The results of ASB's latest Housing Confidence Survey paint a grim picture of New Zealanders' views on the housing market.
Taken over the three months to the end of January, the survey found people's expectations around house prices were heading towards the lows last seen at the height of the Global Financial Crisis (GFC).
Asked if they expected house prices to increase or decrease in the coming year, 43% more people thought they would decrease than thought they would increase.
That's a big jump from the previous three months when 31% more people thought prices would decrease compared to those who thought they would increase.
It's also getting closer to the levels seen during the GFC when 55% more people thought house prices would fall further than thought they would rise.
Adding to the gloom, more than three quarters of the survey's respondents expect interest rates to go even higher over the next 12 months.
ASB senior economist Kim Mundy said it was likely that the number of people expecting prices to keep falling would continue to increase.
"The housing market has been weak of late and it doesn't look like it's going to turn around any time soon," Mundy said.
"Housing market activity is heavily linked to the interest rate outlook so it's not surprising people's price expectations keep falling, given the Reserve Bank has signalled there are more Official Cash Rate hikes to come," he said.
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108 Comments
Quelle surprise.
Seems to be playing out, just as predicted by the psychology of a market crash cycle.
Housing markets usually take a few years to correct. Often followed by a period of doldrums before the next growth phase. This bubble was so outsized that it might be a more drawn out correction however. Especially if the recession deepens.
We never learn.
https://financialhorse.com/psychology-of-a-market-cycle-where-are-we-in-the-cycle/
Well said 👍
That's why I am picking 2027 as the bottom
That's a big call!
If central banks over-react - as they are wont to do - then we'll get a hard landing and i-rates will crash. And we all know how people respond to lower i-rates ... :-(
Who's *we* white man 🤔🙄🤪
I've certainly learnt that there is a lot of money to be made playing the cycles.
I have profited hugely by playing the last 3.
Anybody could see this last one a mile off!
Covid hit 2019, Prior to 200k+ of returnees with euros/pounds/USD to waste, we buy buy buy.
COVID ends -may 22- nov 22 we sell sell sell.... Pocket a cool 500k tax free.
Since nov 22 peak - Market crashing - we wait wait wait, then ( very soon) we buy buy buy ( equivalent to what we sold for 200 - 300k less)
Total out lay $1k TM add to sell, 4k lawyers. 1k moving trailer.
To easy and 🖕🖕🖕to RE agents.
Too
Spot on in all respects
I see the banks are offering a sneaky 4.99% to keep the ponzi scheme going, probarly they have realized they have put to many people at risk so they will delay it for a year so property mad kiwis keep buying in this still over inflated market.HOW do your offer 5% term deposits and 5% mortgages, never seen it in my 65 years on this planet lol
The market has inverted the interest rate curve (which means short term money is more expensive than long term money). So term deposits (short term) = mortgage rates (long term), is reasonable. This actually last happened in 2019 with US gov bonds, although NZ lending rates did not invert.
-SMG.
I'm an ASB customer who recently refixed and is rather grumpy to hear about the unadvertised rate. They pretend the best rates are available in the app -- of course that was always a fiction -- but to see that it's untrue by such a large margin is annoying. Fortunately we're only talking about a small rump of the loan and it doesn't matter very much, but it's something I'm not that happy about going forward.
Switch to Westpac ;)
It's becoming abundantly clear the only way to get better rates is to transfer to another bank.
They only want new customers to take on the 4.99 rate so that they get screwed later.
They're not expecting rates to drop below 4.99 in the coming years. They're just trying to set the trap for the years ahead.
Ok but you can compare apples with apples here with the same term. One year TDs are 5.3-6% and these 1 year mortgage rates were 4.99%. The fact that the mortgage is for a long time is irrelevant because it's really a series of short term loans. It's very unusual to have a negative margin.
I overheard someone on the phone to the bank negotiating 4.99%. Is that advertised? New customers only?
Nikki Connors says you're wrong : it doubles every 10 years ... 7 % growth every year since 1991 ....
.... " so why havn't you called us yet ... "
Teeeee heeeee .... yeah , right !
