
There was good and bad news from the residential property auctions held in January this year.
First let's get the bad news out of the way.
There were fewer properties auctioned in January this year compared to January last year.
Interest.co.nz monitored 199 residential property auctions in January this year, compared to 278 in January last year. That's a reduction of 28%.
The good news is the sales rate was higher this year and prices were just a tiny bit firmer.
Of the 199 properties offered at the auctions monitored by interest.co.nz in January this year, 103 sold under the hammer, giving an overall sales rate of 52%.
Of the 278 properties monitored auctions in January last year, 116 sold under the hammer, giving a sales rate of 42%.
The last time the sales rate nudged above 50% was in July 2023.
Prices might have been marginally firmer, with 43% of the properties that sold in January this year fetching prices above or equal to their rating valuations, compared to 39% in January last year.
January is usually a fairly quiet month for auction activity and this year was no different. However, the relatively high sales rate could be a signal the market is starting the main summer selling season on a slightly firmer note compared to last year.
But it's early days, and we will need to see how things shape up over the next few weeks as the market ramps up for its busiest time of the year, before we can draw firm conclusions.
The individual results for all of the properties offered at the auctions monitored by interest.co.nz, including the selling prices and QV valuations of those that sold, are available on our Residential Auction Results page.
229 Comments
https://www.interest.co.nz/property/131574/buyers-likely-retain-whip-ha…?
A large number of property withdrawals (3,755 in December, up 43.5% from the previous year) indicates that many sellers are still unwilling to accept current market prices. Combine that with the struggles in trying to rent properties out and yield/costs being what they are house prices are not going up anytime soon. This can only be good for our society - not so much for the over leveraged and greedy.
In 2024, 68,817 homes sold, which is below the 10-year average of 78,315 https://qem.infometrics.co.nz/new-zealand/housing/house-sales
At the same time, over 33,000 properties were withdrawn, up 24.3% from the previous year. That means nearly one in three listings didn’t sell—not exactly a sign of a booming market. Sure, homes are selling, but a record number of sellers are pulling out because they obviously can’t get the price they need/want. If demand was really that strong, we wouldn’t be seeing so many withdrawals.
The number withdrawn doesn't mean a thing unless you have numbers of those withdrawn which then sold after relisting.
Your linked article shows that 68,000 properties sold last year. From some of the comments on this site, you would think that only 5000 properties were sold! The average for the past 10 years is 78,000, so considering that we have been in a recession for the past 2 years, 68,000 is not a bad figure.
I tend not to wade into these debates but context is what matters here. Homes will always sell at one rate or another. People need a place to live, life circumstances change and they need to move, etc. And there are good reasons to want to own a home for many.
The real debate is "will housing as an asset class perform the same over the next 40 years as it did over the last?". And on this the signs aren't good IMO. We had 40 years of declining interest rates from roughly 1980-2020, this seems highly unlikely to repeat itself for a number of reasons. There have also been deep (and global) shifts in how housing is viewed as an asset so barriers are falling to increasing supply.
On the more local level, rents are falling in NZ and apparently much more difficult to get tenants which will mean further falls. A time of falling rents but rising house prices would be a very unusual combination especially with interest rates what they are.
All morality aside (which is important to do when considering investments), housing doesn't look like a great investment to me. If you need the utility value etc then of course worthwhile to buy one. But if the price you are paying (or willing to pay) is predicated on the idea of comparable capital gains as people who bought 20-40 years ago, I would be very cautious. There will be diamonds out there but there will also be a lot of rough.
You're splitting hairs here imo. For practical purposes, the questions of housing affordability and housing as an investment are the same thing.
The more affordable housing gets, the worse it will have performed as an investment. The less affordable housing gets, the better it will have performed as an investment. Broadly speaking. There are various complicating factors but that general principle holds true.
Even in the scenario you give (rising incomes + rising prices) that still indicates a relatively worse investment than in the last 40 years where we've had house prices rising more quickly than incomes.
> More affordable housing increases rental yields.
No it doesn't. At least not causally and it isn't guaranteed.
Housing price and rental prices most commonly move together. Increases in supply will have flow on in impacts into both ownership prices and rental prices.
Whatever. If it costs $1M instead of $1.8M to buy a rental and you can rent it for roughly the same amount as before then explain to me how your rental yield hasn't improved.
Rents aren't set according to housing prices, there is an interrelationship but it isn't correlated.
> If it costs $1M instead of $1.8M to buy a rental and you can rent it for roughly the same amount as before then explain to me how your rental yield hasn't improved.
And if it costs, $1m instead of $1.8m and you can rent it for half as much, rental yield hasn't improved. See how the actual reality of the numbers matters here?
Rents aren't set by house prices but they often move in tandem. Your original comment was incorrect. And like I said, there is no casual relationship here. It is an unusual housing market indeed where prices for homes halve while rents stay the same. Hence why NZ is currently seeing declining house prices alongside declining rents.
The biggest risk re investment at these levels is that a Government pivot to "productive investment" will be carrot and stick.
The stick may seriously impact capital gains, which at current price and rent levels are the only way you will make enough return to warrant the risks. Hell borrowing $7-900k to buy an entry level AKL home is not risk free.
Houses here compared to other OECD countries are unaffordable while GDP growth is the worst in the OECD.
Why are we special enough to be such a house price outlier?
