Greg Ninness says the outlook remains soft for the Auckland housing market, regardless of who wins the election

By Greg Ninness

The Auckland housing market is an enigma wrapped in a conundrum.

Surging migration-fuelled population growth is driving up demand, while construction of new homes remains well below what is required to meet that demand.

So growth in demand for housing continues to outpace growth in supply, creating a housing shortage that gets bigger by the day.

By the normal rules of supply and demand that means prices should still be going up, especially as mortgage interest rates remain stubbornly low and may continue to be so for some time.

But instead the market is heading in the opposite direction, with a dramatic fall in the number of homes being sold and prices falling so much that by some measures they are now below where they were 12 months ago.

How can this be?

There are two main factors at work; lack of buying activity from local investors and the drying up of Chinese money.

Housing prices have risen more quickly than rents in Auckland, which has made rental properties relatively less attractive for investors and many of them, particularly professional investors, have fled the Auckland market for other regions where returns are more attractive.

That process has been hastened by Loan-to-Valuation Ratio (LVR) restrictions the Reserve Bank imposed on new mortgage lending by banks.

That took a big chunk of buyers out of the Auckland market, which had a major impact.

But a more significant impact, both in terms of the strong growth in Auckland house prices over the last few years and the more recent decline, was the river of money flowing out of China.

There were two drivers of this, people living in China who wanted to invest their money overseas, and people who had moved to New Zealand from China but whose main source of income and/or capital remained in China. Auckland residential property has been an attractive option for both groups.

If the investor was back in China the purchase would often be made through a local associate, which is why so few overseas buyers of residential property have shown up in the official statistics.

But whether the buyer was resident in this country or not, the important thing is that the money was coming from China.

That was an international phenomenon affecting housing markets around the world and this country was no exception.

It would be hard to overestimate the impact it had on Auckland’s housing market.

Last year at the big Auckland auctions where several dozen homes could be auctioned on the same day, it was not uncommon for 80% or more of the homes sold to be purchased with Chinese money.

But that all started coming to an end late last year when the Chinese government clamped down hard on the amount of money people could send out of the country, and the Australian-owned banks here raised the threshold for providing mortgages to people whose main source of income is from overseas.

Within a very short space of time the river of money that had been flowing out of China into the Auckland housing market had turned to a trickle, and so far it shows no sign of picking back up.

With investors and Chinese money both out of the Auckland market at the same time, demand slumped.

Under normal circumstances that would have created an opportunity for first home buyers to fill the void.

But by the time that happened, the speculative frenzy of the previous few years had pushed Auckland prices beyond the reach of most first home buyers, including many of the migrants settling in the region.

Those buyers that were left in the market and able to afford to buy were either the wealthier migrants or people who already owned a home and were looking to make a change, often baby boomers looking to make a lifestyle change.

And with fewer buyers around, it wasn’t long before new listings started to exceed sales by a significant amount.

If it was wasn’t for the fact that demand for housing in Auckland exceeds supply by such a large margin there would very likely have been a significant housing market crash.

Instead we’ve had a market where prices are slowly deflating to the point where new entrants to the market can afford them.

So could removing LVR restrictions on mortgage lending or a drop in interest rates revive Auckland’s housing market?

Perhaps a little but probably not a lot.

They wouldn’t have any effect on the supply of Chinese money or alter the fact that the rental yields on Auckland properties are still lousy.

And first home buyers aren’t getting much help from rising incomes while real wage growth remains low.

So affordability remains the issue that’s weighing on the market and depressing prices.

And regardless of which party wins next month’s election, none of those things look like changing anytime soon.

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191 Comments

Greg, you summed it correctly this time: "And regardless of which party wins next month’s election, none of those things look like changing anytime soon."

LVR became the hand brake, The Banks are restricting the money flow, and prices are not going anywhere soon - the only sales are those of people who are obliged to sell, or clearing and getting rid of extremely over valued junk that was bought foolishly in the fever of the boom - the buyers are those who need to move on and buy in the same market, FHBs, people relocating from O/seas, maybe few bargain hunters... Hence No big volumes of any definition.

Important factors influencing the market movement are external including availability of loans and future interest rates movements -- etc.

If the centre right holds power then this correction would take its time and things would start moving again according to market forces and supply and demand - and that could lead to UP or Down in house prices --- No sales volumes - NO significant change

If the Left assumes power and more taxes including CGT and god know what else were added to everyone's spending menu , then chances are that a 3 year long stagnation period will prevail while Quality & New houses will hover around ±5% of where they are now .. the chances that low sales will force lower prices are Slim especially when investors will certainly stop selling and speculators will seek some of that CGT back ( which was the main reason of pushing prices up wherever CGT was implemented)

FHB could be misguided again ( like in 2009-2011) that they need to wait for a drop in house prices so they should not take a bigger debt .... we see that today, even when they get approval for a suitable loan they are reluctant to buy ...

Time will tell if history is still a good reference to go by ( I believe it is) , If a new Government will distort the markets, or the market will be allowed to correct itself and move on.

You seem to forget to mention how bad Greg thought the overseas investors had on the nz market and markets around the world and how that very large amounts of money pushed up prices a lot and his thoughts that thats over making one of the main differences to the Auckland market, NOW PEOPLE MIGHT LIKE TO LOOK AT THE COMPARISONS OF CITIES OVERSEAS TO HERE AND THINK ABOUT THERE RISK, be careful people ,PS it was hard to get figures of the % of overseas investors buying Auckland property, bloody hell it never stops with the lies of national and the way they spin things, nz is going to have a big reset of property prices over the next 2 years with id hate to think how long we go stalemate in housing, bloody overseas investors with outside large money, stupid, next we'll be told the Auckland population has gone down because so many left to live elsewhere and because slowly FHB slowly started buying landlords excise rentals they couldn't hold onto and supply in ok now

This Government tells us that 3% of house buyers are from overseas, notably China. From my experience, this is a complete fabrication and lies. The true figures would be very surprising.
We sold a house last year for about $1million to a young Chinese gentleman aged no more than 26.
Later, we were told that this Chinese resident was in fact a student and makes money acting as an agent for overseas Chinese investors.
This is why Chinese investors will have a huge impact on the slowing housing market now. The Government should have put the brakes on overseas investment 3 years ago.
Our Real Estate agent told us this was very common so the buyer in China does not have to supply their bank account number or IRD number and the authorities in China do not know where this money has gone. This money could have come from ill gotten gains or anything, there is simply no record.
National is conning us with their figures!!!

Don't worry mushrooms ...

This is like a scab. You pick at it and pick at it and pick at it. If you leave it alone it eventually goes away and you forget about it. Often it leaves a bright scar. This government has used the silent treatment - "keep quiet, say nothing, dont answer, and it will be forgotten". Other things take it's place

Have you seen any published announcements by the RBNZ about any product of the controls over money laundering. The RBNZ web site contains details of two warning letters issued to two banks. Nothing else. Which tells us money laundering does not happen in New Zealand. The case of Bill Yan was picked up by the NZ Police only as a byproduct of another issue

The CBA bank in Australia is in the middle of a controversy over money laundering through its IDM ATM machines. Masssive case. Do we accept that CBA rolled out all these intelligent machines in AU but not in New Zealand?. Stone cold silence.

Dont worry mushrooms, you can sleep tonight

Hard to overestimate, not underestimate?

Cheers!

Restricted money supply is equals a decline in property values based on the clock the specuvestors worship. New govt and its new rules will change the picture on foreign and domestic speculation. Leverage can indeed work in reverse.

