Real house prices could drop over the next two years, although there would be a limited decline, while households remain cautious toward spending and their perception of how the economy is evolving, according to the latest ANZ-Roy Morgan Consumer Confidence Index.
The index fell eight points to 108.2 in February, and has been on a declining trend since early 2010, it said in a release accompanying the index. However, seasonal adjustment showed confidence only fell one point, pointing to little change in households' already cautious outlook.
General inflation expectations lifted in February to 4.1% per annum over the next two years, from 3.9% in January.
"This has been trending up since October. While such measures are generally a poor bellwether for inflation itself, they do provide some value in terms of wage bargaining expectations, an area we will watch with interest," it said in the release.
Meanwhile house prices are expected to rise 1.8% per year on average over the next two years, down from 2.1% in January.
"Such measures typically have a positive bias and we view the measure as flagging limited movement and declines in real house prices," it said in the release.
Here is the release from ANZ Nationa and Roy Morgan:
The ANZ-Roy Morgan Consumer Confidence measure dropped nine points to 108.2 in February. The index has been on a declining trend since early 2010.
Turning to components, the Current Conditions index fell nine points to 96.6 (previously 105.2). This reverses the lift seen in January and takes the index back below the key 100 threshold. Leading the fall in current sentiment was a drop in the perception of whether it is a good time to buy a major household item (from +20 to +13) and more negative perceptions by respondents regarding their current financial position relative to a year ago. A net 20 percent of consumers still feel worse off relative to last year, compared to a net 9 percent in January.
The Future Expectations component fell from 125.0 to 115.9. This was underpinned by declines in perception regarding financial wellbeing and economic prospects over the coming year.
While the decline in the month appears discouraging, seasonal factors account for the drop in sentiment. If we remove the seasonal factor apparent in consumer confidence, headline confidence was down only a point and the current conditions component was unchanged at 94.8. All the five subcomponent questions were largely unchanged on January once seasonal influences are removed.
Hence, the overall message is unchanged: households remain cautious towards spending and how they perceive the economy is evolving, though more upbeat than the dark days of 2008.
Looking at the detail, there was a considerably larger drop in the confidence of males than females. Male confidence fell 14 points to 109.6, while female confidence slipped only 3 points to 106.7. Females are more confident about the current economic environment than their male counterparts. Males, however, are more confident about perceived future economic conditions.
Confidence eased for most of the age cohorts, with the 18-24 age cohort registering the largest loss in confidence, dropping 16 points to 117.3 This deterioration in sentiment was reflected over both the current and future conditions measures.
Confidence was weaker across every region. Wellington had the smallest reduction in confidence (down 4 points to 116.8) and remains the most confident locality. The South Island recorded a large fall in current conditions, dropping 21 points to 88.4. This was primarily due to a drop in current conditions in Canterbury, which slipped 12 points to a twelve month low of 91.5.The North Island recorded a larger fall in future conditions, dropping 11 points to 115.0.
General inflation expectations lifted, while house price expectations dropped. Households expect general inflation to average 4.1 percent per annum over the next two years (up from 3.9 percent in January). This has been trending up since October. While such measures are generally a poor bellwether for inflation itself, they do provide some value in terms of wage bargaining expectations, an area we will watch with interest. House prices are expected to rise 1.8 percent per year on average over the next 2 years, down from January’s 2.1 percent. Such measures typically have a positive bias and we view the measure as flagging limited movement and declines in real house prices.
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42 Comments
The question I have been asking for a long time, and asking it more and more aggressively, is why WOULDN'T our house prices follow the example of Japan, California, Florida, Spain, and Ireland (at least, so far). Why all the misplaced faith and spruiking in the face of real world evidence?
We are different to all those others, all right; we had their example to go by and still didn't learn. Oh, we loved mocking them meanwhile, especially the stupid Yanks.
IF we manage a loooong, slooooow deflation like Japan, we might be entitled to retain some dignity, given the rapid and calamitous nature of the crashes in the other markets. The Reserve Banks of NZ and Australia have the advantage of foreknowledge of what they are trying to stave off. Good for them if they pull it off. But it must be next to impossible for Reserve Banks to manage economies through base interest rates, when town planners are enabling and abetting property ponzi; our own Don Brash predicted this in the early 1990's, and more and more experts are saying this now. The "mainstream" just hasn't "got it" yet.
Maybe the smartest guys, like George Soros, just use their knowledge to outwit the mass of stupid people and their blind experts, and make a killing both on the way up and on the way down. Pity no-one listens to the honest guys who actually don't do this, and try and warn everyone.
