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Westpac forecasts 6% GDP growth in year to June 2012 on govt spending, Christchurch rebuild

Westpac forecasts 6% GDP growth in year to June 2012 on govt spending, Christchurch rebuild

Westpac economists are forecasting 6% GDP growth in the year to June 2012, senior economist Dominic Stephens says.

In a weekly video update (see also above), Stephens said the near-term outlook for growth was poor due to the second Christchurch earthquake on February 22, with the possibility of zero per cent annual economic growth in early 2011.

This follows comments from Prime Minister John Key, who said the effect of the two Christchurch earthquakes would take NZ$15 billion out of GDP in the year to June 2011. Treasury is planning to release its assumptions on the effects of the two quakes on Sunday afternoon.

"There's actually a double-hit here. Some of that reconstruction activity that we expected to buoy the economy in 2011 has been delayed further, and also the loss of life, the ongoing nature of this event, could well hit confidence nation-wide," Stephens said.

Westpac expected the Reserve Bank of New Zealand would respond with a 50 basis point cut in the Official Cash Rate to 2.5% on March 10.

"Is that going to help with reconstruction? No, of course not - that's not the idea. The Reserve Bank is always looking to stabilise inflation and to stabilise the economy. This is an economy with very weak near-term prospects. The Reserve Bank has to act to shore that up," Stephens said.

However the picture looked quite different going into 2012.

"We have billions of dollars - possibly NZ$10 billion - of overseas reinsurance money pouring into New Zealand with the explicit aim of paying for reconstruction activity in the Christchurch region," Stephens said.

"We've also got a central government that's going to be borrowing heavily to rebuild infrastructure, and all of that is going to be jobs, activity and money flowing in the Canterbury region. Now it doesn't make us better off in the long-run, but it is going to help growth in 2012," he said.

"We're expecting 6% GDP growth in the year to June 2012."

Talking to after the video was released, Stephens said the June 2012 annual GDP forecast was 5.7%, coming off 0.5% growth in the year to June 2011.

That would mean a lot of demand at a time where the economy's capacity to supply goods and services had been damaged, he said.

'Recipe for inflation'

"In other words it's a recipe for inflation. In particular, I'd expect the cost of construction to skyrocket. That could flow through to CPI inflation and will require a Reserve Bank response in 2012 and 2013," Stephens said.

"So we expect sharp OCR hikes over 2012, 2013, even into 2014 that could take interest rates far higher than they are today," he said.

Lower short term interest rates and the expectation of sharp increases in the future would mean a steep yeild curve where fixed term rates are much higher than short term rates.

Here is Westpac's full research note previewing next week's Monetary Policy Statement.

*   We expect the RBNZ to cut the cash rate by 50bps to 2.50% next week.
*   The devastating earthquake in Christchurch will dramatically alter the near-term outlook for growth; the knock-on effects to confidence and activity are unquantifiable.
*   Much of the harm cannot be undone, but the RBNZ can at least act to shore up confidence and ease the burden on an economy whose short-term growth prospects have been stunted.

Like the rest of the country, the RBNZ's thoughts as it prepares next Thursday's Monetary Policy Statement will be dominated by the devastating earthquake in Christchurch on 22 February. At this early stage it's impossible to gauge the full economic and social impact, though it will clearly be some multiple of what was estimated for last September's quake. That uncertainty in itself presents a sizeable risk to the economy's near-term prospects, and not just within the Canterbury region. Our judgement is that the RBNZ will err on the side of shoring up confidence and easing some of the short-term pain, with a 50 basis point cut in the OCR next week.

Our call is less controversial now than when we made it a week ago, with a majority of analysts now expecting a cut of some size. Even so, we should spend a bit of time explaining the ins and outs of what will undoubtedly be a tough decision. And we should emphasise up front that this is not a claim about what the RBNZ 'should' do; the right response will become clear only in hindsight. Our pick is merely a reflection of what we would do in the same situation, given the balance of risks and our understanding of the monetary policy framework.

