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Median house price hits record high in October but volumes fall away (Update 2)
November 13th, 2009The median house sale price rose NZ$5,000 to a record high of NZ$355,000 in October from September, but volumes were “disappointing” and fell 6% to 6,091 over the month from 6,464, the Real Estate Institute of New Zealand (REINZ) said. (Update 2 includes ‘days to sell’, charts.)
The median sale price was up from NZ$335,000 in October 2008 when there were 4,469 sales during the month. The October 2009 median is above the previous high of NZ$352,000 in November 2007.
“The steady return of property values is a positive sign, confirming property as the very best investment,” REINZ President Peter McDonald said.
“Around the country, median values have risen in seven out of 12 districts compared with October 2008 prices. The largest gains were Wellington, significantly up by 12.46% to NZ$415,000, followed by Canterbury/Westland up 6.16% to NZ$310,000 and Auckland up 5.08% to NZ$455,000. The two largest drops in property values were at either end of the country: Northland, down 7.73% to NZ$310,000 and Southland down 8.94% to NZ$180,750,” McDonald said.
“The rises aren’t, in most cases, dramatic, but slow and steady over the past few months as confidence returns to the market. For the first time we are over the peak of prices in 2007 which is a very reassuring milestone,” he said.
McDonald said another “positive picture” of the market was the REINZ’s ‘days to sell’ figure, which fell to 31 in October from 33 in September.
“I believe the market will firm even further with the better economic news we’re hearing more and more frequently,” McDonald said.
Stratified measure (see chart below)
The REINZ’s new stratified house price measure, which was developed with help from the Reserve Bank, shows house prices in October were still 3.1% down from the November 2007 peak. The index rose 1.3% over the month.
The new measure was designed to compete with Quotable Value’s (QV) figures and shows an average of sales prices for common groups of houses, as opposed to the median price.
See all of our REINZ and real estate charts here.
Tags: House prices, Peter McDonald, REINZ
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November 13th, 2009 at 10:26 am
That’s incredible!
That poll at the top right of the page should be removed!
November 13th, 2009 at 10:30 am
There are good reasons why people may be being cautious about debt levels. For example, They may feel their jobs aren’t secure, so they don’t want to trade up to a more expensive house and take on more debt. Or maybe they just don’t want to change anything right now if they feel they are OK. They have other priorities.
Reasons to cash up might be to sell now before the risk of tax changes becomes the reality…and the market takes flight and prices fall. Someone who correctly anticipated this might find themselves buying back into the market in a year or two at a much lower price level.
The media, in particular the NZ Herald, has every reason to try to talk the market up right now and maximise ad revenues through to the end of the year. They have done this several times over the past several years….and it has been effective.
The bottom line for each of us is our own incomes, outlooks and goals. Everything else should be taken as self-interested information from one vested-interest or another and adjusted / discounted accordingly.
The poll on this page should have included an option about concern for the economy and debt generally…Most Kiwis are still carrying far too much debt.
November 13th, 2009 at 10:50 am
Up up and away…
November 13th, 2009 at 10:52 am
Dead cat bounce definitly at the peak, it is bouncing back from next month.
November 13th, 2009 at 11:02 am
What ever may be said by the RBNZ, it’s just a lie to avoid blame later down the road when this (possible) debt leverage situation implodes. The fact still remains that housing “investment” is still the best game (and so far still profitable) in town. Leverage is still possible for the average KiwiJoe….and as long as the possibility of the next sucker still exists, there is still money to be made.
All the talk by RBNZ about overvalued housing is hypocrisy as they are the ones directly responsible for the rise in property prices by their low interest enviorment. All the talk about rising interest rates is still talk as far as the next property buyer is concern…in fact the “talk” of rising interest rates may just be the fuel to push the buyer into the market (before rates rise) than out of it….
November 13th, 2009 at 11:03 am
Funny. This is like the two fingers salute from R.E agents, sellers to Alan, govt, and all doom merchants
November 13th, 2009 at 11:06 am
Hi Bernard,
Can’t find your email on this site so hope this finds you OK.
A year or so ago, you were predicting a 30% fall in property prices. You might remember we made a bet for a bottle of Laphroaig or equivalent that REINZ Auckland house prices would have fallen by less than 15% from the December 07 peak by the end of November 2009, or by the time they made a new high.
Granted they haven’t quite made a new high yet (460,000 in Dec 07 is the old high.) And prices MIGHT fall 15% in the next month.
But we’re running low on gin, so I’d be prepared to accept a bottle of Bombay Sapphire instead of the Laphroaig if you cough up this month – a saving of about $30.
Happy to share if you need a swig.
BTW 1 – The REINZ announcement said Auckland prices went up 5% last month – in fact they’re unchanged.
BTW 2 – According to a graph measuring the gap in performance between money in the bank and money invested in housing the current property slump bottomed out in February 09. I think of that as a measure of market sentiment.
Actual prices bottomed out in September 08, 8.7% below the Dec 07 peak.
November 13th, 2009 at 11:11 am
Hi David, will pass the message on to Bernard.
The 5% rise in the auckland median is from Oct 08.
Cheers
Alex
November 13th, 2009 at 11:22 am
Steve – whilst what people read in the media does have an impact on sentiment, I’m not sure the NZ Herald can claim responsibility for holding up house prices over the last few years! The guts falling out of the building industry due to tight credit and lower sale prices had a big impact though.
Joe Blog – “Dead cat bounce definitly at the peak, it is bouncing back from next month” – I think November will be higher still, and then pulling back over Dec/Jan. Personally, I still think it’s a crab market and we will hover around $350k median for a couple of years yet…..
November 13th, 2009 at 11:48 am
Murray,
Responsibility? Who is supposed to be responsible for what?
If there is the audience to listen, the trumpet shall sound… Halellujah….!
November 13th, 2009 at 11:57 am
Murray,
“The guts falling out of the building industry due to tight credit and lower sale prices had a big impact though.
”
No – i think you can put it down solely to stupidly low interest rates.
November 13th, 2009 at 11:57 am
Our economy isn’t as unbalanced as some.
http://www.zerohedge.com/article/other-side-chinas-8-gdp-growth-ghost-cities
If I was Oz, I would be a little nervous that there is a sustainable market for my raw materials in China.
November 13th, 2009 at 12:01 pm
@Joe Blog
The dead cat bounce thing has been said for about 6 months now. Something isn’t being allowed for in the calculations of many people like yourself.
November 13th, 2009 at 12:47 pm
this quote on another site sums it all up.
the asians are coming in in droves all cashed up and ready to pay no tax on their new property income and driving up the market.
it’s not everyday kiwis…check the stats….get a perm, mr wong!
“If like our family, younger members are trying to buy an affordable home (based on income) for a young family, the truth of the present bull run really hits home. 10% in Auckland is understated. Debt, debt and more debt is the answer it seems. The government and RBNZ are slow to react to this sector, which created the melt down in the first place. Defies logic. It is also apparent in the auctions we have attended that Chinese groups are out in force and buying at far greater prices than Kiwi nationals can afford. You see the same groups at various auctions. Is it immoral? The estimate I read was 2 billion is lost to the tax base. Does that mean every tax payer is subsidising this bull run, as happened 03-08? ” end of quote…
November 13th, 2009 at 12:50 pm
Crikey rob of the north.. get over it! Without the asians we would be like one of those insignificant pacific islands
November 13th, 2009 at 12:55 pm
Hahahaha GBM – in comparison to most economies in Asia I think we are an insignificant Pacific Island – one of the better ones to park some excess capital in for a few years.
November 13th, 2009 at 1:06 pm
You aint see nothin yet until you see the asians in Australia and Canada.. may be this blog site is the place for NZ First supporters to vent their frustration. Thinking about it, without the asians going out for a nice exotic meal would be something like fush and chup with BBQ instead of tomato sauce
November 13th, 2009 at 1:25 pm
I guess there’s only that one last piece left to fit into the property affordability jigsaw puzzle…..
Bernard, Alex; Get your wages demand in at +30%, ahead of the rest of the pack…….How does it go? Brewery workers, (ahead of Xmas), then health workers, then teachers, then policemen… and then the rest of the pack.
