Prices at the bottom end of the market were rising strongly in most places in March but record low mortgage interest rates provided some relief for first home buyers

Yes Housing Sector was up so did stock market, which was up - infact all time high just before the virus SO what is new that we do not know or do we have to throw past positive to create a smoke going future which in realty is otherwise - Part of Propoganda by Real Estate Sector.

Not only stock market along with housing, many other industries and sectors were doing excellent for themselves like tourism and hospitality and everyone knows past what is important is knowing about the future from here wher no one has any idea with entire world shut.

Private Viewing for real estate agents allowed - good that housing sector will start moving and only when it moves will it slide as when in freeze mode even the fall was freezed.

Lock-down was a blessing in disguise for the declining house price.

All FHB or anyone looking to get more for their dollar should hold on tight - try to avoid FOMO and wait or see your depoist / equity being wiped out.

Those who bought house specially in last few months will suffer but were not aware of what is comming but now when writing is on the wall and still if some goes ahead should be ready to face the music without sympathy as jumped knowing the disaster waiting.

Gee some main centre price rises were breaking not just the road speed limit but also the speed of sound. Without covid then 2020 would have gone too far too fast thats for sure. A circuit breaker was needed

Rising house prices are celebrated, but rising fuel prices are loathed.

Greg: you write "Those who are in secure employment with stable incomes may actually benefit as house prices fall."
Stating that house will prices fall is pure speculation and therefore not factual or neutral reporting. Is Interest being swayed by its commenters? (see also Gareth's piece on removing LVR's)

Helicopter money is coming!!!!!!
https://i.stuff.co.nz/business/121205189/finance-minister-not-ruling-ou…

everyone is saying that removal of LVR is RBNZ's way of propping up house prices .. here's my take on it - it's them effectively putting a safety net to cushion the fall instead starting with the lower-quartile houses as mentioned in this article

say an over-leveraged investor had to sell one of his properties - this gives the tenant a chance to purchase without having a hefty deposit. even a couple on minimum-wage (provided their jobs are secure) can purchase a house for $400k (using back of envelope calculation of ($18.90 * 40 hours * 52 weeks) * (2 people) * (5 times income) plus government grants etc) ... So would be applicable to South Auckland houses with a price tag of $500k to $600k when they actually bought it for $300k 10 years ago .. this is a scenario I see happening where investors will sell these types of properties first if needing to readjust their portfolios

We can speculate to the cows come home as to how the market will react when the lockdown ends and yes some of the comments have merit ie especially with market segments that are clearly impacted by the coronavirus ;but,i i believe with the exception of God Almighty no one really knows exactly how its going to pan out,industries have already had redundancies these individuals have lost their spending power to purchase items currently manufactured or created by others still currently employed ,not to forget debt to be serviced ,export demand and employment fears.
i reckon once the dust settles 3-6 months we will be able to gauge how this will impact house prices,it will i believe be a very different market to pre corona virus one.
.
it will really be interesting to see what the herd mentality will be like, do nothing-wait and see ,sell junk ,cut costs and save like crazy or panic.

Reporters sound upbeat when house prices go up. Rising house prices without wage growth are a curse to our economy. NZ house prices are a giant vacuum sucking all productive money out of the economy. Already last year people were not buying new cars because the money was going to pay mortgages and rents. Thanks for lighting this fire, too, Adrian.

A reminder for all potential owner occupier buyers and current owner occupiers - choose your scenario and act accordingly.

Which will the owner occupier regret most:
1) missing out on future potential gains in equity?
2) potential loss of their savings invested as the initial deposit for purchase of the house or even potential negative equity?

For owner occupiers, a reminder of the impact of leverage (it amplifies property price changes both on the up and down):

Scenarios of financial impact of leverage on equity, assuming an 80% LVR for owner occupier, for a recent $100 property purchase, $20 initial deposit, mortgage $80.

A) Scenario - property price rise:
1) property price rises 5% to 105, mortgage 80, equity 25, so 25% gain in equity value from 20.
2) property price rises 10% to 110, mortgage 80, equity 30, so 50% gain in equity value from 20.
3) property price rises 15% to 115, mortgage 80, equity 35, so 75% gain in equity value from 20.
4) property price rises 20% to 120, mortgage 80, equity 40, so 100% gain in equity value from 20.
5) property price rises 25% to 125, mortgage 80, equity 45, so 125% gain in equity value from 20.
6) property price rises 30% to 130, mortgage 80, equity 50, so 150% gain in equity value from 20.
7) property price rises 35% to 135, mortgage 80, equity 55, so 175% gain in equity value from 20.
8) property price rises 40% to 140, mortgage 80, equity 60, so 200% gain in equity value from 20.
9) property price rises 50% to 150, mortgage 80, equity 70, so 250% gain in equity value from 20.
10) property price rises 100% to 200, mortgage 80, equity 120, so 500% gain in equity value from 20. (i.e if they believe that the property price doubles every 10 years)

Remember, the owner occupier must be able to hold on under ALL economic environments (including any potential significant reduction in household income).

