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The latest lockdown has not been kind to first home buyers

The latest lockdown has not been kind to first home buyers
HouseBoat

August may have marked a significant turning point for first home buyers, according to interest.co.nz's latest Home Loan Affordability Reports.

They show that August and its Level 4 lockdown restrictions were not kind to first home buyers.

In most regions property prices at the bottom of the market continued to rise, with the Real Estate Institute of New Zealand's national lower quartile selling price increasing by $20,000 in August to hit a new record of $620,000.

In Auckland, the country's most expensive region, it increased by $22,000 to $877,000, and lower quartile price rises were recorded in seven other regions, with only four - Hawke's Bay, Wellington, Canterbury and Southland posting a decline in lower quartile prices for the month.

So around the regions lower quartile price rises outnumbered falls by two to one.

On its own that would be bad news for first home buyers, but misery loves company and to add to their woes there was also an increase in mortgage interest rates. The average of the two year fixed rates offered by the major banks rose to 2.82% in August from 2.78% in July.

That was the third successive monthly increase since the average two year fixed rate bottomed out at 2.52% in May.

The combined effects of higher prices and higher mortgage rates had two main impacts on aspiring first home buyers.

Firstly it increased the amount they would need for a deposit.

The amount they would need for a 20% deposit on a home at the national lower quartile price increased by $4000 last month and has increased by $25,600 in the 12 months to August.

That sort of inflation makes it extremely difficult for first home buyers on anything approaching average incomes to scrape together a deposit, especially in Auckland where they would need to be able to lay their hands on $175,400 for a 20% deposit on a lower quartile-priced home.

And of course rising prices and rising interest rates both push up mortgage payments.

The payments on an 80% mortgage (30 year term) for a home purchased at the national lower quartile selling price increased from $454 a week in July to $472 in August.

In Auckland those payments increased to $667 a week in August from $646 in July.

So first home buyers are being squeezed between the need to find bigger deposits and their ability to meet the repayments on bigger mortgages.

On the plus side, once they get into their own home, the value of their asset and their equity in that asset, has been increasing.

Taking a longer term view of those numbers reveals some interesting trends.

The first table below sets out the main affordability measures for typical first home buyers nationally and in Auckland and how they have changed over the three years from August 2018 to August 2021.

It shows that over that three year period, the lower quartile price in Auckland has increased by 32% while the national lower quartile price has increased by 65%.

So while Auckland is still the most expensive region in the country, prices have been increasing at least twice as fast in the rest of the country as they have in Auckland.

Because prices in Auckland are so high, it's likely that affordability has been the biggest constraint on price growth in the region.

The other number that sticks out like a sore thumb is the change in income over that three year period.

Interest.co.nz's Home Loan Affordability Reports estimate that the after-tax pay for 25-29 year old couples (where both work full time), increased by 9% in Auckland and nationally over the three years from August 2018 to August 2021.

So house prices at the bottom end of the market have increased at more than three times the rate of incomes for typical first home buyers in Auckland, and at more than seven times that rate nationally.

That's not a good look for anyone saving to get into their own home, because the price increases have pushed up the amounts required for a deposit by 32% in Auckland and 65% nationally over the same period.

The price rises have also pushed up the amount of money first home buyers need to borrow to get into their own home.

An 80% mortgage for a home purchased at the national lower quartile price has increased from $300,000 in August 2018 to $496,000 in August 2021, while in Auckland it's gone from $532,000 to an eye watering $701,600 over the same period.

However not all the news for first home buyers has been bad, because while the amount first home buyers need to save for a deposit and need to borrow for the mortgage have headed skywards, the resulting mortgage payments have remained well within affordable limits for people on average incomes.

The payments on an 80% mortgage for a home purchased at the national lower quartile price increased from $348 a week in August 2018 to $472 a week in August 2021.

Although that's up 36%, as a percentage of the after-tax pay for couples aged 25-29, it has only moved from 21% to 27%, which means that even with the huge price increases that have occurred over the last three years, the payments on an 80% mortgage for a lower quartile-priced home would only be eating up just over a quarter of a typical first home buying couples' take home pay.

That's well within affordable limits by any measure.

