ANZ report affirms forecast of 10% to 15% fall in house prices this year but warns there's a risk they could fall by more, says commercial property market likely to be even more badly affected

ANZ report affirms forecast of 10% to 15% fall in house prices this year but warns there's a risk they could fall by more, says commercial property market likely to be even more badly affected

ANZ is sticking with its forecast that house prices will fall 10% to 15% this year, but says there is a risk they could fall by more.

In its latest NZ Property Focus report, ANZ's economists confirmed their earlier forecast that house prices would likely fall by 10% to 15% this year, compared to an 8% to 10% fall in GDP.

"On balance, we see downside risk to our forecast," the report said.

"Usually the housing market actually responds more to downturns in GDP than we have assumed. This means there is a risk of an even greater fall. But with the current downturn so far outside of usual historical events, it is unclear what "normal" for the property market would be right here and now," ANZ said.

The report also warned that the Reserve Bank may have only a limited ability to prevent house prices falling.

"We don't think the RBNZ can prevent house prices falling double digit, but they may be able to support a faster recovery," the report said.

"Nonetheless, downside risks remain, particularly if financial market jitters were to lead to a tightening in funding markets and credit supply."

The report said ANZ does not provide regional price forecasts, but regions were considered more at risk if they were significantly exposed to tourism, had tended to attract new migrants and overseas students, had seen high rates of new building recently and had experienced rapid increases in house prices.

On that basis, the report said the regions most vulnerable to price falls were Queenstown-Lakes, Mackenzie, Kaikoura, Westland, Taupo and Thames-Coromandel.

The report said residential rents would also come under downward pressure.

"Rents will also be affected by lower demand and reduced ability to pay," it said.

"More supply coming on stream due to short term rentals sitting vacant will also see the supply-demand balance shift and put rents under downward pressure. This will become clear as new tenancies are entered into and in some cases where tenants negotiate down their rents to a level they can afford. Landlords in some regions may not have much negotiating power, given the increase in rentals available," the report said.

The report also warned that the commercial property market could face even tougher times than the residential market.

"Lower rents, falling prices and credit constraints are expected to affect the commercial property market too," it said.

"Indeed, impacts are likely to be greater they are than on the residential side. The commercial property market is very cyclical, which means it is very affected by cycles in GDP and incomes. This is because there is a link between business activity and demand for commercial buildings."

"Additionally, some participants in this market take on more risk. Riskier ventures may be more vulnerable to asset price falls, exacerbated by the fact that they are probably also more likely to come up against credit constraints," ANZ said.

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117 Comments

34
up

It really is amazing how the tone of these releases has changed in the last few weeks or so.

29
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It really is amazing how the tone of these releases has changed in the last few weeks or so

Not that just that. This is more about comms strategy rather than forecasting future prices and reporting directly and objectively to the general public (target customer). From what I'm seeing across different media, "10-15%" represents some kind of pain barrier. So even if modelling in the back room shows that 20% is possible with a reasonable probability, it's better to say "prices predicted to fall 10-15% but could fall by more."

Professionally, I'm schooled in some of these dark arts. Got out of it quite some time ago. It can be soul destroying.

10
up

Indeed. Unlike most actual science, economics is largely a self-fulfilling prophecy. If the banks tell people houses will drop 30% the probability of a 30% drop increases markedly. They will never print anything too dire regardless of what they really think.

Aside from that, there is no reason to believe any of their forecasts will be more accurate than random dice rolling. They pretend to know things they don't and can't know.

10
up

Yes, you're right. Also, your point about what the banks tell people is spot on and this is a demonstration of psychology. The 'trust' relationship is what it's all about. For ex, what a bank economist says will be perceived as far more reliable than say someone who's saying something different that creates a negative tension (don't know who that would be in NZ but Steve Keen springs to mind in Aussie). It's also like Granny Herald, which might run an article by Ashley Church stating that house prices double every 7-10 years supported by a graph that shows house prices doubling every 7-10 years. "Granny Herald. Media source since I was a kid". Trust box checked. "House prices double every 7-10 years. Graph showing just that". Confirmation box checked.

If house prices were to fall by 15%, that would be a small amount relative to the prices increases of, say, the last five years.

And when prices increase again, they can take off like a rocket - as everyone here knows.

