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Although auction numbers are still well down on where they were at this time last year, the sales ratio is higher

Property
Although auction numbers are still well down on where they were at this time last year, the sales ratio is higher

Auction rooms around the country are coming back to life, with interest.co.nz monitoring 79 auctions last week (18-24 May) compared with just 12 the previous week.

Although the numbers are continuing to rise, they still have quite a distance to go until they are back up to where they were at this time last year (18-26 May 2019), when interest.co.nz monitored 226 auctions throughout the country.

However it's likely that auction numbers will increase significantly in June.

An interesting feature of last week's auctions was that although the number of properties offered was relatively small compared to the same time last year, the sales ratio was higher.

Of the 79 properties offered at auctions monitored by interest.co.nz last week, just under half were sold with sales achieved on 38 properties, giving a sales rate of 48%.

That was well up on the 35% sales rate achieved in the week 18-26 May last year.

Anecdotal evidence from agents suggests a level of pent up demand built up during the lockdown, from people who wanted or need to buy a property reasonably quickly and had the cash available to do so and that is likely supporting auction sales.

Prices also appear to be holding up reasonably well so far, with interest.co.nz able to match selling prices with Rating Valuations (RVs) on all but two of the properties that sold last week, and prices were higher than RVs on 71% of the matched sales.

Of course RVs should not be used as an indicator of market price and many RVs are more than three years old making them well out of date. But what the figures do suggest at this stage is that there has not been a major price collapse in the market.

Another noticeable trend since the market started opening back up after lockdown is that more agencies are now streaming their auctions live on the internet.

Although many vendors and potential buyers still prefer to attend auctions in person, a significant number are bidding online or over the telephone and it's likely that internet auctions will remain a widespread feature of the auction scene from now on.

Details of the individual properties offered at the auctions monitored by interest.co.nz and the prices achieved, are available on our Residential Auction Results page.

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93 Comments

Had a friend sell to a pre lock-down offer. They will live in a free family house for the next twelve months and then reassess. They are very happy.

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the government will make sure the largest form of wealth in NZ to hold its value.

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Only so much they can do I'm afraid. Not much room for interest rates to fall further.

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Sorry StuckAtHome,

But interest rates can go much lower.....

To be clear, they can go as far in the negative direction as they can in the positive direction.

TTP

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Fed has already come out and said not happening in the US. Do you think we might go there even if US don't?

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There is a difference between a negative OCR and negative RETAIL deposit rates.

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Hi Independent Observer,

American Fried Kentucky Practice doesn't have to apply to NZ.

What Trump does, Adrian Orr (or Jacinda) might decide against.

Thought you would know this, I_O.

TTP

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Pointy do you have anything intelligent to add or just your usual vague and vacuous comments. Just asking.

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Hi BadRobot,

I'm always vigilant when it comes to factually incorrect information appearing here - like the chap above who said interest rates couldn't fall any lower.......

That statement is BS. I don't like it when people attempt to mislead or deceive others. So I jump on them.

TTP

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RBNZ did say that neither depositors or borrowers would experience negative rates if the OCR was negative though. It would be the inter-bank lending rate effected. Clearly with a negative OCR, retail rates could go lower in that environment but they won't be charging retail depositors for keeping their cash at the bank or paying borrowers to borrow. And as per Andrew J's comment on another article, in an otherwise deflationary environment, even a mildly positive interest rate on deposits can be acceptable. Depends on the overall investment landscape and each individuals risk preference.

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Exactly.

Wholesale interest rates could go negative, whilst retail interest rates for borrowers remain positive.

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Doesn't seem to stop property investors rubbing their hands together in glee at the prospect of more welfare for them.

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Actually it's not a fact but an just an opinion. Both sides are guilty of spreading misinformation - frequently the real answer is we simply don't know - the issue is people will not admit that.

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Please point us an example of RETAIL deposit rates going into negative territory.

