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Quotable Value says the housing market came out of the first lockdown like a runaway train, but this time things will be different

Quotable Value says the housing market came out of the first lockdown like a runaway train, but this time things will be different

Quotable Value is predicting a soft landing rather than a crash for the housing market as it faces the headwinds of rising mortgage interest rates, an increasing supply of new homes, closed borders and declining affordability.

The latest QV House Price Index (based on sales over the three months to end of August) shows that average residential property values are still rising in most parts of the country, with Marlborough and Queenstown-Lakes the only districts where average values declined between July and August. And even those declines were relatively small.

The average value in Marlborough declined from $686,403 in July to $685,751 in August, while the average value in Queenstown-Lakes declined from $1,435,138 in July to $1,425,821 in August.

But average values rose in all other regions and the national average value increased from $952,078 in July to $963,046 in August.

Over the three months to the end of August the national average dwelling value increased by 3.3% and regional increases over the same period ranged from 0.3% in Marlborough to 5.8% in Christchurch (see the chart below for the figures for all regions).

However the rate at which average dwelling values have been increasing has now declined for four consecutive months, suggesting a marked slowdown in growth.

"While prices were still going up as we headed into the latest lockdown, the growth was at a significantly reduced rate compared to earlier peaks," QV General Manager David Nagel said.

"This is the fourth month running that we've seen a reduction in the nation's rolling three month average growth rate, so the market has clearly been cooling.

"Interestingly, value growth rates are very similar to the levels we saw in the middle of 2020, when New Zealand came out of its first lockdown.

"Pent up property demand from last year's extended lockdown, plus a stimulated economy as a result of the Reserve Bank's slashing of the OCR, led to a property market on steroids that became a runaway train," he said.

But Nagel says things will be different when the market comes out of lockdown this time around.

"The economy is doing fine without the stimulus that was needed in 2020, interest rates have nowhere to go but up, which was already signalled prior to lockdown, plus the rate of new builds is at an all time high," he said.

"But most importantly, house price inflation coupled with reducing credit availability has taken home ownership out of the reach of many New Zealanders.

"It's difficult to see the housing market return to anything like the growth levels seen over the past couple of years.

"The gap between supply and demand is closing rapidly, with borders largely closed and new houses coming out of the ground at record speed.

"More likely, we'll see a soft landing for the current growth cycle, with the market settling into a new norm closer to the rate of inflation," he said.

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64 Comments

"However the rate at which average dwelling values have been increasing has now declined for four consecutive months, suggesting a marked slowdown in growth."

 

To the QV bunnies: Past results  are NOT a guarantee for future performance

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Landing...on the Moon?

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Nothing is ever guaranteed but we'll probably see another soft-landing - same as the ending of the last housing boom in 2016/2017.

TTP

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Goodo - only three years till the next boom then

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People sleeping in cars... Kids being raised in motels. Yet here we are with our leaders still talking about sustainable growth being the desirable outcome for the property market. Surely the polls are telling them that the people of NZ see this as a disaster and that collectively the majority want their children to be able to live and thrive in their own cities/towns?? Am I missing something here? Its a Myopic view in my opinion...

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Spot on. 

We are getting all types of measures eg house prices going up, showing how well the economy is going and yet we get all these other measures (largely ignored) eg homelessness, food parcels needs, huge building supply increases, extra Govt. assistance, that say the opposite.

Also the flatlining of any house price falls, do not tell you the true extent of any fall, which is only recorded when people sell. Homeowners could be going into negative equity, but rather than selling and taking the loss, they will continue to subsidize the loss by not selling and still paying the interest on equity that does not exist and may still be falling. This is not recorded in any measure.

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They are myopic but the information they are listening to and acting on is not coming from the people of NZ, it is coming from the banks including the RBNZ, and the wealthy, all who stand to lose, some a lot, if the market crashes. They don't want to acknowledge that housing is unaffordable for ordinary Kiwis, and they are still afraid of pissing off the MONEY! And every election we get given a Hobson's Choice. and in the meantime thee is a persistent movement to undermine democracy by increasing the electoral term, which would further entrench this attitude.

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 Chardonnay socialism http://share3works.com/pc.html

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It may seem strange but we must have lived in a Motel or two for over 6 months when we first moved to NZ in 1974. Must find out why, it must have been due to the lack of houses to buy at the time. All I can remember is bouncing all over the place to two different Primary schools before finally we bought and settled at the third primary school. I can confirm its not good for kids, but it didn't exactly ruin my life either. Living in cars ? well that should be seen as totally unacceptable by any "First World" society, but then I think we slipped to second world a while ago now.

