Westpac thinks house prices will keep rising into next year then go into a sustained downturn

Nice Dominick.  So why on God's green earth is your bank and the other lenders trying to drive increased lending at wafer thin interest rate margins ina  current market that you yourself say is at peak and going to start falling in a year or so time?

Do you not project out asset cover covenants and regulatory capital requirements?  Or do you expect governments to bail you out when your over aggressive residential lending practices come home to roost and you find your debt was all lent against a house of cards, the same way all banks did in 2008?

Maybe if you took a more sensible long term equilibrium view on lending practices you would dampen house price volatility and protect wealth for everyone, including your own shareholders...

I'm sure they do expect that the taxpayer and depositors will bail them out, Bear (much of banks improved results actually result from reduced provisions for bad debts). Along with fontera (Fitch thinks so), the meat co-ops, finance and insurance co's ..........& etc; this is the not so subtle signal that governments have sent out since 2007. And planned for with things like covered bonds and OBR (the Cyprus option).  But we rave on and on.

Regards, EP 

Money supply keeps increasing, prices keep going up. What is a sustained downturn? 1 - 3 years before prices continue their never ending march upwards. Getting back to the gold standard may change things one day.

The link to the westpac report doesnt work (it goes to another interest.co.nz story)

Thanks.

Looks like he's making a couple of large leaps of faith. First being the AU recovery leading to NZ'ers heading back over the ditch.  That would be linked to a rebound in china, which seems unlikely, more likely to see neutral and more of the same for mine.

Second is interest rate rises making the investment value of property drop drastically.  Already ASB have backed off until march 2015 for next hike, does this sort of revision to further out dates seem familiar?  With no one else rising rates, (BOE seemed more dovish yesterday), our current settings might be it for a the rest of 2014 and most of 2015.  The 'new neutral' being a lot lower than what most expect, meaning the NPV of property that returns solid yields increases as the discount applied to future earning is reduced.  Although, being auckland focused, where future losses need to be discounted to present day value, a reduced OCR track/inflation track would be negative for these negatively geared speculative properties.

I recall in 2004-2005 similar calls were made about nz property prices (google searched but couldnt find any commentry from back then, but it was there, as it caused me to miss out on the best part of 100k by not buying back then). I think auckland will moderate, plateu, and other parts of NZ may see a few % growth over next few years as they play catch up and as rates hold for longer forcing investors to chase yield available in the residential property market of the secondary cities.

"Despite our near term bullishness, we anticipate a period of falling house prices later in the decade."

Another dopey prediction.

Any one guessing what will happen over the next 6-7  years lives on another planet.

What does "falling" mean??

Do they mean country wide?

With or without allowing for inflation?

What if interest rates  remain steady for much longer or even fall? ( just see what is happening  Australia and Europe)

"What if the NZ dollar drops and and overseas money rushes in to pay less for more? 

What if immigration increases as people flee from the trouble in Europe and the Middle East?

Any one who predicts the future of the property market is either a great genius or a flat earth publicity seeker.

Prices haven't moved that much in te regions so are we talking Auckland only? 

Those that pick falling prices have never built and faced the high costs. At $2k per sq metre to build its $400,000 to build plus section. If prices fall building will stop. 

house prices wont fall - except for crappy inner city cubicle apartments and  new build high density housing in the burbs...antique central auckland villa's are going up up and away

The ASB and Westpac should have a cup of tea sometime and get their stories striaght.

It's looks pathetic when two major banks predict the exact opposite within a day of each other

"House prices picked to keep rising

By Brian Fallow  

Friday Aug 15, 2014



Rate rises fail to dampen enthusiasm in the property market amid tight supply of homes.



Expectations of house price rises - especially in Auckland and Christchurch - remain high. Photo / Dean Purcell  

Rising interest rates have yet to dent people's expectations that house prices will continue to rise over the year ahead, especially in Auckland and Canterbury.



ASB's quarterly survey of housing market sentiment found a net 49 per cent expected house prices to rise over the next 12 months, virtually unchanged from 48 and 47 per cent in the previous two quarters and historically high by the standards of the 18-year-old survey.



http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11309056"

 

Banks predicting house price falls may be an indirect way of confessing that actually interest rates will be falling soon - in line with the rest of the world, and that we are not immune from global conditions.   

"The ASB and Westpac should have a cup of tea sometime and get their stories striaght.

It's looks pathetic when two major banks predict the exact opposite within a day of each other"

Not at all BigDaddy; in fact exactly the opposite.

I think it is entirely healthy to have different opinions out there.

It is when everyone always agrees that I start to really worry.

Unfortunately some people have to work in an office full of sycophants who simply want to be 'yes people' who agree with the big boss.

Me, I encourage alternative viewpoints.