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Median house sale price up 0.9% in September as sales rise 10% from August (Update 4)
October 14th, 2009The first month of the ’spring selling season’ saw the national median house sale price rise 0.9% in September from August, while sales rose 10%, figures released by the Real Estate Institute of New Zealand (REINZ) show.
(Update 4 includes ASB economist Jane Turner noting seasonally adjusted sales rose 2.9% over the month, also comments on RBNZ implications.)
The national median sale price was NZ$350,000 in September, just below its peak of NZ$352,000 in November 2007. There were 6,464 sales over the month, up from 5,878 in August and 4,499 in September 2008. See all of our real estate charts here.
Newly appointed REINZ President Peter McDonald said the figures “indicate improved confidence of buyers and sellers in the marketplace”.
“We’re seeing a slow, but steady, appreciation in sale values and we’re now back to the prices being fetched in the corresponding period in 2007 when the median was NZ$351,500,” he said. There were 5,894 sales in September 2007.
House prices in September were up in all but three out of 12 districts compared with 12 months ago. Northland was down 4.20% from a median of $297,500 to $285,000, and Hawkes Bay fell 2.48% from $271,742 to $265,000. Central Otago Lakes was down 15.62% from $480,000 to $405,000.
The biggest rises were in Auckland, climbing 8.33% from a median of $420,000 to $455,000; Taranaki which rose from $256,583 to $283,000 (up 10.29%); and Wellington, up 8.04% from $350,000 to $378,168.
Number of days to sell was the third factor contributing to what the real estate industry is describing as a very encouraging month, Mr McDonald says. Nationally, properties took a median of 33 days to sell compared with 34 in August and 52 in September 2008.
“Again for days to sell we’re back to 2007 figures which was a comparable 32 days,”
The REINZ’s new Housing Price Index, created with help from the Reserve Bank of New Zealand, increased 1.9% in the September month, while prices in the three months to September were up 2.5% from the three months to August. The index rose 5.3% from a year ago, and shows house prices in September were down 4.4% from their November 2007 peak, the REINZ said.
ASB economist Jane Turner said sales rose by a seasonally adjusted 2.9% in September from August “largely as expected given the steady pace of mortgage approvals and agent listing data.”
“Housing demand continues to be underpinned by the lift in net migration and low interest rates,” Turner said.
The RBNZ is likely to be uncomfortable with the current degree of tightness in the housing market. While agent data suggests new listings are increasing, it has not been enough to meet demand resulting in house prices continuing to be bid up. The very low number of days to sell suggests more house price inflation pressure is likely over the next few months.
However, a strong housing market and rising house prices are likely to attract new listings and encourage new building, and we expect the supply and demand imbalance will soon correct. However, in the meantime house price inflation has been slightly stronger than we had been expecting.
The RBNZ has voiced concerns around the sustainability of a housing-led recovery. The current heat in the housing market is taking some time to cool, with supply sluggish to respond. On its own, the current housing market may see the RBNZ favour increasing the OCR sooner rather than later. Although this needs to be traded off with the current fragility of the economic outlook and the high NZ dollar undermining export competitiveness.
While we do not expect the RBNZ to increase the OCR until June 2010, we see the risks skewed to an earlier start.
We will provide further updates.
Tags: House price index, House prices, house sales, Housing Price Index, median house price, Peter McDonald, REINZ, Reserve Bank of New Zealand
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October 14th, 2009 at 10:41 am
What does he mean by “house”? Does he refer to insulated houses? Might there be a “P” lab next door? Will the property to the north be bull dozed to make way for a high-rise apartment?
October 14th, 2009 at 10:54 am
Great!
I would probably receive a flyer this weekend which reads” get in before you miss out!”
October 14th, 2009 at 11:00 am
Who can understand all this in the same article !
“The national median sale price was …., just below its peak …in November 2007….we’re now back to the prices being fetched in the corresponding period in 2007″
AND…
“..house prices in September were down 4.4% from their November 2007 peak, the REINZ said”
???
