Housing sales in Auckland hit their lowest point for the month of June since 2010

Property

The housing market continues to hibernate over winter, with sales volumes at five year lows and prices flat in Auckland and inching higher elsewhere

12th Jul 19, 9:40am by Greg Ninness

The housing market is continuing to crawl along in low gear with the number of properties sold hitting a five year low in June.

According to the REINZ there were 5978 homes sold throughout the country in June, down 3.8% compared to June last year and the lowest number of sales in the month of June for five years.

In Auckland, the country's largest real estate market, June sales were down 3.2% compared to a year ago and were at their lowest level for the month of June since 2010.

In the rest of the country (excluding Auckland), sales were down 4% on June last year.

Some of the biggest falls in sales volumes were in the central North Island with sales in Hawkes Bay down 26.8% on a year ago and a four year low, while sales in Taranaki were down 24.9% which was a five year low.

In the Wellington region sales were down 3.3% on a year ago and in Canterbury they were up 2.1% (see the chart below for the full regional trends).

However while sales volumes were sluggish, median prices remained relatively firm.

The national median selling price was $585,000, up slightly from $578,000 in May and equalling the record price set in March.

In Auckland the median price continued on the steady course that has been evident for the last three years and at $850,000 was unchanged from a year ago.

However REINZ chief executive Bindi Norwell said price movements varied widely within the Auckland region.

In the Waitemata and Gulf ward which includes some of the city's most expensive suburbs, the median price was up 16.3% compared to June last year while the median price in the Orakei ward was down 11.9% annually.

Record median prices were set in Manawatu/Whanganui ($370,000) and Tasman ($642,000) in June.

Across the entire country the median price edged higher in June compared to May in seven regions, declined in seven and was unchanged in two, suggesting a reasonably steady price trend.

In the Wellington region the median price dropped from $618,000 in May to $609,480 in June and in Canterbury it was unchanged at $445,000 (see the interactive chart below for the full regional median price trends).

The REINZ's House Price Index shows that across the entire country, selling prices are up 1.7% compared to 12 months ago.

Perhaps not surprisingly, it is also taking longer for homes to sell .

In June the median number of days it took to sell a home (nationally) was 41 compared to 38 a year ago.

In Auckland that number has increased from 40 to 45 over the last year (see the chart below for the regional trends).

The comment stream on this article is now closed.

Median price - REINZ

Select chart tabs

Source: REINZ

Volumes sold - REINZ

Select chart tabs

Source: REINZ

Days to sell - REINZ

Select chart tabs

Source: REINZ

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194 Comments

by Miguel | 12th Jul 19, 9:50am 1562881832

With Interest Rates being cut, and the CGT getting taken off the table, shouldn't we be seeing increasing sales volumes?

The fact that rate cuts aren't able to generate any additional demand suggests continuing softening of prices seems likely.

by Ocelot | 12th Jul 19, 10:32am 1562884350

The foreign buyer ban, and China restricting capital outflows has been pivotal. People don't realise how much money was pouring in at the top of the market which significantly boosted the equity that was able to be shifted down into the lower tiers of the market. The fall is starting from the top too. With the marginal buyer gone, there is a reverse cascade effect.

by Laminar | 12th Jul 19, 10:34am 1562884455

Please do tell me how much?

by Joe Wilkes | 12th Jul 19, 4:18pm 1562905114

Where are people getting the press release from. I mentioned it earlier but it’s now 4.17pm and the 12 July press release from REINZ still links to a copy and paste of the June report for May..

https://www.reinz.co.nz/public-archive-2019

by Pragmatist | 12th Jul 19, 5:43pm 1562910204

https://www.reinz.co.nz/residential-property-data-gallery

the big bar that says download the full press release at the top of the page...

by mikekirk29 | 12th Jul 19, 8:08pm 1562918904

I get direct as am an Agent!

by Yvil | 12th Jul 19, 8:39pm 1562920787

by NoFax | 12th Jul 19, 10:34am 1562884484

I think the foreign house buyers ban has had a marginal effect at the very most. The downward trend was already there before the ban. The biggest effect has been greater enforcement of capital controls by the Chinese authorities.

by mikekirk29 | 12th Jul 19, 10:45am 1562885117

Not much effect? Sales down 18% on residential sales, last 3m in a row compared to last year.
In Hibiscus Coast sales are 50% below where they were in June 16.
Yes, AML has had a very large effect I think but section sales last year were front running OBB and section sales have collapsed (70% this month)
However, apartment sales also down a hell of a lot in Auckland (47% this month)

Residential sales in Auckland I am afraid are not down 3.2% they are down 17%.
And above 2m they are down 41%
Only things selling well are 4 beds 800-1.2m and 3 beds priced under 800k.

by CJ099 | 12th Jul 19, 11:04am 1562886279

Yep that seems logical that property priced above the million mark will be much more difficult to sell to wage earners, and it is a direct result of the current restrictions AML etc.. that have been enforced both here and in China. Canada and Australia are also suffering withdraw symptoms from lack of overseas money from China and that's very evident in their declining property markets. Still I can see that Oz in particular seems to be hoping for another cash out flow bull run from Hong Kong with all the current tension over China wanting to impose an extradition law on them.

Better Dwelling article: Vancouver Detached Real Estate Sales Fall To Multi-Decade Low, Losses Get Bigger
https://betterdwelling.com/city/vancouver/vancouver-detached-real-estat…

by Glitzy | 12th Jul 19, 12:03pm 1562889793

Mike, its quite telling that despite new apartments being exempt from the OBB, volumes are still significantly down.

A question though ~ with all these new blocks going up. Are the sales only reported after the final stage payment or do they count anything when the agreement to buy is signed and the initial 10/20% deposit is paid (prior to building) ?

Thanks for the advice.

by mikekirk29 | 12th Jul 19, 8:10pm 1562919018

Not a sale til payment received in full - can of course default and lose deposits

by NoFax | 12th Jul 19, 12:50pm 1562892608

Causation vs Correlation;I think the foreign house buy ban is not the main cause of Chinese money not coming to NZ. The real issue is Chinese capital controls. That's why the same thing is happening in places that don't have a ban or had a pre-existing ban.

by mikekirk29 | 12th Jul 19, 8:11pm 1562919117

See BIS article on source Chinese capital flows bring to get rid of USD in their financial system. AML also v under rated as a cause of sales drop

by CJ099 | 13th Jul 19, 6:28pm 1562999335

Yes don't forget shadow banking BBC Article: 'Gangster grannies' and China's shadow banking world https://www.bbc.com/news/business-37114643

by NorthernLights | 12th Jul 19, 3:48pm 1562903298

Surely no decline in the leafy suburbs ?
Not Remmers not Kohi not St Hel ?
Not the fabled DGZone ?
This surely must be not happening
Must be fake news
The earth is flat it’s always been flat in the DGZ right ?

by Iceman | 12th Jul 19, 12:05pm 1562889957

Ocelot, you mention the 'fall is starting from the top' - and it appears the bottom end is being supported by FHB activity. Building also appears to be catching up. This is intriguing to me, the gap between the top and bottom can also only close so much in my opinion. Your thoughts? Def interesting times ahead..

