Auction numbers may still be low but there are plenty of bidders out there and properties are selling although results are mixed

Auction numbers may still be low but there are plenty of bidders out there and properties are selling although results are mixed

Residential auction activity continues to slowly rise as COVID-19 restrictions are eased, especially in Auckland where auction activity is traditionally strongest.

Auckland's largest real estate agency Barfoot & Thompson auctioned 30 properties in the last last week, compared with 201 in the week from March 16-22, immediately before the lockdown commenced.

However while the number of properties offered at the latest auctions was just a fraction of the number offered pre-lockdown, the sales rates were remarkably similar.

At Barfoot's latest auctions the overall sales rate was 53%, compared to 48% in the week from March 16-22.

Although buyers are out and about again and bidding was very competitive on many of the properties offered, results varied widely and it is hard to pick winners.

For example a modern, four bedroom/three bathroom, brick and tile house in Epsom with a Rating Valuation of $2.275 million had received a pre-auction offer of $2.135 million which had been accepted by the vendor, subject to receiving a higher offer at auction.

But there was extremely competitive bidding over and above the pre-auction offer price and it ended up selling under the hammer for $2.51 million.

At the other end of the scale, a fully renovated, 1950s-era, three bedroom, weatherboard bungalow on a 620 square metre section in Onehunga, which in more settled times might have attracted significant interest, was passed in without receiving a single bid.

Meanwhile, Auckland apartment specialists Ray White City Apartments also had an auction this week, with five properties on offer, all of which attracted multiple bids. Three sold under the hammer, a result which also would not have been unusual pre-lockdown, although the prices achieved on the units that sold appeared soft.

A two bedroom apartment with a car park in the Imperial building on Hobson St sold for $490,000 compared to its Rating Valuation of $600,000, while another two bedroom apartment in the popular Citta building on the corner of Symonds St and Khyber Pass road fetched $390,000 compared to its Rating Valuation of $430,000.

So things are still a bit all over the show and although auction numbers are increasing every week, realistically it will probably be several more weeks before they will be occurring in sufficient numbers to give a reliable indication of where the market is sitting.

Details of the individual properties offered at auction and the prices achieved on those that sold are available on our Residential Auction Results page.

Barfoot & Thompson Auction Results
16-22 May 2020 
  Sold Sold Post Passed in Total % Sold
19 May 7   2 9 78%
20 May 3 1 4 8 50%
21 May 5   8 13 38%
Total 15 1 14 30 53%
Ray White City Apartments Auction Results 
21 May 2020
  Sold Sold Post Passed in Total % Sold
21 May 3  - 2 5 60%

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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272 Comments

30
up

Too early wait 3 months as we still have people buying that have no clue what is coming but it is good for sellers to bail out now before market shows true colours.

10
up

I would love to see property prices drop, but I just cannot see that happening. A small decline, maybe? But certainly not anything like some folk are predicting.
That said, I agree with you, the real telling will be in August/September after sellers are able to move tenants on and put their properties on the market.

11
up

Define "small". Is 20% classified as small? May be 30%.. Saying small is pretty trivial.

Twenty is huge... I’m pegging 5-8% drop across NZ. Some places more of a drop and some places going up. Property is ingrained in Kiwi psyche and does not have much connection to the reality of the world, nor even NZ economy.
Before y’ll start yelling at me... I personally would love to see prices retreating 15%-20%... I think that’s what the economy can handle... any more and I think we’ll be in pretty deep ‘ship’....

Agree with you. I would also like to see property drop 20 to 30% so i can get back into investment properties. Current prices are still too high for covering interest costs (in Auckland). There is still a lot of demand and dont know when that will change. I will be circling around waiting for prices to drop haha.

You and thousands of other hopefuls which is exactly the reason that prices will not fall much.

Where's the evidence supporting your argument of high demand? I could argue the opposite for what I've experienced, especially given the amount of new homes currently under construction or just recently finished.

You're too low. I've said 10-15%. But have recently thought it might be more, based on the scary direction the economy is headed.
Of course all efforts are and will be made to prevent total carnage.
How successful they are is another question.

17
up

We are still on the Govt's ventilator (wage subsidy), not much will happen until the intubation is removed. Can the patient breath on it's own? I think it is too early to tell.

15
up

I think we will keep seeing steady job losses even with the wage subsidy in place. It hasn't stopped Fletchers and Air NZ. Sounds like Auckland Council are sharpening the knives

Why is it huge when we saw a 13% increase in the 12 months prior to COVID for *no reason* whatsoever?

And now we have, you know, a pandemic and the most uncertain economic environment in our lifetimes.

Huge in terms of how unlikely it is to drop more than 5%... property is NZ religion.
One of my employees and her partner, combined salary of 130k , just went unconditional on a property of 850k. She is just one of dozens of young ones working in the broader team who are still actively looking and who will sell their soul to own a home, at any cost! That thinking will not just go away because of a ‘mere’ pandemic... not even the four horsemen of the apocalypse could shift the obsession to be on the property ladder in Aotearoa.

Banks extend credit. People in NZ have cause and effect backwards because the bank credit has been free flowing for so long that consumers think they are the ones deciding things. The minute banks start taking losses credit expansion will scream to a halt.

Houses are worth only what the banks will lend. NZers have no savings.

"a 'mere' pandemic".

Oh my LOLs.

Well clearly it’s not. ‘Merely’ .. it was a commentary on how Kiwis view property... Not even a catastrophic pandemic will deter the need to procure property. The clue was in the four horsemen....

Yeah well last time I checked a virus doesn’t give two hoots about religion...I feel this will be the external shock that will scar the younger generation in particular, much like the 87 sharemarket crash scarred the boomers.

How is this about religion? Good grief! Please don’t make me explain pop culture to you.
Anyhoo, look how well it turned out for the boomers in the end. Boomers are singularly the wealthiest and most selfish people in history.

It’s not. You metaphorically compared property ownership to religion (implying that somehow someone’s devine belief/ devotion to something can prevent a negative event happening to them) and I said a virus does not discriminate, hence doesn’t give two hoots about religion.

Nope, I did not. I stated that property is the religion of New Zealand and that nothing would change the obsession of Kiwis selling their souls to get it. I never implied that zealous belief would miraculously keep prices high, only that people’s investment at all costs will keep property prices high.

Well we are going to have to agree to disagree, however, you are over dramatizing our obsession with property ownership and your anecdotal evidence (n =1) just doesn’t cut it I’m afraid.

I’m ok with that. But I somehow riled you and am not quite sure why? Though suspect, because you read my comment out of context, commented and are now too embarrassed to walk it back. It is a fact, property is the obsession of a large percentage of Kiwis... the comments section on this good publication show it to be so. The fact you are on a property forum claiming it’s not, shows that it really is.

Not riled at all my friend, I'm just highlighting that your statement is overly simplistic. Yes, Kiwis love property but this innate addiction will not keep prices high (as quoted by you in your most recent post "investment at all costs") when countered by severe negative economic forces.

Comment Deleted

".... nothing would change the obsession of Kiwis selling their souls to get it. I never implied that zealous belief would miraculously keep prices high, only that people’s investment at all costs will keep property prices high."

That's what happens when prices have been rising for a while, and people believe that prices will continue to keep rising. That is FOMO in action. That could have been the same in any asset where there was an excessive amount of FOMO. Then something unexpected happens, causing people to lose confidence that prices will keep rising (and FOMO disappears).

Some real estate markets to note (note how prices prior to these periods showed a seemingly consistent upward direction. Then something unexpected happened):

1) residential real estate in Ireland circa 2005/2006 - then house prices fell over 50% (and still haven't recovered to their previous peak over 14 years ago) - https://tradingeconomics.com/ireland/housing-index
2) residential real estate in United States circa 2005/2006 - then house prices fell 27% - https://fred.stlouisfed.org/series/CSUSHPINSA
i) residential real estate in Las Vegas circa 2005/2006 - then house prices fell over 60% (and still haven't recovered to their previous peak 14 years ago) - https://fred.stlouisfed.org/series/LVXRNSA
3) residential real estate in Spain circa 2005/2006 - then house prices fell 26% or thereabouts (and still haven't recovered to their previous peak 14 years ago) - https://tradingeconomics.com/spain/housing-index
4) residential real estate in Hong Kong circa 1997 - then house prices fell 55-60% - https://tradingeconomics.com/hong-kong/housing-index
5) residential real estate in Singapore circa 1997 - then house prices fell 40% - https://tradingeconomics.com/singapore/housing-index
6) residential real estate in Japan circa 1991 - then house prices fell by over 45% (and still have recovered to their previous peak almost 30 years later. They are still at least 30% below their peak almost 30 years ago) - https://fred.stlouisfed.org/series/QJPN628BIS

Certainly would be very interesting to hear what people think, in those markets where property prices are still below their previous peak. Particularly 2 categories:
1) buyers of residential at or near peak prices
2) next generation of house buyers who have no experience of a large price fall in house prices

".... nothing would change the obsession of Kiwis selling their souls to get it. I never implied that zealous belief would miraculously keep prices high, only that people’s investment at all costs will keep property prices high."

Also will be interesting to watch what happens to recent property purchasers in Queenstown.

General H
I was rooting for you there all the way, up-ticking all your comments but you lost me in the last sentence! :(
Cheers :)

Thanks P8 :) am not really anti boomer... it was perhaps too facetious... I need to rethink how I write things sometimes. I appreciate the feedback. Have a fab week.

Another dreamer. 30% drop minimum.

I’ve heard all these predictions before... there is no connection between property prices and reality.
Like the Stock Market in the US, over twenty percent of their work force are unemployed and they are already talking up a bull market... and that’s not bull...
As I have said, I have a vested interest in property prices dropping 30%, but it just ain’t going to happen.

It’s called irrational exuberance. As they say, “History doesn’t repeat but it often rhymes”.

"Is 20% classified as small? May be 30%."

Remember most buyers of houses need to use debt to finance their purchase. For an 80% LVR owner occupier, a 20% fall in the house price would mean a 100% loss in their equity. Is a 100% loss in equity classified as small?

