Average residential property values are now declining in most parts of the country, according to property valuation and data company Quotable Value (QV).
The QV House Price Index shows the national average value of New Zealand homes declined for the second consecutive month in March to $1,046,636, down $17,129 from $1,063,765 in January.
Perhaps more importantly, average values declined in 10 of the 16 cities/districts measured by QV's House Price Index in March compared to February.
The table below shows the average dwelling values nationally in all 16 districts measured, in each of the four months from December last year to March this year.
This shows that in January this year only four districts had a decline in average values compared to the previous month, but by February that number had grown to seven. By March it increased to 10 of the 16 districts.
The districts where average values declined in March compared to February were Whangarei, Auckland, Hamilton, Rotorua, Napier, Hastings, Palmerston North, Wellington Region, Christchurch, and Dunedin.
Average values have declined for at least two consecutive months in Auckland, Hamilton, Hastings, Palmerston North, Wellington Region and Dunedin.
It is significant that areas such as Palmerston North, which are now showing some of the biggest declines in average values, have been popular locations for property investors and have had particularly strong growth in values in the past.
QV said its House Price Index for March posted its largest quarterly drop in more than a decade.
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270 Comments
I'm pretty sure the 1pm press conference today will see Labour taking credit for bringing down house prices
If it's not thanks to Labour, then why are people making all this noise about the CCCFA?
Not to mention the removal of mortgage interest deductibilty for all those Palmy investment properties...
Don't worry, Luxon plans to repeal that legislation. It must be affecting his bottom line quite a bit, with 7 investment properties.
Well, it's a property speculator's god-given right to live tax-free while working folk pay for society's services (and landlord subsidies, and universal welfare benefits for many of them).
I didn't see the press release where Labour dropped income tax rates to offset gains made through interest deductibility changes... No, instead they increased income tax too so it was tax grab followed by tax grab.
Maybe you should join the Hosk and move to Oz,enjoy their tax rates below + capital gains + Stamp Duty...;
$0 – $18,200
0%
Nil
18,201 – $45,000
19%
19c for each $1 over $18,200
$45,001 – $120,000 32.5%
$5,092 plus 32.5c for each $1 over $45,000
$120,001 – $180,000 37%
$29,467 plus 37c for each $1 over $120,000
$180,001 and over 45%
$51,667 plus 45c for each $1 over $180,000
Note: These rates do not include the Medicare levy of 2%.
Here is a good overview of the property market at the moment.
The New Zealand Time Machine Housing Pivot Bites!
Andy Stewart is on the hourly RNZ news today talking about how much the market has turned for Palmerston North.
The Media certainly is not holding back, repeating the same thing over & over & over each and every hour.
Its like saying 7% rates this year Guaranteed on repeat.
https://www.professionals.co.nz/agent/andy-stewart
Andy Stewart must be the Trusted Real Estate Spokesman for Palmerston North.
What ever happened to Tim Mordaunt from Property Brokers ?
https://www.stuff.co.nz/business/91418098/property-brokers-manawatu-and….
David Clark, unsung hero.
There's a by-line I never thought I'd see.
Maybe in more of a Ralph Hinkley style however
Early days for anyone who understands property boom bust cycles, lets revisit later on in the year.
Looking to buy after selling late last year but will keep my powder dry for now.
Next part of the show will be the next interest rate decision next week.
Another 25bps almost guaranteed from the RBNZ is not going to do much at this stage, its death by a thousand interest rate rises.
You mean 50 bps? 25 is an outside chance only, I'd give it only slightly better odds than a 75 point hike.
I doubt it just watch, I predicted 50bps for the last two reviews and I was wrong and a 50bps rise was the obvious choice then so no reason to change now. They have pretty much already signaled 25bps rises at each review for the rest of the year.
I disagree. Last MPS explicitly introduced language paving the way for 50 bps rises - to me, it read as though it is a done deal but for a dramatic turnaround in the data. They risk longer term interest rates skyrocketing if not seen to aggressively target inflation. Lastly, an Uber-hawkish Fed gives them permission to go for it.
Yes the Fed has indicated they would have done 50 last time if it wasn't for Ukraine and the market is pricing in 50 for early May, so it makes it easy for the RBNZ to do it next week.
Thats Ok Carlos, you are wrong more often than not so we understand.
Sadly you will be wrong 3 times in a row. The RBNZ cannot afford to get further behind in the inflation flighting battle. I reckon the probabilities sit at 5% = 0.25% hike 85% = 0.50% hike and 10% = 0.75% hike. Market is pretty much pricing in a 0.50% hike and one thing most CB Governors understand is give the market what it has priced in the early stages of the battle and then surprise them later down the track. He has the backing of current inflation numbers and inflation expectations to call on should anyone doubt the need for more than 0.25% hikes. Slow and steady was yesterday's tactic when inflation was transitory.
Watch and wait... and wait and wait. If buying a piece of clothing the best time to buy cheap is when retailers are clearing stock for change of season. That might be now in the property market but wait to find the one you really love
Liquidation sales are a better time to buy.
Just the start of a long decline in house prices, this is with interest rates still at emergency levels anyone over leveraged should get out quick before deposit is gone and are in negative equity..
"Long decline in house prices"
"get out quick"
Flip a coin, heads or tails no-one knows.... not even DGM hahah
With inflation the main focus for FED rates are going up and with so many people in high debt we all know which way housing market is going way on down.
And so few see them coming.
“It is significant that areas such as Palmerston North, which are now showing some of the biggest declines in average values, have been popular locations for property investors and have had particularly strong growth in values in the past.”
I see Greg has put out a special shoutout to Tim Mordaunt
Be quick....to offload before your fellow investor needs to.
Lol.
I follow and invest fairly heavily in palmy.
Haven't bought last 3 years as numbers don't make sense and prices seemed bizarrely high.
I welcome a correction in palmy so I can get in with the business of providing quality rental accommodation to those not ready willing or able to buy themselves.
You'd have to pay me to live in Palmy. NZ's least desirable city IMO
In a way I'm glad we have reached this point but we must realise that what is ahead is a more mixed bag. The property bubble has done immense damage to our real economy, many who benefitted on the way up will find normalisation miserable.
Apart from sectors buggered by covid, the "normal" economy is doing fairly well, many export sectors are booming. The assumption is any dollar increase in property is at the detriment of the "normal" economy, I don't think they're exactly competing for the same investment dollars, and in some ways are interdependent on each other. If the "normal" economy was immensely damaged, you'd get big exodus and real estate would head south pretty quick.
It's more social damage than damaging the economy.
The normal economy would probably be 2x it's size if we had decided to throw our investment $$ into businesses instead of housing, if we had been brave enough to deal with it 20-30 years ago. You aren't taking into account the oppourtunity cost of having almost all of our money in housing instead of things like shares/businesses. You should look up to see how much of our money is in housing compared to our peers, we are something like double that of the US.
