Auckland apartments selling for substantially below rating valuations

Property

Apartments with remediation issues are fetching particularly low prices - one sold for just $35,000 while another with a declared reserve of just one dollar was passed in

27th Jun 20, 9:02am by Greg Ninness

This apartment in the Scene One complex in downtown Auckalnd sold for $35,000.

Prices of Auckland city apartments appear to be cooling rapidly with most the apartments that were sold at recent auctions monitored by interest.co.nz selling for well below their rating valuations.

Although apartments are still attracting good interest from potential buyers, they are being extremely cautious on price and vendors who require a sale are having to accept sharply reduced prices or see their properties passed in at prices that are often well below their reserves.

The drop in prices appears to be across the board, affecting smaller apartments that are traditional investor fare as well as more upmarket units that would appeal more to owner-occupiers.

Recent examples include a studio unit in the Kohura Walton building just around the corner from Karangahape Road. It had a rating valuation of $270,000 and although it received multiple bids it ended up selling under the hammer for just $225,000.

Similarly, a three bedroom unit in the Harvard building on Hobson Street sold for $365,000 compared to its rating valuation of $460,000.

Properties that are leasehold or that have remediation issues appear to be suffering particularly severe price falls or are becoming difficult to sell.

A two bedroom unit in the Scene One building on Beach Rd, which is on a leasehold title and has remediation issues, sold for $35,000. According to Quotable Value records it had originally been purchased for $375,000 in 2005.

A studio unit in the Century on Anzac building on Anzac Ave, which also has remediation issues, was offered with a declared reserve of just one dollar. But although the auctioneer announced the one dollar reserve before bidding commenced, meaning it could have sold for a dollar, there were no bids and it was passed in.

Details of the results at the main Auckland apartment auctions monitored by interest.co.nz over the last two weeks are listed below.

City Sales auction 17 June.

46/146 Fanshawe St, CBD. Marina Park complex. A 54sqm, 2 bedroom/2bathroom unit with a car park.Rating valuation $540,000. Received an opening bid of $450,000 and when there were no further bids the auctioneer placed a vendor bid of $475,000. But there were still no further bids after that and it was passed in.

Ray White City Apartments auction 18 June.

8A/100 Anzac Ave, CBD. Century on Anzac building. A 39sqm, 1 bedroom unit with a 12 sqm balcony. Building has remediation issues and a rating valuation of $280,000. There was competitive bidding for this property and it sold under the hammer for $171,000.
6D/9 Victoria St East, CBD. The Lister, a character building on the corner of Victoria St and Lorne St. A 40sqm,one bedroom, high stud apartment converted from office use so the price was plus GST. Rating valuation $340,000. Received an opening bid of $300,000 plus GST and when there were no further bids it was passed in.

City Sales auction 24 June.

3C/9 Upper Queen St, near Karangahape Rd. Kohura Walton building. A 29sqm studio with a rating valuation of $270,000. There were multiple bids for the property and it sold under the hammer for $225,000.
9B/23 Emily Place, CBD. Silo building. A 34sqm, 1 bedroom corner unit with a car park on a separate title and a balcony and views over the park across the road. Rating valuation $480,000 (apartment $400,000 + car park $80,000). There were multiple bids and it sold under the hammer for $456,000.
1302/9-17 Byron Ave, Takapuna. Spencer on Byron. A 30sqm studio, due to come out of the hotel pool later this year. Rating valuation $220,000. There were multiple bids on the property but it was passed in at $280,000.
11B/147 Hobson St, CBD. Harvard building. A 41sqm, 3 bedroom unit with a car park and a balcony. Rating valuation $460,000. There was only 1 bid on the property, which was successful and it sold under the hammer for $365,000.
9H/100 Anzac Ave, CBD. Century on Anzac building. A 31sqm studio. The building has remediation issues and the unit had a rating valuation of $235,000. The property had a declared reserve of just one dollar but there were no bids and it was passed in.

Ray White City Apartments auction 25 June.