Here is 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 $1,000,000 property purchase, $200,000 initial deposit, mortgage $800,000. (simple round numbers used for illustration purposes)

A) Scenario - property price rise:
1) property price rises 5% to $1,050,000, mortgage $800,000, equity $250,000, so 25% gain in equity value from $200,000.
2) property price rises 10% to $1,100,000, mortgage $800,000, equity $300,000, so 50% gain in equity value from $200,000.
3) property price rises 15% to $1,150,000, mortgage $800,000, equity $350,000, so 75% gain in equity value from $200,000.
4) property price rises 20% to $1,200,000, mortgage $800,000, equity $400,000, so 100% gain in equity value from $200,000.
5) property price rises 25% to $1,250,000, mortgage $800,000, equity $450,000, so 125% gain in equity value from $200,000.
6) property price rises 30% to $1,300,000, mortgage $800,000, equity $500,000, so 150% gain in equity value from $200,000.
7) property price rises 35% to $1,350,000, mortgage $800,000, equity $550,000, so 175% gain in equity value from $200,000.
8) property price rises 40% to $1,400,000, mortgage $800,000, equity $600,000, so 200% gain in equity value from $200,000.
9) property price rises 50% to $1,500,000, mortgage $800,000, equity $700,000, so 250% gain in equity value from $200,000.
10) property price rises 100% to $2,000,000, mortgage $800,000, equity $1,200,000, so 500% gain in equity value from $200,000. (i.e if they believe that the property price doubles every 10 years)

B) Scenario - property price falls:
1) property price falls 5% to $950,000, mortgage $800,000, equity $150,000, so 25% loss in equity value from $200,000.
2) property price falls 10% to $900,000, mortgage $800,000, equity $100,000, so 50% loss in equity value from $200,000.
3) property price falls 15% to $850,000, mortgage $800,000, equity $50,000, so 75% loss in equity value from $200,000.
4) property price falls 20% to $800,000, mortgage $800,000, equity is ZERO, so 100% loss in equity value from $200,000.
5) property price falls 25% to $750,000, mortgage $800,000, equity is NEGATIVE $50,000, so 125% loss in equity value from $200,000.
6) property price falls 30% to $700,000, mortgage $800,000, equity is NEGATIVE $100,000, so 150% loss in equity value from $200,000.
7) property price falls 35% to $650,000, mortgage $800,000, equity is NEGATIVE $150,000, so 175% loss in equity value from $200,000.
8) property price falls 40% to $600,000, mortgage $800,000, equity is NEGATIVE $200,000, so 200% loss in equity value from $200,000.
9) property price falls 45% to $550,000, mortgage $800,000, equity is NEGATIVE $250,000, so 225% loss in equity value from $200,000.
10) property price falls 50% to $500,000, mortgage $800,000, equity is NEGATIVE $300,000, so 250% loss in equity value from $200,000.

At best/worst, scenario B1 is the most likely.

You're dreaming.

Absolutely dreaming.

Scenario A1 then... lol

People kept having dinner and the band played on during the early stages of the Titanic sinking. Just saying...

" . . . realistically it will probably be several more weeks before they will be occurring in sufficient numbers to give a reliable indication of where the market is sitting."
Enough said. Anything else is either just guessing and/or wishful thinking.

“Plenty of bidders out there” according to Greg’s auction report today........

That frequent descriptor “resilient” remains relevant.

Indeed, those who follow the NZ property market have become well acquainted with the word “resilient“.

Happy weekend everyone!

TTP

It’s easy being “resilient “ in boom times...bust, not so much..

Quality properties are always “resilient “

so the tired old average ex-state house in suburban Auckland.. are not going to be so resilient?

After the past months "resilient" is a word we should have learned that should not be applied to our economies, just a hick up and see where we ended up.Obviously this was something that was cooking for years, but again "resilient", really?

Pent up demand post lockdown. The Industry had to catch up on at least 6 weeks of very little action. When this wears off and the economic reality kicks in, we will be in a much different environment.

Spoke to a realestate agent yesterday. Prices are still going up in Upper Hutt, with multiple offers going on properties. “There is no indication of downward pressure,” she said “... and there is no reason to expect any!”

Hi GH an agent contacted me this week to say that the buyer who wants to buy our land is still keen (probably keener than ever) He also told me that a property he is selling had multiple offers presented. He shouldn't have told me this as it effectively shoots himself in the foot

Hi HW. The RA is probably aiming for a huuuge commission.... nice work if you can get it.

I should help him get an even bigger commission by playing my cards. Whaddya think

Indeed you should!

10
up

No reason to expect any? Hahaha well rea’s are known for their honesty.....yeah right

LOL. It would be great for a Tui ad.

Yeah I spoke to 2 in the last week on separate occasions from the same company and they both had differing views so it is going to be a wait n see game but I believe patience will pay off

11
up

REAs.

Known for their in-depth understanding of macro-economics.

11
up

I tuned out after “ spoke to real estate agent”

So you missed the punch line of the joke at the end of the sentence!

25
up

I spoke to a car salesman yesterday and the vehicle I have been looking at has had a lot of interest.

24
up

LOL. I stopped believing in the tooth fairy when I was 6, in Santa when I was 8, and in real estate agents when I was 20.

I sold a property in one day for full asking price, an unconditional offer. That was during level 3. Doesn't appear to be any reduction in demand or prices being paid from what I've heard too.

Theoracle,

Are you the Oracle of:
1) Omaha
2) Auckland
3) Queenstown
4) Wellington
5) Christchurch
6) other

We also have amongst us, The Man 2 of Christchurch. I've often wondered whatever happened to The Man?

“The Man” is in Queenstown for a few days
Bought block of land so thought I better go and have a look at what I had bought!
Quite a few people out and about but they tell me it is very quiet.

This Friday 23 queenstown properties going to auction

Large Queenstown property auction a "market barometer" | Stuff.co.nz
https://i.stuff.co.nz/life-style/homed/121607361/large-queenstown-proper...

The Man 2,

Just wondering, how are you ("The Man 2") and the The Man related?

Are you The Man's
i) assistant
ii) son
iii) other?

14
up

House in Howick with CV of 1050000 which earlier would have gone above CV (as need slight makeover or if very tidy would have gone above 1.1 million) was sold for 9150000.

History :Appraisal before lock down was 1.1 million and when listed after lockdown was adjusted to over million but finally sold for 915000

https://www.oneroof.co.nz/estimate/38-judkins-crescent-auckland-165134

Things to come in future with few exception as happens in any situation and it is this exceptions which will be highlighted intially by media and RE agents but nit for long.

Should wait for few months - may be September/October.

It's not the only house in New Zealand, alittle.

Thought you'd be beyond generalising from a single house sale.......

That's not very smart, you know.

TTP

TTP, Their may be more but this can vouch as witnessed it for a friend. Also if you still believe that this is one off and want others to believe the same does not prove smartness.

In current situation can hope that house price will not fall as can hope for anything but not accepting the reality when everything is falling apart is not being smart.

Even if you are investor, to be smart one should not predict the market with what they want But should read the market and act.

Hi alittle,

Most notably, you're always looking for excuses and cover-ups......

Why not front up, and make amends for your foibles?

TTP

13
up

You should lead by example... walk the talk....

Hi TTP,

Excuses and Cover up for what ?

My understanding is that going forward market will fall and why should I try to excuse or cover up for that.

You can hold me as house price fall is imminent - how much cannot comment but knows that the fall will start from 10%, where it will end is to wait and watch and wil depend how things unfold from here.

Am sorry, if you are not liking but truth is bitter.

I looked at this yesterday. It sold for $276k in 2001 I think, which is around 330% in 19y. That's insane, 100% of original sale every 6y. If that property is worth $1.1m then prices need to fall.

That is only 6.5 percent pa compounded. Pretty low growth rate when comparing high returns however anything above zero is good in my book ... its free money. The original builders and developer only earned a fraction of the current value yet did all the yakka and took the risk while the homeowner got to enjoy it and make money.

Money or equity

Either/or. Both are an asset. Equity can be drawn down easy peasy to spend on upgrades, holidays new car etc

Ah so that's how all those young Mums have been driving around Albany in the latest model Range Rovers...I get it now.

"That is only 6.5 percent pa compounded"

That is the property price growth for 19 years. The return on the equity invested would likely be higher, and is dependent upon the amount of leverage used.

Note:
1) "only" 6.5% per annum compounded - remember property prices doubling every 10 years is 7.2% per annum.
2) 6.5% per annum vs 2.0% per annum inflation target - that is 4.5% real returns since 2001 (i.e 19 years).

CN house prices don't double every 10 years, that would be parabolic.

"house prices don't double every 10 years, that would be parabolic."

Te Kooti,

I don't believe that one can extrapolate historical returns into the future.

However, just wanted to use that example as a comparison to that commonly repeated by some property promoters and property mentors (based on historical property prices and historical returns).

https://www.oneroof.co.nz/news/36140

Here is a past comment on historical property prices doubling:

"by Te Kooti | 8th May 20, 2:12pm
No, prices doubling has been perpetuated by reality. You can close your eyes if it's unpalatable. FWIW, the doubling is on the original price and not the compounded price. The first 100% can take as long as 12-15 years, the next 100% 8-10yrs, then 5-7 and so on."

I can understand why we have a generation of investors believing that narrative.

https://topforeignstocks.com/wp-content/uploads/2012/08/Australian-vs-US...

Real houses prices were pretty much flat for the better part of 100 years (1890-1985) until central banks decided to take interest rates from 20% to zero over the course of the last 30-35 years, fooling a generation into thinking that house prices only go up.

What happens next is the key, not what happened for the last 30 years.

Exactly, spruikers only like to select the previous 40years of data (which just so happens to be the start of rapid declines in interest rates) to produce their “doubles every 10 years” bollocks. Bring out to 100 years and account for inflation and things look quite underwhelming

Read Robert Shiller's 'Irrational Exuberance' and the section on property bubbles if you have some spare time.

