Days to the General Election: 20
See Party Policies here. Party Lists here.

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

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

The number of homes being auctioned by Auckland's largest real estate agency continues to rise while the number being sold at auction appears to be stabilising.

Last week (8-14 June) Barfoot & Thompson marketed 102 residential properties for sale by auction, up from 85 the previous week and 45 the week before that.

Of the 102 properties marketed for auction by the agency last week, one was withdrawn from sale and four were sold prior to the auction, 34 were sold at auction or immediately after and 63 were not sold.

That gave an overall sales rate of 38% last week (see the table below for the results of the individual auctions Barfoots ran during the week).

At the previous week's auctions 35 of the 85 properties were sold, giving an overall sales rate of 41% and the week before that 29 properties were sold giving a sales rate of 64%.

The figures show that the number of properties coming to auction has been increasing at a substantial clip since the level 4 lockdown ended, and while the number of auction sales has also been increasing, they have been rising at a slower rate.

That suggests that there may have initially been a certain amount of pent up buyer demand that built up during the lockdown, and initially only a limited supply of properties as the market opened back up.

But the latest figures suggest supply and demand are starting to come back more into balance and auction activity is starting to get back to normal.

Details of the individual properties offered at auction and the results achieved are available on our Residential Auction Results pages.

The comment stream on this story is now closed.

Barfoot & Thompson Residential Auction Results
8-14 June 2020
Date Venue Sold Sold Post Sold Prior Withdrawn Not Sold Total % Sold
8-14 June  On-site 3     1 1 5 60%
9 June Manukau 11       17 28 39%
9 June Shortland St 1       6 7 14%
10 June Shortland St 7   1   13 21 38%
10 June Pukekohe 1       5 6 17%
11 June North Shore 6   3   12 21 43%
11 June Shortland St 3       8 11 27%
12 June Shortland St 2       1 3 67%
Total  All venues 34   4 1 63 102 38%

 

 

 

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

90 Comments

16
up

Yvil in 3 2 1.....

18
up

Shall we all save some time and just copy & paste yesterdays comments?

Good idea.

16
up

In the real world, an old crusty house like this would go for no more than $400k. In NZ over $2.3Million. The resets long overdue.

And who want to live in crammed Ponsonby anyway, for the same price you can have so much better quality of life, and for the coffee shops and resturants you can always take a drive.

I know that house very well, a friend lives few doors away from that place. Used to be a student flat..
Compare what you can get across the ditch.. at river front
https://www.domain.com.au/268-kent-street-teneriffe-qld-4005-2016235854

https://www.zillow.com/homedetails/3440-S-Ocean-Blvd-APT-603N-Palm-Beach...

......I know where I would rather be - for the same price of your 100 year old damp, wooden villa :)

I find homes like this a little heartbreaking. All very flash yes, but no attempt to retain any of the original character. Why even bother, just buy a new one and fit it out with the w@nky glitzy bling you like? I hate to see old homes gutted without sensitivity like this.

What do you expect from Yvil?

Some are now suggesting that any looming recession will be short and shallow......

TTP

16
up

Who is suggesting that?

Either a spruiker, specuvester, rentier or Bindi .... Literally nobody else would be so sinister.

10
up

And some are suggesting it'll be long and deep. Place your bets ladies and gentlemen...

As usual, vague references with no substance or evidence. No detailed reasoning on WHY you believe this to be the case.

He always says "some are suggesting" so that when it turns out to be wrong, he could say "I didn't say that, others did".

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

16
up

Haha so it would be greedy for a FHB to want to buy a home at a historically accepted affordability ratio.

Right...our property investors in NZ have had it too good for too long and in my view have completely lost the plot.

10
up

TTP, I don't know who you are referring to as a 'DGM', but I just asked a simple question - who is suggesting that the recession will be short and shallow? I am interested to know, and presumably you have read something that I haven't, as I haven't seen anyone predict that. Could you let me know who you are talking about? Thanks

Lol you are a true gentleman.
People who want affordable housing are "pests in a street full of men". How self-centered and greedy of us.
Some people who claim to know you in person say that you're a good guy. Why are you so bitter and vile towards us then? Always on the offensive. Are you insecure? In my experience people get really offensive when you hit a nerve, touch on some sort of insecurity. Are you perhaps worried that your business won't make the gains you were hoping for this year?
So self-centered and greedy of you.

CJ,

As Miguel highlighted above. Lack of robust rebuttal to the question on shallow recession. Resorting to name calling as a method of distraction from their inability to provide a robust rebuttal ...