Why cut?
As was discussed in September, earthquakes tend to be ultimately inflationary. Over the medium-term horizon in which the RBNZ operates, repairs and reconstruction will lift the level of activity above where it would otherwise have been, soaking up some of the excess capacity that would have kept inflation pressures subdued. On balance, a major earthquake may require a steeper interest rate track over the medium term.

But that balance also requires a central bank to look through the near-term costs of disrupted activity. The RBNZ was able to do so in September, but the impact will clearly be much deeper and longer-lasting this time around. Indeed, this quake is doubly damaging to the near-term growth outlook, because much of the growth expected for the first half of this year related to reconstruction work from the September quake. And the disruption to activity won't be confined to Canterbury. Many New Zealand businesses have direct and indirect links to the region, and purchasing or investment decisions may be put off until the situation becomes clearer.

Our pick for a rate cut is not a comment on the state of the economy before the earthquake. The RBNZ had already recognised that activity was weak in the second half of 2010; whether it met the technical definition of a 'double dip' recession is a moot point (we've already seen that the economy shrank on a per capita basis in the June and September quarters). But there was a growing body of anecdotes and survey data that suggested the economy was regathering a head of steam in the early part of this year. The question now is how much if any of that momentum will be sustained.

What would cutting rates achieve?
The earthquake has caused much harm that cannot be undone by lowering interest rates. What the RBNZ can do, however, is to mitigate the potential flow-on effects to the wider economy via disrupted activity and the likely hit to confidence. The OCR is a blunt instrument, but that's also what makes it so effective in an emergency.

While the need to shore up confidence is a key part of the case for a rate cut, we're not proposing it simply as a symbolic gesture; there would still have to be a tangible benefit to the economy. We're seeing that already: lower wholesale interest rates, in anticipation of an OCR cut, have been passed through to some lending rates. Of course, for those lower market rates to be sustained, the RBNZ will still have to deliver.

Not everyone is convinced that lower interest rates would provide any benefit, or that they are the right tool for the job. We'd simply note that even those arguing against a rate cut are in agreement that the RBNZ should further delay the resumption of rate hikes. Let's think about what this would achieve: signalling a slower pace of tightening would push down the short end of the yield curve, just as an OCR cut would. So there's no real disagreement about whether rates should be lower, just about how much.

Why cut by 50bp?
This is admittedly the most uncertain part of our call; if cutting rates is intended as a morale booster, does the size matter? With immeasurably large risks to the downside, we think it better to err on the side of 'insurance'. Once an easing proves to be no longer necessary, it can be withdrawn fairly quickly - admittedly not without cost, since it would add to inflation pressures in the meantime. Our forecasts now imply that once rate hikes resume (in early 2012), the pace of tightening will be a little faster than previously, and given the greater extent of reconstruction activity that we'll see in 2012 and beyond, the OCR is more likely to peak on the tight side of neutral, rather than settling at neutral as the RBNZ had been aiming for.

Unlike last September, the RBNZ would have had just enough time to incorporate the earthquake into its MPS projections - though like our own forecasts, these could only be considered working assumptions at best. The main details are likely to be:

*   Close to zero growth in the first half of this year, picking up in the second half as reconstruction resumes. Growth to slow to around 1% for calendar 2011 (no better than population growth), but then to accelerate beyond the 3.8% peak that was previously projected for mid-2012.
*   Higher unemployment, lower business investment and construction over the near term.
*   Underlying inflation (excluding government policy changes) well within the 1-3% target range for the next two years.
*   A lower interest rate track over the next two years. To the extent that tighter policy is required in the future, it may be pushed out beyond the published forecast horizon.

Market implications
A recent poll showed 13 out of 19 analysts expecting a cut next week, with nine of them plumping for a 50bp move. Interest rate markets have priced in 35 basis points of easing, suggesting a similar split of opinions. And the fall in the NZ dollar over the last week, most notably to a 19-year low against the Australian dollar, also reflects anticipation of a sizeable rate cut.

That might make it seem that the RBNZ is now obligated to deliver a 50bp cut - anything less might send interest rates and the currency higher again. But that shouldn't really be a concern; the RBNZ should aim for whatever level of interest rates that it thinks is appropriate. And in fact, there may not be much left to squeeze out of the market even in the event of a 50bp cut. The two-year swap rate has already fallen by 50bps since the quake; even we're not suggesting that an insurance cut would need to stay in place for that long.

