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Opinion: 10 reasons why New Zealand house prices have another 10% to fall
By Bernard Hickey
I want to detail 10 reasons why I think house prices have another 10% to fall, but first a bit of background.
Back in March 2008 before the Global Financial Crisis hit and before finance companies collapsed en masse, I predicted house prices would fall 30% from their late 2007 peaks.
I got a lot of stick for saying such an outrageous thing. Our Home Loan Affordability analysis showed then that prices were unaffordable for most and I was worried about the stability of the global financial system, although not the New Zealand system. I thought New Zealand house prices had been pumped up with NZ$100 billion of foreign debt over the past 5 years and would subside once the cheap foreign credit dried up.
Then most of the property finance companies collapsed through May, June and July of 2008. Lehman Brothers and AIG collapsed in September 2008 and global credit markets froze through until early 2009. All hell appeared to be breaking loose and there was genuine fear for the future of the financial system.
In early October Australasia's banks were granted government guarantees and between July 2008 and April 2009 the Reserve Bank of New Zealand cut the Official Cash Rate from 8.25% to 2.5%, helping to bring the 2 year mortgage rate down from over 9% to under 6%. This stabilised the economy and the housing market, where prices had fallen as much as 11% by early 2009.
So in early 2009 I revised my view on house prices to a fall from the late 2007 peak of 15%, rather than the 30% I forecast a year earlier. House prices bounced through mid 2009 thanks to the drop in interest rates and the decision by many investors to abandon low interest rates in banks, a collapsing finance company sector and a discredited stock market to put yet more leveraged cash into rental property.
Also, it appeared, New Zealand's economy had dodged a bullet because of our stable banking system and our close connections to the strong-growing Australian and Chinese economies.
Related Topics
But the fundamental problems had not gone away. Housing was still vastly overvalued compared to incomes, households were carrying too much debt, and the cheap foreign credit had dried up.
And now those fundamentals are coming home to roost.
In the last six to eight weeks the sheer weight of these problems has ground down growth in the economy and the housing market to a virtual standstill.
Reports on the housing market from Quotable Value, REINZ , Barfoot and Thompson nd First National indicate the winter of 2010 has been awful for the housing market. Buyers have gone into their shells and those that haven't are demanding price reductions. Those that still want to borrow are reporting the banks are being cautious about Loan to Value ratios and the types of property being bought, in particular apartments, townhouses and sections.
Two events locally and one internationally seem to have been the catalysts for this slowdown. The May 20 Budget was initially welcomed by property investors as being a weaker crackdown on property tax breaks than they had feared, but it was still a crackdown of sorts. Also, the Reserve Bank's widely expected decision to start putting up the Official Cash Rate from June 10 appears to have shocked those who thought interest rates would stay low for a long time. The European Financial Crisis in May to June was the final nail in the coffin.
So now prices are falling again.
Here's why I think they have another 10% to fall, taking the fall from the late 2007 peak to 15%. QV figures show prices are now down 4.7% from the late 2007 peak.
1. The cheap foreign credit has dried up
Before the Global Financial Crisis banks could borrow as much as they wanted for around 15 basis points above the prevailing wholesale interest rates. That cost rose above 200 basis points early in 2009 before subsiding to around 120 basis points earlier this year. The European Financial Crisis boosted that cost to back over 150 basis points and now it's clear that the cost is never going back to the 'normal' levels of 2002-2007 when New Zealand's banks borrowed almost NZ$100 billion on these 'hot' money markets and passed it on to home buyers at a sharp margin.
This chart shows how much those margins have risen the crisis. Interest rates are likely to remain around 1 percentage points higher than they would otherwise have been.
This makes it harder for the banks to offer fixed mortgage rates that are significantly cheaper than floating rates and keeps the margin between mortgage rates and the OCR relatively high.
2. Home loans remain unaffordable for most in the bigger cities
The Roost Home Loan Affordability reports that we prepare show that it still takes 61.8% of a single median income earner's after tax pay to afford an 80% mortgage on a median priced property in New Zealand.
In Auckland Wellington, Hamilton, Tauranga, Queenstown, Nelson and Christchurch that portion of after tax income is between 65-75%.
New Zealand's house price to gross income multiples are still well above historic norms and those of other countries such as Britain and America, albeit not Australia.
Those with two incomes in provincial cities such as Wanganui, Palmerston North, Invercargill, Whangarei and New Plymouth can still afford to buy a house, while first home buyers with two incomes can also afford a cheaper property in these markets.
Rodney Dickens makes the point in his piece about the property outlook here.
3. New Zealanders are migrating to Australia again.
The exodus of New Zealanders to Australia through 2008 was a major reason for the decline in house prices through mid to late 2008.
During 2009 the exodus slowed as the Australian economy slowed, but it has restarted again in recent months as Australian wages are now growing at a rate of 5.5% while New Zealand wages are growing around 1.5%.
Australia's unemployment rate has fallen to 5.1% versus New Zealand's on 6.8%. The likely reduction in non-New Zealand immigration to Australia after the upcoming Australian election will intensify the pressure for New Zealanders to migrate to Australia. The wage gap between Australia's average weekly earnings and New Zealand average weekly earnings has blown out to NZ$643 from NZ$565 in the last two years.
That translates into an annual gross wage gap of NZ$33,400, up from NZ$23,000 two years ago. New Zealand wages are now on average worth 60% of the Australian equivalent, down from 66% two years earlier.
At current wage growth and exchange rates, New Zealand wages will be half those in Australia within 7 years. By then annual wages will be NZ$65,000 higher in Australia than New Zealand.
4. The property tax changes are hurting more than expected
The tax changes in the 2010 Budget were less than some had expected or hoped or feared, depending on your exposure to property. But they are having a real impact on demand for residential investment property, particularly by those already heavily geared.
It is forcing many to ask whether than can afford to take the risk of going negatively geared when they may not be able to claim so much of the losses back against their regular incomes.
The IRD is also cracking down around the fringes of the property trading, LAQC and family trust areas. The recent Penny vs Hooper Penny and Hooper vs IRD case has sent a chill through the sector, although the IRD win has been appealed to the High Court.
Independent economist Rodney Dickens believes the property tax changes are having as big an impact on property demand as a 100-150 basis point increase in the OCR. See more here.
5. The developed world is deleveraging from property bubbles
The forces of deleveraging globally cannot be underestimated. The scale of the debt now embedded into developed economies in Britain, Europe and America is enormous.
Consumers, in particular, but also governments, will spend at least 20 to 30 years either repaying or restructuring debt to reduce their debt loads.
This chart here shows the scale of the debt in the US economy, the world's biggest. To reduce leverage levels to anything near normal will take decades of slower growth, less consumption, more savings and higher interest rates. Debt is now much higher than it ever was before the 1929 Depression.
New Zealand's banks depend on these international funding markets and will be affected in one way or another by this huge sinking lid of deleveraging.
6. NZ households have hit debt saturation point
New Zealand's household debt to disposable income hit a peak of 159% in the fourth quarter of 2008, right at the time of the Global Financial Crisis. Since then it has been trending down as New Zealanders chose either not to take on any more debt or chose to repay debt.
Reserve Bank figures show many New Zealanders either left their mortgage repayments at relatively high levels, even though interest rates had fallen, or 'downsized' their houses and repaid debt.
This chart below shows how leverage is reducing. It has a long way to get back to 'normal' levels of around 100%, which is widely seen as the sustainable maximum for any government or household.
To get back to around 100%, New Zealand's household sector would have to repay around NZ$45 billion of debt over the next five to seven years.
House prices will not rise without the impetus of extra debt.
7. Our debt is relatively high compared to many others
This chart below shows that New Zealand's household debt to disposable income ratio is actually higher than some of the countries such as Britain, America, Spain and Italy, who are seen as heavily indebted and in danger of being ostracised by lenders.
New Zealand is lucky in that government or sovereign debt is much lower than in those countries, but it's the reason why our government can't afford to 'pump' up the economy with deficit spending.
That will restrain the ability of our government to restart economic growth with heavy government spending.
The risk is that foreign lenders will work out how indebted we are and increase our interest rates.
8. Rents are not increasing in most places
Data from the Department of Building and Housing up until the end of June shows the median rent across New Zealand has been flat since December 2008 at NZ$300/week.
However, they have risen in Auckland in recent months, particularly for larger houses rather than apartments. See our interactive charts here.
However, rental growth remains signficantly below inflation and has stubbornly remained less than growth in house prices.
Landlords looking to increase rents more than wage growth have consistently failed to impose such increases.
Increasing costs and the potential removal of tax breaks will dampen demand from residential property investors, given rental growth will not be enough to compensate for higher costs and the removal of tax breaks.
That sends a new chill across the market.
9. Banks face even more funding pressure
The pressure from the big banks to pass on increased funding costs and to restrict their lending growth will become more rather than less intense in the coming two to three years. This will keep the pressure up on interest rates and ensure banks remain cautious.
European and US banks have to replace over US$2 trillion worth of funding in the coming 18 months, raising the likely cost of such funding on international markets.
The Reserve Bank's Core Funding Ratio (CFR) is expected to increase from 65% to 75% over the next two years, forcing the banks to raise more funds from the expensive long term and local funding markets rather than the cheaper 'hot' short term money markets.
The likely imposition, albeit slowly, of tougher rules for capital and leverage by the Basel Committee for international capital rules will also keep credit growth contained in coming years.
10. The baby boomers will start selling down their houses and rental properties to free up cash
Fresh research published over the weekend by the Bank for International Settlements estimates real New Zealand house prices could fall more than 35% over the next 40 years as a growing population of elderly are forced to sell assets to a smaller population of younger people to fund their retirement and health care costs.
205 Comments
The question I have is: is
The question I have is: is this 10% drop valid for all of NZ? Or is immigrant city Auckland exempt?
I'm talking about the
I'm talking about the national median, but I don't necessarility think Auckland will be better off.
You could argue it has further to fall and will be hit most by the net migration outflow to Australia.
cheers
Bernard
I think you were right the
I think you were right the first time with the 30% fall.with the present outlook... even that might have been conservative .Negative equity is a thing the english have been living with for years.If its your home it dosn't matter.
I don't predit because I am
I don't predit because I am not an economist. I prefer to leave the economics prediction to professionals.