Step it down GBH
You mean the same Nikki Connors fighting off liquidation proceedings by IRD.
How someone can advertise capital gains in the property sector at the moment, without a disclaimer, is beyond me
Auckland - net 2% think it is a good time to buy
So one third of the country then
Yes, even Spruikers are allowed to participate in these surveys 😁
No. 52% of one third, or about 17%.
Meanwhile, a net 2% of respondents say it’s not a good time to buy a house
Nationally, 49 percent say it IS a good time to buy a home. Evenly split, and balanced.
Talk and action... dont see much action.
Thats because you've got your eyes shut. Everytime I highlight the thousands of homes sales happening monthly, you like to scoff about it.
The facts destroy supposition IT GUY. "Do try it"
So what do you think this is worth, land bank it ? what would the yield be say $750 a week and 2.2 mil? (1.7%) 2017 valuation, someone would have paid 3.2mil for this in nov 21...
https://www.oneroof.co.nz/estimate/10-ngaio-street-orakei-81385
Up for Auction this week at BF, be quick, but hold long could you hold it for at 1.7% before massive expenses, rates, oh year pay tax on that income as well.....
As a house its worth maybe a mil, as a dev site how much?
Is it great school zones, and whats the reason for selling. Saving 1 mill is good buying, do you think. Let us know what it goes for.
I'm easily pleased and happy anywhere. Prefer average suburbs.
The school zones listed by Barfoot are Baradene (Catholic so doesn't actually have a zone) and Selwyn College (which has a bad reputation).
The location is also close to a lot of the Kainga Ora properties in Orakei.
You could possibly build a duplex at the back of this house, that would be the best use of the MHU zoning.
Nah its a 6 unit site.... agree re neighbours, and agree school zones nothing flash. I do not think it will sell lets watch it.
True you could certainly squeeze 6 terraced houses in but it wouldn't make sense economically with high construction costs and falling house prices - no developer will touch that.
The existing house isn't terrible but could do with a renovation, hence adding in a duplex out back would be the best use from a cash flow perspective.
Would be surprised if it sells at auction for more than $2m.
Its why this type of property is not selling well.... its more then a house ie too much land, but is priced too high to attract the risk premium required by a developer. I agree It will not sell, house is old as well for a land banker type. current risk free term dep 2 year lets say 5.25% 4.5-5 % risk premium re Chris Joce lets say 10% 750 per week rent ... mmmm ugly worth 500k..... in a spreadhseet.
Clearly you cannot buy a house to this quality in AKL for 500k so .... the market has some big dropping to do.
even at 5% - 780k
The term is passing income. It is not meant to be a sustainable return.
And then you use dubious figures of 750pw to justify low valuations. Goodness
ok so take a look at how close the house is to boundry on the LHS, if you could get something built behind it you would need to take away from this one..... Council no longer allow narrow access in Auckland... what would the front be worth after mods, what would 380sq m be worth out the back, what would you offer HW2
I wouldn't offer anything. Full stop. Its no use asking me that sort of question and demanding a response. How much are you offering if at all, you're waiting and waiting.
1 I not familiar with that market segment
2 I'm not a developer
3 my mind is elsewhere
4 I usually go with average suburbs and a totally different property if investing
5 I dont compete with owner occupiers
I was gonna say 'dumb' question (sorry bro), but then everyone gets triggered and shouty.
You still haven't answered my question on when the recession is starting. Something you were adamant about that it was a dead cert, so That's a fair question
The RBNZ will stop raising rates once the recession has started..... they re still raising rates.
Well it sold for 2.6 mill
Lol. Sold for 2.6
!!
True you could certainly squeeze 6 terraced houses in but it wouldn't make sense economically with high construction costs and falling house prices - no developer will touch that.
The existing house isn't terrible but could do with a renovation, hence adding in a duplex out back would be the best use from a cash flow perspective.
Would be surprised if it sells at auction for more than $2m.
The bubble was so immense, all time highs wont be seen again until the late 2040's.
So we're looking at a higher interest rate environment for 25 years?