We chose to retreat and fortify our houses rather than striding out and solving the problems of the real world. What a failure of imagination.
It is more a failure of education.
You are right but having assets types available at acceptable risk/taxation/bureacratic interference discourages many. Look at Rocket labs operated in an area with little of the above and wooosh as it climbs to the USA.
Rocket labs is a case in point as it is now a US company, just based in NZ. If Peter Beck wasn't there, it almost certainly would have been shipped off elsewhere. It is currently majority owned mostly by various US venture capital firms, because the funding from the NZ side essentially ran out (Tindall and Beck obvious early investors). Imagine if we had a NZ home grown rocket company that was fully owned by NZ interests... instead we put the billions of $$ that was invested into this company into about 1 month of over inflated housing stock. Brilliant.
Having inflated share prices isn't always a bad thing as it enables companies to issue more shares based on those prices and can result in huge ongoing growth. Tesla is a great example of that in the last few years.
But nah, let's keep pouring money into overpriced mouldy shit boxes because that will make us rich, not investing in high tech future growth stories...
Americans only have approx 35% of their net wealth in property (mainly their home), thus have a lot more disposable income to invest in other assets like Rocket lab. And because they have so much more they can spread the risk ie have some of that in less risk and then afford to put some into higher risk, including a punt in Las Vegas if they want.
Meanwhile in NZ approx. 65% of our net wealth is in property, leaving us very little to invest in other assets, let alone save, cover health and education costs, etc, and the ones we do are more in one lower risk basket.
And the difference in the % of what is in property is not due to us not getting paid enough per se, but our house prices are approx. 50% more expensive than they need to be.
And almost all of that is based on restrictive Govt. land-use policies that enable land banker rentier and council monopoly gains.
It's also because property is veerrrry tax efficient in this country. Why work when you can make untaxed gains in property... and why put your money into the stock market where it attracts the top tax rate or at least the corporate tax rate?
There's a lot of assumptions the additional dollars spent on shares would follow a path of linear returns, and you have to remember housing investment is financed over 30 years (or more), business investment is usually done in cash, or at much higher lending costs/restrictions.
What business you would have puored your $$ in? you know that NZ is a remote location, with expensive labour, shortage of many skilled categories, expensive manufacturing environment (NZ cares about the environment), with a very small local market, widely distributed etc.
You understand that madness about housing is the result of an economy that does not have any thing more to offer (agriculture and primary products are very heavily invested in). HOw is NZ a peer to US is beyond me. NZ should be compared with other primary industry based countries, and it is doing (not as well as Holland maybe) in those areas. Maybe it could do a little better. But do not full yourself that housing is depriving Business NZ from needed funding. It is the opposite, excess money supply that has not other place to go, all ends up in property
And yet, we have produced many quality companies. MFT, XRO, ATM have all started in NZ and done well overseas - although XRO have abandoned the NZX now and shifted to the ASX. Perhaps ATM will do the same - trading is driven by the ASX already. These are symptoms of our poor quality capital market.
I'm sure there's a feedback loop and causality isn't one-way, but I'm confident that if we didn't have so many people only willing to consider term bonds and investment property, we'd be able to grow more of our small companies into big international names.
Two of the small Christchurch companies I invest in - Syft and Pharmazen - have both recently had to look overseas for significant funding to allow them to grow. Both sell internationally. I wonder if they'll bother listing on the NZX or go straight overseas like Rocketlab?
Literally any of the companies that have been shipped off to overseas investors? I already invest in half a dozen NZ companies because I want to see them fly and some of them already have. The problem is investors like me a few and far between, instead there are very few investors who will invest in NZ companies, which is why they all have to leave to find funding.
Generous housing taxation and the cost of housing is EXACTLY what stops investment into other areas of the economy. You are fooling yourself if you think it's anything else. Halter, for instance, is a great NZ company which will likely have to get overseas investment to get anywhere. Then we can say bye-bye to all those well paying jobs and economic benefits.
Treating us only as an agricultural economy and doubling down on that is going to make us poorer in the long run, not richer. Look at the richest countries per person in the world, none have primary sector farming as their main industries and we keep slipping down the list of rich countries BECAUSE we have farming as our main industries. There is nothing stopping us from having good, well funded capital markets except that we are a bunch of property obsessed idiots that think swapping ownership of already overpriced shitboxes somehow makes us wealthy. And it's helped by tax system that goes easy on property and hard on financial markets.
Do we blame people for making money investing in housing when they are incentivised to or do we blame those who set up those incentives?
We blame both, because one reinforces the other.
It's a cultural problem as much as an incentive problem. We actually have great incentives for local stock market investing - same lack of capital gains as for property but without the bright lines test, and we're one of very few countries with imputation credits which mean if the company has already paid tax you don't get taxed again on the dividends (or taxed as much, at least). We have high dividend yields compared to other markets, great for income investors.
But, people just aren't interested because they think stocks are complicated and risky. I could setup a lifetime of investing in an afternoon by picking a provider, picking a couple of EFTs, setting up an automatic payment, and be extremely confident my retirement will be looked after. Maybe increase the automatic payment once a year, maybe spend an hour a year rebalancing. My money would be spread over the whole world's publicly owned companies. But people don't want to engage with that - much better to take out a mortgage of several times their net worth to buy a house and put not only all their eggs, but a bunch of bank's eggs as well, into one basket.
Yep. It’s really not that hard the share market. The problem is people are not well educated in NZ and don’t really have a clue what proper investment actually is. So, they invest in houses, which is what the lowest common denominator do, and so create artificial demand and so the prices rise, artificially. Now, the rug has been pulled due to financing costs and the market will collapse, which is pretty obvious. Share market investment is different, you have to diversify, across industries, countries, and have mix of dividend paying and growth stocks. Never invest in one company only, and never take tips…..and also the general rule is never invest in NZ, as the same people promoting property are the same people running corporates, and they aren’t very bright and they don’t make money.
Overseas properly run companies are where is is at. I have built a portfolio in the millions, which now earns 25% each year (on average), excluding dividends. No leverage and no debt. I don’t trade and I don’t really need to do anything (no tenants). If you know what you are doing properly is just such a poor investment option.
Agree 100%. It's madness, trading real estate just redistributes wealth and makes us poorer as a whole as the price of existing assets are driven up, whereas development of industry that increases productivity actually generates wealth. Hopefully, as a nation, we change course.
The Oil has gone. Its dry times ahead.
Does this not contradict the info that Corelogic released, especially for Auckland?
No. The other figures released don't take into account what's being sold.
Note rising inventory and days to sell are steadily increasing.
So if the straight non adjusted avg stays the same it just means that people are buying more house for the same money.
"Steadily increasing "
That would say it is not a panicked sell out or FONGO. Emphasis on steadily
Even in large correction, history says its likely to be a slow steady decline.