The OCR may go negative, but there is no precedent for retail deposit rates going into negative territory. Why? Because depositors will pull their cash out of banks, as it will hold its value better as hard currency than as an electronic deposit ... and that will collapse the banking system. Hence there is a limit to how far rates can fall.

As usual you claim to speak with authority, but are always light on evidence. You are the one being disingenuous.

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This is a game being played by Trump and the Fed. Trump wants neg rates and the fed don’t. They will bounce this around for a while before they announce they are introducing neg rates.

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A $1M mortgage at 2.69% is $934 a week. The difference between a 2.69% mortgage and a 1.69% mortgage is $117 a week.

At that level its not really about the interest rate. It's not markedly cheaper. It's about whether you are employed and can service the $934 a week ($4,050 a month).

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https://voxeu.org/article/swedish-experience-negative-central-bank-rates

Negative interest rates were once seen as impossible outside the realm of economic theory. However, recently several central banks have imposed such rates, with prominent economists supporting this move. This column investigates the actual effects of negative interest rates, taking evidence from the Swedish experience during 2015-2019. It is evident that the policy’s effect on the inflation rate was modest, and that it contributed to increased financial vulnerabilities. The lesson from the experiment is clear: Do not do it again.

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To be clear, they can't.

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"To be clear, they can go as far in the negative direction as they can in the positive direction"

I dont think so Tim

Remember when interest rates were 18%, cant imagine a -18% interest rate. There would be no depositors....

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Is that a moribund reflexion of the high rates of the past or a morduant thought about an challenging future? Wonder what the REA think?

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This just can't happen, at least for borrowers never will, even a very small negative rate will be offset by banks by charging fees to their customers. This is what they do in countries with negative rates.

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I'm not so sure. If deposit rates go below zero, then there aren't going to be any! Better off buying a safe and holding currency - I suspect a lot of deposits are already on their way to the Perth mint.

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Well, not really. This comment really shows you don't understand how the banking system works.

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The government can try and hold up the property prices as much as they can, we will see in the months ahead, once the smoke blows over

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This is against the long term interest of the country, so if they are a responsible government they won't

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Its going to crash one day that's for sure!

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I'm surprised that prices are holding, the volume of bad news and general market sentiment obviously hasn't sunk in for those who still have solid jobs, and the severe shortage of listings appears to be keeping competition and prices firm for the moment..

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Housing markets take months/years to fall apart.

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Housing corrections take around 18-24 months. Usually sticky on the way down.

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I was watching the dfa channel and they said it took about 3 years for the USA market to bottom out after the 2008 gfc,as much as 50% decline in some cases.

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Demand and unfinished business will see sales in May and June.
Then unemployment effect will kick in.
Expect 25% fewer sales in last 5 months of the year, than in 2019.

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mike
"That means approx April 18th for when housing market will freeze over." by mikekirk29 | 21st Mar 20, 9:51am
Doesn't seem to have happened Mike.
Your predicted decline for Auckland house prices for the end of 2019 didn't happen either.

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No response to my forecast.
No acknowledgement that house sales and price dropping commenced when I said it would.
Notice word I used for date of forecast "approx". You know the meaning of that word I take it.
Freeze over is a subjective term.
Intended, as most will recognise, to indicate when the turn comes in market.
Further forecast to annoy you. bit more:

Sales in May and June will lead to commentators saying its not too bad.
Then , in mid July the shit will hit the fan.
The lowest sales in last 5 years were in first 6m of 2017.
In the second half of 2020, sales will be 25% lower than then.
Final sales for Auckland for 2020 will come in approx (sorry there's that word again) 17,000.
Prices will fall 12-15% by end of 2020 and 25% (median price that is) by end of 2021
Prices will fall more outside Auckland

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So, April's drop of 72% in sales for Auckland is not in the ball park of "freeing over " then.

