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Auckland's median selling price down by $80,000 in January - REINZ

Property / news
Auckland's median selling price down by $80,000 in January - REINZ
House on the edge of a cliff

There was a significant drop in both median house prices and the number of homes sold in January.

According to the latest data from the Real Estate Institute of NZ, the national median selling price dropped to $880,000 in January, down by $20,000 compared to December's $900,000 median.

It was the second month in a row that the national median has retreated from its November peak of $920,143.

The price fall was especially severe in the Auckland Region where the median selling price declined by $80,000, from $1.28 million in December to $1.20 million in January.

In the rest of the country (excluding Auckland) the median price declined by $10,000 to $750,000 in January.

However, four regions went against the trend, with median prices in Northland, Bay of Plenty, Taranaki and Otago all higher in January than they were in December.

All other regions posted median price declines over the same period.

The biggest declines appear to have occurred in the lower North Island, with the Wellington Region's median price dropping from $985,000 in December to $911,000 in January, while the median price in Manawatu/Whanganui dropped from $650,000 in December to $600,000 in January (the chart below shows the median price trends in all regions).

The decline in prices was accompanied by an even more substantial drop in sales volumes, with the REINZ recording 3655 residential sales throughout the country in January, down by 28.6% compared to January last year.

The REINZ said that was the lowest level of sales for any month of the year since January 2011 (excluding April 2020 when the market virtually closed down because of Level 4 pandemic restrictions).

In Auckland the number of sales in January was down 32.2% compared to January last year (the second chart below shows the sales volumes trends in all regions).

"Allowing for the usual seasonal trends, this January is weaker than a typical first month of the year," the REINZ said.

"Feedback from agents  across the country suggests a decrease in the number of first home buyers and investors in the market, noting quieter auction rooms and open homes," REINZ chief executive Jen Baird said.

"Looking forward, we would expect sales volumes to increase as we head into February and March, however this does depend on reasonable levels of new listings," she said.

The comment stream on this story is now closed.

Median price - REINZ

Select chart tabs

NZ total
Source: REINZ
Northland
Source: REINZ
Auckland
Source: REINZ
Waikato
Source: REINZ
Bay of Plenty
Source: REINZ
Gisborne
Source: REINZ
Hawke's Bay
Source: REINZ
Manawatu
Source: REINZ
Taranaki
Source: REINZ
Wellington
Source: REINZ
Tasman
Source: REINZ
Nelson
Source: REINZ
Marlborough
Source: REINZ
West Coast
Source: REINZ
Canterbury
Source: REINZ
Otago
Source: REINZ
Southland
Source: REINZ

Volumes sold - REINZ

Select chart tabs

NZ total
Source: REINZ
Northland
Source: REINZ
Auckland
Source: REINZ
Waikato
Source: REINZ
Bay of Plenty
Source: REINZ
Gisborne
Source: REINZ
Hawke's Bay
Source: REINZ
Manawatu
Source: REINZ
Taranaki
Source: REINZ
Wellington
Source: REINZ
Tasman
Source: REINZ
Nelson
Source: REINZ
Marlborough
Source: REINZ
West Coast
Source: REINZ
Canterbury
Source: REINZ
Otago
Source: REINZ
Southland
Source: REINZ

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251 Comments

I like blue banners

Up
4

That’s but a small drop in median price compared with the robust gains of the last couple of years.

There’s no “crash” 💥 in sight. ✅

But opportunities will emerge, no doubt, for counter-cyclical participants in the housing market. 👍🏻

TTP

Up
9

I don't know, Auckland HPIs dropping 2.6% in one month looks entirely consistent with a crash to me. Not that I'd be arrogant enough to say such a thing is certain, but it's a very real possibility. Plan accordingly.  

Up
28

If I hadn't heard similar comments on this website for the past 12 years I would agree with you.  I'm not expecting anything spectacular to happen.

Up
9

Well yes, the spectacular outcome will always be the least likely. I do see where you're coming from - NZ houses have defied negative predictions for a long time, but it is a certainty that prices will fall at some point. No markets rise constantly up and to the right, as we should all know from other real estate markets. It's also logical that the higher prices go and the faster they do it, the more likely they are to suffer from large falls. The same logic that makes people wary of high flying stock markets. 

So no, a significant price fall is not guaranteed. But I certainly wouldn't want too much of my wealth tied up in the NZ property market at this point (or at any other point - diversification is a no-brainer). 

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5

I hear what you are saying about diversification, but it appears to me that nearly all the asset classes are over-valued.  P/E ratios on every stock market globally are crazy high.....  maybe gold could be a bit under-valued at the moment?  Rare earth mineral miners?

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3

It's tricky buying out there sure, although there's a few NZX companies I'm still buying and some gold miners and oil cos don't look too dear. Life is much easier if you're in the accumulation phase - you just keep on piling money into the markets and if a few of those packages end up losing money for a while it's no big deal, you get to buy more while they're cheaper. 

Those who respond to these difficulties by ploughing all their money (and then some) into leveraged investment property in a single city in a single country should be seen as just as crazy as a leveraged Tesla investor. 

Obviously FHBs often have to put the vast majority of their net worth into their first house - not having a go at them. I did the same. 

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1

I think Tesla has huuge upside potential, but not so much because of the cars but once they have finished development of Neuralink it's going to be bigger than mobile phones.  Maybe not worth the carry for a leveraged investment but there is the potential for a life changing investment.

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0

Hah - I thought I'd get some criticism for that provocative statement but I didn't think it'd be saying I'm being unfair on Tesla. 

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1

Carbon Credits. 

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3

2.6% monthly drops over 12 months is 28% down on a year.  That said, 2.6% is the initial figure, before general market sentiment kicks in.

 

Yes, not suggesting a fall is happening, but all we can do is take data we have, extrapolate forward and prepare for it.  

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5

I wouldn't take a couple of monthly data points and extrapolate forward with any degree of confidence, not for something as illiquid as housing.  Full employment, wages are rising, on the other hand 2% interest rate increase on 600k is $230pw but interest rates haven't gone up by 2% yet (unless you fixed 5y - in which case you can afford it anyway). 