What did you caption this piece, Alex? “Have we learnt nothing…”
November 13th, 2009 at 1:32 pm
The fall in volumes is a bit surprising. Here as the average number of sales per month for the 17 years 1992-2008, with the monthly figures for 2009 alongside:
average 2009
Jan 6218 3706 =60% of average
Feb 7643 5228 68%
Mar 8426 6694 79%
Apr 7137 6210 87%
May 7545 6291 83%
Jun 6778 6040 89%
Jul 6706 6014 90%
Aug 6954 5878 85%
Sep 6932 6464 93%
Oct 7282 6091 84%
Nov 7828
Dec 6223
So, not what REINZ may have been hoping for in that the pickup in volume from September to October (seen in 13 of the 17 previous years) was absent. Looks like they will be lucky to crack 6500 sales in November before the summer lull (note that Dec and Jan are the 2 slowest months on average).
In prices, the pickup is in line with averages since 1992. In September, prices increased at an annualized rate of 11% from the previous month (long-run average is 9%), and in October they increased at an annualized rate of 17% (long-run average is 15%). Still, any way you look at it it is pretty incredible to hit a new record median price just now.
Good luck everybody!
November 13th, 2009 at 3:26 pm
Agree with your comment Murray, I think it will plateau early next year
November 13th, 2009 at 3:34 pm
There’s still a few years to go before the realization that the RMA is causing a housing shortage causing prices to rise. First there will need to be some sort of tax thing on property introduced. Then once this has had no effect other than raising rents and prices further there should be a general realization that houses are a neccessity, not a commodity, so demand is relative to the population, not price.
November 13th, 2009 at 3:50 pm
One important note in regard to your figures Robert is that within the 17 average is an ever growing base of dwellings in NZ. Between 1992 and 2006 there were an additional 200,000 homes built which means that log term averages of sales should be growing as the frequency of house transaction remains static.
This means those figures you show of % of average will be lower this year, clearly indicating that we are not back anywhere close to long term average rate of sales.
November 13th, 2009 at 4:02 pm
re china—in brisbane courier mail on wednesday there was an articial on the
dalrymple bay coal terminal at makay.as of wednesday there were 77 bulk ore
tankers waiting to be loaded–delay is 3 weeks– gladstone had 6 ships waiting
terry mccrann stated that china is building a coal fired powder station every 2
weeks.[mccrann is one of better economic writers here.]rudd trying to push
for corbon tax in aus .whats the point? is nz going down this road?
November 13th, 2009 at 4:05 pm
We can’t afford a road pwilkie, gunna get us a cycle track instead.
November 13th, 2009 at 5:02 pm
I seem to recall Bernard writing a blog titled “Why I was wrong about property prices plunging 30% – I now think they will fall 16%”. I’m now waiting for the blog titled “Why I was wrong about property prices falling 30%, even 16% – I now think…”. Personally, I wasn’t bothered by Bernard’s predictions that didn’t come to pass. What I did find irritating, however, was the band of ‘doom merchant’ followers who viewed Bernard Hickey as a prophet, his predictions as a prophecy, and anyone who dared say otherwise a blasphemer!
November 13th, 2009 at 5:02 pm
there’s two sides to every story and then there’s spin.
here’s an extract from a stroy in todays NBR
“Today the Real Estate Institute of New Zealand (REINZ) also released its Housing Price Index data (which shaves off the extreme highs and lows of results for a more balanced view). That showed a 3.3% rise during the three months to October.
“Compared to 12 months earlier, the REINZ Housing Price Index increased by 5.0 percent. Housing prices are 3.1 percent below their November 2007 peak,” the Index report said, in contrast to the claims of ten-year-high prices from the straight median method.
“In Auckland, housing prices in October were 4.9 percent above those in September 2008 with housing prices in Wellington up 11.7 percent, Christchurch up by 4.3 percent, other South Island suburbs up 3.1 percent and other North Island suburbs up by 1.0 percent from the year earlier levels,” the REINZ Index report said.
The figures are doubly deceptive when one takes in to account the number of homes sold. Last month in Auckland, 2072 houses were sold down from 2,355 the previous month. Last year in the October 1,371 homes were sold and in October 2007, 2,240 were sold – more than the 2,072 transacted last month.”
whaddya reckon , wally?
November 13th, 2009 at 5:29 pm
Christopher, christopher, christopher…..For one whose name means ‘bearer of faith; bearer of Christ”….where is your adherence to your monica? Wasn’t He also doubted and belittled? All things must pass, Christopher, even Bernard’s prophecy. Time is a relative concept.
November 13th, 2009 at 5:29 pm
The head line link to this story is `We learnt nothing`. Wrong. We learnt that real estate dropped in value by 10% before a full recovery. We learnt that the NZX wiped out 50% of capital before a partial recovery http://www.nzx.com/markets/nzsx/FNZ/charts We learnt that the NZ Finance company industry was corrupt and has almost completely disappeared along with the pensioner nest eggs.
Even if Bernard Hickey’s false prophecy of 30% loss on real estate had come to pass property would still have beaten these other asset classes!
November 13th, 2009 at 5:33 pm
“Even if Bernard Hickey’s false prophecy of 30% loss on real estate had come to pass property would still have beaten these other asset classes!”
Nonsense. Gold, silver, numerous other commodities, and high-yielding currencies have easily beaten real estate as an asset class since the onset of the GFC.
November 13th, 2009 at 5:43 pm
Well Rob, I reckon the best plan is to get as far away from the trees as possible so you can get a good gork at the forest. One gork is enough…then turn on your heels and run like buggery before the bomb goes off….I stopped taking any notice of any housing data yonks ago. It’s all total crap.
November 13th, 2009 at 5:54 pm
Wally I think your right , I have done well out of property over the years due to starting out young in the early eighties but I wont be buying any xtra properties at prescent its Madness out there most people dont see or want to see whats coming down the pipe. Its all built on debt America in two years will we stuffed please take note of my last comment they are going to see real poverty due to the coming collapse of the economy .
Baz
November 13th, 2009 at 5:59 pm
” Moniker ” , Harriet . Lest Bernard ( 6 ft 5 inches ) , should mistakenly think you just called him , monica !
November 13th, 2009 at 6:18 pm
Sorry, Roger! Been at the Show, and fingers and brain are frozen! I can’t even think of a witty Lewinsky response.
November 13th, 2009 at 7:41 pm
OK , Harriet . Wildly wet and cold up here at Loburn , too . A little lesson I learnt in Australia , not to call a really big guy ” Monica ” . Being rat-arsed is no excuse , the cobbers told me , when my concussion had worn off .
November 13th, 2009 at 8:02 pm
As far as property prices goes I am looking at a 110m2 unit in Masterton with a GV of 215,000. It’s for tender and am thinking a price of 109,000 would be about right. Any help or comments appreciated
November 13th, 2009 at 8:07 pm
“Christopher, christopher, christopher…..For one whose name means ‘bearer of faith; bearer of Christ”….where is your adherence to your monica? Wasn’t He also doubted and belittled? All things must pass, Christopher, even Bernard’s prophecy. Time is a relative concept. – ‘Home Ruler’”
Indeed, Bernard has a spirit of prediction. But such spirits eventually grow tired of their host. Incidentally, mine is not a pseudonym (moniker).
Christopher.
November 13th, 2009 at 8:11 pm
investor : Offer them a Ford Falcon ute & a slab of Tui .
November 13th, 2009 at 8:40 pm
NZ Herald January 6th 2009 These were the expert house price predictions for 2009:
- 16% Allan Bollard
- 42% Rodney Dickens
- 5% to – 10% Tony Alexander
- 16% Robin Clements
- 13% Brendan O’Donovan
- 5% to – 10% Mike Elford
LOL!
November 13th, 2009 at 8:47 pm
So looking at Robert’s figures Octobers sales figures were down over 10% on September when seasonally adjusted.
The market is clearly stable now compared to a year ago but that’s hardly the stuff that makes a boom.
November 13th, 2009 at 8:58 pm
“I believe the market will firm even further with the better economic news we’re hearing more and more frequently,” McDonald said.
What a load of spin bollocks
What good economic news? Rising employment? Minimal GDP growth (yeah sure thats better than negative but still far off bouyant)
November 13th, 2009 at 8:59 pm
Russel, this one is all time best:
“…we forecast last March that house prices would fall around 30% on average from their November 2007 peak in the following two years….
