Oh, what did they do that for?
The Reserve Bank people have only gone and mentioned the 'R' word, haven't they.
And it gets worse. RBNZ Governor Adrian Orr has conceded that the central bank is actually attempting to engineer something beginning with R, so hell bent are he and his troops at bludgeoning inflation into submission, as discussed in the first part of this year-ahead series.
I have previously talked of my aversion to the 'R' word.
My main grumble is that as a label, this word is essentially meaningless and simply becomes a distraction. Economic slowdowns can either be slight or severe, so, trying to encapsulate them in one word is not helpful. But given that there's already been quite a bit of chatter in the mainstream media on this subject during 2022, I'm afraid we are going to have to steel ourselves during 2023. Because I'm afraid we can confidently expect an endless cavalcade of 'are we there yet' stories appearing. Well, not from my computer...
To put some perspective on this, Statistics New Zealand generally produces its quarterly data for the country's GDP nearly three months after the quarter in question has finished. For example, the data for the September 2022 quarter is due to be released on December 15. You will be hearing more from me on this closer to the time, but I can assure you now that the September quarter figures will again show a reasonable amount of GDP growth. The RBNZ's forecasting +0.8%. And the GDP growth will continue in the near future.
The RBNZ's forecasting the first negative GDP return for the June 2023 quarter to be followed by another one in the September 2023 quarter, giving us the 'technical' (again pretty meaningless) description of one of those R things.
So, here's the zinger - assuming similar Stats NZ release patterns for the year ahead, the September quarter GDP figures will be released on or about December 14-15 of 2023. That's right we won't even find out if we are in an R-thing till the VERY END of next year!
Sorry, therefore to put a dampener on things for the gloom merchants and the aforementioned mainstream media try-hards, but the economic downturn (for, oh yes, there is going to be one) will be much more a subject for 2024. And we all need to bear that in mind. Patience. It feels like everybody wants to get this whole interest rate hiking cycle-cum-economic downturn out of the way in months and then back to happily buying and selling houses again - at rising prices of course. The whole thing might take a little longer, I fear.
Before any of this, there is the non-trivial matter of an election to navigate. For me, this one looms as the most crucial election for a while.
It is most definitely the National Party's election to lose. But having said that, the National folk have given the impression (particularly when their leader veers off-piste with media comments) that they might give losing it a crack! So, it's going to be very interesting.
I mentioned houses. I will also mention migration. Two subjects that can be easily linked. And they are two subjects that will be pivotal to the election outcome I think.
It's a reasonably comfortable assumption that a National-led Government will once again open the doors to unfettered inbound migration (it worked for them under John Key's leadership). On housing there will be a reversal of this Government's canning of interest deductibility on housing investment and a backing off on the capital gains tax on housing profits through the euphemistically-named bright-line test.
Unfettered inbound migration offers up the possibility of businesses once again augmenting themselves with abundant quantities of cheap(er) labour. So, labour market tightness problem solved.
Of course the migrants need somewhere to live. So, that's 'good' (if you are not trying to buy) for the housing market too.
Because of what a change of government will likely offer, I can see 2023 very much switching into a holding pattern. Key decisions will be put off.
In the housing market itself, it's not hard to imagine a similar holding pattern developing as people wait to see what the election might bring in terms of a change in environment.
In the meantime, of course, owner-occupiers are facing prohibitive mortgage rate costs while investors are dealing with handbrakes such as the previously discussed deductibility rule.
The question of how many forced sales we may or may not see during the year again relates back to the labour market. There will only be a big spike in forced sales if there is a big spike in unemployment.
If we did see such a spike, obviously all bets would be off. A lot of under-duress houses all going on the market at the same time would cause ructions and discomfort that would extend far beyond just the sellers of the properties.
Our housing market remains extremely vulnerable, simply because so many of us have a vested interest in it, aided and abetted by banks that are hugely (over?) committed.
Remember, the context here is that (according to REINZ figures) the national median house price rose 44% across the two calendar years 2020-21 (from $629,000 to $905,000). That left us all very exposed. Talk about betting on the house.
At this stage, I think we are showing every sign of 'getting away with it', but the labour market will be pivotal. And then there's that election.
I certainly won't blame people if they vote for 'the houses' in terms of supporting policies that are likely to support house prices.
As I've said before, I think in many ways we've reached a point of no return with our house prices. Seems to me that our housing market is in the too big to fail category and therefore we have been cast into the position of needing to support prices at what are, by international standards, high levels.
I think there was a time when we could have seen a re-adjustment back to more 'affordable' levels - but that was blown away in the feeding frenzy of 2020-21. Now any such readjustment could prove just too damaging for the economy at large.
Regrettably, what this is means is there will likely be an increasing disparity in this country between the haves and the have nots. But I'm not expecting to see any meaningful discussions or policies around that in this election. (It's far too late in this article to start a diatribe about how our elections in recent times have become far too much concerned with discussing things that aren't important while NOT discussing the things that ARE important, but that is what I do happen to think.)
Anyway, that as I see it is 2023 and some of the important things I will be looking for over the coming year. I've not tried to incorporate overseas events and influences because there's just too many uncertainties. Suffice it to say though that something big could happen internationally that blows everything I've said in these two articles out of the water. For example, I shamefacedly admit that my preview of 2020 didn't have one single word about Covid in it.
For me, 2023 looks very much as if it will be a 'bridge' year - moving from one thing to another. But whether it will be a bridge to better things in future - or worse - hangs very much in the balance.
This is the second of a two-part series looking at prospects for 2023. The first part can be read here.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
242 Comments
The more I think about the situation, the more I think labour inflation is the mechanism that'll resolve the generational wealth divide.
It's a form of tax that directly targets the pockets of non earners (read oldies), so over time either workers wages will inflate to where they're more capable of buying houses, or those older will have to liquidate their houses to pay wages, or both.
It will likely be a few election cycles before there's a party that takes this concept and runs with it in some form or another.
by Pa1nter | 4th Dec 22, 6:23am 1670088192
The more I think about the situation, the more I think labour inflation is the mechanism that'll resolve the generational wealth divide.
It's a form of tax that directly targets the pockets of non earners (read oldies), so over time either workers wages will inflate to where they're more capable of buying houses, or those older will have to liquidate their houses to pay wages, or both.
It will likely be a few election cycles before there's a party that takes this concept and runs with it in some form or another.
If house prices fall 50% in real terms, because we have wage inflation running at 8% and that occurs for 2-3 years while nominal prices fall 30% (as a result of rising mortgage rates), we achieve the same result.
Not always, I have had very generous pay increases and know of quite a few others who have too. All in the private sector.
I approached my employer just last month for a mid-year review, and was given a CPI level adjustment.
