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The real estate industry has just had its best June sales in four years

The real estate industry has just had its best June sales in four years

House prices bounced back up in June after slipping in May, according to the latest figures from the Real Estate Institute of NZ.

The national median selling price increased from $620,000 in May to $639,000 In June.

That means it was still below the median prices for February of $640,000, March $670,000 and April's record of $680,000.

In the Auckland region the median price bounced back up to $928,000 from $904,500 in May but remained below March's record price of $945,000.

A similar trend was evident in most other regions, although in the Waikato ta new record median of $615,000 was set.

Across the whole country median prices were higher in June than they were in May in 10 of the REINZ's 16 sales regions (see the interactive chart below for the median price trends in all regions).

"Earlier this year there were a number of predictions that house prices would fall post-COVID, however we are yet to see any evidence of that happening," REINZ chief executive Bindi Norwell said.

The number of properties sold was also reasonably buoyant.

The REINZ recorded 6625 residential sales in June, the highest number for the month of June in four years (see the interactive chart below for the sales volume trends in all regions).

"Not only did sales volumes return to normal in June, they were the highest for a June month in four years, suggesting that the impact of lockdown is now well and truly behind the country, and that people have been able to get on with their sales and purchasing decisions as usual," Norwell said.

However, she also sounded a cautious note on the figures.

"We've said it before and it's important to say it again, that this may well be a post-lockdown peak in activity levels," Norwell said.

"There are concerns that with wage subsidies and mortgage holidays ending and an election in September, that there may be a potential trough in activity levels in the coming months."

The comment stream on this story is now closed.

Median price - REINZ

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NZ total
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Northland
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Auckland
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Waikato
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Gisborne
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Manawatu
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Wellington
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Volumes sold - REINZ

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Southland
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We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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181 Comments

25
up

The full shock of the recession will not be felt until July, August or September.

25
up

True , we have dodged a bullet so far , but the battle has not even started .

The recession will be long and deep , forget about V shapes or U or L shapes .............. we dont have an alphabet character to describe the shape of things to come .

Wet noodle is probably the shape i'd go for.

*

lol

Backslash

We have dodged a bullet, but have stepped on an economic landmine of our own making.

Boatman - That is ridiculous, the Economy is doing well, our terms of trade are great, Q1 +2 negative of course but Q3 will positive so given we are in July technically the recession is over. The light and heavy truck traffic index is pretty much back to pre covid levels why be so negative. Everywhere in the country the real estate market is strong. We very much are bouncing out of the V ! Dairy is strong and up, horticulture is booming, retail strong.

13
up

Are you not aware of the subsidies? Right now money is created out of thin air to prop up the economy. It will stop soon.

CJ - You are over stating the subsidies, and the fact the economy has bounced back so quick, I can't be bothered arguing lets check in say December 1st there is no need to be so pessimistic !

Overstating the subsidies? It’s billions of dollars of handouts.

‘Economy is doing well’ - that isn’t true. It could be the worst it’s been in nearly 100 years.

I am guessing and verse N or S recession. I think it will be long.

Agree but as of today their is no sign of consequence of panademic in Housing Market. Should have it in September / October, again that is predection but for now is booming.

Should fall in future but will it?

Yes it should fall and probably will..BUT there is a lot of money not being reinvested in term deposits looking for somewhere "safe" to invest. IF property prices hold up for another few months, it will be seen to be resilient enough for investors to start piling in and up prices will go again.

I agree with you to a point, if we make it through to the new year without any significant falls, then I think the confidence could be there.

But even if prices do hold I think volumes will sink as unemployment rises and deflationary pressures arise

Tradable deflation has, and will, lead to higher property prices. In fact, I would go as far as to say it's the single biggest factor in NZ's property market.

While I remain a property bear for all the reasons mentioned here, you can't deny this is strong housing data that no one really saw coming. Record low mortgage rates must be having an impact. I can't see any other positives supporting the market.

4m sales in NZ down 41% on same period in 2019
“No consequences of cv19”
Pardon?

Lowest June quarter sales volume ( unadjusted ) since last century, lowest ( any ) quarterly sales since last century, well at least 1992 . A market where statistically both the median price can fall in both Auckland and New Zealand ex Auckland, yet the national median price can rise.

Won't be felt till October, when the life support gets switched off, both mortgage holidays and wage subsidies. Banks will likely extend another 6 months at least, before considering foreclosures. We won't see the what the bottom looks like until at least this time next year.

Wonder if the banks are already looking at their loan books, top 10 customers based on LVR. Deal with the problem now in smaller bites.

I think they will extend and hope that borrowers sort it out at their end, either by finding new income or deciding to sell. I want to know what % of lending is on the mortgage holidays now, it was 14% in April but has surely been growing since.

Why wouldn't they just keep extending the holidays? If we get a glut of forced sale early next year, it is going to cause a problem. A house is only worth what someone is prepared to pay for it. So any valuation is essentially worthless IMO if there isn't a buyer who is prepared to pay what the value is on paper. The value is largely based on what similar properties sold for during good times, and not during bad times.

Because continuing to extend forever isn't in the best interest of the bank or the customer, unless there is evidence things will get better (assessed case by case). Customers will be paying interest and getting stung with late fees and a degrading credit file (under a non-RBNZ mandated extension), while the banks see the quality of their portfolios dropping. At some point both parties need to cut their losses. Banks will only take a loss on sale of the property if value < loan, and thanks to LVR rules that shouldn't happen for the majority of cases.

Yes have you ever looked at Dublin house prices and history? We’re valuations 100% over valued before their crash or 50% under valued after the crash? Same house just a couple of years time difference.

.

Those who anticipate (and dream of) a catastrophe in the housing market may be in for yet another upset.......