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Unfortunately most polls carried out by the media are biased toward asking questions that.suit the government - this is because funding will be cut if they don’t - see attached link - media should be conducting polls on every major issue affecting NZ but they don’t.  Eg Does the public think the OCR be increased to control the increase in house prices?  https://spectator.com.au/2021/09/the-bribing-of-the-new-zealand-media/?fbclid=IwAR2lXFK7DwAGdvDcswMIyC_BBzkN5B9fJUNyRAXXa15To_tH18Wsdd1e-7g

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Undoubtedly the way media not raising the housing crisis, it clearly show they are biased.

But we cannot blame them, media houses need financial support if advert don't cover there expense, the other option is to become puppy of biggest sponser (Govt.).

So we have no hope for next 2 years and after that no option to select (as no one have guts to pull the chain & stop this train).

 

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People want a sharp correction after a sharp rise... unless there is a new external shock it's not going to happen. I think it will flatten and drift sideways, which in an inflationary world is the drop. Upwards pressure is now inflation, downwards pressure interest rate increases, no immigration and (coming soon to an Auckland near you) a lot of houses. 

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Yeah I’m really interested to see what happens if these houses start coming on stream whilst immigration is still low/controlled. There is an insane amount of building going on in my suburb and I can see how we will quite easily reach the mythical $40k houses we apparently need between what’s coming on stream and what’s already been released.  Most of Auckland seems to be the same. 

House building is s big excercise, you can’t just pull out halfway if it appears that inventory outweighs demand.  

Would be an unusual situation for NZ but given our complete lack of planning around housing it wouldn’t be too far fletched IMO. 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Shortage of skilled trades people is what will delay the catch up, including skilled migrants.

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"Quotable Value is predicting a soft landing rather than a crash for the housing market..."

 

Perhaps with a red carpet, laid out by the politicians?

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"Quotable Value is predicting..."

Much akin to those religious nuts that continue to predict rapture or return of Jesus. Deserves as much of our cognitive ability.

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I hope you don't vote Labour because you're a hate speech charge waiting to happen.

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"Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich person to enter the kingdom of God.”

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Just for Context: "The Eye of the Needle" was a gate used at night to avoid opening the main entrance to Jerusalem. 

Camels had to do some gymnastics to get through.. and they definitely had to be unloaded first. I believe Jesus is saying that great wealth can not only be a blessing, but a cruse - often blinding people to the realities of the unseen and human nature.

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@Zack Brando ....yes agree,  to many people, "wealth and the pursuit of it" takes over their very existence, as you said it "blinds" so many people to anything else, even their ideas or principles can't or won't be questioned or critiqued.

While if I have a good result financially, I give a small part of it away .....so I live by "I am blessed to be a blessing" 

 

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Can't be a soft landing, I've just had a bunch of rampant communists telling me its going to crash like nothing we've seen before...   and we all know they're never wrong.  :)

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Weird comment.

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Yes, dunno why you posted it. 

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Nah, your comment was definitely wierd. Almost like you're trolling.

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I thought Labour were the communists yet they want prices to keep rising?

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By chance, I happend to be watching a couple of short documentaries on YouTube last night ("Ireland: The Rise and Fall of the Economy, Real Estate, Development" and  "Collapse of the Celtic Tiger - People & Power"). There was a lot of people predicting a "soft-landing" for their frothing RE market prior to 2010 too.

 

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The key difference is that they were part of the Euro, so couldn't debase their currency to engineer a soft landing.

Its an unfortunate reality, but the 'have-nots' and future generations will be left with the bill for this generation's unearned 'wealth'. 

If the general masses had a better understanding of economics there would be riots.

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StuckatHome, the ECB cut its main lending rate from 3.25 percent  October 2008 to 0.25 percent by July 2009.  Ireland 's house prices continued to fall. 

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Yes, but less flexibility on QE (the ultimate currency debasement tool).

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Ireland was fundementally very different to New Zealand in that they actually massively over-built housing. The supply of land wasn't limited, development companies where building estates of affordable modest semi-detached houses by the hundreds annually as the country boomed. People where buying them just to hold for capital gains and not to actually use or rent as residential dwellings.

