Post RSS Feed 
Podcast Feed
Property listings fall, asking prices steady; Are buyers losing power?
May 1st, 2009The number of new property listings on realestate.co.nz fell 21% in April from March and 34% from April last year. However, April traditionally has been a quieter month for new listings, realestate.co.nz CEO Alistair Helm said.
The average asking price for listed properties was unchanged from March at NZ$405,936 (a truncated mean). This was down 2% down from April 2008.
“This lower listing inventory which has been seen as a trend for over 12 months, matched to the recent awakening of sales in February and March, could mark the end of the buyer’s market which is how the property market has been typified over the past 18 months,” Helm said.
“Whilst there is no clear sign that the market has entered into a seller’s market phase with any consequential impact on prices, there has to be a point of inflection and that is a sense of where the market currently is,” he said.
“The asking price expectation in many ways supports this turning point, as the asking price expectations are not perpetuating the declines seen through 2008, rather it is as though it is seeking direction as the market heads into the traditionally quieter winter period.”
What do you think?
Is the housing maket entering a seller’s market phase?
Tags: Alistair Helm, House listings, House prices, realestate.co.nz
You may also like to read:
Loading ...
May 1st, 2009 at 1:43 pm
A true test of the Auckland Central real estate market will be the auction of 46 Cumberland Avenue in Westmere at 11am this Saturday 2nd of May. Huge numbers of people have viewed that house – I attended one of the open homes and there must have been 40 people there and it has had thousands of online hits. Will be interested to see how many people make bids and how much above the CV it actually sells for on Saturday. http://www.realestate.co.nz/1045896/statistics
May 1st, 2009 at 1:51 pm
Property listings drop 34% in a year! Sure sign of green shoots in the property market, say the spruikers (sorry, I’ll read that again, “independent analysts”) at realestate.co.nz.
Just the same as the British withdrawal from Iraq meaning that victory has been achieved.
May 1st, 2009 at 2:41 pm
No way, can’t be true, Matt where are you?!?
May 1st, 2009 at 3:04 pm
I think the building consent data tells a different story. Property prices will keep falling because incomes are falling and unemployment is rising and there is no quick fix, we are entering a 30 year trend away from living on debt.
The RBNZ will fail in their efforts to trigger some growth on cheaper credit.
The Marlborough market is characterised by dozens of properties that remain unsold after years and the re-lisiting of others over and over again.
Buyers are being found but the chains get longer and deals often fall over.
Hundreds of sections and plots of dirt are stuck with few buyers.
In a few months the wave of inflation Bollard warned about 6 weeks ago will arrive and that will be curtains for those who refused to cut their price. Higher rates will be the norm, maybe 10% or more.
May 1st, 2009 at 3:14 pm
How about this take.
Listings are down because sellers haven’t faced up to the real value of property and have decided to remove properties from the market rather than spend winter doing open homes for no visitors. Plus no new large amount of listings are coming up because sellers don’t wish to sell property for less than the bank loan and are fooled by the idea that they will get a better price come summer…which they won’t.
Job losses are now in full swing and its a long road ahead. Doesn’t matter if rates are low if prices keep going down and there is no income to pay the bills.
May 1st, 2009 at 3:18 pm
The purpose of this article was to create the old fear that “oh sheesh prices are gonna rise soon – better buy now.” Its total nonsense. Its an advertisement dressed up to look like news. Its by realtors (whose incomes depend on separating you from your money) with the only purpose, not to inform, but rather to get you to buy. Lets look at the facts:
- Unemployment is going up.
- Interest rates will go up (its pretty much the only way they can go now).
- Prices will continue to fall.
Real estate agents are not going to make any money if you all sit and wait for prices to drop – they need sales activity. Don’t buy into the hype.
May 1st, 2009 at 3:32 pm
Sam
Just to bring clarity to the discussion. I write the report, I do the analysis of the data. The full report which is available on our website is rich in statistics not conjecture and certainly not advertising dressed as news.
The website of http://www.realestate.co.nz is not a realtor – we are a commercial company that is a publisher of listings – the success of the industry less and less effect our success as we operate an advertising based business model. We are industry owned, however I would say a read of the Unconditional blog would tell you that we operate a site that is no just a mouthpiece of the industry. To be credible in today’s world you need to act and be seen to act in an open, engaging and transparent manner – I judge we operate under that principle.
I am more than happy to be challenged as to the interpretation of the statistics – on this blog or on Unconditional. I think you would agree there are many ways to interpret any statistics.
May 1st, 2009 at 4:02 pm
I know very little about economics and i will confess most of what is said on this site can go over my head but i find it very strange that housing is starting to turn into a sellers market all of a sudden.
From what i can make out prices in the last year or so have been dropping, now all of a sudden with a lower OCR the market is starting to turn.
please
May 1st, 2009 at 4:16 pm
Well, G, look at the fundamentals.
NZ has colossal net debt – about $40,000 for every man, woman & child, 90+% of GDP – heading for Icelandic proportions. Most of that debt is represented by bank debt that NZers have sunk into the housing market. Every year the debt necessarily goes up because of the spectacular Investment Deficit (ie, even if we manage to break even on the trade stats, we still go financially backwards). On average, each NZer has debt worth 160% of their annual income, compared with 60% 15 years ago, & is stressed thru job insecurity and loss of confidence. NZ house prices are still close on 6X annual earnings, compared with a 3X sustainable level.
There has been an international credit bust, international banks etc are very risk averse, & the governments that have bailed them out are making sure their 1st lending commitments are to fulfill local needs. Plus those govts are soaking up $$ like sponges thru their fiscal deficits. Remember, we need these foreign institutions to fund up to 40% of our housing and other credit.
In this context, if there is in fact a “point of inflection” and “turning point” for the housing market as Alistair suggests, in which direction do you think it might be headed?
I would suggest it will be “good night nurse” territory.
May 1st, 2009 at 4:26 pm
Matt is having an “if only” moment but no doubt he will return with a vengeance when he has “correctly” broken down the stats
May 1st, 2009 at 4:36 pm
Well said Philly…. if anyone had read ANZ’s revenue report out last week, they would notice the huge increase in “Bad Debt” .. so the banks are going to stick to their 20% deposit requirement, for a very long time… they cant afford to give out loans and suffer in a years time if the person looses their job…
it’ll be interesting to see how many jobs are lost every day in NZ…
Japan the worlds second largest economy is heading into deflation.. US’s economy shrunk by 6.1% and europes unemployment rose to 8.9%… people still think house prices are going to go up? good on them..
May 1st, 2009 at 4:49 pm
G
I think this is an interesting quote from Mervyn King, Bank of England Governor.
“The price of a house is a matter of opinion, but the debt is real”
There are many and varied opinions about the price of houses, but the debt that we have taken on to buy them is indeed real and still has to be repaid as we will soon find out in spite of losing our job or business.
I heard on the news last night that applications for the unemployment benefit doubled in the last year.
May 1st, 2009 at 4:57 pm
Hey Alistair – Keep hanging in there buddy. All you have to do is keep predicting the next sellers market, boom etc, and eventually you will be right. We might have to wait until sometime around 2035, but yeah, your gonna be right some day. However, at the moment, the entire world is in undergoing a massive long term deleveraging and the process is only being delayed by the actions of governments around the world. The best cure for this recession (which includes property revaluations) is to have a recession. Lets just get on with it and stop telling ourselves that it isn’t going to happen.
May 1st, 2009 at 5:39 pm
Alistair, lets be practical, the purpose of your buisness or website is to make money and that is by listing on them. so all your going to do is talk up the market… need to put you guys on a Lie Detector and see how many pass!!!!!!
May 1st, 2009 at 5:45 pm
since when was a fall in listings a sign of a market ready to resurge?? Surely its a sign of a depressed market? No one wants to buy at old prices so sellers dont put on the market.
May 1st, 2009 at 5:52 pm
Nice to see so much realism on here. Philly, nice name, and you are right onto it. You are absolutely right that all the fundamentals require a downward realignment of house prices.
What I fear is that New Zealanders will commit economic Darwinism with the aid of new lower interest rates, and we will now merely track other countries experiences until our Reserve Bank, too, runs out of room to cut rates any further.
There is an underlying economy-distorting problem here; it is that speculative demand for housing has no supply-side vent. Housing bubbles in the past in most parts of the world, ended up with too many new houses getting built; but the very fact of too many houses getting built kept prices from increasing beyond a few percent. This is in fact what has happened across most of the USA, it is only in California that they have experienced the absurd rises in prices that NZ and Australia and the UK and other countries have.
A PRICE bubble as opposed to a building bubble, affects the prices of ALL houses and gives most of the population collateral for unwise borrowing that otherwise would not occur. It is not just the people who are being unwise, it is the banks – I find it hard to believe that there is so much denial about this being the underlying problem even among the experts that contribute here. So it is no surprise to me if the banks participate willingly in this economic Darwinism even now, even after all the evidence they are confronted with.