It's a common trap to think it's all a tradeoff between productivity and housing investment, or that one is occuring to the detriment of the other. "We'll make more money AND houses will get cheaper" is a nice aspiration, but would require far more than just penalizing one and assuming the latter will naturally occur.
Productivity especially in developed economies is fairly elusive for obvious reasons. NZ in particular fares poorly there.
The answer to why productivity is so limp here, is likely more related to why it's so expensive to generate a new unit of housing here (or a new unit of anything other than agriculture), than any perceived preferential treatment of house ownership. It's not like people are trading off whether to by a 3 bedroom in Manurewa, or start the next Amazon.
However we've also seen in NZ's own history land value tax being used to break up land banks and get land into the hands of average Kiwis. And we've also seen distorted house pricing by privileging property over productive investment while constraining supply. And we've seen governments achieve affordable housing in post-war decades through policy.
All of which highlights that policy can incentivise productivity over speculation, where willingness exists.
"The real debate is "will housing as an asset class perform the same over the next 40 years as it did over the last?""
An astute observation, T&T.
Every wannabe residential property 'investor' needs to understand that question before leaping in for their un-taxed capital gains based on past performance.
The last 40 years also saw major demographic shifts. Single income households became double income households as women entered the workforce, increasing the ability to borrow. Couples chose to have less (or no) children, which increased their disposable income and ability to pay higher mortgages. More people went to University which enabled higher incomes (an effect that is now going backwards).
The only current demographic change on the horizon that is driving house prices is access to the Bank of Mum & Dad. So unless multi-family or multi-generational living becomes a new trend, there is not much anyone can do to increase their household incomes to pay for bigger mortgages which enables higher house prices.
So unless we start selling off houses to wealthy foreigners who have more money than New Zealanders to spend on houses, then its probably going to be 40 years of house prices following incomes.
I agree with Rookieinvestor that it's not about "pumping house prices" vs "gentle declines".
The best "middle ground" could just be gentle increases. This should be a good compromise with the least amount of stress on any particular group of people.
Gentle increases - defined as house prices which aren't going up in value faster than people's incomes (on average)
The economy was performing well before housing turned into a get-rich-quick and retire-early scheme. I suggest that keeping prices stable or in a gentle decline, combined with a capital gains tax and lower debt-to-income limits for investors, would help eliminate this behaviour and better serve the majority of New Zealanders.
You are deluded. The biggest handbrake on the economy is the excess capital spent for tax avoiding housing gains. You really need to remove your self interest greed goggles and look at the. Bigger picture. Housing price massively out of balance with incomes.
Stupid prices has been the number one item listed young medical staff moving to Aussie. Read in lots of future high tax payers no longer paying tax here.
The biggest handbrake on the economy is the excess capital spent for tax avoiding housing gains
Say you're right, and this is the primary factor.
Can you illustrate examples where changing the tax status of capital gains for housing has had a commensurate impact on an economy's productivity.
If it were a simple case of "tax housing, beef up incomes" then everyone would keep ratcheting up CGTs.
No, they're going from Auckland to Perth, Brisbane and Melbourne. Or the Sunshine/Gold Coasts. There is more to Australia than just Sydney you know. Auckland is a country town compared to Melbourne, and probably now more even provincial than Brisbane (which has come a long way in the last few years).
Elephant meet room
by Amokk | 1st Feb 25, 6:35am
https://www.interest.co.nz/property/131574/buyers-likely-retain-whip-ha…?
A large number of property withdrawals (3,755 in December, up 43.5% from the previous year) indicates that many sellers are still unwilling to accept current market prices. Combine that with the struggles in trying to rent properties out and yield/costs being what they are house prices are not going up anytime soon. This can only be good for our society - not so much for the over leveraged and greedy.
As above so below. In all seriousness - you appear to be so against house prices stabilising and/or decreasing slightly (as the facts indicate they are) for a very long time - why?
by Amokk | 1st Feb 25, 8:16am
In 2024, 68,817 homes sold, which is below the 10-year average of 78,315 https://qem.infometrics.co.nz/new-zealand/housing/house-sales
At the same time, over 33,000 properties were withdrawn, up 24.3% from the previous year https://www.interest.co.nz/property/131574/buyers-likely-retain-whip-hand-housing-market-heads-2025 That means nearly one in three listings didn’t sell—not exactly a sign of a booming market. Sure, homes are selling, but a record number of sellers are pulling out because they obviously can’t get the price they need/want. If demand was really that strong, we wouldn’t be seeing so many withdrawals.
See my comment above in reply to a previous post of yours.
I am not against prices stabilizing and I'm not sure where you got that idea from. House prices will remain flat, like I have said in many previous comments. Obviously the market is not booming, and I don't think anyone has said that it is.
I believe that Auckland is overpriced, and prices there need to drop to make them affordable.
There appear to be two categories of people on this blog:
i) Those who want a house; and
ii) Bagholders.
Good luck to both groups.
Kraken
A bag holder an investor who holds onto poorly-performing investments, hoping they will rebound when chances are that they will not.
Migration might turn negative this year...good luck..
https://www.rnz.co.nz/news/top/540471/nz-could-become-net-exporter-of-p…
From the FB Property Investors Chat Group NZ https://imgur.com/a/3YSy8O2 - a sign of things to come.....
Who said he needed one?