1316/2 Beach Rd, CBD. Scene One building. A 61sqm, 2 bedroom unit with a car park. Remediation issues. Leasehold. Bidding opened at $10,000 and there were multiple bids for the property which sold under the hammer for $35,000. According to QV.co.nz the apartment was originally purchased for $375,000 in 2005.
12A/100 Anzac Ave, CBD. Century on Anzac building. An 88sqm, two bedroom apartment with two balconies and a car park. Building has remediation issues and the unit has a rating valuation of $520,000. There were multiple bids and it sold under the hammer for $316,000.
909/70 Sales St, Freemans Bay. An upmarket, 110sqm apartment on two levels, in the newly completed Grace building, with 2 bedrooms and 2 car parks. Rating valuation $1.7 million. There was competitive bidding on the unit but it was passed in with a top bid $1.2 million.
1008/430 Queen St, CBD. Volt building. A 40sqm, 2 bedroom apartment with a rating valuation of $410,000. There were multiple bids but it was passed in with a top bid of $340,000.
GN/147 Hobson St, CBD. Harvard building.A 38sqm, 2 bedroom bathroom unit with 2 car parks. Rating valuation $450,000. There were multiple bids on the property and it sold under the hammer for $350,000.
1333/72 Nelson St, CBD. Zest building. A 37sqm, 2 bedroom unit with a car park. Rating valuation $420,000. Passed in with a top bid of $322,000.
707/15 Union St, CBD. The newly completed Union & Co. building. A 50sqm, 2 bedroom unit with a balcony. Rating valuation $560,000. Passed in with a top bid of $480,000.
218/38 Khyber Pass Rd. Skhy building. An 88sqm, 2 bedroom/2 bathroom unit with a balcony and car park. Rating valuation $870,000. Passed in with no bids.
1206/8 Airedale st. CBD. Queens Residences building. A 50sqm, two bedroom apartment with a rating valuation of $600,000. There was competitive bidding for the property and it sold under the hammer for $578,000.
408/9 Sarawia St, Newmarket. A 38sqm, one bedroom unit with a car park. Rating valuation $470,000. There was an opening bid of $300,000 followed by a vendor bid of $350,000 but when there were no further bids it was passed in.
5i/1 Emily Place, CBD. Tower Hill building. Remediation issues. Rating valuation $350,000. Sold under the hammer for $275,000.

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Details of properties at other auctions monitored by interest.co.nz are available on our Residential Auction Results page.

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119 Comments

by taimaiakka0 | 27th Jun 20, 9:08am 1593205739

Still early as will know full impact by end of year.

by tothepoint - d… | 27th Jun 20, 11:07am 1593212853

"Properties that are leasehold or that have remediation issues appear to be suffering particularly severe price falls or are becoming difficult to sell."

Surprise, surprise.......

Not too many people are prepared to pay big money for another person's problems.

TTP

by Becnz | 27th Jun 20, 11:21am 1593213687

Wait for Christchurch plenty of properties with issues that have patched over which will be a headache for future sellers when market turns south and buyers sense a chance to haggle.
Also have heard some insurance companies now refusing to insure certains areas of CHCH.
Be very careful what you buy.

by Yvil | 27th Jun 20, 12:14pm 1593216897

I very much disagree, I had lunch with a friend who specialises in buying "where is as is" houses in Chch (read EQ damaged and uninsurable) fixes them up with Engineer Producer Statement and sells them on. He sold 4 this week! 3 at full asking price and one $50k above!

by Foreign buyer | 27th Jun 20, 12:20pm 1593217228

Asking price????... He could be asking $300k under CV?

by Becnz | 27th Jun 20, 12:44pm 1593218687

Yes he is making good profit but the problem is buyers of as is properties that have been fixed to a basic level and reinsured will have a rude shock if and when insurance companies start to dig a little and find an out due to engineer/building not fixed to standard if and when another claim is made.
Remember these as is properties are being paid out for a reason i.e cost to fix properly by insurance companies is too high so beware when trying to claim on the so called new policy as we all know how hard it will be to get a payment from them before the earthquakes let alone now that they will have many outs due to so called repairs being signed off via an engineer who will no doubt not be liable for anything they miss and inurance will be worthless.

by Becnz | 27th Jun 20, 12:51pm 1593219089

Also many people have homes that are fixed ?? but now they are finding problems which like leaky homes etc are only now being found years later so my main point is the checks being made are substandard and will cost many people in the future but at moment demand is forcing people to buy properties that are very high risk for a very high price.
Read page no 9-10 in below link to see what is happening
https://www.yumpu.com/en/document/read/63550851/the-star-june-25-2020

by CJ099 | 27th Jun 20, 5:00pm 1593234013

Yes it's not just leaky homes but also ones that have needed underpinning work done to stop them from falling down. Just goes to show the shoddy build quality that still seems to go on even with all the hugely expensive building regulations. Also I couldn't fathom how banks here are willing to lend on these properties and would allow people to purchase homes without a building report?! In places like the UK, you can not purchase a home without a fully qualified builders report if you want to get a mortgage on it.

by DIYman | 27th Jun 20, 4:07pm 1593230861

Please don't pick on Christchurch, virtually every house in the country is "an as is where is" house, just that in some streets in Christchurch, insurance companies have pretty much paid out in full for every house in the street, and they continue to be lived in, many in way better condition than inner city Wellington.

If I was the insurance company, I too wouldn't feel inclined to offer insurance again, so obviously two can play at that game, and the current owners are happy to self insure. Post EQ, some houses were snapped up for land value only, and then rented to people out of their houses for repairs or rebuilds, at rents, that paid for the whole property in 5 years, yes a 20% return. Of course that's all over, and one day an uninsured house will be destroyed by flood, fire , whatever, but please don't feel sorry for the owner, thats the nature of risk and return.

by tothepoint - d… | 27th Jun 20, 12:46pm 1593218771

SBAs (shoebox apartments) are like fools' gold.

Unpleasant to live in and a poor long-term investment.

Property underperforms as an investment, unless you own the land that the building sits on.