@ Philbest ... OR follow house prices which have fallen in the UK ,Canada, Belgium, Greece, or even South Africa for that matter?
Only OZ and New Zealand are out of step with the rest of the world, I hope it does not wash up here but I have my doubts.
The only thing holding it all together is Dr Bollards 'life support' system of low interest rates .
I have a vested interest in investments in listed property , and direct property so I dont want a big drop , but I am not at all optimsitic or confident , and am quite negative
OZ and NZ are not out of step with the rest of the world...That is the miss conception
The rest of the world went on a property boom offering over leveraged loand to those who could not afford it on a huge scale...called sub prime...and if didnt they exposed themselves to it.
Ausse and NZ sure over lent but only lent to those who could at least show they could cover the repayments....Here sure there where a few who could not refinance, got hit with reduncy and stuff.....We did not have the sub prime, where not exposed in a huge manner and have not had the unemployment increase.
We are not out of step, but because of a certain amount of prudence (not enough) the results of the crash/ression are not as sever.
This has resulted in a smaller drop in our markets, flatenning out early, basically going stable till the long term property means come up to meet the market values....which as this gets closer will be when things start looking rosy again thru the whole economy.
So in other words, the Oz-NZ bubble is not deflating as rapidly as the US-Euro bubble.
Their's burst and collapsed quickly, while ours is very slowly-but-surely deflating, like that of the Japanese bubble.
You see? Bubbles burst. It's what they do. Always. And the consequences are usually identical, whether it's a fast or slow burst.
But hey, you can continue to kid yourself that "We're differenter!!!!11": intelligent people don't care, it'll just be even more entertaining for us when you are FINALLY forced to man-up and face the facts.
:)
Justice, I'm curious about the place you mention. Isn't the B&B they call the Castle (actually Warick House) up the top of Collingwood St (city fringe)... I thought the only B&B in Monaco was 'Shells' ?. And where did you get your numbers from, is this registered QV info or similar or anecdotal information ?.
I'm about to offer on a large property in Nelson, so it would be interesting if there was evidence that the market had fallen by this much.
However I'd also note that the Press reported yesterday that Nelson was the only main center to still expericance positive house price growth (albeit probably below inflation levels) during the 12mths to end Jan.
Cheers, Ki
The truth is, right now I'd rather own a rental propery than my small portfolio of shares. It's value is dropping faster a stone thrown out of a hight rise apartment.
My granny lost 120k in Hanover (Allied Farmer). In her case losing 20-30% on a rental isn't that bad...
Your Granny may have lost 100% of her savings in Hanover, Chairman, but those who have say $120k as 20% equity in a $600k property are going to lose not only their 100%, but have debt of $60k still to pay off, if/when property does fall 30%. Leverage works both ways...up, and down...
"Areas once thought to be virtually immune to the downturn in the housing market are starting to see signs of decline.
Cities like Seattle, Minneapolis and Atlanta are now entering their own downturn in the housing market, and there are no signs of it slowing.
"In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix."
http://www.nytimes.com/2011/02/14/business/economy/14dip.html?_r=3&page…
this could be of interest to Hugh Pavletich
And you were absolutley right! And who's to say you wont' be right on the housing market, either ~ except, me, of course ;). But a little anecdote: The final home I sold in Feb '08 was bought buy a late middle-aged couple that 'had just got their money out of Hanover, as they'd heard through the grapevine, that it was struggling". They were in the process of putting down the rescued money on 'as many houses as we can at 10% deposit, as the property market always goes up". I just smiled......But even I didn't know a GFC or an earthquake was going to add to their investment strategy.
Although I do believe in any investments, there are risks and you must have a back up plan plus a long term strategy. My shares portfolio as an example, long term it would be OK and so is housing. I have a plan B, so it's unlikely that I will need to cash it up (but I'll be spewing with the value right now if I have to!).
I know a number of friends who are PIs, they ones that do well are those lowly geared and in stable jobs. Long term trends; 5, 10, 15 years.. who knows.
Horses for courses, CM. I'm more of the view that 'if you diversify, you will win-some-lose-some'. Most people can't do that properly! They expect to win on property; win on shares and win on cash. They hold whatever is losing at any given time, and hope it gets better. It rarely does! People find it hard to 'take a loss'. So I go the other way...it's all or nothing. That tends to clarify one's mind, if things go astray. Act...or lose it all.