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0

This is without any large interest rate hikes anyone who has bought in last two years will see deposit gone and probably be in negative equity over next few months period.

Up
25

With the exorbitant reals estate fees, as soon as the ink has dried many will immediately be in a hole that will take years to climb out of.

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7

Higher interest rates are definitely on the cards unless the those in charge want to see the NZ dollar loose significant value and drive the economy into the ground with inflation. Already people are starting to feel the pinch of increasing prices amidst mediocre / stagnant wages. Now if savvy investors think that they'd keep increasing rents to offset their mortgage payments, all you'd find is empty houses for rent.....

The only way to get out of this is open the immigration tap and let a few immigrant families huddle together in an overpriced derelict property ....... we sure can compete with Dubai when it comes to housing immigrants. I'm sure the Govt will definitely take that route when all other avenues are exhausted ............... 

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1

I locked in 3.05% for 5 years with ANZ about 9 - 10 months ago.  Wife convinced me to trade up, we locked in at 4.95% for 5 years in December with ANZ.  Both had the same discount percentage off the carded rates (something like 0.65%).

 

Is that not a large interest rate hike?  

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2

So you think if someone who purchased a million dollar house, 2 years ago, with a say 200k deposite and is now valued around 1.4 Mill is going to drop from 1.4 to below 800k......thats gold😂😂 

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3

Apparently it’s only the old and the uncool that use the laughing face emoji now. My daughter informed me and let me know its embarrassing. Just FYI …. 

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5

Thanks, my kids just told me facebook is not cool either, haha. 

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1

Facebook is uncool now too! Thanks for the heads up, saved me the ridicule at home… hahah

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1

What is really uncool is worrying about what teenagers think is cool or not.

😲😆🙄😬🤔😁😎

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5

Thanks Limited IQ

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0

Thanks, my kids just told me facebook is not cool either, haha. 

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0

Lost gold luke83 because that just what is about to happen.

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1

Have seen house price fall in 2018 between 10% to 15% and if one looks at past, even this time, house price should not fall more but as the growth has been very fast and very hard in extremely low interest environment unlike previously, will be interesting to watch how it all pans out in 2022.

However this time the situation is different unlike past and may see meaningfull fall unless rbnz and Labour party goes out of the way again just as they did in 2020 but will be hard for them as last time had pandemic as an excuse.

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8

Anyone with a bit sensible knowledge about business and economy should know that it's bad to interfere with free market. But our government and RBNZ did it in 2020 (actually they've been interfering with Market for a while), now everyone in New Zealand needs to suffer this consequence. If this doesn't teach them a lesson about not interfering with market, I don't know what else can...

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6

Housing has never been a free market, it's always affected by all sorts of government policies - migration settings, accommodation supplement, first home buyer subsidies, state house numbers, lack of capital gains tax.

Let alone the RBNZ setting interest rates and bank stability measures. 

Up
10

It's more a welfare scheme for the wealthy than a free market with risk, yes.

Up
8

From what I can see, a "free market" is merely a fantasy bedtime story for people to believe that things just sort themselves out when there's no interference from a central government.

Up
6

What does "there's no crash in sight" mean? What kind of sight are you expecting? Surely crazy house prices combined with increasing interest rates and with poor yields for investors which are now taxed looks at least a bit like a crash waiting to happen?

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23

Fear not. TinkerThePrice is deploying the plunge protection team as we speak.

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26

Priceless :) 

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8

Welcome back RP! The market for the foreseeable future is now in your favour.

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1

"Priceless :)"

Brainless.

TTP

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3

Priceless :) 

Price fix? 

Up
3

OMG the housing crash is here for sure with the return of RP ! Welcome back have you just got out of rehab after the massive house price gains over the last 12 months put you in there.

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3

RP, Return of the Jedi the force is strong in this one.

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3

Hi DTRH,

“the force is strong…. “

Translation:

”the farce is strong….”

TTP

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4

TTP Don’t need any comments from dark side.

Up
1

hahaha, is this satire? ;) I love it

Up
2

My response is not meant to be satire, lekkerbydiesee.

Just keeping them in check....... but love it if you must!

Cheers,

TTP

Up
2

Trademe houses for sale in Auckland up too almost 11000 and whole country 27750 up over 10% in last week.So in Auckland we have 10 weeks worth of stock for sale this will just continue to climb until prices fall to meet market as most speculators and investors will not touch market at the moment who is going to buy as average wage earners cannot afford 1 million plus houses.The slide is on just depends on interest rate and inflation as to how big the crash will be

Up
9

I'm genuinely curious to see if the stock volume will start flattening out soon. Kiwis are notorious for holding onto properties for dear life. If what we are seeing is indeed a transition into buyers market with falling prices, not many people would want to sell their houses now unless circumstances (e.g. divorce, mortgage) force them to do it? Wouldn't we be seeing a very static market this year in that buyers not buying as they can't get credit (some waiting for potential correction), and sellers extremely reluctant to sell as they wait for the market to bounce back? 

Up
0

Plenty will be coming off interest only.... I’d imagine some will be needing to sell

things are dire for many businesses and many have been using the house to fund a loss making business.... losing the home is next

nz is going to go through the wringer

Up
0

That’s but a small drop in median price compared with the robust gains of the last couple of years.

"Look at how much welfare we got over the last two years! LOLZ!"

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3

BE QUICK 🤡

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17
Up
23

Good link. Thanks.

Up
0

FONGO

Up
11

Fear Of Not Getting Out?

Up
7

This is 2nd time I've seen the abbreviation. 1st time I googled it. Brought up some surprisingly dodgy answers as well as the correct one...

Up
0

Must...resist...Googling...

Up
0

Beat me to it

Up
2

Is it due to more older stock being sold, or smaller dwellings, or a real drop?

Can we not have some more in-depth analysis rather than just bait headlines with no body?

