The housing market may be in danger of heading into a slump over winter, with sales volumes well down and prices starting to show significant declines.
According to the Real Estate Institute of New Zealand, just 6752 residential properties were sold throughout the country in March, down by exactly a third compared to March last year.
March is traditionally the busiest month of the year for residential property sales, but the national sales figures for March were the lowest they've been for the month of March in 10 years.
In Auckland, where the property market first started to cool, the decline in sales has been even greater, with 2367 residential properties selling in March, down 41% on March last year. (See the interactive chart below for the sales trends in all regions).
At first glance, selling prices appear to be holding, with the national median selling price of $890,000 up 0.6% (+$5000) compared to February, while Auckland's median of $1,200,000 was up 0.8% (+$10,000) compared to February.
However, it appears these prices may reflect a change in sales patterns, with higher priced properties taking a bigger share of the market, which would tend to push up the medians.
The REINZ's national House Price Index, which adjusts for differences in the mix of properties sold each month to give a more accurate view of overall price trends, declined by 2.1% in March compared to February and is now down 4.3% from its peak. The only regions where the HPI did not decline in March compared to February were Otago and Southland.
The biggest monthly regional declines in the HPI were in Wellington -4.7%, Gisborne/Hawke's Bay -3.5%, Manawatu/Whanganui -3.1% and Auckland -2.4%.
Significantly, all regions except Waikato, Bay of Plenty, Canterbury and Otago are also posting three-monthly declines in the HPI, although all regions except Marlborough are still showing annual increases.
"Following a period of significant activity and growth, prices are easing and the market is returning to a more settled pace," REINZ Chief Executive Jen Baird said.
"While we continue to to see prices increase annually in all but one region (Marlborough), the rate of growth is slowing, sales activity is down and the median days to sell is up.
"We're seeing the market moderate as people settle into this phase of the property cycle," she said.
The comment stream on this article is now closed.
Volumes sold - REINZ
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179 Comments
Not a good sign as you point out Greg, March normally is the best month for sales.
Place around the corner for me was listed on Trademe with a bracket of over 1.6m and went to auction this last weekend. Bidding stalled at 1.2m. Now it's been re-listed with an asking price of 1.4m
Time To Panic.
They will be kicking themselves when it gets 1.0m. That will be about a -37% decrease .
-30% Decrease in home prices this year a Certainty .
Time To Panic Indeed.
If you are going to Panic, Panic First !
Let's get To The Point. HPI is down 3 months in a row. Time To Panic if your an investor hoarding multiple investment properties you picked up with the LVR removal in late 2020 whilst interest rates were heading towards record lows.
Now the removal of interest deductibility is coming home to bite, your equity is shrinking on paper (paper capital gains your relying on) and your probably going to be in a negative cash flow position.
Thoughts To Ponder
St John. You are correct on so many accounts .
You could just about provide an Ambulance at the bottom of this Cliff.
Tough Times Prophesied.
Turning To Poop.
"Time to panic if you're an investor"
You're getting investors and speculators mixed up. An investor is sitting on massive capital gains from the last 2, 5, 10 years and an investor knows that the market sometimes goes down and often goes up. A true investor will now be getting ready to buy more property in... 12 months? time or maybe a bit longer
Unless of course the equity has Vanished. Rents have dropped. Interest rates are still very high. Then Banks have come a knocking.
Has your equity vanished? I don't think so, house prices are still much higher than 2, 5 & 10 years ago. Also rents are not dropping but rising, this is the crucial bit as it allows the investor to pay the mortgage and no bank will "come knocking at the door while the mortgage is being service and repaid. Interest published an article about rising rents just this week. Lastly interest rates are still low, yes they are rising from a ridiculously, record low level but really, they are not high by historical standards.
I'm quite surprised about your comment above, how long have you been investing in property for?
Yeah all good if you purchased 10+ years ago when prices were closer to 100k than 1mil. You've got 1mil of equity most likely.
Different story if you actually refer to the investors plying into the market end of 2020 I am talking about ( Capturing about 40-50% of sales if you cast your mind back). Most probably picked these up with 5,10,15% deposits ( remember the LVRs got removed for investors).
Run the numbers. 900k loan, with 700/w rent . plus rates,insur etc. oh and now your about to start paying tax on your rents.
Financially your going to be either topping up your mortgage repayments xx per week ( where does this money suddenly come from). Or you offload and hope to balance out flat, or take a small loss. I suspect a huge amount of investors who got into the market within the past 24 months are up sh*t creek. I.P made sense with sub 2% rates, but with them on pace for 7+ as one commentator suspects, your in negative cash flow territory.
Some people will weather it, adjust and be better off in the long run.
Some won't.
Meanwhile interest deductibility is on the way out and what about Interest Only? Right, 5 years IO is up now you're P&I for the remaining 20 years.
Much like 70 year old John Norris with his portfolio of rental properties in Australia that was suddenly lumped onto P & I back in 2018.
Time to buy a trailer and build a shack on top with a compost toilet and gravity feed water, infinity gas system and rent for 400 a week on your back lawn.
Its happening and its happening as these are not houses - these are vehicles - vehicles that earn 25% net yields as you dont even have to pay rates on them (no ones going to discover your sewer sump under the thing, or discover an illegal connection to city infrastructure.
Go nuts - I certainly am!
You don't need to know how a car works to enjoy rubbernecking an accident.
Obviously older investors who got in earlier and have received more wealth transfers will be more comfortable than those who have lower equity or started more recently.
"no bank will "come knocking at the door while the mortgage is being service and repaid."" Wrong. If you own many properties and deemed as an investor, ( commercial ), then you play by a very different rule book. Banks often need to get there house in order to meet certain criteria, and they have no regrets what so ever to roll these people and call in the loans.
Brock Landers knows more about this topic.
That's not true, banks are not in the business of reposessing houses and trying to offload them, it's foreign and messy to them and they hate doing this. A bank is in the business of collecting income (from mortgage interest rates) and as long as this income is paid the banks are happy, very happy.