TTP

13
up

Some say those who bought in the current market may be losing money hand over fist in the next 6-24 months..........

CJ

I find myself wanting TTP and Yvil to be wrong and good on those that keep telling them they are wrong....... But not much evidence to support opposing their views so far.

The current uptick, despite their beliefs, doesn't contradict predictions made for the end of this year and early/mid 2021. That's when most so called DGM's expect significant drops.

It’s a bit like listening to the captain of the Titanic though - will they go down with the ship if it hits an iceberg? And they’re out there. It’s fine gloating about rising prices while missing icebergs by smaller margins each time.

Court Jester
That is what you were saying last winter.
Trouble was there was an upswing over the spring and summer.

CJ - You sound like RP - the same old 'you'd be a fool to buy now', as he said for 2017,2018,2019 now he has disappeared in disgrace. He potentially gave terrible advise to many FHB buyers on here that could be easily spooked. There are no facts out there indicating a massive housing correction as some economists had suggested, the facts point more to a strong market. RE agents I know in many parts of the country are reporting very good market conditions, Your statement is as valid as a tip from your local women's hair dresser - gossip gossip gossip !

So interesting that you mentioned hairdressers! Both of my hairdressers in the recent years have been the biggest property spruikers ever. "Property prices have never fallen, anywhere, and never will" - he said just a week or two ago.

Hi, Shoreman, I don't think people here need advise on whether to buy houses or not and when is the best time to buy as there is no such a thing called "best time" to buy. They need advise on which house, how much they should pay and mortgage rates. Most people are here for discussions and views. I think you'd be a fool if your purchase decision is reply on people's advise here.

That's not quite true. I would take a lot of comfort doing the exact opposite to what the majority here advocate.

FHB read interest and get spooked? Pull the other one. Niche readership here of investors (the real ones who buy shares), landlords, REAs and Bank staff. Everyone knows FHBs get their coolade from Nanna Herald

Court Jester
Your comment “those who bought in the current market may be losing money hand over fist in the next 6-24 months..........” is naive garbage.
I have experience of three (or four?) occasions when properties fell in value.
I bought an investment property in late 2006 to see its RV fall by 10% below purchase price during the GFC. So, I know that property prices don't always go up.
Firstly, a property is bought as a home or investment and is not bought for 6 or 24 months. For a FHB it is for life time (although they will trade up during that time) and for an investor it is at least 5 years or more in terms of the bright line test; in either case short term fluctuations are totally irrelevant as the house remains a home, or for an investor the yield remains the same.
As I have long said; a FHB does need to be prudent and pay down the mortgage as there is a wide range of possible shocks; otherwise, short term fluctuations are totally irrelevant.
As for investors – well, they are just laughing at your comment.
Oh, that 2006 property down 10%? Sold it in 2016; didn’t lose money hand over fist – in fact made a tidy (tax free) capital gain.

I recall you stating on here that your wife bought a property recently with the intent of capital gains. Presume that means you (or she) will be paying tax on that profit when it's realised?

How easy is it for a Recent FHB to quickly pay down a loan that is 10x their Income?

Haha, TTP, I don't think people will be upset if they dont see a catastrophe, at least they still have their money. But for those people who get in the market at wrong time, their houses are not theirs and they will lose money. So I'd rather miss out the opportunity than lose my houses and money.

15
up

Well yes, rising house prices only benefit investors, real estate agents and those silly enough to tick up an Audi on the house. For the other 90+% of us, we either don't care (already on the ladder / buying into the same market), or dream of this 'catastrophe' (trying to get on the ladder). Rising housing prices are a shit stain on society.

14
up

Why would you call affordable housing for more New Zealanders a "catastrophe"?

Is New Zealand really all about Tim and no one else?

It's certainly not hard to guess who the dictators and their henchmen might turn out to be, given the opportunity.

That’s very to the point.

It’s a slight correction after a massive drop which was poorly advertised by REINZ BTW, but the main concern is the low quality of mortgages happening at this point, I have witness a few FHB recently getting mortgages >20 LVR with non-permanent jobs in retail, tourism and even currently receiving job subsidies. I guess banks expect taxpayers to bail them out when things go down.

@b21

interesting? - associates I know in mortgage broking and RE sales are saying the opposite. Their experience is that mortgage applications are being absolutely hammered on serviceability... fine tooth comb stuff. Line item questioning on expenditure and job security.

Where I work in the B2B space our credit account criteria threshold has increased 300% in terms of background information, Directors PG's etc etc

My experience comes also from brokers.

We have a centrally planned financial system. House prices don't go down. Ever. It's not permitted.

b21
Not sure how widely you have "witnessed".
Talking to an Auckland mortgage broker (family so no need to "spin") who in answer to a query regarding FHB activity comments were very different:
1. Banks have become a lot, lot tighter on both one's income security and job security - e.g. casual relief teachers without confirmed hours are being downgraded or ignored, employment with risky companies also downgraded
2. Receipt of the wage subsidy as a red flag.
3. Low LVRs typical of FHB have a premium added on carded rate (investor high LVR are given special low rates below carded rates)
5. The 6.2% to 7% interest rate test is still being applied.
Her comment was that banks are protecting themselves and being far more conservative in their lending.
Sadly this is strongly to the disadvantage of FHB and advantage of investors with good equity being able to leverage off other properties.
I am interested in hearing of potential FHB recent experiences in dealing with banks.

printer8 this is also what i've observed. FHB being offered less mortgage than they might have hoped for and applications from anyone without a chunky LVR being heavily scrutinised.

It's to be expected really. The economic outlook has never been murkier and until the clouds clear banks will be reducing their exposure to any potential risks.