by oreo | 12th Jul 19, 12:33pm 1562891589

Yes I am wondering the same thing as well. I understand that some FHB buyers want to get on the bandwagon by fear to miss out but surely you would think that it all will trickle down. Why pay under a mill or 800000 + in outer suburbs. They are not worth that amount of money especially with the commute

by Iceman | 12th Jul 19, 12:46pm 1562892366

@oreo, agree. We are looking to trade up too, some of the stock in Huapai and Kumeu while appealing because of new build quality etc, the land you get is bugger all and prices are around the 1m mark. The number of houses also continuing to be built here is worrying, as these places would take a major hit first in the event of a major downturn. But again going back to the bottom end holding up - I know a lot of FHB are buying now because of the fear of missing out, but also immigration appears to be steady and is probably supporting the bottom. These trends might well continue for a while if serviceability of a mortgage is good because of low interest rates.

by Yvil | 12th Jul 19, 12:53pm 1562892799

Ocelot, you say (make up): "The fall is starting from the top"

Either you didn't read the article or you're can't accept reality. Here is the statement about "the top"

"In the Waitemata and Gulf ward which includes some of the city's most expensive suburbs, the median price was up 16.3% compared to June last year"

by RickStrauss | 12th Jul 19, 1:03pm 1562893415

I think per our discussions yesterday or the day before that on low volumes it's difficult to tell much as medians easily veer back and forth depending on the mix of the few properties sold. The small data set is noisy. Median doesn't tell us anything about how much people are getting for their money either.

Would your own estimate be that all things being more or less equal, prices on the whole in those areas are up ~16% on last year?

by Yvil | 12th Jul 19, 4:02pm 1562904168

I just accept REINZ's data rather than making up my own

by RickStrauss | 12th Jul 19, 5:02pm 1562907771

Sure, but you're reading too much of your own meaning into it. Median doesn't tell you much on a small data set when you fail to account for the mix of properties sold vs. last year.

Check out deez nuts - REINZ "gold measure" HPI: -3.5% year on year

by cmat | 13th Jul 19, 8:18am 1562962684

Yvil gets the Rob Report of all sales in prime eastern suburbs.

It's patently obvious fron that report that the top end is strughling with volumes.

He knows it, he's just having a hard time with cognitive dissonance at the moment.
This isn't how thinga are supppsed to work.

by Miguel | 13th Jul 19, 10:44am 1562971484

So I guess you still believe that Gisborne house prices rose $2,645 a day in May then?

by mikekirk29 | 12th Jul 19, 8:15pm 1562919313

Sales at top are collapsing not prices. But medians are 22% down in Red Beach. On HC sales only hold up where medians fall

by Laminar | 12th Jul 19, 10:33am 1562884412

Affordability in 2016/17 was at its historical highs and a correction was predictable. The scale of the decline however is very hard to gauge with high immigration and too few homes been built over the last decade. The RBNZ appears to be ahead of the curve and looks to be attempting to pilot a flat market. Rate cuts and removal of CGT concerns have so far effectively delivered a flat/slightly-down Auckland market price. That these measures have not seen sales rise does not indicate prices will fall, as they could have simply been targeting a 'mostly flat' outcome. Affordability is still stretched however, and momentum rarely turns without a reason so the trajectory should still be down, but not because of rates cuts failing to increase sales, but simply because houses are still too expensive in most buyers opinions.

by oreo | 12th Jul 19, 9:52am 1562881965

Looks like winter is going to be longer than 3 months. Are we seeing the beginning of an Ice Age in Housing?

by Dgm | 12th Jul 19, 2:07pm 1562897275

"Ice Age in Housing"..

Couldn't be wrong there.. most houses feel like ice..

by Audaxes | 12th Jul 19, 9:55am 1562882104

The housing market continues to hibernate over winter, with sales volumes at five year lows and prices flat in Auckland and inching higher elsewhere

Good to see the supply of greater fools remains solid.

by Houseworks | 12th Jul 19, 10:30am 1562884235

I looked up something on homes this morning. A modest property it sold in 1999 for 125000 then again in 2002 for 119000. That's a roughly 5 percent drop and the buyer may have thought it could drop further but his strongest motivation was to secure his future, own a home and not have rent to pay. The property is now valued at 435000, job done. Those who dont secure their future are Great Fools

by Laminar | 12th Jul 19, 10:36am 1562884599

Yeah but imagine the idiots who bought in 2007, i bet they are crying in to buckets... of money!

by Pragmatist | 12th Jul 19, 11:42am 1562888524

Reality check, if they had taken similar leveraged position in the S&P500 at that time instead of Auckland housing, they would have done so much better.
Nov 2008 to now
S&P up 273%,
Auck Median house price up just under 100%

Edit, for 2007, the numbers are a bit closer.. S&P up 105%, Auck median up 88%

by RickStrauss | 12th Jul 19, 3:39pm 1562902785

So depends on leverage and cost of interest etc... Buying a house in 2007 would have seen around 7% per annum increase on the house value before inflation and costs.

Edit: clarifying, that's not calculating return on the original investment where the investment is a deposit (i.e. the effect of leverage). Return on investment would depend on what the deposit was.

by cmat | 12th Jul 19, 2:22pm 1562898173

What?

by Laminar | 12th Jul 19, 3:28pm 1562902103

You guys are calculating this incorrectly. Shares are bought in cash, almost always. Lets call shares a 10% annual return. Property is often bought 20% down. The return on a 4% initial yield, at 5.5% cap growth and 3.5% rent growth with interest of 4% and 35% costs is 400%, while stocks would clock in at 235%.

by RickStrauss | 12th Jul 19, 3:37pm 1562902649

Sorry, realise I did mention leverage.

The calculation was on return on the total price of the house, not the effect of leverage, that's correct.

by Laminar | 12th Jul 19, 3:41pm 1562902900

Conversations about returns should deal with reality, you cant have an honest conversation about property returns without calculating in the effect of the debt.

by skudiv | 12th Jul 19, 3:45pm 1562903107

Yet not the price of rent, or renting, which is curious.

by Laminar | 12th Jul 19, 3:57pm 1562903849

4% initial yield is a direct reference to the initial rent and 3.5% rent growth is a direct reference to rent changing through time.

by skudiv | 12th Jul 19, 5:57pm 1562911055

I'm getting confused with all these numbers, can't you just keep it simple, is buying a house good or bad in current time?

by Laminar | 13th Jul 19, 1:25pm 1562981119

Downside risk short term, upside long term. No great rush to buy but no great loss long term if you do buy. Some good deals already out there so if you can buy with a decent discount id personally feel okay about that.

by RickStrauss | 12th Jul 19, 4:02pm 1562904142

I was out of interest performing a single calculation of the rough return on the value of a house over that period, now a raft of calculations about all and sundry. Apologies if your personal favourite was not featured. Maybe in next week's episode.

Keep cool till after school.

by Laminar | 12th Jul 19, 4:16pm 1562904962

Im was not replying to you specifically but rather noting a common issue with how people are comparing stocks and property.

by RickStrauss | 12th Jul 19, 4:42pm 1562906566

Sweet as. Friday drinks time. Cheers to you.

by mfd | 12th Jul 19, 4:09pm 1562904584

It's inappropriate to compare one leveraged investment to an unleveraged investment without acknowledging the large increase in risk. If I spend 100% of my money on shares with any kind of sensible strategy, there is virtually zero chance of losing all my money. If I invest 500% of my money in property, there is a very real risk of losing all my money, and a non-negligible risk of losing more than all my money.

