The REINZ national median selling price dropped from $680,000 in April to $620,000 in May

The REINZ national median selling price dropped from $680,000 in April to $620,000 in May

Housing market activity came back to life in May as lockdown restrictions eased, but prices were weaker, according to the Real Estate Institute of NZ.

The REINZ recorded 3990 sales throughout the country in May, a near trebling from the 1371 recorded in April when Level 4 restrictions brought the market to a near standstill.

However, May's sales were still down by 46.6% from May last year (see chart below for sales volumes in all regions).

Prices were also weaker, with the national median selling price dropping from $680,000 in April to $620,000 in May (-8.8%), although that was still up by 6.9% compared to May last year.

Prices showed a more modest decline in Auckland where the median slipped from $925,000 in April to $910,000 in May (-1.6%).

In the Wellington region the median dropped from $730,000 in April to $677,510 in May (-7.2%) and in Canterbury it rose marginally from $459,000 in April to $460,000 in May, although it remained well below the peak of $489,000 set in March.

Prices were firmer in many regions, with record median prices achieved in Waikato, Taranaki and Tasman in May (see chart below for the price trend in all regions).

The REINZ House Price Index, which adjusts for differences in the mix of properties sold and is considered a more reliable indicator of the movement in prices than either median or averages, declined by 0.5% in May compared to April and was down -1.6% compared to three months ago.

Over the last three months the HPI has declined by 2.1% in Auckland, in Wellington City it is down 4.1, in Christchurch it's down 2.1% and in Dunedin it's down 3.5%.

The length of time it took to sell a property also increased significantly in May, with the median number of days sell increasing from 41 in May last year to 58 last month.

In Auckland the median number of days to sell increased from 45 to 61 over the same period, which was the highest number of days to sell since records began.

For the rest of the country excluding Auckland, the median days to sell increased from 38 to 57, the highest number for the month of May in 19 years (see chart below for the full regional trends).

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Median price - REINZ

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NZ total
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Tasman
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Volumes sold - REINZ

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Days to sell - REINZ

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239 Comments

Ouch.

It is still up more than 10% from the 2018 value. I think you have to delay Ouch.

12
up

Til next month

16
up

He's back with a new name!

Which zombie do you think this one is?

@newbie. Sales volumes down 46% on May last year would suggest that new money creation has fallen off a cliff. That will bring a big ‘Ouch‘ further down the track! Falling prices and a near halving in transactions Is not a good sign for the future of the broader economy.

That is assuming we have an economy beyond housing.

I admit your headline is not misleading Greg but I will still quote the better data of the HPI:

HPI up 7.9% NZwide, up 8.8% in NZ excluding Auckland and up 6.8% in Auckland

40
up

Nothing wrong with the headline.. except it doesn't suit your narrative.

Your comment is disingenuous, you are always the first to say that the only measure that matters is HPI

19
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I'm disingenuous? It is you that went back and editted their comment which originally had nothing to do with HPI. (Check the timestamps people)
And since you bought up HPI. Auckland, -2.1% in 3 months, NZ -1.6% in 3 months. So if we extrapolate that out to an annual basis, -8.4% and -6.4%. Not that i'm at all suggesting that'd be a smart thing to do.

Auckland city, -3.3% in 3 months.. ouchies.

Yes I edited my comment to say "I admit you comment is not misleading Greg" and you call that being disingenuous...

11
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I stand by what I said. It didn't suit your narrative so you tried to deflect to yearly figures when the big events that are major drivers in the market only happened in the last few months.

13
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He was following Bindi who was quoting the annual change left and right today. She is either naively incompetent, or grossly negligent in her blindness to the reality of what's unfolding. As an industry spokesperson, I'm not sure which is worse.

Hardly. 2 months ago HPI was up 8.5% YoY in Auckland.
It's early days, so hard to be too sure, but the headline seems reasonable to me.

I admit Greg's headline is not misleading, I'll edit my comment now

50
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The figures you refer to are annual figures, which do not reflect the current trend. I'm afraid it's your comment which is misleading Yvil.

I believe we both know that comparing different months is unwise Greg. Me quoting the HPI cannot be misleading, it's a hard figure, the widely accepted best measure. A comment can only be misleading when interpreting data so I admit that your headline is not misleading either

17
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Yvil, Do you realize that a once in a hundred year pandemic has just occurred which is causing economic upheaval around the world. It makes sense to look at the HPI from just the last three months given that a "black swan" has arrived.

Do you really believe its worth looking at an annualised figure, when during the past couple of months the world has been hit with the largest economic shock in 100 years? People are trying to figure out what will happen over the next 6-12 months, and the data post lockdown is going to be our best indicator of this.

Next phase in the cycle Worldwide bankruptcy and insolvencies.

Ninness 3:16

11
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Why did you not keep your post up Yvil? Didn’t won’t to make a fool of yourself again?

The Gareth Morgan of interest.co.nz

Yvil, your modified comment is still misleading. You need to put "year on year" after, otherwise it's obvious that you are trying to mislead readers to your own narrative.

As widely expected, prices show signs of weakening in some regions in the wake of Covid-19 & winter.

Auckland continues to prove pretty resilient.

Notably, as economists say, house prices are "sticky-down".

Have a good week!

TTP

Dropping at 1% per month(HPI for City and Waitakere) over the last three months is pretty resilient? I bet there are some property owners hoping their property stop being "resilient" pdq.

39
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Positive signs for those hoping for a better future for our younger generations.

21
up

In other words: DOOM AND GLOOM

If being called a doom and gloomer, by those with huge financial vested self interests, ultimately saves the financial futures of owner occupier buyers who:

1) avoid being collateral damage,
2) avoid taking on too much debt, and high debt service ratios for the next 30 years,
3) avoid the mental and psychological toll of financial stress and their families, children, etc (and avoid the risk of potential suicide)

Then so be it.

It is all for the greater good of our fellow hard working owner occupier citizens in our community, rather than those motivated by their own financial self interest.

Amazing what happens when central banks keep interest rates artificially low. Who'da thunk! While I wish house prices would drop I wouldn't bet on it given the cheapness of credit. Depends how unemployment pans out... and if things get worse it wouldn't surprise me if the one trick ponies in Reserve Bank will pay the banks to lend.

As predicted by many, Queenstown-Lakes District was the hardest hit. HPI down 6.1% in a month, and down 4.2% YoY.

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

Strong uplift from sales activity from April to May.... It is a positive sign...... Really what sort of comparison/ positive is it as it is bound to be much more in May than April when the country was under lock down.

Have to wait till election to know the direction of the housing market (Possibility that historically low interest rate may soften the market without any meaningfull fall or unemoloyment and fall in business may have deep impact on housing market. So is wait and watch)

28
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Here comes the freefall. Hold on and watch our oppressor class panic. Fairness is about to return to NZ.... Lovely!

15
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The sad part is the people about to be hardest hit are those FHB who bought in the last couple of years. These aren't the "oppressor class", they will be largely made of up of people just trying to buy their first home to live in.

11
up

More victims of the spruiker oppressor class. These FHB's should have waited. It was obvious that the market was about to crash, with or without a pandemic.

As a FHB, I have a lot of sympathy for those caught with their pants down. The 6 years or so have been really unfair. That said, I've not too much sympathy for those out there right now. How can you be that oblivious to the risks?

Take it with a pinch of salt, but from REINZ report on Wellington - "First home buyers who have had pre-approvals prior to lockdown have a sense of urgency to purchase in case their pre-approvals expire, as they must start the process again"

18
up

I would have less sympathy for those FHB if there wasn't such an overwhelming amount of disinformation and propaganda shoveled down their throats from media outlets with strong ties/depencany on advertising dollars from realestate/banking industries. Its unrealistic to expect everyone to be able to analyse the underlying data, and have the confidence in your conclusion when its contradicts what you read and hear from the media.

As with the bubble in Ireland, it wasn't until after it all came crashing down anyone bothered to look into the how complicit the media were in stoking the bubble, and i'm sure the same will be true here.

Yes, the NZ Herald is particularly guilty, as has been mentioned on this site before. Here is today's offering:
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=123...

12
up

That woman should be sued.

I agree Miguel. The urge to buy is very strong. I have a couple of FHB friends actively looking, seemingly oblivious to the economic turmoil the pandemic has already caused. When you *want* things to be a certain way, it's very easy to miss the truth. The media are owned by the advertisers, of course (there is really no other way), and the advertisers are all vested interests. Wouldn't it be great if there was a genuine, warts and all news source out there that would get to the bottom of the data. Imagine what would happen to the market if the truth was spread as widely as the lies and bs.

Well this site removes all the vested financial interests at least. It’s our job to disseminate this non bias information to as many of our friends as possible.

…and make sure "your friends don't get ahead in life" (makes oneself feel less inadequate)

17
up

So everyone should buy more and more houses to get ahead right? Get ahead of who or what? Morally bankrupt people seem to roll this bs out as some sort of mantra.. "I brought another rental coz you know 'I need to get ahead'" without ever thinking of the implications they have on greater society.