Interest rates are rising so fast now there will be plenty of investors who CAN'T pay the mortgage soon.
Especially all the investors with interest only loans (wasn't it something like 40% of them?) who will find that the banks are much more likely to require capital + interest payments from now on.
Really? So are you getting close to the position where you are struggling to pay your mortgage, Fitz?
I think it will get interesting if people get close to or into negative equity. Then the bank needs to do some analysis of how likely you are going to be able to continue making your repayments over time lest they be carrying the bag if you go bankrupt. Particularly if you are on an interest only loan.
Banks don't give a rats ass as long as your meeting the repayments. I was unemployed for a long period on $250 a week but was still paying the mortgage and I never even told the bank I was out of work.
it will only be an issue if the market really tanks -- in which case the banks will have more than enough problems with mortgagee sales and taking hits on those -- and will have no interest in looking at investors or homeowners who can continue to meet repayments -- even if they hit negative equity -
Hi Brock
No
Its only a problem if you are overly leveraged or purely targeted cap gains.
I must admit, I look at all the bargains coming up and and I start to drool slightly.
KKKAAAAARRRRkk!!
Sadly all those "investors" combined have exposed first home buyers to the risks of speculation. Congratulations New Zealand.
.. yes ... the question needs to be asked , who truly benefits from insanely high house prices ? ...
People born early enough to get in very cheap thanks to earlier governments' supply efforts. That's basically all.
People with > 1 house. This is a small minority in the country with an unfortunately large amount of influence.
Yvil
Agreed.
There is no need to shed tears for most investors.
Any short to medium term fluctuations in the market has absolutely no affect on the vast majority of investors holding a property - same rent (and more than likely continuing to increase). As you point out the vast majority of investors have been holding properties for fairly long periods and the current yield on their initial purchase price will be good and the increasing mortgage rates are likely to be their only concern but readily covered by past and future rent increases.
Those established investors choosing to opt out will still be pocketing considerable (in the majority of cases, tax free) capital gains.
As property investment is long term, those investors who purchased in the last few years will find increases in mortgage interest rates and the progressive loss of tax deductibility the main concern rather than falls in the market. Like many other investments such as the sharemarket or Bitcoin, one needs to accept risks and ride out the down times . . . and those most recently involved in property investment will be on reasonable wages and have the ability to absorb and possibly see increased rents off-set the down times.
Absolutely! That's what the next generation is for, to absorb and finance the sloppy and parasitical decisions of others. If you can extort even more of a renters salary or wage, steal their lifeblood. Go for it, get ahead!
More and more young people start to realise what is actually happening here. I guess that's why young people are leaving New Zealand. Good on them! We have been killing the future of New Zealand for many years.
It makes me happy to think of all the money that my parasitic landlord is/will be losing.
He might charge top dollar rent for a crap house with old carpets in the middle of a housing shortage.... but he is still going to go D-O-W-N 😁
Do you understand that rejoicing in the other people's misery doesn't make you better off?
An everlasting truth about life. If you exploit someone, or take advantage of someone, then that person will hate you and rejoice in your downfall.
This has been true since the first humans walked on earth, and will be true for as long as people are in existence.
Rents have been rising faster than incomes for a very long time. Landlords who are charging "market rent" during this housing crisis ARE exploiting their tenants, and are taking advantage of their fellow Kiwis. Screw the lot of them. Tough times ahead for landlords, and I for one will be watching with 🍿.
So do you apply the same logic when you buy items made in Asia, like China, Indonesia, Philippines, India where people earn $10/day? You're exploiting them Fitz! By your definition above:
- they will hate you Fitz, and rejoice in your downfall
- you are exploiting them Fitz
- screw you Fitz
Lol. Someone is upset about rising interest rates.
That is a really childish post, totally changing the subject to avoid answering the question...
I guess you like judging others for "exploiting people" but you have a much harder time admitting you're doing the same
Very handy to be able to easily evade tax on capital gains by simply pretending never to have bought for capital gains too.
P8 Loan on a million 1530 per week at 7% rate over 30 years. Try renting a 3 bedroom box on tiny lot for more than 750 in Auckland, bleeding 780 a week this is just on one property. Not to sure if you understand housing P8, go and see financial advisor he will explain this to you.
Agree, it will be speculators and also mum n dad new builders who over streched beyond and will be first to panic.
Worst hit will be those who bought last year during peak.
Been there, done that. Time to chill and dig in for a while. Then get organised, at the right time, this time the reward. A remote family holiday getaway/ bolthole type of place. In the country.
stjohn,from what I garner in here,most are not in it for capital gain,they are altruistic long term 'investors' trying to provide nuch needed,warm,dry affordable accomodation for folk who are less fortunate than themselves....
2022 - I doubt they will drop that low. I think you're being a bit pessimistic there
There are Media examples of up to -38% decreases in prices already.
Wag their tongues as they may, certain people here will find that the housing market is more resilient than they ever dared imagine.
TTP
I have to say, the HPI graphs for the North Island are not painting a picture of resilience. Auckland looks particularly sick.
https://www.reinz.co.nz/Media/Default/Monthly%20Press%20Release%20Asset…
It's only April and we are already seen new records for market flaccidity being achieved.
That Luke83 fella claimed it would be up 5% by years end. Mrs market is going to be very disappointed indeed.
The top of the market was when you could get a mortgage for 2.5% for 30y
Let's pretend you could afford 1M, which means that you could afford to pay 911 per week circa
In no time a new mortgage will be about 7% for 30y
That means that a new prospective buyer that can pay 911 per week will be able to affor a mortgate of 594k
1000000 - 594000 = 406000
yep, -40.6% of mortgage availability
take out some deposit and some other side effects you will have a -37% circa of the cost of the same house.
That is my bet, not a simple opinion, I have reasons to think that.
You might think of "external interventions", and I will say that we had plenty of them already, and I will also say that I compute for the data that I have today.