Theoretical returns will look higher with leverage due to the much higher risk - this is not a free lunch.

by Pragmatist | 13th Jul 19, 12:30pm 1562977831

No, we are just pointing out that housing doesn't do better.. its only the leverage and untaxed nature that has made them more profitable.

by Houseworks | 13th Jul 19, 1:16pm 1562980590

Why do the housing haters, anti-investor types like to claim property has an unfair advantage that it is untaxed. Shares are also untaxed. The same rules apply to both. There is also a case to say that housing is discouraged with the likes of non deductible depreciation

by Pragmatist | 13th Jul 19, 2:11pm 1562983885

NZ shares are untaxed, but overseas shares are taxed, FIF. And the NZ sharemarket is a weak piddly thing, with NZ brokers charging ridiculous fees. Most share investors invest overseas, if not totally, at least in part.

by Due Diligence | 12th Jul 19, 12:35pm 1562891756

Pragmatist, given that you refuse to use your bank's cheap money to generate wealth through property, perhaps you'd instead be comfortable to use your bank's cheap money to generate wealth through shares? Either option is better than playing tiddlywinks with your own money in shares.

https://www.asb.co.nz/asb-securities/margin-lending.html

by Pragmatist | 12th Jul 19, 12:38pm 1562891906

Same old BLSH... Yawn.

by Due Diligence | 12th Jul 19, 2:11pm 1562897467

I'm not BLSH, his/her wisdom is lost forever. I just don't want you to be playing tiddlywinks all your life. Why would you scoff at my margin lending suggestion?

by Pragmatist | 12th Jul 19, 2:24pm 1562898296

So no loss then...

by Due Diligence | 12th Jul 19, 3:14pm 1562901273

Good advice is worthless unless you decide to act on it. So in your case, yes, no loss.

by Laminar | 12th Jul 19, 3:38pm 1562902697

Margin share trading is pretty risky business and if you dont know your business you could easily face a pretty dramatic margin call and crash out. Although risky in its own way, leveraged property isnt as harsh as margin shares when you have declining equity.

by Due Diligence | 12th Jul 19, 4:31pm 1562905875

I don’t disagree, but where there is risk there is opportunity. I think the risk (and reward) is moderated by the fact that ASB’s top minds have taken riskier shares off the table. The equities should be committed to as a long-term investment, and risk should be spread across a number of companies.

Pragmatist’s comment gave the impression shares may be the way to go, so I put margin lending out there. I’ll stick to property myself.

by Plutocracy | 12th Jul 19, 1:08pm 1562893712

Pragmatist, given that you refuse to use your bank's cheap money to generate wealth through property

I think you mean 'extract wealth' rather then 'generate wealth'.

by Yvil | 12th Jul 19, 12:56pm 1562892994

Pragmatist: "if they had taken similar leveraged position in the S&P500 at that time instead of Auckland housing, they would have done so much better"

It's more comfortable to live in a house than in a share certificate

by CourtJester | 12th Jul 19, 1:28pm 1562894930

And living in the same house you bought in 2002 feels so much better now than it did in 2002, right? Since it's worth 3x as much on paper. If you don't realise any of that profit, it's not really a profit yet, is it?

by Yvil | 12th Jul 19, 4:11pm 1562904660

Yes it is, do you think Bill Gates is one of the richest man because he sold all his shares in Microsoft to "realise his profiy"? Didn't think so

by CourtJester | 12th Jul 19, 12:46pm 1562892374

So that's a return of 265% over 17 years. A lot worse than S&P 500 over the same period (360%). You could say that they lost 112k by investing in that house instead of S&P500.

by Yvil | 12th Jul 19, 12:57pm 1562893072

…and live on the street instead of the house?

by CourtJester | 12th Jul 19, 1:29pm 1562894994

A riddle for you, Yvil.
I don't own a house, yet I'm not homeless either. What am I?

by Glitzy | 12th Jul 19, 10:26pm 1562927178

A millennial ?

by skudiv | 12th Jul 19, 3:52pm 1562903561

A snail

by Nzdan | 12th Jul 19, 2:32pm 1562898774

A troll.

by Yvil | 12th Jul 19, 4:17pm 1562905032

Courtjester, you missed my point, I'll make it clearer for you, you live in a rental house, therefore you pay rent, rent (which has to be paid by the guy who bought shares but not by the guy who bought his own house) is an expense that Pragmatist did not include in his calculation of house vs shares return.

by Due Diligence | 12th Jul 19, 4:33pm 1562906011

And the cost of rent has gone up substantially faster than inflation, while mortgage interest has gone down.

by MisterB | 12th Jul 19, 11:19pm 1562930343

That could be misleading. While interest rates are down (2009 2yr rate 6% v circa 4% now)... mortgage interest cost has dramatically increased, as has the principle repayments. An 80% loan in 2009 Auckland would have needed $360k loan; an 80% loan in 2019 Auckland $680k an 89% increase in debt.

by m@tairua | 13th Jul 19, 8:20am 1562962840

A Gen Xer like me who was too busy being a Slacker to grow up and has been at the WTF phase since 2013:)

by Houseworks | 12th Jul 19, 2:51pm 1562899910

The owner only had 24k (20 percent) f the house value and they used OPM for the balance. His equity now $340k, 1400 percent return on capital PLUS the rental expense avoided. Winner. Put it all on black, black caps that is.

by Retired-Poppy | 13th Jul 19, 8:39am 1562963990

Translated "desperate times call for desperate measures. Yes, my cherry picker faces the wrong way, but it's the tallest one here. I'm a winner"

by Houseworks | 13th Jul 19, 12:45pm 1562978717

Rise and shine retired-pops it's a great day today. We have a new restaurant in Hamilton East called Winner Winner. That attitude goes against everything you stand for, you would not like it.

by Cowpat | 12th Jul 19, 10:16am 1562883395

Bindi, where is the headline. "Gisborne homeowners crushed by lower interest rates and capital tax changes as median house prices plunges $105720 in June, or at an astonishing ,unbelievable staggering rate of $3524 a day "
Bindi wrote in June "Gisborne saw a new record median price increasing by a staggering 54.4% year-on-year to $440,000 up from $285,000 – a $155,000 increase. Even looking at the previous month showed a 22.9% increase in median price (from $358,000 to $440,000) an $82,000 increase or $2,645 per day."

by nymad | 12th Jul 19, 10:25am 1562883943

Haha.
Live by the median, die by the median.

by Miguel | 12th Jul 19, 10:33am 1562884423

Haha, well said. It's unfortunate that so many media outlets just copy paste REINZ written headlines - particularly when REINZ will happily just intentionally misinterpret statistical anomalies to push the narrative they want.

How many June media stories included (or lead) with that commentary about Gisborne? Its a fairly sad indictment on the state of large swaths of the NZ media this is allowed to happen.

by Joe Wilkes | 12th Jul 19, 11:13am 1562886784

Hopefully no one has gone out and remortgaged for the boat or car off the back of one months REINZ spruiking of Gisborne. ‘What a month that was, we were rich beyond our wildest dreams.’
But the lords of Real Estate data giveth and they takeaway.. they just forget to mention when they take it away.

I’d best tell my brother in law that there is no point in adding arsenic to his mother-in-laws tea... she’s not worth as much this month.

Here’s a trivia question for all - Guess which year the CEO of REINZ bought their house in Auckland?

by k_s | 12th Jul 19, 11:23am 1562887412

...