Ambitious.
Maybe not 4+% OCR but may not be under 2% going forward either. The low interest rate environment of the 2010s was a monetary response to the extended period of low imported inflation post-GFC because of the huge efficiencies China added to global manufacturing and supply chains since the late 90s and early 2000s.
With China's rising wages, aging population and ongoing issues with the West, several experts are forecasting a gradual return to "normal" inflation levels globally. The likes of India and Indonesia cannot possibly emulate China's success without sorting out their issues around skills, infrastructure, political stability, etc., which could take over a decade.
Low imported inflation or low internal growth?
They know if the economy gets sick they can juice it with cheap money. I'd say the chances of a central bank not playing that card for 25 years is around 0.
And how did that cheap money juicing during Covid play out for our economy in the absence of low imported inflation? Let me remind you CPI in NZ was already at 5.9% YoY before Putin waged war on Ukraine.
Start here, econ 101: what happens when the market is flooded with cheap money but not enough cheap stuff to buy?
Before the war in Ukraine there was a pandemic and that's still attributing to inflation today.
If the world doesnt find balance for 25 years then house prices not returning to 2022 levels is probably the least of our concerns. But if it does, it's not unreasonable to expect future QE and asset inflation.
At the height of the GFC in July 2008, net 55% of respondents thought prices would decrease in the year ahead
The reality is that from October 2008 to December 2009 house prices rose around 8 percent
Just shows you should trust your own instincts and not listen to the crowd
The GFC overhang continued until 2011/2012. That 3 or 4 year period saw us buy some outstanding properties which quickly turned to multi-baggers.
For anyone is a student of life they are probably saying "Roll on the pessimism"
please post your purchases here HW2 , we want to help you celebrate the bargains
1 museum st pipitea
Settlement date 14 October 2023
Big celebration
Right place, you were always destined for the museum
that place is full of BS, suits you
Thats not very nice to say to dgm
So you do recognize yourself
Dp
"Dp" your most insightful post to date 🤣
Haha. Well played that post.
I hope it will be a big RED celebration.. My vote is RED hot!
Mine is red not. Will wait before making further decisions
How long have you been in oz
How long have you been in oz?
Long (or short) enough to qualify for voting right!
The reality is that from October 2008 to December 2009 house prices rose around 8 percent
Just shows you should trust your own instincts and not listen to the crowd
Nah, what it shows you is the effect of reducing interest rates/the cost of debt
The RBNZ cut the OCR from 8.5 to 3.5 between June 2008 and Jan 2009 - to save a market crash that time/kick the can down the road
https://www.rbnz.govt.nz/monetary-policy/monetary-policy-decisions
So keep praying they can do that again, now that they have let the inflation dragon loose to burn overpriced leveraged assets
The students of life are actually saying "looks like we're toast this time"
The real shame is that so many were conned into this by property market spruikers - 100,000 households with $1m+ of debt is a national disgrace
As the mountian of 2% roles over to 6% or more how can it not get worse. Let face just like hard drugs, the removal of freely available cheap debt will cause withdrawal for many.
But hay...be quick, leverage up, it will be OK in 50 years, doubles ever....blah blah blah.
Alternate view:
1. the housing market IS IMPROVING as we speak, by becoming more affordable
2. "the results of the ASB's latest housing confidence survey paint a BRIGHT picture of NZer's views on the housing market" as more people will be able to participate in it
3. "Adding to the JOY, more than three quarters of the survey's respondents expect interest rates to go even higher over the next 12 months."
One of the best posts ever.
Is that you INDEPENDENT economist Tony Alexander?
You got it.
- our kids will be able to afford housing
- investment will flow into productive innovative business
- we can attract skilled immigrants to decent work with affordable living costs
-kids will want to learn useful skills not want to be developers RE agents and bankers
The only downside is that the generations that caused it will feel some short term pain. Karma.
A change of government fiscal policy is worth a 1% reduction in the OCR and will bring back business confidence. This year is the best time to buy.
And to buy... someone else has to sell.
