have a seller and no buyer, and there will be that much less demand relative to supply - and one more reason that prices may continue to fall, or stagnate, in 2010 or 2011.

"All of these people could be made to change their plans if a sharp improvement in the economy got their attention. The young couple could change their minds and decide to buy next year, and the elderly couple could decide to further postpone their selling. That would leave us with a buyer and no seller, providing an upward kick to the market price....

"Even if there is a quick end to the recession, the housing market's poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997."

Matt in Auck - very probably, hence my question:

http://www.interest.co.nz/ratesblog/index.php/2009/06/09/opinion-why-wes...

A Matt in Auck: Nothing's new! It's all been tried, one way or another, before. Google "Young New Zealand Party".

Call it 'BalanceNZ', because rebalancing the economy/investment more toward productive activity, from where we are now, will be good for all, and in particular X & Y:

http://www.interest.co.nz/ratesblog/index.php/2009/05/28/opinion-this-bu...

It'd be ok to have a limited policy set, as per UKIP. With MMP it might be possible to sway a coalition to enable certain policy to allow the rebalancing to happen.

Young NZ Party is too limiting and sounds divisive.

Well, this looks like a debate in its own right!!!??
Some very good comments here.
Les I take your point about it being too limitting and divisive, but I also take SimonD's point of it perhaps having to be divisive to have an impact. Policies that favour "Young NZ" would probably have to be at the expense, to some extent, of "Old NZ"
My view is that a significant proportion of the population is in the 18-45 age group, provided the party was set up credibly I can't see why getting to the 5% threshhold may not be possible.
I think a key plank of policy would have to be education, but I haven't really thought too much about it.
Immigration would be important. I would propose that a targetted pro-immigration policy would be required, as we'll need a larger population and we'll need to make NZ more exciting and dynamic for young aspirational kiwis. But at the same time rising immigration would put further pressure on house prices, thats why I would propose a radical overhaul of planning and buiilding regulations.
this would include:
1. Removing Metropolitan Urban Limits, with the exception that urbanisation of sensitive ecological areas and productive famring areas should be limitted. A conditon of removing the limits would be that all dwellings built in peri-urban areas must be built to high "green building" standards to mitigate against carbon emissions, and also substantial tree planting requirements.
2. Freeing up rules within urban limits to allow for more low rise apartment and townhouse development.

Other ideas appreciated!!!

"If we think through the political consequences of such a group reaching above the 5% parapet, I suspect that the result would be grey power marshalling its not inconsiderable forces."

Sure, but I think the other main function would be to communicate to the two major parties, whole of NZ society, that the issues raised cannot keep being ignored, as they seem to be now.

In my view the issues raised need to be small in number to have the right focus and thus impact. This kind of party is not seeking to govern, but to influence the government, just like the Green Party do. In that regard it'd probably be party-vote focused campaign, unless you found one or two strong electoral candidates in appropriate constits.

I think a good few 'boomers' would see the sense of appropriate change as well and would support it. No one wants their kids living at home forever, or simply moving offshore as soon as they can because they have zip future here. The debate would tend to gravitate toward that around the generation gap issue sure, but, the solution IMHO is rebalancing the economy, and Matt, there is a raft of appropriate stuff on this site, that could taken as the core issues. [Mainly in the things I say, only kidding. Wish I knew how to do those smiley things, but at 94 it's struggle just seeing the screen.] A policy set is important, but more important at this stage is defining what said entity has as it's purpose? It's identity? It's values and core beliefs? That kind of softy, wonk stuff - that is all important. Am off for nap now.

If Rodney's right, Mitch O, I'm with the Realist. I'm off to Aussie. Even at current prices, housing's too expensive here to beat what's on offer there. And there're lots like me who have just that choice.

Rodney attention seeking, Robert Shiller is a wise soul and all the other interest groups keep up the same PR angle...ho hum

The only bit that make me pause is the generation x and y comments, a robbed generation.

Ordinary people's concerns of currently worldwide bad developments on many fronts such as economy/ politics/ health/ environment and it's consequences here in NZ are washed away, when some economists/ experts come up and say unemployment will peak 8,55 % by 2010, the property market will recover sooner and banks are in good shape "“ at least we don't have to change our life- style, the way of thinking and we sleep well, knowing something positive is happening around us.

Sounds like an "Economic Bible Session"- go(o)d on you. :-)

Agreed, Ruru. Lighthearted moment:
Key and Clarke ads. were going at it on TV last year. My 18 y.o. stepdaughter, showing unexpected interest, and proabably still taking in the information from the preceding blu pill ad. chirped up with an enthusiastic,
"I know who I want to put in at the next erection"

Realist (for PM!) says :

"I have never really understood the immigrant wave that people kept talking about. While I love NZ and know it has a lot to offer, much of its advanatge has receed somewhat over the past few years.

I mean crime, pretty much higher than most european countries (and the UK).
Public transport..rubbish. Traffic congestion, low wages, relatively insular population, lower standards of education, miles from anyway, dependent on the overseas public purse"¦.

But you say the scenery"¦well there are mountains, lakes, snow etc pretty much everywhere else in the world and the wages, oppurtunities are better. So while I see new immigrants as good, I often wonder why here"¦

Maybe that's why most of the young uns are heading to Aus."

