House sales fell off a cliff in December as the country saw volumes fall to levels not seen in years, indeed, with some regions hitting all-time lows.
At the same time, the Real Estate Institute of New Zealand (REINZ) says the annual median house price fell 12.2% to $790,000.
The national median is now down 14.6% from the peak of $925,000 in November 2021.
Wellington, Auckland, Gisborne, and Tasman had the largest drop in median sale price with –20.2%, -18.0%, -17.3%, and -14.1% respectively year on year.
Auckland's median, at $1,050,000 is now down about 19% from peak ($1,300,000). Wellington's at $790,000, dropped just over 20% during the year.
Northland and Taranaki were the only two regions seeing an increase in median sale price, up 3.3% and 5.1% respectively.
REINZ's House Price Index was down 13.7% for the year, while compared with its peak in November 2021 it's now down 15.2%.
Inventory shot up 55.3% year-on-year, with 26,057 properties available as at the end of 2022.
The days to sell figure nationally rose by 11 days compared with December 2021 to 40.
In terms of sales, nationally, the figure dropped to just 4336, which was down 23.6% on the figures for November 2022, and down an enormous 39% on the December 2021 figure.
The latter point can't be stressed enough because sales had actually plummeted in December 2021 after banks struggled with imposition of new credit rules. The 7104 sales in December 2021 actually represented a 29.4% drop on the 9573 sales that had been reported in December 2020.
So, in other words, December sales have tanked by well over half compared with what the market was doing two years ago.
In Auckland, sales in December 2022 were just 1,327, which was down on the 1,834 for November 2022 and some 45% lower than the 2415 in December 2021.
ASB economist Nat Keall said "beyond the near-certainty" of further short term cooling, the broader headwinds facing the housing market (and indeed the NZ economy in general), "suggest we are still a fair way off the market turning around".
"We retain our present house price forecasts and, based on the quarterly QV index, we expect prices to ease 25% from peak-to-trough – about another 15-17% from here. In real terms, that fall looks to be a little north of 40%," Keall said.
"We don’t expect the market to turn around in any meaningful way until mid-2024, though earlier OCR [Official Cash Rate] cuts from the RBNZ (Reserve Bank), and thus lower mortgage rates, have the potential to trigger an earlier recovery."
Kiwibank economists including chief economist Jarrod Kerr, senior economist Jeremy Couchman and economist Mary Jo Vergara said in reviewing the figures that it was "a disappointing end to a tough year in the housing market".
"Given the current backdrop of a slowing economy, and a large chunk of mortgages rolling onto higher fixed rates, house prices have further to fall. We still see house price falls trough in annual terms at -15% in the current quarter. And house prices will continue to fall beyond the current quarter, but just at a slower pace. Our forecast suggests a peak to trough fall in house prices of 21% in the current correction. A recovery in the market appears a long way off, perhaps a 2024 story. However, on the demand side net migration is turning around quickly and will see population growth pick up," they said.
They said there "are clear risks" to their outlook for the housing market this year.
"We believe the RBNZ may deliver too much in the way of rate hikes and monetary tightening. That includes the likely 75bp hike in the cash rate [OCR] next month to 5%. Although we would advocate a lesser move (25, not 75). And financial markets are moving in favour of reduced rate hikes. The economic pendulum is clearly swinging towards downside risks, rather than upside risks. We continue to forecast a peak in the RBNZ’s cash rate in coming months, and a likely cut to that cash rate by year-end."
ANZ senior economist Miles Workman said the market was now "just over two thirds of the way through the 22% peak-to-trough decline we have pencilled in".
He said the latest REINZ data "were pretty close to our expectation, suggesting relatively balanced risks to our outlook".
"Our forecast assumes downward pressure on house prices will dissipate shortly after the RBNZ is convinced they have knocked pipeline inflation on the head, and can therefore stop lifting the OCR.
"But that assumes the household sector broadly holds it together as higher mortgage rates bite, meaning forced house sales are relatively rare," Workman said.
"Anecdotally, there certainly appears to be some households out there really struggling in the face of rising interest rates, but the macro-level data still looks relatively robust, with non-performing housing loan data remaining low and stable. But before we get too comfortable with our forecast, let’s not forget there’s more to the housing market than just the interest rate and household sector outlook. Net migration, housing market sentiment (animal spirits), and housing policy all have the potential to throw us a few curve balls this year."
Westpac acting chief economist Michael Gordon said with financial markets now turning their attention to the prospects of recession and OCR cuts at some point in the future, "we think that term mortgage rates have now peaked or are close to it".
"However, the increases in borrowing rates to date will take some time to work their way through the housing market. We’re still seeing a drop-off in new listings, as property owners choose to hold back rather than sell at a loss. That tends to slow the process of finding the new equilibrium price level, and suggests that we’ll see further falls in sale prices over the coming months. Our forecast remains for a 21% total drop in prices from their peak," he said.
REINZ chief executive, Jen Baird says prices are continuing to ease but the pace of the decline is slower, and the market has settled at its new pace.