What a deluded comment. You’re saying that the only way to get ahead in life is to listen to people with vested interests? If that’s the kind of people you associate with Yvil then you need to get out more.

15
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Mighty rich coming from the insecure “man” who has to plaster his capital gains over this website.

Rich indeed, very rich : )))

"Well this site removes all the vested financial interests at least"

I have heard anecdotal stories of the comments section of other media sites editing out any mention of the possibility of property prices falling when the probability of this outcome was low (say 2016-2017). As a result, readers were being denied being made aware of potential property price risks, and hence this resulted in a less informed buying decision, and a buying decision heavily influenced by the property market promoters and those with a huge financial self interest.

This all contributed to maintaining buyer confidence in the property market prices which led to FOMO, and active buyers willing to bid up prices at property auctions.

Agree Miguel.... there are plenty of interviews on youtube where property was discussed on TV in Ireland. The similarities in the narratives both here and in Australia are concerning too.

It isn't even obvious that prices are about to crash now, let alone 1-2 years ago. Not that I'd be surprised if there was a 10, 20, even 30% drop in the next year or two, but don't count your chickens until they've hatched.

It isn't obvious, no. But it's become very likely. We've waited this long, what harm will another 6 months do?

No argument here - the market is much more fragile than it was at the start of the year. My best guess is a ~10%, maybe 20% drop nationwide. But hey, there's plenty who in mid-March would never have believed what's happened with the stock market. Anyone pretending that virtually anything is 'obvious' when predicting future market levels has a serious lack of self-awareness - nothing is guaranteed. Make your best guess and position yourself appropriately, sure, but always be prepared to be wrong.

Anecdotally, I have been looking for a house in Chch and open homes are fairly busy and offers are being made. Not sure if this will peter out once reality sets in.

Wise words. I’m a natural pessimist and am out of the money on every position I took expecting the apocalypse.

24
up

One of those FHB's who took the plunge and bought just before Covid-19 emerged here. It is pretty galling to be called essentially stupid for taking the plunge and buying a family home especially given how much we ummed and ahhed, knowing the property market was overpriced and have waited and watched for years when whispers of crashes never came to fruition. For those that apparently knew this was coming, how? How could we have predicted the clusterf**k that is Covid?

Please don't write us off as morons. Despite having well paid jobs and a healthy deposit, we still couldn't live with the eye watering debt levels that buying in Akld would have meant, so shifted to the south island after securing transfers with our respective employers. We did everything we could to purchase sensibly and are gutted that we have likely bought at the top of the market. At the end of the day, who can wait forever, we have young children and wanted to be home owners.

Sometimes this comments section seems completely based on theoretical arguments, by people who have obviously already enjoyed the benefits of home ownership for some time now....

You will be okay On the fence. Saved by the low interest rates.

It’s a miracle that one of causes of the problem, low interest rates,is always the saviour, but I guess when the system is under pinned by the miracle that debt is money and money is debt, it makes sense. What a sinister scheme our economies have become. Lucky there is always a future generation to exploit.

"How could we have predicted the clusterf**k that is Covid?" Sure, but my comment said about those out there now - in the post covid environment. I tried to buy a house myself just weeks before it hit us. No one's calling you a moron.

"... by people who have obviously already enjoyed the benefits of home ownership for some time now"
My wife and I have been going through the same struggle for years, and are still renting.

Edit - Sorry I realise you weren't responding to me. That being said, I'm in the same boat and get where you're coming from.

Hi Northman, no definitely not directed at you or necessarily any individual commenter. More just wanting the FHB perspective represented a bit more here....

Good luck with your property search. If I was you I would be feeling humbly optimistic about potential bargains down the track....

OTF, don't listen to the countless childish, insecure, envious comments on here. You will be fine, enjoy your house, be proud of it and don't let the miserable sods on here get to you. Just remember you will be infinitely better off than them

21
up

Back to bashing others views that don't fit with your confirmation bias (including the envy line..) even though you just tried to take the moral high ground earlier by saying that people come here to learn others views as its about 'helping you make financial decisions'.

Do my views not count because they don't fit your confirmation bias? And therefore other people should dismiss them as well?

And what happens if you don't have it right - per your advice above. And in the next 12-24 months we see the bubble collapse, like many other property bubbles have done so in the world, would you be willing to stand by your views? And if that unlucky FHB now lives in significant negative equity? How is that being 'infinitely better off than them' than those who are being cautious in these times of significant doubt?

Covid was the pin, not the cause. Plenty of good info out there highlighting the bubble prior Covid.

I'm in the same camp.
People will know late last year I was predicting moderate price growth this year, then a fall from 2021 / 2022.
I thought the fall that I saw coming (10-20%) would at least be largely compensated by the gains I expected this year.

As it turns out, I got what I think is a good deal in November, and prices increased 4-5% before covid. So I don't think I'll lose much, especially as I'm picking 'only' a 10-15% fall in Auckland.

It's good to have one's own place.

I might feel a sense of regret though if prices dropped 20-30%... I just don't think that will happen, but time will tell.

Fingers crossed for that 10-15% pick Fritz.

BTW, what do people use as the most reliable indicator of value? We've been watching the homes.Co.Nz estimates tick up even in the middle of lockdown and wondered what the hell is happening.. Just delays in data I am guessing...

~3 month delayed data

Otf, I bought a house in a nice part of Auckland 3 months before the GFC started in 08. I rented it out, GFC happened, pretty cr@p timing obviously. Prices didn't do much for a few years and then our circumstances changed so I sold it and it went up 33% in 6 months, turned out to be a fantastic investment. Don't make the mistake of getting into a negative mindset, hang in there and it will all work out.

19
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I'm sorry, the idea that 'mindset' is a thing that matters is pretty silly. The fact that until now I was unable to afford a house because prices were going up annually by more than my entire take-home salary was not caused by my 'negative mindset.' And there are people who have bought houses very recently who will lose them because of the coming recession - the idea that things will all work out if you just 'hang in there' and 'avoid a negative mindset' is pretty cruel really. It's bordering on blame-the-victim.

I thought it was pretty obvious I was referring specifically to the person commentating, not in general. I am quite aware a mindset doesn't "magic" up a deposit. I'm not blaming anyone or being cruel, not trivialising anybody. You sound so totally negative that it could be clinical.

On the contrary, I'm feeling pretty positive at the moment given my situation. But I'm aware of the fact just as when houses were going up, bad news for me was good news for other people, and now it's the reverse, and that in both cases 'mindset' has bugger all to do with it.

"You sound so totally negative that it could be clinical."

Te Kooti

Stop the name calling, and judgements on a person's personality. That is entirely unacceptable behaviour. People in New Zealand should expect much better behaviour from academics, and university post graduates. Instead of the name calling, focus on improving the quality of your rebuttal.

The name calling behaviour, and judgement on a person's personality is more of a reflection of the person making the comment.

He is relentlessly negative and I haven't called him any names, but thanks for expecting better of me!

More seriously, his mindset is such that any advice, encouragement or mentoring would be dismissed with total disdain and it would be a pointless exercise.

Te Kooti, you've suggested there is something clinically wrong with me on the basis of a comment. That's a pretty crappy thing to do.

I made a comment about how much I dislike it when people talk as though 'mìndset' makes a difference, and gave my reasons. You seem to have taken that very personally and resorted to personal attacks and sweeping generalizations about my mindset in response.

Point taken. However, it was very obvious I was passing on my experience directly to another poster in an effort to assist them and, not only did you discredit it, you questioned my motivation. If you want me to take you seriously, which I am very happy to do, please be constructive. I am not a mindless property spruiker so please do not treat me as one.

I wasn't questioning your motivation. What I was doing is explaining why there are problems with the idea that 'mindset' matters. Which is why I referred to the 'idea' in my comment.

If you want me to take you seriously, please refrain from personal attacks. And if you do indeed take the point that it was a crappy thing to do, the gracious thing to do would be to apologize rather than follow with a patronizing comment about the conditions under which you are 'happy to take me seriously'.

Yep. With all long terms of investment assets, just buy and hold (property, low-risk index funds). Does it look like you bought at what will be the most recent bottom? Maybe not. But ultimately who knows. As long as your jobs are secure, It's your family home so presumably weren't planning on moving for a while. After every recession in history, there has been an expansion. So will right itself eventually.

Great comment that really highlights what a tough position FHB's were in, and why those that don't have the stable jobs or equity you have, are unfortunately going to be the first that suffer.

Sounds like you did the all the right things, by buying in a less expensive market with a good deposit. I've been saying for a long time its not a bad time to buy, but only if you have the equity and stability to ride out any correction.