Ginger
I was optimistic that out of all this current economic carnage, FHB would be advantaged with falls in mortgage rates, removal of LVRs and some fall in house prices.
Unfortunately at the moment the fall in house prices has not materialised, and any advantage in removal of LVRs and lower mortgage rates seem to be negated by banks tightening up on their lending criteria.
While FHB have been disadvantaged, investors have been.
As to the future: in terms of house prices there is still some uncertainty, but it is likely in the event of this then banks will most likely tighten their criteria further at FHB disadvantage.
It is simply a case of banks protecting their own interest.

"FHB would be advantaged with falls in mortgage rates, removal of LVRs and some fall in house prices" - I'm sure you're well aware that the 2 former points work strongly against the 3rd.

CJ
Yes, but RBNZ who were responsible for the first two, also estimated a fall of approximately 10%.

printer8

Falacia ad hominem won’t make your arguments more valid.

B21 - Those new mortgages are going through a acid test of 6.5-7% so the banks are being very tough !

I really hope you are right although past track records in other countries right after housing bubbles are evidence of the opposite behaviour in banks.

If the Auckland market is indeed going up then it's sole due to falling mortgage rates and lots of back door buying by fleeing HK citizens.

CJ099
"back door buying by fleeing HK citizens"
What evidence do you have of this???
From what I am hearing the multi-layering requirements not only by REA, but also banks (not only regarding lending but also re source of deposits), and lawyers is effective.
Clearly you have no experience of these requirements.
I find it hard to give credibility to your comment that REA, banks, and lawyer are all prepared to risk prosecution and risk their businesses through loss of registration for one property transaction let alone a number.
You need to stump up evidence or rationale for comments like this.

P8, You only have to look at the stats available on sites like "oneroof" Suburbs profile info to see there's a huge volume of properties owned by Trust Companies. Example Auckland, Remuera has over a third of properties owned by Trusts, and it's a similar amount for most of Central Auckland.

A lot of that is (largely nominal) family trusts though. Hard to disentangle.

CJ099
My wife currently does, and my mother until last year, both own property under Trusts. I assure you that they are not ethnically Asians (who you seem to be most concerned about in this and past posts). Trusts are are common form of protecting one's assets or home for a vast variety of reasons: relationships (marriage or partners), rest care, business (for liability reasons), joint ownership . . . . While you may disagree with the morality of some of these reasons, the reality is that Trusts for these reasons are common.
If you consider that Auckland prices are driven by foreign buyers, then how do explain the increases in all other regions especially as many regions increased by significantly more than Auckland. I find it hard to believe that there is a rush of Hong Kong residents buying property in Gisborne/East Coast up 29% or West Coast South Island up 15% and distorting the market compared to Auckland's median up only 9.2%.
Your explanation falls well short (desperation actually) of what is really a conspiracy theory of yours - maybe rather than trying to justify this you possibly may think about other reasons underlying it.

CJ099
You also need to appreciate that Trusts have a further layer of scrutiny in relation to FB and anti-money laundering.
As well as REA, banks, and lawyers required to scrutinise carefully the source of money/ property transactions, there is considerably more detailed scrutiny related to trusts on top of that.
The scrutiny and complexity of the demands on trusts is such that many of those that have family trusts are now winding them up. Talk to someone who has a trust has bought a property recently.

Why are they reporting median? Where’s the HPI data?

Yeah I wondered that too, so I went and found it. See next post below.

HPI here: https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2020/June/RE...

Summary: small one month gain has offset some of the 3 month falls.

Ha! What’s that saying about lies and statistics?

12
up

Statistics are like a bikini.

What they show is suggestive, but what it hides is vital.

Summary: small one month gain has offset some of the 3 month falls.

More importantly, your link demonstrates what the HPI is: a kind of rolling average that is weighted by volume. Because of the low sales volume in the NZ housing market with relatively high price tags, the HPI is at best directional.

I also wonder about the seasonality adjustment in circumstances as unusual as the current ones. I haven't looked in detail at the HPI methodology (nor do I even know if it's fully published).

There is no post estimation seasonal adjustment in the REINZ HPI series.
The methodology is published here:
https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Analytic...

a kind of rolling average that is weighted by volume
That is not at all what the HPI is.

The HPI (in this case) represents the expected house price movements controlling for heterogeneity in the transacted housing stock. The REINZ approach does not follow a rolling window type methodology. So, no, it is not 'a kind of rolling average', at all. Price growth is explicitly revealed for each period in the sample.
Nor is the REINZ HPI a weighted measure. Higher sales volumes result in more accurate inferential properties, however the index point estimates are not resultant from some arbitrary weighting structure.

So, the reduced sales observations make the index growth estimates less accurate in the sense that their variance is increasing. However, these point estimates are not 'weighted' by sales volume.

OK, it's not an 'average', but why are the HPI values smoothed as a "rolling" aggregate as demonstrated in their monthly report? And why would the Auckland HPI value be for the actual month but Buller is a rolling aggregate of P6M?

OK, it's not an 'average'
But it is an average, just controlling for heterogeneity in housing stock.

but why are the HPI values smoothed as a "rolling" aggregate as demonstrated in their monthly report
Correction - some are. All larger urban areas are single month estimates - these are not rolling averages.
Areas such as Buller are 6 month rolling window estimates due to observation sparsity - here you are correct, these can be though of as a smoothed series.

Which goes back to my point that the values are smoothed based on market size and activity.

Fair if that was what your point was.
But don't think of it universally as a rolling average that is weighted by volume.
1 - the rolling window is a special case of the standard (monthly) HPI methodology.
2 - it is not 'weighted' by volume.

It's quite obvious and you're just being intentionally oblique. Regions with relatively low sales volume and # of housese are smoothed using a rolling aggregate when reporting the HPI values.

