House sales volumes reached 7,330 nationally in March, the Real Estate Institute of New Zealand (REINZ) says, the most in a month since November 2007, with the national median price rising to a record high of NZ$370,000.
The national median price was up NZ$15,000, or 4%, from NZ$355,000 in February and was up NZ$5,000, or 1%, from NZ$365,000 in March 2011. The previous high was NZ$367,500 in November last year.
“The new record median price is only NZ$2,500 higher than the previous high set in November 2011 and is only NZ$5,000 higher than the median price in March 2011," said REINZ chief executive Helen O’Sullivan. "Prices are certainly not rising sharply, but the trend is certainly starting to move upwards."
The 7,330 sales is the highest since 7,837 in November 2007. The record monthly high is 11,378 in March 2004 and low is 3,252 as recently as January 2011. The March 2012 sales volumes are 1,162, or 19%, higher than the 6,168 sales in February this year, and 1,482, or 25%, higher than the 5,848 sales in March 2011.
New record median price for Auckland
Auckland also recorded a new record median sales price of NZ$495,200 in March, which is up NZ$27,000, or 6%, from February, and up NZ$25,200, or 5% versus March last year. O'Sullivan said the Auckland market reflected increasing demand for housing in the city and a lack of available stock, noting this was highlighted in the Productivity Commission's report out last week.
"Auckland Central and the North Shore area are both stand outs in terms of the upwards impact these combined factors are having on prices," O'Sullivan said.
In the other major centres, the Wellington price of NZ$393,750 is the second month in a row with a year-on-year decline of 5%, and at NZ$320,000 the Canterbury median price is a year-on-year rise of 10% for the fifth month in a row.
Stratified index still below national peak of November 2007, but Auckland & Christchurch at new highs
Meanwhile, REINZ said its Housing Price Index, calculated using stratification that gives an averaging of sales prices for common groups of houses and was developed in partnership with the Reserve Bank, is still 1.1% below the November 2007 peak at a national level. However, the Auckland index is 1.3% above the previous peak reached in July 2007, and the Christchurch index is 0.9% above its previous peak scaled in October 2007.
Other factors in the March figures include a record low portion of houses sold for less than NZ$400,000, with 4,085 of the 7,330 sales in this price range. And at 1,467 of total sales, it was a record high portion of sales above NZ$600,000.
The national median days to sell was 35 in March, down 11 from February and six lower than in March 2011. REINZ says during the last five years the national median days to sell has averaged 41.
ASB economist Jane Turner said housing demand was likely to remain supported over the coming year from earthquake-related insurance payouts.
"Low supplies of housing in Auckland and Canterbury have resulted in very tight markets there, and as a result house prices are increasing in these areas," said Turner. "We expect some of this pressure will be alleviated once rebuilding activity commences in Canterbury."
"The Reserve Bank is likely to be wary of the recent pick up in house price inflation and, if the increase in house prices does not abate once rebuilding starts, the potential for spill over into wider inflation pressures. However, for now the Reserve Bank can remain relaxed on the inflation front, as we expect inflation pressures to remain very subdued over 2012. We continue to expect the Reserve Bank will keep the Official Cash Rate unchanged until December 2012.
See the REINZ residential market statistics here and see REINZ's regional data here.
Volumes sold - REINZ
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165 Comments
No Auckland is not red hot. Only areas like Ponsonby, Grey Lynn and Westmere are redhot according to ChrisJ. Eastern suburbs (Parnell, remuera, Orakei, Mission Bay, St Heliers, Meadowbank and St Johns) are all going downhill and house prices are selling way below CV and the 2007 peak.
doublegz you are out of touch. Villa on cross leases in Ellerslie outside grammar zones are going at close to $900k. Only leaky buildings (anything plasterboard) is sitting on the market or selling below CV. A dunger (habitable only for students) on 200m2 in Parnell went for about $850k at auction a couple of weeks ago and that's now starting to look cheap compared with other sales.
If you don't believe go and sit in Barfoot's auction room on Wednesday.
Auckland is hot
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10799360
Watch out Baby Boomers with kids, interest free loans from parents look set to be the new norm to get into the Auckland market
Final call, all aboard, the train is leaving the station.........
I am stunned - this guy in the article was not even looking at the top 10 suburbs. 880k for a 3-bed-room house in Mt Albert is quite high.
According to the "Who wants To Be A Millionaire" article: Nine suburbs within Auckland have houses with an average $1 million price estimate:
1. Herne Bay ($1,855,611)
2. St Mary's Bay ($1,477,278)
3. Parnell ($1,339,000)
4. Epsom ($1,134,389)
5. Stanley Point ($1,090,222)
6. Remuera ($1,085,944)
7. Takapuna ($1,080,333)
8. Mission Bay ($1,046,667)
9. Devonport ($1,001,833)
10.Ponsonby at $964,333, just fails to make the grade.
The first area outside Auckland to reach for these heights is Wellington's Lowry Bay-it hit Number 14 on the list at $933,444.
Note - Grey Lynn hasn't made the top 20, coming in at around 22.
Where have all the "sky is falling" bloggers gone?!!
Bernard, are you still of the opinion we will see a $299k median price? Do you remember me saying it was much more likely to pass $399k?!
Watch those volumes, they always precede price movements...
It will no doubt cool down again over winter before being even busier next Feb/March, and just watch National be reluctant to let the "independent" RBNZ hike interest rates too much before the next election because they're all politicians at the end of the day.
Doh, that's right, history never repeats....
Renters left behind again. How long will renters wait for the 30 / 15 10% house price drop? How many years of low interest rates will they miss out on? http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=107…
Because they couldn't afford to buy earlier and they certainly can't afford to buy now... Are you that out of touch with the real world? How can you people be pleased about these insane prices when the rest of the economy is still struggling? May your greed be mightely rewarded!
The shake of the quake money and Cantabs insurance prompted funding finding a new home (plus bank credit being kicked out the door).
Its doubtful to see the southern funds coming back to Chch anytime soon and on the ground one can see the hollowing out of people and place continue.
The insurance funds are not limitless, and there are examples of ECQ fixed properties are showing damage again as the shakes continue.
I viewed one property already fixed twice by EQC (after Sept and after June) and now in need of total repair again. EQC have twice tried to patch unreinforced masonry chimneys at the property which are shattered again, it's criminal what they are doing allowing dodgy dangerous repairs - no wonder the owners have given up and have the property on the market.