Anyone buying prior to the legislation changes has more money than brains

I think everything is going exactly according to plan. There will be no major crash of the housing market. Neither will we see the dramatic rise in prices experienced in the last few years. Interest rates will remain low which will stop any panic selling by over leveraged investors. House buying and selling will be done in much less fevered way which is a good thing. Opportunities for making money will be much more modest but they will still be there. Houses that need a bit of work in up and coming suburbs will be affordable and will offer opportunities for canny buyers to make a modestly good return on their time and effort.
Look out for do ups that have been owned for a long time. People who are moving to rest homes and who have owned their houses for many years and let them go a bit will still make a very good capital gain while offering houses to the market that are affordable and offer potential.

Zachary you know that you'll be attacked and shot down by 90% of the people here with this bold comment right?

Yeah, but that wont change the facts ... I totally agree with him ..

I guess we are used to these attacks now .. lol, just brush it off ...

Yeah, but they are terribly misguided. Housing is a very important part of our economy with many industries and jobs tied up with it. Stability will be best for everyone involved including FHBs who actually do want their home's value to keep pace with inflation and make capital gains if they make improvements.

If we expect the market to play the major role in affordable housing, as has been the current government's mantra, then we need a crash to rebalance the economic imbalances.
The alternative to the necessity of a crash, and which is my preference, is that we have a major government house building programme, such as Labour's Kiwibuild.

If the government were to step in and directly inflate the bubble with a state building program this country would be screwed.

NZ actually has a long history of government participation in fostering the supply of affordable housing, through bother PPPs, direct builds, and other measures around financing and tax. No reason it couldn't encourage the creation of affordable housing at scale once again.

Agreed, I have two FHB of my own going through the same dilemma - Everyone needs to be realistic and work towards keeping that stability - no one wants to punish others for whatever they have achieved or Not ...
A good solution to a problem is identifying it first and using cool heads to overcome it - kneejerk solutions don't have lasting effects at all', they are usually followed with another kneejerk.!
I think the housing market could benefit from the coming correction, limiting immigration to provide price stability for a couple of years while inflation and wages will catch up and narrow the affordability gap, we should hopefully have a bit more supply available to balance that then and Banks will ease their lending constraints.

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How quickly you have changed your tune Eco Bird, your comment from just a few days ago:-

by Eco Bird | Wed, 16/08/2017 - 13:05

The answer is simple Badrobot - if you don't earn enough and you cannot save then you are NOT going to be able to buy the house that you want.

Haha I was about to write a similar thing, good on yeah Eco bird, only as hard as it might be prices are a mile to far above affordability for all sectors of incomes , some could afford a 1.5 to 3 million dollar property but I can't see enough demand for locals alone and lifting the minimum wages is peanuts in comparison

Yes I hope the main casualties with be the Real Estate fees but they could do their bit to help FTB's by dropping their commission rates to 1% in Auckland.

By lowering commission rates this helps Sellers to come down to more realistic property sale prices, which in turn is much better for FTB's.

I've said it before and I'll say it again; if 1% commission is good enough for London RE's then is is certainly more than enough for Auckland RE's!

Eco Bird's statement is still perfectly valid.

Well you many want to start stocking up on those baked beans then Zachary.

Don't forget to do your Homes.co.nz screenshot for your area. If my theory is correct then you're going to see some significant long term price falls.

What do you think of this 'flats' Zachary? Asking price too much??
http://www.trademe.co.nz/Browse/Listing.aspx?id=1397411579

It seems a bit too too high an asking price considering the CV. It looks like a gross return of about 4% which they have possibly used to determine the asking price. I always maintain that house prices are determined by potential rent being a bit better than term deposits. That's why I don't think we will see the 50% price drops. The return on rent to a landlord buying in that market would be a bonanza. If you could buy that house for 1M and it returned 80K you would have 35K a year for doing absolutely nothing and outlaying nothing. That would be great wouldn't it? Is this what people want? Those that can borrow a million making 35K a year for doing nothing?

I think the asking price is a reflection of around $500k per flat.

Great location. Walking distance to Hells Angels HQ.

"situated in a quiet street, ideally positioned to enjoy the buffet of lifestyle choices"
like gAnGsTeR lifestyle choices by chance???

March 2017 the asking price was $2,200,000.
June 2017 the asking price was $2,099,000.
August 2017 the asking price is $1,990,000.

You can't make it cheaper for some people and maintain prices for others. Either prices drop and FHBs get cheaper houses or, prices stay the same/rise and they remain unaffordable for most people. It's a binary state. There is no magic policy that maintains prices but makes houses affordable. The only cheat would be to raise inflation but that would devalue existing prices in real terms - so a drop by another name. It amazes me that people here think prices can rise when nobody can afford to pay the price. It doesn't work like that. I can accept prices will plateau but anyone that thinks we'll see 5%+ compound growth over the next five years is bananas.

"Housing is a very important part of our economy with many industries and jobs tied up with it."

Really? Like what?

Yes housing is very important, that why it's very important to take housing up with incomes, if the only people that can afford houses is overseas money then all we do is turn the country into a country of the rich and the rest tenants, alsorts we form bubbles or booms which bust or correct , yes housing is really important, IMPORTANT WE GET IT RIGHT

Why DubleD it was you who told me I should not write in this blog because I did not live in my own mother country anymore ! It is Yourself DubleD who tell others here to go away ! You told me to go to Ontario ! ? Don't know why you said Ontario because I live in New York
Just stop the spruiking DubleD & Zach and you may find you aren't criticized !
Of course we all know here your objective is to display how clever you both were buying up old houses to rent !
Keep up the comedy writing

Our objective is to only report the truth. Do you have anything intelligent to contribute?

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Do you ?

BA-ZINGA ! .... ooooh , feel the burn .... good one ...

Northernlights, They aren't clever, if they were clever you wouldn't stop hearing about there houses they just sold, they don't want to sell and are as worried as most people about there gains being eaten away, some people act like this to hide there pain, everyone please be nice to DGZ , Zach , tothepoint, ecobird , although ecobird may save himself

Back patting, about 1050, which I find really unusual. No one else is as selective over 1 single area. People are worried about NZers on a whole. I could understand if you talked about the whole market in Auckland and how DGZ area has had little impact, but its very specific about single houses.

Im happy for 1050 to be worth millions, Im happy about the 1050's with their Louis Vuitton hand bags and their poodles. But do we have to hear about it all the time. Congratulations.

It should go like this, Hi Zac my name is DGZ, Im really interested in DGZ and 1050, this is my email, maybe we can keep in contact and see if we can add value to each other portfolios. I think you have great insight and they are aligned with mine.

Then if you guys are finding great insight like your area is staying up and yield is X% and Cap gains are X% then Im happy to hear, as it could be an opportunity. Probably not my cup of tea, but it may be of interest. But single properties worth 5 mill, I just cant see the value in that information.

OMG you need to move on and leave us Double Grammar Zoners and 1050's alone.

You stop mentioning DGZ and I will stop.

"OMG" you are from DGZ.

O.M.Goodness. DGZ.

You are possibly right, but predictions are fraught, and you shouldn't be so cocksure. A major economic shock in China - which is almost certain, the question is when - could have a major effect on house prices here.

Excellent article Greg, Very well done and thank you for being honest and revealing the situation we're all in. It's been fascinating to watch the Auckland property market unravel without those top end buyers and it certainly will deflate to affordable levels.

I've been keeping an eye on what's been happening in the other gateway cities too. Apart from Auckland Totonto city in Canada seems to be very affected by the sudden turning off of the capital outflows tap from Asia and provides a good snap shot.