I suspect many employers are concerned about losing existing employees/experience, and it costs a lot less to pay more to retain than it does to train from scratch.
As I've said before, I think in many ways we've reached a point of no return with our house prices. Seems to me that our housing market is in the too big to fail category and therefore we have been cast into the position of needing to support prices at what are, by international standards, high levels.
I think there was a time when we could have seen a re-adjustment back to more 'affordable' levels - but that was blown away in the feeding frenzy of 2020-21. Now any such readjustment could prove just too damaging for the economy at large.
I will never understand this position. It seems to be predicated on two things:
- bad things mustn't be allowed to happen
- we have the ability to prevent bad things from happening
It's an especially strange position to be taking at a time when it's obvious that neither of these things are true.
If house prices need rescuing, and the RBNZ lowered the OCR too early, our currency would tank ushering an even bigger inflation punishing interest rate cycle. What other Central Banks do in the near future will decide what room there is to lower the rate and when.
The recent RBNZ stress tests conducted on our major banks is the room they think they have. Up to a 47% decline in house prices and the banking system shall survive.
https://www.stuff.co.nz/business/130326334/reserve-bank-stresstesting-s…
Who knows, events in 2023/24 might end up testing the RBNZ for accuracy....
Except the OCR isn't just a big knob you turn to change how much houses cost. I think the Reserve Bank will end up having to dump the cash rate again eventually, but if people aren't borrowing and lending, house prices will continue to fall regardless.
The whole reason behind the negative interest rate discussion is that in the middle of a credit crunch, not even 0% is enough to convince people to borrow. You need negative interest rates to actively penalise people for not borrowing.
"Except the OCR isn't just a big knob you turn to change how much houses cost"
On the OCR downside, I totally agree with what could transpire. On the OCR upside, the effect on house prices is quite dramatic. It just goes to show what was holding this ponzi together all along- cheap credit. Leading up to Nov-21, cheap credit was the Elephant in the room, smashing the China and the Property Besotted refused to acknowledge the building carnage. In retrospect and to avoid looking silly, the same people now claim they knew interest rates would rise eventually. If such a correction formed part of a speculators decision making process, we probably wouldn't be in this mess to begin with. Either they never saw it coming or they thought they were gifted with the necessary skills to exit at the top.
"...but if people aren't borrowing and lending, house prices will continue to fall regardless."
Chebbo, please sit down, because, HP will not be falling indefinitely.
Evidence: Building materials are still climbing along with labour rates
So A, the replacement values are increasing and B, affordability is increasing on the income side.
What it costs to build a house is irrelevant if people aren't buying them.
If you want to go out and build a house and then let it sit empty because nobody is prepared to pay the $1m you think it must be worth due to the high cost of materials and labour, then be my guest.
The mounting pressure is people's natural tendency to buy or move house. Right now, and probably for the next 12-24 months, many people will be in a holding pattern.
No evidence as such, more of a hunch based on historical behaviour. Who knows, if we remove people's desire for home ownership, that pressure will disappear.
The outlook for 2023 is the most uncertain we’ve seen for a long time. Evaluating this risk, it depends on whether you would you rather hold liquidity to mitigate risk or leverage up and see what happens.
Taking on a mountain of debt is no longer a risk free exercise, it’s a gamble. Having a home in this country is a gamble. Read and read and read again, it never made sense and never will make sense.
Refusing to vote means losing the right to complain about the government
Having a home in this country is a gamble. Read and read and read again, it never made sense and never will make sense.
Refusing to own a home should mean not being able to complain about House Prices. Complain about rent prices though, eat your heart out.
Chebbo is on point. Not sure why they should sit down?
During every other major property price correction (Spain, Ireland, USA, Japan, etc) prices kept falling even as interest rates were falling. Because people and banks stopped borrowing and lending.
You can't just pull the OCR lever and get people to borrow/lend into a falling market. There is a saying for this.... it is called "pushing on a string".
Once the price falls in a highly leveraged market start, they gain a momentum of their own. Which is probably why Orr was so panicky about gentle price falls back in 2019-20.
Here is a link to a description of "pushing on a string" in case anyone is interested. As Chebbo and Retired Poppy allude to above, you can pull on a string, but you can't effectively push on one. This concept is worth taking the time to understand, because it may become quite important over the next few years. https://www.investopedia.com/terms/p/push_on_a_string.asp#:~:text=Pushi….
"Building materials are still climbing along with labour rates"
HW2, a good effort at counter argument however, like reaching a critical mass in a falling market, the cost of building new homes becomes unsustainable and it all falls over. Where an increasing cost of credit is concerned, which is the bigger force that determines pricing power? A developer relies on someone paying him/her a higher price than the base cost inclusive product and labor. Which side wins when we're approaching a recession, the spiraling cost of a new build or the plummeting cost of an existing dwelling?
The plummeting cost of an existing dwelling.
Yeah, Ireland. At times there's only 500 houses to rent in the whole country, new housing stock is low and people can't buy houses so they're having to raise the DTI.
They basically did everything we've done or are planning to do. They're back where they were before the GFC.
"They're back where they were before the GFC"
Yes, and how many years did the recovery take? There were many that wished they'd seen that train wreck coming too. House prices have only just achieved the 2007 peak. What do you think will happen next year......
"While its rapid rebound from the crash has seen the Irish economy become one of the fastest growing in the Eurozone, the country's attraction for foreign investment is threatened by the absence of high-quality housing and associated infrastructure, both economic, such as roads and broadband, and social, such as schools and healthcare (a problem recognised by the government in the 2018-2027 National Development Plan which promises massive infrastructure upgrades over the next decade).
https://www.ashurst.com/en/news-and-insights/insights/construction-in-i…
Compared to Ireland, it seems like we have a superior infrastructure. Why aren't we the hub of the Pacific like Ireland is to the Eurozone? Is this because we are more an outlier nation by location?
Will you be around long enough to witness "500 rentals" available here on any given day?
Time will tell.
Housing bubble, and debt in general. Across the board we have borrowed for a certain lifestyle.
We have a policy to promote full employment, which is understandably of some merit, but we have a large amount of low value jobs.
Our businesses have been value and are operating on the basis of obtaining cheap funding, only permitted by money printing and debt.
We have developed a consumer society that is just spend spend spend, for arguably little emotional gain, at one hell of a tab.
I agree, we can't afford a lot of this.
In old terminology spec houses have been the downfall of numerous builders long into the past. Know a well established builder in our neighbourhood. Had been working to a plan for quite a while on having three builds on the go two contracted one spec. Up until the tightening up etc had been making more out of the spect than the other two combined. Now he is not doing any specs at all. Says the trap is starkly obvious. You build with rising costs which involves many unknowns on a market in price free fall, you end up completing a house that has cost more than the market will pay.