But Bernard and others predicted house prices would fall 30 %.......
Dec 21st 2008 "Since February, I have been expecting house prices to fall 30 per cent over the next couple of years from their peaks of last November and to take another decade to recover to those peaks." - Bernard Hickey
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1054...
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1066...
If you followed that advice, sold in Auckland in 2009 then became a renter you would have missed out on some significant capital gain over the last two years. Quotable Value say house prices in many Auckland suburbs have increased over 25% in the last two years!
Gareth Morgan also got it wrong and was still sure prices would drop when interviewed in June 2011:
http://www.gmi.co.nz/news/1199/why-gareth-is-thrilled-about-falling-prop...
Rodney Dickens was also way off the mark:
http://www.interest.co.nz/news/40732/opinion-why-real-house-prices-are-2...
Looks like Olly Newland is the man to follow!
The here and now, we are seeming two spots cracking along, and due to the ChCh quake anything from 5 to 15 years of sales transactions need be conducted within the next say 24 mths. Its the pig in the python.
Some property folk say, well over time you get a series of PITP moments, you just never know what the next one will be.
Your point of the long term population/social trends is valid (but these often come with game rule changes), you can go down to the West Coast and still see towns struggling to get over the gold rush of 1860.
That tired old baby boom argument doesn't really stack up though Simon, for several reasons.
If you look at the stats instead of regurgitating opinions from so called experts, you'll find the population in NZ has increased reasonably consistently since the beginning of the baby boom in 1946.
The "Pig In The Python" is a myth if you take the time to actually look at the data.
Take a look at this graph - do you see any bulge between 1946 & 1962?
The worlds population from the beginning of time until 1946 reached around 2 billion. By the end of 1964 it was around 3 billion. Now it's around 7 billion and is predicted to reach 10 billion in the next 2 to 4 decades.....
Another point is that a large number of baby boomers have already retired and/or downsized their properties, and yet we now have the highest median price ever....
Your graph shows total population not the age distribution. Something like this is more relevant. Remember too that the BBs will live longer than past generations thanks to modern and expensive advances in medicine. Economies boom when the population density is biased towards those of working age and decline when the percentage of those working declines. Capital asset pricing is also affected. Japan is an example of this.
Simon, what your graph shows is that in 1901 there were bugger all 70 & 80 year olds that needed somewhere to live, and by 2101 there's going to be lots of them.
How does that make for less demand for property or cheaper prices?
"Remember too that the BBs will live longer than past generations" - this is true, but subsequent generations will live just as long or longer thanks to even more "modern and expensive advances in medicine"
Japan is also an example of a country that had a property boom so big in the 80s that the rest of the world has only just caught up, and also a country which has had weak population growth and is expected to soon start declining. I've always said it's possible we could all follow Japan, but in that case I look forward to the 0% interest rates!
Most of you that quote Japan seem to think we'll follow them in every way except we'll have high interest rates. A declining population is not on the horizon for NZ or Australia anytime soon....
"Simon, what your graph shows is that in 1901 there were bugger all 70 & 80 year olds that needed somewhere to live, and by 2101 there's going to be lots of them."
Did a little deeper and you will find that is not the case at all. The population graph reached an inflextion point in 1961, which means that the rate in growth in population is falling for the first time in human history. Within a generation it will turn negative, the demand for housing will drop. But the important bit is that inflextion point, and the why? We have reached the limit of resources and the downslope when we hit peak will be dramatic.
If you don't accept volatility as part of the natural scheme of things , then what do you invest in ?
........ the greater the volatility , the greater the potential return ........ which explains why the long term returns to shares far exceed those of residential property .......
Key words here : Long Term !
"the long term returns to shares far exceed those of residential property" - not sure about that one, Gummy.
My experience is that they're both similar long term on yields and capital gain, the biggest difference is the borrowing advantage that property has.
Also property is safer as there isn't the same variation in performance from one property to the next as there is with shares.
I'd rather look at some broad market indices , such as those published by Rogers & Ibbotson in the USA , which showed total returns ( capital gain plus income ) from shares to be considerably greater than total returns from residential property ........
....... commercial property fares better than residential , but still less than stockmarket returns ..
Gold only just tracks the inflation rate over time ......
...... and cash savings get killed by inflation , courtesy of our ever friendly central bankers ..
The lack of new building will counter any baby boomer effect not that there is likely to be a BBE as only a small proportion of elderly move out of family homes into rest homes and that's something that is unlikely to change in the next 5 years.
In the meantime banks offering 5.75% fixed for four years and floating rates of 5% will just fuel the housing market - Auckland likely to increases 10% or more in 2012 and renters who had hoped for a housing crash will be left even further behind.
The higher prices go the less mortgagee sales - banks like house price increases and are doing their best to encourage it.
Banks also lending 95% and 100% again and that's good business for them - by the end of the year there will be 10% equity increase so what started out as a 95% mortgage becomes an 85% mortgage and a year later a 75% mortgage so the banks know that current low deposit loans will soon look after themselves by way of capital gain.
Huge increase in mortgage approvals during February and March so no surprise that the housing market has ramped up and will continue strong growth through 2012/2013.
You do realize that everything comes to an end right? So too will massive house prices realtive to income. Also, convincing someone that they have to buy something RIGHT NOW or they won't be able to in the future doesn't speak much confidence in your asset allocations. Why not invest for value rather than speculating? Do a Ben Graham.
"You do realize that everything comes to an end right? So too will massive house prices realtive to income"
This may be quite true, but it can also occur from higher incomes and/or lower interest rates.
I also agree with investing for value rather than speculating, but as I've said here many times before you don't need capital gains to do well out of property. If you have a 25 year loan you will own it outright after that period, regardless of price movements.
I'm currently aquiring another business and as usual the banks first question is "and what property do you have to secure this against" - why? because they know it is the best type of security. Bernard and others that bleat on about how much gets borrowed against property underestimate how much of that gets reinvested in businesses, other properties both residential and commercial, and renovations and improvements.
Murray - you can hardly argue banks are good at assessing risk, property securities are no different. And its of major concern if a large proportion of our businesses are tied up with residential property, even more dominoes to fall.
