Property data company CoreLogic is forecasting higher interest rates, lower housing sales volumes and flatter housing prices for the rest of this year.
According to CoreLogic's Property Market and Economic Update, residential sales activity began to show hints of a slowdown in the middle of last year and then became "genuinely weak" as the trend extended into this year.
CoreLogic's chief property economist Kelvin Davidson said many households would be forced to adjust their finances fairly quickly this year, following the doubling of mortgage interest rates and high debt to income ratios.
"It's going to be harder to get a new mortgage this year than it has been for some time and there's also a large refinancing wave to come through too, with about 50% of existing loans fixed but due to roll over this year," Davidson said.
"These borrowers will generally be facing a much higher repayment schedule when they refinance."
Higher mortgage rates and reduced credit availability were already having a significant impact on sales.
"Property sales volumes in the first quarter of this year were the weakest they'd been in about a decade," Davidson said.
"While the Omicron variant may have stalled property turnover temporarily, the key drivers for the sales slowdown were fundamental and longer-lasting," he said.
"We expect property market activity will continue to be subdued, with sales volumes perhaps declining by as much as 10% this year and another 5% or so in 2023."
However Davidson was less pessimistic about the outlook for property prices.
"It's important to acknowledge there are still [price] increases at the national level," he said.
"But the momentum has certainly shifted and some key areas saw values drop in March, including Hamilton, Wellington, Christchurch and Dunedin.
"The rest of the year is likely to remain soft for property values too, as mortgage rates rise, credit remains tricky to secure and buyers have more choice of listings.
"However, if unemployment stays low, we don't anticipate significant or widespread falls in property values," he said.
He characterised current market conditions as a slowdown rather than a serious downturn.
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118 Comments
What’s Kelvin going on about here? He correctly highlights all the issues home owners are and will be facing…and in the same breath expects no dramatic drop in prices. This attitude is very common among economists and RE people… do the laws of economics no longer apply when you become an economist? It’s either extreme bias or hopelessly hoping.
No massive drop in price because we have inflation as well as rising rates. Existing house price is related to what it costs to buy a new house, if new house prices increase then so does the entire market, that's just common sense. The rise in everything related to building a new house due to inflation and complete lack of materials and a slowing in new builds will drag the prices up not down.
Speaking to a friend who is a builder. He put a 200sqm brick and tile single level home at 500K, if you were prepared to wait 12 to 18 months. But, price would be between 600 to 800K if you wanted it within 12 months. Essentially everyone is clipping the ticket, subbies quoting 50 to 100% more than usual as they are inundated with work . I would not expect the cost of construction to remain at these levels. Real estate agents will be using the higher figures to justify vendor price expectations.
"Honestly" anyone can say whatever they like, credibility or not
That $500K is total BS I couldn't get a 200sqm house in Auckland built 5 years ago now for that. Where is it getting built ? Invercargill ?
I will build you a 200m2 house right now for $500,000.00 inc gst anywhere in Manawatu ( 4 bed, 2 bath etc) - based on regulations as right now. Excludes land & anything outside the floor slab.
The 7 stages of grief
- Still here Carlos -> Shock and denial. This is a state of disbelief and numbed feelings.
- Pain and guilt. ...
- Anger and bargaining. ...
- Depression. ...
- The upward turn. ...
- Reconstruction and working through. ...
- Acceptance and hope.
Hi Ammok,
You are well-versed on the subject of grief/depression.......
Personal experience, I imagine. Certainly, reading your contributions here is a recipe for instant misery.
Go get yourself a life.
TTP
Old Timmy. You’ve been bringing others grief and depression since forever champ, not to mention getting in terrible trouble for being a naughty boy and ripping people off.
If you see me being happy at the unsustainable madness that is NZ house prices coming back to reality as being depressed then that says more about you than me without me saying a word. Cheers me old China.
Got anything to contribute to the conversation other than just talking shit about other commenters?
"Taking the Proverbial" .....I note in your post to Ammok ".......reading your contributions here is a recipe for instant mystery"
I know you were meant to say "misery" .....but the irony, as your posts are a "mystery" to me, as where do you get your "rock solid" information into the future of the New Zealand economy and it's relation to residential housing ?