Same old playbook.

Stay away from those who exhibit repeated disrespectful, emotionally immature and toxic behaviour. Avoid wasting your time. IGNORE the commenter. AVOID ALL ENGAGEMENT with the commenter.

Interest.co.nz policy :
"Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments."

"will de-register those repeatedly making such comments." - interest.co.nz editor, HOW MANY TIMES IS ENOUGH?

Yeah my "Booom" comments was deleted thanks to Tim

Question to the interest.co.nz editor:

"will de-register those repeatedly making such comments." - HOW MANY TIMES IS ENOUGH?

Interest.co.nz policy :
"Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments."

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.

I got an email from the editor after I retaliated in the same fashion a couple of times, which was just a request to change my behaviour, fair enough.
There's definitely people here to whom the rules don't apply. Meh, it's up to the editors, I don't really care. I guess they wouldn't want to lose donors, and that's fair enough.

TTP, Such a strange comment that avoids the the simple question you were asked. Who now is suggesting that any looming recession will be short and shallow?.

TTP, are you feeling okay? None of what you said makes any sense.

1 - You didn't answer who is suggesting what you stated above. Pretty easy thing to do; this page thrives on details and data.
2 - You define "DGM" as anyone who isn't 100% bullish at all times. That's nonsensical.
3 - Nobody has said they 'hate the prospect of a minor "short and shallow"recession'.
4 - 'in the vain hope that they'll be able to buy a house for a halfpenny' - There is nothing wrong with hoping you'll be able to buy a home. Isn't that what you're always telling people to do?
5 - 'the DGM are transparent. They're driven only by their self-centredness - in a word, greed......' - The irony of calling FHBs and renters greedy is clearly lost on you, doesn't even warrant unpacking.
6 - Quoting Conrad - totally random?! DGMs (aka those who may have a slight sense that all is not well after a global pandemic and collapse of the world economy) are "pests in a street full of men"? Is everyone who disagrees with you a "pest", and everyone who agrees with you a "man"? Why do you persist in equating property investment and bullishness with masculinity? This is extremely outdated and sexist. Please, stop it.
7 - "most of the nation is committed to rebuilding our social and economic structures following the ravages of Covid-19" - Our economic structure was a FIRE economy and a house of cards. Getting our house in order was well overdue. Calling out the reality we are facing doesn't mean one wishes for the collapse of civilisation, for heavens sake.

Seriously TTP, get yourself a nice cup of tea and try to relax a little. I'm sure you'll be okay, but bitterness will eat you up.

Two words: vested interest.
I know I get nervous and irritable when I feel insecure about something, so I suspect that this otherwise good guy (according to others) is just going through a stressful period either in his work or personal life. Let's hope things will get better for him soon.
However, he's been caught blatantly lying here before, so who knows.

"just going through a stressful period either in his work or personal life"

CJ,

You've raised a very good point. Any business owner who was caught unprepared may be facing cashflow / financial stress due to the significant fall in revenues. A friend of mine in a business partnership had to find $1,000,000 to inject into their business to maintain its ongoing viability.

Here is a real estate agency in Australia that called in the administrators (unsure if it is the master franchisor or a franchisee) -
https://www.smh.com.au/national/big-renovation-on-the-quiet-as-lj-hooker...

Having said that, the commenter in question does have a repeated history of name calling.

...it's "all good" TTP , Yvil et al ....nothing will stop "The Great New Zealand Residential Property Gravy Train" ...no need for concern, the good people at our Australian owned banks will see to that ! ...remember the bank is your "friend " :) ...... queue yet another nauseating, patronising bank TV ad. for good measure.

12
up

Misleading headline AGAIN Greg! It should be 'number of sales at auction INCREASED by 17% in just two weeks '!
Just kidding :)

At that rate in six weeks' time we'll be selling 150% of properties at auction!

At this rate, B&T will be selling 2000 properties per week at auction a year from now. 100,000 houses sold at auctions per year! Clearly this is a great time to buy.

....and number of sale fall by by 40% in just 2 weeks

Not kidding :)

As a seller you must be out of your mind to try to sell by auction specially within the current context, not sure what people are thinking about. Looks like ill advice from the RE agents but I guess they are making their part out of it.

The last few weeks was like of all NZers have been staying in the underground shelter. Now we are slowly coming out to assess the damages. The next couple of months will be a good indicator of how much damages we ended up with. Way too early to tell.