In Auckland, where the rate of price growth has been lower, the payments on an 80% mortgage for a lower quartile-priced home increased by just $50 a week between August 2018 and August 2021, and when you look at those mortgage payments as a percentage of typical first home buyers' take home pay, there has been no change.

Three years ago the mortgage payments on a lower quartile-priced home in Auckland would have eaten up 37% of a typical first home buying couple's after tax pay and three years later in August 2021, it's still at 37% and still within affordable limits.

So over the last three years, the impact of rising house prices on first home buyers' ability to make their mortgage payments has been minimal, and there's a simple reason for that - declining mortgage interest rates.

The average of the two year fixed rates declined steadily to 2.82% in August 2021 from 4.43% in August 2018. That's a drop of just over a third, and this has largely insulated first home buyers from the effect of rising prices on their mortgage payments - although it won't have helped with their deposit requirements.

But as noted above, the interest rate worm has started to turn, slowly but steadily over the last three months and rates are widely expected to keep rising.

And as interest rates rise, the cushioning effect that falling rates have on mortgage payments is removed.

The last time there was a sustained increase in mortgage interest rates was in 2009 and that lasted for just 11 months before they started heading back down.

If interest rates keep rising as they are expected to, first home buyers will be coming under pressures they haven't experienced in more than a decade.

The two large tables below give the main affordability measures as at August 2021, for all main urban districts throughout the country based on 10% and 20% deposits.

The comment stream on this story is now closed.

Changes in Main Home Loan Affordability Measures for Typical First Home Buyers
August 2018 - August 2021
Auckland
    August 2018 August 2021 % Change
  Lower quartile selling price $665,000 $877,000 32%
  Median after-tax weekly pay for typical first home buyers  $1,655 $1,803 9%
  Amount needed for 20% deposit $133,000 $175,400 32%
  Years needed to save 20% deposit 7.5 9.4 20%
  Size of mortgage required $532,000 $701,600 32%
  Mortgage interest rate 4.43% 2.82% -36%
  Weekly mortgage payments $617 $667 8%
  Mortgage payments as % of after-tax pay 37% 37% 0
         
