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ANZ economists are the last major bank to tip that house prices will drop - now picking a 4% decline next year

Property / news
ANZ economists are the last major bank to tip that house prices will drop - now picking a 4% decline next year
house-RBNZ3

All five of New Zealand's major banks now expect house prices to drop in 2022.

In addition, the Reserve Bank has for some time been picking price falls for during the second half of next year as well.

Any declines - if they occur - will of course follow the extraordinary 30%-plus gains that have been seen during this year.

After the RBNZ first came out with predictions of falling prices in its August Monetary Policy Statement, the major bank economists have, one-by-one gradually changed their picks from, for the most part expecting flat prices next year, to mostly modest declines.

Thus far BNZ economists appear to be forecasting the largest magnitude of falls, suggesting a peak annual drop of around 6% or 7% by 2023.

The last domino to fall in terms of expecting outright falls in prices were the ANZ economists who have now changed their pick from generally flat prices next year to a drop of -4%.

In the bank's latest NZ Property Focus, ANZ chief economist Sharon Zollner, senior strategist David Croy and economist Finn Robinson said in November, house prices posted the second-lowest monthly increase since the end of lockdown in 2020. 

"And it’s looking like the shine is well and truly coming off the housing market, with weaker sales, tighter LVR restrictions and new consumer lending protections legislation seeing mortgage lending rapidly drying up, even as new listings surged to multi-year highs," they say.

"As a result, we’ve revised down our house price outlook a touch, and are forecasting house prices will fall around 4% from their current extremely-elevated levels by mid-2022.

"Usually, falling house prices are correlated with recessions in New Zealand. But with the labour market running so strong, we think domestic demand will get through a period of mildly falling house prices relatively unscathed."

The ANZ economists note that the 4% drop in house prices that they are predicting will only bring the level of house prices back to September 2021 levels – "which were already way higher than before the pandemic".

"Re-winding the clock a few months for house prices may not be ideal for people who have purchased a property very recently. But those people are few in number relative to the vast bulk of existing property owners whose property values would still be miles above where they were just a few years ago."

The ANZ economists say given very high household debt levels "we can’t rule out seeing consumption fall significantly, or that house prices could fall by more than we are forecasting".

"But our central view is that so long as the tight labour market continues to sustain economic momentum, a fall in house prices won’t bring an end to this economic expansion as long as nothing comes out of left field."

But they they then go on to add that "left field is a pretty crowded place at the moment", as the US Federal Reserve "finally" faces up to inflation, China "finally" faces up to problems in its real estate sector, and the world nervously eyes up the implications of Omicron.

"With house prices this far out of whack compared to incomes, we need a good solid run of decent income growth and balance sheet consolidation to reduce the risks of a nasty hangover from what’s been a truly spectacular boom. Cross fingers."

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127 Comments

For years now economists have guessed at price declines while property has soared in value. Even if they are correct one day it's be completely useless.

Too wrong for too long.

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9

Yup Squishy, economists, wrong since...... forever. If inflation goes below 2%, then maybe prices will fall a bit, but at 4.9%, and ANZ predicting a 4% fall, as Darryl Kerrigan says, tell 'im he's dreamin'. House prices, historically, outperform inflation (see Brian Easton's analysis of this), so you'd expect, a worst case scenario of house prices matching inflation, a .9% GAIN in house prices based on ANZ's prediction.

 

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Have a look at Robert Shillers work on real house prices. 
 

I think you might be at risk of being caught in recency/confirmation bias.

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9

Yep I have resigned to the fact. I would like nothing more than to see an end to this insanity and a return to a fair platform where many could afford to buy a house, including my kids but I am beaten. This freight train will not be stopped, it will continue on with the wealthy at the wheel and plough the lesser people out of its way.

There is something about our obsession with property ($$$) that no matter what, it will never be allowed to fail. This combined with the absolute shambles that our country has become brings tears to your eyes. Massive social issues, poverty, homelessness, suicide, inequality, inflation, high cost of living/low wages, massive increase in crime/gangs, breakdown of communities the list goes on. So there is a free for all to grab whatever you can to look after 'yourself' and property is top of the list.