They're experiencing pretty large drops in their property values especially in the more affluent areas and I bet you we're are experiencing the similar price falls too.

So hopefully this will mainly effect the 'top end' of our property market.

Here's a nice example of what's been happening in Toronto's more expensive suburbs; Bayview Village/Hillcrest Village (TREB C15), One of the city’s most affluent neighbourhoods, saw the greatest declines. The benchmark price for a detached in that neighbourhood fell to $1,532,100, a $205,200 decline from the month before.

So in relation to the same capital withdraws, it will be really interesting to see how Auckland's more affluent areas are effected?

Bear in mind that the city of Toronto has probably got a lot more going for it then Auckland in terms of business infrastructure. So if their property market is this badly effected you can bet will feel a similar impact.

Better dwelling article: Toronto Detached Real Estate Prices Drop Up To $200,000
https://betterdwelling.com/city/toronto/toronto-detached-real-estate-pri...

What about Vancouver, Sydney, Brisbane, Adelaide and Melbourne, even Singapore?

I was quite shocked when I spoke with a young Singaporean couple who said they thought 750K for a two bedroom unit in Meadowbank seemed very good value compared with Singapore. They said it would go for 3M there and the quality of life was much better here. There must be a bit of stigma associated with social housing in Singapore which many tout as a model solution for house price inflation.

social housing works ok in singapore as long as you vote for the Lee family.........

Well Zachary, That all depends how much they've allowed overseas buyers to dominate their property markets??

One thing is for sure is China isn't going to relinquish control any time soon on their capital outflows. Remember Iceland had theirs (Capital Controls) for seven years with the GFC. And China has some very ambitious plans ahead with it's move to new technologies, away from manufacturing. Plus their 'One belt one road' policy that's going to take a lot of funding over many years.

And you know what, I think those wealthy Singaporean may have a big China a problem too, sorry to burst your bubble Zachary:-

Bloomberg article: The $100 Billion City Next to Singapore Has a Big China Problem
The $100 billion city rising from the sea next to Singapore has hit a roadblock: China’s capital controls.

https://www.bloomberg.com/news/features/2017-06-22/the-100-billion-city-...

Why are we compared anything with Singapore anyway, I can't see the point, Singapore hasn't changed that much since before the GFC, Ozzie on the other hand is starting to correct like here, and Canada, compare apples with apples and if there's any differences 10 years ago to now from overseas investors

House price growth is slowing in the main cities of Oz but not actually correcting yet. Maybe you can start making all these comments when it actually does happen instead of trying to constantly wish it would happen.

Hardly wishing when it's actually happening Zachary. You said it yourself only a few days ago that you've already lost - $300k and I doubt that Auckland's property prices are going to increase anytime soon.
Hey I did try to warn you about the storm brewing.

Try to stay focused CJ099, I am responding to O4normal's claim that prices in Oz are correcting. The current news is that growth is slowing which is something quite different.

Yes if you look at the big Chinese investor picture and Ozzie my comment is fearer than any comment about Singapore

CJ099
OMGosh is it 300K Zach lost in profit by failing to act and sell !?
I know I told him a year ago to sell & take his profit at WestHabour but he failed I thought.
All I can say is OMGosh if it's over 300K he left behind !

I'd feel bad for the next buyer if I had done that. I'm in for the long term. Doesn't worry me at all. Life is good.

So pleased for you Zach you've obviously worked at it

You'll make up that $300k in 50 years Zach or sooner if the Chinese investor is aloud back , you're lucky tho , 2 million dollar property in Auckland has a good chance of returning to 1 million, there simply isn't the volume of buyings there, but if you're selling and buying on the same market it doesn't really matter mate it's just money you never had

LG = Life's Good ^^

@ NorthernLights
Yes I got them to check their online valuations on Homes.co.nz, which had been very popular website with both Zach and DGZ when prices were rocketing. But obviously Auckland's property prices had been falling faster then their valuation algorithm could keep up. Well they updated their algorithm and then I think reality really hit home to some people. ;)

Its easy to comment when it has already happened, the skill is sharing your opinion on future events and the satisfaction is in being found to be correct.

There is a lot of wishful thinking on this site with people using their heart rather than their heads.

Everyone has their own perspective
The important consideration in reading that persons perspective is to gauge its validity
In the case of the spruikers here we know their statements are skewed because they're heavily indebted
It's hard to fathom how working all day and having to organize and maintain rental properties around Auckland is a "Good Life"
Been there done that for too long and never called it anything other than work
Only 1 lifetime best actually use your time better

As you were one of us why are you giving us such a hard time? Is it because you know us too well?

Zach because he has sold up and fled the country. He is trying to justify that he sold at the peak and in order to make him feel better he is trying to talk the market down to prove it to himself. What a sore loser!

CJ099
Oh don't spoil Zach rant
He's tried so hard to spin the positive
I just love the wishful thinking
The guy doesn't seem to comprehend yet this is a completely different paradigm than has ever occurred before

Hardly a rant. Only reporting the truth about the situation right now.
Vancouver, Sydney, Brisbane, Adelaide prices still going up.
Auckland houses still selling for around 30% above CV.
All market indicators look positive.
People fleeing Singapore to come to Auckland.

"People fleeing Singapore to come to Auckland" - more hyperbole ?

Anyone who compares the housing market in their home town / country to the the housing market in another country is a naive investor - as the old saying goes when in Rome do as Romans do. An intelligent investor understands what the locals can pay for a house, what they are paid and the quirks of the local market ( issues with infrastructure , local natural hazards etc). If the naive investor doesn't do their homework my guess is they will overpay for what ever they are buying.

I'm sure the owner of this house will gladly take a Jafa's $750k for this house (I've viewed the house and the pictures make the house look way better than is actually is. The house needs to be painted , some of the exterior timbers are rotting - generally I don't think is has been maintained very well).

http://harcourts.co.nz/Property/815287/BD8894/6-Moreland-Avenue

It was CJ099 that was comparing Toronto with Auckland that started it so I was just illustrating that were other cities you could use for this purpose and come to different conclusions if you were a "naive investor". Although I think Auckland is similar to Sydney due to geographic, demographic and historical reasons.

As for the hyperbole I was just relating what a Singaporean couple had told me. I have recently been in Singapore and a taxi driver told me that things were pretty tough for working folk. You see a lot of old folk doing cleaning jobs. Apparently there is no benefit if you don't work.

I live on a 6 million dollar house in Asia and would be the equivalent to a 4 bedroom ponsonby villa. People in NZ have no idea what expensive is.

And a standard apartment for a family of five would be no change from 3 million NZD

Humm... Perhaps their banks should have introduced LVR restrictions a long time ago, if they had they would have been in such a debt burdened mess, that spilled out in to other global cities. Unfortunately your less affluent citizens in Asia aren't as lucky as you keywest.

https://www.theguardian.com/cities/gallery/2017/jun/07/boxed-life-inside...

http://all-that-is-interesting.com/cage-homes-hong-kong#1

Luck has nothing to do with it, studying at school, Uni and working hard probably had a little more to do with it... but you're missing my point, auckland house prices are still cheap when compared to any other major city in the world

Which made me think as I was catching the underground today, that perhaps life in Asia is not supposed to be equitable, and what I mean by that you give everybody all the free stuff like we do in NZ, school, house, healthcare, pension and then your own your own, fancy that, you need to do it all by yourself. Think about it, works in Asia and you don't hear to many complaints as the Lambo's drive past the pedestrians, they just suck it up, more an observation but perhaps valid vs NZ left voter self entitlement

CJ099
Toronto property was dropping in price I think around minus $2100 a day
It's a mega city bigger than Boston but smaller than Atlanta & if you go to Atlanta you won't believe that airport its massive. No Toronto has about 6 million and a bridge and tunnel links it to Detroit.
Vancouver is another biggie but I usually only pass through its airport.
Vancouver & Toronto are both extreme housing bubbles on far greater scale than Auckland but the same inflationary speculation applies. It also applies to the US here where Chinese have bought up more homes than Canadians in the last 12 months

@ NorthernLights
Yes it's going to be interesting to see how things play out for Canada. I've got friends in Vancouver and Victoria who were jumping for joy when the Foreign Buyers Tax was brought in. They're still keen to see prices drop a lot further since it's effecting our industry quite a bit and they want the cost of living to go down.

