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Barfoot and Thompson Auckland house sales volumes fall 1.5% in October from September but average price rises 1.1%

Barfoot and Thompson Auckland house sales volumes fall 1.5% in October from September but average price rises 1.1%

Barfoot & Thompson, Auckland's biggest real estate agent, says it sold 11 fewer houses in October than in September but prices rose 1.1%.

Barfoot & Thompson said sales volumes in October totalled 727, down 11, or 1.5%, from 738 in September, but up 166, or 30%,  from 561 in October 2010. The average sales price in October rose to NZ$553,765 from NZ$547,883 in September and NZ$524,004 in October last year.

Peter Thompson, Barfoot & Thompson's managing director, said a feature during October was the number of new homes listed.

"At 1,314, this was an increase of 4% on that for last month and the highest number of homes listed since March. It created greater choice and raised buyer interest," Thompson said.

At the end of October Barfoot & Thompson had 4,999 listings, 4% more than at the end of September, and the highest since June.

He said the housing market in October followed a similar pattern to the previous four months, remaining in a "relatively stable period" in terms of prices and activity.

"As for much of this year, this average price was affected by the strong interest in the high end of the market, and in October we sold 60 homes with a value in excess of NZ$1 million. In the past two years sales of NZ$1 million plus homes in a month have exceeded this number on only three occasions."

For the 12 months to October 2011 Barfoot & Thompson sold 8,930 houses, up 625 from the previous year's 8,305.

'Tightening of market'

"Far more homes are selling this year than last, but for the past three months sales numbers have been marking time, with the movement between the high and low numbers in that period being 31 homes," said Thompson. "We expect the current stability in prices and sales volume to remain through to the end of the year."

ASB Economist Christina Leung said Auckland house sales had increased 7.2% on a seasonally adjusted basis, but new listings were down 8.1% on a seasonally adjusted basis.

"Following on from 3 months of decline in housing turnover, this rebound indicates a stabilisation in housing market activity in the region," Leung said.

"Meanwhile, there was another decline in new listings, suggesting a continued tightening in the Auckland housing market," she said.

"Despite the latest improvement in house sales, the pick-up in housing market activity remains a very gradual one. Nonetheless, the continued tightening in the Auckland housing market should put upward pressure on prices. Going forward, the key trends to watch will be whether sales and new listings continue to pick up. We expect housing market activity will continue to recover gradually over the coming year."

(Updated with comments from ASB's Christina Leung)

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148 Comments

Last year, vendors were ‘waiting for the market to improve’. Now they are looking at it and asking “Was that it?” - (..sales volume up 30%, from  October 2010) - and have decided, “Yes it was”….and are now heading for the exit. It’s likely to get a might congested in that property-selling door, this year….”Leapfrogging” ( vendors trying to make sure theirs is the best offer price by anticipating what the neighbor is going to list for) is the next step. The top end may have already started down this road ...".. a feature during October was the number of new homes listed.."  and".. this average price was affected by the strong interest in the high end of the market..."

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4999 Akl  houses for sale ,be in quick while stocks last .

PS -   Would be interesting to know  sellers reasons for selling up , I guess they are off to Liquifchristchurch to help with the rebuild

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Prices moving up quickly in the good suburbs, but now also edging up in other suburbs ie South Auckland - also up substantially on last year.

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But what happens on 27th November 2011, SK ? You know.. the day John Key gets a huge mandate to.....sell the SOE's? Where does the money come from, $7 billion I hear, to invest in those sure fire assets? I'll give you a clue.....the richer NZ'ders are already selling their houses... in anticipation :)

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Mate it won't be "richer NZ'ders" buying the SOEs it will be foreigners as usual. "Asset sales" should be called what they really are -- "ASSET LOSSES"!!!

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Look to the building sector still sliding down the slope to ruin....National helped it on its way with the gst spike killing off too many who had planned to build. Now Key faces having to slash gst on all new builds and all reno materials and on labour if he is to save the industry.

Everyone now measures the gst pain when it comes to doing reno work or going ahead with that new build, especially when it is so plainly obvious English will chop 33% off the tax theft in an effort to keep the sector from becoming a corpse.

That's a huge amount to risk throwing away on any work when the gst cut is likely post the election. Bad enough that people borrow to pay the gst on the new build but to have to pay rates on the tax as well.....and then pay gst on top of the thieving rates bill.....what an utter scam.

And where does this stolen gst go?....why straight into the pot to be paid out to the National Party rump landlords as a subsidy...all aimed at keeping the house prices jacked to the hilt...to save the bubbles to save the banks that farm the country for fatter profits.....

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I know an old lady, who swallowed a fly.... :) 

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Must be all doom and gloom in Labours' inner sanctum...they went with fresh fruit and veg when they should have promised a 33% cut to gst on new builds and all reno work...would have gone down a treat with the building sector and set Fletchers up against the govt...and made the chch people happy as....too late now!

You folks out there what fail to realise the power in your hands to dictate govt policy...it's not just the one vote every three years....you have the power of your combined actions and I don't mean joining rent a mob...just stop spending on new builds and reno work...just stop.

If you could all do that.....BE would be bouncing off the inner Beehive office walls in desperation....the gst cut would be announced as starting at midnight......

Taxation kills activity. Currency debasement kills saving ....dead.!

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Rich NZ'ers dont need to sell anything to invest in SOE sales if they so wished.

They have been unscathed by the recession are coming out of it in better shape than before.

Perhaps you should get out and meet some rich NZers!

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Most of the Rich Nzer's I know own their home and maybe another rental prop, rest is in other assets. "Oh but for them the capital gains are the cream off the top". Cream my @$$, they like living where they live and thats all there is to it, they all know that property is a middle class chumps game. The real money makers are the ones that own the bank shares and buy low/sell high and trade well on the ASX.

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C'mon folks .... get your 5% deposit together and get out there and invest in that sh*tbox that you would never live in yourself

That's the way..... use as much OPM as you can, mortgage it to the hilt, now you talkin' !

Just watch that great "cash flow" roll in from the rents from the punters ..... ohhh financial bliss :)

Don't forget those great capital gains ..... you're sound asleep while your property churns out profits at a compounding rate of knots .... eye eye capt'n

Wait are you waiting for ! .... c'mon do it for your country !  you will be providing homes for all  n' sundry to ease your social conscience of being a "slumlord"

That's the way ..... tie up as much of people's net income in rents as you can, as we need that so you can pay the mortgage !

"pay the mortgage" ..... we love those 3 words,as they mean PROFITS !

Who cares about the general economy, R&D, new business and industry, innovations, value adding to primary products, higher incomes etc  when everyones disposable income is coming our way ... yes our way, thru you the Landlord !

See it's all worked out .... we do "live in your world" ... although it may be 1500km away across the ditch, but that's a minor technicality :)

See you at that open home.....our brokers will be standing by !

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Yeah you only have to look at record banking profits to see who the suckers are, I can tell you now its not the people who are renting. To the statement "Yes, but one day the landlords will own their homes outright" I answer "Yes they will, but they paid 3 times more than they needed to in interest". I was always taught only to borrow money when you're on the bones of your bum.

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I watch statistics that don't seem to be published, but are there, if you pay attention.  Here are some good metrics I use, making for a very sick market, according to these indicators:

--uncertainty meter- current reading- very high- what is certain today?

--private listing meter- noticed the increase of "private sales" lately?  This is usually due to a disconnect in the market- often a seller that must cover the cost of paying off the mortgage AND paying the real estate agent.  If the 2 add up to a larger number than the market will pay, then the "owner" (read- renter from the bank) must try to sell it, on their own, to pay off their debt, and walk away without banruptcy. 

--changes to the way that listings are described.  I spoke with an agent recently who said he has specific instructions to no longer list as "mortgagee sale" any property owned by the bank.  Why they are doing this is blatantly obvious- so people like Barfoot and Thompson can go on and say "very few mortgagee sales."  Ha ha.  They're there.  They just aren't calling them that, anymore.  They've been doing the same thing in America for some time now, drip-feeding their dregs into the market, slowly.  We'll just call them "auctions" so as to not scare the suckers- we mean "buyers." 

--Auction clearance rates- houses go to auction- but do they actually sell?  Very anemic, at the mo, in spite of this being the "selling season" now going into the holidays- "that was it?" Well put! :)

--a catalyst for the last mania was low interest rates.  Today interest rates are at record lows, even lower than before the last boom, yet prices are still flat- too much debt, already!  Look to America, where you can get a 30 year fixed mortgage for less than 5%, and prices are still going down!  Too much debt!  Too much "shadow inventory"

--hidden desperation in listing descriptions- See how they rise.  How can you sell "I'm going bankrupt, unless I can rid of this darned millstone of debt" without seeming TOO desperate?  Check number of listings with key words like "circumstances changed"  (translation- husband lost job or had hours cut, or same for spouse), "packed up and ready to go" (translation- bank keeps bothering us for money that we don't have, won't you PLEASE take this turkey off our hands?), or the all too often seen, "moving overseas" (translation- off to Australia, where I can actually find a job, doing something other than selling dresses at a dress-shop or prepare flat-whites), or the obvious "Off to Perth" (translation- we are now out of money, so may as well make a fresh start)

--turnonver of retail establishments- previous tenant goes out of business, ask new tenant- how's it going?  REALLY?  How's it going?  How eager are people to spend?