However the economy of Ireland has been an incredible success story from the early 90s. They've fundementally successfully transitioned from exporting low value-add agricultural commodities to high-value added goods like pharmaceuticals, chemicals, food additives etc. so the economy has prospered. Although New Zealand and Ireland share a similar populations in terms of numerically and denisity they have very different economies.

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I genuinely hope that our cheap-debt driven, speculative greed bubble is diffrunt to theirs. If we can somehow engineer a "soft-landing" we may also avoid the unemployment, exodus of young workers, and the spiralling suicide rates that accompanied the collapse of their bubble.

Full disclosure: I have been trying to buy a home for myself and teenage kids for three years, post divorce. On the face of it a massive correction would be great, as I could secure a property for our future. In reality any major RE market correction will be devasting for all Kiwis, whether they are 'on the ladder' or not. Hard to know what to wish for....

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I wonder, if New Zealand built an over-supply of housing whether this would drive down prices, or would people just buy and hold/hope for capital gains?......

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Surely that would eventually push rents down and put people off buying if they can’t get tenants and won’t see capital gains?

No idea if it would it would ever happen though 

 

 

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...we should not be entertaining negative speculation and unfounded worst-case doom and gloom scenarios when all that is being experienced is a levelling in the extraordinary pace of growth we previously experienced... a soft landing for the Irish housing market is still possible and is the most likely scenario.

 - Marie Hunt, Head of Research, CB Richard Ellis, April 17 2007
 

I'm sure it's different this time, though. It's amazing how intent we are in refusing to learn the lessons of history.

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Is it a relief that house growth instead of double digit is in single digit after 30% to 100% rise in a year.

This reflect the mindset of people who are promoting the ponzi : Their best excuse / defence is that now house price growth has reduced from $6000 per week to $4000 per week.

 

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30 to 100% rise in a year?  Your comments get more rediculous by the day. 

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Really, what seem ridiculous to you is a reality. A house bought in Mangere last year in June for $620000 sold last month for  appox 1.2 Million.

My comments reflect what is happening and agree with you that is ridiculous.

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Ah, we all love a good cherry pick.  

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Not cherry picking but reality. What seem to be ridiculous to you, just reading is actually happening.

Number of houses have been sold. 

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... and I love someone who only makes negative comments without ever providing supporting evidence or a reasonable counter argument... Oh wait no I don't, no body does.

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Gisborne 38.2%
Palmerston North 39.1%
Carterton 38.3%
South Wairarapa 44.9%
Whanganui 41.4%
Auckland City - Islands 39.3%

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Yes, nothing like 100%

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House prices rose between 30% and 900% in a year.  

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A 40% rise effectively doubles the price in two years, so not too far off.. Out of this world numbers really..

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Totally reasonable then 

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"Quotable Value is predicting a soft landing rather than a crash for the housing market..."

Two points :

1 : This is to give reason to RBNZ, Government and all so called economist and experts to give a justification to not act on housing ponzi (So now likes of Robertson and Orr can quote when confronted to hide behind as have no intent to control the ponzi)

2 : Characteristic of Ponzi is that it is either boom or doom and has no room for flattening or slowing.

 

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Agreed. I also think the talk of the "stabilizing" of prices by Ardern and Robertson is merely to avoid blame if prices do tank.

It doesn't look good in election year if it looks as you deliberately popped the economy.

The trouble with this is it doesn't stop the rampant inflation and makes a pop even more likely / serious.

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4-5% increase every 3 months on an average 850k house is still a good gain of 38k or so - better income than most household combined salaries.  Softish landing or perhaps a moderated re-surge?   
And Level 2 freedoms only just been released on NZ (excl Auck) today.  Let’s see how it goes. 

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a good gain of 38k or so - better income than most household combined salaries

 

Most household combined salaries are higher than 38k...

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Annually, maybe, but not quarterly. And the house price increase is quarterly. 

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Sometimes looking at percentage rises as opposed to absolute increases can obscure the problem. It might be true that nationwide house prices have 'only' gone up by 3.3% in the last three months. But in dollar terms, that's a 30k increase. Just to keep up with a deposit requirement of 20, you'd need to save 6k.. So those who have not yet bought a home will be needing to save around $500 a week just to not be going backwards. 

It gets worse - if you are trying to save the deposit while renting, the average rent is close to $500 a week. (https://www.interest.co.nz/property/110471/rents-have-risen-much-more-s…). 