BH is making news again to gain clicks on this site, so he can gain cash.
say again, in english
say again, in english
I would imagine Bernard is
I would imagine Bernard is predicting 10% of the NZ Median house price. Many centres (e.g. Queenstown) will fall more and some will fall less (E.g. Wellington)
Wellington will fall even
Wellington will fall even further if Key gets a second term - as the public sector will be slashed big, big, big time. Big, big, bigger than the Lange/Douglas era because it's even more bloated now than it was then. JK knows what's wrong.... he's just keeping his powder dry for another year. Not that I think we (NZ) have that luxury of time - but he's betting on the rest of the world's money printing keeping things in abeyance until our next General Election.
Excuse me, more bloated than
Excuse me, more bloated than the Lange-Douglas era? If you look at the figures from the State Services Commission (link goes to Excel spreadsheet) you'll find that in December 2009, the public service stood at 47,052 (3,768 of which were part-timers), while at its peak in 1987 it was 72,467. If you look at it as a proportion of the labour force, or of the population as a whole, the decline would be more marked.
Pete, I'd assume that NZR,
Pete, I'd assume that NZR, NEC, VNZ and all the other government businesses sold by Lange-Douglas and National successors figure into the 70,000 figure?
Simply not correct.... I
Simply not correct....
I think you are simply living out your wildest extreme right wing dreams in print...National isnt to the right of ACT...
Also I think it would be more appropriate to call it the Muldoon era, Lange/Douglas slashed it after all....and no it isnt as bloated today by a long way, try reading the data.
JK keeping his powder dry...yeah right, he wants to win the election to do that he has to get a mandate from 51% of the people, flipping to the extreme right wing aka Donnie Brash would be his political death and he knows it. His biggest saving grace is Goff who is not a charismatic leader....he just has to be replaced....
Wellington will be hit, but badly....its a difficult call, I would think less than most areas myself.
Reasoning, if it was that easy to slash we would have seen it already in the last 6 months so dont think it will be. Sure Wellington will be impacted but its not as crazy as many areas ie based on "lifestyle ideals' that are going o get hard landings...
So areas to be hit, places like Queenstown as the rich run away. Areas like Marlborough ie grape/wine production/demand will collapse and cause carnage...this will be repeated in other similar areas....waikato milk farming etc etc land is simply far to over-valued it needs to drop 50% possibly more...
regards
National will win the next
National will win the next election not because they are the best choice but because they aren't the worst.
Totally agree. We need
Totally agree. We need rebalancing away from houses. Why are NZers so obsessed with the perceived values of their homes. Lifestyle assets are not investments, people! Income multiples to loan repayments are crazy. What is the point of buying if you put a noose around your neck financially? What effects does this have on young families and the stability of communities. I would like to see houses drop to realistic values. And I am a homeowner who has rented in between houses.
If not real estate
If not real estate investments then what?
An under-performing dog which is the NZX or in all time low term deposit rates?
Everyone says we need to move our money into local businesses. Local businesses are crap!!
...there are better yields on
...there are better yields on the NZX than on residential property, better diversification, better liquidity.
Balance man is the key.
NZ art has held up well and
NZ art has held up well and continues to look strong going forward.
A Shane Cotton painting sold last week for $200,000. I can remember only ten years ago you could get his work for $5k.
With art at least you have something to enjoy and in some cases you can even depreciate it!
Regards
Bryce
...and for a counter
...and for a counter proposal. The reason that NZ home loan servicing costs are "unaffordable" by international standards is that NZers just don't know what to do with their money other than to put it in to houses. We spend less on cars, less on going out, less on pretty much everything other than our houses.
The typical house-buying experience that I have observed amongst my peers is that we will get the maximum possible mortgage that we could ever hope to pay with 2 incomes, savings and family loans, then go buy the best house in the best area possible. Then if any capital should appear against the house (by capital gain or accidental capital repayment), it is swiftly extracted to make the biggest possible alterations to the house and property.
Our willingness to sacrifice in other areas for real estate expenditure is what drives the unusually bad affordability ratio. Unless that changes, then as long as there are kiwis breathing in this country, they will be spending every available cent on upgrading their homes.
Don't worry about the baby boomers hoarding intergenerational loot either - they are actually an enormous "grey" bank funding invisible second mortgages against NZ's housing stock.
Fair comment Rhys. I can just
Fair comment Rhys. I can just see one issue with this. With all household income being spent to purchase property and service the debt on mortgages, the less money that is available to be spent in other sectors of the economy, i.e., retail. Perhaps if you had a closed loop where the majority of people were working in the property and related industries, there could be hope that people could maintain a self-sustaining system where income could be derived to behave as you suggest. Unfortunately, the economy doesn't work like that so the more you starve one sector of the economy, the less income is available to pour into property as you think that NZers are hard-wired to do. Furthermore, I very much doubt that the dairy industry would be able to drive the income desperately needed to drive the endlessly appreciating property market that is our very lifeblood.
Personally, I think Bernard is unwise to make predictions about future property prices. However, given that he is a journalist and our society craves predictions, this is probably unavoidable.
That starving is already
That starving is already baked in. Retail in NZ is permanent discount quality, where most purchasing is end-of-line/seconds, parallel imported, imported second hand, or low-price point versions.
This works out in property with a bitter twist - high price because of supply and demand, but low quality because of corner cutting to get the largest floor space in the most expensive area. eg. leaky homes. So a lot of money is going into property, but the majority of that goes to debt servicing, not to the building industry. Having said that, a good builder can live like a good lawyer in Auckland.
Perhaps I didn't explain well
Perhaps I didn't explain well enough. No matter how much NZers want to spend on property, it cannot be achieved if people can't find work in other sectors of the economy. The debt taps have been shut off.
This is an excellent point
This is an excellent point and very true.
Ever wondered why the brand new electronic equipment you've recently purchased, especially computer-related stuff, doesn't appear anywhere on the manufacturer's website?
It's because NZ is considered to be a "sucker market".
All of those short-run items -- printers with the design flaw, TVs with unsupported components, modems with flaky chips, etc -- don't get wasted in landfills: they are shipped to NZ and the former Soviet Union.
If you ever visit websites which specialise in, say, device drivers (software) and spend a bit of time browsing, you will see Kiwis and Russian's plaintively begging for help with some bit of crud gear or other which was dumped in those countries by quick-buck merchants, while the users from other nations scratch their heads and tell them to recheck the model number again because manufacturer X doesn't seem to list that item...
Rhys - SOOOOOOOOOOOOOO
Rhys - SOOOOOOOOOOOOOO true... just come back from UK and Europe, it's a real eye opener to how we do things in NZ. It's a frustrating cycle we seem to have caught ourselves in. My girlfriend (who's from UK) constantly wonders where NZ gets its awful clothes, shoes and fabrics from, you don't see them anywhere else overseas. And it's not like they're cheap here either!
RhysLewis...said........ Don'
RhysLewis...said........ Don't worry about the baby boomers hoarding intergenerational loot either - they are actually an enormous "grey" bank funding invisible second mortgages against NZ's housing stock.
you know there's a lot o truth in that Rhys...... wonder just how many realize.....oooooh doggy!
Bernard , I believe that you
Bernard , I believe that you might be wrong.
Why?
What unaffordable means: more people cannot afford to buy new houses but they can afford to live in the one one they have.
The prices stays as they are for much longer because this stagnant situation depends on few factors:
unemployment, emigration, interest as main ones.
Obviously prices will fall with inflation. The nominal figures stays but the value will deteriorate.
The rapid de-value of houses may happen only when one or more above parameters come to bite us.
That people can afford to
That people can afford to live in the houses they currently have is becoming an ever more debatable argument.
What happened to the 40% fall
What happened to the 40% fall Bernard?
Whilst Bernard did revise his
Whilst Bernard did revise his call many months ago, I suspect he is erring on the side of conservatism, this time!
Story above mentions my 30%
Story above mentions my 30% prediction in March 2008 and how I revised that to a 15% fall in early 2009. I'm sticking with that 15% figure. The 10% fall figure takes into account we've already fallen 5%, which means 10% more to go.
cheers
Bernard
Well BH back in late 2007 I
Well BH back in late 2007 I worked out about a 28/30% drop compared to the long term 40yr ave...upto the beginning of the boom 2002.
During the boom, the types of homes, types of buyers and seller where all out of the norm, making the ave for that period compared to previous and now, way out of proportion.
So I aggreed..with your 30% , not withstanding any interference, the market in theory could have dropped 30% at that point in time...I still stand by my prediction, and it so happens its still on coarse.
If you take the same house purchased in 2007, now resold its around 15 to 20% cheaper...The long term ave upto about 2002, expolated out indicates fundamentally that there is still further drop of around 8 to12% to go over the next few yrs....less as the long term ave has a gentle rise, upto 2002 which was an anomaly.
when the long term ave (slight rising) meets the current ave, the market will return to normal .
Your original and updated predictions in effect where correct at that point in time...and when all this is over, If you had tied in with the long term ave in you justification, you would have been show to be right on the mark.
Your comments on BBs a load of rubbish....funny how all the sob stories published are 30 to 40 age group...the BBs are ripped off by finance companies...where are the stats to show the age group of the speculators....and if do get in the 'offical' BB age group (which is wrong) they are the tail enders and minority.
BBs sit back on the family home, morgage free or near to it, entertain the grandchildren, and when the gardens get a bit much, downsize. Alway have for generations....unless can afford a gardener.
CIR v Penny and Hooper svp.
CIR v Penny and Hooper svp.
And the 11th reason is that
And the 11th reason is that investors can earn 6.75% (or more from earlier bonds) safe and sound from a bank without market risk, and without the hassles of tenants.
For a $350,000 house that translates to rents of $450/wk + some amount to cover costs, servicing, vacancy, amortized purchase fees, etc + some amount to cover market risk. If you can't charge that much in rent, you should have bought a bond.
Dump the house, buy a bond, and enjoy better returns.
Was talking to a high up
Was talking to a high up person in ANZ Bank (his area is Risk Managemen)who is very aware of the aspects Bernard indicates. Their modelling indicated that residential prices would remain fairly stagnant over a prolonged period from now on (there will be a decline relative to rising costs) but a significant actual decline is underway for farm prices. Bernard says there will be an actual decline in residential prices of 15%, so guess we wait and see.