When/if there will be new data I will review my prediction.
for now:
-37% from the peak by mid 2023
Not sure you've ever been able to fix your mortgage for 30 years in New Zealand but your numbers still tell the story.
Completely realistic for a range of reasons but especially due to the abrupt, substantial and increasing cost of debt.
Auckland down 4.5% in 3 months with 2.4% of that in March, so seems to be accelerating and on track for a ~25% annualised decline, without further interest rate rises biting or factoring momentum where market sentiment change/public awareness fully kicks in.
This will be painful but it needs to happen to restore the social contract in New Zealand.
The recent Auckland market hot air has made no sense to me. The provinces sure - Covid related domestic migration pumped up those markets - but Auckland has had negative net migration the past 24 months and the greatest addition to housing stock since the 1950s. The only way to save it from imminent decline in the short term is with tens of thousands of immigrants.. but so far they're yet to appear.
... there's plenty of Ukrainians rushing out of their country , in desperate need of a new home ...
But we bring in sushi-rollers, Uber drivers, service station attendants, supermarket workers, fruit pickers,etc. They are not going to be able to get out a jumbo mortgage with a ~7% interest rate for an overpriced sh#tbox in Auckland.
Average wage earners in Auckland have no chance of buying a 3 bedroom property at a million plus,while prices are out of range for these people prices will continue to fall anyone who has purchased in last 3-4 years will see deposit gone and be in negative equity in next 18 month, hopefully this will keep speculators out of market and government can create a law to discourage housing speculators so market would be more stable housing is for living in not profiteering.
... you are 100 % correct , but sadly , politicians from Labour & Gnats deludedly think that rising house prices are a good thing , and a boost to their election hopes ...
The truth being , extreme house prices can be linked to poverty amongst the large number of renters ... and to social unrest ... we , as a society pay a high price for house price bubbles ...
So don't vote for them... it is that easy.
TOP, Greens, ACT, Maori ?
I mean there are alternatives.
I don't get why people think that voting minor parties = throwing away your vote.
I see the inverse
The danger is for young people, never underestimate the degree to which MPs and central bankers will dole out welfare to bail out speculators. Themselves included. They've been very happy to allow property investors to comparatively freeload while working Kiwis pay the bulk of taxes, and they've been happy to subsidise property investment with welfare over years.
Ooof. The next few months could certainly be interesting.
Its all down from here. Interest rates all up from here.
7% interest rates this year Guaranteed .
2022 - Do you really need to put this comment in every article?
Yes.
I think he might be on the spectrum. Be kind, he means well.
2022,
This will be a real test as to whether I am a glass half-full or half-empty sort of person. On one hand, I have a lot of cash in short-term TDs and will benefit from rising rates. On the other hand, having had a cancer diagnosis some months ago, I decided to simplify life and have just put my small rental property on the market.
On balance, I'm going for the positive outlook. I have had the property for over 20 years; it has no debt and a long-term tenant. If it fails to sell or attracts only offers which I think are too low, then I will just take it off the market and carry on.
On a really positive note, the drugs I take are working really well and the tumour has shrunk considerably. The fact that somebody somehow managed to get my card details yesterday and use it to make 6 purchases before the bank blocked it will not dampen my spirits. The sun is shining and I'm off for a good flat white.
That's a great attitude. All the best, mate.
Good for you Linklater - that's really positive and I hope you continue to improve on the health front. You can beat cancer with the right dose of treatment, drugs and attitude, I know people who have done this... when they were only given a 5% chance.
Enjoy your day.
DDDDebt,
Thanks. The drugs I am taking are unfortunately unfunded, though very recently, they have become Medsafe approved. I am lucky enough to be able to afford the six figure sum involved but most Kiwis could not. I have now become very aware of how badly underfunded Pharmac is but this is not simply because successive governments have refused to give them more money, but Pharmac itself is guilty of asking for very little.
I now quite a lot of information and am trying to make this more widely known. I am leaving the Pharmac board in no doubt of my views.
linklater01 - Sorry to hear about you situation yesterday with your bank card. I would imagine the police will track that person down, they are good at that. Great news about the improvement with your health also.
Sounds as though your financial situation is very comfortable, your plan sounds good to me.
What is really going on at the moment is a story about a man who built his house on the rocks, and another man who built his house on the sand. It was the same waves but 2 very very different outcomes.
2022,
Looking at your last sentence reminds me of a very short poem by Edna Millay called Second Fig.
Safe upon the solid rocks, the ugly houses stand,
Come see my shining palace built upon the sand.
I have long been an admirer of her poetry. Thank you for your good wishes.
Pretty sure Jesus (or possibly Matthew the Apostle) has the copyright on the story. ;)
Matthew 7:24-27
Great to hear the positive prognosis.
Brock,
Thanks. I appreciate it.
i'd be saying more than 7% man, especially if OCR increased by 50bps again next month and followed by few series of 25bps. Tough luck especially for the FHB's that bought last year! I heard the stress test was only done around 6% interest for them last year....
And who knows what information was really given to pass the 6% stress test. And how motivated were those bankers to make the deal happen. Well, we are about to see.
On the stress test, done last year did not take into account the rapid price increases on everything from food, petrol, rates, insurance etc being the necessities you need to pay for. Eating out has increased in costs also, but can be pared back. If you are used to first class flying you will have to do with bussiness class only:).
That's what I was wondering a few months ago. If the banks stress test at that higher rate, surely they have to factor in economic conditions that cause the rates to increase that far. Whether it's a flat increase % wise of all declared out goings?
It's interesting how much the market is turning given these recent rate increases will take a few months to filter through before having any effect.
Reminds me of Charles Barkley all the time he's basketball player, he says that.
I don't need the data. Just read the mood. Housing is about to get smashed - no question about it.
It will be down till next summer and if it didn't gain the momentum before May 2023, you will see 30% off the plate from house values.
This was warned by Ardern and if it happens then Labour seems to be delivering the promise before the next election.