(Updates with comment on 5.7% figure, full Westpac MPS preview note)

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what is this guy smoking?????

He's an economist, silly! If it transpires, we'll see this clip again; if not.....well he can have another guess.

And there was me thinking that Ken Ring was the biggest charlatan around at the moment!

NZ has watched him make a dick of next week folks!


to be fair we could get 4% growth on the back of the rebuild, between June 11 to June 12

but he needs to remember that much of the rebuild won't even start till late in the year

and his comment about the OCR is just inane

Bernard, this is insulting.  I haven't made any comments really since last Tuesday, because I felt that discussing economics was trivial in relation to other events, but just to set some people straight.

I was in the CBD during the quake, and spent several hours on Tuesday afternoon there.  The destruction is not primarily of old brick buildings, it also includes some near new high quality structures.

I've seen concrete block 1960s and 70s 2 level blocks with the ground floor flattened to the width of a concrete block.  Eight year old 3 level timber framed townhouses that are now two levelled.  Timber framed buildings skewed on abhorrent angles.  A 10 year old 3 level ofice building with its stairwell and lift shaft perched on such a precarious angle.  Brand new tilt slab warehouses buckled and split open.

Most high rises will go.  Most office buildings, hotels, multi-level flats, all double or triple brick structures, many low rise houses will all go.

I was in the cordon yesterday at our residential properties, all of which are uninhabitable, and was talking with one of our neighbours who owns a large scale tourist accommodation operation.  Of about 10 buildings on his half a city block site only 1 (the smallest) was salvagable.  Accross the road a $21m hotel had been condemned.  A block down every building new or old in the area was unsafe due to sinking and would need demolished.  An eight storey tower on the corner was tiliting obviously.

The entire central city is in disarray.  Buisnesses are scrambling to rent suburban houses as temporary offices.  My solicitor has taken over a suburban real estate office. 

Rebuilding will take decades rather than years, GDP will slump enormously, any rebound will be years away.

This article sounds as if it has been written by someone entirely uninformed.

On top of CBD destruction the eastern hill suburbs and east Christchurch are like a war zone with street after street of contorted, sunken and in many cases collapsed houses.

I would be surprised if NZ does not lose many tens of thousands to emigration immediately let alone over the next few years as people come to realise that there is no short term solution to the chaos.

CJ- well said.

At the end of the rebuild, even if it's possible, you end up where you were, physically.

If some idiot folk - and I stand by that description - think that by some artificial measure we'll be better off, then the measure is horseshit.

Perhaps it's about time we had the debate: What is a measure which counts the actual and the real?

GDP sure ain't it.

Pity so many worship it unquestioningly.

ps - same offer to you, that I made to Les R last night - if you know anyone needs a few days/weeks/months on a lifestyle block not far from schools (just N of Dn), get in touch.


Many thanks for your reportage. Compelling and useful as ever.

Sorry this article has been painful. That wasn't our intention.

I'm sure too that Westpac is doing its best to understand how this will affect the economy.

Whether we like it or not, currency markets and interest rate markets are still operating.

Unaffected businesses, borrowers and savers elsewhere are having to make decisions.

They're looking for whatever information they can find.

We're doing our best.

Many thanks for your insight on the ground.

It is sobering.

Best wishes


Bernard, what I am really saying is that trying to predict growth when the scale of business interruption and property loss is not even remotely quantified is more than a little premature.

My prediction is that growth must be hugely negative over coming quarters.  Rebuilding will then be spread over many, many years.

What has not been discussed in the media is the failure of modern buildings in the quake.

Many buildings built in the last decade have failed from shaking (not liquifaction related) which is of huge concern.  Reinforced concrete buildings have failed on both large and small scales.  Concrete block and tilt slabs have failed.  Some timber framed buildings have even failed.

This was only a M6.3 event yet destruction of some types of modern buildings was widespread.

Both Auckland and Wellington are susceptible to larger events so this should be of national concern.