** Noted your post now changed, but the principal still remains **
Thanks Crazy.
I've corrected the typo - as I don't want you to become too agitated.
TTP
No worries champ - i'm just happy someone is out there touting to keep house prices as out of kilter to reality as they are. You sir (judging by your comments about depression, spruiking to keep house prices where they are and penchant for price fixing) are an upstanding man.
NZLS | Property Brokers Manawatu and director fined $1.5m in price-fixing case (lawsociety.org.nz)
Yawn… the amount of people who’ve posted references to this man’s case. I’m sure he’s paid the price and learned from it
What a nasty piece of goods you are Tim.
Fine one to make that comment
Cheap.
since when have I mocked mental illness buddy???????
You sure do love to be aggro. So while pretending to be caring and empathetic you actually come across as a bully. If not mental illness, I think you have probably mocked and belittled most other situations which is the point that I was making. Accept it if you can
I bully those who bully.
I think that's fair and reasonable.
Bullies need to be bullied.
I also mock those who make ridiculous claims and / or troll.
Trolls also deserve mocking.
Its easy to become a hypocrite when accusing somebody of something, but doing the same thing while making that accusation. Being human, I'm just a guilty as anyone....but this graphic (and teaching from a wise person) is always a good one to help the humility.
https://usercontent2.hubstatic.com/8680573_f520.jpg
Tim, you forgot to switch your Carlos login again
This is just start, worst figures in 10 years wonder what they will say when house prices go back 10 years and with inflation at highs not seen for years, even the mullet is making a comeback.
Reduced sales volumes of houses doesn't necessarily translate into reduced prices. This has been witnessed time after time in NZ.
The DGM get it wrong - time after time.
TTP
Depends which way you look at it, but I think the true DGM is the one who is perpetuating a true doom and gloom.
Some examples of doom and gloom could be considered: cost of housing crisis, cost of living crisis, record levels of emergency accommodation, homelessness, crippling debt compounded by rising interest rates, rent more expensive than ownership.
Conversely, I don't think anybody is considering that a negative adjustment in the equity of some to benefit the next generation of tax payers is synonymous with "doom" and "gloom".
Where TTP? - all I have seen time and time again is a lag between volumes and prices - everyone knows that
But let's give it another 12 months and see where we're at
The VCM is the Vested Confidence Muppet - they are like a con-man, only worse because they are dumb enough to believe if they repeat things over and over people will believe them, regardless of where market sentiment is - which apart from the cost of debt, is what really drives prices.
That isn't correct. That's like saying you can't buy rimu any longer so that house with rimu scrim is now essentially priceless. Bollocks.
Another economist I really don’t rate.
Also for anyone else that does not see your pt of view. Choose the adjective... desperate, worried, over leveraged, bitter
Some seem to be holding their breath for those promised tweaks to the CCCFA in June, believing those changes will 'fix' house price growth and send prices soaring again. :-D
With inflation running at 6.9%. That means if a house value is staying flat, then it is losing 6,9% of its real value each year.
Carlos: there is your price drop.
Which doesn't matter to anyone with a mortgage since their mortgage is nominal.
So it's pretty much a win-win for everyone except for those with fixed incomes.
How confident are people that they're going to get a pay rise that beats inflation?
If you're putting half of your income into mortgage and savings then your pay rises only need be half the rate of inflation to cover the increasing cost of your expenses.
Besides that, over the long term most people can expect their pay to increase by at least the rate of inflation because you eventually get promotions or change to higher paying jobs based on more experience and skills.
Where is the money going to come from to pay for the wage increases? People are cutting their spending on non essentials, so many businesses are going to lose business. Minimum wage also isn't increasing by inflation.
Comparing pay increase from promotion to inflation is very incorrect. Promotion means i am supplying more value therefore recieve due compensation. If inflation goes up and my current wage doesn't increase i am worse off. If my promoted rate doesn't increase in value equal to inflation then my promoted rate is worse off. Compare like for like.