Chairman Moa is right, if you do not have to sell your house and are not going to need to sell to release any capital then only thing that matters are interest rates and Jobs. (for the majoirty of house owners) property will dip and it may give those a chance if have not brought and opportunity to do so.
So: If I was to say to you "FCM. Sell your house for a million today, because you will be able to buy it back for half a mill. next year", would you not do it because 'you have a secure job and interest rates are staying low'? Of course, none of us actually know; but life is for those that see possibilities !
CM this is part of my 'homework' along with a plethora of other information gathering, plus some knowledge of the market (having lived in this area 40 years). I've been looking at making a property investment for 18mths, and haven't done so yet, which I guess shows I'm cautious... this one has ticked 'most boxes' for my situation, but then I read comments from Justice and it makes me reconsider. This is a diversified property investment, but when I hear (granted it seems unsubstantiated) reports that the market here (at the higher end) may have dropped 40%, it makes me pause!
Fox news expample is probably a good one... probably some extenuating circumstances (if theres even a shred of truth to it)... so come on 'Justice', how about some 'evidence' !
As a fellow Nelsonian might I ask is it commercial or residential property you are buying? If its commercial I would only consider buying at a BIG discount as the Nelson market is awash with such property.
I concur - I know of no Castle BB in Monaco. Surely he means Warwick house - which I believe was on sale - it may well have gone at a substantial discount as the market for motels/guesthouses etc at the top of the South island is similarly flooded.
Sorry Andy, the towns a bit small to say too much. It's well located commercial, mixed use stuff... but I would agree, there is empty commercial EVERYWHERE and at some pretty serious rental discounts too (have a colleague scouting for an office at the moment).
Wanted offers starting with a 1, I thought $850k cash, flexi settlement, no conditions etc was a reasonable bid ?. Told the REA not to counter, as I'm not in the mood to screw round in a market that I think has a bit more downside yet (I have no 'qualifications' in this area other than being a property owner... pity some others on this site couldn't admit to that). Problem is I know they are going to counter, and the REA will play the old tired game... problem for them is that I will walk or counter lower (as I did on the last property I purchased and was successful in buying that).
So I get the feeling the REA will effectivly kill it, though I figure a 15% discount in todays market (considering the nature of the cash offer also), is the MINIMUM I should be applying... it's been on the market a looooong time... and might be there longer yet!.
Stick to your guns, behind the scenes there are a lot of previously 'monied' folk in Nelson who are having to divest themselves of assets because they are not as quite as rich as they thought they were a few years ago. There are no end of folk who have their homes as re-re-re-mortgaged depleting piggy banks for their struggling businesses who are under a lot of pressure. Most things retail/tourist related are doing in very hard. In terms of international tourists I think Nelson has passed its peak - fewer Europeans coming and we arent going to get a share of the Asian market because of where we are:
http://www.stuff.co.nz/business/industries/4677793/The-changing-face-of…
Thats not to say we cant once again be the favorite playground of Cantabrians again - we may well become that as things continue to tighten. Just that I doubt they will replace the European cash cows. International tourism is no longer a growth cash cow for Nelson.
Ki,
Someone I work with who is doing very well in properties. Before he committed to any investment he would go out and be on the other side to see what hot and what not. Recently he bought a rental house in western part of Auckland. He went out and pretended to be a tenant for at least 6-7 weeks. Took lot of notes from people he came across. Lots of work but I had to give it to him for being on the ground and I guess he trusts his instinct.
Sorry NA not many think like you, most Mums and Dads have a house to live in, not to buy and sell every time the market go up and down, thats for the property investor. And as a property investor you will have ups and downs thats the risk you take, just like the sharemarket etc etc..property is long term..not short term, most people who own property are in it for there life time, not for 5-10-15 yr period.
Totally agree FCM.
You own home is not really an investment: its one of the options of putting a roof over your head, be it renting, boarding, owning, camping etc.
The problem with a lot of kiwis they want the quick unrealistic returns over a short period and don't have long term view on investing. Thus they tend to put all their investment eggs in one basket which appears to be favour at that time.
Diversity and having investments vehicles (be it shares,both domestic and offshore, property, both residential and commercial, fixed interest etc, managed funds) relative to your risk tolerance is the key to long term investing.
There is a big difference between investing and speculating.