The history is correct but interest rates have no effect on price if supply is allowed to equal demand, as is shown in other jurisdictions. It has been the restrictive zoning and consenting bureaucracy that has allowed land banking and other speculative behaviour drive the price of land.

With restrictions, any money saved by having lower interest rates increases demand, worsening the supply issue, and the saving goes directly to the restriction, which causes the land price to go up.

The phrase "doubling every 7y-10y" is used a lot, it's poorly worded but I generally don't correct people because we all know that it refers to the original sale price and not compounded. My quote you have reposted is entirely consistent with that.

Hows that's work? So if someone bought a house in auckland in 1970 for 9000 it would be worth in 2020 5 times the original PP therefore 45000.
Edit: I heard that in early 70s (1973?) house prices tripled overnight

Firstly I said 7 to 10. Secondly, house price growth is greater in % terms the cheaper the house (and vice versa), it's not linear. Nor is it linear across city/rural.
If you had bought a $10m house in Auckland in 2010, it's not going to be worth 20m in 2020. I could keep going but it's a bit pointless. I don;t think we are disagreeing, it's a rule of thumb with lots of exceptions. Maybe start in the 80's!

Oh so you're not saying house prices double every 7 to 10 years, but you're saying they HAVE doubled every 7 - 10 years??? I think we're just as confused as you.

That doesn't really make any sense though. What is the 'original' sale price? Imagine I buy a house for 100k in 1970. If it doubles every ten years using the 'original' sale price measure, it would be worth 200k in 1980 and 300k in 1990. But the person who buys it for 200k in 1980 would expect it to be 400k in 1990 if the original sale price doubles...

Hahahahahaha. What if a house is sold every 10 years versus being held on to for 40 years???

Property held for 40 years:
$100k, $200k, $300k, $400k
or
Bought every 10 years, prices doubling on original purchase prices:
$100k, sold for $200k, sold for $400k, sold for $800k

If house prices doubled every 7 years you would have been able to buy a house for under a dollar in the 1950s.

Ok Beautiful Mind, we are defining the relationship between an initial and final value. That can be expressed as an annual compounding rate, or more crudely as some multiple of the original purchase price. Your theoretical arbitrage applies geometric sequencing by resetting the initial value every 10 years, clearly violating the relationship discussed.

But what do you mean by 'initial value'? Do you mean price when it was first built? Its not clear to me why that should be the benchmark, but maybe you can explain.

Choose whatever initial value you want, any time a house sells would be a fair reflection of it's value. The one above sold for 276 in 01 and then 915 just now = 6.5% compounding annually (that doesn't include rental return)

This isn't a rule, it's an observation. House prices are idiosyncratic so there is never going to be a single observation that explains every house.

But we've just shown above that if you add the original purchase price every ten years starting with when the house sells, you get a vastly different result depending on whether and when the house happens to sell in a 30 year period, which doesn't make any sense. So no matter how you slice it, this 'doubling every ten years' thing doesn't really make sense.

You've totally lost me, and it's 7 to 10 years.

If you're referring to the below, I discredited the "Beautiful Minds" logic above, resetting the initial value invalidates the relationship and creates a geometric sequence.
Stick with the 6.5% annual compound if that's easier.

Property held for 40 years:
$100k, $200k, $300k, $400k
or
Bought every 10 years, prices doubling on original purchase prices:
$100k, sold for $200k, sold for $400k, sold for $800k

But that's the whole point - what do you mean by 'initial value'? If we imagine two identical houses, one bought and held for 40 years, and one sold every ten years then the holder of house 1 would expect the house to be 400k if a house is expected to add its 'initial' value every 7-10 years. But the buyer of house 2 would expect it to be worth 800k if a house adds its 'initial' value to the buyer.

So, to repeat: when you are talking about 'initial' value, what do you mean? The price the current owner paid for it? The price when the house was originally built? Or something else?

Clearly they're not the same thing are they, because you arrive at very different outcomes. The initial value is a sale price in the past, or the day it was built, or whatever. Here is a house price index going back to 1990, work out on a spreadsheet what the internal rate of return on it was. You'll be able to answer your own question then. Also, 7 years is very different to 10 years.

https://www.properazzi.co.nz/articles/the-property-market-cycles-of-the-...

That's exactly the point: if you say house prices double every 7-ten years, by which you seem to mean that they increase by the 'initial' or 'original' price every 7-10 years, it matters what you mean by original price. Posting spreadsheets and telling me to answer my own question doesn't help, when my question was directed at your so, again: what are you referring to by 'initial' or 'original' price?

For the last time, I'm clarifying an observation about medium term house price evolution. In the house price index I gave you, the initial price was 100k and that evolved to $550k over 28 years. That is a 450% increase over 28 years, a 100% of the initial price every 6.25 years and an internal rate of return of 6.5% pa. It's a very general observation, not a rule. You could swap these with a house purchase and sale like the example above. 6.25 is not far from 7

Much more importantly, how could anyone be comfortable not owning a house?

Who said anything about not wanting to own a house? I certainly didn't.

Whatever the magnitude of increase its clear that you both agree one thing,, that house prices increase over time. And... that being true, then housing costs such as rent also increase. Thus making the answer to the age old question of 'when' to buy a house, being as soon as possible.

"Thus making the answer to the age old question of 'when' to buy a house, being as soon as possible."

Wonder if this will be the case for recent purchasers of residential real estate in Queenstown ...

Cute very cute CN

Covered in mold and worth $1m....

Buy 10 litres zinsser anti mould paint (it's good stuff) for $200 dollars and after a weekend you will have added 200 thousand dollars to the value.

Sounds good...should I flip it do you think? Make a quick $200K?

Bright line rule applies and gst if it's a flips business... make a quick 100k

Nah would rather just have a real job and income.

38 Judkins had a 1236m2 section, steep fall to the rear gully. When sections are selling in cascades rd in Howick for over 700k for a 400m2, its a case of supply and demand.. I blame immigration policies..

Record low interest rates, no LVR’s, new National party leader and less competition from other, more timid, buyers. Nows the time.

Satire or not satire?

Not to forget low employment, low business operating, low sentiment......

I though low business sentiment was caused by the Labour party, not pandemics.

For everyone who has lost their job, there remain Hundreds, or thousands, who havent. Are you saying they should join in solidarity with their unemployed comrades and hold off any major life decisions until we go back to the time of full employment and infinite growth?

Sarc level?

Economy will be affected and sentiments will be down if unemployment goes up and many lose business as all this have domino effect and affect most.

In this situation no Political party / Country is immune. Important to see how each country comes out of it, once the tsunami of Corona Virus is settled.

CM - it will take time for the trickle-through of economic contraction to manifest. For every business that is already feeling the pinch (to put it mildly) there are many more that in turn rely on income from that business for their own revenues.

Let's say Air NZ is a client of my employer (which it is), and has contracted sharply, with a freeze on procurement. My employer's business takes note and looks elsewhere for revenues, targeting growth markets, such as certain FMCG ventures (let's say hand santisers for the sake of it), remote working technology companies, and sectors we haven't previously focused on, who now need to change their ways of working and may need our services. But some of those businesses in turn are also starting to feel the pinch because their clients in construction just liquidated, and are hesitant to commit to new projects in the meantime. And so it goes on.

Lack of confidence and contraction anywhere in the market impacts the *entire* market. There are hundreds of medium-sized and large enterprise organisations currently hanging on but freezing recruitment, requesting employees take leave early or reduce their hours, or mandating furloughs. At some stage reality will bite for a large number of these, and people will be laid off. This is often in areas you may not have thought of. For example, telcos lost tens of millions of dollars in roaming fees over the lockdown.

We are seeing the tip of the iceberg, I promise you. Shi* is yet the hit the fan, and when it does, the insanely inflated house prices of areas like Auckland will take a significant hit.

Yeah I do watch the news. Lots of bad stuff is happening. That leads to more bad stuff. Its good news for people who love bad news.

But what about businesses who have seen their books improve, who have found ways to adapt, with generally healthier employees, who can work more flexibly.

Every time i buy something these days i ask how their business is. Without exception, everyone is busy. Some are pessimistically busy, but everyone is busy. The only place I encounter unqualified pessimism is in the comments section on this website.

Oh that's nice. I guess you don't know many people from the tourism industry, airline industries, hotel sector and so on. The decimation of our #1 export earner was clearly an exaggeration. Domestic tourists can no doubt prop it up! Phew.

A vast amount of the economy is shut. Its hard to interact with things that don't exist. A surprising number of people are hitting the malls but that speaks more to a chronic lack of financial self control than anything positive.

I would concur, my business is a out 30% up on may last year, but the rubber hasn't hit the road yet. It is catch up, I am very pessimistic about the future.

Auctions this week have been well attended by bidders sooo good to see. Some have even hit the high notes
1 Grove Rd Sandringham sold for 1.6m https://homes.co.nz/address/auckland/sandringham/1-grove-road/JMewQ?utm_...

So what’s your background Housework’s? We know TPP has vested interests, how about yourself?

I will tell you mine if you tell me yours ... hehe. Am a very avid spectator with nothing to push or sell, and believer in property providing a secure future through following the formula. Of course now everyone questions the future, but what's changed, as a race we have always done that.

By formula you mean ponzi?

No. Btw hows your plan putting all your eggs in one Ray Dalio basket buying gold following the formula that ray is promoting in his book. Sounds to me it's the old pump and dump. And he gets the book sales royalties. Gold investments can only be described as a ponzi, the ultimate ponzi after winding up small investors fear factor

Gold is a ponzi now?

Will just give the bank a phone call an see if they'll give me a $500,000 loan to buy some gold.

Do you even know who Ray Dalio is or do you not like him because you don't understand what he has to say? Inflation, diversified portfolios and risk are a bit complicated for housing spruikers I guess.

Perfect slam! Ouch! Personally I think the whole DCA theory of shares is a bit of a rort and shares/ gold in general keeps investors awake at night. Whereas with home ownership there is no need to worry so much, it certainly beats being a tenant hands down. Agree?

I lived through the GFC in the US. Housing investment can certainly keep you awake at night.