I saw a couple of years of pay freezes coming so negotiated a salary to compensate in my new job. Still want a pay rise this year =D
Doesn't make it any easier to buy a house though right (unless you manage to negotiate a similar salary increase)?
As usual the pain of some bad decisions will be spread across the populace. The prudent saver always gets screwed.
Rubbish. Unless your wages are going up faster than inflation, which nobody's wages are there is no price drop. Your spending power is falling and its beginning to fall fast. Not only do you need to find more money for increased interest rates but all your other bills are rising faster than wages. It remains to be seen if the RBNZ can rein in inflation and perhaps we can revert to some "Real" price falls which should show up first with Petrol.
Yes and unless house prices rise faster than the rate of inflation, you highly leverage investment is dropping in value in real terms. The losses in real terms, on that leveraged position, could be equal to your annual take home pay each year (6-7% inflation chewing away at the average $900,000 home in NZ) - a substantial drop in buying power for the largest purchase you will ever make in your lifetime.
I think you fundamentally misunderstand the uniqueness of the housing market. Most participants are looking for somewhere to live - not to make optimal investment decisions. This is not the sharemarket. Because of this, changes to housing market fundamentals have less of an impact than in other markets since less participants are investors looking for an optimal return. It also means that those people looking for somewhere to live (most of the market) don't sell in the face of changes to the fundamentals unless they have to. Hence why Kelvin says he doesn't expect dramatic price drops - as long as unemployment stays low
Taxpayer subsidies, favourable tax treatment, and government / Reserve Bank protection in hard times have also widened that distance between actual investments (with risk etc.) and the NZ property market.
I think there is more to it than that. FHB account for ~35% of the market, and Owner occupiers ~28%, so there's 63% of the market looking for somewhere to live. The 35% FHB ultimately have to change tack due to changes to fundamentals, the banks are agreeing that they are priced out. Good. The remaining ~37% odd percent looking to invest, well many of those may see the doors close with LVR, DTI, interest floor, bright line...
What this is suggesting is that for prices to be sustained, that 28% of the buyers market would have to be doing a loooot of moving around selling and buying. What were the latest auction clearance rates, 29% across the country - buyer/sellers? A comment on this site the other day mentioned 1000 new builds coming onto the market every month in Auckland. Not sure if that's right, but an interesting thought.
Hence why Kelvin says he doesn't expect dramatic price drops - as long as unemployment stays low
This is what the ruling elite (RBNZ and govt) 'reckons'. However, to me, I think that line of thinking comes is a result of the prevailing dogma.
I've heard this argument before but don't buy it. It is the investment side of the equation and expectations that the value of property will increase which is a fundamental pillar of the NZ housing market.
People with mortgages have had plenty of warning and time to get their finances in order. Even people who recently purchased will have years left at relatively low interest rates to really begin to smash that mortgage. The real problem now is new mortgages going forward from here. I still think those waiting for huge drops in prices on quality built houses in desirable areas are going to be disappointed. Inflation is now really kicking in on everything, even my regular Chinese takeaway went up $1 yesterday, doesn't sound like much but thats 7% in one hit.
Watch how fast prices drop when the vendor is under pressure to settle by the banks..., the banks never loose.
I was trying to figure out why the cost of my regular order at the local Thai restaurant didn't sound right last night. I just realised it's gone up...6.98%.
I'm sure my large, corporate employer will be happy to give me a 7% pay rise.
BAAAAHAHAHAHAHAHAHAAAAAA! *head falls off*
30 year mortgages are already becoming the norm. Watch the term blow out to 'help first home buyers get on the ladder'.
The ponzi is hungry and needs to be fed more. And more..
We must consume the young to keep ourselves fat!
50yr terms coming your way...
I agree with you on the likely absence of ‘huge’ drops.
I think the drops will be very significant, though.
I guess potential downturn will be varied and no easy to capture in something as simple as median and HPI.