--responses elicted when you ask someone "hey, I'm looking at buying some real estate.  Do you want in on the deal?  Safe as houses, I swear....ya can't lose with real estate, maaate."  Then get out your watch and time how long it takes for people to stop laughing or staring at you, funny.  The time has grown over recent months.  Real estate is quickly becoming a hated investment.  People are taking money they do have and paying down debt.  Eliminating risk. 

--have salaries gone up, lately?  Not from what I'm hearing.  But hey, Auckland is "special."  Let's see how that works out for you, now that you must sober up from the RWC.  Go All Blacks!  Now, back to reality.... oh sh-t...how much do we owe on that rent house?  Multiply that by the number of people calling themselves "investors."  More like "speculators." 

--count the number of people excited about the recent tax law changes affecting property investment.  Has it risen?  There's more shadow inventory. 

--Commercial vacancies and sales- how's business, folks? 

--how long between tenancies?  Real estate follows JOBS, and jobs follow BUSINESS!  Am I the only one who knows this simple fact?  Where are the jobs coming from?  Where will they be coming from in the future?

--Worldwide- metric of number of demonstrations, uprisings, etc, leading up to some real nasty events.  Are we at peace, really?  Sufficient to sustain even our pre-boom pricing?  Just because you owe $500K and "have to get $500K" when you sell, doesn't mean the market gives a sh-t about what you "need."  The market is the market, and I'm sorry, but a 1% rise is very anemic.  How many of these buyers of luxury homes are wealthy Asians, trying to get out of their dictatorship countries, before they go to war?  Would you pay any price to get to a relative safe-haven, like NZ, if you had the means?  Where else would you go?  Chile?  Few places are safe from the ravages of what's coming.  Nobody talks about it, but we all know it's there.  See Kim dot com.  Not an idiot.  Also certain members of banking families, quietly moving here.  Why now? 

--Averages tell you very little, anyway.  And for the average guy right now, life isn't easy, and he must make due with less than he had last year. 

--yes, there will always be exceptions.  Upper-end neighborhoods will be better protected, because of who lives there, but they are not totally immune.  "You pays your money and takes your chances."  Everybody needs a place to live, even rich listers who can afford to pay cash for their homes- a small minority of the overall market, yet holding enough power to skew the averages to the upside with their all-cash, luxury home purchases.  Meanwhile, the dumpy, tired 3 bedroom, 1 bath home that "has potential" sits on the market, forever, price reduced, "circumstances changed", etc, ad infinatum. 

--Comparing the number of rentals compared with last year- did anyone notice the spike 6 months ago?  And then big drop about 2 months ago (to sell again)?  Or was it just me?  What do you do when your house doesn't sell?  You rent it!  Renters are spoiled for options now.  Hence my screen name. 

--Who would want to be a renter to the bank, "buying" the turkey on the wrong side of the street, when, for the same money per week (and no upkeep headaches), you could rent the palace on the right side of the road?  And leave any time, whenever you want?  And not have to deal with selling your house in a down market?  It wll probably be this way for at least the next 5 years....anemic "growth" if you even want to call it that.  Sorry, 1% is not "growth"- it's FLAT.  

--A FLAT market does one of 2 things, eventually, it screams up or it crashes.  What is the catalyst for the former?  There are far more for the latter, unless you are a fool.      

--What all supposedly "educated" consumers and "investors" should be aware of is the hidden or "shadow" inventory, currently building, into the market.  Where is it?  How is it being accounted for?  If it is not being accounted for, that's because they are HIDING it, because it is BUILDING!  All you have to do is look to America, where banks sit on over 5 years of inventory, and 13% of all homes are vacant.  What makes us so special?  But we have Australia!.... uh, oh. 

--All of the so-called "experts" have been wrong about just about everything, really.  What would make you think that "this time it's different?" 

--the only time a market really changes is once there is TOTAL CAPITULATION.  Hasn't happened yet.  Might be a few years away.  People are still holding on, tying a not, etc trying to stay afloat.  About 1% is falling off the boat, drowning in debt.  That 1% represents a LOT of inventory, especially as it grows to 2%, etc.  Banks are keeping it quiet, so as to not scare the sheep.  Quiet before the storm, head in the sand, (insert your metaphor), etc.  Denial is the phase just before the REAL crash happens.  We may already be in it.  I believe we are. 

--It takes about 2 years for the whole process of writing down debt on a house happens, for the bank to take back the house, re-price it (quietly) and "feed" it in the market, repricing it to meet the market.   Sellers are now trying to sell their overpriced turkeys, marking them down to what they owe on the debt, listing privately instead of with an agent, and they will untimately LOSE.  The market always wins, regardless of what your personal circumstances are, or what you think your house is worth. 

--Those currently in denial about their financial situtation represent a huge, awaiting waterfall of inventory that will hit the market, sooner or later.   A large percentage of these "owners" will lose their homes to the bank, and will be re-sold at a discount, by the bank (though the bank will try to keep that a secret).  

--Banks hate losses.  The best they can hope for is a flat market, with as many people servicing their debts as possible.  Taking back houses in mortgagee in possession is part of the game, and must be played STEALTHILY, so as to not bankrupt the bank iteslf.  Keep the sucker's payin!  Don't scare the flock!  Feed the foreclosed houses in slowly!  We don't want to bring down the whole neighborhood, and our good paying customers with it!  Look what happened in America, where people mailed in their keys!  We don't want no "jingle mail!"  That doesn't mean it won't happen.       

--How many people do you know bragging about what a great deal they got on their house?  I talked to a guy yesterday who was almost in tears about their financial dire straights, regarding their "lifestyle block" bought just before the top of the market.  What percentage of the entire market are people like this a part?  Overleveraged?  Debt higher than the value of the property?  How long do you think they will "tie a knot and hang on?"  I say 2 years, and I've been saying that for 2 years, so I think we are in it now, actually.  After this so-called "selling season" - about to leave with a whimper, not a bang, banks wll be taking possession of far more homes in the winter, writing them down, and putting more homes in the same neighborhood "underwater" or owing more than the house is worth.  

--have you had a look at the financial health of banks, lately?  If you aren't scared, I'll be scared for you. 

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So do I take it you have a fairly dim view of things?  By the way, landlords usually like 'Happy Renters"

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I think that rant deserves article status, how about it Bernard?

What about the sign you can see in non real estate assets? I am hearing of some amazing deals on boats as people are desperate for the cash. 

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--private listing meter- noticed the increase of "private sales" lately? This is usually due to a disconnect in the market- often a seller that must cover the cost of paying off the mortgage AND paying the real estate agent. If the 2 add up to a larger number than the market will pay, then the "owner" (read- renter from the bank) must try to sell it, on their own, to pay off their debt, and walk away without banruptcy. 

Responsible agents try to reign in the unrealistic expectations of sellers, but the sellers don't want a bar of it, so they give the agents the heave ho and try to sell privately, convinced they'll get the big money they were being deprived of by agents. The sellers assume collusion and conspiracy where none exists, but why else would agents be telling them their asking price is too high? Obviously the agents are trying to rip them off somehow!

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"Responsible agents"? Get away!

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Good on SK for his or her half hearted attempt to continue the spinning and spruiking but where are all the other real estate agents and mortgage brokers etc such as MortgageBelt? Funny how they are all keeping a low profile for once.

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Perhaps because month after month the figures show a strong market in Auckland - and stable market in the rest of NZ - and if nearly everyone on this site prefers to ignore facts - people tire of the same yes it is, no it isnt routine.

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Mate that's the spirit! Good on ya! HA HA HA!

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"How did you go bankrupt?" Bill asked. "Two ways," Mike said. "Gradually and then suddenly." ( Ernest Hemmingway). Time takes it's toll. And property holders will suffer by contagion. Any one individual may not 'have' to sell, but others will ( or the bank will do it for them) and prices will the head towards a 'suddenly' moment....

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It's a shame none of you bought a house in Mt Eden/Herne Bay/Westmere/Grey Lynn at the "peak of the market" in 2007 isnt it.

I suppose you wouldnt have been able to afford it - well if that was the case then - you definitely can't now.

