Westpac predicts gloom for housing

Westpac sees 'lacklustre August house sales, price weakness, lengthening time to sell'

13th Sep 10, 2:55pm by Nick Jones

Westpac economists predict more gloom for the housing market, ahead of the release of the Real Estate Institute of New Zealand's (REINZ) August house sales data tomorrow.

The bank's Weekly Commentary newsletter did not beat around the bush.

"There is no getting around the fact that the New Zealand housing market is weak. Net migration is slowing, upcoming tax changes are a clear negative, and floating mortgage rates are rising."

Westpac did note one offsetting factor in falling longer-term fixed mortgage rates, but still predicted further weakness in the housing market over 2010 and 2011.

"Anecdotes for the month of August point to lacklustre sales, a further lengthening in the days to sell, and continued price weakness."

REINZ's July house price index showed property sales fell to 4,411 from 4,575 in June and 6,014 in July 2009. It was the lowest sales month for a July since REINZ started collecting records electronically in 1992.

The median sales price in July fell to NZ$349,000 from NZ$352,500 in June, but was up from NZ$340,000 in July last year.

Days to sell lengthened to 44.6 days, the highest since March 2009, and the stratified house price index fell 1.2% in July.

REINZ is due to release its August house sales details tomorrow.

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56 Comments

by Number 6 | 13th Sep 10, 3:14pm 1284347666

That's two of the Big Four now, with Westpac joining BNZ in the 'gloom'. Only ANZ and ASB to go. But I can't see Corin Dann, or any of the MSM, repeating this.

by Wolly | 13th Sep 10, 3:20pm 1284348047

It's a long way down for PIs...all the way to bottom...bit like the Kaikoura slip really. You just don't wanna be under that property market when she begins the slide...she'll take all the sprookers along for the ride.

by Crazy Horse | 13th Sep 10, 3:46pm 1284349611

It's gonna be one long wild ride ...... hang on to your hats !

I reckon all the major banks will begin to "tighten the reins" more than ever, which can only force prices down, if you are forced to sell....... bye bye all those capital gains a la 2005-2007

by anonentity | 13th Sep 10, 5:21pm 1284355272

It might look a lot like that, but as we are only a small player in a very big game. All it takes is a wild card to throw all the graphs and calculations on their side.

The land grab is happening in Africa and South America, away from potential danger spots..George Soros has bought land in South America..and doubled his gold holdings..Putin is going to make a play for the Presidency of Russia...Tony blair has made not so vailed comments about Iran..Who just wanna have fun with Plutonium.The North Koreans have been printing "Superdollars" to Undermine the U.S..Economy. They are being passed into the Western economy, from ex? Kgb in Moscow...China what does it know? as a protector of North Korea.

Israel has taken delivery of two Billion dollars worth of fuel over and above its usual supplies. Any fool can see that the shit! is gonna hit the fan ,at just about the time on the graph when the next Crash should occur. Yes folks all bets are off! ..Chinas navy is now bigger than the States.Why if they are inherently peacfull?.....Remember 1938 when the Kiwi unions put an Embargo on scrap going to Japan,because they new we were gonna get the scrap back morphed into a shell?...How necesary is Australias raw materials to Chinas future growth...and should they be worried?.. Whats the point of waiting to fight over resources when their arn't any left...I wont be leaving New Zealand for at least a year.

by Horace the Grump | 13th Sep 10, 4:16pm 1284351393

More likely that the residential market will become even more illiquid, with vendors taking their properties back off the market if they can't hit their price point or timing... If they are moving cities for jobs its more likely that they will rent out their houses and rent also in the new location....

People hate to realise capital losses... so it means that the number of sellers will continue to dwindle...

by Number 6 | 13th Sep 10, 4:27pm 1284352035

You're right at this stage, HtG. What you describe happens in the UK starting in '89. By '92 people couldn't/didn't hang on any longer, and the 'buy and sell in the same market' came out. People realised that selling at a loss, and buying someone else's loss, wasn't a net loss~ and the market got on with it at a lower price point.

by Malarkey | 13th Sep 10, 6:09pm 1284358165

Problem is a metric buttload (approximately) of PIs desperately need to sell or they'll go under. Debt's funny that way.

by Vera Fayed | 13th Sep 10, 4:28pm 1284352083

Seems to be the case Horace. Over 500 fewer listings on TradeMe than 2 months ago and still dropping. Not much fresh meat out there.

by Donald MacRonald | 13th Sep 10, 4:36pm 1284352603

this is only a temporary hiccup and once the scarcity of good listings kicks in,supply and demand will handle it and the market will rise up again...it always does!

by Number 6 | 13th Sep 10, 4:41pm 1284352900

Buyers have to be able to/want to pay the price of those 'good listing's first. Looks like a lack of 'good listings' mortgage capital coming from the banks, to me. Then, it's capital release time, for those that have to, because the banks aren't going to do life-style top-ups for quite some time.

by Wolly | 13th Sep 10, 5:17pm 1284355033

The scarcity of buyers beats you scarcity of good listings..haha!

