QV says average property values falling on Auckland's North Shore, Waitakere and central suburbs, also in parts of Hamilton and Canterbury

Average residential property values dropped in Auckland and parts of Hamilton and the South Island last month, but continue to rise in other parts of the country, according to the QV House Price Index.

The average value of an Auckland home dropped $4,019  to $1,043,680 in February from $1,047,699 in January. However trends were mixed in different parts of the city, with average values declining on the North Shore, Waitakere and central isthmus suburbs, but continuing to rise in Rodney, Manukau, Papakura and Franklin.

The most sustained fall in the average value of homes has been on the North Shore where they have fallen for three consecutive months, from $1,224,477 in November to $1,196,987 in February, and in Waitakere where they have fallen for three months in a row, from $845,864 in November to $831,705 in February.

In Central Auckland, the area within the old boundaries of the former Auckland City Council, the average value of homes dropped from $1,225,096 in January to $1,224,673 in February.

LVR restrictions blamed

Although the falls in average values are not large, they are significant because the QV House Price Index is a lagging indicator of what is happening in the residential property market and many of the prices that were used to make the latest adjustments to average values would be from sales that occurred in the fourth quarter of last year.

That means much of the weakness that has been evident in the Auckland market since the beginning of this year will feed into the QV figures over the next couple of months.

QV pointed the finger at the latest loan-to-valuation (LVR) mortgage lending restrictions for investors as the reason for the falls. The Reserve Bank last year stepped up its LVR restrictions, setting an LVR limit of 60% for landlords across the country.

"There continues to be uncertainty around where home values are going and there has also been a surge in listings coming onto the market during February, which is giving buyers more choice," QV Auckland homevalue manager James Steel said.

"Properties at the lower end of the market in suburbs popular with investors tend to be not selling for the same premiums they were before the new LVRs came in."

The QV figures also show that average values have fallen for the last three months in a row in the south east and south west suburbs of Hamilton, but are continuing to rise in other parts of the city.

In Hamilton's south east the average value of homes has drooped from $488,963 in November to $481,707 in February and in the south west the average value has fallen from $486,468 in November to $464,668 in February.

Average values also declined in Banks Peninsula, Selwyn, Ashburton (where they have declined for three months in a row) and Waitaki in February, but continued to rise in other parts of the South Island.

"The Christchurch market is showing normal levels of activity but with the supply of homes meeting demand there is nothing driving value growth, so home values are relatively steady," QV Homevalue Christchurch valuer Daryl Taggart said.

QV House Price Index. February 2017.

Territorial authority Average current value $ 12 month change % 3 month change %
Auckland Region           1,043,680 12.8% -0.7%
Wellington Region               589,784 21.5% 4.3%
Main Urban Areas               750,253 13.0% -0.1%
Total New Zealand               631,349 13.5% 1.1%
       