I've repeatedly heard Gerry Brownlee comment in the media that modern buildings performed well and it's the old dungers to blame.  That is simple untrue.

Most rundown old timber buildings are fine, when plenty of modern concrete and concrete block buildings claimed lives.

To be honest, if I was living in a concrete block apartment complex in Wellington, I would be very, very afraid.  Nationwide building codes need to change now.  The failures are unacceptable.

(Bernard, I will email you some photos to illustrate what I mean in due course, but for now I am escaping to Central Otago).

Chris J

One thing you have alluded to but perhaps needs expanding is that obviously building codes will be relooked at. The result of that will be many building outside of Christchurch ( Wellington , Auckland , all east coast cities of both islands ) will probably have to be strengthened and quicker than the current standards require. So commercial building construction companies are going to be very busy. But as you quite correctly say it be of many years , not the next 12mths.

Chris J - I was in ChCh city centre a few hours before the latest quake.  I have had to check out some of the infrastructure on the east side of the city, but not the city centre, and and totally agree with your comments.  Most of the forecasts that I have seen and heard in the media are nowhere near what the reality will be.  I understand there is a need not to unsettle people at this stage but there is also the need to tell people the truth, so that they can make informed decisions for their futures.  Like yourself I am taking a break away from ChCh in the near future.


Many thanks. Looking forward to seeing those.

Best wishes


You will I presume share them with the site?

Yep. I'll find a place to put them with Chris_J's permission.



I look forward to the story.

Good comments Chris.

I agree this rebuild will take years. I do think, though, that come late this year a significant amount of rebuild will start happening. This will, in my opinion, boost GDP fairly significantly, but nowhere near to the extent Westpac claim.

In the meantime, till say September / October, I would be expecting -1 or -2% growth, as you allude to Chris. So any GDP growth over 2012 / 2013 is just making up lost ground

Also, can someone enlighten me as to why all these economists are arguing for an OCR cut (beyond my probably unfairly cynical view that they just want more customers to borrow more). This guy acknowledges this won't help the Christchurch reconstruction, do they just see it as some symbolic, morale lifting gesture? He acknowledges inflation might ramp up but still states the case for an OCR cut.

The legislative mandate for the reserve bank is to control inflation...... 

Matt in Akld says -  "I do think, though, that come late this year a significant amount of rebuild will start happening."

From many years experience of living in ChCh I would suggest that resource consent & building control approvals will have to be taken away from ChCh City Council, otherwise it could take centuries.


LOL! Brilliant

but true....

I was not even going to comment on this article as it is such a joke, i agee with Chris J about the destruction in the CBD and it appears to me it is actively being kept quiet. The people of this city are still stunned.

The other problem with forcasting  is the underlying assumption of how long before the after shock sequences settles down....before any real work can commence, makes timing of forecasts impossible.

The last point I would make is ground acceleration is more valid than the M6.3 it was around 2G, that has never been recorded anywhere in a built up area before, office buildings were trying to lift off the ground. Now that it has happened this is a whole new area to work out building codes that will work.



Having just covered seizmic in Tech 2 last year, NZ has been at the leading edge of earthquake engineering.

Looks like we are still at kindergarden eh?


Yes I was in the same year and classes as both Bill Robinson who developed the shock absorbent blocks  used here and overseas  and a lesser known Jim Lord who now lives in California with his speciality being the reinforcement of existing buildings. Jim also was a major instigator to getting acceptance in Los Angeles of buildings over 13 storeys, one of the first of those being 42 storeys high.

This country has no excuses other than economic waffle from politicians and accountants for avoiding the upgrades that would improve earthquake performance of all but true heritage buildings.

We covered the Parthenon in depth in first year and it was designed with seizmic activity in mind! 2400 years later.....

But this is NZ where it is more important that the budget covers the profit of the developer than the quality of the building.

Interesting thing the professor said was the 10 stories is the most difficult to design for, as the longer period of taller buildings mitigates. Not sure if the book has to be re-written with CHCH though.

good long do they have to wait for the "Seismic all clear" before they can even think about redesigning and rebuilding?

After all the latest quake hit 6 months after the original

Then theres all the insurance shenanigans, and consenting as you say

So heck, even optimistically not much rebuilding will start till November or December at the earliest surely?