I think you miss the point.
That being that it hasn't been taken away; it is a relic of the index methodology.

by Glitzy | 12th Jul 19, 11:38am 1562888318

JW,

What staggers me is that the apps used by Real Estate agents in NZ allow any user to search by name and find out every property you own across the country.

Its worth lobbying to change this. It simply isn't right that I can spend two minutes on an app and dig out the home address of every member of the cabinet or a police officer, judge or the journos working at Interest.

It's a gross violation of privacy.

by CourtJester | 12th Jul 19, 12:52pm 1562892753

Which app is that? Asking for a friend

by Glitzy | 13th Jul 19, 8:33am 1562963613

Core Logic enables the user to search under owner. I believe the REINZ engine is the same.

by ShoreThing | 13th Jul 19, 9:50am 1562968249

You can get this information from LINZ, the particular dataset is called the property titles owners dataset. It contains every single property title issued in New Zealand, and tells you who owns it among other things. Anyone can download this and look it up for themselves, it is public domain information.

by Brock Landers | 12th Jul 19, 12:06pm 1562889991

Comical Ali in a dress.

by Simon | 13th Jul 19, 5:14am 1562951661

Palmerston North City june:460,000 may:420,000 june last year 387,000 and sales for each also : 124 137 127:

120+ sales in winter months is boom time for Palmy - gets up to 150 a month in spring/summer so these are strong Palmy numbers.

PN is not gizzy (actually sell enough to get a sample size for data so that median isnt wildly thrown around each month depending on the handfull of sales in Gizzy)

Anyway 420k to 460k - average Palmy owner just made 40k in June following the logic used on the gisborne commentry .

Palmy is actually leading the HPI % growth charts for all cities - 17 point something % yoy growth, 2 point something last month growth - so hotest city in NZ presently - with another 80-100k upside left IMHO.

by Cowpat | 12th Jul 19, 10:22am 1562883745

Auckland real estate agents continue to hibernate as June sales third lowest this century.

by Laminar | 12th Jul 19, 10:42am 1562884925

Cool man, so like thats 19 years and we are at the 3rd lowest you say? Honestly you make it sound like this is common and so i guess we shouldn't worry? Was that your point, that its just business as usual?

by skudiv | 12th Jul 19, 11:07am 1562886457

You should be afraid, be very afraid. Be very careful crossing Queen St. there is a lot of traffic there and who knows what my happen?

by Carlos67 | 12th Jul 19, 11:38am 1562888339

Well crossing the road for most of us is no problem but the millennial's think they can do it at the same time as looking down at their mobile phone.

by CourtJester | 12th Jul 19, 12:54pm 1562892868

"The millennials". I love it. We are all idiots who can't even survive on our own, right?

by skudiv | 12th Jul 19, 4:04pm 1562904296

Well can you survive on your own?

by Clementé | 12th Jul 19, 11:43pm 1562931818

Time will tell, when the baby boomers all die, that may be then end of the human race... them kids have no idea how tough life is

by Pragmatist | 12th Jul 19, 12:39pm 1562891994

Should be able to pick up a used Audi quite cheap if thing don't turn around soon..

Pity I wouldn't touch most Audi's with a 10 foot pole..

by CourtJester | 12th Jul 19, 12:56pm 1562892971

It's okay if you don't mind driving around with a silly customised rego plate. For some reason RE agents seem to love those.

by mikekirk29 | 12th Jul 19, 8:17pm 1562919448

In fact only June 2008 was worse

by Voiceofreason | 12th Jul 19, 11:09am 1562886585

Something that jumped out at me was the "median price in the Orakei ward was down 11.9% annually." That's quite an annual dip in east Auckland there. Anyone got thoughts on why Orakei in particular leading the way down? Are there a lot of smaller places being built there to drag the median down, or just general tanking?

by lalaland | 12th Jul 19, 11:14am 1562886884

High debt saturated areas go first.

by Miguel | 12th Jul 19, 2:02pm 1562896933

Low volumes, small sample size and median used as the measure - I wouldn't put too much stock in the suburb medians as they are too easily skewed.

by cmat | 12th Jul 19, 2:36pm 1562898968

It's the Orakei *Ward*, not Orakei suburb.

The Ward includes Orakei, St Heliers, Glendowie, Kohimarama, Mission Bay, Saint Johns and Meadowbank:
https://www.aucklandcouncil.govt.nz/about-auckland-council/how-auckland…

A reasonably large area and sample.

by Joe Wilkes | 12th Jul 19, 11:28am 1562887732

This is weird. I just clicked on the REINZ 12th July release and got a report from June of the May data.

https://reinz.co.nz/public-archive-2019

by CourtJester | 12th Jul 19, 1:43pm 1562895818

Yeah I guess the link was just copy-pasted from May. I replaced 'may' with 'july' everywhere in the URL but there's no such file uploaded yet.

by theglc | 12th Jul 19, 11:35am 1562888145

big Story is the Akld sales volume, lowest since 2010 and that was the aftermath of the GFC.

Imagine if GFC 2.0 were to hit now.....

by Carlos67 | 12th Jul 19, 11:44am 1562888693

Watched the "Big Short" on Netflix for a second time on the GFC and I still don't understand it. Now I understand the result, what I don't understand how they every arrived at getting the systems in place to ALLOW it to happen in the first place. So after that hard lesson the system is all fixed right ? I mean there is now point in talking about a GFC2.0 because it simply could't happen again, you know that definition of insanity and all that...

by Pragmatist | 12th Jul 19, 12:35pm 1562891746

I saw an interview with Steve Eisman (the guy the Mark Baum character was based on) recently, and he said
"I can honestly say for the first time in all the many, many years that I have covered the financial services sector, I actually think the banking system in the United States is safe."

Also, he is currently shorting Canadian Banks in fairly hefty way. Wonder what (or if) he thinks of the NZ system...

https://business.financialpost.com/news/economy/what-the-big-shorts-ste…

by Simon | 12th Jul 19, 12:35pm 1562891757

Massively mispriced risk in mortgage backed securities, mortgages taken out by people with no jobs, no deposit, no way of paying it off. Coupled with the fact that in US as you can walk away from your house and leave it with the bank together with the debt as soon as debt exceeds house value and you get a cascaded failure.

Absolutely no parallels to the NZ market.

by Pragmatist | 12th Jul 19, 12:43pm 1562892182

" Coupled with the fact that in US as you can walk away from your house and leave it with the bank together with the debt as soon as debt exceeds house value and you get a cascaded failure."

That's a common misconception.. it was only in something like 12 states, and only for some types of mortgage. So realistically only an option for something like 10% of homeowners in the USA, the rest were full recourse mortgages.

by cmat | 12th Jul 19, 2:37pm 1562899079

Oh man.
Where to begin?

by EarlyMillenial | 12th Jul 19, 3:40pm 1562902831

Where to begin indeed?

Even if we start by assuming it's correct, we can do a thought process as to what might happen in NZ if the debt does start exceeding house value.
1. Banks start asking for more equity, and/or ask more aggressive P&I payment schemes as people come off interest only. Or banks refuse to refinance without both, and people are forced onto other lenders with higher interest.
2. People's disposable income gets chewed up by the additional mortgage repayment requirements, which flows through to retail figures and everything else.
3. Recession. Negative feedback loop.
4. People might sell, but they've sold at a loss and still have a debt balance to clear, which chews up their disposable income Go back to Step 2.