10
up

If people have never experienced something firsthand, many of those people don't think of that scenario within the realm of possibilities.

Here are some examples of events that were considered outside the realm of possibilities before they occurred:

1) interest rates becoming NEGATIVE -
2) oil price being at NEGATIVE $37 - https://www.nbcnews.com/business/markets/oil-prices-tumble-lowest-level-...
3) House prices falling 50% in Ireland - https://tradingeconomics.com/ireland/housing-index
4) House prices falling 62% in Las Vegas - https://fred.stlouisfed.org/series/LVXRNSA
5) share prices falling 22% in one day (October 1987) - https://money.cnn.com/2017/10/19/investing/romans-numeral-black-monday/i...
6) earthquake in Christchurch
7) global pandemic

Some commenters here are aware of the possibilities of a significant house price fall in some locations in NZ. Most of these people have been involved in financial markets, or experienced house price drops firsthand.

Many property investors believe that a significant house price fall is inconceivable, and that property investment is low risk. This is likely due to the fact that nominal house prices in NZ have risen over the last 55 years, and have only fallen during the GFC by 8-10%.

I saw some property investment calculations being made by property investors and the inherent property price growth assumption that they had made (most likely from historical property price returns) - those property price growth assumptions have a low probability of eventuating, in my judgement.

It sure can. Especially when you own more than one property.

And/or you bought in the last couple of years before the drop.

And/or you have a discounted/ interest-only loan about to reset.

And/or you put down the minimum and leveraged yourself to the hilt.

And/or your mortgage payments, rates and property maintenance vastly exceed the rental value of the home.

And/or it's not a non-deficiency judgement jurisdiction.

And/or you just lost your job or had to take a pay cut.

The stuff of nightmares.

As a home owner it's certainly nice being left alone as well. Not having to deal with bi-annual home invasions property inspections, phone calls from the property manager after 2 weeks of rain because the grass berm is 2 inches tall, or having your bond refund turn into a lolly scramble.

No harm in hoping but trying to convince other is........specially when the only thing that can be questioned is will it be a fall or crash ( For now it seems fall but one never knows as consequence of all shut downs yet to be felt)

Yes dont try convincing others of your extreme views aittle. You are already conceding defeat that prices won't crash.

I mean fall for now but one cannot rules out crash depending upon how things unfold from here lol

Extreme situation.. so you are correct extreme consequene/ views can be ruled out.

Harry Dent Jr seems to think that NZ housing bubble has finally popped. He shares some valid concerns about our overexposure to residential housing. Probably be a few months until we start to see a clear trend.

https://www.newshub.co.nz/home/money/2020/05/new-zealand-s-housing-bubbl...

I'm a DGM but can't stand Harry Dent. He seems to be the anti-spruiker, who gets stuff wrong just as much as the most optimistic delusional spruikers, but in the opposite direction. Big words, lots of big numbers, but I don't know if his track record of predictions is very good.

I’m aware he predicted japans housing crash and the GFC but I agree he does have a degree of sensationalism about him.

Yeah, I can't stand him either.

The guy is interested in nothing but self-promotion.
Terrible individual

Did you read the article thoroughly RH because HD jr saved his strongest warning for the sharemarket.
"get out of risky assets, especially stocks - anybody can sell stocks, they are super overvalued. "
With those sentiments, where do you think investors and fhb will move their funds, certainly not into TD. Tangible assets such as houses and flats are an obvious choice.

Why not TD's?

Why bother with TDs. Earn next to nothing and pay rwt

The very real prospect of negative interest rates is a big worry to those with significant sums in term deposits......

They've been hard hit with falling interest rates for a long time now.

TTP

Well if everything else is losing 10%+ the next few years, a 2-3% return on a TD could be quite an attractive return.

When there are price falls, people start to focus on return OF capital (i.e capital preservation), not return ON capital.

Look at how many in KiwiSaver switched from aggressive to conservative when the share market prices fell in March.

Yes just noticed below that both Yvil and Houseworks are selling part of their portfolios - but of course prices can't fall!

But of course if every housing investor sells a house, it won't have much of an influence on the market because prices couldn't fall here.

What about when you sold your one share in a2 at a dollar to help finance your purchase of one sky tv share at 5 dollars

Do you understand systematic risk?

No mate I think you mean systemic. Listen to zb week on demand from 4pm today and hear how people are still buying and selling homes since LD including fhb. Do you think it's a conspiracy theory to suck you in?

Apologies Houseworks - yes meant systemic. Thank you for correcting.

I'm not sure I understand what you mean around conspiracy theory?

Systemic and systematic are interchangeable.

That's not nearly the killer blow you think it is.
Not even close.

"With those sentiments, where do you think investors and fhb will move their funds, certainly not into TD. Tangible assets such as houses and flats are an obvious choice."

How do retirees make up for the fall in their retirement income? (round numbers used and taxes excluded for illustration purposes). Here is the dilemma for income oriented investors:

1) Two or three years ago, a $1,000,000 time deposit at a big bank could be invested in a time deposit at say 3.0%, so $30,000 in interest income
2) Now that same $1,000,000 time deposit at a big bank would earn say 2.1% p.a, so $21,000 in interest income.

That annual income has fallen by $9,000 or 30%.

Other forms of income for retirees have fallen:
1) government bonds - yields have fallen
2) shares - dividend cuts or eliminations - say bank shares, etc

So in order for retirees to make up the reduction in interest income (for their living costs), they reach for yield. How? By investing in other higher yielding investments.

The current higher yielding investment that is considered "safe" and has a low or zero risk by many income oriented investors is real estate - both residential and commercial property.

Income oriented investors have also invested in funds that invest in residential and commercial real estate that provide dividends to shareholders. These are listed and non listed.

In the early 2000's to 2005, the investments that had high interest rates (and were considered "safe", where the loss of principal was considered low) were debentures with finance companies.

A mate yesterday was discussing this with me and remarked that retirees (and I would include other savers) are the silent victims of the rbnz

Have been for quite some time now.

When did we decide that retirees shouldn’t ever have to actually tap their savings? If you have $1m and own your own home (and still get the pension), you can live much more comfortably than most working adults if you spend some of your capital.
I’d also suggest that most of the retirees suffering from low interest rates have benefited from the ridiculous capital gains on property that those low interest rates have fuelled. I doubt there are many retirees out there with a huge cash nest egg but no property.

Yip - the boomers I've been talking to the last 12 months or so, many are now thinking about selling the 3/4 bedroom home and moving into something smaller, ready for retirement. Less land/house to deal with and free up some capital.

Does anyone know what happened at QV.co.nz?

They seem to have changed their website format. A relative's account is no longer active even though their subscription period has not yet expired. It seems that now it is powered by Corelogic in Australia and not NZ now?

Also QV.co.nz have chosen to display only the current RV and not display historical RV's.

Are they trying to reduce historical data transparency for market participants? (that would be similar to listed companies only providing the latest annual report, and not annual reports prior to that).

I noticed it was looking weird too. QV always had its issues but overall I found it was the best site for getting property data. If it deteriorates then that's a major blow to buyers and what little market fairness we have. Having timely and accurate information is key, and things are already massively in the favour the selling agents.

Btw, if the government was serious about improving the housing market they would legislate for greater transparency. None of this "the house is under offer but we can't tell you how much for" nonsense.

Panic buying, mainly due to less 20% deposit and low interest rates. Wrong move, wait for a few months and you will get a much better bargain

Exactly.

I wish people would stop going on about "less 20% deposit".
You didn't need 20% deposit in the past to get a mortgage, you just needed to be able to service the higher interest rate and pay low equity fees.
You still need >20% deposit to access the special rates.

Nothing has changed, if anything its got harder as the banks are asking about job security now.

Are you completely over the 'hype' of house ownership

Yep, pretty much.

I sold my house this week there were 4 houses for sale 3 sold, small sample

Congrats well done.

Houseworks!
There you are…
In a past conversation, you mentioned something along the lines of “Rich, like John Key”, and to put that into a context of two of his colleagues at Bankers Trust at that time; Rich Farleigh ( who I can’t recall meeting) and Ivan Ritossa (who I knew well), here’s some dated quotes and links to where they might be today. (Farleigh probably worth 5 time Key, and Ritosso 10+ times). So you be the judge!
(Farleigh, at 34) “I had more money than I dreamed anyone needed, but when I got to Monaco I realised it was not nearly as much as I thought."
https://www.smh.com.au/business/investors-life-is-no-longer-so-derivativ...

(and Ivan)
“Vaucluse, Sydney in 2008 then head of foreign exchange Ivan Ritossa snapped up (the house) for $45 million, setting an Australian house price record. About three years ago, Ritossa knocked back an offer on the property of $100 million”
https://outline.com/wcsz7K

I dont aspire to that level of wealth bw whether its JK or Jeff Bezos. However if you do that's fine by me and I am happy for you. I am simply congratulating Yvil for achieving his objective of a successful house sale and one which I hope exceeded expectations. I love those auctions where two people battle it out. I have had the pleasure of being on both sides of that situation and never regretted having to pay extra for a property which I felt had X factor. Tbh it's worse being the underbidder and always wondering what if. Agree?

Thanks Houseworks. I was surprised how many people there still is with substantial money to spend

Good time to be cashed up? Am getting our old home ready for sale, not expecting any cg after 3 years but it's been a good place. Even did the alterations plans myself and submitted to council for consent :) want to buy a beautiful home?

"Am getting our old home ready for sale"

If property prices are going to keep rising, why would you sell?

Hi CN that's not my goal. We dont use the house and I cant be bothered renting it. Also we have something I have been waiting for a long time and have signed an offer. How long are you waiting before you grab yourself a bargain.

"we have something I have been waiting for a long time and have signed an offer"

Houseworks,

So you're selling an existing property to finance the purchase of another property?

Yes and a business. You didn't answer my question.

"How long are you waiting before you grab yourself a bargain."

I have a longstanding policy of not discussing any personal financial transactions.