It’s not to early to tell, it’s blindingly obvious - but if you are relying on the latest real estate data you are looking in the wrong place. It’s called lag.

That's what he was saying yes, that there will be lag. But for those of us who are blind, where should we be looking?

10
up

The number of Auction rising most probably indicates that more people are worried about future market condition and expecting price to fall so are rushing to sell before it gets worse.

Properties sold in Auction - from healthy 64% it came down to to 41% and now stands at 38%.

Though the trend is negative but is too early as should get clear picture by September / October.

Few houses (Good Houses) are still getting asking/premium. With low interest rate everything will depend on unemployment numbers/ business closure / earnings. So is wait and watch as in very uncertain and unpredictable times (Evident from the way way every government is printing money).

I reckon the auction clearance rate is probably subject to feedback. As a buyer, the main reason to participate in an auction is your fear that the property will sell at auction and you won't get a shot. Otherwise, the entire auction process is heavily in the vendor's favour. So if you see that clearance rates are low, and so you can probably make an offer after the auction, you stay out of the auction. If clearance rates are high, you feel compelled to participate.

Personally I despise auctions as a predominant method of sale and would be very happy if they fell out of fashion in the NZ property market. Doesn't seem likely, but still.

"Personally I despise auctions as a predominant method of sale and would be very happy if they fell out of fashion in the NZ property market."

Comments I have heard about property going to auctions and why real estate agents recommend them ...

1) agents like auctions because if sold it's unconditional contract so agent gets paid straight away. With negotiation and conditional contracts you never know if buyer can go unconditional or not.

Auctions are a double edge sword. Works well in boom market. Sucks in a flat market

2) (real estate agent)
it is because of the internal pay structures - if a salesperson lists an auction they get a bigger cut of the commission - so if another salesperson sells it the lister gets quite a lot more than they would if it were listed as By Neg or with an Asking Price. They are legally supposed to disclose if one method vs another will give them a financial benefit but most stay silent on this - whatever you do please do not be fooled into using the auction method in 2019 - it is a waste of you first three or four weeks on the market

3) Many years ago I worked in real estate for a while (started only weeks before the '87 crash) and I had the privilege of working with an old RE guy who knew exactly which side was up. He told me that auctions we actually little more than advertising for the real estate agent, paid for by the client. No wonder they push them.

I understand why the agents like them, and why sellers are persuaded to go that route when agents push it. What's less clear is why buyers put up with it.

"What's less clear is why buyers put up with it."

Market conditions. When it is a sellers market there are many buyers.

On the other hand, when it is a buyers market and there are fewer active buyers, auctions clearance rates are lower.

Some of the recent successful auctions I've noticed are being bid up are on properties in Auckland with large sections that can be subdivided.

"Market conditions. When it is a sellers market there are many buyers."

Well, yes and no. In the US and UK auctions are almost unheard of, except for mortgagee sales, regardless of market conditions.

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.

In 2015/16 auctions represented around 75% of listings that fell to less than 20% by 2018. They were already less popular even before the pandemic hit. Corelogic do a report on this every quarter if you want to track methods of sale.

I agree they're less popular. I hope that trend continues.

Damn, accidentally reported comment. Sorry! Please ignore.

We've all done that with our itchy trigger fingers.

Is Auction / Sale number stabilizing ?

What data suggests suggest is Auction number - volume is rising and Sale/Success rate is declining.

I thought the comment was strange too.
It seems to be that auctions are becoming oversaturated whilst sale rates are dropping weekly.
The conclusion on this article seems off?

7 weeks after level 2 is July 1st.
Given time taken to sell therefore, we cannot expect a clear picture until stats in August.
However, given similarity to 2017 market decline in sales cf 2016, (absence of Chinese buyers) and also first 3 months of 2019 (AML and OBB) expect sales drop of 35% compared to 2017, between now and Xmas and a 10-15% drop in prices in median in Auckland.
A 38% clearance rate is not impressive.

This certainly aligns with what I've be hearing from a couple of colleagues at work about purchasing right now. One had an offer rejected on a property several weeks ago, and told the bid was too low. Now the agent is called them out of the blue to try and convince them to resubmit that bid ... It does seem like the buyers are increasingly finding themselves in a stronger position.

I don't think we will see the true extend of impact until the mortgage deferrals and wage subsidy schemes start to expire.

Maybe if next week this percentage will rise of 1% there will be an article on NZHerald / OneRoof:
"Auction sale rate percentage increased in the last week!"

