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Auction numbers dwindling but sales rate improving for Bayleys

Property
Auction numbers dwindling but sales rate improving for Bayleys

It was a very quiet week in Bayleys' Auckland auction rooms with just 14 properties on offer. But the sales rate was a lot higher than it has been for some time.

Of the 14 properties on offer eight were sold giving a clearance rate of 57%. Four were passed in for sale by negotiation, one had its auction date postponed, and one was withdrawn from sale.

Prices ranged from $875,000 for a two bedroom home unit in Mairangi Bay, to $2.3 million for a four bedroom villa at Cheltenham on the North Shore.

At Bayleys' Hamilton auction, seven properties were offered ranging from a two bedroom home unit in Hamilton to a 58.7 hectare grazing block with a two bedroom house on it at Miranda.

Two were sold and five were passed in for sale by negotiation.

You can see the full results with photos of all properties and the prices achieved on those that sold, on our Residential Auction Sales page, or our new Rural Sales page, depending on the type of property.

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107 Comments

Toronto House Prices Crash 192k since April.
https://www.youtube.com/watch?v=hGL0ysImPCo

Auckland Albany House Prices Dive 13.5%
https://www.stuff.co.nz/business/property/94154549/house-prices-dive-in…

The Crash Is Coming.

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......Yeah right.

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Top cities to live in 2016:

1. Vienna, Austria

2. Zurich, Switzerland

3. Auckland, New Zealand

4. Munich, Germany

5. Vancouver, Canada

6. Dusseldorf, Germany

7. Frankfurt, Germany

8. Geneva, Switzerland

9. Copenhagen, Denmark

10. Sydney, Australia

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Auckland was at the top previously wasn't it? With the coming influx of affordability we are poised to reclaim top spot in someones opinion piece!

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Nah, Vienna & Zurich have been in top spot for many years

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Is this from the point of view of someone in Ponsonby, Remuera, Sth Aukand, a park bench, shop doorway or carpark?

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Nice to live in for the top 1% but otherwise it's pretty average.

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According to who????????
Hugely subjective matter

Oh yeah it was the Mercer study - designed to inform expat postings for large corporates.

Almost meaningless rating for the citizens of a city

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You have it spot on. The reports are worse then useless. They are designed to weight remueration decisions for expat postings. They are not a measure of the Gross National Happiness of the residents of the respective cities. They don't have anything to do with relative local incomes or local affordability.

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Must be for married couple expats of good character.

Most of the expats I saw in Asia were having a grand time exploiting the effects of third world poverty. Their wives enjoyed it less, obviously.

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True, if a married male makes it through an Asian posting without going off the reservation he's the exception not the rule. Same in the Middle East and Third World countries.

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Oddly enough, I think some of the luckier generations in NZ aren't appreciating this change that's being fostered by current policies in NZ too. (Or maybe a few of them are appreciating very much indeed.)

I knew a guy who was posted here from overseas for a number of years, with quite the high income. His wife moved back overseas because she didn't like it in Auckland. He became a highly active patron of NZ's working girls, and anecdotally suggested that over time the number of native Kiwi girls starting to work in the industry increased hugely.

So it seems the older generations might be shafting young Kiwis in a variety of ways. But these are folks' daughters and granddaughters increasingly resorting to such measures...

It certainly feels like Auckland has been starting to resemble the Third World more in some ways in recent years...

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Wow, even Melborne is not in the top ten ...!

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There are about 4-5 Livable surveys conducted by different organisations on different criteria, Melbourne was no 1 on on of them and Auckland wasn't even on top 10. Listing Auckland as No on one survey is bordering cheery picking!

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NZ Rank 1, Most prosperous country in the world
http://www.prosperity.com/globe/new-zealand

NZ Rank 13 - Human Development Index
https://en.wikipedia.org/wiki/Human_Development_Index

NZ Rank 8 - Happiness
https://en.wikipedia.org/wiki/World_Happiness_Report

NZ Rank 7 - EIU Where to be Born
https://en.wikipedia.org/wiki/Where-to-be-born_Index

NZ Rank 7 - OECD Better Life Index
http://www.interest.co.nz/news/81889/oecd-better-life-index-finds-new-z…

Mercer - Auckland Rank 3
EIU - Auckland Rank 8
Monocle - Auckland Rank 22

Auckland is a beautiful and safe place to live, with beaches, parks and all the attractions of cosmopolitan living. It offers good income, good education, good health, easy business, great climate, diversity of cuisine and improving transport. It is low in corruption and high in green spaces. It is a surprise to no one, now that people overseas can come live here, that our property prices are dislocated from income.