You can't beat a freehold fee simple title. Many people forget this key factor - they get mesmerised by the glossy marketing and the real estate agent's hyperbole.

Frankly, I'd like to see all modern-build (and/or leaky) SBA complexes in Auckland's CBD demolished. They're a blot on the cityscape. Ugly!

TTP

by b21 | 27th Jun 20, 5:19pm 1593235185

For once we agree TTP, there's nothing that sustains high prices in apartment buildings since it is the price of land what has driven property prices up mostly, in one of these buildings you may have 10-15 apartments sharing the same land surface. In addition to that, the lack of students to pay for investors mortgages will bring these property prices lower than most expect.

by theglc | 27th Jun 20, 10:35pm 1593254107

regardless of leasehold or remediation, looks like buyers are looking for 25% discount on RV.

This is just the begining...

by Foreign buyer | 27th Jun 20, 12:13pm 1593216821

I am seeing SOLD house prices dropping everywhere but have not seen any mention of such in the MSM or even the 'independent' Corelogic.... why is this? Whenever prices rise it seems to be 'BIG NEWS'... Free press?

by Houseworks | 27th Jun 20, 12:34pm 1593218096

Sounds like you're trying to generate hype of a conspiracy. Nothing stopping you telling everybody and broadcasting if you have any contrary info.

by Foreign buyer | 27th Jun 20, 12:43pm 1593218589

You need to look no further than the residential auction results on this very site. I have been watching these for a while. Prices are definitely on the way down and the number of "PASSED IN's" is becoming embarrassing !

https://www.interest.co.nz/property/residential-auction-results

by Houseworks | 27th Jun 20, 12:51pm 1593219095

I think its 50 percent clearance on auction date and that's an ok performance but not stellar. Quite a few will sell within a week of auction. I have been through it a few times now and is the most successful method IMO.

by Foreign buyer | 27th Jun 20, 2:37pm 1593225454

Those 'passed in' sellers can be compared to the rich folk on the titanic who had a spot in a life boat but decided to run back to their cabin to retrieve some jewellery. When they returned they found that all the life boats were gone.

by b21 | 27th Jun 20, 5:21pm 1593235272

It would be pretty interesting to see some numbers comparing asking vs sold prices these days, pretty sure there's more than 20% difference in many cases and over 30% in apartments like these ones.

by rastus1 | 27th Jun 20, 1:07pm 1593220066

Too early...... said the captain on the titanic. If you can’t see the icebergs by now, you never will.

by taimaiakka0 | 27th Jun 20, 1:25pm 1593221152

Well said rastus :)

by Zachary Smith | 27th Jun 20, 9:10am 1593205839

This all seems fairly normal for apartment sales. Were apartments generally selling above valuation before now? Were apartments with remediation issues or leasehold ones not being knocked about before now?

by taimaiakka0 | 27th Jun 20, 9:21am 1593206491

Agree ZS - gloomy or not will be clear by end of year amd should be positive/happy s now, still have buyers who are bidding though on lower price.

by CrispyKahawai | 28th Jun 20, 4:53pm 1593320024

"This all seems fairly normal for apartment sales. Were apartments generally selling above valuation before now?"

1. No it doesn't. Because...
2. Yes, they were.

by bw | 27th Jun 20, 9:21am 1593206473

"the one-dollar reserve before bidding commenced, meaning it could have sold for a dollar, there were no bids and it was passed in."
Somebody paid for that property, and someone finances it (either a bank or self-funded).
Not something we should be proud of as a nation. Speculation, as a means to wealth, is all very well - when it works. But when it doesn't.....and that, is where we are as a people. It has to change, and now is the best time we are ever likely to have gifted to us.

by stuart786786 | 27th Jun 20, 10:08am 1593209301

Speculation ........no agency or government will allow reset by themselves specially in NZ as is the only indicator of Rock Star Economy but this time is hit by coronavirus which is beyond their control so the probability of reset in price is higher.

Money is flowing freely by government as stimulus provided without any thinking and planing and most business (except this affected by border closure) have made a fortune- correct not profit but a tidy fortune (A company who have 50 employees and after level 4 are doing excellent business -approx 160% than before but are delaying delivery to avoid raising invoice to avail wage subsidy and in process, business /management getting a buffer/free money/bonus in entire process of appox $500000 and surely must be many more such companies and many other loopholes/ways to exploit and make fortune).

So for those that are not affected till now by border closure, panademic has been a boon for them in term of $$$$$ and their are many such small, medium and big companies.