Good points. I would tend to agree with your summation that NZ is perhaps overrated.
As you say with regards to the much trumpeted scenery, most countries of the world have regions of great beauty.
Really, the main reason I am still here is family. Oh, and I guess there is an intangible quality to NZ in its landscape and people that I guess is still pretty special, and which is hard to quantify.
You know what I mean, its the sort of qualities you see in films like Whale Rider

So I guess as a kiwi I still really value the place. Although I do wonder why immigrants - with no strong ties to this place - would choose NZ over say Aussie. Maybe because they don't like creepy crawlies and 40 degree summer days

It bothers me that Rodney's 'ravings' which used to be pretty neutral and soundly based seem to be becoming desperate. It's as if house price's remaining in the stratosphere is the only thing important. Why should this be so when the housing pyramid game of recent years never created wealth; only higher debt and less afordability for our children. I recall similar desperate analysis by English analysts a couple of years ago (shortage of houses...) and the US slightly before (never has been a nationwide fall...). Many of Rodneys points are indeed arguable but as to outcome he seems to clutching at straws, as other blogsters above so ably point out. Perhaps a good windup and resulting publicity is the objective.

Ian - well we haven't heard form the man- so thats disappointing
I think many valid comments / criticisms have been made here, and no response.
Its a "post and forget" approach.
At least guys like Hugh Paveletich follow up the postings with interaction

I have to agree a bit with Realist here on the security side of things. I felt safer walking the streets of New york and Chicago at night than Auckland

I'm coming to the conclusion that Auckland is not all that its cracked up to be (so much for all these global quality of living surveys). I think the best of NZ is to be found in smaller cities and the regions. Its like Auckland is trying to be a big international city, it has all the big problems of the big cities (traffic, high cost housing etc) but few of the benefits (culture, dynamism, energy)

It is sad to hear people who have supposedly traveled internationally can only sight the negatives as they perceive it at home.

I love this country in so many ways... it has many aspects that are unique if you have really traveled and lived internationally. As a a consequence of earning a reasonable six figure income here allows me to enjoy the best international cities and places in the world on a regular basis..which i could not afford if I lived in an international city in similar circumstance.

p.s Auckland is not New Zealand, regardless what you may think lol

yeah, I agree with Wally. I live in a holiday park in Hawkes Bay. On the beach...in a mobile home...time rich and a slave to noone. Travel a lot to family all round the world and pretty much do what I like in the daytime....walk, go to gym, play golf tennis etc...Ditched the keeping up with the Joneses years ago. My sons are 24 and 26 and own 3 rentals between them. cash flow positive in Hawkes Bay which I encouraged them to buy 5 years ago. They earn a pittance and still do but they have got their properties by going in together. More than one way to skin a cat.

@The Realist
Humans share about 98% of their DNA with chimpanzees. Chimpanzees have actually undergone more genetic change than humans.

With our new generation of widespread drink-, drug- smoking and violence - culture I suspect this is going to change very soon. :-(

Matt, Les and others: The single issue a "Young New Zealand" party should be concerned about is Economic Sovereignty. Few will argue with the macro goal but in the process it will drive real economy policies that will naturally shift wealth from passive asset holders (currently in the hands of us Boomers) into the hands of the Productive Economy owners. If Young New Zealand truly took up that challenge and fought for a Productive Economy to achieve Economic Sovereignty then I for one would be help fund it. As Les says don't under estimate the vested interest groups lining up to fight the changes required. Boomers like me have nothing to gain by the changes required. We have the assets, we have income and when we die our kids will be okay relative to the population.

It's only when you think in terms of Nation Building that your views change. If you can capture that sense of National Pride, of Independence and a genuine disgust with politicicans who knowingly vote for policies that are not in the national interest then you will get a party over 5%.

Put don't count on many votes from Boomers as they have everything to lose and nothing to gain (in their lifetime) and generation X & Y have everything to gain and nothing to lose. The problem is you almost have to be a Boomer to know the problems we face as a Nation and Gen X & Y are trying to get on the tread mill that caused this decay in the first place to get ahead. If you have a way of mass educating Gen X & Y voters it will be more than a 5% party.

Jim Coyle, just had a another major local power failure and but for the housebus I would be toast. Great to have 240v backup whenever. Can't understand why more people don't just toss the whole suburban nightmare and opt for a life on the road. That housetruck site in the States sure has some super conversions.
No rates to pay and there are so many secret overnight sites to park up in.

Selwyn & Les,

NZer's are so locked in to the 1940's, you carn't change the architecture, the welfare sate and even something as simple as Auckland under one council causes all sorts of problems not because it's not a good idea but because it's change and NZer's don't like change.

And when there is change it's all about protecting the status quo in a changing world.

I suggest NZ move to purchase the world supply of gold creating a NZ dollar value which is based on the gold standard so that countries trade is in NZ dollars instead of the current $US for their foreign trade.

The outcome of NZ clipping the ticket on every international trade transaction would ensure our quality of life but more importantly would create a secure financial system for the rest of the world to live in and trade in.