For better or worse Auckland is never going to be 'affordable'.

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Good compilation Laminar, I have copied your comment for future use. I think it is indisputable that Auckland has a location, location, location quality stamped all over it. In a globalised world whole cities, even countries, become hot real estate locations. This is great news for those that already own property in those locations and for those that can see the potential of other places like Hamilton or Tauranga.
It has been generally recognised for quite a while that the Anglosphere and Nordic countries are desirable places to live. This was once jealously guarded and I think for the good reason that if you guarded it it would remain desirable and future generations, the Kiwi whanau, would inherit it. It does seem a bit off to just sell it off to the highest bidder, like selling the family jewels or a place at the family table or a couch near the hearth.

New Zealand property until now has been greatly under-valued. If it was highly valued it wouldn't have been so readily sold. We didn't sell just property but rather a whole package, a whole lifestyle, but I think we have made it harder for the next generation to enjoy it as a consequence. But then a big chunk of the next generation are going to be children of the immigrants themselves.

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NZ being on all those lists, while great, does not mean property is undervalued or will increase.

Ireland has been and still is on many of those lists in the top 10-15, in a tight spread.

Logic does not necessarily hold that if it was valued it would not have sold. If we kept selling amongst ourselves, the desire to realise capital gains (now or future ) could drive the sales, together with FOMO

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MisterB, yeah Iceland is a bit like that.

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John Wheeler is still yearning for a crash in house prices.

My advice to him is go buy a rocking chair, some comfy slippers and a pipe - because he's going to be waiting a very long time.

Yearn on, John.

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Yeah it's not the Auckland market has already dropped by -4% and is continuing to fall. Get real and look at those teeny tiny auction results.

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How much Auckland property price has fallen ; Last year February property purchased for 850000 is available for 800000 that is after 18 months property is available at appox 6% less and even after February when this property was purchased, the same property property in June/July last year would have gone for more than 900000 so their is a fall and if it is just the beginning than ................

Hard hit will be people specially FHB who entered the market in last 2 years as will lose.

Like it or not : upward movement has stopped for few years and now it will be downward...by how much has to be watched. Definite about 20% from the peak and below that only time will tell.

My agent friends are saying that now buyers when they come to see the property and if the property has been sold last year will immediately discount 10% and are not jumping to buy.

So the process has started. Like it or not.

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A 57% sales rates sounds pretty positive good news for the Auckland market (and real estate companies and their commissions) but it says little about the state of the property market.
Why was a relatively reasonable clearance rate obtained? Was it because of a buoyant market or was it because sellers appreciate that there is further fall in the market coming and are being realistic in their expectations because of this.
I think probably that later.
As the market falls, expect sellers to be realistic as they try avoid future falls so consequently there will be a relatively high clearance rates. When the market bottoms out, one can expect clearance rates to again slow in sellers expectation of upside.

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Mostly due to there only being 14 properties for sale I'd imagine.

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dp

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This is just a wrong calculation and unnecessary attempt to show market uplift. If there is only property for auction , then it would be 100% success rate but that does not mean that all is good now. The percentage system is designed to get leverage. It does not reflect the market condition unless the size of auction was too big and realistic.

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Hi abnz1

With regard to how much house prices will fall, you write, "Definitely about 20% from the peak and below that only time will tell."

Not sure how anyone can be so definite.

You create the spurious illusion of precision.

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5% to 15% fall has already happened depending upon the house so 20% fall is an understatement from my side based on current situation.

This week a property that should have been sold for 1.6 million in botany went for 1.3 million and property in pakuranga that were going for 900 to 950+ are going between 800 to 860 (though are asking mid to high 800s).

Having said that if someone is in property for long period should not worry but fast money in short period is over for now.

Process has started and 20% fall based on current situation is being positive about housing market and speculators should be happy if it stops at 20% - though doubtfull that it will stop at 20%.