Regionally, yes. But not for low volume months in larger markets, if I'm understanding the distinction here.

Correct.
To say that the HPI, in general, represents a rolling average is incorrect. Well, unless we were to be considering price changes on a weekly basis - which we evidently aren't here. Thus, your original comparison was fine.

When the HPI says 'two or three (etc, etc) month rolling' it means that the index is estimated on a rolling window of 2,3,6 month data.

In either case, the index estimates are not 'weighted'.
A weighting is only applied when constructing the aggregate North/South Island and NZ indices.

In either case, the index estimates are not 'weighted'.

Meh. Semantics.

Well not really.
A standard repeat sales HPI is unweighted. A Case-Shiller (the most popular HPI in the world) repeat sales index is weighted.
The difference between them is a function of the length of time between individual sales. The REINZ HPI is a special case of one of these methodologies.
When you say 'weighted', it has a very specific meaning in this context.

10
up

Crazy ASF ........ committing to a 30 year mortgage right now is a case of running where angels fear to tread .

You would be wiser to put off such a purchase for at least a year until the virus is either under control or the re is a vaccine , and the economy is on a rebound

There are many things right now that don't make sense to me. I have FHB friends who have been looking for years, and chosen right now to buy. Madness if you ask me. But also, have a look at the TSLA and AMZN year-to-date charts. I love both companies but it's totally mad.

My kids are currently playing a game where they make their own "money": a bit of paper with a 1 followed by as many zeros as they can bother to write. Future central bankers I reckon.

It kind of makes sense that wealthy HK citizens looking to flee China due to recent events, would aim for NZ (Auckland) as a safe haven to stash their cash and eventually relocate to, since we're mostly virus free and not as far from their home land as the UK for example.

Canada, Australia and the UK are all making it easier for HK citizens to gain entry. Guardian article: China accuses Australia of 'gross interference' after offer of safe haven for Hong Kong visa holders. https://www.theguardian.com/australia-news/2020/jul/09/australia-offers-...

It's the biased media and fear of never getting on the property ladder. But have to admit, there are families with high demand out there, they just couldn't wait. But I definitely agree that buying now with large amount of mortgage is crazy. These actions wont do any of us good in future, RE agents are also included. Mark my words. It's just not showing the damage yet.

I want your crystal ball.

But seriously, how can you predict what will happen in a year's time? There could be another event that happens, or something else? If you have a secure job, and good equity etc, why not buy your own home?

"how can you predict what will happen in a year's time?" vs "If you have a secure job"
Define secure. Unless you have a crystal ball to predict the future, how do you know your job is secure? Look at the US. How many of those newly unemployed people knew a year ago that their jobs were not secure at all?
It's all about risk management, research and your own analysis (that's where gut feelings come into play). If based on the current indicators you think that the property market will be sustained at the extremely unaffordable levels despite the economic shock, sure, go ahead and buy.
I for one don't *know* if the market's gonna fall or not, but I *think* it will (7% YoY by the end of December). I have enough for a 20% deposit on a decent house in AKL, but I won't buy because I don't want to lose 30-50% of my equity.
The downside risk is way bigger at the moment than the possible upsides. Even the most bullish don't think it will go up by another 7-10% in the next 12 months.

I would not too bothered if the value of my (future) home goes up or down - it's a place to live in. If I can meet the mortgage payments, then I will be fine. Most government jobs / services are quite secure, jobs that provide a service or goods that are needed (not wanted), are also quite secure - those are the ones I can think off the top of my head.

Then you are bad at maths. If prices fall 10%, you might be able to pay off your mortgage 5 years quicker, and save 50k+ in interest. These are real savings that will have a big impact on anyone's financial position. That's before you factor in the reducing the risks associated with losing equity and having to sell (and realise that loss).

Your spiel is really only effective on the financially illiterate.

They are referring to the implications of price fluctuations after the property has been purchased.

I'm now a FHB (post divorce) and its a tricky place to be. Hard not to succumb to FOMO when the market still appears to be fizzing, my deposit & KS are (at best) holding static, and waiting another year means <$20k of earnings going into Rent, never to be seen again.
Not to mention the fact we are in a kind of limbo, unable to make our current rental proper "home".

How much would your mortgage interest + rates + other home ownership costs be over the same period? Also deduct the interest your deposit would make in a TD during that time. Is the difference still $20k? Or is it much much closer to zero?

I estimate mortgage interest (@2.55%), rates and insurance would be around $11k minimum in the first year. I haven't factored any other spending on the property that would tend to haemorrhage money in the first year. This is based on a ~$370k house in the Southside of ChCh (granted there's not very many of those, and I have a lot of competition from FHB couples and investors..)
I take your point though, and the exercise does make me feel better about sitting tight for the rest of the year. It will be worth it if I can lessen the mortgage that I end up being saddled with.
Currently my deposit not attracting a lot of interest...

The range of predictions seem to put house price falls between 5% and 12% within the next year. Basically prices are very likely to fall by more than your annual rent payments.

I too thought the same way. What I’ve come to learn is market fundamentals don’t seem to matter. No matter how bad the economic outlook is, the powers that be (Govt and RB) will do everything possible to stop house prices from falling as they know it’s the foundation of our economy. Just look at what’s happened to global stock markets over the last 3 months, unbelievable. I’ve changed tune and now looking to buy because with lowering rates prices are likely to go up and the Govt will to anything to protect property prices. Better to get in now before the irrational herd behaviour kicks in and it booms again. I just hope I can sleep at night carrying that debt/risk!