I’m sticking to that 30% price fall forecast because the global economic catastrophe of the last 6 months is only now starting to lap at our shores and banks will be forced by New Zealand’s foreign lenders to curb most new lending ”
BH March 12 2009
Looks like there are only two weeks left before the end of the world
November 13th, 2009 at 9:08 pm
Allen, BH made that predication well before Bollard dropped the rates to record lows. Noone could predict that and the world situation that resulted, but there is still a lot of water to pass under the bridge. There is going to be a correction in the future, there has to be, because banks can only lend so much, comparative to our incomes, and NZ incomes are not rising. Remember that many financial experts believe that this is a W shaped recession, so we are only at the V so far.
November 13th, 2009 at 9:17 pm
Russell – do you have a link to those Jan 09 predictions
I find it hard to believe Dickens predicted that as throughout the year he has talked up the fatc that he predicted the market wouldn’t tank
Rob – I think our dear friend Tony A. is about the only economist who is talking up a sustained increase in house prices without another dip
Both Westpac and ANZ have made it clear they think there will be another dip after this current “mini boom”
November 13th, 2009 at 9:26 pm
@tumtetum: As long as the Govn’s keep pumping in $s I guess the dead cat bounce wont flop without some huge external wack.
November 13th, 2009 at 9:28 pm
Speaking of Rodney Dickens he also seems to be implying that there will be another dip
November 13th, 2009 at 9:49 pm
Rob, this prediction is made in March this year,and
rates were actually on their way up!
November 13th, 2009 at 9:50 pm
Matt, of course it will be another dip, but when? In 10 years time?
November 13th, 2009 at 10:01 pm
Rob/Allen – and wasn’t the latest the “square root” prediction “V” plus a “flat line” – Japan style stagflation. I doubt it though – somehow I do think we’ll do the “W” but the more like a W with a little “v” followed by a big “V”, meaning the next downside is going to be a whole lot bigger than the small blip we’ve just seen.
November 13th, 2009 at 10:01 pm
Allen – I think there are quite a few predicting late 2010 or early 2011
the rationale being:
- rising interest rates
- unemployment around 7-7.5%
- turnaround in migration stats, kiwis heading to Aussie again, fewer students coming here (less favourable exchange rate), fewer immigrants coming here (tight job market)
- house prices still fundamentally out of whack with incomes, and incomes barely rising
- the possiblity of land tax / capital gains tax
all makes sense to me
November 13th, 2009 at 10:08 pm
Matt in Auck – couldn’t search back far enough for that item but I have the actual newspaper and could photograph it and put it online for all and sundry to view – will do tomorrow. It has lots of dart holes in it though LOL!
November 13th, 2009 at 10:15 pm
Matt in Auck Says:
November 13th, 2009 at 10:01 pm
Allen – I think there are quite a few predicting late 2010 or early 2011
the rationale being:
- rising interest rates
- unemployment around 7-7.5%
- turnaround in migration stats, kiwis heading to Aussie again, fewer students coming here (less favourable exchange rate), fewer immigrants coming here (tight job market)
- house prices still fundamentally out of whack with incomes, and incomes barely rising
- the possiblity of land tax / capital gains tax
all makes sense to me
Makes sense to me to. However there are some buyers who aren’t affected by any of that, and that includes all cashed up buyers. This includes offshore investors and buyers. Also mum and dad investors, who would have otherwise invested in finance companies. BO
November 13th, 2009 at 10:18 pm
Here is the article http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10550607&pnum=0
It took up a full page and had big photos of all those who made predictions with a huge – 42% under Dickheads photo
November 13th, 2009 at 10:18 pm
sorry – Dickens
November 13th, 2009 at 10:59 pm
(“the asians are coming in in droves all cashed up and ready to pay no tax on their new property income and driving up the market.
it’s not everyday kiwis…check the stats….get a perm, mr wong!”)
A lot of that are buying properties now ain’t even NewZealanders.
Fundamental this fundamental that and talking about the unemployment here iis pretty much useless. Come on…Kiwis are not buying.
Many in this country has such narrow view and analyse things only based in this country.
Asians hate borrowing money, they prefer to pay cash, and for those people NZ is still “very very very affordable …and beautiful”.
And funny thing is for many kiwis NZ simply isn’t good enough for them, so they head over to Australia..etc, therefore whos going to fill the space? What does the govt. have to do to keep this country going?
Tony A. is about the only one who sees the whole picture and understands different cultures and the big shift that is taking place at a greater and greater rate everyday. Believe he was in Hong Kong last week?
(“in comparison to most economies in Asia I think we are an insignificant Pacific Island – one of the better ones to park some excess capital in for a few years.”)
Exactly, Hong Kong along(such a small place) has double the entire NZ population, take a visit over there then come back here, you should be able to see what Tony.A is trying to tell everyone.
November 13th, 2009 at 11:18 pm
Dr Chen is right, that many of the offshore people who are buying houses have cash, and don’t borrow to buy. The west has made the chinese rich and flush with cash over this last decade.
November 13th, 2009 at 11:25 pm
But why would offshore investors be keen on NZ property?
the yields in general are poor (lucky to get 5%) and a lot of investors overseas (maybe not so much Aus) have witnessed housing crashes in their own markets so know that housing is not invincible
not to mention unfavourable exchange rate
Dr chen – yes some Asian immigrants have greater buying power but there are plenty of Chinese immigrants living near me in crappy little flats struggling along so its a stereotype to say they are all rich and buying up lots of property.
Rob / Chen – I take your points but I don’t think these things will be enough to create a sustained boom, there are too many things wrong with the fundamentals
before I hit the sack here’s my prediction – I’ll probably be very wrong but then so have most of the experts:
- further 3-4% increase by winter 2010
- Flat or 2-4% drop over winter 2010
- Flattish or slightly rising over spring 2010
Net result 2010 maybe 2-3% increase
2011
Minus 5-7% over the year
I reckon by 2012 prices in real terms will be similar to 2007
November 13th, 2009 at 11:25 pm
Also with more Asian students coming to study here again, their families actually also buy houses here, for the students to live in or even to rent out. They see renting themselves, as dead money. NZers can’t compete with that sort of money.
November 13th, 2009 at 11:27 pm
Dr Chen,
Nothing is inevitable. And we can choose to crowd out our countries with asset inflating Asians or not. I’d prefer not to myself. I’d much rather a slow economy and cheap houses.
November 13th, 2009 at 11:31 pm
Rob – I’ve known many Asian students over the years through my own study plus some part time lecturing and only a very small minority have parents who buy houses.
also the asian student market is very cyclical and sensitive to the exchange rate. Numbers have increased over the last year or so largely on the back of a more favourable exchange rate late last year. With the NZ dollar very strong again numbers could easily drop off again in 2010
good night
November 13th, 2009 at 11:42 pm
Can anyone tell me how easy / hard it is for non-NZ residents to buy property here? I’d like to know
If its fairly easy I think a petition should be started to make it much harder. Don’t have a problem with foreign permanent residents buying here of course.
Its about time kiwis stand up and say that we don’t want to be taken advantage of any longer. We are being ripped off.
November 13th, 2009 at 11:58 pm
There is no restriction on foreigners buying a residential property here. I have seen mini-vans full of Asians doing the open home circuit in the Flatbush/Botany Downs area.
The Chinese are spending up large. Same thing happening in Sydney and Melbourne as leading agents say more than 30 per cent of their stock is bought by families from mainland China.
“This calendar year 34 per cent of our sales went to mainly Chinese buyers compared to 15 per cent last year. We’re up 125 per cent overall,” Jellis Craig director Scott Patterson said. “Demand is so strong we’ve got two native speaker agents starting next week.”
“There’s been an incredible surge from Chinese buyers since the rules for foreign ownership of real estate were relaxed by the Government to allow foreign citizens to buy established homes worth more than $300,000,”
http://www.heraldsun.com.au/news/victoria/chinese-ignite-real-estate-boom/story-e6frf7kx-1225783989959
November 14th, 2009 at 12:01 am
(“But why would offshore investors be keen on NZ property?
the yields in general are poor (lucky to get 5%) and a lot of investors overseas (maybe not so much Aus) have witnessed housing crashes in their own markets so know that housing is not invincible”)
They are not in for the money.
NZ for many foreigner isn’t a place to make money.
The market is too tiny in NZ, you don’t make money here.
As the saying goes “The only and the last remaining clean piece of land on planet earth = New Zealand”
(“….but there are plenty of Chinese immigrants living near me in crappy little flats struggling along so its a stereotype to say they are all rich and buying up lots of property.”)