Now the question to be asked is not if it will fall or not BUT but by how much.

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Would have been good to have some links to these properties. We like to verify these claims for ourselves.

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See my earlier post on the magnitude of falls required to return yields and income ratios to long term averages. Circa 50%. If we think the long term averages aren't relevant we need to identify what the structural changes are in the market that have rendered those long term figures irrelevant. Things like "half the worlds population will move the nz" and " the Chinese will buy everything" don't really cut it.

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Think I'll write into DB Breweries and tell them we have a kick a.ss new idea for their 'yeah right' campaign for Tui Beer & pass on JW's details

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Actually, things aren't too bad at all.

Need to careful in interpreting Auckland house prices right now.......

In Auckland, the number of apartments listed for sale in June almost doubled over May (800 apartments in June compared with 453 in May 2017). Of course, that substantial increase in (lower-priced) apartment listings impacted on the average asking price for a residential property in Auckland.

To be precise, realestate.co.nz statistics show that the average asking price for an apartment in Auckland in June was $679,170. That compares with the average asking price for all residential dwellings which was $917,250 - or 4.7% lower than May.

So, clearly, with apartments generally being more affordable than houses, Auckland's average asking price has been pulled down.

In Auckland's inner city suburbs - like Ponsonby and Freemans Bay - stand-alone house listings are very scarce. There are far fewer of these listings than 12 months ago. And the prices haven't dipped. Just ask anyone who's looking to buy a stand-alone house in those areas.

I'd love to be able to buy a stand-alone house in Auckland Central - but I have no expectation that there'll be any significant drop in prices there. It's too sought-after and owners just won't sell. (If you do sell, it's too hard to buy back in later.)

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This is why the REINZ index is useful - it weeds out all of the changes in sales composition and it shows prices have fallen. I agree with your comment on inner city stand alone properties, but I noticed these were increasingly difficult to sell during March/April/May and there haven't been new listings. The test will be how well these properties sell when there are more listings in Spring.

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I just "analyzed" the first six properties listed as sold on the North Shore. They averaged sales of 33.5% above current CV.

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How recent were those CV's

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2014 CVs.

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Zachary, your math is interesting. Maybe you have different auction results.

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Well, I didn't spend too long on it. I just added up the sale price of six typical North Shore houses (7369) and then added up the CV values (5520) and then used this Percentage Calculator using What is the percentage increase/decrease to get a value of +33.49.

Will double check to see if I got anything wrong which is entirely possible.

Edit. Hmmm I note a trifling inconsistency in that I did include one Saint Heliers property and didn't include the 2A Church Road one (I never include problematic properties in my calculations).
I still maintain that for good, standard, properties somewhere between 30-40% above CV can be anticipated and these sales back that up, even for the North Shore.

Edit2: Actually the Saint Heliers property drags my average down a bit as it only sold for 26% above CV making my average +35.5% instead. I note that it was considered a bit of a do up which I have noticed are getting lower prices. Looks like a good buy for someone.
My advice for FHBs is look for do ups and negotiate hard.

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Trifling , statistical trifle. Mistake accepted. 2A looks classic leaker,although not stated,( truthfully how many of these lurk in Auckland and the ongoing fallout ,economically both in terms of health and finance).Agree, rare for any Auckland property to currently sell below RV, and 25-35 percent above can be expected. Trade me mid estimates are over by 15-20 percent. Absolutely perfect day to go and view Auckland property, if one is in the market.

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Zachary, analysis is good, but it doesn't tell us much about what is happening in the market now. For example, if North Shore properties are selling for 30% above CV that's great, but were they selling for 35% above CV a few months ago, or 25% above CV? It tells us a lot about prices compared to 2014, but not a lot about the current state of the market.

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Agree. He seems to have reverted to pegging any increase or reduction to 2014 figures, which, as modelled valuations, were largely based on 2012-2014 sales data.

The question absolutely should be what they sold for relative to the modelled valuations of, say, November 2016, which was the most recent peak. If that's not desirable then the least is to compare to like-for-like sales this time last year.