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24

The massive social issues are a result of what we're doing enriching ourselves off the young.

So now, of course, instead of addressing the causes we will think of ways to hide in gated communities from the problems we're creating, and talk of problems like "putting those people in camps or purpose built apartment buildings far away" (already seen).

How absolutely stupid can we be to undo a decent society and push it toward what's found more often in developing countries?

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Correct. There are plenty of morally bankrupt countries out there we can take notes off.

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Correction 

House price “growth” to fall.

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A "drop of -4%" is an increase of 4%

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What you've said is blatantly not correct. They've really only forecast falls in the lead up to the GFC declines, around the time of the 2020 lockdowns (which was wrong as we now know - but then again who guessed we'd have near record-low unemployment), and now (including the past few months). Perhaps you've been conflating things as they often say things like "we can't rule out the chance that they fall" even while they forecast increases, but it's been quite rare for them (outside of the above list of cases) to actually have a central projection for a decline. 

 

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In the prefu - pre election fiscal update - RB or Treasury was predicting 9% falls, yet every single body on the ground already knew they were completely wrong. It those smart alecs had called a few random agents, and listened, they would have found out what was going on.

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They could have just read the comments section here if they weren't censored every time an uncomplementary word is said.

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Let's clear something up here. For years, bank economists have been saying this, to trigger the RBNZ plunge protection team into acting to ensure the opposite happens.

It's been the playbook for about the last 5-10 years, laid bare in the last 2. RBNZ, having painted themselves into a corner with rate drops (whether they are "emergency" ones or not), now have little left in the tank to play with, without being completely obvious about their intentions to keep the bubble going.  So they hope that house prices will decline steadily, but will be watching to jump in again if a doom spiral appears.

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Interestingly no thought that a doom spiral might be exactly what is needed. If they act that way it would highlight that they are a shill for global banking interests. Being trapped in endless debt servitude serves the interest of no one in NZ

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3

I need a house but no way I am going out shopping in this housing market. I am not getting paid 200k a year to afford a decent house.

And buying someone's shit is not my plan. I would rather earn some in the country and move somewhere else. This place is not liveable anymore. Too many rotten investors and real estate agents have infiltrated in this country from overseas. There has been no control on who they let in. Now pay the price. 

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21

Great post Notgreedkiwi.

 

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3

I agree with the sentiment of your post but I know plenty of Kiwi born investors and real estate agents who have done very well in the past 7 years. Why do you think the problem came from overseas?

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4

Investors and agents huh ? please do a favour  before you leave  get educated on how the money works in particular   low Interest rates , QE and supply and demand 101. If you look at almost any major economies the same thing happened. 

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2

Typical arrogance and ignorance.  Living in the bum Of the world having little knowledge but trying to be Einstein. 

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1

Don't be so  hard on yourself. 

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0

They will be right eventually. Even flipping a coin could be as accurate. 

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"What do you call and economist who makes a prediction?"

 

- Wrong

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Not surprised, if you have a look recent auction results in Auckland, it's not hard to figure out where house market is heading next year.

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Expecting.... Feeling.... Suggesting....... BUT data suggests........

Mr Orr has been talking of housing market softening since last seven Months - March and banks are no expectations.

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(Wrong spot!)

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Don't really understand what you're getting at but seen his son has just finished his first development and conveniently selling at 'the peak'...

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Maybe that's confirmation?

Would you leave your son out to dry if you had an idea of what was around the corner? (My original post moved to 'Breakfast Breifing'. Sorry about that :) )

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John ?

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Out of  the 1,975,000 homeowners ,only 15571 unfortunates will see paper losses over the coming year. The proverbial soft landing..  

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Even if the housing market survives, it will come at an irreversible cost to the wider economy (whatever's left of it) and shape NZ's demographics for generations to come.

With real wages in NZ already declining and 70% of borrowers expected to refinance at significantly higher mortgage rates in 2022, tens of thousands of households will be forced to cut back on discretionary spending.