Bugger me how Westpac think they can get 1% growth out of this calendar year, taking into account what will be a devastated tourism sector and a drained Auckland economy. I've met a few old engineer mates who work at consultancies and they are bloody worried about the likelihood of bigger infrastructure projects being canned in Auckland. You've already got a pool of starving consultants scrapping for a small pool of work let alone some of these projects being canned. In addition to the obvious tragic turmoil in ChCh

Matt and other make some good points . I gather the Chch contributes somewhere between 15% -20% of New Zealands  GDP. This has been significantly destroyed and I fail to see how we can expect a 6% increase in GDP in 2012 given this dreadful event.

@ Chris_J  4.3. 4:39pm

......Minister Brownlee don’t make stupid comments and

don’t rebuild the “City Centre” - as we knew it.

The idea of rebuilding the “City Centre” is wrong - too costly, unsafe and delays the urgent needed reconstruction of business complexes/ houses, but on safer areas - in the outskirt of Christchurch where people live. In today’s world and not sufficient public transport we do need “Living- Working Communities”

Transform the too many Shopping malls of Chch, consumerism temples - into working/ production and leisure parks.

Do we need a CBD ?

All buildings considered unsafe should be demolished. The ones which are safe should be integrated into a completely new approach of designing and creating the City Centre. The most wonderful City Centre in the world at minimal costs - with the best outcome for the wider population and businesses – a “Giant Botanical Garden"- including recreational features, small shops/ cafes, works of art, beautifications and memorials etc. - all build with rubble left by the earthquakes.


Visionary ideas or already forced reality ?

Visionary ideas for New Zealand include plans - which say: The majority of NZpeople doesn’t live farther away then 20 minutes to work by bicycle or pubic transport – that’s an economic sustainable and profitable solution for the wider NZpopulation – for our NZeconomy.

Thanks Chris.

Your comments stand out because they are based on facts. I am grateful for them.

Your statement: "This article sounds as if it has been written by someone entirely uninformed." is probably spot on. Westpac may also be getting increasingly desperate to find something positive to spin.

The scary bit about all this is that you are most likely right. It'll be a while before Chch appeals to anyone again.

Bernard - wht not make an addition to your extensive data banks - a rolling compendium of economic growth forecasts (estimated GDP, time period, source) so we can all go back and examine the veracity of these guestimates. It might prove hugely entertaining - and very chastising for some of the originators. I think far too many of these bozos get away with making these predictions as most are forgotten about 6 months down the line. Why not try and keep them honest?

There's an extensive literature on the effects of natural disasters on GDP growth.  Few studies support a positive link between natural disasters and GDP growth.  One study that does finds evidence to support such a positive GDP effect shows that this exists only for climatic disasters, whereas geologic disasters like earthquakes lead to decreased growth rates.   Of course, GDP doesn't measure the loss in the capital stock., which is one of the main factors of production.

Here are some links.;col1

Interesting, thanks Dosser.

thanks Dosser - interesting reading.

No mention of the energy flows through the system - I often wonder if you can simply monitor that, scale in an 'efficiencies' factor, and quantify activity. Given that GDP includes discretionary activity, you could hardly do worse.


He's either worried that his house is going to fall in value without inflation or westpac's portfolio is going to get wacked without inflation. He should apply for a job with the FED. Mr Bernanke could use this kind of academic wonk. The real threat is specific costs related to oil and inflated commoditiy prices which will only exacerbate an already overindebted household.

Economists are paid the promote exponential growth. Thats all they do, anything less is no good for the multiplier fractional reserve banking business.

The young buck is on the same plain as our Bulgaris House Market friend James Doole. Both had aleady forgotten the reality of CHCH a few days after its aver and are already attempting to capitalise on others misfortune through the rebuilding process. Wow..

Its based on the whole idea of spending your way out of debt. I mean you cannot totally blame these young guys, they have grown up as a spend thrift generation under their nanny Helen. Time and healing do not matter. A 3 - 5 yr slow readjustment is just not in the frame. Its more a case of give it to me now!! So bring on this 6% chinese style growth. Maybe it will happen through stellar export demand overseas and a current account that has begun ballooning once again through another debt fueled housing market. But even the RBA gov has been warning that Ausi's good times have to end sometime and we are closer to the peak than the trough...