It's just a shame we are living in a country that has taken a basic human need (shelter) and commodified it for the greed of a small portion of the population. The only factors you should have to consider when buying a home is whether you are in the right life stage- you shouldn't have to worry about a bubble thats primed to burst. Allowing the property market to become a boom (and bust) market is just a horrible outcome that makes the country worse off in aggregate.

"The only factors you should have to consider when buying a home is whether you are in the right life stage- you shouldn't have to worry about a bubble thats primed to burst. Allowing the property market to become a boom (and bust) market is just a horrible outcome that makes the country worse off in aggregate."

Exactly. Hard working owner occupiers should not be collateral damage as a result of the huge vested financial self interest.

Many commenters have warned of elevated property price risks to potential owner occupier buyers on interest.co.nz so as to allow potential owner occupier buyers to make a more fully informed buying decision, rather than a buying decision based solely on biased narratives of those with huge vested financial self interest.

Those potential owner occupiers are then able to make their choice, and act accordingly. People are free to make their choice, however they are not free from the consequences of their choice.

Good on you for doing what you felt was right for the fam (and especially for avoiding Auckland debt levels!)

Ultimately, paper value now is irrelevant to you unless you want to refinance, top up or move. Just use the historic low interest rates to deleverage.

It does suck for you On The Fence. I think the spirit of the comments is more focused on rebutting the insane propaganda of the incredibly small number of information sources NZ has and also the bored real estate brokers, mortgage lenders and ex taxi driver landlords that post here claiming that housing is a zero risk investment.

Bottom line it is ok to make even a dumb decision with your primary residence. You need somewhere to live and NZ landlords have behaved outrageously (a lot of good landlords too but wow there are some evil cretins out there). Stupid is buying extra properties in recent years. That is reckless and the sole motivation is a belief in endless price appreciation.

"the insane propaganda of the incredibly small number of information sources NZ has and also the bored real estate brokers, mortgage lenders and ex taxi driver landlords that post here claiming that housing is a zero risk investment."

Reminder that these are some reasons given in the mainstream media, property market commentators, property market promoters, bank lending promoters masking as bank economists, real estate agents, property market mentors & other sources as to why property prices in Auckland will not fall by much and that there is a low probability that property prices will fall dramatically:

1) during the GFC, house prices in Auckland fell only 7-10%
2) over the past 50 years, house prices in Auckland have averaged 7.2% per annum (or commonly referred to as house prices doubling every 10 years). This trend can be expected to continue into the future - https://youtu.be/Agp9xFWoBX4?t=172
3) there is a shortage of underlying housing in Auckland, so property prices won't fall by much - https://www.interest.co.nz/property/97513/auckland-councils-chief-econom...
4) there is a growing population which means that there will be more demand for houses - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
5) we have inward immigration which means more demand for houses
6) Auckland is an attractive city with an attractive lifestyle - that makes it desirable and attracts foreigners to move to Auckland and hence raise the demand for houses
7) lower interest rates are supportive of rising house prices
8) lower interest rates make debt servicing easier for borrowers
9) Low interest rates were also forcing retirees and those nearing retirement to look for investments that would produce income, such as rental property. "Plans of the baby boomers to retire and live off a conservative yet well-yielding portfolio have evaporated with low interest rates," he said. "[They] are seeking assets and buying investment properties. They are also seeking assets they can hold and live off of for three decades in retirement rather than just 15 years given advances in health and medicines." - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
10) we mustn't forget either the vested interests in ongoing stability. No government, central bank or trading bank with mortgage exposure wants materially lower house prices. Nor does an incumbent Beehive want falling house prices going into an election campaign https://www.stuff.co.nz/business/110499233/think-house-prices-are-going-...
11) the economy is doing well, with low unemployment - https://www.stuff.co.nz/business/110499233/think-house-prices-are-going-...
12) there has been insufficient construction of new builds to meet the housing shortage - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
13) there are high construction costs to building a house. House prices cannot fall below their construction cost. - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
14) people don't sell their houses at a loss - https://www.stuff.co.nz/business/106883553/house-prices-have-fallen-but-...
15) continued inflation means that house prices will continue to rise in the future
16) The fact is, debt levels have barely changed from the beginning to the end of those 10 years, compared to GDP levels, compared to household assets, compared to household disposable incomes. And much more importantly, debt servicing is very much easier now, an item that is almost universally overlooked. We are not pushing out to unsustainable levels now, and even if they creep up a little, we are far from that point. https://www.interest.co.nz/opinion/95894/if-you-think-new-zealands-house...
17) in aggregate household debt servicing is low in New Zealand - currently at just under 8% of disposable income of households - https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt
18) property market participants & commentators who have been correct in their predictions about recent property price trends have more credibility and hence their predictions of upward prices are believed by a wider audience (such as Ashley Church, Tony Alexander, Ron Hoy Fong, Matthew Gilligan, etc). - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
19) previous warnings about a house price crash have been wrong - property prices have continued rising upward significantly since these warnings were given, so there is little reason to believe these warnings.(such as Bernard Hickey) - https://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland...
20) its unlikely Auckland prices collapse. I think the main two reasons though are:a) Affordability has been this bad, and worse, in the past and it only resulted in about a 10% drop. b) The number of homes built over the last decade has been too low and will take some time to recover - https://www.interest.co.nz/property/100670/housing-market-continues-hibe...
21) returning New Zealand expats will buy houses in NZ -
22) NZ is a safe haven from COVID-19, etc - expats will buy houses in NZ - https://www.theguardian.com/news/2018/feb/15/why-silicon-valley-billiona...

You did the right thing. Ignore what others say.

You bought a home for your family for the longterm. Be glad you live in a great place.

"These FHB's should have waited." Sometimes waiting isn't that easy though; I've been renting for over 2 years now (while negotiating a separation/divorce), and since the end of last year have been actively trying to purchase my "first home" as a single Dad. Just before Lockdown I was getting desperate too; after a while, the time and effort of dealing with RE agents, valuers and going for auctions becomes overwhelming. Each unsuccessful auction was costing me ~$1.5k - $2k, and all the while I was watching the house values climb. I was also starting to stretch just to get into a property just so I could get on with my life and have a secure home for myself and the kids.
Now I'm glad I was outbid though!

"Each unsuccessful auction was costing me ~$1.5k - $2k"

This is a huge entry cost for participants just to get into the arena and be able to participate in the auction. The entry cost for interested potential buyers shouldn't be this high. Imagine potential owner occupier buyers being outbid and losing out on say 3 auctions - that is $4,500 - $6,000 effectively down the drain. How can this cost be reduced for potential owner occupier buyers who miss out?

When property market prices are rising, it certainly contributes to creating FOMO by buyers at auctions.

While living in Canada for a number of years I tried to explain that in NZ properties are auctioned. Looks of disbelief.

Vendors still get value in Canada through multiple offers and properties selling over asking price. But at least you know the ballpark price the vendor is looking for. Instead of wasting your time on due diligence, while some greasy agent tells you they want $250K less than the vendor reserve.

You also have vendor agents and buyer agents. So as a buyer, you have a professional take care of your best interests (to an extent). Instead of it being all with the vendor.

One way to reduce the cost to buyers would be to adopt a system like Scotland's, where the Vendor must provide a Home Report pack. The pack includes a valuation, building report, energy report etc.

That is a great idea.

The system that is currently in use in NZ, benefits solicitors, valuers, etc. As I understand, in auctions, the vendor currently has to provide a LIM report and some other basic reports. No builders report, no energy report, no valuation report was required from memory.

Imagine that there are multiple bidders on a property, and each undertaking their own builder's reports (from different builders), valuation reports from different valuers (can be offset by the new cheaper computer valuation platforms like homes.co.nz, QV.co.nz), etc

Also each potential owner occupier bidder would incur solicitors fees for each bidder to review the S&P contract before auction and these would be incurred even if the bidder was unsuccessful at auction.

Having sold my last three houses myself, I always prepare a pack of all the relevant data. Last time around I gave away USB sticks with all the stuff to avoid printing costs. Used a generic sale and purchase contract from my lawyer.

Easy...peasy.

I was told that even if the vendor is good enough to do that, a seller should always get their own one done. Unnecessary do you reckon?

Hard to trust reports that the vendor has paid for and selected.

Hmm.... report downloaded from the council to save punters doing it again and an independent building report. No one chose to do extras as the report identified some faults correctly. Everyone happy, and both sides saved a shed load in fees.

Win, win, win.

I disagree. Everyone will be hit in different ways. Arguably, if recent buyers are not reliant on their properties to appreciate in value, they're not hit at all.

True, except for the opportunity cost of what they might have invested in other than property. But, in this age of bloated finance markets desperately bidding up the price of everything, better options might be hard to find. There are pundits saying gold could be a way better investment than property because there may be a return to gold standards as currencies devalue due to QE and negative interest rates. If I had significant savings I'd seriously look at gold rather than property from a financial perspective (although I understand that to many people just owning your own place is worth something regardless of the financial risk/return).