I can’t remember the source, but recently read a plausible argument that we’re in for an asset price collapse, or currency collapse. That house prices are stable and equities are rising would suggest the latter. Starting to think I should take on as big a mortgage as I can as inflation will likely far out-pace capital + interest payments on a large loan. MAZA - Make Aeotearoa Zimbabwe Again!

In the event of banks facing high inflation, why will they not raise their interest rates to avoid their investment being eaten? If they do not, don't they simply absorb the loss of value of the currency on behalf of the debt holder?

It’s funny that if you research the history of spectacular market crashes the narrative of ‘fundamentals don’t matter anymore’ (or similar) are a reoccurring theme near the peak of the market. Almost like an alarm that things aren’t sustainable but our psychology needs to develop a narrative to justify the current market pricing.

12
up

Adrian Orr isn't going to let some virus get in the way of his plan to steal from the poor to give to the rich.

ZIRP house prices to the moon.

ZIRP house prices to the moon.

Meh. House prices to the moon means total destruction of the economy via the neo-serfdom mechanism. The economy is too tied to consumer spending to allocate more h'hold income to housing costs.

You are are absolutely right, but that won't stop them.

You are are absolutely right, but that won't stop them.

In that case, they are fools. Too many NZers are already involved in businesses that produce and sell 'valued added' products and services. Now, if the great unwashed are living like serfs, the opportunity to reach for the bottle of Matakana massaged olive oil on the supermarket shelf diminishes. No sales volume or lower margins means these businesses get into strife. Things like houses need to be liquidated. The whole thing is circular you see.

Agree JC - the higher house prices go, the long term repercussions for our economy also grow. What people identify with as being ‘good’ and ‘bad’ can be at odds with what may actually occur.

That's fine, we don't need an economy. Just gotta have enough cash and goods to sustain the remaining 20 years or so of the boomers' lifespan.

HPI year on year -

Nationwide +8.6%
Auckland +7.7%
Nationwide Excluding Auckland +9.5%

https://ibb.co/nBVJrm2

Ties in with the Ashley Church prophecy

You might be living off past glories there - 3 month figures are:

Nationwide -1.2%
Auckland -1.8%
Nationwide Excluding Auckland -0.8%

Yeah, post covid movements are the area of real interest. To date, the falls are minor, but it's still way too early to call it. I think there will be further falls, but I'm not confident they will fall by as much as 10-15% (on average, across NZ), which is what I was predicting.
But again, let's wait and see.
As someone who bought in November last year, I would of course be glad if my prediction was wrong.

3 months ago is March's figures, when prices were at a record high and COVID was likely starting to stuff the data in who knows what direction. Do you really think that's a fair benchmark? Add to that seasonal variation. 3 months isn't great for declaring a property market trend under normal circumstances, and even less so now.

YOY prices are well up despite the fact that COVID wasn't a factor this time last year.

Nope, not a fair benchmark at all, but no less valid than a year ago before the country was in recession. Neither of our numbers gives the whole truth, we just have to wait and see like everyone else.

Record low interest rates, mixed with the unbreakable confidence in property values, means enough people are still ready to buy.
The reality of stricter lending, if it is true and widespread and starts to seep into mainstream media, should start to displace that property addiction.

The banks and the real estate industry will continue their dance later this year and probably continue to hint that the-best-time-to-buy-is-now, even if the market starts to fall. There is no shock to be seen there (I predict) until someone else steps in to spin the media with a fresh view.

The problem with unbreakable confidence is that is gets spectacularly broken at some point. Is that point this year? Maybe, maybe not but its getting closer every day.

are you talking of your confidence that property prices are about to collapse ?

I've been watching/contributing to this site since 2016 when I moved back to NZ from Canada.

While, always being able to buy a property, my energy/focus has always been to grow and invest in business as the returns I can generate using capital for business supersedes that which can be made in property.

Since 2016, the market has barely moved. And we’ve been watching it to eventually buy our primary residence. Meanwhile our businesses has generated NP of 15-20% each year. Index fund investments (S&P 500 et al) have performed out of sight.

What irks me about the comments on here is the folks that are all in on property or on the flip side want property to crash. Assets are all about balance. Diversify your asset portfolio (property, index funds, businesses, bonds). Assets will go up and down over time. Can’t time the market. Invest for the long term. If you’re not diversified you miss out on gains in other asset classes.

I learnt pre lockdown as the market heated up quickly. You can’t time it. We’ve now just purchased a home in NZ that we can live in for the next 10-15 years. Which I believe we bought for under market value. Did we buy at the bottom or the top? Who knows. But, I now don't care about its value in the short to medium term.

I agree with almost all of this. But diversification is difficult with residential property at present valuations. You can't buy 1/4 of a house, really, and with a place good enough to want to live in running $1m or more (in AKL anyhow) most people only have the choice of either zero exposure, or majority exposure.

Yes and the higher house prices go, the more difficult it becomes to stay diversified. For nearly everyone, it’s all of my money and a large amount of the banks debt in property and nothing in shares or bonds or gold/silver etc.

Just to clarify, the debt is yours, not the bank's. It is a asset to the mortgagee (bank) and a liability to the mortgagor (homeowner).

What appears to be an asset can quickly turn into a liability if the market falls and unemployment rises! The banks didn’t see many of the bad mortgages they had as assets in the US when I watched their property bubble burst there.

But yes understand the accounting principles - thanks ;)

Agreed. It's a challenging situation with values & to get the deposit. But as your primary residence, it doesn't really matter if it goes up or down in the short term.

However, on a 30-year term at 2.6% interest, you're paying off 45% principle right off the bat. Halfway through year 3, you're paying off more principal than interest.

At 4%, you're paying 72% interest off the bat. And it's not until year 13 where you are paying off more principal than interest.