All of New Zealand 
    August 2018 August 2021 % Change
  Lower quartile selling price $375,000 $620,000 65%
  Median after-tax weekly pay for typical first home buyers  $1,623 $1,770 9%
  Amount needed for 20% deposit $75,000 $124,000 65%
  Years needed to save 20% deposit 4.3 6.8 58%
  Size of mortgage required $300,000 496,000 65%
  Mortgage interest rate 4.43% 2.82% -36%
  Weekly mortgage payments $348 $472 36%
  Mortgage payments as % of after-tax pay 21% 27% 29%
Home Loan Affordability for Typical First Home Buyers with a 10% Deposit
For Homes Purchased at the Lower Quartile Selling Price
August 2021
    Amount required for a 10% deposit Years required to save a 10% deposit Size of mortgage required with a 10% deposit Weekly mortgage payments Median weekly after-tax pay for a typical first home buying couple Affordability: Mortgage payments as % of after-tax pay
  Northland $52,500 3.0 $472,500 $522 $1,680 31%
  Auckland $87,700 4.7 $789,300 $872 $1,803 48%
  Waikato $62,300 3.5 $560,700 $619 $1,745 35%
  Bay of Plenty $67,000 3.9 $603,000 $666 $1,680 40%
  Hawkes Bay $56,000 3.3 $504,000 $557 $1,679 33%
  Taranaki $46,000 2.6 $414,000 $457 $1,707 27%
  Manawatu/Whanganui $52,100 3.0 $468,900 $518 $1,707 30%
  Wellington $70,000 3.7 $630,000 $696 $1,842 38%
  Nelson/Marlborough $58,000 3.3 $522,000 $576 $1,718 34%
  Canterbury/Westland $47,050 2.6 $423,450 $468 $1,769 26%
  Otago $52,010 3.0 $468,090 $517 $1,686 31%
  Southland $32,000 1.8 $288,000 $318 $1,759 18%
  New Zealand $62,000 3.4 $558,000 $616 $1,770 35%
  City/District            
  Whangarei $58,000 3.2 $522,000 $576 $1,788 32%
  Rodney $97,500 5.2 $877,500 $969 $1,803 54%
  Auckland North Shore $98,027 5.3 $882,245 $974 $1,803 54%
  Auckland West $87,500 4.7 $787,500 $870 $1,803 48%
  Auckland Central $79,000 4.3 $711,000 $785 $1,803 44%
  Auckland Manukau $90,600 4.9 $815,400 $900 $1,803 50%
  Papakura $80,000 4.3 $720,000 $795 $1,803 44%
  Franklin $69,000 3.7 $621,000 $686 $1,803 38%
  Hamilton $68,800 3.9 $619,200 $684 $1,739 39%
  Tauranga $76,500 4.4 $688,500 $760 $1,690 45%
  Rotorua $50,000 2.8 $450,000 $497 $1,733 29%
  Gisborne $45,000 2.9 $405,000 $447 $1,521 29%
  Napier $61,600 3.6 $554,400 $612 $1,686 36%
  Hastings $55,500 3.2 $499,500 $552 $1,679 33%
  New Plymouth $51,200 3.0 $460,800 $509 $1,682 30%
  Whanganui $44,000 2.7 $396,000 $437 $1,581 28%
  Palmerston North $59,000 3.2 $531,000 $586 $1,807 32%
  Wairarapa $57,050 3.8 $513,450 $567 $1,442 39%
  Kapiti Coast $66,500 3.9 $598,500 $661 $1,646 40%
  Porirua $70,000 3.9 $630,000 $696 $1,747 40%
  Wellington Hutt $73,500 4.0 $661,500 $730 $1,792 41%
  Wellington City $80,050 3.7 $720,450 $796 $2,095 38%
  Nelson $58,000 3.3 $522,000 $576 $1,718 34%
  Christchurch $50,600 2.8 $455,400 $503 $1,763 29%
  Timaru $32,270 1.9 $290,430 $321 $1,621 20%
  Queenstown $76,000 4.4 $684,000 $755 $1,686 45%
  Dunedin $51,800 3.2 $466,200 $515 $1,580 33%
  Invercargill $36,000 2.1 $324,000 $358 $1,681 21%
  Notes: Calculations based on buying a home at the REINZ's lower quartile selling price in each region/district. Mortgage interest rate used is the average of the two year fixed rates offered by the major banks. Weekly income is the combined median after-tax pay for couples aged 25-29 with both working full time. Years to save is based on saving 20% of after-tax pay each week.
 
 
 