If they are a marginal vendor; trimming their price expectations to get a transaction across the line. Feeling the winds of change or the lash of higher mortgage rates, then their sale price will affect all the other properties in the area/country.
Unless purchasers have the courage to stump up more money into the face of a survey like this? You know - pay more than anyone else thinks it's worth.
I imagine some of that sentiment may be due to buyers actually doing their due diligence. Leaky homes won’t be selling as easily as they used to, and some may be nearing the end of their useful life.
Here’s a townhome for sale in Wellington, not sure how to remediate a leaky townhome when it’s attached to another leaky townhome.
Bought 2020: $627k
2021 RV: $720k
For sale: $450k
https://homes.co.nz/address/wellington/karori/79a-woodhouse-avenue/vyBk9
Edit: was listed for 6 months at ~$600k before recently being reduced by ~$150k due to inspection results and destructive testing of the untreated wood frame.
Hahaha that’s a hilarious ad - it’s an absolute rotter, BUT it’s got all these great features!
lol
The cost to fix or rebuild has probably increased $100k since 2020
Rebuild will be way cheaper next year.
Gloomy for whom really?
The ones who expect to have 200% appreciation of their houses over a period of 5 years? The deluded lot?
Otherwise if you are a house owner who has owned for a few years and didn't cave in to the FOMO couple of years ago, it's not gloomy at all.
Yes, but the gloom is much wider because so much of our domestic economy is based around a booming housing market. As J.C. Likes to emphasise, the ‘Wealth Effect’ is in reverse now, and this has much wider effects than just house prices - bonuses will drop or not be paid, work will dry up, jobs will be lost, salary increases will be nil or minimal….Note - I am not saying that is a bad thing, quite the contrary. Our economy got totally out of whack off the back of the housing bubble. It’s now re-balancing.
Read this, and I especially challenge those who think Change isn't coming to the New Zealand property sector to do so (it is) - the whole article; Swap out 'Australia' for 'New Zealand', and weep. It's hard to know which paragraph from the captioned article to highlight below. But for starters:
How did it come to this?
In the mid-1980s, the median earner forked out three times their annual income for a home, compared to the record-high 8.5 times their income in 2022. Parental lending is reported with humour in our media — the Bank of Mum and Dad is now the ninth biggest mortgage lender — but this creeping return to feudal social relations is a shocking development in a nation that defined itself against the rigid class hierarchies of Britain. Our investor-dominated housing system has walked the nation to the cliff's edge of our egalitarian history; whereas employment income was once sufficient to secure housing and a good life, working any job today is no longer enough — the wealth you're born into increasingly determines your life chances.
https://www.abc.net.au/news/2023-03-05/house-prices-intergenerational-i…
Banks have migrated away from lending to productive business enterprises because the risk weights can be as high as 150%. Thus around 60% of NZ bank lending is dedicated to residential property mortgages owed by one third of already wealthy households.
Michael Hudson: Corruption. Your central – when I was down in Australia, Karl took me to your very nicely-designed capital of Canberra and I met with the central bankers there. And they said, “We’re a very lucky country. We live in the – we’re a neighbour of China and we can balance our payments and really get by just through exports. We don’t need any industry and quite frankly, we don’t need people.” So, this is – the corruption is just the bank-centred world view that Australia should be run for the benefit of the mining interests, the iron mining interests that created the wealthiest lady, I’m told, in Australia.
And the central bank is run for the mining interests and for the foreign investors. The Bank of Australia policy is made by England, which is made by the Federal Reserve so just as you elected a socialist Premier or Prime Minister, the Queen of England’s local representative in Australia said, “Well, you’re a colony, we don’t agree with that person. You can’t elect them. You can only elect people that we agree.” This is what Australia did and so, it passed a neoliberal regime of the government in Australia that is even worse than Tony Blair in London. And the same thing in New Zealand under Douglas economics. Link
Hmm no mention of this survey in Tony’s 9 reasons the housing market is going to do well this year: https://www.oneroof.co.nz/news/tony-alexander-nine-reasons-why-the-hous…
Tony is on Cloud 9
Sitting there paid to write drivel by 9 property companies
Hopefully we replace Tony with ChatGPT in the near future
ChatGPT will be unable to comment on the property market as doing so may offend someone.