Also, a minor drop in valuation for the 1.975m homeowners could reverse some of the false economy created by "wealth effect".

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Tomorrows data will confirm the complete financialization of the housing market over the past twenty years as New Zealand housing "wealth"  exceeds five times GDP for  the first time. If housing wealth is linked to economic growth New Zealand has a intractable conundrum. 

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If the wealth effect from property reverses, the NZ economy is cooked. It's all we have. 

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Then we will be force to get something else, while we have this fake wealth nothing will change.

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Same report same people last year March.

And see where we are, again the same people with the same bu11sh1t, hope they will be right one day.

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3

5% fall with inflation at 5% is a 10% fall, which is probably the best outcome as it shouldn't cause people to be hitting negative equity, even if they bought at the peak

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It is FOMO and FOMO alone that is driving the ponzi - same thing happens in stockmarket and once that is gone things change drastically.

If any fall just like rise, if it happens will atleast be in double digit or will not fall at all.

 

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FOMO has been massive. But even if it still exists, it's now largely been scuttled by higher interest rates, more restrictive lending, and soaring construction costs.

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I would say FOMO is just as strong as ever, but a whole lot fewer people can afford it.

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Housing is not the same as the stock market tho is it ? You can sell and walk away from shares but if you sell your house you still need a place to live. Housing has become the #1 hard asset for a reason, everyone wants to live in one.

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Places to live can be rented and this suits many people better with a functioning and competitive rental market.

With the demise of mass immigration and the rapidly approaching end of the supply shortage we should soon see a functioning rental market return.

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<i> demise of mass immigration </i>

Covid-19 has simply stalled mass immigration, not killed it. There have been virtually no changes to the student or worker visa policies over the last 18 months to suggest anything less than new record-highs will be set on migrant influx into NZ come April 30.

I am certain this government is banking on mass migration to stimulate our economy, as it has utterly failed to move the needle on any other front.

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The cynic in me believes you are right.

But I wonder what tolerance voters have left for their country being wrecked by such folly.

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What choice do we have, vote National or ACT they will do the same, our democracy only gives us the impression of control. Like the wealth effect gives us the impression of wealth.

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You can also easily argue that there will be a mass exodus of young Kiwis next year. I'm expecting this to outweigh the immigrants and we continue to have negative net migration next year. Many young Kiwis are giving up and leaving for a better life elsewhere.

They should try living in Sydney, Australia's most expensive city Sydney and be shocked by the amount of extra cash that they can save while renting there rather than here (it's what I did). Sure you can't buy a house and have a family but you can't do that here either. 

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No amount of stringent regulation of NZ's rental market can make up for the power imbalance that favours landlords caused by short supply of decent options. The easy option of keeping the investment property vacant for a short period to make tax-free capital gains instead of adhering to strict standards is yet another issue.

And then we have reports of MSD outbidding renters by paying 3-4x the market price on private properties to make matters even worse.

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Its the stringent rules that have tipped the balance already in favour of the tenant that has unbalanced the rental market to the disadvantage of many. Landlords & Tenants should have equal rights & responsibilities and a tribunal system that's is truly neutral and reflective of what most accept as acceptable.The no eviction policy of Oranga Tang Kiaora sends the wrong message and is indicitive of Govts policy.

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These comparisons don't really mean anything, since they compare apples with oranges.

In Auckland, you are most likely stuck paying rent set by the landlord on whatever is available in the market. The average rent buys you a substandard house here as compared to Sydney.

Also, these averages are greatly skewed higher by plenty of high-end rentals for deep-pocketed individuals available in those global cities.

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Sydney isn't such a good option 'finance-wise' unless you earn a lot more.

But I know a few people who have moved to Melbourne in the last couple of years, and the rentals are significantly more affordable or at the very least better value / quality for the money.

And it goes without saying that Brisbane, Adelaide and Perth are much more affordable.  

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I agree the exodus will exceed the incoming. 