Of course you are fine if you've bought in 10+ years ago, and have small(er) mortgage balances. You can ride it out. But the risks aren't with you. The risks are with FBH, amateur landlords and specuvestors who are leveraged to their eyeballs.

by skudiv | 12th Jul 19, 4:14pm 1562904847

Which would be what 1% of homeowners?

by EarlyMillenial | 12th Jul 19, 4:43pm 1562906599

That would really be the question, wouldn't it? What proportion of the total home owners? What proportion of the transactions? How much influences would the transaction have on the prices/values of the 99% (taking your figure here)? How much of the banks' loan books are potentially in at-risk? I wouldn't purport to know. But the so-called Doom-and-Gloomers here look to be basing their thought alongside those questions. Whereas the Sunshiners' argument simply appears to be based on the dogma of boundless capital gains & rent rises.

by skudiv | 12th Jul 19, 4:56pm 1562907419

I prefer the monikers Doomers, and cornucopians. For the banks however I would expect they would be looking at a minimum of 90% recovery with their customers taking 100% loses in the event of a bankruptcy. With the old 5% deposit and less, things were a little moar risky for the banks, but nowadays the banks are pretty secure.

by EarlyMillenial | 12th Jul 19, 5:11pm 1562908292

But we digress - Simon's comment was that a slowdown (hypothetical or not) in a property market can't cascade down to the real economy because NZ and US are different. I think it absolutely can. Instead of the banks holding the can and impacting the economy, it'll be the households holding the can and impacting the economy.

by skudiv | 12th Jul 19, 6:08pm 1562911696

Household spending will be in toilet because most members in a household don't have an income and can't benefit from the increases in minimum wage which is why I support a UBI for ALL.

by theglc | 12th Jul 19, 1:20pm 1562894455

GFC was a debt induced crisis

The world debt is worse now than it was then

https://www.bloomberg.com/graphics/2018-lehman-debt/

by skudiv | 12th Jul 19, 6:09pm 1562911749

Which (all things considered) is why we are Doomed.

by skudiv | 12th Jul 19, 6:10pm 1562911812

Especially with the Orange cry baby in charge,

by CJ099 | 12th Jul 19, 1:27pm 1562894876

Yes what went on with the banks during the GFC was shocking enough and that's only part of the puzzle. But what's even worse is when you look how the property bubbles have been formed more recently both here, Australia, Canada and parts of the US. Most of those property bubbles have been driven by money laundering at the top end of the market, creating a false economy. This has only recently been curtailed here in NZ by Labour enforcing Anti Money Laundering regulations since January this year, part of the reason why the top end of the market has fallen away.

Here's some interesting articles for you, Better dwelling article: How A Little Money Laundering Can Have A Big Impact On Real Estate Prices
https://betterdwelling.com/how-a-little-money-laundering-can-have-a-big…

Canada Would Be In A Recession Without Money Laundering
https://betterdwelling.com/canada-would-be-in-a-recession-without-money…

by cmat | 12th Jul 19, 2:41pm 1562899309

Asset markets globally have been driven by fast and loose monetary policy.

That's the story here.

by skudiv | 12th Jul 19, 5:03pm 1562907811

Yeah companies are doing crap and not making any profits at all nor do they have future profit potential that anyone would want to invest in.

by CJ099 | 13th Jul 19, 9:10am 1562965821

@ cmat: Yes particularly when it comes to money laundering. Thankfully most responsible Western countries have taken Anti Money Laundering measures to help fix this issue. Sadly Australia is lagging far behind seems that they're in too deep.
News clip: Real Estate: dirty money laundered through Australian housing | ABC News https://www.youtube.com/watch?v=-A_lH4S3ufA

by delboy | 12th Jul 19, 12:20pm 1562890827

If GFC 2.0 were to hit now the banks would be giving me money at extremely low interest rates to go forth and buy up properties at bargain basement prices from the schmucks who bought properties between 2014 and 2017.

by Simon | 12th Jul 19, 12:51pm 1562892710

Nice find there Pragmatist. To my point about the US in 2007 being NOT anything like NZ today:

"So just before the financial crisis started, Citigroup was levered about 33 to 1. Today, it is levered about 10 to 1. That is, in my world, like comparing the distance from Mercury to Pluto. It’s such an enormous change it’s hard to even describe it. I can honestly say for the first time in all the many, many years that I have covered the financial services sector, I actually think the banking system in the United States is safe"

So, what are NZ banks leverage? Well a little over 10 to 1, average across all maybe 12? As he says, enormously different to the 33 to 1 type leverage seem in US in 2007 that was priced by all at the time as 'super safe' before being repriced overnight more accurately as 'crazily unsafe' which caused the GFC.

by cmat | 12th Jul 19, 2:53pm 1562900018

Have you heard of a little firm called Deutsche Bank?

Are you familiar with the concepts of global systemic risk and contagion?

by skudiv | 12th Jul 19, 5:05pm 1562907923

Are they part of the Weimer hyperinflation? Which killed the world and caused WWII.

by cmat | 12th Jul 19, 2:45pm 1562899507

You know what happens in a financial crisis right?

Liquidity dries up.
i.e. Banks stop lending because they get nervous about the value of their security (i.e. the asset/property) they are lending against and the ability of borrowers to service.
They especially stop lending to shmucks who want to speculate on over priced assets .

by Dgm | 12th Jul 19, 2:11pm 1562897507

If GFC2 were to hit, we would be attending a number of funerals.. can name a few on this site..

by skudiv | 12th Jul 19, 5:09pm 1562908184

Property investors have been putting up a 40% deposit, just imagine prices taking a 50% fall where all those specuvestors lose money and become bankrupt!

by RickStrauss | 12th Jul 19, 1:07pm 1562893652

Auckland figures from the REINZ report:

- Inventory: +8.7%
- Days to sell: +12.5% (45 vs. 40 last year)
- Volume sold: -3.2% on last year
- Median: same as last year
- REINZ gold measure HPI: -3.5% vs last year

HPI takes into account the characteristics of individual properties sold, where median does not.

by Glitzy | 12th Jul 19, 12:06pm 1562889977

"REINZ gold measure" is that an oxymoron ? :)

by alittle | 12th Jul 19, 12:04pm 1562889876

When the market changes from high to low it does not happen overnight.

Process has started and is visible , will take time but no escaping despit very low interest rate.

Wait and Watch

by Iceman | 12th Jul 19, 12:12pm 1562890369

That's quite generic. The market has been relatively flat over 3 years, so it's a bit more than overnight. RBNZ appears to have flexed all it's muscles with possibly a further few rate cuts to come. What I think will be the telling factor is immigration. As long as those numbers stay the same, I cannot see any major decline in prices unless there are external factors.

by skudiv | 12th Jul 19, 5:17pm 1562908666

I'm already factoring in the RBNZ raising minimum deposits to 50%, this market is going to tank because that is what the RBNZ and the greens want.

by Glitzy | 12th Jul 19, 11:49pm 1562932188

For purchases over the equivalent of NZD2mn, Hong Kong already has a 50% deposit requirement set by the HKMA.

by richard1965 | 12th Jul 19, 12:14pm 1562890468

How true

High end price had already started to fall and now even 2 bed units which earlier had asking of 700+ in mid 700 in Buckland beach / Howick and nearby area, now have asking of Mid 600s and will be sold for 600 and 3 Bedroom good units which were earlier demaning high 700s to early 800s are now not even going for mid 700s - so will be for near around 700s.