Out of interest, I viewed a number of open homes over the weekend. Relevant to this conversation were two properties closeby to each other with similar attributes on paper, 4br, similar section, 2 bathrroms, large living etc. Floor and land sqm very similar also. One was a tidy new build, one was an off kilter villa. Asking prices: $1.1m for the villa and $1.15 for the new build. RV: $550k for the villla and $980k for the new build.
The national fall in prices may very well site halfway between these two. A new build in a desirable location should be more valuable than a tired villa which has three contours across the level of the home.
Fall in sales, leads to fall in prices..
"The seasonally adjusted national median house price rose $5000 in March to $890,000"
Yes median prices are still rising, despite expert analysis, comments and predictions.
Rents rose 3% in Auckland, and gone sky high in some towns.
It's like the sky is falling down, getting worse with each passing day.
Imagine if we have another year of house price rises after all this talk of house price falls lol
Yep. There are those who are dealing with the housing crisis day by day, and see the rising rents. And then there are those that write articles based on stats/figures & reprojections.
There is still a lack of housing being offered in NZ at (and this is key) Affordable levels. This is despite numbers wise some claiming we have enough homes (we can’t use them for whatever reason). There is still Emergency Housing provided by the Govt so things have a long long way to go yet.
There's an estimated 40,000 vacant houses in Auckland alone. Trickle that down to those in emergency accommodation with families and two incomes and you'd start to believe there were enough houses for the people in this country. Not to mention the lack of substantial population growth over the last few years...
Where did you get those figures from? Just prior to Covid it was about 39,000 Gross vacancies and about 12,000 net vacancies.
I would expect to see many more coming vacant to the coming oversupply, but the oversupply is generally because the wrong type of house is being built in the wrong location.
Ahh good catch, fake news - I've updated my comment. Census data suggests ~40,000 vacant homes after a quick google search, perhaps I had misread data previously and the figure in my head was vacant at time of census vs truly unoccupied.
Actually looking here, the 100,000 is potentially nation-wide unoccupied homes: https://emptyhomes.co.nz/Numbers
C'mon, please stop using the median, it's super unreliable and is just spreading misinformation. Use the REINZ HPI, which fell 2.1% in March: REINZ Monthly HPI Report - March 2022.pdf. New one out in about two weeks.
Both have their place. When talking about affordability, median is a better bet than price index. When talking about trends, price index is better than median. When talking our your a**, use average.
Price index is better for all changes (i.e. not just trends, but also monthly % movements). I get what you are saying re median being useful for affordability (as it gives you a $ figure you can compare to incomes etc), but one single month of data for a median is usually pretty useless as it massively gets thrown around by the types of property that sold (but still better than an average).
My favorite is the comparison between median house price and average income. Leaves a little to the imagination really.
But yea, agree with what you're saying. When the last REINZ report came out this issue was highlighted in that the median was stable and the HPI dropping. But those stats together tell a more interesting story than either stat alone.
not when there is a well publicized downturn on the lower end of the market, the median becomes contaminated by the shift in sales demographics
Slowdown rather than a serious downturn...
Sounds like Tony Alexanders "it's a correction, not a crash" saying...
If average home in Auckland cost 12 x average wage earners income how will it just lose 10% 15% ? Who can afford to buy, rates are still just off emergency level and with inflation will go higher this on its own will put people over leveraged in trouble with paying mortgage. This year prices will fall 30% and next probably another 20% this would still leave average wage earners in Auckland unable to purchase a average house. Some people are in denial but you can’t get blood out of a stone, the market will crash just in slow motion because huge amount of people on fixed rates but a in article 50% will come off fixed rates this year too maybe double the rate.
If average home in Auckland cost 12 x average wage earners income how will it just lose 10% 15% ?
Because average wage earners are not buying average homes. More relevant is the average wage of people in the market to buy property, which will be higher than the average wage because it excludes people on minimum wage jobs, students working part time, young people starting out who aren't interested in property yet.
The metric is median household income with median house price and is a good measure (as good as we have got) to determine affordability and more importantly whether our land-use policies used to supply affordable houses are working or not.