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Someone I know rents a nice 2 bedroom apartment in Melbourne city for ~$400 per week. So much cheaper than Auckland, then add to that higher wages and lower living costs. They're just very happy they got out of New Zealand.

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I understand it was a record 80,000 just before covid, even though they were supposed to be cutting it back. Will they use the excuse of catchup? eg 100,000 over the next year?

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A falling market is not a problem for owner occupiers as the rungs of the ladder close up. It makes buying the next home easier. You only lose if you are down sizing or can no-longer afford the mortgage repayments. 

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This is correct.  Cheaper housing is better for anybody that wants to upgrade.

Isn't it strange the media is infested with the contrary narrative.

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Can you explain what you mean by "the rungs of the ladder close up"?

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If the market falls 10%, a $2 million property loses $200k and the price becomes $1.8 million but someone selling a $1 million property has only lost $100k and now have $900k. The price difference between the two properties falls from $1 million to $900k. It is easier for the person to move up the ladder. 

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Fall by how much? 1.5M house fell to 1.4M in 2022, then back to 1.7M in 2024??

Two fundamental driver of NZ's house price:

1. the value of NZers output is getting lower and lower in the global market

2. population growth in the next 20 years

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Comrade Xingmo, this websites' own little version of Hu Xijin

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胡锡进 (Hu Xi Jin). https://en.wikipedia.org/wiki/Hu_Xijin

I am flattered that you think I am a version of him. He is so awesome, experienced, right on the point. 

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I'm sure you are.

Got to ask again though, if we are so inferior and stupid compared to your motherland, why are you here?

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Surely Xi can criticise some aspects of NZ without being told to leave.

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Not telling him to leave. Not sure how you arrived at that.

I'm simply questioning why he chooses to live here, when he thinks China is so much better and we are failing.

I'm guessing it's the higher standard of living here, together with a cleaner environment, and the ability to express oneself comparatively freely.

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Xi - Housing is seen as a safe investment/in a market with limited opportunities for the middle income to diversify into.Taxation/finance & over regulation plus an obstructionist bureacracy are fundamental causes and without radical change will continue to stifle innovation, something that appears to infect the world and even China is experiencing the same.

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0

Let's have a look at the key drivers.

  • Population Ponzi scheme on hold. (Thankyou Covid).
  • Tightening credit.
  • A seeming flood of nearly finished sh#t boxes ready to hit the market.
  • Consumers under stress with rising food, energy bills etc.
  • Real wage growth at zero.
  • Flow on/in effects of the Chinese property mega bubble bursting.
  • A local NZ population that has seen inter-generational, almost un-interrupted yearly increases in house prices and truly believe it's a one-way bet. 

My bet is on an almighty crash.

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32

I'm not sure how many houses you own Timmyboy, but I can tell you, housing is a one way bet over the long term (and if you don't believe me, Easton has done an analysis of house prices to inflation, and has nice wee graphs showing house price increases since 1960. And UP is the only way they have gone). The only thing that needs to be analysed, is whether it is the best one way bet over any period of time. The one of the more important things you have missed in your nice list (which by the way, is interesting, but stupid), is that nobody is making land anymore.

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Land is "made" every time local government changes zoning boundaries.

The scarcity of developable land can be changed to an abundance at the stroke of a pen.

Which is exactly what was done yesterday in parliament.

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That’s utter BS - look at Shiller’s work on real house prices. 

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No

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Triggered? 

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Bored? 😂

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The best description I've seen of the laughing-with-tears emoticon: an “obnoxious, chortling little yellow dickhead”.

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I think you should look up Smith's work, you'll find it enlightening. 

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Kjeldorian

Wasted post: IO doesn’t read anything else but the one book by Shiller. He is besotted with it and by IO’s own admission IO has been calling bubble burst for coming up to seven years now.

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The thing is, yes it has been an amazing investment. But that does not guarantee it will continue to be.

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This is true housing has always been good investment, but if you lose your house through bankruptcy you have made nothing and lost all you have ever worked for ,it looks like many will be heading this way. Debt is so high and many are over exposed if inflation and interest rates keep going up and with NZD on way down. Not looking good just look at big picture not just NZ housing market.

