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Opinion: Why the RBNZ should take the IMF's advice and lean hard against the property price bubble
By Bernard Hickey
Now that the world has avoided going over the financial cliff, at least for now, the powers-that-be are doing a post-mortem of what went wrong.
The International Monetary Fund (IMF) has just produced a 42 page paper titled "Central Banking Lessons from the Crisis" that makes for an interesting read.
It diagnoses a bunch of problems, including keeping interest rates too low for too long, not watching the shadow banks, and light handed regulation.
But it also raises a topic of great interest in New Zealand, where a doubling of property prices between 2002 and 2008 distorted our economy in favour of consumers over producers, and sucked in around NZ$100 billion of foreign debt. This buildup of hot air in an asset bubble became a key factor in the Reserve Bank's thinking over that period, albeit indirectly.
The Reserve Bank shied away from deliberately targeting this asset bubble in its monetary policy and instead had to deal with the fallout using just one tool, the Official Cash Rate (OCR). Increasingly frustrated by cheap fixed rate mortgage lending funded by short term wholesale bank funding, it cranked up the OCR to 8.25% in a desperate attempt to slow the economy. It seemed behind the curve.
Now the IMF is saying central banks should revisit the area of targeting asset bubbles and of using supplementary tools to help keep the economy stable as well as keep inflation under control.
"The longstanding debate on whether central banks should “lean against” emerging financial imbalances or “bubbles” by raising policy interest rates has been reopened by the crisis," the IMF said.
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A common view has been that leaning mechanistically against financial imbalances could increase inflation volatility, require strong interest rate responses to be effective and thus impose high output costs, and may be counterproductive in small open economies where high interest rates can attract capital inflows," it said.
"Nevertheless, the high costs of systemic financial instability shown by the crisis can be seen as strengthening the case for using monetary policy to lean against asset price bubbles. Until financial developments are better structurally incorporated in monetary policy decision making, central banks should best utilize judgment in deciding whether to maintain interest rates somewhat higher than otherwise in order to avoid imbalances from undermining financial stability, which would ultimately endanger price stability," it said.
"For example, the combination of rising asset prices and rapid credit growth may warrant a higher policy rate. "
Politically explosive
This would be a major change in the way central banks think. It would also be politically explosive. Now that high house prices are now embedded in the psyches and balance sheets of middle New Zealand, changing the way the Reserve Bank Act operates to reduce or control that 'wealth' would hit the front pages and focus groups.
But that shouldn't prevent a debate.
Up until now central banks have said they find it difficult to measure the timing and size of bubbles. They worried any attempt to prick the bubbles would destroy the overall economy.
The US Federal Reserve and its then leader Alan Greenspan took this stance right through the last 20 years, in particular during the Dot.com bubble of 2000 and the housing bubble of 2005 to 2007. He chose the easy option at the time, but clearly disastrous policy now, of letting the bubble grow.
Our own central bank under the leadership of Don Brash and Alan Bollard were less sanguine about the risks, but were similarly doctrinaire in saying their single focus was inflation and their single tool was the Official Cash Rate.
As recently as 2006 the Reserve Bank of New Zealand looked into the use of 'supplementary tools and concluded "that there are no simple, or readily implemented, options that would provide large payoffs in the near-term, without significant complications and costs."
The shock of the Global Financial Crisis and the freeze in interbank funding markets in late 2008 and early 2009 forced the Reserve Bank under Bollard to revisit the area of supplementary tools.
To its credit, the Reserve Bank was the first of the central banks to suggest and implement a supplementary tool called the Core Funding Ratio, which forces the banks to fund more of their lending from domestic and longer term sources.
This fits into the 'macro-prudential' category of supplementary tools. It is primarily aimed at keeping the financial system stable, rather than targeting inflation or asset prices. Here's Deputy Governor Grant Spencer's Reserve Bank Bulletin paper on the tool.
Loan to value ratios?
This IMF report suggests a closer look at using other supplementary tools to try to control asset bubbles, in particular housing bubbles.
"Macroprudential tools will need to be developed and a greater emphasis given to systemic financial risks," the IMF said.
"These need to build on prudential tools that apply to individual institutions (such as capital and liquidity requirements) and contracts (e.g. loan-to-value ratios). "
The Reserve Bank has steered away from getting so down and dirty with regulating bank activities and prices, but I wonder if the Reserve Bank should now revisit this area.
It was a bubble
It's clear now as the economy struggles to get going again that it has become dependent on the debt growth fueled by the housing market's ever-increasing values.
When the values stopped rising, so did the borrowing and the spending that went with it.
Our Roost Home Loan Affordability report shows just how out of line with fundamental earning power house prices got at their peak. In the main centres prices were at bubble levels when it cost the equivalent of 90% of after tax earnings to service an 80% mortgage on a median house. House prices were also well over 8 times earnings. They remain unfeasibly high and affordability is close to 80% in the main centres.
The Reserve Bank has yet to really look at targeting asset bubbles.
Now might be a good time.
286 Comments
But hang on, aren't we
But hang on, aren't we following world best practice anyway? What do we need to change? What could possibly go wrong? What did go really very wrong?
Bring it on.
Cheers, Les.
www.mea.org.nz
Bernard your comments are
Bernard your comments are quite right unfortuately the central banks "should have leaned years ago" the damage has now been done.
This was obious for years
This was obious for years IMHO and did the IMF release a warning paper? not that I am aware of....why? becuase either their inherent right wing stance made them as blind as the rest of the mainstream neo-clasical economosts or, their political masters kept the leash tight....
Anyway I think MP as it stands is dead....it cant handle expensive imputs onto an essentially capitalist system....
regards
Interest rates are definitely
Interest rates are definitely the wrong tool to tackle a bubble, rising interest rates don't deter people from jumping in as the prices are rising and everyone is doing it.
The proof is New Zealand. Rising interest rates didn't stop the banks from doubling their loans to well over 200bn. That's 100bn of fresh printed money that is now sitting in the pockets of savers and the Government because they enjoyed surpluses over the period.
The smart ones are those that collecting the new credit money as they sell into the bubble and walk away. If you see the bubble forming by the time you see it and raise the rates.
Raising interest rates now would be just plain dumb. Lean on them now and they will fall over. Who loses the most, the borrowers or the savers. Every defaulted loan injects money into the economy in exactly the same way as counterfeiting it would . . . . or if the Govt just printed. They are both exactly the same thing. A defaulted loan hurts the saver. Governments printing money hurts the saver.
The only sensible thing is to lower interest rates which need to be low anyway from a long term sustainability perspective. Not free though, set by the market depending on what the borrower can afford.
"...rising interest rates
"...rising interest rates don't deter people from jumping in as the prices are rising and everyone is doing it."
Nice try.
What does deter people (and is deterring people) is reduced lending by banks.
The only reason the gibbering baboon PIs were able to pile in and shove prices up so much was because banks were willing to lend them almost any amount of money, and sans the traditional deposit requirement.
The banks aren't doing that any longer, therefore the gibbering baboons are shrieking because not only can they not play the "How Stupid Am I?" game any more, but because their existing mega-mortgages are squeezing them dry, and upcoming rate changes will kill them.
"The only sensible thing is to lower interest rates which need to be low anyway from a long term sustainability perspective."
Love it.
Do you really think anybody besides the drooling greed-addled troughers at an investment property seminar is buying that argument nowadays?
Face up to the fact that your two-short-planks ponzi scheme is collapsing.
Go on, be a man about it, I dare you.
It wasnt just the PIs who
It wasnt just the PIs who drove the housing market up....but dont let that get in the way of a good rant.
Um...huh? Who do you
Um...huh?
Who do you think it was who drove property prices into the stratosphere? God?
The RE industry whipped gullible and greedy people into house investment religious fervour, and the banks loaned all the money it took to let it happen.
+ The banks flush with
+ The banks flush with overseas money to invest + the finance companies with all of our own high risk /.no reward money+ the rich mastery gurus. Oh and why is Mr Kiyosaki so quiet at present? He was all the rage remember
A few years ago I read Rich
A few years ago I read Rich Dad Poor Dad just to see what the fuss was all about.
What I found was a cleverly written book about almost nothing.
It is superficial, vapid and usually arse-about-face, therefore of almost limitless appeal to the superficial, vapid and usually arse-about-face people to whom it panders.
Truly a book for the 2000 decade.
I couldnt get into it because
I couldnt get into it because it seemed a bit flakey. Some were almost religious about it and treated any doubters like heretics needing to be lynched. Time has proved the heretics to be right
Kiyosaki is an absolute
Kiyosaki is an absolute charlatan - google for John T. Reed's take on him - but to be fair he did call the top of the US real estate market at roughly the right time. It was amusing to watch his NZ disciples still slavishly quoting him in praise of real estate while he was warning people off it. http://finance.yahoo.com/expert/article/richricher/2329 for example.
Yep droolers the lot of them.
Yep droolers the lot of them.
It's true of richmastery and
It's true of richmastery and all the other seminar hucksters. They didn't make money out of real estate, they made it out of selling overpriced propaganda to greedy suckers.
Could someone please explain
Could someone please explain why the biggest property price rises have been where there are the least PI's and the least price rises where there's the most PI's. How can PI's push prices in areas where there are 0% investors.
Give us a hand, bob, and
Give us a hand, bob, and point us to those areas of 0% PI.
Obvious examples over last 10
Obvious examples over last 10 years: Auckland CBD - large percentage of property investors - not much in the way of price rises. Coastal Waiheke, Omaha beach - no property investors - huge price rises. How is it possible that price rises are all the fault of property investors and how could increasing taxes on property investors possibly then reduce prices?
No one has yet provided any logical argument that property investors are the reason house prices have been rising, but all solutions assume this is the cause. Even SNZ data shows only minor change in investor/owner-occupier proportions.
I don't consider anecdotes about a friend being beaten at an auction by someone who looks like they may be a property investor a convincing argument.
CBD prices haven't increased
CBD prices haven't increased within the last 10 years? Omaha Beach and Waiheke Island price/value increases not caused or effected by rampant property development and speculation in those areas?
What the hell are you smoking?
So what exactly are you
So what exactly are you proposing? That people not be allowed to invest in property? Get a grip mate, its called an economic cycle, there are ups and downs, if you are smart you buy in the down cycle. If you want property to be artifically locked at an affordable price for you, move to Cuba. Give my best to Fidel.