Far North 399,780 20.8% 8.9%
Whangarei 468,033 19.4% 2.4%
Kaipara 470,913 25.3% 8.1%
Auckland - Rodney 936,877 13.6% 1.4%
Rodney - Hibiscus Coast 918,495 13.4% 2.6%
Rodney - North 957,228 13.6% 0.8%
Auckland - North Shore 1,196,987 11.2% -2.2%
North Shore - Coastal 1,363,263 11.6% -2.7%
North Shore - Onewa 962,999 11.0% -2.2%
North Shore - North Harbour 1,176,182 11.2% -1.0%
Auckland - Waitakere 831,705 13.8% -1.7%
Auckland - City 1,224,673 12.5% 0.2%
Auckland City - Central 1,062,336 11.6% 0.7%
Auckland_City - East 1,540,731 13.5% 1.3%
Auckland City - South 1,100,193 11.5% -1.3%
Auckland City - Islands 1,057,341 18.9% 2.7%
Auckland - Manukau 902,477 14.2% -0.4%
Manukau - East 1,159,890 14.5% -0.7%
Manukau - Central 685,233 11.6% -1.7%
Manukau - North West 785,112 16.2% 1.6%
Auckland - Papakura 686,465 13.6% 0.9%
Auckland - Franklin 663,638 13.3% 2.4%
Thames Coromandel 654,659 17.7% 4.9%
Hauraki 362,059 30.0% 2.7%
Waikato 452,169 26.2% 5.9%
Matamata Piako 400,688 26.3% 4.1%
Hamilton 532,171 16.7% -0.8%
Hamilton - North East 681,204 18.6% -0.5%
Hamilton - Central & North West 494,010 15.7% -0.8%
Hamilton - South East 481,707 14.8% -1.5%
Hamilton - South West 464,668 15.1% -0.8%
Waipa 497,582 23.4% 5.6%
Otorohanga 266,734 20.8% 13.3%
South Waikato 192,649 31.8% 6.5%
Waitomo 176,081 18.8% 4.7%
Taupo 428,410 15.1% 5.5%
Western BOP 581,540 20.1% -1.6%
Tauranga 673,923 19.4% 1.3%
Rotorua 386,810 29.0% 3.7%
Whakatane 390,862 23.9% 7.0%
Kawerau 174,150 51.5% 9.8%
Opotiki 253,857 14.7% 2.7%
Gisborne 272,982 17.4% 2.4%
Wairoa 163,883 12.9% 1.4%
Hastings 397,013 21.7% 5.8%
Napier 419,190 18.8% 2.6%
Central Hawkes Bay 259,663 12.7% 5.8%
New Plymouth 420,813 12.7% 3.7%
Stratford 232,541 10.9% -1.5%
South Taranaki 197,336 5.3% -2.0%
Ruapehu 158,007 15.9% 3.6%
Whanganui 212,695 11.4% 3.3%
Rangitikei 171,286 15.0% 9.7%
Manawatu 297,286 15.1% 6.0%
Palmerston North 349,494 14.9% 2.9%
Tararua 165,264 5.9% 0.3%
Horowhenua 258,639 19.3% 3.3%
Kapiti Coast 479,823 21.5% 3.4%
Porirua 498,652 23.5% 5.3%
Upper Hutt 437,832 25.5% 6.3%
Hutt 488,797 25.0% 5.8%
Wellington 709,806 21.5% 3.8%
Wellington - Central & South 704,885 20.3% 2.9%
Wellington - East 773,982 21.3% 4.8%
Wellington - North 639,076 23.9% 6.0%
Wellington - West 806,933 19.5% 0.2%
Masterton 284,601 15.9% 5.8%
Carterton 333,802 18.8% 7.7%
South Wairarapa 376,069 17.5% 7.5%
Tasman 501,153 15.2% 2.9%
Nelson 513,933 16.9% 5.0%
Marlborough 425,213 13.6% 3.3%
Kaikoura N/A N/A N/A
Buller 177,902 -1.8% -7.0%
Grey 206,481 4.5% -0.7%
Westland 233,275 -0.1% -0.2%
Hurunui 374,130 4.3% 0.4%
Waimakariri 437,569 3.5% 1.8%
Christchurch 498,710 2.8% -0.5%
Christchurch - East 371,793 0.7% -1.8%
Christchurch - Hills 672,029 3.2% -0.8%
Christchurch - Central & North 589,186 3.6% -0.5%
Christchurch - Southwest 479,064 3.9% 0.9%
Christchurch - Banks Peninsula 508,096 1.6% -1.8%
Selwyn 545,372 3.2% 0.3%
Ashburton 344,881 2.4% -1.7%
Timaru 338,653 8.0% 1.8%
MacKenzie 433,271 28.0% 9.0%
Waimate 224,971 7.4% -0.2%
Waitaki 263,134 11.9% 4.0%
Central Otago 423,431 20.1% 7.8%
Queenstown Lakes 1,039,434 29.5% 3.9%
Dunedin 359,629 15.6% 5.3%
Dunedin - Central & North 372,954 15.0% 5.3%
Dunedin - Peninsular & Coastal 326,875 16.5% 6.9%
Dunedin - South 340,838 15.3% 4.8%
Dunedin - Taieri 376,406 16.8% 5.3%
Clutha 192,737 11.1% 3.6%
Southland 240,861 11.6% 6.9%
Gore 203,873 9.2% 0.8%
Invercargill 235,895 9.2% 1.1%
Notes on the above data:    
1. The information included in the above table is based on the monthly property value index. This index is calculated based on the sales data entered into CoreLogic's system in the previous 3 month period. For example, information for the period ending June will be calculated based on sales entered between April 1 and June 30.
2. The average current value is the average (mean) value of all developed residential properties in the area based on the latest index. It is not an average or median sales price, as both of those only measure what happens to have sold in the period.
3.  The percentage change over three months, twelve months and since the 2007 market peak are based on the change in the property value index between that time and the current.
4. Any of the statistical data shown in italics are calculated based on a sample set of data that is less than the recommended minimum. These results should be used with caution. Those showing N/A had too few sales to generate an index

 

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113 Comments

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11

no its alternate facts
house prices don't drop in Auckland
investors don't push up the prices of lower quartile housing

Auckland house prices cannot keep falling forever. Time for it to rise upwards and onwards. #VoteForNational

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19

Not even the slightest chance of that. Vote anything BUT National!!!

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12

Young people, vote for National and #RentTillYouDie

Good Slogan. All the opposition should pick that one up for the election.