TTP

When you say 'everyone' is that your confirmation and recency bias you're referring to?

How's the Zimbabwean tourism business going Tim? https://www.stuff.co.nz/manawatu-standard/news/118083563/our-people-tim-...

TTP,I'm sure that will be of comfort to those who bought last year and have lost their jobs...

14
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Not true. A general house price fall of 15% would halve the gains of the last five years, if we go by the REINZ CAGR of 7.4%. That's a 50% reduction, so not a small amount relative to the growth.

See TTP, maths can be fun! Now we all get a practical lesson in why a 15% drop is bigger than a 15% rise.

15
up

Keep dreaming, mate. I consider myself optimistic in forecasting 20% decrease this year and another 10% next year.
By end of 2021 average house prices will be a third less than now. But I would not be shocked if I saw a bigger decline.
The music has stopped.

20% one year and 10% is neither a 30% drop or a drop of a third.
On a $1m house a 20% drop is $800,000 and a further 10% is $720,00
A full third drop over 2 years would require 20% in first year ($800,000) and a drop of 17% for a resultant $667,000 :)

Are you seeking congratulations and esteem again?

. Post deleted. Point made by others already.

I'm sure thats very comforting to those who bought in the last few months (baited on by you and the other spruikers) who may see their equity disappear at the same time their employment prospects are increasingly uncertain.

As they lose their house and life savings, i'm sure they will be comforted by the fact that the property investors who got in early as still making money

"If house prices were to fall by 15%, that would be a small amount relative to the prices increases of, say, the last five years.And when prices increase again, they can take off like a rocket - as everyone here knows. - TTP"

TTP this is so irrelevant. If you bought in the last year, your equity just got wiped. You paid $1,000,000 for a home, that is at best going to be worth $850,000. That $150k you spent all that time saving has evaporated. If you purchased a new build with 10% down you're upside down, and if you want to sell and move (because you won't be able to cover the mortgage if you lease it out) you have to pay the bank! You may even see the value of your improvements gone too.

As many people on here said in he last couple of years, the market was hideously over-inflated, highly fragile, and prices were unsustainable, meaning a correction of some sort was overdue. The spruiking that went on in some quarters, and I include you, was unconscionable and clearly driven by personal motives. Now the chickens are home to roost. Harping that, "well it went up before, so it doesn't matter" is cold comfort to most buyers of the last two to three years who were victims of the most endemic ponzi this country has ever seen.

And you have no idea when prices will go up again. They could decline for the next five years or more. When the US crashed in 2007 prices didn't even *bottom* until 2012. And NZ and Aus home prices were more inflated than the US, with a correction much longer overdue.

27
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In a correction released from ANZ,having been in consultation with TM2,they now say this won't affect the CHC market,which is recession & pandemic proof.

As per above comments
Banks are now playing a game 15percent drops are better than 30-50percent so they are trying to program us to accept 15-20 as that will be best for them due to safety buffers and then they burn money.
Next they will be saying 20 percent.
CBA in OZ are saying 32percent so I am thinking they are saying the opposite to try and put a postive if only 25percent.
Be careful now when buying and dont let agents trick you with FOMO

32
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Hope there is a reset downwards, they are too expensive through out most regions in NZ, the exception would be the West coast of the SI.
I am a proprty owner but feel sorry the first home buyers.
Lots of things require a re adjustment, living costs in our great country are far too high.

18
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"We don't think the RBNZ can prevent house prices falling double digit, but they may be able to support a faster recovery,"
And how pray tell, is the RBNZ going to do that?
It's commercial banks that make the lending decisions and ask any of them, ANZ included, if they want to increase the size of their asset books ( lending) with interest rates down here that can pretty much only go one way at some stage.
Asking them to lend when it's inviting default at some stage in the future is not going to be high on their list of things to do.

The usual way, one would assume - low interest rates, low/no LVRs, continuing to encourage misallocation of lending through RWA calculation etc. They could always buy collateralised mortgages at inflated prices from the banks if it got too bad - then the banks would be free to lend up a storm again.

18
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Ah. I see. All the same sort of stuff that hasn't worked anywhere else until the basic price of the market has reset much lower.
Seriously. Anyone who can't see how bad this lot is going to be; far worse than it needed to be had we got it sorted years back, is choosing not to look.