You misssed the bit about '
You misssed the bit about ' if you are smart you sell at the top of the cycle". That's what a lot of poster on here have done, and they await the bottom of the cycle, which is way off in the distance.
No i didnt. If you are smart
No i didnt. If you are smart you never sell. Its obvious that you are not a successful person.
If you are smart you never
If you are smart you never buy something more expensive than you can afford and then be forced to sell later because of that.
Lots of "unsmart" people around at the moment, all of whom considered themselves to be very smart indeed until recently.
I guess it boils down to what
I guess it boils down to what you call an investor, bob! Omaha Beach? I'd see as a great investment, but you don't; and you don't see any price changes in the Auckland CBD in 10 years. Well, I guess that explains your reasoning. And I don' think anyone ( well, me, anyway) is finding "fault' in whatever property animal you call it has been up to. The rules have been the rules to be played with. We're just saying, the game has run it's course, and the rules are likey to be changed. If you want to keep playing, that's up to you as an individual property owner.
Amen and 100% bang on !
Amen and 100% bang on !
The OCR has been proved to be
The OCR has been proved to be useless and now you want to do the same thing so you can watch a train crash. BTW I'm not a PI.
Interest rates dont need to
Interest rates dont need to be low....if they are ppl will find it cheap to gamble....why is it sensible to allow ppl to gamble with others money?
Plain dumb behavior....its madly infaltionary...
regards
Fred, Fair enough on rate
Fred,
Fair enough on rate hikes to stop a bubble. But what about regulating loan to value ratios or interest payment to income ratios?
cheers
Bernard
Because we aren't communists
Because we aren't communists Bernard!!!!!!!!!!!!!!!!1
I can see where you are
I can see where you are coming from with that liberty focused kind of comment and a reluctance to have your freedoms limited. So how about we abolish road speed and driving-alcohol limits?
Because road speed limits and
Because road speed limits and drink driving laws save lives. If i want to take financial risks i think thats my own business isnt it??????
I guess so, let's ask the
I guess so, let's ask the taxpayers around the world who are now underwriting that exact same selfish attitude that caused the GFC, if they agree, that your own business to put them at risk? While here in Noddyland that same one-eyed selfishness has led to an econmy that is looking more and more like that of Easter Island each time a young and talented skips the ditch to avoid the effects of the selfishness liberlooneys like you demonstrate. Maybe we should also ask the young and talented if they think your selfish attitude is saving their lives, while there are no limits on the excessive risks you are keen to take on, at the the expense of their lives - in NZ?
No bank or financial
No bank or financial institution is forced to lend money to me you idiot. They are in the business of assessing a loan application and deciding whether it is a prudent lend. What all you anti property investing people need to realise is that it was the banks chasing profitability that led to the huge surge in lending, which led to the surge in property prices. People in a free market economy cannot be restricted from making their own financial decisions. Jesus it sounds like you would be more happy in Korea under the rule of Kim Jong il.
"..it was the banks chasing
"..it was the banks chasing profitability that led to the huge surge in lending, which led to the surge in property prices.." We know that. That's how we know the time has come for that practice to end, if indeed it hasn't already. Goodbye property buying liquidity!
Yeah we were actually
Yeah we were actually discussing a completely different point, but thanks for your completely useless and un-original input.
Oh dear. Bernard is strirring
Oh dear. Bernard is strirring again. The main problem in trying to force property prices down or at least keeping them level is the esculating cost of building. The economy cannot stand a situation where there is a huge disconnect between "used" houses and new built houses. Currently buildiing costs are rising steadily ( $60,000 in taxes alone for the average new built house). This continues to keep a floor under used homes and therefore a catastrophic fall is unlikely- as would be controls of "bubbles".
So Olly ... without deviating
So Olly ... without deviating from that logic one can argue for land price decreases as the balancing item - the rise in excess of building cost prior to the current flatter period can only have been rising land prices, and they have plenty of room to fall...
Ollie N : I beg to differ the
Ollie N : I beg to differ the level of new building work is abysmal right now and we are pricing new work at cost just to stay in business. That means we are at 2005 prices accoridng to our pricing model , ie before the bubble . Its a disaster and if it does not improve we will go into liquidation. I think they call this deflation but I could be wrong
A builder client of mine
A builder client of mine building by himself with no apprenticies or workers made $350,000.00 before tax in the 2006/2007 year. You ask yourself. How much did he make on each property and is there room for him to drop his profit margins in future work. I think there is.
But Olly is quick to ignore
But Olly is quick to ignore the departure of the builders for aus..they have less work here and more over there...and as they go, demand for rentals and property drops yet more...oh and it's not just the blokes with hammers and saws who leave...it's their families too and the related trades.....right Olly?
I fail to see how the ' but
I fail to see how the ' but the cost of construction puts a floor under the market' arguement works."
Those, like OllyN I assume, bought property surplus to their requirements ( ie: they bought and rented it out) yonks ago, and can sell it 'at a profit' now regardless of what the replacement cost is today. It can be moved on to new buyers at a lower than replacemnt cost and still be a win-win for both parties?
What's missing from Olly's
What's missing from Olly's 'logic' is any explanation of what is supposedly putting a floor under construction costs.
Pun of the day kakapo!
Pun of the day kakapo!
Kakapo ... the margins made
Kakapo ... the margins made by wholesale builder merchants and the big boys have been astronomical. They could make a profit at 10% margin for high volumes , but if you look at prices quoted from China for say Tiles or sanware the margins have been 200 - 500 % in NZ . How do you think the biggest listed Company in NZ got there, They made so much money in the boom , and had so much cash to burn they went off buying Formica factories in the USA. If I were a big enough business , I would import direclty myself . The upshot is that construction material costs could actually fall by 30 % , and we could still make a living. This would equate to about a 15 % fall in building costs ( roughly half of building costs are labour) .
Exactly. Discounting land
Exactly. Discounting land cost, which is dropping anyway, construction costs can pretty much be broken down to labour costs and material costs, and there's no magical barrier preventing either of those from declining. Prices can be dropped on materials if that's what it takes for the manufacturers and wholesalers to sell them, and labour costs and work-hours can be dropped. With labour, staff can be laid off, or their wages decreased, or they can employed as casual day-labour, or under the table to circumvent minimum-pay laws, just for starters.
The builder's labourer's pay
The builder's labourer's pay didn't go up by much during the bubble, but the builder's certainly did.
Now that the bubble has burst, builder's labourer's are losing their jobs while the builder's take a pay cut.
Life is sometimes very hard in the Gouge-then-Starve industry.
"Pay cut?! You mean " leave
"Pay cut?! You mean " leave the debts from the 48 building companies I had - one for for each project; that went broke after I extracted the money, and leave the messy problem for the finance companies and their investors"
If you see the bubble forming
If you see the bubble forming by the time you see it and raise the rates, it's already too late, the best thing to do is talk to the banks and say "hey are you sure?" and then impose rules on LVR etc.
An edit there as you can see
An edit there as you can see :)
Fortunately Dr Bollard is
Fortunately Dr Bollard is starting to do have a stab at the bubble , albeit with a blunt instrument . You are quite right in your assertion, however . The property Asset Bubble was caused by cheap money and it led to a poor allocation of investment flows by Kiwis . Barbecue and Dinner party conversations were all about the hype of making a quick buck flipping property at the time . Those lucky enough to get off the musical chair in time before the music stopped are smiling , others not so. In any event its time the bubble was deflated
Those BBQ's and Dinners are a
Those BBQ's and Dinners are a bit senstive these days! It's best to ask the hostess, "Are there any property investors here?" when arriving. Let's just say that with my firm opinions I have inadvertanatly dispatched a few guests home, angry and early.
The poor wee things! Shame on
The poor wee things! Shame on you.
Talking property at a BBQ is
Talking property at a BBQ is a bore no matter what side of the fence you are on. I think they are going home because you are boring, not because you upset them.
Until recently you couldn't
Until recently you couldn't go to a BBQ or party or dinner with friends without finding some bloated shiny-faced ass roaring about how wonderful property investment was and smugly boasting about the rising value of their property investment portfolios.
Now those guys are usually purple-faced and angry as they desperately attempt to defend themselves from the outrageous and criminal suggestions that their property investment scheme may not have been as clever as they originally believed it to be.
Soon they won't be at BBQs or parties or dinner gatherings, which will be a very good thing indeed as far as everyone else is concerned.
This is super-topical right
This is super-topical right now - the Bank of International Settlements has released this recently:
http://www.bis.org/publ/work317.htm
Also, my personal observation is that the RBA kept an eye on property prices with its more recent (early) rate rises and to a certain extent in the preceding cycle.
IanC, Great link and
IanC, Great link and excellent point
cheers
Bernard
Anyone who thinks New Zealand
Anyone who thinks New Zealand has a shortage of land for building should think again . Go to the UK which is the same size as NZ ( roughly) and has over 60 000 000 ( 60 million ) people . NZ has 4 million , Yet a single residential property section, 20 kms out of Auckland is as expensive as 20 kms from London ( where salaries are at least double ) . Its the craziest thing I have ever come across.
Welcome to Noddyland Migrant
Welcome to Noddyland Migrant Pom...the best action is to laugh and not offer a Penny....did I see on one of those Sky repeated repeats about how the Brits bought into the south of an island in the Canaries I think and the Germans to the north...guess where the property prices went ballistic?
Yeah, but if you pay that
Yeah, but if you pay that kind of money for crappy land you can then close your eyes and pretend you're someplace where it's actually worth it.
It's called town planning -
It's called town planning - compare how many people and dwellings there are within 20km's of London compared to within 20km's of Auckland (like 10 times). Then factor in that new dwellings have pretty much been banned in the Auckland isthmus. If we could build to even a quarter of London's density our house prices could be way lower - but we're not.
Look at http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10661170
North Shore city wants to ban 'tiny apartments' like Auckland City did in 2007. This raised the minimum price of a new 2 bed apartment in Auckland to over $500k and there has not been a single new apartment consented AND built since these rules came in.
An illegal 'tiny apartment' in Auckland would be more than acceptable in London.
The flaw in your argument is
The flaw in your argument is that there isn't the demand for dwellings to justify these rule changes.
There is an oversupply of available residential property in all areas and a shortfall of prospective purchasers or tenants.
The whole "shortage" claim is the last crutch property developers, investors and speculators have left on which to lean, but it's already sinking into the mud.