"Divesifying" is not the 'key' to anything, if you ask me. It's the result to the question: "What should I do?" and the answer comes back "I don't know.." So I'll put 30% into this; 30% into that ; and 30% into whatever, and have fun with 10%. Most people see those items as property / shares / cash/ living costs. But In New Zealand the ratio is closer to 80/5/5/10. If you don't know, then admit it! Stick to 60/0/30/10, in that case. Because hedging-your-bets, diversifying, means accepting a loss in one category ( If you expect everything to remain stable/go up, then what's the point of diversifying.?) Most New Zealanders can't bring themselves to do that ( take a loss); especially if the loss rears it's ugly head in that most sacrosanct of categories ...property....that's why the 'ratio' has to drop from 80 to 60 to take the pressure off households when property prices fall.
The opposite is the same in regards to your comment Because hedging-your-bets, diversifying, means accepting a loss in one category älso means having to accept a lower return on some of your investment as you don't have all your eggs in that basket which is experiencing higher returns.
I agree, if don't know or don't understand ,that sticking to straight bank term deposits is best for many people: they can sleep at night knowing that no one has every lost a dollar in such investment in any registered bank in NZ. Yes the potential to miss out on higher returns is there but ask most pepople today with cash that capital protection is more important the high returns.
Kiwi's are not the best at diversifing: buying 4 rental properties in the same street in the same suburb in same town exposed to the same tenant market (family homes) and property influences.
Or placing their money in 4 finance companies all lending to the market (spec or development property sector or retail consumer market) who will all be exposed to the same ecomonic conditions.
Manyof the people I see today who are in a very strong financial position have had a spread of investments in areas they understand and go for consistant level of reasonable returns (hedging your bets as you say) rather than the quick buck many are after and blame everyone else when it doesn't happen.
"most people who own property are in it for there life time"
bullshit, were in and out more than burlesconi at a 6th form party
gimme a graph with a wiggly line and ill giv u a ruler that points up, up, up...
goes in 7yr cycles, '07 peak-'14 peak....we're at the bottom ppl
One item missing from your 7 year cycle; the 60 year cycle. That's 'the aging' process, and the demograhics that are peaking...now... 60+ year olds; those who have previously saved for their retirtement in 'investment property' are upon us..now. They are nett sellers. They've 'pumped' and are about to 'dump'! But the problem of that pumping is that the nett buyers can't afford what they have to dump. Yes the 'top' of the wiggle line was '07...but the top of the 60 year wiggly line is...'11, coinciding with a slump in property cycle. We now have the 30 year drop to experience :)
I see a lot of the ose who have / are dumping their rentals are the accidential londlords, who in the 2002 -2007 kept their existing owner occupied as a rental and purchased a new property to live in. The basis for such a decision was based more of tax structuring and they forget to allow for R & M, vacancy and unpaid rent as well as the the midnight phone calls from tenants or their nieghbours. While the accidential landlord thing has worked for some I have dealt with many which are taking real losses (allowing for time, topping up rentals and exit costs).
There are still a large number of property investors with the right gearing who are not having to dump their properties and continue to look for the right properties to add to their portfolios.
nic, the only wild card i see is oil...and i think itll b 20yrs away at least
meantime, business as usual
my plan is to keep adding value to my shack, not get into any debt, sell in '15 and build a small place mortgage free or as close 2 it as i can.
but i reckon if uve got the coin nxt 12-18mths is bargain time...look at 20, insulting offers on 10, 1 will b despo enuf?
im not 100% on this theory so i wont borrow to get a bargain, playin it safe atm, but if i had the $ id b lookin 4sure
mark
Nothing wrong with any of that, mjt. You have a plan, your eyes wide open and an alternative,if it all turns to custard ie: no or little debt. That's going to be the downfall of those who went before you, with eyes wide shut ( the "It doesn't matter about the yeild; property always goes up", crowd....)
House prices could drop significantly if Residential land prices were realistic. Currently the cost of residential land is badly affected by the staggering cost of Local Authority fees - up to $50,000.00 & more . As a comparison:
Santa Rosa County,Florida: beachfront subdivision from $24,500US
Henderson County,Texas: Lakefront Lifestyle,5 acres $47,500US
- so our residential sites dont compare well at $160,000.00NZ!
Piffle ! ... You just don't know where to look in NZ , to get a bargain . Here's a wee gem for you , slightly out of Auckland : www.trademe.co.nz/Trade-me-property/Houses-for-sale/auction-344924413.htm or , if you have an unlimited budget , and are beyond " renovate or detonate " ( love that line ! ) ; try this from the top shelf : www.trademe.co.nz/Trade-me-property/Houses-for-sale/auction-356024691.htm
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