Home Loan Affordability for Typical First Home Buyers with a 20% Deposit
For Homes Purchased at the Lower Quartile Selling Price
August 2021
    Amount required for a 20% deposit Years needed to save a 20% deposit Size of mortgage required with a 20% deposit Weekly mortgage payments with a 20% deposit Median weekly after-tax pay for a typical first home buying couple Affordability: Mortgage payments as % of after-tax pay
  Region            
  Northland $105,000 6.1 $420,000 $399 $1,680 24%
  Auckland $175,400 9.4 $701,600 $667 $1,803 37%
  Waikato $124,600 6.9 $498,400 $474 $1,745 27%
  Bay of Plenty $134,000 7.8 $536,000 $510 $1,680 30%
  Hawkes Bay $112,000 6.5 $448,000 $426 $1,679 25%
  Taranaki $92,000 5.2 $368,000 $350 $1,707 20%
  Manawatu/Wanganui $104,200 5.9 $416,800 $396 $1,707 23%
  Wellington $140,000 7.4 $560,000 $532 $1,842 29%
  Nelson/Marlborough $116,000 6.6 $464,000 $441 $1,718 26%
  Canterbury/Westland $94,100 5.1 $376,400 $358 $1,769 20%
  Otago $104,020 6.0 $416,080 $396 $1,686 23%
  Southland $64,000 3.5 $256,000 $243 $1,759 14%
  New Zealand $124,000 6.8 $496,000 $472 $1,770 27%
  City/District            
  Whangarei $116,000 6.3 $464,000 $441 $1,788 25%
  Rodney $195,000 10.4 $780,000 $741 $1,803 41%
  Auckland North Shore $196,054 10.5 $784,218 $745 $1,803 41%
  Auckland West $175,000 9.4 $700,000 $665 $1,803 37%
  Auckland Central $158,000 8.5 $632,000 $601 $1,803 33%
  Auckland Manukau $181,200 9.7 $724,800 $689 $1,803 38%
  Papakura $160,000 8.6 $640,000 $608 $1,803 34%
  Franklin $138,000 7.4 $552,000 $525 $1,803 29%
  Hamilton $137,600 7.7 $550,400 $523 $1,739 30%
  Tauranga $153,000 8.8 $612,000 $582 $1,690 34%
  Rotorua $100,000 5.6 $400,000 $380 $1,733 22%
  Gisborne $90,000 5.8 $360,000 $342 $1,521 22%
  Napier $123,200 7.1 $492,800 $468 $1,686 28%
  Hastings $111,000 6.4 $444,000 $422 $1,679 25%
  New Plymouth $102,400 5.9 $409,600 $389 $1,682 23%
  Whanganui $88,000 5.4 $352,000 $335 $1,581 21%
  Palmerston North $118,000 6.3 $472,000 $449 $1,807 25%
  Wairarapa $114,100 7.7 $456,400 $434 $1,442 30%
  Kapiti Coast $133,000 7.8 $532,000 $506 $1,646 31%
  Porirua $140,000 7.8 $560,000 $532 $1,747 30%
  Wellington Hutt $147,000 7.9 $588,000 $559 $1,792 31%
  Wellington City $160,100 7.4 $640,400 $609 $2,095 29%
  Nelson $116,000 6.6 $464,000 $441 $1,718 26%
  Christchurch $101,200 5.5 $404,800 $385 $1,763 22%
  Timaru $64,540 3.8 $258,160 $245 $1,621 15%
  Queenstown $152,000 8.7 $608,000 $578 $1,686 34%
  Dunedin $103,600 6.4 $414,400 $394 $1,580 25%
  Invercargill $72,000 4.2 $288,000 $274 $1,681 16%
  Notes: Calculations based on buying a home at the REINZ's lower quartile selling price in each region/district. Mortgage interest rate used is the average of the two year fixed rates offered by the major banks with a 30 year term. Weekly income is the combined median after-tax pay for couples aged 25-29 with both working full time. Years to save is based on saving 20% of after-tax pay each week.
 
 
 

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83 Comments

There is no correlation between Homes & kindness in NZ.

Here homes are more for speculation than living.

Up
27

Agree , and it is time websites like interests and any other public platforms discussing NZ housing to introduce the "middle-finger" emoji. That would be well used and super popular feature among young people in general , and especially by FHBs I guess.

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6

We will feel rich though. So where is the worry? 

Up
9

Unfortunately, "feeling rich" can make people spend more, especially when they're mesmerised by the thought of cheap money - in the form of low interest rate loans......

See you outside the Audi dealership first thing tomorrow morning, old chap.

TTP

Up
4

I tire of these reports.

They really underplay the affordability issue and the challenge for FHBs.

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30

In what way? 

Up
0

In many ways.

I've said them before, not going to do so again.

Up
17

Agreed HouseMouse.  

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9

Well, from what I can tell there are four big things they ignore: firstly, the quality and location of lower quartile homes. (1) Buying 'further out' in Auckland used to mean maybe buying in Titirangi or somewhere like that. Now it means buying in the Waikato. And commuting times haven't gotten any shorter. (2) It also ignores the age at which people are able to buy their first home. A 25 year old who manages to buy their first home - even if the payments take up a large proportion of their income (say 40%) will be in a way better position at 40 than someone who only managed to buy their first home at 35. The 25 year old also has an expectation of greater wage and salary increases (the most significant salary increases usually come in the early part of a career). (3) The 25 year old also has more scope to buy a house which is not suitable for children (i.e a small apartment) and move up to one that is, the 35-year-old doesn't. (4) It also ignores the rapidly increasing prices of houses. When I was saving for a house, I started off by making the assumption that house prices would increase by half in the five years I was saving, and saved a deposit bearing that in mind. Prices more than doubled. If we bake that in to calculations of what someone starting now would have to save, that would double all of those timelines (perhaps only very slightly being mitigated by wage inflation - not that there's been much of that lately!). 