Do well? Is it not already well off?
What world are these economists living?
The decline in mortgage rates from here is likely to be very slow.
Interesting way to say mortgage rates will increase...
Without doubt a large number of people this year are going to face a challenge, the challenge of their lives possibly. Severe financial hardship that will result in either a large financial loss by being forced to sell in a bad market, great depression level like hardship requiring cutting back on food and taking on extra work, and bankruptcy. This will take quite a toll. I'm surprised no one is really talking about it. An increase in outgoings by something like a thousand to two thousand a month, every month, will have a significant impact on many.
Houses have suddenly become a liability rather than an asset for many mortgage holders.
Because you still have the house as long as you can make payments on it, and if you have a job you can keep making those payments. Unemployment isn't exploding - that's not to say it won't, but it isn't now.
Ironically we've possibly priced so many vulnerable, middle-level families out of homes that there may not be that much fallout for them from rates rises. So it's going to be interesting from a class and demographic perspective who actually ends up copping it the most from the increases in interest rates. Older NZers will as a rule have smaller mortgages that are largely paid down, they may decide to stretch and just finish the job. That's not going to be so easy for younger families who took on many more multiples of debt to begin with.
Try finding a home to rent that suits you in a tight rental market. You'll be lucky.
In predominant rental area St johns there are 2, 3 bedroom homes available. One is a unit for 695 per week, the other 875 per week or $45500 per year. Hopefully it's a landlord who treats you and your children extra well
And if you can't afford those, there is still avondale, Mt roskill and beachhaven
Generally in the best of times owning your first home with a mortgage is more expensive than renting. This ratio has likely gotten a lot worse now. Hopefully most in this position will be able to tighten their belts and get through somehow.
I was reading an article in Stuff about those under the table special 4.99% rates. Someone said,
“I specifically asked my ASB mortgage adviser if he can provide a lower rate last week, because I could not afford paying principal and interest, but he said no.
“Paying interest only is also very hard for me as I need to stop my contribution to KiwiSaver and my superannuation, otherwise I would not be able to live.” Link
Thanks for the link ZS
Does that information contradict with or add to your earlier claim of the frightening toll and severe hardship of those with mortgages
I have always seen you as having a balanced view. But not so sure about that now
I just have a bad feeling. It wont be all people with mortgages who face severe hardship just a significant fraction. I may be getting overly concerned. It would be informative to hear from any readers who are facing the prospect of great hardship.
Also, even in normal times some mortgage holders face hardship and bankruptcy so if rates practically double over night then it is hardly unbalanced to claim more people will face hardship and possible bankruptcy. Yes it is stating the obvious however I suspect that a doubling of rates corresponds to more than a doubling of those in hardship. It's probably more like x100 or x1000...who knows?
Incomes have risen and are rising, helping to offset
Then there are options to explore with the bank.
Across the country the number of mortgagee sales is tiny compared with past
Maybe see a doctor for that anxiety
I'm joining the camp that thinks you are kind of toxic HW2.
Keep being self focused and toxically positive if you think it helps. I'm just trying to see into the future.
Are there any others that share my concerns or do do you all think 3% wage rises and full employment will cover the extra two grand a month?
Its not my intention to upset you, I would rather portray the facts than wild fears. We all had enough of that during covid
But if you want to make it personal, please continue.
You are being unusually defensive reacting like this to someone who basically just said that someone's mortgage going from 2k a month to 4k a month will have consequences.
These are not wild fears. The doubling of mortgage interest rates will suck a huge amount of cash out of people's pockets ands will have a significant impact on a lot of things.
However let's see how things progress. We are both in a good positions (or are we?). As spectators the game will be a lot more interesting than many think.
Is forecasting "great depression level hardship" out there with the worst possible scenario?
I appreciate you're empathic to people's situations. Natural disasters are taking their toll too, and very awful
I do have empathy as I have been in a position where a 20% drop in house values and a doubling of mortgage rates would have been catastrophic.