October 14th, 2009 at 11:06 am
Harriet – very confusing but the apparent inconsistency lies in the two different measures they are using – their own measure + the new housing price index
October 14th, 2009 at 11:10 am
Hi Harriet,
The first is the median price which in the past has always been used to show where the market is at, so we’re still using that first up. The new one is a stratified measure designed to compete with QV’s way of seeing things.
Some people still like the median price figures so we still report them.
see here:
http://www.interest.co.nz/ratesblog/index.php/2009/08/07/rbnz-and-reinz-introduce-new-house-price-inflation-measure/
Cheers
Alex
October 14th, 2009 at 11:15 am
Harriet – you got the point. Instead of yoy or mom, comparison seems to be jumping around for whatsoever reasons that might be. Maybe, that’s the way they deemed the audience would read. Isn’t that sad that data can’t be reported in a consistent relative manner such as yoy and/or mom ?
October 14th, 2009 at 11:41 am
“Housing demand continues to be underpinned by the lift in net migration and low interest rates”
say no more – i would argue its interet rates that are having the greatest effect (ie increased borrowing power and “affordability” by 75% over the last 1.5 years). This “gift” from the tax payers and savers to an undeserving housing market is thankfully going to unwind again soon. What concerns me is the RBNZ will continue to use this to prevent houses ever falling much, despite the economy needing houses to fall. So next tie round they might just go for 2% OCR, then 1%, then 0. Maybe we nede to wait another 3 cycles before there is simply no ammunition left to fire and THEN we will have the mother of all busts.
Who knows where houses are going for sure?? All I know, is that renting costs me a third of buying at long term interest rates. Awful policy has robbed me of the opportunity to buy at reasonable levels, and I am angry about that, but renting is certainly the lesser evil. So I will stick to that if/when houses become sensible again.
October 14th, 2009 at 11:44 am
and I dont hold out much hope from John Key. I thought National were pro business/productivity. There apparent desire to allow property gains to go untaxed seems more in line with Muldoonist subsidies of farmer than the free market.
October 14th, 2009 at 12:35 pm
Back about May I got an interesting email from an agent over the shore. It was a comparison of resale prices by a registered valuer in the last year on properties that had NOT BEEN RENOVATED ie unaltered between sales. The price decreases were 15-20%, even for houses purchased in 2005 and resold this year. How much of the price increase of the last 10 years has been due to renovation improvements? If you buy a house for $600,000, spend $150,000 renovating it, and sell it for $750,000 you have still lost money(interest, transaction costs etc) although the sale shows a 25% increase in value.
October 14th, 2009 at 12:38 pm
What happens when all the interest rates rise next year and these people who have stretched themselves on historically low floating rates can’t fix at anything like the same level over a two or three year period?
Perhaps we haven’t yet seen the mortgagee sale peak.
October 14th, 2009 at 12:50 pm
Stevek: New houses also distort the figures, even if the building rate is at a low. eg, a new house for $500k replacing an old villa on the market. That is why I prefer QV figures to REINZ ones.
However, even than the REINZ figures have a purpose – they show how much $$ is being shovelled into housing. That is, Kiwis are on average still prepared to bid up the market. Bless them.
October 14th, 2009 at 1:01 pm
Why isn’t BH harping on about how the spring season hasn’t seen any increases in the housing market?? Oh, that’s right, because it has…
October 14th, 2009 at 1:05 pm
A thought, if house prices are not dropping, doesn’t this mean that Kiwis can afford to buy, and think they are affordable? If the housing market was overpriced, wouldn’t there be little demand?
And another thing, prices back to 2007 dollar values means little. It is the inflation adjusted values that really matter. People don’t look at these very often and I don’t understand why. If the yoy CPI is around 2.5%, then house prices are still 5% below 2007 levels.
Can intereste.co.nz add an “Inflation adjusted house prices’ chart?
October 14th, 2009 at 1:34 pm
I recall a snippet recently from the States, where insider ( management) selling of stocks in their own company had recently increased to levels not seen since the reverse insider buying in March.
I wonder, then, if there is a stat. that shows what change there has been to our local politicians R/E holdings, going into this recent rise in prices? Could prove insightful. Are they buyers or sellers?