49
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If house prices in a lot of towns with nothing to offer can go up 100% in 6 years then I am sure that they can go back down 50% after a global pandemic triggered depression.

Which towns have nothing to offer?

18
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Just about any rural NZ town.

17
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I'll take the pleasure of introducing you to a great resource to determine that...'Shit Towns of New Zealand'.

https://www.facebook.com/shittownsofnewzealand/

Please enjoy.

priceless :-)

Haha, very good. Thanks for sharing

IO, you're a legend for sharing that! My favourite shit town write up is;
"hereth be a number two of a town, by name of Stratford. This tryhard town doth reek of desperation – it hath adopt’d a handful of cringely gimmicks in a futile attempt to banish its reputation as a typical Taranaki privy-bucket bustling with pipesmiths, methmongers and childing teens. The town’s main street be called Broadway, but Stratford be not Newmarket, let alone New York. Christened for William Shakespeare’s home, Stratford hath named 67 streets after Shakespearean characters, whilst its senseless Germanic glockenspiel playeth a scene from Romeo and Juliet thrice daily, despite the fact the most talent’d wordsmith to emerge from this Stratford be the scholar who did paint “cummy bum” on the Victoria Park hamster wheel. Stratford-upon-Patea be proof thou canst not polish a turdington".

100 percent agree also Whanganui/Palmerston North/Northland/Southland/Dunedin/Nelson/Hawkes Bay Gisborne and pretty much the whole country will get hit very hard.

10-15% isn't too bad, the key will be keeping the juice flowing to keep an equity buffer.

14
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10-15% isn't too bad... if its even close to right. Probably 10 - 15% light at a minimum, avoiding outright panic is high on the PR machines goals right now.

It’s disappointing that the ANZ comes out with such sweeping statements when it should know that the residential market is not just one lump. While it’s true that some areas, towns, or districts may slump in value, others may well stay steady or even rise. The demand for houses, versus, apartments, versus life style, versus rentals etc, varies greatly from time to time and from suburb to suburb. Houses in small centres may suffer, while apartments in central cities may become hot. Who knows? Likewise commercial values may drop heavily if oriented to retail, but may rise if in heavy industry not to mention areas, towns, and villages. Or the opposite may be true. In any event the ANZ has shot itself in the foot as it’s one if the largest residential lenders and if it’s predictions are true, it will go broke itself as it’s lending and loan book will be upside down.

10
up

I think in a few months time when the offical figures and hard data come in the headlines from media will cause drops across the board. Even in an area that would normally hold up better, people will hold off buying when headlines say prices are infact offically falling.

Yeah but you can't make a catchy press statement with all that detail. People won't read it. They want a quick, snappy headlines, simple and easy to digest.

I guess they are using some sort of average, so you know, a factory that closes in a small town goes down in value by 60%, but a beautiful home on a large section in the double Grammar zone of Auckland stays the same or even goes up.

And ANZ will never ever ever go broke. They won't be allowed to. The government will do whatever it takes to prop them up. AirNZ is much smaller, but it's totally f**ked and will it go out of existence? Will it heck.

Are you talking about parent ANZ (based in Australia)?

And yes you must be right because houses in the grammar zone could never fall in value...ever.

15
up

Hopefully none of those beautiful homes on large sections in the double grammar zone aren't owned by redundant pilots...

14
up

Or Fletchers project managers.

Double Grammar changed the way it was when the Govt made compulsory enrolment for anyone living in the zone. Before that it was a selective school. The best and brightest from all over AKL were offered out of zone places. The Chinese then bought up large in the zone priced everyone out and changed the demographic just have a look at the kids wearing the uniform these days. Sad indication of the times

Back in the days when the likes of National and ACT were against school zones for reasons of personal freedom.

Before they abandoned such principles in favour of being the party of property investors and the Epsom Homeowners Association (formerly ACT)™.

Perhaps they're just giving forewarning - that if the worst happens, yes they will go broke.

10
up

Yeah I'm not surprised that they're predicting a significant price drop in areas that are dependent on tourism such as Queenstown-Lakes, Taupo and Thames-Coromandel.