Landlords like to pull out rising market rents as a reason to raise, with a "take it or leave" attitude - why can't tenants do the same with falling rents/increased options?
It's exactly what we did back in 2022. And the landlord eventually reduced the rent, after having lost 10x the reduction we'd asked for as the place sat empty.
This is how increasing supply pulls market prices down - those desperate for mortgage-slaves will undercut the existing market, some will pivot to take advantage of it - and the landlords who don't will be left on their own.
If immigration really does turn negative (we'll know for sure after the Oct-Mar seasonal bump) there could be a lot of landlords finding they have no choice but to drop rents, just to replace the tenants they said no to.
And if you're thinking of an argument around "moving is difficult" - the average tenants tenure is 18 months vs 7+ years for a home owner - tenants aren't unused to moving.
Landlords like to pull out rising market rents as a reason to raise, with a "take it or leave" attitude - why can't tenants do the same with falling rents/increased options?
It's exactly what we did back in 2022. And the landlord eventually reduced the rent, after having lost 10x the reduction we'd asked for as the place sat empty.
A landlord posted on a Property Investor group that they have had their place vacant for 3 months. They might need to drop their asking rent to meet the market.
Landlords are learning that they are subject to market forces on rents and that they are unable to consistently raise the rent to meet their rising costs such as rates, insurance, maintenance and rising mortgage payments in a rising interest environment.
Hi Nzdan,
"As soon as is practical ...... " often means after the previous tenants have vacated and the dwelling has had a clean.
As a long-time renter, it's not a joyful experience being shown through less-than-tidy inhabited premises, especially if there's a feud in progress between some mix of the tenant/ landlord/ property manager. One feels the bad vibes, sees the spilt blood and smells the "living" odours.
Hint to prospective tenants: avoid landlords who drive German cars. (They're out to fleece you.)
TTP
one smells the "living" odours.
If you can smell your own odours, others must be retching!
This is the truth. Your dodgy business pays rent to a commercial Landlord - yes. Stop trying to make out your a tenant in the residential sense. It's just more lies......LOL!
"It's usually more common to show/let a place after tenants move out."
I'll bow to your greater wisdom as to what is common...
But I've never done that ... ever. And to date, over my many years of LL'ing, I've just two days, on separate properties, where I've not received rent. None of my tenants have objected. They start boxing stuff ready for when they'll move so the places look very tidy for viewings. If they need a skip & I have gardening to do (which is mostly), then I'll provide a skip. New tenant's usually have to give notice, so the sooner they have a date in the future, the less the chances of paying double rents.
"It's usually more common to show/let a place after tenants move out."
1) Have you ever been a landlord in the long term residential market? and if so, that is what you have been willing to do?
2) So a cashflow stressed highly leveraged non owner occupier (who bought in the last few years) in the long term rental market who is already paying a large top up on their negative cashflow property is willing to increase their top up by waiting for an existing tenant to leave before showing to new prospective tenants?
On the Kiwis Moving to Australia groups, one of the most common questions is whether to sell or rent out their NZ house. Australia is soaking up all of NZ's productive workers - doctors, nurses, teachers, police officers, corrections officers, IT specialists, tradespeople. All successful people who own their own homes. The people moving to Australia are not unemployed bums moving to try and get a job, they are giving up a good job for an even better job, higher pay, and more career opportunities.
We should be so lucky to only be getting rid of all the welfare beneficiaries and criminals - but unfortunately those are the people that Australia sends back to NZ.
Australia is soaking up all of NZ's productive workers - doctors, nurses, teachers, police officers, corrections officers, IT specialists, tradespeople. All successful people who own their own homes. The people moving to Australia are not unemployed bums moving to try and get a job, they are giving up a good job for an even better job, higher pay, and more career opportunities.
Citation required.
The average education level of kiwi migrants to Aussie is lower than the education level of the average Kiwi living in NZ.
Since when does education correlate with productivity or success? Police officers and tradies are not "educated" but are still highly sought after in Australia and are being paid a lot to move there, including significant relocation packages.
Secondly, there are a lot of "educated" public servants in NZ who are basically unemployable anywhere else. They will be stuck in NZ for life.
Also these same people claim they can with 100% certainty pick the bottom of the market - so under this logic they must also have known with 100% certainty when the market was peaking back in 2021 and would have been advising people accordingly to avoid getting burnt - but they were not. Most were advising people to ‘be quick’ and ‘don’t miss out’. So what you can conclude from this is that they only advise what is best for themselves and their own financial interests and not what is in the best interests of new market entrants.
Look at us, living in a country of such abundance and space, yet competing so desperately with each other over basic human needs such as shelter.
There’s a theory that I want to examine closely, which argues that property prices may not fall significantly and in fact, may rise again in future, further out of reach of young people and first home buyers.
Economics has been criticised for having these elaborate mathematical models, yet not taking into how wealth inequality in a society affects the distribution of resources, such as access to affordable shelter, health care etc.
The theory is as following: As inequality rises in a society, the wealthy don’t generally spend more of that added income on frivolous consumption, creating more jobs and GDP growth like we’re led to believe. Trickle down economics has been conclusively debunked, it’s nonsense…
…no, as inequality rises the wealthy spend their extra cash on accumulating assets, including houses and property. Ordinary people (from a historical point of view, recently known as the middle class), no longer able to compete for those assets, get eviscerated.