Things like Statistic NZ
Things like Statistic NZ data, Trademe listings and people like the Salvation Army (who, you must admit, don't really have a vested interest in escalating house prices) are a bit more plausible than the unsubstantiated opinion of someone called 'anonymous'.
How about NZ's deflating
How about NZ's deflating biggest bubble...government spending
Seriously 28/29...you have
Seriously 28/29...you have more chance of meeting aliens than seeing the govt spending less.
LOL nice Wally! I do see
LOL nice Wally! I do see pensions getting cut and entitlement age increasing once the smiling assassin leaves. Beam me up Scotty!
should read "How about
should read "How about deflating NZs biggest bubble....government spending ;)
Remember Olly lost a lot of
Remember Olly lost a lot of people money in the 1980/1990's when he stuffed up Landmark so do not put any weight on his comments as he can hardly think he has any credibility throughout NZ. Unless by any chance he would sell his assets and pay those poor people out their losses.
The pushback on some of the
The pushback on some of the macropru. tools will be the distortion arguement. IMO, it'd be good to use em' to re-distort things back to normal.
However, here's another idea, BAN the use for fixed rate mortgages, so that the OCR mechanism loses much of the LAG effect caused by NZ having a high proportion of loans on fixed rates. BAN on specific asset classes, eg. property investment/speculations.
Cheers, Les.
www.mea.org.nz
Les, Tribeless said it. But
Les, Tribeless said it. But I will add. Surely a person is entitles to know what something will cost before they buy it? And secondly, you would need to ban securitisation as well.
Fred - how about instead
Fred - how about instead then, my 26 Jul 10, 8:54pm? As for people being entitled to know what something will cost before they buy it, why? Floaters don't? Currency volatility will mean that exporters, tourist operators and importers alike suffer similar uncertainty. Sure they can hedge, but not as cheaply as fixed rate borrowers. So why not even the playing field somewhat and have those that cause the pain, sharing the burden of the pain, as it were? Why should 'fixeds' be impervious to monetary policy, while doing so causes the problems we've experience? See my 26 Jul 10, 8:54pm, and keep an eye on the end of this thread.
Cheers, Les.
www.mea.org.nz
http://finance.yahoo.com/tec
http://finance.yahoo.com/tech-ticker/the-u.s.-middle-class-is-being-wiped-out-here%27s-the-stats-to-prove-it-520657.html?tickers=^DJI,^GSPC,SPY,MCD,WMT,XRT,DIA
This is where we are heading as well.
John Key et al will love this to happen, that is why he is so keen on getting with China. It would make him and his "ol boy" mates very happy.
C'mon people, get out of housing and into something more productive and we can avoid the above.
Cheers
It would have been - and
It would have been - and still is - so simple for the RB to set out ratio requirements for the banks lending criteria: eg
Minimum 25 % Equity deposit ( Not borrowed from a 2nd mortgage provider )
Loan Repayments as a function of Income constraints
Remember we used to have these with Hire Purchase for many years and the world didn't come to an end.
The real issue now is the gross distortionary effect current policy tools are having on the exchange rate. Then long run exchange rate should be at a level that stops further foreign debt increases - ie we run current account surpluses
China, Singapore, Hong Kong all manage their exchange rates.
South Korea has announced new capital controls - yet we - an insignificant dot in the arse end of the South Pacific with the GDP of Melbourne city believe we know best.
The bubble has had all sorts
The bubble has had all sorts of unintended consequences, one being the local Auckland satelite councils taxing and levying new sections and land developments to death to get money. Its a rort that has added to the bubble. One benefit that should come out of the new Auckland Supercity is a co-ordinated development plan . I heard from someone about a confidential side - discussion at the National Party Conference on Sunday that the gameplan is to allow orderly develoment of the city to the north ( Rodney) and the South ( Franklin) that would open up 200 000 - 300 000 sections for development. This would allow (theoretically) Auckland's population to increase by 50% in the next decade ( if needed) It would also balance the backlog of land demand , with an adequate supply of land , resulting is fairer pricing . The National Party apparently knows this freeing up of land for development is going to be very messy politically , hence letting Rodney Hide do the dirty work.
How can there be a "backlog
How can there be a "backlog of land demand" if land prices are rapidly falling (they are) and few people are interested in buying land (they aren't)?
The only people who want to see the urban land cancer spread are property developer/speculator slime who somehow believe that if they ignore the fundamentals they will go away.
There is no land or housing shortage.
It's a myth, a fantasy, the wishful-thinking of those who cannot imagine a way to profit from anything but house trading.
Serious questions
Serious questions Bernard.
Do you agree Keynesian economics combined with the conjoined central bank system and fiat money grew a much bigger property bubble (world-wide, including NZ)? Indeed, asset bubbles in total.
If not, why not? (And you can't argue it was down to domestic tax policy; our property bubble was no more inclement than in countries with tax systems running capital gains taxes and other more vicious land taxing provisions).
If yes, then why look to Reserve Bank policy and politicians at all? If you acknowledge they 'are' the problem then what stops you advocating a laissez faire market, that both would not have created bubbles of this size, and would have within it the natural corrections to stop the smaller bubbles in a timely fashion? Free markets correct malainvestments efficiently, in other words.
Tribeless - without trying to
Tribeless - without trying to preempt a response from Bernard to your questions I would cue the following.
America under G.W. Bush was as un-Keynesian as you can get in reality. Yet they're in deeper trouble than us. As unhelpful as our macro-economic policies may have been, a fundamental factor that led to this property bubble was irrational investors. In the context of maximising long-term return on investment, it makes little sense to invest all of one's borrowing power into housing given that spreading it across different asset classes would be more rational. This was compounded at a national level for NZ when so many "mum and dad" investors made the same irrational decision. There are various causes that have been touted for what brought about this behaviour (e.g., risk-aversion instincts as a legacy of the 1987 crash, financial illiteracy, incompetent advisors).
Unfortunately the Efficient Market Hypothesis is conditioned upon participants being utility maximising rational agents, which clearly is not the case in reality. At the scale of national economies when people make collective irrational decisions it is not surprising to witness the monumental failure of free markets. Having navigated incorrectly to this point over some number of years, it will take us probably at least as long for a course correction. I suppose only time will tell what kind of irrational behaviour we'll see in future due to the lasting memory of the past couple of years.
Tribeless, And you believe
Tribeless,
And you believe the efficient markets hypothesis after what just happened?
Hard to blame govt intervention for the mess in America.
If anything our mess is much smaller because of Paul Keating's 4 Pillars Policy and Australia's compulsory pension fund.
cheers
Bernard.
While things are good,
While things are good, criticism of "the system" from people such as tribeless is notable by its absence.
If they are making money (on paper) then they are perfectly happy with whatever status quo exists.
It's only when the bubbles they worship begin to burst that we're deluged under a torrent of whiny blaming and finger-pointing.
Bernard I can't believe you
Bernard I can't believe you can say, quote: "Hard to blame govt intervention for the mess in America ."
It is easily argued government intervention was solely responsible for the crisis in the USA, starting from it's two biggest welfare agencies, Fannie Mae and Freddie Mac.
And what efficient markets? If you have a central bank distorting the markets to the extent the Fed has and does, especially under that traitor of freedom, Greenspan, then you do not have any form of laissez faire.
I know you're on NotPC's twitter, do you not read any of his economics posts? Or mises.org? (I recommend their bailout reader). Indeed, you refer from time to time to the Austrian theory of the business cycle, but to say the above, then you cannot have a clue what it is about. No wonder you resort to more and more taxation to solve every ill you perceive. Save us.
Talk about an eye opener.
Anyway, I'm too busy today to continue on with this ... (um, for the chap above, Bush was a big spender, and a huge government interventionist; again, no laissez faire to be found there under him. The only president who came close was Reagan).
Tribeless is obviously a
Tribeless is obviously a misnomer. I would identify you as Americanus Republicanus Teapartius.
Just a thought... maybe what happened in the US can be attributed in part to the dismantling of regulatory protections, which started with ... wait for it... Reagan.
Fannie and Freddie were certainly unhelpful. But you've got your libertarian blinkers on. Sometimes lack of regulation is a problem too.
Quote: "maybe what happened
Quote: "maybe what happened in the US can be attributed in part to the dismantling of regulatory protections, which started with ... wait for it... Reagan ."
Wrong: http://blog.mises.org/9696/krugman-rewrites-history-again/
<em>
Furthermore, much of the banking deregulation came during the administration of Jimmy Carter, not Reagan. (Carter was president in 1980, something that apparently has slipped the mind of Krugman the Distorian.) </i>
</em>
But having said that, deregulation was not at the heart of this; a pumped fiat money supply sluiced through the banking system, and central banks distorting the cost of credit downward - there's the problem. And crony capitalists in collusion with the Almighty States seeking their monopoly rents only made possible by the State and pork-barrel politics.
The West is far closer to centrally planned, totalitarian economies than it is to laissez faire, and the times since August 2008 are just the economic chickens coming home to roost, just as they did for the Soviet Union two decades beforehand.
For Bernard: the Mises Bailout Reader, to understand how the State, fiat money and central banks + Keynes are at the heart of our economic and philosophic troubles:
http://mises.org/daily/3128
And clueless, I am no Republican - no Libertarian is: they are every bit as Nanny State as the Left are; they are big government interventionists, and in their Christ-freak conservativism, they are mystical idiots, and that means, dangerous.
Another piece on the myths
Another piece on the myths surrounding Reagan and banking de-regulation (there are for more thorough ones which I shall hunt out if I get time:
http://blog.mises.org/10047/krugmans-latest-financial-fantasy/
Quote: "It all began, Krugman claims, with the 1982 passage of the Garn-St. Germaine Act. Well, not exactly. Much of the major deregulation of the financial system began before then, and it came because inflation was driving people out of the regulated savings accounts and into money market accounts. "
Then ask yourself why the inflationary pressure - it's called Keynesian economics, and pumping of the money supply. All to do with too-powerful governments, the opposite of laissez faire.
In the Muldoon area and
In the Muldoon area and earlier we had just such controls which limited the amount that could be lent on everything and anything, cars, furniture, boats, hire purcase of any kind. Before then we hand land price controls and rent controls ( Fair Rents it was called). The results were even bigger distortions and rip offs. New cars, appliances etc sold for more second hand than new. House prices were sold at cost with massive "carpet money" paid under the table, rents were cheap but there was nothing availabe to rent. Do we really want that sort of system back again? Judging from some of the comments made already on this topic seems that there are a lot of neo-socialists just waiting to get something for nothing- so long as some one else pays.