However, for the purposes of illustration, will share about what constitutes a bargain for me. One bargain was grabbed in March. The real estate related asset was purchased at a price which resulted in a current yield of over 20% per annum (without any leverage whatsoever). After tax yield (after all costs) of over 14% per annum.

It's not the asset class that matters, it's the return that matters. That return may or may not be in residential real estate.

Well done

The fact that it is real estate is significant though. If it was some other investment class with these known returns it would likely be very suspect and risky. Hence the appeal of real estate.

"If it was some other investment class with these known returns it would likely be very suspect and risky."

There are so many types of real estate related investments. Which of the following real estate related investments would be considered risky?

1) raw land
2) section with no dwelling
3) house on free hold land
4) apartment on free hold land
5) house on leasehold land (such as around Cornwall Park in Auckland)
6) apartment on leasehold land
7) commercial real estate - retail
8) commercial real estate - industrial / warehouse
9) commercial real estate - office
10) commercial real estate - hotel / motel

Note that the above can be owned individually or in a partnership, or syndicate.

Shares in unlisted real estate investment entities:
11) unlisted property investment fund in retail -
12) unlisted property investment fund in industrial space - such as Olly Newland's fund - https://www.newlandburling.co.nz/property-fund/
13) unlisted property investment fund investing in office space -
14) unlisted property investment fund investing in hotels / motels
15) unlisted property investment fund investing in greenfield projects (i.e construction of new a new projects)

Shares in listed real estate investment entities:
16) listed property ETF - https://finance.yahoo.com/quote/NPF.NZ/profile?p=NPF.NZ
17) listed property REIT in diversified commercial real estate - https://finance.yahoo.com/quote/KPG.NZ/profile?p=KPG.NZ
17) listed REITS in residential real estate - https://finance.yahoo.com/quote/EQR/profile?p=EQR
18) listed REITS in commercial real estate - retail - https://finance.yahoo.com/quote/SPG/profile?p=SPG
19) listed REITS in commercial real estate - industrial - https://finance.yahoo.com/quote/GMT.NZ/profile?p=GMT.NZ
20) listed REITS in commercial real estate - office - https://finance.yahoo.com/quote/EQC/profile?p=EQC
21) listed REITS in commercial real estate - hotels / motels - https://finance.yahoo.com/quote/PK/profile?p=PK
22) listed shares of retirement village operators - such as MetLifeCare, Ryman, - https://finance.yahoo.com/quote/RYM.NZ/profile?p=RYM.NZ

24) listed property developers
25) listed property construction - e.g Fletcher Building

26) listed mREITs - these are lenders to property owners - https://finance.yahoo.com/quote/STWD/profile?p=STWD

27) Listed options on listed real estate investment entities -
a) residential real estate - https://finance.yahoo.com/quote/EQR/options?p=EQR
b) commercial real estate - retail - https://finance.yahoo.com/quote/SPG/options?p=SPG
c) commercial real estate - industrial -
d) commercial real estate - office - https://finance.yahoo.com/quote/EQC/options?p=EQC
e) commercial real estate - motels / hotels - https://finance.yahoo.com/quote/PK/options?p=PK

Others?

You could perhaps add other shares to that like Auckland Airport - not sure what proportion of the value of their holding is related to the land and property under their company.

Hold on - are all the property bulls selling parts of their portfolios now?

What does that tell you IO ?

You tell me Yvil if you're all doing it.

Yvil,

The point that IO is making is that no one is a mind reader and we are unable to read your mind (or is that just me on here who doesn't possess that skill?). So if you want to be understood, don't assume we can read your mind or any inferences you might make.

People ask questions to clarify their understanding - that's how people communicate.

E I E IO

Yep, to buy more and different property.

Next thing da man will be letting go of a couple of his CHCH gems :-)

I hate it when I have competition at an Auction.
I tend to pull out when there is nothing in it for us!

It probably all depends how you see potential and/or value

That was a ballsy buy in 2008, but it's small beer along there now.

The market is already changing in Tauranga. Just about everything is coming on with a price that I'm interested in. Sellers are still in lala land however asking hundreds of thousands over the pre-lockdown valuations. Its going to take a while for the reality to set in so at least 2 or 3 months from now. Some of the posters here will try and criticise the "Waiting game" but if there was ever a time in the last 50 years to wait, now is that time.

Young Wgn FHB friends report a noticeable change. Queues at open homes now rare, agents no longer disdainfully assessing their worthiness to enter the house, now enthusiastically following up by phone and the previous 'offers above RV considered' has been replaced with 'vendor will consider offers around RV'.

It's funny how employment has changed over the years. As a baby boomer I remember in the 1960s and 1970s how hazardous it was to walk down any street with factories or commercial offices. Why? Because as you passed one of these work places the personnel (human-resources) department staff would race out of the building running towards you to try and persuade you to become an employee and, even on occasion, trying to literally frog-march you back to their office. It was a not uncommon sight to see young men (with long hair those days) careering down the footpaths being chased by those from the personnel departments of a company.

If you did take up employment with one company it was common to work there for only say a couple of weeks to earn enough money to see you through the next two weeks of partying and then take up employment at the next factory along for another two weeks and so on until you had worked for every factory in the street.

We did attend the odd lecture at university but we did have stressful times. For instance, there can be nothing so stressful as trying to decide which party to attend, out of a good dozen on offer, after a solid Saturday evening drinking session at the Kiwi pub on Symonds St (now long gone); don't ever think we baby boomers had it easy!
Sorry, did I say that? I've just had an afternoon nap and I must have been dreaming.

Compare that to today's job market, where hundreds, if not thousands apply to a single minimum wage job at Countdown. In a market where it can take 200 job applications to receive a single interview offer (not job offer!) unless you got lucky when you were 18 (practically a child) and picked the right career.

This cant possibly be true.

We're told, ad nauseum, about how tough it was for Boomers.
Akin to the war experiences of the Silent Generation.

@streetwise. Mmmmh. The Kiwi Pub 1971. Those were the days my friend.

Here's a video for the property spruikers made by a property guru himself highlighting the downside risks we're facing:

https://www.youtube.com/watch?v=vmpaFiTTZBA

IO, listing this type of poor video about a very different country to NZ, does little for credibility

Concepts are the same and most issues are shared by both countries, so it does much for credibility.

Not looking for credibility on a site like this Yvil - just gifting information and views if people want to digest it/them they can.

Are you looking for credibility on here? I hope not. Prefer my credibility to be in the real world..

What a strange post, you are telling us we should give no credibility to your comments…

Yes please Yvil - zero credibility. Why would you give me any credibility? You can openly refer to me as 'Independent_Observer with zero credibility' if you like and as often as you like but it is pointless and probably says more about you than me.

You have no idea who I am, what I do, or what qualifications I have.

To desire credibility on a site like this either says you're highly un-confident in your views or have ego issues.

Do you think you have credibility here? (I'm trying not to laugh as I write this!)

I clearly said credibility of the comments made. You made it personal by changing it to you or me having credibility (or not), that's different, I was not casting a judgement on you. If you think yourself that your own posts have no credibility, you may as well not post anymore

Think I’d rather keep commenting and balance out some of the baloney. Hope you don’t mind?

I like collecting little cliches of purported wisdom. A good one for this comment thread.

"Listen to everyone
Believe noone
Make up your own mind"

The listening bit is hard.

Funny to read so many comments desperately trying to hide the fact RE is going down, badly. In a just a few months you will realize how much was for real and how much was just greed talking.

I find the obsessing about house values here, quite amusing. I bought the house I live in, for cash, in 2007. The value of it concerns me not at all - it's a place to live, where I'm not beholden to a landlord.

14
up

Perhaps if you had spent most of your adult life paying ever increasing rent, stressing about having to move because the landlord has decided to sell (again), watching house prices rise by more than your entire take home pay in a year, and facing the fact that if you ever wanted any kind of stable housing situation you would have to move away from all your friends and family you would probably be obsessed too. I'm obsessed because realistically buying a house is the only way to ensure a stable living situation and the main plank of a reasonable retirement, and (until now at least) it was looking increasingly impossible to achieve despite saving hard for years and years. 2007 was a whole different ball game compared to 2012+.

Best of luck later this year then....

Feel your pain. I had to take a job in a remote part of NZ to be able to afford a house. Was a huge sacrifice moving away from everyone. 6 years of hell in the sticks was enough for me. I don't envy anyone trying to get started in Auckland. Hope your situation improves soon.

I spend 5 hours a day just commuting so I can have a mortgage 1.5 times my household salary.

That's legend, but that amount of commuting is not something I could do longterm. It also comes at a cost which is another outgoing for you. Do you think now is a good time with low interest rates and the increased equity you undoubtedly have to move closer to your work

Yup - and 2007 was very different to 1976, when I bought my first house. There was no point asking a bank for money, I borrowed from a lawyer, interest only, to be refinanced after 10 years, and from a relation, to be repaid as I could. Mind you, the house was only $13,000.

Thankfully you have the benefit of hindsight to suggest this worked for you.

In 1989, the household debt to income level that the banks lent was about 1.5x
In 2020, the household debt to income level that the banks lend can be 6.5x

The banks have changed lending criteria over the years to enable borrowers to take on more debt relative to incomes in the following ways:
1) previously assessed mortgage application using the one main household income. Now they use both household incomes
2) previously used a 25% debt service ratio, now it can be up to almost 40%
3) extension of mortgage terms - previously the standard mortgage term was 20 years, now it is 30 years.

These factors have resulted in large changes of borrowing amounts relative to household incomes

Good luck. Your chance is coming.

Good luck, hope things turn out well for you.

I agree, I find the obsessing about price falls weird too. Prices not falling would be weird. Real estate goes up and down. So what. It's fallen significantly before all over the world for various reasons. Then it goes up. Even if that takes quite a few years. Then another disaster occurs. It goes down. It goes up, it goes down. So what. I really don't get why people obsess about this so much. Yes, it's likely to go down now. Maybe a lot in some places. Maybe everywhere. Maybe for a long time, years even. Who knows. No one.