October 14th, 2009 at 1:37 pm
All this just goes to show that NZ can teach the US and Europe a thing or two about how to manage the economy.
October 14th, 2009 at 2:02 pm
Osty,
people can “afford” because interest rates are so low (ie dropped 60-80% over the last 1.5 years). Whether they can continue to afford these when mortgages are > 8% is another issue entirely. Thats when we start to see that affordability has little to do with interest rates and everything to do with price v income.
We also have to be conscious of the perverse effect foreign investment might be having on the NZ market. This should be removed immediately.
October 14th, 2009 at 2:06 pm
william,
the responses from ALL global leaders have been pretty much the same – lower rates and stimulate the economy. The approach is fundamentally flawed. The difference is that people in the US and Uk are lucky enough to have weak banks who now realise they cant take the people for a ride anymore. Our banks are “stronger” because our houses are that much more overpriced, and perhaps our people are that much more stupid.
October 14th, 2009 at 2:26 pm
Invest your money in a business and don’t invest in housing! it’s now a mugs game…..has the recession caused by mortgagee property collapse not taught NZers something?
Houses are way over priced! what do they produce?…….nothing and when our GDP goes down, who is going to have the money to buy them? think long term people, buying a mortgage is worse than paying rent…….and the time of making money doing nothing is over!
October 14th, 2009 at 2:32 pm
Laurie! You have taken the word, literally, out of my mouth. I am relocating from Christchurch to Auckland in a few weeks and am doing excatly as you have outlined! Homeless ( well. renting, anyway!); happy and excited at where the new venture could lead. Time to make the next pile out of REAL production, not real estate.
October 14th, 2009 at 3:14 pm
“Invest your money in a business and don’t invest in housing! it’s now a mugs game…..has the recession caused by mortgagee property collapse not taught NZers something? ”
Would love to see investment in Business Laurie- what is the business going to use as security ? -ahhh Property !
You try getting a business loan without property to back it.
Banks aren’t interested in lending on business- what does that tell you- that they are stupid (well maybe), or have more understanding of the risks ?
BTW I don’t believe the NZ recession was caused by “mortgagee property collapse” of any property in NZ.
I believe it was caused by Banks withdrawing money from our money supply due to mortgagee collapse (subprime) in the US. The 2 property markets are very different.
October 14th, 2009 at 3:21 pm
Not everyone needs a loan to start a business, Keithw. For those that don’t, it’s about comparative advantage.
October 14th, 2009 at 3:25 pm
But they sure need one to expand it, or survive the down times
October 14th, 2009 at 3:29 pm
Not necessarily. There are going to be more and more (of us who exit R/E) who have more than adequate resourses from a lifetime of effort, that can expand if they choose, or stay at whatever level suits their immediate social, financial or professional need.
October 14th, 2009 at 3:40 pm
The recession in NZ? who buys our products? who doesn’t now buy product or as much products as they did before the recession?……yeah overseas consumers who have lost in the markets! This has been a major for NZ
Just as well they did pull $ out, otherwise we would be seeing a lot more mortgagee sales now….
Do you think these people overseas are going to continue to go without things such as a bottle of milk or wine as the economies slowly recover? Not likely, therefore business will pickup to provide these products etc but houses will remain flat.
NZ needs to concentrate on economically producing primary product exports and growth will come domestically from that.
October 14th, 2009 at 4:02 pm
KeithW,
“The 2 property markets are very different.
”
You are right Keith. The US market never got as overheated as ours – their market was 4.5 * incomes at peak, ours was close 7 * incomes. and before you go on about their over supply consider this:
1) Does this oversupply justify our houses now being TWICE that of the US????
2) If its all about our undersupply, surely it will correct when we have enough supply?? according to the article in the paper yesterday we have never had an undersupply.
.. and dont forget our CA deficit is more than double the US, hmmm wonder if thats because our housing bubble is bigger.
October 14th, 2009 at 6:13 pm
The guts of the REINZ press release:
* September sales volume 43.68% higher than September 2008
* Prices are up 6% compared with September 2008
* Days to sell now 33 compared with 52 a year ago
* Median price in September only $1,500 lower than the September 2007 figure
So it wasn’t an Indian Summer after all. A solid performance for 6 months straight.