Stimulus should be targeted to those affected as is suppose to be a cushion for those companies to survive and not Bonus to many.

by alittle | 27th Jun 20, 11:02am 1593212551

IRD should highlight that if just after 30 days period (Avail wage subsidy) if sell shoot up suddenly will be an enquiry to check any exploitation / misuse of the subsidy BUT no such thing willbe done as government /IRD are hand in glove with such businesses.

by Zachary Smith | 27th Jun 20, 11:04am 1593212692

The problem is not speculation but poor building quality. We shouldn't be proud of some of our building standards, sure, but its a long stretch from some poor soul losing money on a poorly built studio apartment to claiming that we should outlaw speculation. Whatever next, that's face palm stuff.

by Houseworks | 27th Jun 20, 10:18am 1593209892

In auckland too many apartments are being built and too many are being bought by investors. The percentage of auckland 2 bedroom rentals has increased over the last year from 27.9 percent 12 mths ago to 33.7 percent of current total rentals. That's where the increase in rental listings has come from this last year an increase of 400 since june 19 a one-third jump

PS to clarify, that's one third increase in 2 bed rentals. Total Auckland rentals have increased about 6 or 7 percent overall

by Fritz | 27th Jun 20, 9:41am 1593207706

Good data thanks.
It's an interesting one. If you look at the demographics then it suggests we need a lot of 2 beddies.
Because of the development economics, 2 beddies often stack up well. On a per bedroom.basis, rent in a two bedroom apartment will almost always be cheaper than a one bedroom apartment. Hence the popularity of 2 bedroom apartments among young renters.
Ordinarily, there would be a sound basis for mass construction of 2 bedroom apartments. But in the post covid world, there is going to be a glut, as many of the young people who would have rented them return to their parents, other family or friends or overseas.

by Houseworks | 27th Jun 20, 10:21am 1593210113

Yeah I think it's a longterm trend as there are smaller households it's no longer mum dad and 3 kids. It's the affordable end of an unaffordable market so buyers and renters probably resort to something like that out of necessity rather than choice. We had some one bedroom units and tenants like them as they dont have to have shared common areas or entry ways. We also liked them because of the size they are a breeze to maintain and it's easy to keep number of occupants down which then reduces wear and tear and noise. You do get a few very strange tenants from time to time but mostly harmless.

by Rob Reid | 27th Jun 20, 11:54am 1593215686

Yeah, I've seen several overseas commentators talking about a shift to 2 bedroom places being a mega-trend as more of us work from home (2nd bed becomes office). The other megatrend (particularly in the US) is a trend away from paying a premium for being in an expensive city. We can work from home in the burbs or in 2nd and 3rd tier cities.
If NZ follows, we should see more Auckland apartment price drops, but little places in the burbs and the whops being popular.

by Houseworks | 27th Jun 20, 1:05pm 1593219928

Has the trend away from expensive cities mainly started occurring since covid RR

by Rob Reid | 27th Jun 20, 3:23pm 1593228201

Well, no, but it seems to be accelerating - another reason to get out.
Ken McElroy (experienced property developer) released this on 18 June - an online interview with Jason Hartman. Its over an hour but I found it worth watching from a megatrend perspective as it affects real estate and investment:
https://www.youtube.com/watch?v=4Wl7dxPZaEc

Interesting what Ken says near the start (around 1 min 20) about lenders having pretty much shut their doors.
Around 4.09 Jason starts talking about mass migration to low density.
I kind of lay on the couch as it played and let it wash over me.

by Rhumline | 27th Jun 20, 10:21am 1593210082

Mr H. What sort of yields are owners of these mini-2 bdr apartments targeting?

by Houseworks | 27th Jun 20, 10:28am 1593210501

I dont really know. They are higher than average yield esp if you buy a whole block. The older blocks are often one title and simply investor material. 60s to 80s blocks are not leakers and have a bit of space that you can utilise. Does that help

by Rhumline | 27th Jun 20, 10:27am 1593210442

Thanks

by Houseworks | 27th Jun 20, 10:29am 1593210542

Can I ask what's your interest and background rhumline

by Rhumline | 27th Jun 20, 12:01pm 1593216073

Semi-retired and self employed. Spent time in the public and private sectors (so do take offence at some of the more rancid anti-bureaucrat comments on this site), dabble in property with a couple of other investments on the side. Recent gold card recipient. Just broke out my Kiwisaver too - like all other self employed people its all my own work with not one cent of employer contribution.

by blobbles | 27th Jun 20, 11:46am 1593215168

It's fascinating some of the "rancid anti-bureaucrat comments on this site". We literally won the first battle against COVID19 BECAUSE of a strong public service and a leadership that listens to them. Yes, they screw up occasionally (see the second battle currently being waged), but you will look like the US if you have a weak public service and idiot leaders.

by al123 | 27th Jun 20, 12:52pm 1593219148

If you earn a wage or salary, the contents of your kiwisaver is all your own work too - the employer contribution is part of what you've earnt by working.

by Rhumline | 27th Jun 20, 6:00pm 1593237652

Fair point

by Doris | 27th Jun 20, 12:41pm 1593218489

I've been watching 2 bed apartments in Auckland central, under $450 per week rent.