 

Up
3

It was ex cyclone Dovi. Gone now. Relax.

Up
3

Take a look at the raw data and make your own mind up. HPIs tell the same story, so looks like a real drop, certainly in Auckland

https://www.reinz.co.nz/press

https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2022/Reside…

Up
6

Thar's what I'm suggesting Interest.co.nz do, but the good thing, is you can always get pros and cons from other commentators as to what might be happening. If you have time to read them.

It's amazing how much more you can get from the comments than the article, in many cases. I wouldn't be surprised if  Interest.co.nz deliberately leaves 'the question open,' to generate comments.

Up
1

They do have opinion articles but most of them are pretty raw stats dumps without much in the way of context.

For instance, does Auckland being in lockdown from August to December mean January sales figures are better or worse than the same time the previous year, when there was no lockdown over that period?

End of the day things need to be looked at over longer periods to determine a trend vs an anomaly.

Up
2

Anyone else remember the film Titanic?

I went and saw it at the movies when it first came out. There's a scene where the ship first starts breaking in half, and I'll never forget that haunting, low frequency groan which came across the theatre sound system as the ship's icy steel hull began to buckle and twist under the weight of the water it was taking on. It's a sound which is forever embedded in my brain.

Anyway. For anyone who can't be bothered reading this month's REINZ report, it can be quite succinctly summarised by that sound.

Up
38

Phew, for a moment there I thought you were going to the higher frequency groaning in the scene with Jack and Rose in the car.

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3

Investors and speculators need not panic as this news will drive RBNZ and Government nuts and they will soon get into least regret mode as it is their reputation which is at stake and not of people who have taken debts in extreme.

May be it is the first time in history where RBNZ and Government are more worried than the person actually taking the debt as it is them who instigated greed by throwing cheap and easy money giving rise to FOMO which resulted in mad rush .....

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10

Its  like house prices are tied to interest rates and the availability of credit.

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54

Whatever gave you that crazy idea?

Up
14

Agree.  However, it's way more than interest rates and the availability of credit.  Investors have pulled back because the numbers no longer add up.  No big tax breaks, high purchase prices, low yields, on-going maintenance and what now looks like no capital gain. The smart ones bailed last year.  Yields will be key going forward and to improve the yield prices have to drop (and they have).  Sit tight FHB for a little bit longer.  It will be worth it.

Up
18

In a dysfunctional economy, they are, that's how you can tell it's dysfunctional. In a balanced truly free market economy they are not.

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2

A drop of 30% would not be extreme considering the increases since the pandemic. Not a crash but rather a normalisation. Issue will be the amount of owners being under water which will make banks ‘force’ their clients to bank elsewhere upon re-fixing, up their deposits or go to second tier lenders. 
 

Interest rates are already bank at pre-pandemic levels, prices always take time to catch up.  

Up
25

Why would banks force that? If you are in negative equity the last thing they want is for you not be able to make repayments, and go bankrupt they will be the big losers, and doing it on mass will only bring down house prices more. They want you to keep paying, you are in an incredibly strong bargaining position you have nothing to loose, apart from 3 years of bankruptcy, they no longer have a fully secured loan.

Up
1

Because, as soon as you break the agreed ratio of your equity to loan on the newly revised value that rollover or new mortgage at the end of fixed-term triggers, they are either legal obliged to make you increase your equity, or decline to give you a new mortgage until you do, OR even if they have discretion, but their numbers say the market will fall further and may put you into negative equity, then they will take the opportunity to take their money now while they can.

Up
5

This isn’t true is it? Where is this mandated?

I understand the bank can call in your mortgage but don’t they get to assess the risk.

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2

If they have discretion, then you don't have to mandate common sense. Does anyone really expect the bank to ride the loss with you to the point where they also lose money?

They may have been your perceived friend when they lent you the money, and even if they are really your friend, they are not your financially silly friend. They are banks after all.

Up
5

You are correct, it doesn't work like a margin call..poster overreach perhaps driven by wishful schadenfreude. The vibe of this thread indicated by its vote tally...

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1

Banks will have no hesitation in taking control of a development to manage some lightning quick sales once ccc is over the line. This will send property prices on a downward spiral if banks see the chance for a full loan repayment dwindling. Saw this first hand during the GFC. 

Up
2

Every RE agent I've seen at open homes: "iT's jUsT sEaSoNaL"

Up
11

The market is in an itsybitsy little gully right now.

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18

Is that a line from the Big Short movie? 

Up
7

Hah yes it is from the big short.

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5
Up
4

So the Herald's propaganda machine is out in full force trying to help the RE industry maintain this bubble. Why am I not surprised...

Up
17

Not only Herald, stuff too... You wonder how we kept our housing higher and higher for many years and kept people in FOMO mode...

REINZ: Big slump in turnover, Auckland house sales down by a third | Stuff.co.nz

“Many point to access to finance, exacerbated by changes introduced in December to the Credit Contracts and Consumer Finance Act (CCCFA) – currently under review, as having a major impact. This is a sentiment echoed in a survey conducted at the end of January by economist Tony Alexander in collaboration with REINZ, which noted that the predominant concern for buyers is no longer availability of stock but rather financing.”

 

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4

Ashley Church, CWBW et al are going to look like right idiots in 2022!

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16

More so than usual?? 
I reckon CWBW has one of those standard issue smug grins that all these property guys sport. I’m looking forward to the old classic..”yeah but what about all the capital gains from the last couple of years”..or the “you could have it if you just worked harder”.. one finger typing old geezas with wee stained trousers. 

Up
26

"one finger typing old geezas with wee stained trousers"

 

Appears a bit bitter and twisted..sure none of this has been fair..just don't let it take more from you than it has to.

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0

Hi Speckles. It was a generalisation not aimed at anyone in particular. It was supposed to be humorous… missed the mark, clearly. Cheers. Tom

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5

That's no different to any other year.

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3

Even more so!

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1

But I got an e-mail from homes.co.nz advising me to look at the new valuation of my Wellington house.