Gold investors have been hit with the whammy of falling values in nzd terms. It's not a good investment imo. No income and values falling...

If anyone wants to verify Houseworks views on gold in NZD, please see the following charts.

https://goldprice.org/charts/history/gold_all_data_g_nzd_x.png

https://goldprice.org/charts/history/gold_all_data_o_b_nzd_x.png

One can only assume he believes it isn't a good investment, simply because it isn't a house and anything that isn't a house isn't worth investing in.

Did you want to put some cavests on your view there Houseworks to make it an accurate statement? Like gold is a bad investment for the last 2 months, or something like that?

Why 2 charts saying the same thing... that the before tax gains in gld over the last 25 yrs have been abysmally low. Notice also I didnt say 'return' as there is none. Keep 'investing' it might just pay off. Will you produce the HPI chart now for the same period
HOUSE WORKS

If you have a point to make, make it and provide relevant references. Otherwise you’re just adding false narratives.

Thanks for highlighting the inaccuracy of housework’s statement.

Someone has to otherwise false narratives keep getting spread around which confuse the picture.

Your statements defending the indefensible are GOLD... you are the first to mention testing returns against inflation. Gold returned about 4 percent pa non adjusted. That yield would be acceptable now but not in the 90s. Go on tell me its acceptable hehe. It's only a gamble for you gold investors, would you be better off "investing" in lotto?

But houses were flat inflation adjusted for the better part of 100 years! But they're the best investment ever.

Ok.

Flat against inflation over 100 years sounds pretty good but you wouldn't agree I guess. I realise that you're a johnny come lately gold investor ... ouch!

Ouch yes - good burn! Nice one.

Have a look at the history of gold values when governments attempt to devalue their fiat currencies.

Mark Moss (quoting analysts like Jim Rickards) makes the case here (Feb 14, 2020) for big Gold price increases. Would be interested to hear comments on how plausible this is: https://www.youtube.com/watch?v=mXSGwDa4aMU&t=4s

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This is some positive news, but still a long way to go before we see a recovery in affordability. Fingers crossed.

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Took a pandemic and worldwide economic collapse, but here we go!

TIMBEEEEER!!!!

In Australia the sentiment is far more positive. The mentality there is that mankind would esentially have to be wiped out before house price could fall (based on their preferred indexes)..

NZ and Australia have invested pretty much everything in this property bubble. Whether you like it or not or have benefitted or not, the problem with these bubbles is that are destructive beyond what most people understand. Very few really understand the wealth effect (even Ashley Church had a stab at it recently). Japan in the late 80s it was $10 coffees whereas NZ it was winter holiday trips to Fiji.

If people could take a year of income from the increased capital gains in their home prices, we would be in a much more secure position economically.

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Yip, if this thing unwinds, which it could well do, it will leave us in a complete mess. And for what purpose?

Looking at the charts in the report, it really is insane what has gone on with prices. How anything good comes from this, other than the likes of Yvil making $980K in 7 years, untaxed, and now a debt burden for the future generations, I'm just not sure....And this isn't envy Yvil - before you decide to attempt that dismissive strategy, just simply a concern that if this all falls apart, I'll be left with the pain of a failing economy loaded with bad debt and insane house prices, as will all of society, and you'll be left with the $1million. Am I, and the others who didn't make the untaxed millions, allowed to feel aggrieved by this as we didn't cause it, nor benefit from it, but instead will have to pay for it? Where are the ethics and morals in this?

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IO, we do definitely not live in a fair world. There are hundreds of millions who do not have proper shelter or food while we type on our fancy internet devices, sitting comfortably and possibly sipping a coffee.
Interest is a business website IO, its motto is "helping you make financial decisions", it's not a moral and ethics site. Still, to address your ethics comment, I see 3 types of people:
The first group, the vast majority of people who complains that the world is not fair but never do anything about it (apart from complaining). Note this group only ever complains about others who have more, never about others who have less .
The second, much smaller group, who recognise the world is not fair, learn the rules of the game and do their best to get ahead in life to provide for their family (some donate to charities with their gains)
The last, minuscule group, who dedicate their whole life, selflessly trying to make it a more equal world.
I see myself in the 2nd group, if you're in the 3rd group, you are truely a better human being that I am

Interest is a business website IO, its motto is "helping you make financial decisions", it's not a moral and ethics site.

Are you saying that finance / business are mututually exlusive from morals / ethics? If you believe that fine. I was reading over the weekend about investors complaning that kids were trading the stocks listed on a Goldman Sachs fund via Robinhood and have been making out like bandits. The older GS investors are pissed becuase they have to pay fees while the kids on their phones don't. Somehow the older people see this as unethical.

The intersection between finance and morals / ethics interesting. I don't believe they're mutually exclusive. For ex, everytime Jay Powell prints money, it influences SPY for which he owns millions. Isn't that a conflict of interest (an ethical question)?

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Yvil, you're presenting that as though there are only 3 options. What you've missed is that there is quite a lot of room between 'never doing anything about it' and 'dedicating your whole life to trying to make it a better world.' There is recognising the world is not fair, doing your level best not to make it worse (for example, by deciding not to go nuts with your unearned equity and buy up as many houses as possible) and doing some of what you can to make it better - this can include, by the way, discussions on a website such as this. Sure, it's a small thing - but movements and shifts in political opinion have to start somewhere. And they often start with people pointing out injustice.

You forgot to mention that some in the second group also feel like it’s appropriate to gloat about how much they have prospered from so called “learning the game”...

I’m sorry for constantly giving you grief about your previous transgression but it still makes me cringe.

Go ahead cringe, would it help if I told you I own property in both the South & North Island, Asia and Europe?

Congratulations?

Love the "?" on the end - v funny!

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Yvil a little tip for you: wealthy people don't boast about their wealth. Only people with huge debt loads trying to keep it all together do that.

It could just be insecurity.

Yeah, if by help you mean confirm your tone deaf arrogance

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Owns properties around the world.
Made almost $1m tax free capital gain on recent sale.
Collects almost $30k wage subsidy, paid for by hardworking taxpayers like my neice who has a second job cleaning schools at night for minimum wage.
Who should be cringing?

Yip and don't forget all the deductions our property investors can claim. Mortgage interest - phew an expense!

Saving for a home...RWT...pay up!

Earning wages...PAYE...pay up! Oh so that can pay the rents of landlords who are 'making loses' so they have no taxes to pay.

System is broken...

"Collects almost $30k wage subsidy"

I have a friend who has a business partnership. The business employs several hundred employees in New Zealand. The partners chose not to collect the wage subsidy. The partners in that business will have a 60% pay cut this year, and on top of it, each partner has had to contribute $1,000,000 each to ensure the ongoing survival of the business.

You might have realised by now that kiwis don't like boasters.

Indeed Fritz I have. Also Kiwis don't like anyone at all doing well and the capital sin is to be proud of it.

Please don’t pull the victim card now Yvil. You’ve been gloating on here about how wealthy you are at a time when people are losing their jobs, taking pay cuts, people dying of a disease with unknown consequences, there’s mass protesting and unrest on the streets around the world and you want respect because you own houses and just made a million dollars?

It’s mind blowing that you might be in your 50s or 60’s and have zero situational awareness or humility. What happened?

I here I was thinking Trump was the unhinged one?

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No the second group don't just "learn the rules of the game" they do their best to influence those rules for their own gain. Watching the howls of outrage of a proposed capital gains tax were a great example of this.

The fact you believe that interest.co.nz being a "business website" means it should exclude all discussion of morals and ethics is just laughable. The writers of interest.co.nz often write articles that include discussion on the societal impacts of financial events, which suggests that they disagree with your view on what should be discussed.

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@Yvil never said Interest (or any other business website) "should exclude all discussion of morals and ethics". He just said it's not a morals and ethics site, which it isn't. This is actually just a comments page, after all; we've all just hijacked it to chat, fret and project about finances, especially the housing market. Anyone is free to say whatever they want, really, outside of hate speech. If others take some of the things that are said as 'gloating', you can pretty much expect the same response as you'd get in person. It's never nice to point out how well you've done from a situation that has shafted others, and unlikely to go down well. Business tips are a little different. As with everything, a little empathy goes a long way.

Yes well perhaps we should have more morals/ethics in our behaviours and the world wouldn't be in such a mess right now. The every man for himself, without stopping to see how interdependent our society is, and how your behaviours impact somebody else, is/has degraded the quality of society over the last 10-20 years in my view. We used to care about each other a bit more, but now its just about 'me', 'my wealth', 'my family'. How is that philosophy working out in your community? How is it working out National level? And how do you think it will work out at a global level?

My wife's group for cooking for the people in need is now in it's 5th week, there were over 300 meals made lat week (and ingredients paid for by my ill gotten gains & others), she setup a FB page called "Ladies that cook" anyone on here is very welcome to contribute, all we do is buy ingredients and provide meals every Thursday to people in .
PS Albert2020, feel free to give me a hard time for now showing off that I do something for others.