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The worst that happens to those who didn't buy there, SK, is that they buy somewhere else. The worst that can happen to those that did buy 'at the peak' or therafter, is that depending upon their gearing, they could lose.... all that they have.... if it was the wrong thing to do. Life is a risk/reward game. The secret is to still be alive...if you are wrong.

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99% of people prefer not to live in Oamaru.

99% of people do actually aspire to live in these areas - and would love to - if they could.

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Yes, but 100% of the properties in Oamaru are owned by somebody. ( nice place, actually! Down by the seafront can be quite nice on a sunny day). Thats' the point. There is ALWAYS and alternative place to buy or rent, SK. And as the economy worsens ( even yesterday's unemployment figures came out 'suprisingly' higher than expected) peple will go the where they can afford to live. That could be Oamaru or Otahuhu.....if their circumstance change in Herne Bay....

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The point is that all the restaurants along Pons Rd are buzzing on a Monday night - full of people who have probably never heard of Oamaru - and dont know anyone who is unemployed. That is the point.

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Have a look at the other busiesses on Ponsonby Road, tonight, SK. Check out the empty shops for lease; the empty clothes shops and other businesses for sale, mingeled in with the cafes and bars.That's where the money comes from to go out to dinner in the first place. And that's what's slowing to a crawl in wider New Zealand. And all those businesses had employees; who lived somewhere - probably local - and who now haven't got a job..and will move away.

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People move away because, all of a sudden, the 'cool' who used to live there, no longer like the 'new blood' they've helped create in the area - sounds like 'Pons Road' (wherever the heck that is) may be well past this stage. Bet the smart money has gone already.....

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Something simply cannot be an investment if someone says to you "buy now because you won't be able to later on down the track". Thats not an investment, its a con. I reckon if you think property prices are fair these days you do not have your head screwed on, good thing is governments can easily rectify it when the population cries foul. If you think pricing your children out of home ownership is a good idea SK just so you can make a few bucks you a sorely mistaken, it will cost you more down the track.

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Normally I would ignore SK's trolling but now he's picking on my home town. Oamaru is vibrant, arty, scenic, & sunny and all of those other things that are sadly lacking in Ponsonby :-) The problem is that there are limited work opportunities there. Watch those property prices fall, if and when people lose their high-paying jobs in the CBD.

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"Oamaru is vibrant, arty, scenic, & sunny"

'Vibrant'? It can be. 'Arty'? In places. 'Scenic'? Hmmm, I suppose so. 'Sunny'? NOT!

After almost ten years in Ommers it was a relief to move to a place that saw a blue sky more than once every two months! (But I still love Oamaru for almost everything else besides the weather.)

LOL.

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Fair call, I'm just trying to wind up the JAFAs. These days I only ever visit in mid-summer and there is a lot of blue sky, most of the bad weather hits Dunedin and then goes out to sea. I do remember some pretty grey winters.

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There was a big drop in the number of Wellington properties listed on Trademe a few months ago but it looks like the numbers are drifting up again. When we sold there were around 4600 listed, this dropped to around 3800, now back up to 4370ish. Many of these properties have been listed for YEARS without selling, ie large leaky style homes, overpriced lower end homes etc. Having said that, vendors just refuse to budge, and it will take a large drop in employment figures to motivate them I guess. Lucky for them the employment situation is on it's way up....

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                            Oct-11       Oct-10

  Central          642,623       567,182

  Eastern          817,933      705,115

Is there anyone who does not consider this to be a good performance over a year of Global Financial Crisis?

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You sure you've got your facts right SK? How on earth can folk afford these houses? I don't know if these are median or average prices but they look seriously unaffordable for incomes under a couple of hundred thousand.

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You could find those figures in this very article - link to barfoots report.

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DP

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Wow SK - does that mean I'm part of the 1%?  And no, I do not live in Oamaru (nice place though it is).

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Once again we see figures to show the property market is not collapsing.

Once again we have the broken record mutterings of people telling us the collapse is 'coming'.

Columns like this are entertaining. The doom, gloom and despondency brigade get more and more desperate to justify their views.

Relatively speaking, there are so few houses being built that the possibility of a collapse gets remoter by the day.

Bernard implied house prices were going to continue to boom in his moaning 'letter' to John Key the other day. Even Bernard is a housing bull now.

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"Melbourne is heading for a bust.

People with an interest in other markets may not be too concerned but it must be remembered that Melbourne is a very large market, it is therefore possible that any problems in Melbourne will lead to contagion. The last thing Australia needs at a time of global instability is for one of its major city’s housing markets to send tremors through the financial system."

Now this is 'just another opinion' but will New Zealand, and by extension Auckland, be imune fro any Australian fallout?

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Melbourne's residential property has been an excellent performer for investors for the last several years, so it should not be surprising if it slows down a bit or even exhibits a correction. "A bust"? - I doubt it... 

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"The average sales price in October rose to NZ$553,765 from NZ$547,883 in September and NZ$524,004 in October last year".

Nah, can't be true. It's been clearly stated many times on this site: house prices will fall 20 to 90 percent !

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I think a lot of people whos values have dropped would argue that they have already dropped by that amount.

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New RVs for Napier out today:  My land value has just gone up from 170,000 to $195,000.  OK, admit the  Improvements/House flatlined,  Still not bad given the recessionary environment.  

Hope this factual news is not too upsetting to anyone.

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Lucky you! You get to pay more rates now. And if there's a Land Tax,..well...Perhaps 'improvements' would have been a better option for your new revaluation?

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That's funny!  That's exactly what I was thinking :)  You took the words right out of my mouth...  this is what happens when the city tax fund starts going dry- they make sure they collect as much tax as possible and ensure "everyone is paying their fair share."  That translates into higher tax collections, higher taxes.  That also means a greater burden of ownership, higher costs of doing business, which translates into higher pressure on prices. 

So congratulations.  You are paying more than your fair share now.  Have you used any more city services than the next person, now that you are paying more? 

In the last Depression, taxes went UP.  Few people seem to know that bit of history.  As the host dies, the parasite gets hungry.  Knowing nothing else to do in this crisis, the parasite sucks harder.  The host dies, and then everything starts over again, usually after a war.  Would you like examples?  Pick your war, then follow the money to the debt that started it.   

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So we are all agreed that the following result over the last year is rather good really.

In that case everyone on this site who has moaned and bleated on and on about the impending collapse - has hearby been proven incorrect, bitter and boring.

                             Oct-11       Oct-10

  Central          642,623       567,182

  Eastern          817,933      705,115

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Nope.

Nope.

Nope.

debatable.

Cherry picking....

Come back and check in after one of say the PIIGS defaults...it isnt over yet.

regards

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Not saying "its over" just saying over the last year (last few years actually) you and your mates have clearly been proven wrong in a major way.

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On RadioLive this morning , with Andrew Patterson , Mr Bernard " Chicken Little " Hickey admitted that house prices had risen 16 % in central Auckland over the last 12 months . ..

.... which means that Ollie Newland & Big Daddy have been proven correct .

And the gloomster who predicted a 30 % collapse in NZ house prices ..... he is still merrily stalking the dark side of life , cackling happily about impending doom in Greece , Italy .. the EU generally , and the world as a whole . ...... sad bugger !

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Yeah sure Gummy and you're buying piigs bonds at rock bottom prices....yes?.....oh you're not.....haha....spose instead you're buying euro on the fx market....oh...you're not buying them either...

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Well, I intend to lodge an objection on the Improvements - as I have spent 18 months re-landscaping every weekend  -  breaking concrete, planting trees, new lawns, fences etc ...so is far more saleable, and improved value.   Not that I intend to sell,  but .... if /when I persuade the better half to move to Aus, I'm off (as have had 2 job offers in Aus in 12 months) .....   but yeah,,  can't avoid tax  -  but low cost, high work improvements on your property - sweat equity - can help you financially ... 

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Great news for B&T...Cubans allowed to trade property for the first time.....!

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Who knows what a new Key government will go for.

Maybe the new financial order will raise interest rates. Key & Co could allow the $ to fall because price rises can be forgotten before the next election.

So $3.00 petrol and $6.00 milk is no concern until 2014.

Put those in the mix with a 2% extra mortgage rate and it will all hum.

Key will happily slum it in Hawaii, or Omaha or even Parnell but will give up the commute to Welly and leave it to Double Dipton  and ilk

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Look for Tolley to go to welfare and Bennet to get education...that'll be smiley's new years joke...Gerry has been asked to fix the leaky Beehive roof cos of his woodworking skills...some poor sod will be expected to push Gerry up the ladder.

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Couldn't Tolley go to Air NZ as a trolley-dolly , Wolly ?

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No...it would be folly.

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As this report by Barfoot covers Auckland, their biggest marketplace, they show positive in good suburbs.

But in other areas there is a very different picture. I know heaps of sellers with their houses on the market for years, and cannot sell.(Too high expectations).