Perhaps the headline should have been “House sales up 44% compared with 2008″
We have been in a recession, long term fixed interest rates are reasonably high yet house prices and sales volumes have recovered. Who thinks house prices will still drop?
http://tinyurl.com/ylzyztg
October 14th, 2009 at 7:04 pm
Russell,
like many you miss the obvious. the recession SAVED the housing market via lower interest rates. When rates rise then expect the reverse. its not helping anything that Bollard is making statements that rates will stay low till the end of 2010. Where house prices will go in the short term no one knows. All we can say for certain is that its not sustainable at current prices given the increasing impact it will have on our wallets and the current account deficit. we can also say with certainty that the best case scenario of limited capital gains will not for the most part offset the massive disparity between rent v buying. Sooner or later people will cotton on to this. I wished it was sooner, but a combination of govt/RBNZ largesse and punters stupidity is lengthening out the process. NZ is all the poorer.
October 14th, 2009 at 8:52 pm
Jimmy – don’t you live in Oz? Why are you so concerned with the NZ scene? Planning to move back soon?
October 14th, 2009 at 9:36 pm
I’m not so sure immigration is driving this one. Rents are static declining. Shouldn’t rentals also increase if driven by immigration?
This is a low interest rate story both on borrowing and deposit side. debt is more affordable but there is also significant property buying with cash. Property is a hard asset and provides a perceived inflation hedge. 2.5% after tax on td vs 6% yeild on property, transaction costs and capital risk tend to be ignored by the investor.
If it is interest rates this will all unwind quite quickly once/if they’re back at 9%+. Current prices make no sense to me, but haven’t for the last 5 years.
October 14th, 2009 at 9:47 pm
Spoke to an old mate today who has done plenty of property development / investment. A very canny individual with a Masters degree in engineering. Both practical and very intelligent. He is not anti-property – he is mortgage free at age 39, and has two investment properties (but these were bought 7-8 years ago, pre Boom)
His view is that property is still 25-30% overvalued, and that the correction will come some time in the not too distant future.
He has given away buying investment property as he thinks the rental yields are miserable and he can’t see any decent capital gains – quite the reverse he ultimately sees declines.
But the masses remain deluded!!!!
RLM – not many properties – at least in Auckland – giving a 6% rental yield buying at today’s prices. Most seem to be in the order of 4-5%. Maybe the occasional rare one at 6%
October 14th, 2009 at 10:02 pm
Why isnt he selling then…
October 14th, 2009 at 10:09 pm
Matt in Auck, your mates view seems pretty much the same as your own in regard to properties being overvalued and you may well be right on the face of it but isnt the price determined by an agreement between the buyer an seller? as in just because you think it’s too expensive doesn’t mean the next person will agree with you.
You could go out and put in offers at 30% below and pick up a few houses no doubt but Im sure the only people who will sell to you at that price will do so only because they have to, all of the other people who can afford to hold out probably wont accept your offer. You seem very happy renting and good for you, I personally could not think of anything worse than having to answer to a landlord.
If prices came back 30% for you Matt would you buy ? if you would go and buy then what is stopping you doing it now on a house you can negotiate a 30% discount on?
October 14th, 2009 at 10:28 pm
“Why isnt he selling then…”
Sort of like I complain to friends about how bad my V8 is on gas, how expensive it is to have it serviced and how much hard work it takes to detail the panels to keep it looking sharp.
They hope they can one day afford a car like mine and I always tell them its not worth it having a car like this and how badly i want to get rid off my car…blah blah no no no…don’t buy it…..
But funny that I never act anyway like i say, I love my car so much…
Guess thats just what i SAY to them, doesn’t mean much.
October 14th, 2009 at 10:37 pm
There are a few topics here.
1. For most middle class families owning a home and paying motgage interest will still get you more bang for your buck than renting and if you get you timing right you might actually make a capital gain (well that use to be the case). In my case if I tried to rent a similar house to what we own (which is just a 3 bedie) i would be paying at least double my interest costs in rent. Thats why for many owning your own will always hold more appeal.