The wealthier areas, Central and East Auckland are not unsurprisingly bucking the trend.

You are correct Penguin.
Top 15 suburbs in New Zealand based on QV Median Home Value as at 1st Feb 2017:

1 Herne Bay $2,468,000.00
2 St Marys Bay $2,271,550.00
3 Remuera $2,019,550.00
4 Stanley Point $2,018,950.00
5 Campbells Bay $1,872,900.00
6 Epsom $1,865,300.00
7 Westmere $1,842,100.00
8 Mission Bay $1,763,050.00
9 Orakei $1,761,150.00
10 Ponsonby $1,743,400.00
11 Kohimarama $1,724,700.00
12 St Heliers $1,701,700.00
13 Takapuna $1,700,000.00
14 Devonport $1,676,700.00
15 Glendowie $1,649,900.00

I'm kicking myself for not buying a property in Takapuna about 12 years ago $256K, someone bet me to it. Those were the golden days, no auctions, (in retrospect) bargain prices everywhere. If only I had a crystal ball back then.

Bugga

Yet some of the old folks with the luck of being born at the right time insist it's just that the new generations of Kiwis are lazy and don't know how good they've got it.

It's a psychological phenomenon - even lottery winners start to regard their wealth as all down to their own hard work and something they've earned.

Oh com'on, there's no "luck of being born at the right time", do you really believe this ?
Instead of complaining about things you have no influence on (like when you're born) why don't you take action and make your own "luck"

It's pretty simple maths, really.

Born at a time following multiple periods of government builds, other government measures to encourage home ownership (including cheap government leasehold land, loans), and affordable price-to-income ratios? Resulting in NZ's highest rate of home ownership ever.

VS.

Born once that generation had stopped all such measures, dropped taxes and foisted more costs onto the young (including training themselves for their jobs, something the government and companies did in the past)? Born at a time when price-to-income ratios are the worst they've been and are among the worst in the world, at a time when property investment receives tax privileges, and the government tacitly encourages foreign investment and imports a workforce to drive wages down?

There's no comparison.

Sure, some moan "I faced 20% interest on my first home", but at the time inflation was also similarly high - meaning without such interest the capital would've been eaten rapidly by inflation.

It's absolutely factual that boomers benefitted from the hard work and high taxes of the prior generations (e.g. the pre and post WW2 builds), then lowered taxes and foisted cost on those that followed, not passing on the same lot to the next generations. And it's absolutely factual that the mathematics of home ownership is a much more difficult equation for folks born today. The efforts of earlier generations that created ready access to home ownership for your generation is not you "making your own luck".

No one is saying life was easy back in your day - but even the most jaded grey-hair should recognise that accessibility to home ownership is much worse for the young today.

Home ownership rates are plunging. That's also a fact. And no, it's not smashed avocado that is causing the rate to plunge...

You'll say the same in 12 years time from now

Agreed! In the long run there is only one way Auckland house prices can go and that is UP!!

Surprised the price fall hasn't been more severe. LVR is such a crude tool though. What was given, considering ~45% of the purchases were being made by the investors prior to the 40% rule, was the price will definitely fall with the LVR, which means more and more people will be under the 40% rule which may effectly wipe out half of the potential purchasers out of the market in a short period of time. Why don't we just have higher interest rates for investors like in Aus? And the rates gets higher and higher as you owe more. Or are we OK with the banks as one of the main causes of the boom bust cycle?

That just makes the bank richer and tenants likely having to pay more rent...

Rents are ultimately constrained by what tenants are able to pay.

(Mind you, this could be another motivation for National continuing to import prospective new tenants as fast as they can get them through Auckland Airport.)

It should be clear in april if the price have stabled or going up.

December / January had many houses for sell by negotiation or had asking price but come March many are under auction as vendors and real estate agents are hoping for repeat of 2016.

Unbelievable!!!
Why should investors who provide housing for people that don't want to,own a house be required to pay a higher interest rate than owner occupiers.
The LVR that requires investors to have to stump up 40 per cent on every new purchase is acceptable, what isn't acceptable,though is that previous purchases that the Banks only required 20 per cent deposit on, have been altered and those purchases also need the 40 per cent!!!!!
How they can make that retrospective is a bit hard to take.
Of course that is going to stuff the market and effect people.

Why would the higher interest rate, that investors have always paid, matter if they are making a profit? It doesn't.

The banks are correctly applying the 40% to an investors portfolio. That's how all margin lending works. That said if the investors have owned their properties for 1-2 years they could get their portfolio revalued and with the insane increases over the past years they should have 40%+ across their portfolio. As such 40% equity has nothing to do with the sales slowdown in Auckland.