You could probably add other areas like the Far North and Tauranga in to that mix as well due to both lack of tourism and having had their property prices massively pumped up by Auckland Mom and Pop property investors during 2016 to 2018, when JK kicked them out of Auckland by introducing high LVR restrictions but he didn't impose that on overseas investors (money launders) did he, so they could continue to asset strip.

Indeed! and it my mind that the LVR's have now, of all times, been eliminated. The hypocrisy of it all.

Just goes to show how bad the RBNZ think this is going to be. Its now so bad that there is no point having any insurance as its simply going to be a write off.

Sell, sell, sell, buy, buy, buy! Nothing has changed except the housing market cycle.

Got the cash, buy as many as you can before Rob and RoB_NZ prints NZD into Bolívar.

"The report said ANZ does not provide regional price forecasts, but regions were considered more at risk if they were significantly exposed to tourism, had tended to attract new migrants and overseas students, had seen high rates of new building recently and had experienced rapid increases in house prices" -

Auckland ticks all those boxes and more.....

Exactly what I thought! Out of the near 2500 people who lost their jobs in Fletcher and AirNZ how many of them are mid- senior level managers living in Auckland. I know at least 2!

26
up

I've got to give it to the interest community. You called this at the beginning of level 4 lockdown. Everyone else was in denial.
Now everyone has caught up (with the exception of real estate agents).
We were pre-approved during lockdown (FHB) and thanks to this community we decided to pause and wait. Really glad we didn't rush into anything.
Thanks interest!

11
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I have to agree, this is a good place to get insights that you won't find anywhere else. The media is impossible to decipher half the time; the headlines don't match the data and that's the way they like it. It's been looking extremely dodgy for a long time but this is the only place where people were prepared to say the Emperor has no clothes.

11
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Interest.co comments is the best financial education resource in NZ

10
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It’s true. I don’t know of anywhere else where diverging but thoughtful viewpoints get aired as succinctly without (usually) descending into personal attacks or political cliches. I’m of the DGM tendency myself, and I’m glad to find here both people who agree with me (make me feel less mad) and cogent arguments why I might be wrong, to temper my viewpoint. Good moderation too.

I think it just requires a bit of independent thought. We knew there were going to be job losses on a significant scale. We knew property was over valued.

Add those two things together and you have a clear direction for house prices...

We were also pre-approved, but pulled out of a land purchase in a subdivision in Feb - I could see the virus wasn't going to be contained and I damn well knew the effect that would have on NZs second biggest industry. Just think about what is happening now and extrapolate, generally you won't be too far off.

Sure enough that subdivision we were going to buy in has had 2 private sellers trying to offload land they bought this week on Trade Me for the price they bought it. We pulled out over concern that building might be very risky in 6 months to a years time (or two) as the construction industry goes through a major reorganisation, which is exactly what's starting to happen. I expect a lot of house builders and construction related companies will go bust over the next year or two, not a good time to be building a house.

Yes you should see the number of brand new homes for sale in Millwater and Milldale. Prices are already being discounted, and there are more in Red Beach and Whangaparaoa. Shame I hate them because I reckon you could pick up a steal in about a year's time when the builders can no longer hold and need to liquidate assets (or the company).

Meanwhile the property promoters frequently remind the general public:

1) there is a underlying housing shortage in Auckland
2) property prices double every 10 years

Something to think about:
If there is an underlying housing shortage in Auckland, why are prices being discounted by sellers?

There is a big difference between:
1) underlying housing supply vs underlying housing demand (the commonly quoted underlying housing shortage which does not consider market prices)
2) effective housing supply vs effective housing demand (which impacts market prices)

Yep, look at this from Bindi YESTERDAY! https://www.oneroof.co.nz/news/37932

- "North Shore house prices hit record highs pre-Covid-19 - can they do so again?" (Yes, Bindi, if you wait long enough!)
- "The lockdown hasn’t appeared to impact prices"
- "people’s confidence is starting to return"
- "we’re hearing examples of ...multiple offers"
- "an absolute opportune moment for those who have finance approved to purchase"
- "with increasing numbers of expats looking to return from overseas, good levels of buyer and seller confidence and stock levels still remaining relatively low, those who are hoping for a "bargain" may be disappointed."
- "don’t wait as you may be disappointed as someone else makes a good offer for the property."