One factor that doesn't come up in the conversation is that baby boomers will leave inheritances probably on a scale unlike before, so may be not all doom and gloom to all the younger generations?
Give us a break! The BB's
Give us a break! The BB's have to die first, to leave the inheritance. Given that 2011 the first of us head into official retirement, that inheritance ( if there is anyhting left but the debt!) is a long way off in time ( hopefully)
Trusts nevah die....
Trusts nevah die....
Thats because ANZ employ
Thats because ANZ employ actual economists rather than purely shock and awe journalists. They look like things like the equilibrium between housing supply (new consents) and demand (net migration) - which I will note that there is still a relative shortage despite the recent slowing of net migration, and they look at the supply of houses coming onto the market (a glut would indicate depressing prices whereas a low volumes will support prices), they look at rents (Bernard is a bit of a simpleton for not saying there havent been increases - there has been some recently - but it takes times becauses rents are fixed so over the next year as rents or leases roll off they will be renegotiated), they look at expected future capital gains (there is no reason that after 2012 that 3% isnt maintainable), and the ability of investors to leverage their investments get in renters and pay down debt. WIth the later you dont even need house prices to go up to make a return by paying down debt.
Bernard points to simple things like median income to median household price. That is a bit stupid for places like Queenstown where the people that own the property there are earning their salary somewhere else. Same for the north shore. These things are rules of thumb.
And as for credit - it will find its way back. The invisible hand is still there. Bernard lacks any real intellectual rigor and is instead looking to create a self fullfilling prophecy. He got it WAY wrong last time, and is wrong this time. Fact is we will have flat to mildly declining house prices for 2 years, then house price growth at or below inflation for 3 more.
Y are the kids of the
Y are the kids of the BBs....X is where the next money is at interms of buying off BBs....X doesnt have it...Y might get it...
regards
The baby boomers' parents
The baby boomers' parents have to die before the baby boomers get their hands on the loot. Many of those are in their mid 80s and going strong.
What is the best economic
What is the best economic outcome for those retiring? Deflation. Sell property portfolios, as many will want to, and the cash gets added purchasing power the lower prices fall. For anyone that believes in the conspiracy theory of the Baby Boomers, do you think that they will let the final piece of the jigsaw puzzle fall through their fingers?!
Nail on the head
Nail on the head Nicholas.
There is a lot of talk about that BB move from growth to income assets and how it will pan out.
Lower interest rates, but capital preservation and retained buying power.
You have to hand it to them, they really have managed to do over three generations, the one before them and the two after.
But how many Ys will actually
But how many Ys will actually inherit property ? BBs had more than 1 kid, perhaps 3 was the norm, and unless they leave behind 3 or more properties, Y will still need to buy, and more than likely, the inherited property will need to be sold tofor the proceeds to be shared.
5 out of 7 articles on by BH
5 out of 7 articles on by BH on today's news page alone are all about some aspect or aspect(s) of real estate prices falling....
I've read a lot of comments about BH being overly negative about house prices but it is in fact ridiculous. Just look at the above from today alone. OK, WE GET IT. At this rate, it's an unhealthy obsession, not news. I've been patient and up until this point have found it mostly interesting. But I give up.
I don't see the point of reading interest.co.nz news anymore. And I'm not even a property guy unless you count owning your own home as a PI (or whatever the rabid crowds on here call them).
It would only have been 5/8
It would only have been 5/8 if we'd had '10 @ 10' to peruse. But alas.....
Hang in there
Hang in there Nicholas
Beavering away right now on Top 10
cheers
Bernard
First I've heard of you
First I've heard of you ..unhealthy person..what do you normally call yourself..? just so the rest of us know who to miss when your gone.
If you don't like the
If you don't like the actual news then read fiction this is all about indicators as to where we are heading.
Totally agree with unhealthy
Totally agree with unhealthy obsession or news.
Why do you have the same argument, by the same people, day after day. My god, its only property! It's not like it's of great importance.
What I don't think most people realise on this site is that there is a very unhealthy obsession with property. Just look at the number of comments on property related articles. It's no wonder our economy is in the toilet - we're too focussed on parts of the economy that are unproductive.
Perhaps a step back and a look at the bigger picture in life is what's needed for some of you.
Reading these comments is a bit like watching Nero fiddle while Rome burns.
What the hell do you expect?
What the hell do you expect? Movie reviews? Low-fat casserole recipes? This season's must-have eyeshadow colours?
It seems like the only
It seems like the only unhealthy obsessions around are by those BH and the anti property club. Stop taking it so personally guys.
You mean Penny and Hooper vs
You mean Penny and Hooper vs IRD, not Penny vs Hooper.
Penny and Hooper were granted leave to appeal to the Supreme Court on 2 August.
Robert M You're quite right.
Robert M
You're quite right. I'll correct and update.
cheers
Bernard
Good analysis Bernard, have
Good analysis Bernard, have to agree,real estate has become overpriced and there are not enough buyers out in the market .It is still supply and demand, but too much money has been borrowed against an ever increasing value which has now stopped and as you say in retreat.The rural market is fast waking up to the same realisation.
Don't know what the answer is?Like the tide going out,can't stop it but know its gunna happen.
You know Bernard the Nats a
You know Bernard the Nats a finally going to address the ideology that Social Welfare is based on................yay....whoo....at last....something positive in a positive direction..... be a real good thread to revive......
Auntie Phill you should have listened quite aways back when you could have cashed in on the growing dissatisfaction the WFF and Social Welfare policys based on outdated...outmoded......out of touch ideology that successive vote pandering Govt's have enshrined..............
That Unholy Church for the Unwilling is about to get .... it's commandments a good rewrite.
If anyone messes with social
If anyone messes with social welfdare,more provincial towns will become ghost town,it's only this that keeps them going.
Hi BH These are 10 reasons
Hi BH These are 10 reasons why the NZ housing price will not drop any more
1)The cheap foreign credit has dried up
Actually, the overseas banks is creating credit again.
2) Home loans remain unaffordable for most in the bigger cities
Wrong. Home loans remain affordable for most in the bigger cities. Home loans is only unaffordable for first hombuyer in the bigger cities
3)New Zealanders are migrating to Australia again.
Net migration is still positive now. About 16k for last year, they need somewhere tolive, I don't prodict the future.
4)The property tax changes are hurting more than expected
5)The developed world is deleveraging from property bubbles
Wall street is busy to package stuff to bubble some kind of property.
6)NZ households have hit debt saturation point
Wrong, NZ households are paying back debt quickly now.
7)Our debt is relatively high compared to many others
Same level with AUstralia.
8) Rents are not increasing in most places
Rents in main certres are moving up rapidly now.
9)Banks face even more funding pressure
NZers save $2b every month now. Banks will have plenty of cash soon.
10)The baby boomers will start selling down their houses and rental properties to free up cash
The baby boomers are not moving out of big cities now. They are more concern health care and family now and they can afford to live in big cities.
That was only 9 poorly
That was only 9 poorly written, mis-spelled reasons........
why do you waste time
why do you waste time commenting when you have no clue what your saying!!!
How about instead of anon,
How about instead of anon, you use an identifier....at least BH is doing so.
regards
Why just 10% the market is at
Why just 10% the market is at least 40% above historical trends. When it goes it will over correct remember its been a long time since NZers have see a significant correction the fear will be profound.
The fear is profound.... and
The fear is profound.... and in abundance.
Bernie, what a 10% drop on
Bernie, what a 10% drop on the mansion in Remmers and the holiday home with boat (of course - haw haw) in Pauanui, couldn't be ol' chap. Boy, that could devalue the multiple family trusts I have acquired over the years. I was a wee bit concerned, but as I was having a chat with the ol' boys at the Northern Club for after work Friday drinkies and the consensus was everything is going so well .. in fact, damn fine. The returns are great on the multiple properties - both commercial and residential, I have around the town. Anyway I didn't get involved in this recent property, so called "boom".. no way ol' boy, I had bought all my properties many years before, so no worries there, in fact the accountant says I have to spend more money on them, so I can reduce my tax bill - haw haw.
Anyway I think your above article, although very well written and backed up with the relevant colouful charts, graphs and such like, which I did find interesting but not really relevant to the likes of my ilk and status. I'll leave it to you plebs to sort and discuss said matters, as I really haven't got the time. In fact I have a board meeting to attend to, for one of my companies, as I would like my director fees to be increased by 50%, then I have to catch a flight to Honolulu for a week break at my beach house on Maui.
Enjoy your week people and don't forget that Smith and Caughey has an upcoming sale :)
Recession ..... what recession.
cc - you'l want to check up
cc - you'l want to check up the tent cities sprouting up everywhere around Honolulu then - heaps of your kind living there.
Kate - no problem there, my
Kate - no problem there, my limo has tinted windows to and from Honolulu Airport .... if I would ever want to venture into Waikiki ....NOT full of tartan-shorted, balding mid-western Americans, with all due respect, as I have some fine American friends, but from Manhattan with the obigatiory vacation residence on The Hamptons.
Anyway where are you geography skills. I just transfer to my chartered private jet to fly to Maui once I land at Honolulu...no need to see all those tent people ...haw haw.
Must fly, there calling first class passengers and don't forget that Smith & Caughey sale ...damn fine bargains and it keeps our private shareholders happy ... me included :)
Will fall another 10%. How
Will fall another 10%. How much have prices fallen as of today???
5%... regards
5%...
regards
http://www.nzherald.co.nz/bus
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10664400
Paul Holmes: Our worst fears are being realised
By Paul Holmes
6:00 PM Sunday Aug 8, 2010
http://media.nzherald.co.nz/nzhgfx/themes/0/images/horizontalDottedLine1...); background-attachment: scroll; background-origin: initial; background-clip: initial; background-color: transparent; padding-top: 0px; padding-right: 0px; padding-bottom: 6px; padding-left: 0px; margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; width: 220px; font: normal normal normal 0.7em/normal Arial, sans-serif; color: rgb(51, 51, 51); background-position: 0% 100%; background-repeat: repeat no-repeat; ">
Finance Minister Bill English. Photo / Mark Mitchell
The economy is tanking.
Let us push away all the pink fluff and the political talk and the fine words and face it.