Do you think that there are other factors that I'm missing here? 

Up
8

Yep some of that is what I have mentioned before.

It also seems to pay little attention to the burden of paying off student loans.

It also makes big assumptions about young people's relationships ie. A young couple of 23 will stay together and save hard for 9 years before buying together. Many relationships are volatile and changeable in people's younger years. Also how about the many single people out there?

It also doesn't factor in the issue that over the period people are trying to save, prices and therefore deposits keep increasing, so there is an element of many FHBs chasing their tails.

There's other problems with it too.

You make a good point about people having to live further out. That can really add lots of transport costs to people's budgets. We bought our first home in the south, our transport costs (including finance on a second car) are around $300 per week. When we rented in central Auckland, they were about $100 pw.

We also get takeaways more because of the long hours we work and the significant commutes.

Up
5

"I've said them before, not going to do so again."

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0

Yes the 40 year old that bought a house 5 years ago paid a lot less than he would have had to pay for that same house right now. I to could have made a whole lot more money by pouring every thing I had into the most expensive house I could even a year ago. Depending on what each of them bought at the time of purchase, the 40 year old could still be better off now than the 25 year old. Future gains on a house are also going to outstrip any apartment. Most 25 year old's are now going to be severely limited in what they can buy, in fact they probably cannot afford to buy anything without a partner with a decent job and a great deal of help from the parents.

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5

The only easy way to get into the market for FHB is to buy new builds, off the plan.

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2

Yes, and that's still far from affordable, and potentially fraught.

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3

The housing market has turned into a wealth transfer mechanism where it takes money from young people and gives it to old people (in general).

Fortunately for society, most boomers will be dead in 20 years meaning that sanity will be able to return to financial markets and towards social stability.

This may sound harsh, but it is unfortunately (from my perspective) a significant part of the problem. Boomers with their wealth and voting power have had their opportunity (over the last 40 years) to create the world they want - which they have now done - and like a self-licking icecream cone, it is now time to sit in the sun during retirement and melt away.

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11

I can smell the sarcasm  but todays 40 yo, who is old relatively will not be dead in 20 years. I dont know how old you are but are you expecting to be dead by 2041

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1

Today's 40-year-old is a millennial (born in 1981), not a boomer. 

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7

Yes precisely. Many 40 yo are also home owners not necessarily first homes and so are gen Xers born 65 to 80

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1

Zero sarcasm - are you referring to me personally or the online persona of Independent_Observer? Independent_Observer is the utilitarian moral consciousness of the people of New Zealand. His or her age, wealth, nor social position matter in those views. Based upon principles, they are timeless, so never die...let alone in 2041 when the boomers are gone.

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1

I am referring to you as a person but maybe you choose whichever personality you wish to be

Up
1

Also:

-interest rates are at rock bottom now, buyers are taking on enormous risk if they revert to anything close to historical averages;

-FHBs are now mostly getting cheaply-built units on a very small piece of land, reducing the long-term potential for appreciation vs the past;

-land prices now dwarf building prices (in most places), so there's not much opportunity to build with sweat equity. There are no 'do-ups' anymore, the state of the house is largely irrelevant to the selling price unless you're in the provinces.

But your points are all well-made.

Up
5

It's a great point about the 25 (or 30 year old) not having to worry about buying a bigger place for kids etc, like the 35 year old/s will often need to do. And as you imply, not many 25 year olds (or 30 year olds) will be able to buy that first, smaller place as a stepping stone.

Of course, there are single 35 year olds, or couples who can't or don't want to have kids. But I imagine couples, who want to have kids in the near future (or have recently had kids), make up a decent proportion of FHBs. In the development where I live ( about 50 x 2 and 3 bedroom townhouses), it's mostly FHBs, and about 80% of those households would be couples, either with one or two very young kids, a kid on the way, or plans for kids in the next couple of years. There's one gay couple, and five or six single person households.

I guess we'll see a bit of a return to the old days - couples with two young kids living in 2 bedroom townhouses. Two kids to a room! 