Domino Ripple down effect has started but time to come will give opportunity for FHB to buy and should hold for now to get more for their deposit.

by Yvil | 12th Jul 19, 1:06pm 1562893586

"High end prices had just started to fall…"

Just not true, read the article

"In the Waitemata and Gulf ward which includes some of the city's most expensive suburbs, the median price was up 16.3% compared to June last year"

by richard1965 | 12th Jul 19, 4:24pm 1562905491

Article or no Article, Come to Pakuranga, Bucklands Beach, Howick and nearby area and will notice that houses that were going earlier for Million Plus are now going near 900s. By high end I meant million $$$ Plus houses or check with any RE Agent and will vouch for it.

by skudiv | 12th Jul 19, 4:27pm 1562905642

Real estate agents are the most honest and open people you will ever meet.

by skudiv | 12th Jul 19, 4:26pm 1562905583

No that's just not true, Auckland prices have been crashing 30% since 2008 and it's just going to destroy so many evil specuvestors we wont know what to do with them all.

by Zachary Smith | 12th Jul 19, 12:25pm 1562891148

The figures look pretty good for Auckland. The fact, that there is no denying, is that a fair number of properties sell each month.
The graph for the median price for Auckland looks so spikey yet flat - a thing of beauty.

by Due Diligence | 12th Jul 19, 12:29pm 1562891377

Very stable as far as median price goes. Really just fluctuating within a band either side of $850K.

by THE MAN 2 | 12th Jul 19, 12:54pm 1562892898

Reality is that the housing market has taken a breather in Auckland and a few other North Island locations.
Most of the rest of the country is still pretty steady.
It is great if many of the posting contributors end up buying a home for their own occupation if they feel that prices have become more affordable for them.
Personally I wouldn’t be holding off too long as things are going to rise again due to interest rates being low and demand.
However, I believe that if you have had the ability to borrow to but a property, you have made a mistake of holding off where there are always good opportunities to buy and improve your financial position!
The people who become financially stable,are the ones that do take action rather than sit back and just complain.

by Pragmatist | 12th Jul 19, 2:46pm 1562899607

Taken a breather? Its been taking a breather after its sprint up to 2017, now its toddled off to the bedroom for a lie down as its not feeling so well.. Maybe it should have washed those big handfuls of chinese greens before consuming them?

by Zachary Smith | 12th Jul 19, 3:54pm 1562903672

The Auckland property market is like a Boeing 737 MAX, you just have to ease off the throttle when it wants to dive head first into the ground. After that it's a slow cruise and maintaining altitude.

by cmat | 13th Jul 19, 8:45am 1562964327

Did...did you just use a 737 MAX analogy to suggest the housing market is A-OK?

by Pragmatist | 13th Jul 19, 1:18pm 1562980684

Is that his way of saying the soaring RE market is about to have an unplanned spatial concurrence with the ground-sky interface?

by skudiv | 12th Jul 19, 4:31pm 1562905861

Property never falls, it flatlines and goes up, up, up. Proven fact.

by Retired-Poppy | 12th Jul 19, 5:06pm 1562907996

"up, up and up", much like your debt.

by skudiv | 12th Jul 19, 5:22pm 1562908929

My debt levels are astronomical and I intend to get into as much debt as possible because that is how you become a billionaire. Paw people have little debt which is why they are so paw.

by skudiv | 12th Jul 19, 5:23pm 1562909010

I was like "wtf.. where tf is RP"? This is a property article for crying out loud!

by Retired-Poppy | 12th Jul 19, 5:40pm 1562910010

by Joe Wilkes | 12th Jul 19, 11:26pm 1562930798

Are you feeling ‘paw’ RP?

by Retired-Poppy | 13th Jul 19, 7:48am 1562960901

Ha-ha-ha :) Skudiv has discovered there's a link between my appearance and a gathering of lying Spruikers.

by Wrong John | 12th Jul 19, 12:51pm 1562892666

Interesting Tauranga's Eves auction numbers. It was a similar story when I was there a month ago. It was like going to the theatre & watching a show. For the lousy results, it was very well choreographed.

by WhenwillitEnd | 12th Jul 19, 12:55pm 1562892945

But can anyone explain to me why in the regions, Dunedin is in absolute frenzy? It’s like Auckland three years ago, many purchasers, no time to do due diligence or you miss out. Pressure from agents, cash buyers, asking prices 50 percent over Rv. Absolute dumps going for top dollar. eg asking hundreds of thousands for a centrally located1 bedroom tiny workingman’s cottage with an interior untouched since the 1930s. (not ina good way). Can’t all just be the uni student thing and the hospital upgrade, surely?

by CourtJester | 12th Jul 19, 1:03pm 1562893431

Probably the work of people who don't have enough capital to buy in Auckland but really want to be part of the property get-rich-with-no-work scheme (scam).

by THE MAN 2 | 12th Jul 19, 1:15pm 1562894115

I can assure you that property is not a no work scheme to get rich!
Any investor will tell you that there is plenty of work required to manage residential property, but done correctly, yes generally you will become financially better off than sitting on your butt!
Shares and equities and money with financial advisors is the no work investment, and any property investor that provides quality housing for people in NZ, deserves every cent of capital gain.

by mfd | 12th Jul 19, 1:50pm 1562896239

"any property investor that provides quality housing for people in NZ, deserves every cent of capital gain."

For once I can agree with you on something. This is why I have shares in CDL Investments on the NZX - a company that's out there developing residential sections to increase the housing supply. Doing far more for the country than a 'property investor' who does nothing more than buying existing stock and renting it out, perhaps sticking in a little insulation or a heat pump here or there.

by THE MAN 2 | 12th Jul 19, 5:47pm 1562910479

mfd, you haven’t got any idea then if that is what you think!
We are continually improving property, which just makes financial senses to us!
As for developing sections, that has got very little to do with providing housing for tenants as any property investor with any nous isnot tenanting out brand new homes!!!

by RickStrauss | 12th Jul 19, 3:43pm 1562902991

As for developing sections, that has got very little to do with providing housing for tenants as any property investor with any noise is not tenanting out brand new homes!!!

Notwithstanding the accidental but rather accurate misspelling there, it's interesting to see a property investor claiming that property investors don't usually contribute to supply.

by mfd | 12th Jul 19, 4:14pm 1562904856

If noone develops sections, there is no housing supply for anyone. It's rather an important step. Where do you think the houses you buy come from?

by THE MAN 2 | 12th Jul 19, 5:49pm 1562910573

Our houses come from the pool of existing houses!
No return on new houses

by CourtJester | 12th Jul 19, 2:20pm 1562898010

I don't have an issue with good landlords who actually put some work into their properties. My previous landlord was amazing (mind you, they lost hundreds of thousands of dollars when they sold the house this year). But there are a lot of 'accidental landlords' who bought houses mainly for the promise of capital gains, and aren't willing to spend a dime on their investment. Interesting that some people are okay with buying a 2br house for 800k, but don't want to spend $500 extra to insulate both bedrooms instead of just one...

by Yvil | 12th Jul 19, 1:11pm 1562893891

"In the Waitemata and Gulf ward which includes some of the city's most expensive suburbs, the median price was up 16.3% compared to June last year while the median price in the Orakei ward was down 11.9% annually"

I'm just highlighting this because several commenters have posted that values "are dropping at the top of the market and will trickle down"

by RickStrauss | 12th Jul 19, 3:44pm 1562903081

Auckland HPI is down 3.5%, which also factors in the mix of properties. So on a small sample size there could be both a higher median price and a lower HPI. Perhaps people are getting more for their money this year.

by Yvil | 12th Jul 19, 4:32pm 1562905960

My post was about high end houses (not) dropping in value. I believe the HPI covers the entire market, therefore you can not use it to come to a conclusion for specific (expensive in this case) section

by RickStrauss | 12th Jul 19, 4:55pm 1562907324

It's been well covered elsewhere in the thread that small sample sizes and the mix of properties sold in a small sample will easily allow some skewiffy medians. Which can account for both your cited median increase and the big decline in the Orakei ward. I.e. if a small number of houses are sold but they are larger houses and properties, the median will be higher but it does not mean prices have gone up (in fact, those houses could have declined in value and still pulled the median up).