Here in Auckland we've been experiencing the same thing; tech business shutting down since it's too expensive to be globally competitive.

Article: Vancouver’s Tech Scene Shows Just How F**ked Up The City’s Real Estate Is
https://betterdwelling.com/city/vancouver/vancouver-tech-scene-shows-jus...

The only way that house prices can grow is through growth of incomes of the average home buyer. Optimism for house growth from current valuations (relative to average income) is optimism for real growth of average wages per household of at least 4% p.a. for a decade. I would love to be sharing in this optimism, where are we going to get such real growth?, the real growth we have in wages at the moment is due to hours worked rather than productivity of those hours, surely we cannot increase our hours worked per household at 4% per annum.

If nz house prices were affordable wages wouldn't be that bad and we'd stay competitive with exports, you don't want to price yourself out, cheap housing is the answer, always has been,

Excellent article Greg. And while I for one for do not doubt how much hot Chinese money has pumped up prices, cynics will question what proof there is for that claim. Further, if it is pumping through Chinese who are permanent residents here, then it is questionable what if anything can be done here to stop that. Of course, the actions of the Chinese govt are having some effect.

Some effect, the auction rooms are empty and Auckland was going up 10s of thousands a week, that's not only stopped its reversed

I went to an auction last week. About ten groups of bidders with four actively bidding. Sold on the day for over 30% above CV.

Isn't 30% of 2014 CV's a bit on the low side?

30% a bit low?

Actually no. I think people have gotten caught up in the mania of it all and 100% above CV has been assumed as sort of normal. It as happened but those sales have been exceptional. I did notice that some houses down in South Auckland were selling for +60% above CV and was a bit concerned. They did have very low CVs however. Since commenting here, which has been a couple of years now, I have been calculating the sales figures compared to CV's and on average it has been growing from high twenties to high thirties. It was rare to do a calculation that exceeded 40% and that was usually due to one exceptional sale amongst the lot. When I removed that one sale it returned to normal.

Before that unit sold at auction I told the Singaporean couple that you can expect it to sell for around 30% above CV and I was right.

I have to agree. I've been to a few auctions to guage the market in the last couple of weeks. All Good homes, renovated with 3 bedrooms. 2 bath, a bit of a section (500m2) in Mt Wellington and Ellerslie areas.

Property 1: CV 680 - Sale price $980 (1 bidder)
Property 2: Ellerslie - CV 800 - Sale price 1.3 (5 bidders)

Then you see the point, these buys aren't anywhere near enough to flatten or lift the market, it's dropping, good point Zach , great to see you and Eco bird on track now, finally, toothe point is coming around, DGZ could be hard he seem quite stubborn

prices are decreasing at around $3K per week since Feb in Auckland

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Thank you for this article Greg. I've been harping on about rich overseas Chinese using NZ based Chinese to buy houses, and this site is the first one to actually put it into an article. Stuff and NZ Herald purposely ignore it.

Phase 1 was stopping new money coming in, and we saw within a few months how successful it has been.

Phase 2 is when the Chinese government want the money back, and they just formed an agency with 400k employees to do this for them. NZ will be the easy target (smaller country compared to Aus, Canada, UK) so we'll see the big sell off in North Shore, Botany, Dannemora and Flat Bush by next year.

RichMuhlach - thanks for your comment.
Can you please elaborate on phase 2 - what the Chinese govt are doing, how aggressive they will be on repatriating funds

Hi Fritz, Yes I think 'Phase 2' could be a very likely event and RichMuhlach could well be right about that.

bw posted this article earlier in the week which discusses the possibilities of China restricting even further.

Financial Review article: House prices face China exodus risk, says former top US Federal Reserve economist

Quote from article: Nellie Liang, who recently visited Sydney and shared her thoughts on financial stability research with the Reserve Bank of Australia, told The Australian Financial Review policymakers were right to be "really concerned" about high house prices and household debt that was elevated by international standards.

Amid signs that Chinese businesses and people are being forced to move offshore money back home, the recently retired head of the Fed's financial stability division said a "trigger" for a real estate price collapse could be a reversal in international capital flows.

"The problem with high house prices and high household debt is it leads to unsustainable debt burdens if house prices fall," Dr Liang said in Washington.

article link: http://www.afr.com/real-estate/residential/house-prices-face-china-exodu...

How aggressive? I guess they will ask very nicely and then point to a bullet with person in question's name on it.

Don't know that, o my god

There are two main factors at work; lack of buying activity from local investors and the drying up of Chinese money.

Greg... I'd also add a 3rd factor... The unitary plan ( within the context of the boom prices) .

Even thou it is not fully operative, it has resulted in massive revaluations of land.. Single family homes with land have sold for large amounts of money.... and helped inflame prices and the "boom".

As the Plan becomes fully operative, and time is passing , its effect on land prices will be less and less..

A wise and forward thinking council might aviod throwing "rocket fuel" on a boom by implementing something like the unitary plan well before there is a severe imbalance in actual supply/demand... ( which, for well paid leaders, they should be able to do )

Yes very good point. As an Urban Planner who has worked extensively in housing policy, there is very good economic evidence that shows that comprehensive upzoning - as per the unitary plan - initially inflates prices, but as the hysteria dies away and people realise it is not a monopoly situation, prices stabilise or even drop a bit.

I think the Auckland plan comprehensively suppresses upzonig, restricts supply and inflates costs. You think the Auckland plan fosters comprehensive upzoning, increases demand and a surge of pricing. And we have both read the same plan.

We can test the theories very easily. An increase in demand increases the rate of building supply, but an inflation of costs decreases the rate of building supply.

I'm not an urban planner... But

Isn't the effects ( good or bad ) of the unitary plan measured by the cost of land..??

If the utility of a piece of land is increased , then its value increases..??
ie.. upzoning increases the value of land..?? ( gains made possible by the allowable increase in density.. )

Yep, but value is only half the equation. Price is determined by demand and supply curves, so have a look at costs as well as value. if a city under-supplies upzoning the cost of the restricted land area increases with everyone competing for less available area.

Cost + value = price

I'm not an urban planner and think you can work out what is happening by observing the rate of building. Rate of building is proportional to value minus cost.

Maybe I am on a parallel planet Auckland, but I have never seen so many new developments and houses being built. I used to live in Riverhead - a sleepy little backwater. Now it's got hundreds of million dollar 5 bedroom homes and the traffic is insane. Isn't there a massive shortage of tradies because of this? Where are the massive land restrictions that I keep hearing about when my eyes tell me there is land being built on everywhere?

When you drive out to Riverhead from Auckland, do you notice any sort of predominantly green areas flashing past the window? Now repeat the process and drive from Auckland out to the new suburbs of Warkworth or Kumeu, again do you notice any large areas of green space? Those are the sort of areas mostly restricted.