Good stuff Yvil.

Are any of the people needing meals previous tenants in your rental or your motel?

Haha, nope, not that I know of. I'm just the ATM, the ladies cook the food, it then gets distributed from a place on Great North Rd, I don't see the people who get the meals

Good on you for laughing Yvil..it was a funny (ha, ha) comment, I chuckled, but even for IO it was a bit of a low blow !!

When the wolf sneaks into the paddock in sheep's clothing you need to sound the alarm loudly and clearly. Why worry about offending the wolf?

Haha, how about I do one better and provide you with a miniature violin..cry me a river mate.

Yvil, you state this is not a morality and ethics website with the implication that these sentiments have nil in common with conduct of commercial and capital life.
I suggest you might like to have a good read of Adam Smth's "A theory of Moral Sentiments" rather than just Wealth of Nations. It is full of praise and advice re being communally minded and good to people in business dealings. Of course it is v rarely quoted from and even less read.

Yip, if this thing unwinds, which it could well do, it will leave us in a complete mess. And for what purpose?

Case in point: Japan. At the end of the day, very few people "made out like bandits" during their epic bubble. Most suffered in some for or another. I was a student their in the mid-90s and you could still see people living a kind of rock star existence and also throwing money arould like it confetti. Even though their institutions and ruling elite did their utmost to revive the bubble,. hrowing the kitchen sink (which is an understatement) wasn't enough.

Somehow we believe our own BS in NZ and Australia.

Yip having come back from the US and living through their property bubble first hand and then witnessing the complete ignorance and denial that property prices can fall here (ranging from investors to bankers) - and the real impacts it has on people (financially and mentally) - its been pretty painful to watch. The gloating from those benefiting from it has made me a little mad in the past but realise its not worth wasting my time on as the only way they will learn is first hand, even though all of society will pay a cost for the greed of a few who have benefited.

I read on Twitter this weekend that Australia are now proposing reverse mortgages instead of pensions. Basically calling for people to take out more debt to keep the property ponzi going. In debt till you die.....

Would the number of days to sell account for the lockdown (I.e would those properties where no one could view them in level 4 and 3 be reflected in the May figures?)

I remembered that quite a few people on interest.co.nz used "supply and demand" theory to try to forecast Wellington housing market. But can anyone explain why median price in Wellington dropped 7.2%? HPI dropped 4.1% which is far more than Auckland? If this so call "the supply is simply not enough, the demand is so high" really reflects housing market, then why price in Wellington dropped?

I think there is a difference between the supply/demand between the population and the number of houses vs the number of willing buyers and the number of houses. That is the speculation factor. I.e. investors competing with owner occupiers creates an artificial demand on the supply. Hence why we've seen the rate of ownership dropping but the prices going through the roof. Remove the speculative behaviour from the investors and prices would probably be affordable and we wouldn't have our 'housing crisis'.

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I am expecting Welly prices to drop some and then be pretty flat for a decade (similar to after the GFC). Its been very bubblicious round these parts the last few years. A new build 4 bed on a 450sqm section sold for 2.2 mil on my street late last year which is CRAZY HIGH for Wellington. Doesn't even have views.
Welly bulls keep repeating that there are government jobs and uni's to sustain prices but my neighbours both have government jobs, both graduates in their mid 30s and they scrimped and saved for years to get into 110sqm 60s home for $720k. Most government jobs are no way near sufficient for buying above $600/700k. A lot of my friends in government jobs are only just making their rent, let alone spare dollars for savings.
I bought in Welly last year and am spending a chunk on renovating and extending, so it's not as if I have some kind of self interested bias in seeing prices fall and I have no idea how much they might fall by, but some of the exuberance will unwind I think.

Agree Ginger, Welly’s price not right for the past 3 years.

I doubt that Wellington house prices will fall by very much at all.....
There’s a serious shortage of good quality family dwellings in the city suburbs - such as Brooklyn and Kelburn. If you’re trying to buy a house in such suburbs you’ll know exactly what I mean.......

Wellington house prices will likely continue to increase - albeit at a more modest rate for the foreseeable future. Good homes with a view will continue to attract premium prices.

TTP

We went to many open homse last year and laughed at the +800k asking prices for 1920 homes on a step bank with no work down on them for years. Add a garage and another $50k on top. It seems Welly you pay for the views and if you want a warm house cross your fingers. Glad we walked away and rent our humble abode with great landlord.

Frazz, we had nice enough landlords but both of the last two sold out from under us because they wanted to cash in their capital gains. It's not fun to have to move every 18 months with two kids and 2 cats in the Welly rental market. Many cold and damp or nightmare access.

The house we bought has views but cold, damp, borer infested, scrim and rubbish access woo hoo!!!! However, the mother of all reno's will put all that right. We have radiators going in at the moment, plus double glazing, insulation everywhere and a woodburner. As God is my witness, I shall never be cold in my home Welly again!!!

Well done ginger..love the woodburners. Looks like your weekends will be booked solid for the next year or so. We have decided to head back to Auckland (My home town) for the greatest sport in the world...Amex cup.

Saw a new build for sale today, wanting $1.1 mil. It's not even free hold! There's $6k body corp.

Are yes the bodycorp...madness

Reverse speculation also exists - those with multiple houses speculating prices to fall so list them all at once - the artificial increase in demand on the upturn now becomes an artificial increase in supply on the downturn

"I think there is a difference between the supply/demand between the population and the number of houses vs the number of willing buyers and the number of houses"

When talking about the property market, most commentators talk about Level 1 supply and demand (aka underlying supply and demand)

Level 2 supply and demand (aka effective supply and demand) are the variables which impact market prices and very few people understand this.

The housing shortage quoted by commentators is Level 1 supply and demand. They miss looking at Level 2 supply and demand.

The difference between level 1 and level 2 demand.

A 2009 / 2010 report by the Dept of Building and Housing recognises two types of demand
1) underlying housing demand
2) effective housing demand

1) Underlying housing demand

‘Underlying demand’ refers to the number of houses needed to accommodate households in the population. Population increase in the age range of 20–40 (which is when people tend to form independent households) leads to smaller household sizes and more single-person households. Further, positive net migration increases underlying demand for housing. A ‘household’ means either one person who usually lives alone, or two or more people who usually live together and share facilities in a private dwelling.

Natural population growth rates, internal migration, housing preferences and household formation rates all tend to change relatively slowly, and therefore changes in underlying demand caused by these factors are reasonably predictable. By contrast, the level of external migration depends on policy rules and incentives, as well as on wider domestic and international economic conditions, and it therefore tends to have a more volatile, less predictable impact on underlying housing demand

2) Effective housing demand

Effective housing demand is the combined effect of both 1) the desire to rent or buy a house, and 2) the financial ability to rent or buy a house. This aspect of demand is what shows up in the housing market statistics for sales, prices and construction. It also largely accounts for the changes in housing and tenure choices over time.

The New Zealand housing market has not only experienced increased underlying demand from population growth and higher net immigration; it has also (until the recent global financial crisis) experienced an increase in effective demand as a result of higher incomes, lower unemployment, cheaper and easier access to credit, and the preference of New Zealanders, for various reasons, to invest in housing over other forms of investment.

The difference between underlying and effective demand is a function of:
• buyer wealth and income
• the cost and availability of finance
• the state of the economy
• individual consumer preferences (for example, location, or between renting and owning)
• the attractiveness of housing as an investment good.

Repeated here for reader

by CN | 23rd Jul 19, 1:38pm

The basis and purpose of the underlying demand calculation is for town planning purposes. The underlying housing shortage has been taken out of context as justification that house prices will continue to rise in Auckland by those with a vested financial interest such as real estate agents, etc
How you can have a housing "shortage" and a fall in property prices at the same time.

Note that this is underlying demand for housing in Auckland. Factors which impact effective demand (on which the market prices of residential dwellings are based) are not accounted for.

Note that for the basis of this calculation for the housing shortage for underlying demand, no adjustment is made for changes in demand due to changes in house prices.

The calculation of underlying demand is used for the purposes of long term town planning, and infrastructure needs (such as sewerage, parks, roads, schools, etc) due to an projected future increased population. It is fixed due to the long term planning and construction of the infrastructure. Underlying demand is not useful for estimating future property market prices, nor does underlying demand change for changing property market prices.

For example, the housing shortage number calculated for underlying demand would remain unchanged in the following 2 extreme situations, (assuming current household incomes, current population, current population growth & the number of residents per dwelling of 3.0).

1) if the current median house price in Auckland was $10,000. In this case there would likely be a huge increase in the number of active property buyers which would increase effective demand (and would be above underlying demand). People who were not owner occupiers would buy at this price. A large number of people who are already owner occupiers would also become active buyers and buy at this price - buy a house for their children, grandchildren, parents, holiday homes for out of towners, etc as they are cheap. People who could afford it from all over New Zealand and abroad (such as Australians and Singaporeans who are exempt from the foreign buying rules, and New Zealanders living overseas), are likely to become active buyers in the market. The underlying demand calculation does not incorporate this.