2. Bank’s didn’t cause the recession through restricting lending. The recession was already well underway prior to the financial crisis. Anyone remember the drought of 07 not to mention the high interest rates, petrol prices and exchange rate crippling exporters. I’d far rather have a strong banking system than one which needs a taxpayer bailout.
3 Property over valued by 25% ? I dont think so. We do not have an over supply of housing. Building consents at lowest level in decades. Immigration is up. Even conservative growth estimates show the need for another 220,000 homes in Auckland alone in the next 25 years. Thats 8800 home a year just to keep pace with Auckland’s growth. Any idea whether we’re building that many currently? I think not.
October 14th, 2009 at 10:58 pm
Nick
I am not buying now for the following reasons:
- I refuse to pay upwards of 450-500K for a leaking dump in an average suburb with poor schools (that is the reality in Auckland). As an architect I know a poor house from a good one in terms of contruction, insulation etc. and that is the reality. And education and quality of schooling for my 11 year old son is a big priority – his education and future is more important than whether I am on this “keeping up with the Jones” property ladder (stuff the Jones I say, they are tossers)
- I can pay less rent for a good house in a good suburb with very good schools than paying a mortgage for a mediocre house in a less than average suburb with poor schools
- I believe at best house prices will only grow at the rate of inflation next 2-3 years, and think there is a good chance there will be another significant dip in the order of 7-10%. I am still fairly young and with minimal house price gains I think I am better placed to build a really decent deposit (ie, get to a 30% deposit in 3 years) than go in now with 10-15% and a big big debt
- in the current market I don’t think anything near 30% discounts are possible
Rob said:
“In my case if I tried to rent a similar house to what we own (which is just a 3 bedie) i would be paying at least double my interest costs in rent. Thats why for many owning your own will always hold more appeal.” Rob, that scenario only applies if you have a very large deposit or have paid off a large chunk of your mortgage. For most young people / First home buyers that situation will very rarely apply.
October 14th, 2009 at 11:03 pm
I think if there was going to be a house price crash we would have seen it by now but clearly it hasn’t happened. We now have QV, REINZ and Barfoot figures all in synch so is it likely that those waiting for prices to drop will get their wish? NOPE!
The majority of people out there are now very confident and think prices will gradually rise – interest rates in the 9% region are not going to make any difference.
Unemployment is not as bad as expected, net migration is up.
October 14th, 2009 at 11:04 pm
Rob,
Assuming long term int rates of 8% plus and a deposit of 20% it is simply not possible to find a decent house in a decent neighbourhood in a major city where your rent cost is > than mortgage, maintenance, insurance etc. NOT POSSIBLE.
Any asset (company, house, car) is ultimately worth the income you derive. On this basis houses are probably 45% overvalued. Any perceived undersupply is irrellevant to the equation as this should be reflected in rents. And even if there is a looming supply shortgage you need 10 years of strong rent growth and nil capital gains to bridge the gap. When i hear the “pent up demand” argument its almost as though the existing price is irrellevant to the equation ie there is a feeling you can pay ANYTHING and the demand will ensure future rises. This is simply not true.
Nick,
Matt in Auck is well aware that at the moment people are prepared to pay crazy prices > 30% real value. You seem to be arguing that people being prepared to pay these prices somehow renders the equation rational. hmmm think dot com bubble, 87, Japan real estate crash, US crash. Bubbles NEED people to act crazily to exist.
October 14th, 2009 at 11:08 pm
Bank Manager,
News flash – we were having a house price crash. Interest rate falls improved “affordability” by 60-80%. Then houses started rising again. If you think this is a coincidence you are on drugs. Rate rises will kill the bubble, and in all likelihood kick off another bust.
October 14th, 2009 at 11:10 pm
Matt- fair comments Im right at the other end of the country so for the price you are talking about you could get a really good house, I hope for your sake that your growth projections are correct so you can add to your deposit, if it were me I’d be worried that prices could take off again making the deposit worth less in the future.