Auckland Council has actually allowed building to take place in some small areas on the edge of the city like Hobsonville, but restricts most of it. The housing built at the edge of the city takes tradies less time to construct than the 5-bedders out of town = we have a tradie shortage. Closer to the edge of the city there are transport options other than cars, but we can't build more Hobsonville like places = we have more traffic

You are right - the green is flashing by and turning brown with breathtaking rapidity: Whenuapai, Kumeu, Westgate, Huapai, Waumauku, Silverdale, Orewa .... anywhere and everywhere. Oh and it looks like Mangawhai is tanking again

Yeah I am pretty sure Auckland is more pro-sprawl than any other city. Single dwelling, car reliant, huge exurbs are the future.

Kumeu is to increase 200%, Riverhead 100%, Orewa/Silverdale 150%, Warkworth 200%, Wellsford 80%.

Auckland (urban city) is to increase by a mere 15%.

Restrict the urban city and massively expand the exurban sprawl. That is the Unitary Plan,

Inefficient, polluting, costly, sprawl happy, congestion and housing crisis inducing - Auckland Council planning scrapes the very bottom of the barrel.

Auckland house prices will steadily decline between 45-55 percent over the coming years, making it a more insidious decline. The most expensive properties will decline the most in percentage terms.There will be no exceptions. . No one can force anyone to purchase on the way down, as there will be no plateau. Prices will be lower in a year, for those that disagree, show me the countervailing facts. Simply put it will be a surprise to most.

That seems incredibly unlikely considering the state of the economy, employment, low interest rates, the love of property ownership and immigration. What a doomster! Also even now you can buy places that are serviceable for about the cost of renting. This place for example:

http://www.trademe.co.nz/property/residential-property-for-sale/auction-...

CV 2014 $195K. That's more like it..

10% return for some rich b*stard, that would be a nice little earner wouldn't it?

Much more suitable for government to buy as social housing.

Zach, Look at history man , ITS A BOOM, at the end of all boom things are doing great, of course they would be, booms THEN TURN to bust, it's not a doomster its part of life, if you want to tag or blame someone, blame boom, who added to them, who's job it was to hold them back, government, RB ,, RE , overseas investors, greed etc , don't blame people telling the truth about the facts they see and present

I am looking at history. Booms have never turned to busts like 50% drops in value in the Auckland market. Prices are more likely to go up in the medium to long term.

So its different in Auckland?

when in history was the DTI ratio so disproportionate?

Zach, You're the one putting 50% on a bust, , all booms and bust are different , ok we better not ever say a boom then unless it goes over, how bout you come up with a number a, medium to long term investment isn't the issue right now, it's about weather a FHBer should buy into a falling market and what the market is likely to do now to navigate it to help

You don't have enough data to make that kind of prediction. Look at the USA, they said their housing markets were diversified and couldn't simultaneously crash - they were wrong.

In terms of the data: Pre 1984 data is useless for obvious reasons. 1984-1999 has a massive catch up for interest rate/inflation changes. So really we have 17 years of data from 2000-2017 to base predictions on. There has been one correction in that time and it was about 10% from memory, more if you factor in inflation. If you think that proves Auckland property can't crash 40% you are dreaming. However, I agree 40% is unlikely unless there is a major recession. However, there is every reason to think NZ will have a recession in the next 3-5 years, and it could be a major one.

The fact is the housing market is incredibly uncertain. Everyone saying it will crash is as bad as everyone saying it won't. Truth is it may crash or it may stagnate. What we can say with some confidence is it won't rise faster than wages forever because that is impossible.

Hi Zachary,

True - Auckland is well placed for the future.

There's every chance that housing prices will increase considerably in the medium/long term - after a pause in the short term.

There's no point taking notice of the disaffected doomsdayers who hang around here. Collectively, they offer a minority viewpoint.

The great majority of Auckland house owners/investors are relaxed about things. They're most reluctant to sell out of the Auckland market. And that situation is destined to remain.

Spoken like a true Real Estate Agent! :)

In my time we have never had a property frenzy like this before before. Every man and his dog was attending property seminars and purchasing as many rental properties as they could.
We are now in uncharted territory and nobody can predict how far down the market will drop or if we stagnate against inflation for the next 10 years or so. On paper this will be a significant loss for property investors.

In my experience, Booms only turn into Busts when there is a heavy speculative element, and also a large increase in debt used for that Boom... ( true ponzi finance)
I don't know how much of our boom has been hard core speculation, but I do know the debt growth has not been excessive ... ( in fact the RBNZ has mitigated that danger with the LVRs' ).

Without those things, residential real estate is unlikely to "bust ".

For me , warning signs of a potential bust unfolding is a rapid increase in mortgagee sales, and a rapid increase in unemployment..

It seems to be built into our DNA , that we do not sell houses for a loss, unless we are forced too...
I've had friends that have hung on for years to sell a house for more than they paid for it.

just my view..

In my experience, Booms only turn into Busts when there is a heavy speculative element, and also a large increase in debt used for that Boom...

I think you've just described the Auckland market perfectly.

Exactly.

Hi Zombi,

I don't think so.

Most people who buy in Auckland are in for the long haul. They're investors - not speculators.

Once you have a holding in Auckland, they aim is nearly always to keep it. (Once you get out, it's too hard to get back in.)

And why wouldn't you? Capital gains have been a feature of the market for several decades and interest rates have got lower and lower as well. Any fool can and has made money.

It's my opinion that the capital gains are over and that the downward trend in interest rates is also over.

No doubt your opinion is the opposite.

The question is, if you've stretched to buy a property yielding 2.5%, your interest costs are creeping up, and you've got the prospect of having to switch from interest only to principle and interest approaching, how long do you feed it money for? I think after 1-2 years of losses either the speculator or their bank freaks out. No doubt your opinion is that they hold firm no matter what losses they suffer. I'm not talking about the long term investor who purchased a property yielding 5% in 2010. I'm talking about the thousands of properties purchased by speculators more recently.

Time will tell.

Actually no one can predict what is going to happen. We haven't had a recession for a very long time, and are well overdue for one, considering the bulls run on the share and property markets. It is likely we may see a change in government, because there are a lot of fed up people, who aren't happy with the way NZ is heading in many areas. This will no doubt affect property values. People may say that there won't be a 50% fall, but that may effectively happen over a long period of time, if property prices stagnate, and the buying power of the dollar decreases.

Hi Rob,

On the contrary, property is a pretty good (safe) place to have money in a recession (unlike paper assets).

In a recession, I would think of buying more property. I certainly wouldn't sell!

Depends if you have a big mortgage or not in a house. In a recession, you may lose you job, and interest rates may rocket. So the bank may require you to sell, at a loss. So potentially you may lose all your equity you put into it, and may even come out of it with a debt. However a recession can be a great time to buy. I am wondering if some first home buyers are making their voting decision, hoping for a recession to totally crash the housing market.

Just short of $400k for THAT? Do you know what that area is like. Salubrious would not spring to mind for a hint if you don't. Definitely a long way to go.

PocketAces, I'm really surprised you are being so snobby here. I just did a quick StreetView wander around that street and it looks perfectly fine, plenty of trees, no litter, well kept houses. Just around the corner are all the shops of Takanini. The road leads out to a light controlled major intersection which will make getting to work easier. There are big new developments not far away. People who live in Papakura love living there.

It makes me think that a big issue with many folk here is that they can't afford to buy in the upmarket areas of Auckland. But that has always been the case. My first house was in the poorest area of Glendene in West Auckland and it was perfectly fine. I never dreamed of buying in Central Auckland.