Recently I got this information published by Ray White Warkworth. And Warkworth area is not Otara.

Check it out. Quite some losses. Scroll also down to the very bottom, this property was bough Dec.10 for 1,4 mill. and sold now for 1 mill. in September. I would not like to be in their shoes, they also lost the money for the agency. Funny enough, it is again newly listed for sale for 1 mill.

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I don't see houses as being different than most products - that is, a good quality, well maintained, tidy, presentable and desirable will sell and you may make a buck.

However, my observations of both the properties and their finances are that large numbers of landlords  entered the market with a budget based on meeting minimal outgoings (interest/rates etc) only with no surplus of funds factored to modernise or update said properrty.

Hence, we have a build up of poorly maintained and dated rubbish that will soon finding it's way to market. And I suspect there are heaps of them.....middle and low incme earners, including beneficiaries, who were suckered into this game by the banks......they simply cannot afford to stay in the game.

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Agree.  Taking Barfoot's examples is like taking a blind man's explanation of an elephant.  Which part is he feeling? 

And for believers, like SK, I have some simple math for you.  Did you know that, on average, people only live in their homes for 5 years?  And less than that for first time homeowners?  I have owned 8 personal residences myself, in less than 20 years.  I've done plenty of "owning" for while.  Taking a break. 

“In God we trust; all others must bring data.” -W Edwards Deming

Each real estate agency tells a different story, and knowing that they are all spruikers by nature, you have to take off your foggy spectacles to read between the lines, and look at what the statistics are really saying, or better, what they are NOT saying. 

Few people realize that the average person only stays in a house for 5 years.  Even fewer actually do the math to figure out if it even makes sense.  Usually it doesn't. 

Numbers can be interpreted a thousand ways.  Yes, a lot of houses changed hands, but why?  That is not answered anywhere in just one number.  That is totally an incomplete picture.  Number of houses sold is a measure of VOLUME.  It's present in booms and busts.  So is this a boom or a bust? 

"The most important things are unknown or unknowable."-- W Edwards Deming

What is keeping the market resilent?  And will continue to keep it that way?  Where is "the Man" from Christchurch?  We haven't heard from him in over a year...  did he recover?  Nobody saw that earthquake coming, but it happened.  That is just one example of an unknowable force, cutting the legs out from underneath your investment, and plans. 

Are you prepared for such eventualities?  Or are you a slave to your debts? 

There are so many knowable (much less unknowable, like earthquakes) things affecting, or even shocking, the future of your real estate "investment," or any investment, for that matter.

Can you survive the cost of playing the game?  Most "investors" eventually become casulaties, on the road to wealth and fame. 

To me, it's a matter of simply figuring cost between renting and buying a basic NZ house. 

OWN-  Total money spent, out of pocket, to play this game =  $3700 X 60 = $220,000 for "a place to live" 

RENT-  Total money spent, out of pocket, to play this game = $2000 x 60 = $120,000 for "a place to live"- savings = $100K over 5 years- and no down payment necessary

I think anyone in real estate right now is akin to a person building their house at the bottom of a mountain that is known for avalanches...and it's been snowing quite a bit, lately. 

Here is some simple math for believers, like SK, on why it makes sense to rent in this market...  it's similar to why Casino's always win.  The longer you play, you, the gambler, eventually lose everything, and have to leave the game, and not by choice.  The key is knowing when to leave the table, and doing so by choice. 

For a $500K present value house

Rent- $2000 per month     

equity after one year => $0

vs.  "Own" (or rent from bank)

At 6.5% interest

Payment- $3160 per month plus $600 per month for insurance, rates, maintenance = $3700  

difference in monthly cost = $1700 x 12 months = $20,400 per year, out of pocket each year

In 5 years = $100,000 or "opportunity cost" poured into house, when that money could have been used elsewhere.  IT'S FORCED SAVINGS AT 0% return.  It gets even uglier when you add the down payment, because you earn nothing on that, either.  

the "risk" of renting vs buying = loss of appreciation, lost opportunity

say 5% appreciation per year on your "investment" (good luck, but let's assume this will happen, compounded) = $640,000 value after 5 years

potential gain =  $140,000 - $100,000 (difference vs. renting) = $40,000 net after 5 years, plus principle paydown (forced savings, and 0% return on that money, with no easy access to your cash) of $30K = $75K potential "gain" (assuming the market doesn't go down, and you don't need your cash for something else, and don't have any other investments paying more than 0% return)

Total money spent, out of pocket, to play this game = $3700 X 60 = $220,000 for "a place to live"  

Potential gain (assuming market doesn't go down, or sideways) = $40K

Sell house after 5 years- less 4% real estate agent fee = $20K 

Total gain after 5 years, assuming 5% per year increase , and no major repairs= $20K

the "risk" of buying vs renting = loss of appreciation on other investments, lost opportunity on other investments, and loss of money if RE market doesn't appreciate, and potential loss of everything in bankruptcy, if you lose your job and can't make your payments

total money spent, out of pocket, to play this game = $2000 x 60 = $120,000

$100k difference, invested and compounded yearly at 5%, after 5 years = $127,625 or a $27,625 gain, with easy access to your money at any time (bonus)

$20K (for assumed house gain) - $27.6K = $7,600 LOSS, after paying real estate commissions for your "owned" house.

and additional bonuses:

-no maintenance headaches, unforseen expenses, major repairs

-nicer house to live in, for same weekly outgo

-free to leave any time you want

-no real estate agents to deal with, or pay

-less worry about collapse of the Euro, riots in London, etc.

-no loss of everything in bankruptcy if you can't afford to make your out-sized mortgage payment in this over-inflated, bubble market, about to burst "someday"  (don't want to be in real estate when it happens)

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Interesting reading Gertraud T. - thanks.   The striking thing about the report is that the downward trend is consistent across all price bands.

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And here's the detail broken down by suburb.

http://www.barfoot.co.nz/Info/Market-Info/Analysis/October-2011-Market-Analysis.aspx

Average prices in the Eastern Suburbs of Auckland are up 15.9% (!) in October from a year ago to NZ$817,933.

Now we know where the tax cuts went for those on higher incomes. Into buying more/bigger houses, leveraged up with debt.

That's not my idea of economic transformation.

cheers

Bernard

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Hi BH, No facts and no evidence to prove what you are saying.

Please show me the data whare is the relationship between tax cut and house price.

Creating theory from thin air is ruining your reputation.

A person who looks after you.

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sure, prices have gone up in the eastern suburbs, no doubt, but remember these are average prices, rather than medians. Averages are quite unreliable (distortions occur if more high value sales occur), certainly more so than medians.

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Further to my point, Thompson himself acknowledges the effect of more higher value sales on the average prices:

"As for much of this year, this average price was affected by the strong interest in the high end of the market, and in October we sold 60 homes with a value in excess of NZ$1 million. In the past two years sales of NZ$1 million plus homes in a month have exceeded this number on only three occasions."

I suspect Bernard does have a point that tax cuts has been a factor in increasing activity at the high end of the market, although I think the prolonged retention of low interest rates is perhaps a bigger factor

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Where are the eastern suburbs?  Highland Park, Howick and Cockle Bay?

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Nonsense. South Auckland house prices increased by 7.85% too.

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I suspect the low interest rates are much more of a factor than the tax cuts

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The tax cuts are hardly a factor at all (but a convenient argument for the lefties).

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Seriously, that is what you call quality analysis? Consistent with most of the people that comment here I guess.

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I sold our home in the Eastern Suburbs in March this year, the interest rate position was the main reason these people purchased combined with change in bank lending policy towards them. Initially it looked like we would provide some vendor finance, professional couple both on six figure incomes. They had 500K equity from previous sale however finance was problematic. They finally  secured a 650K mortage not previously avaialble to them. Happy didn't have to leave 250k in at the end :-)

I believe the interest rate policy of lower for longer and the keeness of the bank to keep the loan book moving after the Chch EQ allowed us to sell this property. I  think it actually gave us a 200K premium.

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big big drop according to those stats in Rodney. Me - I don't believe the massive drops there, nor the massive gains in the city. This is what using averages does. It distorts. Lets see what the median figues show

notwithstanding this, what benefits has cutting the OCR to record lows had other than boosting the property market?

I would suggest very little 

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That was the intention Matt. The Beehive spins BS about enterprise and growing the productive export wealth generating, job ceating sector, on a wave of increased savings and superior govt....while Bolly gets on with doing what the banks have said must be done.

All Hail to the property economy and the everlasting credit stoked bubble. 

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I actually agree with Sk thats superior property is still a good investment even in a recession if you buy at the right price.

We have a property in Santa Monica, LA which was valued at 2.2 million in 2007, which should be at its peak. We do not have it on the market however on occassion asked if we will sell it, actually been offered 2.9 in september for it. This is during the worst economic situation in Califonia ever. Some people have the money regardless.