The economy is heading south very deeply and very sharply. It is happening now. What we all dreaded is happening.
We all have the numbers that show it and, if you are the kind of person who keeps any eye out, you will know it instinctively.
What makes it a really lonely feeling is that we all know - those of us who watch these things and have been round for awhile - that neither the politicians nor their officials have an idea in hell about what to do.
It is a worldwide thing and there is no answer except the economic cycle itself.
long term interest rates are
long term interest rates are falling.... Down 30-40bps since OCR. 5yr fix below 7% not out of the question by Christmas
Oh Bernard... I should have
Oh Bernard...
I should have saved all those comments of mine over the last few years pointing out what a idiot you are, but alas, you are not just an idiot anymore, you are a good businessman driving your web traffic to new heights. For you it is your niche way of generating lots of money and respect from the brain dead.
Although I will not go full slaughter after you this time around, as I believe you already understand my position on this matter. So although you have developed good smarts about what headlines sell news, advertising space and increases traffic, I hope in the back of your mind you remember some people will believe you and chances you are doing them over, further losing any footing or hope of that rung on the property ladder, only to find out you are in the business of getting your melon as much coverage as the networks can handle.
In a way you are as bad talking it down as those talking it up. Residential property is a necessity, way more important than if people put 91 or 95 octane in their tanks, or if the kids get the fancy yogurt in their lunchboxes - end of story...
Don't bet the farm on Olly or Bernard, do your own homework people. (remember though location, location, location....)
Oh, and I particularily remember how you describe yourself as contrarian - kind of sums it up.
Hamilton. Solid block tidy 2
Hamilton. Solid block tidy 2 bedroom unit, in decent area in amongst 6 other owner occupier units. Asking $289,000, CV $279,000, Sold for $240,000. Cheers
POP How can the average
POP How can the average struggling New Zealander think location location location. They are just trying to get their first home and now need a much bigger deposit than they used to in the silly period. They are not in a position to just buy where they want to or what they want to. Their very precarious position dictates that they get what they can afford even if it is tent.
not in a slum town = location
not in a slum town = location advantage
not next to the local gangster pad = location advantage
not in a decile 1 school zone = location advantage
I would suggest if you think about it location can be about where NOT to be rather than just where the best street in New Zealand is. If you need to choose a property choose one around you needs not your wants, and take into consideration external neighbourhood forces that are out of your control as you will have no control over those things, and consider what the future may bring i.e. having a place close to your babysitting friend may not be so good if it is a half days trek to a decent primary school once the kids reach school age.
I'd rather be in a sh-one-tty caravan on a section in a decent neighbour and feel relatively safe, than have the best place in gangstertown for all my neighbours ready to burgle the house moments after i leave driveway.
And that is where speculators learnt a lesson about demographics... you can too...
You seem to have serious
You seem to have serious memory issues, or someone else is posting under your name:
"I’m sticking to that 30% price fall forecast because the global economic catastrophe of the last 6 months is only now starting to lap at our shores and banks will be forced by New Zealand’s foreign lenders to curb most new lending" ( BH March 12 2009)
and get that edit function
and get that edit function working again
I agree with Bernard to put
I agree with Bernard to put the foreign funding at the top of the list. This is the BIG PROBLEM.
China screwed = Australia screwed = New Zealand really screwed.
China is NOT the universal savior of all markets, as many believe. Quit fooling yourself if you think this is the case. Have a look at the over 60 million Chinese housing units that were built and are VACANT!!! Would recommend getting Hugh Hendry's take on this.
Real estate is a Ponzi scheme on steroids in China. 68% percent increase in ONE YEAR! Soon it will all be over. Demand for Aussie commodities will slow down AT BEST. Then the Aussie banks begin to sweat. Then New Zealand banks -wait! Aren't most NZ banks really Aussie banks? Crap! Foiled again!
Who will buy your property when you can't get a loan? Answer? People like me who have CASH.
People should learn the significance of the Baltic Dry index, which has crashed in recent weeks. Hasn't been this low sine the end of 08. http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
The BDI has bottomed and is
The BDI has bottomed and is on the way back up. Seems you missed the boat on that one......
OOOOH Yes!!! China,when that
OOOOH Yes!!! China,when that pigs bladder pops the crap will make what were doing now..a holiday.
But the RE agents are
But the RE agents are planning on sending delegations to China to sell houses to there. So perhaps that should be factored into the forecast. The Chinese who worry about Chinese bubble bursting are diversifying, buying properties in countries like Australia and NZ. Current regulation allow non-residents to buy properties here so there's no need for increase in immigration to prop up the market. Just need to sell overseas.
Ok. I feel better now. You
Ok. I feel better now. You can always trust real estate agents! I'll go back to sleep now. Our trusty and ever vigilant agents are on the task!
Happy Renter
No desperation within the
No desperation within the NZ real estate industry, I see.
She'll be right...mate
She'll be right...mate
OH NO! I spend the day at
OH NO!
I spend the day at the office and while my back is turned BH is being very very naughty. He's just stirring and he knows it. .
But serioulsy it is no coincidence that unemployment jumped at the same time as the housing market slowed.
What my clients tell me is that they have cut back on upgrading work because of tax changes and the silly blunder by the RB to increase interest rates when i wasn't necessary. This unholy combination has spooked the market precisely at the wrong moment in time.
Every day I am in touch with all kinds of trades people and suppliers, including house movers and valuers, appliance dealers, painters, electricans etc etc all of whom complain of slowing business.
As the property market slows so does the demand for trades and hence jobs are lost.
Strange are the ways of the market. As the market slows, the demand for rental accommodation rises- and will continue to rise to panic levels until the cost of renting matches owning.
Suits me.
...and as rents rise and
...and as rents rise and house prices fall we produce first-home buyers.
Hooray to that!
You'd think I'd have learned
You'd think I'd have learned by now that I don't know what the hell I'm talking about and always come a cropper in the end.
Ooooh doom and gloom! House
Ooooh doom and gloom! House prices are up 5% YoY, stupid. Sure adjust for the higher proportion of high value houses. Fair enough - but do the same for volumes - adjust for the lower proportion of bottom decile houses.
People like BH are sort of like the global warming fanatics - they think they may be doing a good cause (they are) but because of that think they can do so by any means they see fit. With BH he just skews statistics to his favour - he has no intregity.
The only real measure of
The only real measure of house prices that matters is the stratified index. Of course the number of cheap houses that PI bought are falling. But that skews the statistics massively and is not representative of the overall market. In fact volumes and prices in upper value houses have been very resilient. What is happening on the bottom of the market is simply not relevant and is not representative on what is happening more broadly. Where as bottom decline volumes are 6% lower than they were in 2008 the top deciles are still 20% higher than 2008.
And as to credit - if you go chart and look at RBNZ mortgages - you dont see any bubble or blip associated with the resurgence you saw from April 09 to Dec 09. THat implies that it was funded mostly with equity by the people that still have some money, and signals the market is far from being dead.
Finally - there was a world pre bubble. In fact, if you go back to 1998 to 2000 - there was a period with significant net outword migration and declining houses. Yet the volumes were significantly higher than they were last year where we had that flash in the pan come back. We are in a W shaped real estate market - weve been down once, gone back up, and are just about to trough in the next few months before the next recovery.
Ciao.
boring...< yawn >.
boring...< yawn >.
Pre credit crunch where was
Pre credit crunch where was the money going, into property? Novices investing heavily into what resembled a gold rush, lured by media hype and oil strike stories.
Post credit crunch have property values reduced significantly to date - not really. But all one hears about these days are reality stories of property developers, funding finance companies, investors and everyday people either going or gone broke.
Bearing in mind the other negative property influences Tax, rates, migration, retiring population etc. Surely points to a significant property devaluation? the writins on the wall?
Are we on the brink of a major contraction, the signs are Ominous, anyone who is overcommitted or highly leveraged in property as future source must be feeling very vulnerable/exposed, waiting for the axe to fall.
It would be fair to note house prices are unaffordable, we risk losing educated skilled work force, middle class to countries that offer better opportunity, God zone will be left with an aging population and low skilled work force.
Phew the news is not getting
Phew the news is not getting any better. There must be a few investors out there getting a little nervous and wishing they had sold down all or part of their portfolio like Olly and ex agent. Sentiment has turned for the worse in every sector of New Zealand in the last two months or so and it seems to be getting worse by the week. What we need is some good news like an interest rate decrease. Wouldn't that be great.
House on our street sold this
House on our street sold this year for $4.5m. Bought in 1973 for $22k. Peaks and troughs, it keeps on climbing beyond inflation etc etc
In 1973 the average house
In 1973 the average house price was around $16-$18000, so it sold back then for about 1.37 times above the national average, at most.
Today the average house price is around $405000, so it has just sold for around 11 times the national average.
Why such a huge change in relative value?
Sounds like a cock and bull story to me. Unless there is more to this than just a house.
And how much did they spend
And how much did they spend renovating the shack over the last 37 years ??
I'll take your figures as
I'll take your figures as read. But you have one thing wrong; the tense. It's, 'kept' not 'keeps'.
It must have exceptional
It must have exceptional views of the sea or something else and I suspect it has been kept up to date. What will be interesting is what it will be sold for next time. What is important is that this is not a normal property. Most New Zealand homes are unmaintained cold homes that most people from countries like Holland would laugh at and say, "how much."
Here is my predictions: 1.
Here is my predictions:
1. I predict BH will keep on making predictions on housing market but not any other investment sectors.
2. I predict interest.co.nz will continue to attract viewers because of housing predictions from expert contributors that can only predict housing market.
3. I predict that 80% more of contents on interest.co.nz is on housing market.
4. I predict interest.co.nz will continue to attract idiots that trolls the comments section to flame others.
5. I predict i will use interest.co.nz less and less.
did you predict that you were
did you predict that you were an idiot?
This is how profit is
This is how profit is generated cant you see? Get people to talk, specially negative stuff.
This is how Interest.co.nz works.
Classic!
Classic!
Here is my
Here is my predictions:
1.Hebrews 9:27 And just as each person is destined to die once and after that comes judgment,
2.Tax increases
3.NZ housing market crashes......big time!