My dream for Auckland is to make all areas upmarket. We are #8 in the world for livability so even Papakura is a good buy. I sometimes work in a data centre out there and have found the place to be perfectly nice.

You should probably go there. I have no problem with there being less wealthy areas but for crying out loud the price needs to reflect that, $400k does not add up in older Takanini in my view for an older, tiny home unit on a x lease section. Much of that new development on the west side of Porchester Rd where the old training track was, will ghetto-ize pretty quickly, much of that has happened already.

"My dream for Auckland is to make all areas upmarket." Good luck picking up your own rubbish, sweeping your own streets, wiping your own grandfather's bottom, making your own coffee. Elitism is not attribute, pal

I already pick up my own rubbish, clean the street and make my own coffee while both my grandfathers have passed away. I plan on euthanizing myself before I need my bottom wiping.

Zachary, appreciate being called a 'doomster'. Often words are used without an understanding of their meanings. Indeed I have been a sound and reasoned Judge of the Auckland housing market. You have seen a noticeable decline in your paper wealth over the past 18 months, as you freely admit. Holding onto any asset that has been purchased as an investment as it declines in value is consistent with individuals who deny the reality, argue reasons for doing so and find solace in comments from individuals such as toopointy. As your paper wealth continues to decline over the coming years take time to reflect on what could have been.

Cowpat, time will tell if you are a sound and reasoned judge of the Auckland housing market not your own declaration. As for the drop in wealth it was simply the homes.co.nz estimates which were over valued in my opinion and kind of overshot in very recent times. Property holders cannot just sell up when prices slip a bit like you can with shares. There is a responsibility involved with tenants and the stability of the market. Obviously if everyone put their houses on the market all at once there would be problems.
I would rather see the figures on homes.co.nz change than see my recently sold house dramatically drop in price for the new owner. I recall awhile ago being a bit anxious about a house I sold when I heard that the new owner told the agent he suspected he had paid too much for it. I told the agent I felt exactly the same way when I bought it but it turned out okay and I am sure the same thing will happen for him. Of course I wasn't certain but as it turned out everything turned out well and I was happy about that.

Cowpat, i totally agree but would add a blood bath in the first year and because of the election and false hope we wait for the start, and after a year slower drops to stagnation, at that point ya we can get on with it but hopefully lesson learnt and do things better

Greg, this article nails it, thanks.

The downside risks are significant. At the current trajectory prices will be maybe 6-8% lower in a year? Post election that trajectory may steepen, particularly if listings jump again, and by next winter prices may be more like 10-12% lower. Most corrections don't seem to happen much faster than this (prices are sticky, vendors hold on, etc). But all signs are that this could keep rolling for several years.

The other major factor is sentiment. Bubbles are psychological.

The RBNZ's expectation released is blank for house prices in 1 year;
https://www.rbnz.govt.nz/statistics/m13

Can't tell if this means the expectation is zero or if it's negative. But it's only just moved to this zero point THIS QUARTER. I say September 23 marks the end of the beginning of the correction.

China’s cabinet on Friday issued guidelines to regulate overseas activity in a change that could signal the end of the country’s... frenzied M&A activity in recent years. Beijing will limit deals in property.. stepping up its campaign against what the state planner described as the "irrational” acquisitions of foreign assets.

http://www.telegraph.co.uk/business/2017/08/18/china-crack-firms-irratio...
Nothing we don't already know....except that this was a new initiative...yesterday....

Just as the inflow of hot Chinese money has had a disproportionate impact on the upward trajectory of house prices, so can the stem in flow and even reversal have a disproportionate downwards impact on prices.

Of course it will be commensurate, how can it not be?

Perhaps, based on the strength of our rockstar economy, wages are poised to catch up with the 5 or 6 years of house price hyperinflation that we’ve had…

Yes it's certainly crazy and irresponsible of a Government to let house prices get so out of control and rely on a false economy. It causes a huge negative impact on their real economies such as exports with and over inflated NZD, this gradual erodes them and in some cases causes them to fail.

If we go in to recession next year remember we've had nine years of National doing nothing to reign in overseas foreign buyers, that have now left us high and dry.

Hmm didn't I hear the other day Adern promising to apologise to all the people with "Chinese sounding names".

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National ceased payment to the Cullen fund during the greatest stock market bull run in history. They sold all the Auckland houses to the Chinese leaving Gen X & Y homeless renters in a housing bubble. They will leave the country in a considerably worse state than they found it IMHO. If there’s any apology it should be from the National party to the people of NZ

CJ099, no one better blame Jacinda with the lovely smile next year if we go into a recession when she's Pm, I'll be pissed

I think the Boomers will want to vent their anger at someone after they see their property retirement capital go up in smoke.

But think of it this way; If things had continued on at the pace they were going with National, we would end up in a recession that we could never recover from.

Hopefully if we have a change of Government this time round and our housing market returns to affordable levels, there maybe a small recession in the interim but it will be short, then everyone well be much happier.

Except for the Auckland Boomers, they'll be a bit grumpy since they won't be able to afford their million dollar mansion over in Queenstown or where ever.

That is what is going to happen, and really, if you think about it, Labour are in a real Catch 22 here, but I think they need to make sure they have a Plan B for when it does all pick up speed on the downhill run

insert tui sign here

It is very simple, Auckland has an inelastic building supply.

When demand is high prices in Auckland go up faster than other places. When demand is lower prices fall faster in Auckland than other places.

Auckland is an exciting housing market to be in, hold on or jump out. Have fun.

You cant underestimate the psychological effect, sense tends to go out the window. The housing market has a lot more transparency these days and could well react more like other financial markets when sentiment turns.

After the GFC I bought bonds paying 10% for half there value, these were solid corporates with strong balance sheets. There was no rational reason to sell them at that price especially when some had relatively short maturities. It becomes a mind game..

"Get in, gear up and load up quick as you can" they said..."property only ever goes up" ...they said...

Great article, hits the nail right on the head.

In a nutshell, prices will have to return to affordable levels, which is a good thing for our society in the long run.

It is however a long road to get there, basically prices have to drop by 30% unless wages skyrocket.

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So Chinese money was at play and it means that national government was denying. Manipulating and lying all this while.

Wake up and vote for change as no one wants manipulated and government who lie.

National is and has been selling NZ to.........

Think and vote

Reality bites ... at long last .... as if anyone in their right mind ( not investors and RE agents , obviously ! ) ever thought that the average price of a house in Auckland ought to be a $ Million plus ...

... but I'm not gonna be childish and say " told you so ! " ... ... no sirrrreeee , Jim-Bob ....me's just gonna sit back in the old hammock , scoffing a gummy-bear or two ... sniggering smugly to meself .... heee heeeee heeeeeeee !

Someone commented in these forums that myths were powerful. While true, when the myth changes from Chinese money buying houses in Auckland (which I'm not convinced is true to the extent people believe ) to Chinese money stopped from leaving China - the urgency to buy a house because of FOMO drops. While houses are still being sold, sales volumes have tanked and sales prices are dropping. How many houses would have sold if the offer that was presented was accepted (those low ball offers). The market consists of willing buyers and sellers. If the seller is not willing to accept the lower offer there is no sale and there may be none at the expected price. While only the desperate have to sell, it is those who have to sell that set the market price / market expectations ( only about 2% of houses are sold each year) . As much as people may like to believe that their house is worth X, it is only what the market believes it is worth - it may be less.

Some people have been trying to dismiss the price drops as insignificant because the market hasn't dropped significantly and then using the logic that if it hasn't happen overnight , it won't happen. While a share market works that way (there is high liquidity) the property market doesn't because it is illiquid and it takes time for "market signals" to be digested. As was demonstrated by Brexit (the share market took three days to recover) and the election of Trump (the share market took three hours to recover) and yet as someone recently pointed out Ireland the market kept dropping for a number of years.