Yeah I think the foreseeable future relating to property is pretty clear now and therefore "Breaking News" does not apply. "House sales up significantly......" would now be 'Breaking News".
Where I live the housing in the $1.5 to$3m bracket is not shifting especially the older character homes. Many of them need huge reductions in asking prices . Their owners are hoping someone will be stupid enough to offer what the vendors want. The party is over. It has been for several months. And there won’t be another party for many years.
Even the stupid buyers are now stopped by the banks. Who ever would of thought.
4.3% off peak, hardly worth panicking over. Will it even get to 10% off peak? maybe.
Auckland is close to 10% off peak now, by HPI.
-7.7% for both Median Price and HPI for Auckland Region vs. peak in NOV. ($1,300,000 to $1,200,000 and 4,272 to 3,941)
Papakura is the worst/best for median price vs. peak -20.7% drop vs. NOV ($1,173,000 to $930,000)
Manukau is the worst best for HPI vs. peak -9.9% vs. NOV (4,649 to 4,187)
Question for you. If prices had plummeted over the last year -30% and suddenly there was a 4.3% rise over a couple months, would you dismiss this as nothing? Or would you say wow thats a dramatic change in direction, this could be the start of a boom
No, i wouldn't say 4.3% is the start of a boom.
The yawning chasm between what Auckland thinks it's worth and what it's actually worth is beginning to close.
But there is still plenty of room for downward valuation. ⤵️💥
It's a prime opportunity to observe a practical lesson in greater fool theory.
https://en.m.wikipedia.org/wiki/Greater_fool_theory
Especially now that the supply of fools has dried up.
Those that took bad advice from the charlatan spruikers have been transformed from first home buyers to first home bagholders.
while Auckland's median of $1,200,000 was up 0.8% (+$10,000) compared to February.
So when are the median & average prices going to drop? I have no doubt RE agents will be pumping these figures...
However, it appears these prices may reflect a change in sales patterns, with higher priced properties taking a bigger share of the market, which would tend to push up the medians.
The next two paragraphs suggest the figures are skewed by people buying in higher price brackets. This may be homeowners selling/buying in the same market, or anything really. Surely not FHB or small time investors I would hope. At any rate, a stable median and a dropping index is the telling story and suggests there's a support pool of buyers unfazed by market fluctuations steadying the median. Homeowners and long term investors maybe. Fewer people buying at both ends of the market will still show a steady median and mean, and generally be a symptom of reduced sales. It's a classic bell curve. HPI and recent sales stats suggest that bell curve is tightening and slowly but surely shifting left. Picking up those who waited, and taking names of those who didn't.
I posted this yesterday- but I have just updated some data based on todays releases - Hutt Valley Market Update
Current Market Listings
665 houses on the market- increase of 13 on this time last week and an increase of 70 houses since the 9th March. I’m predicting over 700 houses could be on the market by the end of April.
Based on the REINZ data which showed today 104 houses sold in March, this follows 96 in Feb. This means the average house sales have collapsed from 40 a week this time last year to now 25 a week. Moving forward I will use 25 a week to calculate how much stock is on the market
665 houses means there is 26 weeks stock on the market.
House Price Reductions
294 houses have a listed price and again this week prices have continued to fall, although only 50% of the houses listed have reduced prices The average markdown is steady at 70K. Previous reports have shown markdowns as high as 60% of the market. In the last few weeks more houses have listed with prices but fewer are reducing their prices. Looks like a number of listers are taking a longer wait and see approach , this could also indicate recent listings don’t have the same urgency to sell as previous listers may have had.
The data continues to show the majority of houses listed are under 900K. The Median house price for all 665 listings is now 839K. (10K drop on last week) please note REINZ is showing the median at $925K down on Feb's $971K.
The difference between my median and theirs is - I look at current stock, they are looking at sales and as noted the bottom quartile is showing very few sales whilst I'm seeing more sales in the $800K- $1Million Mark.
Looking at my March sold data I record - I only can see at the moment the last listed price (it takes 4-6 weeks for me to see actual sold price) - my median price for property sold was $889K - so not too far off.
Length of time on the Market
Given how slow the market now is – I’m adding a new Length of time – which is houses that have been on the market for over 90 days- effectively these houses listed in 2021 and remain unsold.
- 428 of the houses have been on the market for over 30 days - 64% (last week it was 403)
- 256 of the houses have been on the market for over 60 days - 39% (last week it was 243)
- 130 of the houses have been on the market for over 90 days – 20% (last week was 134)
The percentage and number of houses on the market longer than 2 months is growing each week – indicating a stagnation of house sales.
Rental Market
Meanwhile the rental market has 175 properties for rent (up 5 on last week), up 53 on this time last year.
A number of properties are taking some time to rent and having to drop their rental price up to $100 a week in order to rent the property. Average rental price reduction YTD is $47 a week and 40% have dropped their prices since listing.
Three brand new properties are advertising this week – with first week rent free and have had to 2 of the 3 have dropped their rental price from the original listed price.
Thanks again for your insights IKP, I find them probably the most interesting on this site. Wonder if you'll get to the magic 700 by end of April - may be tough with the short weeks...
Time To Panic.
IKP - I hope you set a trend here on Interest for others to also track and trace their own areas. I have made more of an effort myself with using trade me watchlist and notifications since following your posts.
Both you and Brock Landers are the most informative here.
That’s encouraging for renters. National would like us to believe that changes to interest deductibility would lead to increased rents. From your figures it would seem that popping the speculative bubble has increased available stock and rents are falling. You won’t be reading that in the MSM.
+1 on much appreciating your insights, they paint a really interesting, relatable picture that the high level stats don’t.
My only gripe is that you don’t live in Auckland 🙂
Keep it coming
Wellington's volumes sold this March is only around 60-70% of the usual amount from past years, however this year we have almost double the amount of houses listed for sale.
Be quick to sell.
Napier Listings have gone up 80% since December.