They might be struggling, but they are happy, becasue the wrose they can have now is always going to be millions better than what they had before…
There are 13billion+ people in China along, it wouldn’t even make a difference to them if you pick 5 million and send them here. And fingers crossed that doesn’t happen.
November 14th, 2009 at 12:01 am
Matt in Auck
Watch this entire video clip and you will see evidence that Chinese do not care if the homes remain empty. They are not interested in rental return, they pay cash, no mortgage.
http://www.zerohedge.com/article/other-side-chinas-8-gdp-growth-ghost-cities
November 14th, 2009 at 12:07 am
Matt in Auck
It is so very easy for anyone offshore to buy property assets in NZ. The is compared to much of the rest of the world where it is a lot harder. In many countries you have to be a resident, and I believe we do need some sort of similar system here as it is causing our property prices to bubble. There was some talk about preventing ‘key’ property assets from being purchased, and this I believe is one reason the Auckland Airport sale was blocked, as Labour didn’t want the Canadians owning such a key piece of land and infrastructure. There has also been talk about preventing offshore investors buying waterfront land, but yet again the government have missed the boat on that.
November 14th, 2009 at 6:29 am
Looks like infometrics prediction of 24% increase by 2010-2011 based on a housing shortage/lack of new houses is a good prediction
Matt in AKLD- was that you on TV3 last night in the story on property price rises?
Question (genuine) to all the people holding off buing and waiting for prices to crash/fall- what will it take for you to get on the property ladder? ie If there is no crash by this time next year will you be looking to buy then?
As I said earlier , I think it will peak in autumn 2010, flatten out in winter 2010 and climb again in spring 2010.
Prices and volatility don’t bother me much. I buy and hold long term, good property with good rental returns. I use fixed interest rates and I have a guarnateed cash flow in my job. So if there was a huge crash it would still be business is usual. Ignorance is bliss indeed.
November 14th, 2009 at 6:38 am
Matt in Auck, Dr. Chen
In my area(inner west), I can say most buyers from overseas betting on the phones are Kiwi living in Australia. They are all NZ-residents not paying tax to NZ when they are able to work, and they will come back to NZ when they need passion.
November 14th, 2009 at 7:08 am
The signs for Bollard are all screaming “Stop this Madness Now” but because the RBNZ gets its orders from the Beehive and they get theirs from the banks…expect property to remain seriously unaffordable until such time as the ratings agencies realise their lying about the safety of the banks is an open joke. Already there are warning reports out in aus about the risks faced by the big four here in NZ. They know this bubble is gonna implode and the banks will take much bigger losses. The truth about the NZ economy will continue to be hidden from the public for political gain. We were told “there was no recession…there was no recession”…right up to the point when the BS would no longer float and then in the flick of a day the humbug changed to….”the recession is over…the recession is over”. Measure the danger by the rising level of BS coming from all those involved in taking money out of the property bubble!
November 14th, 2009 at 7:39 am
I am keen to join a lobby group to stop NZ residential property being sold to overseas buyers. Anyone want to start something? Maybe a Facebook page first off where people who care about this issue can register interest? I am also dismayed at the prospect at mass immigration into NZ – I want public discussion on this before the government quietly springs it on us- any takers?
November 14th, 2009 at 7:54 am
The game being played Observer, is one where the banks with the most to lose in the coming collapse of the NZ property ponzi scheme, are hell bent on porking as much activity in the market this summer as they can because they want to attract the Asian carry trade investors to move money in and buy at high prices. The bank gets relief every time a NZ mortgage holder sells to an Asian buyer and is able to clear their mortgage. This US$ to Kiwi$ via HongKong is the capital flow National wanted. Sadly, it will end in a bloody big crash. The banks know bloody well that is what must happen. They hope to reduce their exposure quickly. I expect you will see many properties selling to Asian buyers at high prices in a gambling rush but the local banks will not be dishing out the easy to get mortgage loot to locals. The greatest losers will be the Asian buyers left holding the properties when the boom comes down.
November 14th, 2009 at 8:11 am
28_yr_old Don’t get too excited prices are still roughly the same as 2-4 years ago which means you have had 2-4 years of negative returns effectively supplementing your tenants accomodation costs, which is very kind of you. If you are willing to gamble all your equity in the face of tax changes, rising interest rates and declining population growth then well done, you obviously know better than Bollard, English, O’donovan, Bagrie,Trass, Newman, Dickens, Hawes & Hickey. Maybe you are getting your rose tinted veiws from real estate agents and Tony Alexander. Make the most of it because this year will be as good as it gets.
November 14th, 2009 at 8:27 am
Kieran – I think you missed the bit where 28_yr_old said “I buy and hold long term, good property with good rental returns. I use fixed interest rates and I have a guarnateed cash flow in my job.”
So “tax changes” don’t matter since 28yo doesn’t sell.
Many others will still be complaining about the way things are…..
“rising interest rates” don’t matter (at least for the next 5 years) since 28yo is fixed.
“declining population growth” – I’m not sure where this one comes from, Stats NZ predict very good population growth for NZ in the next few decades.
“this year will be as good as it gets” – I agree things will probably flatten out again when interest rates start rising, but in the long term, 20 years time when the loans are paid off and house prices are no doubt “x”% higher, 28yo will be a well off 48_yr_old
November 14th, 2009 at 9:20 am
Observer, Do you want to include KIWIs living overseas? They are the main stream of oversea buyers.
November 14th, 2009 at 10:17 am
Observer – you are right to be concerned about the prospect of “mass immigration” into NZ. Politically, the consequences of this would impact you far faster than has been the case in Britain because your core population is small. This would lead to immigration ‘political critical mass’ (the point at which the new population can ‘out-vote’ the existing population) occurring much more quickly than most Kiwis have comprehended. For measured analysis on this matter visit the following:
http://www.migrationwatch.org
November 14th, 2009 at 10:20 am
Kieran, just picking up on your comment “prices are still roughly the same as 2-4 years ago” – 2 years ago I would agree with but 4 years ago the Oct median was $295k.
Oct 07 $350k to Oct 09 $355k = 1.4% gain in 2 years, or 0.7% compounding per annum.
Oct 05 $295k to Oct 09 $355k = 20% gain, or 4.74% compounding per annum.
Oct 99 $168k to Oct 09 $355k = 111% gain, or 7.77% compounding per annum.
Timeframes make a big difference when looking back at prices….
November 14th, 2009 at 11:38 am
I’ve just read the NZ Heralds summary by suburb, it seems so out of wack with $30k swings, and I bet things could have exactly the reverse for some suburbs next month.
The results need to state the possible error variation otherwise it’s all worthless data. and I bet you would find there would be 10% possible error rate which would make it worthless data, but any data is fodder for any media to hype and sell papers
November 14th, 2009 at 12:44 pm
Murray it depends which market you are looking at Northland, Hamilton, Hawkes bay, Manawatu, Nelson, Malborough, have all been flat since 2005/6 28_yr_old said he has good properties which means negative cashflow even with a low 5yr fixed rate his cashflow is from his job to top up his rentals he is basically putting his pay check directly into his tenants savings account. Without capital gain he is losing money wether or not he sells is irrelevant tax changes will reduce the value of his properties. Statistics predict declining population growth from 1% year down to 0.5% over the next 20 years (it used to be over 2%) but unfortunatly all the increase is from the 65+ age bracket the 15-65 age bracket (house buyers) are predicted to stay at the same level so there isn’t going to be increasing buyers each year like there used to be.
November 14th, 2009 at 12:55 pm
28_yr_old
If you have purchased as a long term investment, and it is a rental, don’t forget that you will be taxed on the capital gain. The IRD does chase people up on that, because I know a family who purchased a house to live in, but their job also gave them a house to live in , which they lived in for 15 years and rented out the house they purchased. They ended up having to pay tax on capital gains on the house they purchased when they ended up selling it, because it was mainly used as a rental.
November 14th, 2009 at 1:44 pm
Rob, the law as it currently is, is based on intent. Rentals normally are ‘intended’ for cash flow, so they pay tax on rents (although often this is negative so they actually get tax back off their salaries/other income). Either way, the capital gains are not taxed as property was not purchased with the intent of making a capital gain. Same rule applies to shares that pay dividends, you are taxed on dividends (major diff is there is no way you can negatively gear the dividends to make paper loses) but not the capital gain when share value goes up. Intent is fuzzy and in my opinion bulls**t, I think these definitions may be sharpened up in next budget.