If the houses you would consider buying grew say 5 % in a year can you still pay rent and save more than what the growth $ amount would be?, I’m a hopeless saver but Iv’e never missed a mortgage payment yet so hats off to you if you can be that dilligent.
cheers
October 14th, 2009 at 11:11 pm
Bank Manager – I think you are very wrong – interest rates around 9% WILL make a difference – they were one of the key reasons for the 10% drop from late 2007. Remember the house price drop in NZ was largely independant of the financial crisis, and was largely a result of overvalued prices (prices divorced too far from incomes) and higher interest rates snuffling out demand – we will be there again
Bank Manager – confidence is one thing, fundamentals another. Few people in 2006 ever thought house prices would drop 10% but they did!
October 14th, 2009 at 11:24 pm
Jimmy- what can you or I do about it?
are people suddenly going to stop buying because the price is apparently crazy? Im sure most people who can afford to are happy to ride the wave, when things went bad I was trying to sell a few houses that I had just finished major renovations on I didnt get what I wanted so I just withdrew them from the market, they pay for themselves and some so Im happy to wait a while for some growth I suspect there are many others who did the same, Im now on reasonable 5 year rates like alot of people will be I would consider selling them but only at the right price so thats 9 houses in my local market tied up until things get better.
If there are alot of people in a similar position to me then that is a whole lot of housing stock tied up will this lower prices
October 14th, 2009 at 11:26 pm
Jimmy
The current situation is diabolical. I had lunch today with a friend who is a senior lawyer, slightly younger than me (he’s 33) with a young child, struggling to afford anything better than the mediocre house in the dumpy suburb scenario
he’s a LAWYER!!!
MAD!!!!!!
Nick – there will come a time I think when all the ageing boomers wanting to sell up will not find enough of us young well paid professionals who can afford to buy their overinflated properties – result PRICE CRASH
October 14th, 2009 at 11:44 pm
“……a senior lawyer, slightly younger than me (he’s 33) with a young child, struggling to afford anything better than the mediocre house in the dumpy suburb scenario”
Sounds like he has serious financial management problem, I’m 28 and i m not a lawer, but i m in so much better position than he is. My partner and I have no child tho, not planing to have any before we’re ready.
Cant believe i m turning 30 in two years, no way…
October 14th, 2009 at 11:51 pm
Matt,
I feel so sad for the younger generation and worse for future generation. Deficit is growing huge, ACC is increasing, utility bills are rising, govt got to borrow significantly, yet house sales/price increases are reported several times a month. How would the younger generation earn the kind of salary to substantiate and finance a mortgage to own their home (not to even mention about unemployment yet)? What is driving all these? Is the lesson from the US subprime crisis forgotten already?
October 14th, 2009 at 11:51 pm
Im 26 and my partner is a lawyer…(31) we started with sh**t box after sh**t box to get ahead, we now have a decent home but in now way could we have afforded a decent place right off the bat we had to work our way up, seems that alot of people aren’t prepared to do this, houses may be overvalued but anyone is capable of doing things to lower the mortgage to make it affordable
October 14th, 2009 at 11:51 pm
Matt, without equivocation house prices should fall dramatically in order to liquidate the monetary excess that has driven them to such absurd multiples of income. Yet there is the paradox! The more intense the underlying deflationary pathology the more politicians – and the bankers who command them – will seek a contrarian reflation. Probably the most absurd example of this is currently Britain. Within this I have previously argued, at this site, that we could see the ‘billion dollar’ Kiwi house in due course. Yet such a preposterous event would merely be a symptom of the deranged ‘Weimar style’ embrace of the printing press that is the logical end-game of what our leaders here and overseas are doing. Ludwig von Mises reminded us that a credit induced prosperity can end in only two ways. Either there must be voluntary abandonment or, ultimately, a total destruction of the currency system involved. It is to that disastrous destruction of the currency system that the property ‘perma-bulls’ would take us. Why? because they refuse to understand that the essential contemporary driver of New Zealand house prices is the progressive destruction of the nation’s capital. The truth is that house prices can be anything you want them to be if you debase the unit in which they are measured sufficiently. I attach a link to a splendid article by Professor Antal Fekete which should be compulsory reading for all property ‘perma-bull’s’.
http://www.professorfekete.com/articles/AEFFiatMoneyInDeathThroes.pdf
October 15th, 2009 at 1:45 am
NZ property is soooo 2006. My advice (if you have any drive and ambition) is to leave NZ and find your fortune in Asia. You may never have to go back to NZ again except to see your mum; buy a milkshake; and scratch your head at the silliness of the NZ economy.