I believe that until the land supply issue is resolved as per Hugh Pavletich’s analyses, we will see further ridiculous bubbling of house prices against all economic fundamentals, doing further massive damage to the economy, if that were possible. Sorry, it is.
May 1st, 2009 at 5:54 pm
What I would like to know is how much property the pessimists on here own, most people I deal with that have been investing in property for considerable time are are buying now and have been for months…
May 1st, 2009 at 5:54 pm
From another thread:
# shuttle Says:
April 30th, 2009 at 3:38 pm
“Chris_J – I would suggest that if NZ house prices stabilise at their current levels then the NZ economy will be in recession for a long time. I don’t think high house prices in relation to incomes is good for any economy.”
You are absolutely right, shuttle.
The housing price bubble is about the worst malinvestment that could exist in an economy.
The only thing that will get us truly in a sound economic position again, is when interest rates reflect the relationships between people’s willingness to save money, and the demand for finance; this, and the elimination of real estate speculation as the source of the biggest financial gains. Regular readers will know what I think is required to achieve that; I do not believe that capital gains taxes and ring-fencing of property losses would solve the problem, and I also believe they would introduce new problems as long as there is not a genuine supply vent for property demand.
The trouble with real estate price bubbles as opposed to every other type of bubble, is that they are self sustaining right up to the point at which they cause the whole economy to crash. This is because the returns on property speculation up till that point, will be greater than either the potential returns from honest productive business, or interest rates that honest productive business can afford to pay and still survive. The property price bubble is like a huge leech or other parasite on the economy, that only dies when its host dies. Therefore, any policy that prevents them is worth the price.
I believe that they used to be prevented simply by the existence of land supply without the hang-ups and rationing that has been introduced in the last 20 years. I believe that this is the underlying cause of housing price bubbles becoming a unique modern phenomenon. (But note that England has had several since introducing their rationing system decades ahead of everyone else).
May 1st, 2009 at 6:00 pm
prosperopink
That quote from Mervyn King is brilliant!
May 1st, 2009 at 6:02 pm
# buyerinchch Says:
May 1st, 2009 at 5:54 pm
“What I would like to know is how much property the pessimists on here own, most people I deal with that have been investing in property for considerable time are are buying now and have been for months…”
See, Philly?
Economic Darwinism 101.
As you said at 4.16, “….look at the fundamentals….”
These people honestly believe it makes sense for house prices to go up now, when everywhere else in the world that they have got so far out of kilter with incomes, they have crashed big time; these people honestly believe it makes sense for house prices to go up now with our economy contracting, unemployment rising, a global financial crisis unwinding, with household debt among the worst in the word already, with international credit markets freezing over, with our banks having to crawl over broken glass every 120 days to roll over their borrowing that props up our indebtedness, with our government unable to borrow because international credit markets have assessed our economic position correctly, even if we can’t.
BAH. We deserve everything we are going to get. I just feel sorry for a guy as nice as John Key, becoming PM right now. Nothing he could do to help the situation now, would be politically acceptable to Darwin-award winning Kiwis.
May 1st, 2009 at 6:39 pm
In reply to PhilBest, regarding Buyerinchch
Yes, it is astonishing that optimism manages to rule supreme in some property-loving circles. It is real head in the sand stuff. I read in a recent Economist that experiments show that in times of stress, we tend to make bigger gambles, facing greater losses than in “normal” times (April 11, P.69). Maybe seeing their property investments decline, they frantically try to make other investments at “the bottom of the market” to recoup their losses? It is strange, irrational behaviour that I don’t really understand, considering where we are heading.
I would love to see property spruikers trot out their “fundamentals”, but they always use a narrow range of highly ambiguous metrics that can be used to suit their argument – for instance, that people withdrawing their properties from the market constitutes a reduction of supply to demand & therefore means the “turning point” where the market will become buoyant again. This is a symptom of pain, not a sign of strength in the market.
To Buyerinchch: I have no property of any kind. I sold out at the peak, & starting renting waiting for the inevitable crash. In my home town, real estate decline of 16% so far (REINZ figures) have so far benefitted me to the tune of about $50k for the kind of house I will buy ; however I anticipate bigger gains yet so will hold off for another year or so. FYI, I have a brother in Chch doing the same strategy, and I’m a-tellin’ you – he ain’t budgin’!!
May 1st, 2009 at 6:47 pm
“Simon says, Hands up New Zealand
May 1st, 2009 at 6:51 pm
PhilBest- property prices may well not go up as in rv figures, but the opportunity to purchase property for low prices to resell hasn’t been better for years.
May 1st, 2009 at 7:31 pm
If you want to rent for cheap move out mid winter & you can often negotiate a low rent. Remember to get a 12 month review
May 1st, 2009 at 7:51 pm
Buyerinchch: I’ve been closely following the Chch market for the last 18 months. I notice: it’s very localised, the situation differs from suburb to suburb, some are selling fast and some are dropping in price hugely; in the last 6 weeks there has been a clear-out of properties that have been on the market for ages — they are selling eventually but the true bargains are few and far between; the for sale columns are shrinking (look at the anorexic Realtor!) and the to let growing — people are still hanging on in the hope prices will rise again; rents are definitely less than in January, especially in the renting-heavy suburbs like Woolston and Brighton.
Also the wide boys are out buying now: the tarted up quick flicks are coming back on the market, but guess what: they don’t move on like they used to. I’d be very cautious about buying to resell because a very cold winter is coming….
You say “most people that I deal with now are investing in property…” Rather gives the game away that you are in fact an agent/ broker /property finder rather than a straight-out property buyer, non?
May 1st, 2009 at 8:21 pm
Sorry that quote was not quite accurate but its the substance of buyerinchch’s post…
by the way, who else thinks that the eternal property optimists seem to be mostly under 40 — no sense of history maybe?
May 1st, 2009 at 8:23 pm
Banks do have a vested interest in keeping the house prices high. The local savers are being penalised for keeping their dollars with the bank. In absence of good returns, I am afraid savers may have to invest in housing accelerating the vicious cycle further. If the Government cared about saving then they must introduce a capital gains tax. I will wait for the budget, and if nothing is done by the Government to discourage housing speculation, then I will have to buy an investment property. The interest rate of 2% at the Public Trust for my call funds is below the rate of inflation and 39% tax on the interest earned gives a very low yield on my cash savings. I feel the system is a sucker on savers.
May 1st, 2009 at 8:25 pm
Does anybody take realestate.co.nz CEO Alistair Helm seriously any more? I certainly dont….
Any numbers per month about for real estate agents leaving their job market? when that slows down then there really will be signs of a recovery, either that or there wont be any of them left…We are looking at a flat 18 months….its going to go down more …only a fool would buy into this right now, renting for 12~24months looks way better if you dont already own.
May 1st, 2009 at 8:37 pm
I think its just a small bounce in the beginning of a decline and property will plunge at least another 20% between now and the rest of next year. Unemployment is still going up and the economy is still contracting.
May 1st, 2009 at 8:39 pm
sam.p
when you say…
“Banks do have a vested interest in keeping the house prices high. The local savers are being penalised for keeping their dollars with the bank. In absence of good returns, I am afraid savers may have to invest in housing accelerating the vicious cycle further.”
…i’m afraid you are advocating people to invest into a capital losing proposition! It’s a sure fire way to lose capital if house prices drop substantially, and drop they will.
Anyone with cash in the bank is just going to have to sweat it out for a little longer, and I bet you that in less than 12 months time, those of us with most of our cash in banks in simple call or short term accounts will start to smile a lot more as every month goes by.
May 1st, 2009 at 8:48 pm
I think perhaps some potential sellers have listened too much to real estate agents who are saying things are on the up. They are thinking “why sell now when I could sell in spring for maybe 5%”
Not everyone is that stupid. My friend wanted to sell his place, he cashed in whilst he could getting a reasonably good price for his house in March. He is a financial analyst at a bank and he reckons house prices will tank in the next 9 months. He is pleased with his sale (down 8% from peak) and is planning to rent for at least the next year before buying agian after the market has dropped further.
May 1st, 2009 at 9:10 pm
Some of these comments just make me laugh, gosh some of you are full of s—t.
Phily says on av each NZer is 160% in debt well philly my boy only about 1/3rd of all houses in NZ have a hook on them so with your thoery Philly the ones that have a mortgage are 480% in debt– wake up mate. House prices are stabilizing if you want to buy, buy now before its to late, and if you are already inthe market if you buy and sell at the same time who cares as its the same Market.
To all you who think house prices are going to drop heaps, you are in for a shock, the bulk of the drop has already happened.
May 1st, 2009 at 9:38 pm
ha ha Rod u so funny, not so clever man, all NZ debt not tied to housing!
see here….
http://www.interest.co.nz/ratesblog/index.php/2009/05/01/agriculture-lending-still-going-strong-in-march-as-business-lending-contracts/
“buy, buy now before its to late” ha ha ha u very funny man!