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No Mike
You were talking prices, not number of sales.
You were comparing the fall in the housing market to the fall sharemarket prices.
What have we here - " . . . and prices were higher than RVs on 71% of the matched sales".
I am expecting some fall, but so far 71% post lock down still selling above RVs that is a surprise - and hardly could at best be called a chill and definitely not a "freezing over".
Not surprising a fall in sales due to lock down - not rocket science.
Cheers

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Current construction projects will take a while to finish, then the pipeline of new projects will be thin on the ground for many. Expect the construction industry to go through tough times I'd say. At the same time, the prices of existing houses may drop at least double digit percentages.

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"One in three renters face housing stress and are at risk of defaulting their rental payments, while more investors are selling their rental properties before prices drop even further.
The number of tenants who are struggling to pay rent, mostly due to a loss of income as a result of the lockdown (rises)."

https://www.afr.com/property/residential/investors-sell-up-as-rental-st…
From Aussie, of course, but how different is NZ? Among the casualties born of loss of income are likely to be.....real estate agents and their associated industry, as uncertain owners try to sit it out and commissions based on turnover, fall.

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bw
“ . . but how different is NZ?”
Not saying it won’t apply, but I heard this bleating throughout 2017-19 that sure as night follows day Auckland was going to follow the big time drops in the big Aussie cities. The sarcastic “But we are diffrunt” was often used; but we were different.
Just as the Auckland market is quite different to Queenstown and regional centre markets, so may the NZ market be different to Aussie and US. As an example, whether right or wrong, it would seem that RBNZ is much more conscious of housing for market stability purposes than RBA and Fed.

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RBNZ is much more conscious of housing for market stability purposes than RBA and Fed.

Not sure what that means. What has the RBNZ done any differently than other central banks and what is their thesis on house prices for market sability (I assume you mean the strength of the broader economy)?

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Ok, I'm going to lose the will to live reading 6 to 12 months of dmg house market crash paranoia, so how about we make it interesting and run a sweep? $100 per person, NZ house price index as at 30 Nov 2020 with the proceeds going to Interest since we all free ride on their journalism in tough times. The closest has bragging rights.

Maybe like if you think that's a good idea and they could run a story on it?

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The problem you have is you make a predition and the govt intervenes

If we were to say that no further intervention from the govt or RBNZ I would predict prices across the country to be down 10% from now to end of Nov

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Oh, ok that explains it. You see, I actually thought all the predictions here were real and not some parallel universe where central banks or Governments don't exist.

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Great idea but no takers… hmmm what happened to all the outspoken crash predictors?

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Precisely Yvil, why don't you and I shout them drinks anyway?

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Depending on the price, there might be some commenters on interest.co.nz willing to buy 10 year put options from the property price bulls.

Hit the thumbs up if interested ...

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The real price or the parallel universe price? But sure, I'll make you a price. I need the index, the time to expiry, your size and your strike.

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What is the underlying price reference?

1) 10 year maturity
2) Amercan style
3) Monthly market to market
4) Monthly cash settlement

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I'm a little bit lost, European only please (no one trades American). 10y, that's a little too long my friend - how about 6m or 1y?, we can only mtm when the index is published, cash settlement on expiry.

A single expiry. Pick an index and a strike, let's go.

Is this going to be like the property market where you expect to buy it for half it's value???

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Te Kooti,

Not even remotely interested in a short term maturity.

"no one trades American" - US listed options are American style.

Also independent third party valuation on the option after initiation of the trade.

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But we're dealing bilaterally not, on an exchange? Show me an OTC American (not equity)

A 1y strike is very long duration, why do 10y when we can just keep rolling annually champ?

Why do we need a 3rd party if we are using a published index?

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Te Kooti

1) Only interested in 10 year maturity. Uninterested in rolling.
2) "Why do we need a 3rd party if we are using a published index?" - you very well know why. Nice try.

Since I'm the option buyer, here are the terms:
1) 10 year maturity
2) American style option
3) Monthly market to market
4) Monthly cash settlement
5) independent third party valuation on the option after initiation of the trade

Otherwise uninterested in what you're selling.