2) if the current median house price in Auckland was $10,000,000. In this case, there would likely be fewer active property buyers in the market. The number of effective demand would be fewer than that for underlying demand. The underlying demand as calculated above would remain unchanged - after all there is no change to population estimates or the assumption of the number of people living in each house. There would still be a "housing shortage" as calculated by economists using the population numbers, but in reality there would be few buyers active in the market if the median house price in Auckland was $10,000,000. Very few would have the deposit necessary to buy, and very few would meet the bank lending criteria particularly on debt servicing.

This is the reason why the underlying housing shortage is a misleading number (as calculated by economists, etc, and quoted by mainstream media, politicians, property market commentators, etc) as a justification for future house prices to continue rising. It is used as a convenient justification by those in the real estate industry to persuade those to enter the residential real estate market.

Economists in their calculations of the underlying housing shortage, and talking about future property market prices, have failed to incorporate the fact that:
1) as prices rise, effective demand falls
2) as prices fall, effective demand rises.

This is introductory economics and the basics of demand. Underlying demand is unchanged, yet effective demand changes. This is how there can be a housing shortage (due to underlying demand vs underlying supply), yet property prices fall (due to an imbalance between effective supply and effective demand).

So when talking about a housing shortage, there are two numbers to understand for their own specific purposes:
1) Level one supply and demand - this is underlying supply and demand - this is the most commonly referred to and discussed by most property market commentators, media, politicians, etc. This is useful for long term town planning purposes for local councils to determine infrastructure needs.
2) Level two supply and demand - this is effective supply and demand - and this is the key determinant of property market prices - and this is how property markets can go from being a buyers market to a sellers market (and vice versa).

The 150,000 "shortage" referred to in the Kiwibank economist article headline is based on underlying demand and underlying supply - many who do not understand the basis and purpose of the number, misinterpret this number as a shortage of effective supply over effective demand, then use this to argue that property prices will go higher due to the shortage. This is a very common misinterpretation of the 150,000 number by many. There was a recent news article about the higher risk of a property price crash in NZ - many of the comments made on the article stated that a property price crash was not possible due to the widely reported and well known housing shortage in Auckland.

"• the attractiveness of housing as an investment good."

This includes non owner occupier buyers:
1) property traders,
2) long term tenant landlords,
3) landlords who rent out on the Airbnb market,
4) capital gain oriented negative cashflow property investors,
5) non resident owner occupiers,
6) infill property developers
etc

Note that NONE of the above are included in the underlying housing shortage calculation as discussed by the property market commentators, property market promoters ...

Yet in reality, they may have an unduly large influence on property market prices ....

I think if you read Shiller's property bubble section in Irrational Exuberance it covers some of those level 2 factors you talk about. I always wondered where they went when bubbles collapse, but they are just an externality having an undue influence on real supply demand. I.e. real supply and demand being families living in homes, not people trying to make money from an investment who already own their own home - and our decreasing rate of home ownership shows that we've had a significant externality on real supply/demand by investors/speculators.

Got to say that having just looked through the charts in the REINZ report. If there is no concern about the possibility of a bubble bursting, perhaps there should be. Those charts are seriously frothy.

People are hoping and counting on the government and reserve bank propping up house prices as they have in the past. It's almost assumed at this point that wealth is brought forward from young and future Kiwis to enable people to party today. Such is the life of the pseudo-capitalist hanging on the welfare teat.

Hard to draw much out of this, too early.
Clearly a downward trend has commenced, although a very minor drop for now.
Wellington's drop is surprising.

Finally, a reasonable comment

It's actually a much larger drop than i'd have expected, simply because the wage subsidy and repayment holidays should still be cushioning the housing market from a large increase in forced sales.

The fact there has been a notable drop while these policies remain makes me think this could be the start of a bigger correction than I initially expected.

I wholeheartedly agree that its too early to get a clear picture of what's going on, but I can't see much in the short term that will put upwards pressure on prices.

In regards to Wellington, maybe it's the people who had used their easy Auckland money to buy investment properties in the Wellington region. They are now realising that they pushed themselves too far and that they need to get out now before it's too late? Just an idea.

and the reason for the price drop is that fhb's aren't getting approved?

For those in the housing bull market camp. Just flip the chart upside down and you will have a massive upswing trend.. Yeeessss everything is going upwards, lets drink to that!

CM, it's not a game of rugby or UFC, it's not "us against them", black against white etc… Interest is a business website whose motto is "helping you make better financial decisions". The point is to understand the market and where it is heading so we can make better decisions in life, all of us

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But anyone who says it could fall by 50% needs to have their view dismissed? Haha sure ok Yvil.

Yvil certainly has his Filp Flops on today.
https://www.youtube.com/watch?v=bYJMtn6IJeE

as I read your comment, the radio in the background is playing Pink Floyd's Us the Them.. How appropriate at this moment..

"Black
And blue
And who knows which is which and who is who
Up (up, up, up, up)
And down (down, down, down, down)
And in the end it's only round 'n round (round, round, round)
Haven't you heard it's a battle of words
The poster bearer cried..."

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So it's not "us against them" all of a sudden? I remember being called a DGM by "them" lots of times?

He just needed to keep talking the market up until he could take is $980k in untaxed capital gains before it was no longer a bear vs bull thing - but a collective 'us' and by us he means me with the million dollars in untaxed capital gains and the next generation now with a million dollars of debt.

If what you're saying is true, would I not talk the market down, now that I sold my house? Think about it

Don’t you own a motel?

Yes I do

Ummm, then is that not an incentive to continue to talk the market up?

"would I not talk the market down, now that I sold my house? Think about it.."

Boy, someone is in good mood this morning.. Would have thought if he got a good price he would be a bit merrier...

You've still got skin in the game as far as I'm aware. Motels and your own home (and possibly other rentals). Think about it...

So you guys really think I can influence the NZ RE market with my comments on here? I think you're giving me too much credit

Worth a shot though right? You don't seem to have anything else to do, based on the volume and timing of posts.

IO it really stinks that someone made a gain eh. Btw I think you're unwittingly encouraging younger buyers to get in

Interestingly, although not necessarily surprisingly, it is the more affordable locations in the bigger cities that seem to be holding up better.

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The snowball is building momentum. The rentiers are in trouble and are willing to rent to anyone at vastly reduced rents. Seeing headlines like this one will make FHB's hold out and just rent for now. Inevitably prices will drop much further. Any specuvestors holding on now will get burnt. The clever ones have already abandoned ship. They know whats coming.

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As I am on record with the price and sales forecast, I will not repay here.
But it does bear repeating that wage subsidy and 12 month suspension of payments on mortgages on $18 billion of housing debt is artificially holding up the market, believe it or not.
Like a brick held by an elastic band on a table, it takes a while of exerting tension on the rubber band, before the brick begins hurtling back towards you. This is unlikely until "props" above are removed. So, real decline in prices unlikely to hit in Auckland pre mid July and nothing dramatic til mid August but still forecast 15% drop pre Xmas. Sales in Auckland should remain 35% below 2019 figures for each month remaining in 2020 and most likely the first 4m of 2021 also.

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Yip it could be a real train smash later on this year if/when government wage subsidies stop and employers release employees.

Youre probably hoping that.... in fact 2013 level when you first started looking would be nice

I think it will take a bit longer, mortgage deferrals come off end of August, banks will probably prop up a bit longer with internal support, and 3 or so extra months for vendors to come to terms, list and accept lower prices. I don't think we will have any meaningful downward data until early 2021, when the summer uplift never eventuates.

I think there's some truth to what you're saying MIke but I also think it glosses over some aspects of the situation. For starters many on the subsidy are already on a substantially reduced income. This applies in particular to self-employed people, and those who have voluntarily moved to a shorter working week or even a leave without pay type situation. Being on the wage subsidy is already having a big impact on these people and thus will be impacting their financial decisions including those involving property.

Secondly, even for those who've kept the same level of income for now, not all will wait until after the subsidy finishes to take action. Some will see the writing on the wall and sell up early in an attempt to minimize losses.

Overall I expect the market to continue to dip further over the next few months.

I haven't put anything down before and don't pretend to have a crystal ball. But just for the hell of it my pick is:

- flat until August, boosted by low interest rates, relatively low inventory, and some 'pent-up demand'
- September - real price drops start
- Down 10% from today's prices by Xmas
- Another 3 years of declines
- Bottom out at 35% below peak around 2023

This will be brought about initially by a combination of specuvestors and AirBNB owners dumping, alongside too many new builds on the market, market uncertainty being felt by July/Aug (the pent up demand being sucked up by July), and job losses.