Quoting v 2014 CVs is misleading, as even in 2014, house sales were attained at rates higher than the 2014 CV

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They are the same as last years prices in general - you can take that from a person living on the Shore and is in the market for a good one ... prices are holding up ... and vendors are refusing to lose money ( there are properties which did not have any significant CG to be mentioned ( not leaky and good ones too) ... section prices are soaring too - New built could be declining a bit as developers want to move to the next project and I have seen 100K shaved off a $1.2M new 5 bdrm ... but I can assert that 30-40% over 2014 CV is correct - the exceptions are the old 1950s houses mostly rentals slammed on with a pile of makeup - these have gone down a bit as the market is over supplied with better properties and no one wants these at these prices anymore.

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When looking for a house in spring 2015 in Auckland central suburbs most were selling for between 35 and 40% above their 2014 CVs so little forward momentum there.

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Tom Joad, I first started commenting here around about that time and my shtick then was to go through the auction results and work out the above CV average percentage. My theory was that I could predict the trend of prices by doing this. I don't recall (wish I had kept a record) sales averaging more than 40% but do recall high twenties and sometimes early thirties. I thought to myself that if it dropped below twenty or went above forty I would know for sure what was happening. You are right in that there has been little forward momentum since that time as we are still in the early thirties.

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22 and 28 Allum St in Kohimarama sold on 21/6/17. The prices are now on homes.co.nz. 22 was subdivided and renovated so no easy comparison can be made, but 28 went for $3.25m or 1.47x CV

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Ex Expat there was always the odd sale that seemed exceptionally high or low which is why I tried to get as many sales together as possible on any given day and work out the average to determine if there was a trend happening. I would weed out problematic sales. Actually if this system was just used on brick and tile units it would probably give a good indication of real price movements.

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CV multiple is a very blunt measure, especially if the sample is small. #22 was sold at 1 x CV for $2.8m , but that ignores the fact that they carved off the front of the section after the CV and it was extensively renovated. #32 was sold at 1.27x CV but that sale was in April. Unfortunately there isn't enough recent data to collate a June figure but the Kohimarama multiple was mid 1.3x last time I looked. If it has a northerly elevated aspect on a larger site it appears to still attract good bids like #28

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Another data point is #26 Sage Rd sold in May for $3.25m, a CV multiple of 1.64x. I imagine a lot of these larger houses in the Bays are being remodelled to achieve these prices so it's unlikely to be an apples for apples comparison.

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This is close to La Fourchette. Good buy!

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Yes agreed that's why I suggested the bog standard B&T unit as a possible measure.

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that means the prices have already dropped by 10%, last year this time, the sell price is around 40% to 50% of their 2014 CVs.

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Lots of great appartments for sale in the Gold Coast $365 to $400k , 2bed2bath2car nice place to

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Apparently Vienna is much better?!

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Gold Coast, is great for a holiday. But, to live there long term need to appreciate the company of bogans on steroids, IV drug users and alcohol fueled teens + 20s to 30s tourists, eg schoolies. As someone who has lived in Brisbane and worked on the Gold Coast, you soon realise the Gold Coast is a permanent residence for a good chunk of South-East QLDs long term beneficiaries and drug addicts.

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Earlier this year I traveled on the Jetstar flight to Coolangatta. I texted my wife that there was no entertainment so all I could do was look at Tatts for a few hours. Apple corrected Tatts to tarts. It was possibly right in the both the original and corrected version. A mix of bogan and old enough to know better.

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Yes Zach I agree with u that's low a, normally miles higher than that

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Dp

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Actually no, you're wrong O4 normal, I have been doing these calculations for sometime. 30-40% over CV is fairly normal. I would be very happy to get these prices for my properties.

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Listings have doubled u say, o no, ok it's starting then

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Listings have not doubled. On trademe Auckland listings bottomed at approx 6500 listings mid to late 2016, then spiked to 11500 early 2017 and now sit at 9764. Listings are gradually falling, in Auckland post GFC, but pre-boom the number of listings on trademe was in the 12000-14000 K range. So the market is still tight with regard to listings and the population keeps rising. So the number of listed properties per capita is very low compared to 2012 (approx 12000 listings for Auckland in 2012). Wellington is even tighter, the number of properties listed in Wellington city (Seatoun to Tawa) has never been lower at 423. I have Auckland probably declining 10% from top, as late 2016 rush to beat new LVR restrictions surge is knocked off prices. But, I find it hard to see Wellington property prices falling when we have the lowest number of listings on the market for at least 20 years (anecdotal from agent, backed up by numbers on trademe since mainstream use of trademe property) and minimal decent stock for sale.

