There was a 38% sales rate at Barfoot & Thompson's auctions last week compared to 64% in the last week of May

Classic eh - the old 'some are suggesting' which is his subconscious stream of thought tapping on the keyboard but he isn't sure who 'some' is.

Would the unidentified source please name themselves. Oh its me!

See the DGM "contributions" above......

The DGM clearly hate the prospect of a minor "short and shallow" recession. The DGM yearn for a severe recession (or depression) in the vain hope that they'll be able to buy a house for a halfpenny.

As always, the DGM are transparent. They're driven only by their self-centredness - in a word, greed......

They remind me of Joseph Conrad's eloquent words in his classic novel, "The Secret Agent" - they're like "pests in a street full of men".

Thank goodness that most of the nation is committed to rebuilding our social and economic structures following the ravages of Covid-19. That's the type of solidarity for which we can be truly grateful.

TTP

Was speaking in a purely NZ context.

You have raised an interesting question though. Can anyone here shed some history on how auctions become the prevalent method of sale in NZ?

Auctions were only in use for mortgagee sales in early 1990's from memory.

Yes I stand by that comment, but I'm not saying its going to happen! But if it did, I wouldn't be surprised. Many other people in NZ might be - and nobody warned them that it could happen. I'm simply that voice for them - if they still chose to buy that is fine, good for them. They've made a risk based assessment.

I'm simply countering the hindsight, confirmation and recency bias that appears to have been stoking the very bullish run on property from a psychological perspective and you see it everywhere from news papers, property investment/renovations TV shows, oneroof etc that all trigger peoples minds to FOMO and buy, buy, buy! I'm playing devils advocate so to speak.

From a RBNZ perspective - why would you say they are reputable commentators? They probably have more skin in the game that REA's...Orr looks like he's been shitting himself about the price of our housing from day 1 in the job, but he can't say that directly. They're doing everything in their power to prevent asset prices from falling. Why would they need to do that? (because asset prices or the debt that supports them is too high...that's why).

We clearly see the world in a different view, which is fine, in fact its the reason why it remains interesting. Thanks for the counter arugments P8 (honestly).

"- there is however also the intrinsic and security aspects which The importance of cannot be readily quantified."

Yes, you are absolutely right on the money. That is up to each individual's personal preferences, and how much they are willing to pay for those qualitative factors.

Some owner-occupier buyers on a 80% LVR, may be willing to incur an unrealised loss in equity of 100% for that peace of mind, while others may be unwilling to incur such a large unrealised loss in equity for that same peace of mind.

The information above showing the impact of property price changes on their equity value is provided to enable them to make their own informed choice.

For some recent owner occupier buyers, some believed that they were willing to accept a 50% unrealised loss in equity for that peace of mind at the time of their house purchase. Amidst the backdrop of a 10% forecast of drop in house prices by some economist (resulting in a 50% unrealised loss in equity for the 80% LVR buyer), now some of those recent owner occupier buyers are experiencing regret with their recent property purchase.

"if the advice is don't buy a house unless you can service the mortgage if interest rates rise and you lose your job, well surely almost no one would still be able to service a mortgage under those conditions."

Many households who took on high levels of debt to purchase a house in recent years are now finding out that they were unprepared for an unexpected reduction in household income, and took on too much debt.

The key question is how much financial flexibility to handle an unexpected seemingly low probability scenario. After all, mortgage payments must be made under ALL economic conditions.

A) Could the borrower continue with debt service payments if they lost their job?
B) How long would the borrower be able to maintain their debt service payments if they lost their job?
i) if the answer is less than 1 month, then that is very little financial capacity to absorb an unexpected loss in income - it may not buy sufficient time to find another job.
ii) if the answer is 6 months, then that may be sufficient to buy time to find another job.

With COVID 19 and the recent lockdown, there are many highly leveraged households now that have found out that the they may only have sufficient funds to cover 1 month of debt payments. As a result, over 100,000 borrower customers have reduced or deferred their mortgage payments for up to 6 months, courtesy of the banks. These are exceptional economic circumstances, and banks may not always allow mortgage payment deferrals.

What happens after the mortgage payment deferral period expires and the highly leveraged borrower is still unable to find a new job or has had their hours cut (for wage earners), or has had their salary cut by 20%, or is now receiving significantly lower commission income (such as real estate agents)? They may be forced to sell their house to reduce the size of the mortgage (as the debt service payments were too high relative to their now reduced incomes). Many other highly leveraged households may be in a similar position.

There are other groups of potential house owners who could be forced to sell to reduce debt.

When there are a lot of highly leveraged house owners who are forced to sell, then that can lead to an imbalance between effective supply and effective demand and typically results in lower prices. Some locations are likely to have larger house price falls than others (e.g Queenstown. Auckland CBD). Overall, expect to see the number of mortgagee sales increase over the next 12-24 months. That is what happens in economic downturns.

People who have experienced several economic downturns have the benefit of experience.

As the adage goes, "those who fail to learn from history are doomed to repeat it"

Thanks team, some interesting info. I am 37 with a wife and 2 kids and am def looking for space. We considered going with home and land package but I am being cautious and might wait another year or 2 and see if; and if, how low they do drop. Another year or 2 should only increase our savings and kiwisaver. To me it seems as if there is no right or wrong. Half the comments will be right if things go to shite, and half will be right if they dont. Unless your psychic then i respect all the opinions given so thank you