Murray says: So “tax changes” don’t matter since 28yo doesn’t sell.
Irrelevant as Kieran rightly pointed out. Any change in tax (almost certainly going to close loophole that allows property investors as a whole to claim more tax back than they pay, depreciation is effectively an interest free loan from the tax payer to further fuel the property bubble), will make property values worth less.
November 14th, 2009 at 1:59 pm
Murray says: “”Kieran, just picking up on your comment “prices are still roughly the same as 2-4 years ago” – 2 years ago I would agree with but 4 years ago the Oct median was $295k.
Oct 07 $350k to Oct 09 $355k = 1.4% gain in 2 years, or 0.7% compounding per annum.
Oct 05 $295k to Oct 09 $355k = 20% gain, or 4.74% compounding per annum.
Oct 99 $168k to Oct 09 $355k = 111% gain, or 7.77% compounding per annum”"
Be carefull with median prices, they don’t tell the whole picture.
Because median prices are up say 5% does not mean houses are worth on average 5% more.
Median SALE PRICE includes a large portion of NEW houses which are worth more and often built on land that is worth more. Demographic changes mean all the baby boomers are selling there family homes and buying upmarket 2 bedroom homes, again giving large increases in median sale price that is independant of an overall average increase in housing value.
November 14th, 2009 at 2:54 pm
Voila, Liam! That’s exactly what we have done. Sold the $1.5m 5 bedroom house now the cookoos have flown, and are looking to buy a, say, $850k 2 bedroom townhouse ( sod the garden after all these years!). BOTH those transactions will impact upwardly on the median, yet we are actually downgrading. In the meantime renting @ $25k p.a. still leave us $35k p.a. cash flow positive, even after tax.
November 14th, 2009 at 3:51 pm
28 yo. To answer your question as to what would make me hop back on the property ladder. I will hop back on when the rent I pay on a house comparable to one I want to live in is roughly in line with what my outgoings would be to purchase.
I currently live in a modest 3 bedroom house (130sqm) which has a GV of $650k. My rent is $520 per week.
Fundamentally things are out of whack – the rent should be $900 on a house this value. So either rents go up, interest rates come down, prices come down or my landlord contines to have a low rental yield and the taxpayer continues to subsidise his losses.
What’s more likely to happen
- Government tightens taxation loopholes on property investments, they have already signalled this
- Wage inflation remains modest, the recession has some ways to go by all signs.
- Interest rates rise next year – we already know that yields curves are sharply rising.
So I guess I don’t see much chance of rents going up much, certainly not to a point where I would consider buying a property for an economic reason. My money is on one of the other options.
November 14th, 2009 at 4:03 pm
Mike in Wellie – Govt have not signalled it – committes/task forces have. Can you really see a Tory govt bringing in new property taxes – no way bud!
November 14th, 2009 at 4:06 pm
@Liam
You’re spot on. Indeed, median and average are difficult to interpret and difficult to reflect the actual value of any price increase.
Furthermore, recent price increase was reportedly due to net migration, low interest rates and demand is more than supply. Is that the case ???
Net migration? : is there any significant increase in immigrants recently? I thought it was not due to the increase in people coming in but LESS ARE LEAVING, is the correct?
Low interest rates? : I thought that fixed interest rates are moving up recently?
Demand more than Supply? : Supply of houses for sale could be compiled as agencies would have the records of how many houses are selling for a certain period. But, how would the demand for houses be recorded and compiled? Is it by the records compiled by agents during open homes or what? So, if a buyer were to visit 10 open homes, does it mean that there are 10 buyers in record? Hence, how would the demand for housing be reflected as one of the reasons commonly reported – “demand is higher”? is that so???
So are the above attributes clearly reflect the positive sentiments and house price increases?
November 14th, 2009 at 4:58 pm
Kieran yes you are correct. Have 3 bedroom properties in the suburbs of Auckland and are topping up each week. I aim to have my properties cash flow positive in less than 5 years time. I have decided to buy good quality brick or weatherboard property in nice quiet streets or culdesacs rather than 2 bedroom units etc. In 20 years aim to have 10 or so all cash flow positive, bring in a great weekly income. My question to you is where do propose I park my money. Gearing allows me to borrow. I have manged funds and 8% kiwisaver but as there isn’t going to be a pension when 65-70years I need to take care of myself and family.
Rob as Liam pointed out current tax rules based on intent and long term buy and hold of the radar from IRD…at the moment. I don’t mind paying Tax, I am currently in the top tax bracket and pay my fair share. If a CGT is introduced it won’t make a difference to me.
mike in Welly I agree things are out of wack. And for me it would be great if I could better rental returns from my tenants.
To the baby boomers out there any investment adviceoutside of property for my Gen Y/X friends. They think I’m nuts investing in property.
Time for another surf
Regards
November 14th, 2009 at 4:59 pm
I wonder how much of the NZ housing upswing this year can be attributed to the creation of the USD carry trade, which is causing new asset bubbles all over the world?
eg Hong Kong house prices up 28% this year.
http://business.timesonline.co.uk/tol/business/economics/article6915447.ece
And we know what happens, very quickly, when carry trades unwind… As it will.
Anyone taking on big debt when buying a house should be very careful.
November 14th, 2009 at 5:21 pm
You’re right, YoungTel.
I was amased to see a BUS load of Asian people slowly going around my newish ( Northwood) estate here in Chch last week, and pointing at particular houses. My companion casually said” Oh, that’s just a property buying holiday tour”. Now there’s the carry trade in action!
November 14th, 2009 at 6:33 pm
Harriet,
If that is the scenario, then you got to thank the policy that allows non-residents to buy up properties easily here.
When there is the happy buyer and happy seller, the transaction is done. Just wonder where do the sellers go if they were to sell up….. are locals going to buy at a higher market too? so, all is good but selling then buying in the same market? who is the ultimate gainer? maybe, more non-residents buyers will be those gaining, then who shall be their tenants if they rent out ???
Interesting questions?
November 14th, 2009 at 6:41 pm
Observer – well I’m going to do something, I don’t know what.
I don’t use facebook but maybe you could start it.
I WILL write to the opposition’s spokesmen for housing and immigration though, and the equivalent ministers in the government asking for an explanation as to why they are really letting this happen if they care about New Zealand.
I’ll let you know how I go – I don’t expect much
A PLEA TO BERNARD – CAN YOU ACTION SOMETHING ON THIS TOO
November 14th, 2009 at 7:42 pm
28_year_old there is nothing wrong with property investment but you have to work hard for it from cashflow positive houses that return at least 10% in south auckland or similiar areas. Free and easy capital gains are a thing of the past. Buying a rental property with a mortgage is no different than buying shares on margin both use gearing which is a high risk game. Unless the return is greater than your interest payments you are losing money whats the point of that? Kiwisaver is a great investment if its in fixed interest where else can you get a sure $1000 return a year + interest? I would be putting at least $5,000 yr to give a guaranteed 10-15% return for the next few years. If you have a large sum and want to play it easy and safe there is nothing wrong with term deposits which are likely to go up next year. If you want similiar returns but with greater potential for capital gains there are plenty of companies on the NZX or ASX with 4-6% divedend and good growth prospects. The great thing about shares is returns have been as good / better than property but:
-you don’t need debt
-no tenants (a big one)
-far more diversified
-easy and cheaper to sell if you need a bit of cash
Opening a share trading account with ASB securities is simple, all transactions are done online. Don’t be put off by BB scaremongers who say the share market is too risky thats a load of rubbish they are still hung up on the 87 crash. All investments need prudence and common sense. Having shares 1986/7 turned out to be a very bad decision just like owning property at the moment. When PE ratios go over 20 or rental yeilds go below 5% its not the time to buy or hold.
November 14th, 2009 at 7:58 pm
Matt and Observer,
Does anyone have any knowledge if Australia is allowing non-residents to buy their existing (not new projects) real estate properties or do they have some restrictions like ie. could it be that non-resident could only buy new projects/development from the developer and could only resell them to non-residents or something of that nature….. is that the practice/restriction in Australia? could anyone comment?
November 14th, 2009 at 8:04 pm
Kieran : And there are plenty of property trusts listed on the sharemarket . A doddle to add or subtract from the holding , as finances fluctuate . Not so easy with a rental property , to extract a bit here or there when it’s needed .