Up
3

It's at a point now, that any drop in house prices, is actually seen by the wider NZ community as a good news story. Bring on a correction, at least 10% would be better than nothing.  

Up
22

Problem is 10 percent drop across the board would crash the economy.

The Govt and Banks will need mass immigration again to control inflation and wages with all this credit creation for asset inflation. It will get harder to service debt with all this leverage if our population stays stagnant.

Unless of course banks create credit for productive purposes. But I've got more chance of dying from covid or Harry Tam becoming a Govt Minister than that happening.

Many articles are becoming depressing with headlines like this. 

Up
3

The economy has already crashed for out FHB's.

Mr Orr and his vested interest team need to b-off and let the markets do what markets do.

This intervention has been a disaster and needs to unwind with a great big housing crash. Bring it on and let some sanity return.

Up
21

The economy is gonna crash one way or another. If the hike couldn't be contained, then the developers will eventually ran out of cashflow and go bankrupt as Government and RBNZ tightening the lending rules by seeing it becomes riskier day by day and houses becomes more unaffordable for people. Just like what's happening to Evergrande. 

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4

Unless the gov will bail developers out with printed money, which they will.

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0

No, they won't. It's not that easy. If they bail out developers, they will give out the wrong signal to encourage more developers to overleverage themselves, which can cause some serious damage to economy system. I don't think they can or they should to intervene the market like that. Even  China is reluctant to bail out Evergrande.

https://www.wsj.com/articles/china-makes-preparations-for-evergrandes-demise-11632391852

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0

I imagine they'd be reluctant to bail out Evergrande given a good proportion of the money Evergrande owe is to state owned banks.  

 

"hey, um, we've kinda lost your money but please help us stay afloat by giving us more money".  

Up
1

Here's your reality in Auckland, FHBs!

A small two bedroom apartment, yours for only 875K!!!!

Bargain!

https://www.trademe.co.nz/a/property/new-homes/new-apartment/auckland/a…

 

 

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12

The most important part:

expected completion is Q2-2023

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2

The developer, Ockham, has an excellent track record though.

Up
0

I must be doing something wrong! My new build 114m2 townhouse  on 450m2 selling at $590K - definitely have to raise my prices!

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1

Must be in the wops

Up
4

One hunga! What a rip. I would say there would be lower than average capital gain on a property like this unless you have an uber long time frame or there is massive price growth. Expect less than average

Up
0

I'll wait until borders reopen before commenting, we are in a very unusual situation for nearly two years but very soon it will be time to reopen the borders to the hungry huddled masses. Let's revisit this in nine months or so.

Up
1

You seem to be implying it will get a lot worse.

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1

The supply/demand situation has been thwarted by the control measures put in place for the global pandemic. We need to see the situation equilibrate to understand what the growth trajectory will be. For a start while the pandemic has been going on ImmigrationNZ have kept going with applicants who may have paperwork but cannot cross the border presently.

In the long term the situation will reverse just because of demography within the working age population of developed countries driving inflation upwards.

Up
4

Yeah.

We are also going to see a big supply drop off in Auckland in the next year or so which won't help either. 

Up
2

That drop is coming but why would you expect it so soon? I'd speculate it isn't going to eventuate for 3-4 years.

purely from an armchair interest.co.nz reader perspective..

new home consents have peaked and the industry is probably at its capacity currently working on homes that will reach completion in late 2022,

Builders can continue to start new projects as long as existing home prices are sky high, interest rates appear to be affordable, and government supports making land available for housing. Maybe in 2024 when that second lot of new homes are all done there is a chance the flow has been lost and we really notice that new homes aren't being built?

 

Up
0

My reasoning is as follows:

- CCC's have already fallen quite a bit

-  a large proportion of building consent numbers convert to CCCs in a strong market, but I see this proportion falling away markedly. That is, we won't see the usual follow through in the large number of building consents going through to building completion (CCC)

- FHB's have been a MAJOR factor in Auckland's house building boom. That demand is going to fall away for several reasons. Firstly, developers can't build within the Homestart price caps any longer - that takes a big chunk of demand away. Secondly, rising interest rates (affects developers AND buyers). Thirdly, soaring land and construction costs.