“Buyer caution is evident in the drop in count of sales, down 23.6% month-on-month and down 39.0% annually from December 2021. Comparing this activity to the long-term trend, we can see the current market is weaker than this trend. This is leaving a lot of choice for buyers with a 55.3% increase in inventory – now sitting at 26,057 properties.
"With interest rates rising and banks stress testing at 8.1-8.5%, buyers’ ability to secure finance and service a mortgage remains a key driver to buyers taking their time. As a result, properties are spending longer on the market with 40 being the median days to sell, 11 days longer compared to December 2021," Baird said.
"The median sale price has decreased nationally by 12.2% overall to $790,000 and decreased 7.9% for New Zealand excluding Auckland to $700,000. The REINZ House Price Index (HPI) showed an annual decrease of 13.7% in the value of residential property nationwide which is in line with the sale price changes we are seeing.
"Again, cheaper prices coupled with more choice for buyers means sellers have to be realistic about their price and timing expectations.” Regional median house prices have decreased across the board except for Northland which saw an increase of 3.3% and Taranaki 5.1%. These were the only regions to see a rise in median price compared to December last year."
Baird says Wellington is now into its 14th consecutive month of being in the bottom two ranked regions for the year-on-year House Price Index movements.
With Auckland, all seven Territorial Authorities (TAs) had negative year-on-year median price movements with Papakura the largest fall at -23.6% from $1,010,000 to $772,000, followed by Waitakere City at -20.5% from $1,170,000 to $930,000. The region has recorded eight consecutive months of year-on-year median price decreases for the first time since June 2008 - January 2009.
In Wellington, seven of the eight TA’s had negative year-on-year median price movements with Upper Hutt City largest fall at -24.5% from $920,000 to $695,000, followed by Wellington City at -24.2% from $1,161,000 to $880,000. At a regional level, this is the first time since records began that this region recorded seven consecutive months of year-on-year median price decreases.
REINZ says in terms of sales counts, if we exclude the month of January (usually the lowest month for sales count) and the two Level 4 lockdown-affected months of April 2020 and May 2020, December 2022 had the lowest sales count in:
- Northland since October 2011
- New Zealand excluding Auckland since February 2011
- Taranaki and Waikato since December 2010
- New Zealand since October 2010,
- Auckland since December 2008,
- Wellington since June 2008,
- Nelson since records began
In terms of inventory, 12 of the 15 measured regions (80%) had at least a 60% YOY increase in inventory Listings
Nationally, new residential property listings have decreased 25.9% year-on year. Regionally, all but two regions (Gisborne and Taranaki) have had a decrease in listings since December 2021. Over half of the regions have had listings decrease by more than 20% year on year.
In auctions, nationally, 11.7% (509) of properties were sold at auction in December 2022, compared to 30.4% (2,162) in December 2021. New Zealand excluding Auckland saw 8.7% of properties (262) sell by auction compared to 21.7% (1,018) the year prior. Gisborne and Canterbury had the highest percentage of sales by auction for December 2022 with 50.0% and 18.9% respectively.
Volumes sold - REINZ
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Median price - REINZ
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Days to sell - REINZ
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251 Comments
I notice Jen Baird has updated her profile pic for the latest REINZ report. Ditched the bright lippy and wide-rimmed glasses, sporting more of an au naturel look with muted tones on the garments.
I wonder if that's a signal that mating season is already over, and we should all be retiring to the bush to overwinter and fatten up for next year.
I can only hope that the Gnats ask Orr to leave , after they win the general election this year ... he's completely overcooked the economy & housing market with his ultra low OCR ... and now , is slamming it all into reverse ... trying to undo the damage he's caused ... hopeless ...
... and Robbo will get his comeuppance when the voters boot Labour out ... completely hopeless ...
The answer is that Adrian Orr gets paid megabucks to essentially be a lightning rod for the Reserve Bank. He cops way too much flak for decisions which get made by all members of the Monetary Policy Committee, and replacing him with someone else would not result in any meaningful policy changes.
It's Plucking brilliant 😁💪
This is a perfect storm.
I divested my property investments at max gain three months ago and have predicted this crash.
I'm now just waiting for the pain to " go hard" on all the idiots that brought at the top thanks to Jabcindas Robbing son and A Drains "cluster economics " to kick in some more and...
.💥 Boom 💥💥💥💥💥
lap up the cheap houses.
I'd say April to June, mid winter sale... But wait!... There's less!!! 🤣🤣🤣🤣🤣🤣🤣
Places like Papakura in South Auckland down from a million bucks to 770k, no surprises here. Sadly even after these falls the Auckland median is still over a million. In any case, the correction so far is a help for genuine first home buyers. TSB will be very happy with Taranaki prices UP 5%.
TA/AC both promised the huddled masses at their "With property you absolutely cannot lose" "My surveys show only upwards is possible" revival meetings, gains forever and at least a solid 5%!
Can these guys go out in public without attracting egg throwing crowds?? The thronging "property trading sessions to the moon".......have turned into pitchfork lynch mobs!
Solid 50 percent ROE, when you borrow 80 percent. Its equivalent to 10 percent total returns.
Is it possible to get a capital gain in a falling market? It sure is. Though not easily done.
My motto: if someone throws eggs at you, then scrape up the mess and cook a meal.