This will be continued and exacerbated by the nationwide (and global) recession, death of our international tourism industry, and visible price falls happening so rapidly that confidence evaporates and no-one wants to catch that falling knife. 2021 we start to see more repos and that just makes things worse. There will be peaks of 'hope' along the way, especially around the summer months, spruiked for all they're worth by the media and politicians, but the decline will continue for at least 3 years...maybe longer.

I'm not necessarily holding out til 2023 though. Just keeping a close eye on inventory, international economies, and the FOGO effect.

And who can say you're wrong because we dont have crystal balls either. Oops sounds slightly off

Lol. Apparently I don’t have any balls, crystal or otherwise, according to (the increasingly quiet) TTP.

I reckon 35% down by 2023 sounds about right. More in some places, less in others, of course.

The REINZ national median selling price dropped from $680,000 in April to $620,000 in May

Why excessively easy money is destructive

On the subject of broader Fed interventions, such as interest rate policy, it’s worth taking a moment to think about what interest rates actually mean.

A nominal interest rate determines the number of additional dollars one will owe in the future, in return for a dollar borrowed today. Similarly, a “real” interest rate simply determines the number of additional “goods and services” one will owe in the future, in return for a unit of goods and services borrowed today.

Question: What sort of projects do the Fed encourage with zero nominal interest rates, that aren’t worth doing at even interest rates of 1-2%?

Answer: Only projects with near-zero rates of return – primarily those that involve enormous amounts of leverage, where interest is the primary cost of doing business. The main activity that fits these criteria is yield-seeking financial speculation. This is exactly what produced the mortgage bubble and the global financial crisis, and what has encouraged U.S. corporations to burden themselves with cheap, low-grade covenant-lite debt and leveraged loans, increasing their risk of bankruptcy, for which they now cry for public support.

Question: What sort of projects do the Fed encourage with negative real (after-inflation) interest rates, that can’t even jump the hurdle of a zero real interest rate?

Answer: Only projects with negative real rates of return – primarily those that destroy capital and harm economic productivity. If these marginal projects aren’t worth doing unless the real interest rate is negative, then by definition, they are incapable of producing the same amount of real goods and services that is required to initiate them.

The monetary dogma of the Federal Reserve seems to view the U.S. economy as one big demand curve that always benefits from low nominal interest rates, and negative real interest rates. It is exactly the dogma that produces repeated economic cycles driven first by yield-seeking speculative bubbles, and then by financial crises that count on the bailout of private losses with public funds.Link

I think it will continue to go south until immigration comes back

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Ohh mass immigration. Pretty sure no one in NZ ever voted for that (thanks JK). Or will this time rather.

Whoever pushes for more immigration in this election is giving themselves a great chance of spending the next 3 years in opposition

It would be a miracle ( not that not possible) if in time to come housing market does not fall with everything in world comming to a halt.

Defination of economy too has changed from Demand and Supply to QE - more the printing/Debt better the economy.

As of now housing market is not giving any clear indication may be because of low interest rate and some pent up demand (Families whose earning have not been affected by panademic and confident about their job/business in future may still go ahead instead waiting for FOMO).

16 Banksia place in Goodwood Heights did not sold before lockdown by Raywhite but I understand that now relisted after lockdown with different agency and has been sold for a million (RV 890000 and earlier in February Auction - best bid was early 900s so now if going near a million is good price to the vendor and does not reflect the downward sentiment).

Still feel that market has to correct but yes if it does not will be a miracle as expect many job and business loss in future / depression for many and also government can throw free money till a limit and that should be reached by elections bank politics) before feeling the real impact of coronavirus in economy.

How did Tauranga/Bop fair?
Weighing up holding out for existing homes to drop or just committing to a new build.
I doubt new builds price will come down? It seems if anything the demand for them has increased with the lower interest rates?
Went to G.J Gardner on Sunday to have a look. The waiting list for new builds is 40 people and you have to put down a $1500 deposit (refundable) to be put on the list.

Yes, sure they have. Just look at their Trademe listings.

The trademe listings just show a bunch of sold out new builds...

On sunday we drove past an OH sign in a middling but actually cool suburb. I felt like going in and making an impulsive offer because of the happiness of the first L1 weekend. The country is quite rapidly getting back to a sense of normal again, it maybe at a slightly different level to before true. The thing is the property market is doing what it does and staying reasonably stable. That is the case even in the massive property market of Qtn.

Why stop at just one impulsive buy? Why not 5?

Exactly bloody good too. If I did that all you numpties would complain

Don't mind us silly buggers, go leverage some new houses up quick before the next price surge!

Silly and buggers. I agree but you said it. Anyways I thought you already have a home in whanganui

Yea I'm owner/occupier. Whats your point?

I can't understand why you made your original comment. It doesn't make any sense in light of being a homeowner.

I was being facetious regarding your original comment. It makes sense when you can understand the distinctive difference between a homeowner and a property investor. You original comment seems to be some kind of attempt to console yourself after reading some data that doesn't fit your bias.

Can you point out where I made the reference to buying the property as an investment. You do say some really dumb stuff.

So your making an impulsive offer on something you're intending to live in? Sounds clever

So Qtn falling 7.2% in 3 months is 'staying reasonably stable'? Noting that at an annualised rate, that would be a fall of 28%?

Is that median? Means virtually nothing in a tiny market believe it or not qtn is not that big

Queenstown Lakes District HPI was 2823 in March, 2629 in May. 6.8% fall in two months. It's possible that some of that is seasonal, I don't have time right now to look at the seasonality.

Thanks mfd :)

From The Parent Land of Our Banks... (Australia, to be crystal clear)

If the deferred loans were treated as impaired this year rather than deferred, and the big four’s share of them was the same as their 80 per cent share of total loans and advances – probably a safe assumption – impaired loan expense would be 16.6 per cent of their loans and advances and would more or less wipe out their capital.
But if the government’s various income support packages end in September and October, as planned, the bank support will have to begin, or else the pandemic crisis will turn into a financial crisis like no other.

(Alan Kohler - The Australian)

yes. Extend and pretend in la la land

"Extend and pretend in la la land"

Could it happen in NZ with the NZ banks?

"Asked whether there was any discussion going on about extending loan deferrals, introduced in late March for up to six months, Jurkovich said there is.

"That's part of an ongoing discussion. I think what was really key was that we had to mobilise really fast to get the support in play. I think what's going to be just as important is that you don't put a hard stop on it. I think you have to try and let people readjust."

https://www.interest.co.nz/personal-finance/105481/kiwibank-ceo-steve-ju...

Yes. Aussie is a fascinating case study. Thr country that doubled down on the China relationship, housing, and immigration. Much like NZ.

I expect that Auckland sales will be 35% below the equivalent month of 2017, until Xmas.
This is based on an estimate of the impact on sellers and buyers psychology right now and in next 6 months.
2017 was last time market fell 35% in sales terms, which was when China stamped on the hosepipe of funds.
May be of interest to readers:

Auckland sales May 2007: 3189
May 2012: 2751
May 2017: 2211
May 2019: 2013

Yes, sales trend, along with owner occupation, is clearly falling.
Despite ever lower interest rates and , until March, high immigration.
Of course, some readers have only one metric for a housing "market" which is price.
Some have that metric because they want prices to go on rising above rate of inflation.
Others want them to fall.
Census estimates 59% are owners in Auckland now.
But it gives a large caveat, stating that the figures are only estimates because 20% of people did not complete the question on ownership. So, the real figures, given the trend of falling sales, will be lower most likely.

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One Data and Two opposite Headlines on the same date / Time (Though not tottaly wrong but is biased based on vested interest - Glass is half Full or half Empty) :

NZ Heralad : House sales drop almost 50% but prices stay record level (Indicating prices are Up/High)

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=123...

Interest.co.nz : Housing sales picking up again but prices weaker in the main centre :

https://www.interest.co.nz/property/105499/reinz-national-median-selling...

For the same reason FHB should not be influenced/ FOMO by Herald Aunty or any so called experts Uncles and make cautious wise decession.

Media news publishers - pick your desired spin on your story ...

Here is some more:

1) NZ Herald (positive spin - focus on property price increases, dismissing the negative price forecasts)

Yet despite the dramatic slowdown in sales volumes, New Zealand's median sales price hit $620,000 in May, up 6.9 per cent on the $580,000 median sales price in May 2018.

Auckland's median sales price jumped 7.1 per cent to $910,000 from $850,000 in the same month last year.

"But what continues to surprise us, is the fact that there are still regions with increases in median price and that there are still regions experiencing record median prices – a far cry from some of the doom and gloom predictions that were immediately touted when Covid-19 first hit the country."

Auckland, for instance, reached its third-highest median price on record, she said.

2) interest.co.nz (balanced - highlights both positive price gain and negative price gain)

Prices were also weaker, with the national median selling price dropping from $680,000 in April to $620,000 in May (-8.8%), although that was still up by 6.9% compared to May last year.

