The housing market looks set to end the summer season with a big overhang of unsold stock

The following is an excerpt from the above article you obviously haven't read properly👀;

"the housing market looks set to be heading towards winter with a large overhang of unsold stock that's likely to weigh heavily on buying decisions and prices" HPI ↘️ - which "apparently" fits your investment strategy as you're a winner no matter what happens - right? 

Just to clarify, my comment above made no specific reference to the latest HPI release whatsoever as I was referring to the near future. 

"HPI going up is interpreted as not going down as RP claims."

It seems that there is a misunderstanding or misinterpretation. 

1689 Baptist is referring to the latest release of HPI data earlier this week which showed an increase.

My understanding is that Retired Poppy is referring to his expectation of future HPI. (As I undertand, the time frame he is referring to is the next 12 - 18 months or so so - perhaps Retired Poppy can clarify.)

Many people are using recent house price trends to develop their near term house price expectations by extrapolating recent house price changes into the future. 

You've said it so it will happen, is it true that you've had many accurate predictions 

Yep let me get my detailed plans out so I can  post them on a public forum for yourself and others.. am I stupid? Don't answer that! Lol

Why did the market go down... More Sellers than Buyers.

And the economy shat the bed. You always omit broader economic problems with house price declines.

Where in Aussie? Brisbane has just surpassed Melbourne in price.

Australian super is currently 11%, going to 11.5% in July, and then 12% in July next year.  NZ just gets further and further behind.

you will easy get 10% off this year for these reasons

Spruiker alert level : desperation and panic

BUY NOW GODDAMIT OR YOU WILL BECOME INFERTILE 

Currently seeing a few places on a family members rural street selling up as the oldies downsize form their rural sections and lovely large houses. Nobody is buying and with many selling at the same time people are asking questions. All are asking over what they are currently worth, time will tell until one of them cracks and takes a lower price and the cascade will continue.

If someone's distressed, it probably will be priced accordingly.

And the modern first home buyer is far more likely to be letting a room or two than traditionaly might have been the case.

I did a trial pre approval and this topic was brought up and recommended by the advisor over 1yr ago outside of my preexisting intention to do the same.

My closest confidante also had the discussions with a different advisor at another time prior. Where the suggestions or discussions were had.

Another friend has just moved in to board with some first home buyers they previously rented with. That in another NZ city.

Do not fear that commercial business oriented landlords exiting will mean so many more empty homes and rooms whilst those people previously homed become not so.

Plain logic. High sales would be 10k per month and the level of demand is just not there now. If all borrowers were approved that might make 8 to 9000 sales per month. Its clearly more than half are accepted 

Lets not let the facts get in the way of a good spruik

Likely still pretty high. Put it this way, if we follow Ireland's path, 70% price falls, DTI, the whole sheebang..... Houses won't be any more affordable.

This is because DTIs don't actually address affordability, they just limit borrowing. The flawed assumption is reduced borrowing automatically makes prices lower.

New house building in Ireland has been in the doldrums, because the market can't meet the DTI limits, so everyone ends up scrapping over whatever houses exist (either to buy or rent).

The discussion regarding affordability on this site sits disproportionally in concepts that won't provide it.

Why would you hold up Ireland as a good example? They have one of the worst housing crisis in the world.  Ireland is what happens when Govts decide to force housing investors out of the market.

https://www.stuff.co.nz/business/property/129646516/heres-what-we-can-l…

https://www.nytimes.com/2024/01/15/world/europe/ireland-housing-crisis…

Reasonable to assume given the increase in ease to rent out a batch or the family home via the likes of booking.com and AirBnB. 

Would people land bank a property if it was certain it would halve in value in 10 years?

Exactly. Further to that, would people pay current prices if capital gains were off the table (I'm not even talking about further falls)? Unless the money printing machine (i.e. cheap credit) starts up again this is the foreseeable future. Cheap credit is not 0.25 or 0.5 less than the current rate. All of the talk of planning, construction, red tape, etc is secondary to that fundamental.

I should add that I do actually believe that we are in for more QE in the future, sadly. Until that happens though, as I said, the foreseeable future...

Never heard of 'supply skepticism'. Thanks, I'll take a look sometime.

I should make it clear that I am not arguing that supply constraints don't play their part - that would be silly. I'm just of the opinion that the more significant part of the supply and demand equation as it applies to the housing market has been on the demand side for a long time (not necessarily always and everywhere of course).

Supply side issues do also need addressing and always will as communities naturally grow and change, but it can never be a sufficient solution to our current problem. It's just easy for politicians to argue about while ensuring everyone can stay on the gravy train. It's politically 'safe'. Let the councils deal with that one or better yet use it to your advantage and come up with some boondoggle.

You could, in theory, cause an accommodation crisis in a growing community with supply constraints alone, but that is definitely not what is going on here (or in Sydney, Vancouver, etc) in my opinion.

As an aside, I was living in Australia when John Howard was elected. I remember he repeated the mantra for years that "interest rates will not go up under my government". I was young at the time and wondered how and why he would put so much emphasis on this claim. Turns out you can pretty much tie it in directly to the start of the mainstream property investment madness. The terms 'negative gearing' and 'equity mate!' appeared in the mainstream around the same time.