Agree - this is just the end of the beginning and we are a long way from the beginning of the end. Panic and forced selling yet to start.
Inflation will come in over 7% against when it is released, OCR will go up again, the last of the fixed rates will rollover and the new financial reality will kick in.
Then the job losses will start as retail and hospo hit the wall…we’re not even at the end of the beginning yet. But this is a necessary, long overdue correction after 10+ years of excess house price growth, and younger generations who have not yet been able to buy will be thankful
House prices going up OR down quickly is never good for people on the sidelines...it always ends with some being 'collateral damage'.
I feel for anyone heading for negative equity or selling at a loss currently,just as i felt for people in the last decade chasing ever increasing prices,whilst paying ever increasing rents for essentially the same property or folk who sell,then by the time they settle looking for a new place find they can't afford to even buy their old place back,let alone upgrade.Our property market has as many sad stories as good ones unfortunately.It has been broken for years...and the Nat / ACT parties want to cobble it back together for a couple more laps.
There will be a few in here loving this,want it to fall further while they sit cashed up on the sidleines,waiting for a change of govt, removal of Labours disincentives...then swoop in to make money out of some other poor individuals bad luck of being born at the wrong time.
National maybe phasing back in the tax rinse for property speculators, maybe by 2026..... wont matter a jot as interest rates swing in the 7- 10% range.
The DTI rules cannot come soon enough, once the market craters the by the comming 40-50% and then only increases by the average wage of 1-3%
Just be aware that sort of drop would come with a price tag (decimated domestic spending and higher unemployment) and probably a body count, given the extreme mental pressures that come with financial stress.
It doesn't mean it won't happen, or that it couldn't be something we manage smartly if we're clever about it. But it's not a situation of zero negative consequences like some want to make it out to be if we don't have a plan to make it work.
Just be aware that sort of drop would come with a price tag (decimated domestic spending and higher unemployment) and probably a body count, given the extreme mental pressures that come with financial stress.
It surprises me that few NZers understand the mechanics of bubbles and the wealth effect. It's economically far worse than the price tag people think they can stick on their house. Without a doubt, family holidays to Fiji will likely be off the table in 2023. But it's the little things. Going for the discount wine in the supermarket. All these little changes in behavior all aggregate. And that puts more pressure on the property ponzi as consumption-related businesses suffer.
100%. Unfortunately it's been a long time since the NZ economy ran on what people actually earned - getting by has long been contingent on spending more than what you earn for a meaningful standard of living, or a live that passes as worth living. And that's not allowing for any divorce, career setback, illness or loss of earning partner.
Unfortunately it's been a long time since the NZ economy ran on what people actually earned - getting by has long been contingent on spending more than what you earn for a meaningful standard of living, or a live that passes as worth living
Perhaps people will realise through this crash that the standard of living they had was not actually realistic to start with. Ask yourself, what do you truly need to be happy, I'm betting at the crux of it you could list these needs on one hand.
Sometimes the realisation that going out for coffees, having annual overseas trips, skiing every winter etc aren't actual necessities, can be one of the most wholesome, reflective and best things that can happen. Maybe then the division within NZ society will heal, and we will both value and spend time and money on that which makes up the classic kiwi lifestyle of old where the people were what matters, not the pictures and the stuff. Better living everyone, we'll get through this and come out the other end better as a country.
And would limit investors considerably. E.g.
- FHB with a household income of $120k could borrow $600k.
- Landlord looking to buy a rental appraised at $30k p.a. rent can borrow $150k. Maybe more if if they factor in his own salary, except if that's tied to an owner occupied mortgage (the source of the initial deposit).
"B-b-b-b-but what about mom and pop investors? We need them to provide much needed supply to the rental market". No we don't. Certainly not from the existing housing stock.
The HPI index in December had the following month on month drops in price - Hamilton down 4%, Auckland down 2%, Whangarei down 3%, Wellington down another 2.6%, Queenstown down 5%, Dunedin down 3.4% Christchurch down 1.1% and basically all other areas down. Invercargill New Plymouth and North Shore only places that stabilised. Those are huge month on month falls and the pace is accelerating (not stabilising) like REINZ are trying to say. Page 6 https://reinz.co.nz/Media/Default/Monthly%20Press%20Release%20Assets/Re…
This is why the release was late i'd wager, they needed more time to come up with how to spin the numbers. I wouldn't be surprised if their analyst had to re-run it and make some tweaks as well. They must not spook the horses. The spin in the write up is shocking, the bias is showing.
Interesting to see Queenstown Lakes finally having some falls. Here in Wanaka there are now 270 listings compared to 100 in August 2021. Deadline sales are mostly converting to asking prices, then seeing the odd drop in asking price. There are a lot of sections selling secondary and quite a lot available directly from developers. Still all crazy expensive. Like up to $1.9m for 700sm.
Airbnb have been holding up the values with many people buying just to Airbnb, then rents get pushed for the few rentals available. There are 600 Airbnbs currently available in May which is crazy for a town of 10,000 people.
Anyway there's my rant. As someone who would like to buy here one day it's good to see some falls.