As you've said the effects won't be felt evenly. More recent buyers who've only been on 1-2 year terms will be feeling it differently from someone with no new borrowings for 10 years who's on longer interest terms.
There's going to be a percentage getting ruined partially by bad luck.
It will hit recent FHBers, those who never pay down debt and investors. Those who have minimal debts and have healthy kiwisavers balances will see it as an opportunity to buy a cheaper ute....
I totally agree there’s going to be very real pain, as you say not for the majority of mortgage holders but for a still significant number (definitely in the tens of thousands of households).
But I will still come back to my key point of the past couple of years - it’s going to be loss of income and/or employment that’s going to be the real problem for many. Obviously the biggest impact is people whose mortgage payments soar AND they lose income / jobs.
What I saw quite a lot in the GFC was loss of income being a big issue, so when we are thinking about impacts that should be up there with loss of jobs. In 07/08 I saw a lot of retrenchment in people’s working hours, often down to 9 day fortnights (so a 10% wage cut) or less commonly 4 day weeks.
This obviously whacks people renting as well as people mortgaged up to their eyeballs.
As younger people are usually disproportionately impacted in these situations, we will probably see more young people returning to live with their parents, and this might reduce demand for rentals.
Widespread use of hour reductions for staff keeps unemployment down , but it certainly can be impactful on peoples’ finances and wellbeing.
I also share your concerns Zachary. NZ already has an appalling suicide rate, and our mental health services are woefully underfunded. We are not in a position to cope with a wave of people losing their jobs and/or homes....
People often cite financial downturn as a bit of a suicide influencer, but financial hardship isn't in the same realm as longer term mental health issues surrounding depression, PTSD etc.
How absolutely fascinating. I mean, sure, financial hardship isn't the same as long-term mental health issues, but that doesn't mean it can't lead to suicide. Maybe you should try using your brain for once and actually consider that different people have different experiences and what might be a minor issue for you could be a major issue for someone else.
I asked ChatGPT:
Yes, financial downturns can affect suicide rates. Economic recessions or downturns can lead to job losses, financial insecurity, and increased stress, which can increase the risk of suicide for some individuals.
Studies have found that suicide rates tend to increase during economic downturns, particularly for men. For example, a study published in the Journal of Epidemiology and Community Health in 2015 found that in Europe, the economic crisis of 2008-2010 was associated with an increase in suicides, particularly among men. Another study published in The Lancet in 2014 found that the global economic crisis of 2008 was associated with an estimated 10,000 additional suicides in high-income countries.
Immigrant here...positive attitude and a contributor to my community. 7 years head down and now a citizen. 350K later in taxes and 275K in rent... burnt out, broke and unable to provide a stable, affordable roof over our head. Owning a decent home is the bare minimum a wife deserves for uplifting away from her roots.
The impact on mental health is no joke.
Hi rent and high taxes paid. Paying 50k in tax per year must be 180k income
I'm no fan of the FBB, holds back immigrants aspirations, keeps them stuck renting
Interesting post, and reflects the feelings of many I know.
I've accepted how it's played out for me and my depression is manageable, but I have young kids who I fear are growing up into a shit storm.
NZ has long been a retirement village for people who think they are millionaires but complain there aren't enough health services for them (surprise!).
At least there is one upside to being a renter - you can leave and say to hell with the place, with no struggle to try and sell a property that is more inflated than the Hindenburg. That balance of payments is pretty ominous, for the millionaires...
Luckily there are 46 3+ bedrooms in St Johns and surrounding suburbs, over half of which are less than $875pw, then?
The point being the trend and the tight rental market
Ellerslie has 26 rentals including 6 two bedroom
This time last year, 57 rentals incl 17 two bedroom
Looks like 43% have arrived at level 5 and 6. It's incredible to think that 57% of people are completely unaware of the current situation (still between level 2 and 4).
Housing bubble crash stages:
1. Rising prices
2. FOMO
3. Euphoria
4. Denial
5. Disbelief
6. Panic
7. Bust
Humans just hate change. Esp when it involves loss.
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