By the end of year 13 on an $800K mortgage @2.6%, you'd have paid 227K in interest & $272K in principal. Whereas at 4%, you'd have paid 360K interest & $235K in principal.

The $ amount may be scarier. But you're making a bigger dent in the principle (equity) and paying less interest to the banks. (effectively, you'd pay 135K less in interest, + $40K in principle. So you're $175K better off, after 13 years).

As realterms said, you need a lot of capital to be able to diversify including property. (By 'a lot', I mean compared to the savings of the average kiwi.)
It's much easier to diversify $5 million than $50k. Also consider that your first $50k in my opinion should never be an in illiquid asset. You could lose your job tomorrow and not find anything for a couple of months, or you could have some kind of emergency where you need $5-10-20k urgently.
So someone with $100k of total savings will have to keep $50k in a TD or other liquid asset and can only 'play' with the other $50k. There aren't a lot of houses in NZ that you can buy into (as an investor) with $50k. And even if you do, that means you're not diversified at all.

Totally agree. The diversification comment was more directed at property bulls, buying residential real estate as an investment vs those that are purchasing their primary residence.

Hard to most to find money to invest elsewhere while you are paying off the $7xx,xxx mortgage and trying to turn the 1970s house into something liveable.

So looking at the data with my calculator in hand, Auckland City (as in the central region) appears to have increased by an extraordinary 17% in one year, with the median now at 1,147,000 - despite being usually weighed down by apartment sales

"Depsite usually being weighed down with apartment sales".You almost got there.

When apartments aren't selling median shoots up. Doesn't mean your property has. HPI went up 7.1% YoY for Auckland central for a more realistic estimate of the change in value of a central auckland property.

Yes, predictable comment from me: June increase does NOT make up numbers of sales lost in March April, May.
Less stock OTM, so higher prices for what IS available.
Catch up now finished.
July sales will be lower than July 19
August, September, Oct, Nov sales will be 25% lower than 2019
Shortly, I will add up the sales for March-June inclusive and show what deficit in sales was in that period cf 2019, which of course REINZ did NOT do

Markets can stay irrational longer than expected, but mean reversion always happens eventually.

I'll go out on a limb and suggest a good proportion of houses that go onto the market don't add to supply because many vendors are an owner occupier trading up/down therefore so zero sum demand. If nobody is distressed then nobody is going to drop their pants on price. Just house swapping with cash my/your way. Therefore "supply" is not exceeding demand.

You seem to have forgotten about the record high number of new builds coming to the market, and the record low net immigration.

I haven't forgotten about it at all, but those indicators will be lagging. Downward pressure will come from (as you say):
>Record number of CCC's issued
>Air BnB's finding their way back into the rental market or housing market
>Surplus accomodation from 60k foreign students not coming back.

"Days to sell hits longest in 111 months, Real Estate Institute says"
https://www.stuff.co.nz/life-style/homed/300034780/days-to-sell-hits-lon...
"Barfoot & Thompson's auction rooms plot a steady course, sales dip slightly"
https://www.interest.co.nz/property/106022/barfoot-thompson-continuing-a...
Do you still think "supply" is not exceeding demand?

What about new builds coming into the market and the banks ability to lend against those to FHBs or investors? Or owner occupiers leaving their older home to live in a new build?

Lagging indicators. They'll show up. I'm just pointing to the reason why the market "appears" to be trucking along.

What affect will pre-approvals be having?
I know of FHBs with pre-approvals who know they are unlikely to get renewed, at least not at the same level, when they expire. So despite recognising the risks they fear it is now or never.

They do realise pre-approvals are conditional right? If the bank isn't going to "renew" the pre-approval, they likely won't be happy with approving the actual mortgage, so it wouldn't be wise to be making an unconditional offer or going unconditional on the basis of a pre-approval.

I would hazard a guess that many do not fully understand this.

My forecast was for sales to fall, as a result of CV19, by 25-35% in the year following first lockdown. That is in the year after 26th March. In last 4 months, march-June inclusive, sales in Auckland are down 32%, whilst in June they rose 9.3%. For NZ, excluding Auckland, in last 4m sales are 41% down compared to same 4m in 2019.
For Aukland City 4m sales are -31%, for Waitakere City they are only - 25%. For NSC they are - 34%. Rodney is - 26%. Manakau is - 39%. Yes, median prices are up in June 2020 cf 2019. Because inventory is at all time low. So, less choice for buyers. Notice rich in central Auckland are bailing out early, as per share markets. In July we will see effects of recession take effect overall. Not til after election will prices fall in earnest. interesting that Bindi Norwell admitted median in Auckland was up due to number of sales over $2m and over $4m, whilst not stating the numbers

Net immigration last 4 months is DOWN about 50,000 compared to same 4m in 2019
So, it looks clear that more people are leaving than arriving?
Hence, LESS demand for housing.
Also, I suspect more Chinese/Asians leaving than arriving and not just because of CV19, but because CCP in China is pressuring returns, due to HK situation and desire to retrench and focus on internal market.

I am currently saving to be a FHB, and am absolutely shocked by the number of FHBs jumping in at the moment. To me the downside is much heavier than the upside, so i'll be waiting an extra year while continuing to save and pay down my student loan. I am curious about the psychology of all these FHBs jumping on now, why are they doing it despite the market being held up by loan deferrals and wage subsidies? Waiting 1 more year doesn't seem like such a bad price to pay, for more security over my life savings. This is probably the biggest financial decision of a lifetime, why make it when the market is predicted to fall? Especially if you have low equity. Seems like some sort of herd behavior to me, rather than rational thought.

My personal theory is that people are reacting to broader uncertainty by wanting to shore up their personal situation: if their jobs seem reasonably safe, owning seems more secure than renting.