May 1st, 2009 at 9:41 pm
OK, Rod, lets roll out the figures and see who has the statistics behind them. I’ll start with official Reserve Bank & Statistics NZ figures to back up my claim. Check here for my claiim that NZers average debt is 160% of their income, up from 60%:
http://www.rbnz.govt.nz/keygraphs/Fig5.html
Does that “make you laugh”? Are these authorities good enough for you?
OK, your turn: Provide some basis for your claim that “the bulk of the drop has already happened”
Lets see whose “fulll of s**t”, eh Rod?
Your move, boyo
May 1st, 2009 at 9:50 pm
US Bank destroys homes
May be of interest
http://globaleconomicanalysis.blogspot.com/2009/04/extreme-home-makeover-depression.html
And part 2
http://globaleconomicanalysis.blogspot.com/2009/04/extreme-home-makeover-depression_30.html
G
May 1st, 2009 at 10:39 pm
@buyerinchch
…..another opportunity next door buyerinchch- one or even two of your neighbours are just going to lose their jobs during 2009 – grab it !
You wrote: What I would like to know is how much property the pessimists on here own, most people I deal with that have been investing in property for considerable time are are buying now and have been for months…
My opinion: Over 30 years we worked hard, creating, producing and exporting, have a mortagefree property – and would never join the speculation game like so many to inflate the property market – one happy home is good enough and lead to many more happy homes!
May 2nd, 2009 at 12:29 am
okay – cut the crap, bullsh1t session over. who can post on here that has lost money (real money) on a sale of property that also has the financial literacy that you all seem blessed with? answer – nobody….
fair enough, never trust a real estate agent, that’s what due diligence is for…
all the negative stuff going on, i place on the opposite side of the fulcrum to property. It may not be obvious economics 101 but it aint always good being a sheep in a drought…
if we all agreed on everything there would still be a margin of error…
May 2nd, 2009 at 2:14 am
>>buyerinchch Says:
>>May 1st, 2009 at 5:54 pm
>>What I would like to know is how much property the pessimists on here own, most >>people I deal with that have been investing in property for considerable time are >>are buying now and have been for months…
Speaking for myself, we sold up at the end of 2007 and have been renting since and are looking to buy winter 2010.
May 2nd, 2009 at 8:20 am
Alistair Helm is quite correct, statistics can mean anything you want them to mean. They are also about as honest as all the real estate agents out there.
NEW listings does not mean New ! It just means listings that have been recorded for that month by the agents. So the properties do the rounds between agents and each time they list, they are regarded as New. What a load of crap.
Wanna check the private sales on offer? Off you go to realestateco.nz and see how many listings there are!
May 2nd, 2009 at 8:25 am
Rod? Rod??? Are you out there?
That’s funny, he seems to have gone quiet! Strange. Not talking so big any more………..
May 2nd, 2009 at 8:55 am
don’t worry Philly, I’ve tried asking Rod and “If Only” Jerry (thats a very tired line J) for constructive , logical explanations and they can never deliver
all they can offer is 8 year old nonsense
typical of the real estate fraternity
May 2nd, 2009 at 10:18 am
I don’t pretend to understand economics, but I would like someone to explain to me why some people here are always saying that house prices are going to carry on plummetting and we better sell up now, and in the same breath say that rampant inflation is just months away.
In times of severe inflation, aren’t people who own land (commercial land, rural land, residential land, any land) better off in the long term?? Someone with a mortgage can fix for 5 years at 7.5% now can’t they?? What rate of inflation is ‘rampant inflation’??
Some of you economic genius’s out there; please enlighten me.
May 2nd, 2009 at 10:19 am
language aside, i was right so far, nobody with any financial literacy and intelligence has lost any real money on property, just unrealized gains
marketing experts the world over spend billions promoting sales in their advertising, people love a bargain, but when it comes to housing, just because it’s not being hawked like goods from rebel sports or briscos with all the flash signage some people get shy
i’d rather get 10% off a $400k dwelling than 60% off a $110 toaster. it sure will last longer than the toaster… (leaky buildings aside)
May 2nd, 2009 at 11:30 am
Will be back later to see some answers to my questions. For example, CTNZ could explain to me why he will be smiling in 12 months with cash in the bank if the inflation rate is, say; 10%?
May 2nd, 2009 at 11:40 am
NevK, in 5 years time and it is time for the bank to reset your interest rate, what do you think it is going to be if inflation is high?
What do you think is going to have happened to the whole economy meanwhile?
Do you think it matters at all that businesses cannot borrow money or get their loans rolled over while banks throw all the available finance at the housing sector in a last ditch effort to prop it up? Can the sector that actually provides the jobs and the incomes and the tax revenue, just die off meanwhile, while the economy performs some sort of miracle of levitation based on house price faery gold and consumer spending based on borrowed money?
If we haven’t already reached the end of that rope, we can’t be far away from it.
May 2nd, 2009 at 11:51 am
The trouble is, NevK, rampant inflation is obviously no help to an economy in the overall situation. In Zimbabwe, it is the result of monetary policy stupidity, and it is the result of monetary policy stupidity to whatever extent it happens anywhere.
An economy cannot work with savings being penalised by continual real loss of value. Finance for everything, businesses and housing and government, is supposed to be the result of savings being made available for lending. But that linkage has long since been abandoned in favor of deliberate money supply inflation either domestically or imported. Seriously big things are happening and very few people understand. And it is a biiiiig question who you can trust to tell you the truth. Do you think NZ is immune to the sort of stupidity and venality and denial that has caused so much trouble in other countries?
I recommend THIS to all readers as a matter of general interest: US economist Gary North saying “told you so” to one of his longtime critics:
http://www.garynorth.com/public/4674.cfm
May 2nd, 2009 at 11:58 am
From Gary North:
“…..if you bought in 2007 means that you are $800,000 in debt, a lifetime condition of servitude for all but the highest-income owners. I hope you have been renting, or else you bought in 2002. If you bought in 2002, you missed out on $800,000 of easy money in 2007, but at least you could sell today without bringing money to closing.
You may not be able to sell at break-even next month. One specialist in California real estate expects a further decline of $150,000 to $200,000 for the median price in the Los Angeles area. But, given the high prices in Newport Beach, the decline there is likely to be worse.
For comparison’s sake, here is what I wrote in November 2005 about California real estate.
“”If you remember the S&L crisis of the mid-1980s, you have some indication of what is coming. The S&L crisis in Texas put a squeeze on the economy in Texas. Banks got nasty. They stopped making new loans. Yet the S&Ls were legally not banks. They were a second capital market. Today, the banks have become S&Ls. They have tied their loan portfolios to the housing market.
I think a squeeze is coming that will affect the entire banking system. The madness of bankers has become unprecedented. They have forgotten about loan diversification. They have been caught up in Greenspan’s counter-cyclical policy of lowering the federal funds rate. Now this policy is being reversed. Rates are climbing. This will contract the loan market. Banks will wind up sitting on top of bad loans of all kinds because the American economy is now housing-sale driven.”"
How did I know? Because I had read and understood Austrian School monetary theory. I had read and did not believe Milton Friedman’s monetary theory. I also recognized that Greenspan was a destroyer……
“…….You got into the stock sales business at the bottom of the first phase of a bear market rally: 2002. It rose until October 2007, but not in terms of purchasing power. Then it crashed. That was the bear market I called in March 2000. It sucked you in. It sucked in your bosses. You in turn sucked in your clients. Dollar cost averaging, if they did it after October 2007, has ruined them.
You have been a very naive young man. You trusted Greenspan. He has betrayed you: “Nationalize the banks that my policies wiped out!” You trusted his stock market bubble. It has popped. You trusted his real estate bubble. It has popped. You trusted the investment banking industry. Its business model blew up last October. It’s gone. You trusted Wall Street. It’s busted……”
May 2nd, 2009 at 11:59 am
Having read the various posts the negativity and pessimism is certainly rampant. Or should I say thriving. Property prices have certainly fallen throughout NZ and other parts of the world, we all agree with this. But another 20% “plunge”, or even 10-15%.. let’s get real. Some localised areas may realise these levels of decline, few and far between, but the majority won’t come close to it. Or to put it another way, if you purchased in an area that’s lost 10% with another 20% to go, then you’re a bloody fool. Whether there was a global recession or not, you would have lost money. Word of advice, stay away from the car dealers!
As for not buying for another year or two, well what can I say, rarely do the smartest and most knowledgable buy at the bottom of a market cycle.. but give it a year or two – no matter where you reside, or plan too, you will have missed the boat. By the way, I do own property, a variety in fact, I haven’t lost a cent in real terms.. – don’t need to sell, and I am actively picking up deals here, there and everywhere. Which I have no doubt will turn a pretty penny. Those not really in the market that enjoy a good old whine about the economy, property market and so on.. stick with it, it’s entertaining and sometimes enlightening in a round about way. And to anyone actually active in the market, there has rarely been a time like the present.. best of luck.