"If you have a 25 year loan you will own it outright after that period, regardless of price movements." yes, but you are assuming you are not putting in more that you are getting back in rent. If you buy in a half decent area in Akld the yields are poor (maybe 3-4%), especially after costs - anyone with a large mortgage will be putting in money for at least 10 years, probably more. Alternatively you could buy shares in govt guaranteed Aus banks with 7-8% fully franked dividends - even if the shares stay the same in value, you have paid off the purchase in 10 years (a bit better than 25 years). You can expect some small rise in divs over this period though, but like property, nothing is guaranteed. The only thing thats guaranteed is the yield on shares suggest undervalue, the yield on houses suggest overvalue.
Well, as much as I dislike banks, I think on the whole they're very good at assessing risk. Most of them have been around a lot longer than you or I, and during that time they've learnt what makes good security and what doesn't.
Try going to your bank and securing a loan against a business or shares and see how you go. Why? Because history is littered with failed businesses and worthless shares - show me a block of land that is cheaper than it was a few decades ago....
"its of major concern if a large proportion of our businesses are tied up with residential property, even more dominoes to fall" - all that tells me is that you have no experience in owning businesses or property portfolios.
"Well, as much as I dislike banks, I think on the whole they're very good at assessing risk."
hmm no - hence all the bailouts and guarantees. There are plenty of banks only in existence pre GFC because of the taxpayer (eg BNZ in 90s) and lets face it ALL banks post GFC now exist due to GFC guarantees / money printing / covered bond deregulation etc etc etc etc etc. What banks are good at is understanding that they can take a crap load of risk to amplify their profits in full knowledge that when things go bust they can rely on govt intervention. Thats why I like them as an investment, you get the profits of high risk, but someone else wears the loss.
When has logic or fundamentals ever stopped booms or busts, sometimes we are just to clever for our own good.
Logically I agree property is overvalued by any measure, but emotionally hey you lemmings wait for me!
No I won't be following the lemmings, can't afford to lose my gains, can afford to miss out on future gains. Bit like casinos in the long run you will lose, as the booms and busts speed up and get larger.
Herald on Sunday editorial:
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10798864
Deputy Mayor Penny Hulse has described the commission's report as "ideological nonsense" and accused it of failing to understand "modern" urban development. But she risks being accused of failing to see how her "modern" city is developing right in front of her.
Residential development in Auckland is already intense: cross-lease sections have proliferated, as have apartment buildings in the CBD and inner suburbs. A profusion of shoddy apartments - including, but not limited to, those in the leaky-building fiasco - has hammered public confidence in intensive residential development. And any sober person who ventures into the Queen St valley after 10pm is either brave or foolhardy; stepping around puddles of body fluids and avoiding assault has become standard practice. If this is a vision of the high-density future, most Aucklanders would say you can keep it.
The fact is that the apartment lifestyle is not the Kiwi dream. We want to live in places where we can watch the kids play, keep a dog, and maybe dig a garden.
It's fine for the council to have a vision, but it needs to accord with that of the people who live here. It should devote itself to making public transport work - as it works in Hulse's "modern cities" - rather than trying to make Auckland into a dense urban jungle.
I don't get why anyone chooses to live there!
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10798935
Entering a war zone is how cleaning supervisor Leon Lyford describes a typical seven-hour shift for him and his 25 co-workers, tasked with clearing up after hordes of drunken CBD revellers party into the small hours.
How embarrassing for the city. Something is very amiss in the society of the city at large when the young fashionable set want to trash a place to that degree. It's a rat race - literally.
As much chance of reducing immigration as there is of GBH avoiding the use of the phrase "hickeysterical gloomsterising".
Too many vested interests in keeping the population growing. Preferrably with immigrants with a bit of dosh that can out bid any locals. But if not, no matter, more tenants who can get accomodation supplements.
Got to keep a good supply of free range tenants so the Accomodation Supplement can be porked a bit more.
heard bill english on Nat Radio this morning saying the Govt. was concerned about the heat coming into prop. mkt but his only input was that they are instructing local councils to get cracking and accelerate freeing up land and speeding up resource consent process!
i sold my house at peak in 06 and rented until November last year...watching watching...then swooped and bought a magnificent prop. with an 825K GV and paid well over 100K below that...reason?....i saw that the bottom had been reached, the new normal had been accepted by the public generally and the wheels of upawrds were grinding around....there'll always be factors affecting the housing mkt but the trend is your friend or your enemy....once the banks start lifting mort. rates then the trend will slow but till then sh'e gangbusters time at the fantasy factory !!
If you think New Zealand doesn't have "sub-prime" mortgages, think again.
Due to the extremely high median house price:median income ratio in New Zealand of over five (above six in Auckland), most new mortgages, particularly those for first home buyers, would be classified as "sub-prime" were they to be handed out in the USA.
Unfortunately, New Zealanders don't have the option of driving a few hours down the road to find affordable housing - relative to incomes it is expensive everywhere in the country.
I get sick of all the gloaters who happened to own property pre-bubble acting like they are geniuses and young people like me who can't afford to buy a house are slothful layabouts. When New Zealand's delayed housing market crash finally happens the schadenfreude is going to be epic.
I think we,re all getting sick of complainers citing some magical income to house price ratio.It may take some courage to take a risk & borrow for a house. Theres no sure thing in life. We bought our first house with interest rates of 20.5%, 1 entire wage for mortg, no capital growth for 5 years.
It's all a party until the capital markets dry-up, and banks slow their lending, and stop taking risk. New Zealand, like Australia, is a favored place for other countries to park their money...until it isn't, anymore. That day will come, when we are longer considered a "good risk." On the long enough timeline, all the fundamentals return to the mean.
The tide has come in, and when it goes out, we will see who is swimming naked. What makes us so special? Do trees really grow to the sky?
One of four things usually happen:
--interest rate rise, values fall
--interest rates fall, values rise
--interest rates rise, values rise, fast crash (think America 2006-2008)
--interest rates drop, values drop, slow crash (think America 2008-today)
Mortgage belt, you experienced this in your first house- and it didn't make you a genius. If you had waited until 1983 to buy your house, for essentially the same price, you could have timed it perfectly.