I think AIR Bnb has created a massive issue. Moteliers and renters should hate them. I wonder how many previously rented places are now out of circulation due to this ? Be an interesting thing to look at if the data was available. 328 available for the month of Feb in Auckland.
That is interesting, thanks. QL is unique in having a year round rental holiday let market, there is nothing comparable in Australasia (well maybe the GC but that's pretty low rent). The market feels like it's at a stand-off but it will only take a couple of forced sales to get the whole market marked lower. Sections will suffer the most as they have no income obviously, and the cost of carry and building is up. I would not touch a section unless it had a min 25% mark down. I'm looking to buy there but happy to bide my time.
No. Good old fashioned hard work.
Sort by recent listings NZ wide. Find the first listing for the year. Count the number of listings since. 22 listings per page x 139 pages = 3058.
You don't need to click through each one, you just change the page number in the URL.
Over 500 listed for sale yesterday alone.
Alternatively, you can refine by each region and sum the total. Got to nearly 40k last year.
Northland - 2,132
Auckland - 11,947
Waikato - 4,416
BOP - 2461
Gizzy - 153
Bay - 1018
Naki - 887
TTParadise - 1938
Wellington - 2392
Nelson - 800
Marlb - 462
West coast - 470
Canterbury - 4381
Targa - 2112
Southland - 700
36,268
Wow if the RA increases the OCR to 5.5 per cent it will get really rough. People were warned but many did not listen. It was better in 2021 to keep renting but they had to buy that home and borrow squillions to get it. Some will now lose their homes as rising Bank repayments will tip them over the edge. I hope these high interest rates do not last for too long.
People have been 'warning' others about overdue blood-letting since the post-GFC era. It's stopped clock stuff at this point, especially after the actions of the government and RBNZ, who pushed past rational actor status with the Covid response. Expecting individuals to factor in near universal institutional and political failure is the equivalent of not getting out of bed because an air conditioner might fall from an office block and crush you.
Very tidy houses in nice locations will hold some value. I imagine there will be 3 for 1 deals going on, ie sell up and buy your forever home.
Based on current rates and inflating rent at 4% for 10 years, I reckon (big I reckon) investor bid without capital gains or cash is currently around 2015 levels. That is an amount you'd be willing to pay to break even at interest only, and rely on eventually selling for a gain or waiting 5 - 10 years for it to become cashflow positive and start cracking on with the P.
Just refixed the other day. Went from about 2.5% to 6.5% on the portion of the mortgage that was up for renewal; roughly $100 p/w in additional payments on a $200k loan.
Not really too problematic for my household as we've got some extra income from a return-to-work scenario (and there's fat to trim if needed from the budget) but brutal for those who bought at big values and were "marginal" in terms of being able to cope with the extra costs ... particularly if people start losing jobs.
The construction sector was running well-beyond capacity causing build prices to run at astronomically high levels in 2021 and 2022. I am all for house prices settling closer to affordable levels but the building sector going bust is not a good outcome for the broader economy.
The ideal scenario would be demand for construction gradually easing back to manageable levels with social housing and non-residential projects picking up the slack.
"people start losing jobs" will have to happen before there is any relief. As it will the first of the 3 mandates to cross the bands to suggest OCR cuts or even just holding. The CPI will be >3% for at least a couple of quarters more and "sustainable" house price levels will just keep decreasing.
Overlaid the graph with a trend chart
https://www.dropbox.com/s/67rf347n2nes1j4/Screenshot%202023-01-18%20at%…
A third layer might be needed: Mortgage rates. And zoom out.
Fixed rates now are higher than any point on your chart. 2014 or 2011 on the house price chart will give you some idea of where the expected reversion might be. Then adjust for the difference in median household incomes.
- 2014 - Median house price $425k. Mean household income $91k
- 2022 - Mean household income $110k = x 1.21 on 2014. $425 x 1.21 = $515k. So another 35% to fall?
Even with prices on them people are asking for too much. In the midst of a stock market correction you don't get to sell at last weeks prices just because you've decided it's time to sell, available stock on the market is going to keep rising a lot this year because of this. It may result in a panic.
Agreed. I'm getting really tired of 'watching' homes go from 'deadline' to 'by negotiation'. By the time the sellers actually price the house (I'm interested in), my offer will go down because I will know that there are no buyers out there at the price the seller wants.
That's how this unaffordable house price started. Investors pumping up market by speculating. They were far from dispassionate, they were fighting each other for houses and pushing prices out of reach, chasing self made capital gains. Speculation needs to be curbed, sanity and a market price based on wages need to be attained. Once we get a market price, DTI needs to be introduced so we have sanity, lose the fomo and heated property market. Quite keen to see how low market will go, and see prices return to house advertising, get rid of speculation and auctions.
I should have clarified. I am talking about a moderate rise in unemployment to say 5%. In that scenario, I think the ‘positive’ impacts on the housing market of lower interest rates would outweigh the negative impacts. And noting that a significant proportion of those turning unemployed would be renters.
Above a certain level of unemployment - 6 or 7%? - I think net impacts on the housing market would turn negative.