"The market will rise up again"...and pink pigs will fly!

by Malarkey | 13th Sep 10, 6:10pm 1284358227

Where's the finance coming from?

by Number 6 | 13th Sep 10, 5:21pm 1284355272

Good point ,( from Oz) "...As.... boomers retire so do their tax incentives ...as they can no longer negative gear. A good proportion of them will want to sell their investments to fund their retirement. Suddenly ... thousands of... investment houses become retirement funding vehicles and enter the market for sale..."

http://delusionaleconomics.blogspot.com/2010/09/oz-real-estate-and-desperate-banks.html

by David George | 13th Sep 10, 5:57pm 1284357426

Thanks for the link #6, delusionaleconomics.blogspot (great name) is in my favourites already.

by Mort | 14th Sep 10, 8:34am 1284410042

If you have held a property for 30 years then it highly unlikely that the bank would have let you roll Interest only payments for that period. So in essence even if people have gone into the property investment game fo self fund their retirement, and 20 yrs down the track they retire, there should be very little of the mortgage, and the rents have been inflation adjusted throughout the ownership timespan. Thus, why would a PI need to sell if that were the scenario, especially given the likelihood of investors to hold in the face of capital price decreases. Why solidify the loss when you don't need to? If you have a good LVR, and you are cashflow positive, which one would hope is the case after owning an investment property for 10+ years (if its not then you bought really badly), then there should be no need to liquidate your position. You'd just live off the surplus cashflow paid out as wages.

by Number 6 | 14th Sep 10, 8:53am 1284411193

The point made in the link in my post was, those PAYE investors who get a return from the IRD will no longer do so once they retire ( ie: they no longer have PAYE). My thinking, until recently, has been that as self~funders retire they will release the capital to live on/enjoy life. This PAYE aspect is a new point of view I hadn't concidered.

by Alen1 | 13th Sep 10, 5:50pm 1284357012

Number of new listings has decreased for 5th consecutive month, and housing shortage is becoming critical in some areas, even PM is addressing skyrocketing demand for rentals in Christchurch

by Malarkey | 13th Sep 10, 6:29pm 1284359387

"Number of new listings has decreased for 5th consecutive month" - Nobody's buying.

"...housing shortage is becoming critical in some areas..." - Hilarious crap!

"...even PM is addressing skyrocketing demand for rentals in Christchurch." - And with that remark we have ourselves a new low. Who'd have thought a property spruiker could be so despicable?

by Alen1 | 13th Sep 10, 7:43pm 1284363838

It's actually quote from today's media:

The Government's moving to address housing shortfalls across Canterbury. Demand for rentals has sky-rocketed since the earthquake because people have been forced to leave their severely damaged homes.

Prime Minister John Key says a paper outlining support options will be presented to Cabinet on Monday. However Mr Key, who's visiting the area today, says some time will be needed just to assess how serious the problem might be.

http://newstalkzb.co.nz/newsdetail1.asp?storyID=182169

by Mort | 14th Sep 10, 8:37am 1284410279

when 20% of houses in a city are uninhabitable, of course any unlet inhabitable dwellings are going to become premum property jsut for the mere sake that people can;t go on living in Shelters for want of privacy.

by Number 6 | 14th Sep 10, 8:45am 1284410754

Some will just plain leave the area. Good scenario for short term rental rises; bad for longer term rental prices and sale prices.

by Alen1 | 14th Sep 10, 8:30pm 1284453059

Of course, but as I quoted " Demand for rentals has sky-rocketed..." no metter what caused it. What is so despicable about? It is fact, like it or not.

by Justice | 13th Sep 10, 5:59pm 1284357594

Wow! those people at Westpac are real genius. WTF, tell us something we don't know

by Donald MacRonald | 13th Sep 10, 6:31pm 1284359515

i was only joking!

it's down,down,down for the ole real estate market until those vendors get real!

by Elley | 13th Sep 10, 6:40pm 1284360031

Wow, a property thread with only 18 comments in 3 hours. Something's seriously wrong here.

As for house prices, I'm glad they've stopped increasing in a way that was completely out of line with wage increases. Maybe at some point families will again have a choice regarding having one parent at home with the kids as opposed to being forced to work two full-time jobs just to pay the mortgage and still make ends meet (here's hope).

by Matt in Auck | 13th Sep 10, 6:53pm 1284360819

Yep, the banks are very coy.

Even that old property bull Tony Alexander says things will be flat this year and most of next.