B) Scenario - property price falls:
1) property price falls 5% to 95, mortgage 80, equity 15, so 25% loss in equity value from 20.
2) property price falls 10% to 90, mortgage 80, equity 10, so 50% loss in equity value from 20.
3) property price falls 15% to 85, mortgage 80, equity 5, so 75% loss in equity value from 20.
4) property price falls 20% to 80, mortgage 80, equity is zero, so 100% loss in equity value from 20.
5) property price falls 25% to 75, mortgage 80, equity is NEGATIVE 5, so 125% loss in equity value from 20.
6) property price falls 30% to 70, mortgage 80, equity is NEGATIVE 10, so 150% loss in equity value from 20.
7) property price falls 35% to 65, mortgage 80, equity is NEGATIVE 15, so 175% loss in equity value from 20.
8) property price falls 40% to 60, mortgage 80, equity is NEGATIVE 20, so 200% loss in equity value from 20.

Hi Greg,

from mainstream commentary, it appears the most common base assumption is that interest rates will remain low for over a year. However, the next important determinant of debt and loan availability and its cost is whether the global system of liquidity is kept fluid. I have severe doubts on this, as substantial portions of the global credit system (esp bond market) are under water , ie have no return % rate and also substantial portions are junk and are being down-graded to junk rapidly (see Italy today). No matter what fed does and other central banks, the banks actually lending the money have criteria that will tighten at precisely the point when demand is hit. Loans to the housing market will then, surely, decrease and this will mean fewer loans and lower prices. There has to be severe debt also that the bond market will keep taking on government debt when many governments will default (see Turkey and Argentina for starters and Italy is also broke) . The oil market turmoil indicates that the world credit system and demand management is in chaos and this is likely to continue. We are not even in the second quarter yet, the virus continues to infect MORE people per day, even in USA where Trump thinks things are getting better. Most economic commentators forecasting 25-40% drop in OECD GDP. Incomes service debt. So, defaults will inevitably rise and this will impact credit ratings of everything, including all banks and individuals. the whole system rides on debt and this debt, in my view, will become more expensive and harder to get in collective terms. Aus is particularly vulnerable in this respect and particularly in relation to they hyper leveraged investor rental market. Hence I see the big 4 banks having trouble with the equity soon.

Prices were rising in last 4 months to end of March because interest rate cuts were loaded on to fire market.
Unless credit is continuously goosed in this fashion, velocity of money falls.
IE unless credit increases exponentially, the credit market loses power.
Are people seriously stating that the goosing of rates 2013-20 will continue?
Plus that people will have confidence to decide on taking on extra debt in current climate?
And that banks will not tighten criteria?
Sorry, not going to happen

It amazes me how the politicians and the reserve bank seem to do everything in their power to keep our house prices artificially high. First they lowered interest rates as far as they can and now they, it seems to me, created money out of thin air. It would have been very painful for everyone if they hadn't I agree. Oh, and they've loweres the LVR too.
Two phrases spring to mind though: if it seems too good to be true it probably is and there's no such thing as a free lunch. Surely they're going to eventually run out of tools to prop the property market up and then it will be very painful for future property buyers?

I just brought my first home in Auckland in December - price has risen 3-5% since. I was thinking to myself its actually a good thing if prices drop 10-15% then I've got hope to get a second property in 3 years time! Cause otherwise I never would! Sucks that I brought but got to look at the glass half full!

Great news!
https://mortgagemanagers.co.nz/blog-posts/anz-now-allow-low-equity-prem…

Today ANZ have changed their policy and will now allow the low equity premiums (which are a one-off fee) to be added to the loan amount even if this means the overall lending exceeds 90%.

From today (24th February 2020) they will allow low equity premiums to be capitalised into the loan.

For example: Where there is new lending of $450,000 against a property value of $500,000 the lending is 90.00% of the property value (90% LVR) and would therefore attract a 0.75% low equity premium (LEP) so that equates to $3,375. Although the total LVR would be greater than 90% when the LEP is capitalised (90.68% LVR), the LEP remains unchanged at 0.75%.