Since the beginning of May listings have been rising steadily, 51 available then to 126 now, most immediately available. Many offering first week free, and there's a couple available for $400 in the building my daughter is in (they signed up at the beginning of the university year at $440 p.w.).

by frazz | 28th Jun 20, 10:25am 1593296738

I have been looking as well as we are moving back up in 2 months time. So many of these apartments are shoeboxes..in areas that are noisy at night, no outdoor spaces, and small kitchens. Good luck to all the owners trying to rent these out..all I can see is carnarge as they all try to exit the door by selling up.

by OpenMinded | 27th Jun 20, 9:31am 1593207098

The best remediation that could happen to the Scene apartments would be to knock them down, they are a uninspired downmarket eyesore that should never of been built!

by Fritz | 27th Jun 20, 9:43am 1593207790

Much taller and skinnier would have been better.
Yes, they are horrid.

by Houseworks | 27th Jun 20, 9:36am 1593207401

I feel for those stuck with apartments such as those in scene one building. Leasehold AND leaky, they dont even have the value of land to help restore value. Investment wiped out.

by Foreign buyer | 27th Jun 20, 9:43am 1593207797

Apartments and leasehold properties in general are to be avoided at all cost. Freehold is the only viable option (once the price drops between 20-50% that is!)

by Uninterested | 27th Jun 20, 10:23am 1593210234

Surely leasehold apartments are going to have much lower ground rent to pay in a few years time?

by swingtrader | 27th Jun 20, 4:06pm 1593230807

Unlikely. I’d say almost all ground leases will have a ratchet clause in there somewhere.

by Rhumline | 27th Jun 20, 10:26am 1593210401

Totally agree about leasehold, but freehold and company share apartments can work at the right price points. We have two here in Wellington that deliver an unspectacular net yield of 5%. Not too concerned about the price dropping because the rental market seems pretty steady going forward.

by Houseworks | 27th Jun 20, 10:37am 1593211052

Wellington is one of the stronger markets right now RL across the board commercial and residential, sales and leasing/renting. Maybe values will drop (??) But I cant see it being too noticeable for the foreseeable.

by blobbles | 27th Jun 20, 9:48am 1593208123

What's that saying about canaries in coal mines?

by dictator | 27th Jun 20, 10:21am 1593210085

Apartments built on leasehold land have been a disaster waiting to happen, yet there's no shortage of them. Even if the building doesn't have any problems the body corporate fees, land lease and rates add up to a large negative carry. Better to rent them than buy.

by Doggog | 27th Jun 20, 10:28am 1593210517

I have never understood a person buying a new leasehold apartment. Many years ago when looking I saw a new 50 sqm unit selling for $400,000. That is $8000 per sqm which was and still is outrageous. The initial ground rental was set at a very low level to lure the people in. They are the ultimate real estate ruse. Three step wipe out. 1 - the ground rental is jacked up and half your money is gone. 2 - The new building becomes an old worn out building - half of what is left now gone. 3 - It leaks - Pray someone will take it off your hands!
The developer is living in the south of France.

by b21 | 27th Jun 20, 5:24pm 1593235496

It is actually 10x$8000 per sqm in a 10 storey building which is insane. At this price 500sqm section would cost 400 million

by Justa comment | 27th Jun 20, 10:51am 1593211901

Looks like 10% drop is turning into 15. Good article, what is really going on. With loss of confidence in jobs, there will be reluctance to buy properties with bcorp fees. Going forward it will all be about job security.

by Zachary Smith | 27th Jun 20, 11:48am 1593215319

I think in certain situations a BC is a good thing. A group of brick and tile units can benefit through having a BC. The BC ensures that the whole complex is maintained and stays looking well kept and consistent. The BC are owners generally so have an interest in keeping costs down. A fund builds up over the years and when you buy one of these properties there are dollars for maintenance that you don't need to fork out for. The BC may have 20k or more to fix the roof or paint the windows. They look after the common areas too. You can see a huge difference between a block of flats that has a BC and one that doesn't.

by Yvil | 27th Jun 20, 10:52am 1593211965

Makes for grim reading, apartment in buildings with remediation issues selling for peanuts is not new but ALL other apartments selling below RV is a bad sign

by Zachary Smith | 27th Jun 20, 11:40am 1593214819

Things are probably a bit worse for apartments now but I wouldn't rate it as grim. For context I went back through the auction results for apartments for August 2019. For apartments that sold that had RV listed I noted out of 34 apartments 25 sold for less than RV, 8 for more and one the same. Several of the apartments sold for hundreds of thousands less than the RV, for example 810k RV sold for 84k, several sold in the region of 20k. That's why I wrote above that it didn't look too abnormal.

by dictator | 27th Jun 20, 11:42am 1593214935

Something I'm wondering is how banks are approaching lending for apartments right now. It was always a mild issue in the past but I'm not up with the current lending environment.

by Wilco | 27th Jun 20, 11:05am 1593212706

A lot of potential renters have gone.. Foreign students can't get into NZ. Kids returning back to the family home in suburbia. Companies looking at downsizing HO space and staff. Tourists have gone from Q Street so less retail jobs. University students have been able to continue study online not needing to be close to Auckland Uni. The leasehold and remediation issues adding to loss of confidence.

by Foreign buyer | 27th Jun 20, 11:53am 1593215636

If foreign tourism is locked out for over two years then Queentown property prices simply have to drop at least 50%. The prices have already started coming down and that's with all the free money that Jacinda is throwing around. The smart ones are already trying to exit, the blinkered ones are holding on for dear life. Good luck to them !