November 14th, 2009 at 8:36 pm
trudy–aus govt has a review body–foreign investment review board
nzers can do what they like –rest of the world has to go thru this board- it appears that there are restrictions on speculation—you basically have to get a visa
look up australia-migration.com/ or foreign investment board
cheers—more radlers
November 14th, 2009 at 8:53 pm
28_Year_Old,
“To the baby boomers out there any investment adviceoutside of property for my Gen Y/X friends. They think I’m nuts investing in property.”
You are nuts investing in property. And its going to be a lot harder to get cash flow positive quickly when the govt changes the laws on negative gearing. And dont forget those repair bills, tenants trashing the place, insurance, rates as well as periods of interest rates over 10% (EG, you might be cash flow positive one year, and find int rate rises put you negative again the next year. In fact if you are not positive now when rates are stupidly low, good luck for 5 years time when they are 9% plus OR potentially a lot worse with all the money printing going on). … and lets not discount another major financial crisis and double dip recession. The world economy is in very sick shape. The US and UK are frightening. Not quite sure why we should be different, in fact given our debt levels and greater reliance on foreign creditors there is every reason to believe we shoudl be a lot worse. In this sort of environment do you really want to be carrying tonnes of debt???????
My advice, sell up and stick it back into TDs which soon will have a better rate of return. Shares are also looking overvalued at the moment (so you would need to search for good stock), but not nearly as bad as ppty. Remember that wealth is an entirely RELATIVE concept. When ppty drops 20%, you are about 100,000 better off (assuming you live in Akld) even if your TD only gives you a couple of thousand dollars.
November 14th, 2009 at 8:54 pm
pwilkie, thanks for the info.
So, the Australian govt do have some kind of restrictions on non-residents buying properties in Australia. Then, why don’t we also have the similar type of policy like their Foreign Investment Review Board..? Good idea, cheers.
November 14th, 2009 at 9:25 pm
James: You obviously haven’t been to a property seminar! Leverage IS the name of the game. $100k down on $1m of property and a 10% increase in values gives you a 100% return on your investment! Easy. Property will never fall in the long run… will it? “Your” 20% fall?…nasty….
November 14th, 2009 at 9:42 pm
Trudy,
Rudd, the complete 2 faced sellout that he is, has loosened the rules on foreign investment in Aus which has led to a MASSIVE increase in foreign purchases this year. Aus ppty has basically become a de facto currency hedge for cashed up Chinese.
November 14th, 2009 at 9:48 pm
Harriet,
No – i have not been to a ppty seminar. i never know which one to choose. Some of them have 6 easy steps, whereas others have 10 .. then there are those with the rules of thumbs to apply and of course the all important “secrets” that the pros dont want you to know about … not to mention the “from 1 to 20 properties and 5 milion in equity in 4 years” stories from Joe Averages just like me eager to escape the rent trap and a life of wage slavery. They are all without question a risk free way to make a killing, I just cant seem to find the 1000 dollar entry fee.
November 14th, 2009 at 9:49 pm
james,
Is that so? do you have any links to read about their loosening of rules there?
So, are non-residents still required to apply to the Foreign Investment Review Board to seek approval prior to buying properties in Australia? If they have relaxed their rules, then, there should be some news report or announcements about that, right? Tell us more about that.
Apart from CGT, Land Tax, maybe NZ should also have a dept such as the Foreign Investment Review Board to assess and approve non-resident’s property purchases. How about that?
November 14th, 2009 at 9:58 pm
28_Year_Old – “They think I’m nuts investing in property.” – that’s what people told me around 1990 & 2000. I’d be more worried if everyone was telling me it was a great idea as they were around 1995 & 2005…..
Kieran – “Free and easy capital gains are a thing of the past” – again exactly what I was told around 1990 & 2000….
I do agree with you re: shares &
“-you don’t need debt
-no tenants (a big one)
-far more diversified
-easy and cheaper to sell if you need a bit of cash”
…..though it’s very important to make sure you ARE diversified otherwise buying the wrong stock can wipe you out. Also, although you don’t need debt, it’s the leverage of debt that multiplies gains & losses. I feel safer about property not taking a 30% dive than I do shares, and I would NEVER buy shares with borrowed money.
Both have averaged around 7% capital growth long term, but the leverage with property can easily make that 30% or more….
It’s also very easy to find better yields than median or average, only average investors go for average yields
November 14th, 2009 at 10:14 pm
Kieran, Murray and Harriet all good points thanks
James…yes I may be nuts…but at least I have nuts
. All investment carries risk. I’m relatively young so I will stick to buying property (and reducing debt all the time in 10K clumps), managed shares and the 8% kiwisaver. Risky yes, but if the crap hits the fan I have time on my side.
Well done the All Whites!
November 14th, 2009 at 10:46 pm
Yeah, go the All Whites!!
Liam – regarding your earlier comment “Be carefull with median prices, they don’t tell the whole picture” – would you say the same thing if the median price was down 20% ?
It’s true, no statistic tells the whole picture, but the national median is as accurate as you’re gonna get. We moved away from averages to get away from prices being skewed by million dollar sales.
Given that the median is the “middle point” of all sales, there would have to be a very large number of baby boomers selling million dollar properties and buying again above median to have any effect. If we used averages it would make more impact.
There is also a large number of baby boomers who have already made this change over the last 5 to 10 years, without causing all the disastrous effects that have long been forecast…..
November 14th, 2009 at 11:13 pm
Trudy,
heres a piece on the Rudd sellout. He really is a tool.
http://www.theage.com.au/business/foreign-investors-flock-to-australian-property-20091105-hzx3.html
November 14th, 2009 at 11:25 pm
Murray,
“that’s what people told me around 1990 & 2000.”
and back then the fundamentals looked a lot better … oh i forgot, the fundamentals dont matter.
28_Year_Old
“All investment carries risk. I’m relatively young so I will stick to buying property (and reducing debt all the time in 10K clumps), ”
Some investments have more risk than others. Ppty carries the risk of
a) currently being the biggest bubble in our history and obscenely overpriced against ALL measures (including relative to overseas). Is there really a reason for this bubble to be different and for NZ houses to cost TWICE what they do in the US??
b) being VERY debt sensitive at a time of an extremely fragile local and global economy
c) being VERY debt sensitive at a time of rising int rates and potential double digit inflation
d) requiring tax distortions to assist with managing the high debt at a time when these distortions are likely to be removed
e) all the while being GUARANTEED to lose you lots of cash flow thus REQUIRING large gains to offset the loss.
Having time on your side is not a good reason to make a bad investment decision. And well done the All Whites.
November 14th, 2009 at 11:26 pm
Murray,
“Both have averaged around 7% capital growth long term, but the leverage with property can easily make that 30% or more….”
I made 50% on the asx this year and that is with NO leverage.
November 14th, 2009 at 11:30 pm
james,
Thanks for the article.
Although they have relaxed the rules, there is still some level of restrictions.
But, it is really a concern after reading that report. Are we heading for that path? It will come a day soon where earning NZ income/salary here may not be able to afford to purchase property here. Maybe, it is a wake up call to us…..!
November 15th, 2009 at 12:04 am
Trudy,
We have been having that wake up call for some time. Sadly, and I have become increasing cynical after global govts handlnig of the GFC, govts no longer act in the best interests of their people. They take the easiest short term route, and asset inflating foreigners is one of those to keep money coming in. For what purpose if we lose our quality of life?? But I guess thats not a concern for the boomer generation, they are ok.
November 15th, 2009 at 8:37 am
@: 28_year_old.
“You never have as much time as you think”. According to Peter Drucker, the management guru, it can take as little as 4 years to be in a position where you may NEVER recover from a financial failure. Within that timeframe, those behind you on the ladder of life can have jealously taken up the rung that you hoped to step back onto.
November 15th, 2009 at 8:44 am
james – “I made 50% on the asx this year and that is with NO leverage” – well done. Can you achieve that on average over say a 10 year period?
I bought two properties at the start of the year, yielding 11% and on recent registered valuation for the bank up 25% in value. How? Mortgagee, with no one else bidding…
If I had put in 10% deposit my gain would be 250%, but I actually put in nothing so my gain is infinite…. obviously though, you need equity in other properties to be able to do this. I fixed the loans 5 years at 5.95%, so even after rates & insurance I’m making 4% positive cashflow on money that’s not mine which thanks to depreciation is practically tax free. Sure, if interest rates are 10% or more when the loans expire in another 4 years they could go cashflow neutral or negative, but how much cashflow and capital gain have I made in the meantime, remembering I put nothing in?