The month of lockdown appears to have amplified millennial FOMO - not just NZ housing but retail share market investing as well.

Have a read of Robert Shiller ‘Irrational Exuberance’ and/or ‘Animal Spirits’ if you want to be understand the psychology of people wrt markets.

Currently have it on my bedside table :) been a while since i've read an academic book, so slow going, certainly helps me sleep!

Wow - ok! The general response to recommending any of Shillers books comes with dispair, usually from property spruikers, despite pointing out Shiller has a Nobel prize for his work on asset valuation - a key topic for any investor!

It can take a while to get through but some of the charts etc are great - love the CAPE ratio and inflation adjusted work on US property - the bubble becomes very obvious when the data is analysed that way. An Australian econ did the same for their market and it’s far worse there and NZ has more or less tracked the same. Buyer beware in my view.

Cheers, i'll continue to persevere! My background is in Finance so thankfully not all foreign.

Great - I find most people making comment on financial matters do so through one form of bias, vested interest or another. But enjoy Shiller thoughts as he just likes to try and make sense or rationalise to the best we can the irrational when it comes to people and money.

You have a time machine at your disposal. It's called the interest.co.nz comments section. Go have a look at the people making comments like yours back in 2011, just before property prices started to rocket. Plenty of commentators with low acumen advising that its a bad time to buy, plenty of property optimists being ridiculed as spruikers, and plenty of prospective FHBs being convinced into holding off. You're shaping up to be the latter this time round. Nothing wrong with learning from the past and others' mistakes.

https://www.interest.co.nz/property/53858/volume-house-sales-rises-may-b...
https://www.interest.co.nz/property/53722/auckland-property-market-turni...

So your argument is "It hasn't happened in the past 9 years so it will never happen." ?

No.

But DD, 2011 was very very different to today. Related to that period, today is probably more like 2007. In 2011 we didn't have increasing unemployment, mass mortgage holidays , and the government subsidising SMEs and wages, nor were the borders shut. That's not a fair comparison, and is frankly a BS attempt to try and make me feel FOMO.

"but this time is different"

No property cycle is exactly the same as the last, but the long term trend is what you need to be looking at. Trying to time the market is folly - ask all the folks that swapped their KiwiSavers from growth to conservative funds a couple of months back, only to miss the recovery and lock in their losses.

You obviously haven't heard of the 'random walk' of markets.

You contradict yourself by saying on one hand that timing the market is folly, but on the other, that its trends that count. Can you predict the market, or not?

As the great Ashley Church says, the long term trend is up, and there will oscillations along the way.

If you can time those oscillations perfectly, you're smarter than you're letting on.

This month's HPI is 2991. Let's note that and compare in the month if/when you buy.

Edit: You'll find that being pessimistic about property for no good reason on this site will get you plenty of upvotes - pitty you can't buy a house with upvotes.

As the great Ashley Church says, the long term trend is up, and there will oscillations along the way.

Ashley Church might be some kind of genius or prophet, but his audience is limited to suburban NZ. The Church of Scientology have far greater reach.

We can do that DD :)

I'll buy once mortgage deferrals have ended and the market is standing on its own feet, estimating just under a year. If HPI is up, i will not be upset. My choice to wait is more about waiting out the downside risk while continuing to grow my deposit. The only way I will consider myself having lost, is if prices grow faster than my ability to save, which is price growth over 6% over the next year.

Again, I just don't think trying to time an incredibly complex market is prudent, as those 2011 comments suggest. As long as you do actually buy when mortgage deferrals end, you'll probably avoid missing out. My experience chatting to people on this site over about 7 years (previous accounts went missing) is that prospective FHBs that can find an excuse to wait now will be able to find an excuse not to buy later.

"PROBABLY avoid missing out" ah, so you are peddling FOMO.

For the record, I don't think missing out is the end of the world, there are many benefits to not tying up my life savings to date and 30 years of future income on one asset. Opportunities will be easier to take when they come by, my income and savings are only growing.

I'm peddling truth. People get priced out of the property market. MO is a thing. You've already MO'd to a certain extent already because you didn't buy a year ago, foregoing 7% capital gain.

I couldn't afford to buy a year ago DD, and I have a very good salary, DINC. I really feel for others in my generation who aren't as privileged as me. They all MO, though no fault of their own. Also, that capital gain would mean nothing as I intend to OO, its not an investment.

You contradict yourself by saying on one hand that timing the market is folly, but on the other, that its trends that count

It's gibberish. It's no different than saying "buy at any price because at some time in the future, the price will be higher". It's embedded in the assumption that prices extrapolate into the future. Well that might be true (or it might not be). If people knew that the price of an asset might not go up in their natural lifetime, what advantage is there to buy, particularly if you're loking at a house as some kind of wealth generation.

Yeah, in my case I am buying to have a place to live, owner occupied. I am not chasing capital gains as I assume that when I sell, I will be buying again in the same market as I still need a place to live. What I need is stability, so that when I do sell in the future, i'm not losing money.

The main reason you don't want to buy before a dip is twofold:
1/ If you have low equity a significant fall could leave you unable to change properties (no equity) - or worse case lose the property
2/ If wait and buy at a lower price you will require significantly smaller mortgage, paying off the loan quicker (or getting a nicer property).

For some, individual circumstances may dictate these factors are less important than say having a permanent residence (say if you have kids). But for those that can wait for now almost certainly should

1. Why do you think a price fall would put them at risk of losing the property? Its value has no impact on their ability to service the mortgage. Also, first home buyers shouldn't be looking to shift shortly after buying, so being unable to shift properties should be no concern in the short term.
2. That goes both ways. Price rises could cut them out of the market while they wait due to being overly risk averse. In the long run short term price differences are not significant. E.g. someone that bought at peak 2007 is still significantly better off today.