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The property will always be there specs..the value of the toilet paper will not.

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fair comment, if we sell will look at alternative means of exchange :-)

Lets face it Wolly it is a relativity game. We can sell at what ever and will be relatively better of here than most.

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Quite right...each to their own...I'd rather own a batch in a sunny spot on a coast on the Med close to a high speed link to the UK......and tootle round the best spots in a big campavan for 6 months each year.

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Younger brother of a mate, in late teens, got a job at Gladstone in Aussy, walked into $28/hr and plenty of over-time. But can't make ends meet because of the outrageously high costs of renting in the town, so looking to move on. Realises how cheap relatively rents are in NZ- he was previously in Wellington.

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One of my sons is in the same situation, only the company he works for provides the accommodation. It's not exactly a mansion on a secluded private beach, but it's probably no worse than 90% of Kiwis currently inhabit. And they provide the electricity. Not sure if landline telephone is included, but they do supply him with a smartphone. So all in all he's way ahead of those of his mates who didn't head over to Australia.

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Muzza, it depends where you are. Here in glorious adelaide i'm paying $400 pw for a nice 3 bed townhouse, in a mt eden equivalent suburb. Same place in Auckland would be $600 pw. And most other costs are 20-30% less

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Petrol is $1. 40 per litre. Shop around at coles and woolies and you save 20% over nz. Phone plans, electricity etc 20-30% cheaper. And with ikea....

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The math on renting vs buying gets even uglier when you factor in the down payment on the house. 

For a $500K house with 20% down, that's $100,000 out of pocket- and now earning 0% interest. 

But wait!  There's more! 

If you don't make your $3700 a month payments on the remainder of the $400K, you could LOSE your $100,000!  What a bargain! 

I think I'll stick with the $2000 a month renting, for the same house, without the burden of ownership, thank you very much.  Take the savings and have a life, other than paying excessive interest to banks.

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HAPPY RENTER said 'I think I'll stick with the $2000 a month renting'.

This is one advantage of living in the provinces - my rent is $600 p/m. For that I get a very nice house on an enormous section covered with fruit trees. And the LL's ride on mower is in the triple garage. This rent has remained unchanged since I relocated here 8 years ago. The money I got from selling my house at the end of 2005 remains untouched.

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Good job.  Quality of life does matter, and something to be said for having a life, and not being a slave to debt. 

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As usual Olly Newland was bang on with his predictions. Look what he says in his latest article:

"Should Investors Stock Up Now?

Interesting to note in this article that the Minister Of Housing reluctantly agrees with what I predicted last year.
I said that rents would rise because of ill thought tax changes to deprecation rules in last years budget.
If the Minister wants to know what so few people are buying state houses the answer is simple. Renting is (or was) cheaper than buying . Look at the facts in the article more closely. It is obvious that the housing shortage is worsening
As the queues for a state houses and rental housing get longer and longer, rents will continue to rise.
Extract:

“A report by the Housing Shareholders Advisory Group last year found there was a 70,000 house shortfall across the country.”

Now why would that be? Would disincentives to supply rentals be a factor? You bet it is. The removal of depreciation from investment properties has greatly exacerbated an already chronic shortage and now the chickens are coming home to roost.

And just in case you think I am being political, housing under the last Labour government was made unaffordable for many as house prices doubled in just 4 years.

In a nut shell, investors should be buying up as much stock as they can sensibly afford. You don’t have to be a rocket scientist to work out that a shortage of rentals coupled with low interest rates, tax disincentives and an increasing demand can only lead to one thing: Higher rents- and that, my friends can only be a good thing for investors."


Housing under National

DANYA LEVY

05/11/2011

“National swept to power in 2008 promising to restore the “Kiwi dream” of home ownership.

It was to allow state housing tenants to buy their homes and enable first home buyers to build houses on sections provided for free for up to 10 years.

And it did just that. Unfortunately few people took up the offer.

To date 78 families have bought their own state house and just 32 plan to build houses on land provided under the Gateway programme.

It is now being scrapped, but Housing Minister Phil Heatley stands by letting tenants buy their own homes, saying it is funding 78 new state houses.

The Government now recognises it has to focus on programmes that help more people, he says.

Another of National’s election pledges was to retain existing tax rules and deductions for rental property owners.

That hasn’t happened; the Government has stopped property investors claiming depreciation on their buildings.

Mr Heatley admits many in the housing sector believe that increased rent prices.”

link: http://www.stuff.co.nz/national/politics/policies/5913416/Review-Housing-under-National

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Bugger off Olly, will you?

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I guess Olly never figured in that more than one family CAN live in a house, at the same time, and survive.  Duh.  Happoened before- in the last Depression.

This is how market can contract, in spite of "shortages in rental property." 

If a house doesn't sell, it often becomes rental property.  Multiply that by the number of houses NOT selling, and you have a lot of supply.  While you're at it, multiply the number of families struggling with higher petrol and grocery prices, and you have a growing number of families looking for every way to cut costs- their highest being rent opr morrgage payments! 

"Is it ok if I move back in with you, mum?  Bring the kids?" 

Housing shortage solved!

And it will continue this way.  Now you have single mum moving in with mum and one vacant house.  Didn't need new construction there!  That woman is a genius in house creation- and no contractors or sparkys!

Olly is apparently not a student of the last Depression.  You are free to take his advice at your own peril.  You place a lot of faith in our financial system masters figuring out how this all works out well for everbody.  I'm not so convinced.  I might "miss out" on some huge gains, but I think I will sleep just fine, knowing that our rent will never price us out of the market.

The other thing that has to rise is wages to pay those higher prices, and wages that stay high.  It's called a "Nash equilibrium."  See the movie "A Beautiful Mind."  A market is defined by what everybody THIINKS it's worth.  If the government, paying the dole, thinks that rent shouldn't be more than $300 a week, then there is the bottom of your range, your equilibrium.

The boat anchor holding down rents is the dole.  If the government will not increase subsidy for rents (the lowest of the low for renters, forming the base of all rentals), then I don't see rents going up any time soon. 

Do you really really think that the government, and politicians. will rescue your investments?  If you think this is the case, then you deserve to lose everything you have.  Sorry. 

There will be dead bodies everywhere, all casulaties of the market, before this is over.

"It is to be hoped that the poor Jews now being robbed and mauled in Germany will not take too seriously the plans of various politicians to rescue them."  November 27, 1938, writer H L Mencken, Baltimore Sun 

Anyone in this market is a speculator.  Here is a quote from arguably the best and most respected stock trader of all time, Jesse Livermore:

The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or for the get-rich-quick adventurer. They will die poor.

Over a long period of years I have rarely attended a dinner party including strangers, that someone did not sit down beside me and after the usual pleasantries inquire:

“How can I make some money in the market?”

In my younger days I would go to considerable pains to explain all the difficulties faced by the one who simply wishes to take quick and easy money out of the market; or through courteous evasiveness I would work my way out of the snare.

In later years my answer has been a blunt “I don’t know.”

– Jessie Livermore, How to Trade In Stocks

We are past the "shoeshine boy" phase, where everybody is an expert in real estate.  We have not yet reached the capitulation phase.  It's coming "soon."  Real estate will be despised before all is over, and the real buying opportunity presents itself.  Until then, is your powder dry?

 

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In 'The Sugarbag Years' (book about Great Depression in NZ), there are reports of landlords just letting families live in houses rent-free when they couldn't pay.  They knew they wouldn't be able to find replacement tenants who could pay reliably, so instead cultivated community goodwill by not throwing families out on the street.

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You defined bubble right there BigDaddy.  "And just in case you think I am being political, housing under the last Labour government was made unaffordable for many as house prices doubled in just 4 years. "  You are still living in those 4 years, and think they will continue for ever. 

I support people buying thier own home, as a home.  As an investment it's is borderline riduclous.  The fact that fat cats think the way to riches is by sitting on thier arse waiting for someone else to pay them money so they can milk the fat of the back of the working man, makes me sick. 

Hurry up and crash the system so we can see whose labour has real value.  Got physical items for survival?  Got good neighbours? 

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The real economy has been arse ?????? by the parasite economy for too long.  The real economy will be just fine without the parasite economy, the parasite economy however will not survive the death of the host.

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Happy Renter is lucky that stupidity isn't crime and ignorance isn't a disease because he (or more likely "she") doesn't have a clue.

The rents that the State House tenants pay is Government subsidised based on their income. The lower the income the lower the rent  ( or the greater the subsidy). Open market rents are the only true way to calculate what a rent should be as between a willing buyer and willing seller  (i.e. landlord and tenant).

Happy Renter  is typical of her ilk. Everything should be paid by the Government and everyone should be able to get Government money so long as somebody else pays for it.