As I have pointed out several times there is a supply and demand for housing and there is a supply and demand for mortgages. One doesn't exist without the other.

My workmate told me a story about how money can still come out of China as a wedding present. His brother in law recently bought a place in Auckland with wedding gift money from China. Whether that money was already out of the country before the capital flight restrictions, i'm not sure..

It's concealed in the wedding cake manufactured in China.

1986, That's cash, isn't the hole Chinese money problem, 20 family members with one house between them go to 20 different loan shark banks or shadow banking and all borrow money and take it out of the country x a billion , the government wants it back

Chinese banks now even have to report foreign ATM transactions of 1,000 yuan ($200) or more to the banking regulator. The screws have been turned pretty hard.

You can still get large quantities out, but the going rate to facilitate that is something like 15-20% last time I saw some anecdotes.

There are still innumerable ways to get money out of China - bitcoin mining, exporting goods at a loss, overpaying for foreign purchases (like art), losing foreign legal disputes to friends (eg intentionally infringing patents) even simply carrying money or goods over the border in Hong Kong, plus a million other schemes dreamt up by 100million wealthy Chinese.

You can still get large quantities out but it is getting much more difficult.

Taking the bitcoin example, it's not like every wealthy Chinese family is going to be able to mine enough bitcoin to buy a house overseas. Not to mention the Chinese Government developing it's own cryptocurrency.

The Chinese government has cracked down on "irrational" (their term) foreign purchases like art. Forex transaction now need to specify what the money is for and sign a declaration (so you are now on record should you be investigated in future).

No shortage of people being caught trying to carry cash over the border - money goneski.

Over invoicing, yep, agree but unless you own your own business you pay a significant fee for the privilege.

The Chinese government knows about all of the schemes and has been steadily plugging the holes and making it much more difficult. The net effect is much less money is getting out.

Didn't the government say that very few properties were being purchased by overseas. Then didn't they release some recent stats showing it was only about 5% last year? Although that was probably after the buy up had slowed down.

Rob he said they were buying with locals names, I'd hate to count the amount of people that have told me of youngsters with millions been told to go to auctions and buy buy buy, thats over ,so many People thought it was that bad at the time the government put under pressure to check into it, I think they came up with 3%, but most that I know laughed at that, we no different now , wasnt there also brokerage companies opened up by the Chinese in Auckland to handle all this, not long ago I read on here of Chinese speaking brokerage companies under investigation that were under the ANZ and harcourts umbrella, they were closed real quick

I know. Although the stats released seem to have pacified main stream media from pressing it further. It now now longer seems to be used as a reason for the prices rises in previous years

Not bad bad robot, although the part about desperate to sell and have to sell, that might apply to people who have been in the market recently, as you said only a small % of houses in the country sell each year, I would add that there's a big % off people that didn't play in the market lately and payed very little for the houses and people sell for alsorts of reasons and these people will sell and set the price of the market lower, it makes no difference at all the people that payed to much and refuse to sell, they end up being a distant memory

On a separate note I read a piece on Bloomberg news that residential property prices in the City of London have fallen 18% in last year and 11% in Westminster. Ouch.

https://www.bloombergquint.com/global-economics/2017/08/13/u-k-property-...

This article reminds me of a talk by Satyajit Das where he says … either the real economy is lagging, and will catch up with the financial economy. In other words, the inflation rates will rise over time and justify these valuations. Alternatively those financial asset prices have to match the fact that we have a much more subdued growth environment ….. in which case you will get a massive rerating of these asset prices….. more here

I couldn't agree more.

AUCKLAND 8TH MOST LIVEABLE CITY GLOBALLY 2017! We did it again yes!~
https://www.tvnz.co.nz/one-news/world/auckland-ranked-8th-most-liveable-...

Great news Double-GZ. I think we even improved a little over last year. Sydney has gone down a bit - whoohoo.
Interesting that terrorism has reduced the rankings of a few places.

umm... That's not the only thing that's slipping in Sydney, so are their house prices. Well you did say you wondered how the property market was doing in Oz, here's some recent news for you.

Article: Fears of Chinese exodus from Sydney property market
http://www.weeklytimesnow.com.au/real-estate/fears-of-chinese-exodus-fro...

OMG ...this reminds me of some of my innocent younger generation friends who have taken on big debts in the last couple of years. I know of two young couples in their 20's who have taken on 800k each with the help of their parents to buy their first homes...ouch!
“When you have the outsiders buying properties, if the outside money pulls out and prices fall, there’s innocent bystanders who took on debt and end up under water, which could lead to defaults,” Dr Laing, a senior fellow at the Brookings Institution in Washington, said.

Yes you may want to read the full article on that DGZ. You'll probably find Dr Laing's comments and reasoning very informative. Here's the article from the Financial Review that I posted earlier:-

House prices face China exodus risk, says former top US Federal Reserve economist
http://www.afr.com/real-estate/residential/house-prices-face-china-exodu...

Which is, quite possibly, the number one reason why you don't let that sort of money in, in the first place. And didn't John Key say something similar on the fly one day. Whoops.

You completely misunderstand the point I am trying to make CJ099. You need to post a link to an article that actually shows figures and data for house prices declining in Sydney. The article above doesn't mention prices declining at all, only sales volumes.
Your comment is FAKE NEWS! as are so many of the other commenter's idle speculations.

Oh come on Zachary you're sounding like your golden haired angel Mr Trump! Fake News, that's so yesterdays tactic. It didn't work for Mr Trump and it's not going to work for you. :)

Yeah and I suppose that you're going to say that the related article that I just sent DGZ from the 'Financial Review' is fake news too. Perhaps you should just wake up and listen to what's going on around you.

First Trump is absolutely correct in his assessment of the news media.

Look your article doesn't mention prices at all just sales volumes. In your first comment I quote you,

That's not the only thing that's slipping in Sydney, so are their house prices.

Where in the article does it support your assertion that prices are dropping? This is my complaint about so many comments here. Things are presented as happening right now when they are only wishful thinking. I really don't mind reading that house prices are dropping in Sydney but it is a small demand to make to have the link you post reflect your claim. No?

Wow I still can't believe that you're still at Trump supporter that says it all about you.
The article does highlight how their auction sales have been dropping, though not as bad as ours.

Quote from article: Sydney has enjoyed a stellar run with Chinese purchases, but a 50 per cent sales outcome at last weekend’s major Sydney CBD off the plan offering was the lowest take-up in many years.

Double-GZach a Trump supporter - why am I not surprised?

a key point is that Chinese money seems to be drying up and has had a huge influence in ozzy.

The govt reckons it has only been 3% of the market here, but everyone knows it has been significantly more than that.

It has created a false economy in the housing market. you can be sure that if foreign capital was not allowed to invest in our domestic housing that this bubble would have been avoided purely because the DTI doesnt support the current values.

A crash is on the way whether we like it or not, but in reality it will only be a return to normality

Ok Zachary, when you've quite finished spitting out your dummy and acting like a big baby you may want to take a look at this article in regards to Sydney's auction results. Which clearly shows that their market is cooling but not quite at such a rapid rate that ours is slipping but then again the Ozzy's tend to have higher wages and are a lot more popular with investors.

Sydney auction clearance rate below 70 per cent third weekend in a row
https://www.domain.com.au/news/sydney-has-third-week-of-auction-slump-bu...