FYI have updated with Westpac's full research note previewing the Monetary Policy Statement.



Mr Stephens looks sooooo authoritative with his hordes of smart ANALysts researching away in the background

Its world beating research and analysis being delivered by old W'Pac

BTW they project:

*   Close to zero growth in the first half of this year, picking up in the second half as reconstruction resumes. Growth to slow to around 1% for calendar 2011 (no better than population growth), but then to accelerate beyond the 3.8% peak that was previously projected for mid-2012. BOLLOCKS - GROWTH WILL BE NEGATIVE FOR 2011
*   Higher unemployment, lower business investment and construction over the near term. OK
*   Underlying inflation (excluding government policy changes) well within the 1-3% target range for the next two years. BOLLOCKS - I THINK WE'LL BE PUSHING THE 3-4% RANGE
*   A lower interest rate track over the next two years. To the extent that tighter policy is required in the future, it may be pushed out beyond the published forecast horizon. 

This article in light of the events to me indicates a scary view into the mids sets of big banks. It is simply an insult to the destruction to the people affected by this tragic event. One wonders just what they are trying to hide under this disgusting spin effort.

Bernard I know you have to report events and news, however then it is clearly disgraceful drivel such as this, if is offensive to those suffering, and anyone with half a brain.

Chris - great comments from the ground and much appreciated, I am sure the pillock in the video having not likely been to ChCh would try to refute your first hand report.

Growth is irrelevant, and can in no way heal the long term damage nor replace the lives lost in this event.  It is distasteful in the extreme so far as I am concerned to think NZ can benefit in as a result of this. Sure jobs will be created etc, but the underlying social damage to the city and its people I doubt can be measured, certainly not while denying and hiding from the truth under this type of BS. Lies, lies and more lies…NZ deserves better than this in times like these, but true colours come through from the institutions such as Westpac (of scum)

Has anybody thought about rebuilding homes and offices in Hebel lightweight concrete. I have heard that in earthquake prone Japan it has been used a lot and after an earthquake it has been the Hebel buildings that have suffered the least damage. 3 years ago I built a large home useing Hebel and would not use anything else if I had to build another house.The house is cool in summer and warm in winter. I used 300mm blocks on all exterior walls. Its a very easy product to work with. Just my thoughts. Cheers.

I used the 75mm panels in 2006; and yes, it's good stuff...until you come to sell the place! "What's that?" was the most common question. And in the light of the leaky building syndrome, anything slightly 'unknown' was hard to sell. Maybe a product for the future, though?

We built with Hebel cladding last year and live not very far from Chch. Delighted to hear it behaves well in earthquakes.

So Ollie Newland wins again. Auckland house prices to boom.

Until 'something' unexpected happens to Auckland! Anyone in Christchurch who took Olly Newland, or his ilks, advice has lost...well, you pick a %.

If any one is interested Google Hebel Japan. Look at what happened to Hebel buildings during the 1995 7.2 Kobe earthquake. Very interesting! Cheers.

Tipping point for New Zealand with the 2 earthquakes reached ?

 Food and petrol prices are higher – wages are not.

Mortgages, rents are higher – wages are not.

Insurance premiums, rates, taxes are higher – wages are not.

Doctor bills, school fees, etc. are higher – wages are not.

Money just eaten away - how on earth are we going to master the next recession or worse ?

Considering our mismanaged economy, other worldwide events - climate change, financial, economic and political developments - yeah – rebuilding the Christchurch CBD – with what and why ?  


For a nation already feeling the pinch, a stark double warning: Food and fuel bills to rocket

Read more:

I talked to friend in the States about the damage, its his field. He sent me this



The blog you sent is interesting. It certainly sounds like NZ needs to review its building codes. The thing to remember is the code is not to protect the building itself, but to have it stay together sufficiently to avoid serious injury to the occupants. I've always considered concrete the least friendly for earthquake survival, at least as commonly constructed. Concrete is great in compression, but inflexible and very poor in tension, and a heavy pendulum if raised high. The earlier quake probably caused minor fractures resulting in hidden weakening. Masonry is similar. The wooden buildings properly designed should be like a box. they may fall off their foundations but would remain reasonably intact. Steel is flexible and with properly designed connections should ride out an earthquake with the least damage.

