The BNZ-REINZ Residential Market Survey for May has found a sharp increase to record highs in the net percentage of real estate agents who see prices rising.
But the report's author, BNZ Chief Economist Tony Alexander, said the market remained reasonably balanced and consistent with the view expressed by the Reserve Bank this week that there was no boom underway in the property market. See more in our earlier article.
A net 64% of licensed agents said they were seeing prices rising, up from a net 25% in April and a net 7% who saw prices falling in the May survey from a year ago.
"Yet in spite of clear gathering upward pressure on prices, the market still appears reasonably balanced in the sense of an absence of panicked buying. The real estate market in New Zealand is clearly rising, prices are increasing, but again we reiterate – as the Reserve Bank Governor did earlier this week – there is no “boom” underway," Alexander said.
"Just a growing level of interest from first home buyers and investors in particular and an absence of a rush of listings," he said.
The survey showed the market remained balanced, with the agents seeing buyers as only marginally more motivated than sellers. The previous month buyers were seen as only marginally less motivated than sellers.
"In spite of the prices result it is clear that there is no bidding frenzy as such, and this is a result which came through clearly in the real estate responses in our monthly BNZ Confidence Survey. There continues to be rough balance between those agents who perceive buyers to be more motivated to transact and those who perceive sellers to be the most motivated," Alexander said.
"We read this as signalling in conjunction with the result above that prices are rising and will continue to rise, but that there is no boom element to the residential property market."
Shortage of listings
However, he noted only a net 5% of agents saw an increase in requests for appraisals from people wanting to sell their homes.
"We read this as implying that the shortage of listings in some parts of the country is set to continue and that this has obvious price implications in a climate where good numbers of people are still showing up to look at houses," he said.
Prices and demand remained strongest in Auckland and Christchurch, where supply was limited.
"In all locations reported here prices are perceived by agents to be rising – except Whangarei/Northland and on the Kapiti Coast. In Wellington the strong perception remains that sellers are more motivated than buyers."
37 Comments
Debt develerage will take years. Why is nobody talking about the effect of currency wars taking place right now? What is the real reason for NZD and AUD price fluctuations? Do you want your mortgage debt priced in NZD? How well did that work for Eastern Europeans who took out mortgages in Swwiss Franc? It matters. Do you want to pay your mortgage on a rising NZD? Rising NZD = harder to pay debt. This is why I think we will see 0% OCR in coming years, just because of the flight to apparent safety in the NZD, and people start really losing their homes.
While you are at it, ask agents what commercial property is doing.
Commercial is well on the way to doubling in value at this rate
Get a load of this:
A mix of small industrial, commercial & retail sites attracted rapid-fire bidding and yields down to 4.1% at a Barfoot & Thompson auction yesterday.
The first property up for sale, a standalone retail offering in Mt Albert containing an ASB Bank branch & a real estate agency, set the tone when the yield went under 6%.
On the next one, a single-level building at the top of Parnell Rd containing 3 longstanding retail outlets, with rent of just over $118,000, bidding started at a cool $2 million and ended with a battle between an Asian investor and the owner of the neighbouring property, local investor & developer Paul Doole. It was Mr Doole who stayed the distance. The yield on current rent was 4.1%, but the property’s in an area where redevelopment has been occurring.
Surprisingly, given the strength of bidding on those 2 properties, the next one – a vacant industrial & office property in the Mackelvie St transition zone of Grey Lynn – was passed in at $1830/m² of land.
The second property to sell at a very low yield (4.2%) was a 2-storey brick building in a high-profile Manukau Rd position which could require a large spend to meet earthquake code compliance. Despite that, it attracted several potential buyers.
As one developer commented to me when the hammer dropped on that sale: “We’ll be down to 1% soon. You can’t make any money on this!”
http://www.bdcentral.co.nz/afa.asp?idWebPage=8338&idBobDeyProperty_Arti…
Commercial property investors must be allergic to the stockmarket , as earning yields and dividend pay-outs far exceed these figures :
Kiwi PT ( KIP ) , earn yield 9.6 % , gross dividend 7.41 %
Goodman PT ( GMT ) , earn yield 18 % , gross divvie 6.76 % , and
Property for Industry : earn yield of 7.5 % and gross div 7.33 % .
....... and you don't have to lift a finger ! .... they do all the work , and every 6 months , as if by magic a juicy fat dividend is credited into your bank account ...... Oarsome with a capital " O " .
Have you ever walked into the Bank Managers office are said - 'I need a loan to invest in the share market'.
You might get some margin but not like you'd get on a commerical property loan accompanied with a Personal Guarantee. And the margin loan can be called at anytime, usually the wrong time.
Property Investment in NZ is over cooked for negative gearing reasons, to get personal tax down.
Also be careful - GMT chopped its Dividends. They are not dependable. The New Zealand REIT's are a smorgasboard of Fees. Directors, Managers etc...