- I think we'll see some carnage with settlements falling over. Deposits paid on townhouses say  1 or 1.5 years ago, the developers will often need to sell for 10-15% more because of cost escalation. Sales fall over, and some developers will go bust. I think there will be a fair bit of this.   

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0

In the interim my only worry is that, without low wage workers being allowed through the border, wages will be pushed up rapidly and the Reserve Bank will begin raising too soon. That said in Prime Minister Ardern I trust to support property investors. Government still have a plethora of tools at their disposal, like FTB support or subsidising children, to keep prices rising.

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1

Don't worry about the RBNZ raising too soon. They will do everything they can to limit the raises. 

I'm not even sure they will raise in October. If the fallout from China is bad enough, they will use that and the long lockdown in Auckland to kick the can down the road.   

Up
6

Yep, any excuse to hold off rises or large rises in OCR.

With level 4 lockdowns a thing of the past (based on what PM says, if you can believe it), people will be even more gung-ho now building and buying knowing restrictions will only lessen with higher vaccinations.

If the TM listings are to go by, there's been a number of new listings in my area since level 3... just imagine how many pent-up buyers there are after 5 weeks locked down.

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2

Yes, it's true that Covid has restricted the supply of materials, which is generally outside the control of anyone in NZ, including the Govt.

BUT there is a big difference between that and the supply of things the Govt. can control like land supply and consenting factors.

Housing was unaffordable before Covid due to Govt. housing policy, and these policies are still there regardless of what happens with materials supply.

 

Anything over 3x median multiple indicates a restriction in the system somewhere. And we have a lot of restrictions at the moment, more so than our normal dysfunctional market.

 

Up
1

Let's be honest though, the housing crisis is 'the crisis government doesn't want to solve'. Homeowners are voters and voters react favourably when government showers them with money.

If the asset being bid up where Matchbox cars the government would just introduce kerbs of manufacturing volumes of new Matchbox cars. The fact it's houses is entirely incidental, though unfortunate.

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Yes 100% true.

But it's a truth that most that are making money out of this don't want to acknowledge in case it gets in the way of any moral conundrum or 'my good management' fantasy.

People are just playing the hand the Govt. have given them (and not given others).

It's OK to make money out of bad Govt. policy. Or is it?

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Actually Government are just playing the hand people have dealt them. New Zealand voters (a subset of the public) want a centre-right wing government, now they have two to choose from. It's simple supply and demand.

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Moral of the story...

Be quick!

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Genuine question - have you bought investment property over the last few months?

You talk the talk, do you walk the walk?

Seeing you seem to think you can't lose with property, surely you've bought?

Or are you a property tycoon wannabe?

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If you're keen, yes. Something in Auck and Welly. On average, our annual inventory turns are around 31 and we aren't the envious types that try to keep an open secret secret or play down opportunities to get ahead ourselves.

It's a fair open playing field, you're free to join or leave- no one is forcing you to choose between peanut butter or ratsack.

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Struggling to see an answer to the question in there...are you saying you have recently bought investment properties in both Auckland and Wellington in the last few months? 

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Yes, 4 in the last 10 weeks.

It's not knowing what others are buying that'll make you money, it's you who need to do the buying yourself.

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"If you're keen, yes. Something in Auck and Welly. On average, our annual inventory turns are around 31 and we aren't the envious types that try to keep an open secret secret or play down opportunities to get ahead ourselves."

 

Are you able to clarify what you mean by 'inventory'. Is this the number of rentals you own?

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Looks like you need a course on accounting. You never put rentals under inventory, they belong to PPE with another name. The inventories are flips.

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"Looks like you need a course on accounting. You never put rentals under inventory, they belong to PPE with another name. The inventories are flips."

So are you saying on average you flip 31 houses a year?

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IO or the person with an agenda behind the Internet name ... dont take this the wrong way, Mind your own business.

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This article exemplifies the confusion of the average media punter trying to describe the housing situation. Affordability for FHBs going down is bad; interest rate rises are bad, because they are bad for affordability; prices going down is bad, because home owners are just FHBs +some duration of time; this implies that FHBs should in fact want prices to rise as fast as possible, or else they'll be making their future selves poorer. 