NZ land use and house policies are dysfunctional. http://www.demographia.com/dhi.pdf
Do people on average wages not need a house.We all could buy houses on average wages for years. So your idea is only people with high wages have a chance of buying at 1.2 million for house in Auckland have to be earning 300k no many making this sort of money thats why it will crash over next couple of years. With inflation and rates raising could going back to 2015 prices
That's not what I'm saying. I'm saying that people on average incomes won't be buying average-priced houses - they'll be buying below-average-priced houses or not buying. It's simple maths that average income of home buyers is not the same as average income of the whole population.
Even budget house in Auckland are around 900k still well out of reach for average wage earners. Who is going to buy? prices just need to reduce or is 90% of population who don’t have house yet or still living with family just going to rent forever start call landlords governors
But isn't that price relative to the emergency low interest rates? But when interest years rise, the amount of mortgage people can afford to service decreases. So logically prices should drop to meet conditions. It seems some of the experts have some skin in the game and don't want house prices to drop. But the reality is that some people selling need to sell and will take what the market is willing to pay. Whatever happens most people selling will still likely be selling for more than they paid and they will be buying and selling in the same market.
If you ask any agent that honestly doesn't want to make money from you somehow and doesn’t care about keeping up the ‘markets hot as right now’ vibe, they will tell you it has crashed. Prices dropping everywhere still can’t get a sale. Obviously mint houses may still sell so obviously median prices becomes skewed.
@ Kiwi Tim ....I know what you are saying, as in the weekends, I drive past so many open homes and the only car outside is the agents...but be careful around here, as anything that goes against the "property is only in for a soft landing at worst" brigade, you will be classed a "doom n' gloomer" aka "DGM"
Hi Crazy,
Note that the expression "DGM" is being downgraded to "Doom Goblin".
You need to keep up with the play, my friend.
TTP
I'm up with the play buddy, sold out of the USA market, freehold in NZ and sitting tight on some moolah .....maybe I'll buy ....maybe I won't...and that is the state of play with most potential buyers (as a property investor) out there.
And before you say, your losing with cash at the bank - will that's where cryptocurrencies comes in :)
And before you say, all crypto's will crash - well, if they crash, we'll have 1929 all over again....so neither good for you or me.
Have a wonderful day down there in Palmy and may all your real estate dreams come true.
Yea it’s a bit of a strange one for me to get my head around, not sure what label suits me. I personally will be impacted by a crash kind of, yet I try to be a realist and looking at the data, news etc believe we are in for chaos. I’m not doom about it because my son may be able to buy a house one day, that didn’t feel possible 6 months ago.
Tightening credit conditions, higher interest rates, higher cost of living, higher mortgage servicing requirements, Government hinderance on investors, low migration, more supply = "Flatter housing prices"???
Falling house prices and rising material costs are going to tank residential construction. Once tradies are through this backlog it’ll be tumbleweed
Depends on how many people the governemnt let into NZ as apparently we have a housing shortage, if you ignore the vacant and airbnb homes.
"It's important to acknowledge there are still [price] increases at the national level,"
why are they still perpetuating this myth when its blatantly false. REINZ's HPI showed a 2.1% fall in March whereas they are saying there is still 0.7% growth. Their data is so far behind the market because it uses three months of sales data and not just the most recent month.
It just shows that Corelogic aren't trying to provide impartial information, but are attempting to mislead people. Using YoY figures is useful in a stable market with a steady trajectory. When we have had such a dramatic shift (from prices rising 2% MoM in 2021, to now falling 2% MoM) it becomes largely useless.
Yet they are still using they year on year figure to attempt to create the impression of rising prices.
Nothing wrong with YoY information. So you want to just ignore all the gains and just dive into the recent loses ? YoY is fine and if the current trajectory continues it will become negative so what's the problem ? The reason I'm going for YoY in Tauranga is I still expect single digit gains before 1st Jan 2023. We still need to have monthly falls for a quite a few months to offset the gains already made. There are no falls in house prices until at least the last years worth of gains have been wiped out and its a continuing trend of falls. Good luck with that if NZ history is anything to go by.
Hutt Valley Market Update week of 26th April
Current Market Listings
648 houses on the market- decrease of 2 on this time last week.