October 15th, 2009 at 6:44 am
Hi MIA
I have friends in a similar situation. Looking for the perfect 750m sq property in the middle of Remuera/Epsom with great school zones etc. These properties sell for $1million bucks+. So you need $200K for the deposit. Then 8% interest rate on $800K = $64K in interest alone repayments per year, more if a table or P&I loan. This is all big money and would require both parents to work in good jobs to service the McMansion.
I didn’t go to a private school/Grammar as a kid I did very well for myself, mortgage free at 28, 2 kids, decent share & property portfolio. The vast majority of Gen Y don’t live in Remuera or Epsom (unless the still live with their folks). The “Jones” as you put it actually all live in the susburbs on the property ladder, making small steps up the ladder every few years. My advice is start looking in other areas of Auckland for a decent two storey brick 1960s house-these won’t leak…I have three myself.
Good luck MIA. Cheers
October 15th, 2009 at 8:30 am
Nick
But you are in Dunedin or something right?
Maybe thats the key – be a professional in one of the smaller cities, then you have it sussed! Income relative to house prices becomes manageabe
But personally I’m a big city boy
Be a professional in Auckland or wellingotn and you are stuffed!!!!
28
you say:
“I have friends in a similar situation. Looking for the perfect 750m sq property in the middle of Remuera/Epsom with great school zones etc. These properties sell for $1million bucks+. So you need $200K for the deposit. Then 8% interest rate on $800K = $64K in interest alone repayments per year, more if a table or P&I loan. This is all big money and would require both parents to work in good jobs to service the McMansion.”
you’ve got me wrong. Thats not what I am expecting!!! A compact 3 bed house on 400 sqaure metres in somewhere middle class would be fine, but even those propeorties are 500-600K
October 15th, 2009 at 8:47 am
The country has returned to the splurging wasteful debt stoked binge behaviour that Labour encouraged to fester. There will be no export lead recovery…the talk was BS. We are lumbered with the debts…with a useless govt….a gutless RBNZ and a mainstreet chocker with landlord banks. Welcome to Neo Serfdom, your future for the next twenty years plus. Move aside for the next wave of humanity mustered through the immigration gates by the govt dogs. And remember to smile when you hand over your wages to the bank…enjoy the warm fuzzy feelings when you hear Key and English, Bollard and Brash have one and all been knighted for their ‘achievements’.
October 15th, 2009 at 9:16 am
I get the impression more and more folk are wising up to the un-sustainable current pricing of houses. Contributions like ‘Jimmy Says’ are wise, and time will prove them correct. You don’t have to delve into much history to discover that all out of whack price distortions eventually correct. For extremes Google (say) the Florida and Japanese housing bubbles. As with today, folk really believed back then ‘things are different this time’…..
October 15th, 2009 at 11:03 am
Jimmy – How about the Government refund me and some property investor colleagues for the loses we have actually made since November 2007. While we are there lets do the same for my US & UK shares. It is nonsensical to reward good behaviour by taxing assets – tax the resulting income from them.
What is relevant is taxing income not capital. It’s why it is called an Income Tax Act! Developers and traders have properties as their trading stock, like a farmers with lamb or cattle – they are taxed on the gain, and get tax deductions/losses if they lose money on the sale, or the lamb dies/bank forecloses on the developer that can’t sell and pay the interest $).
If you are worried about the tax deductions through LAQCs that so many property investors in good paying jobs get, then push hard for a ‘thin-cap’ type rule where interest up to only a maximum of say 70% of the property’s Rateable Value can be tax deducted. Hey trim my depreciation deductions a bit too – it’s only a timing thing as I am holding for the long term as I have for years, and I have had to replace rooves, curtains & carpets – multiple times, re and re and re-paint, overhaul plumbing & electrical, light fittings etc. That should keep balance in terms of trimming a tax deduction investor’s have, without causing too many foreclosures, rental rises from trying and succeeding in passing on costs to tenants (with no extra money themselves).