by b21 | 27th Jun 20, 5:28pm 1593235710

Unfortunately that "free" money makes no difference in this context, however QE is pumping the stock market and who knows what would be next.

by Rob Reid | 27th Jun 20, 5:46pm 1593236815

The wage subsidy "free money" should at least be delaying some of the value loss down there, while it (well, the extension now) lasts...

by b21 | 27th Jun 20, 8:19pm 1593245946

While it might save households from going into mortgage stress or defaulting nobody getting a wage subsidy will be given a new mortgage by a bank so it will unlikely stop prices from going down in any meaningful way.

by Ex Expat | 27th Jun 20, 12:59pm 1593219558

Sold signs all over the Eastern Bays. I’d love to pick up a local 2bdrm brick and tile, but the current market is not meeting the expectations of apocalypse. I hadn’t thought about an apartment, but the youngest off to Uni next year makes it a possibility. The problem with the article from that point of view is that it gives no detail on where the market is. Dogs will always be discounted but without knowing the various title types, remediation and Body Corp fees I’m not sure which are true mutts.

by Foreign buyer | 27th Jun 20, 3:36pm 1593228969

Congratulations to those sellers in the Eastern bays. They are comparable to the people on the Titanic who were lucky enough to nab one of the first life boats. There are still a few life boats left, but once they are gone they are gone and we all know what that means.

by Ex Expat | 27th Jun 20, 1:18pm 1593220723

As I’ve written before, I expected Economic apocalypse so have cash, kiwi bonds, TDs, gold and a SS Rolex. I’d love for you to be right as I can’t spend years in this holding pattern but I’m not sure the big reset is much more than wishful thinking. Out household’s only hits so far are lower rates on TDs and a cancellation fee with Air NZ.

by Rhumline | 27th Jun 20, 1:59pm 1593223188

How are the Kiwi Bonds working for you? Based on the doom and gloom on this site over the past few weeks I cashed up my share-based investments - instant remorse!

by Ex Expat | 27th Jun 20, 4:55pm 1593233738

Not only do I only get 0.50%, but then I pay 1/3rd of that back to the Government in tax, so every $100,000 returns $335. My Gold is down 2% In NZD terms (ignoring the premium for coins which you lose on sale) and the Rolex is up 2.7% (ignoring the retail margin to sell). All told, I’m going backwards, slowly. It’s a holding pattern. I can’t sit on the position for ever.

by Independent_Observer | 27th Jun 20, 5:07pm 1593234466

Here’s the latest from Dalio - includes some thoughts on asset allocation that might be useful for your position (I’m similar in some regards).

https://youtu.be/hjAOGAOMBQw

by Ex Expat | 27th Jun 20, 5:51pm 1593237096

Interesting. I hadn’t read the link with stock market rises in 1933 after delinking from Gold. The margins in physical gold trading are large, especially with coins. It’s more of an apocalypse asset. I won’t buy any more but I am thinking of possibly another watch and am certainly interested in property for family use if there’s a pull back.

by Mrs The Point | 28th Jun 20, 1:04pm 1593306298

Rolex Hulk! Get one.

by Yvil | 27th Jun 20, 6:06pm 1593237971

Thanks for the link IO, I watched the whole interview, interesting but light on practical advice. Also Ray only mentions stocks or bonds (ok a short mention gold and cash as well), what about other asset classes, especially property? Not a single word.

by Independent_Observer | 27th Jun 20, 8:07pm 1593245221

Hedge fund managers take from a macro view. Residential property not a consideration nor are Americans as fanatic about property (now) for the most part as we are here, courtesy of the GFC.

by Yvil | 27th Jun 20, 8:55pm 1593248100

You do realise this article is about real estate?

by Independent_Observer | 27th Jun 20, 9:23pm 1593249803

See Expats post above - wasn’t specific to RE

by Independent_Observer | 27th Jun 20, 2:31pm 1593225076

What does a 'big reset' mean to you Expat? What would it look like?

by Houseworks | 27th Jun 20, 5:04pm 1593234291

You're back on the reset wheel IO its like a mouse wheel to you, around and round it goes but doesn't take you anywhere.

by Independent_Observer | 27th Jun 20, 5:10pm 1593234612

A bit like your comments in many regards.

by Houseworks | 27th Jun 20, 5:19pm 1593235140

My comments should get you thinking. If you keep running around and around then you will eventually have to try something new... and please dont say gold or bitcoin they are just pure spec

by Independent_Observer | 27th Jun 20, 6:15pm 1593238531

Reading books by the likes of Robert Shiller or Taleb gets me thinking - not a property spruiker on a financial website.

by Houseworks | 27th Jun 20, 7:41pm 1593243694

If that works for you then fine. However its obvious its not working for you which is why I made the comment about you being on a mouse wheel and hoping for something more but not finding it. Enjoy

by Independent_Observer | 27th Jun 20, 8:03pm 1593245016

What gives you the ability or authority to judge what works for others without knowledge of their financial position nor affairs?