Seen some desperation on the property investors chat group... Lots hanging onto hope that national will win the election and then repeal the interest deductibility rules. IMO if you are relying on both these outcomes, you should get out while you can. If either one of these doesn't happen (what are the odds of both?), there could be a rush for the exit.
REINZ's House Price Index was down 13.7% for the year, while compared with its peak in November 2021 it's now down 15.2%
So there we have it, the best measure of house price says it's down 13.7% for 2022 or down 15.2% since the peak. Nowhere near 30% down as someone repeatedly "guaranteed" by December 2022.
And no, the fact that one can find a district which has gone down 30% doesn't make a 30% fall prediction right, just like T Alexander's prediction of a 5% gain is not correct despite Gore rising by 5.3% or Taranaki up 5.1%.
Papakura the largest fall at -23.6% from $1,010,000 to $772,000, followed by Waitakere City at -20.5% from $1,170,000 to $930,000.
Upper Hutt City largest fall at -24.5% from $920,000 to $695,000, followed by Wellington City at -24.2% from $1,161,000 to $880,000
As the Speights ads says Yvil
Still, plenty of time yet......
So, hand picking areas that suits your bias is the way to go? Com'on, this is dumb and you know it, should I say that the housing market is going up, because Kaikoura went up 19% or Rangitikei is up a hardly believable 29.1 % ? Of course not. The HPI is the best measure and what matters is the nationwide measure to give a complete picture.
(btw, I totally expect prices to fall more in 2023)
Impossible not to see falls in 2023...
I find the national number pretty irreleavant, but perhaps a usefull statistical reference point.
I find the reginal tables better illustrate whats happing around NZ, it's expected that the rergions will follow the major centers down, they always have in the past.
Also, the 30% target is rubbish, more importantly the ANZ and ASB target total house price % drops have already been achieved in AKL and WGTN.... due for a revision I suspect as 2023 continues.
Do not love how you zone in on the "30% fall guaranteed by Dec 2022" and repeat it mercilessly - your comments around this are unbecoming of you.
Some of the comments from Prophet et al were very astute and more on point than most commentators, here and in economic circles.
Your censorship was very Labour like - definitely not a good look.
Well, I for one dont mind being given a significant warning for the falls on the way. The scrolls were off by a month or two, big deal.
Now many comments are suggesting a 40% to 50% drop from the Nov '21 peak. This is looking more and more likely the longer inflation stays above 3%
Yvil, his predictions are largely irrelevant, it's the narrative and sentiment that counts when trying to influence the sheeple with dribble pumped into MSM to support the market
Tony the Combs 2022 prediction highlights (January 2022) were:
'This year is going to be one in which borrowers will see additional increases in their mortgage rates, but with fixed rates unlikely to rise at the pace they did last year.'
'This year is going to be a lot different from 2021 for the housing market at least. Average nationwide house prices are likely to flatten out and could even fall a tad in some regions.’
https://360propertymanagement.co.nz/wp-content/uploads/2022/01/Tonys-Vi…
Sadly, some naive FHBs would have listened to this financial advice in MSM (where his caveats don't appear) and bought in Q1,Q2 2022, fully loaded with debt
Yvil - Sorry for the confusion, I was talking about TA's predictions - not the Prophet's.
Only Interest commentators read the Prophet’s predictions for 2022 - so they were largely harmless to the sheeple
Tony the Combs market predictions are pumped far and wide in MSM and every property industry communication/rag (his financial sponsors) as the market expert
Remembering, every time we were warned of a bubble, crash or correction, MSM wheeled in TA or Ashley Church to tell us everything will be OK and to keep buying/loading up on debt
https://www.oneroof.co.nz/news/ashley-church-four-reasons-the-housing-m…
FHB's are mostly young, impressionable, and unable to assess risk - so are at the mercy of these muppets.
Or this one. I actually sent this to the NZ Media Council. I'm not usually the one to complain, but mixing different data types like that is very disingenuous.
House prices are seeing a small spike after nearly a year of declining, according to new data from realestate.co.nz.
But the market she said was now slower and more stable.
- References an article where house prices have dropped more than $100k in 1 year using QV HPI data (Sales Prices).
- Said it was a trend that was expected to carry into December, then talks about how the average asking price has spiked defying expectations
https://www.rnz.co.nz/news/business/481672/unexpected-spike-in-house-pr…
The completely bewildered and now massively Underwatered, Massive Debt saddled- For a lifetime, masses of First Home Buyers:
1. Should be marching on the Financial Markets Regulator to take severe sanctions and disciplinery actions against these Property Ponzi scheme MSM promoters and " Independent advisers/economists"!
2. They led them led them like a scurellous Pied Piper to the jagged cliffs and then completely over the edge!
_---------------------
Edit: You are all right! -
3. The Media (Oneroof and Granny Herald) for being paid to promote the Ponzi......or keep it afloat against the heavier lead weights being increasing attached to its legs.
FHB's are mostly young, impressionable, and unable to assess risk - so are at the mercy of these muppets.