Average household net income is 86k. So an average household, renting the the average house, and saving for a deposit will be spending 52k of that (60%!) to stand still, housing wise. 

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Housing crisis, Increasing public housing waiting list, Child Poverty, Huge Debt, Increasing inflation, mental health crisis, health worker & teacher protests & Welcoming Refuges with shady past (putting kiwi community in danger).

What else Labour can offer us.

 

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Why not nationalise all NZs polytechnics into one big controllable bureaucracy and remove regional autonomy?  
And merge all the hospitals together into one system? 
And force all the councils to give their water to a national system?  
oh wait, they’re doing that.  

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So... Be Quick?

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Would an enlightened banker out there, care to share the new lending regulations etc presenting themselves this October 01, for the good people at Interest.co.nz ? .......queue "cross cultural, happy family" TV ad :) 

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If we can expect a soft landing in house prices, then we can expect a violent take off of young Kiwis leaving the country.

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and many will be up to their eyeballs in student loan debt

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Soft landing -  triumph of hope over experience - bubbles tend to pop, and this has been the mother of all bubbles IMO. In Auckland, where I live, a perfect storm of increased housing supply  and reduced demand is approaching.

On the supply side, Auckland is experiencing a massive ramp up in residential housing consents, which is rapidly reducing past undersupply.  Also, the undersupply problem may have been overstated - the 2018 Census indicated Auckland’s population (and number of households) did not increase as much as projected.

On the demand side, increasing numbers of fhb have been priced out of the market. The RB policy changes are also acting to dampen demand by fhb and property investors / speculators. Auckland’s population growth will be affected by the drop in net immigration to NZ, due to Covid. As already mentioned, demand from population growth has been lower than expected, with increased  internal migration out of Auckland (to regions where housing is more unaffordable). Also household size has been increasing, probably a response to unaffordable housing.

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What are we going to do with the 10,0000 building apprentices and 50,000 builders when housing supply catches up?

 

Just a thought

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Government could and should  step up and build more state houses for people squeezed into overcrowded houses, and emergency accommodation. Government could also partner with private builders to build  more affordable houses for sale to fhb. This would be a basic Keynesian response. According to Keynes, a key role for Government is to step in and spend when private sector  demand collapses. We need to stop the cycle of boom and bust in the housing market and this could do that.

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If you look at the graph for the bitcoin price it looks like a camel's hump for the first part of 2021, followed by a dip and then a second hump has formed and is where we are now.

If bitcoin is a proxy for speculative behaviour driven by increased worldwide monetary liquidity then this graph tells me that we are in the second wave of worldwide liquidity.

The NZ govt and the RBNZ have had quite a good hack at putting people off buying houses by putting obstacles in the way of house purchase. If there was some other investment that could hold the value of a saver's capital in the same way that investment in land and houses has done in the past then I've no doubt that people would put their money in those vehicles as well.

As it stands where will this increased liquidity go as it passes into the New Zealand economy?

The New Zealand govt is not supporting New Zealand industry. Banks are not supporting New Zealand industry. If New Zealand industry and R & D was being supported to a greater extent than it currently is there would be more outlets for savers to put their capital into.

There does not seem to be a coherent plan for the support and development of New Zealand industry at any level of our society. If there was more of such development then the speed and destructive impact of the flows of liquidity within New Zealand would abate somewhat and our society would be more balanced.

As it is we are experiencing continual financial whiplash and houses are a safety net. The task at hand is to extend the benefit of that safety net to more people in our society rather than cut off the means to get there.

It comes back to govt building affordable houses and giving state loans to low income people so they can put a roof over their heads or gain a foot on the first rung of the ladder.

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Agreed, but is why we need a land tax to recover some of the gains, and Debt to income on lending so the speculators are forced to stop putting the banking system at risk.

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Housing unaffordability creates poor social outcomes. A society does best when most people have a acceptable standard of living i.e. good housing, healthy food etc etc. I don't need to explain how bad this has got in New Zealand. 

I am encouraging my kids to leave NZ to make a better life elsewhere, the trouble is - the rest of the world is just as bad or worse. Maybe small town NSW will offer a healthy happier future for my grandkids or perhaps the smaller centres in England look better too. 

The value proposition for NZ no longer works. Massive inequality with a landed gentry owning a most rentals,  sipping lattes while kids go without lunch in South Auckland. Its ugly!

Kiwis aspire to be rentiers rather than entrepreneurs - that right there is the problem in a nutshell.

 

 

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