Again, if I had put 10% in and we get measly growth of 25% over the next 9 years, my gain would be 500% or 50% per year, but since I didn’t put in anything my gain would be even better, even 1% per annum would give good results.
I would have bought more if the banks weren’t being so miserable, I think they knew the rates were too generous and they weren’t keen to lend much out at those rates
Capital Gains Tax and reclaimed depreciation don’t matter to me, since I don’t sell.
There ARE great deals out there (more so 9 months ago), just don’t buy a median priced house with median rents and median yields…. unless it’s a house to live in, in which case buy what you can afford….
November 15th, 2009 at 9:29 am
NZGold – from the article: “Thoughts on the Mortgage Tax – Is ‘Weimar’ New Zealand starting to panic?”►4th March 2007.
“This, of course, would be wonderful for foreigners – since they would be able to snap up depressed Kiwi assets at effectively bargain basement prices! All the heavily mortgaged locals would be able to do is ‘press their noses up against the window’ and watch the party from outside”.
Full article here:
http://www.nzgold.org/articles/thoughtsonthemortgagetax.htm
Matt – The critical matter in respect of mass immigration is to learn from the British experience. In my view the parallels are clear and, in consequence, writing to politicians will do little. Increasingly, you will find Labour abandoning its traditional supporters in favour of a ‘replacement population’. We saw this under Ms. Clarke – with many of those most impacted by the practical effects of her immigration policies being those on modest incomes with few assets. This is British Labour Party policy to a ‘T’. Put simply the working class had their chance to ’smash the system’ in the 1960s and 70s and failed. Instead they actually became more conservative/free market orientated. Simple! Replace them. National seems very similar to the British Conservative Party, with all opposition to immigration effectively silenced – largely on behalf of their business friends and the banks. Herein lays your dilemma, because mass immigration really satisfies both poles of the political extreme. Within this the ‘re-distributive left’ get its new voting block, whilst big business gets its cheap labour and asset price inflation. Both left and right ultimately benefit from growing social tensions (of the kind now evident in Britain) because they are handed a ready made pretext to constrain civil liberties. People need to understand that Labour and National/Conservative are, like hyperinflation/debt deflation, not ideological opposites – but the polar extremes of the same political/financial pathology that will ultimately destroy all our freedoms and prosperity.
Within this rising house prices – because of the ‘opiate’ effect on Joe Public – are the perfect cover for changing, beyond recognition, his country. By the time he awakes, and discovers the magnitude of the scam, history will have delivered its verdict – TOO LATE!
November 15th, 2009 at 9:41 am
Malcolm – “National/Conservative are, like hyperinflation/debt deflation, not ideological opposites – but the polar extremes of the same political/financial pathology that will ultimately destroy all our freedoms and prosperity”
Sounds like a good reason to focus on building an inflation-proof “ark”. Which will it be – shares, property, fixed interest, gold? A combintion of all? Obviously I have my own opinion on which asset class has historically proven to be the best inflation hedge…..
November 15th, 2009 at 9:44 am
Murray,
Again, I can only take your word for it with your figures -perhapos you can be my buyers agent. But a number of points:
1) the 50% is from a low risk index fund
2) there are individual stocks, like your individual house that have returned 3000% out there in the past few months. I have actually started to have a look at small cap stuff and there are some greate performers.
3) you can gear up on shares as well, and many pay out more in dividends than the cost of credit AND you dont have to worry about maintenance, finding tenants and kicking them out, inspections, insurance, high transaction costs, inability to sell at short notice.
4) most importantly – housing has not had its crash yet. The sharemarket has. That more than anything is the reason to stay away from ppty.
Housnng investment is a mugs game. The onyl reason it seems good, is the reason we are in a bubble ie the gains over the past 10 years can not be justified on any fundamental
November 15th, 2009 at 11:53 am
and add another factor 6) better rbnz policy restricting the ability to tap into hot foreign credit http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10609289
What people need to realise is that the gerenal consnsus is pretty clear. This housing bubble is KILLING the nz economy, not juste the wallets of first home buyers. policy going forward is to deflate the bubble, not because it is popular but because we now have no choice. Long may this continue.
November 15th, 2009 at 12:00 pm
jimmy – I agree with you re: maintenance, tenants etc – property can be quite a hassle. There is no “free lunch” however, and in my experience putting in the hard yards reaps the returns. Shares are easy, but are a more volatile market. Margin lending on shares is VERY risky, which is why banks won’t do it. Even after a “Global Financial Crisis”, they will still lend 80% or more on property.
I also agree the capital gains on property could be very weak in the short term (2-5 years) and I wouldn’t recommend anyone buy expecting another boom. However, if they’re getting good cashflow or looking long term (10 – 20 years) without being hugely negative geared….
November 15th, 2009 at 12:01 pm
Jimmy, it’s cyclical, house prices go up for about 10 years, and then go down/stay flat for couple of years. So, you’ll get your chance in about 9.5years. Just hang on there…
November 15th, 2009 at 12:44 pm
PaulR,
Its not cyclical. The 8 year cycle is marketing spiel based on observing a v short time frame. The only trend over the last 30 and especially the last 10 years is of massive increases in debt leading to big asset rises. The world reached saturation point last at the end of 2007. The long term theme from here is deleverage. Not sure how an asset based on enormouns leverage can thrive long term in this environment.
November 15th, 2009 at 1:48 pm
When more investors start listening to Murray and cotton on to the fact that 5% yeilds + 8% interest rates = big losses they will start buying at prices that give a positive return which means rental yeilds of at least 8% once that starts to happen it will start to make sense to own rather than rent but how will house prices fare? To go from 5% yeild to 8% requires a 37.5% fall in prices thats also how much prices need to fall before it becomes a better choice to buy rather than rent. If you want an idea of what happens to property prices with low population growth take a look at Japan, Germany and Russia over the last 10-15 years
November 15th, 2009 at 2:15 pm
Kieran – or a 37.5% rise in rents, which is probably more likely if higher inflation hits.
I think NZ & Oz will have quite strong population growth in the next decade or two compared with some other parts of the world….
November 15th, 2009 at 2:41 pm
Is selling properties to non-residents considered as some kind of foreign investments on sensitive assets, ie. example such as selling power station, airport, local businesses etc…? Is there similarity? Can anyone advise?
November 15th, 2009 at 3:32 pm
Matt in Auckland- I don’t use facebook either but I would be prepared to get an account to start up a group. I’ll organise something and let people know the url. I don’t have the public relation skills to deal with the media to try to get publicity- hopefully we will get people with those sort of skills involved.
Excellent that you are contacting politicians- I will do the same.
November 15th, 2009 at 3:38 pm
murray and kieran,
re population growth – if it does happen in nz, it wont be from the first world. WHY?? The first world is now starting to compete with each other for precious first world human resources due to ageing population. Those from the first world are the only ones with the cash to pay for over priced houses. Interestingly enough, what will happen to those born in NZ with skills. Dont say Aussie, their houses are worse. But pretty much anywhere else in the first world has very affordable properties by comparison. eg Europe, USA. Once they start freeing up visas to arrest their popultion decline guess where skilled kiwis will be heading?? And why wouldnt you if you can buy a house for half as much.
November 15th, 2009 at 3:59 pm
Murray it would actually take a 60% rent increase
$300,000 @ 5% yeild = $15,000 rent
$300,000 @ 8% yeild = $24,000 rent
$187,500 @ 8% yeild = 15,000 rent
Unless wages increases 60% in the next few years (I wish they would) rents won’t be going anywhere. You might be right about Oz population growth but it will more likely be New Zealanders going there to get 20% higher wages. The stats population projections have the 15-65 age group in NZ staying at the same level over the next 30 years even with 10,000 net migration. Germany has very high immigration but its population is still shrinking because of low fertlity rates of only 1.41 and they have even more tax incentives than we do. I believe our fertlilty rates will be similiar within 10 years because when I look at the the new generation (gen y) they have no desire whatsoever for children or marriage.
Jimmy I agree re immigration from 1st world countries also Immigration from developed coutries is likely to decline as well most of our immigrants are from China and India but demand for skilled labour is increasing in those countries as well which makes it even harder for us to entice them to come here. Their growth is good for exporters but bad for immigration.