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Ok hot shot, show me a 10y option somewhere, good lord. Most ETO's are 3 months, 10y is you just trying to avoid dealing. It makes little to no difference to buy a rolling 3 month.

Your second point I genuinely don't understand. I will only make you a market on an index that's published by a credible 3rd party. I don't ind who.

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I ain't no hot shot - just a newbie.

This is an OTC option. All contract terms are negotiable.

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That had been established.

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Yes, I'm not an academic.

Heck, who knows if I even finished intermediate school.

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Do you want to exchange delta?

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"Do you want to exchange delta?"

uninterested.

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Te Kooti I did go see Interest and shout them morning tea and scones before last Xmas

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I knew you were a good sort, let's shout them a night out on the pi55, but they have to post a photo!

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Still failing to nuance difference between a crash and 20 month decline coming which is my forecast

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Hell yeah!

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Have heard from a real estate agent and barfoots in the Eastern suburbs that houses are being sold to overseas kiwi’s wanting to return home.

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Going to be quite a bit of that. Particularly, once the wage subsidies in the countries they live in finish up. Hopefully, we bring back some of the best kiwi brains to kick start our economy.

I have a mate in the UK on 80% of his wage. House is sold, ready to come home. But is still earning a wage there for the time being. He's a professional & uncertain about getting a job here.

All very well wanting to come when there is plenty of jobs. But when there are hiring freezes at many companies, it's easier said than done.

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Nowhere to hide........

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Just rang my Eastern Bays RE friend to check. He's sold 3 since L2 and has another 3 expected to sell this week. Said it's the best market he has seen. Some returning Kiwis e.g. ex HK and some who cashed up pre Lockdown. I suppose we will find out prices vs CV when the next report comes out. If nothing else it will allow good price discovery.

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But is it price discovery. It may be for a short period but as others have pointed out this is a long game and NZ has only just started the race. It all depends on income and the ability to service debt (if you have debt). The landscape may be different in 12 / 24 months time.

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It's the price discovery at the moment. That's all we can say with any certainty. I expect prices to soften, but then I expected the NZ50 to drop further as well. We will find out.

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In other words no one really knows........

and yes in time we will find out.

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" Said it's the best market he has seen. Some returning Kiwis e.g. ex HK and some who cashed up pre Lockdown"

FYI, heard anecdotal story from a mortgage broker - he normally gets 2 applications a month from Kiwis based overseas. Says last month was processing 25 or so applications, from Kiwis based overseas looking for investment property in NZ (they are not planning on returning to NZ)

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Wonder if they're all prepping up with preapproval and hoping to buy after a drop.

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A bit early to be buying on the dips and pre approvals won’t be valid for long.

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True.

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I thought banks stopped lending against foreign income some time back.

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"I thought banks stopped lending against foreign income some time back."

Yes, that is my understanding also.

So either the overseas based buyers are:
1) having lower LVR's based on the investment property's rental income stream (and thereby requiring a higher equity amount) or
2) the mortgage broker is applying to non bank lenders and they may be lending higher LVR's.
3) other options?

Don't know if the overseas based buyers are willing or able to borrow in their own country of employment and remit funds to purchase property in NZ. Obviously currency mismatch between asset and liability.

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They could also be paying cash.

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"They could also be paying cash."

Yes, that is also a possibility.

Here is what the mortgage broker processing the applications wrote about the non bank lender's current lending criteria:
1) 80% LVR investment at under 4% even for Kiwi's and Aussies living in Australia buying here in New Zealand.
2) Kiwis and Aussies in Australia get to 80% and Australian income counted. Outside of Australia, 70% and as long as income verified no drama.

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Never believe interested words in a time of crisis.

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I mean it's astounding really isn't it - if historically high house prices, both in terms of current asking value and also as a multiplier of wages (a bubble using any historical definition) can't collapse after a pandemic, the economy being shut for 8 weeks and daily announcements of job lay offs - then they can't ever collapse. It's not a market anymore, it's an artificially propped up targeted government wealth creation scheme. If you already own, if you can scrape your way in, if your parents can shoehorn you into a home via their equity, you are now guaranteed intergenerational wealth. The government will never let your investment fail - even if it means locking the rest of your fellow citizens into a state of penury.