With an appreciating NZD, rising to parity with the USD soon, it makes your debt harder to pay. Are you counting on Muldoon to come back and cut the NZD in half, again- davaluing it by 50%, like he did in 1984? Good luck with that. Other countries, that lend to us, need that money, and want our "safe-haven" currency to stay strong! Good as gold!
Just like the Swiss getting their currency bought, other countries are buying our currency like a "safe haven," driving us into massive deflation!...just like the Swiss!... making our exports expensive (fewer tourists, for example) and our money more valueable. Worse, you are paying interest on that for the mortgage, at higher and higher prices! We all know how the .com bubble ended....and the US housing market...are we really that think?
How long can you stay solvent when your rents don't cover your payments? How many properties could you buy at todays prices and still rent for a profit? Therein lies the issue. Your tenants haven't had a pay raise, but their grocery bill went up, as did their petrol. So where is your rent increase on that list?
Leveraging your whole financial future of the appreciation of a single asset class is a recipe for disaster, made worse when "everybody is doing it."
The same thing happened to the Swiss, until they had to devalue their currency, intentionally, with that whole recent debacle. This is a once in a lifetime event, and these are happening with some regularity now, yet the average Kiwi just carries on, oblivious.
The Swiss had no choice, but to devalue their currency, because their small businesses couldn't sell enough coo-coo clocks and chocolate, and were going out of business! Have you not noticed the same thing about your town? The number of businesses going tits-up? You didn't see that in 2007, and that's evidence, at least to me, that this market's foundation is a cloud, not a rock.
Same for AUD, as its value rises against other currencies, the debts get harder to pay, until they can't be, anymore. This is exaclly what is happening now! Debts are unwinding, as Aussies default on their mortgages in a cascade. Banks will keep them, for a while, off the market, but the chicken come home to roost, eventually. Have a look at Perth! Property auctions clearing (selling) at a rate of 23%!!! That means only 1 out of every 5 at auction sells! That's a very sick market, and being closest to the mining activity, is a harbinger of something far more ominous- the loss of the primary driver of their economy-mining! With 80% not selling at auction, that tells me Aussies aren't very confident of future rises in employment and property, so inventory rises, whether you see it advertised, or not. It's happening now, and will spread like a contagion here. Aren't most of our banks Aussie banks? ooops!
Give it time. I can afford to be patient, because I've chased a rising market before, got in too late, and got seriously burned in the past. I think I'll let you win this round.
"Investors" used to say that San Francisco was in a "different category" for its out-sized gains in property, appreciating almost double the rate of other ares nearby, and compared to other parts of the country. EVERYBODY wanted to be in San Fran. Do trees grow to the sky? See for yourself.
So the same is said for "the creme" like Auckland, Vancouver, and Sydney? When the bottom falls out of the bucket (less desirable areas go down), it pulls the creme down with it, just like San Francisco, in a "return to sanity", just like everywhere else.
Hey, I hope you make a sucker out of me. I hope I'm wrong, because I realize that if fairytales aren't, in fact, true, then we are all screwed, and our only options will be a forced deflation, even Depression, or we will print money until it is worthless.
Other countries are way ahead of us in that regard, which means our debts will be almost impossible to pay, because there won't be much money sloshing around our economy, because it will be leaving our shores, as our exports are now too expensive, and foreign banks (who lend us all this money to buy property) no longer believe New Zealand to be a good bet.
Money is looking for a safe-haven in a money printing environment, and foreign banks will lend to us until the point is reached that they worry we can't pay the debts back, anymore. We are suckers for buying into the deal, because it doesn't end well, once the easy money drys up.
That's when you have to look at the rent you are collecting, and decide if you enjoy being in a negative cash-flow situation for years. Good luck with that! The rental market decides the ultimate price, and in a deflationary environment, the rents go down, too! Few landlords realize that, because, like house prices, they assume rents can only go up!
We are in the "return to normal phase" of the crash, or what's known in stocks as a "double top. Do you really think we have the strong fundamentals to support a new "bull run" in property? I don't think so, but if I'm wrong, then you are certainly the better man, and congratulations on your amazing foresight and investment courage (that I don't have, because I think this market is completely out of hand)
Your increase in housing price is not keeping up with inflation, so actually, in terms of buying power, you are losing. You cannot buy as much food, petrol for your car, or heat for your house as you could in 2007. Yet, your house price is essentially the same, your wages haven't gone up, and you are paying to keep this "investment" when investments are supposed to pay you!
Your view is very short-sighted. You call it a "win" when it is more like a phyrric victory. All those years of paying more to keep your property than the cost of renting. It adds up, and there are other investments that better keep with inflation during times of extreme money printing.
Biderman makes a good point that the "resource based" currencies are no longer a good deal, because those commodities have been priced into the market value of the currency, like the AUD, the CAD, and the NZD. What must be priced in now is a real estate price correction, well overdue for those countries. Where does the money go then? There is your real investment win for the next 10 years!
A high NZD makes it harder for local Kiwi businesses to pay their bills- and I've been watching more and more spaces go vacant for some time now.
A return on capital means keeping up with inflation, and maybe a little more. You, on the other hand, are paying the bank to own your "investment." You are the one paying someone else's retirement with your interest paid, even if the bank takes your payments, and balances out some poorly placed trade in Greek bonds.
Yep - be good to welcome back Muldoon. Nothing like some hands-on intervention. Not to mention entertainment with journos.
Actually, I am not applauding booming house prices - just think living inyour own house is best - cos you can never predict mkt movements.
Yes, i got it completely wrong in timing in 87, but never regretted building a kitset then working weekends finishing - really my hobby. Then later on i could draw equity out to finance kids ed, travel etc which i wouldnt have been able to do by savings. Liquid savings are too easy to access!
Most of the world lives in violence and/or poverty. We are a true safe haven in every sense of the word. We are far from Islamist extremism, have a stable ethical democracy, and still have some neutrrality. Millions of people would love to live in nz. A bubbling housing mkt is the least of your future threats...
Ahhh yes however most of the wealthly live out there as well, not in NZ. I know heaps of wealthy people who would love to visit NZ and they will not even achieve that in their lifetime.
We are are very small blip regardless of our attractive credentials.
I sold out of Auckland in April 2011 and made 30% since then in Honolulu, there now cashing up some property and a business. The Chinese know they have some serious issues are buying up all over the planet. Parking cash where they can. Just need to stay one step ahead.