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Like anything it will be a good long term investment if demand continues to outstrip supply. So it really comes down to population growth. Although I would imagine a large amount of population growth is already priced in, so a lower amount of population growth may actually see house prices go down.  

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Wasn't most of the Queens City waterfront strip made by bulldozers?

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Add most of the Netherlands, Hong and Singapore, Dubai.

Rubble from the old Chch stadium was used to make more land in Lyttleton.

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You have been supping too much of that vino.  Nothing goes up forever... and the biggest prerequisite in any housing or stock market calamity, is people believing it will never happen. I do believe that the form book says that if it shows even a 5 percent drop, the traitors that run the place will start trading anything they can to prevent it. Mothers, ports, farms, even children.., nothing is more important to the average politician than their preciously cultivated housing ponzi. A chinese owned south island perhaps.

 

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Another one for the list:

  • a reversal of the urbanisation trend, particularly for higher income white-collar workers. Because they can work from home 3+ days a week, they can buy much further out, reducing pressure on central suburb prices. You might see more less central areas go up in value to compensate, but there's a lot more of them than there are central suburbs.

See https://www.economist.com/united-states/why-americans-are-rethinking-wh… .  

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It might end up that people live and work from home in the provinces and have a “Bach” apartment in the city for weekends. All those inner city apartments will look pretty cheap if the overseas students fail to return and companies change to remote working. 

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The cost of building "creating" a new homes spills over onto the value of the existing properties. If there was an "almighty crash", construction would halt overnight. Thus the ensuing supply shortage would be self correcting.

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Timmy - so few see what is coming, history does and will repeat, for those disbeleivers check out Japans stock market & housing over the last 25/30years and explain why it fell and why it has taken so longer to recover.

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I doubt these economic models are properly factoring in human psychology with the frothing speculative mania that has just taken place and it's approaching flipside.

When the "guaranteed" capital gains stop and flip to probable capital losses sellers will flood and willing buyers will vanish and it's a long long long way down before yield numbers make any remote sense.

Especially with all that sweet sweet interest deductibility about to vanish and interest rates increasing. Once popular sentiment has turned very few are going to consider catching a falling knife.

The risk of the market taking one hell of a dump is a lot higher than many might realise and the Minsky Moment for this extremely speculative bubble may not be far away now.

There is an enormous amount of room for downward valuation.

Even Jacinda is now backpedalling on her "sustained moderation" schtick. She has been forewarned by her handlers what is now almost inevitable.

Be quick!

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I doubt these economic models are properly factoring in human psychology

They never do. Worse than that, they tend to be based on ridiculous assumptions like perfectly rational actors, and 100% efficiency.

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They put in data and they spit out data, hence resulting in a weirdly precise projection of a 4% decline.

I don't know if he stuck to this, but I remember Sir Bob Jones saying back in the day that he hired liberal arts grads rather than commerce grads because the former could think outside the square while the latter tended to be wedded to convention and inflexible frameworks and models.

 

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I hear there's a few vacancies coming up at the RBNZ. Maybe we should fill them with BAs?

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BL, you are bang on the money.  I’m becoming a broken record, but I’m staggered to see how many commenters are oblivious to the role of sentiment in speculative markets.  NZ residential property is essentially a meme stock.  With projected capital gains drying up and turning negative, and deposit rates starting to rival net rental yields (I mean true net, after you properly account for costs), housing really is beginning to look like a one way bet. 

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https://www.barfoot.co.nz/auctions-live/sessions

Any price fall deniers need to look at the daily Auctions on the Barfoot and Thompson website. It was another bloodbath today. Supply is now outstripping demand and the confidence has left the market. Only one way from here until the borders open, assuming anyone wants to come.

Sale Rate:

Highbrook room 1 - 15%

Promenade - 26%

Highbrook room 2 - 25%

Looking fairly dire in the run up to Christmas. 