by Houseworks | 27th Jun 20, 8:13pm 1593245608

Touchy. If you take that position why do you go labeling others, hypocritical

by Independent_Observer | 27th Jun 20, 9:29pm 1593250196

Haha ‘touchy’. Nice troll HW!

by Houseworks | 27th Jun 20, 9:36pm 1593250602

I'm glad you enjoyed it. You know I'm gonna have to remind you of your comment above next time you start "prejudging" lol (check)

by Independent_Observer | 27th Jun 20, 9:44pm 1593251083

Again nice troll!

by Albert2020 | 27th Jun 20, 10:50pm 1593255015

Much like the thousands of empty homes dotted around NZ aye?

by frazz | 28th Jun 20, 10:30am 1593297019

And a hedge Houseworks..look it up

by Ex Expat | 27th Jun 20, 5:19pm 1593235196

A ‘big reset’ to me would be like Rogernomics in the 1980s. A new paradigm for the way society is structured and how its resources are allocated. Many here seem to think it’s about making houses affordable, but I don’t see that as a big reset in itself.

I’d like to see the gig economy expand hand in hand with micro qualifications e.g. if I trained in installing electrical outlet fittings, then I could take on app sourced jobs requiring just that skill, including in my own or friends/family’s house(s). I would have to register work done and be personally responsible but I’d have a marketable skill. Imagine a pool of friends that take on specific complementary courses and barter their skills making their houses affordable? We need new ways of doing things. Focusing on the fact that older people like me are too comfortable is pointless. You can’t change it. Make your own new fortunes rather than focusing on taking mine.

by al123 | 27th Jun 20, 7:00pm 1593241253

'Focus on making your own fortune rather than taking mine' - that's pretty ironic given that the fortunes of large numbers of older people have been built as a result of policies and practices that have effectively been massive wealth transfers from younger and older generations to boomers.

by Ex Expat | 27th Jun 20, 8:13pm 1593245605

We aren’t taking it with us and it only has the value that non boomers are prepared to pay.

by GV 27 | 29th Jun 20, 9:12am 1593378724

Correction: What's left of it once you go. Depends who else decides they want to clip the ticket (Government, councils, banks, etc) before then.

by Independent_Observer | 27th Jun 20, 9:50pm 1593251408

Ok was more thinking in terms of asset allocation based on what you were expecting.

by Fritz | 27th Jun 20, 1:35pm 1593221724

Well as I have said before higher end suburbs will probably come through this ok.
It's the mid value areas (an example that springs to mind is Pakuranga) where there will be more damage.

by CJ099 | 27th Jun 20, 4:24pm 1593231888

Well areas like Pakuranga are a lot more affordable then most in East Auckland. I don't see much selling in the upper property value areas that were more popular with overseas investors.

by Ex Expat | 27th Jun 20, 5:31pm 1593235895

I went for a walk from Kohi to St Heliers this morning. That part of the Eastern Bays is close to 80% owner occupied and ultimately God’s waiting room. I imagine many properties are unmortgaged and their owners 3rd or 4th property purchase (As in changing houses). There are no doubt some leveraged mid level execs in the mix who might have to sell if/when times get tough but i think it’s the minority. Another point I note in my walks is the number of languages spoken. There appears to be material pockets of Russians and French in the Bay suburbs. In fact I keep looking out for the Skripals at Der Metz, a popular haunt for Russians.

by paashaas | 27th Jun 20, 7:37pm 1593243471

Skripal takes his walks in Glover Park . Spotted him there the other day - or so I thought. When I caught up it turned out to be just plain old Elvis.

by Uninterested | 27th Jun 20, 7:37pm 1593243475

Ahhhh. Mr Secret Agent....

by CN | 27th Jun 20, 2:21pm 1593224493

Many people are told that property prices go up and they can't lose with buying property.

In Auckland, the median house price has risen by 180% since November 2003 (from $325,000 to $910,000) - roughly 6.2% per annum.

Yet can you believe that people who have owned property in that very same time frame have lost money in property in Auckland?

Take this single property and the two consecutive owners who may have used 80% LVR mortgages to finance their purchase (interest only assumed for illustration)

A) Owner 1 - buys in November 2003
1) In November 2003
i) buys in 2003 for $270,000
ii) 80% LVR mortgage of $216,000
iii) equity deposit of $54,000

2) In May 2018 (after almost 15 YEARS of ownership)
i) sells in May 2018 for $168,000 (38% lower than purchase price)
ii) mortgage of $216,000
iii) equity value is NEGATIVE $48,000 (loss of 189% from initial deposit of $54,000)

B) Owner 2 - buys in May 2018
1) In May 2018
i) buys in 2018 for $168,000
ii) 80% LVR mortgage of $134,400
iii) equity deposit of $33,600

2) in June 2020 - listed for sale
i) listed for sale $1 reserve - no bidders, and property passed in (assume $10,000 - so a price fall of 94% from purchase price)
ii) mortgage of $134,400
iii) equity value is NEGATIVE $124,400 (loss of 470% of equity value from initial deposit of $33,600)