It is also a fantasy to assert that if a house does not sell it becomes a renter. 99% of the time the seller either stays put or sells for a more realistic price. And in the unlikely event that it should become a renter it will be back on the market within months.

Very few people can walk away from their home and equity for very long. 

Then she blunders into quoting Jessie Livermore as some sort of Guru. For her information Livermore was so clever at playing the market that he was bankrupted on 4th March 1934 and some eight months later while in bar getting drunk he wrote "my life has been a failure" over and over again. Then walking into the mens room, drew out a pistol, held it to his forehead and pulled the trigger dying instantly aged 63 on Thursday 28 November.

If this is an example of what Happy Renter uses to bolster her far left wing views then she had better go back to history school and write out  100 times " Other people should not be made to pay for my life style".  

Better still she should write out 100 times "I am a renter and will never amount to anything"

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You've missed the point, Olly.  Have another go, and think it through this time.

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Big Daddy makes big fool of self!

 "Market rents are the only true way to calculate what a rent should be" .

Which would mean an end to the govt landlord subsidy that goes under the incorrect label as an accommodation supplement....$1.2 billion a year near enough stolen by govt and handed over to landlords and responsible for distorting the market and holding rents higher than they would otherwise be.......just as Big Daddy points out above.

Clearly, Big Daddy believes..... " everyone should be able to get Government money so long as somebody else pays for it."....isn't that right Big Daddy.

Big Daddy is a hyprocrit.

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I always have difficulty parsing out what the hell Olly is on about when he has these confused rants, but he seems to think that there's no bottom income level because government subsidies will be infinite and go up for ever and ever and ever to suit landlords and cover their borrowings?  Good luck convincing taxpayers of that.

And then epic point-missing re the Livermore story. 

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Strangely enough "Wolly"  is right in a strange sort of way ( how well his nick name suits) .

He is right that the Government supports rents by way of supplements - which is totally wrong,

Those who bludge off the state with cheap rents in state houses should pay market rents without subsidies of any kind. That'll make them wake up, stop breeding like rabbits, put way the ciggies and booze, and get a real job. 

The only people who should be subsidised are the truely sick, aged or incapacitated. The rest should fend for themselves like everyone else.

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Those who "bludge" off the taxpayer with cheap State house rent...are no different to the landlords who 'bludge' off the taxpayer with rent subsidies dressed up as welfare payments and called accommodation supplements. The State house rents are determined by pointy heads using the rents paid in the country as a guide...but the guide is distorted by the subsidy. So end the pork handout to bludging landlords and the rents drop ...leading to lower state rents...and so to lower or zero state subsidies to state tenants......less money to be stolen from income earners by the IRD..fewer pointy heads needed....reduced gst on building materials and on new houses....more work generating more paye....

All this is way too complicated for the govt or the RBNZ to understand...it's econ 101.

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You are an stupid, ignorant, sexist, offensive redneck....

You know reading post from PI jerks (thankfully it seems you are unique) like you almost make me happy for the coming depression because you will be bankrupt and living under a road bridge.  Of course ppl like me and happy renter will be paying for your mess......pity we cant sell your kidneys or something........brain is certianly worthless......no wait, it would be a fairground attraction....human has brain size of mouse....

regards

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Bravo.

One of the few upsides to Olly's participation on this board is that he repeatedly shows his revolting true colours.

Olly, your arse is showing.

If we're going to take back subsidies and get rid of parasites, let's start with the likes of him.

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For the likes of Kakapo I am NOT Olly

I have stated that before but obviously Kakapo among others  failed in comprehension when they attended school- if they ever attended that is.

This site has obviously been hi-jacked by great unwashed such as the Greenies, left wingers, Socialists, and those well meaning but unfortunate souls who support Labour.

It's a mystery how they find the time to post on this site when they are so busy occupying Wall Street, demonstrating for more hand outs, bludging off the State or lying around smoking pot.

It must be election year or something.

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Oh, poor, poor, paranoid you, beset on all sides by the imaginary communist hordes.

You'd better go check all the kitchen cupboards for pot-smoking bolsheviks.  We'll wait here.

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Methinks that the vitriol directed at Big Daddy suggests that he has hit a nerve .

... I think that we can all agree that Ollie Newland and BD have been proven 100 % correct , to date ..... and that Bernard Hickey has been hopelessly wrong , by contrast .

Proof of the pudding ; following whose advice would have led to you making more money , and whose advice would have lost you a portion of your investment money  ?

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And the sneering passive-aggressive lackey turns up.

Call that vitriol?  You delicate blossom, you.

Crass, loathesome misogynist bullies like BigDaddy don't get a free pass to be dickholes  just because they claim to have a few bucks.  He'll just have to man up and deal with the blowback.  Won't earn any respect for hiding behind crawly lapdogs, either.

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I'd have to say that's the post of the day.  I'm still laughing.  Good one, mate!  So right on the money!  I'm still laughing! 

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"Oh, poor, poor, paranoid you, beset on all sides by the imaginary communist hordes.

You'd better go check all the kitchen cupboards for pot-smoking bolsheviks.  We'll wait here."

 

I'd have to say that's the post of the day.  I'm still laughing.  Good one, mate!  So right on the money!  I'm still laughing! 

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Livermore did leave $5m (quite a fortune in 1940)

Unrelated to his financial nous he suffered from clinical depression for much of his life.

Motto: Always tell the half of the story that suits the logic of your argument

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Jesse Livermore's greatest weakness seemed to have been a lack of discipline in his private life . He purchased luxury mansions and yachts , held extravagant parties , and consorted with numerous show-girls .

... he built a fortune , and subsequently went bankrupt at least three times over ....

His downfall into depression was exacerbated by the destruction of his second marriage , an event for which he rightfully blamed himself .

... but in his will he left $US 1 million in trust , for his two sons . The money was divided amongst a group of company stocks , hand selected by Livermore himself . By time the eldest son had reached 18 y.o. , those stocks would have been valued at $US 50 million . Unfortunately , the ex-wife took over the trust , sold alll the stocks early on , and invested in safe railroad and municipal bonds .... at age 18 , Jesse Livermore's inheritance had been invested into oblivion by his mother . The bonds were worthless .

 

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If the National govt under John Key had any merit other than being just a bit better than Labour....which they don't.....they would end the market distortions caused by the accommodation supplements which in reality are no more than subsidies to landlords and serve only to distort the rental market. The rents are driven higher and higher by landlords who direct their tenants to the govt dept to get the subsidy...(oops sorry supplement).

By causing this distortion, the govt subsidy encourages the accumulation of rental empires...and this in turn drives out the first home buyers, forcing them to rent...thus boosting the amount of the annual subsidy which in turn is stolen from taxpayers....so it lowers the disposable income of the first home owner and low income family...again throwing them into the rental market.

The govt and other fools would argue that rents would not fall if the subsidy went...that the number without a roof would go up....utter rubbish.....the demand would dive lower and the rents would chase after the tenants....all it takes is a govt with the guts to do it.....this will not be National...their form of socialism has landlord subsidy written all over it.

The rental empires are encouraged by the banks....the banks play a role in training the landlords to take advantage of the stupidity of govt....so in the end the banks dictate to govt that the subsidy is critical in the effort to protect the property bubble that was built on imagined credit and serves to feed the bank the fat profits.

This is the game going on. The banks determine what the property market will be by dictating govt policy and determining RBNZ bank regulations and monetary policy....with one aim in mind...fatter bank profits. All this is possible because we have a gutless RBNZ and govt.

This is not a nation...it is a bank owned farm.

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And a big tick from me. Great stuff Wally. 

Accommodation Supplement seems to have parallels with a 'First Home Buyer' subsidy.

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Totally agree. 

But to be fair to rental owners, it is also available to resident owners as well;

http://www.workandincome.govt.nz/individuals/a-z-benefits/accommodation-supplement.html 

This supplement (subsidy) distorts the housing market - and WFF distorts the labour market.  Bring in the Big Kahuna and be done with both.

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Best comment Wolly - soo far - today !

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Gee thanks Walter...I'll send Hicks an invoice....I'm off down to the beach.

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I have send Bernard 12 tax invoices so far. I'm not sure if they are short of money, but not one is paid so far. :-)

BigDaddy and Olly should start up a new Church together – “Landlords” -

Every Sunday a mess !

I'm sure that would make good money.

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Tithing would help out

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Pfft.  They'd want a 'tithing shortfall subsidy' from the taxpayers.

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Another good one!  I think we agree that, before this is all over, the market distortions will be washed out of the market.  They have to be, in order for any semblance of sanity to be restored.  I think the best that any so-called "homeowners" and property "investors", all leveraged to the hilt, can hope for is a FLAT market.  I think that is the REAL reason why banks have lowered interest rates- to keep their loan portfolio's from exploding, just long enough that they can find a greater fool to buy their drivel- exucse me- "loan portfolio." 