Curious that TA's "weekly Overview" has not been "weekly" for a couple of weeks. Maybe he's got the grumps with his other economists who are paintly a gloomier housing picutre than he is

by alen | 13th Sep 10, 6:56pm 1284361002

Tony Alexander's comments have become an intolerable embarrassment as far as the BNZ hierarchy are concerned.

by Alen1 | 13th Sep 10, 7:47pm 1284364046

You must be very ashamed of your name when decided to use mine

by Donald MacRonald | 13th Sep 10, 7:03pm 1284361408

yes, Elley...it's tragic..where's the fun, the wild raves as those posters of only weeks ago devoured their daily dose of RE porn?

the man, ex agent ,pres of prop..even small kev..all fallen silent..kinda spooky as the malaise settles over the land like whispering fog?!

by powerdownkiwi | 13th Sep 10, 7:36pm 1284363417

A certain Johnny-one-note is a bit silent too.

by ex agent | 13th Sep 10, 8:16pm 1284365792

DMac/Elley I am alive and kicking. I have been quiet of late as there have been so many other commentators talking the new reality which has been confirmed by the BNZ and Westpac. The news gets worse for investors by the day. I am talking to people in the industry daily and they all to a person say it is getting harder and harder to bring the buyers up to the vendors expectations. No suprise there. Tomorrow we will hear from my old institute the REINZ. You have to appreciate that their monthly reports are put out by hired spin doctors who are of course paid to put a gloss on anything that could be construed as being negative to their industry.It is rather embarrassing to think I used to be part of it. It was a good income earner however I am glad I am out of it.Thankfully I sold everything but my home in 2007/2008 as things are getting worse and will continue to do so for some time. I think we will hear less and less from the Man/Fool and co as they try to rescue themselves from a dying method of getting ahead. People are going to have to look to diversify in investing and at the same look to cut their standards of living as we now go into new territory. Capital gain of any significance is not going to happen for some time.

by Alen1 | 13th Sep 10, 7:51pm 1284364302

I would expect 150+ comments by now. I mean article is about housing doom! Wally, have you lost all your alter egos?

by Donald MacRonald | 13th Sep 10, 8:25pm 1284366307

well put,ex agent,well put.!

by amalgam | 13th Sep 10, 8:26pm 1284366370

A little while ago PIs were so terrified of the obviously inevitable collapse of their residential investment property bubble that they began invoking the spectre of a natural disaster or similar catastrophe to save it, and them.

It was all about some foreign awfulness driving hordes of wealthy refugees to our shores, guaranteed to pay enormous sums when snapping up all of NZ's residential property.

Now?

It's the Christchurch earthquake which will save them.

As all those poor unfortunates whose homes have been destroyed seek alternative shelter, the vulture-like PIs salivate at the thought of profiteering from the distress and predicament of their fellow countrymen.

That PIs gleefully hope to prey on Kiwi victims for their own financial gains, to cash in on their dire straits, clearly demonstrates the prescience and accuracy of all those who claimed PIs were disgustingly greedy pigs, with no sense of morals, ethics, scruples, or human decency, while possessing a gargantuan belief in their own divine entitlement.

by Mort | 14th Sep 10, 8:44am 1284410687

would you rather the destitue freeze to death or find suiotable accommodation until their own house is back in order, which given the size of thte tragedy, will take some timee?

by Sunny Nelson | 13th Sep 10, 8:51pm 1284367876

Westpac in Australia are still trying to pump up the property bubble over there as fast as possible .... adding more petrol to the fire

Australian Lenders Learn Nothing from US Housing Bust: Mortgage House offer 105% Mortgages, Westpack offers 97% Mortgages

http://globaleconomicanalysis.blogspot.com/2010/09/australian-lenders-learn-nothing-from.html

How can they be so thick in doing an action replay of what US banks did a few years ago when it is so obvious what the result will be?

I hope/guess the Oz government will be able to bail them out due low government debt once the whole ponzi scheme implodes.

But this screw up is definitely not going to help NZ due lower exports, higher interest rates etc.

by MichaelH | 14th Sep 10, 12:44am 1284381885

Sunny Nelson,

This is very simple. They fuel the bubble because they can reap huge rewards now and know they will be bailed out later. This, if anything, was the big lesson learnt from the GFC.

As much as I detest this behaviour, I must admit that from a banks standpoint you'd be stupid not to do this. It's free money (for them).

by Donald MacRonald | 13th Sep 10, 9:10pm 1284369046

Economists can't even measure real prosperity, let alone fiddle it. So they put on the GDP and employment numbers the way a bald man puts on a cheap wig. It makes him look ridiculous and fraudulent, but it's the best he can do.