Can someone pass the popcorn, salted caramel please... as a business person I find the situation intriguing
Hi HW2,
Popcorn will only make you fatter and lazier.......
It certainly won't help you buy a house.
TTP
Tim Mordaunt - Buying a house now is like a Chicken Voting for Colonel Sanders. Its NOT a good idea !
You told me the other day so I know already
Just like a Tsunami. Bankruptcy happens slowly at first then all of a sudden.
Hemingway. Sort of.
Bugger prices still going UP here in Tauranga, Aucklanders need to BE QUICK.
Get in before they start falling!
Boomers love Tauranga
Nah the Gen X that have already made it and bailed out of Auckland are already here as well.
"Made it and moved to Tauranga" sounds like a good soap to rival Shortland St?
Or maybe your namesake, Baywatch? Where's Billy T James when you need him. A perfect follow up to Turangi Vice.
I think there was another show with that name ...featuring the Hoff and Pamela Anderson. Maybe they live in Tauranga now as well?
Crazy :)
If you are set on moving to Tauranga ensure you buy on higher ground and some distance from the coast, certainly not Papamoa. The off-shore Pacific Plate subduction zone has been grumbling in recent years,,,,,witness the White Island volcanic mini-explosion and the Kaikoura earthquake. Papamoa would be the perfect place to experience a giant tsunami if you were so inclined.
Have a good day.
People should use their GPS to give them a height above sea level. Yes Papamoa is only 3 to 4 meters above and that was always in my mind when looking down there. Bought a place 120+ meters above sea level but it was mainly because I wanted an epic view. Reality is however the chances of a Tsunami are about the same as you winning Lotto so its not really worth the worry.
Central bankers are real culprit : https://www.stuff.co.nz/business/world/300560572/a-toxic-mix-of-recessi…
Worst is yet to come as the pain has just begun and still is hitting hard.
QV said its House Price Index for March posted its largest quarterly drop in more than a decade.
Just wait for April, when the quarterly decrease should at least double.
You'd have to think there are several new records ahead of us yet.
And pray tell me all you prophets of doom, who will be buying all those mortgagee-sale houses as FHBs can't pay the mortgage. Come on, of all the above, follow through on your speculations, no one's recited the last chapter of the narrative. Your speculations count for naught if you can't give us the whole story.
Quell Surpise
Any thoughts on what to do with an upcoming mortgage due to roll in June. (My Sons) He's been offered 12m 3.6, 24m 4.3, 36m 4.5.
He's also convinced that although OCR will increase, he believes mortgage rates won't up much more and inclined to stick to 1 year rates ????
3.6% for 1 year is very sharp but there will be significant refinancing risk at the end of that term. 2 and 3 year terms will likely save him from a potential mistake (getting spooked by sky high rates and fixing for too long) in a year's time.
so getting spooked and fixing long now will save him from getting scared and fixing long later?
I'm saying fix mid term (2-3 years) for a reasonable rate after which time the reason to panic will likely have passed.
Depends on his appetite for risk but splitting his mortgage over those three rates would reduced his exposure to large interest rate hikes in a year but allow him flexibility should rates drop when we are firmly in recession in the next 12-18months.
This is excellent advice.
Can he split it to hedge his bets. My mortgage is in 4 chunks (3 is probably better) on different length terms. This allows me to adjust strategies as only 25% of it renews each year or so. Some times I go 12 months and other times out to 36. (Was typing at same time as Albert above, agree).
If he expects to accrue surplus cash over the year setting up an offset facility will also benefit him in the long run.
Agree - I dont know why kiwis dont use offset facilities- yes its a variable rate - but the variable rate is not much more than a 2 year fixed rate and you have the advantage of upping your repayments meanwhile any surplus cash is offsetting your interest.
We used on our first house an offset loan and saved ourselves $250 000 in interest repayments (on a $400 000 mortgage)
I never understood why banks charge more for variable as opposed to fixed loans, especially in a time of increasing interest rates, you are taking on the risk. My best guess is they have locked you in to their bank.
I have an offset facility of $200k, which is completely offset thus all my payment is going to principal. I also have the flexibility of using part of that $200k should I need it. You would need to find a term deposit of at least 6% to come out even.
Good comments Albert. Sound and insightful thinking.
Albert - welcome to the minority of 5% group.
Yup, that's the way to do it. My offset is at $110k at the moment.
I read somewhere the banks are allowing extra principal repayments without penalty - why wouldn't they, when they can lend the money out at a higher rate to someone else.
At the risk of sounding flippant, why does he not just sell his house?
Talking about those different mortgage rates is to be talking about cash flow differences of a hundred, maybe 2 hundred dollars a week. That is peanuts compared to capital gains/losses.
If he sells now and rents, he will be saving thousands of dollars a week in capital losses.
Most often our quality of life is determined by the big financial decisions (to sell or buy), but we spend more time focusing myopically on the little ones (how long to fix for).
I practice what I preach. Sold my house, and rent. Although the rental is a bit of a shit box and a step down in standard of living, I am very happy with my choice. A little short term inconvenience for long term gain.
Worth a thought, at least?
I’m in the same boat as you, but alas, most people don’t seem to think like we do. Perhaps they don’t like easy money?
A dangerous game to play, you might not be able to afford an house of the same standard you used to own.
Very dangerous game, for everyone I know that has opted out of the market for one reason or another it has been suicide. Selling your house and renting hoping the market crashes is a stupid idea. Even selling in Auckland and moving to Tauranga has obvious risks if you ever intended moving back.
That’s because the conditions we are currently facing have never been seen in recent history. If you can give me a reasoned argument explaining why house prices will (or even can) go any way other than South from here, I’m all ears. Truly successful investors are the ones who are attuned to multigenerational structural shifts in markets - events that are without recent precedent, and therefore overlooked by the masses who cling to the ill-conceived idea that recent history repeats.
If you can back cost how much a new property costs it can help shed light.
Council fees including subdivision and costs: 100 grand minimum
Build cost on 200m2: 500 grand minimum
Then you have landscaping, maybe more groundwork if you're elevated, and that's before you get to the section costs. The section cost being the biggest question mark and the only one likely to move much.
Realistically, the cost to generate one unit of housing therefore is probably a minimum of 800 grand. Thats the minimum, some of these houses now are costing millions to make, and you expect to pay a premium for views or living centrally. I wouldn't expect to see values go backwards long term, unless something external fundamentally changed. Long term economic retraction, natural disaster, depopulation etc.
Obviously the fortunes of some regions, house sizes etc will vary.
I don't know how much people think a house should cost but it's not a cheap exercise.
Cost to build doesn't have an immediate impact on buyers willingness/ability to pay. In the long run it will cause supply constraint, but that's a few years out. In the short run, I'm afraid builders will be left holding the baby. Hopefully will see some long-awaited structural change that brings cost to build more in line with developed nations.