I'd have to disagree with you on the mostly part. While yes many FHB's bought up in the FOMO and gargantuan price increases in the housing sector, the vast majority I know including myself, have been avid in assessing the risk of high interest rates given the historical and unprecedented low interest rates we had during this period. One only had to take a look at historical trends in interest rates as a bare minimum to see the risk of servicing a mortgage above what the banks were stress testing at or above. The main difference between those that did and those that did not was if they bought into the FOMO and let it overwhelm their rational thought with the pace of everything around them.
Yes and your everyday investor using equity to purchase that $500k property would be running the numbers without capital gains:
$35,350 in interest payments
$10,000 insurance, rates, maintenance (could nudge this down)
5% PM fees
$47,368pa in cost
/ 50 weeks (account for 2 weeks vacant just in case)
= $950pw in rent.
So the question is, could you rent it out for $950pw. Go on TM, find a property for $850pw (adjust rent up to $950 for rent inflation over the next 5 - 10 years... if there is any...) and look at the 2020/2021 RV. That's a cashflow negative property at a $501k bid on an interest only mortgage.
Alternatively look for a property for $500k currently, look at the yield and compare it to what you'd get in the bank.
The numbers don't work currently.
Yep at current prices the yield is stupidly low and even at prices 50% less it’s pretty bad. The current prices barely made sense at 2.5% interest rates.
At some stage the rental yields need to have a premium over a term deposit, whether that happens from house prices dropping or from interest rates dropping is the unknown.
On an affordability basis, 40% drops are likely - the amount you can borrow for the same payment at 6.49% is 40% less than at the lows of 2.19%. Another 0.75% in Feb will take this to 44%.
We will also likely overshoot as confidence drains from the market. I would say 50% is possible or maybe likely.
It's interesting that, when I state the facts of how much the market has dropped vs what a certain person repeatedly "guaranteed", readers think I'm trying to talk the market up. I'm not, I'm simply holding someone accountable, I actually expect house prices to continue dropping for all of 2023!
From the report:
INVENTORY
Twelve of the fifteen measured regions (80%) had at least a
60% YOY increase in inventoryLISTINGS
Nationally, new residential property listings have decreased
25.9% year-on year.
So a 60% YoY increase in inventory, despite a 26% decrease in new listings. That is huge.
Yes, the market is in complete collapse and it will continue if rates are not cut. Only our absurdly positive market sentiment is holding prices up. Quite why any landlord would hold when they are negativity geared (especially if you offset deposit rates on equity) and losing value? It's not rational (the only answer I have found is laziness and reluctance to lose a status symbol).
I'm guessing they are hoping they can crush inflation quickly before sentiment turns with extra rate hikes, or something.
....don't worry everyone ....these prices are just a blip on a computer screen ...it's all part of the plan and the plan has been going nicely since the GFC ....pump up economies and their assets with very low interest rates for a decade .....then "conveniently" use covid as an excuse to dish out money (that ALWAYS had to be paid back) when the debt levels are "maxed out" .....oops realise those asset prices are now way to high ie houses ....so central banks put up interest rates ....to extract as much money as possible out of the working people/small businesses...inflation turns up and supply shocks with the Ukraine war ...recession ensues and corporations ie Blackrock and governments around the world step and buy those "distressed" assets .....then "rinse and repeat" the whole cycle ....ridiculous !
Many of the populace out there are being played like lemmings, running towards the cliff .....gotta get a house so FOMO ! ......got that $1mil house now I'm in ! .... oops interest rates are going up ......inflation......must work even harder to "pay the mortgage" ..... like a hamster on a wheel going no where ....play the "system" don't let it play you !
HW2 ....only need one house to live ..... still wouldn't want to buy at this price point in the market ....while the bank wouldn't even look at me ...I did the NZ "house" thing on the very "slow burn" - now 36 years in the market ....it's not "timing the market, but time in the market" ....while I have never aligned with the "mainstream" in "running around buying stuff, to impress people, who don't care"
I never got into the "NZ property madness" ...in fact, even then ie 2011 , prices were already getting "out of whack" to peoples incomes.
That's why I went into the USA (btw now completely out) in 2012 ...as the gross returns (the capital gain were a bonus, but no where like NZ) were up to 15% ....so it made the NZ (esp. AKL) market look like a "freak show" .
Also you can change "truckload" to a thimble full ...very small time cash buyer .
I know it's an old trope, and this is just a snapshot in time, but funnily enough if you go back to December 2012 you'll see the median price was $390K - despite everything, property prices still doubled in 10 years.
Not saying that will hold true going forward, mind you. I'm officially putting it out there that if property prices in November 2031 are double the Nov 2021 figure (i.e. $1.85M) then I will eat the grease-covered, sweat-stained, possibly-bovine-excrement-tainted hat that I wear when I'm out in the paddocks.
With soy sauce.
- Average 2 year fixed rate in 2012 was 5.8%.
- Average 2 year fixed rate in 2021 was 2.5%.
- Average 2 year fixed rate in December 2022 was 6.5%
https://www.interest.co.nz/charts/interest-rates/fixed-mortgage-rates
I feel for those experiencing pain at the moment. Despite everyone’s differing views, there are real people and families that are struggling under the weight of debt and rising cost of living, when they were playing with the cards they were dealt. May we all show humility and compassion as this cluster*** unwinds.