Lo and behold it has increased in 'value' by another $100k since Christmas.

Surely they are the pulpit of truth and on this basis I will chuck some more on the mortgage and look to invest in some quality horseflesh at the upcoming Karaka sales.

What could possibly go wrong?

 

Up
6

Don't forget to buy the bigger freezer.

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3

Settled on our place in December.  CoreLogic already have it valued 10% higher than purchase price in our ANZ banking app.  There haven't been any property completed property sales in the area since, so would be interested to know their method of calculation.  

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4

They will factor in moving averages so if the market turns the figures will be out of date for a while

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1

Homes...is that the site that lets agents manipulate the prices to whatever they want?

Up
0

John Key and the sleeze brothers have picked a strange time to go all out on property. Their build initiative is ultimately a good thing, depending on type of homes etc.. but a challenging period to launch it. Max Key, Max debt, Max risk

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22

tomjones_04,

But just think, every development will be able to boast a unique facility-a 'tasteful' brothel AND a John key designed flag. What more could you want?

 

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6

"What more could you want?" How about some pole dancers with Ponytails please. Asking for a friend.

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13

Bloody heck, I am in stitches with that!

Hilarious

Up
3

Key is known for timing. Might be counter intuitive, however,if they pick up big blocks of consented land at fire sale prices from deleveraging developers , they will be very well placed in 3 or 4 years at the point of the next upswing.However,If a real extended slump occurs, then the opposite scenario of being highly leveraged in depreciating assetts , that have no cash flow, in a period of  increasing financing costs, and ,gosh,blew the family fortune on a punt. I expect he will be hedging his bets,limiting personal exposure ,and using as much " other peoples money" ,as possible  whilst retaining control. Will he be more astute in a relatively unknown business,to him, to out guess those that are selling,rather than proceeding thenselves? 

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4

They are looking to raise $100 million. You didn't think they would use their own money did you? Oh and JK is only an "advisor", how convenient.

Up
21

Yes, because the bank doesn't want to finance their projects in a falling market and ever increasing prices and shortages in the building industry..

Up
0

Max Key, Max debt, Max risk

LOL love it.

Here is my ultimate scenario: National wins election, 1 year in the property market nukes 50% amid a global financial crisis, Max Key, Max debt, Max risk and his property company goes bust. Articles in the Herald and Newtalk ZB with Hosking rant for months how it is all Jacindas fault. Priceless.

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11

The Keys are likely waiting for the crunch and then will buy off the struggling for a cheap price... could be perfect timing for the morally corrupt...

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5

Yet I hear so many people here advising to do exactly the same thing.

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0

Yep. Then we move more towards corporate landlords. See Blackrock and co buying up thousands of American homes after the 2008 crisis. Slowly but surely all the houses and land will end up in fewer and fewer hands. A bit like amazon and online shopping if you will.

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3

Wonder if we'll see ANZ coincidentally launching a 'Blackrock' here.

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2

"Max Key, Max debt, Max risk"

you forgot Max Headroom ...

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1

tomjones,

You reckon it's a strange time to go into property, know who I'd put my hard earned cash on, and it wouldn't be.......

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0

Volume sold down a massive amount yet total for sale increasing rapidly with interest rates only starting to raise and inflation up with NZD tumbling the housing market is in a bleak place.

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13

It was bound to happen.  Borders have been essentially closed for 2 years and with all the build activity we have all but got rid of the shortage of houses we had a few years ago. At the same time booming interest rates will be required to slow inflation. 

Writing is on the wall, but we will have to wait a couple more months to see if it's a real decline or just a bad month.

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3

Don't try to catch a falling knife.

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4

Smells like a cat is about to die and bounce.

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0

This is a non news. The drop is insignificant Compared to what it has risen too. The average value of houses needs to come too 600-650k in the county to be a viable and living community.

The Auckland average should be around 800-850k. Anything above this is not worth it and not affordable corresponding to wages in the country.

If the houses are the in above range, it creates vibrant economy where people can live happily, spend money and not worry about the cost of everything in everyday life.

But the greed of few and current government policies screwed it for all of us. We just need to get the country and society back from these greedy few. 

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15

In pyramid ponzi, it is not the worth that is important as long as one is confident to find another person to sell. It is only when the chain break that one realize on valuation and greed. It has happened in stock market so how would property market be immune 

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12

If there is a crash, cashed-up investors will pour back into the market like greased lightening.   Don't forget there are companies (I should say corporations) out there that own hundreds if not thousands of houses and have the super equity to obtain funding at any time.  Doesn't Sansom Corp come into this category....some-one might enlighten me?  And there was another one, more recently established, written about in the Herald some months ago.....but I forget the guy's name.

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0

The market would need to become significantly undervalued for that to make sense. Fingers crossed.

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0

Those guys are into commercial, not resi

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1

When the data suggested that house price have gone up by 23% it was actually between 30% to 40%. Similarly if the data suggests that it has fallen by 7% in reality will be much higher fall.

Fall is in happening when interest rates are very low, what will happen when they actually goes up. In the past rbnz could control by relaxing LVR and reducing OCR to prevent from further fall but today ........

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6

Impossible! CWBW used his high school knowledge of statistics and 1 week of auction sales to prove that prices had risen 14%!! 

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14

Did you even read the article?

I was talking about February. Greg is onto January.

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4

Reading the DGM commentary really makes me laugh!

The Januarys are traditional month where prices retreat and this year remains no different. As for the magnitude, they are well within what was expected.

This chart proves nothing unusual about price behaviours.

We cannot expect DGMs to suffer the complexities of buying a house or making money with it when they can't even understand the basics- they reserve their rights to be DGM poor.

As for the sane, opportunities to take advantage on the dips are rare,

Be quick!

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7

Yes, but the article clarifies that even by January standards it was worse than usual.

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9

Whether it's usual depends on it's history and based on that, it isn't.