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"With house prices this far out of whack compared to incomes"

https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018824550/h…

Just read this article. Really had me going thinking bulldust no one can get $500k or more in just 28 trades.

 Kicker at the end, house price only $80k US. 

Is there even one single crappy house in this country for only $118k, what about a single section.

Out of whack doesn't even begin to cover it and ANZ, you are the more guilty than most of creating it.

 

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In other words: FHBs can wave goodbye to any bank accepting anything less than a 20% deposit. I expect the others to follow what BNZ and Kiwibank have already done.

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For years people have talked about a price crash but really it up to the government they manipulate the market with cheap interest rates and lvr. In 2008 a Auckland house was 1/2 million interest rates 8% average today 2% and a house around 2 million. When the market starts falling the interest rates will come back down

 

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Just remember that cheap interest rates and LVR is the reserve bank. The reserve bank isn't the government.

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The reserve bank isn't the government but the government sets the RBs objectives.

This whole good cop bad cop routine where the government blames RBNZ and the RBNZ blames the government is a cop out.

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Auckland up 25% last 12m

if drop is 15% next year then means v little

Sales will drop back to 2018-19 levels

By the way, recession is inevitable when wages rise at half rate inflation does. Which is the position as Luzon pointed out recently in parliament 

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If it drops 15% and inflation is 10%, it’s a meaningful correction 

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That's torn it - if the bank says prices are going to fall, they'll go up!

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Good call, mate.

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A 4% drop will get lost in the noise. Expect price increases this month to offset that anyway. You know for a fact that the government can just flick the switch on immigration and problem solved. No way Labour will want a crash on their watch at this stage of the game. What I will say however is that we are running on a knife edge, "Global stability" doesn't look good.

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Given the appalling clearance rates and massive number of listings be negotiation or asking price now flooding the market I'd question the price increase narrative this month and going forward.

Its turned.

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My pick is a static housing market for a number of years now and it will give it time for the dust to settle. Far to many variables out there that are much bigger than the housing market to contend with that need be focused on.

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Static prices? 

Why?

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Surely if prices are static then investors will exit as rental yields are terrible and not worth the hassle. If lots of investors exit, I can't see prices staying static. 

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House prices up, rents up. House prices down, rents up Stable house price, rents up

 

Joking? ... maybe

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Agreed.

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Carlos - understand your view but suspect its is your hope rather than a market expectation based on facts/changes already in place.

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Lol - you think a political party can control asset prices in a debt bubble 

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Well, shucks! They sure think they can!

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Look at labours track record as far as delivery goes.

If labour start enacting polices to halt a crash then look out below.

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This is directly related to their pullback on lending. I'm not sure why companies that control the market to this degree are even permitted to comment/predict publicly on predicted results of their own influence. 

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Might flatten out a bit. But momentum of 26% annual gains won't turn around on a limited timeframe of one year.

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Yea okay, house prices tend to be on the up from inflation. So I'm guessing at worst we see a 12 month figure somewhere from 5% 

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4% drop will not do it for FHBs whose only rational option is to get out of the country.

If National get the whole house price direction will strongly reversed upward.  Note that their leader has 7 properties so he is not going to damage his wealth despite anything he may say unless he is insane. 

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Jo Moir pointed out it was a critical strategic error not to have sold his rental properties before becoming a politician. I agree, and it might have changed his perspective.

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Are you serious?  He gained a rental property in Wellington by renting from himself with his living away from home subsidy.....  He also owns the property that is used as his electoral office.  So two guaranteed income streams as long as he is in politics.  How this is even allowed is beyond me - Classic snout in trough behaviour.  It is a well trodden path for politicians.  Bill English moved his family to Wellington and still claimed the allowance, hence earning the nickname 'The double dipper from Dipton'.

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a new guess as usual, pointless

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Housing facts:  for all the infill townhouses and apartments being built two important point should be considered.

Firstly, people over say 65 years prefer not to live in a multi-storey home as they age. They prefer only ground level with no stairs. I know.