It's as if she thinks we've done Covid and now it's business as usual. She reminds me of Trump flogging hydroxychloroquine. Wonder if she's taking her own medicine and buying right now?

"We are also seeing a lot of investors active in the market. Some with bigger portfolios, particularly baby boomers with several rentals, are seeking to sell some or all of their portfolio and then younger investors are taking advantage of those opportunities."

Remember 40% of household debt is owed by 8% of households ...

"with increasing numbers of expats looking to return from overseas"

What Bindi isn't telling potential buyers, or she is totally ignorant and unaware, most Kiwi expats returning from overseas aren't going to be buyers, many are going to live with mum and dad, or renting. Many returnees have gone onto government welfare and so will not be in a position to buy.

4,718 returning Kiwis went on Jobsaver in April. - https://www.interest.co.nz/news/105047/more-young-white-middle-class-peo...

Exactly.
If you're an expat with a good job and income overseas why would you return home in the most uncertain economic environment in our lifetimes?

It's pure fantasy to think tens-of-thousands of cashed-up Kiwis are going to choose to come home now.

As you say, those coming home now are ones that have hit the financial skids or have cut short their OEs... with nothing but pennies left in savings.

"If you're an expat with a good job and income overseas why would you return home in the most uncertain economic environment in our lifetimes?"

There is a commenter on interest.co.nz named Mike1. He and his family recently returned to NZ from the US, to, as he put it, "avoid dying". He did say he isn't buying but renting in Queenstown. He owns his own business which he can manage from NZ.

There are some of others who have businesses which can be managed from another location, however many businesses may be unable to be managed from abroad.

Many others who are employees may be unable to return to NZ and do their job in NZ. For example, I have a friend who works for their local city airport in the US, others are nurses in a US hospital in Texas (and their kids are currently at university there). Those expat Kiwis aren't likely to be returning anytime soon.

There is an enthusiastic real estate group we are working with here who are finding us a string of very nice places for way under "market" value. It might help to mention that people returning with money (all five of us) may not have the same attitude to real estate as is normal here. I sold my house before I left the US so I have no anti ownership bias at all but the idea that asset prices can go down is very normal to me.

There is absolutely no chance I would buy any property in NZ. I have the cash to buy without a mortgage I just would not do it. When prices re-adjust I would be an enthusiastic buyer.

Don't forget to give David, and the Interest team, a little bit of the money you haven't lost for providing the platform - please, thank you.

I like the picture for this article. Looks like the typical Glenfield rental.

IO...it could be a beautiful home on a large section in the double Grammar zone of Auckland when you can no longer afford to maintain it...

Auctioned off at $1.4 million. Congratulations to the lucky buyers!

A DIYers dream! The perfect buying opportunity for a savvy investor or FHB willing to roll up their sleeves!

"One for the astute investor"

16
up

So just confirming,as there appears to be conflicting views on this site.
Should I sell my portfolio of 2 rotbox rentals on half sites in Clendon,both with good off street parking on the berm...or should I sit tight and enjoy the ongoing capital gain.
I am also torn,because I only really got into rentals accidentally when looking for a way to help homeless people.
They seem so grateful when I go around and collect the $700 p/w.

10
up

That’s a real community service you’re providing there vman. Hopefully you can leverage your investment to buy four more slum lets to rent to some poor homeless family for the paltry sum of $700 a week. If they have to invite extended family to live with them to afford the rent that’s even MORE homeless people you are saving - so in a way you are doing even more charitable works.

What can I say,i am doing Gods work

Funny you should mention that,a Clendon local who owns the local dairy,also has a degree in property valuation,he can provide a veeery healthy valuation and has a 'contact' in the bank who can speed my application up.
I am hoping to eventually be called the 'King of Klendon' as I clean up some more bargains during the very short lived down turn,fear is my friend.

TTP...taking the piss. Classic.

If you double the banks prediction of 10-15% fall you would be close to the actual fall rate

Spruikers all

Since when did the reserve bank have a mandate to explicitly "stop house prices falling"?

Their mandate is CPI inflation.

Although I have a bad feeling that they are going to look the other way and whistle when the inflation comes, crooked as they are.