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2

You sound so desperate 

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13

Exactly. Median may change due to the composition of sales in a slower month. But a sharp fall in the HPI is less common and paints a very different picture showing falls across 1 month and 3 month period in many regions.

Given we likely have upwards OCR movement it will exasperate this further

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8

3 months with 2 of them Decembers and Januarys with a 1.5%.

I think you're overdoing it.

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3

Oh yes - it's very early days and NZ data is always noisy. Time will tell. 

Simply pointing out that your statement is factually inaccurate when looking at the superior HPI results. Presumably the annual median price artefact is due to sales mix? 

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My statement stands correct.

You cannot use monthly rolling data to identify outliers for a single month.

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"The Januarys are traditional month where prices retreat and this year remains no different."

HPI December -> January monthly change, all of NZ

2018: +0.1

2019: +0.1

2020: +0.3%

2021: +1.3%

2022: -1.5%

This year is different - it is the only January in the last few years where the HPI has gone backwards.

Perhaps you mean Auckland only rather than all of NZ? In that case you're right: -0.6%, -0.8%, -0.4%, -0.3%, -2.6%. One of these is still not like the others. 

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10

That's exactly what you don't get. HPI's composite for the whole country are an aggregate of mostly 3 months or more and using them to determine the significance of any 1 month is wrong.

The actual changes between the averages in December and January are the most reliable numbers.

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1

The three monthly HPI is negative too. -0.9% for the country. 

But yes, I understand you are only interested in the data which supports your view. No doubt we'll reconvene next month and see how things are looking. I suspect we'll see another small slide in HPI. 

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9

“NZ data is always noisy.” [mfd - see above]

Just like the DGM.

TTP

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5

A statement that is appropriate to both extremes of the debate on this website.  

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1

You are a bundle of contradictions, which makes me think you are Taking The Piss.

You refer to DGMs one moment, then say you are renting (yeah right!) And want prices to drop, the next...

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CWBC you are always pushing your narrative just think for a moment would it not be better to have a huge crash around 60% people would start investing in business rather than pushing up house prices. People would no have to spend most of wages on mortgage or rent. I know you are panicked but stay calm salvage what you can before it’s gone as this market is going down and NZ government will not be able to do a thing about it.

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A 60% crash in the housing market would have no effect on the wider economy, lets just crash the housing market so I can buy a house. 

 

Genius. 

 

 

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Uncontrolled inflation is what crashes entire economies.

Let's just worry about an overcooked housing market instead so clowns think they are rich.

Genius.

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Yes. So lets crash the housing market and have it not effect the wider economy. 

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OK.

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This is one of those classic issues that humans are poor at thinking about. Balancing the sudden, in-your-face issue against the insidious, slow moving destructive alternative. The housing market over the last couple of decades has pushed us away from productive investments, kept young families from owning their own homes, and even prevented families from forming as they can't afford the space required. Higher house prices have made the country worse. 

Yes, a crash would be extremely painful, in a very obvious way. The status quo is also painful, but in a way that is easier to ignore. 

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I never said that the current situation is a good thing, it obviously isn't. 

I said a sudden house price crash of 60% would effect the wider economy. Some posters here seem to think that a 60% fall in house prices would be just that. It wouldn't, it would be catastrophic.

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*affect

Of course a crash would be rough. Many are simply pointing out that it's probably better for many that a crash and recovery is allowed to occur as is usual in history, instead of the catastrophic economic effects of the current welfare-driven model of propping up the wealthy and sacrificing the rest of society to avoid at all costs a crash in asset values.

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My sincerest apologies, English isn't my first language. 

Many have been drooling over the prospects of a 60% house crash for months on here. A crash and recovery will kill off the middle class and simply make the rich, richer. It won't mean middle and lower classes can finally afford a home. It'll mean they lose their jobs in the resulting recession/depression. 

 

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60% isn't good enough.  There needs to be a 400% house price crash.

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Can I ask where did you get this information from? Any source? 

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No need to apologise :) I was being a little pedantic.

A crash is an opportunity too, in both the creative destruction and in policy. New Zealand is not yet a complete plutocracy / corporatocracy as the USA has become, and our governments in the distant past have been good at dealing with recessions, depressions and hard times in a way that supports creation of the middle class rather than destruction.

With many voters severely and obviously affected, there would be scope for better government to rebuild the middle classes...and undo some of the gutting of them that has been carried out by our turning investment property into a welfare scheme for the wealthy. A new new deal, a re-do of the post-war (or 1930s) decades.

 

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Exactly. People who think there is a pain free way to exit an asset bubble like this are ignoring the obvious. 
 

If we keep allowing prices to rise the bubble gets worse and makes the ultimate correction more painful.

if you try to flatten prices and let rising wages correct affordability the costs are shifted onto future generations taking on high debt levels into a stagnant economy as we deleverage

Third option is a sharp correction. In this scenario the asset holders who gained from the bubble take the biggest hit. Once the correction is over we have a less indebted economy that will grow faster

Pick your poison

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Love your posts Miguel, so rational and on-point

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there probably isn't. 

I just hate the people on here wishing death and destruction on many so that they can own a home, and thus, become the very same people that they hate. 

Let's set NZ on fire because i'm cold. 

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I haven't seen anyone on here wishing for "death and destruction", not sure where you are getting that from? Some people have expressed that they feel house prices are unsustainably high to the detriment of the average working NZ'er, some feel that a drop in house prices is inevitable, some are convinced that house prices will remain strong. Its all opinion, if it doesn't suit your agenda then maybe this isn't the place for you?

Pump the hate brake pal. 

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The reasonable commentators have expressed that prices are unsustainably high. 

But the usual suspects over the last month or so have been wishing for a house price crash of 60%. Would cause death and destruction.

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There's no credible way that houses will fall 60%. Not going to happen, or anything remotely like it.

20-30% is possible though and in my opinion the short term pain would be worth it to teach this country a lesson and even reset things a little.

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20 - 30% in price, while wages go up 20 - 30%.  Boom there's 60%.  

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I want to see a crash of circa 20-30%, I suspect plenty of others do too.