I wonder how old "John Norris" from 2018 is doing. The 70 year old smug Aussie retiree. Bought a bunch of properties on IO lending to fund his retirement, until the bank forced him to P&I so he ran crying to the media.
Pause at 2:57 where they pan across his letter to ANZ. "The above loan accounts were on interest only lending". I can count 5 suffix numbers. Also shows an increase from $5700 to $8900 per month in payments. $68k in IO = $1.7m in loans @ 4% p.a.
This party's getting started.
Cost of debt is now 2.5x what is was with a very strong likelihood of being 3-3.5x what it was. Tenants are already being squeezed to an inch of their life so any increases will see them move. Capital gains are in reverse as a result and its a long way back to where yield actually adds up. Money in the banks makes 5% and soon to be more, so yields have to be well north to factor in rates, vacancy and RnM.
Do the math.
Yes its 60-65% off peak to make it worthwhile as a yield investment with no cap gain.... math is not pretty back to 2010-12 levels. Tax situation is worse now as well. IMHO NZ res housing is not an attractive investment at all without cap gain. Most of the cheaper res suburbs (Manurewa) have crappy shiteboxes, that even if brick and tile need lots of maintenance soon. mostly they where good 800sq m investments in 2010 with the idea you could redevelope, but stormwater issues make it hard in that suburb, in fact council make it hard and if not council NIMBYS.
The worrying thing is that on the market cycle cheat sheet, I get the feeling most of NZ is still at the complacency stage. Still a long way to go before we hit anger and depression.
And unfortunately it could be coming. Cindy knows her fairy dust is powerless in the event of the property ponzi falling apart at the seams.
Do you think Cindy should not even try to win the next election on purpose, so the Nats walk straight into a economic cluster-f***, allowing Labour to get back in during 2026 for multiple terms?
My subjective feeling is that she's already checked out. Biding time. As for the wingnuts, I would not want to be in their shoes.
Wow, the median price in Whangarei is up from 700k in Nov 22 to 798k in Dec 22 but the HPI is down 3.3%. Does that mean that the high end of the market is going strong but everything else has fallen off majorly?
It probably means sales volumes are so low that price variation can appear that things are not as bad as they likely are.
I wonder if any analysts from REINZ post on the Interest comments section. I'm sure they must - but anonymously. It would be cool they (or Corelogic) did a tri-monthly Q&A session or something similar (or perhaps they are worried about getting overwhelmed by commenters with clear bias/agendas.
Yep, there's still a lot of Aucklanders moving up into big coastal holiday homes. But... Traditionally it's baches that take the biggest fall in a housing market crash, people sell their toys when they get desperate. They also should be considering climate change risk, it's not priced in yet but will have a big impact on Northland with both insurance retreat from flood prone areas and increased flooding and drought leading to insecure water supplies.
Yawn the property market is not driven by fundamentals its irrational exuberance in NZ. Yeah a bit of a recent fall but the prices will rebound and double again over the next 10 years.
If I were to score you on originality for this troll skit, I'd only award 3/10.
This housing price falls is just the start higher rates are only just starting to kick in, as I have said many times a 50% crash from top will probably happen by end of 2023 and if world downturn gets worse then expect bigger drops. People who borrowed a million for 3 bedroom boxes in Auckland and other areas will be paying 1500 per week rather than 900 once they need to refinance
| house price | 80% mortgage | 2.5%@25r on 1yr | 6% @25r on 1yr |
| 1 mil | 800k | $1,650 | |
| 800k | 640k | | $1896 |
I just know some people would jump with joy on the property price drop. however, it's worth to do some math here.
take a look at wellington median prices. the peak was 1mil, and currently sits 800k. but then the interest rate was around 2.5% for 1y, and currently 6%.
so buying the same typical house then you will have a mortgage of 800k and $1,650 payment a fortnight. but now you would have a mortgage of 640k with a $1,900 payment a fortnight.
it's not cheaper or easier for people to buy, and property is still VALUABLE asset everyone wants and needs.
and property is still VALUABLE asset everyone wants and needs.
That value is getting more lowercase by the month. Being something everyone wants and needs doesn't make it immune to being overpriced.
It's the same fallacy that leads to logic like, there's a housing shortage, so prices can only go up. Forgetting that at a certain point, that shortage is already priced in, eventually many times over.
It may be more difficult for a buyer to service a mortgage on an average home today than it was at the peak of the market, but that buyer would still be far better off buying today than at the peak of the market for reasons that I'm sure are obvious to all. Over time, mortgage rates revert to the mean so you are almost always better off paying a lower price at higher rates than paying a higher price at lower rates.
Sure, if you assume the buyers deposit somehow evaporates at the same rate as property for some reason. In the real world, if a buyer has a 200k deposit, that 800k home only needs to be 760k for parity in the fortnightly payments (560k @ 6% over 25). That's only what, a month or two of price falls in wellington? You can either wait a month or two and grow the deposit, or find a motivated vendor who will eat the difference.
But the FHB that wants the 640k mortgage to by the 800k house probably wont qualify for the mortgage because they will be tested at 8% interest on their actual expenses. Even if they have somehow got their hands on the 160k deposit.If they need to borrow at LVR over 80% then forget it.