And vice versa in Orakei ward. If it was mainly 2-br units that sold the median could be down year on year even if the price of those 2-br places had increased, had there been lots of 4-br sales in the previous year.

On a small sample size neither provide a completely accurate picture of whether houses (on a per metre, or per x) basis) have gone up or down in price over the year based on the median alone.
So it doesn't actually support your point. (Nor does it support the contrary claim that prices are absolutely going down in real terms.)

But at least the HPI factors the mix of properties in, that's why REINZ calls it their "gold measure". And the HPI is down. Perhaps we need an HPI split for Waitemata and Gulf, Orakei ward etc.

Of course, individual properties may vary again.

by skudiv | 12th Jul 19, 5:36pm 1562909760

Property prices are such an awesome thing to obsess about, all the effort is so rewarding, I can't imagine doing anything else with me life but studying the minutiae of property prices in small parts of the country.

by Voiceofreason | 12th Jul 19, 1:27pm 1562894856

I really don’t like how NZ and Australia markets are looking for the next 5-7 years. Anyone have experiences (good and bad) to share about investing as a foreigner in fast growing, less expensive South East Asian real estate markets (not inflated China, Hong Kong or Singapore)? Or good real estate investment trusts/funds for same?

by J.C. | 12th Jul 19, 2:56pm 1562900177

I was at a CBRE conference in Ho Chi Minh City y'day. One thing that the speakers emphasized was how great the value was compared to other markets in the region. However, yields are much lower than term deposits with Vietnam banks (around 8%).

I wouldn't touch it with a barge pole but that's beside the point.

by skudiv | 12th Jul 19, 4:37pm 1562906268

Much better value for money and security in East Asia (aka Japan) but you do have to cross some hurdles to buy into that market.

by Voiceofreason | 12th Jul 19, 5:58pm 1562911130

Thanks Skudiv, do you mean by stable that the market hasn’t really appreciated by much since the bust in the late 1980s, and an aging population with not much immigration? It is a very developed and hence slow growing economy. I fear Aust & NZ are heading for similar, although we favour immigration. Some others are fast growing (5-7% GDP growth for years and years) but yes a little riskier.

by skudiv | 12th Jul 19, 6:17pm 1562912263

Yes exaxtly if it hasn't gone up, how can it crash? Right! What we want is an asian market that has zero chance of crashing and will go up and up.

by Voiceofreason | 12th Jul 19, 6:36pm 1562913395

Not so sure about a “zombie economy” though, but maybe Japan will revive again at some stage. As for crashing, yes China’s property bubble could impact the whole SEA region I guess, with so much Chinese money and construction being poured into these places, bit like Japan’s influence in the 80s. Still, hard to go past considering underdeveloped/emerging markets growing above 6% a year, with young, growing populations, and property for less than US $1500 per sqm. Future doesn’t look bad at all.

by Voiceofreason | 12th Jul 19, 5:46pm 1562910406

Thanks JC, I think an issue there for foreigners is that you can only buy strata title condos, and those tend to be overpriced (for the market but cheaper than NZ) and depending where, oversupplied. There are some countries that allow non-strata though I think. Have just done a little research so far. Vietnam’s economy has been going strong for years, even through the GFC. Big population too: 90mill.
Why wouldn’t you touch it btw?

by J.C. | 12th Jul 19, 10:33pm 1562927594

Why wouldn’t you touch it btw?

Because the general market is priced for the elite and foreigners. There is very little in the way of "affordable" housing for the general populace. Therefore, I wonder about the sustainability of property as an investment when it's all about a quick buck. The economies of Japan and Singapore are what they are because housing was inclusive, not exclusive.

by Voiceofreason | 13th Jul 19, 1:36am 1562938561

Ah right, I understand even parts of Cambodia are becoming like that, with a lot of tourism from China and elsewhere. Overpriced condos built for foreigners and tourist market, sometimes shoddily (one on the coast collapsed at few weeks ago), but older style French colonial era houses, apartments, and other styles are better value.

by CN | 12th Jul 19, 3:16pm 1562901416

These are some reasons given in the mainstream media, property market commentators, property market promoters, bank lending promoters masking as bank economists, real estate agents, property market mentors & other sources as to why property prices in Auckland will not fall by much:

1) during the GFC, house prices in Auckland fell only 7-10%
2) over the past 50 years, house prices in Auckland have averaged 7.2% per annum (or commonly referred to as house prices doubling every 10 years). This trend can be expected to continue into the future
3) there is a shortage of underlying housing in Auckland, so property prices won't fall by much
4) there is a growing population which means that there will be more demand for houses
5) we have inward immigration which means more demand for houses
6) lower interest rates are supportive of rising house prices
7) we mustn't forget either the vested interests in ongoing stability. No government, central bank or trading bank with mortgage exposure wants materially lower house prices. Nor does an incumbent Beehive want falling house prices going into an election campaign
8) the economy is doing well, with low unemployment
9) there has been insufficient construction of new builds to meet the housing shortage
10) there are high construction costs to building a house. House prices cannot fall below their construction cost.
11) people don't sell their houses at a loss
12) continued inflation means that house prices will continue to rise in the future
13) property market participants & commentators who have been correct in their predictions about recent property price trends have more credibility and hence their predictions of upward prices are believed by a wider audience.
14) previous warnings about a house price crash have been wrong - property prices have continued rising upward significantly since these warnings were given, so there is little reason to believe these warnings.

Sources:
1) https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but…
2) https://www.interest.co.nz/property/97513/auckland-councils-chief-econo…

What are other reasons that house prices in Auckland will not fall by much (i.e 5%)?

by RickStrauss | 12th Jul 19, 3:59pm 1562903943

It's an interesting time we live in. A time and place where we extrapolate everything from previous decades assuming that things will continue along the same way and that a rare event will not occur.

In Taleb's coinages, most people live in 'Mediocristan,' a fake model of reality where no rare events occur, and not in 'Extremistan', the complex real world where unpredictable and devastating events can dictate the outcome.

...

No one, he believes, is more guilty of living like turkeys in the false security of Mediocristan than economists and financial risk management analysts who rely on computer models that don't account for rare devastating events.

https://www.theguardian.com/books/2008/sep/28/businessandfinance.philos…

Others on here have noted reasons that could swing things the other way:

- More houses per people than in the 1990s (Auckland)
- Capital outflows out of China being stopped
- Lack of buyers with deposits or ability to pay for more expensive houses
- Declining numbers of residency applications
- Rising living costs
- Not the the greatest real economic performance over the past decade
- Likely higher capital requirements for banks, and reduction of risky lending by banks
- Anti Money Laundering requirements being applied to real estate

I don't think we've seen a situation quite like this in NZ before. But it's nigh on impossible to know which way things will go.