Property owners (as a whole) aren't cleverer or harder working or more deserving of wealth than other investors - they are however treated as a special, protected class. I guess, as always it comes back to Orwell, All animals are equal, but some animals are more equal than others.

How people put up with this from a Labour government is beyond me.

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It's much too early for these kind of statements. Property markets take 1-2 years to correct so its far, far too soon to make any calls either way. Same with the stock market.

I agree that property investors are no more deserving of protection than other investors but it is not the investors that RBNZ are worried about saving, it's over leveraged home owners. Central banks are still a pretty new phenomenon, inflation targeting is newer still and QE is a babe in arms. We still have no clue what the long term effect of it will be. It would be too soon to even claim conclusively what the post-GFC QE achieved because arguably we are all still experiencing the unintended consequence of it still.

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"...Hardly anyone sells below what they paid"
I would!
In fact, the previous owners that we bought the place we now own did as well.
Because...they too did the same thing as us, and it allowed them to upgrade at a lower change-over price.
That's all that matters for those looking to keep a home - the change-over price.
It's like buying a new car. It doesn't matter what the sticker price is or the trade-in value offered. All that matters is the difference in between.

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I have purchased based two of my houses over the years at less than the last owner. All about timing.

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NZ Dan's link said 97% of people sold the house they bought at a profit, I guess you are the 3% bw.

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"Doom and Gloom merchants."

I think I understand your perspective. Is this it?

1) media reports on potential downward property prices is "doom & gloom" merchants.
2) media reports on potential upward property prices is quality news reporting?

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Affordable housing for more New Zealanders is apparently doom and gloom.

What a warped perspective.

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Wait and Watch.

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Yeah… I read that at least once month, every month… for years now, wait and watch... the problem with waiting and watching, is that you don't get anywhere …ever

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Yvil, I'm sure you know full well that at certain times waiting and watching is the wisest move. For example, after a global pandemic, large-scale nationwide redundancies, or predictions from multiple financial institutions that property prices will fall. It is simply illogical to say that it is *always* the time for action.

Sometimes it is smart to make a move, and sometimes it it not. Would you genuinely, hand on your heart, say to an FHB today, 'Now is the time to buy!'? If so, I question your sanity, as well as your ethics.

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"If so, I question your sanity, as well as your ethics."

Big_Data,

This is the interesting part.

1) Yvil is actively telling people to act (and implicitly buy as there has been no explicit comment by them telling owners to sell).
2) Meanwhile they have chosen to sell their multi-million dollar property in Auckland last week.

I find that inconsistency in behaviour both morally and ethically wrong. Actions speak louder than words. I thought that Yvil was genuinely well meaning, however it seems that I was clearly wrong. As the adage goes, "Fool me once, shame on you. Fool me twice, shame on me."

Seen that behaviour many times elsewhere. Some observers might see that inconsistency between their words and actions, as classic "pump and dump".

The message to all potential owner occupier buyers, CAVEAT EMPTOR.

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Very true CN. And I stand corrected: now *is* the time to act, if you have any intention of selling up within the next 3 years. Better to do it now than wait 6, 12, 18 months. There were many, many people in Arizona, Florida, Nevada and California who regretted not getting out when all signs pointed south. They didn't want to 'lose' that little gain they had made in the last couple of years because prices had already softened.

By the time they realised how bad it was going to get, it was too late...but it was set to get worse. Investors then dumped billions of dollars of homes into the market, many via foreclosure or short sale, which tanked it for even the sensible and cautious home owner who had put down 20% or more, and invested in significant home improvements. This is the reality of FOMO. And it is coming to a street near you soon.

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Today's auction harcourts chch, 13 sold with half under rv, 15 passed in

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Auctions on Mar. 58>RV, 28<RV, 57 passed in

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