Hawkes Bay as a whole is closing in on 1,000 residential listings, which is (word of the year alert!) unprecedented. Those listing $1M+ properties without significant acreage in Waikpukurau must be getting nervous. I use places like Flaxmere as a bellwether for specuvestor mood. A few fixed prices and lots of BEOs showing up there now
Similar tale in Wellington city. Approaching 1000 listings. Though listings have stagnated in the past few weeks, the older stock still isn't selling. Plenty still have obscene BEO prices, especially the listings from January.
Hi General Comment. I have about 20 properties in Flaxmere on my Trade Me watchlist notifications. I typically choose the ones with a price to start with. Shortly there is going to be listings advertised at -20% (CRASH Territory) below the original advertised price. I am getting notified by Trade Me with "New Reduced Price " of 10K amounts often.
Very interesting to follow.
Not quite as bad as that 2022. I sold one of my rentals in Hawkes Bay, went unconditional today. Original offer by two buyers were what I considered peak of the market. Subsequently had to renegotiate offer as neither of them could get as much as they were expecting for their properties which affected the finance clause. Sale price ended up 4.2% below original offers. Was not overly happy but recognised change in market and decided to accept revised offer.
What does BEO mean?
Wellington is down 4.7% in one month (on an annual basis thats 56.4% in a year). Wellington is also only up 0.2% now from April 2021. Go have a look at the monthly index - its quite incredible at this rate house prices are going to drop 20%-25% this year
Its CRASH TERRITORY at 20% or more.
Gulp!
I’ve never seen inventory this high in Wellington city this time of year. And I must say, I’m stunned by how quickly the worm turned.
Several new builds sold on my street (Wellington city) over the last 18 months for over 2 mil. Some were nearer 2.5mil. It’s been a price and building frenzy around here. Long waits for engineers and architects, builders and plumbers booked out for months in advance. Now all of a sudden, it’s falling off a cliff.
We experienced the engineering waits... 6 month before anyone would take a look at a new place we want to build. Our builder is telling us we are probably still over a year away from building, even though we are about to get consent. I think the worm will turn incredibly fast in the new build market as well, nobody will be able to build very soon. Around 50% increase in building costs combined with higher interest rates surely will kill 90% of the market. Particularly if values are dropping all around, what bank would sign a loan for a $700k-$1m build when at the end of the build, the house AND land might not be worth that?
I see Stuff featuring this fellow who managed to build a passive house for ~$2,600 per square metre by being a little bit prudent in approach https://www.stuff.co.nz/life-style/homed/sustainable-living/128349747/a…
Perhaps if most land wasn't covered by crazy covenants people could build more efficiently too.
RickStrauss, we have managed to keep our reno costs down compared to others, and whilst we haven’t quite managed to achieve a passivehaus on our old villa in Welly, we’re not far off!! It’s been the mother of all renovations but the house is now structurally sound, borer free and incredibly energy efficient. We have recycled, repurposed and/or used a lot of reclaimed materials too so I’m feeling pretty good about our carbon footprint overall. The degree of waste and reckless disposal of materials in the building industry really gets to me.
This is the first time we have ever been in a warm, mould free home in NZ and it didn’t require the demo of a lovely old house to achieve that. Plus we’ve restored all the character features we could too. Lots of people just rip it all out and sell it on trademe, in favour of minimalist modern style, so we’ve been able to source heaps of original stuff.
That sounds awesome! Impressive to even get close to passivehaus in an old villa!
Must have been a very fulfilling project to see come to fruition.
Bobbles, yup, precisely. Builds and major renos are stressful enough, without unpredictable and rapidly inflating costs, supply and labour delays and now, a complete change in the funding landscape. There is nothing urgent about the final stage of our project so we are just putting it on hold until things improve.
Well done, Gingerninja! Congratulations!
it appears that you won’t be putting your home on the market……
But neither will the vast majority of others.
TTP
Imagine 4% drops every month for the rest of the year... in fact, here's hoping we get it, to return to some level of affordability.
This time yesterday there might have been 2 buyers for every 5 sellers - now there's more likely only 1 buyer for every 10. Its going be a race to see who can drop their pants the fastest (and deepest) to attract that one... interesting winter ahead for sure.
As a buyer, I have stopped looking at any property being sold by auction. For those being sold by negotiation , I place on my watchlist and wait until they are priced.
Wow this is happening much faster than I expected. A fall of 2.1% in just one month is huge.
Compare to the US housing bubble where prices fell around 20% over 4 years, or Ireland where they fell by 35% over 3 years.
Ireland fell 50% over 5 years after all was said and done. The first year of Irelands decline they only lost 5% or so.
NZ's decline could be a front loaded, but long drawn out affair as well.
I run an agency and appraisals going out as of the start of April are commenting on the market drop. It was quite hard for agents to set expectations lower when appraising because legally they have to give evidence of past sales and recently settled past sales were all higher. The adjustment has been quite sharp and salespeople feel they have to get vendors realistic before they go to market. There will still be some agencies who do the opposite and say whatever they need to get the listing and let sellers experience disappointment and adjust.
Meh - it's a Soft Landing
Taking The Pith
Ouch, looks like Auckland’s HPI down about 8% from peak late last year.
Printer 8’s prediction of 15-20% price increases this year doesn’t look great.
It's unlikely that Printer8 even knows what year it is.
Its 2022. Believe me I know.
Housemouse
A really sad, pathetic and desperate post.
Front up and show where I have posted or indicated a 15 to 20% rise as my posts as below show my view has been otherwise . . . to label you and your comment as BS is being polite.
You are really showing yourself to be a really sad desperate person unable to engage in any honest debate and being accountable for your posts without spiting the dummy.
I suggest you really consider my 10.16pm comment last night: "HouseMouse Some good news - I will ease up, but you really need to ask yourself why you leave yourself open as you do".
The ball is in your court.