By gum that brings back
By gum that brings back memories OllyN...those were the days...Piggy this and Piggy that.
piggy maybe... but truly the
piggy maybe... but truly the last of the cult of personality.... and the nearest thing to Caesar till that bloody Winston B. Arnold. showed up.
I did not always care for his politics but he echoed the essence of a great philosophy....
People don't like what you got to say.............................F#%k em...F#%k em all.
Indeed, all that distortion
Indeed, all that distortion stuff, so how about, ... BAN the use for fixed rate mortgages, so that the OCR mechanism loses much of the LAG effect caused by NZ having a high proportion of loans on fixed rates. BAN on specific asset classes, eg. property investment/speculations.
What do you think Olly? It'd keep prices down/real, and yields on the up/real, just what you guys want, eh?
Cheers, Les.
www.mea.org.nz
While we legislate that, Les,
While we legislate that, Les, lets also legislate:
All Kiwis must eat fish on Monday, because it's good for us.
Sex only on Tuesdays (it takes energy away from work for the State).
We should read Marx each night for half an hour.
Reduce the open road speed limit to 5 kph (empirical evidence shows no one ever died crashing at 5 kpm).
Hell, you're advocating the planned economy and thus police state anyway.
I doubt David would have
I doubt David would have thought for one moment that interest rate hedging (a derivative thingy) would have hamstrung his concepts:
http://en.wikipedia.org/wiki/Ricardian_economics
I doubt others who have simply repeated and finessed thereafter considered the same. Clearly, they have not. Hence we are where we are.
Such a ban is pan economy, so favours no one, no particular asset class - according to my first statement.
How about the pan economy solution?
(I know I'm going to regret this in the morning Mark.)
Cheers, Les.
Bollard had interest rates at
Bollard had interest rates at 8.25% to tame the housing market, Greenspan dropped his rates and kept them too low for too long.
Not rocket science and and mainstream for our RB, in fact the clown running it still dreads a runaway housing market and has decided to nail the productive sector just in case.
David, Bollard did not move
David, Bollard did not move the OCR significantly until way too late! about 2007 infact when he should of acted in 2003-2005 when I wrote to him telling him so. People like me got fobbed off but NOW we laugh at all these so-called economic guru's who clearly know jack shit and were proved idiots via the market and current world crisis which could of been avoided if they had of listened too those of us who live in the real world
OllyN Right now the whole
OllyN
Right now the whole country is gettig something for nothing by borrowing as a nation way beyond our means of repayment.
It's never a perfect world - what we need is an optimal world !
Bank mortgage lending controls are one step we could take that would deliver better outcomes than we have to date.
Bernard said: "It's clear
Bernard said:
"It's clear now as the economy struggles to get going again that it has become dependent on the debt growth fueled by the housing market's ever-increasing values.
When the values stopped rising, so did the borrowing and the spending that went with it. "
That should be quote of the day son! You've summed up our problem perfectly and concisely.
The result is that we will face years of mediocre growth as a result of this unsustainable bubble. And there's not much we can do.
And the Labour govt's policies re: taxation, migration, monetary policy and land use planning are largely responsible for this mess.
"Now that high house prices
"Now that high house prices are now embedded in the psyches and balance sheets of middle New Zealand, changing the way the Reserve Bank Act operates to reduce or control that 'wealth' would hit the front pages and focus groups."
This is where Bernard hits the nail on the head.. and why, despite fundamentals, that house prices may fall in real terms but nominal prices will go edge up slowly. We wont see the sharp collapse that most of you sycophants lust after. :)
wanna bet? it's already
wanna bet? it's already begun. watch the next 24 months as property gets reality shock
Away with you anon...you have
Away with you anon...you have no idea what is round the corner...prices might crash and they might go down slowly and they might go nowhere and they might go up a bit.....The only certainty is the media, the banks and the RE mob will do their nuts in an effort to make them go higher.
What can reinflate the
What can reinflate the residential property investment bubble?
1. The banks resuming their mental lending practices, c. 2003-2007,
2. A residential property shortage,
3. A significant increase in average incomes.
None of these things is at all likely.
Banks are now as cautious as they should have been all along; there has never been a housing shortage and the current glut of residential property is growing; Incomes won't increase much even over a long period, and will continue to be eaten alive by the rapidly increasing cost-of-living.
These are the facts and is the reality.
Spruikers cannot change that.
LOL. I found a picture of you
LOL. I found a picture of you outside Bernard's house...
http://www.peteykins.com/sparklepics2/Cheerleader.jpg
Instead of calling people
Instead of calling people names, why don't you refute the other Anon's points above about the fundamentals and how they preclude the bubble from reinflating?
more fun this way.. guys on
more fun this way.. guys on this site take themselves way too seriously...there's only so much rehashing of the property bubble and financial crisis that one can take... i'll leave you all to your wrist slashing :)
I well remember the days of
I well remember the days of regulation,pass a new law and watch the clever sods bypass/overcome it.
Like the law that you had to have 30% deposit to buy a new car m/cycle simply got around by inflating the trade in price and when things went tits up the finance co got burnt real bad.
It is a nonsense for the RBNZ
It is a nonsense for the RBNZ to get involved with the deflating of housing bubbles.
California hit a Median Multiple of near 9 before it burst - while Texas stayed constant at around a Median Multiple of 2.5.
It is therefore important to focus on the real structural issues being land supply and infrastructure financing.
Hugh Pavletich
www.PerformanceUrbanPlanning.org
If people want to pay five or
If people want to pay five or more times their income on a house for themselves, and banks want to lend that much, then they can.
Nothing says houses should be only 3 or so times income.
Isn't the real issue
Isn't the real issue unsustainable credit growth. We had 14%yoy debt growth from 2003 to 2008, a doubling in 5years, way outstripping growth in the economy.
And we have the banks (yes I'm talking about you Tony) saying that's just fine?
It's important to keep in
It's important to keep in mind just how small the NZ economy is and, consequently, I think the RBNZ should not be allowed to easily get away with the excuse that it is difficult to track asset bubles, regardless of whether it chooses to prick them promptly or not. In fact, such an excuse is an indication that a central bank is somewhat disengaged from its associated economy, as unthinkable as that may be.
An interesting insight that is emerging in retrospect of the last decade's developments is that the RBNZ had no clue about the actual dynamics of the relationship between lenders and borrowers in NZ. It bothers me that the RBNZ seemed unaware of how the majority of mortgages were on fixed and not variable interest rates. I get the impression that it also knew little about the fact that so many lenders (i.e., all the finance companies that are now bankrupt) were happy to approve loans without requiring deposits for assets which could never appreciate in principle (cars, appliances etc.).
It is impossible to rigorously fault the RBNZ since it was (and continues to be) neo-classically doctrinaire. I've always found it difficult to accept the proposition that a single instrument in the form of the OCR will influence how lenders and borrowers behave so as to control the supply of money that is circulating in our economy and keep a tight lid on inflation. In fact, if controlling the supply of money is the sole purpose of having a central bank then wouldn't it be more appropriate to actually control the value of the various asset classes that backs up the money in the first place? If so, then one would think that pricking asset bubbles promptly would be a universally accepted best practice!
Alif - you say, "It bothers
Alif - you say, "It bothers me that the RBNZ seemed unaware of how the majority of mortgages were on fixed and not variable interest rates." That isn't the case, RBNZ were well aware of the LAG effect caused by this problem, and yet still kept racking up the ocr, hoping for the best, oh, and a little shorting off the top of NZD.
As you say, ".... RBNZ since it was (and continues to be) neo-classically doctrinaire." So what would you expect? Like a rabbit stunned in the beam of y' headlights, they just kept panting, the same mantra, .... see above.
So how about 1) BAN the use for fixed rate mortgages, so that the OCR mechanism loses much of the LAG effect caused by NZ having a high proportion of loans on fixed rates. BAN on specific asset classes, eg. property investment/speculations.
Or, a little less radical, 2) a specific supplementary instrument to the OCR, in particular to deal with the lag effect caused by the high proportion of fixed-rate borrowing. I suggest RBNZ additionally have the facility, to directly vary the ‘principal repayment rate’ (PRR) of all loans. (I think David would be happy, see above to Tribeless.) This would leave fixed-rate borrowers with protection from external money market aberrations, but not impervious (hedged) against execution of monetary policy. At roll-over excess money held on a loan account could pay down debt prior to setting the next fixed term of the loan. This kind of supplementary instrument leaves monetary policy unambiguously separated from fiscal policy, (a major push-back used by u-no-hoo) and given borrowers essentially reduce their debt in the process, this might also be more politically acceptable. More so I believe when considering a borrower's money is not lost to the state, in some form of tax, but instead use of borrowers' money is just delayed and ownership of borrowers' money is retained.
With appropriate administration and communication to help implement the approach, I believe this could allow better control of inflation, lead to improved stability in the money supply, the exchange rate and therefore see less exporters driven out of business – which has be a definite benefit to New Zealand as a whole.
What do you think?
Les Rudd.
www.mea.org.nz
Your second suggestion would
Your second suggestion would get my vote (so would the first, for that matter). The RBNZ needs to use something this in order to much more directly influence the behaviour of borrowers (falling short of dictating their behaviour). It is obviously doing something similar with the core funding ratio when it comes to the behaviour of lenders. Both behaviours have to be influenced to really have desired impact.
As for the exchange rate and helping our exporters, the reality is we're dealing with very strong economic headwinds that are originating from beyond our borders. The RBNZ can only have negligible impact using the monetary instruments it dreams up without the assistance of fiscal policy. I would extend your first suggestion to also ban currency speculation, or at least introduce a tobin tax of some sort on carry trading (even at the risk of being labelled a currency manipulator by the US). If we can lead the world with an ETS, then why can't we find the political will to lead with a tobin tax?
Alif.... enjoyed your
Alif.... enjoyed your posts... and Les Rudd as usual........
You would be horrified to know that round these parts mentioning tobin tax can git you booed off or murdered.......... I tell ya I've upset some with similar talk and so has ....justice.