This hoarding of assets by the elites occurs over and over again all throughout human history, from ancient Rome’s rich patricians buying up land and accumulating vast estates thus pushing small farmers off the land into urban slums and poverty… to modern-day regimes where the ultra-rich will happily monopolise a country’s resources while the vast majority live next door in slums.
Even in democracies like the United States open oligarchy is becoming normalised (the Trump/Musk thing). Young people in the States too are concerned about housing unaffordability while billionaires have never had it better.
Orwell’s pigs in Animal Farm comes to mind. The inequalities are creeping in slowly over time, barely noticeable on a yearly timescale. We bicker and argue about interest rates and house price/income ratios while we’re sleepwalking into a two tiered society.
Over the last two generations a paradigm shift could well be occurring in our country once viewed as rather egalitarian and also formally known as the quarter acre pavlova paradise where young people once expected to be able to buy a home and raise a family without getting into a hideous amount of debt.
Today, productive work competes less favourably compared to non productive work such as earned income off assets (parasitic as some refer to it here.)
And as is occurring worldwide; the wealthy get yet richer. They’ll carry on competing with each other with their growing pools of money over assets hence the reason why the prices may not drop.
Ordinary people, will find it harder to compete. I think this is already happening in New Zealand. The very conditions and lack of opportunities that many of our ancestors escaped from in Victorian Britain are beginning to repeat themselves in New Zealand, today.
This is why many of our young are leaving. It is human nature to seek opportunity elsewhere.
Interestingly, history also shows that every fiat currency is devalued over time and in every single case, eventually fails. The inflation that occurs, affects the poorest first whereas the asset holders are insulated to a degree.
So, every time there is a GFC or covid event in future, (and it will happen again) governments will once again make the money printer go brrrrr. It’ll be the wealthy that’ll get first grabs on assets before the prices shoot up again, adjusting for the inevitable inflation.
I believe people are noticing an accelerating decline in the quality of institutions in western democracies, and have lost significant trust in the political system worldwide. I believe a large part of this is because of rising inequality as shown by the Gini coefficient and by scholars such as Professor Wilkinson (“The Spirit Level,” recommended reading).
People know the system is rigged to favour the elite. ‘Leaders’ don’t set examples, they expect privilege and increasing wealth, are mostly out of touch and say things such as, “I’m wealthy, I’m sorted.”
I’m not a communist. I don’t despise the rich as I know I’ll be accused of and I know many work hard to acquire their assets. But newsflash; most ordinary people work hard too, earn an income many multiples less than a wealthy person sitting on passive income and yet are told it’s normal to be competing with these people and their ever-increasing fortunes for the same overpriced assets!
I strongly believe that if we don’t choose as a society to address growing wealth inequality then the middle class will continue to be gutted, while the wealthy accumulate more and more houses that your own children will never be able to afford.
A great, insightful comment. Appreciated.
Coupled with the dynamic you describe is the fact that a significant amount of economic policy is essentially about ensuring nothing is left out of 'the market'. That is, everything and anything should be available for purchase - often euphemistically described as 'providing investment opportunities' when in reality they're often just rent-seeking opportunities.
Thanks. It was written out of frustration really. Yes, neoliberalism is a terrible idea and rather crudely allows the wealth to trickle up, eventually creating poverty for the rest of us.
I don’t know why we put up with it to be honest. Probably something to do with ‘bread and circuses’ I guess.
Most of the sheep do not understand credit, credit creation etc.
Every so often enough sheep vote left, only to then discover the left has no workable (or executable) answers and a few terms later vote right again, or just do not vote.
The best thing you can do for your own flock is educate them about how the banking system and credit works.
I strongly believe that if we don’t choose as a society to address growing wealth inequality then the middle class will continue to be gutted, while the wealthy accumulate more and more houses that your own children will never be able to afford.
History tends to lean towards nothing happening and productivity not returning until things go tits up.
The fact it'll occur this time under an open democracy implies we have to be led, and can't make effective communal action.
It is, but do we see any political representatives promoting the sorts of changes to make a substantive difference?
Quite clearly, the model we (and virtually every other developed nation) are following is producing the same result; huge aging demo, expensive and uncompetitive industry, looming infrastructure burdens, and an over reliance on consumption of imports as an economic driver.
Most parties are offering the same flawed framework as the status quo, with various frills tacked on to appeal to individual persuasions.
Someone needs a serious long term vision that upends much of the norm, which would be very confronting yet require wide consensus to enact. The odds are very slim. More likely, we'll vote in maniac populists as things continue to slide.
Sam - hearing you. Been through the phase of thinking you express above (well articulated).
There is only so far wealth inequality can go in terms of the rich accumulation assets and billionaires having political control.
Eventually such states fail if allowed to go too far - sometimes they reconcile via peaceful means (democracy) and other time by violent means (riots/internal conflicts).
My personal perspective is that we will still head down the peaceful path and wealth inequality will return away from the extremes it is currently at (we are very similar situation to the roaring 1920’s that led into the Great Depression and WW2).
Keep that faith that people will do what is right by one another - ie social stability is greater than personal greed and power. Peoples need for greed and power stems from a lack of faith that there will be enough for them i the future (if you believe tomorrow will be fine there is no need to act selfishly or greedily - if the opposite you feel the need to take more or have more control). So I look to these people with pity as they have lost their faith and are in fact living in fear of tomorrow - while they claim I am envious of them and their ‘success’. Real success is having enough while not causing unnecessary difficulties for others (eg the formation of a housing affordability crisis by people buying houses they don’t need to own or live in - at the expense of young families who just want one affordable home to raise a family).