They'll start reporting the percentage increase of the percentage that sells. I.e. 38% this week to 44% next week (hypothetical) = 16% increase in the sell rate.

“..overall sales rate of 38% last week”
I certainly would not be going to auction with a sales rate that low. I think it was around 80% or higher when I last sold a house in early 2016. I think we’re going to be reminiscing about those heady days for decades.

Reminiscing or regretting?

Perhaps regretting, then forgetting, then repeating with a new generation.

Just after lockdown, Core Logic estimated my homes value (Eastern Inner City Beach Suburb - Auckland) at 111% of 2017 CV. Last week, it had dropped to 98% of 2017 CV. It was updated as of 14/6 to 100% of 2017 CV. Is the dip @ 12% already over?

I wouldn't try to read signal into that noise.

Ironically, that's what happens each time a new set of sales are featured here.

Totally. 200 comments worth.

Question for the knowledgable readers of interest. Regarding current lending activity by the NZ banks, are borrowers getting any rate offers for investment property loans below the public special rates (LVR below 80%)?

2.65% with ANZ the day before they dropped their rate to 2.65%. Felt special for about 12 hours.

1 year? are you a FHB?

1 year refix. Not first home buyer.

ok thanks. Mine is up for renewal September and starting to explore options

As a potential FHB that has been saving trying to get $100k deposit along with $25k Kiwisaver, why is it risky to buy now, or potentially build. Im not an expert, but reading comments on interest.co has me freaked out a little....not going to lie.

Nobody knows for sure, but many expect prices to be appreciably lower in 6-18 months. Leaving aside those predicting massive deflation and/or financial collapse, that is.

Denver
I would talk to your family and others who have got your back such as your lawyer. As a FHB and first consultation with your lawyer is likely not charged for full time; and it is always better for someone young(?) and inexperienced (e.g. asking on this site) to see a lawyer at the outset. It is far cheaper getting guidance from your lawyer first, rather than he/she sorting out a problem later or making a mistake.
As for those on this site, I would be very, very weary as most have a deep seated value position either as a REA or an anti-property renter. I would listen to neither despite whatever they say.

Printer: firstly, a lawyer is not an expert in property market conditions or financial investments. Secondly, lawyers also have a vested interest - they earn money from their services to you if you buy a property. If you don't buy, they don't earn any money.

Also - why do you assume every FHB is young (and how do you define young?)? The way this market looks, with prices in respect to incomes, it's not unusual for a FHB to be in their late 30s or even 40s. Is that young to you?

Additionally, this board has comments from all sorts of people. Not everyone is either an REA or 'anti-property renter'. What about pro-property renters who can't afford the monstrous deposits and mortgages required in order to buy? What about the seasoned investors, and those who have lived through market crashes elsewhere (such as our Colorado friend IO)—neither FHB, nor anti-property? Perhaps they do have some insights, and are not driven entirely by vested interests, but by wisdom achieved through years in the game?

Finally - I think you mean wary, not weary, although all this wariness is enough to make anyone weary, in all honesty.

16
up

I lived through the property bubble in the US denver.

If you haven't lived overseas, you may miss that we have a strange obsession with property and investment in this country - probably because we've never seen a significant correction to house prices here.

In my view that has made many, if not almost all, complacent to the fact that property prices can and do fall, sometimes by 50% or more. Right now, or at least the next 12-24 months, we're probably at the biggest risk of a fall we've experienced in decades, if not ever. The economic data right now is as bad as it gets in the last 100 years and we have some of the worlds most expensive houses, as measured in any ratio of affordability.

Boomer parents will tell you to buy property because they have no idea what is going on, nor appear to care. Banks will tell you to buy property because they want you to be their debt slave. Real estate agents will tell you to buy property because they want to take their cut of the sale. Investors will want you to buy property because they want more buyer demand in the market to push prices up even higher.

The only person who will give you fair advice is the one who doesn't have vested interest. If you can figure out where to get that advice, good luck as its pretty hard to come by in NZ with its property obsession - which in my view is as bad, if not worse that the USA before its bubble popped and values fell as much as 60% in some places.

If you're happy with the risk and are desperate to buy - go for it. But if you're only at a 20% LVR be warned that you could be in negative equity in a short space of time. Upside factors for continued growth in property prices are almost nill in my view. Interest rates can't/won't go much lower, so the only way we will see rises is if wages start rising. But for wages to rise we will need inflation and if we get inflation, interest rates will rise, and higher interest rates on massive amounts of debt makes it harder to service, which means prices can't go up much further. Basically central banks have squeezed everything they can out of the stone and there ain't no blood left - probably only that which might be on the streets later this year.