The real easy gains have already been made in Auckland. Most of my Christchurch clients purchased in Auckland second half of last year and mostly for an alternative residence. The big money in Christchurch has already gone offshore.
Listen to the Chatter. Where the big money has been and gone.
Predictable. If one listens, the answers are there. Yes, speckles, your occasional posts towards the end of last year gave a clear indication of what was happening, and now you telegraph it has happened. No suprise. Chris_J has been indirectly telegraphing for some time where his decision making was going. Implementation now in progress
Lol, MortgageBelt tells people to stop complaining about high house prices, then promptly turns around and complains about how tough it was when he bought a house! What you neglect to mention is that back then house prices in New Zealand were three times incomes, as opposed to six times incomes as they are now.
It was obviously tough for you back then but you bought when interest rates were at an all-time high, yet interest rates are currently at record lows and mortgage servicing costs are still almost at the level they were when you first bought. When the OCR increases there will be a lot of people who are only just getting by at the moment who will find themselves in big trouble.
And besides, the high interest rates you faced initially were only temporary; when you buy a house six times your household income you are doomed to paying a huge chunk of your paycheque to the bank, regardless of what interest rates are doing. I refuse to be conned into making that decision.
I have 40 years until I turn 65; there is plenty of time for me to buy a house during that period when house prices return to sane levels. However, many of my peers have been panicked into buying what will turn out to be a financial millstone around their necks.
I'm in the same boat as you, roughly the same age, I'm not getting conned into it. Why do you think people are syaing if you do not buy you will never be able to? Because they know they can scare people into buying. It's interesting though, like I find when one of my peers buys a house everyone congratulates them for making the move and that its the right thing to do etc, but its not.
MortgageBelt, think about this. If it was tough on your one wage to buy a house imagine how much easier it was when your partner was working. Today it is twice as hard to buy a house and raise a family because both partners HAVE TO work now or they can't afford it, so tell me, who raises the children? I'd rather rent and have their mother at home than buy a house and have a babysitter.
I'm with you guys here Kleefer, steven and MK. I'm in my early thirties, and missed out buying a house in my early twenties by about 2 years since I prioritised paying back my student loan before buying a house (in hindsight a stupid move, but when paying 7% interest at the time clearing the debt was prudent). Since then I've been saving up and have a pretty sizeable deposit sitting handy to let me enter the market and have been contemplating it since about '09... now is not the right time.
We've STILL not experienced the significant correction that was needed after the boom. We've had a 3 year trough that's rebounded, mainly because we've been riding Australia's coat tails the last few years. But given that Australia is showing cracks and their economy has been a shining example of solidarity since the GFC, I'm more certain than ever that this latest upward blip is simply a market in its death throes. The smart money at the moment ain't in housing. It will be in future I'm sure, but not now.
Yeah I have a hefty deposit but I'm not going to jump in to a "hot" market. Fools rush in. The smart money isn't even in this country TBH. Lucky nowadays its easier than ever to get it out and invest it in good businesses. For example, why would I have a term deposit over here, when I can change the money into another currency, get a bank account over there and get twice the interest rate. I won't participate in a property ponzi, unless I can see TRUE value, not speculative value. I guess thats one of the bad points of being a value investor, they see value for what it is and what it's not.
You do run a reasonable risk with large sums invested in money markets or other investments, if you have ear-marked these funds for a home. At least the equity in your home can't be taken from you by the actions of individuals (other than a collapse in prices). There are many stories of 'clever' investors losing their home deposit money between a home sale & re-purchase. If you have the deposit - then by delaying you are risking both entrance and equity effectively.
I do look at the underlying numbers, and mostly ignore the press releases, but what you find by doing that is hardly welcome on these threads. Now that the thread is about dead it is probably safe to note a couple of points.
First, REINZ have stratified data (ten deciles each representing 10% of NZ's housing stock), and if we look at sales by strata we find - number of sales : percentage of total sales:
Strata 1 : 563 : 7.70%
Strata 2 : 587 : 8.02%
Strata 3 : 627 : 8.57%
Strata 4 : 679 : 9.28%
Strata 5 : 647 : 8.84%
Strata 6 : 726 : 9.92%
Strata 7 : 790 : 10.80%
Strata 8 : 829 : 11.33%
Strata 9 : 926 : 12.66%
Strata 10: 942 : 12.88%
If that doesn't suggest a market strongly biased to sales at the top end then keep believing the press releases. If it does pique your interest then REINZ's site has a page making a reasonable explanation of how housing statistics can be distorted which may worth a look:
https://www.reinz.co.nz/public/reinz-statistics/how-reinz-statistics-ar…
Perhaps followed by some reflection on how the above distribution of sales may have influenced REINZ average and median values for March:
Second, the median sale price hasn't risen by $15,000 in a single month since ... March 2011. After which it moved -$5,000 and -$10,000 respectively in April and May 2011.
Third, the average price of properties across the five bottom strata is actually down from their value in February. The bottom half of the housing market actually retreated a little in March.
Sales numbers are up as are the median and average sales prices, but so far as I can tell this is not unusual for a March month, and so far it only represents a small blip up against a flat trend. Lets see what more robust housing metrics than REINZ median or averge sales reveal, or wait for their April, May and June numbers.
fist time user here but i read this from oly in your property article "i told you so" dec 12 2011 ....quote from oly "Bubble bursting more likely than ever'
However I believe there is a risk of some considerable danger so I give this warning:
If we do have another boom - and the chances of that are increasing daily - encouraged by continuing low interest rates, plus earthquake rebuilding, leaky home renovation etc then the risk of the bubble bursting followed by a nasty crash seems far more likely than ever before.
So my advice is to tread carefully.
By all means enjoy any such boom. Do all the profitable deals you can find. Make money with both hands but be ready to press the ‘dump button’ at any time. In other words do not get involved in long-term speculative projects.
In my view the next boom (when it happens) will be shorter, sharper and could have a very nasty bite at the end......ummm....
Yes most of the property spruikers here very selectively quote from Olly.
They usually forget to mention that he picks another inflation of the bubble which is far more likely than ever to end in a nasty crash
Personally I think Olly is wrong on both counts - there won't be another boom - this short burst will be self limitting - and neither will there be a crash
I think Tony Alexander is holding this view, and I think he's right
The boom has already occurred, similar to 2003 where some properties rose very sharply virtually instantaneously and then the rest of the market spent the next year or so catching up. Expect a minimum 15-20% gain over calendar year 2012 in old Auckland City.