Buy a house for $500k, 2 months later it's worth $300k. 20 years later it's finally worth $500k again. Sure a crude example, but why would somoene pay $500k for a house today if 20 years later it's again worth $500k?

In 20 years time the mortgage should be zilch meanwhile longterm tenants will still be having landlord 'issues' and all things being equal, paying higher and higher rents. There is no future in being a tenant longterm, ask shamubeel and he will confirm it.

Except those that could have bought at $500k with 15%deposit waited a couple of months, and bought at $300k with 25% deposit and saved themselves $200k of debt abd got their mortgage at 0.8% lower rate too...

Is it Timing the market or Time In the market, I heard Time In that counts. What if you had bought mid 2019 when you were looking and had finance approval under your belt,,, could have bought well. Dont let that put you off P

Lol, typical spruiker BS

Common sense to anyone who wants to see it. Yes and I picked up the phrase from financial commentator Mary Holm so go label her a spruiker.

Lol, you are good for a giggle on this wet Sunday afternoon.

Have it your way. Do I care if you make wrong choices for yourself and worse for your family and then stubbornly justify and dismiss it.

Oh lol. You aren't keeping up with the game are you?

Houseworks has given you top advice, you can of course ridicule it, your loss

And up pops another one I don't exactly rate as the smartest in the room, and confirms he's also failed to keep up with the play. Good show old chap.

Yes he has given good advice. Not being sarcastic, it is very wise to spend "time in" the market rather than attempting to time it. It then follows that buying homes, you're in it for the long haul. So you can conclude it's best to just buy the one property and pay it off over the full 30 years. That's ultimate "time in" the market.

Yeah I don't think anyone's questioning that. I think people are slightly questioning the wisdom of house flipping while house prices are going up. Because to me, that's more like timing the market. It requires faith that house prices will keep rising, or falling back on "timing the market" (wait until the drops happen, then house flip again when they begin their ascent again, until you reach the home you want).

Yet that's what we were told to do. First home buyers were, and are still, told that by seasoned investors and experts. Just wrap your head around that a bit. That completely flies against what Houseworks just said, which you just said was top advice.

Yes but that would be for a balanced portfolio that is suitable for age and risk profile.

Houseworks, you do realise that borrowing money isn't free, right? If you bought that $500k home with 20% down at an interest rate of 4.95% over 30 years, your interest payments alone would have been $368,629 before you even start on the principal, plus all the costs of ownership such as refurbishment, maintenance and rates. That's $236 a week you're paying the bank in interest for the privilege of borrowing their money, plus say another $50 on average in maintenance if you're lucky, plus another, say, $40 in rates.

Yes that's less than your rent, and finally owing outright is great... if you buy in an up or stable market. But if you make that purchase in a declining market you won't be patting yourself on the back for your investing wisdom, trust me.

Exactly, with the additional issue of the great fallacy that is telling people that their houses increasing in value is great for them, well that is true just if you do not longer need a place to live in or if you move to a cheaper place, which is not the most usual case.

Home owners (still with an income) thinking they are alright and can weather out the storm.

The reset is not going to be based on why you can still afford it but what your neighbor can afford and whether they still have an income.

Seeing the prices this weeks only proves one thing and that’s the clowns are very good at what they do.. so the circus continues.

It’s like when a marriage breaks down and separation and divorce is inevitable. The anticipation of pain is just too much that the
couple makeup and try to move on. Yes they haven’t divorced but they don’t have a marriage either

Theres something about managing to sell to one fool but can that one fool sell to another fool. All very much the Madness of Crowds

Long time reader (and often for the comments alone), first time commenting. Sorry for the essay:

Here is an open question for everyone. I’m an FHB, been in the market for about 4 months. Have found a house I genuinely like and am interested in bidding at auction. It has a relatively low RV compared to other properties in the area (a suburb on the edge of Auckland city and Waitakere).

I’m thinking of bidding up to the cv or perhaps up to 30-40k above. Not willing to entertain the sort of price it would have commanded pre lockdown though.

Positive: at current interest rates I would be paying less than my rent.

Negatives: terrified of financial oblivion if the market crashes and jobs are lost. Myself and partner work in a Govt job and for a health ngo - we feel relatively secure in our jobs, but you never know what could happen.

Really keen to know what interest.co readers think about this situation?

Cheers

Ignore the RV, they can be misleading. Have you searched homes.co.nz for nearby comparative sales. And at least get some advice from a builder who can give you information or even inspect it for you. You dont want a lemon and I assure you they're out there. Do you have a lawyer, I can recommend one. Remember you are buying at auction and cant back out, is finance approved? Good luck

Thanks for your comment HW. Yup, will definitely be getting a builders report before bidding anything. I don’t have a lawyer at the moment, so a recommendation would be much appreciated. Cheers.

Edit - forgot to mention, yes am pre approved (in fact the bank extended the loan based on the extra savings we made in lockdown. I’m not too keen to get anywhere close to the more than $1m they’re willing to lend though!)

They won't mind me saying... Have dealt longterm with The Property Law centre greenlane... some fixed prices and excellent advice. Initially ask for Richard Middleton. They're also in takapuna

If you genuinely love the place and can get it for less than 5x your annual household income, go for it.
There’s a reason that’s considered the outer threshold for a sensible mortgage in eg. Britain.
Don’t jump in if it’s just Fomo though, price falls are much more likely than rises in the medium term.

Thanks for your comment, appreciate it. And thank you for the advice re debt to income specifically. If we got the property in question at RV it would be just slightly under 4 x our combined annual income, so hopefully that’s relatively safe?

Definitely not FOMO - we are looking for a family home for our (future) kids and would like to pay off our own mortgage instead of the landlord’s. If we got it at or near cv it would be cheaper than our rent at current rates which is mighty attractive...

But yeah, I’m going to be conservative and wouldn’t be willing to offer much above cv in the current climate.

Thank god we lost at auction at the one and only property we bid on. Late feb - three bedroom weatherboard job in New Lynn needing a new roof. We were prepared to spend $850k but it went for $960! Bit of a relief!

Sftp
In the current situation of economic uncertainty probably the most important question is how secure are both your (and your partner's) job and income.
If you are feeling secure and can confidently service the mortgage, then the uncertainty as to whatever happens to property is secondary for two reasons:
- Firstly, you are buying for the long term and short term fluctuations of even two or three years are irrelevant, and provided you can service the mortgage your equity will be a secondary consideration to the bank, and
- Secondly you mention that you are looking at a property that really appeals to you for you (and your family) to live in - you are not buying it as a property investor in which economic factors are the most important thing (yields and capital gains over a relatively short five year period).
A few things to also think about:
- Make sure you talk to a valuer - while there is a cost around $500 it may save you more and it can be used as a negotiation tool (see below re pre-auction offer)
- "Your first house is a home, your second and subsequent houses are investments".
- You are paying off the mortgage for you to make the home mortgage free for you - not mortgage free for the landlord.
- Home ownership has with it considerable intrinsic value. There is also not the hassles with dealing with the landlord including property inspections, the landlord selling the property, landlord's choice of paint colour and fittings, . . . . .
- Home ownership provides financial security although initially - and not just now in these uncertain times - as a first home owner, debt and ability to service is a new and nervous time.
A few things to be cautious about:
- Currently there is uncertainty as to the impact of the current situation on the housing market. From what you say, I would be a little cautious in going too high. Without knowing the property I would not be going too far over the RV. If it goes for a higher price, there will be disappointment as you have your heart set on it, but you will find another.
- You mention auction; just make sure that all is fine with the bank as on the fall of the hammer it is yours and it is unconditional (you have no out and need to stump up the money).
In terms of the later, there have been at least two instances in recent weeks reported on interest.co auctions where a property has gone to auction with an pre-auction agreement (at a certain price) but conditional subject to a better price not being obtained at auction. As this is currently occurring in the market place, you may want to get feel and put in an reasonably low-ball offer (subject to any conditions such as finance) - if at auction it does go higher, then there should be nothing to stop you coming in bidding further. I would get some advice on this from your lawyer.

sftp
I see in a later post you mention that you don't have a lawyer. Don't go any further until you do and you have met with him/her.
You also mention the bank has given your pre-approval, however you need to go back to them and confirm with this specific house and price and builders report; although they have given you pre-approval for a level of finance, it will be on condition of them approving a particular house and price. They may not give you the finance if you pay too much over the top, especially in these uncertain times. They will most likely putting a value of the RV less about 10% - that is what banks and the RBNZ are expecting house prices to fall.

Thank you for that comprehensive comment - I really appreciate it.

Our broker renewed our pre approval with the bank a week ago, so I think we should be all set. I think your advice is super sound and the only real worry I have is jobs. Like I said, we feel relatively secure in our jobs, but if this thing gets to depression level bad then, I mean, anything could happen.

I also will follow up on this getting a lawyer thing. I haven’t done that yet.

Edit - sorry, was replying to your first comment. Thanks for the advice. The impression our broker gave us was we are good to go and bid on whatever we want within the pre approval limits. We have a 20% deposit, so I was under the impression we didn’t need to go to the bank for sign off for any property we wish to bid on. Is that not the case?

Thanks again.

If your not ready to buy with the information you've supplied, then you might as well say that the market has come to a dead stop, because I would suggest that most of the would-be buyers out there wouldn't be in as good a position as yourselves. If there's going to be a recession or a depression on the way then having Government jobs places you in a very good position financially. My father and mother grew up in the 1930's depression and government jobs were then looked upon as the most secure, so my father became a school teacher and my mother a nurse.
If you can, get an experienced builder to look at things like the condition of the roof and especially (remember we have been in a drought) the storm-water drainage situation; could there be a problem under normal weather conditions, when you get days of downpours, if the section is low-lying?
If the section is steep (as many are out west), is there any danger of a land slip when it does rain heavily for days on end?
What cladding does it have? If weatherboard or brick you're probably ok, although have a quick look at the brick to see that there are no cracks which could indicate sinking foundations.
Don't buy anything that is monolithic/plaster clad because it could be a leaky home.
Does it have reasonably wide eaves as these protect against water leaks especially in rainy areas like out west?
What's under the floor? Is it a concrete floor or a particle-board/wooden floor? If the latter can you access under the floor to have a look....the sub-floor shouldn't be wet or damp in these drought conditions. Do the foundations look clean and stable?
If it was me looking to buy I would probably want to have a bit of a quiz at the neighbours' properties over the fence to see if they are well-maintained, as this can give you an insight as to what the neighbours might be like.
As to the price, you'll have to make your own judgement call on that because I've presumed you've looked at many properties (as you should) then if you really want this particular property and it is affordable, then striving for a bargain is probably not worth it. You would probably not want to go too much over the valuation in these times, but it still boils down to what you can afford and how much you want that property.