Cheers
by printer8 | 18th Dec 20, 9:19am
Clearly the current rate of housing inflation is unsustainable (even Bindi has publicly said so) and it poses risk of significant correction which is neither in the RBNZ nor the government’s interest.
and
by printer8 | 3rd Mar 21, 11:35am
Yes, I think that most are now seeing current price rises as unsustainable.
From the release (my emphasis):
Jen Baird, Chief Executive at REINZ, says: “Over the past
three months, we have seen a shift and the market is now
settling into this phase of the cycle. The last two years have
benefited from an exceptional COVID-19 boost.
This is the first time I've heard that admitted so candidly. Up until now it's always been prices surging in spite of COVID-19, not because of it; irrefutable proof of just how "resilient" the New Zealand housing market is.
It's a welfare scheme, not a free market.
So if house prices crash, that must include new house prices.
Which means builders will stop building, and possibly one or two must go under.
But builders don't make massive profits now - so maybe the availability of gib will improve?
New insulation costs won't help profit margins either.
Anyone any idea about how long it will take before we see the number of consents dropping?
Time for the Govt to launch a new state housing building program then.
Edit. i would add that allowing tax deductions on new builds will go a long way to keeping the building sector moving. There is an insatiable demand to interest on debt tax rinsing. Those that can, will continue to buy this product.
... " Kiwi Batch ! " ... the shovels are ready , we've got $ 10 billion to spend ... where's Phil " the toolman " Twyford when you need him !!!
$ 10 billion .... oughta get 1000 built by 2050 ...
We could give it a catchy name , something like " Kiwi Build".
Yeah, and we'll build 100,000 homes in 10 years. Good targets I say.
But let's not actually bring back any trade school incentives like we had in the 80s. Much better to import cheap labour from third world south east asian countries.
#game on
#race to 100k
#ThisTimePromise
Maybe some sort of body to employ out of work builders to do work. We could call it...Ministry of Works, perhaps.
The Targeted Training and Apprenticeship Fund (TTAF) is a government fund that will pay your fees and compulsory costs for many vocational education and training (VET) programmes. TTAF is also known as "free trades training
https://www.careers.govt.nz/courses/funding-study-and-training/ttaf/
It will be a lot more than one or two going under. We are already at the stage of first time developers going under because of major cash flow issues caused by the pandemic (material shortages and dysfunctional supply lines).
I would guess that consents will start to decline in the next few quarters. And some of the consents already issued will be mothballed. Banks are not going to lend as readily on speculative building projects and renovations when there are so many storm clouds gathering. They have already started scrutinising for over-capitalisation (which has been rampant the last few years).
If the Kiwi housing market does finally crash (which is looking increasingly possible) it will drag heavily on the economy, not only because of the “wealth effect” and lower wealth perceptions, but directly related to how many allied professions have sprung up around real estate in comparison to other markets. Hospo especially has taken a hit over the pandemic, so even more people ploughed in to property related jobs since 2020 (RE’s, home decor, gardening, tradies, staging etc etc). Many of those jobs will disappear in a housing crash.
Consent applications are related to optimism and economic growth. It’s hugely psychological. Not to mention the likelihood of increasing mortgage rates.
How do you budget for a build in an inflationary climate? You’ll be on a variable rate as you build. Because of material shortages, your build will likely experience delays and then when the CCC’s are finally in, who knows what fixed rate might be available by then? The cost of your build is likely to increase too, because of the inflating material costs, many builders are including clauses to account for this in their contracts.
This perfect storm is going to wreak havoc on the psychological impetus to build or undertake major renovations.
Hi gingerninja - I was listening to the radio this morning and they were saying building projects that normally took 3 months are now taking about 2 years from start to finish. I wonder what profit you would make at the end of that deal 2 years from now ?
Yeah, that’s not at all uncommon now. Even smaller jobs are taking longer because of Covid. My neighbour had scaffolding up in Feb for a simple house paint. Didn’t need stripping or major repairs, just a fresh coat. It’s 10 weeks later and they’re still nowhere near finished. And obvs they’ll be on the weekly charge for the scaff now too. I booked a new carpet install late last year, the installation has just been delayed for the 3rd time (till May).
My own renovation has been massively drawn out (and had to be done in stages over 3 consents) because of Covid….then after fighting for 2 years to get a Resource Consent the announcement about the new building legislation came in and now we don’t even need the damn RC anymore! Ultimately we decided not to move forward with the last stage of our reno right this year. The last 2 years of pandemic reno have been challenging enough and we don’t fancy taking on debt right now. You need a strong constitution to try and build in this climate!
Hi Gingerninja,
Appreciate your comments. Would be interested in what you think the NZ dollar will do when the housing market crashes?
Unemployment is cyclical. We have been at the bottom, so guess where to next? Perfect storm is on the horizon
If you have been unable to sell in the last two years the only thing stopping you was your excessive greed. Its only going to retreat from here. The last couple of years of economic mismanagement by the Govt has created a massive bull trap. Those that piled into the trap on artificially low rates simply for speculative return are about to get educated. How many of our newly self proclaimed property emperors are going to be found naked as the tidal retreat accelerates?
I'm picking enough to make the problem worse. Bring on the clowns, I mean mortgagee sales.
The April to June 2022 quarter will be a real reality check;
- RBNZ likely 50bp increase in May 2022
- C.P.I. at potentially 7%+ (although the food/energy/fuel/non-tradables i.e. rates/insurance) components potentially in the 10-20% range
- Borders opening at a glacial pace so significantly reduced immigration
- Minimal International Student arrivals (in fact given the border situation for countries requiring a visa to enter I suspect this will be a major issue until Semester 1 in 2023 (you would go to Australia first). This will particularly affect Auckland
- Slow tourism arrivals in winter as above (excluding perhaps Australians going to Queenstown for ski season)
- MBIE estimating 50,000 (net) people leaving the country (many FHB)
- As above, significant FHB emigration to UK/Australia (no COVID restrictions), particularly the Auckland market
- Autumn/Winter impact on sales
- Low Business/Consumer confidence dampening investment spending
165 billion in New Mortgages since March 2020 to 513 thousand borrowers. 321 k average each. Every day hundreds of those loans roll over onto a new fixed rates 2% higher than previous. Average $123 week or $6423 year of someone's after tax income to service the additional interest cost. 63 million a week and 3.3 billion a year for the whole country. There will be a recession. How soon before the RBNZ begin cutting rates? I assume that is why they are front loading the rises. Will the government encourage the cuts to try and save themselves pre election? Or will National get the glory post election after they revamp the reserve bank committee?