There is too much demand from both red zoners (7000) and insurance payout buyers (10-15,000 plus) plus first time buyers (thousands), renters who now find it cheaper to buy (thousands) and investors looking to get back in the market (thousands too).
If you're not already in the market in Auckland, you're probably too late.
The 30%ers, 15%ers and even 10%ers were all wrong when it comes to desirable locations.
hmmm, will be "interesting" to watch.....such a gain I think is crazy, or maybe I should say delusional...doesnt mean it wont happen, though I think not....will it last, cant see how....
Sure there will be those with a good % cash buying.....I wonder what % though will have a huge mortage 95% plus jumping in convinced that it will go higher.....the chinese (I assume) pushing up Auckland's prices is something I wish we could quantify.
regards
To be a crash in NZ there has to be a trigger me thinks, the EU melting could do it, the USA States going insolvent could do it. Lots of real nasties out there but somehow the amazing juggling act continues...otherwise its going to be accelerating dis-inflation leading to deflation....mild I suppose.....until they wake up to Peak oil.....then we will see it....
regards
For an alternative view to the inevitable speculator cheerleading check out Real Estate 4 Ransom: property speculation, public finance and the great recession.....
http://michael-hudson.com/2012/03/film-real-estate-4-ransom/
Listen to the Chatter
In the last three weeks a dramatic event has taken place in the Australian residential apartment market – the mainland Chinese have suddenly increased their “off the plan” buying of inner Sydney, Melbourne and even Brisbane apartments.
The Chinese have been the main buyers of Sydney and Melbourne inner-city apartments for some time (they were not normally Brisbane buyers) but, according to Australia’s largest apartment developer, Harry Triguboff, the level of buying over the last three weeks is without precedent
Business Spectator
http://www.businessspectator.com.au/bs.nsf/Article/China-property-apartments-Triguboff-interest-rates-pd20120416-TDSLG?OpenDocument&src=sph
The sub-text is they dont go out into rural areas or outer suburbs. Just inner-areas.
and to think the Cantabs detested anything "Dorkland" once upon a time! Remember the infamous kid at the rugger game with the sign?
Heck, I worked for a little while down there and being an Auck was almost akin to being a nazi. Mind you I could always claim I was half Cantabrian through my mum! That helped a little. It was certainly useful having Carter blood
re harry triguboff--who to believe?
"doublegz | 16 Apr 12, 10:09am
No Auckland is not red hot. Only areas like Ponsonby, Grey Lynn and Westmere are redhot ."
Listed our house in one of those areas.. will let you know in few weeks if it's redhot as they said..and if any large number of chinese bidders. Althought got 34 groups thru' the 1st open home, so it's reasonably busy..
OMG Chairman Moa you are such a teaser :)
Nicholas Arrand...Bernard Hickey...please explain all these rising house prices.
Bernard, you should be pilloried for your assertions houses were going to collapse in value. If people have been listening to you, believing you, then you have done them a great dis-service.
Is it anything to do with your ideological convictions getting in the way of a rational view about simple supply and demand ?
YL - they forgot to mention lemmings and ignorance.
All debt is an expectation that the future will underwrite it. If the future cannot underwrite it - and clearly t some point that had to be the case - then an increasing proportion of the debt becomes unserviceable.
If folk are silly enough to sign up for such debt, without ascertaining their future ability to pay, then they can indeed parttake in a bubble.
Won't last, though.
Go listen to Nicole Foss (I think she's still in the NI), and have a long hard think.
Are you unable to understand that there are long term fundimentals to anything? which can be over-riden by short terms events?
Think of it as hand gliding....gravity makes you drop and drop you will, hot air makes you rise and rise for a while you will, and it seems you get go a long way in your case. Eventually and you dont know when you will run out of those updrafts though...and then its a probable rough landing, if you have not planned for it in advance....a good glider pilot has one eye on the ground and one on the altimeter....
This is what BH is warning you to do......if you are frankly that stupid that you cant understand that.....well you probably get the landing you deserve.......
As above, Chch is easy to explain, a temp shortage due to the EQ.....Auckland harder, but without knowing who's buying and where they came from....for instance if "rich" Chchers are moving to Auckland then this would put an upward pressure in select areas....
BH commented that with the BBs retiring there was the probabliity that prices had to decline significantly but this is from fair value.
I will add we have a bubble....even at fair value BH's comment would suggest a dip below the fair value as that is held up by numbers and we are approaching twice that.
We are staring at a second Great Depression, this will be a credit event and like no other....see Steve Keen for that....
Peak oil has put a stop to growth, unlike the credit event this is more towards medium term, but within 5 years....
ie its not a case of simple supply and demand, that is the short term trend....the long term you need to look harder at.....
Dis-service, well I see no logic or thought on your part.....at least with BH you can consider why he said what he said and decide how to act.....
I really dont understand why you see an "idealogical conviction" or politics anywhere in BH's words, you really need to take off your blinkers.....and get away from "this time its different" ....
regards
First time poster;
Some of the pro-property another boom is coming peeps here relish the prospect of teaching those who are not believers, and to a lessor extent 1st time buyers without enough money, a lesson, seeing them "fall even further behind", etc.
Ironically, if this happens those holding the property have the most to lose.
.
Come on fella , dontcha know about land , " they aren't making anymore of it " ....... better to be in now , before the Chinese buy it all .......
..... interest rates can only go up from here ......
There's a shortage of houses in good locations ..... dammit , in any locations ....... and that can only get worse ............
...... if you don't buy now , you never will ........ this's your last chance to snaffle up the good stuff , before she sails up outta your reach .......
Renting is dead money ........ Dead ! ..... it has ceased to be .......
........ yessirreeeee ......... you can't lose with property , mate .........
We don't have income like most of europe though, nor the population, nor the geographical proximity to major economic powerhouses.
We're a small, isolated, sparsely-populated farming island down the arse-end of the world. My bet is that this is just a dead cat bouncing off a ledge on the way down.
So the Q has to be asked if this is another boom how much higher cant it go? V how far it can drop?