There is only so far wealth inequality can go in terms of the rich accumulation assets and billionaires having political control.
Eventually such states fail if allowed to go too far - sometimes they reconcile via peaceful means (democracy) and other time by violent means (riots/internal conflicts).
History shows most large civilisations comprising of a majority of peasants being lorded over for long periods by a few elite. What we've had for around 100 years or so is fairly rare, due to serendipity than any intentionality.
I agree with you in periods of history but this was before western democracy become established as the gold standard (at least nothing better that we know of yet).
So if you think we are heading to a time where western democracy fails then that is fine - I disagree. The periods you refer to are prior to key events like the signing of the Magna Carta, the French Revolution, American Independence, the cessation of slavery in the west. If you believe we are going to regress back from these significant social and political developments then you see the world differently to me - in fact your view would be called by others as doom and gloom. DGMs are generally consider those who want affordable house prices while you appear to be predicting complete social destruction and loss of human rights - that is a seriously negative view point.
Independent Observer,
I appreciate your response and often take the time to read your perspectives.
I agree with your response and the faith that you have in people on an individual level, although I’m conflicted on how humans will collectively respond to certain issues, such as climate change or growing inequality.
I recognise that we are capable of wonderful feats of intelligent (and wise) cooperation, as well as capitulating to greed and stupidity.
You stated the following:
“My personal perspective is that we will still head down the peaceful path and wealth inequality will return away from the extremes it is currently at (we are very similar situation to the roaring 1920’s that led into the Great Depression and WW2).”
I hope you’ll be correct on this. Human history gives a more cynical view, as eloquently pointed out by Painter above.
As the historian Y. Harari says, “You should never underestimate human stupidity.”
"Keep that faith that people will do what is right by one another - ie social stability is greater than personal greed and power."
Like many did in occupied territories between 1940 and 1945? Nanjing? Pol pot's killing fields? I could go on and on.
Sorry, history has a bad habit of repeating. And any such 'faith' is misplaced.
Is it your prediction that these things will happen in NZ in the years ahead? (my comment was specific to NZ and not the global picture). I certainly hope you don’t believe these things will happen here (but I wouldn’t put them out of reach in other at risk nations).
That alternative is to spend your time living in fear but peer my original comment, fear causes people to act selfishly and greedy as they believe that tomorrow could be worse than today. Therefore they do too much today in preparation for the bad they perceive will happen tomorrow (eg start buying/hoarding things they do no need). As Jesus said: ‘Take therefore no thought for the morrow: for the morrow shall take thought for the things of itself. Sufficient unto the day is the evil thereof’
This is what will happen if we try to get any more cycles out of NZ Housing pump n dump...
https://youtu.be/a2AJvCPcNUE The Failure of Chinese Real Estate || Peter Zeihan
No it's not. We've had multiple house price cycles over a timeframe China hasn't even experienced one. They're on Japans path, of one big expansions and contraction, not ours.
China can reverse it's demographics via migration. Any first world nation can, and at a greater rate in future, if it wanted to.
There will be an end. Good luck to you if you're betting it's now.
They're on Japans path, of one big expansions and contraction, not ours.
NZ is only starting its real estate based correction due to miss allocation of investment. Even the PM talks too much unproductive investment (without scaring the women and children). The real estate shop is open for business, why are the locals not buying the super expensive houses Mr Painter?
I put the missing credit at 1/3rd of the economy, JC I think suggests its 2/3rds due to leakage. Ie boomer sells for 2.5mil and buys at 1.5m and has the rest to spend etc etc. The truth is probably in the middle. mean while the sheep chatter about selling Landcorp or QV...
Many small time landlords are "topping up" there sinkholes, further removing spending in the economy.
Growth growth growth, yeah right.
NZ is only starting its real estate based correction due to miss allocation of investment.
That's not the driver though, it's because interest rates are too high. And we haven't managed to decouple the cost of finance from the health of our economy, it's relying on cheap debt to fuel all of our spending, consumption as well as house prices. That's not the same scenario as China or Japan, because neither managed to develop a consumer economy to anywhere near the same level.
Long term it all heads to a bad place, but you're kidding yourself if you think this is the point of culmination.
In all cases the speculation (gambling) on house price increases, has caused the problem.
Interest rates rise and fall globally to fight inflation and stimulate economies.
The driver of NZs lack of productivity is miss allocation of investment.
What part of this is not obvious to you?
The part where productivity migrates to where the costs of production are significantly less. That is an observed phenomenon hundreds of years old. Asset over valuation is just a bi-product.
Hence other advanced economies without the same level of housing unaffordability are having the same problem, like Germany. They're simply unable to compete against lower cost mercantallists.
You're letting housing obfuscate a much greater issue.
I agree that our wages are an issue if we try and compete with low wage economy. ie like Indoneasia to produce ice cream from whole milk powder etc etc.
But our housing market is a different issue, its an albatross around the necks of the bag holders.
It has been allowed to happen by multiple administrations, including our current back on track morons.
This tax free game is a crowded trade, not many can now afford to take the bag off the holder.