Does that include re-mortgaging at the end of a fixed period? We took out our mortgage in 2016 at around 4.5%. As the rates fell we maintained the same monthly payments. Only those that bought in the last 2 years will really feel the sting of the current rates rise. It may end up being 7-10% interest rates but I stressed tested that when we bought. I live by a few rules - only borrow what you can afford to repay, interest rates and house values go up as well as down. Never spend your equity on toys (Jet skis, boats and fancy cars), don't have a credit card and only borrow money to buy a house.
Not everyone is as prudent as you. Look into the weeds of the spreadsheet link on this page.
https://www.rbnz.govt.nz/statistics/c40-residential-mortgage-lending-by…
Be afraid. Be very afraid.
That is a bit scary. Coming from the UK I was told not to borrow more than 3.5 times a single salary or 3 times household income. Cut your coat according to your cloth, that is why I ended up in North Waikato and not Auckland.
Since March 2020 1687 Auckland Owner Occupying (non first home ) buyers got loans averaging 917k at DTI over 9. Now those households will need to commit another 10-20K of after tax income. Just to service the additional 2% interest.
I wonder if the RBA will start hiking post election?
Brave call by Orr & co yesterday. I would imagine Mr R would not be impressed. Another 0.5% in May? Yes please. There's no choice. What do they save, the markets or the people? Has to be the people doesn't it? Get food prices down, get rents down, get house prices under control, keep transportation costs stable - job done. Easy really, isn't it?
Inflation will fall if Russia and Ukraine sign a peace deal, China opens up again and shipping companies build more ships. Tinkering with rates in NZ is not going to influence import prices of cars, food, consumer goods, oil or fertiliser. It will however cool house prices.
Is their any other economy in NZ except Housing....Thanks to likes of............
I don’t think that’s true. Once inflation takes hold, it becomes self perpetuating. Workers demand higher wages, shops charge more... fail to raise interest rates and inflation can get away on you. You can remove the source if you want but inflation remains, it’s just human nature. Our relationship with money.
I wish I fully understood the link between global and national economic drivers. Imported goods costs started rising with the Covid disruption to supply chains. The increase in oil price also contributed. Locally easy credit and money creation has pushed up house prices. I can’t see how reducing demand for imported goods by raising interest rates will reduce prices, as NZ isn’t a big enough market to influence the producers. Wouldn’t they just sell elsewhere?
I think you're right. There might be some effect on prices of locally produced and consumed goods from reduced demand, but we're not gonna shift the prices of imports.
OTOH: rent and property prices and building costs are part of inflation. They'll certainly be affected. As will services - sucks for the service providers, but they'll have to compete on price as demand goes down. Domestically produced goods that are mostly consumed domestically, perhaps because they're bulky or impractical to transport (think potatoes), should get cheaper. Also things like used cars that are usually traded domestically.
The reason to raise rates, really, is to protect the currency. I think we're particularly vulnerable, because we're small. $NZ is very liquid and is considered a risk-on asset. We don't have a diverse industrial/agricultural base. If confidence is lost in the $NZ, it would be difficult to regain. Personally, I would consider big cuts to the nominal value of housing assets a bonus, despite the pain it would cause precisely because our economy is so unproductive and unbalanced. Far too much capital has gone into housing rather than productive assets, and we're about to get taught why that's a bad idea.
I'm looking forward to a lower tax bill, maybe no tax bill, next year. Got to look at the bright side!
Fall of 2.4% in a month as a trend is good but when comapre to jump of 10% in a month witnessed last year is peanuts as the fall has to be substantial or is meaningless.
Begining of Downward Trend is good and if it continues, which it should as is just the begining will be good for FHB. Still long to go as FHB should remember that mortage repayment compare to last year have already gone up by 50% to 65% so advisable to revisit their budget to avoid any surprises.
As highlighted on the same website that last year for every $100000 would be appox $85 - $95 per week and today is appox $135 - $145 per week and worse, this is not the end on interest rate going up. So for $700000 mortage last year, mortage repayment for five year loan would have been appox $595.00 - $665 per week and today will be appox $950 to $1015.00 per week.
Will be a bleak winter everywhere. A lot of mortgage holders have only known interest rates to decrease not increase steeply.
Cant see Prices dropping much....first sniff of the 'bottom of the market' and it will be normal chaos again....
It will probably bottom whenever interest rates are about to fall next. That feels far away at the moment. It really depends on what the US does as we have to follow them if we want to hold the value of our currency. Inflation will remain the only thing that matters to central banks until it has come down.
With all the communications from government about the pandemic and what you should and shouldn't do it it was very remiss of them not to warn the public that the current low interest rates were an emergency to help the economy and may not be long term. The advice should have included paying down current mortgages and to avoid overloading on any more debt.
I know everyone is supposed to be grown up but it would have been good optics for the government to do this. Financial health can be related to physical and mental health.
Instead people who did warn about these things got told off by their wives for being wussy (personal experience)
BIGGEST Mistake was removing LVR.
Need at that time was to support existing house owner from default or panicking instead they ....deadly combination of No LVR and Literally Interest free (Lowest seen for new built was 1.8% - that is literally free).
Do not blame Jacinda Arden as she may not understand as is too much for her but people surrounding her, who for their self vested biased interest....
Just read this article and this are the people in charge of making decession :
https://www.newshub.co.nz/home/politics/2022/04/national-s-nicola-willi…
Anyone read Mr Church's puff piece for OneRoof?