~ Bill Bonner

i think they're referring to tony alexander

by Wolly | 14th Sep 10, 7:30am 1284406257

.....and all the pollys and know it all economists in aymereeka....yah....land of the rugs.

by andrew111 | 13th Sep 10, 10:31pm 1284373875

i've just bought two more rentals and i'm getting 9 % return on one 8.5 on the other and my rents on all my other properties have increased ,so why you guys see the sky falling i see returns rising, so what if values fall rents havent i'm not selling its about returns not capital gains i dont try and guess the future like some of you i just look at what i get back in return for my investment and that is getting to the level i like

by ex agent | 14th Sep 10, 7:41am 1284406893

Pull othe other leg the Man. Being a PI is all about capital gain to cover the losses from the negative gearing. And when you have not got capital gain like at present you are making a loss in capital and income. Why the heck would you buy at present when the market is falling and is going to fall for at least a year and a half according to Westpac. You are either greedy or not very bright or both. As they say a fool and his loan is easily parted.

by Mort | 14th Sep 10, 8:48am 1284410927

spoken like a true RE agent, you guys just don't get that the investment game is about cashflow and capital gain is the cream. You can't go broke making a cashflow profit.

by ex agent | 14th Sep 10, 8:54am 1284411262

But the Bank can still call in the loans when they feel their security is insufficent. Ask the dairy farmers who are currently being forced to sell their farms even though their bank payments are up to date. As the house prices drop over the next few years more and more banks will want houses sold to reduce their risk of losing capital. Banks never lose.

by Number 6 | 14th Sep 10, 9:03am 1284411816

Yep, ex-agent! The second a bank wants it's money, it goes for it; borrower's history be buggered!

http://www.businessspectator.com.au/bs.nsf/Article/ANZ-accused-of-harassing-debtors-report-pd20100914-99S4M?OpenDocument&src=hp3#Scene_1

by Mort | 14th Sep 10, 9:22am 1284412969

Which is why you never keep all your lending with one institution, as it acts as leverage against upity/ flighty lending departments calling in loans

by Number 6 | 14th Sep 10, 8:54am 1284411299

No. But you can make an awful lot more by concidering the alternative application of funds.

by andrew111 | 13th Sep 10, 10:38pm 1284374314

anyone wanna sell me their rentals ?

by Wolly | 14th Sep 10, 7:28am 1284406101

It's a no brainer aint it Andrew...all those suckers too dumb to see how they can get a great return...no need to worry about falling values...just laugh in the face of the knowledge you could have bought the same renter for 30% less capital if you had waited 12 months and then your return would be that much better. Fools for not see how good Andrew Financial Planning really is!

by marct | 14th Sep 10, 7:26am 1284405974

Andrew,

Instead of buying more properties, ever thought of investing into something that would contribute to the economy? Housing is not a bad investment if you are getting 8%-9% returns but this is not what the current economy needs now. We need job creating investments. Think outside the box.

by Mort | 14th Sep 10, 8:54am 1284411253

and your invesment Marct is what field? How are they delivering the benefits to NZ that you deem worthy?

by Christov | 14th Sep 10, 9:04am 1284411846

O.k. i'm going to say some words and you respond with whatever comes into your head....ready...?

Property

housing

land

boom

real estate

honesty

bank

profit

quick

bang

as long as you have these important words you won't need to read any of the stuff that could be wasting your time not reading about ...these words.

And don't forget it's cheerful week...happy joy...! oh happy.

by Number 6 | 14th Sep 10, 9:10am 1284412248

183 points?

by Christov | 14th Sep 10, 10:02am 1284415340

I shall deliberate on your response and give you your score in due course Number 6....at a glance it would appear you have a fair grasp on reality.

by Basel Brush III | 14th Sep 10, 9:25am 1284413149

Help!

Olly N where are you?

by Crazy Horse | 14th Sep 10, 9:53am 1284414780

.... well I am sitting here waiting for the great "spin" machine, the REINZ to come out with their August figures and what "spin" lines they will use in this months report.... ???

Could be .....

1. Housing shortage in CHC due to quake will firm prices in a "shakey" market"....

2. SCF funds "on the loose" will boost Lakes/Queenstown district holiday homes market, heading for a peak November, just before the beautiful summer weather....

3. It has to be noted that as we are so intrinsically tied into the big 4 Aussie banks, real estate has never been a better and safe investment, in such uncertain uneconomic times ....

4. Interest rates have never been lower and are not set to rise anytime in the future...

5. ONLY ONE YEAR NOW TILL THE RWC ... SO GET IN NOW BEFORE IT'S TOO LATE !!!

by Christov | 14th Sep 10, 10:07am 1284415664

Their current publications can now be found at news-stands across the country ....right between Mad Magazine......and....... Playboy's The Next Ten Years.