Whilst reading over the
Whilst reading over the weekend ,an article written by Peter McDermott on October 1st 2002, with the title New Zealand could avoid the housing bubble.In the article he talks of housing bubbles in most English speaking countries around the world are likely to burst once interest rates rise to normal levels, but New Zealand could avoid the problem. House prices up in US 27% , in three years , Australia up 44% Britain 53%, "some of these price increases are just phenomenal and we don't think they're sustainable."He attributes these increases to sharp declines in interest rates as Central Banks responded to the global slowdown. "the easy flow of cheap credit , combined with a relatively secure job market, inflated the bubble""But with debt rising rapidly in proportion to income "households will be forced to listen when interest rates start rising again , as one day they must".In regard to New Zealand interest rates have been kept closer to neutral , keeping the economy/housing market more on an even keel "while we missed out on the fun at least we can thank the Reserve bank for avoiding the hangover that other countries will suffer"McDermott is positive about the local outlook for housing. "While the housing market in the past has been prone to cycles of boom /bust this time around the growth looks staedier and more sustainable"At the time of writing Peter McDermott was a senior economist at National Australia Bank, today he is the Deputy Governor RBNZ,reporting directly to Mr Bollard (having joined RBNZ in 1997).OCR will definetely rise, time for the hangover.
Think you meant John
Think you meant John McDermott http://www.rbnz.govt.nz/about/whoweare/2975512.html
cheers
Bernard
"It diagnoses a bunch of
"It diagnoses a bunch of problems, including keeping interest rates too low for too long, not watching the shadow banks, and light handed regulation."
Have a good read Bollard & co and LEARN something about real economics! I would of fired your asses long ago.
"where a doubling of property
"where a doubling of property prices between 2002 and 2008 distorted our economy in favour of consumers over producers, and sucked in around NZ$100 billion of foreign debt."
What would it of taken for Bollard & Co too have a clue? morons
"Up until now central banks
"Up until now central banks have said they find it difficult to measure the timing and size of bubbles. They worried any attempt to prick the bubbles would destroy the overall economy."
BS! they just decided in this case not too do anything that would hurt their OWN bubble, that being "currency trading" of a very overpriced NZD. Bollard was more concerned with protecting their patch protecting the overall economy
A few of my friends have
A few of my friends have bought houses in 2006-07 and then couldn't afford to go out any more cause of mortgage payments, still can't. Sell it I say join my other mates in cheaper area's in there average houses where they have $'s to holiday and enjoy eating out. (also have lots of cold beers/wine in the fridge) Flash houses are great but enjoying life is better. Problem is I think there houses aren't worth what the mortgage is. Stuck and trapped.
i hear you dc. i've run all
i hear you dc. i've run all the figures and accounted for a few different scenarios and have come to the conclusion that we're in a great financial position unless... we buy a house. so rather than providing an undeserved profit for some vendor and a revenue stream for some rapacious bank, we'll continue renting and saving and investing elsewhere and consolidating and strengthening our financial position while we get on with living a pretty good life.
i dont think you can or
i dont think you can or should lean too hard....ie we have an investment pattern that is 10 years old, unwinding to a "fair" or balanced position should be taken slowly....Also the Govn needs to clean up the regualtion laws around finance so small investors have a transparent and level playing field.....
regards
"should be taken
"should be taken slowly"....good luck with that steven...I think you will find the govt and Bolly are unable to do more than spin the spin and jolly the peasants along. Key and co lack the guts to make needed changes before the election. Post Nov 2011 may well be too late. By then saving should have been expanding rapidly and debt repayment also. Instead the game swings around dithering along and avoiding the snakes knowing there are no ladders.
Alif - yes, I'd favour option
Alif - yes, I'd favour option 2, and Fred, here is a list of benefits associated with the idea to 1) BAN fixed rate loans, or the less radical idea of allowing 2) RBNZ to vary the 'principal repayment rate' (PRR) of ALL loans, see my 26 Jul 10, 8:54pm:
- Improved response, less 'lag' effect, in tightening and loosening. This would see more lending restraint during tightening and better 'pass-through' during loosening.
- Private debt growth would be more restrained.
- Property price growth would be more restrained.
- Inflation would be better restrained and saving improved, given reduced inflation hedging via property investment.
- Housing affordability would be improved.
- The overall track of the OCR during tightening would be relatively lower leading to less 'carry-trade', risk buying pressure on NZD benefitting tourism and exporters and with less volatility, also importers. (They might like it up, but they don't like it all wobbly either.)
- These benefits would similarly be available with implementation of a supplementary PRR approach, given that PRR would be implemented during tightening (initially on new contracts only) and would therefore not undermine the stability of the property market going forward. (It's all about yield anyway, so who'd complain?)
- In relation to PRR, fixed rate borrowers would enjoy relatively lower rates at roll-over.
- Reducing effect on current account deficit.
This is something we (NZ) could do. Whereas a BAN on currency speculation, 'Tobin Tax' or the like, is a very small tail trying to wag a very big dog. This approach would help deliver a lower OCR neutral anyway and so take NZD more and more off the 'risk radar'. So less need to worry about wagging the dog, it'd leave us alone and go bother other turkeys instead.
Comments, anyone?
Cheers, Les.
www.mea.org.nz
I'll read this some
I'll read this some more....some really thought provoking stuff Les.
Dow Jones up another 100
Dow Jones up another 100 points last night guys, driven by better than expected housing data. The next boom is starting! embrace it, it will make you rich. You can kiss your property crash good bye Bernard. Maybe in another 15 years time.
"...May sales were the lowest
"...May sales were the lowest since 1963 after the expiry of a tax break" Not too hard to get a bounce from those lows!
You keep telling yourself
You keep telling yourself that.
What a laugh. Clutching at
What a laugh.
Clutching at straws much?
You must be the life of parties, standing in a corner droning on loudly about how "Ya can't lose with property!"
Notice how absolutely no-one is paying attention to you now, though, other than when the hosts ask you to leave?
Its a shame you will never
Its a shame you will never own a property to actually host a party in.
It's quite easy to host a
It's quite easy to host a really good bash in my rented property with the $83,000 I saved by not owning a property this year. Last years party was better, I must admit , with interest rates at near 9%. That gave me a saving of $134k. So all up, the two years have been quite good, party wise!
Oh. And that doesn't include
Oh. And that doesn't include the 6.1% that property is still down on reval. in that time. Cheers!
It must suck not being able
It must suck not being able to make the place your own, make any improvements, or even just feel like you have some solid foundations. But hey, I guess some of us dont mind living a transient, rootless existence in rental accomodation for the duration of their miserable lives.
Solid foundations? Had 'em.
Solid foundations? Had 'em. Trust me. They're over-rated. Especially when it costs heaps less to rent the same place as own it. A home is where your heart is. That's it. It's not the prison that comes attached to a mortgage.
People that choose to rent
People that choose to rent aren't transients, some of them will turn out to be wealthier than you as for them renting is a choice, a smart one as their assets are not tied down into one class and are a lot more liquid. It's greedy PI's like you that have attempted to sully your children's hopes at owning their own home without help from their parents, which is damn near impossible to do these days. Greed is a sin for which you will spend a long time paying for, and so will a lot of people in this country I'm afraid, the majority of which will be in your age bracket.
Not everybody is female or
Not everybody is female or gay and therefore spending all their time looking at colour charts for their new bathroom.
That's greedier than a
That's greedier than a Property Investor. $83,000 presumably net saving, so plus the rent you paid for equivalent house plus, no doubt, a minimum 20% deposit. Your expectation is a house worth $2.3million?
I'm not sure what you are
I'm not sure what you are saying. But the figures are after tax on deposits and after paying rent. So you can see it's way better to have no property and the cash in the bank. Especially if the asset is not going anywhere, to down, in price.
To save that money implies
To save that money implies that you would have otherwise spent it. To spend that much on a house you'd need a $2M + house. If you had a cheaper house and other investments your saving wouldn't be quite so dramatic?
So the worst June in recorded
So the worst June in recorded history is "better than expected" housing data. - http://www.calculatedriskblog.com/2010/07/new-home-sales-worst-june-on-r...
And the Dow goes up....
And the Dow goes
And the Dow goes up....
Perhaps people are now productively investing all that money they are no longer wasting on houses?
Les, Bans and regulations.
Les,
Bans and regulations. Government regulated price fixing is what it is. It won't work, it's been tried already.
Fred - can you explain how
Fred - can you explain how either option is price fixing? Floating is floating and the fixed available under PRR is still market priced - as much as it is now, that is.
The PRR idea is not a BAN on fixed, but would have the same beneficial effects - those listed, why'd you not want that? Plus it's not a tax and it's not from Singapore - two people hate - tax and juristictions doing it differently and getting better results than our amusing interpretation of Neo.libism! (No broad, flat tax system.)
Under a PRR system most people would gravitate to fixed and enjoy the protection from external aberrations. Plus, they'd probably feel comfortable fixing for longer and in any case if they didn't, at roll-over they'd also enjoy lower priced loans when re-fixing, by comparison with the single OCR approach with it's LAG effect resulting in a more elevated rate curve.
Cheers, Les.
www.mea.org.nz
To me it comes down to the
To me it comes down to the question of "what is the cost of money" and we are told that that it always costs something. We are told that money has an "opportunity cost", so how exactly is that and how should it be determined? The answer, I think, can only be determined by the investor, at the time the investment decision is made.
Now a bank can come along and say on average, I'm finding borrowers with proposals that will return X, and therefore I can return Y to the saver.
The idea that there is some way for the Govt to determine a 'universal" across the board cost is therefore strange. People here have ideas as to what the interest rate should be because they would like to encourage this or that behaviour, but the economy always relies on different people doing different things, so there is never one answer for what other people should be doing.
Of course lending on residential housing is not really business and productive investment, this lending is based on the expectation that there are productive jobs out there behind it. So should the same principles apply? I think Iain has a case in this area, but the USA has tried something like that.
The PRR scheme, what is it, isn't that just changing the numbers in a table mortgage (which BTW seems really unfair for the borrower - all those years just paying off the interest, why should that be paid up front?) so it's adjusting the interest rate in an arbitrary way. The PRR scheme would not work when there is securitisation because the prices of the securities would be changed everytime the PRR was changed.