Yes will be interest eh - if we start consistently hitting prices above the inflation target band the pressure will be on to raise rates.

Here is what the unelected crooks will say:

"Due to the unprecidented nature of this crisis we will look through the current inflationary pressure"

Be very very afraid.

Yes but if you look at the issues of high inflation then if it starts getting too high, their hands will be forced to take action.

Ambulance at the bottom of the cliff. Your savings are already buggered.

Yeah well I'd be recommending some gold as protection.

Their mandate is to ensure long term financial stability. Guess what that means? Propping up house prices because the banks are reaaaally exposed to drops.

I agree, if we do get some serious inflation, they will ignore it and claim it's "pent up" from years of low inflation.

If one were a logical thinker, one might ask if financial stability might mean not blowing a monster credit bubble in the first place.

You get called a doom gloom merchant with a bad attitude if you can see the social/economic ramifications of a property ponzi before it falls apart.

https://www.oneroof.co.nz/news/37932

Braindead Bindi says that everything is awesome.

Not sure how that woman sleeps at night...

10
up

What if we go back to GFC prices ? For my farm that would be a drop fromm 3 mil to 1.6 mil. If they go back to yr 2000 prices it would fall to 600k, which is what I paid for it. My income has hardly changed in the last 20 years ,prices are not based on fundamentals but speculation. It's a long way down from here.

As I've said quite a few times on here Andrew, it wouldn't surprise me to see 50% falls in prices. Standby for the usual bulls who will tell me that 'you can't say that' or 'we'll hold you to that'....

The government can't pay peoples wages forever and if we see inflation then interest rates could go back up. Who says we can't have 6-10% interest rates in a few years time? And you're one of those many buyers who now has a $450,000 loan for the typical kiwi home?

The last 30 years has been fantastic for asset price appreciation (falling rates since the 1980's) but it might now be the end of that cycle.

Interest rate cuts have been capitalized into asset prices in the last twenty years. The interest rates are still rock bottom.

Yes - I look at houses like bonds. Interest rate falls, house/bond price rises. Interest rate rises, house/bond price falls. 1990 - present, interest rates falling all the way to zero. Now what...

It could be an absolute disaster for the retiring boomer cohort. Unless of course they have savings instead of assets, but many don't because interest rates are low so they've purchased a rental...But rates won't be low forever. How good would 6-10% returns on TD's be for boomers if they had savings!

Now what is money printer goes brrrrrrrrrrrrrrrrrrr.

Despite what many people like to believe. House price don't have to go up over the long run. Take a look at Japan. From 1991 Japanese house prices entered a bear market that lasted 18 years, not months, YEARS. At the end of it price averaged 60% below their peak. While I'm not predicting anything like there in NZ, the correction we are now entering could easily go on for 3-5 years.

I've been looking at farms around your price point and you are right they are wildly inflated once you look at the income.

11
up

I have been saying all along that house prices will decrease by 20% this year, and another 10% next year.
It seems that bankers are coming to the same conclusions, at least with regards to this year. The only ones who still refuse to acknowledge reality is real estate agents, housing speculators and a few self-serving commentators with vested interest in real estate.

The music has finally stopped, folks. Time to focus on the real economy, as the delusional fool's paradise of ever-growing house prices has revealed itself for what it has been all along: a gigantic Ponzi scheme.

In the longer term, more reasonable house prices and a more balanced economy, more focused on real productive investment and production rather than on parasitic house speculation that adds nothing to the real wealth of a nation, will be a very welcome result.

Still picking a 20% fall myself but its going to take a few months for this to play out. Several big countries are now officially in a recession, which considering it takes 3 quarters in a row to be officially in a recession just proves they were already in the shite before Covid even arrived and it was just the final straw. Once the official unemployment figures start coming out and the writing is on the wall, even all those still in denial will change their tune. The numbers coming out of the USA are staggering. Rather than focus on little old NZ, the USA is the place to watch.

JUST SOLD MY HOUSE 30 MIN AGO !!!

new phone, who dis?

Maybe I do listen to some of the commenters, LOL

We've only been joking - did you take me/us seriously?

Haha, good one, I planned to sell in March but you know what happened…

"Don't tell me what you think, tell me what you have in your portfolio." Nassim Taleb

You were a closet doomie gloomie all along :)

Well I have several more in my portfolio but not considering selling them

Oh go on Yvil, admit it... you are starting to hedge your bets.