I did just look into 'supply skepticism' and although interesting, doesn't really seem concerned with the issues I raise.

To sum up my view (as I did in a recent comment below):

The property boom of the past few decades has caused an increase in real vacancy rates (or underutilised properties if you prefer).

Didn't know there was a movement as such but where do I join...

Number of NZ private households (2022) - 1,943,000 - https://www.stats.govt.nz/information-releases/dwelling-and-household-e…;

Poulation (2022) - 5,127,400 - https://www.stats.govt.nz/information-releases/national-population-esti…

Working Poulation >20yo (2022) - 3,802,000 -https://www.stats.govt.nz/information-releases/household-labour-force-s…

On above numbers there's enough houses for one house per 2 working age people i.e. per couple.

Or 2.6 people per household allowing children.

Obviously houses aren't always where people want to live, but many sit vacant in some of the most desirable places in NZ as baches, which links to earnedincomes point.

Greenies like Murray Grimwood aka PDK and Gaudy Garry Taylor got elected on councils so they could change the land supply rules. Fuk em

I didn't mention population growth directly, but did refer to the StatsNZ household and private dwelling numbers and how they have changed over time (apologies for not looking them up again but it was some time since I looked and the site is not making it easy to find them again). Taken together, they don't indicate a steady decline in dwellings relative to households over the past few decades (as you would expect if supply was the cause of price rises). It's also worth noting that household size hasn't been increasing, so we can rule out explaining the dwelling to household ratio not decreasing by reference to that.

I agree that supply is important and that planning changes are needed to accommodate growth, but my argument is that this is secondary to availability of credit and demand side issues in general when it comes to price rises. I didn't mention tax incentives, but obviously they also play a part and are worthy of attention when looking at the demand side especially.

more dwellings of the right kind and at varying price points would have been built - and we'd not have had decades of above inflation house price rises.

While I agree with the first part of that statement, I am a long way from having faith that the second part would follow. In my opinion we won't solve this problem without addressing the demand issues.

Just for good measure, here's another argument for demand side causes. In the past, owning a second home (such as a holiday home or pied a terre) was generally an expense. Fewer people subsidised them by renting them out on the short term rental market and capital gains weren't sufficient to justify a complete lack of income generation.

Once prices started to rise at a sufficient pace, capital gains made all the difference and simply owning a second home was no longer an expense but a lucrative investment. Also consider others that were incentivised to purchase second homes due to the burgeoning short term rental market. It's not unreasonable to assume that the proportion of people that own second homes (I am not talking about long term rentals) has increased for this reason.

Now, consider that by definition a primary residence cannot be vacant, only other dwellings. If the proportion of primary residences to other dwellings has decreased (for reasons such as given above) then it is not unreasonable to assume that the proportion of vacant dwellings will have also increased.

Here is an anecdotal example of the above from a conversation I had with a relative just last week. They are by no means rich, but are looking to purchase a small apartment in Wellington to make it more convenient to visit their grandchildren when it suits. They will be relying on some existing funds, probably equity, and the possibility of AirBnB to subsidise this purchase. This would have been unthinkable for people in their situation thirty years ago, but essentially they are talking about taking an existing property and precluding it from becoming a primary residence. I don't think their case is all that unique.

Ultimately, I believe - against what seems intuitive - that the property boom of the past few decades has caused an increase in real vacancy rates (or underutilised properties if you prefer).

Here are the respective cashflows for Peaker and a Buyer Today (in Feb 2024)

1) At Nov 2021

a) Peaker:

i) Mortgage: $1,040,000

1 year mortgage interest rate: 3.47% p.a

Mortgage payment: P&I 30 years: $56,348

ii) Rates, insurance: say $6,500

iii) Total payment $62,848

b) Buyer in Jan 2024 rents until Jan 2024:

i) Rental per year $33,800 (2.6% gross rental yield on Peaker's purchase price of $1,300,000)

ii) Saves: $29,048 (this can be added to their deposit and can reduce their mortgage even more than $715,000 mortgage used in these calculations)

iii) Total payment: $62,848 (same cashflow as Peaker)



 

2) At Feb 2024

a) Peaker

i) Mortgage: $1,005,618 (reduced due to principal payments)

1 year mortgage interest rate: 7.32% p.a

Mortgage payment: P&I 28 years: $85,421 (increase of 51% from 2021 payments)

ii) Rates insurance: say $7,166 (due to inflation)

iii) Total payment: $92,588 (this assumes that the Peaker can continue to hold on - in many cases the increase in payment may be too much of a burden on household cashflows and need to sell (and realise their loss of savings as noted above)



 

b) Buyer today

i) Mortgage: $715,000

1 year mortgage interest rate: 7.32% p.a

Mortgage payment: P&I 30 years: $59,482

ii) Rates insurance: say $7,167 (same as for Peaker)

Total payment for housing: $66,649

iii) Additional amount to reduce mortgage principal: $25,939

iv) Total payment: $92,588 (same cashflow as Peaker)