You can't "stuff" a market. The market is the market and will continue to be a market. The effect on people will be that less FHB are shut out with prices going down. If property investors are affected then they should start running their investments like a business instead of a ponzi scheme where they live on borrowed money.

A higher interest rate equals increased expenses equals less profit... So a higher interest rate ALWAYS matters.

Am i missing something?

As an "investor" I always demand a lower rate than the advertised, not becuase I am an investor but becasue of the fundamentals relating to security and debt servicing e.g. Low LVR, low DTI.

The 40% LVR will affect investors whose portfolios are at or above the 40% LVR. This means they are not able to use the equity in their current portfolio to acquire new properties.

Glad to see you've come round to the idea that the LVR restrictions are affecting investors, as intended, rather than your previous sob story position that they were somehow worst for first home buyers.

Maybe it will make it easier for people to buy their first homes especially in Christchurch where house values and rents are dropping. Housing is going to be the biggest issue in the election. To win it all parties will have to commit to bringing in more measures to make it affordable for everyone. Interesting times ahead.

There are a lot of "as is where is" sales in chch which distort the numbers. Good properties in good locations have been up significantly last couple of years.

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14

One could ask why should investors get tax deductions ot expenses when homeowners cannot?

Easy, homeowners don't pay rent. You should read Gareth Morgan's proposal to tax all equity in houses whether rentals or owner occupied. This may provide the symetry and fairness you are looking for.

Is interest on a mortgage a form of rent? Yes.

Do all home owners have a mortgage? No.

No. Read the TOP policy. That will clear it up for you.

No.

No. Which part of NO do you not understand?

Unbelievable, why should hard working business owners, who could well employ a number of people be subject to higher interest rates than property investors who then turn around and call themselves a business like any other?

Very few landlords meet the requirements of being a business for tax purposes. Tax deductions are claimed on the basis the expenses a landlord has (e.g. rates, interest and maintenance) were incurred in deriving gross income (i.e. rent).

That is a fundamental rule in most tax systems i.e. if you tax an income amount (e.g. rent) expenses incurred in deriving that income (e.g. mortgage interest) should be an allowable deduction. If you want to deny deductions to landlords then you should exempt the rent from income tax. That seems reasonable and fair, but I don't think people around here are too concerned with reason and fairness.

Please do correct me if I'm wrong here, but if I apply your thinking to me buying shares for income (dividends) then should I not also be able to claim deductions for my expenses incurred in buying those shares? Or alternatively, I should not be able to claim deductions, but my shares should be exempt from income tax?

How are the asset classes different to justify the disparity?

Simple. When you buy shares you get the same tax treatment as everyone else. When a lanlord buys a home, he gets deductions that home owners don't. He can alwasy afford to pay more as all expenses get deducted.

A share buyer is not affecting the NZ lifestyle and culture, he is not ruining our suburbs or bidding up a resource than is needed for a secure and socially equatable way of life. You don't live in shares, raise kids in shares and form a living commnity of people with shares.

Simple enough to follow?

You are correct, if you borrow money to acquire shares which entitle you to receive dividends (whether or not dividends are in fact received) you are entitled to a deduction on the interest incurred on your borrowings.

Property has no different treatment than any other income generating asset. For example, if you borrowed $1m at 4% interest and loaned the money for 5% interest you would have to return the 5% interest but could claim the 4% interest so only the net 1% would be subject to tax.

Don't be misled by the misinformation in these forums which state (incorrectly) that real estate differs from other asset classes.

rmnz,

Rastus is right. The tax system is distorted in favour of property investors,making the decision to buy such properties entirely rational,for tax purposes.
The fact that this is not in the best interests of NZ Inc. is a problem to be tackled at government level-ie change the tax rules to create an even playing field-but I am not holding breath waiting for that to happen.
I still prefer the stockmarket despite this.

Not just the tax system but the bank lending as well. Houses have much lower capital requirements for banks and they loan a much large proportion than on a stock portfolio. Most shares are 60-70% LVR versus mortgages starting at 80% for lower interest rates and going up to around 95% LVR with conditions.

Would you say a level level playing field would require all home owners to return a market value rent for their home even if they were owner occupied? For example, a family own a home with no mortgage with a value of $1.5m in Auckland. The market rent is $900/wk and their home costs (e.g. rates, insurance and maintenance) are $200/wk. Should they be required to pay tax on $700/wk (i.e. $900 deemed rent less expenses). Because if they were a landlord they would have to...

HeavyG,

I was thinking of more modest changes,simply to make the tax system less heavily weighted in favour of property investment. What you refer to is I think,one of Gareth Morgan's ideas,but for that to work,there would have to be wholesale changes to the tax system and I cannot imagine any of the major parties going anywhere near it.