In it for the long term. How do you spell secuvestor?

10
up

Ahhh, so you were a spruiker who was trying to ensure there weren't drops before you got out? Well played Yvil!

Will we see a tone change from the spruiking? :-)

I think you give me too much credit if you think I can influence the RE market with a few posts.

I still think the future direction of house prices is a tug-o-war between collapsing businesses & job losses vs more & cheaper credit. On balance, as I said before, I think there is more downside risk but I still don't believe in house prices collapsing

13
up

Sounds like DGM talk to me! Welcome to the Dark Side

Credit will contract. No one in NZ has gone through an actual recession for many decades so the basics are not known here.

23
up

Hi guys. I often read with interest your comments, certainly very anti (typical) agents. I have been an agent for some 15 years (with my wife) and yes, we have done well, always try and treat people fairly and offer honest advice. I have seen and worked through the GFC, saw the agents change tack to auction after endless auction. Crazy prices and risk taking. A quick search on TradeMe yields many laughable prices. Even during the lockdown, phones still rang and sales still made - the sad thing is many buyers just want a home, and don’t understand the values are often massively inflated. I agree we will see a correction, and hope that people are offered genuine advice, rather than the constant stream of ‘great investment, land bank, develop, subdivide, growth’.... how about consolidate, live within your means, have a decent building inspection.

The correction is overdue, and many deserve to be burnt - including agents. Hopefully it will clean up the system.

Yep, the RBNZ data that came out today showing household expectations of 0.5% price drops drives home the extent to which the man in the street believes "houses always go up" is as ironclad as the law of gravity. Pandemic? Global economic shutdown? She'll be right. 30 years of cultural brainwashing doesn't just disappear overnight. I expect there will be a bit of momentum from this for a while, a bit like the old Road Runner cartoons where Wile E Coyote hangs in the air for a minute after he runs off the cliff.

but not in Turangi as it has such strong underlying fundamentals

Haha that is correct

We know and am sure everyone knows except RE Agents.

We also know that RBNZ will not be able to manipulate/control this time otherwise why will governor come out requesting and bullying banks.

I think the professional agents know - maybe not the ones indoctrinated in training on how to push buyers over the line at all cost. Maybe not the ones that suggest buyers go UC on a purchase without selling pre lockdown, don’t worry it’s a long settlement....

The ones that saw and worked through the GFC should know.

There are so many, many examples, not just agents, vendors also that ‘automatically expect’ a 500k gain on something purchased in 2015 (1.3 - 1.8) with no capital improvements....(some agent will list it, then talk about replacement cost to an unwitting buyer on today’s market about how fantastic it is).

A correction is due for these people, but unfortunately everyone gets hurt, sometimes.

Everyone know we are due a correction. Agents are saying it isn't so to get listings, because no listings equals no squashed advo. The top end is always the biggest mover up, and down, as it has the greatest discretionary component. End of the day a house is a house is a house. Why pay 10x what the average house? - because you have the dollars or the income to finance it. In much tougher times you usually dont, but some will.

its the best time to trade up.... for those who have prudently paid off mortgage over last 10 years

They are the few. For starters 21% of people have been on interest only mortgage payments living as though house prices will always double every 10 years. Its going to get pretty ugly for them.

Why give any numbers at all to end up saying the fall might be longer? It is fair to say there's uncertainty, no need to justify your salaries by making things up.

Here’s a glimpse at a dystopian future. In Munich Germany, which has one of the most expensive housing markets in the world, people actually pay agents to find houses for them! The Russian girl upstairs had to pay the agent a significant sum / finders fee for securing her a house to buy. Sure you can get 30 year mortgages fixed at 0.8% for 15 years from the likes of Commerzbank, but it's almost impossible to find any decent real estate. What does come to the market is overpriced rubbish. Owners just don’t seem to want to sell. Also buying costs are significantly higher. House prices are predicted to fall here too, but in the back of my mind I wonder whether it could go the other way, or whether Auckland could go the way of Munich. The line between cash-is-king and cash-is-trash seems to be pretty fine.

How will this affect new builds. And priced off the plan?

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