 

That is the real reason for low interest rates.  Not to protect you, but to protect THEM. 

 

If your house gets taken over by the bank, and the same happens to your next door neighbor, do you think the bank wants both houses on the market immediately, both listed as "mortgagee sales?"  I think not, especially knowing that they have loans out on 5 other houses on the same street.  Have to keep those suckers, excuse me "homeowners" and property "investors" believing the lie "ya can't lose with real estate, maaaaaaaaate!" or "what you have is wafe as houses!"  Until it isn't, anymore. 

It's called the "prisoner's dilemma."  Whoever escapes first benefits the most, while the others, the "good" prisoners who stayed behind, get less benefit, in spite of being "good" prisoners.  There are many interpretations of prisoner's dilemma in game theory, but you get the point.  You want to leave while the exits aren't crowded. 

It is also why real sstate is done for a generation, or some years, because it doesn't take many people getting out of real estate to negatively affect your "investment."  This is people leaving by choice, and not by choice.  I focus on the ones leaving not by choice- due to debts and wages not rising fast enough to compensate.  I met a physio last month who was taking a subsidy to pay his bills, something I would not have seen just a few years ago.  I also talked to the owner of my favorite Indian restaurant at the mall, who has changed his bowls for some cheap, plastic substitute.  "Too many people stealing the old ones."  Stealing small, white bowls?  Are you kidding me?  Has it really come to this?...to want to steal a small ceramic bowl used for butter chicken? 

Some just haven't figured it out, yet.  They will, soon enough.  We are in the "bull trap" part of the crash, where many believe "the recovery is here!"  Next is "capitulation" when the believers get their heads handed to them.  No investment is good forever.  Attachment, or how you feel about your "investment" doesn't change what the market thinks about the value of your "assets."  The market doesn't give a damn what you think.  It does what it does. 

As for this:

"This site has obviously been hi-jacked by great unwashed such as the Greenies, left wingers, Socialists, and those well meaning but unfortunate souls who support Labour.

It's a mystery how they find the time to post on this site when they are so busy occupying Wall Street, demonstrating for more hand outs, bludging off the State or lying around smoking pot.

It must be election year or something."

i am big fan of Austrian Economics.  Do you even know what that is?  Am no, I do not vote.  I think it's a waste of time.  What's the point?  So-called "democracies" always end badly.  It surprises me just how few people know that.  Go back to the first democracy in Greece....  wait!  how f-cking ironic!  

Sadly, the biggest lesson from history is that we don't learn from it. 

If the election wasn't even decided before it started, I would probably vote for Joseph Schumpeter, but few people would even know what the hell I mean by that.  Unlike me, who has started several successful business, and hired dozens of employees, we have some ass-clown prancing around this country, claiming to represent us, when he hasn't created a single job in his life (much less in NZ), yet has plenty of banker buddies.  He's a perfect, prototypical politician.  Great. 

I'm so positive for the future, can't you tell?    As my mother said recently, "I'm glad I won't be around for it."  Well, what about our kids, much less ourselves? 

I have plenty of other things to do, besides post here, so what's the point?  I don't have one.  Honestly, sometimes I don't know what the hell to do, anymore.  What's the point?  Nothing's settled.  Too much confusion.  So keep calm and carry on, I guess?  If nothing else, I worry about what i am giving to future generations, including my own.  What have we solved?  What problems do we dump on them? 

"The world is not ours, the earth is not ours, It's a treasure we hold in trust for future generations."--African Proverb

 

And I gave up smoking pot a long time ago, though, at times, I do miss the occassional puff of escapism- especially in these times- which sadly, could get ugly very quick.  My wife (female, and no, not of lesbian persuasion) would have a real problem with me going back to smoking pot. 

 

 

 

 

 

 

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FYI from a reader via email:

 

Hi Bernard   We currently own a 2 bedroom house in Auckland- Royal Oak. We are thinking of upsizing one day- maybe in about 5 years- to a 3 bedroom house, similar area (by One Tree Hill) something low maintenance- eg a stand-alone, modern brick and tile house, with its own driveway and a garage. We read that house prices are estimated to rise in Auckland about 24% over the next 3 years. Do you think is true? What range do you think we would pay for the type of 3 bedroom house we have described, in our area, in about 5 years time? Would we be likely to pay more than around $600,000? We paid $410,000 for our current home. I guess I am asking, do brick and tile homes tend to rise in value as much as other types of homes, eg bungalows etc?   Many thanks   And my response below:

Many thanks.
Good questions that I'm not really qualified to answer.
Best bet for that type of local detail is a real estate agent, although they are obviously going to encourage you to buy something.
My general thought (which is not intended as financial advice for you) is that brick and tile and weatherboard bungalows are seen as more valuable than anything that might be leaky (ie monolithic cladding or plasterboard).
Here's some recent figures on what prices have done in the various parts of Auckland, although it's not as specfic as the suburbs you mention.
http://www.barfoot.co.nz/Info/Market-Info/Analysis/October-2011-Market-Analysis.aspx

It shows central suburb and eastern suburb prices are up 13% and 16% respectively in October from a year ago.
My view is these are the richest suburbs in New Zealand and have just received big tax cuts. Some of that money is being ploughed into property values (bulked up with borrowing).
Also, there's a lack of new supply going into the market and the leaky building disaster has also wiped out a bunch of supply.
Future house prices depend on these issues of taxes, house supply and the wider economy.
I'm concerned about slow growth in the future and a potential rise in unemployment, but it's just my view. Lots of others are much more positive.

All your call.
cheers
Bernard

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Our experience has been that villas/bungalows appreciate faster than the more recent build brick/tiles - and the unrenovated ones, appreciate way faster than the renovated ones! 

As the commercial goes - we're a nation of aspiring DIYers.  :-)

Perhaps the "property caper" of the next decade in Auckland will be to buy a leaker, bowl it, selling what you can for scrap - and with the proceeds, relocate a "character" onto the section.  But, don't renovate it - become a landlord for a few years, insulate and heat it using the government subsidy - and then sell it to an aspiring DIYer with more money than sense.

 

 

 

 

 

 

 

 

 

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I think the 24% increase over 3 years prediction was the poor one made by infometrics in mid 2009. The 3 years is up in mid 2012, nz is only up 4 or 5% since 2009

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I don't recall any other prediction that was even remotely in that territory - it was a real outlier, with most predictions being a lot more conservative?  Unless there was a similar prediction from one of the banks?  To the archives!

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Well at the time tony Alexander said it was a credible prediction (go back to his archived commentaries around august 09)

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Eastern suburb prices are not overcooked, not as much as Herne Bay and Westmere anyway :)

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An (unusually) "balanced" response, although still with an ideological truth twist about the "the rich" who got the "big tax cuts". Noticeably, the tone has changed from a "house prices will crash" prediction to "I don't really have a clue" one. - Life / facts tends to mellow down many an extreme opinion holder...

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For what its worth... Mum n Dad have a two bedroom, brick, stand alone place in this area. Probably built early 60's

Latest valuation has seen it go from $390k up to $540k.

Dad none too happy about his rates increase!!

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What rates do your M&D pay, cam? Is 'this' coming to Auckland to balance the council budget...on their $540k valued property, the WA rates would be ...$18,810 per annum...

http://www.macrobusiness.com.au/2011/11/wa-budgets-housing-black-hole/

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Current rates are around $1500. But I think that is on the old valuation. Which I actually got wrong...it was $370 k. So an increase in "value" of around 48%!

On the flipside have some friends in Remuera whose "value" has dropped from $3.3m to $2.6m. I think their rates were in the $9k region.

You can look properties up on the Auckland City Council website if you have an address

http://www.aucklandcouncil.govt.nz/EN/AboutCouncil/Rates/ratespropertysearch/Pages/RatesSearch.aspx

edit....

In contrast to my rates in a provincial town. $2k on a property of value $335k. Plus another couple of hundy for the regional rates.

Admittedly the land area I have (1350sqm) is about 4 times my parents property

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I don't know about other aus cities but here in Adelaide there's probably half the media obsession with house prices that there is in nz.
I still love nz but in many ways its a pretty one dimensional little island

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Try the UK 'island' - about 5 times more of an obsession than NZ!

 

 

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And Look where that obsession got the uk.... into a big hole

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I think it's more that the traditional manufacturing base of the country has been destroyed - but anyway....