One other item of note - the NZ Herald story is outside the paywall to reach beyond their subscribers ... (hmm, anybody wondering, why is that article available for free?)

Good point CN.

Outside paywall as is already paid by......

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The quote on the Herald site is hilarious. They normally look at data in 3 month/6 month/12 month time frames... but now "compared to prices in May 2018".

Let's just choose x number of years to look back from, as long as it shows a decent rise. Next month it will be "... up 89.2 per cent on the $300k sales price in June 2009". Then what? "... up 412% compared to the prices in 1983". Total spin.

"They normally look at data in 3 month/6 month/12 month time frames... but now "compared to prices in May 2018"."

FYI, in the NZ Herald article, the year is a misprint - it should read 2019.

1) May 2018 median house price is $560,000 - so the current $620,000 median house price is a 10.7% rise compared to this
2) May 2019 median house price $580,000 - so the current $620,000 median house price is a 6.9% rise compared to this

Meanwhile TVNZ reports the narrative given to them by the REINZ.

1) Property sales see massive drop as Covid-19 restrictions still impact the market
2) In terms of price, though, national median house prices increased by 6.9 per cent last month to $620,000.
3) In Auckland, median house prices increased by 7.1 per cent to $910,000 compared to the same time last year. It is the third highest price on record.

https://www.tvnz.co.nz/one-news/new-zealand/property-sales-drop-covid-19...

Note that point 2 as reported is potentially misleading as people could interpret that house prices rose in May 2020 compared to April 2020. The correct statement should be "In terms of price, though, national median house prices increased by 6.9 per cent last month to $620,000 COMPARED TO MAY 2019."

Or
"In terms of price, though, national median house prices FELL by 8.8 per cent last month to $620,000 COMPARED TO APRIL 2020."

That's exactly what has been happening in the last weeks. Interpretation of data are obviously driven by vested interest.

Eg NZHerald / OneRoof.: Please don't stop buying selling houses or price will DROP FOR REAL.

Good that interest.co.nz is publishing obvious and transparent information

Now wait few days for a new OneRoof article stating totally the opposite

This may be the largest one month drop in values ever registered or am I wrong?

Anyone else thinking about the inconvenient fact that if you purchased in the average house in Mar/Apr as a FHB, using a 20% deposit, that if the current trend occurs for another month, you're almost in negative equity inside 2 months?

I.e. prices fell $60,000 for the average house priced in April at $680,000 - so a deposit of $136,000 @ 20% for the average home. And price just fell $60,000. It if does that for another month or two, you're in negative equity.

Do FHB's really want to buy into that amount of risk - would seem to be mad to me. And surely banks must be shitting themselves if they're lending to FHB's with no LVR based on the recent RBNZ changes. I.e. those that purchased at 0% LVR are in negative equity within a month and it could only get worse.

Exactly IO but of more interest would be a prediction on when the MSM can no longer ignore the downward trending prices and go public ? Are the words "housing crash" actually censored ?

Yes the assumption is that price will keep rising, because that is what they've always done.

But then having witnessed the crash in the US, sentiment just turns and the greed turns to fear. It could happen quite quickly and by Aug we could already have thousands of FHB's in negative equity around the country - and who knows if/when prices recover to the highs that we've seen. They may never if we're similar to Japan, or it could take a decade or more for those in negative equity to escape the trap they have found themselves in.

But everyone's eyes are on price rises - but nobody is talking about how close some people will be to negative equity in a another month if we have another similar size fall. It won't take much.

I mean, at this point its only 1 month of data at a time when volumes are low and there has been some strange disruptions to the ability to buy and sell property. Way to early to read anything definitive.

But likelywise its beyond dishonest to try and ignore the latest data by wrapping it into a an annualised figure. Any responsible reporting would be highlighting the level of uncertainty, while also warning of the upcoming potential impact of the expiration of the wage subsidy and the halt to immigration for the foreseeable future .... but alas, with the exception of sites like interest.co.nz, we don't have that level of quality journalism, and sites like the herald/tvnz are happy to just reprint the press release from REINZ without any quality analysis or investigation.

" sites like the herald/tvnz are happy to just reprint the press release from REINZ without any quality analysis or investigation."

Whose bread I eat, his song I sing ...

Banks will just come up with some policy setting to cope with negative equity. All they want is that loan interest paid. If bits of the loan book aren't great they can always chop up and sell bits of the book. Oh wait... didn't we already try that?

Subprime still has prime in its name, doesn't it?

"I.e. prices fell $60,000 for the average house priced in April at $680,000 - so a deposit of $136,000 @ 20% for the average home. And price just fell $60,000."

The initial deposit of $136,000 is now worth $76,000 - a fall of 44% in just 1 month.
A) purchased 1 month ago
1) At purchase
Median house price at purchase price $680,000
Mortgage $544,000 (at LVR 80%)
Equity deposit $136,000 (20% of purchase price)

2) value today
Median house price at purchase price $620,000
Mortgage $544,000 (now LVR is 87.7% due to house price fall)
Equity value is now $76,000

B) Alternatively purchased at today's median house price of $620,000
Same equity deposit of $136,000 as above
Mortgage $484,000 (now LVR is 78.1% due to house price fall) - the mortgage is 11% less than above - resulting in:
i) lower debt service payments, lower interest costs over the life of the mortgage or
ii) same debt service payments as in scenario A resulting in shorter repayment period of the mortgage loan, lower interest paid over the life of the mortgage.

The rules are there, play the game accordingly and stop wasting your precious life complaining cos it ain’t going to change anything.
The financial system is designed so everyone is working for the bank, end result differs depending on personal choices.
All the negative voices only helps promoting ever growing property prices, people just don’t see that...

Plenty of emotions in this comments section. ಥ_ಥ

I choose to stand up to bullying behaviour. I have known victims of bullying behaviour. I have heard many other stories of the long term effects of constant bullying behaviour. For many victims of constant bullying, it can lead to mental health issues, and in some cases suicide. This behaviour is unacceptable and cannot be tolerated by any community.

1) a certain commenter consistently and frequently engages in name calling
2) a certain commenter has shown to be consistently and frequently disrespectful of others who may disagree with them.
3) a certain commenter consistently and frequently exhibits toxic behavioural patterns

(I have known and heard many more stories of women in relationships with men who demonstrated the character traits listed above - they were emotionally abused and they learnt to get out of those relationships, and stay well away from people with those character traits)

People should choose to ignore, walk away, and stay well away from people who exhibit these abusive, disrespectful and toxic character traits. They are bad for people's mental health. Commenters in this community can choose to IGNORE and DISENGAGE with a certain commenter to avoid reinforcing his UNDESIRABLE and UNACCEPTABLE behaviour. (is this particular commenter, the little school playground bully who constantly craved attention from people? This was a key motivator for some of the bullies I knew at school).

If you've ever been a parent, would this bullying behaviour be acceptable or tolerated from your child? If not, then why is it acceptable or tolerated from an adult in this community?

If you've ever been a parent, would this bullying behaviour be acceptable or tolerated if the victim of bullying was your child? If not, then why is it acceptable or tolerated from an adult in this community? (I have heard numerous stories of victims of bullying committing suicide. Perhaps you may also know stories.)

If you've ever been a manager of staff / leader of a group of people (e.g. sports team, community group, church group, etc), would this bullying behaviour be acceptable or tolerated from someone in your group or community? If not, then why is it acceptable or tolerated from an adult in this community?

If you've ever personally experienced being bullied, then you can understand the effects of bullying behaviour on the mental health on the targets of bullying behaviour.

It is up to the community here to maintain and enforce the community standards of mutual respect for others and basic human decency, and provide a safe environment where each and every person can make positive contributions to the discussion, free from fear of being bullied or ridicule.

Why would a property investor sell a property in Christchurch? Wonder if this property is currently owned by TM2?

https://www.trademe.co.nz/a/property/residential/sale/listing/2664262878

Don't know the circumstances of the current owner, but for a potential landlord investor it would be because it would negative cashflow even using 100% financing (using equity release / deposit recycling techniques) - net estimated rental yield of 3.12% vs interest rate of 3.00% on a P&I basis.

For potential owner occupier buyers, they should pay even less. Asking price of $509,000 by vendor is 104% of CV.

Note that this is a private sale and the property is currently tenanted.

From the property listing on trademe:
"Please note there is no For Sale sign on the street, and the house is barely visible from the street. The property is currently tenanted so please do not go down the driveway unless viewing arranged"

It could be this property which was purchased in March 2019 for $497,000.

https://homes.co.nz/address/christchurch/sydenham/180b-colombo-street/DyxA1

Real estate agent calling for KiwiSaver to be used to purchase investment properties, now that transactional volumes are falling in the current environment.

https://www.landlords.co.nz/article/976517013/comment-allow-kiwisaver-fo...

Is there a vested financial self interest here by the real estate agent? (who are paid based on transaction values and higher transactional volume activity ....)