Now if the global economy wasnt in such a mess I could see that NZ's housing market could indeed carry on over-heated for some years....what did parts of OZ get to, almost 9:1? where we are at 5.5:1? how far can you keep pushing? There has to be a ceiling, its just a Q of where is it....
For me I see the pro-property types as desperate to keep it going despite gravity and to do that they need more (and more) suckers buying. I just wonder when the bailing out will start.....then we will hear it from the ones who just made it in time......crowing how they sold up and left poor first time buyers to take the huge losses.....the ones we wont hear from are the too greedies how didnt believe the drops where possible.....not until we see the bankruptcy proceedings anyway...
The most to lose will be the first time buyers looking at 95% mortgages....they will be hammered out of sight IMHO....no one can pay $100ks back and they wont I think, they will just go bankrupt.....then thats the banks left holding nothing.....
regards
steven,
if you keep looking for rational behaviour you are going to be disappointed.
I would suggest you cast your eyes a little further afield and see whether there are any associations possible between thin-air money in the US, thin-air money in China, and escalating house prices here. If the money is hot money and you are scared of losing it all, then losing 10 - 20% on a house transaction won't seem that big a risk.
I have seen a couple of articles over the past couple of months re chinese looking to get money out of mainland China. If just a fraction of a trickle of the thin-air money from either the US or China headed down here that would be more than enough for a boom.
New Zealand has made it very easy for people with money to come and buy property. (Kim Dotcom / Shania Twain / James Cameron being the bleeding edge).
Where do I say rational?
;]
For me it isnt....its crazy IMHO, but,
Is it possible that hot/thin air money is pushing up rices here? of course the Q is how bad. could it explain Auckland's well to do suburbs boom? of course, can we prove it? hmm no I odnt think so. Given how bad china looks it makes some sense for an individual private investor to get some of their money out and into NZ.....Im not aware US individual investors are doing the same thing?
regards
Its ironic what high rents can do:
http://www.dailytelegraph.com.au/news/sydney-nsw/a-shopping-nightmare-o…
An area that as a collection of shops/eateries created a certain value, until rent extraction becomes too high, and at a certain point destroys what had been created.
There have been comments that genrally rents on retail should be 11%, here it was 14% now I think its even higher.....result will be shops shutting (which is what happned to one place where I worked, it stayed empty for 2+ years)....and then the commercial sector will like the USA implode.
regards
I remember once being in Las Vegas on NYE in a huge crowd on the strip, with no way out, or to safety, and thinking; if anything bad were to happen right now this crowd will panic and lots of people will get trampled... I was scared.
For me, to buy in at these AKL isthmus prices is also scary, so if I can avoid it, I won't. Some sobering things I saw when still living in USA...
Back in '06 I had to take a job in California doing VA mortgage refi's for military types. It was prolly the worst job I ever had, largely because every day I was dealing with idiots who were absolutely CONVINCED that due the ability to borrow big and/or the market was going up, they were on their way to infinite riches. During those times I felt if I offered anything cautionary, they would pull a gun out and shoot me, so I had to keep my mouth shut as best as I could. Not easy when dealing with people who are often loud and obnoxious to the max.
The shoe is on the other foot now.
I also remember meeting a nice early thirties female CPA who had bought and realised by '07 that her best bet was to walk away. Theoretically she would be good at crunching numbers to base that decision, versus another girl in similar situation who chose to tough it out, even though she was underwater by +200k. Don't know how she fared but wouldn't be surprised if she too sent the keys back to the bank at her point of exhaustion.
There are people who say this sort of thing can never happen here, but I just don't know. Yes, NZ is a nice place to live, but becomes less so the more expensive it becomes.
With fundamentals now so out of whack, I think most will agree anything is possible these days, for better AND worse. So those holding obviously are happy NZ had its turn in this global boom and that's nice. But what if our turn for the downer has yet to happen?
Sometimes it doesn't take a lot to spook the crowd. Then, like in Las Vegas that night, were it to hapen, you have zero control over anything.
Expecting that somehow we are different or special, or can only enjoy the good without any price to pay, reminds me of those silly Americans, in debt up to their eyeballs.
As to the USA right now? 15 years fixed at 3.12%. NZD/USD rate uber favorable. The trough of the most dramatic price crash in living memory. Hmm. Mouth watering.
As an aside, a place like Thailand for a second home. Hmm. Also mouth watering (have you tried their seafood Tom Yum?).
It's a global village, where theoretically capital will go where it's best treated. So unless it's a really good deal, I prefer to remain on the sidelines in NZ (and if it's an auction, no fricken way, but that's a thread for another day).
Or just buy somewhere else.
I can't be alone on this, so I reckon the 'business' that is NZ real estate is a tug of war that could go either way.
http://www.businessinsider.com/people-with-underwater-mortgages-2012-4
I saw something similar but on a smaller scale in London in 1993....10 to 15k sterling losses on a 60k flat were ouch territory....the 30% down on losses in the USA is mind boggling....
that link was interesting and very sad....what I didnt see there were the likes of big daddy etc ("Investors")....but ppl who just wanted a home and who are stuffed...and shafted by the banks..........and of course it isnt anywhere over yet the worst is still to come.
regards
I agree I sold my last property in central Auckland April last year for a silly price after it price increased by 125k overnight because of the RB OCR rate cut. Naturally placed the money into a more favourable overseas investment given the cross rate. Macro economics is clear NZ will at some point take a major hit with its debt in the next five years, it will be timed well for traders but not for the general population to react. If you want a diversified portfolio you have to have an international focus.
I agree I sold my last property in central Auckland April last year for a silly price after it price increased by 125k overnight because of the RB OCR rate cut. Naturally placed the money into a more favourable overseas investment given the cross rate. Macro economics is clear NZ will at some point take a major hit with its debt in the next five years, it will be timed well for traders but not for the general population to react. If you want a diversified portfolio you have to have an international focus.
Good on ya IBS,
My Grandson flies out on Thursday, his Father, My Son, is stealing him from me.
Good on him. Glad that I taught him that much and aided him in acheiving that mobility in a global world. Although, all things being equal, who knows what world we are sleep walking into.
At about the time my son was 2 years old, our family mortgage was at about 19% per annum. Everybody that was leveraged at the time, was burnt bread.