I can only see houses getting more expensive to build in NZ. There's a machine feeding continual standards improvements that is crazy inflationary.
They're thinking they can print houses cheap but it's only walls which isn't an overly expensive part of the build.
And yet the quality of the standard home here seems to be decades behind.
Standard cheap homes are pretty average, you'd be better with a 50s/60s Rimu bungalow. The decent stuff is world class, like anything you pay for what you get.
Fewer and fewer of those in Auckland now. Around here they're demolishing them and replacing with 6 or more townhouses. Not even worth moving them these days.
RBNZ Financial Stability Report November 2021:
"We estimate that the value of land now accounts for around 60 percent of New Zealand's median house price, compared to about 40 percent five years ago."
Also, from previous posts, it seems quite clear that you're a FHB, hoping to buy your first house, so I don't understand you claim that you have sold your house at the end of last year
Of course there is no suggestion that we are being humped on the cost of building in NZ......
Not to mention that tradies can charge what they want at the moment...think of a number & double it,take it or leave it.
Maybe you need to do some due diligence on your potential landlord to see how leveraged they are. If the impending downtown causes them to sell. The costs and inconvenience of being forced to move may offset the benefits of waiting for prices to fall.
Indeed and while it has been impossible to predict the market due to out-sized external influences I think people miss-understand to a degree the scale if the fall required to meet affordability experience elsewhere (eg the US).
Investors are unlikely to be as hurt by this fall as FHB's. As an example I recently sold an apartment in Auckland at the top of the market in readiness to buy off the plan further out in Auckland. An off the plan deal that was done early last year as many where claiming the house prices were at the peak. It will be built in Grey Lynn and it would require a 50% fall in the market for the price I will pay to meet the market.
Fear of getting in market is justified when there are clear negative changes afoot and I would not and am not investing in new property at today's prices but be aware of sitting on the side-lines too long.
It is not a game.
This is about making life-changing financial decisions with eyes wide open and a well researched understanding of macroeconomic drivers.
For a long time now Kiwis have ignored the risks involved in owning property. The BBQ/water cooler/MSM banter has always been about "getting on the property ladder". There has been a real blindness to the fact that markets go up AND down, and that bubbles pop.
Yvil - is the OP's son not playing a "dangerous game" by holding real estate in a market that looks to be crashing fast now... with more headwinds against it than even the Irish market at the peak of their bubble? There is a good chance that he will lose 50% of the houses value, and as he is mortgaged he may lose 100% of his capital (depending on size of mortgage).
The reason why it's dangerous is because you don't know when the market hits bottom.
This is what us likely to happen in the real world:
The market is falling, "I'm not catching a falling knife"
The market is going up again, "It's just a dead cat bounce"
The market has risen and buyer competition is strong again, "I'm not paying the rising prices"
The market has kept going up, "bummer I've missed out, well I'll just vent, blame and abuse other property owners"
This is the challenge, you have to make two good decisions - getting out and getting back in. High transaction costs too, it's not like a stock market short. Might need a 5% drop just to break even with the costs of buying and selling with extortionate NZ agent fees, especially factoring in the price of hassle and work involved in each transaction.
Good chance that the market is going in the right direction at the moment though, best of luck. Personally I like to keep my regular life and my financial life somewhat separate.
The market has maxed out, "It cannot possibly go any higher from here"
Famous last words in 2020.
Only reason was emergency rate cuts then FOMO should reverse quite quickly .
… and you think there won't be any yet unforeseen forces popping up in the future that could affect house prices ? That's very naive
Quite right, Yvil. Never sensible to try and jag the absolute top or bottom - just look for sentiment extremes and go contra. Catching a falling knife not quite as dangerous when buying a house as stocks or the like. The tried and true Wall St mantras are never more relevant: 1) leave some on the table for the next guy, 2) bulls make money, bears make money, pigs get slaughtered.
Very true rjn1. I didn't time the top of the market perfectly, and I am OK with that.
Nobody who is still in the market can laugh at me for selling "too early" because the fact is that the peak has passed, and anyone still in the market has missed it.
I left a little on the table, which is a good thing. And have no intention of trying to time the bottom perfectly either.
The important thing is to buy low, sell high. Perfect timing is not needed and is very difficult to achieve.
Hold on Fitz, in past threads you've made it quite clear you were a FHB, frustrated at the high prices preventing you from buying your first house...
Please copy and paste those earlier comments
Nope.
If his mortgage repayments are lower than rent then he would be better off holding. It would only be a paper loss. If he wants to buy and sell in the same market then the house he is purchasing in the future will also have declined in value. For first home owners that can afford repayments there is no need to panic. If he was highly leveraged on multiple properties it would be a different story.
True - but right now it’s really hard to see upside risk
More likely there’s a fair chance he could buy his old house back at 20-50% discount depending on where this ends in 3-5 years
The intention is to buy one of a higher standard. I have a high degree of confidence as the deck is so obviously stacked. But it’s not an approach I’d recommend, much like having one’s KiwiSaver in cash (which currently I do, but do not recommend to any friends who ask for investment advice).
And in a boom, many people overcapitalize.
You can see it on Facebook investors pages, where people buy a shitbox in Huntly then go on Facebook to ask what type of marble tile they should put in the kitchen.
I intend to buy a modest kind of family home, but pretty sure that within a year or two I'll be able to pick one up that someone has put a new bathroom, kitchen, landscaping, etc into in a euphoric bout of overcapitalisation. In a dead market, such things are never really added onto the sale price.
Feeling very confident that higher standard houses will be available cheaper in 3...2...
Yvil
Agreed; it is a dangerous costly game . . .
Just a selection of comments from March 2020 that I copied at the time which make for interesting reading :)
- "Here comes the freefall. Hold on . . ."
- "The housing market is going to tank big time."
- "the biggest hurricane in history just made landfall."
- "looking like a tsunami."
- "That means approx April 18th for when housing market will freeze over."
- "This will mean 25% drop in house price medians by end of 2021"
- "I'm guessing 30% to 50%."- "be -30% drop cone end April"
- "Prediction: House prices will be down 20% by October."
- "Its obvious now that the market is about to plummet and there is absolutely nothing anybody can do about it. We are going back to 2006 prices."
- "Til next month"
- "Shares just correct instantly, housing will follow like night follows day."
- " damn well it will be more like 30%."
- "Another dreamer. 30% drop minimum."
- "here we go! TIMBEEEEER!!!!"
- "in 6 weeks when price go backwards (6 March) . . . "
- "I am picking 30 plus percent . . . Also was picking NZX down to 6000 soon." (20 March)
- "to drop 40-60%"
- " double the banks prediction of 10-15% fall "
- "Blood, blood everywhere. Also known as a Blood Bath."