Foxglove, unlike many others with lessons yet to be learnt, your builder neighbor will more likely than not remain a trusted and well established builder too. When one considers the scores of people that have entered the trade in recent years, thousands, if not tens of thousands, could get financially fried here. Like a disease, these architect's of nightmares return and reoffend; https://www.stuff.co.nz/business/property/300754540/im-deeply-sorry-i-t…
At what stage of the supply chain are you referring to when it comes to margins? Are Winstone Wallboards, Tasman Insulation etc constrained to dropping their prices because the actual cost to manufacture a sheet of GIB in New Zealand is so high? House prices have exploded over the past few years due to loose credit but none of these manufacturers have increased their margins to take a slice of this action????
I don't see house prices falling as such a big deal. A few made insane profits over the 2020-21 madness, and a few will be ruined by a fall. But overall not a problem in the big picture, the big economy.
I still believe allowing that was a crime by government, but the 'economy' will continue.
Voting in a different team will do nothing to fix the fact that the 50-year experiment in central bank fiat currency is coming to an end. This a global problem and voting out the red team for the blue team will have no effect.
It is up to the people to separate money and state.
Everybody is free to issue their own money and call it whatever they like but getting other people to accept in payment is where the problem lies as money is only a form of IOUs. The NZ Dollar is the governments unit of account and the governments power to tax us requires us to use its currency.
What do you use to buy bitcoin and gold, except regular money? Money is created as debt, when we borrow from a bank a deposit is created in our account and we sign an IOU to repay the loan and after repayment the account deposit is cancelled again.The government spends by issuing its own IOUs as central bank reserves and which are its own liabilities and which can only be extinguished again through taxation.
The banking system cannot operate without these reserves of government currency to operate their payment system.
With the fiat currency fiasco we are now seeing fail to some degree, it is the most opportune time to get more than two major parties having a decent level of influence in parliament. Imagine if we had 4 major parties, sure it would take a lot of jostling and time to get things through but it would be with a better representation of NZ today, a more multicultural, educated and diversely opinioned people unlike say 30years ago. We have developed in so many ways, we can't keep going around the same cycle of blue and red politics like we have done, just like the same old ways of managing the economy are being shown to be less effective and somewhat arguably outdated. Talk to as many people as you can and let's give the little guy a chance, find the party of least objectionable policy (we all know there's never one that aligns perfectly with each of our views) and take a new approach. Personally I'm still undecided as I wish to see what policy and vision each party shows over the next year, but we have hope, we have this chance so let's build a better NZ a different way than we have done.
What a shame the trade does not attract the best and brightest. They seem to head for the highest paid jobs available generally. With few exceptions. I think the adversarial nature of our Westminster system dissuades competent people in favour of good communicators. We need a mix of both. Although that is what the list candidates should fill the gap.
I love all this critique of MPs intelligence and competence by people who could not even remotely get anywhere near being elected. Politicians in democracies have a super hard job as they have to be popular enough to get elected while still trying to do the right thing. Often what needs to be done is not popular so they find themselves in a Catch22.
So the first priority, requisite is being popular. Great! What an utterly fatuous comment. That in itself definitively underscores the pointlessness of your suggestion. Was never a great supporter at all of Helen Clark for instance, but she did not ever electioneer on the basis of being popular. Instead she put in place a very solid platform of policy. It was if anything it was gravitas. Hardly the Spice Girls. But whether you agreed with her or not, nonetheless she carried nine years of government. Ironically, in the last term, she made a rather freudian slip by admitting she thought a good deal of criticism that was about, was attributable to her being a popular PM, “that’s what you get.” She was gone next time. Popularity is a double edged sword. Muldoon was initially extremely popular, so to Key. Lange wasn’t but he earned his popularity the hard way, by a combination of being eloquent, and vital when necessary. There is, to my mind, not one identity in parliament today that would foot it in calibre with any of the aforementioned, popular or not.
Well to be fair, an MP's competence only really goes so far as their ability to convince the public servants to also work competently. A new Government does not clear out all the dead wood within the public service, you know, those servants that actually create the outcomes.
It's no different to the CEO of a company. How much money does a CEO earn for the business? How many widgets does the CEO produce?
Can only agree wholeheartedly with you there. For example I have been highly critical of the government’s handling of the pandemic post the border closure & first lockdown. But during that stage and subsequent it was plainly obvious there were significant failures occurring in the MoH even including a refusal to follow directives from the Minister. Consequently the government had to take that on the chin because to do otherwise, publish the failings in other words, would be to undermine public confidence in an already over burdened health system.
Very well put Foxglove. We have seen 2 terms of pandering to the media and worrying more about image than any real competency in the one thing that we vote for - policy and hard decisions. What we need and what I feel is the underlying sentiment around a lot of NZers from those I talk to, is someone to simply be pragmatic in the face of the election. Stand up, tell us the state we are in, tell us what their plan is and, most importantly of all, forego the imagery and trying to look great and simply deliver on what has been proposed.
Like the coworker who talks a big game and is incompetent, we are all tired of the showmanship, we want progress and results.
This is a seed comment that needs to be nurtured and brought to life as a dominant tree. The concept of an apolitical government created from the best minds and that reports to the people . The people then voting for policies by direct democracy referenda. personally I advocate 50 appointed people one for every 100000 people to act as intermediaries between policy and the public. If bad policy is sent to the public it can be voted down. no more politicians wheeling and dealing. and no more sinecures for failed politicians as ambassadors or on boards of directors.
Always hit and miss when gazing into the crystal ball. The importation of workers to displace /discomfort the locals is an obscenity nonetheless it will likely be the' go to' for whomever wins the election but it may not prove to be as lucrative this time round in fact it could be a big mistake socially. If the RB intends on hiking further house prices will certainly decline and rents increase which will put additional pressures on consumer spending. The recession might not be as deep as many fear , I see stagnation featuring as folk tighten and adjust . Lower incomes will be hit harder. Longer term stagnation than many predict I suspect. Plentiful opportunities for those that have prepared for such a scenario...Those with excess liquidity wont be affected by interest rates in such an environment and will be on the hunt for some value , time will be on their side all thru 2023 and into 24. Not sustainable will feature across the board and some are in for an unpleasant reality check.
Should this happen, we will see a flood of specu-vestors jump right back in with all the extra cashflow at hand and outbid the FHB's as was occurring previously, demand increases, eventually prices will start creeping which will trigger yet another flood of FHB's and investors jumping in and the FOMO cycle will start up all over again. This will perpetuate the already widening wealth gap in NZ and the only thing I can see that would do anything to change that is the transfer of wealth from the baby boomers to their children, however this would again have a wealth gap between those who's parents were willing to help their kids out with a house purchase or have sufficient leftover wealth to pass on. We are in for a very interesting decade ahead folks. Grab your popcorn quick!