At the moment, at least, prices are declining in Auckland which is a good thing for average Kiwis who would like to own a home for their family.

by Laminar | 12th Jul 19, 4:56pm 1562907393

2) over the past 50 years, house prices in Auckland have averaged 7.2% per annum (or commonly referred to as house prices doubling every 10 years). This trend can be expected to continue into the future
Not really accurate, after adjusting out the inflation house prices grow only at 3.5% from 1986 until today. With 2% inflation that would then be 5.5%. The trend itself is questionable as interest rates have dropped a long way to generate even the tepid 5.5% pa. Looking back 50 years doesnt even make sense as the economy, taxes, currency where all wildly different.

6) lower interest rates are supportive of rising house prices
Thats not true, in fact the current low interest rates are not even supportive of current prices. You can check this by looking at affordability.

9) there has been insufficient construction of new builds to meet the housing shortage
I think there is some evidence that this may be turning the corner.

10) there are high construction costs to building a house. House prices cannot fall below their construction cost.
That is incorrect, house prices are primarily set by affordability, if for example we hit high unemployment rates it would be easy to push prices below the cost of replacement.

11) people don't sell their houses at a loss
They dont 'willingly'

12) continued inflation means that house prices will continue to rise in the future
Inflation is very low and in and of itself does not drive prices. Wages and interest costs combine to be the main driver of prices.

13) property market participants & commentators who have been correct in their predictions about recent property price trends have more credibility and hence their predictions of upward prices are believed by a wider audience.
Kinda a weird way to look at future price direction, i dont know but i doubt its got a great track record.

previous warnings about a house price crash have been wrong - property prices have continued rising upward significantly since these warnings were given, so there is little reason to believe these warnings.
Whilst true youd really want to understand why they where wrong as they may be right at the wrong time.

by skudiv | 12th Jul 19, 4:46pm 1562906804

I guess you also have to provide reasons why house prices will fall, other than 'they aren't going up at 7%'.

by cmat | 13th Jul 19, 8:53am 1562964788

by CN | 13th Jul 19, 12:36pm 1562978208

Laminar,

Thank you for your counter points.

In respect of:

13) - I was thinking about Ashley Church, Tony Alexander, Ron Hoy Fong, Matthew Gilligan, etc - these individuals have a following by a number of people for their property market commentary and property market price predictions. As these individuals have been correct about their property market price predictions, this has enhanced their credibility with their followers. They have constantly been in the media, or actively promoted their businesses and these have been reported in the media. Also FYI, just seen that Ron Hoy Fong has just repeated the commonly held belief that property prices in Auckland double every 8-10 years.

Note that two of these individuals have property mentoring businesses (one is also a property developer), another one was a spokesman for the NZ Property Institute (which represents property professionals), and another is employed by a bank as an economist who does lending for property. Followers of these individuals may not be aware of the business interests of these individuals which may be at conflict with property buyers own interests.

14) I was thinking about Bernard Hickey (and some others), who raised warnings many years ago, about property prices in Auckland. As he was wrong for so long, many readers have lost interest in his viewpoint, and don't see him as being credible.

The purpose of the list is to try and provide a comprehensive list of why people believe that property prices won't fall by much in Auckland, and assess the merits and relevance of each point / assumption / belief.

by Laminar | 13th Jul 19, 1:42pm 1562982143

I do get your point and agree its unlikely Auckland prices collapse. I think the main two reasons though are:
1) Affordability has been this bad, and worse, in the past and it only resulted in about a 10% drop.
2) The number of homes built over the last decade has been too low and will take some time to recover

Tony Alexander has a very poor track record of calling interest rates so he is a bit hit and miss, like any of them.
Bernard Hickey was so wrong, like you note, that he effectively recused himself from public life. Interestingly he has changed his tune in a lot of ways and i think recognises why he made that error. He effectively use to believe in 'return to historical norms', he has since realized that there is no such thing as a historical norm. Interest rates are not a solved function and no one has been able to figure out what the real rate of interest should be, but suffice to say it changes through time and you cant simply look back and say, 'well this is the average over', 'insert random time period', so it will revert to that level. I mean comparing to 25 years ago is dubious enough, 100 years ago is laughable and we can even go back thousands of years but none of these time periods informs us about what rates should be today.

by skudiv | 12th Jul 19, 5:42pm 1562910130

Average kiwi's actually own their own home, so I just guess you meant to say below average kiwi's. Those of them who presumably live with their families.

by tothepoint - d… | 12th Jul 19, 6:19pm 1562912375

Judging by the number of posts on this thread - and the rapidity with which they've accumulated - there's massive interest in the housing market.......

There ain't gonna be much price weakening.

Enjoy the weekend!

TTP

by oreo | 13th Jul 19, 8:55am 1562964928

You wish!

by CN | 12th Jul 19, 9:38pm 1562924302

Another one is that debt servicing as a percentage of disposable income is low relative to historical levels (at just under 8%), driven by falling interest rate.

https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt

by Nzdan | 12th Jul 19, 7:00pm 1562914830

I came back to this article because the number of comments had grown 50+ since 3 pm. So I set the comment filter to 4 hours, and started scrolling.

Has anyone besides Skudiv commented in the past 4 hours?

by skudiv | 13th Jul 19, 6:26am 1562956008

I am winning!

by Dgm | 13th Jul 19, 7:17am 1562959049

Empty vessels make the most noise

by i am not a nimby | 13th Jul 19, 8:08am 1562962112

Auckland, Sydney, New York, Hong Kong and all similar cities (with its similar characteristics to its location in their respective countries) --you cannot go wrong (whether u buy in crest or trough) as long as you buy in the mass market price range. why? desirable cities in any country is where population gets attracted to- locals and immigrants who are in their "working age". Humans are "social animals". We dont like living in remote areas no matter how well we are digitally connected. While we are being scared off by some "economists", this might be time to pack some 1 and 2 bedders (no matter whether its a hse or apartment) within 5 mile radius of a pin placed at the centre of Auckland harbour bridge, in your portfolio. Look around - this has always worked. Remember 2008/2009 when we were told to sell, sell, sell- guess who were buying at that time?

by cmat | 13th Jul 19, 9:05am 1562965544

So we're like Sydney - because it's desirable place to live

But we're not like Sydney - because prices won't drop here.

Right?

by CJ099 | 13th Jul 19, 9:16am 1562966206

I think you'll find the biggest difference between Sydney and Auckland will be one has AML restrictions and the other one doesn't (Or at least not enough). It will be really interesting to watch what happens to Oz over next year.
ABC News clip: Real Estate: dirty money laundered through Australian housing
https://www.youtube.com/watch?v=-A_lH4S3ufA

by CN | 13th Jul 19, 11:43am 1562975031

"you cannot go wrong (whether u buy in crest or trough) as long as you buy in the mass market price range. why? desirable cities in any country is where population gets attracted to- locals and immigrants who are in their "working age".

"Look around - this has always worked. Remember 2008/2009 when we were told to sell, sell, sell- guess who were buying at that time?"

Use of recent house price history, where property prices in 2008/2009 did,not fall by much, has reinforced their confidence that property prices do not fall by much and continue rising.

by fat pat | 14th Jul 19, 6:47am 1563043635

I think it'll be a good time to buy Auckland when one of Greg Ninness articles on declining sales or prices attracts 12 comments or less.