Based on the REINZ data which showed that 96 sold in Feb and 104 sold in March giving an average sale of 25 houses per week– 648 houses means there is 26 weeks stock on the market.
House Price Reductions
301 houses have a listed price and again this week prices have continued to fall, although only 50% of the houses listed have reduced prices
The average markdown has risen this week from 67K to 75.5K.
Of those that have listed prices (pool 301) 24 have reduced their prices by 100K and 6 have reduced their prices by over 200K with the biggest reduction been 350K (a total 20% reduction)
The data continues to show the majority of houses listed are under 900K. The Median house price for all 648 listings is now 849K. (Steady on last week)
Most sales on the market continue to be at the 800K-$1 Million mark. The bottom quartile is still sluggish with very few sales. The top of the market ie over $1.5M (currently 47 houses listed) is also sluggish with the last few weeks only 1 house a week selling in this price bracket.
.Houses sold vs houses removed
My records show 130 houses listed with a Price have sold YTD. I have records of a further 98 houses that have been removed from the market (this is up 12 on last week) unsold YTD.
14 of those houses removed from the market have been listed on the rental market
Length of time on the Market
Given how slow the market now is – I’m adding a new Length of time – which is houses that have been on the market for over 90 days- effectively these houses listed in 2021 and remain unsold.
- 447 of the houses have been on the market for over 30 days - 69% (last week it was 431)
- 297 of the houses have been on the market for over 60 days - 46% (last week it was 274)
- 162 of the houses have been on the market for over 90 days – 25% (last week was 193)
Whilst the percentage and number of houses on the market longer than 2 months is growing each week – indicating a stagnation of house sales , the number of houses over 90 days has fallen. It appears most of the houses in the > 90 days have been removed from the market rather than sold.
It will be interesting to see of these houses come back on the market under a new listing.
Rental Market
Meanwhile the rental market has 188 properties for rent (up 8 on last week), up 66 on this time last year.
Average rental price reduction YTD is $48 a week and 40% have dropped their prices since listing.
As noted last week I have also been noting how many properties are listed for rent over $650 a week.
At the moment the percentage of properties listed at $650 is steady at 45% - the same as last week.
This time last year 35% of houses for rent in the Hutt were over $650
However earlier this year ie between Jan- March over 50% of houses were listed for rent at $650 or greater with the peak week been the 19th Mar when 54% of houses had a rent > $650.
What this is indicating is more houses are coming to market but at lower rents overall.
The above information is in line with what Trademe released yesterday on rental properties
Overall listings are down and rents are up 7% nationally except in Wellington and Auckland where listings are up and rents are starting to fall
These are great, keep it coming. Thank you!
Also: "14 of those houses removed from the market have been listed on the rental market".
Not sure how well those yields will hold with the impending wave of unsold housing entering the rental market. I had thought the rental market would spike upward as houses were removed from the rental market in preparation for sale, but it seems as though the lack of sales has put a lot of houses between a rock an a hard place.
I really hope for the sake of the third of this nation who rent that prices become affordable.
On any other site this would be taken down as 'fake news' (we don't publish bad news on ppty in NZ ).
Excellent stiff Ikimpaul.
These are awesome. Would value insight into other areas, perhaps on your blog/website.
Man you are good. I hope your getting one hell of a salary with these skills.
Like many on here find these insights very interesting, so thank you.
Would be great if you were happy to share your methodology for putting together?
I'm a web/software developer by trade, I suspect I could write some scripts/automation to pull these together for other areas.
Even if it remained a slightly manual process I'm sure others would like to replicate for their local areas.
Cheers
Housing market is changing not only in NZ but in many other countries where it was pumped up by Central Banks. It moved up fast and hard in NZ, the fall will also be fast and worst than any other country as the saying goes - HigerThe Rise, Bigger The Fall.
https://inews.co.uk/opinion/housing-is-no-longer-a-safe-bet-all-the-ele…
This slump after boom is inevitable, so earlier it happens the better - short term pain for long term gain. Otherwise also ponzi keeps on trapping more and more as it grows, so earlier it gets back to fundamental, better it will be.