Yes, all of those will be in play.
Our external current account annual deficit is currently approx $27 billion.
I am concerned the Sept figure (due out on 14 Dec) will be even higher.
At some time the financial reef fish will realise that this is unsustainable
As David Chaston said some weeks ago, this deficit does not matter until it does matter.
KeithW
Surely part of it is because people are becoming more reluctant to buy stuff that has been shipped half-way across the world due to the emissions cost. I've said it before, even if people here don't give a shit about emissions, our export markets do and we are a high emissions per capita country, our products are high emission to transport. Globalisation is shifting slowly towards more localism, well at least the narrative is. This will have an impact on how attractive our exports are.
Surely part of it is because people are becoming more reluctant to buy stuff that has been shipped half-way across the world due to the emissions cost.
NZ still has a decent share of milk powder exported to Asia. Branded dairy product is a different story. No reason why it cannot be produced locally in Asia.
J.C.,
I have been somewhat surprised by the strength of the NZD relative to both the USD and AUD in recent weeks. I run a NZ-based USD account and with hindsight I am pleased that I did a substantial transfer (for me) when the NZD/USD was .56, having agonised over it. However, I also know that it is impossible to predict short term movements in exchange rates and that is why I use the term 'financial reef fish'. What I do know is that the external current account deficit is not sustainable and one way or another it will have to decrease.
KeithW
Thanks Keith
It has been higher than 7.6% and over 8 percent, about the time of the late Michael Cullen and H Clarke possibly. I know that level caused consternation in financial circles.
Very interesting about the US. I could ask a further question here about the cause of the '87 share crash, but might leave it for a future time.
Thanks kindly
HW2,
Yes, the current account deficit reached 7.8% in May 2006 and stayed high until mid 2009. It was brought under control by the market deciding as part of the GFC that this was not sustainable. The outcome was the exchange rate declined precipitously, a recession occurred, and there was significant unemployment. At that time, however, we were not in an inflation bubble like we are in now. I expect the recession will be deeper this time.
1987 was a different type of bubble again. Arguably the parallels with the current situation are greater for 1987 than with the GFC. But each period has its own unique characteristics. I watched the 1987 situation evolve from afar - I was based in Australia at the time. Australia handled the situation under Hawke and Keating differently than NZ and with less pain.
KeithW
Great article David, I share these sentiments. I saw a Republican pundit on CNN who said he went to vote in the Herschel/Warnock run-off in Georgia. He got into the voting booth and ultimately couldn’t bring himself to vote for either candidate - so left without casting his vote. I am not sure I’ll even make it to the booth. I have voted for both Labour and National in the past but currently don’t feel that either warrants my vote.
Labour has proved themselves to be the totally inept group of inexperienced fools we thought they might have been; they have been “playing” at governing New Zealand and it’s people. I have often thought about where would we be now if we had had Bill English and other experienced ministers sheparding us through the pandemic and this subsequent post-pandemic period. Bottom line is I can’t bring myself to vote for more of the same of this Labour government.
National though, offer me a worse choice. Let’s forgive them the pathetic petty carrying-ons of Simon Bridges and Jamie Lee Ross and then a succession of failed leadership candidates, they now are a group that seem to offer little to the country as a whole but rather want to pander to greedy house and business owners.
What is happening with housing at the moment is a sad and unplanned outcome of very poor government and monetary policy - for a long, long time. Both ourselves and our children will lose a large amount of equity in our homes - I believe we will see a very significant drop in housing prices. But we should not look selfishly at these issues. New Zealand has become virtually unliveable for most young families in the last 20 years and housing is our key issue. The housing crisis drives inequality and undermines our communities and society as a whole. Our house prices have been driven to unbelievable levels by successive governments refusing to apply a capital gains tax and now the market is correcting despite continual attempts to always keep it rising. This is good for us collectively. Cheaper houses will make New Zealand a better place for all of us. Nationals plan to magically kick up the housing market again by reinstating policies favouring housing investment will be a disaster, we need to continue with our current painful process of unwinding house prices. If National retains its current housing policy, I cannot vote for them.
Yep the housing market is only too big to fail until the problems it causes are too big to ignore.
National and ACT are buying votes with these policies rather than considering anything good for the future.
Im with you too, I can’t bring myself to consider voting for either party. But in saying that, the better result is a coalition so my vote will be going to the small guys and encourage the same from anyone else put off but the lack of major party option. If either get in alone, expect some pretty lengthy can kicking.
Perfectly said NellBell. I don’t have your writing skills, if I did, I would have written that post exactly the same. People by nature are self serving and it’s on the government to put parameters in place to prevent blow outs. You cannot blame investors in my opinion (although they do themselves no favours with the envy comments), it’s on the successive governments. DTI, land tax, CGT… all the tools are there and have been there. I just hope National have their numbers wrong when they get in.. the interest deductibility removal was a GOOD thing. Removing it is a step back backwards.
Disagree. Labour haven't done much but they have turned the housing policy settings in the right direction. As others have said, housing (apart from climate change) is the biggest challenge our country faces. National would reverse these policies. They are unelectable on that basis. It's better to vote in people who have underwhelmed but done the right thing than people who may be more competent (massive assumption anyway) but want to take the country in the wrong direction.
This is true, I will have to vote. Can I work hard to lobby the Nationals to drop the housing investor support? If they did they’d have my vote. Maybe I do whats suggested above and make a strategic small party vote - I would have to make it a project to analyse exactly the best way to do this - plus I remember all those years of Winston Peters. I’m secretly hoping that in 12 months much of the huge market shift has happened and many investors have exited the market plus something like DTIs are in place and will trump other housing policy. Fingers crossed. Anyway I’ll vote, promise.
Exactly Nellbell - my thinking aligns very closely with you on these issues.
Our parties are all becoming more extreme in different directions to please their voter base.
If you're centrist (which I believe I am on most issues) - it makes each of the parties nearly impossible to support.
It's possible a few do - I remember the conversations in the comment threads here a number years ago about how we should/could change the tax treatment of new builds vs existing homes for property investors to encourage increasing supply to help resolve affordability....and then not long after that it was policy.
Might have been coincidence or perhaps not.
Kate may have forwarded the ideas through to appropriate person/s - she might be able to clarify (if she reads this).
Labour's housing policies have resulted in a quadrupling of people on the social housing waitlist. National's housing policies will go some way to helping those people get back into decent rental housing, instead of being stuck in emergency housing and motels for years. While house prices may have been high under National, there certainly was never a rental crisis - that has been solely caused by Labour over the last few years.