Well I was actually asking the questions to illustrate the point but I do appreciate the responses. Good to know I'm not the only one who see's it for what it is.

If you are classed as a share trader then you will be able to claim the interest, however any profits will be taxed on the trades.
You will have to be trading serious amounts though to be classed as a trader!

Similarly, if you traded in houses or were a property developer (or sold a non-owner occupied home within two years) you would have to return as income the sale price (and can claim the purchase price as a deduction).

Oh, people here a very concerned about fairness and the lack thereof for potential home owner/occupiers. Landlording should be no more attractive than any other business/speculative action, it really should not be what every man and his dog is aspiring to be, houses need to be seen or what they are meant to be, homes.

Here you are again blaming the landlords for what they're doing, and that they were born in the right era blah blah. I'm sick of this!! Stop blaming the past and what you can't control and focus on making your own luck for goodness sake!

You can control it. By leaving homes for home owners. I am also sick of this ........sick of my boomer generation and its willingness to shyyyyt on the next generation. My father fought a war for me....yet you lot just suck the young dry.

Rastus,

I can't agree that home ownership should be the only game in town. In some countries,Germany for example, a significant percentage including well paid professionals, choose to rent. What's the big difference? Security of tenure. Talk to principals in lower decile schools and they will tell you that pupil turnover is a major problem. Too many families have their lives disrupted by having to move. The market will not deal with this,without legislation to enforce it. I see most property investors as a drag on society,perhaps on a par with currency traders.

Here's the thing, this is what property investors think they are doing, making ther own luck, 'winning'. But it is coming at a cost, it most certainly could have been controlled. Let not pretend that it's a free market, it's not.

To me it's just another symptom of New Zealand's low productivity, and lack of competitiveness in a global market.

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10

>Why should investors who provide housing for people that don't want to,own a house be required to pay a higher interest rate than owner occupiers.

They're not.

People want to own, but investors are taking all the houses.

What needs to happen is removing the tax advantages property has over other forms of business.

Rick, you are talking rubbish, there are no tax advantages whatsoever over other forms of business!!!!!!!

There you go again ignoring facts. Capital gains on property are tax free, real businesses actually have to provide goods and services to make money.

Sales of business's are also TAX FREE so what is the difference????????
Ask Gareth morgan regarding his sale,of TRADEME!

Wasn't his to sell

Yes it was, he was a significant investor in it with his son!!

The government wants and needs private landlords or else the tax payer has to build and manage even more social housing.

Personally, I think if the public is paying for social housing, then the public should own it.

and which is the cheapest option in the long run,
building owning and running the asset
or paying private enterprise to do the same
both have benefits and drawbacks
we already pay 2 billion a year and increasing to private asset holders
I personally would prefer the government to spend the money owning the assets and pay private enterprise to run them

No it wasn't, he was just a significant investor. What's your problem with that, anyway? Let me guess, he wants to try to do something about making housing affordable again, which of course would be the total opposite to what property investors would want, if houses again became affordable for Average Joe, what are "investors" to do for clientele.

Which transaction did Gareth Morgan make his money from, sale of share in Trade-Me or the sale of Gareth Morgan Investments Ltd to Kiwibank for nearly $1 billion

This doesn't stack up. How do you have a 30% fall in sales but a negligible effect (if any) on mortgages. It's not LVR.

Either offshore capital has dried up, which no figures seem to support this, or property flippers have left the Auckland market.

There were plenty of people laughing at the 40% equity saying property investors will have no trouble achieving that. In fact I know people where that LVR is meaningless. Now everyone is blaming, the supposedly ineffective, 40% equity requirement for the slow down in the market. QV are just making this up and actually have no idea what is going on. In fact they are moaning that low end housing is becoming more affordable, what a bunch of dicks.

>In fact they are moaning that low end housing is becoming more affordable

Just goes to show they have zero interest in the well being of Kiwis, zero thought for what they leave to coming generations. They're the polar opposite of the ANZAC generation.

Dictator, there has been a comparative fall in mortgage lending which supports the fall in sales. Although the RBNZ numbers in regard to new lending have room for interpretation, make no mistake the trend and indeed the value of lending is down.

Are you sure? The fall in the mortgage lending increase between December and January is only $14m. I don't think that matches a 30% fall in sales year on year. The same increase in 2016 was $100m more which means the year on year lending increase is down 7.6%. I don't see this as a complete justification for the 30% drop in sales, no doubt there's a contribution but it's not the whole story.

I know there can be some interpretation around the figures and there's no doubt that the property market is slowing.