May 2nd, 2009 at 12:06 pm
Substitute “New Zealand” for “America” and “Bollard” for “Greenspan” in this paragraph that Gary North wrote in 2005, and it is true of NZ in 2009:
“……I think a squeeze is coming that will affect the entire banking system. The madness of bankers has become unprecedented. They have forgotten about loan diversification. They have been caught up in Greenspan’s counter-cyclical policy of lowering the federal funds rate. Now this policy is being reversed. Rates are climbing. This will contract the loan market. Banks will wind up sitting on top of bad loans of all kinds because the American economy is now housing-sale driven……..”
What I have been pointing out for months now, is that when the economy ends up housing-driven, the central reserve bank can no longer control the economy with base interest rates; cuts inflate housing and consumption and borrowing, but the minute they need to get inflation under control and raise the interest rate, they kill the whole economy in no time, wherapon they frantically cut the rate again, only to repeat the process. We are just tracking the USA 3 or 4 years after.
May 2nd, 2009 at 12:12 pm
Philbest.. I am quite familar with the LA market. Would you care to enlighten us
“One specialist in California real estate expects a further decline of $150,000 to $200,000 for the median price in the Los Angeles area.”
There are 12 million people in the LA area. A lot of houses, most of which have never valued in at $150K, let alone $200K. So a reduction of this magnitude to the median price suggests most of the homes in LA will very soon be FREE!!
As for your rant about from 2005.. oh man, it was written all over the walls long before 2005, did you turn this knowledge into hard cash as many others did?
May 2nd, 2009 at 1:32 pm
Bill,
you’ll enjoy the cartoons at http://cagle.msnbc.com/news/HousingPricesFall/1.asp
though to http://cagle.msnbc.com/news/HousingPricesFall/5.asp
The cartoon about Las Vegas is at
http://cagle.msnbc.com/news/HousingPricesFall/2.asp
May 2nd, 2009 at 2:07 pm
Matt in Auck and Philly, you are such pessimists, nothing wrong with investing in property over the long run it will deliver, we are just in a low at the moment not bad as only a 10% drop from the high. Compare this to shares with NZX 50 about the same level now that it was in the early 2000’s, after the peak in 2007 some cases a 50-100% drop. But property is around 70–90% of the early 2000’s level, what a bad investment property is!!!!
The trouble with you pessemists is that you don’t seem to understand the basic fundamental of property price is supply/demand or replacement cost and the fact that not everyone is up to debt to there eyeballs. Those that don’t need to sell sit, those that unfortuantley have too because they are over-comitted are a minority, and create a bargin for some when they sell, happy bargin hunting I say if you can find one.
May 2nd, 2009 at 2:46 pm
Rod, I’ll leave others to comment about your “supply/demand” theory, as I am limited on time.
But I will comment on the relative drop in the housing & share markets, & I will try to keep it simple for your benefit.
1) Share markets can drop much more quickly than housing markets, so the pain is obvious much faster. The housing market is much more “sticky”, that is why we are predicting the housing slump will take 3-5 years to hit the bottom, taking a lot longer than shares.
2) Share prices are about companies. Companies include debt. When the value of the company drops, the debt remains the same – so therefore the equity part is squeezed disproportionately. Are you with me so far? However, house prices do not include the debt – it is considered separately. But of course house owners are just as indebted, in many cases far more so (eg 80-90%) than companies. So a drop of 10% in a house value for a person with an 80% mortgage means a 50% drop in their equity. OK? The apparent 10% loss is a 50% loss to the house owner, just as much as a share market crash.
Got to go Rod, sorry. If you can’t follow this point, ask some other kind person such as Matt to say it in shorter words.
May 2nd, 2009 at 3:05 pm
By the way, Rod, still waiting for you to debunk my statistics & support your own argument.
In your own time, of course……..
I’ve been waiting a few years for the arguments to support the neverending-house-boom theory, so I’ve learned to be patient…..
May 2nd, 2009 at 3:11 pm
Philly your account of house indebt is for only one small portion of the economy, what is your logic on a house worth 900k that drops to 825k with no debt verses a company that was worth 1 bil in 2007 with 900 mil of debt (from900mil $1 shares from start) then, now that Co. is worth 500mil (on current share value) and is borrowing more money to stay afloat or getting cash injection from the Govt ie. does general motors, ford, chrysler, lane walker radkin, blue chip to mention a few, trigger your memory or don’t you read the News Papers. Some bussinesses facing bankruptacy make the little 10% lose of equity on a house look like chicken fed to a company loses.
Do you get my drift now or do I need to say it in a more simple form for you, Land and Housing is still a good investment long term, verses a failed company even after a buy-out which can take years to recover.
May 2nd, 2009 at 3:23 pm
expat-dont think my neighbours will be loosing there jobs anytime soon, one was a family home which is now 3 four bedroom town houses, one of which has now sold to cover the cost of most of his project, and the other is an elderly lady who has been living there for 60 years.
Bill, glad to hear someone who obviously knows what they are talking about! If you have money in the bank now that isnt on a higher fixed rate, and are paying 39% PAYE the boat is sailing away fast…
May 2nd, 2009 at 3:25 pm
Philly Statistics are Historical like you mate been waiting around to long for people to mis-interpret, I prefer the crystal ball approach to the future so I can become a statistic, problem is I seem to have misplaced my crystal ball, hopefully it will turn up soon.
May 2nd, 2009 at 4:15 pm
Bill, so is the property market in California pretty good for people who invested there in 2005?
The whole point of the Gary North essay, is that to avoid being badly burnt one day, it really helps to have a good grasp of the best theories of economics, even if you had a successful formula that was based on repeated positive experience in the past. Economic conditions can undergo a paradigm shift, especially if one of the causes is a successful formula that everyone has adopted – look at Wall Street.
Gary North and others were right about the US housing market years ahead, and many quite intelligent and authoritative people were not. The whole Wall Street debacle was based on a myth that housing-based securities were completely safe, because house prices couldn’t ever come down.
I am saying that New Zealand is following the USA, predominantly California experience. Our house prices are among the most out-of-kilter with incomes in the world. That has not been permitted to last anywhere else except Australia, we and them are in the same boat.
If our lower base interest rates do not translate into investment in productive capital, business, employment, and rising incomes and a reversal of our economy’s shrinkage, where do you think our ability to service what is already one of the world’s highest household debt levels, is going to come from? If our lower base interest rates translate now into a RISING housing market, wait for it. Make sure you sell out before the California-scale crash.
May 2nd, 2009 at 4:22 pm
“……As for your rant about from 2005.. oh man, it was written all over the walls long before 2005……”
And the House Democrats blocked reform of Freddie Mac and Fannie Mae, and Greespan insisted that the fundamentals were sound, and Wall Street racked up record sales of Credit Default Swaps backing mortgage based securities; yeah, it was written all over the walls, right. Good on ya if you saw it and cashed in, (as you would have if you’d been reading Gary North or Jane D’Arista or Stephen Roach or a dozen others I could name, going back years before 2005), I hope you cash in at the right time in NZ.
You’re not saying that you don’t see any writing over the walls about NZ now?
May 2nd, 2009 at 4:23 pm
these posts (this one inparticular) aren’t great for giving any sort of indiciation on where the housing market is going! half the punters are saying wait, don’t buy for a year or so while the other half say nows a great time to buy, prices aren’t gonna fall much more and may go up…. maybe i shouldn’t be reading these hoping to get any indication on what the markets doing to do.
I personally am on the side of the pessimists mainly due to not having yet brought my first home. I’m 28, got 100k on term deposit which matures in a month then i got no idea what to do? I really want a house but don’t mind renting. I’m prepared to wait if i knew prices are going to fall…. if only there wasn’t such contradicting opinions out there!
I’ve actually held of buying the last year and half due to the pessimism on this website and thats certainly done me no harm financially!!! maybe i should stick with it, when the pessimism dries up, then its time to buy!?? is that a good idea?
May 2nd, 2009 at 4:30 pm
Rod, you have got the crux of the problem exactly:
“…..Some bussinesses facing bankruptacy make the little 10% lose of equity on a house look like chicken fed to a company loses.
Do you get my drift now or do I need to say it in a more simple form for you, Land and Housing is still a good investment long term, verses a failed company even after a buy-out which can take years to recover…..”
That is the problem. It is businesses, employment, and income that drive the economy, not speculation in fixed assets and debt. We desperately need government action to restore business as the main destination of investment.
Speculation in fixed assets, and debt, will only last so long while there is not the growth in the economy and in incomes, to sustain it. That is why we have economic crises all over the world.
There will come a time, if it is not here already, when investment in business will have to precede recovery in housing, by many years. Japan is perhaps the economy which has provided the rest of the world with a living example ahead of everyone else. A time can come when house prices will go down for 15 years consecutively. Japan proves it.
May 2nd, 2009 at 4:42 pm
To give some hard, NZ, facts to this debate; could one of the experts who says houses are still overpriced compared to income please tell me what the ‘real’ value of a house should be on average over against the median income??