- " the"black swan" has arrived"
Same sort of comments late March 2021 following Government announcements.
great post P8.
Some of the comments section reads like the blind helping the visually impaired to see less.
by the way
Congratulations. I see the other day House Mouse grouped us together as those who he will not interact with. He doesn't like to be challenged and tends to go into a hissy fit.
A comment of his I loved was:
by HouseMouse | 21st Feb 22, 10:08am
I wish everyone luck. This is the point where I post no more comments on this website. I don't like the editorial direction at all, but that is the editor's prerogative. Best wishes to everyone, let's see how the year unfolds.
Priceless :)
Reminds me of the time my little brother didn't get his way. "I'm running away, you'll never see me again".
Packed their school bag, walked down the driveway and hid behind the letterbox waiting for Mum to come looking for them.
Isn’t it fair enough to not respond to people who, consistently, totally misrepresent my position???
I think it is, at least.
P8 has done it several times.
I can’t be bothered with such stupid / childish / disingenuous behaviour.
Housemouse, housemouse
What misrepresentation? . . . . Is that not your post. :)
You're an idiot.
You know exactly what I'm talking about.
You made several misrepresentations of my forecasts, which I corrected, and I have no interest in revisiting.
See ya knobhead, I have no interest in engaging with such a childish and sneaky commenter.
You call them an idiot and a knobhead but they are childish and not you?
Thanks Printer. Yes, it looks to be I am in the club.
And yes, I laughed out loud when he commented again not 5 minutes later with a disclaimer "but this one is definitely my last comment." :D
another total knob.
From a position of what percentage of the rate of growth?
P8 last year advised his children to sell out of their rental property portfolios (multiple houses) as he thought housing had peaked - but at the same time was recommending FHB's to buy - in essence acting like an agent for his children with the effect of transferring wealth from strangers to his own children.
But of course will claim he has FHBs interests at heart (lol). When in reality his motives appear to be enriching his children at the expense of FHB's he doesn't know.
Watch out for the wolf in sheep's clothing people. If you really want to know what P8 thinks, look at what he advised his children to do, not what he suggests anyone else should do....they should be the same if the advice is sound/unbiased/no self interest.
IO
The kettle calling the pot black - four years ago you said you had no property investment, consistently have called a bubble burst since but I read just in the last month you now claiming you have property in a trust. . :)
As for me: Clearly you don’t understand the difference between a FHB buying a home being long term and an investor buying a rental as a medium term investment. Not surprising for one who admits to calling bubble burst for seven years now. :)
Short term fluctuations in the market are irrelevant as a home is long term. Far better a FHB paying their mortgage down rather than their landlords . . . and better that they get those long term (tax free) capital gains rather than their landlord. That seems beyond you :)
IO
As you raise the issue, a serious question for you.
I had no problem with one of my sons selling four investment properties, but I would have strongly advised all four of my home owning sons not to sell their homes.
Now let’s see if you really do understand the difference between a home and an investment property.
When dealing with certain personalities, you realise that there is no point offering the cup more wine when the vessel is already full. It will only end up staining the new carpet.
Enjoy the weekend and try to avoid having a hernia.
I'm not engaging with the guy anymore. He's totally misrepresented my view, obviously intentionally and to troll me, on several occasions.
And then he seems to think that I have sour grapes, what a joke.
Think he'd score pretty high on a psychopath personality test....if his real personality matches his online personality.
Wow IO, I must say I just don’t see the extremities in your view here.
I consider you both to be beneficial contributors with valuable opinions.
On an aside, I’m pleased to say I scored exceedingly well on your linked test!
Thanks for sharing that. I had to laugh, as I have known of a few who would need to check off very different boxes to myself. ;)
P8 you have forgotten the main reason the crash never happened. Emergency low rates and FOMO.Rates are going up with inflation the party is over prices will drop back to 2018 prices over next 18 months and could even go lower depending on rates
DTRH
No - despite advancing years I do not suffer dementia. My point is that there no certainty in predicting the market as was shown both in March 2020 and 2021 when comments on this site on both occasions were overwhelming for considerable falls in the market.
I’m not arguing that there won’t be some correction - and as IO points out above - I was concerned 18 months ago that the then increases in prices were seemingly unsustainable due to affordability issues. It has surprised me that it has taken that 18 months for this to come about especially despite Government actions March 2021.
DTHR, what's the point of your comment? It seems to be "this time is different", if you are suggesting that this time no other, yet unknown, external factors are going to affect house prices, that is very naive
Yvil have you not seen the news inflation is high rates are going up.you are very naive if you think these reasons have not already turned the market and will continue to take down over valued housing market. I would like to know why you think market is not on downward spiral.
He’s either got dementia or he’s a sneaky / nasty bugger. Those are the only two explanations for the gross misrepresentations of my positions he has made.
Housemouse, Housemouse
How could I misrepresent you? . . . . . I posted your comment.
Is it answer B).?
P8, wow, what an amazing selection of doom and gloom comments, many of which are so similar to today's posts.
Pretty sure I own one of those Mar 2020 comments, still pretty fast learner here and after the RBNZ stepped in to plug the leak I purchased a house in Sept 2020 and have not looked back since.
Can be very dangerous. I would wonder though, how might the reserve bank and government bail out property this time around? Seems like a difficult task for them now.
However, it seemed most folk didn't really expect the extent to which the RBNZ bailed the property market out two years ago. Maybe they do have some more rabbits in their hat with which to pump it?
Just wait until they roll out 50 year mortgages.
And 50k first home buyer grants.
And 50k first home buyer grants.
Off the top of my head, the RBNZ/Government could relax LVRs, relax lending restrictions, relax banking funding requirements, repeal the interest deductibility and bright lines changes, all without reducing the base rate.
All would make our financial system even more prone to disaster and I hope the trigger isn't pulled, but I do see that the current opposition are threatening to go through with some of them.
Perhaps he has a family and bought a house for security? A place to call home for the next 30 years? A home where his children don’t have to worry about being kicked out within 60days whilst searching for a cold damp shitbox to rent for $800/week. Why would you sell your family home (incurring tens perhaps hundreds of thousands of dollars if you don’t get your timing correct) on the belief (that’s all it is) that your home value will decrease significantly???
Great post Albert!
Terrible advice to the middle class income earners, and I hope no one takes that post for her son to sell up seriously. It is dangerous given the housing crisis we are still in, and if you think rents aren’t going above the mortgage rates you are wrong. Rents are skyrocketing, right now the average rent in my area is more than what I pay for my mortgage entirely each fortnight. TLDR if you can scrimp enough to manage your mortgage repayments then it’d be wise to do so
Plenty of concerned investors now on the Facebook property pages. Almost daily people asking for advice about properties not selling so will look at renting it out.
I think we can look forward to a lot more choice for both buyers and renters.
There must be some very stressed people out there.