Using the C30 data lending in Auckland for January 2017 compared to January 2016, is 27 percent lower, (463 million) The December figures showed the same trend. The numbers provided are for committed lending , or loan increases, which does not mean the purchase of a home took place in the same month . One could argue from the numbers that offshore investors have not driven home sales lower in the Auckland region .My last comment would be is that Auckland is a distressed market at present.

Pretty interesting numbers. That certainly correlates with what's going on with the sales. Auckland is taking a hammering with that reduction.

But is 'lending' the same as the total amount of Mortgages outstanding. New Lending might have dropped significantly, and that will not be good news for real estate agents who rely on churn. But all those house that did not sell probably have mortgages that were then not repaid in settlement day and are still in place.
ie. New lending is an indicator of turnover, not prices. There is a link of course but only partial.

S8 shows the total mortgages outstanding and they increased by $1340m in January 2017 versus $1440m in January 2016. New lending is still very strong across the whole country but Auckland specifically is weak which could mean investors aren't struggling to buy properties but that they may be investing outside of Auckland, or they are using debt for consumer purchases.

I'm still speculating as to where the money is going but it should be more evident over the next few months.

One would think qv would have a mandate to be objective but they often seem like just another one of the property spruikers

Telling...?. And our measly little 80 Grand ...Grand Embassy Bash, will not stall the trend. It just makes us poorer b-stupid taxpayers...livid. Throwing good money after bad.

http://www.marketwatch.com/story/number-of-distressed-us-retailers-at-hi...

WHO UPSET YOUR RESIDENT PROGRAMMER?
If I want to recommend a post I get sent back to the heading.
It is all too much for my trigger finger!!!

and my new posting as well.(edit)

The idea that house prices always inflate at around 10% plus pa is born out of looking in the rear view mirror - probably the worst predictor of the future.

For all the noise around supply/demand house price rises have been largely due to falling interest rates since 2000 and wage inflation in the 20 years prior to that. We are now in a flat to rising interest rate environment with negligible wage inflation.

The story now is all about debt servicing and perceived future capital gain. Anyone who expects prices to continue to compound at 10%pa under these conditions has a very rosy pair of specs.

You're right - its the end of the road Tom Joad. The future can no longer pay,
House prices can't or wont stagnate - they will collapse as the debt system collapses, then SHTF
Our debt system requires debt growth regardless of whether anyone can service it... the new new debt has to go into asset prices (since real growth is dead) but the effect is return on capital goes to zero. Game over capitalism.

ham n eggs,

I think you would enjoy the book I have just started; How Will Capitalism End? by Wolfgang Streeck. He is Director of the Max Planck Institute for Social Research in Cologne and also the Professor of Sociology there.

A short quote from the Introduction; "Right now,the balance sheets of the largest banks have increased in the past seven years from around eight to over 20 trillion dollars,not yet counting the gigantic asset buying programmme started by the ECB in 2014. In the process, central banks,in their dual roles as public authorities and guardians of the health of private financial firms,have become the most important ,and indeed effectively the only,players in economic policy".

I agree...and I would add Govts.
With each passing crisis , the size of Govt seems to get bigger.
In some countries it is over 50% of GDP..
( when you consider that the Public sector lives on the back of the private sector , just like a parasite, the size of Govt becomes a problem...at some point )

Central Banks + Govts are two great economic forces..... for better or worse...

If the past is the worst predictor of the future, as you say, tell me what is a better indicator of the future ?

Those will be some sour grapes indeed when that happens. Some people might get wrathful.

What worries me is that even if the financial system survives intact, consumer demand will collapse once the housing piggy bank disappears. When the party stops there's going to be a hell of a hangover for everyone.

The naivety of people is extraordinary. It won’t make any difference who is in power, in fact house prices go up more under a Labour Government than they do under a National Government historically. Back in the early to mid-2000’s it was fantastic for property owners when Labour were in, they doubled in 6 years. Bring Labour back I say! They will depress supply and make the crisis even worse.

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Naivety! Really? What do you think will happen if Winston holds 10-15% of the vote and makes limiting immigration a key pillar of any coalition deal. Add to that fact interest rate are going up, albeit slowly at the moment.

The above scenario is not a long shot. It a very real possibility.

Labour at least is proposing some measures - if not enough, and if their "build" might be a bit unwise if done too soon.

- limiting foreign purchases to new builds only
- increasing coverage of CGT and extending bright line to 5 years
- potential tax to break up land banks (as worked once before in NZ's history, for the ultimate benefit of today's owners)
- removing tax advantages property investment has vs. other investments and businesses.

They do need to do more, yes. A stamp duty on purchases not by PRs or Citizens would be useful, as Vancouver has put in place.

Waipa district still humming along at 5.3 percent in three months.

Should specuvestors pay commercial rates, yes.