8.6% I've heard. They have to prove they have $1140pw spare and $160k in cash (after all of the losses in equities and mum and dads house lately), then be willing to potentially risk paying $1.8m for the house over the life of the loan (not that they would, thats P&I cost over 30y @8.6%)
You have shown there's still time needed for rate increases to filter through to prices. A $555k mortgage is what's needed to match dollar for dollar the fortnightly payments. $695k house @ 80% loan = $1651 per week.
I'd much rather a lower mortgage with a higher rate, than higher mortgage with lower rate. Increase payments by $200 per week ($10k per year) goes straight off the principal. $10k p.a. =
- 1.8% of the principal amount on $555k
- 1.66% of the principal amount on $600k
- 1.25% of the principal amount on $800k.
REINZ says:
"...the pace of the decline is slower, and the market has settled at its new pace."
Does this mean anything?
Is there enough data to support the first part? Even if so, the pace could also speed up right?
"Settled at new pace"... Of decline? So will keep declining?
Even when we hit the bottom of wherever this takes us, the opinion of most commentators is that within x number of years, we will be back to the 'norm' of high and increasing house prices being the way we 'make' our money. And we want housing to be more affordable, as in more stable affordable prices.
It's the same expectation that people have about keeping their present status quo lifestyle and use of resources, and yet 'save the planet.'
As the mother said to her child when they said they wanted to be a clown when they grew up, 'pick one or the other because you can't have both.'
In my late 20s, have sat on the sidelines the last few years due to the ridiculousness of the market, so this is great news to myself and NZ as a whole. Still a lot more to come before I take a look. Will travel this year and reassess.. Australia is still an enticing option.
My best mate (not financially literate) was one of the FHB victims buying all the crap in the media. His 800k purchase for a 2bdr, no garage, 71 sqm home in Petone is now looking like an absolute burden in the coming years. Tough lesson to learn early - I did warn him!
Most people in their 20s & 30s should be in Australia. Don't accept the salaries here and let NZ import someone who will accept them. Being loyal to NZ is a very costly mistake and you don't realise this until you actually leave. I saved a whole lot while living in Bondi.
A very tough lesson considering it's Petone. I mean yeah, if prices fall that's fine he can play the long game........it might be a small house, but sit tight for 20 years until prices bubble up again........hopefully not too close to the shore?
"Properties worth $1 million on Wellington’s Petone foreshore could reach $100,000 a year to insure in 20 years, a climate risk expert says."
Any guesses why the median values in this report for Dec-21 differ from the numbers in the report released last January? Auckland City is showing a decline of 15.4% ($1,188,000 from $1,405,000) but last January's report shows the median price for Dec-21 $1,434,500 which is a decline of 17.2%. Same for Auckland region, $1,280,000 in this report and $1,290,000 in last years for the same period.
My guess is there's no rule as such for the accuracy or authenticity of these reports. They obviously still have to follow a basic trend line otherwise people will cotton on that the content of the reports highly contradict the real world and they lose credibility fast. So they slowly tweak and twiddle and massage to suit. Only way to know for sure is if KPMG were to independently audit.
We need the Chinese people to come in and buy up the property stock. NZ is one of the only countries that allows a person to have PR status which does not expire. China does not allow dual passports or they will revoke your Chinese passport. Chinese people know that the way around it is to get NZ permanent residency, buy a house, and then you can still keep your Chinese passport and PR status in NZ regardless of where you would reside.
Many want to get their money out of China, but with the strict controls over their monetary outflows, it's hard to do it all in one go. Buying property in foreign places is the best way to stash your cash. That is why there are so many houses globally where you haven't seen a single light turned on inside and is empty. "ghost houses" if you may.
The folks from China who currently in reside in NZ knows what I'm talking about. Have their kids educated in an easier education system, buy a nice property (or two), and still have ties with the mainland and earn money there via their businesses. =
-7
We have been selling to foreigners for the last twenty years. And look where we are!
New Zealand is going to need a new plan and new political leadership of the business sector.
Luxon and Willis are in denial of the root cause of the problem, that is, running a ponzi economy. Labour too!
Which an excellent reason to vote for The Opportunities Party (TOP) this election given their Land Value Tax policy. It will make sure those foreigners that bought up property over the last 20 years are contributing to the NZ tax base even if they aren't reporting their overseas income. It's tax neutral so those paying PAYE will pay less. A tax switch from labour to land.
"Inventory shot up 55.3% year-on-year, with 26,057 properties available as at the end of 2022."
Is anyone able to reconcile a national inventory level of 26000, when Trademe apparently has listings at 32000+ (for the longest time). Where is this discrepancy of 6000+ houses coming from?
I notice the figure (26057) is exactly the same as what is reported by realestate.co.nz:
https://news.realestate.co.nz/hs-fs/hubfs/realestate.co.nz%20Total%20Ho…
Maybe REINZ are pulling this figure from them.
Edit: Doing so would certainly work towards painting a nicer picture than to use the TradeMe figure of ~36000; as pointed out by malamah.
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