Ashley Church: Four reasons the housing market won't crash, All things property, under OneRoof
"I adopted my own definition years ago, and have stuck to it ever since. I define a property market crash as a 20% drop in the median sales price from market peak, and which lasts for more than 12 months."
He says categorically it cannot crash by that methodology.
Full of laughable quotes, that's for sure. The best is the line of reasoning that we have low debt relative to underlying asset value. What he forgets to mention is that those asset values are based on the flame of 2020/2021, so are paper values. I for one know the value mine said about 3-4 months ago (which was up 70% since we build 18 months prior) was unlikely at the time, based on comparable sales AND it has dropped c12% since then (including 7% last month).... so.....
It reminded me of one of the pre GFC articles in the states about what definitely could not happen.
But, at least he has put a line in the sand with a clear definition. Peak was $920143, so if it gets below 736,114 it's a crash even by his standards, which is still higher than the median in October 2020. So there you have it.
Well, he is just doing his job. He is paid to create FOMO and promote real estate.........more the need now when everything is pointing towards disaster for housing speculators. His role is more important to calm them.
true that
"Over the many years that I’ve been providing commentary on the housing market I’ve made a lot of predictions, and while those predictions haven’t always been correct, there’s one topic on which I’ve never been wrong: property market crashes.
I don’t say that to boast, but simply to give you confidence in my assurance that the market isn’t going to crash now"
#desperateplea
If you want a laugh... The Church now describes himself more accurately as a 'Property Market Historian'
https://www.youtube.com/watch?v=FvvumzD09w0 - it's in the first minute when he's asked who he is
He's as credible as a history teacher who preaches that we won World War I & II, so we'll win every World War in the future, because that's how the world works
Yes, you are 100% correct, he's paid to create FOMO and pump the market - yet he never declares that's what he's paid to do.
It's only obvious if you have a few clues and can see through the BS... most believe he's an independent authority on what the market will do next.. because that's what MSM wheels him in to ask him.
My wife and I have been looking for a smaller property and can't work out why sellers are still selling by auction. When they don't sell, they appear to be priced "by negotiation" and if that doesn't work, are FINALLY priced. It's time sellers were realistic and stop playing games ... price your homes.
Wait and soon will see asking price with a tagline that seller is serious, please present all offer and vendor will consider, which they too know in all probability will be less than minimum 10% from asking if not more.
Sure hope so - I have 10 properties on my watchlist at the moment - just waiting for them to be priced. :)
By the way, where's that chappy who said that they REINZ number would just say the same as the earlier (but later) CoreLogic numbers....? *wink*
Putting words in my mouth there Zaphod, but I don’t know if I conveyed my point very well either…
What I said was that "the corelogic is a good indicator of what the reinz will show" (this is providing you are watching both datasets as trends over time) after all they are both viewing the same market. The corelogic is a SPAR index (sales price appraisal ratio) and shows greater accuracy. Whereas the REINZ index is based on sales by agents in an individual month and although less accurate can pick up recent trends faster. Neither should be viewed as a stand alone single month dataset. Also corelogic don’t solely rely on the old method of sales loading through the council records anymore, so their data isn’t as far behind as it used to be.
Basically my point was that no dataset is worth discounting. It just needs to be understood within its context. Cheers :)
REINZ HPI is also a SPAR index but uses more recent sales. That's why it shows the market before Corelogic which uses 3 months of settled sales, and fewer will be from the most recent month because they haven't settled yet. The REINZ one reports the action before the corelogics one.
It’s the all too obvious fact few in Unn Zull’nn are willing to face or accept: your house prices are ridiculously high and your houses aren’t worth what you think they are.
Delusional Kiwis tell yourselves everyone wants to own a house in Unn Zudd, and you pretend those dank piles of pine sticks and fiber cement board are somehow worth the millions you’re throwing at each other for them.
Both of these fantasies are hilariously worthless.
The Auckland HPI is 8% down from November's all time high, i.e. it has fallen on average 2% per month for four months. With yesterday's OCR increase not having flowed through to the sales figures yet, and further rate rises to come, it's hard to see things stopping here. It seems like a reasonable bet that the Auckland HPI will be at least 15% down from peak before the year is out, and 20% is not out of the question.
I guess I'm stating the obvious here, but it helps to write it down.
Fair call but that's a far cry from those that are stating 30-40% falls guaranteed. Down here in Tauranga its still going UP and yet to start to go down. No doubt it will but there is a clear lag and I suspect the falls will not be as high as Auckland. I'm still picking single digit YoY gains for the BoP.
.
My mental model of things is a bit too sketchy to be able to predict 30-40% falls, but I wouldn't completely rule it out either.
Regarding Tauranga, the HPI Report says that Tauranga City is down 1.1% for March. I guess some parts are still going up, perhaps the beach areas, while others have started to go down.
Keenly watching a 'high end' home in Balmoral (it is a nice family 4 bed single storey home... But for the price it is insane), it attempted auction 2 weeks ago and was passed in. Now is displayed with an asking price over 4 million. Be very interesting to see what they end up with.
So in the 2nd week of November last year I sold a 800sq m property on Riddell rd Glendowie that had land value only, old 3bdrm house max rent about $850pw for $3.25 mil,, Akl was still in level 3 lockdown. there was nothing for sale and the market was right at the peak of stupidity as developers fought over limited supply.
Chinese developer got it, rank group where under bidder.thats $4062 a sq m. Thank the lord quick, a settlement and we had the dosh early Dec. if it had a long march settlement at 10%dep they would have walked.
It has to either have about 4-6 units on it possibly a massive exec house to break even imho or they bail, right now that site is prob only worth 2.4-2.5mil, in a year 1.8mil.
Be interesting to see how much they loose, can you imagine building delays and sky rocketing costs for All their options. i am a bid at 1 mil.
in markets there is a saying
'The first stop loss is the cheapest, after that they get more expensive."
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