We are so marinated in moral cowardice that we can't think straight. A feudal hierarchy is being constructed before our eyes, and the blame is directed at those who think twice before deciding to go all-in on joining the aristocracy.

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Well said, why worry if the sun suddenly rises out of the west tomorrow, as long as there is a profit in it now, who cares if it signals a fundamental and fatal long-term future for us all.

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I wish that $1 would get automatically paid into my bank account every time someone posted the word "Crash" on interest.co.nz

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Don't let a good thing disappear. It's been going well for housing all this time ;) 

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A more lucrative way is to offer a bet every time a DGM offers a prophecy from the hades. Make sure the contract specifies,

  1. The magnitude of the crash in % or in dollar value with a reference to an asset,
  2. The date the bet expires and concludes, and
  3. Payment date, currency and method of payment including late payment fees and interest.

It can be a great side hustle for your lifetime beer fund.

If you need someone to hold it in trust, gimme a buzz.

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And the problem is that every time you're right, the worse the financial and social situation in NZ comes.

It must be satisfying be right all the time so that you can add to your beer fund?

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If you're flipping 31 properties a year - are you the Evergrande of NZ?

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Oh well, at least we are getting lots of tax revenue from him 

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Or $1 everytime I read be quick. I might be able to afford my first home then.

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Don't worry FHBs, life is long and you will later be glad that you were 'locked out' of this insanity, when you do buy a home in a market or location that rewards you for your hard work as a saver. There are lots of wonderful places to buy real estate, but NZ isn't one of them currently. Whatever you do, don't try to buy right now before the crash, or you will wipe out your savings and more. Ask the Chinese about overcooked housing markets - their largest property investment just lost 90% of its value, but that couldn't happen here, oh no.

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I know newly qualified medical specialists who reasonably expect that they should be able to afford to buy a reasonable house.  Their reaction is that this is madness, so they are packing up their very portable qualification and leaving NZ.   What hope have our young lesser mortals got.  If they have any sense they should be doing the same. And they are showing signs of this.  This is becoming a significant part of their conversations. 

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Once this coronavirus hysteria is over I expect many will realise they have nothing to lose and everything to gain by heading abroad.

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Yes I'm hearing that too. Aus pays medical professionals much more than NZ, and housing is much cheaper than Auckland, apart from Sydney which is still a bit cheaper.

We are going to be much worse off as a country in coming years due to the profound self interest that much of the population has bought into over the past 20 years. 

 

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We are going to be much worse off as a country in coming years due to the profound self interest that much of the population has bought into over the past 20 years. 

I don't get why people can't see this.

10 years ago a mate was jollying himself to us how much his place had gone up in value.  I asked him where he thought his kids were going to live and advised him it wasn't going to be Auckland if they wanted to own a house.

That was 10 years ago...

 

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People can't see this because they can't see beyond their own greed, self interest and short termism.

I have lived in quite a few countries, and I would say self interest and lack of bigger picture thinking is worse here than anywhere, includng Australia.

I blame it on the extent to which this country has embraced neoliberalism.

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Timaru, most affordable town in NZ

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Idiotic and highly offensive comment removed. Brock if you post anything like that again you will be banned. - Greg.

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Given the comment Greg I'm amazed you gave him a 2nd chance.

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Not too many job opportunities though.

Have you moved back there permanently? 

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Is the slumlord motel still doing well, off the back of us taxpayers?

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That's a lot of smashed avo!!

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They are virtually giving avocados away now ... houses, not so much

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So sick of this country and it's expensive housing, I'm moving to China where I can buy a whole ghost city for $6.

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Payable if both remain in ftw 

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Mt Greg N, can you please what and who is kind to FHB !!!!

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Stuart

The article is about what is going on, and makes the observation that recent developments are not kind to FHBs.  There is no good news here because there is no good news.

There are such great wealth disparities now that it would take very radical action to rebalance, with all sorts of collateral damage.  So the damage has been done, and more commentators are now turning to the view that FHBs should give up or leave NZ. 

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