The current NZ Real estate landscape is like watching kids play musical chairs, 10 kids 4 chairs... opps 3 chairs now...
If this was the bottom or even close investors would be piling in... they are not.
But our housing market is a different issue, its an albatross around the necks of the bag holders.
It's not really. It's part of a phenom known as the Cantillon effect:
- an economy gets wealthy
- it gravitates towards luxury
- more capital is needed to fuel the luxury
- production migrates to where it's done cheaper
- remaining capital in an economy chases assets (in our case it's weighted towards houses, but in larger economies they have more choice of unproductive assets)
- production only returns when things collapse and the cost of production falls
Nice one P. You've defined the Cantillon Effect by making it up. The Cantillon Effect is an economic concept that describes how the injection of new money into an economy affects different groups of people and industries unevenly. It's based around 4 key points:
1. Uneven Distribution of New Money: New money enters the economy at specific points, typically through central banks and then to commercial banks, investors, and eventually to consumers. This means that the benefits of new money are not distributed equally across all sectors of the economy.
2. Early Beneficiaries: Those closest to the source of new money, such as banks and large financial institutions and capital owners benefit first, and can spend the new money before prices rise, allowing them to purchase goods and assets at lower prices.
3. Price Increases: As the new money circulates through the economy, prices gradually rise. By the time ordinary consumers receive the new money, they face higher prices for goods and services, reducing their purchasing power.
4. Inflationary Impact: The Cantillon Effect contributes to inflation, acting as a non-legislative and regressive tax on the purchasing power of citizens. It disproportionately benefits the wealthy and those connected to the financial system at the expense of the general population.
"We've had multiple house price cycles over a timeframe"
When was the last time that the nominal prices of residential dwellings in NZ collectively fell over 80% of GDP? Combined with other factors, there are unintended consequences to this.
The bigger the party, the bigger the hangover.
Here's a good example of the ponzi in all it's appalling glory ...
First the breathless spin ...
Vendors almost double their money after property sells for $1.099m under the hammer.
Sounds awesome, right? But lets look more closely at the numbers ...
It was purchased in 2014 for $620k. To follow the 'houses double every 10 years' b.s. - it should have sold for $1.24m right?
But it didn't. It sold for $1.099m. A shortfall of $125k.
Now what was sold had a full reno. New kitchen and bathroom. Repainted all over, inside and out. Floors sanded and varnished. Garden tidied. All rubbish removed. Looks like some structural work too. (Windows are aluminum so re-glazing has been done at some stage but I've left that out.) If the vendors did the work themselves I'd be surprised if they did it for less than $60k. (They've done a great job from what we can see in the pictures.) And the house was staged, maybe another $5k. Marketing costs and commission? Wild guess, $35k. So take all those costs ($100k) off the sales price, we get $999k.
Which gives us an annualized gross return of about 4.9%. If the reno had been done by subbies, it'd be way less.
Perhaps you'd be happy with 4.9%? Well, that's a gross figure. Strip out holding costs (rates, insurance, maintenance, etc.) and it's less. But equally, the vendors weren't paying rent so something would be added back in.
I wonder how much they got as a tax-free hourly rate for all the work they did. Probably nothing to be sneezed at. Congrats to them.
Other links:
https://homes.co.nz/address/auckland/avondale/42-wingate-street/BD04O
https://www.barfoot.co.nz/property/residential/auckland-city/avondale/h…
Edit: Walking distance to The Yacht Chinese Restaurant !!! Lucky purchasers.
You seemed motivated to divest the time to debunk an old wives tale.
The sellers probably did a lot more than double their money. Which isn't necessarily the same as the price of the house doubling.
My Kiwisaver has performed better than that house. But I only started with a grand.
"You seemed motivated to divest the time to debunk an old wives tale."
"seemed motivated" WTF. I am extremely motivated.
I'm doing my utmost to get the majority of residential property 'investors' to stop and think before they purchase what is, for the majority of them at this time, a poor investment. Not only is it a poor investment for them at this time - it does little good for NZ Inc either.
It's kinda funny how I'm a property spruiker who runs multiple trading enterprises and isn't interested in landlording (because as you say, the returns are meh), and you're stacking properties while trying to promote active commercial pursuits.
You apportion personal labels in an ironic way.
I've always said I would be happy with 5% but agree it was disingenuous to say they "nearly doubled" their money. One factor to consider is that they got to live in the house all that time.
I just went through all the auctions at B&T for the last two weeks and noticed that houses bought around 2014 were selling for 50 - 75% more than they paid. A number of properties bought in 2021-2022 sold for 50 - 150K less than they paid.
"One factor to consider is that they got to live in the house all that time."
I did mention that. That's the problem with this sort of analysis. The range of parameters is enormous and a few tweaks to the parameters can change the outcome - sometimes dramatically so.
Taking your example of 'rents saved'. What number to use? A low number of a young couple saving furiously for a deposit or building up an investment fund? Or a higher number from someone looking for lifestyle and don't mind paying for it.
Likewise Pa1nter's comment above, re interest rates. Which interest rate? The average since 2014? Or a fully worked year-by-year including principle repayments? Or 10% down, and the rest on interest-only? Or would 50% down be better? Note that a wannabe investor would need to look forward, and not backwards with regards interest rates.
Likewise, when was the reno done? 2014 dollars are worth more than 2025 dollars. But then reno materials were less in 2014, or were they?