We are all in a little dinghy
We are all in a little dinghy on a mighty ocean that has been hit by an asteroid and no bugger knows which way is up or what happened to the paddles. What Bolly does or does not do is not important. Obama is throwing QE at the market to buy his re election...the tea party crowd are already outside the mid term polling booths....Glenn Beck is trying to scrape the democrats off the sole of his sneakers...Beijing cannot decide what to buy next....Gillard is promising everyone who votes for Labour will receive a million bucks...the aussie property bubble is stupendously massive and set to splatter everywhere...Jerry is digging for gold in his cellar.........time for a cuppa tea!
You're ok Wally...you have
You're ok Wally...you have your taxpayer-funded pension to get you through as you said, eh mate!
Slurp...nice cuppa. It's a
Slurp...nice cuppa. It's a rough old world anon. I shall probably invest it in an aussie greenfield uranium exploration venture anon....just to make the greenies happy as!
Wally, you can only get away
Wally, you can only get away with such nonsense because you know the tax-payer will fund you in retirement, as you have already said.
But anon....I have a better
But anon....I have a better track record at investing than the govt has...if I buy into uranium shares in aus with my pension.. a couple of years in total...$20ooo say...the right shares could mushroom into something massive!
You have well and truly
You have well and truly missed the uranium boat you fool. That ship sailed in about 2005.
Truly excellent comment
Truly excellent comment stream on this article. Many thanks to the readers and commenters on interest.co.nz Useful, interesting and often intelligent debate (with a bit of fun). Plenty of light and heat and a bit of smoke..
cheers everyone
Bernard
Yes, it reads at a cracking
Yes, it reads at a cracking pace this morning. Seems the debate between property and non-property investors is a strong one. For me, a bit of all is the way to proceed.
This debate is more honest than those CNBC conducts, where it seems everyone agrees with one another.
"Ya can't lose with property,
"Ya can't lose with property, shares and investments in finance companies... Maaate"
BH "The Reserve Bank shied
BH
"The Reserve Bank shied away from deliberately targeting this asset bubble in its monetary policy and instead had to deal with the fallout using just one tool, the Official Cash Rate (OCR)."
Short memories huh?
The NZRB did have all the tools..uptil the early 90s when bank raios, desposits required where taken off them, leaving them with just the OCR, and since most ppl where on fixed this took yrs to kick in
And lets be fair the RB govenor warned time and again the bubble was going to burst and was very worried about it...He did this because his hands where tied behind his back.
The tools where removed in a down turn by the pollies, the economy picked up, more and more ppl got on the property band wagon and by 2000 things where starting to wind up.
So now 18 yrs on its full circle....
"Now the IMF is saying central banks should revisit the area of targeting asset bubbles and of using supplementary tools to help keep the economy stable as well as keep inflation under control."
How very clever of them huh?
Dear BH, Is there any chance
Dear BH,
Is there any chance of putting another record on? I'm pretty sure this one is broken since this time last year!
Thank you
Wally - is your "government
Wally - is your "government pension" the GSF or NZS? If teh GSF, it was a greedy rort on taxpayers, if NZS, you are just another beneficiary sucking on the government tit.
Doesn't quite gel with your other rhetoric.
Dear Bernard, Lets put some
Dear Bernard,
Lets put some parameters around your predictions. If the average house price remains no lower than current levels by Christmas 2010, will you publicly admit that you were wrong about a housing crash?
Regards,
Chris.
If you read BH orginal
If you read BH orginal prediction it was based on the fubdimentals at the time and assumes no gov interference or an international crash.
in other places the predictions also carried forcasts going out to 2018 I think it was.
Also take into consideration of the houses and types of sellers buyers at the time ..these have changed dramatically, and if you bother to measure type of house back then against the same house now you will find BH was damn nesr on the mark .
But hey, all we remenber is the headlines right?
So you believe that Bernard
So you believe that Bernard should structure his predictions so that he can never be proven wrong? He should have an escape clause for every possible outcome. Wow thats great, you must really be stupid.
Is that you Anon, with a J?
Is that you Anon, with a J? By my observations you had about 50 properties in Christchurch? Just part of my discussion on another thread.
This site is excellent. The
This site is excellent. The comment streams are intimidating though! Great knowledge but so much opinion.
As someone keen to live in my own home demand still seems high enough to keep the bubble at the lower end inflated. Open homes for a house in wellington below $600k in thronging with fellow first home buyers, downsizers and sadly still plenty of PIs!
If pressure on the housing market continues, is this the last market sector to cool? Are the downward forces countered by renters moving in, debt downsizers and new famillies as a product of the 2007 - 2010 baby boom in NZ?
Should I wait? Continue to line the pockets of a landlord for a year or so? In Wellington, renting a suitable home is likely to cost more than mortgage/rates/insurance than paying off a mortgage on a <$500k house after a 20% deposit. Even if rates rise a point or two.
Wellingtonians will just have
Wellingtonians will just have to buy into that glut of apartments dwelling that's saturated the market, I guess. But those plunging prices won't eventually feed though the stats. to the real houses will they? No, of course not. And that's not even taking into account the 'mortgagee sales' that don't get put into the figures. Oh, and do your figures on the buy/rent scenario take into account the alternative investment of the 20% deposit?
I must admit I am sceptical
I must admit I am sceptical about those numbers that imply rental yields are higher than interest rates in wellington...even if they go up 1-2%. Where in Wellington are rental yields higher than 8-9%?
Ya pack them thar students in
Ya pack them thar students in 5 at a time @ $150 p.w. per 'room'. ( 5 bedrooms/ one bathroom - nasty!)
four houses for sale in our
four houses for sale in our street in Wellington, three are under %600,000. Watched the open homes. Only one couple went to one of the open homes. No one at the other three. One had an open home sign cancelled put up last night - does this mean it is sold, or to be taken off the market, or owners having a breather from open homes every weekend as it has been on the market two months.
Like to know what suburbs of Wellington are booming as ours sure isn't.
What a lovely way to spend
What a lovely way to spend Sunday, peeking through windows...
was actually mowing the lawns
was actually mowing the lawns and took a passing interest - not sure if you were refering to yourself??
That 2007-2010 mini baby boom
That 2007-2010 mini baby boom has skewed the market for family suitable homes. the house-garden-bbq dream dies hard in NZ!
It dies even harder when the
It dies even harder when the bank refuses to lend you the money to buy the house-garden-bbq dream house.
So that must be a small-sized
So that must be a small-sized baby boom, as opposed to a small boom in baby numbers. Because I certianly don't see the prams being wheeled about like I used to! Seems to me that the economic times of the last couple of years has put the kybosh on 'having a family'.
"So you believe that Bernard
"So you believe that Bernard should structure his predictions so that he can never be proven wrong? He should have an escape clause for every possible outcome. Wow thats great, you must really be stupid."
Thats a very stupid statement, reading in something I never said to suit your own convience without even doing the home work to find out what you are talking about....now "must be really stupid"
Wellington? My hometown. I
Wellington? My hometown. I see some tough times for property there....
Glut of apartments....check
ceiling on bureaucrats....check
reduction in bureaucrats...check
not so many grand governemnt HQ office developments being built...check
more HQs to Auckland...check
Baby Boomers moving to warmer climes (would YOU really want to live in Welli's climate if you were were ageing and frail)....check check
Welli prices are crazy! Dumps selling in some of those crappy eastern suburbs like Berhampore for close to half a mill!
I'd suggest holding out for a few more years yet, then there could be some deals
forgot to add: no more crazy
forgot to add:
no more crazy and sustained year after year pay increases for bureaucrats...check check check!!!!
Bernard I have just read
Bernard
I have just read your article and am extremely puzzled by your consistent attacks on the property investment sector.
There is nothing the RBNZ can do and they know it, the only answer is for a massive opening up of the supply of land and with the RMA in full force this seems as likely as Falkland Islands beating the All Blacks!
If there were massive Government controls there would be a reverse effect with the public sector picking up the housing bill, this would cost the country hundreds of millions like it did in the past and make the country far worse off. There is more chance of another boom than a bust.
Daniel
well as the accomodation
well as the accomodation supplement already costs over 1 billion per year perhaps Hundreds of millions for a one off cost would be better. I think your estimate of the costs for state housing are a little light
Jeremy as a solicitor in
Jeremy as a solicitor in private practice I can tell you we are in a bust cycle and it looks like it has a long way to go. After seven years or so of an amazing workload it has suddenly dropped off in the last 5 to 6 weeks and this is being confirmed by colleagues all over the country,bank staff and the odd agent you talk to. Practice is back to where it was pre 2001/2002 and I must say I am enjoying it. One can only work so hard for so long. The only people who need to worry are the people with too much investment and personal debt and there is a lot of them around. The people who should be happy now are the first home buyers and the people on average incomes who can now look forward to house prices continually coming down to levels where they will be able to buy them again. On this site we hear a lot from people who have invested heavily in property as they thought it would continue to climb in value without any hiccups. The majority of them did this whilst borrowing heavily to do it and now they are starting to pay for it. A lot of them need to sell down some or all of their assets and pay down some debt. They need to do this now as this is not going to be fixed in spring.
Jeremy. I doubt it that you
Jeremy. I doubt it that you are indeed a solicitor. You certainly don't write like a solicitor does and seems unusual that you are writing at 8.27a.m. when you would normally be at the office rather than on this site.
You are a very jealous and bitter type of solicitor if you are one.
I follow this site from my
I follow this site from my work desk actually as I have the time these days which is great. I certainly don't know how a lawyer should write as we all write differently. Sorry to disappoint you but I am very successful as I had a huge fee base through the boom and bought commercial property and invested in some private companies which are very successful. I just want to put some balance into this debate. The reality is the property market is going backwards fast and it is going to do this for some time yet. I am not afraid as I am not heavily leveraged into it. My children are going to benefit as they will be able to buy their first home without needing me to help them. There is a lot of bad debt in the NZ property scene and it needs to be worked through and sorted out before there is any recovery.
It's dissapointing to read
It's dissapointing to read provincial solicitors such as yourself seemingly enjoying the strife the economy might get into.
Your comments lead me to believe you are an employee, not a business owner, as no business owner would wish ill on others business activities.
Solicitors rank with real estate agents in the way they rorted customers during the property boom.
You've ripped off customers, now sneering at them.
...no business owner would
...no business owner would wish ill on others business activities.
That is either a very stupid comment or a very funny troll.