Rents are part of CPI....so will loop back into inflation figures, which will feed into OCR, which will feed into even higher mortgage rates....at some point, that cycle has to break otherwise either the renter can put food on the table, or the landlord defaults on their mortgage.
I find it amazing how risk averse most people are. I only ever ask myself one question, whats the worst that could happen. If I can live with that, rip into it.
You are very dead for a very long time. Bank slavery doesnt appeal to me as a great way to spend my life - Epitaph - He was mortgage free, and that was about it.
If you're planning to move anyway, it wouldn't hurt to rent for a while.
Otherwise, shifting house is such a lot of work and expense - why put yourself through that, on the chance you might make a bit.
The question is how close to the line is he. Can he afford doubling rates for 4 or 5 yeas?
After rising as much as $100000 In just one month and over 35% to 50% in just over a year does a fall of 0.7% or 2% makes any difference unless this is begining of the trend.
In Auckland can still see resistance in vendors expectation and the same is reflected in number of auction failing and even afterwards are unable to sell.
Maybe falling momentum has yet to be picked. When going up is fast to trigger and is slow on the way down but yes still a long fall.......
When vendors who are motivated to sell realise they are being left behind on the way down, with little prospect of recovery in the next 5-10 years, things will start to move. Kiwi's have a baked-in misunderstanding of how property markets function, but they will eventually be educated by cold, hard reality.
I find most Kiwis very financially illiterate except for that they invest in property. The single most important thing right now I believe is that the RBNZ isn't going to save the housing market like in 2008 and 2020 if there is inflation to fight, yet so many don't even realise that is what happened in the past. All they know is the in 2008 housing only went down 10% during a major financial crisis so housing won't fall much now especially given the economy is going fine at the moment. Oh and they know that property doubles every 10 years.
So if the RBNZ isn't going to save the day because they have to be credible in their inflation fight, it changes the risk profile of the housing market by a lot, with the downside much more than people can comprehend, because it's been so good for so long, with protection from RBNZ and low inflation. Yes I think there will be some much need education coming in the future.
In NZ housing as an asset class has outperformed every other with the possible exception of Bitcoin over the last 5 years. Not being in housing has meant not getting equivalent returns. Being financially literate is one thing, being successful has meant being in housing (or Bitcoin).
True, but past performance is not an indicator of future returns. A good investment strategy is to have a broad portfolio. Buy a house to live in and be mortgage free by retirement, get a few shares, do your kiwi saver, maybe a bit of bitcoin. Earn a decent wage, have some cash savings and maybe a little flutter on the lotto each week. Having all your eggs in one basket is risky. Also keep debt down, don't try to keep up with the neighbours. Go fishing and enjoy the simple things.
Essentially it was simply a policy-driven wealth transfer from younger generations to older generations. So anyone born early enough to buy affordable property thanks to the supply efforts of the post-war generations and their governments has been enriched at the cost of massive debt we saddle onto the younger generations.
Lol
Unless of course you bought into the bitcoin, at the peak, and just lost 30% of your speculative investment.
Turns out bitcoin may be sensitive to interest rate rises....
In 2008 the RB slashed the OCR from 8.25 to 2.5 over the course of 9 months.
Jesse1 is that is your "financially literate" summation of the whole entire problem. Hilarious really
No not at all HW2. I'm just emphasising what I think is the main thing that isn't understood by most yet I think it's a very defining difference from the past especially if inflation is persistent (deglobalisation and logistics issues could well be here to stay).
Other things like: net migration loss, housing consents and completions, interest rates, RMA reform, interest deductibility going, housing densification changes, foreign buyer ban, potential for RBNZ asset sales reducing liquidity, LVR changes, Potential DTI limits, council land restrictions, NIMBYism, rental regulations, RBNZ funding for lending stopping.... are more well known things being considered in the market (but probably not by most), and these would have distracted from my main point.
Still laughing?
Is it ok with you to hold differing opinions as the best way to achieve ones goals. Even the financially literate DGM do not agree with each other.
Newsflash Jesse, the RBNZ are already "Saving the day" again right up until today by not moving the OCR significantly higher and much much faster. They are deliberately dragging their heals until everyone fixes their mortgage this year so we can kick the can down the road for another 3 to 5 years.
Central banks for a while were hoping the inflation was transitory, it's not and now they really are about to move much faster. RBNZ isn't trying to protect the housing market anymore and the must be credible in their inflation fight now. Let's see what they say next week. Those that fix this year are already having to fix at a much higher rate because the narrative from RBNZ and centrals banks is for fast tightening.
Central banks don’t hope anything Jesse. It is all orchestrated.
Vendors are discounting by choice at the moment.
When the discounting becomes a necessity to sell is when it becomes interesting.
"Unless this is begining of the trend."
I wasn't aware that was even in doubt. The word "unless" surprised me.
This “expert” disagrees. Nothing to see here! NZ property is safe as houses.
He can't be much of an "expert" if he dosen't understand that employment is a lagging, not leading, indicator.
Not if you’re expanding or starting out
To anybody that was foolish enough to buy in near the peak they are basically watching their hard earned savings burn.
I imagine they will not be very thankful to successive governments infested with property speculators, or the Reserve Bank's previous pumping of the market.
Brock
Talking of foolish . . . those who have chosen not to buy over the past four years have been paying of the landlord’s mortgage and allowed them the capital gains. Your past comments over this period suggest that you are in this category.
For those not in a position to be able to afford to buy a home I feel really sorry.
Hi Printer8.
As usual, you're just plain wrong on all counts.
Those with the wisdom to stand back from the bubble will be counting their blessings as prices collapse.
Save your sorrow for those that listened to your drivel and bought the top.
Brock just admit you blew it and move on. Anyone who did not get in before the second to last peak in Dec 2016 when they could of stuffed up big time. It might be difficult to predict the future but its not hard to analyse the past.
Its also Falling $100,000 in Just 1 Month. Trade me Notifications.
Email or ring the agent for confirmation.
https://raywhite.co.nz/hawkes-bay/hastings/havelock-north/HVN30136/
7% rates this year Guaranteed. - 30 Crash in Home Prices by December this year a Certainty.
Wait Wait Wait.
I feel sorry for agent Connie, how will she afford new pearls now? How about a give a little page for the Real Estate agents to help them adjust to their new lives. Just watched the video. Not sure if "here today and gone tomorrow" is a good slogan for selling new builds. I wouldn't pay over $1 million for a 2 bed house on a 370 m2 section in Hawkes Bay.
Waikatohome - Follow the trade me listings for Cars, Jet Skis, boats etc. Its a good indicator of people off loading due to market conditions. Those agents will be off loading a few Audi cars I would imagine. Or the dealerships will be repossessing them. More used Audi cars at the dealerships, more trade me listings, more Pearls going back into the Clams.