I have a database linked spreadsheet for this. Some economists friends and I have been adding to it for years as it gets tweaked for the UK, US, Oz, NZ and a few other places. Some banks use a cut down version. And the 'engine room' of the spreadsheet has been used for portfolio analysis to see which 'investors' get it right. It comes with hundreds of pages of documentation. Taking this single example and entering known and unknown parameters would result in a final analysis that would be many pages long. I could post that - but nobody would read it and none would understand all the abbreviations. And to be honest - not everyone would agree we had done it right.
Stripped back, the question becomes whether an individual is financially better served buying a house, or not.
We could compare the net worth of home owners to renters at the same age. But then that's skewed by the income ability of each group to begin with, and if people are financially comfortable, most will buy a house.
"the question becomes whether an individual is financially better served buying a house, or not."
It's a dumb question though. Why? It is a false dichotomy where growing wealth is concerned.
The answer to that question, and many other similar false dichotomies in the investment space, is how individuals a) maximise disposable income, and b) where and how they spend that disposable income.
It's a fairly practical question for many individuals, because as my response to your workings alludes, most individuals don't have access to the same sorts of credit/leverage for anything else than they do for housing. Making 5% on half a million bucks is going to be more lucrative than making 10% on 50 grand.
Obviously that dynamic could change over a period of decades.
In a way, but I thought and wrote at the time that the COVID property surge was utter madness. The key point in my comment was that I was happy with +5%. To expand on that further I would be as unhappy with -5% as I would be with +20%. Actually, thinking about it, -5% made me less anxious.
Hey Pragmatist. Here's another Devonport one for you. Recently sold.
At the peak Homes valued at $2.7M
Dec 2024 Homes valued at $2.1M.
Price TBC. You tell me how much you think it sold for.
Homes has this as an above average property in Devonport. So either the average is wrong or someone else got another bargain. Lots of bargains, don't you think. Shouldn't all these bargains be bringing the suburb average down?
https://homes.co.nz/address/devonport/devonport/13-anne-st/gJPEN
Yes, that doesn't reflect the actual falls which are much higher, which was my point.
I've given you at least 3 examples today where the homes estimate (which is linked to the suburb average) is wildly over the actual asking price.
If you can't see what's happening, all good. Pay Homes estimate prices and throw your money away.
The home estimate of Roberts Ave will be almost entirely based on the council valuation since it's a new build that just received CCC. Suburb average will have almost no effect on that one. You can't expect any algorithm to spit out a price thats below what the council just told it the new build homes on it cost to build.
Of course you ignore all the sales where homes estimates were too low at time of actual sale or very close. Look at all the sales on Aramoana & Ngataringa, they seemed to get those pretty close.
As for your other comment about homes not showing more than 3 years back because it would look even worse.. loosen off the tinfoil cap. The market peak was Jan/Feb 2022 if you look at any of the HPI graphs or median price graphs for Auckland. Homes have only shown 3 years for as long as I can remember, there is no conspiracy.
Of course you ignore all the sales where homes estimates were too low at time of actual sale or very close
No I'm not. I'm saying those ones normally inputted immediately. For the very last time I will try to spell it out for you using 2 scenarios for 3 hypothetical homes on the same street where all properties were valued on Homes as $1M prior to falling market.
- Home 1 sells for $1M in line with Homes estimate
- Home 2 sells for $700K
- Home 3 asking price $700K
Scenario 1 (your scenario)
You are saying the algorithm would work out the suburb average as being 800K (1M+700K+700K) divided by 3.
Scenario 2 (what I'm trying to get across)
The algorithm works out the suburb average as $1M because:
- The 1M sale is recorded
- The agent put the $700K sale as TBC (we have agreed this happens all the time)
- The third house is still estimated at $1M despite the actual asking price being 700K (I have just shown you 3 instances where this happens)
Only the $1M sale is counted, the 700K sale and the 700K asking price are both 'ignored'. So the suburb average in Homes has been manipulated and the suburb average in real life is 20% lower than the Homes estimate.Now all the other properties that aren't for sale are set from this exaggerated suburb average.
It's no conspiracy, it's a great marketing technique used by real estate people (you know the people who actually pay for the Homes service). I've exaggerated the number to make it easier to understand.
Now imagine you are looking at the map view of that street, the sold house would be showing as being sold for 1M, the one that sold for 700K would show as TBC and the one for sale for 700K would say estimate $1M and when you clicked on it it might say asking price 700K (if the agent has decided to update it)- wow look, what a bargain, a 700K house on a street of $1M properties, what a deal.
This is by design. Data scientists are not stupid.
You are saying the algorithm would work out the suburb average as being 800K (1M+700K+700K) divided by 3.
Lol No, No, You need to stop making up shit and telling me what I think. And no thats nothing like how I think the algorithm works, Not even if you are talking about an island with only three identical houses on it.
The algorithm works out the suburb average as $1M because:
- The 1M sale is recorded
- The agent put the $700K sale as TBC (we have agreed this happens all the time - No, we haven't)
- The third house is still estimated at $1M despite the actual asking price being 700K (I have just shown you 3 instances where this happens)
So many problems with this..
the agent doesn't make it TBC, that is the default until the numbers come thru from the council. I linked the page from homes help the other day that explains that. And sales from Agents that aren't paying homes for premium dont even show until they come thru from the council. Neither of us knows if the algortihm even uses the agent entered sales price in the algorithm until its confirmed by the council records.