Selective memory? Articles from 2016:
The Government has spent almost $70 million on emergency housing over the last five years in just Rotorua alone
https://www.nzherald.co.nz/bay-of-plenty-times/news/sonya-bateson-stop-…
A COUPLE sleeping under a loading dock because they couldn't find a rental property in Rotorua is just one of a number of calls that have "inundated" a local MP's office.
https://www.nzherald.co.nz/rotorua-daily-post/news/homeless-in-rotorua/…
I find it perplexing that John Key got into parliament on the promise of "balancing the books" and telling NZ the pragmatic thing of we have debt and we need to pay it back to progress. He rallied the country buy calling it how it was, yet Luxon now is campaigning on the housing ponzi we have an surprisingly forthrightly showing that he is helping the vested interests in business and housing, while neglecting the pragmatic solutions needed to help everyone prosper. Such a stark difference in a downward cycle it baffles me
Excellent article David and agree that if left to politicians, bureaucrats and agencies, house price will be supported at all cost but first time in ages fundamentals has taken over and is beyond manipulation by vested biased interest, so this time economy cycle will run it's course.
As I've said before, I think in many ways we've reached a point of no return with our house prices. Seems to me that our housing market is in the too big to fail category and therefore we have been cast into the position of needing to support prices at what are, by international standards, high levels.
I find it disappointing that we are compared with overseas when it comes to measuring our hose price affordability performance. Currently we have failed to keep houses affordable for all New Zealanders, irrespective of our the international metric. Surely making this factor one of the central tenets of our political endeavours along with affordable food for all a basic right for our people? Apart from inflating wages I see no other realistic plan that is not a generation away through bureaucratic tinkering if even then.
It's taken 30 years of incompetence and greed to get us here - maybe it's only to be expected that it will take 30 years to correct.
I'd date the rot back to the mid-90s and the introduction of 'market rents' for state housing/destruction of state housing; the moment when the Govt decided that housing really is not a right but a luxury for those who can afford it.
It would appear the only politically acceptable option may be a sinking lid DTI for housing over the long term removed from the vagaries of the electoral cycle and administered by the (apolitical?) RBNZ.
Am not sure how the international financiers will feel about that however.
I like the idea of a sinking lid DTI type system but I see some issues that will have to be addressed.
1. With general inflation we have to somehow adjust the current cost of small new builds downwards, perhaps removing developer contributions on houses below a certain sq meterage, lets get rid of GST on these as well.
2. We have to make it easy and quick to subdivide to allow affordable housing, NIMBYs be damned, if a developer gets stuck in high court and it takes 3-5 years before they can start ALL this cost gets passed through to the buyers.
3. We have to loose this stupid focus on travel on public transport, but the answer is not fossil fuels, lets remove GST on EVs. That way people can live further out and use EVs to get to the park and rides. We can then build more around Warkworth, Waiuku etc etc (using AKL as an example.). While we are at it lets remove GST on solar installations on New Builds.
4. The government need to produce a few (20-50) signed off house designs, that with minimal council BS can be put almost anywhere, Indeed lets tender the building materials as well, so you can buy the package design and all materials , and have a list of approved builders (lets add some insurance in there as well and deposit protection). If necessary lets import materials if Fletchers will not play ball.
5. We need to move fast, Australia have approached the super funds to see how they could help build 1 million affordable homes, Who will build them? Our builders will, thats where they will move to at the bottom of this crash.
We need to protect homeowners from this OCR BS, lets start an NZ Government Fannie Mae, Freddie Mac type system for these houses so people can get fixed rate 20-25 year mortgages.
I don't think its hard to fix, but the Left (5 houses Helen Clark) and the Right (7 Houses Chris Luxon) don't seem to want to even consider the above.
Policies look good IT GUY. On the transport front can we also review money being spent on cycle ways (drove down Hutt motorway yesterday, massive hugely expensive cycleway being constructed for who knows how many cycles) - perhaps funnel some cycleway money to your low cost housing strategy and cement in bright line/capital gains tax on investment property. I would vote for this :)
Yes, sorry, there is an argument for cycleways - I did say review :). I confess I am a little sensitive to cycleways as they are such a political crowd pleaser. When I lived in Bay of Plenty huge amounts of money got put into cycleways - one from Omokoroa ( a seaside retirement suburb) into Tauranga. Not a commuter route, who knows who uses it. A perfectly good computer option could have been established if needed with a small ferry running from the already built Omokoroa jetty to the already built Mt Maunganui and Tauranga jetties/wards. I just think sometimes it’s things like cycleways that are seen to be vote getters. I guess they are seem more appealing to voters than low cost housing or tax on land.
The amount of money out into cycle ways is a tiny, tiny portion of the transport budget. The idea that people are spending big on cycle ways is laughable to anyone who knows anything about our transport funding system. I can only think that it is because cycle ways are so rare that when people see one they notice. Next time you drive have a look at your tripometer and count how many KMs of road your on has protected safe cycle ways compared to those that don't. As a bonus exercise count how many unpriced and/or unused parking spaces are on those same roads.
Cycleways are cool but EVs on normal roads are cooler, for SO MANY REASONS, first you don't have to change peoples lives, just the energy source.
I used to ride a Triump Speed Master to save money on the commute, but an electric car saves even more. And in the EV you can still do the grocery shop/school run etc etc, hard to do that by cycle.
I am all for hydrogen buses as well if thats faster to deploy.
We could even run a design challenge - design a house that can be built for say 300k - prizes of 1 million would motivate young architects etc.
I think the most important thing is talking, public consultation. But thats not Labours way.... Maybe I should try to get onto a party list, Whats Shane jones's number?
This is pretty spot on. Without doing most or all of that nothings going to change much.
Not hard to force, if you could get 10-15% support of this through social media etc as an alternate vote, it'd hold the government to ransom next election.
Getting support for the funding is probably the problem. It'd be a 10 year project.
Not just Australia. Many of the Asian countries are now handing out residency visas to moderately wealthy people in order to get them to move there and bring their money. A wealth tax would definitely see me leave NZ, but probably for somewhere like Thailand or Singapore. https://www.iexpats.com/thailand-woos-wealthy-expats-with-the-long-term…
Its funny how some countries want to attract wealthy taxpayers, while others want to drive them away. I wonder which policy will be the most successful in the long run???
Successful at what? Qatar is swimming in wealth, yet the majority of their labour force live close to slavery conditions. You can expect to see that replicated with countries that try to attract high paying taxpayers and high wealth individuals. Remember these are people who do not care about society as such, just their own lifestyle and maintaining their own wealth. Not a particularly appealing society to live in.