November 15th, 2009 at 4:29 pm
Kieran,
“they have no desire whatsoever for children or marriage. ”
certainly not if they want to afford a house.
November 15th, 2009 at 4:43 pm
Matt in Auck and Observer – Winston Peters is your man.
By 2026 we will have 790,000 Asians living in NZ!
November 15th, 2009 at 5:04 pm
Russell,
You wrote “By 2026 we will have 790,000 Asians living in NZ!…”
Those going to be living in NZ is one issue, what about those non-residents and not living here yet could be buying and owning properties here, maybe renting to Kiwis later … who knows? is that going to be the trend here?
November 15th, 2009 at 5:36 pm
Matt and Observer,
Russell wrote “…There is no restriction on foreigners buying a residential property here. I have seen mini-vans full of Asians doing the open home circuit in the Flatbush/Botany Downs area….”
If that is the situation that Russell has seen, then foreigners buying up properties here would be a concern pertaining to recent price increases. Seems this is one focus not discussed much in the postings here?
If this the case, then whether CGT or Land Tax might not do much to affect foreigners purchases, right?
November 15th, 2009 at 5:53 pm
It would seem that these “Asian Property Buying Tours” are a nationwide phenomenon in NZ and Oz – Harriet posted earlier “I was amazed to see a BUS load of Asian people slowly going around my newish ( Northwood) estate here in Chch last week, and pointing at particular houses.”
Banks have relaxed the purse strings, with ANZ lending up to 90 per cent of a home’s value again and Kiwibank and BNZ up to 95 per cent. But when borrowers apply for more than 80 per cent finance, lenders will check their bank statements to see how they manage their accounts and what they spend money on.
http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10609292
November 15th, 2009 at 6:01 pm
That’s right, if “Asian Property Buying Tours” is a nationwide phenomenon, then the focus on postings here about having CGT and/or Land Tax etc.. might have to shift focus and consider foreigners’ purchases. If they are not taking any loans here (ie. cash buyers), then the more it becomes a concern for Kiwis just wanting to purchase a decent home using local earned income. Would that affordability be stretched further with salary not moving the way to take on foreigners ability? Scary indeed!
November 15th, 2009 at 6:26 pm
Observer – for your interest:
http://www.telegraph.co.uk/news/newstopics/politics/lawandorder/6418456/Labour-wanted-mass-immigration-to-make-UK-more-multicultural-says-former-adviser.html
Incidentally, the level of UK unemployment amongst 16-24 year olds is now officially almost 1,000,000. Whatever the level would be under earlier (more honest) calculations one shudders to think. Add this to ‘under-employment’ and we have a social timebomb ticking. Now what are we constantly told about mass immigration? Don’t tell me – it stimulates the economy and creates jobs! Utter and demonstrable garbage.
November 15th, 2009 at 6:46 pm
A real estate agent is rubbishing suggestions we are in the midst of a property boom.
First National general manager John Stewart says he does not support the view there is a boom in real estate sales. He says medians and statistical analysis are fine but when there are half the number of sales there were two years ago, you can not call it a boom.
He says fewer properties are being better presented when they come to market so they are fetching higher prices, but buyers who miss on one of them out do not necessarily have another property to move on to and buy instead.
November 15th, 2009 at 7:03 pm
Malcolm- really scandalous, cynical behaviour from UK Labour. Mass imigration is a short term fix loved by both the left and the right unfortunately. The long term consequences go on forever and in a world short of oil, food and water immigration is now a major, major concern. NZ is going to become a highly desirable place once the above shortages really start to bite. Discussion needs to be had about how many people NZ can support in terms of water, electricity etc. The world is going to be a very different place without cheap oil. Most people have no idea.
The future is worrying and all NZers would do better to forget past grievances and unite and stand up for our sovereignty and the future of the country. I found it so annoying last week seeing the left wingers in NZ (The Standard blog etc) arguing again the wrongs of the British colonization of NZ after the Hone Harawira episode. Arguing about past colonisation when we are in danger of being sold to the Chinese (so the elite don’t lose their money in a property collapse) is so pointless. We are all really interbred now anyway. It was good to see Phil Goff move away from political correctness in his response to Harawira. Gives me hope Labour may reconsider a whole lot of the policy of the past 9 years including using immigration to boost growth. We need a decent opposition.
Otherwise we are likely to become a little China. China has the money and our politicians are likely to sell us out in a heartbeat. The interest of the elite and the ordinary citizen are not the same in regards this issue.
This link has already been put up but it is really worth reading the letters below the article. Many Australians have realised what Rudd has done to them by opening up the housing market to overseas buyers and inviting mass immigration.
http://www.theage.com.au/business/foreign-investors-flock-to-australian-property-20091105-hzx3.html
What Australia does in regard immigration ha sthe potential to affect us greatly. I wish we had a say in their policy. When they run out of water and the place is too hot to live in thanks to global warming- they will be coming down here. We need to leave enough room for them and all the million or expat NZers . This could add another 20 million or so to our population.
November 15th, 2009 at 7:38 pm
After the Banking Inquiry, I remembered I saw a link to one of Labour MP’s website. Did anyone still recall who was the MP and what’s the link? If there is any link to Phil Goff blogs, please also let us know. Let’s hope that both Nat and Labour are also reading the postings here.
November 15th, 2009 at 7:38 pm
Trudy, there are actually realestate publications solely in asian languages, that solely advertise NZ residential properties. It is a major industry, but this isn’t really covered in the media. Yes we should be making it harder for non NZers to buy property, because otherwise NZers will never get to own their own house, as they are competing against higher earning countries, who see NZ as a bargain and an investment for the future. Perhaps Winston Peters should be jumping on this.
November 15th, 2009 at 7:41 pm
Russell- Winston is useless. He is all talk. Some years ago he campaigned relentlessly on immigration, but when he got into coalition with National he did nothing about limiting immigration. He never even mentioned it. He just uses issues like these to get votes. I’ve would never vote for him. I just want the main political parties to be prepared to open the subject up for public consultation.
November 15th, 2009 at 7:45 pm
Observer – if Phil Goff is re-inventing a different approach, then he might be the man. It would be more effective if he is directly interacting with this blog.
November 15th, 2009 at 9:03 pm
Please check this link:
http://www.rbnz.govt.nz/statistics/monfin/c16/hc16.xls
It will tell the facts:
1) The amount of homeloan approve hardly increased from 2003. So, the theory of people borrowing to the eyeball to buy the house is not true;
2) Harvey borrowing affecting NZ economy is false, because homebuyers’s borrowing no increase;
November 16th, 2009 at 11:10 am
Joe Blog. If im an alcoholic and have been drinking 3 bottles of wine a night since 2003, does the fact that the amount i drink per night since 2003 has not increased mean I dont have a drinking problem?
November 16th, 2009 at 11:26 am
george You only have a drinking problem if your income is exceeded by your booze bills………Get a second job ! Or plant up the neighbourhood in grapes . The only problem is your lack of thinking laterally …….Cheers man , hic .
November 16th, 2009 at 12:11 pm
Yup so if NZ has been living beyond its means since 2003 do we all get second jobs? All plant money trees?
The tax laws will change. The depreciation everyone uses as deposit for there next 3 rentals will be scraped. Tax will not longer be deductable. And the rate of borrowing will finally drop to around the 1-2 glasses of wine per night which is sustainable and won’t kill the host in the long run…
Maybe some realestate agents will lose there jobs (im sure a lot have already), but the reality of life is you will only get back the amount of value you offer others (on average, in the long run), and when your’re a glorafied door-to-door sales person you can’t expect top class job security and never ending pay rises
November 16th, 2009 at 12:25 pm
1-2 glasses of wine per night ………. Sounds like the mother of all budgets . A typo , you must mean 1-2 bottles , instead of 3 ? C….’mon , have a heart , we need our flat-screen TV’s , the third car , winter in Rarotonga . Don’t make us go cold turkey , man .
December 1st, 2009 at 10:41 pm
“If like our family, younger members are trying to buy an affordable home (based on income) for a young family, the truth of the present bull run really hits home. 10% in Auckland is understated. Debt, debt and more debt is the answer it seems. The government and RBNZ are slow to react to this sector, which created the melt down in the first place. Defies logic. It is also apparent in the auctions we have attended that Chinese groups are out in force and buying at far greater prices than Kiwi nationals can afford.
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