I hugely appreciate your advice and will investigate everything you have mentioned. Am staying well away from monolithic cladding - have done my research on that.

Big shoutout to everyone who has commented so far, but more generally to the editor, reporters and community here. Great website and resource. Cheers

I disagree with the other resonder. Dont borrow more than three times your income. Use a 7% interest interest rate when you calculate the cost of borrowing. If that puts you out of the game then consider your self a bullet dodger.

I agree that 3x income is much saner. Unfortunately this guy is in Auckland and sanity hasn’t applied for a while. The number of FHBs who could buy a house in Auckland at 3x income could be counted on one hand; you’d have to be a real executive power couple. Of course prices might fall, and I think they will, but they’d have to fall maybe 50% to make a 3x DTI possible for FHBs with normal jobs. I’d love that myself, but the chances of it are low IMHO.

sftp
Definitely go to a lawyer.
The most important person by far is your lawyer and this is especially so as a FHB. He/she is the only person in all of this that has your interests as the primary consideration.
Everyone else has a vested interest. I would not go on the advice as to regards certainty suggested by your broker - they have very much a vested interest for you to buy (with the biggest mortgage as they have seemed to acquired) as otherwise they do not get their commission. Despite what you think about how friendly and caring and what a great fellow he/she is, your broker is you should not be relying on them as they are poorly qualified and will not be giving you unbiased information.
It is important to see a lawyer PRIOR to signing or bidding on anything. They are the only person protecting you.
Lawyers have fairly set fees for property conveyancing. To see a lawyer prior is not really going to cost you extra, and any pitfalls can be ironed out early before they become a major expensive problem.
They are also keen to take on new clients if they can, and a new young client tends to be attractive as is likely to a long term client.
a lawyer will only be too happy to have an early meeting which may be brief.
I am going to make a subsequent comment as a think it a very important warning.

stfp
A WARNING.
I thought it strange that a FHB is looking to an auction - most FHB buy through a negotiated sale as typically they are conditional offers (e.g. finance) whereas in auctions the sales are unconditional and you will be sued for all sorts of costs if for any reason something fails such as the bank not agreeing with the purchase value.
It concerns me that you seemed to be guided by a broker; "yeah, yeah everything is fine by the bank, go, go, go"; "yeah, yeah bid, bid you can afford to go high", "yeah, yeah you can go to a million", "yeah, yeah . . . . ". "Yeah, yeah great fellow" - just like the car salesman trying sell you a car.
As said previously, brokers have a vested interest in you buying and you do not know how independent they are (e.g. do they have any undeclared or unknown relationship with any agencies????).
I find it strange that in these uncertain times you are talking about going above RV, and personally this makes me very suspicious if your broker does have not at least some informal relationship with one or more agencies. Is your broker talking with the agents, has some inside knowledge and advising you on price???? If so, it could be tainted advice.
I may possibly be wrong, but I have alarm bells ringing that you may possibly be a lamb being led to slaughter.
DO NOT be guided by your broker. SEE A LAWYER and describe all to him/her as to what you propose doing and also what has happened.
You have absolutely nothing to loose and everything to gain by first seeing a lawyer.

Agents are paid by the seller. It's their job to try and get the best price. Add in they are at the wrong end of the "most trusted" scale, all combines to underline the meaning of the term "due dilligence", and "caveat emptor".

Averageman
I agree - and in terms of trust I would put a broker somewhere only halfway between a lawyer and agent.
Accept critically whatever both an agent and a broker have to say - just as one critically accepts what a car salesman says and seeks advice from either a knowledgeable mechanical person or the AA. o
When buying property see advice from a lawyer - it is to big to risk otherwise.
Lawyers are your only 100% trusted friend when buying property and especially more so for a FHB.

stfp

Printer8 is absolutely right here.

The mortgage broker is there to help you find financing. Avoid any advice from them on how much to pay for a house. The maximum amount that you pay for a house should in no way be influenced by the mortgage broker, or real estate agent (they both have a vested financial interest).

Note that mortgage brokers are paid on a percentage of the loan (by the mortgage lender), so they have a huge financial interest with providing you with the largest loan that you can get. Just because you can borrow that amount it doesn't mean that you should. That large loan amount may not be in your best interest in the long term. (imagine a drug addict asking their drug dealer - should I stop taking drugs?)

There have been stories of owner occupier buyers applying for a mortgage (via a mortgage broker) to buy a property, and the potential purchaser couldn't borrow enough to pay for the house. In order to be able to borrow more, the mortgage broker then recommended to the loan applicant to add "fake" income (rental from a non existent boarder in the house) so that they could meet bank lending criteria. That is the length that a mortgage broker is willing to go to in order to get the loan for the applicant and then earn their commission.

Also make sure you complete the financial section in the mortgage application form (and you take a copy of the form you completed). I recall a story of a borrower in Australia who just signed the mortgage application form and the mortgage broker filled in the financial section with fake financial details (by inflating the assets, reducing the existing liabilities of the mortgage applicant). These details came out only after the borrower was in financial stress and unable to meet their debt payments to their lender.

Remember that the borrower must be able to maintain mortgage payments under ALL conditions. Some conditions to consider

A) Could you continue to maintain the debt service payments on lower household incomes?
1) are your jobs and income secure? (even if people keeping their jobs, remember some staff have been forced to take paycuts - either salary paycuts or lower wages due to fewer hours worked)
2) if you are planning to have children, what will happen to the household income - will one person stay at home and look after the children? or will there be childcare costs involved

B) Could you handle higher debt service payments?
1) how much higher interest rates can you manage? - allow for a buffer in your incomes for higher debt payments

The lower the debt service ratio (debt payments / household income), then the better, as there is a buffer to unexpected changes to circumstances - the bigger the buffer, the better. If a borrower gets themselves into a position where they are starting off in a high debt service ratio (as they borrowed too much) and little or no buffer, then that leaves little or no financial flexibility to cope with unexpected changes in circumstances such as those outlined above.

Here is the link to the mortgage fraud story
https://www.abc.net.au/7.30/interest-only-home-loans-under-scrutiny/9540724

CLAIRE MOODIE: One of her most recent loans was taken out with Westpac four years ago, through her self-managed super fund. Despite already owing that bank close to $1 million, she managed to secure another loan for $360,000.

She says she only signed the back three pages of this loan application form, supplied by an independent mortgage broker. And when she applied recently for a full copy of the application form, she was shocked by the contents.

(Linda indicates section of contract to Claire Moodie)

LINDA SCHMIDT: First of all, that didn't exist any longer.

CLAIRE MOODIE: The money in your self-managed super fund?

LINDA SCHMIDT: Mm. There wasn't...

CLAIRE MOODIE: It says $500,000 there.

LINDA SCHMIDT: Yeah. But there wasn't.

CLAIRE MOODIE: And she says her existing loans are understated by tens of thousands of dollars.

I concur. Speak with your lawyer and get him/her to confirm with the bank you intend to use that they are all OK to proceed. And get it in writing too.

CN and zorba
Glad to see you concur.
One needs to see the risks in dealing with a mortgage broker and especially when considering auction - and especially more so when a FHB.
A very much a possible risk scenario:
On brokers advice all is fine go ahead at auction to $x
Buy at $x, but bank is not happy with the value of the property so declines to lend (which they will have covered themselves for)
Broker in his/her terms "scrambles" around for "temporary" finance which is only available through a finance company at a much higher rate (with bigger commission for the broker)
Pay for the property transfer with the property registered with the mortgage against the finance company including lawyer fees
Broker later negotiates with a bank for a mortgage at a lesser rate (another commission for the broker)
Pay the fees for the discharge/breaking the mortgage with the finance company (will also be a broker fee in their somewhere) and pay for the bank's mortgage to be registered and pay again for lawyer fees.
- $$$$$$$$ for the FHB and + $$$$ for the mortgage broker

Hi SFTP, here's a term for you. Trailing commission. Your Mortgage Broker is not acting in your interests. He's looking after his interests. If you are keen on property my suggestion is to adopt a wait and see attitude. Mortgage Holidays will soon expire. Wait another 4 months to see the new properties that will inevitably be listed as overextended borrowers have to bite the bullet. Auctions will lock you in to a purchase - now is the time to be adaptable. You Want to be able to take advantage not any opportunities that will arise when the reality starts to hit. Life is not going to pass you by because you waited 6 months to a year before making the biggest financial commitment of your life. Don't believe the REA's/Property Spruikers posting their rubbish here. Look at Australia, Perth apartments are dropping in price, as are Auckland's. Wait, and see how this fear will spread to other classes of property. NZ property is at the bubble stage. Employers are letting go of staff. The economy will contract, and as a result unemployment will increase. I wouldn't use RV as my pricing guide. Look at comparable properties in the same location. Inspect as many as you can. The other advice is good, get a capable builder/inspection to ensure that the house is in good Nick. Get a Lawyer who will look after YOUR interests. Do NOT listen to people whose income depends upon your purchase. I will be in the market late 2020/early 2021, do not let FOMO drive your purchase behaviour. The Commonwealth Bank in Australia is forecasting a fall of up to 32% in the worst case scenario. Even NZ banks are forecasting teen figures. So wait, watch and then act when prices fall. There is no need to rush.
"Australia's big four banks are predicting housing prices could fall around 11-32% by 2022. ... With the Commonwealth Bank (ASX: CBA) outdoing all of the others with its “worst case'' forecast that house prices could fall by an amazing 32% by the end of 2022.May 14, 2020"

"I will be in the market late 2020/early 2021"
You and thousands of others Anzac, competing hard for the reduced number of properties being listed.