Well chaps, looking down on
Well chaps, looking down on the werld from 37,000 feet I can say the Pacific looks delightful tonight, with the moon rising over the horizon and a glass of cool champers in my hand. Now come on all you chaps and chapesses, I detect a bit of rivalry and ol' boy competition between the property investors and the property speculators. I think it's time for a cooling down period, say what. How about we settle this over a game of polo this Saturday at Clevedon... a spiffing idea, I'll supply the champers and we can all forget about interest rates and return on investments ectera ectera Nothing like the sound of horses hooves clambering down the paddock on a clear winters day and the wind in your face to forget all your cares and woes. Hoorah !
I can't organise this, because as you all know, I am on my way to Maui for a weeks sabbatical, from all the gloomy news for the masses in the media. So I will get my secretary in Aucks to send out invites to the selected few.
Anyway back to my champers, dinner is about to be served and it's smoked and sear grained Angus beef fillet washed down with a deelightful Jules Taylor Pinot Gris 08
Tiddle pip for now until it's Aloha on touchdown at happy Hawaii.
Yours
CC
Thanks JK at least we know
Thanks JK at least we know where you are right now.
So sorry WK, you must of got
So sorry WK, you must of got me mistaken with a certain gentleman that runs this beautiful little piece of paradise in the Sith Pacific .Although I do have connections with the JK you are refering to, through my vaast social network of business colleagues and good friends et al.
Anyway on my arrival in Maui I will catch up with the above good fellow JK, at the Kaanapali Country Club & Beach Resort for a drop or two at the 19th. While I will do you the good service of passing on your regards to our mutual friend, JK.
Anyway back to that fine Pinot Gris and I must say the service is damn fine on this
Air New Zealand flight to Honolulu.... thank you Rob.
sent from my iphone ..... 4 of course
poor old charlie living in
poor old charlie living in his guilded cage - is it lonely in there?
Anyone hear that clown Olly
Anyone hear that clown Olly on the radio today? Really tryed to talk it up while talking to Sean Plunkett. By the end of it he was back tracking!
What else can he do? Olly
What else can he do?
Olly will never concede that he was wrong and his precious property market is on the wane, and that he and his fellow spruikers helped kill the golden goose.
When you talk to PIs now they behave and sound like brainwashed cultists, repeating the mantras they've been forced to memorise, but in their eyes you can see the terror.
"Prime Minister John Key says
"Prime Minister John Key says he is concerned that New Zealanders could become "tenants in their own land" and that is why the Government is looking at overseas investment rules around land sales to foreigners."
ah, TOO LATE for many! particularly the next generations
if property prices fall by
if property prices fall by 10% banks will require more than 20% deposit so good luck finding 80K plus for the average home.
Don't worry DT, there's a lot
Don't worry DT, there's a lot of us with far more than that saved. When most of your income isn't being wasted on overpriced houses during a bubble you can save a huge amount.
Justice and anon If you are
Justice and anon
If you are going to take my name in vain at least get it right.
I was not "talking it up" or "back tracking". Just calling it as I see it.
Don't forget I am in the market every day unlike many who post crticisms here but who have ever done an honest days work in ther lives if the truth be known.
Listen for yoursleves and judge if i was fair or not:
http://podcast.radionz.co.nz/mnr/mnr-20100809-0753-Latest_property_stati...
To be fair Olly did say you
To be fair Olly did say you need to take a long view and not pay too much.
If your view is say 2 years (as mine is for various reasons right now) then I think you'd have to be pretty short on the market.
Fair where fair is due, you
Fair where fair is due, you certinaly weren't back tracking in this interview.
I do how-ever pity the people who follow your advice and decide that today who consider that the market is at worst flat.
The question I would be asking is is the market going to go up or down or stay flat in 6 months time?
Having already answered that question with the answer being flat or down, I would then ask myself what advantage do I have in buying today?
Again the answer is none.
So why would I purchase today? When the low volumes of housing sold over the last month has not filtered down to lower prices.
Because in 3-4 years you will
Because in 3-4 years you will be well ahead.
It's a long game remember .
Learn to think in 3-4 year bites and not less.
Property is not for day traders.
But house prices are now down
But house prices are now down 5% on where they were three years ago...
Getting a bit beyond a mere breather now
cheers
Bernard
Yes Bernard, down a whopping
Yes Bernard, down a whopping 5% over a three year period which will be remembered as probably the most severe recession in NZ's history. How has the NZX50 performed over that same period? I'll tell you, -30%. I'll take an asset class that only falls 5% over the duaration of a major economic meltdown, any day of the week!
PS - You and your followers really are a bunch of losers.
5% and 7% inflation added
5% and 7% inflation added since 2007 and dropping by the month over a number of years. Anyone who bought shares in early 2009 is up in a huge way. Some properties are a way down over the 12% though. You do not know what you are talking about.
I know alot more than you,
I know alot more than you, you complete fucking moron. Comparing people that bought shares in 2009 with people that bought property in 2007. Shit thats really comparing apples with apples isnt it! Would you like to change the data to suit your argument any more ? What a complete dipshit.
Agree with you Olly and if my
Agree with you Olly and if my situation changes in the near future I'd hope there will be a load of sellers getting a bit more realistic with price expectations making the 4-5 year plan more attractive. But on the 2 year plan the numbers just don't stack up.
I agree with you expat -
I agree with you expat - how-ever 2 years is a long time for a non-economist like myself to predict.
Do I think prices will be down next week - yes.
Do I think prices will be down next month - yes
Do I think they will be down in 6 months time - yes
As a renter I don't think I'm losing out on not being in the market even with a five year plan. Maybe, I spend to much time reading this website to be bipartisan in my thinking, how-ever I do think that there is a possibility that I will overtake people my own age who purchased 5 years ago in terms of net wealth simply by having no debt to worry about.
Ref house prices and the
Ref house prices and the ten points
All the remarks from both sides seem to be talking round in circles about the problem and not a solution. Most developed counties have targets for inflation why not a target for the median house price in terms of say a 40 % of median income. This could be controlled via the government budgeting for supply needs and releasing land in areas like Auckland. Credit control for house finance. The fringe benefits may be greater saving with higher disposable income and demand for other services and products in NZ. The most important thing is balancing the economy and becoming more self sufficient in terms of raising finance especially given future competition world wide for funds. I appreciate this could not be done overnight due to the disruption/stress any sudden change in the property market would cause. However, we must stop making the same mistakes.
A danger with credit control
A danger with credit control is people won't be able to get finance for a house and therefore wont be able to buy.
This happened decades ago when people were turned down for finance because there wasn't any available. Freer finance markets have made things fairer for all people in the economy.
Rubbish
Rubbish
Not rubbish Gibber. It's
Not rubbish Gibber. It's true, there was no money. Talk to older people who went to the bank or solicitor and got told to go away.
You actually used to have to dress up nicely when you went to a bank for money.
Rubbish to the comment that
Rubbish to the comment that "Freer finance markets have made things fairer for all people in the economy"
Ninja loans = madness
125% LVR = madness
Rubbish.
ANONYMOUS- do you think
ANONYMOUS- do you think more people can afford credit now and that easy credit has solved the problems of lower income families. All that has happened is more people are in debt they cannot afford. This is apart from the economic disaster we are going through at the moment due to lack of control. Giving credit to everyone is not the answer, looking at other solutions either social housing or increasing the supply so prices are affordable are things to look at. What ever your political leaning a solution a solution needs to be found.
OK UKMAN, you can be the
OK UKMAN, you can be the person who decides who gets money for a house and who does not get money for a house.
Actually. It's just what it
Actually. It's just what it used to be. You went to the bank; showed proof of earning; they gave you an amount equal to 33% of your gross pay to use in repayments. You got the money and off you went to buy whatever it could buy you. Everyone had the same rules ( it was Government Law - predetory lending rules applied), and everyone played by the same rules. No one had to choose ' who go what'. If you wanted more, you had to earn more; be more productive; better for the whole country.
As a long-term property
As a long-term property investor I am greatly encouraged by Bernard's article here today.
Bernard has a terrible record at predicting what happens. One can make a lot of money out of doing the exact opposite of what he says.
So his predicting house price falls is a sign to me that it is time to get into the market, buy, and confidently await rental increases and ultimately house price increases, to my benefit.
Go ahead and lose some
Go ahead and lose some capital anonymous.Bernard is only confriming what QV and several of the banks have said of late. You can expect prices to fall for at least a couple of years yet. I note you talk about price increases. Funny how PI's say they are in it for the income when we know they are in it for capital gain. I have several rentals I need to sell.Can you give me your cellphone number so we can do a deal.I would really appreciate it.
Hahahaa, classic!!! This is
Hahahaa, classic!!! This is so true. Its like the saying that when AMP is selling property it is time to start buying. Taking property or economic advice from Bernard is like taking marital advice from Tony Veitch. Just listen to Warren Buffet, the worlds greatest investor..."Be fearful when others are greedy, but be greedy when others are fearful". When morons like Bernard are spouting on about doom and gloom, it is definately the bottom of the market!
UKMan, Good point I would
UKMan,
Good point I would consider 40% to be a good affordability point but it is not within the governments mandate to police this because:-
The government looks after BBer's and older, who (anyway you look at it), control around 50% of the vote and over 80% of the money supply.
For these people creating urban growth limits - called smart growth policy, and controlling city planning - in particular resource consents against inner city landfill, dramatically force their home values higher.
The good news is that this will be re-evaluated by all if / once, the property price collapses because older people will have to develop upwards in order to add value to their properties.
Then infill will begin and we can get back on track to living, instead of working for the bank.
UKMan. Living sounds good.
UKMan. Living sounds good. What if people didn't spend as much as they could on the best house they could get but enough to get a normal house. Those people would be out more pouring money into the economy rather than the bank. The economy spins around with Mr restaurant owner buying a new furniture and employing more staff and on a personal level buys a new outfit. Economy looks good rather than the banks getting it and stalling it.
Bernard, whenever there is
Bernard, whenever there is the slightest negative economic sentiment you again start bleating on that the housing market is doomed to crash. It hasn't. And it won't. Your articles are based on extreme possibilities and outcomes, created in your mind and positioned as reality. But they don't come to fruition..
"So in early 2009 I revised my view on house prices to a fall from the late 2007 peak of 15 per cent, rather than the 30 per cent I forecast a year earlier."