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Auckland most recent cv are 2014 aren't they, if Auckland starts getting anywhere near them that would b bad

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⚠️, investors if u still have time sell to home owners helping them, put your cash away, buy on the next low, help to push the next low up, cash is king in lows, it's only a house, if u r a bit elderly maybe not, stop this stupid attitude prices don't go down, that's only over said 50 year averages, MAKE MONEY, corrections are a good thing used intellectually

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So you are saying investors should sell to home owners at today's prices to help the home owners, then buy "on the next low" How exaclty does that help the homeowners for them to buy at today's prices and the investors to buy in the future when prices are low ?

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People could do the wait and c with the election but if u owe to much money waiting to after the election could b to late , then u r locked into that house for years, buy low sell high , don't use your main house as a ATM, and remember cash is king like winny

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JOHN WHEELER, great , by the comments it's working, fish r only nibbling at the mo but everyone on track, keep up the good work wish I'd thought of it

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The world is so messed up at the moment

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Sorry Zach I forgot Aucklands 2014 cv,s were fairly high, it was the 2 before that were very low,

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Cowpat I was going to check mr booms maths but I couldn't b bothered because the 3 marvels pull the bits for there agenda, he probably found one or 2 high as sales out of the 6 and used other cv averages, haha

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Zach , I didn't spend much time on it, the old putting things first hit in people's minds a , it's a oldie but a goody, bring on wheeler

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John Wheeler is taunting the likes of tothepoint, doublegz, zach & co with his repeat post but seriously a nig correction is on the way.

The only way that the govt can change it is by relaxing the LVRs which they can't do till after the election, if they rule alone. Even then it might be too late

In my opinion the correction at least -20% is now imminent and unavoidable

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John Wheeler just copies and pastes the same comment over and over. It doesn't surprise me that you guys think that this is an act of genius.

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...as you do to ZS.

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John "Yearn On" Wheeler would be better off buying Lotto tickets than hanging around yearning for a property crash.

He needs to understand that the housing market isn't going to stoop down just to offer him (and certain others here) a cheap property.

Life moves on. Some people need to get off their chuffs and face up to reality.

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You might do well to rake some of your own advise and face up to reality!

No comments on this site will push the market up or down in any way what so ever, its all just opinion and quite a bit of hope in some cases..

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I doubt if ANY poster here changes their view based on what they read. There is an epic thread on Trademe http://www.trademe.co.nz/Community/MessageBoard/Messages.aspx?id=165395… where the conspiracy theorists for 911 go toe to toe with the rest, 14,711 posts so far and I doubt any parties have changed their views.

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I think there's a strong case that relaxing the LVR restrictions would increase house prices, because it would stimulate credit growth. Rapid credit growth with a fairly static supply of assets means higher asset prices... prices rise to what funds are available.

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It is a fact that many people have made heaps out of housing Ponzi and many have become millionare by default. Good for them as otherwise in life could not have dreamt of this type of money.

Now when they hear about fall are extremely worry but if have made money and want to make more than they should not try to predict the market but Read the market (be it stock market or housing market) and the reality is that the situation has changed and housing market trend at the moment is downwards.

Similarly people when the house price was going up were not ready to accept and lost and the same will happen with many who are and will not accept that the boom is over for now for next few year and this people when they argue in favor of boom are actually trying to convince themselves than others.

So best is to ignore them

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It's natural that people would want to believe in something that supports their own situation. That's why warriors fans always start the new season thinking this time it will be different.

However if you weight up the evidence and look at the facts, as things stand currently the only way is down. Something extraordinary needs to happen to change that.

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They do not have the money until the house is sold
and the cheque is cleared
and the bank survives

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Is it genius that something socsimple should get so many bites? Nope! Just ridiculous that you take the bait

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Very interesting article from Better Dwelling that highlights New Zealand as being the most over valued property market in the world relative to income ratio this is based on an IMF report (International Monetary Fund).