This would surely tell us how far away we are from the bottom. Don’t get sidetracked by the ‘an economy doesn’t grow on house prices’ discussion (doesn’t everybody know that?), but focus on: WHAT IS THE HISTORICAL, REAL VALUE OF RESIDENTIAL PROPERTY WHEN COMPARED TO THE AVERAGE WAGE.
Of course, everybody is going to lose their jobs blah,blah,blah. Yeah right, even liquidations create income (look at the liquidators fees on this site!) People do actually have to live somewhere, same as people seem to have to consume oil.
Also, PHILBEST, how long does a recession cycle normally last?? Five years should at least see the economy on the up, going by history.
Further to that, I have an 86-year old grandmother who lived in The Great Depression – and still has her wits about her now – she says those who hung on to their assets and looked after them were the best off when the economy picked up again. (Compared to those who had sold everything and lost the value of their cash through inflation.)
There is no way I could pretend to have The Answer, but it is pretty obvious that these posts are dominated by people who thrive on doomsaying drivel. They need to remember that when somebody loses, it is only because somebody, somewhere, is winning.
Bill seems to have one or two clues, Rod is too ‘it’s all good stuff’, PhilBest – please stop dominating the discussions.
May 2nd, 2009 at 4:47 pm
Trouble is Philbest the aftermath of Rogernomics has merely destroyed manufacting locally and the country relies on imported crap that only ends up in the land fills evenually, I remember when I was a kid you got toys that lasted forever, past them on to future generations, today most of my kids toys don’t last more than a year as they fall apart. So my argument is that businesses are so weak here apart from a few, that one is mad to invest in them.
I think personally the whole thing is on a crash course of which we could be seeing the start of it, for most I hope its going to recover or else there will be nothing left to invest in if all the pessemists here on this Blog are right. God defend the world.
May 2nd, 2009 at 4:51 pm
Ecker, if a few thousand of you formed an association and boycotted the market, you would get your wishes of low prices sooner rather than later.
What I am pointing out is that the last few years are unique in economic history; house prices in NZ, Australia, Ireland, Spain, parts of the USA, and the UK, and several other countries, have delinked from incomes like never before, and this has produced the very economic distortions themselves that have caused the economic crashes.
Up to 1990, it was normal to be able to buy a house with 3 years income. (median figures). It started to rise steadily from there, until in 2002 it was 4 times. From 2002 to 2006, it went to over 6 times.
Our economy is now in recession, as is the rest. We and Australia just have not had the housing crash like the other countries, partly because we are a few years behind the others for our reserve bank cutting interest rates. I pick that our fate depends on what we do with our breathing space. If we pump house prices up again, we are asking to have the biggest crash of anybody, because as Rod points out, there is just no interest right now in investing in businesses – and where else is recovery in our incomes going to come from?
If you want to read more about this, do check out Hugh Pavletich’s website and the annual Demographia reports that he helps produce. Hugh is trying to convince the government to free up the supply of land so that new sections are not a rip-off price any more. All the increase in value since 1990 has been in land, stemming from the price of new sections. If you could form a co-operative and buy a farm and have it developed, you and your mates would end up with $30,000 sections. Then you could build $150,000 homes on them. The only thing stopping this happening is Councils Zoning policies.
I actually blame the whole crash in all countries, on this phenomenon, which has only developed since Greenie conservation ideas became fashionable. There have been share market bubbles before; the monetary conditions were all there for house price bubbles; they didn’t happen, simply because $30,000 sections in those days, stopped them. Most of the USA actually has not had this problem, it is mostly confined to California. Countries that have not had the problem, are Canada, Germany, and Austria, simply because of their continual development of cheap new houses.
England, on the other hand, is the only country in the world to have had 3 huge housing price bubbles since 1960; why? They started conserving land in the 1950’s.
One of the best things you could do is use the info on Hugh Pavletich’s website to lobby the government in support of his proposals, and get your mates to do the same. And organise a boycott of the market until it has seen sense.
May 2nd, 2009 at 4:59 pm
Rod, productive business needs lower taxes and less regulatory hindrances. (As opposed to the finance sector).
But apologies for “dominating the discussion”, I will leave it alone now. I hope my points are of value in getting a handle on the problem.
This quote from Ludwig Von Mises is my motivation:
“No one can find a safe way for himself if society is sweeping towards destruction. Therefore everyone, in his own interest, must thrust himself vigorously into the intellectual battle.”
May 2nd, 2009 at 5:27 pm
PhilBest – yeah right…. i really see all those happy farmers, conversationalists, DOC workers, trampers, and land bankers lobbying for change in land release reform.
Rod, make hay while the sun shines… sooner or later those still in a position to will latch on to what you are saying, but in the meantime enjoy.
and for those fixated on history, i remember not being allowed to take a calculator into mathematics exams, that does not mean that some day soon the same rules will apply
and if i have to finally be rude and shout so be it. IS THERE ANYBODY THAT HAS LOST REAL MONEY ON PROPERTY THAT HAD ANY FINANCIAL LITERACY TO BEGIN WITH?
and sorry for shouting (but i guess from the silence i have my answer)
May 2nd, 2009 at 5:40 pm
Is someone going to answer Nevk’s question?
“# NevK Says:
May 2nd, 2009 at 10:18 am
I don’t pretend to understand economics, but I would like someone to explain to me why some people here are always saying that house prices are going to carry on plummetting and we better sell up now, and in the same breath say that rampant inflation is just months away.
In times of severe inflation, aren’t people who own land (commercial land, rural land, residential land, any land) better off in the long term?? Someone with a mortgage can fix for 5 years at 7.5% now can’t they?? What rate of inflation is ‘rampant inflation’??
Some of you economic genius’s out there; please enlighten me.”
May 2nd, 2009 at 5:46 pm
President of Property you are so right why can’t all the pessimists and doomsdayers see it.The only ones I know that have lost real money on property would still have done so in a good market, I was into shares in the 1980’s and lost about 50% of my money in the crash, since then I put the money I recovered into a roof for my first spec house after 3 years my accountant said to me stick to bricks and mortar son forget unit trusts, shares, super funds and any other type of investment, GOD I AM PLEASED I LISTENED TO HIM I AM NOW SEMI-RETIRED, but still play in property for a supplement income and to this day have never ever lost any real money in property, and don’t intend to either, and thats where I am staying, I love it. People will always need a house to live in even if they are unemployed, working, or retired. But when businesses fail or enter bad times you lose.
May 2nd, 2009 at 5:58 pm
dazza, the only response I’ve had is PhilBest ranting about me having a mortgage in 5 years and the bank re-fixing the rate.
I won’t have a mortgage in 5 years, so I’m still none the wiser from what he says. And for those that do have a mortgage, look at it like this: mortgage on interest only at 7.5% for five years while inflation is at 10% and higher, or cash in the bank at 5% less tax?? Who will be better off in 5 years??
Of course, maybe inflation won’t happen – in which case half of PhilBest and his mate’s arguments are irrelevant also.
Is it too simplistic to say that either house prices carry on down for 5 years and we have deflation or they start moving up again and we have inflation??
Oh; for someone that really has the answers!!
May 2nd, 2009 at 6:45 pm
Rod – its interesting that you see people who believe property will fall further as pessimists.
why am I pessimistic for thinking property will fall further?
Pessimism is a view of the future based on a negative outcome. I would argue that more people would benefit from property falling another 5-10% than would suffer
People who have owned their own houses for more than 3-4 years wouldn’t be that affected. the only ones who would be really hurt would be those who bought in the last year or two and over leveraged investors
Potential first home buyers would benefit significantly
I guess it depends on your position, but I consider myself an optimist because I see further property price falls as a good thing
May 2nd, 2009 at 7:44 pm
i am completely neutral on the whole thing, but as it is only 1972 i think i will go out on a limb and buy all the waterfront houses in auckland and wellington, and all of parnell and ponsonby and see what happens in 45 years or so… i have a feeling that in about 2009 they prices will be better than they are now, and i’m guessing that trend will continue on from there into the even more distant future… in fact i might even buy some grammar zoned properties as they might come in handy too. I think I will structure the monkeys to be interest only and see what happens, and in the meantime will probably have to start clearing other peoples pubic hairs from plug holes during renovations before i can retire early or going fishing, saving the world or whatever…
May 2nd, 2009 at 7:52 pm
Matt you are a pessimist because basically property is going to stay around current levels for years to come before they increase, but you are all talking negative that prices are plummeting, and are going to crash, the only reason they iniatally plummeted here and overseas was because of the speculative over-supply, which now has been sold off to a large extent. Also this is not the first time this has happened in NZ, Auck has had its moments in the past, so has Ch.Ch.
I do support your views in respect of overleveraged investors but they are the minority in this cylce. I for one are totally against negative gearing and have never taken part in it for the simple fact of what is happening now was always a possibility, the only away ahead is reducing real debt not being greedy. the only way to reduce real debt is to increase real disposable income of which there have always only been 2 ways to do this (1) pay off debt or (2) get an increase in income.