I would have to say that the car market for anything 1995 and older definitely has taken a kick in the balls. Presumably the new credit restrictions have made their mark, can't chuck an old LandCruiser on the mortgage so easy now.
Yes I have noticed that too.
Plenty have. The house we sold in Havelock North (3 bed, 1 bath, '80s spec build) in late 2016 is now on the market for double the price, with the only change being a little bit of paint and a fence.
Connie will survive, she's been making bank for years around here.
How will her fellow agents fare ?
There is a set of well-established agents that will get through, however I suspect the latecomers (read: younger agents) will be looking for alternative employment before too long.
947 Hawkes Bay properties on TM right now. The highest figure I recall for 2016-2021 was 605. "Buy and hold" is increasingly looking like "dump and run". I'm not concerned, we never bought our current property for capital gain, and it means a higher chance our children will be able to afford their own houses in future.
But the garage has a soft close door!!!
Ctrl "c". Ctrl "v"
1
What on earth...? Wanting over $1.1 million for a 2 bedroom place in Havelock North???
Must be something in the water ;)
For Tony Alexander, a fall of 1 % in three months is BRUTAL, speaks volume on how unbiased and independent, he is.
OR is he predicting the future being more sensitive and touchy about any downturn.
When rising by as much as 10% In a month, at that time it was demand and supply and natural process for him.
https://www.oneroof.co.nz/news/41201
Comments on Tony Alexander comment, welcome.
In January he said prices would rise 5% this year, by March he was saying they would fall by 10%.... a 15% swing from the Big T!
When I was younger I used to think a title like "BNZ chief economist" involved empirical hard science.
Instead it's all frogs legs and cauldrons.
No. Economics is a social science facts and figures.
But the banks outward statements are PR releases, more what they want to see.
to be classed as science doesn't it have to have falsifiable theories...?
When I was young and took economics at university I soon realized it was making shit up and using mathematics to give it an air of legitimacy.
How do you think any advancement of tech and physics are made.
Theory / experience / evaluation of data gained / publish results
He now keeps repeating "It's not a crash...it's a correction" lol. It's interesting seeing his commentary change as the months go on.
Changes like the wind!
And I can't stand the patronising way he talks 'We economists think...'
I'll never forget the 'avocado on toast' crap he spouted.
It would be fair to get rid of the word crash and simply note that prices have corrected 40% to a reasonable price level, were that to happen.
Water has started to spill over the dam... it has been rising to the point that it was detrimental to the well-being of all.. the over flow will only pickup over time
Just need a few more logs ( higher interest rates, interest deductability biting, more houses being built that ever before) to slam into the dam wall and create some cracks.
Good time to own a kayak....
When the water spills at the dam it only does so until the level of water recedes to below the spill level it does not pickup over time.
You probably need to be spoon fed info.. don't you realize there are underlying currents pushing up the water level.. read stjohn's post if you are still struggling
lol "underlying currents", let me guess, your analysis reads something like "double, double toil and trouble; Fire burn and caldron bubble."
Let me guess.. ah it's your opinion!!!
What happens if the dam breaks? (peoples ability to service debt).
Then you hope you haven't spread yourself across multiply kayaks with shoddy paddles ( cash flow) , otherwise she's a bumpy ride down the river ;)
otherwise known as
TTP- Time To Panic
true -- but the water - interest rates rising, supply chain breakages, rising oil and fuel, food shortages, market sentiment, security of employment, availability of credit fullstop --- are all increasing -- safe to say the inflows of water are all rising fast
Based on my minimal understanding of how inflation devalues cash and debt, my loan pile will devalue by nearly $500,000 in real world terms this year.
The government is quietly relying on inflation to get them out of the QE mess they created. Might as well go along for the ride.
Only if your income or purchase power inflates at the same level.
It won't.
The middle class squeeze is very real.
It's relative, debt becomes more expensive to hold so is not desirable unless earnings from that debt on the security it was raised against outweighs that increased expense. In relation to investment housing this relates to the income from rents which will clearly not be able to be increase in concert with the costs of holding the housing.
This makes the housing market very, very likely to fall.
Little gained by deflating your debt away if the price of the asset falls in equal quantity - a reasonable possibility given the market conditions (this isn't a repeat of the past 40-50 years...but could be the opposite).
I hope that makes you feel better.;)
Many seem to believe that an increase in interest rates, is the deadly blow. House prices collapse, and the astute buyer swoops in.
How quaint.
I think many of the astute 'investors' in here who have been talking up the market have been quietly flogging off their portfolio for the last year,preparing for the decline in prices that they said would never come...so they can buy back in..rinse and repeat.
Offloading to younger generations. Peak entitlement mentality?
We now enter the fear stage of the bubble model. This transitions to capitulation and then despair.
You can really feel the fear in some of the spruiker types that comment here.
Thats true HouseMouse. Its like a demonic spirit manifesting at the moment. The End Is Nigh.
Still a fair amount of cognitive dissonance going on out there by sellers who still think the market is rising at 4% per month.
Looking at the Hutt Valley data I note a number of houses have listing prices 150-200K over their current QV valuations. Primarily they are at the top end of the market but given there are currently 46 houses over $1.5M (7% of total listings) and 1 of them sell on average every 2 weeks - its wishful thinking that a buyer with shedloads of money is going to pay over the valuation in this market.
On a separate ( completely unrelated to property) note- but related to congnitive dissonance and paying too much for something - why do people bid money (up to $50 in some cases) on trademe for Feijoas shaped like hearts and penguins- its got me completely bamboozled.
That disconnect is the problem and it has shown up instantly at auctions. It will take some time for vendors to realise it is no longer going up at 4% a month and get reconnected with the recent RV's, which to me look about right in many instances due to the timing when they were released.
Were the RVs released in 2016?
For the Hutt valley RV's were last released Sept 19- what I''m referring to is the QV Property Valuation which is a monthly valuation QV publishes on every property, So an example is one house is listed at $1.75M - its current QV property valuation is $1.51M. It's Sept 19 RV is 990K. So the person is listing at 760K over RV and 240K over the current property value.
I will worry about the value of my house if and when i want to sell.Until then it will remain as somewhere to get out of the rain and cold and a place where my family can feel safe.
Since when are homes used for that ?
We need a good 30-60% crash followed quickly to massive changes to our tax system to stop future speculation. Sure it would be a massive short term hit to our economy, but long term it may keep us as a developed country.
Sounds like the Greens manifesto. Only by us all being poor can we one day be rich.
It's pretty clear to most people that having overly expensive housing that nobody can afford to buy, or if they do buy in are subject to debt servitude for the rest of their lives, is not an economic path to wealth.
Also a touch ironic when folks rant about socialism and communism yet use authoritarian NIMBY zoning to reduce supply, receive landlord rent and price subsidies, enjoy society's services funded by working Kiwis, and in many cases collect New Zealand's only universal welfare benefit handed out regardless of need.