Post of the week.

IO and Big Data
There you go; two commentators with definite biases as shown by their previous posts.
In the case of IO a person who by his own admission has posted about a bubble burst for five years - yes, five years - and thrown around figures of 50% imminent fall in conflict with RBNZ and bank economists. Not a sound basis for offering unbiased and sound advice.
Bid Data you have also previously posted strongly against buying property. I do not claim that lawyers are housing experts but are likely to discuss and be experienced to offer advice on issues associated with seeking advice from a valuer and that on new build contracts and where to seek that advice. Lawyer is the only person who you pay to look after your interest (without a vested interest) and you shoot it down. First prudent step for anyone looking at buying property (or building) is to see a lawyer and in many instances that initial consultation is not specifically charged and falls into a standard conveyance charge. Very poor (shocking) advice on your part to argue that a FHB should not see a lawyer at outset.

. . oh and I did not assume that the person was young hence the question mark.

P8, m8, as you are well aware I have owned numerous properties and still hold two. I'm also a former REA, so to say I have "previously posted strongly against buying property" is disingenuous at best. I have posted strongly against buying property NOW.

My comment regarding lawyers was to highlight that they too, have vested interests. Almost everyone could have some sort of interest, so to claim everyone on here (except, presumably, you?) has a vested interests, as if that is unusual, doesn't make a whole heap of sense.

I don't "shoot down" the idea of speaking to a lawyer. Of course, anyone buying a specific home should seek the advice of a lawyer. Anyone deciding whether or not to buy a home *in general* should do a lot more than that. Lawyers are not the best source at that stage of your journey. Gathering opinions from a variety of sources, and studying current and historical data, is a sensible part of the research that any buyer entering a market for the first time should do. And yes, a lawyer could advise you to speak to a valuer...or, you could just speak to a valuer, anyway ;-)

You're making stuff up again P8, like other vested interests appear to do in order to dismiss and belittle my opinion/views.

There is a difference between acknowledging a possible outcome - in this instance a 50% fall, from saying 'everyone housing is certainly going to fall by 50%'. If you don't understand risk, or weighting bets based on probability, that is fine.

As I say, I watched the housing market tank in the US and didn't understand how that could happen. I have since educated myself on bubbles and irrational human behaviour by reading books by the likes of Shiller, Ackerlof, Taleb and Kahneman who have dedicated their lives to studying these fields.

If you want to dismiss my views after reading thousands of pages of books in these fields, that's fine. I'm simply trying to raise the quality of assessment here beyond the hindsight, recency and confirmation bias of 'house prices go up because they've always gone up'. The only books many property bulls appear to have read is the property press.

IO
Not making stuff up - refer to comment below. However for the future I am happy to let the comment go as the point has been made.

I am concerned that (if I can call it this) the anti-property brigade has been very vocal, and over the past few years consistently make wild unsubstantiated comments . Not only has this happened, but reputable commentators including the RBNZ and bank economists have been consistently rubbished by these anonymous keyboard warriors. I acknowledge the difficulties and frustrations that many face with current affordability issues.
These comments tend to discourage potential FHB, are usually simply scaremongering, and undermine discussion on this site. It is for this reason that I suggested that Denver seek advice elsewhere.
Are bank economists going to get it right all the time? Of course not; that is the nature of forecasting. Forecasts are based on consideration of the then current factors and making estimates based on those. However, comments such as Westpac economists are dismissed simply as "morons" (Foreign Buyer) are not adding to constructive or meaningful debate.
As to the bubble burst you refer to - is there going to be one? It is concerning that house price inflation over the past decade has been the result of falling interest rates and it is concerning that the RBNZ may be using up all their powder when there is now significant need. There is no conspiracy as is often posted (including by you) to support housing. Falls in the OCR and the government Co-vid actions are not primarily about supporting housing - rather economic stability in the sense of encouraging businesses to borrow to expand to protect both businesses and jobs. The impact on house prices is a secondary consequence of that; arguably, for many millennials it was either jobs or houses, just as it has been poor returns on term deposits for many retired boomers.
Cheers

by Independent_Observer | 22nd Mar 20, 11:01am
I've been saying this on here for about 5 years now. Our property market could well be the mother of all bubbles. It wouldn't surprised me to see a 50% (or more) fall in property prices across NZ.

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).

IO
Cheers
I see many comments of yours that I do up tick! :)

" I have since educated myself on bubbles"

IO

Just out of interest.