May 2nd, 2009 at 8:01 pm
Gosh I wish I was around in 1972 with you President of Property and adopted your approach I’d be living on my own private Island in the pacific or somewhere exotic, mind you isn’t that how some of the billionaires/millionaires of today became just that by buying property and not being pessimists as to the future of the property market, lucky buggers they got a head start, not like some of the pessimists above
May 2nd, 2009 at 8:18 pm
As for negative gearing, I wouldn’t touch it either, and if anyone wants to know exactly why, if they give me $100, i will tell them why AND give them $75 for free…
May 2nd, 2009 at 8:54 pm
>>>>
buyerinchch Says:
May 2nd, 2009 at 3:23 pm
expat-dont think my neighbours will be loosing there jobs anytime soon, one was a family home which is now 3 four bedroom town houses, one of which has now sold to cover the cost of most of his project, and the other is an elderly lady who has been living there for 60 years.
Bill, glad to hear someone who obviously knows what they are talking about! If you have money in the bank now that isnt on a higher fixed rate, and are paying 39% PAYE the boat is sailing away fast…
>>>>
Dont follow your line of discussion, you must be replying to someone else.
May 2nd, 2009 at 10:15 pm
And what will happen to the value of commercial real estate in this ‘low interest rate’ environment?
May 2nd, 2009 at 10:24 pm
Carl, you are obviously one of the experts please tell us.
May 2nd, 2009 at 10:30 pm
Nev K Some of the comments on this thread seems like posturing to me..”.I’ve been clever, I’ve got property….you’ve missed the boat “etc. Fact is…. not everyone wants to be a property investor!
NZ society is all about the struggle for existence. Its hard for families who are basically
honest and hard working to get ahead here.
Obviously, the people with PI’s want the property market to go on being the golden goose because its been an easy way to make money in a poor country and it has brought them prosperity. The people without property want to be able to buy a home or for their kids to be able to buy a home at a reasonable price without unreasonable debt levels. They feel the current situation is not fair or just .
I agree with Matt, the patient has had an abnormally high temperature with a huge spike on the chart which is coming down now
To acknowlege that, is not being pessimistic, it’s being realistic. Some would say that by throwing another high temp and spiking up again that the patient is “recovering”
Others would say that “recovery”will be when the rise in house prices returns to the normal historical curve.
We are in a new situation now, with the Govt., the media and vested interests doing their utmost to keep the poor patient sick with a very high temperature.
We can only watch and hope that there is a way out of this fever of excess debt that has been created.
We sold up in April 2007 ( more by circumstances than clever planning) and are waiting to buy when the fever goes down a bit. Maybe we will miss the boat, maybe we can’t actually afford to live in NZ, maybe we won’t want to live in NZ the way it might be soon.
No-one can tell you Nev K what will happen for sure… but good luck!
May 2nd, 2009 at 10:37 pm
Houses in my neck of the woods are just sitting on the market-
There are 5 very nice houses in my neighborhood that have been sitting on the market for a year now. 4 years ago houses on my street sold as soon as the sign went up.
May 2nd, 2009 at 10:43 pm
…..I heard there is good news – despite a lot of businesses are closing, at the same time new Loan & Law offices and Second hand stores etc. are opening all over New Zealand – great ! Time to invest in commercial real estate.
or 
???
May 2nd, 2009 at 11:08 pm
I agree
May 3rd, 2009 at 9:03 am
Prosperopink, the pessemism is coming from all the negative people on this blog. Don’t forget what the blog is about the realistic thing here is its Headline, although I think it far to say that buyers probably still hold the majority of power but are losing some also, so being the successful optimist I am from my current to date experience in the P market the author Alex Tarrant is somewhat right, therefore that is why you are a pessimist along with the others here, not a realist as you claim to be.
May 3rd, 2009 at 10:33 am
Rod, pessimist and optimist camps take opposite views for sure. This is not surprising given that everyone knows there are bulls and bears who drag the market to their side (profit). The balance in the market gets lost at times. The bull cycle went much too far in the NZ housing market and some correction has taken place. No one knows how much further correction will take place and it is already over. We have our individual bets. The role of the referee, the central bank/Government is not often balanced. The excessive and irrational housing investment using overseas debt is still being supported by the monetary and tax policies in New Zealand. The risk free low deposit interest rate may force many of the savers to take shelter under housing. What is good for a group of individuals need not be good for the country. We do have a large section of the society who are poor and cant afford to decent housing or debt free. Only productivity growth can bring wealth to everyone in the country but not the profits made by the section of the society on housing investments. It all depends on how the monetary and tax policies evolve in the future (given our debt levels, political realities etc).
I do agree that housing investment proved profitable for us in the past but one can never be sure about the future given what happened in other Anglo-Saxon countries.
May 3rd, 2009 at 10:56 am
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10570065
May 3rd, 2009 at 11:35 am
P of Property good artical backs what we are saying.
sam.p I agree but the poor have become so from the huge gap in salaries over the last 3 decades, for example the factory worker on x salary and the manager on y salary, give them both a 5% pay rise pa and after 30 years you will see what I mean. The compound factor is guilty not only in that case but also can be said for peoples greed and the countries debt, but one thing all the pessimists forget we still need a roof over our heads and that market is driven by supply and demand, as you can see both are weak at the moment so nearly a balanced market one could say, although still favouring the buyers not by much though and that s what Alex is saying above.
May 3rd, 2009 at 11:54 am
Rod,
“good article backs what we are saying.”
Which is what? That article can be read as supporting both Bull & Bear arguments. For the Bear there are quotes like
“The trends are far from certain, and most experts agree it’s too early to confirm an upturn.
..
the report’s conclusions has been refuted by some property experts saying it’s too early to tell”
For the Bull
A cautious murmur of optimism can be heard from some economists, property companies and estate agents: they are hoping that a slight upturn in house sales may herald the start of the recovery.
Stating that article backs what you are saying is a long reach.
You might be right. If I was a gambling man I wouldn’t bet my house on it though.
I would suspect this article:
http://www.stuff.co.nz/business/2380652/Property-investors-get-probing-bank-questions
is probably more for the Bear case than the Bull case at this point in time. But again. Whether this is true or Main Stream Media sensationalism is something that will become apparent with time.
May 3rd, 2009 at 12:24 pm
as i have said before – food, clothing, shelter and water (presuming oxygen is readily available) and if necessary – debt…
Gibber – you are correct, we always tend to look for things that back up our own personal opinions, so it is important to have reality checks every now and then
as for the article, hmmmm, a worry to some for sure, a good sign for others, and for me, i’m glad i am requesting through legal channels for discharge of mortgage over some of my properties to get my LVR in line with current bank policy, so have have dry powder for another day…
and as for those that say property investing is not work, what is the difference between slapping on paint to attract better tenants, or slapping cups on a cow to get milk, or slapping something on the lathe for a client, nil, nada, nothing. They are all productive jobs, unless you think we should all be slum dwellers.
It boils down to do what you know the most, what you think you know less, what you don’t know even less than that again, and occasionally discover what you don’t know that you don’t know, and what you thought you didn’t know but you do.
May 3rd, 2009 at 1:08 pm
Gibber, backs the optimists that can see the turning point or least a stable P market, doesn’t back the pessimist that are predicting a plummet in the P market by a further 10-20%, I do agree it is to earliy to tell for sure
May 3rd, 2009 at 1:16 pm
Just heard that house prices in dubai has dropped by 41% from previous quarter.. who would have thought a place like dubai would get affected by the global slump????
its just a matter of time before buyers in NZ realise the selling tricks our real estate agents.. and stop paying more than a property is worth.
this article clearly indicates how real estate agents are out to fool people to make a gain/profit for themselves and their vendors…
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10570014
May 3rd, 2009 at 1:31 pm
Mario Dubai was built by speculators, the prices there where though the roof, NZ was built by immigrants over 150 years, although some foreign intervetion here did push prices up in certain locations, thanks to Rogernomics deregulating and letting foreign ownership esculate.
May 3rd, 2009 at 1:46 pm
And another interesting article from Olly N
http://www.nzherald.co.nz/commercial-property/news/article.cfm?c_id=28&objectid=10570011
For those who are looking to invest in property in the near future you could do worse than read this article first. At least you will be more likely to avoid the mistakes Olly has seen.
May 3rd, 2009 at 2:03 pm
Mario – the article doesn’t say agents are using tricks, it is saying there are still uneducated greedy people who get excited about buying someones loss, even if they have to pay more for it
secondly, i wouldn’t rate too highly someone that wrote “A bank or finance company will want to unload the property with the least possible risk.” as they are telling people one thing but meaning the exact opposite – darn fools…
and i believe Dubai is rather oil orientated, but i think it’s fair to say that the price per barrel has dropped somewhat, so perhaps maybe there is less cash to feed the purely speculative market that Dubai is.
housing in NZ is not all about greed and money – sometimes it is about housing….