Plus Ozzie has several major city's that balanced the rises better and gives people better options, overseas investors hit Auckland only in a big way, so it will react quicker and harder

CJ099 I didn't realise I came across like a baby spitting out my dummy. I shall try and be a bit more diplomatic. Dear CJ099 I don't know if you noticed or not but your links don't mention price drops. I'm wondering if you may have made a tiny mistake? Especially this last one. If the devilish spruikers follow that link they will be contacting their agents first thing on Monday to look into buying more property. I haven't read a more confidence inspiring article in a long while! And the links to be found there, they are amazing:

Malabar property sells for $720,000 above reserve at auction

Hong Kong, the world’s most expensive housing market, just got even pricier

Hobart becomes Australia’s hottest market after rapid price surge

I told people over a year ago to consider Hobart as the next hot property location and I was right, over 15% up since then. Hobart is like NZ or Australia twenty years ago. A little piece of paradise that still exists.

Zachary my comment refers to Sydney's falling auction rates which we all know leads to eventual price drops and certainly there will always be up and coming areas, look at Queenstown. Well then again, I don't think they've had any auctions over the pass few weeks.

But look at it this way, if they're worried about a 70% clearance rate with good sales volumes think how worries we should be about Auckland's tiny 30% to 40% clearance rates with extremely small volumes.

But agreed there are some bargains to be had, check out these in Mission Bay: http://www.trademe.co.nz/property/residential-property-for-sale/auction-...

http://www.trademe.co.nz/property/residential-property-for-sale/auction-...

CJ doesn't understand the difference between "dropping sales" = fewer sales and "dropping values" = lower prices

Yvil; You're so lacking in any substance and any logic.
I've already highlighted what is happening with the market. And how a reduced auction clearance rates results in eroding property prices. Do at least try to keep up. I'm sure your business isn't doing all that well at the moment but that now reason to take it out on us.
The market has changed and the top end buyers are gone and the banks have stopped credit to speculative investors it's as simple as that.

Those rankings are garbage.
Adelaide 5th most liveable city in the world?
Pleasant place but has an awful economy.
Auckland - nice city but poor housing stock and unaffordable prices, and a rubbish transport system.
And how can you trust a survey that marks Tokyo down for crime and poor public transport?????

And Auckland AND Tauranga the 5th and 6th most unaffordable city in the world , sorry I forgot they can go live elsewhere unless you were blessed

I find it very hard to believe the people of china , the overseas investors, could make such large movements in housing in so many major city's around the world at roughly the same time, what is it close to 10 city's, 92% of the Chinese people are on the bones of there ass, of course that leaves about the same population as American that does have money, but still billions of dollars would need to come from china , I do believe tho if a housing market was pushed in the right direction specially considering many countries just had long lows so locals of these countries were keen to jump in to, Greed and momentum could easily get out of control as we have seen, But still the amount of billions from china must be mind boggling, how much is savings , how much is loans , how'd they get these loan, does the Chinese banks know these houses even exist , we haven't heard the last of this, no way, these houses they have brought are loosing value all around the world

You just need a handful going to auctions,.pushing up the price but ending up second highest bidder. Onto the next auction and repeat. After 30 auctions might end up buying, but not before pushing up the previous 29. Extrapolate this enough times and there's your impact of a not so large number of buyers.

It's a concerted effort in some cases. The overseas buyer will have 2 or 3 groups bidding on their behalf, appearing to be bidding against each other but effectively raising the price up. Now local investors see this and try to compete, but joke's on them because they can just go onto the next property and do it again. The Chinese just raised the price without being the final buyer. Now you know why the auction rooms were filled with Chinese.

And the thing is, the Chinese actually WANT the house prices to go up because the higher they make the price, the more they could send out of China for investment purposes. Well, this was before the January 2017 regulations set by SAFE to curb Chinese capital flight. Stopping new money coming in effectively turned the tide on the NZ Housing Market.

Now imagine what would happen when the Chinese government start "asking" for all that money back. We ain't seen nothin' yet...

@ O4; If you want to see how much impact one individual can have on an unregulated market. I suggest you take a look at this wonderful documentary called 'Sour Grapes'. It should how one very charismatic person managed to drive up prices in the US wine investment market through counterfeit wine. Yes it's a different arena to property but the same out come once the system has been 'gamed'. :)

http://www.sourgrapesfilm.com/about/

Ok, a friend asked me to explain how a few can influence the housing market up and down. Sections near where I live were selling for $240K and there are 30 for sale. One sold for $199k, so what are the other 29 now worth? Then a few weeks ago a prime section sold for $179K, so what are the remaining 28 worth? I dont need to say more, in essence 2 sales have lowered the expectation for the remaining 28 from $240K to, at the most, $179K. Same math works on the way up as the way down ...........

Jono, where are these sections???
Miggt look to buy a few if they are being so discounted!

Greg, you're not allowed to say that there was a lot of Chinese money coming into the country.

"These are not the droids you're looking for"

"The Chinese are not buying our real estate"

Comments get interesting at this point in the cycle. When prices were going up, investors are told the gains aren't real unless you sell.. only on paper gains etc. Now prices are declining those "gains" are said to be lost! Wouldn't investors have to sell to lock in the loss as per the earlier argument?

What is it?

So my on paper gains are arguably dropping back. How does this effect me? An over 100% increase followed by a 5, 10, 20% drop? So what.

I'm still wealthy and now my kids can possibly buy a house one day. Win/win.

I guess that would depend on how you bought the houses, if you have them lock, stock and barrel then you can take up to a 49.99999% price fall and still have made money. If on the other hand you have mortgages, and for example are only paying interest for them, then those falls will hit people far harder.

For ease of maths a $1m home rising 100% is now a $2m home, a 20% drop is a whopping $400k, a 50% drop takes you back to square one. If you borrowed from equity based on those growths, then suddenly each percentage point becomes a little more precarious.

Not saying you are in that boat, but I would imagine a number are - 50% of "investor" mortgages are interest only http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&obje..., add in regulations to prevent this out of control scenario happening again - closing the negative gearing loophole etc.. and things start to look bleak very quickly indeed.

A 50% drop? It's like 2009 all over again.. BH and Henny Penny both lived to regret such wild predictions. I think you will too.

My question is why do the doomsters claim they are only "on paper" gains when prices are rising but suddenly when the market turns investors are losing all this "money"?

The point is it makes practically no difference to the long term buy and hold investor. Sit tight. Be a good landlord. Pay off your mortgage. Carry on.

Wow after today's news re Peter Dunne there is certainly going to be a lot more listings hitting the housing market especially in Auckland and those sellers who have been there for some time will certainly be looking to whether they should be trimming their asking prices. As much as I hate to say it Labour is looking pretty strong and if they do win the election there will not be any good news for the property market. It is not too late to trim the odd rental especially one requiring a lot of maintenance or the one that has a regular turnover in tenants. If you are not happy with its value now you certainly will not be happy with its value in two months time if Labour get over the line.

I bought my 7 rental properties back in 2005/6. paid $1.050M now worth conservatively at $2.2M. (more like $2.4M) Make over 140K per year revenue with $60K interest costs. I can afford to maintain these well and have some drawings too. Why sell them? In 2020 I believe there will be upturn in values again, as new cycle kicks in. If not I still have the income from these. There are many long term investors like myself who dont care about short term movement. Never sell , and never pay back the bank either!

Long term housing inflation that the govt wants (increases money supply year after year, gradually devaluing the dollar) allows nominal price to increase long term. Mortgage is fixed, so must gain equity.

It will matter when you need a heart transplant soon old boy can't buy back your youth!