I question your professional background and experience in accurately evaluating fiscal and economic probabilities, as well as overall insight and agenda. Do you simply churn a story out of what you read, then lavish in personal opinion - which has no real merit (rhetorical question that doesn't require an answer)
And I question why you never present a more balanced story. The sign of a worthwhile journalist. Your opinion is bent on the housing market falling into the abyss and never recovering. A strong recovery is as difficult to estimate as impending doom. But you prefer to focus on the latter.
It would seem there is underlying disdain for those financially successful or looking to benefit financially in the property sector. My guess is you are neither, but made the attempt and failed.
There is as substantiative retort to each of the points you've raised, but who has the time or inclination to address each in any detail.
Clearly you are hopeful of a looming collapse in housing values in order to prove yourself right amongst peers.
It won't happen.
Anonymous, Many thanks for
Anonymous,
Many thanks for your comments, including this one:
"My guess is you are neither, but made the attempt and failed."
I don't guess at your motivations. In fact, I try not to guess at anything.
You are wrong.
My wife and I own the house we live in and have a mortgage worth less than 30% of the house's value. We've actually done well out of the property boom both here and in Sydney.
We have never tried to be a property investor and have no desire to do so.
I prefer to invest the savings I have and whatever skills I have in building a business (interest.co.nz) that employs people and produces something of value (I hope).
My overall aim is to build a business around providing useful news, information and debate about economic, financial and investing issues for New Zealanders. That way, I might have a chance (in a tiny, tiny way) of helping the New Zealand econony producing higher paying jobs for my two daughters so they can stay here and bring up their children here.
A nation built on property investment won't do that.
cheers
Bernard
Bernard - I'd pay attention
Bernard - I'd pay attention to what your 'customers' (ie us visitors) are saying. I used google trends for websites to check out your website statistics and it appears the number of daily unique visitors are down from about 10,500 in late April to around 6,000 now. People come here to learn, not for a blog against property.
When Bernard introduces
When Bernard introduces registration the number of visitors will drop further.
But my concern also is that the stream of comments will become bland and everyone will fear causing offense and start more-or-less politely agreeing with one another.
This site is informative as is...it is also entertaining.
All the best Bernard.
"We have never tried to be a
"We have never tried to be a property investor"
Then your commentary surrounding property investment needs to be toned down and less one-sided. Your opinions and predictions are not based on experience, market insight or adequate knowledge.
"My overall aim is to build a business .. helping the New Zealand econony producing higher paying jobs"
Rest assured higher paying jobs in New Zealand will not result from this website, the information it publishes or most certainly the debate it creates.
"A nation built on property investment won't do that."
Bernard, this statement is clearly where your negative sentiment lies. It underscores your fascination with the housing markets imminent collapse.
The property sector employs many people and encompasses a vast array of skills and disciplines that help support New Zealand's economy. "Property investment" is just one facet that the sector has and will always rely upon.
Every nation has been built on property investment.. without which you would be living and working in a grass hut.
Bernard. Thank you for
Bernard.
Thank you for disclosing that you own your home.
You have never and won't be a property investor ever which is certainly your choice.
However, I don't see how this site is creating higher paid jobs apart from possibly yourself.
Finally, what would you suggest to invest in currently if people had money to invest in?
Like he said,
Like he said, interest.co.nz is a "BUSINESS", it must make money, but how?
Well, creating negative talks and fool people into it sounds like a great idea.
Bernard, you succeeded in
Bernard, you succeeded in something that no one else ever did. You managed to divide this nation (part of it which regularly visits your site). Two sides are constantly exchanging low punches. I never seen so much rude words , jealousy and even hatreds You managed to distract people's attention from main economy/political issues and divert attention towards irrelevant housing industry, which will not change anyway any time soon.
Bernard, please explain how
Bernard, please explain how you investing your capital into the establishment of interest.co.nz is more "productive" than if you had invested your money in a rental property for expample?
BH talks facts and presensts
BH talks facts and presensts them as such. He looks at long term trends and where the market should be. What he can't do is predict the market as the market is based on emotions. Who cares how people feel about the market like QV and banks poll. That's so short term.
What fact has Olly and other optimists ever produced aside from temporary low interest rates and migration numbers which are now reversing.
BH can't predict housing in the same way no one can predict the stockmarket. One thing is for sure though, and that's history will eventually repeat itself. We will get back to those averages BH talks about but that could be years if not decades away. Read all the facts that BH and others present then read the BS that Olly and the banks presents and make up your own mind on where you think it will go. I put my money on historical averages coming back because they always do.
"BH talks facts and presensts
"BH talks facts and presensts them as such. "
Talking facts and objectively positioning a balanced report are quite different.
There are a couple of points being made. Bernard's forecasts are rarely close to accurate, therefore take with a grain of salt. His opinion as a professional journalist is worthless.
"What fact has Olly and other optimists ever produced "
So you're saying you are not an optimist. It's no wonder you believe every word Bernard and his coherts spin.
Its Cohorts,coherts is when
Its Cohorts,coherts is when cows get their teats pulled.
that's worth a "lol"!
that's worth a "lol"!
If only you'd get over 100
If only you'd get over 100 comments for a post about managed funds or equities Bernard. Clearly there's a disturbing property obsession in NZ.
Fair enough. Too true. But
Fair enough. Too true. But this one with Brian Gaynor on the stock market did get 66 comments ;)
http://www.interest.co.nz/news/gaynor-pins-future-hope-sharemarket-gener...
cheers
Bernard
Of which 2/3rds were PI's
Of which 2/3rds were PI's saying "I told you so". "Can't invest in anything alse in NZ except property, as this article shows no one trusts the sharemarket ...." etc
It's impossible to get high
It's impossible to get high traffic and comment volume without attracting a certain proportion of mouth-foamers, mouth-breathers, trolls and conspiracy theorists.
Have been thinking about this
Have been thinking about this recession and comparing it to what happened in the 70's when things were very bad economically. We knew that people were having a struggle but the good thing about it was the doom and gloom merchants were not able to have a field day, pushing their own barrow by constantly bombarding us with irrelevant information day after day. There was no Internet and economists were relatively unknown.
Now the government thinks that billions of taxpayer funds have to be spent on Broad Band because we are behind the rest of the world in technology. I seriously question their reasons and wonder if there is a more sinister reason behind their grandiose plans.
The fear factor of sites such as this, I believe is counter productive. The horse has already bolted because people have been living on borrowed money because they have to have all the mod cons without actually earning them.
But the disease of ‘spenditis’ continues on unabated in Central and Local Government. Why? Because nearly all communities are led to believe that they have to have 'fantastic facilities' that are not affordable to bring people into their communities. Taxes and rates just keep on going up, up, up, up, up. Which makes it all counter productive.
The reality is New Zealand is a small Pacific Island and cannot be compared to Australia. The sooner our politicians and bureaucrats wake up to the fact that we are in the same boat as the people in Fiji, Samoa etc are, the better for us all.
Central and Local Government must be drastically downsized as they are holding us to ransom.
Sally, The beauty of the
Sally,
The beauty of the Internet is you are free to read or ignore, but even better the raw data and research is out there for you to make your mind up in your own time. Before that we only had what was in the papers and the TV, a one way, shallow look at the world through the eyes of some possibly wonkie journalist publishing in a paper usually owned by a right wing media mogul...I read the Torygraph and others and the opinion pieces are usually biased towards the journalists strong political views, but I can then go off and research for myself, of listen to counter, or supporting arguments for those pieces and make my own mind up, this is tremendious freedom.
So if you dont agree with what BH and say I say, I dont see why you complain that we are doom and gloom, our outlook / analysis is based on information, dont agree, its simple do your own thing. Dont call us doom and gloom without simlar research as to why you think its a recovery. or justify why we should be positive....I'd like to be positive but all the information is not good....you cant ignore that...IMHO...or I wont anyway, you are free to do so.
There are bears and bulls out there, as an interesting aside Paul Krugman commented that if ppl had followed what the WSJ had said/advised in the last few years they probably would have lost a lot of money....
"spenitus" yes Ive seen comments that Buller? council (for one) was doing a works (stadium?) because they had to because...um other councils were and so the population would move, thats plain crazy....they should be shot IMHO.
Drastically downsized, sorry I dont agree...kept in check, yes...
Its simple to my mind, if as with say health care publically funded is way cheaper (and it is) there is no sense in wasting twice our GDP on a private system...
regards
"There was no Internet and
"There was no Internet and economists were relatively unknown."
Ironically, the Internet is the very reason the world's economies will not suffer the way they did in past recessions.
"Now the government thinks that billions of taxpayer funds have to be spent on Broad Band "
It's necessary if NZ is to compete globally. As you've correctly pointed out "New Zealand is a small Pacific Island and cannot be compared to Australia"
More rate increases at the
More rate increases at the short end and cuts at the long end. Amazing curve flattening at present. Bollard wanted people on floating mortgages but the curve changes over recent weeks must be tempting people back into fixed again. His last hike was a disaster for his strategy of keeping mortgages at the short end of the curve. I think a no change decision in Sept is a no brainer now.
"QV prices down 4.7% since
"QV prices down 4.7% since 2007 peak". So anyone who has a property that had a 95% LVR in October 2007, has been effectively wiped out; only the debt is currently left. And those that had an 80% LVR have an equity revaluation loss of nearly 24%. Money in the bank at 9%,then 5% pa. during that time seems mighty good looking by comparison.
I think one would find that,
I think one would find that, if they were paying off principal as well as interest (which would have been tough when interest rates were higher (but still possible) that they maybe even break even now at current values? only if they were to sell of course and realise the impact current conditions.
As usual, beg to disagree
As usual, beg to disagree with your predictions and many of your arguments Bernard. I note that Australian houshold leverage ratio is the same as NZ, and yet they had a 20% increase in prices over the last year. You say that "baby boomers will start selling down their houses and rental properties to free up cash" but this has its own issues. For a start it drives up the prices of smaller houses. As they die, the inheritance given to their children makes them in turn more wealthy and able to pay more for housing.
You always harp on about 'affordability', Bernard, as if this is the sole driver of the price of houses. But it is only a loose connection for many reasons eg. families often have more than one income, many have equity in property already, and of course many people earn over the mean wage and so can spend more on housing. Not to mention the fact that people nowadays are more and more happy to live with debt. Eg. I have a big mortgage but am ok with that because I still pay the same as if I was renting. And I would sooner have my money tied up in real estate than gamble on the fickle sharemarket.