Take this ponzi down, get this bullshit over with. Then kiwis might learn a thing or two, and we might re-set (actually we probably won't, the nonsense would probably just restart again after a few years).

 

 

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Kjeldorian ,Just what is going to happen, have to look at silver lining. It crazy to think average wage earners are locked out of market how can it stand up if prices are beyond average wage earners this is just market forces. Interest rates going up inflation high NZD tumbling only way market is going is down.The market has gone up 40% in last two years with emergency low rate this and more will come off in downturn.so genius why don’t you explain how you think this won’t happen.

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I never said it wont. It might do. I'm smart enough to not make predictions on the housing market. 

My issue are the people on here wishing for a 60% crash because they are either naive and think that house prices can fall by that much and have no impact on the wider economy. Or they know that and simply don't care.

I hope the country floods so I can have a drink of water.

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Kjeldorian like I said it is not a wish just what all the facts are showing the market is going to take a tumble.people need to prepare for this.people investors speculators all pushed market way too high the party was over last December now only a few sobering drunks left pondering how to clean up mess the smart investors sold last year.

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Really interesting read on NZ's ability to weather significant house price drops by Bernard Hickey. TL;DR:

Only a 50% fall from early 2020 levels and a 17.7% unemployment rate would stress the banks and force them to raise capital, but not wipe them out, but remember prices are now 40% higher than when that stress test was done, so any price fall able to stress the banks would have to be 60%.

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You would delusional to think that we can't see through the smoke screen of DGM narratives.

It's business as usual on our end.

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CWBW If this is business as usual for you this could be your Waterloo moment if you don’t get off at the embankment 

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Welfare-dependents such as property speculators have become can't necessarily envision an actual free market. 

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🤡

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Who ever have waited to buy for last couple of years should wait for at least next 6 months.

I know people will say there is no wrong time to buy property but if you are really in hurry, just visit as many open houses as you can, this is the time when you can negotiate and after 6 months the prices will at least go down 5% and if you wait till 2023 the prices can slashed to 10% (minimum).

Don't go for auctions, have met couple of Re agents and they have confirmed that market is very quite. 

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10% in a year?  Looks like Wellington has dropped 7.5% in just one month.....

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100% agree with you.

As some feels here that house price will not fall and  assuming them to be correct (though highly unlikely) but even if they do not fall, definitely it is clear that house prices are not going up from here in near future so if have been waiting for sometime to buy, few more months wait may be worth the wait.

At the same time, if FHB finds a deal in their price range should go for it though finding a house in price range is a myth for now.

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Good advice.  When I traded up into second home I had been to soo many inspections that when a new listing came on I wanted immediately went cash unconditional - but still had to sell.  In a way I felt no risk - I knew I was buying very well (more so than the agent) and I knew what I could sell for. 

That's what patience and knowing the market does.

Be patient fhb's.  Get to the point you don't need an agent to give you price guidance. 

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Looking forward to end of February results to see if this beds in.  Anecdotally in Wellington hearing stories of houses selling for ~10% under the new RVs... so hope to see this play out in the numbers...  also seem to be a large number of houses passing in at auction in the region...  

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A 7.5% drop in one month is quite significant!  

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especially at 1.5 mil

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Have definitely noticed a lot of places just sitting on the market for some time, as well as a lot of by negotiation and BEOs instead of tenders. A sign of slowing but wouldn't yet be showing up in sale prices because... they're not selling.

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Houses prices falling by nearly 5%, inflation at over 5%, in real terms this is starting to look significant.

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Good grief - David ran the same story on rents yesterday and missed the same obvious point....

House prices fall month-on-month pretty much every January! It's usual. You don't have to work hard to spot the trend - just run your mouse over the median house price graph at the bottom of the page. 

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Explaining science to DGM may attract the the mob to denigrate your profession.

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Yeah. A 6.35% drop is totally normal in January.

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Presumably people are factoring in more than the sale prices, such as volumes sold, rising interest rates, stock levels, etc etc.

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"Allowing for the usual seasonal trends, this January is weaker than a typical first month of the year," the REINZ said.

That may be the case but this fall is larger than normal.

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Not sure anyone would pass 2022 off as a 'typical year'?!?

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House prices fall month-on-month pretty much every January! It's usual.

If we are in an atypical year then what is the relevance of a normal annual trend in your comment above?

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Bet rates don't drop in line with house values .

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Why would they? A houses rates bill is based on it's CV relative to every other houses CV. Whether the market rises or falls has nothing to do with your rates bill, only an increase or decrease in council budgets will affect your rates bill.

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While technically you are right in the real world rate payers are probably more likely to accept an increase in rates if their house price increases and they feel richer. Which probably means the council is likely to increase rates more.

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The new RV's are out in Tauranga but are still way down on the current value of the house by $200K in my case. Note that these are backdated to July 2021 so I guess it was like trying to pin the tail on the donkey with the rapid changes. 

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How did you establish the current value of the house? 

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Homes.co.nz of course

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That’s the real ‘pin the tail on the donkey’

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Whangarei RVs were for same July 21 date. Northland Coastal properties selling double and triple RV already. Fully priced.

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Everyone knows house prices need to fall to a place where average waged couple can buy a house. So if average wage is around 54k would give you around 108k together, so a 3 bedroom house cost would be around 420k these prices will come back to this level once people understand houses are for living in not for making money. speculators need to be removed market and a claps in the market will complete this quickly if government get this right this situation will never occur again.

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Your just dreaming thats going back to 2005 house prices, never going to happen. Most people buy a house to live in, not speculate on and they just move on with life and pay if off. I can understand people getting pissed off but many of you out there would have said hoses were still to expensive back in the early 2000's and refused to pay even $280K for a terraced house back then in the case of a guy I know. That same place is probably $900K now and they are still renting it when they could have bought one in the same complex. Its a mindset and some people simply cannot get over it and pay a high price in later life.