Socialism for me, own two feet for thee...
This! You could also add something in there about climate change
I see this quite often, socialism for landlords and it is a quite the construction. The Accommodation Supplement is for those who need support paying their rent. Not many landlords need help paying their rent.
Maybe if Landlords dropped their rents, then the Accommodation Supplement wouldn't need to exist. Why should the tax payer enable renters to pay more to support a Landlord's decision to leverage themselves to the hilt?
According to reserve bank data. 171 billion in mortgages loaned since March 2020 to a total of 532000 borrowers. RBNZ have said in the media that 80% of NZ mortgages are fixed for 2 years or less. So we can assume that every day 400+ mortgages are reaching the end of their fixed rate period and are being refixed at rates 1-2% higher than when they were first drawn down. For some people that means their interest cost doubles overnight. When you look at the DTI statistics for borrowing that was going on in Q4 2021 it is scary. Rewatch some highlight clips from The Big Short on Youtube for some perspective.
QV claim the overall decrease was 0.6% nationwide for this month and so far this year we have seen, Jan +1%, Feb -1% and now March -0.6%.
Before we crack the champagne can I just remind you good folk that last year prices went up 28.2%, so to get back to January 2021 prices the monthly decrease needs to be about 2% every month.
While the direction is correct the pace is slow.
https://www.qv.co.nz/price-index/
https://www.nzherald.co.nz/business/national-average-house-price-went-u….
The pace is Fast.
Some homes still not selling even with up to 38% decrease in Values.
https://www.stuff.co.nz/life-style/homed/housing-affordability/12819683…
The pace is slow but if you want to take Stuff's rumour mill over QV actual facts then help yourself, I highly doubt you have the wherewithal to be involved in any respect.
The numbers are from Q.V. You should of read the article first. I highly doubt you have the wherewithal to be involved in any respect.
the only thing to consider here is the dollar values of percentage increases are lower than the dollar value of percentage decreases.
in other words prices going down 1% now when house prices are 900k is $9k whereas 12 months ago when house prices were $700k a 1% increase was $7k
If house prices are up 28% YOY then they need fall only 21% to return to the same value as last year - over 12 months a decrease of 1.75% a month would return prices to the same amount as this time last year
Yes a good point, I think the point regarding us needing to see an increase in the rate of fall stands. At the moment we are 3 months behind that rate so to keep up with 1.7 across the year we will need the final 9 months to be more than 2%
Irish house price growth turned negative in 2008 and didn't get back into positive territory until 2013. That's 5 years of declining prices! Prices only declined about 5% in the first year of that fall, but by the end of it their market had halved, and some appartments were down 60%. We could very easily be at the start of a similar run. Our housing market is likely more overvalued than their's was at it's peak.
Most people expect it to be sudden. Its a bubble popping right?
Slow steady decline.
hell - i think we will see big drops --- but the numbers here are actually 0.7% drop since december -- these numbers really reflect a FLAT four months -- little up and a little down -- not the drop thats to come
An Talk about cheery picking a headline to suit the narrative - how about 9 out of 16 regions up in the last four months ??
Investing is easy, just sell at the top and buy at the bottom.
Especially when it is an unimportant investment like the home you live in.
/sarcasm.
If most people are like me and buy the best house they can afford then my prediction is that the average Auckland house price will fall from around a million to $675k by the time we have 7% interest rates.
$1,000,000 house with 200k deposit borrow 800000k @ 2.5% repay 3,161 per month
$675,000k house with 200k deposit borrow 475000k @ 7.00% repay 3,160 per month
You only have to pay off 475, rather than 800k. Interest rates change, principal once agreed, doesn't
That is indeed the math. Most may not appreciate that the changes from 2-3% to 5-7% are almost logarithmic in the change. By contrast the change from 9% to 11% is a less significant change. Accordingly those tapped out at 2-3%, and needing to role over are about to get crushed by inflation and a massive a debt servicing change.
This is going to be scary as winter is near, forget any price increase even a stable price will be a bigger challenge for the next 6 months.
Property sold in last 1 year was a bad deal for buyers incoming short term and don't know till when this short term will stay.
On the bright side, the last 5 years has been a fantastic time to pay down debt and get rid of the mortgage.......just sayin.
Make hay while the sun shines, for those old enough to have planted our seed in easier times. Luckily I had the foresight to be born in the 80s.
The market is in a little itsy bitsy gully right now.
Correction and Crash all share one thing. The effect of financial gravity.
It's a great time to be a bank shareholder!
Work harder, house slaves!
The slow motion car crash is a accelerating. Next week RBNZ will lift OCR again, and then another wave of rate increase across trading banks to follow.
Popcorn.
When houses in glendon ave avondale sell for 1.375m you know you have a problem. No offence intended to those who own a house there
1 out of 10 sold in the main B&T auction today. Yet there was still a Mount Eden pre-auction offer lot later in the day. Unsurprisingly it sold with no further bids $1.3 Mill for a dated house. It is sad to see I’ll informed buyers being tricked into pre-auction offers. Why do buyers do this? Don’t offer before the auction. Wait until it passes in, then low ball.
Blue chip Epsom sold under the hammer this week for $2.5m - nearly 20% below CV.
https://www.barfoot.co.nz/property/residential/auckland-city/epsom/8291…
Ouch
The picture of the house makes it look grander than it really is. Closer inspect reveals a shared driveway to the neighbour at the back. It is a crosslease as well. Possibly would have got more late last year but not a huge amount more.
That is not a significant drop, it is barely reaches the margin of error at this point. When you are looking at an over 25% per year rise across multiple years a small sliver of a single digit drop over months is not going to change it to the point people with 3 household incomes above median would call housing affordable to own or rent still. So the headlines and drama in other media sites are incredibly insulting and deluded in comparison. In real terms over covid pandemic alone housing vaues increased over 50% and prices to build have skyrocketed, a small tapering off during the credit crunch of a massive war is not promising. If there is not a massive market crash of horrendous proportions then we are still facing the cool hard rock cliff edge of the worst housing crisis NZ has seen.
I think people need to also consider the political context. While the government has no direct control over the OCR, it does set policies which flow on to affect the OCR.
Next year is an election year. If interest rates are still going north this time next year, the government will be toast. But if they use this year to set policies, or have pretty good advice around what the domestic and global economy is going to do over the next year, then I think you will find the OCR peaks towards the end of this year before starting to ease next year.
Tony Alexander has a good piece on OneRoof, he notes the current economic situation presents more downside risk to the OCR than upside, and I'm inclined to agree.
Sure, but if inflation hasn't been tamed by this time next year, they'll be toast anyway. In any case, the shine has come off, and the platitudes won't cut it anymore. I don't think there's any coming back from this.
With respect, you think Labour could plan this outcome? Let alone execute it?
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