Thing is, nowadays, one calorie of burnt bread is 10 calories of burnt oil.
regards
@idlebumski
I spent some time in the States last November (Phoenix, AZ) and what truly amazed me were the number of people that were holding "negative equity" or upside-down properties, as they like to call it....and just like your CPA example, many of them had already chucked in the towel and "jingle mailed" the keys back to the bank.
Also was truly amazed what $210,000 US would buy you ..... a beatiful brand new 2 storey, 4 bdm, 2 living areas house and land in a good part of Phoenix, while there were alot of alot cheaper properties around as well - whether bank owned or foreclosed.
The USA (esp. AZ) has really been hit hard by their property bust and this got me thinking - here is a country that has a much higher standard of living than NZ, yet it had this "crash". This is when the kiwi property spruiker will chime in and say "NZ's (or Australia's!!) banks are so much more profitable and have higher equity holdings than in the US" ..... OK that may be the case to a point, but what most kiwis don't realise is that the banks are the "REAL winners", colluding and dictating their terms to maximise their profits. As the thing is with property, is that your property may go up 20% pa BUT SO HAS THE PROPERTY NEXT DOOR.... so you are back to square one, while the bank have collected all that mortgage interest money.
Also you realise that the average working American family pays quite a bit less on mortgage repayments, as a % of their net income. Here NZ is stung again, with high house prices leading to much higher repayments and LESS disposable income for other things in life ...... there is more to life than scrimping and saving to pay off a mortgage.
Your point about the housing market now being an "international" one .... it truly is and capital will go where there is a return, not a piddly gross 3.5 - 4.5 %
KIwis (esp. in AKL) may keep saying the Chinese, kiwi ex-pats etc will keep paying these high NZ prices but in their naviety, these groups have a CHOICE and they will go where they see value... I know one thing for sure, they are NOT just snapping up houses in the land of the long white cloud ......
I have to say I completely agree. There are recessions for the rich, and recessions for the poor. There are also booms for the rich, and the pre GFC madness was one such example. It never delivered wealth to those further down, so unwinding it must surely be a good thing. If you still have your job in the USA (and the majority of people do) then you are far better off than in NZ / AUS. Strong banks are good to a point, but there is a point where they are strong because we are being creamed. A crash can quickly address this problem. Apparenty Aus has had 15 years of uninterrputed "growth", yet I dont know of anyone who can afford to raise a family off one income, let alone buy an insanely overpriced house. The USA still has excessive housing markets (eg San Fran, parts of New York etc), but for the most part its reasonable to cheap. In AUS / NZ there is NOWHERE to go to avoid expensive housing.
Yeah; The amount of new 'house' you can buy in parts of the US makes you wonder whether the people who justify NZ prices due to building costs here etc have seen the same thing. It wouldn't seem so.
And yeah; As I understand it, the Chinese are HUGE buyers in the US right now, plus other places like Phuket. Proud Kiwi's have been known to believe we are the centre of the world, but in reality I think people like that are a bit naive, or delusional. Yes, living here is nice, but most places on this planet also have upsides.
Here's the thing; When I look through the slideshow in the post above, can't help thinking that those most affected are perhaps a bit simple and indogent, which helps explain how they could end up so badly screwed.
My fear is; If that's the way I view them, then it's likely that somebody may also cynically see us in the same way, as silly, silly, suckers.
It's not hard...
1. Allow the prices to run-up. Check.
2. Get everybody locked in whether they have any equity or not. Getting there.
3. Let the market go limit down. Was that them that gave us the push?
4. Hey presto! Massive redistribution of wealth. Bonus time at GS.
There's just too much money at stake for it NOT to be a strategy to a bunch of evil pricks somewhere.
USA, UK, Iceland, Ireland, Portugal, Greece, Spain, etc. Check.
So who can guarantee that there are NOT shadowy forces somewhere licking their chops at the thought of us being next?
While central banks are defecating fiduciary media, property is still a reasonable investment I think. My call has always been there is room for another hurrah, but it will take a while to pick up steam due to initial reluctance.
Just finished reading Paper Money Collapse:
http://www.amazon.com/Paper-Money-Collapse-Monetary-Breakdown/dp/111809…
Makes a lot of sense, the system we have is so heavily distorted in terms of relative pricing little reason there is such confusion in the market.
Both of my kids and partners (late 30s) have bought first houses in the last month.
I would have been frightened as hell if it was not for the one fact in each case. They each had more than 50% deposits.
No way would I like them to have gone in with less than 25% down in this market.
5.1% fixed for 3 years offered by bank - 9th paragraph in this item:
http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=107…
"So he went to his parents for a $200,000 loan and had no problem getting finance with banks offering 5.1 per cent fixed interest for three years."
So is the 5.1% a typo - I realise most banks are doing deals but a full 1% below the published 3 year rate seems incredible especially given that he needed to borrow off Mum and Dad to afford a house?
Interest.co.nz should investigate the current fixed mortgage rates being offered by banks - its a story in itself!
If Chairman Moa, is telling the truth the the only property that fits the description is Wood St. But we've viewed that and got the impression that is was a rental rather than owner occupied so I'm not sure. To be honest we considered Wood St because of the fantastic location but it is a total doer-upper (to get it to the standard expected in that area) especially with the uneven floors so it's value is hard to pin point but is unlikely to be stratospheric.
Of course if it's Cameron St or on the corner in Arthur St, CM's property is in a different league.
Lol it will go for a bomb. Its a nice property. We sold our place just around the corner and higher up the hill (closer to Ponsonby Rd) in Renall St, comfortable but total do up on 200m2 for $780,000 in 2004!
Mental prices for do ups on tiny sections but Freemans Bay is my pick of Auckland's suburbs. Leafy, mostly quiet and 15 min walk to town.
Common sense home truths from Brian Fallow: http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10799830
The property market is close to its highest its ever been, and it has got some experts worried about a bubble forming. A housing crisis might form where people are unable to pay for higher prices, and resort to borrowing more. For investors, it might signal a good time to start investing in property, but it definitely comes with a big risk.
Derek - http://www.heritagegardens.co.uk
The property market is close to its highest its ever been, and it has got some experts worried about a bubble forming. A housing crisis might form where people are unable to pay for higher prices, and resort to borrowing more. For investors, it might signal a good time to start investing in property, but it definitely comes with a big risk.
Derek - http://www.heritagegardens.co.uk
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