I am sitting in my daughters
I am sitting in my daughters 50sq mtr apartment in Manhattan that she rents for US1800/mth. The capitol value is US$1m.
Every night the restaurants are full and the finance businesses are hiring again. The east coast is buzzing again. Last week met my UK based brother who owns three UK based businesses and he says he his flat out, he also told me that the banks in London are hiring again.
NZ needs a quick dose of inflation (30%) to inflate wages and property(by 20%), this will bring down the real value of houses making them more affordable and give investors some profit if they only own say 50% of there houses.
US$22k p.a. to rent a million
US$22k p.a. to rent a million dollar apartment ( studio, I'd guess? Probably lower East side or Greenwich?) in Manhattan! Now you can see why anyone with any sense rents.
No, 1 bed 70th St 1st Ave
No, 1 bed 70th St 1st Ave
And as for 'inflation'. Well
And as for 'inflation'. Well here's somehting that's probably been on your cable today:
"Jim Rogers, the respected currency trader and hedge fund pioneer, cautioned that when the downturn takes hold "the world is going to be in worse shape because the world has shot all its bullets...Is Bernanke going to print more money than he already has? No..."
Thats correct, inflation
Thats correct, inflation will save the day and the Chinese will loose their shirts.
There is not going to be any
There is not going to be any inflation, yet. One of the reasons for that is , as you note, the Chinese are not going to allow the combined work effort of the last 30 years that is invested in US Treasuries to be devalued by inflation before they have reallocated their funds. First there will be a massive deflationary jolt. Then inflation can follow.
Where to. Mars?
Where to. Mars?
Not that far. Just "anywhere
Not that far. Just "anywhere but the US". My calculation is to where your brother lives, Europe. They at least have stared to recognist that debt retirement is the only avenue possible for world recovery in due course. Many inside the US are starting to see that inevitability as well.
Students can't afford to buy,
Students can't afford to buy, they get federal loans for the rent.
http://www.nzherald.co.nz/pro
http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10661647
How come in Hong Kong when they get concerned about high property prices they simply increase the amount of land available for development (and land in the centre of the city - not suburban sprawl), whereas in NZ the solution is always more taxes and a witchhunt. The town planners have more control over house prices than the RBNZ.
I am finding this website is
I am finding this website is slowly becoming a place where people can vent their resentments against prop investors (or whatever forms of investment that did well). Other that, if I was looking for some other informed opinions on how I should invest my money, I am afraid this site isn't one of them. I haven't seen anything at all on how we should invest our money wisely, stuffs written so far have been mostly on how naughty we were! we should move on really..
And remember, I am not a PI so don't start accusing.
Do you mean save or invest
Do you mean save or invest GBM? If you mean invest, as in gamble to make more money than the risk free rate of return by assuming more risk, then the finance company debarcle should give you a good illustration of what can happen. Whatever happened to people just being happy to save for the future?; rather than feel that unless they are taking a punt; a gamble or making an investment they are missing out on something.? In essence; what's wrong with saving money in the bank?
Hi there NA. That's exactly
Hi there NA.
That's exactly what I meant, there isn't a healthly debate in this site on what we could do with our money, I guess saving in a bank is a form of investment which I am taking at this stage. In every form of investment, there are associates risks and I guess for PI, one of the risks is the down turn in properties cycle. I found it ironic that it's easy to attack others without offering any credible alternative solutions. I tempted to bet that if the share market is booming - most comments here will be on share speculating...
May be it's business opportunities to set up an alternative website..
Here's the thing GBM, No
Here's the thing GBM, No one,( not even me!), knows what 'will' happen, only what 'might' or 'should'. In that light, anything, is an investment, as by definition whateveritis can either go up or down from wherever it is at any given time. It's 50/50. Otherwise the price of whatever it is would be somewhere else. It's only the personal view of the fundementals that prompt one to make an investment eg: Paul the Octopus picked the winner of the soccer matches, but each pick was just 50/50. For me, I believe that one gets rich from doing ones day job; (better, faster, smarter etc) and any excess of earnings over expenditure is savings. Not investment capital for something one knows little about, 'hoping' for a magical profit and no loss.
That is what hubby and I do,
That is what hubby and I do, we save. We have no mortgage and yet we have our own home: we saved, built it, and finished it off inside over 10 years. We are both quite happy to save via the bank, it gets so addictive (watching the balance grow) that we hate spending it! And yet, we spend quite happily when we need to - nothing better than walking in somewhere and saying we'll take that, and watching the faces of the young staff as we pull out a wad of cash, or pay via eftpos.
People just need to learn to be happy with their lot in life and learn to earn it first before spending it.
As any long term investor
As any long term investor knows , markets go in cycles, be it shares, property , futures , what ever....a market builds then takes off about every 20 yrs...then busts and everything settles down for a few yrs, with a few ups and downs. But a market doesnt boom, bust then take off again...a different one does.
The trouble is a market booms, then busts, those who still have money to invest ..espec those 1st time round and in this case property, are still hyped and all they iknow is property.
Prperty is basically dead, and as far as I can see none of the markets are ready to go.
Same thing happened after the 80s sharemarket.....investors who survived , wandering around like lost chickens still all hyped up ready to go, and nothing to do.
You post describes this to a T
What do you expect. A lot of
What do you expect. A lot of PI's are very greedy and have collectively pushed up the value of housing in NZ and made it hard for first home buyers and average kiwis to buy their first home. The problem for PI's is they did it with debt not equity and now the chickens are coming home to roost and they are panicking. They should be panicking as housing values are already falling hard in some areas and the rest of NZ will follow over the next few months as people come to grips with their debt problems and sell off more and more of their assets. People did not diversify. They concentrated purely on property and now they are paying for that stupidity and greed.
so what?
so what?
So what? So stop whining like
So what? So stop whining like the little bitch that you are about how mean PIs are being treated. They are merely reaping what they sowed.
I hope you are feeling better
I hope you are feeling better now.. Now sit down and have a cup of tea....
Exactly what Gingerbreadman
Exactly what Gingerbreadman was saying, more senseless venting !!!!!!!!!!!!!!
Not venting. Reality, which a
Not venting. Reality, which a lot of you cannot face as you are probably in that category called PI's with a lot of debt.
again, and your point
again, and your point is...?? and remember, different strokes for different folks! Let me put it this way, if someone dresses cheaply with clothes made in asia, that doesn't meant he/she is bad for supporting cheap labour..
God you negatives go on. You
God you negatives go on. You missed the boat and now you bemoan people that have tried to better their lot in life.
If property continues to drop in value in Christchurch I will admit you were right as far as recent investors who are heavily geared goes.
Many investors are cashflow positive and can sleep at night unlike many of you bitter and twisted people who show total jealousy continuously.
Property as an investment purchased with correct fundamentals is by far the safest and best legal return there is.
It gives both rental return and future capital gain at no risk.
Saving in a Bank is not going to get you anywhre at all. Tax plus inflation etc no return at all.
Do not listen to The Fool. He
Do not listen to The Fool. He admitted recently he bought another rental in Christchurch in this market and he would have borrowed all or part of it. My wife says I have not stopped laughing since he admitted that. Next months figures from QV will be shocking according to what I am hearing from my colleagues around the country. The sanatised version from the REINZ will try to hide the truth which is we are now in a strong buyers market and it is getting worse by the week and spring is not going to fix it. If you want to or need to sell, sell now if you can.It is going to get a lot worse than this and will take a long time to bottom out.I hope there is no interest rate tomorrow as it will send a strong signal to the market.The Fool have you been keeping an eye on the apple shares. You should have bought them instead. Oh sorry a Bank would not lend you on shares as you are too highly leveraged for a start.
ex agent. Worthless replying
ex agent. Worthless replying to you as you are an absolute drone. May be your wife is laughing at you ex. agent for the fool that you obviously are. The opportunities are out there still for people who wish to something for themselves rather than bemoaning all their ex. colleagues and to an industry that you say trated you well financially. You are obviously a hypocrite. Wouldn't want to be in the trenchs witrh you !!!
Anyway non productive talking to someone that keeps saying the same old crap.
Right again TM. He is
Right again TM.
He is obviously just another caravan dwelling loser envious of us for making our fortunes in property while he rents forever.
But you did reply the Fool. I
But you did reply the Fool. I am in the trenches as you say and know what is going on and for you the news is all bad. It is going to be seriously bad from QV and the others next month. Ask any lawyer ,finance broker, banker or agent. It is bad out there and getting worse by the day. You obvioulsy are either not in the trenches or you delude yourself.
Ex agent. Don't care about QV
Ex agent. Don't care about QV stats. How do they affect an investor with good rental returns?
WE know it is slow it is not rocket science. Business as usual. THe people doing the work at the moment see the opportunities now. Anyway had enough for the day. By the way someone has used your name to comment I see.
I genuinely wish you the best but you do need to become less bitter about things as it will age you.
You are wasting your time
You are wasting your time here TM.
These envious and bitter clowns cannot be made to see sense.
Bitter you must be joking.
Bitter you must be joking. You are the most bitter and nasty commentator on this site when you use all your names such as Brent and RPOT. I am realistic and honest something you are not. When QV says your values are back to where they were in 2002/2003 or so you will not be so cocky especially over the price you just paid for the last one you bought.
One think Ihave noticed is
One think Ihave noticed is houses on large bits of urban land pulled good prices, and since the reccession and espc now, they are about the same or even less than the equivilent house on asingle section....the extra land is worthless.
It seems a lot of these are coming onto the market in recent months, "sell cheap" and auctions. This land will not always be worthless. Right now one can pick up these land 'package' for free...just the price of the house.
Rent it out, sit on it for a few yrs, building /subdivision will pick up in 3 to 7 yrs, urban land will be in a shorter supply, councils will be a bit more leaniant (as they have in the past with infill). If I was into property and wanted to stay in it, thats what i would be looking at now.
Land tax coming, Steps?!
Land tax coming, Steps?!
Land tax what ever doesnt
Land tax what ever doesnt matter, the markets will adjust and lifev will go on.
They said that when England taxed windows, gst came in..the markets always adjusts, just brick up the windows.
My work mate is moving to
My work mate is moving to Melbourne, they sold their house in just under 2 week and not a bad price either. So if you price it right, it will get sold...
And it's probable that they
And it's probable that they made 'a profit' on it GBM if they bought it some years ago. I can just about guarentee you, though, that they didn't do the ' we won't sell it for less that the cost it would be to build it today' sums. Another reason that houses can, and do, sell for less than the cost of building the same thing today.