The folks that took this sort of advice back in 2011 wish they hadn't.

You have a time machine at your disposal...................

The ol' big bad wolf argument. This was used by famed U.S. journalist George Will on Robert Shiller for raising the possibility of bubbles and irrational exuberance. Nassim Taleb picked up on it. Taleb pointed out that Will was often just used by media to "sound smart and intelligent to the hordes." Taleb then went on to mention that Shiller is more skilled in understanding randomness and the emotional investment the masses have when defending dumb bubbles.

Keep saving and only buy when you feel comfortable with it. A lot of people have FOMO due to only ever hearing opinions from the mainstream media and not digging deeper.
Think about it: what are the odds of house prices falling 10% in the next 12 months? And what are the odds of them increasing by 10%?
With all the current events going on in the world, what would support a big price increase?

2.6% interest rates and central government making it rain.

Certainly possible. More risk on the upside than I would have imagined a few months ago. But I would say there's still plenty on the downside as well.

Downside risk exists for sure, particularly around the time that mortgage holidays start to end. But the risk of prices being lower than they are today diminishes considerably as you get further out, particularly 5+ years. FHBs shouldn't be looking to flip properties short term anyway in my view.

But the risk of prices being lower than they are today diminishes considerably as you get further out, particularly 5+ years.

Thankfully you weren't advising the Japanese about the Nikkei and Tokyo house prices back in the 90s.

Because that's the same as the NZ housing market /s

Do you also think the NZ housing market is about to tank because the tulip bubble burst a while back?

I don't know. I'm not a fortune teller. Not sure why NZers think they know the future of NZ house prices simply because of their nationality.

The point it raises though is that if we do a Japan, is the FHB happy living in negative equity for a significant portion of the term of their mortgage? It’s not impossible. Nor is it probable. But you’d want to make sure you’re aware of that risk before buying. Nearly ever FHB I talk to is oblivious to the risk but are buying based upon FOMO.

NZ is different to Japan, and that actually matters. JC's insinuation that my advice to Japan on the Nikkei or Tokyo housing market the 90s would be the same as my advice regarding NZ's property market is bizarre. Akin to saying it’s a good thing I wasn’t advising the Dutch during tulip mania. NZ property isn’t tulips, so to make such a comment is moronic.

But if you were advising the Dutch, you would have known there was a tulip bubble. Because you're from the suburbs of NZ. Right?

I’m a prospective FHB in this market. I’m under no illusion that the economic risk is high but I’ve also found a place I like. The way I’m trying to look at it right now is I could commit another 50k to rent and wait a year for prices to drop (which I believe they will) or I could buy sooner and even if property prices do drop, I would have offset that by contributing to my mortgage rather than my landlord’s.

I’ve found a place I like now and will receive the builders report on it tomorrow. I’m not in any rush to buy but equally I know I’ll be kicking myself if I hesitate and miss out on something good.

Excellent mindset in my opinion.

an alternative / additional way to measure price changes would be to show sales vs previous sale/s of the same property. it is done in the UK. not hard. doesn’t allow for improvements when comparing but gets rid of the distorting effect of change in sales mix (eg apartments v houses) in data that relies on the median. Anyone dis/agree?

I’m surprised homes.co.nz hasn’t already done it.

That's HPI, more or less. Scroll up about 100 comments!

Some commentators on here are fond of referring to "trends"
The trend I am afraid, in NZ, is for home ownership to decline, especially in Auckland
Clearly this is due to outlandish price rises in Auckland, esp in 2014-16.
Residential only sales in NZ were 45,885 in first 7m of 2012. In same period of 2019 they were 39,931 (- 13%)
In Auckland it was (first 7m) of 2012: 15,863 and in first 7m of 2019: 10,865 (ie down 31.5%)
Landlords buy up lots of new builds and their rents accrue largely to the top 25% of wealth holders in NZ
Hence the trend is to greater rentiership and wealth inequality.
Price rises, often celebrated here, only aggravate this trend due to exceeding wages rise each year, for average worker pay. As an estate agent myself, I do not celebrate price rises because I feel the trend identified here is iniquitous and needs to be reversed. Selling debt to people and more of it each year, is a disgraceful alternative to real income rises which might allow more purchasing power.

-Circa 40,000 jobs lost in NZ so far
-Government is providing subsidies to individual and business and I reckon they will keep on doing it until sep 2020 ( elections atleast)
- banks have deferred loans for 6 months ( this increases loan term by circa 1.5 yers)

so at this stage the income is provided in the form of subsidy and expenses such as house loan have stopped

Lot of individuals have stopped their insurance to cut down expenses( or insurance through jobs) so the insurance companies will be impacted

tourism contributes 5.8 % in NZ GDP which is impacted badly

University education contributes 9% in NZ GDP (https://www.universitiesnz.ac.nz/sector-research/growing-new-zealand-eco....)

so the decline in number of international student will impact GDP and lot of jobs related to them will be impacted ( immigration, teachers, admin)

Prices are stable or declining in new subdivisions around Christchurch ( Halswell, quarry park etc. - The section prices have dropped)
Economy is holding up so far but in the era of globalization it will definitely impact NZ economy adversely.

Like a lot of people say it is early days. The curve is following a predictable path. Shame really the so called financial and property experts are not publicly declaring their real hands. The only clear believable comment is that no one actually knows what will happen. (apart from me of course ). Previous crashes have caused existing houses to be significantly lower in price than new builds. This happens when people leave the country (not likely this time). Drop in prices are also caused by banks not lending. (this is already happening). That causes the building industry to collapse which causes a real huge shortage of properties be it rentals or places to buy.
What this space.

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