1) all asset price bubbles? (such as share markets, commodity markets, foreign exchange markets, futures markets, options markets, sovereign debt, corporate debt, municipal debt, etc) or
2) mainly real estate bubbles?
i) US
ii) what about other real estate bubbles such as:
a) Ireland, Spain, in 2005-2006
b) Hong Kong, Singapore, circa 1998
c) Japan circa 1990's
d) other?

Denver,

Don't take our word on it. Here are some perspectives of some banking insiders. Get informed on both sides of discussion on the property price risks and make a fully informed decision. Beware of those with a huge vested financial self interest who promote property on television or property promotion websites such as oneroof.co.nz.

1) Don Brash, former RBNZ Govenor - https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11672584
2) Arhtur Grimes - former RBNZ Chairman - https://www.stuff.co.nz/business/money/81853314/auckland-home-owners-who...
3) David Hisco- former CEO of ANZ in New Zealand - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116...
4) Dr Michael Rehm, University of Auckland - https://www.nzherald.co.nz/university-of-auckland/news/article.cfm?c_id=...
5) Bryan Gould, former UK politician - https://www.stuff.co.nz/business/81379799/housing-bubble-about-to-pop-br...
6) RBNZ Financial Stability report May 2020 - https://www.rbnz.govt.nz/financial-stability/financial-stability-report/...

Read about the peakers vs the troughers and the different financial trajectories of the one single decision to buy a house.

It should be titled valuation matters.

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

After being aware of the Peakers vs the Troughers, and with that in mind, here is a reminder for all potential owner occupier buyers and current owner occupiers - choose your scenario and act accordingly.

Which will the owner occupier regret most:
1) missing out on future potential gains in equity?
2) potential loss of their savings invested as the initial deposit for purchase of the house or even potential negative equity?

For owner occupiers, a reminder of the impact of leverage (it amplifies property price changes both on the up and down):
Scenarios of financial impact of leverage on equity, assuming an 80% LVR for owner occupier, for a recent $1,000,000 property purchase, $200,000 initial deposit, mortgage $800,000. (simple round numbers used for illustration purposes)

A) Scenario - property price rise:
1) property price rises 5% to $1,050,000, mortgage $800,000, equity $250,000, so 25% gain in equity value from $200,000.
2) property price rises 10% to $1,100,000, mortgage $800,000, equity $300,000, so 50% gain in equity value from $200,000.
3) property price rises 15% to $1,150,000, mortgage $800,000, equity $350,000, so 75% gain in equity value from $200,000.
4) property price rises 20% to $1,200,000, mortgage $800,000, equity $400,000, so 100% gain in equity value from $200,000.
5) property price rises 25% to $1,250,000, mortgage $800,000, equity $450,000, so 125% gain in equity value from $200,000.
6) property price rises 30% to $1,300,000, mortgage $800,000, equity $500,000, so 150% gain in equity value from $200,000.
7) property price rises 35% to $1,350,000, mortgage $800,000, equity $550,000, so 175% gain in equity value from $200,000.
8) property price rises 40% to $1,400,000, mortgage $800,000, equity $600,000, so 200% gain in equity value from $200,000.
9) property price rises 50% to $1,500,000, mortgage $800,000, equity $700,000, so 250% gain in equity value from $200,000.
10) property price rises 100% to $2,000,000, mortgage $800,000, equity $1,200,000, so 500% gain in equity value from $200,000. (i.e if they believe that the property price doubles every 10 years)
Remember, the owner occupier must be able to hold on under ALL economic environments (including any potential significant reduction in household income).

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

The other essential considerations are:

1) how secure is your household income?
2) will the house suit all your future needs (e.g is it sufficient size if you want to have children, etc). You may be able to add extensions. Proximity to school for future children. The last thing you want is to have to sell to upgrade if property prices fall dramatically and haven't recovered to your purchase price.

Remember that the borrower must be able to maintain debt service under ALL conditions such as:

1) lower household income due to fewer hours for wage earners, salary cuts, lower commission income, loss of job, one spouse choosing to stay home to look after children,
2) higher interest rates

CN
Some good balanced substainiated comments - I have upticked all.
You have naturally focussed on economic considerations - there is however also the intrinsic and security aspects which The importance of cannot be readily quantified.
Clearly the most important consideration for a FHB at the moment is security of income and ability to service the mortgage.

"- 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.

I might be misunderstanding, but 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.

"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

Days to the General Election: 20
See Party Policies here. Party Lists here.