Yes, but what is the long-term gain?
Is it that those who have cashed out high can now buy more at the bottom of the market and then rinse and repeat on another bubble rise?
Or is it that at the bottom of the bust we fix our dysfunctional speculative policies so that will not happen again, and now housing will be more affordable and stable going forward, especially for FHB?
Either way, those trapped with their present debt are in for some pain, and even if they survive the fall, the last thing they will want is to be locked into that lost equity if changes are made so no boom can again occur.
All homeowners want prices to increase, all renters want them to fall - until they become homeowners.
‘All homeowners want prices to increase, all renters want them to fall - until they become homeowners’
Is this really true when a poll showed that 70-80% of the sample wanted house prices to fall? That obviously included a significant proportion of homeowners (perhaps parents that want to create opportunities for their children).
Easy IO to solve ......charge on a daily basis, any empty housing in an urban area, that is not been rented....these buyers are taking away an existing resource, that could be used to house others.....at least anyone thinking of buying in the future, just to store capital would think twice ....sad part is this should of been bought in, at least 10 years ago.
It's a truism for 90% plus of the population.
The survey results are people saying what is the current trendy sentiment to say.
What the survey is really saying is that 80% of people want house prices to fall - as long as it isn't their house.
How many stories have you heard from anyone selling saying to the potential purchaser, 'I want prices to fall so take 10% of the price you were willing to pay.'
If it was all about what a survey says, then prices would have been on their own way down over Covid.
As a homeowner, I would be happy to see prices fall and for us to rebalance our tax and economic policy to reward hard productive work rather than speculating on assets.
Same here. Multiple property owners have a vested interest in pretending all people who own their home want prices to rise and it just isn't true.
Really, you'd be stupid not to, no matter who you are. The only ones that would be upset about it would be the real estate spruikers, who add nothing to the real economy anyway. Real estate trading is such an unproductive activity and so amoral, it should probably be banned anyway. Instead we encourage it with horrific policies and an even more horrific cultural imperative.
Great, I have run the numbers and about 40 to 50% of the value of a NZ house is made up of non-value-added rentier monopoly gains.
Are they the type of fall you would be happy with?
Yeah, sure. Far better to reward hard productive work than sitting around on our ass-ets. The Entitlement Mentality that has driven the speculation and pumping of our property market through policy is obscene and is making NZ society so much worse.
Fine with me too. Same mortgage repayment, same house, I'd just have to update a number in my spreadsheet. No change to my lifestyle but it means the younger generation have a better chance of a decent, stable life in NZ.
There'll be some who bought recently and/or overextended who are harmed unfortunately, but I think the benefit to others without homes and making our economy more competitive would outweigh this pain.
Well with myself, RickStraus, and yourself, that's three people out of 5 plus million.
And of course, if it is only 'a number' on your spreadsheet, and considering it would be equity permanently gone, then you obviously don't have many of your assets in property, unlike most NZers.
The majority of my assets are property, although my share portfolio is slowly catching up. But all my future planning is based on owning a house that I'll live in, so I think of it more as '1 house' rather than 'x dollars'. Once the mortgage is paid, my retirement plans wouldn't be changed even if the house's value went down 90%.
If you have more than 1 property then it matters, especially if you are leveraged.
The reason why a fall in sales need not result in a fall in price is that the property market is highly monopolized as many of you point out. Meaning the profit margin is so large that a lot of would-be sellers can afford to wait out a potential downturn. The non-speculative demand is always there. The speculative supply comes and goes. Look at the past 50 years and tell me how many house price collapses has NZ seen. As to 'how to fix that' - it's a regulatory failure. The government gives sellers market power through regulation (restrictions on zoning, density, etc). And there's the real price which - as many of you also point out - declining as we speak courtesy of RBNZ's inflation.
50 years is not long enough horizon to perform this analysis. There's plenty of people, older, who state that they've never seen a sustained reduction in their lifetime. They'd be right. They'd also be extremely arrogant/dumb to suggest that a "lifetime" is a long enough horizon to experience all eventualities and circumstances.