Should specuvestor have favourable tax treatment removed...yes.

Should some sort of capital gains tax apply to investment property...yes.

Voting for change. If specuvestors are sweating now, they aint seen nothing yet.

Now....let the panic kick in!
It is delighting to see 3 houses for sale in 50 meters on the same side of the street.

Just remember, before y'all pop the cork on the '17 Schadenfreude, two old adages:

  • house prices are fluid on the upside but sticky on the downside.
  • How does one go bankrupt? Slowly at first, then all of a sudden.

To be sure, a wobble or two now will flush out the - shall we say - more nervous, over-extended, amateur or otherwise inept owners, onto a gently descending market. But as someone once said 'There is a deal of Ruin in a Country' - in other words, folks will tolerate a lot of pain before they cave in and join the race to the bottom. After all, around one-third of owners have no mortgage, if the Statistics are to be believed. So their 'losses' (unless they've been making lotsa Withdrawals from that there ATM bolted to the side of the hoose) are Unrealised. Paper gains, paper losses.

Realised losses are what will start the Panic....

A lead indicator of the Auckland housing market through March will be the level of sales through auctions. If auction pass-in rates continue at the level of the last couple of months, then it's a safe enough bet that the downward correction in prices (already recorded) will be further sustained.

There's plenty of anecdotal evidence that numbers of people attending open homes is well down in most parts of Auckland - but there's no hard data. Real estate agents keep a register at each open home (with visitors being required to sign in) but nowhere does any data seem to be collated/publicised.

All you hear from the media is that property values have grown, wonder if they will left some of the restrictions if they feel the values are dropping more then they should.

This two months are crucial and will get direction about house price by May.

Some want all the tax deductions that are claimed like interest etc. not to be tax deductible on rentals.
They are a legitimate expenses and therefore can be claimed.
Personally speaking be in my best interests if we couldn't claim the expenses as we wouldn't be needing to pay any tax on the profits!

You can have your ineterst and rates and insurance and the new carpet (that you put in your own home)... but only if you let home owners do the same. Then we have a more level playing field. At present landlord can always afford to pay more for a ppty...

Perhaps you could pay commercial council rates as well?

As long as the home owners pay a market rental rate then there will be consistent treatment to allow them expennditure. Big tax bills for all those whose home ownership costs are less then a deemed market rent. But that can pay for the whingers...
He has two houses make him give me one.
He has two cars make him give me one.
He has two TVs make him give me one.
He has two girlfriends make him give me one.

Heaven forbid you pull finger and try and get your own. You need to establish the "Big Bosom" party and get all the other whingers to vote so you can become Government and all latch on to the public teat.

You've hit the nail on the head!!

Ahh yes the hollow rhetoric of righteous. Donald Trump is equally good at this type of talk. What is it exactly you are saying? I can't understand it.

No one is advocating more taxes. Hell I should know, my tax bill is horrific.

The tax system exists already is it perfect? no absolutely not, it's terrible.
Does it distort all sorts of prices and behaviors? yes cigarettes for example
Can the tax system be used to encourage positive economic behavior? yes
Does the tax system need to change as market conditions change? sometimes yes

For example a tax or stamp duty on overseas buyers could have slowed the property market, instead the Chinese government stopped capital flow for us. The decreased money supply will cause the overpriced assets to fall. And so the boom and bust cycle will continue.

Unfortunately for the over leveraged when this happens the property will only be worth its true value.
Which will boil down to what people who live in New Zealand are willing to pay in rent. How's that wage growth looking?

He has a Pension he doesn't need, give me one!

Funny, these faux capitalists who don't appreciate how much society has provided for them over their lives seem to lose their "my own bootstraps" standards when it's time to put their own hand out for welfare once they hit 65.

Non sequitur. Try reading up on what's happening in the UK - interest expenses can only be used to reduce tax on your profit up to the lower 20% income tax rate (higher rate is 40%). The government can do whatever it likes to influence behavior using tax, even if you think it's unfair.

In Zimbabwe the Government put a bullet in white farmer's heads and repatriated their farms for distribution to blacks. No one questions the "might is right" position of Governments, however, in a civilized society you would hope there would be reasoned fairness and policy justifications for a Government's laws.

Yes, you'd hope for it. I think that following the UK's tax treatment of investors is rather more likely than Zimbabwe's ethnic land clearance though - certainly it seems short sighted to think that a policy enacted so recently in a similar country with similar problems could never happen here.

The Boy you certainly snivel a lot for someone who prides himself on being so positive. LVR's are bad,DTI's are bad ,rising interest rates are bad, dropping rents are bad,dropping house values in Christchurch are bad. I appreciate things are going bad for you but could you get back to your positive self because so many on this site are so negative. I am very happy at present as all my investments are going gang busters thanks to Donald.