May 3rd, 2009 at 2:28 pm
Regarding Property investment-
It seems to me there are 2 main approaches; buy and hold or do-up and flick off.
The first being investment and the second being speculation.
I tend not to bother reading much about the speculation at the moment- in my humble opinion it is not even worth discussing. If you don’t know why, then brush up on risk analysis.
My concerns regarding property investment are these:
1. Rents may well drop quite a bit. Good ol’ supply and demand…
2. Government will introduce capital gains tax.
Number 1 would be survivable for the smart investor.
Number 2- not so much…
I can’t help getting the feeling that number 2 is coming, but can’t back it up with any further info sorry.
May 3rd, 2009 at 2:35 pm
there are murmors and rumors that the Budget could hold some surprises, such as introduction of Capital gains tax, will have to wait and see.
May 3rd, 2009 at 3:09 pm
I wonder how CGT would affect fixed rate investments as interest payments are a form of capital gain, therefore CGT would have to be around the minimum tax rate at least, ala vista to the wealthy with heaps of cash in the bank, you can’t stop the rich getting richer and the poor getting poorer now can you.
May 3rd, 2009 at 3:51 pm
Fixed rate investments would not attract a CGT. The capital does not change. Interest payments reflect the benefit gained by lending the capital. Just as the borrower pays interest as a cost of having the capital to use as they choose.
May 3rd, 2009 at 4:33 pm
there already is a capital gains tax if the intention is to make a capital gain, if anyone be so bold to introduce a broad sweeping CGT for every property they will not be in government next time around, and when/if such an occurrence does occur then it would most likely be on investments after such in such a date.
maybe something more like a stamp duty for buyers and sellers will be introduced before they took political suicidal measures like CGT,
there are plenty of people out there for the IRD to grab as it is, and some measures are already taking place to have cheaters of the current system to come in from the cold, and huge penalties for the idiots that have GST and CGT to pay on all their rollovers and flicks
May 3rd, 2009 at 4:38 pm
I think there are alot of good tenants out there currently that were saving to buy property and now cannot with 20% deposits, making renting quality family homes easier.
The changes in the market and drop in housing values does create some unusual situations, friend brought a house on full size section in a good area with no depost 18mths ago after trying to save and get into the market for 5 years, his property may currently be worth 50k less than he paid but is happy now his mortgage has rolled over to floating and isnt renting/saving for the next xxx? years to get 60k deposit.
May 3rd, 2009 at 5:17 pm
buyerinchch – good point, i had not taken that angle into account, better a foot in the door than a stubbed toe from kicking the brick wall looking for an entrance way into property…
also the drop in interest repayments is a nice balancer, especially if they keep up with the old payments to pay it off in less than half the time
May 3rd, 2009 at 5:45 pm
I am looking about to buy in the lively city of Nelson. For the houses that sit on the overinflated pricing of the last 4 years there seems to be little interest ie I am the only one at the open home. However I viewed a house today, in my opinion realistically priced, with over 200 people at it, it was insane. Pent up desire to buy.
My point would be that no, residential property doesnt follow the rules of investemtn, because it is detached due to the psychology of the masses. It will take a huge cultural change to remove this, and it wont happen in our lifetime.
Prices to bounce along the bottom for a few years. Those that dont have to sell wont. Inflation to pick up in a couple of years and prices with them.
Yes there will be unemployement but not at the scale predicted.
President of property, no , no one has losst money in bricks and mortar, but not because of any financial nouse, but because of the extraordinary power of greed and fear buying. As long as this psyche stays around no one will. Hate to be holding the tulips when someone says they are worthless though.
Matt, for gods sake buy a house
May 3rd, 2009 at 6:36 pm
There is little chance to make any big money on housing investment for another 3-4 years to come. Any investment must be for a long term such as 10 years. At the current levels housing investment is good only for cash rich to hedge against the inflation but such investors are not many. First home markets may sustain due to lower interest rates as long as the unemployment does not increase very much. The excessive debts will always blackmail us and housing investment is most vulnerable. There are lots of IFs & BUTs……….. Cerainly not a time to rush.
May 3rd, 2009 at 6:42 pm
Fairfax Orouke, well said you are on to it. Hopefully Matt will listen to us because the pessimists only see negative things, you know what they say about negative people hey!!! THEY GET LEFT BEHIND AND THEN MOAN ABOUT IT BECAUSE THEY MISSED THE SHUTTLE (silly Fools).
May 3rd, 2009 at 6:45 pm
.
May 3rd, 2009 at 7:54 pm
Rod, your attitude sounds quite arrogant… there is no need to call anyone Fools… this is an open forum and treat it as a discussion, rather than abusing others…
May 3rd, 2009 at 8:17 pm
Mario sorry about that, does silly pessimists sound better as I suuspect you are the PC type.
May 3rd, 2009 at 9:59 pm
I have been looking to buy a house in West Auckland for a few weeks now. As we have decided that my wife will stay at home and care for our children we are somewhat limited as to what we can buy. What we have found is that any place halfway decent in our price range is beeing ’swooped’ on by investers/vultures. There is limited stock at the moment because people dont want to sell if they dont have to, and the quality properies are being sold quickly. And by the way, I have a 90% mortgage pre-approved, so not sure about all this 20% deposit requirement malarkey.
May 3rd, 2009 at 10:02 pm
Mario,
perhaps you might want to check out Steve Keen’s blog.
I have linked to a post on the economy in Oz from someone who purports to deal with banks and insolvent companies. The way its different this time is that the banks are not foreclosing. They are allowing the companies to choose to go belly up…
From this page
http://www.debtdeflation.com/blogs/2009/04/27/launch-of-political-economy-now/#comments
snipped from a posts by gaday May 3rd, 2009 at 7:44 pm
“For many years 20-25yrs I have been consulting with small business retail, mainly within one particular category. I deal with (mostly in troubled times such as now) banks and insolvency companies. This time it has been different in that the financial institutions have been reluctant to foreclose allowing many small businesses to “go to the wall” on their own accord. This is most probably because the collatoral is negative ion equity as is the business and the bank has the mortgage anyway. The cause and delay are a bit mixed up but fair to sya that the banks have over lent and our now facing up to the task of recovery.
It would seem that the Banks and the Govt have been concentrated in their efforts to focus on the big picture borrowers (what I call the top of the financial pyramid)and their collaterised debt obligations CDO’s so that they can adjust to the “roll” over of funds needed from overseas in the near future. These companies would especially be REITs and LPT’s where the property valuation and therefore loan to value ratio, exposure would be international as well as local. The banks have told REIT’s and LPT’s to go to their shareholders for investemnt money for “we want ours back” What is that saying? is it that property prices are going to rise in the near future? I don’t think so.
It is now time for the “base” of the pyramid to come under scrutiny and as Mike Smith (ANZ) stated last week as did the NAB that the small business sector and the debt defualts in this sector is alarming (however they believe managable of course)
My experience is that it is a cliff hanger with more hanging on by their finger nails than one can possibly concede. Ofcourse once these businesses “go” their homes, jobs, families will all be affected. This is the real crisis of what this recession/depression is really about it’s about what I believe Steve is saying and theat is our INDIVIDUAL DEBT LEVELS ARE TOO HIGH it’s reflected in the GDP that we actually have spent 60% more than we have earned for years and years and years. With unemployemnt and small business failures this will come to light a lot quicker than the Babcock and Brown’s or ALLCO or ABC Learning etc We have always had this type of clean out in any recession but grass root worker and small business defaulting is really depression stuff.
I agree with Steve housing and all collatorised propery, investment will fall in price 20 -30 -40 percent for those that have to sell maybe more, just look at the share market if one has to sell.
A lot will depend on how many “hit the wall” at the same time as to how much the prices will fall for once the scary bits hit the man in the street undercomsumption will be paramount.
Steve, on a day to day basis it is hard when we hear read all the spin to stick to the truth I admire that your conviction is also learned and makes sense to laymam like me. It is comforting to read and sometimes hear what you say for it gives me reassurance that I am not a one off dissenchanted negative guy just someone that sees that the excesses of the past have come to roost no matter and no matter how it is ‘hidden” will come to light.”
Is he a realist or a pessimist?
May 3rd, 2009 at 10:38 pm
It’s been an interesting read. I really enjoyed people talking about how they have knowledge of the California market because I listen to a US radio station and one of it’s advertisers talks of four bedroom two bathroom houses going for $20,000.00 – now that’s a buyers market.
It would seem to me house prices in NZ are dictated here in NZ by baby boomers – who don’t need to sell, how-ever with generation x and y being expected to come up with 6 * their earnings, this is not sustainable for them to raise a family.
So the result is that the government (mainly baby boomers them self), will encourage more foreign Baby Boomers to live here, and generation x and y will continue to live as serfs or relocate overseas.
May 3rd, 2009 at 10:45 pm
Matt the Vultures buying now are leveraging debt and will be the first out of the market should NZ follow the US trend.