Australian and NZ economies in the period from ~1835 to 1890 were built on real estate surveying and development. Not just residential, but farming and resources etc. A lot of people got very rich and that money is still around today in the form of family trusts. During the 1890's after a period of credit growth banks over extended their positions, because "property has only gone up for the last 50 years". Then it stopped going up, actually it went down. They went down for a long time. In real terms prices didn't recover until after the close of the second world war.
We can easily extend our sample size by adding in other countries, like the UK, Ireland, Spain, the US, Japan, Greece...all of them have suffered house price crashes in the last couple of decades. NZ should not be expected to be different, we have just been on a good run of 'luck'.
The other current influencer to perhaps consider is the political one. As we head towards an election next year, what will Labour do to assist their cause to tempt the peoples into voting for them again. The Nats are still stumbling, bumbling & fumbling their way through today's reality with the Tauranga by-election to be their first big test. Tauranga is a seat they should win & win well, but we have yet to witness the outcome of their selection processes, which was a key ingredient in their demise in 2020. I think the Labour Govt will try & keep interest rates as low as they can for as long as they can & suck up the inflation. Why? The inflation eats away at the govt debt, which has doubled on their watch & secondly, they wont want to see large falls in house prices, especially in 2023. Maybe they will tolerate a 10-15% fall this year to stabilise & perhaps perk up a bit later on next year. Yes I realise their delivery-per-promise rate is atrocious, but they did lock down a country for a couple of years, so I wouldn't put it past them just yet.
I finally realised what they meant the other day when they said it was their year of delivery a few years back. They ACTUALLY meant de-livery, by making people WFH it has meant public servants don't need to dress up in their work attire anymore. BOOM! De-livery. Everyone else thought that it meant they would deliver something, duh.
Hot take!!
Tony Alexander keeps copying me! Here’s his prediction of 5-10% price falls for Auckland:
I thought house prices had already dropped 5-10% in Auckland....is he just saying what is happening as opposed to forecasting?
I thought house prices had already dropped 5-10% in Auckland....is he just saying what is happening as opposed to forecasting?
Maybe he's referring to after this drop. So it means 10-20%. Doesn't really matter anyway. The property media celebrities always drop in a qualifier to cover their tracks.
~ 10% drop already happened, plus ~ 10% drop predicted....add in inflation of around 7%, and we are quite quickly getting to around ~ 25-30% drops in real terms, even according to Tony (Rah Rah Rah Property) Alexander.
Time To Poop your pants.
Tony is projecting what he would like to happen, prices have risen 40% after emergency rates were introduced and as rates rise the 40% will be taken off plus maybe another 20% depending on where rates and inflation end up over next year. Purchasing a house because of FOMO and thinking price’s could only ever go up is now going to cost anyone who purchased in last 2 year their deposit and probably be in negative equity fora number of years
I find it quite funny and ironic that people like Yvil, HW2 and Printer 8 mock me and my views, but absolutely adore Tony Alexander, yet most of the things he has been saying in the last 2 months mirror what I was saying mid-late last year. Friggin hilarious
What happens if the stock market crashes before the housing market?
Does this just make everything worse with businesses closing, higher unemployment, that therefore flows into the housing market that then quickly follows suit?
Or does the Reserve bank then spring into action, drop the OCR in the hope of softening a great fall (as much as possible), the government then looks at measures to mitigate the negative effects on the NZ economy?
With the aggressive OCR raises this month, it seems entirely possible that the wider economy including the stock market goes into recession or even crash mode. Yes, I agree, this would make things much worse.
Hopefully, the Reserve Bank will spring into action then by dropping the OCR. They should better do this now, in May, as OCR adjustments affect the economy in a delayed way, after several months.
The NZ Reserve Bank can not lower the OCR if the USA Federal Reserve is aggressively raising rates.
They simply can not do that.
It dosen't matter if our housing market crashes. It dosen't matter if our stock market crashes. It dosen't matter if we go into recession.
If the USA is raising rates, then NZ must raise rates. It really is that simple.
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