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I remember in early 1990 in uk I worked for a bank so had fixed low rate mortgage my friend were fixing at 9% the rates went up to around 15% house prices dropped 50% people in them days could just drop keys off at bank and walk away and so many did it took over 10 years for prices to recover without inflation taken into account. This was with 70k loans now we are talking 1 million for two bedroom granny flat going to be big problems in Auckland most people have only seen upward market and have no clue what’s about to come.

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People will think that that is nowadays impossible, rates going up 6 perc points (9% =>15%). Obviously assets that depend on credit go down 50%.

The point is that what will happen now is more than that. Starting at 9% and ending at 15% is "only" a 60% increase in interests paid. Now we are going from 2% to 6% (or more) which is a 300% more interests. Thinking that houses (or any other assets that depend on credit) will keep their current prices, growing , flat or moderately decline is just delusional. The natural consequences on paying 300% more of something is that you can afford 1/3 of the same.

right?

am I missing something?

 

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You are correct. But what’s more, a shockingly high portion of mortgages in New Zealand are interest only terms, which are even more susceptible to Interest rate movements.

Let’s say a loan of 700k.

interest only loan at 2.5% is $1459 / month

interest only loan at 6% is $3500 / month

if the bank forces you onto p&I @ 6% on 20 year term …. $5016 per month

It could get a little dicey for those who are highly leveraged

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Goodbye FOMO, hello FOOP...

It's surprising how many agents are still opting for auctions - time to learn some new sales techniques.

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You call them agents. I can them parasites of the worst kind. The most manipulate people in the world. How do they even live with their family's in everyday life when only thing they do all day is putting up lies.

Seriously, how these agents add zero value to a decent society. 

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They're actually salespeople - the Agent is an AREINZ and usually is principal of the Agenecy

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For a while I've been reporting the Hutt valley Situation

as of today 538 homes for sale on trade me- equivalent of 13.5 weeks SOH. This is the highest number of properties on the market since 2009.

43% of the houses have been on the market more than 2 months. 

Roughly 200 existing  properties (ie not new builds) have a listed price. Of these 60% have reduced their price since listing. Average price reduction is now 70K (it was 48K in early Jan). 

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FHBs would be best placed to bide their time in 2022, but keep an open mind.

I suspect that August / September could potentially be a good time to buy, with prices likely to be at least 5-10% lower, and possibly a lot more. Look to either go on one year fixed or take some early pain on floating before interest rates pull back in 2023 when the economy will really be in a funk.

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The people just need to stop fighting and only pay the right price as per their income. Do not ever over leverage for an investment like house which is an immovable asset and you get stuck with it.

Just make sure you only pay the amount which you can easily afford too and sell it and move away without much impact on your everyday life. 

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Is it just me or is the wellington region median price graph going the incorrect way for Jan? (Based on the figures above in reinz pack)

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The sky is falling. 

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The sun is rising for some of us.

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Us humans are a funny species. We should not be surpirsed of how this story is going, should we? We have been doing this over and over again for hundreds of years. For those who arent familiar I recommend googling the Tulip mania of the 17th century. 

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i wonder if this means that previously "priced in" 25 bps OCR rate hike next week may be postponed? I guess the RBNZ is a bit screwed cos if they don't do it, the currency falls and inflation gets worse. Talk about a rock and a hard place.  .  . personally i still think they will raise, i think inflation scares them more than property falling a bit.

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Im not sure they will be able to get away with not raising the OCR because house prices are falling. On the way up they were pretty vocal about house prices not being their responsibility.

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The RBNZ don't factor asset values into OCR decisions.  We've been told this many times.

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Heh. Nice one.

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They have no mandate for sustaining house prices. As for maintaining financial stability - their stress testing finds the banks can survive a 40% fall in house prices:

https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulleti…

Meanwhile, their primary goal of keeping inflation on target is failing miserably, and their other goal of maintaining employment is looking fine and dandy.

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their inflation problem is too big not to raise the OCR- they should actually be going at least 0.5% up - to help control that problem  (The US are rumoured to be considering a 1% increase) - but I suspect they wont - they will probably only go 0.25%

As for home owners will Mr Orr warned them over and over not to pay too much as everything would change this year, for most people as long as you can afford your mortgage repayments and dont need to sell in the next couple of years (if you bought in 2021) then the fall of house prices will have little effect on their day to day lives it just means people will feel a little less wealthy and inheritances will be a little lower - although only back at last years values.

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Yep.

This won't stop them raising.

I would add that house prices aren't a primary concern for them, but they are a secondary one, as a collapse in house prices could severely affect the economy, employment etc.

But we are still some way off that scenario.

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The US are rumoured to be considering a 1% increase

That may be a rumour inadvertently started here, by you ;)

The most hawkish I’ve seen is Bullard’s call for 1% by July, which may start with 0.5% in March.  Other Fed Presidents are more measured and would need a significant push to agree to anything more than 0.25% in March. 

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I think he will play safe at .25%

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It's a line call but I think he will try to whack it hard early in the year before the economy has slumped too much.

50 BPs is my pick.

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I'm picking more of the "go hard and go early" or should that be "go hard better late then never" with 100 BP.

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Wow. 100 BP, I doubt it, but I would like to see it.

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Well lets be honest, not much difference between 50 points now and another 50 points in 6 weeks time. Clearly the RBNZ is now lagging so badly that its going to be a rise every review for months.

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Agreed. Anything less is playing around the margins.

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Agree they should focus on inflation management. Last two years they have done an exceptionally poor job of that creating a speculators paradise.

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Tauranga is still pumping I see, there is still time to sell and get out of Auckland, be quick.

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Lol, the doomsday crew are out in full force. The only worry here from investors is if they are forced to sell.  With the borders reopening, immigration will return and put pressure on rents, which will offset some of the increase cost of servicing.

Everyone talks about papergains, but paperlosses are also a real thing.

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Paper gains and paper losses are both imaginary until realised.

Cashflow on the other hand...