While that sounds like a good thing to some RE's, the IMF generally warns that too much growth means overvaluation. Overvaluation requires a correction, and if it goes too high, even a crash.

Quote from article: Global Real Home Prices

Most countries tracked by the IMF saw real home prices growth. This measure looks at how prices changed over the past 5 years. The top 5 countries for real price growth were Iceland (12.51%), New Zealand (12.23%), Hungary (10.65%), Latvia (10.51%), and Canada (10.49%). The median growth for all countries was 2.86% . The top five countries grew at least 3 times that rate.

House Price-to-Income Ratio

Home prices grew faster than income in 15 of the 32 countries tracked by the IMF. This is a basic affordability measure for housing, and takes the median house price and compares it to the median disposable income over the life of a typical mortgage. The highest numbers were observed in New Zealand (137.02%), Austria (126.43%), and Germany (124.58%). Canada came in seventh with 118.75%.

The higher the ratio, the less likely the country is able to maintain home prices without a severe correction.

IMF: Canada Has The Most Overvalued Homes In The G7, Fourth Globally
https://betterdwelling.com/imf-canada-overvalued-homes-g7-fourth-global…

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U shouldn't only think inner city prices will stay high because there aren't many for sale, like areas everywhere there's areas that people rate at all sorts of levels , like Aucklands top 20 areas , I think not sure but around 1.5 to 1.8 million, all nice areas and I'd go ok I'm buying in the number one area because I can afford it, if 18 areas still very nice dropped $200k maybe I'd still go with no 1, but if prices were to drop 30 to 40% from the cheapest area all would drop in the end, NO ONE MISSES OUT , NO WAY, but big BUT there are alway small packets of area that don't fall as much, usually a short rd with unbelievable water views

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U can't go by cv, at all, how could u, ok in 2014 at that exact time when the council got it done, around October isn't it, they get some sales facts, then take into it a few other things, bdrm, house size, section size, cladding and roof material, I think permitted improvements, WANT has that got to do with now , it like the cv,s about to b done , early next year they mean nothing, u check latest sales and not listings , the number of listings can tell u something, special if there's big jumps, it's like I think DZG the other day, a property they thought might go for 3 million, and maybe it will, but on trademe it said I think under 300 m2 sections but it's 3 examples and prices looked good but if u look closer had great section sizes and houses,

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Lower number of properties for sale but higher clearance rates. Let's put our righteous pre-conceived opinions aside for a minute and think why this is. In my opinion, it means sellers who do not have to sell are holding off selling = less houses for sale and the sellers who do have to sell are lowering their prices = higher clearance rate. So what could that mean for the future ? I think it means average house prices will continue to fall slighlty, because some (the minority) have to sell. But many will hold off selling which will buffer the fall. I continue to see a small correction, around 10% pa

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It's just one liot of autions, so cant take too much from it. Maybe sellers are relenting and selling lower.

Next month's published results will tell a true story...

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I'll b what it'll b, but ALL houses everywhere comes down to supply and demand and everyone is in the same boat TODAY, but just because u think your house is worth $2 million and no one has sold in your area has sold doesn't make that so, if areas close buy have dropped and people sell for all sorts of reasons, that will set the price, u don't really think if 5 km away and is still a great area drops 40% the next area won't b affected, come on now get real, people aren't that stupid

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Home owners always pick up houses when the price is even a littte better, they need a house and can't wait forever, if u are a investor why wouldn't u buy as low as possible and to do that in need cash, b ready

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Didn't we just go through a period of time when investors brought low and keeped buying as the market went up, to do this in the next cycle which happens about every 10 years, this being the longest lift by far u need to cash up a little, of course some mighted need to,

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Your house is only worth what someone is willing to pay, and unless your house is on a little island or the area it's in has golden roads it will follow closely to its nabours , within reason, it's not about nobody selling, if it's a buyers market they just buy close by to someone who is willing to sell, and people sell for many many reasons , then bang , there's your new medium price

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Of course dreaming is free, and yes the market mighted even go down much and hopefully it doesn't but wages don't support these prices at all in fact the RBNZ need a kick up the butt, they should have slowed this a year ago, LIKE THEY NORMALLY WOULD