Drivers of house price include many variables beyond the ones you think are important. Eg the price of building a new house soon to go up with the GST increase, local migration which can make cities increase in growth despite national migration stats, petrol price increases which can encourage people to spend more money to live closer to where they work.
As the recession ends, the housing market will pick up despite your protestations and misconceived predictions.
Good comments John. I agree
Good comments John. I agree with your observations.
"... have a big mortgage but
"... have a big mortgage but am ok with that because I still pay the same as if I was renting." I assume that you mean your repayments ( interest only ?) are the same as what you would rent the place for. But what value do you place on the alternative use of the funds that you have in your house? If you sold the place and stuck the funds in Rabogirls pocket at 5.6% for a year; even after tax, would the cash return be more or less than the rent you would pay ( Let's not even get into the running costs etc!).
Hi BH UKMAN| 10 Aug 10,
Hi BH
UKMAN| 10 Aug 10, 12:25am
Said
the government budgeting for supply needs and releasing land in areas like Auckland
Well noted UKMan.
BH, You omitted one of the largest factors in house price gains over recent years. Owen McShane [ww.mcshane.orconhosting.net.nz ] has been desperately trying to point out to the powers that be in local and central government [along with others like Pavletich [w.performanceurbanplanning.org] that one of the main problems is Metropolitan Urban Limits. The ‘smart planners’ who want to dictate how people live their lives want people to live in concrete boxes along arterial routes and ride bicycles and catch buses but preferably walk everywhere. Well, most people just do not want that. But the ‘smart planners’ [read socialist controllers] are in control and set urban limits. The law of supply and demand helps drive up land prices at a current ratio or about 10 to 1 inside MUL versus outside MUL. Couple that with Council voracious monopoly demands for development contributions also driving up house prices, and then couple those with all the other 10 points made by BH, and you have the housing price bubble.
Looking forward, perhaps expect the new AK governance to open up land at a fairly fast pace. Watch the government duplicate that in other main centres with council amalgamations leading to MULs being expanded fast.
There are now more drivers pushing down than up. BH. Your conclusion of 10% or more down is more likely.
Don't be silly - there's no
Don't be silly - there's no such thing as supply and demand - there's only greedy property investors, innocent would be first home buyer victims and a government/real estate agency conspiracy.
Of course there's supply and
Of course there's supply and demand! That's why there are fewer and fewer buyers ( demand) and increasing listing by the day ( supply, at least a years worth of it and growing!). What does the acedemic, not the emotional, supply/demand formula tell you will happen in that scenario?
Yes you can just see by the
Yes you can just see by the negative headlines on the front page of the hearld yesterday that most people love to hear bad news. The problem was all the price increases that had happened had gone UP! Makes you scratch you head at times!
And what did the words above
And what did the words above the figures say, Gavin? "Value - shaky"; "Sales - down"; "Gloom - rising" or have I got a different paper to you!
this one from anon at 12:08
this one from anon at 12:08 was worth reposting.
"We have never tried to be a property investor"
Then your commentary surrounding property investment needs to be toned down and less one-sided. Your opinions and predictions are not based on experience, market insight or adequate knowledge.
"My overall aim is to build a business .. helping the New Zealand econony producing higher paying jobs"
Rest assured higher paying jobs in New Zealand will not result from this website, the information it publishes or most certainly the debate it creates.
"A nation built on property investment won't do that."
Bernard, this statement is clearly where your negative sentiment lies. It underscores your fascination with the housing markets imminent collapse.
The property sector employs many people and encompasses a vast array of skills and disciplines that help support New Zealand's economy. "Property investment" is just one facet that the sector has and will always rely upon.
Every nation has been built on property investment.. without which you would be living and working in a grass hut.
That poster is confusing the
That poster is confusing the word "investor' and "developer".
"That poster is confusing the
"That poster is confusing the word "investor' and "developer"."
No I didn't.
Try to undertake a development without private equity capital and other forms of investment.
Without the developer, there
Without the developer, there would be no need for the private equity capital? That capital would be deployed elsewhere to realise a return. The private equity capital is therefore part of the development prosess, not an investment.
"Private equity capital" when
"Private equity capital" when deployed is the same as an investment, moron.
In the company it's placed
In the company it's placed with, not the property.
So investing in a company
So investing in a company that invests in property is ok in your book? Sounds like how most property investors invest - via their LAQC's.
He's right you're a moron.
He's right you're a moron. Private equity capital can be the deposit you put up for your house. Some of you guys really are an embarrassment .
Okay. So that money that you
Okay. So that money that you get to buy your house. Does the lender get a partial share of any profits you make on it, or do they just get the principal back, plus interest? If it's P&I they have invested in you, not the property.
Hey financial whizkid, what's
Hey financial whizkid, what's used to secure the P&I? That's right the Property. They can't sell off the borrower to recover their INVESTMENT. Yawn.
Why do lender lend money? To
Why do lender lend money? To make a return on the money. It could be property, goldfish or aerospace engines. Whatever it is, the lender is lending to the developer, petshop or factory. It is not investing in any of the assets. It may take a lien over the good to minimise its risk. But lender lend on the basis that they will be repaid, plus an interest rate factor, based on the risk and skill of the borrower.. They do not, outside joint venture partnerships etc, take a share of the profits as part of their lending descision.
I give up. Simpleton.
I give up.
Simpleton.
So if you sell your hosue for
So if you sell your hosue for a profit, what percentage are you going to give to the bank for lending you the money?
The developers return needs
The developers return needs to come from somewhere - with no investment in property there would be no return for the developer. With no return then there is no incentive to build. With no building there is no where for productive workers to live. Vicious circle. Only way out is for the government or coporates to provide accommodation and build the cost into taxes or salaries.
i get frustrated with the
i get frustrated with the spin sometimes
here are some cold hard facts:
Data based on REINZ monthly medians
average house price calculated: Total money spent/no of sales
fall
suburb
date
$
%
beachaven
highest mediansale price
$436,000.00
Dec-07
current mediansale price
$403,500.00
Jun-10
$32,500.00
7.45%
highest averagesale price
$453,845.02
Apr-07
current averagesale price
$415,771.20
Jun-10
$38,073.82
8.39%
birkenhead
highest mediansale price
$580,000.00
Jul-07
current mediansale price
$522,000.00
Jun-10
$58,000.00
10.00%
highest averagesale price
$613,953.95
May-10
current averagesale price
$549,055.54
Jun-10
$64,898.42
10.57%
takapuna
highest mediansale price
$825,000.00
Feb-08
current mediansale price
$570,000.00
Jun-10
$255,000.00
30.91%
highest averagesale price
$1,109,689.66
Feb-08
current averagesale price
$639,606.43
Jun-10
$470,083.23
42.36%
devonport
highest mediansale price
$885,000.00
Aug-07
current mediansale price
$687,500.00
Jun-10
$197,500.00
22.32%
highest averagesale price
$1,229,983.33
Aug-07
current averagesale price
$717,625.57
Jun-10
$512,357.77
41.66%
Data based on REINZ
Data based on REINZ monthly medians
average house price calculated: Total money spent/no of sales
fall
suburb
date
$
%
beachaven
highest mediansale price
$436,000.00
Dec-07
current mediansale price
$403,500.00
Jun-10
$32,500.00
7.45%
highest averagesale price
$453,845.02
Apr-07
current averagesale price
$415,771.20
Jun-10
$38,073.82
8.39%
birkenhead
highest mediansale price
$580,000.00
Jul-07
current mediansale price
$522,000.00
Jun-10
$58,000.00
10.00%
highest averagesale price
$613,953.95
May-10
current averagesale price
$549,055.54
Jun-10
$64,898.42
10.57%
takapuna
highest mediansale price
$825,000.00
Feb-08
current mediansale price
$570,000.00
Jun-10
$255,000.00
30.91%
highest averagesale price
$1,109,689.66
Feb-08
current averagesale price
$639,606.43
Jun-10
$470,083.23
42.36%
devonport
highest mediansale price
$885,000.00
Aug-07
current mediansale price
$687,500.00
Jun-10
$197,500.00
22.32%
highest averagesale price
$1,229,983.33
Aug-07
current averagesale price
$717,625.57
Jun-10
$512,357.77
41.66%
I know you like charts,
I know you like charts, Bernard. Can you provide one showing correlation between your "predictions" and volume of internet traffic. I am sure you have them.
All these news/discussions
All these news/discussions for just a fall of 10% and again there is no fixed time frame by which this fall is likely to occur.
Does not seem to be worth it.
Prices and value are not static and tend to move up and down always.
And homeowners can't be bothered to be worried about such movement because the value they get from staying in their own house is different and not always oriented towards capital gains.
Prices will not fall by
Prices will not fall by another 10%...they will fall by far more than that. This is a new era...one of thrift and debt avoidance...of window and sales shopping....of home vege gardens and makedo....higher crime rates as thefts increase....falling wages as costs are cut to chase up some demand.........wake up folks...saving is in and splurging waste is out.
Medians are meaningless
Medians are meaningless especially in highly volatile times.
A monthly median can be distorted by just a few higher priced properties pushing the median up although all properties in the sample fall in price. Try doing some figures on just how easy it is to distort medians. A major problem is that the REINZ figures mix price stratifications. REINZ want the public to be deceived. The RBNZ acknowledge the problem with house prices and so do QV. The government is working on better methods but it will take time.
From Stats NZ:
''Statistics New Zealand recently undertook a Review of Housing Statistics: (http://www.stats.govt.nz/browse_for_stats/work_income_and_spending/Income/review-of-housing-statistics-2009.aspx)
One of the recommendations of this review was that "Statistics NZ, with input from Quotable Value/PropertyIQ, the Treasury, the Reserve Bank, the Department of Building and Housing, and Housing New Zealand Corporation, should lead an investigation into different methodologies and data sources for quality adjusted house and land price indexes with a view to confirming or upgrading existing measures, or developing new measures."
They are not doing that because they have faith in the existing data set. In Australia, there are many more methods including one called the hedonic method or such like. It gets complicated but here in NZ we get the best of the worst information.