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If the investor is one of 40% using interest only terms, and they previously relied on interest deductibility to make the cashflow work, its going to be an interesting year if interest rates keep going up.  When rates double, your monthly payments double if you are on IO.   Will investors be willing to eat the cashflow shortfall on a property that isn't banking capital gains?  Time will tell

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What if the investor reaches the end of their 5 year IO limit, and is foisted onto P&I?  

Going from 3% IO to 6% P&I on $500k is an increase from $288 per week to $826 per week.  Over 20 years of course, because the first 5 years was nominated to IO terms.  

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Who's on 6%?  I just got 3.6% and refixed just last week.  With a $500K mortgage, you likely have a $700,000 home - probably generating roughly at least $500 - $600 per week in rent.. but I accept it could be more or less than that depending on where and when you bought.

My view is if you can't wear a $100 - $200 (max) per week cash outflow.. which is mostly on capital repayments.. you probably were never in a financially strong enough position to buy a rental investment in the first place. 

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You'll see my reply is to a hypothetical example of rates doubling.  I've painted what will happen if rates double while also being bumped from IO to P&I.  

 

by Miguel | 15th Feb 22, 12:08pm

If the investor is one of 40% using interest only terms, and they previously relied on interest deductibility to make the cashflow work, its going to be an interesting year if interest rates keep going up.  When rates double, your monthly payments double if you are on IO.   Will investors be willing to eat the cashflow shortfall on a property that isn't banking capital gains?  Time will tell

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The ocr is generally predicted to rise over the coming months. It’s a hypothetical of what would happen if rates do hit 6% (which is not far fetched if inflation can’t be reigned in)

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It's a two way street, likely that many will emigrate. Even Tony Alexander is saying that.

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RBNZ called out issues with people chasing to much debt last OCR review. Banks calling it out as well and have significantly tightened lending standards. Govt mandating tougher standards. Even St Jacinda advised against going full retard on debt last year.

People who get in trouble this year cannot say they were not warned.

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I don't recall Ardern warning against taking on more debt. I do recall her stating she would like to see house prices increase on a sustainable basis. Which is clearly nonsense and only added fuel to the fire lit by Orr and Robertson.

Has there ever been a NZ Prime Minister with as little grasp of economics and finance as Ardern?

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This is why core logic data should come with a disclaimer that they're of less than no use in fast moving and/or changing markets.  It will confuse a lot of people how the REINZ data can be so different to what we've just seen a week ago, although purporting to cover the same period. 

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Come to think of it, if Auckland is fell 6.3% and the NZ total only fell 2.2%, then the rest of the region outside is price flat for January.

Business as usual for the rest of the region.

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NZ ex. Auckland is down 0.8% on the HPI for the month.

https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2022/Reside…

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So my calculation is right! It is flat for the rest of country.

My back of the envelope estimate was 0.41%.

The other 0.4% could be their data was updated in between reports.

Given the ex-Auckland's stellar performance, there is still room for upward valuation in this country.

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No - down 0.8%. Not flat. Including Auckland drags the HPI even lower, 1.5%. 

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0.8% is flat either way.

-10% is a correction, -20% is a crash.

Nice attempt anyway.

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I haven't said we're in a correction or a crash - you only ever know that once it's well entrenched. This month's data is just another weight on the scales of probability. 

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As prices keep falling even more room gets made!

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How is it that property values can rise 30%+ in a year and thats ok but if there is even a hint of them dropping a few % all of a sudden the entire economy is at risk???

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Don't know how it works?

Here's the tip.

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Yeah nah, it was a rhetorical question.

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my thoughts exactly. a 20% correction should be celebrated as healthy.

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To Support and Promote ponzi, government will soon come with the idea of a deposit or government guarantee deposit to bank or something that will help in boosting the house price and will be done in guise of helping FHB.

In reality it will be helping housing ponzi. If really want to help FHB, let the market take its own course and do FHB a favour - Do Not Try To Help Them.

Government and RBNZ not trying to help FHB will be the biggest help that they can do to FHB.

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Best comment today. 

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Prices have to fall. No if, no but.

We need our country back.

The ill educated politicians have made it miserable for us to live a decent life here.

Things have to be turned around. 

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Why politicians of all breed will never allow housing pyramid scheme to stop :

https://i.stuff.co.nz/life-style/homed/real-estate/127773569/sir-john-k…

 

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There is money to be made in housing full stop. You either get into one and carry on but don't sit on the sidelines and cry 10 years later when house prices have doubled. Just admit you screwed up. Not to worry though as entry into the DGM Club on here is free and has plenty of lifetime members already.

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Carlos still hasn't been able to muster the mental fortitude to understand the mathematical impossibility of prices doubling each decade in perpetuity.

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The problem is Brock your really only interested in what can happen during your lifetime. Time is short, I woke up a couple of weeks ago and I'm 55 so really only interested in the next couple of decades. House prices are already well on their way to double in the next 10 years so that's one down. Bigger problems coming for humanity in my opinion than house prices, I guess you have time to think about that once you have crossed the house off the list.

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Carlos over next few months you are going to learn some painful financial facts without you being aware you really think house price’s can’t fall maybe you have read this or listening to some mantra looks like you will find out soon.

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House price falls are really not going to be as painful for me as it is for most others on here if they don't fall. 

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Dont FOOP your pants. 

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“There is money to be made in housing full stop. You either get into one and carry on but don't sit on the sidelines and cry 10 years later when house prices have doubled. Just admit you screwed up. Not to worry though as entry into the DGM Club on here is free and has plenty of lifetime members already.”

 

Facts.

Complaining will make no difference, why not find better things to do, life is short, don’t waste it here.

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As you would expect - the tv one news piece on this report talked about house volumes down but when it came to prices they only talked about the annual change of a 20% gain. It might still be a while before the shift in the market is widely known...

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Despite fall in house price by as much as $80000 FHB percentage decreased indicating the scale of housing ponzi

 

https://www.oneroof.co.nz/news/40872

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246 comments so far. You can smell the fear. As interest rates rise this will get worse for th heavily leveraged.

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