Well it beats living surrounded by gang members, criminals, drug addicts and welfare beneficiaries who expect someone else to pay their benefits. If you think a low income society is some great model of equality, you can have it. I'll take the wealthy neighbours in a gated community with a pool thanks.
The problem is when the wealthy all leave, they take their taxes with them so the taxes of everyone who has left has to increase to compensate. This is one reason why countries like France quickly reversed their wealth taxes, as the taxes they lost far exceeded the wealth tax they gained. People forget, money is mobile, people can take it anywhere.
...it is only when we get to around the top 50 per cent of households is there any net income tax paid. Below that income level no net tax is paid, as those households receive more in transfers than they pay in tax.
12 per cent of individuals pay just under half of all personal taxation, and the top 3 per cent account for almost a quarter of all personal tax paid.
An inconvenient truth about tax in New Zealand | Stuff.co.nz
"Does Frankenstein learn from his mistake in creating the Monster? In the days leading up to his death, Frankenstein regrets that he will die before destroying the Monster, revealing that he understands that creating the Monster was a mistake."
Major difference here is that politicians and central bank do not even regret creating the Monster - Inflation/ Housing Ponzi
I voted Labour both the last elections: them being silent on their co governance agenda & National being a basket case.
The ONLY issue in next years election is whether we want to live in a democracy that represents what all our NZ ancestors (European, Maori, Asian & other ethnicities) fought & died to keep alive in the long ago dark hours. All the other issues are noise, these too shall pass.
Labour, Greens & Maori parties wilfully undermine NZs democratic fundamentals in their secretive agenda.
We need to vote this Govt out while we've still got enough of a democracy left to do it with.
I'll vote them out just so I don't have to look at the sad face/hand waving/ be kind bullshit. All the other destruction of democracy/apartheid stuff is just an added bonus. Good riddance Jacinda & Grant may you both sail off into the sunset to that UN place you belong.
Finally seeing some seasonal fruit and veg prices, at new world today broccoli 2 for $3, strawberries $3, telegraph cucumber $1.69. I could even afford to buy a tomato today. Also fuel prices much lower. Could we see a negative quarter for inflation? Surely building supplies demand and prices have peaked too.
I read a very good piece from Australia a few days ago arguing that CPI inflation will be dead in the water around mid 2023. Along the lines of what I have been saying but more extreme (I personally think we will still be circa 3% or a bit higher by mid 2023).
I go to Aussie sources quite a lot. It’s probably a product of our small population, as well as our hermit-like insularity and conservatism, but we don’t get well argued contrarian pieces much in NZ.
Australia does not have wage inflation (currently) which is why they think inflation will come down there. They have flooded the country with immigrants, over 3 million visas approved in the last few months.
https://zw.linkedin.com/posts/australian-department-of-home-affairs_tit…
This is not the case in NZ. We cant even find people who want to come here. So wage inflation will continue to spiral, feeding into the prices of domestically produced goods and services.
https://www.nzherald.co.nz/bay-of-plenty-times/news/nz-out-of-favour-re…
Everyone seems to think a National led government and its’s reintroduction of interest deductibility, and bringing the bright-line back to 2 years will save the housing market.
My thoughts are that deductibility won’t be enough to swing the supply/demand levels back to a bull market due to a lot of investors having already fallen below the 40% equity level with the recent value reductions, and the bright line adjustment will likely provide another flood of houses to the market only speeding up the decline.
if the bright-line goes back to 2 years, there won’t be any property sales incurring tax as anything purchased in the last 2 years is not making a profit anyway.
Its about cashflow. Labour's policies have turned previously cashflow positive properties (on which tax was already paid) into cashflow negative properties, that with 7-8% interest rates, investors can no longer afford to hold. So they will sell up, forcing more tenants out of their homes, and forcing down house prices faster (as these sellers will be the marginal price setting seller). The 5 year Brightline period expires in March, so from then on investors will be free to sell, although if prices fall fast enough then the Brightline will quickly become irrelevant as there will be no profits to pay tax on. If National can reduce the number of forced sales, that keeps tenants in homes, and reduces pressure on house prices. Labour/Greens answer will probably be something stupid like rent control which will simply exacerbate the number of forced sales.
KW
I call bs on your claim.
I recall half of landlords were claiming an 8K loss.......sounds better than 70-80% not making a profit I guess
You are right to think that tenants are going to be kicked out so the property can be sold.The whole clusterf**k is a social disaster that is only beginning.
Also agree. Probably very few tenants will actually be kicked out (because very few rentals will sell). But there will be more disruptions and tenants having to deal with real estate agents and open homes.
The exit door is shutting fast. And if landlords don't get out soon, they are likely to be stuck with their rentals, like it or not.
Most people get rid of the tenants before putting the property on the market, otherwise its unlikely to sell with tenants in situ. People want to be able to move into the house not wait months for the tenants to be given notice, and then hope that the property is not damaged at the end of the tenancy. And as you said tenants will be difficult to deal with during the sale process and the house will not be well presented, so unlikely to sell or sell for a good price. If you want to maximise your chances of sale, you get rid of the tenants, clean the property up, then put it on the market.
What changes is the name on the title of the property. If the Landlord chooses to list the property empty, then sure the tenant becomes homeless. But if the reason why the Landlord is looking to sell is due to cashflow, the last thing they will be doing is axing their cashflow while trying to sell so the tenant stays.
- Property is sold to FHB, where were these FHB living to begin with?
- Property is sold to Investor, no net change of rentals
- Property is sold to existing OO, where were these OO's living to begin with?
In a just society those tenants being evicted would be able to buy the property they live in if that is their desire. To achieve this scenario there will unfortunately be those evicted as you describe. Using this reason to keep the system the same unjust one that it now seems one that only suits property investors that have a marginal and unsustainable business model.
"I certainly won't blame people if they vote for 'the houses' in terms of supporting policies that are likely to support house prices."
Why not? Seriously why tf not?
Is this what our democracy is now about, purely a financial consideration.
If people do vote in that way I for one will point the finger and see no reason not to.
I do not think most people in NZ understand the meaning of economic recession.
The people are still pouring all their cash into housing and not even what they have, they are borrowing more to buy bigger houses.
Sometimes I do not understand when people tell me that buy now and then you can sell it later and make more money and enjoy. This is the deluded lot.
The time to enjoy is now. You will not know if there ever will be a tomorrow. Now I am not being pessimistic but realist that if i don't have enough now to enjoy it, how do i know i will courage or mindset to do it tomorrow anyway.
Exactly right. Your money is useless when you're dead, some spend too much time focused on amassing more and more and more until they realise they spent their best years focused on something that doesn;t really exist, and they have little time or energy left to relish in their spoils.