Asking prices dont factor into the algorithm, they're irrelevant to the dataset. I can just imagine the bitching from you if they did when things were going the other way, Agents dialling up the estimates by simply loading optimistic asking prices.
OK you tell me how much you think the algorithm would make out the suburb average to be and why, because I'm basing your scenario on what you have said before.
As you don't know whether the algorithm takes input from Council or the agent you can assume either.
the agent doesn't make it TBC, that is the default until the numbers come thru from the council
How does Homes know the property is for sale and that it has sold?
And asking prices are 100% relevant to the dataset. They are the maximum value a property can be valued at at that point in time.
So come back and tell me (under my hypothetical street with 2 properties recently sold and one for sale with an asking price) what would Homes have the suburb average at and how would the algorithm have calculated it?
I'll come back and check later today as you are almost there.
I no longer use Homes for pricing, its way off. Closer to the actual price would be One Roof now, the difference on mine between the two is $60K. Pretty rare event, but a house up the road actually put the asking price on the for sale sign out front so it will be interesting.
Here's another one
Homes peak estimate $3.5M
Homes estimate on 9 Jan 2025 $3.27M
Homes estimate today $2.6M
Actual asking price today $1.8M
Care to explain that one?
https://homes.co.nz/address/auckland/belmont/6-roberts-avenue/7N1eV
Right, last week's were cherry picked. This week's are also cherry picked.
Must be a pretty big cherry orchard to pick from.
I'm just confused because apparently according to you and spruikerville:
- Good homes in good suburbs are still selling at good prices
- Homes definitely does not alter the algorithm (except these 'anomalies' that I keep 'cherry picking')
This particular example is a bit silly. The original homes.co estimate was for a 898sqm section and house yet the house being sold now with an asking price of 1.85M is on half that section size and sharing the driveway. Property has been subdivided with a new build at the rear of the property.
Yes, its explained by the fact that the section has clearly been subdivided and new houses built on it
"Move in ready, you could be settled for the new school year. This newly built freestanding home (with C.C.C) at #6 Roberts Avenue stands out for its premium craftsmanship and attention to detail, fantastic value for money."
As is the other Devonport one.
"Indulge in the epitome of coastal living with this exquisite townhouse, boasting captivating sea views and contemporary luxury. Crafted just a year ago, this residence effortlessly blends comfort with style, offering a refined living experience."
And another one
Homes estimate 3 years ago over $2.5M (they won't go back further because it will be even more apparent how out of whack the estimates where)
Homes estimate today $1.3M
Actual asking price: $1M
How strange?
https://homes.co.nz/address/auckland/devonport/2-69-lake-road/QWoGA
https://homes.co.nz/address/auckland/devonport/2-69-lake-road/QWoGA
What people may not see:
1) March 2018 purchase price: $1,600,000
2) Jan 2025 asking price: $1,029,000 (listed since Oct 2024)
3) That is a price fall of -35.7% (-6.1% p.a for almost 7 years) before the impact of inflation.
4) Allowing for inflation since March 2018, the house price in real terms is estimated to be -9.3% p.a since March 2018 (or -49.5%)
From propertyvalues.co.nz:
2/69 Lake Road, Devonport, Auckland, 0624 is a Residential property built in 2018 with 3 bedrooms, 3 bathrooms and 2 parking spaces. The property is estimated to be valued in the range of $1,200,000 to $1,300,00.
Listed for rent it 2019 for $860.
Listed for rent in 2022 for $750.
Also "Overseas vendor must sell!" in the Oct 24 listing.
Note this doesn't answer the question of whether the 1.6M was pre/post build.
Are we looking at the same units?
Because 1/69, the unit next to it, has sold a couple of times since 2018. 2021 on Barfoots, along with photos, 2019 before according to homes.
And it's present on Google maps (roofline is obvious) but I can't check the historical satellite view on my phone.
100%
The guy round the corner sold his house for $4M and bought an apartment close by for $3M.
At the peak the house was valued at $6.5M. He didn't give a shit as he's old and wanted to move to smaller place. Still got $1M in the bank (even though he overpaid by about 500K for the apartment at the time).
https://www.oneroof.co.nz/news/tony-alexander-why-no-one-should-expect-…
The comb says
Probably because of high awareness of the weak state of the labour market and what this means for the likely number of other buyers in the housing market – fewer. Also, hopes of interest rates really falling away have backed off somewhat, encouraged by the likes of myself and other economists warning of underlying inflationary pressures still being too strong.
Then there are the many monthly measures showing house prices either flat or falling. In fact, last week the REINZ nationwide measure which I track fell 0.8% in December to register a monthly rise averaging only 0.1% for the three months in the December quarter.
There is no upward momentum in house prices on average. Will there be this year? I think yes, however, with higher unemployment to be reported soon, new uncertainty in the global trading environment, net annual migration running 100,000 weaker than a year ago (though still 31,000 positive) and still good house supply growth, gains will be quite minor.
To interest.co.nz - I like your site as the reporting is largely, as it should be, neutral & reports facts. Leave reporting opinions framed as facts to Stuff, the Herald, TVNZ, RNZ et al. Thus, can you avoid telling us what is "bad" news and what is "good" news? Give us facts - we can decide for ourselves how we feel about it.
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