Warren Buffet said something like “I can never pick the top or the bottom of a cycle, but I can tell if it’s good value for money”.
The house you purchase should not be more than 3 * your house hold income.
May 4th, 2009 at 3:10 am
An infestation of real estate people on this thread it seems.
May 4th, 2009 at 6:45 am
We’re living the curse of a globalized environment. Same as with our dairy, wine, meat and timber – if we want something that is NZ made, we have to be willing to pay the same as the highest bidder overseas. That, tragically, seems to include our housing.
Despite the fact that property here is generally pretty shoddy and completely “unsustainable” from an environmental perspective, our housing market is priced to compete in much richer “global” property markets.
Houses here might not be 3 times our salaries, but sure as heck they’re 3 times somebody else’s. While this continues to be true, I’m afraid that we can forget any notion of property prices coming down to 3 times our average wage.
It’s sickening really, but it’ll continue until somebody decides to put some legislation around the property market. I’ve not seen an industry so rife with intrinsic greed – worldwide, it’s time somebody put a lid on it somehow. We’ve already seen how left to it’s own devices, it is capable of generating and destroying tremendous amounts of wealth within very short time-frames.
Surely we need some sort of legislation in place?
May 4th, 2009 at 7:19 am
Mozart well put, blame is all on Rogernomics under the Labour Govt”s 1980’s deregulating reforms letting anyone buy property here, except for the big stuff its open to anyone.
May 4th, 2009 at 7:25 am
Well said Mozart.
I still cannot see what foreigners (not residents of NZ) have to offer our country (whether you’re a PI or a home owner) by being able to purchase property here. Please sing out if you can think of anything.
We’re one of the few countries that still allows this.
May 4th, 2009 at 7:33 am
Bottom line. The Auckland housing market is steady and likely to stay that way for a number of years. If you have been waiting for the so called property crash, well it has already happened. Section prices have halved. If you are wondering when is a good time to buy? Well when you need a house is a good time!
With the current price of sections and current interest rates the maths is just starting to work again for new houses, which is great!
May 4th, 2009 at 7:41 am
Gavin: Could you please link to data on half price sections. Haven’t seen any myself.
May 4th, 2009 at 7:50 am
Gavin, the bottom line is we are no where near the bottom of this cycle, house prices and interest rates may have dropped but the underlying value is still not there for generation x and y who fund the debt portion of the market.
They continue to vote with their feet and move overseas.
May 4th, 2009 at 8:15 am
I have a question. Does anyone have reliable statistics as to the actual percentage of homes that are owned by foreign investors? I’ve looked through NZ Stats and see that the % of residents owning the homes that they occupy has declined since 1991. In 1991, 73.8% of dwellings were owned by “usual residents” whilst in 2006 this number is reduced to 66.9%. Additionally, the % of dwellings “not owned by usual residents” is at 33.1% as compared to 29.3% in 1991.
So whilst the % of “not owned by usual residents” shows an increase, does this refer to foreign ownership? Is the NZ housing market significantly impacted by foreign ownership or by something else?
May 4th, 2009 at 9:00 am
Two more articles that could indirectly affect house prices for the short term..
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10570168
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10570147
May 4th, 2009 at 9:21 am
Mario, stop bringing up inconvenient facts. The market is bouncing back, we all know that.
Move along, nothing to see.
May 4th, 2009 at 9:46 am
I have to say that it galls me to know that there are no real restrictions on overseas investors snapping up land & property in NZ.
Kiwi’s surely have a right to property pricing that is aligned with their income and environment? We all know that everyone else in the developed world earns more than we do – allowing unfettered access to land and property seems like selling the family silverware. Sure, there’s a short-term gain (for individual’s, not NZ as a whole) but then what?
So why don’t we put legislation in place, protecting these assets for the benefit of Kiwi’s as a whole? Obviously, I’m including those who have made a commitment and gone to the expense of going through the residency process as Kiwi’s.
And why don’t we have a Capital Gains Tax on properties other than our primary residences? It wouldn’t stop people from buying investment properties, but it would certainly encourage a more measured approach to the whole business.
I know a lot of people rail against the idea of a CG Tax, but I can’t see the problem with it. It would only kick in if you sell a residential property that is surplus to your main residency and even then, only if you make a profit out of it.
It’s not going to be the silver bullet to fix all inequities, but it’s a step in the right direction.
May 4th, 2009 at 10:08 am
expat, you must be a real A** hole to tell someone else what to do!!!
May 4th, 2009 at 10:10 am
Expat , read it if it suits you, else ignore it, dont tell me what to do.. Go tell your mum that!!!
May 4th, 2009 at 10:26 am
Mario? Hello? I think Expat was being ironic. You can tell that by his use of the word “inconvenient” . Dear me.
May 4th, 2009 at 10:32 am
lol!
May 4th, 2009 at 11:31 am
May 4th, 2009 at 12:49 pm
Back at the top of this thread, “Optimist” said: “A true test of the Auckland Central real estate market will be the auction of 46 Cumberland Avenue in Westmere at 11am this Saturday 2nd of May. Huge numbers of people have viewed that house – I attended one of the open homes and there must have been 40 people there and it has had thousands of online hits. Will be interested to see how many people make bids and how much above the CV it actually sells for on Saturday.”
Well it seems this property failed the test as it apparently didn’t sell, and is now on the market for the hilarious price of $769,000. The agent has had the chutzpah to put “Priced to SELL!” in the listing title too.
May 4th, 2009 at 1:07 pm
Well all I can say is I don’t believe it. My own saved search on Trademe for specific properties in a particular Auckland suburb in a particular price range has gone from 25 listings in January to 28 in March to 34 now – a steady increase. I’ll be the first to admit it’s not scientific but neither is most of the much hyped data you read these days anyway. Still no need for would be buyers to panic!
May 4th, 2009 at 6:12 pm
Woah, just checked out that listing dave, http://www.realestate.co.nz/1045896/statistics
Can’t believe that house has $770k on it….dam! That house wouldn’t be worth anymore than $250k down here in Invercargill!! glad i’m not a jaffa!
May 4th, 2009 at 6:29 pm
Ecker – yeah its nuts mate
Its a tidy enough house but $770K?????
Mozart – I totally agree with you. How can kiwis compete with cashed up immigrants and foreign investors? Fact is, most of us can’t.
I said to my foreign-born wife the other day that “kiwis are getting ripped off” She totally agreed.
I guess these kinds of property prices are the price we pay for the “benefits” of globalisation.
May 4th, 2009 at 8:08 pm
As the first Realist, this price has nothing to do with immigrants or cashed up buyers, but unrealistic expectations. No way will this house go for more than $700k and should really only be worth $600k max. But stick Westmere, Grey Lynn or Ponsonby in the title, throw in a latte or two and common sense goes out the window.
3 rooms, 1 bathroom and lots of ongoing maintenance.
May 4th, 2009 at 8:16 pm
well realist cashed up immigrants and foreign investors have been an influence in these ridiculously inflated prices, as well as many other factors. Of course if planning regulations weren’t so overly restrictive the demand side factors like foreign investment wouldn’t matter so much
But you are right that house should be $600K max. I’m renting a similar place at the moment, its got character and is charming blah blah but is starting to feel cold as winter approaches, the roof leaks etc etc.
Mind you that place does look like it has a nice big section
Still a silly price
May 4th, 2009 at 9:13 pm
Heck – Here’s a Palmy equvalent for under $250K! And this is a great no exit street – a block away from the Warehouse, New World, Spotlight, Pizza Hutt, Mad Butcher, The Mill to name but a few – with the Square being about five blocks away!
http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-216089633.htm
And if you want to go to a great beach – Kapiti’s about a 45 minute drive!
(Waits for the Palmy jokes!)
May 4th, 2009 at 9:29 pm
http://www.haaretz.com/hasen/spages/1077151.html
A great article on economic irrationalism
May 4th, 2009 at 9:52 pm
Kate, Properties in burns ave and nearby areas in palmy are selling below th RV (roughly by 10%). A property with RV of $230,000 does not sell for the asking price of $245,000 in Palmy.
May 4th, 2009 at 10:55 pm
sam.p – totally agree … but it hasn’t stopped folks asking – it just stops them from selling!
We bought one in Riverdale 18% below current RV (RV done in 2006) about a year ago now – new RVs are due out later this year … should be interesting, and Palmy won’t be the only place to be re-valued shortly.
Somehow I think the ‘powers that be’ (banks and government) aren’t going to want to see rateable valuations drop wholesale all over the nation however.
May 27th, 2009 at 10:18 pm
We have been looking for the last 18 months and have sold… In Remuera/ Epsom area…Shortage of stock.. but more vendors meeting market and some getting good money.. Circa CV… B and T had 75 sell out today at auctions…. six months ago zero….
last night one property was handed in at 860k… cv was 1.15… mixed bag huh…
Keep hunting… remember the agents will always talk the market up to buyers and down to vendors.. to close the gap…..
More competition on sales now…