For me the best part of David’s article was the explanation of the lag of reporting gdp figures months behind the actual quarter that it reports on. Subsequently that if we are to have an official recession that will likely be reported at earliest over 1 year away in dec 2023. This could all drag out for some time.
Regarding housing affordability: The best outcome would be for inflation to stay a little elevated for some years while house prices plateaued eventually reaching an affordable level. This would allow time to try and fix the many reasons they have become so expensive ( building costs, planning rules, many many more ).
Yes I know many reading here are simply not that patient and prey for a crash. But I think in the event of a crash panic will ensure, levers will be pulled and no attention will be paid to the actual long term causes.
"Recession? Falling house prices? Tight jobs market? Don't worry - the election will fix everything"
Labour are currently seeing to it with entrenchment under urgency that elections won't be able to fix anything. Labour have dissolved equality of suffrage and handed over control to a privileged ethno state.
edit: Hold the phone - "The government has announced it will remove the entrenchment clause from its Three Waters legislation.
Leader of the House Chris Hipkins said the government would fix the Water Services Entities Bill this week by removing the entrenchment clause that was voted on during committee stages."
https://www.rnz.co.nz/news/political/480046/three-waters-government-ann…
Yes, have we been suckered by a sleight of hand? While we've all been worried about the entrenchment clause, no one has been discussing what it means that the oceans have now been included in the bill, no public consultancy on that, no idea what the ramifications will be - yet it gets voted on shortly
Most of this Govt has been spin, if not outright lies.
There are 40% more people on benefits today than in 2017 when Labour took office. There were 345,762 working-age people receiving a main benefit at the end of September 2022, or 11.1 percent of the working-age population. In Sept 2017, there were only 277,218 people receiving a main benefit, or 9.3% of the working-age population. We have a tight labour market because Labour has entrenched welfare dependency rather than work.
Immigration was at a record high in 2019 not under National - https://www.stats.govt.nz/news/net-migration-provisionally-at-61600?fbc…
"There will only be a big spike in forced sales if there is a big spike in unemployment. If we did see such a spike, obviously all bets would be off. A lot of under-duress houses all going on the market at the same time would cause ructions and discomfort that would extend far beyond just the sellers of the properties."
There does not need to be a big spike in unemployment to force sales. A rise in underemployment will have the same effect. If you lose overtime, bonus pay, commissions, have your hours reduced, or your side hustle goes belly up you are not going to be able to afford your higher mortgage payments. Income reductions will tip people over the edge.
Also those who own two houses (a bach or an investment property) are going to face a double rise in mortgage payments, and its a safe bet that the decision will be made to offload one of those properties to keep the other. This will be exacerbated by the fact that the recent tax changes around interest deductibility means many properties that were previously cashflow positive are now hugely cashflow negative (and due to become even more so) - and without capital gains on the horizon many investors are just going to cut them loose.
And the 2018 5 year Brightline period expires from March 2023 so all those waiting for that before selling up will now be free to hit the market. Of course, if price falls mean that there are no capital gains, the Brightline period will become completely irrelevant, and 5 years of previously locked up stock is free to hit the market.
Under IRD's "buying a property with the firm intention to sell" assessment, will IRD be watching out for those "cunning folk" as yet another way of filling the coffers? - Probably. Brightline expiry aside, under this category, it could still be quite a cash cow. The onus is on the stunned Speculator to prove otherwise. In the last ten years, how many people bought houses driven along by a FOMO on their piece of the pie? I suspect the IRD will now wants theirs.
https://www.ird.govt.nz/property/buying-and-selling-residential-propert….
by HW2 | 4th Dec 22, 1:41pm 1670114506
Total hypocrite losers taunt investors with pejoratives like specuvestor
Then later encourage them to sell out
And your pal Tim (aka TTP) who has been found guilty of deceptive business practises in the past, has spent his time on this forum promoting the sales of houses for his Property Brokers business, while taunting anyone who disagrees with him as a doom goblin/gloom merchant (DGM).
As I said last night, if you chose to live by the sword, you will die by the sword.
I thought you were more into intelligent intellectual conversation than trolling and anonymous smearing. But I must have been very wrong as your comments are often little more than mud slinging. You get highly upset though if I make pointed comments
How was church by the way?
by HW2 | 4th Dec 22, 2:34pm 1670117670
I thought you were more into intelligent intellectual conversation than trolling and anonymous smearing. But I must have been wrong. You get highly upset though if I make pointed comments
How was church by the way?
It's impossible to have such conversations with certain commentators, especially those ravenous wolves dressed in sheep's clothing (i.e. TTP, CWBC, P8 and yourself...although you appear to be almost the lone wolf still pretending to be part of the flock).
https://th.bing.com/th/id/OIP.twJK81-BFdJrdXEJ3V7KggHaHa?pid=ImgDet&rs=1
by HW2 | 4th Dec 22, 1:41pm
Total hypocrite losers taunt investors with pejoratives like specuvestor
by HW2 | 4th Dec 22, 3:06pm 1670119571
You brought it up yourself, not me!
Ravenous wolves dressed in sheeps clothing
Practise what you preach
Yes and you taunt people with doom gloom merchant (or have done so, so I'm just keeping you honest).
https://i2.wp.com/catholicreadings.org/wp-content/uploads/2019/09/Remov…
Over the past few years I’ve seen commentators removed off this site for various reasons. Some controversial and some with personal vendettas. By far the most obtuse and facetious is HW2, yet he remains? Ridiculing everyone for having egalitarian or morally fair views. What does he add to this site apart from dated obnoxious laughy face emoji’s??
Those who make statements like yours are not genuine I reckon. If you were genuine you would take your concerns straight to the administrator.
In answer to your comment, I give straight forward rebuttals of the nonsense that is pedalled by several other commenters, who in my opinion should be removed. But that is not for me to say.
And I recall you were posting your own share of nonsense about citi-bank. Then claiming immunity for some obscure reason. Therefore be careful what you wish for tomjones04
But hey I am not the administrator, so its purely their role to decide.
Cheers 🍻
You come across as a really horrid person and I really wish you would be banned from this site, as you were previously as ‘HouseWorks’.
A large proportion of you posts are nasty or trolling.
I really don’t get the editors’ approaches on this website much of the time. Although he was bloody repetitive, ‘’Fortune’ was seldom nasty.
I got warned last year for calling MPs ‘clowns’ for heaven’s sake.
This kind of strange editorial approach is one of the reasons I don’t contribute financially to this site.
It’s weird.
Why do you reply in kind then HouseMouse also known as Fritz and any other incarnations. Youve already been proven a double die twister as Fritz.
If someone wants to see the kind of crap I have to put up with from this man, named HouseMouse. Look back two days ago when he automatically assumes the worst of me. Kiwi Tim (I think it was) was denigrating his property owning relative and ended up having his post removed for good reason. HouseMouse still used it to have a good troll.