The reality is that there is no worth while set of readily available housing price data suitable for public consumption.
Dont get it those who
Dont get it those who predict drops are "negative"
What is so negative about affordable getting better?
What is negative about those who have purchased the family home, raised the children, and its still worth 3.5 to 4.5 times more than what they brought it for 15/20 yrs ago?
Who cares it is now not worth as much...when upgrading or downgrading, all the other have done so to.
What is so negative about those who over leveraged, didnt do their homework, or keep to good business practice and the proverbial has hit the fan?
What is so negative that property is not sucking the money out of the productive economy.
Is it not better that the shrinkage off the economy hits these people and not the 'savers'
Its about as negative as pump petrol prices drop tomorrow by 50c + or the mortgage principle dropping fast.
Its all good news
It's just vested interests
It's just vested interests trying to use the oldest propaganda trick in the book.
Data based on REINZ monthly
Data based on REINZ monthly medians
average house price calculated: Total money spent/no of sales
Beachaven
highest median sale price $436,000.00 Dec-07
current median sale price $403,500.00 Jun-10
Fall $32,500.00 7.45%
highest average sale price $453,845.02 Apr-07
current average sale price $415,771.20 Jun-10
Fall $38,073.82 8.39%
Birkenhead
highest median sale price $580,000.00 Jul-07
current median sale price $522,000.00 Jun-10
Fall $58,000.00 10.00%
highest average sale price $613,953.95 May-10
current average sale price $549,055.54 Jun-10
Fall $64,898.42 10.57%
Takapuna
highest median sale price $825,000.00 Feb-08
current median sale price $570,000.00 Jun-10
Fall $255,000.00 30.91%
highest average sale price $1,109,689.66 Feb-08
current average sale price $639,606.43 Jun-10
Fall $470,083.23 42.36%
Devonport
highest median sale price $885,000.00 Aug-07
current median sale price $687,500.00 Jun-10
Fall $197,500.00 22.32%
highest average sale price $1,229,983.33 Aug-07
current average sale price $717,625.57 Jun-10
Fall $512,357.77 41.66%
So what are you guys posting
So what are you guys posting those stats saying ?...
They may not be truly accurate....By crikey, I recon they give a damn good represntation of the reality, and would not be to far off either way.
If have all the sales from 2006 to current in the area we live..have been following the markets for 40 yrs here, and in that time the mean, ave has been close to the national numbers and therefore thrends in that time.
I agree with BH that median
I agree with BH that median prices in NZ will drop another 10%. But let me qualify that.
I think in Auckland that they will fall another 4-5% maximum, then be flattish then rise very slowly.
But in some of the regional centres I am picking falls in the order of 15%-20%
Auckland has supply side issues, which, although exaggerated, will start to press in 2-3 years. It is where most of NZ's immigrants settle.
What immigrants. Increase of
What immigrants. Increase of 70 in June when comparing arrivals against those leaving for Australia and beyond. Auckland will suffer at least the same as others. In New Plymouth the number of empty rentals is currently twice the normal amount on a daily basis. This is a thriving provincial centre but rents have reduced up to $50 per week because of the competition for tenants. What are other people experiencing elsewhere.
Anonymous - not many
Anonymous - not many immigrants now but they will come again, its all cyclical
And most (around 70%) do settle in Auckland
I simply do not foresee doomsday for property in Auckland. We'll have a lean few years, but no crash
We will see Matt. As QV said
We will see Matt. As QV said yesterday things are not going to improve in spring and Westpac see values dropping for the next year and a half or so. I am talking to my clients and everyone I meet and they all say the same thing. They are all fearful of their financial wellbeing in general and as Rod Duke said on Friday the country has stopped spending. You will only need a few more months of no immigrants and then more and more strapped vendors will blink in Auckland and they will start accepting those offers from buyers which are going to get lower and lower as the listings increase in volume in spring. Those drop in prices will have to be factored into valuations by the banks and valuers and bingo we have the market values dropping in general. You need immigration increasing now to stabilise the situation and it is not going to happen when so many people are going to Australia.
Anon - as you say, we will
Anon - as you say, we will see. I'm no housing bull at all, but I'm also far from a housing doomsday merchant
I will be surprised if Auckland values fall more than 5% (in nominal terms) from here
BH said housing would fall
BH said housing would fall 30% 2 years ago just to get media coverage, he was wrong then and is wrong now.
What where you predicting
What where you predicting around March.June 2007?
Even Nov 2007?
John,Bernard is going to be
John,Bernard is going to be close to the mark when you factor in inflation and the fact that the market is going to drop slowly and surely (at the best) over at least a five year period as the toxic debt in NZ is worked out of the system. The unbelievable drop in sentiment in NZ over the last two months has been amazing and is predicted to continue for some time by a number of banks.
Yes house prices are too high
Yes house prices are too high in comparison to incomes.
As said by many other people we need to reduce the money being spent on our houses. i.e. not putting all of our income into them and pushing prices up. But that's not all. We also need to increase our incomes. People these days expect to be paid more for doing the same job and without much increase in productivity.
Our neighbours in Australia put more of their money into local businesses which provides them with the financial resources for those companies to invest and grow. When the companies we work for make more money, they can afford to pay more to their loyal staff and create more jobs.
How many times do we see fantastic NZ companies being bought by overseas companies and profits going offshore? Why do they do this? Because they see it as a great investment and way to make more money for them and their shareholders. To keep these profits in NZ we need to support our local businesses. You don't necessarily have to buy their products or services, but if you like the business buy shares in the company or if you're not comfortable with that you can put it into a managed fund. This is one of the huge benefits of Kiwisaver to NZ as a country and long term outlook.
I was told by a friend before the global financial crisis hit that houses are the best investment because they never go down in value and that shares are like gambling. This was the belief of many NZers, which is sad because it shows we didn't understand. Our house doesn't generate any income! A business if run corectly should be making more money today than it did yesterday. Each day it operates it sell more than the previous. So wouldn't that be something to consider before you decide where to put all your eggs?
So in summary NZ needs to stop putting all their money into their houses and at least start to think about putting the money into something that will generate money for them and our economy.
That is my simple view on it.
A possible solutions for our
A possible solutions for our housing problems:
If majority of people are prepared to share their accomadation with others, there will be reduced pressure on housing in this country. Look around you, how many single or couple living in a big house? Imagine how much money you'll save by sharing your house with others. You'll save on rates, insurance, phone bill, mortgage, maintenance or rent repayments ....... You will end up with more money left over to bank or spend. It will also drive down rents and house prices. A win win situation for everyone except the dreamers and the greedies who still think house prices are going to double every ten years.
Deflation is getting a firm
Deflation is getting a firm grip on the property market here and the higher cost of credit, set to worsen, will make matters more serious. Rents are likely to decline across the country. Renter properties will load up the listings. Aging BBs opting to downsize will add to the slide in prices. Real incomes will go on falling until the cost of homes has dropped to the point where families have some money left over after feeding the bank mortgage or the landlord. Meanwhile the govt will carry on with the current patter of spin until it finally dawns on them that the brown stuff has splattered up the Beehive interior walls....round about then they will start telling the truth....expenditure must be cut...borrowing must stop...stupidity and state waste must be replaced with prudent behaviour. No more booze and parties for the senior civil serpents.
That's what economists do:
That's what economists do: Play GOD and predict. Even if BH is correct, does it do much for the economy? I guess not. Live and let live.
Prediction is just that..
Prediction is just that.. nothing other than one person's opinion. Predictions may be based on historical data but relied heavily on interpretation of the data...
There have been many interesting prediction in the past incl. many on the ending of civilisation!
BH should set up his own religion and probably makes more money than running this website.
So, we like. Sit still and
So, we like. Sit still and don't take a view and act on it? Wait for the economic waves to come in and sit like started rabbits on the shore, waiting to be washed away? Hasn't Bernard made you think? He has me. I agree and disagree with much of what he says and predicts, but he's made me look up lots of things I didn't know about before. Keep predicting, sir! And we shall keep challenging you!
he said "jump' and you said
he said "jump' and you said "how high?"
Thta's 'cause he knew the
Thta's 'cause he knew the waves were coming in, we looked, and were saved ( You wanted a religious tone, didn't you?)
Sorry I don't believe in any
Sorry I don't believe in any religion. I am not neccessary disagree with BH but I tend to take a wider views from a wider range commentators.. After all he's a journalist! what do you expect (yes I read on this webiste so it must be true!)
BH is a realist. When the
BH is a realist. When the average mortgage repayment is 61.8% of your nett income, you are not going to be able to meet all you living expenses sufficiently, particularly in Auckland. We need to live within our means, period.
Unfortunately house prices in this country has also been artificially increased by the following factors:
During the boom time, lack of skill labours = high labour charges. You could not get a builder for less than $40/hr. Now many builder will charge less than $30/hr. Therefore you can build the same house now a lot cheaper than during boom time.
Same applies to many building material suppliers, now many offer huge discounts on building materials. Therefore the same house will cost less in building materials today.
Past greed is coming back to haunt us.
The economy is rooted. Read
The economy is rooted. Read the infrastructure supplement in today's Herald. The big guns from Fletchers downwards are worried. The big boys have relied heavily on infrastructure projects over the last 2 years, the money is running out. the private development sector is dead. I can advise you this with authority as I work in the architecutre and engineering field.
Consultancies and construction firms are having to buy jobs at massive discounts. Something will have to give soon
My prediction - 2011 will be just as ugly if not uglier than 2010
House prices will drop further
I take what Bernard says very
I take what Bernard says very very seriously.
When I first became aware of his predictions I'd just sold a house, had $ in the bank and he was predicting an imminent 30% or 40% drop in house values. Based on Bernards advice I would have invested the money in shares or Hanover and now be renting with between nothing and 1/3 of my capital left. Instead I bought another house, did it up and pay half as much in mortgage repayments as I would in rent - plus similar houses sell (right now, within days) around here for 20 - 30% more than what I put into it - doubling the money.
So I take Bernards predictions very seriously and do the exact opposite.
good call!
good call!
You should have waited and
You should have waited and just kept your money in the bank. Your capital gains are going to disappear over the next few years. You might have been able to buy without a loan. you should have rented and done the normal thing and kept your house money in the bank.