Nicholas. What part of NZ are
Nicholas. What part of NZ are you talking about. Certainly not NZ wide. You are talking garbage.
Which bit? I'm responding to
Which bit? I'm responding to GBM, above, whose mate went to Melbourne. So I have no idea where GBM's colleague lived. And if it the ' won't sell below replacement cost', comment then ' anywhere in New Zealand' can apply to that.
You are just another envious
You are just another envious property have-not. Go away.
Nicholas. You really don't
Nicholas. You really don't know the real estate market at all although you think you do.
What is your expertise?.
To buy a section in Christchurch in a medium area would set you back about $240K
To build a small first home you are up for approx $160,000 plus and that is a very small home. That makes it $400K approx.
You can buy a same size 3 bedroom home for $260K approx.. So what are your feelings to that?A difference of plenty.
TM why do you waste any of
TM why do you waste any of your valuable time and considerable experience trying to educate these losers?
RPIT. I have been out
RPIT. I have been out improving one of my properties where new tenant moved into for a recent acquisition. Got home and thought I would see what anger they had going on this morning.
It is really an eye opener as to how many in this country think, if that is what you call it.
I know I wont't change there thinking as they look at it with blinkers on and are plain jealous and really don't have too many life skills.I
Yes they sit in there
Yes they sit in there caravans spooning dog food into there gobs and moaning about people like yourself who have got out there and made something of themselves and got rich while the losers get poorer and poorer.
Why does an idiot like Bernard Hickey have a website like this when he doesn't know anything except how to talk down the market because he is unsuccessful in life when someone who is so knowledgeable and experienced like you has to comment on the site to tell him how things really are?
The Fool/RPT/Brent/Anonymous,
The Fool/RPT/Brent/Anonymous, you still visit this site though because deep down you know it says the truth and you are afraid to admit it.
Subconsciously Rich PI
Subconsciously Rich PI Troll has made comments/insults that reflect the situation they see themslves in, in due course.
Veeeerrrrrry
Veeeerrrrrry eeenteresss-tink.
Isn't that just my point? You
Isn't that just my point? You can buy that 3 bedder you note at $260k, less than the $400k for a new build. That's my point. The cost of new build has less to do with the price of property than many would have us believe.
Nicholas. You need to read.
Nicholas. You need to read. You stated that houses were cheaper to build than existing homes. Garbage. To build the small home was $400K and a second hand existing was $260K therefore you are wrong. Can't comment about Auckland though!!
I thought I was pretty clear
I thought I was pretty clear @ 10.01am "...houses can, and do, sell for less than the cost of building the same thing today."
How would you know how much
How would you know how much it costs when you live in a caravan?
Well said TM. Thanks god
Well said TM.
Thanks god you're still here at this site to sort out the morons.
RPIT. Don't think anyone is
RPIT. Don't think anyone is capable of sorting out many of these bitter and deluded people on here.
Most property investors do it to get ahead and in general have a happy disposition and wish to help others as well as themselves.
The negative property people on here are both jealous and not prepared to help anyone including themselves and continue to cry foul about everything.
Do they realise that if there landlord goes broke they will probably out on the street.
I would also point out that most of my tenants do not save money at all and live hand to mouth every week. It is utter garbage from these negatives stating that they are saving hoards of cash and getting rich .
If property did drop Banks would want a much higher deposit possible 40 to 50% to be on the safe side.
That is why ownership property is safe. Always be tenants and always be moaners.
Watch the comments flow!!!
If the landolord goes broke,
If the landolord goes broke, the landlord goes broke. The mortgagee will sell to another buyer for whatever they can salvage, probably with a sitting tenant who will be happy with a lower rent as a result of the lower price the new owner will have paid for the property. Win-Win for all, except the original landlord!
You're just a loser.
You're just a loser.
Anon at 1.56p.m. I keep
Anon at 1.56p.m. I keep hearing on this site that it is a silly time to be buying. If the price is low then why is the first home buyer not buying? Is it OK for the investor to buy to keep you on is it? Hypocrisy I would say.
Spot on again TM. These
Spot on again TM.
These losers should spend more time listening to you and less time listening to themselves.
Sounds like The Fool has
Sounds like The Fool has houses at the low end of the market which he would have paid too much for especially the one just bought recently. He just wants people to keep buying to prop up his little empire(if in fact he has one). Interest rate increases are not good news for PI's of his ilk who are over leveraged. He will just get shittier and shittier as the news goes from bad to worse. Wait for the QV figures in August. He will use another name then or just give up.
ex agent. This is absolutely
ex agent. This is absolutely pointless stating anything to you with your cruddy attitude. Take you blinkers off and smell the roses.
I am not a fool, I am not the RPIT, and I am not ANon.
I have bought many properties over t he years not just one in the last year either. They have treated me very well and no it is not always esay as we have to put up with many people who aren't prepared to do hell of a lot.
I don't need people to keep buying I just need people to keep renting and they continue to do so which you are certainly helping with. Thankyou.
The bulk of my portfolio is nice and tidy permanent 3 bedroom hopmes in average to good areas and always rent well.
Equity is 2/3 and debt 1/3 and plenty of surplus rental income over debt repayment.
Don't care if rates go up as more opportunities.
Don't care if no. of sales is down either as it doesn't affect me.
Does that upset you ex. agent? I know you will come back with dropping prices etc. Yeah heard it from you and all your mates around the country. Pretty boring though.
Get a clue loser. And get a
Get a clue loser. And get a job.
Hey Brent, why dont you throw
Hey Brent, why dont you throw yourself into oncoming traffic you miserable bastard.
What a clever retort. You
What a clever retort. You should write a book about how to be unsuccessful.
The Man at 2.28p.m. This was
The Man at 2.28p.m. This was not written by "THe Man"
I do not need to work as I
I do not need to work as I sold my property portfolio in 2007/2008 which in hindsight is the best investment decision I ever made and it is looking better by the week at present. It will look better with each interest rate increase from Bollard and will be confirmed again by QV next month and for the next 5 to 10 years of downturn I am picking.
When have you ever worked?
When have you ever worked? Spending your WINZ benefit is not work OK?
"So if you price it right, it
"So if you price it right, it will get sold..."
That's the key.
Pricing it right.
At the moment that means an asking price far lower than those of previous years.
Because your friends had to sell (moving...) they couldn't be idiots about it and sit around waiting for some braindead drooling sucker to pay them 2007 prices.
Many others who don't feel immediate pressure to sell are holding out for the bubble-peak price, but are going to find themselves caught very short when the pressure does finally come on.
That's when they discover the market has fallen so far that they will regret not selling for a 2010 price in 2010, instead of the 1997 prices they'll be lucky to get for their property in a year or three.
You're right and these people
You're right and these people operate on the basis that if you sell low you'll buy low.. housing market in Melbourne is a bit flat!
Keep the informed comments flowing guys...
Anonymous 9:28 - flimsy
Anonymous 9:28 - flimsy analysis, predicated on bold assumptions.
Please post evidence that enough PIs are heavily indebted, and need to retire debt, to support your argument.
So prices fall hard - who picks up the bargains - first home buyers won't get finance if the market crashes. No. PIs with ok or good balance sheets/diversified balance sheets. Yes.
The usual argument is that current buyers are stashing away higher deposits. Please, I doubt this. Proabbaly just retiring other debt or buying more useless imports.
Housing further concentrated in PIs hands.
First home buyers with good
First home buyers with good deposits and PI's who have not been greedy will get them as the banks will need the houses bought by someone. PI's who are stressed financially will not be buying them that's for sure. Hopefully by then PI's will have learnt their lesson and will not be greedy again.
Hopefully by then PI's will
Hopefully by then PI's will have learnt their lesson and will not be greedy again.
Yeah, sure!
The only thing which will prevent them from doing the same sort of thing all over again is a lack of available funds.
Nobody has established that
Nobody has established that PIs were "greedy". It is just constantly stated and restated, usually prefaced by "drooling" "idiotic" etc. by those seemingly upset about someone buying more than one house.
Again, if the anti-PIs are so sure of the situation, they could sit back with quiet dignity. Same to the PIs. Otherwise, some good and informed comments.
I have the felling that some
I have the felling that some of them, the anti PI are sore losers
If prices return to 97 levels
If prices return to 97 levels the whole economy will collapse and nobody will have a job.
You've hit the nail on the
You've hit the nail on the head. Best to have no debt, stick the loot in the bank and not need a job, I suppose, becasue it's looking mighty like that's where we are going.
I'm not sure where you live
I'm not sure where you live but its clearly not in reality. What is wrong all you conspiracy theorist/doomsayers??? The world is not ending. In fact its gradually improving. That is why Dr Bollard feels confident enough to start raising interest rates. You guys are just so behind the eight ball its amusing. The global financial crisis was a 2008/2009 story. Anyone with a brain or an education or the slightest bit of buisness nouse knows that the world is now in recovery mode.
That noise you can hear is
That noise you can hear is the cold sweat dripping from your back.
Exactly as i thought, you
Exactly as i thought, you have absolutely nothing intelligent to say in response to my comments.
The world *is* improving in
The world *is* improving in one way: the property market is backtracking to where it should be, which means people besides disgustingly greedy baby-boomer property investors will finally be able to afford their own home again.
You know those "loser" tenants and renters you've been so scathing of for years? Well they've mostly been saving much their incomes, instead of giving it to the bank in the form of interest on their huge mortgages.
With property prices falling to historical norms again fairly soon, those "loser" tenants and renters will have plenty of cash on hand to buy homes for themselves. They may not even need mortgages to do so.
Who will they be buying those homes from? The disgusting pig trougher BBers who are so debt-laden that they will either sell for whatever they can get (which will be *much* less than they paid in most cases) or be mortgageed.
Definitely a win-win scenario for non slimeballs everywhere, but bad for PIs and other RE arselicks.
Put it this way, if property
Put it this way, if property prices fall, the economy will go back into recession and the reserve bank will need to lower interest rates again. Bollard is currently raising interest rates because he feels so confident that the economy is growing again and inflation will be back on the radar in the near future. So the reserve bank does not believe that house prices will fall. But you do, and I suppose thats all that matters.
Yes they will Keriwin...they
Yes they will Keriwin...they will all be working in Perth!