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lf it's your normal correction the cheaper areas maybe 10% and getting bigger as u go up .but and a BIG as but, I wouldn't like to guess about the big money overseas investors and greed that's pushed some areas threw the roof, what did someone say the other day, there cvs were about, $500 , $870 ,$1500 then the last one 3 years ago $2350,000, maybe these super high prices will hold , but in a normal buyers market ,New Zealanders buyers market, I just don't know, logic would say 50% drop at least, even changing the LVRS , I don't think would help the dear stuff

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To bring current prices back into line with the long term Auckland income ratio (5?) prices would need to drop by up to 50% in real terms To bring them back to long term rental yields the drop would also be 50%. If credit conditions were to return to more normal settings (higher interest rates) both those outcomes are possible. If there is a material deterioration in credit conditions (for eg, as a result of bank stress caused by an Australian property correction) I would say those outcomes would become probable. I have yet to hear any coherent argument as to why the fundamentals have changed so much that there cannot be reversion to the long term average. I have heard a lot of the usual "this time is different" arguments

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Bobster, here is a coherent argument, why you will never see ratio of 5 again in Auckland for median wage to property prices..

1, Household income is a higher multiple of median/ average wage as more women have entered workforce, ratio needs to be multiple of household income not median wage. Altered population demographics, likely mean we have more extended family households, that will also add to the average wage earners per household.
2, Falling home ownership rate, means property ownership is being skewed to higher income earners. Property prices need to be a multiple of household income of median property owner, not median household income of the whole population ie renters and home owners. What someone earns in a low/ minimum wage job is irrelevant to property prices. As with growing wealth divide driven by robotics, technology, globalisation, wages for unskilled will stall, but those with desired skills will be able to secure wage rises. This is the pattern we are seeing in the Western world, this stalls the median wage, but the median income/ household income of skilled workers continues to rise ie likely home owners.
3, Secular change to lower interest rates, due to deflation principally driven by technology, and retiring baby boomers (when retire move from high to low income so spend less). Also studies that have shown asset booms suppress interest rates for at least 10 years (Reinhoff and Rogart). As if interest rates rise, debt load causes recession and rates are then lowered to below where they were previously, this had already occurred in NZ and Sweden. Lower interest rates automatically increase the multiple, as home owners can service a larger mortgage and lower net yields from property, even 3-4% compare well to term deposit rates or the dividend yield from shares
4, Wealth divide, home ownership is becoming the bastion of those with a significant asset base, so income metric is less relevant, as the average mortgage is a lower percentage of property price. So in general income is servicing a lower percentage of property price, due to larger deposits form wealthy owner occupiers. To a degree this is already being mandated by LVR changes ie 20% deposit for owner occupiers for purchasing existing stock, 10 years previously would have been able to get away with a 5-10% deposit.
5, High cost of construction, with new Health and Safety standards re: scaffolding etc, wage rises in construction sector, mandated higher spec eg double glazing. Property prices are usually underpinned by the cost of replacing the housing stock, as if property prices fall below replacement cost, construction falls as the majority of people elect to purchase existing stock rather than build, and as the population rises the housing shortage worsens and this eventually leads to the next surge in property prices.

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+mja Wow lol, you absolutely dismantled him, very well done sir. So rare that i get to see someone competent posting, what a pleasure to read.

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Sorry, who dismantled who?

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Youre essentially assuming that there is some 'correct' or 'normal' rate of interest that lets you ignore interest rates and focus on income multiples. But as affordability, not income, drives house prices you need to be pretty sure youre correct about interest rates trending upwards long term. These days there is a very strong argument to be made that rising debt causes interest rates to fall. As dangerous as that may well be, it appears to be the case for now. So while this process lasts, we will see interest rates bump up and down but ever lower on average. So property will bump down and up but ever higher on average. If house prices drop 20% take a guess at what will happen to NZ interest rates :-)
Probably house prices in Auckland will drop a bit, but with migration rates high and a reasonably robust economy for now, as prices fall it will be in to rising demand and so its hard to see anything too perilous taking place and if it does, interest rate cuts will follow.

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And for many, many people house price to income ratio is indeed, based on the household income.