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You are totally depended on the "greater fool" theory of real estate investing, propped up by myth, that soon will be crashing down.  I suggest getting out while you can, because you might be buying you new home a lot cheaper than you think. 

http://www.greaterfool.ca/

 

My suggestion- sell your house, while there are still enough suckers (excuse me "wannabe homeowners") around, and rent the house you want in One Tree Hill for the next few years, for the same money you are paying now for your 2 bedroom, and save up for the downpayment on said "dream house" AFTER the crash, because there will be plenty of desperate sellers/banks in the market at that time, looking for people to take over their now-hated "investments."   This includes One-tree hill.  No place will be immune from the tide when it shifts and leaves the bay. 

 

Have your wages gone up, lately?  Think they will any time soon?  That's my point, and therein should be your answer.  Either pay goes up or costs go down.  I'm in the camp of the latter, obviously.  The only way costs go down is the cost of money goes down- which means lower interest rates or LOWER HOUSE PRICES.  

I believe Kate's reply is a bit misinformed.  A piece of land with a house on it, that needs to be demolished, is worth LESS than a piece of land with nothing on it.  Few people want that headache.  Much less a bank offering a loan to do it all.  Good luck.  

Or you can keep listening to the "expert" economists, like Barfoots, and place your whole financial future on these clowns, all spruikers. 

If you are looking to Bernard for financial advice for what is arguably your largest "investment," then how can you not look yourself in the mirror and say you are not concerned about the state of the real estate market, or its future?  If you believe you will "miss out" on lower prices, then you really do deserve to have all of your hard-earned money taken from you by the market.  Sorry, but how naive can you get?

Do you really think someone will pay you (read- a bank lending someone who qualifies, because NOBODY has $400K lying around in their bank account) $400K for your house if, say, Europe explodes?  or Israel starts a war with Iran?  Maybe... if you are lucky to sell to asylum seekers, but as "regular buyers" they will probably DISAPPEAR very quickly if any of those scenarios play-out. 

If anything, I urge caution.  Renting isn't that bad.  There are many benefits.  "Experts" are usually wrong.  Few have been right- twice.  Most get lucky once, and build a carreer around saying "see! I was right (once)." 

 

I suggest taking a DAY to study the OZ property market and the Chinese property market before deciding just how high price in One Tree Hill can get in the next 3 years. 

Here's a start- how long do you think the religion of property will last, before the market shifts 180 degrees?  Wouldn't be the first time it's happened.   http://www.abc.net.au/news/2011-10-25/housing-stress/3599936/?site=melb…

 

If your house is worth today the same as it is 3 years from now, i would say "congratulations."  Please think for a second- it's a roof over your head- nothing more, nothing less.  It's 4 walls and a roof!  All owned by the bank! 

 

 

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Happy Renter,

Perhaps you should consider that Bernard and his team are running a financial and economic advice website/blog and would like reasoned comments based on the real world in which we live -  not the existential, survivalist, zero debt/credit virtual 'world' that compels your rantings.

Interest.co.nz, I'm sure,  would like a mix of financial advice from a range of commentators - unfortunately it seems to have attracted a host of doom and gloom merchants that offer nothing to a visitor to this site seeking financial tips for investment, savings or wise living.  You have to live in the reality of the current system - as flawed as it may be.

The house owner / seeker was seeking realistic advice:  such as Stay in your current home, pay down as much debt on it, and maybe add a 3rd bedroom with another 40k - rather than the transactional cost of 16k agents fees, 1500 Solicitors, 1000 moving costs and any break fees.    Also: To live in your own home allows a debt-free home in retirement - achievable for most.

Renting and Self-sufficiency, as attractive as it sounds, is not a pathway to prosperity. Unless you've already made your fortune then you can experiment with your alternative lifestyle/s.

 

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Please define "real world."  I'll be waiting. 

"You have to live in the reality of the current system - as flawed as it may be."

I couldn't agree more! :)

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I thnk Wolly's comment of "bank owned farm" is spot-on.

What happens to said farm when people start shunning new debt, even for houses?  Wouldn't be the first time...  it's happening now, in fact, and the evidence is there, unless you get your data from blind elephant grabbers like Barfoot's. 

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To answer your question happy renter..."when people start shunning"...the system starts pushing....advertising is doubled and the flavour of the drug is enhanced with a lower price.

If necessary, Bollard will drop the ocr to near zero and the banks will be allowed to raise the covered bond scam to 20% and the govt will 'taxpayer guarantee' the bank foreign borrowing and the capital requirement % will be cut in half and the media bosses will be told to go along with the spin and BS .....all are measures aimed at porking the property activity.

The "if necessary" bit means if the banks phone JK and tell him they are in trouble because the dam public have stopped borrowing credit. 

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I dont think Bollard will, but the Govn has one good string to its bow that has been proven to work well.....the OZ first time buyers bribe.....expect a nice $8k cheque......too late mind......

Not so much porking the property activity because they want to but simply there is nothing in our economy now that can hold up GDP and keep ppl employed, and a lot of it is confidence.......

So standby for 50%+ loses on property.......my favourute pic will be SK and Bigdaddy in their shared under the bridge cardboard insulated "condo" shots.......

regards

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You won't get it steven. It pays to repeat the following saying  "Joe Kiwi is silly"  a few times before you conclude that property values will be allowed to drop that far by the banks that own the farm. The advertising cheap credit game will always suck in enough fools to keep the bubble stable...stable is good .....gives Bolly time to debase the currency...time to wash away some private debt....time to rejig the 'message'.....introduce the odd Hollywood dumbo actor to sell the banking line...use a fat nit to ask "what do banks do?"....all part of the game steven.....massage the punters with the same message......great strategy....punter pays for it too....!

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What's the difference between a bank owned farm and a bank owned house? If you have a mortgage, the bank owns your house or farm. Most of the cockies I know inherited their farms or bought them from their parents at never never pepper corn rates but the ones who borrowed from a bank to buy don't actually own the farm unless they've repaid the debt. Most of them keep rolling it over for tax reasons.

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Yep.........and when prices collapse and they will........the bank finds the assets on its books are not worth 50% of what they say so have to re-capitalise.....from nowhere.....wont happen....here's hpoing the NZ home grown banks survive this.......I dont think the OZ owned ones will....huge exposure to 2 property bubbles....

regards

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6 months ago I had a chat to an ASB chap about the economy; property etc. and posted here that he was really excited about the 're-incentivisation' (i.e.  change to bonus schemes etc)' that the property lending division was promoting, and that the market and interest rates were about to 'head up!"..... Whoa! What a difference 6 months makes.... Over lunch yesterday, the same chap was listless, downbeat and has recognised that the bounce in lending that he foretold has failed to materialise. Distressed loans are now concentrated upon and he actually sees interest rates headed down... along with the property market. Finally, reality appears to be dawning on even the most 'optimistic' of professionals. As an aside, he also mentioned that Kiwibank's less seasoned mortgage portfolio might be something to keep an eye on.....

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"less seasoned mortgage portfolio" interesting.....of course he was wrong before.....given the huge lending of others into farming.....ho hum.....

regards

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Note the clue in there steven..."going down".....the rates that is....all part of the game....'the greater the downturn...the fatter the bait'. Throw in the advertising and media control by the banks...hey presto you have yourself an orchestrated rebound..."boing boing boing....bouncing along the bottom...happy as can be"

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You mean "optimistic" as in "thinks they can talk up the market indefinitely"? And "thinks happy thoughts will always be all you need"? And also "doesn't have a bloody clue"?

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I find it quite bizarre that the Auckland Herald keeps printing these articles about people complaining that their new Ratings Valuation has gone down and that it's affecting their property values. In the old days people only complained when the valuation went up, because it meant that they would have to pay higher rates.

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In the old days?

You mean back when houses were homes, not commodities?

Today a house is viewed as nothing more than a Capital Gain in a box, something to be bought low and sold high.

That's why a high property valuation is more important than life itself.

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Wellington papers also did a series of profiles on outraged PIs bleating about their valuations.  I liked the idiot in Otaki who was simultaneously gloating that he'd bought his place for 300-and-some K, well under the then valuation, and whining that the new valuation reflected this.

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Hilarious. 

This is an interesting RE ad;

http://www.trademe.co.nz/property/residential/for-sale/auction-415283107.htm 

Headed: Desperate Vendor - Gotta Go Now

And then states:  http://www.trademe.co.nz/property/residential/for-sale/auction-415283107.htm  

The new rateable value has dropped by $10,000 and my Vendors have dropped the price by $20,000!! This home is a BARGAIN and you must see it now before you miss out.
 

What's the problem, you say?  The new, lowered asking price is still above the new rateable valuation!

Makes you think that saying its a BARGAIN (and in full caps, no less) should be considered false advertising.

 

 

 

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STEVEN said:

So standby for 50%+ loses on property.......my favourute pic will be SK and Bigdaddy in their shared under the bridge cardboard insulated "condo" shots.......

 

It's tough being the villan. Sorry to burst your bubble of bitterness - but it would take a much higher rate of losses that 50% to put me under the bridge.

 

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