He's spot on really....the idea is indeed the building stays in a good enough state long enough that ppl can get out....that is all the code is really designed to fulfil.....beyond that some buildings like the MoH are designed to survive and be opertational....the cost though is very high....Consider that a building has an effective life of say max 100 if we live in a 900 year event area, its quite probably that 8 buildings could have come and gone before one gets wacked....makes no sense to build them earthquake proof unless like MoH they are essential co-ordination points for such an event....really we just want safe....





Professor Jarg Pettinga explains some of the geological factors behind the Quake

went to an auction about a week ago, a good house in a very good part of Auckland

quite a few turned up but it soon became apparent they were mostly neighbours, friends

there were NO bids from the floor

before the auction started I overheard the agent telling one of the family members that the market was "slow", which he said was concerning given February / March is usually a hot time of the year for property 

After the property had been passed in the agent talked to me and he was hyping up the market - all the usual bull about the housing shortage, rental crisis etcetc and that prices are pushing up again and the market is heating up. Don't think he knew I overheard his earlier comment 

He was obviously stressed about the lack of response at the auction, because I mentioned a possible offer price that was identical to what the vendor (distressed?) paid a year ago - I figure the market is almost exactly the same, so that wasn't unreasonable. Yet he got shitty. Not pleasant

I guess some of these agents are getting a bit desperate, and are not used to this environment after years of boom

I posted on here a few weeks back re an offer we had made on a beach place up north. The TradeMe listing expired on Friday, so we gave the agent ring, and mentioned that we were suprised we hadn't had contact from him since the firm ( rejected!) offer that we put in. His response? "Well I didn't give you a call as you obviously weren't that interested, given the level that you put that offer in at ". Silly man......

yeah they don't seem to realise the paradigm has changed

investors will be going in lower and harder - they have to, in order to get the yields to work

and prospective home buyers will also be going in low and hard, knowing that prices could still fall further, and with a lot of economic uncertainty. Any prudent buyer also knows that interest rates will start climbing again in a year or two, and that food and petrol inflation will eat into money that could otherwise go to housing 

I feel that as the economy weakens this year we will start seeing more desperate vendors, who simply cannot afford just to take the house of the market (of course there will still be plenty who can). Then we will start seeing more and more having to accept lower offers han they really wanted

This will lead to an inevitable dip in prices

It sounds from our experiences that a lot of these agents are still pretty obnoxious and arrogant, as if it was still 2005. Its not even like I went in with a crazy offer - it was about 5% below CV, and idenitical to the purchase price just over a year ago

I feel that patience wil be rewarded, as a potential buyer

No 6

If you feel that your offer is correct (rather than speculative) - why not contact the owner directly. You may be able to accomodate one another. Ignore the agent - state your own case to the owner.

Good suggestion, KW John. But the owners split the year 50/50 between here and o/s, and they left last week to get their summer in. I don't think the agent will give us their address! Is our offer correct, who knows? 70% more than they paid for it 13 years ago, but 25% less than 2007 RV. (It's a beach house 'miles from nowehere' , to quote Kate on here, who gave us all the property history a few weeks back) Time may tell. - next autumn if they come back?

"Sorry double post"

"I posted on here a few weeks back re an offer we had made on a beach place up north"

Well, we took the plunge yesterday and put offer for place in Bayview with 8% less RV.

Offcourse the owner is asking around 10% + RV, however the property needs a lot of do up (paint, carpet, bathroom kitchen).

When we gave that offer the agent got annoyed and started saying we should considered what the owner was asking.

However when we said we were basing it on the RV, he gave me standard line "Oh you should never go by what the RV says"

I ignored his remark however I really felt like asking "if RV is not important then why do agents advertisements properties where they explicity mention that it is selling less than RV"

Hope you get it!


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