Btw HouseMouse, I respond to stuff that I know quite a bit about and try to limit myself. You on the other hand pretend to be an 'expert' on virtually everything. So I know when someone is pulling the wool.
Its intention that is the test. Every investor will claim that they bought the property in order to hold it long term and for it to be their passive income in retirement and never had any intention to sell it but to leave it their kids on their death. Its only the forced change in taxation treatment that has meant the property now has to be sold. Too bad, so sad. Almost impossible for the IRD to prove otherwise.
Perhaps you need a new Accountant? One that works in your bests interests and not theirs. One that won't leave you looking over your shoulder. From the link, this publicly available information has no time constraints that I could see. I am open to being corrected if you have an alternative link to IRD website that does.
If you are indeed correct and the IRD does view a long term investor as someone who holds a property longer than five years and the very fact we have a five year Brightline to capture the short term investor, can you explain why this ((Buying with the intention to sell) advisory appears on the IRD website to begin with? Maybe you could ring IRD and ask they delete this "outdated" and "misleading" information? Seriously, I'm sure if it could be deleted on this basis an Accountant or two would have pushed some buttons. Its been there for years.
If assessed (investigated) the onus is on the stunned speculator (not IRD) to prove there was no intention to resell at the time of purchase.
edit
On one hand it could be argued that if a whole load of people list their properties on the day the Brightline test no longer applies to them, then they had the intention of selling earlier.
But you do make a very valid point, a counter-argument would be around the tax changes making it no longer viable to hold on to the property.
I struggle to see how they would enforce the 'intent' to sell. Years go buy, people have children and need to upsize, divorces, sickness, change of job or location for job, there are that many legitimate reasons to sell, maybe they simply wanted to move to a different area closer to _______. Watch this space
Even without a rise in underemployment many loans were only stress tested to 6% or so and an expected inflation rate of 2-3%. Actual rates will be 30% over that soon enough and inflation has been and probably will continue to be double that.
Interest deductibility hasn't hit yet, when is terminal tax due? ( Mines April but my end of year is June ) is it February 7. Unless paid prior there will be two lots of tax due this financial year with the provisional double last year's terminal.
So much hitting at once. Nah she'll be right.
Edit
Terry Baucher inadvertently just answered the tax date question. February 7th.
5.8% to be precise. Now they're moving onto 8.15%. It's a shame the specific test rate does not set the benchmark upper limit rate on the loan document, maybe the banks would have applied a more accurate risk assessment based on what they have to lose on servicing their funding obligations.
https://www.interest.co.nz/personal-finance/118188/anz-nz-ceo-antonia-w…
Even without a spike in unemployment a 400K mortgage refixing at 7% from 3.5% will cost 14000 more per year so discretionery spending will reduce, those destinations will do less trade and require less staff and so the dominoes fall. If/when we get a recession it will be worse much worse.
Yep, we've fallen off the balance beam before, but this is more like falling off a ladder in ACC ad.
There's no cushioning and and it's going to hurt a lot more.
I'm not convinced there's much fat left in the budget for many. It could all happen very quickly (think a couple of months, not 6 - 12).
I am coming late in on the discussion. We all see the world from our own past experiences.
Oddly for me housing and asset devaluation doesn't even cross my mind.
We either all have short term memories but it has happened before. Interest rates in the late 1960 were about three percent. By the time we purchsed the farm the Rural bank was 7% and the remainder mortgage was 16%. We farmed through on farm inflation that over three years we increased to 35%.
And we survived. We may have not put fertilzer on for a few years but because we altered our farming practice, did more harvesting of crops, we actually increased the on farm productivity.
I predict that many of the get up and go of this generation will be like us.
If the grandma govt allows us to do so.
I wonder if an ACT/National coalition will sell some more of our infrastructure to its wealthy supporters.
I've done very nicely thanks Mr Key.
MCY 12000 @$2.5 + 400 free cost $30000. If sold at peak 12400 @ $7.6 $94240
GNE 2559 @ $1.55 + 170 free cost $3966.45. If sold at peakl 2729 @ $4.00 $10916
MEL 9250 @ $1.5 cost $13,875. If sold at peak $9.94 worth $91,945
Potential $197101
cost $47841.45
Potential tax free capital gain 150k
I can believe how much speculative theories are written in so many different media, including this one, talking about the house market. We can talk for ages about the reasons why the megahousbubblenz is popping: interest rate, potential recession + unemployment, new houses being built.... but at the end of the day it's super simple: houses are overpriced around 30-40% and this is what this HOUSE CRASH is correcting, for the next two to three years is going to keep on going down (a total of 40%-50% from peak) and then very slowly going up (it will never get back the prices of 2020-21). I lived the crash in Spain and Ireland and this is not different (as everyone with half a brain can finally see now)
Was talking to a Spanish guy in his 40's while out on a hike last summer. He was telling me about his experience of the Spanish bubble.
He got talked into buying an apartment as an investment during the final years of the hype of the Spanish property bubble (he admits he got caught up in the FOMO) and he still owns it now - but it's still worth less than what he purchased it for nearly 15 years ago.
So he's still trying to pay it off knowing that he will get less for it that when he purchased it - and in the interim he's paid plenty in interest repayments.
He tells me he regrets the decision and it's been a massive burden ever since he made that decision to buy.
He can't for the life of him understand what Kiwis are doing right now (or have done in recent years) - it seems crazy to him.
Even now that the crash is happening (so it's a reality) I find fascinating that some people are still in denial, definitely the Emperor New Clothes. My message for everyone is to avoid the rhetoric from some people on the media with sociopathic attitude giving advice about buying now in the knowledge that this is massively going down. Like your hiking Spanish friend, it will have terrible consequences in the quality of life of many people listening to these so called 'experts'.
Even now that the crash is happening (so it's a reality) I find fascinating that some people are still in denial, definitely the Emperor New Clothes.
As has been highlighted before, Ground Zero for the great Aussie property crash is centered in BrisVegas. Falling around 2% per month, despite a low vacancy rate. All the 'why our bubble is different' narratives are being shot to pieces.
Reminds me of that TV advert re speeding.
The faster you go, The Bigger the MESS.
Looks like 116 properties up for Auction this week at BF,
Maybe we will see some pent up supply this week as sellers
realise they have one last shot before xmas.
Great buying here for You and the Kids HW2, put your best foot forward.
After all none of us here on the forum will be bidding against you guys.
You lucky man.
No discussion.....it is as clear as day or night that it will get far worse before getting normal
https://www.barrons.com/articles/fed-interest-rate-hike-inflation-wage-…
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