These are all gone: CGT, LVR, FHB dep, OCR down, relax banks CAR, no Dep guarantee, all relief measures were directed for RE industry, NZ newest economy back bone.
As 'RE' played big part in NZ F.I.RE economy, got it? - PM has promised no one should sell the house just because loosing job/s & in highly leveraged position by banks 'prudent lending practices' as for this country shall bail you out, no matter what - when should you be in the position to sell it, merely due to covid19.
The AirBnB started to flood the market. It's clear RBNZ directives+govt? is to spend spend spend. Saving? NO! - NZers/Kiwis - Please, do understand if you want to save jobs in; tourism, hospitality ,hotel/motel ,restaurants ,airlines ,educations, seasonal workers, small business/retails etc. - your every $ contributions really matters to 're-start the economy'. You must channeled your effort to buy into more REs, OZ Banks in turn 'will loan more' for those business in needs, using the 'housing/land/property' assets as guarantee with a handsomely inflated valuation for your reward. So do your bit - Let's do this, spend anything you can recapitulate all your asset means, joint venture, shared capitals that can be turned into cash, then bring it to 'OZ banks' then apply for home loan. Your option to do it only in 12 months! before foreign buyers tap being opened again - warning! - you've been encouraged.

Reflexivity was a word and idea proposed by George Soros to describe feed back loops in finance and in particular assett prices. Another term for it is balance sheet inversion. Basically it means that the liabilities side of the balance sheet is unstable and high volatility events are likely to swamp the credibility of the assett side of the balance sheet. As everyone knows leverage is your friend on the way up. Your enemy on the way down. The question is then...Has the RBNZ stress testing, stricter lending limit requirements and strickter capital ratio requirements been enough to cushion the economy from the impact of a pandemic induced housing down turn? Was this a considered scenario? I seriously doubt it. Housing debt and associated assets are a massive part of the NZ economy. They underpin the whole building industry. And the building industry is a huge and highly inefficient part of the NZ economy. I doubt there is anything the RBNZ can do to prevent the fall. Lowering deposit ratios might stall the decline a little but unless they step in and start buying houses with printed money...

Did COVID-19 cause the music to stop?

Building a buy and hold property investment portfolio is being sold by many as a panacea for those looking to fund their retirement, and those who have insufficient savings for retirement.

1) That is fine in the beginning of the property price cycle when properties have sufficient yields to have positive cashflow and be positively geared.

2) Then this attracts a number of new property investors (and lenders who have financed them) who drive up property prices. It also attracts property traders who buy, renovate and resell for profit. It also attracts capital gain oriented investors. Some residential property investors become residential property developers by adding new dwellings to their properties with vacant land (typically a house on a large section).

3) The higher property price allows aggressive property investors to revalue their property portfolios and then borrow more money to maximum allowable LVR's (aka recycle equity / equity release) to use as a deposit on the next investment property purchase, typically financing with interest only loans.

4) repeat steps (2) & (3) above a number of times, until conditions in step (5) are apparent. Note that interest rate declines since 2006 / 2007 has allowed steps (2) & (3) to go on a lot longer.

5) Property prices continue to rise to the point where properties financed on maximum leverage and interest only loans become negatively geared and have negative cashflow.

6) Capital gain oriented investors with high income levels continue to purchase investment properties even though they are negative cash flow. Property traders continue to buy properties to renovate, and resell for profit.

7) Meanwhile as property prices rise rapidly, owner occupiers and first home buyers have a fear of missing out and feel compelled to buy or they will miss out.

8) Those cashflow oriented property investors unwilling to buy at negative cashflows then buy in areas with higher rental yields which allow properties to be positive cashflow - this has likely driven up property prices in former high yielding locations - for Auckland property investors, first the move was to Hamilton, then other areas further abroad - more recently it has been Hawkes Bay, Kawerau. Kawerau has been one of the locations with a low price point for property investors - since 2014 the average property price have risen 95% - now imagine the impact on that with leverage. For property investors with 62,000 of available capital to put down as a deposit, they can still buy in the Wairoa district (lowest price point) with current 65% LVR's.

9) In their search for returns, and as LVR'S on residential property become the same as commercial property, some residential property investors start venturing into commercial property investments. Increased investor demand for commercial property drives up prices, particularly for those at lower price points.

10) Then something unexpected causes the music to stop ...