Secondly, young families don't want to bring up their children in a multi-storey home, specially the expensive little boxes that are currently being built.  It's NZder's birthright to enable their children to have some out-door playing space that can be watched over from the home; with pedophiles walking the streets it's important that parents do not just send them down to a local park unsupervised; in this respect my mother's cousin married an American soldier and had to bring up her two boys in a New York apartment...she had to accompany them down to the nearest park to play outside.  In the end the marriage broke up and she brought the boys back to NZ to raise them in healthier surroundings.

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"Secondly, young families don't want to bring up their children in a multi-storey home, specially the expensive little boxes that are currently being built." - I think you mean you don't want to. 

"It's NZder's birthright to enable their children to have some out-door playing space that can be watched over from the home" - entitled much?

"with pedophiles walking the streets it's important that parents do not just send them down to a local park unsupervised" - Not sure what country you live in, it isn't that big of a problem here. 

 

 

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All 5 major banks spokespeople should be roundly ignored....about anything

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Well I was thinking house prices would stay about level over 2022, but now that the bright sparks at treasury are predicting rises of 10%+ then they are guaranteed to fall....

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All the banks will know that house prices and sales are stalling as they have slowed and stalled much of their lending.  No mortgage, no purchase. No purchase then prices drop.  
Homeowners need to be very careful selling atm without a clear pathway and approval to repurchase as they may find their mortgage power has shrunk, and they won’t be able to purchase.  And so the entire market may freeze with vendors staying put.  Similar to 2009/10, but maybe worse.  

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Yes, I have a mate already in that position.  Wants to trade up, but last I heard he was having no luck selling, and the clock is ticking on his pre-approval for the extra finance he needs.

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in another news0 Treasury predicts predicts-house-prices-to-increase-more-than-10-pct-in-2022

https://www.newshub.co.nz/home/politics/2021/12/treasury-predicts-house…

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I wouldn't be surprised to see a number of the franchise builders go in 2022.

There's just too much against them. Rising interest rates, tighter credit, higher compliance osts, inflation of 15-30% on materials, and increasing labour costs.

You only need a couple of houses to delay because of materials, or stop because clients can't get extended credit, and it could be a bit iffy.

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Oh, Oh, what a sad bunch of people FHB have become? 

Oh, yes  I am a millionaire, my 3-bedroom shoebox is now worth 1.3 million in the market. Oh what a feeling  just wish I could cash in...

But instead, the bank got me in their grip, charging higher and higher rates,  the council rates going through the roof, and now, housing prices are going to fall?

Where is Mama gone all of a sudden? 

Oh, I wish, I was strong enough to escape this madness...

- just kidding -

 

 

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If house prices suddenly go from a 30% rise yoy to a 4% drop, that's a 34% swing.  Seems pretty unbelievable to me.  Might be more believable if the banks were to predict slowing house price growth.  The demand for housing is still there, interest rates are still low by historic standards, so I see maybe 10% growth.

Banks have been predicting falls in house prices most years over the last decade, and they've been wrong every year.  I don't see why they would be right this year.

Having said that, if house prices suddenly halved next year to what prices were like about 3 years ago, then most home owners will still be well up on when they bought. And people will still be struggling to get their first house. That's how crazy this market is right now.

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The combination of high developer payouts, squeezed supply, low interest rates and COVID uncertainty has led to an unnatural market over the last two years. 40% increases in any asset class over one or two years in the past would draw a sharp intake of breath and warnings against speculation. The developers in November 2020 were looking at profit margins of 30% (based on four units on a large section). The recipients of their largesse plus returnees bid up the limited stock that was available (they’ve won lotto so why not) growing everyone’s expectations. 

This is not sustainable. Hopefully Council CVs won’t  bed that in. 

There aren’t enough capital flows into NZ to keep prices at the current level. Once COVID settles the Australian exodus restarts and nz expats remember what they left behind, further downward pressure will result. New immigrants won’t be able to pay either. Perhaps if NZ wants to become a Monaco or the Hamptons of the South Pacific then maybe. But that’s not NZ

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