"9H/100 Anzac Ave, CBD. Century on Anzac building. A 31sqm studio. The building has remediation issues and the unit had a rating valuation of $235,000. The property had a declared reserve of just one dollar but there were no bids and it was passed in."

https://homes.co.nz/address/auckland/auckland-central/9h-100-anzac-aven…

Even though this particular apartment might not be for an owner occupier, I have a friend who is an owner occupier in another apartment complex in Auckland and has owned for 17 years. The property value is still 16% below their initial purchase price 17 years ago (and that is before the impact of leverage). At current market value estimates, assuming an 80% LVR, the owner has an unrealised loss of 82% of their initial deposit. This loss has caused not only a financial toll, but also a mental toll on the owner occupier.

To all owner occupiers - CAVEAT EMPTOR

by b21 | 27th Jun 20, 5:12pm 1593234754

The only ones profiting from auctions are RE agents once again, you must be out of your mind to spend your money and time on this at this stage.

by Yvil | 27th Jun 20, 6:09pm 1593238198

I just sold my house by auction, sold for $980k more than I bought it for 7 1/2 years ago, I was happy with the result, wouldn't call it "being out of your mind"

by b21 | 27th Jun 20, 9:20pm 1593249619

Happy to hear that, hope you don't put that money back into RE or your profit will be meaningless since the price of whatever you'll buy would have increased by the same amount in the same period of time.

by Houseworks | 27th Jun 20, 9:23pm 1593249824

I realise you have a lot of expertise Yvil, well done on a good result

by Fritz | 28th Jun 20, 3:04pm 1593313442

Expertise? I would put it much more down to being in the right place, right time.
I don't think property investment needs expertise at all. A little bit of financial nous that's about it.

by General HubHub | 27th Jun 20, 10:10pm 1593252648

Yvill... Tacky...

by Tillers | 27th Jun 20, 5:17pm 1593235043

Went to open homes today in Auckland Central suburbs. Interesting that they were much quieter than this time last year and also Feb 2020. In Feb all the houses we were looking at were auction but about a third are now priced or PBN. Went to 3 auctions last week in the CV range of 1.3 - 1.4m and all 3 passed in.

Also noticed that all 6 open homes I went to today were rentals- usually in that price bracket it’s home owners upsizing or downsizing. Interesting times

by J.C. | 27th Jun 20, 5:25pm 1593235549

The transformation of urban living to apartments in Auckland (and much of NZ0 was a disaster from the start. What was built in terms of quality and suitability showed no long-term vision whatsoever. Essentially, it was a rort by property developers to make a quick buck and GTFO of Dodge. The govt also shoulders some responsibility as there are plenty of case studies globally that show the potential problems caused by such mindless, short-term planning. This happened in Japan during the 80s when much low-quality apartment buildings started filling the ciities. Now, Japanese developers have no choice but to build quality apartments that people actually want to spend a lifetime living in. I very much doubt Auckland can get to that situation as the resources simply don't exist. All that will be left will be ghettos.

by Uninterested | 27th Jun 20, 7:42pm 1593243724

The unitary plan is completely and utterly all about ghettos.
For some reason the Councillors/ Planners do not understand this fact.

by Fritz | 27th Jun 20, 7:59pm 1593244786

Is there an alternative?

by taimaiakka0 | 28th Jun 20, 8:33am 1593290012

So each and everyone is predcting fall in house price, even due hard theorists who never admits for vested interest :

https://i.stuff.co.nz/life-style/homed/real-estate/300041329/whats-real…

Not surprising and does not need any expert advise as writting is on the wall.

For Sellers : Sale ASAP before panic sale / Price Falls in real term starts
For Buyers : Wait and control your FOMO to get more for your deposit.

Avoid REAgents / Agencies and paid news creating FOMO. Hibernate till election to get best from the opportunity created for those who not badly affected by panademic.

by Foreign buyer | 28th Jun 20, 10:13am 1593295988

I bet Bindi expects at least a 50% price rise this year

by Poppyc | 28th Jun 20, 12:24pm 1593303862

While prices have held for the time being, there is no telling what would happen once current government initiatives to stimulate the economy, such as the wage subsidy, wore off, REINZ chief executive Bindi Norwell said.

From today's herald (premium)

by al123 | 28th Jun 20, 12:31pm 1593304280

Cripes, if even Bindi is publicly allowing for the possibility that prices might fall, we might be in for an actual crash

by Fritz | 28th Jun 20, 12:31pm 1593304284

What she believes and what she says are potentially two different things, although I doubt it...

by VeryInterested | 28th Jun 20, 11:12am 1593299529

$1 to $35k sounds about right for a lot of NZ’s rotbox housing.

by Pragmatist | 28th Jun 20, 12:55pm 1593305708

Heh, for some you should probably call the scrap dealer rather than the valuer.

by Rob Reid | 28th Jun 20, 6:55pm 1593327323

Hey, if we can have negative interest rates, why not negative apartment prices?