Having a capital gains tax is stupid – I have properties in trusts set up years ago which last for 80 years and then you just resettle them into another trust. Besides good Kiwis that want to provide for their own retirements and ease the Government burden would simply vote for a party not having a Capital Gains Tax. The Tax Working Group’s Risk Free Rate of of Return method would get investors simply to gear up their properties as high as they could and I would probably be paying less tax than I do now this way and actually be buying more property as I would use my equity tax efficiently to buy even more high income (pre-tax positive cashflow) properties.
So really it is better to maintain the status quo, but monitor and measure and cut Government spending – this will cost many thousands of Government non-productive sector jobs, but the workforce increased far too much. Cut the number of politicians down to 70 or so – this “industry” has to stop. We have a massive number of politicians per capita and all their baggage (political secretaries, offices, convention on talking about reducing water consumption on shower taps in Hungary, MP homes, 2nd homes, taxis, Chris Carter’s junket of the month cost big lot of money, all ex MP perks have to stop).
Perhaps there are grounds to raise GST a little to say 15% – however income tax rises must be very carefully tried to minimise middle and higher income earners leaving NZ to Australia, Asia, UK and USA (will be more likely when those economies recover sooner – particularly the latter two) – as “net incomes” are higher in these countries, and it is human nature (for most) to want to get ahead; rather than be taxed more for less services by successive Governments.
October 15th, 2009 at 11:39 am
another excellent article from Brian Fallow:
http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10603223&pnum=2
hope all you irrational property bulls out there read it
MIA
October 15th, 2009 at 11:57 am
John P,
“How about the Government refund me and some property investor colleagues for the loses we have actually made since November 2007. While we are there lets do the same for my US & UK shares. It is nonsensical to reward good behaviour by taxing assets – tax the resulting income from them.
”
Hmm – if you had accrued tax on your gains over the last 10 years then YES you would get some refunded after a small dip. I have no issue with that. It is NONSENSICAL to differentiate between income and gains, they are both forms of the same thing, wealth generation. When you tax income, then the emphasis goes on capital gains speculation to avoid tax. Property is a PRIME example of this. At 3-5% yields it is a LONG TERM LOSS MAKING VEHICLE that can only get the investor ahead via larger and larger capital gains. I have no doubt that this model will blow up, but the exsiting taxation laws (-ve gearing credits and tax free CGT) exacerbate the situation and make it “profitable” for longer and effectively lower the break even point for speculative activity. Its a farce, and should be removed.
Out of interest – how many other countries make a distinction between tax on gains and income???????? And as for shares, I see no reason why these should be exempt. And if you want to change the name of the “Income” tax act to include gains then who gives a toss – its only a name.
October 15th, 2009 at 12:07 pm
nick,
“Im 26 and my partner is a lawyer…(31) ”
I think that sums up Matt’s point exactly. 2 professionals with no kids struggle to buy what 1 tradie with 4 kids could have afforded 20 years ago. Good on you for working your way up. But our gripe is not how to get ahead in the system that currently exists, its about how to rework the system so that the housing market serves middle NZ again NOT investors/banks/agents/foreigners etc. By doing that then we would hope to return to a situation where 1 tradie income could buy a reasonable house, and 2 professional incomes could buy a fantastic house. The solutions are obvious – the only thing standing in the way is vested interests and gutless govt.
October 15th, 2009 at 12:14 pm
For Sale: extensively renovated ex dog kennel. Would suit young Kiwi peasant family. Has wall to wall____ on the solid wood floors and excellent flow through between the back hole and the front wall. This is a must see Kiwi home, exactly what the young family is expected to be able to afford thanks to great govt planning and superb management of the economy over the last three decades, or longer. The cv will astound you, as will the bloody thieving rates.
October 15th, 2009 at 12:24 pm
Don’t wait, strong interest expected. Spacious treadmill ideally suited to young hamster family called Jones. Great lifestyle can be achieved by mum and dad running 16 hours a day. Recommended as a great investment by financial guru J Key.