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1: that's a constant factor over the last 30+ years, and in any event is already factored into the household income numbers. It is no reason for the price changes of the last 7 years, there has been no material change in this factor. In the last 20 years the household debt to income ratio had gone from 80% to 170%. Leverage of household income had more than doubled. Changes in household debt, which is largely mortgage debt applied to house purchases, is not explained by changes in household income.
2: "falling ownership rate". Didn't quite understand this argument. Are you saying there are lots more people who earn more money now ie the distribution of income earners has changed? I have not seen any evidence of this.
3: permanent shift to low interest rates? No evidence of that, time will tell. 10 years ago weren't mortgage rates at about 8% or so? So even on a 10 year lookback, that doesn't stack up.
4: the relative increase in wealth of capital owners is a function of the loose credit of the last 10 years post GFC. This loose credit is not a permanent state of affairs. When credit tightens, asset prices will fall.
5: the high cost of residential construction, esp wage growth, is a function of the amount of mortgage credit that had been tipped into the sector. Increases in construction costs are caused by loose credit conditions. When those conditions tighten, construction costs will fall. You have it the wrong way around.

The increases in housing prices and construction costs are a product principally of unusually loose credit conditions. When those conditions change, asset prices will fall. Your list is a standard set of justifications for why "this time is different". Except it isn't different: high prices, high costs and low yields are all indicators of a credit bubble not supported by fundamentals, which will deflate. In a low interest environment household debt to income has ballooned to 180% Is this sustainable? No. And when that credit falls, so will prices.

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Vendors, above all, make sure you haggle over the commission with the real estate agents. It's a ripe market for bargaining with the agents.

And, purchasers, make them provide you with a LIM and a building report (at no cost to you) if they want your business. If they tell you that a LIM and building report aren't necessary for the property, then avoid them like the plague. "The better the information the better the decision."

It won't hurt real estate agents to live off the fat of the good times for a while. (Or they can go sell cars, life insurance, spa pools, pet food or whatever.)

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Took a drive from the North Shore to out West Auckland today and there are houses going up all over the place. There will be a significant number of apartments coming onto the market as these go up in huge blocks like the Rose Gardens that are 200 in total. For a housing market that's about to go "Tits Up" I'm not sure if I have seen as many new houses being built.

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Hi Carlos67,

The reason is that there's huge underlying demand for accommodation in Auckland. Auckland's population is set to grow at a mind-boggling rate over the next 20 years.

But, remember, the further out (from the CBD) that you purchase real estate, the less investment potential (capital gain) it will yield (and the less rental potential).

Beware of apartments too. They're tainted, individually and collectively, for a whole host of sad reasons - not the least being leaky building syndrome, dysfunctional body corporates, noise and rooms (cells) that are too small for comfort/convenience.

In general, stand-alone houses close to the CBD (especially Auckland and Wellington) are the best investment bet. Some provincial cities are worth a punt too. Palmerston North with Massey University; good regional hospital, schools and an airport that flies to Australia comes to mind.

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The 57% sale rate will be reassuring to some acquaintances of mine. They've "just decided" to sell their investment property in west Auckland.

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They are 9 months too late. They should join the queue, and take plenty of food and water.

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Still it's interesting to see that prices are falling in the expensive areas. Just taken a look at the latest handful of sold properties.

10 Kokopu Street, Omaha Sold for: $1,575,000
Homes.co.nz price estimates: Low: $1,675,000 and High: $1,930,000

8 Burgess Road, Devonport Sold for: $2,300,000
Homes.co.nz price estimates: Low: $2,240,000 and High: $2,560,000

54C Whytehead Crescent, St Heliers Sold for: $906,500
Homes.co.nz price estimates: Low: $900,000 and High: $1,000,000

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Kokopu Street 31% above CV note: Holiday home
Burgess Road 29.6% above CV note: Not cheap at 2.3M !
Whytehead Crescent 20.8% above CV - note: A do up unit or duplex or something.

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Why is everyone quoting estimates on this homes.co.nz site and saying "See it sold below that, prices are falling!"

Those are estimates only, and they're mostly high from what I've seen.

So a house selling below some made up and over the top number doesn't mean house prices are falling...

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The values have also been recently adjusted upwards as well.

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Boys and girls, one thing you can be certain in the next 12-24 months is that interest is on its way up. If you are In the mindset that house price is going up then you might want to sit down, have cuppa and rework your strategy.

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