Grandad Gordon, not snivelling at all.
As I say more than happy not to be able to claim expenses but won't have to pay tax on profit.
DTIs are not beneficial for anyone including first home buyers. haven't got a problem with new property being bought being the 40 percent but for Banks to make it retrospective is wrong.
Interest rates have not risen for us and rents overall are about the same.
House values don't affect us at all as we are investors and don't sell property that are positively geared and giving good returns Gordon.
As for your investments, I am pleased you are more than happy with them as you don't appear to be a hands on sort of person anyway, so having someone else handling your money will suit you no doubt!

Not a grandad yet The Boy but will be one day. Life is fantastic with the dividends coming in and the rent from my commercial properties. I would hardly call that hands off but beats relying on accomodation grants from the government so my tenants can pay my rent.

Gordon, you talk like a bitter old man, so stop calling me The Boy!!!!
I have a commercial property and certainly not much to do,on that and how you can say collecting dividends is a hands on investment is hard to understand?
Don't rely on accommodation benefits at all!
Remember that offer is still on the table and waiting for your acceptance Gordon!
Bit of a waste of time on here anyway as there are so many that haven't really got any idea when they think that legitimate expenses should not be able to be tax deductible, if they have to pay tax on the properties!

Goodness me, I agree gordon really does sound abit like a grumpy old man haha.

The Boy at 61 years old I hardly think I am an old man. Currently I am cycling for two hours every second day in the heat of the afternoon while the weather is so pleasant. Anyone who knows me would laugh at your suggestion I am grumpy. In fact I am quite the opposite. I am a very happy person who has a lot of freedom each day to do what I like as I was fortunate enough to be able to retire early from my profession as I prepared for it literally the day I started working.
Among a variety of investments I have built up over a one per cent shareholding in a NZX Company over a period of 10 years. That is not a hands off passive investment. It is very much hands on as having such a significant amount of money in one company has its risks as well as its positives as it has been an extraordinarily successful investment. In order to mitigate risk I monitor it constantly each day the market is open. I read every announcement the company makes and I read as much information I can find about the company from brokers, analysts,commentators and financial journalists. Every day I also ready considerably about world markets and individual companies. I can only presume that your foray into equities was a failure because you thought they were a hands off investment. That was a big mistake The Boy. Like any other investment you have to keep a constant eye on them as markets are always changing as evidenced by dropping houses prices and rents in Christchurch. No wonder you have turned from your once positive self into a snivelling moaner.

ha ha nice one gordon...made my morning (though you have probabaly just ruined 'the childs' day)!

"DTIs are not beneficial for anyone including first home buyers. haven't got a problem with new property being bought being the 40 percent but for Banks to make it retrospective is wrong".

As a minority shareholder in your 'business' you evidently don't have any say in the matter.
The DTIs were brought in specifically to curtail under capitalised investors from spreading themselves too thinly.

Haven't got a problem with that, but to make it retrospective is totally wrong.
It is like putting up,the tax rate and then coming to you for more tax that you would have paid years ago if it had have been at the new rate!!

"From April, landlords will also lose tax relief on mortgage interest, which will be reduced to the base income tax rate"
http://www.theweek.co.uk/66688/buy-to-let-mortgages-pulled-at-fastest-ra...

That's the U.K though, not here?????

Average house price inflation is unlikely to be greater than the cost of borrowing over the next 5 years imo.

The period of valuation expansion driven by falling interest rates is over. Expect prices to average 3-5% pa. going forward not double digit movements.

"Expect prices to average 3-5% pa"
Typo? -3% to -5%

Tax advantages over other businesses and investments? Ah, can you please tell me them? There are none whatsoever. CGT makes no difference, the 1972 Labour government found out all about that.

ANZ bank seem to think there are a few. http://www.anz.co.nz/personal/home-loans-mortgages/property-investment/i...

and these guys : https://www.loanmarket.co.nz/products/tax-and-negative-gearing.

Would you negatively gear your own non-real estate business, why or why not?

This is when we get the inexperienced new property investors flocking in near the top of the market.

I started reading this blog and came to this comment :

"Personally, I think if the public is paying for social housing, then the public should own it."
I stopped reading any more.
By the above comment, the public/customers end up paying for the various businesses and therefore they should own them. Like the Tui advert>>>> yeah right. We did own the post offices and the likes untill we had to get the hell out of them. Let the landlords get on with their business of providing accomodation to the nation with no risk to you. If their business is profitable, thats just good business. Dont knock that or the the tax payer housing stock could end up like the unprofitable post offices owned by taxpayers.