Have you seen the phone app called Gavl. Maybe there are others too but that's the one I know. Its brilliant. Takes you into actual live auctions happening around nz or, you can save properties to watchlist to view the auction later. You will get to witness a variety of auction strategies and get a feel for your own approach. Also check out auction attendance and activity levels. Auction strategy is important because when the all important auction date arrives it's easy to suddenly feel out of your depth.

SugarforthePill, I can't tell you what you should do. I can tell you what I am doing. I am cashed up, will be watching what happens and looking more seriously at the end of the year.
I think the job losses will be severe and there will be a significant drop in the market. Leveraging yourself now will trap you and limit your options if the market declines.
I do not believe the line spouted by some on here that "there will never be a better time to buy than now"and "you can't time the market". A better time to buy is coming to a house near you soon.

MTP
Likewise; I have already posted that I am cashed up (in neutral gear), watching and waiting.
Got out of property four years ago, but given the returns and uncertainties of other investments property may enticed me back in.
No pressure to buy, but certainly if I see a specific opportunity then happy with that. but otherwise will look at other low risk investments

What else do you consider low risk at the moment?

MTP
I think that there is a lot to pan out and that is why I am waiting and watching.
As posted in February I battened down the hatches. At that time I pulled back from exposure to the share market due to the uncertainties, and currently not rolling over term deposits due to fall in interest rates.
In terms of property I will be looking at a low attention demand property with reasonable net yields, but as I will be looking at a medium term of more than five years (bright line) capital gains are likely. However, I don't (unfortunately ) see the 50% fall in property prices as suggested by the likes of Foreign Buyer and Independent Observer.
I have cash just sitting there although I have shares in what I consider one low risk company which should do well despite the current downturn.
Note that this is not about my income stream - I have a defined benefit government superannuation scheme.

Did I say 50% P8 - I meant 80%. Feel free to use 80% next time you want to use one of my data points.

Cheers IO
Surprised you saw that - I thought you lived in a dream world! :)
It is just that I see a lot of unsubstantiated predictions on this site.
We wait and see how true some of these predictions are.

I think we all live in a dream world - you included. Central banks lowering interest rates and printing money into infinity and thinking everything will be dandy. Now that's a dream, but at least we're in it together right?

"I have a defined benefit government superannuation scheme."

Lucky you.

CN
I appreciate that I am very lucky.
It did cost me an arm and a leg to buy the ex-wife out at the start of 2002 especially to keep the house for the kids' sake - I was double lucky as house prices exploded here in HB shortly afterwards. Unfortunately many of my peers withdrew from the scheme when they wanted to travel or buy their first house.
To me, I traveled (twice for a year at a time when young and not working in either year) and it was about keeping a balance in life - living life but being prudent.
I am fortunate and really wish young people well and that is why I am supportive of FHB in my comments.

Don’t forget rates, insurance, maintenance as ongoing costs in your assessment

Albert
I am not a totally ignorant bunny.

Not sure the relevance of your post, my post was directed at the original poster who stated his rent was more than the mortgage.

Albert
My humble apologies then.
Your comments directly followed a post of mine (in sequence and time); so to save any confusion I suggest that you address your comments to who you refer.
Cheers

Thanks for your humble apologies, just next time try not to skimp on the humble. It’s quite clear from the text I responded to the original poster. Cheers.

"It’s quite clear from the text I responded to the original poster."

FYI, I read on my phone frequently. The comments section, can be difficult to follow when there are multiple sub-threads to different comments, and I do get confused as to which comment the responder is replying to. This is the reason for taking the specific comment that I am responding to, to reduce the risk of miscommunication.

"Positive: at current interest rates I would be paying less than my rent.

Negatives: terrified of financial oblivion if the market crashes and jobs are lost. Myself and partner work in a Govt job and for a health ngo - we feel relatively secure in our jobs, but you never know what could happen.

Really keen to know what interest.co readers think about this situation?"

Sftp,

Also be aware of the Peakers vs the Troughers.

There is a huge difference in their future financial trajectories.

The title is incorrect - it should be titled Valuations do matter.

https://www.irvinehousingblog.com/2008/08/11/timing-does-matter

After being aware of the Peakers vs the Troughers, and with that in mind, here is 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 $1,000,000 property purchase, $200,000 initial deposit, mortgage $800,000. (simple round numbers used for illustration purposes)

A) Scenario - property price rise:
1) property price rises 5% to $1,050,000, mortgage $800,000, equity $250,000, so 25% gain in equity value from $200,000.
2) property price rises 10% to $1,100,000, mortgage $800,000, equity $300,000, so 50% gain in equity value from $200,000.
3) property price rises 15% to $1,150,000, mortgage $800,000, equity $350,000, so 75% gain in equity value from $200,000.
4) property price rises 20% to $1,200,000, mortgage $800,000, equity $400,000, so 100% gain in equity value from $200,000.
5) property price rises 25% to $1,250,000, mortgage $800,000, equity $450,000, so 125% gain in equity value from $200,000.
6) property price rises 30% to $1,300,000, mortgage $800,000, equity $500,000, so 150% gain in equity value from $200,000.
7) property price rises 35% to $1,350,000, mortgage $800,000, equity $550,000, so 175% gain in equity value from $200,000.
8) property price rises 40% to $1,400,000, mortgage $800,000, equity $600,000, so 200% gain in equity value from $200,000.
9) property price rises 50% to $1,500,000, mortgage $800,000, equity $700,000, so 250% gain in equity value from $200,000.
10) property price rises 100% to $2,000,000, mortgage $800,000, equity $1,200,000, so 500% gain in equity value from $200,000. (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 $950,000, mortgage $800,000, equity $150,000, so 25% loss in equity value from $200,000.
2) property price falls 10% to $900,000, mortgage $800,000, equity $100,000, so 50% loss in equity value from $200,000.
3) property price falls 15% to $850,000, mortgage $800,000, equity $50,000, so 75% loss in equity value from $200,000.
4) property price falls 20% to $800,000, mortgage $800,000, equity is ZERO, so 100% loss in equity value from $200,000.
5) property price falls 25% to $750,000, mortgage $800,000, equity is NEGATIVE $50,000, so 125% loss in equity value from $200,000.
6) property price falls 30% to $700,000, mortgage $800,000, equity is NEGATIVE $100,000, so 150% loss in equity value from $200,000.
7) property price falls 35% to $650,000, mortgage $800,000, equity is NEGATIVE $150,000, so 175% loss in equity value from $200,000.
8) property price falls 40% to $600,000, mortgage $800,000, equity is NEGATIVE $200,000, so 200% loss in equity value from $200,000.
9) property price falls 45% to $550,000, mortgage $800,000, equity is NEGATIVE $250,000, so 225% loss in equity value from $200,000.
10) property price falls 50% to $500,000, mortgage $800,000, equity is NEGATIVE $300,000, so 250% loss in equity value from $200,000.

Govt is positioning a big lollipop fund heading into the election. I would keep my financial powder dry untill before the election. You will know if you have a secure job by then and sellers wanting g moonbeams will be getting depressed after a long winter drag of negative news. Conditional offer prior to the election so you can factor that result in would be my recommendation. Patience is a virtue.

Some more perspectives to consider for property buyers at the 30min mark.

https://www.youtube.com/watch?v=cOX69bB4vJY

Hi guys - as as active agent for more than 15 years - In the last week, appraisals coming to us without any “hunting”.

Vendors thinking to sell now whilst the market stats are limited and still pent up activity from pre lockdown buyers. In the higher brackets 2.mil plus, have seen homes sitting for 6 months prior to the lockdown unless priced correctly.

Most buyers enquires cautious - some over optimistic about the pending correction.

I am guessing prudent buyers should factor in a level of price reduction if purchasing today. And, if you miss out, so be it, wait for another opportunity.

Do you think the downward spiral of Interest Rates is an economic factor, or a Quid pro quo as money is brought into Magical being to raise the Inflation Rate to cater for those exposed to a Dream Bank, that works on Multiplication of its funds times a factor of 14.(approx).

To keep a simple return to reality I suggest, if the Interest Rates rose to a level charged 10 years ago, then we would see a vast difference in Rhetoric on this Page dedicated to Interest Rate deception by design and-Orr..... Accommodating the Super Dooper Rich Leveraged Borrowers ..en-masse.

I heard someone on the radio and they were looking at selling their house, and had been told be the agent to expect between 5-10% drop in prices. So it looks like some agents are lowering sellers expectations. I wonder if some agents are also telling the buyers the same thing? If I was looking at selling, I think I would try doing it now, although people buying and selling in the same market possibly won't be too affected by any house price drop. Just so much greed in the housing market IMO, house rices should never have increased the way they did, but the conditions set in place meant that they had to IMO

Here's my 2 cents from a Kiwi living abroad for 20 years in the US. During the Great Recession we lost 74% of the value of our house located just 5km miles (down the coast) from Donald Trump's Mar a Largo. Our average small home was valued at USD$284k before the crash and ended up at $75k 6 years later. It has not yet gotten back to that level. We live less than 1 km from the beach and have approx 1.5 million people around us and 6 million in the South Florida region. A continuous area of housing stretching over 120km down the coast. Currently the US is overdue for a correction as the last one started in 2006/7. Normally they occur "naturally" ever 10 years or so. So we are 3 year overdue. The wealthy and the rich make more more when things take a turn for the worst and then recover. The problem with the US recession was every man and his dog was buying real estate to get rich. However these days the US is a lot more resilient in real estate and conservative hence my house still hasn't gotten back to 2006 values. Can you imagine NZ house prices back at 2006 values? QE from the Gov. might just be able to print their way out of this, but its a massive massive issue. Saving the people from starving is one thing but propping up a entire countries real estate portfolio that punters have been feeding off of for the past 38 years straight might or highly I suspect absolutely definitely implode... It has to happen. It must reset and if it doesn't happen now I will be shocked.

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