...... I did once , at the Westpac , Kilkenny ( Adelaide ) ..... they couldn't understand why I wanted to borrow to invest in risky companys such as BHP & SA Brewing ...
... ... and they were prepared to lend me many times the amount to purchase a house instead ...... which is non-risky of course . You can't lose with property , cobberdiggermate .
As a single 25 y.o. guy , I obviously had no interest in boring old houses , and launched myself into the exciting hurly burly of the ASX : BHP , CRA , TNT , Boral , SA Brewing ..... ah ! Happy days .......
Your point is well made , but . The REITs on the NZX have been perennial underperformers . The Gummster sticks to investing in industrial stocks ( energy , healthcare , mining service companies ) ........
And all the above contibutions lend credence to investing in Real Estate NOT BEING EQUAL to other investments because of gearing available from the banks.
However for a similar geared risk you can use CFDs. Personally while I avoid longer term investing in CFDs I have held some Goodman Property as CFDs The yield is over 6% and the cost of CFD financing is 5.5% - so it is financing neutral.
Meanwhile the rise in GMT of 12 cents over two years odd is a 60% increase on my outlay of about 20c per share.
Like property prices can and do fall and the investment has been slightly under water only once in the period. Add the cost of the transaction where an investment of $20,000 (equating to 100,000 shares) is just over 2% after allowing for buy-sell spread.
Compare that to the cost of transacting a buy and a sell of real estate and the in-out time is instantaneous rather than weeks or months.
A no-brainer with the right share.
“There is only one side of the market and it is not the bull side or the bear side, but the right side.”--Jesse Livermore
“When the gods want to punish us, they answer our prayers.” --Oscar Wilde
"Nor do the gods appear in warrior's armour clad
To strike them down with sword and spear
Those whom they would destroy
They first make mad."---Bhartṛhari
Kiwi's are mad about property. We know nothing else!
Yeah, when near 100% of all people "know" something to be "absolutely, positively true" then it usually serves to bet against the crowd, despite being despised for doing so. It amazes me the disdain, generally that owners of property have against renters of their very property- these are their customers! When common sense is lost, it's best to bet against the crowd.
Selling real estate to one another, while spiking property prices in Japan in 1989, didn't work out so well for "investors" in the long run, not to mention their banks, now all zombies. Buyers evaporate, as they did in Japan, and now America, then who will be your greater fool when it's time for you to sell? Sellers abound, but who's buying in Japan, as their thier property owners continue to retire?
Remember America,EU --> China --> OZ --> NZ and GFC continues, making demand sick
All Aussie banks are overleveraged with debt, against their now sliding property market. Zombie banks coming to OZ, soon, just like Japan. I think they are walking dead, now, in fact.
Your average indebted Kiwi is not far behind. Yet, the only thing they know is to "buy property." It's almost sad. I agree with GBH, stocks are arguably a safer place for money. Don't like margin? Try trading without it! You DON'T have to take the margin loan, if you don't want to. It too is DEBT!
You are parking your money, that's all, same as if you park it in property, but without the management headaches. It's making the same bet on the economy "working out" but your losses are limited only to your cash invested. Compare this to an unpaid debt? One that follows you for years after a mortgagee sale?
The days of Aussies and Kiwi's choking on debt will come to an end, and then the vomiting starts. It's happening now...if you know where to look.
Plenty of wanting Asian "investors" abound, all seeking a foothold in this country. Does that, somehow, make you an investing "genius?" This is profit by accident. Can your genius predict when the music will STOP? Or will we all be speaking Chinese in 10 years?
I'm surprised at how few people here discuss the immigration and foreign ownership laws, because that has a lot more to do with property profits, than Ollie's "genius market timing" (or is it BigDaddy, today). As long as our government holds the doors open for our Asian neighbors to buy up every lot, your "investments" should do fine, but if winds change...then the pain starts.
Of note: it is harder for a foreigner to buy property in OZ, and get a foothold, so they come here. Is that a sound investment plan? Why is nobody talking about this?
Chinese might be the latest "greater fools" willing to pay whatever price to get a foothold outside of their communist nation. We, in our infinite short-sightedness, forget that the art of war was written in China. We just might live long enough to regret the decision.
Property is a trade:
“And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.” -Jesse Livermore
Can't live in your shares, unless you make a paper house with them. Let's face it - Renters are shiftless, won't contribute to their community via rates etc, & want to sit back & skim 'profits' from corporate largess.
Not everyone is a yuppie with no kids & watching their bank balances grow - while they play no authentic part in their community. The anti-property brigade have been wrong for four years now - guess in a matter of time they'll get it right by the law of averages?
huh? renters pay you rent which means you can pay the rates.....and you gain capital. Landlords on the other hand dont often even live in the "community" their properties are in....so as per normal you are talking rubbish...
Anti-property, well Im certianly anti-over-priced.....and anti-crazy-risk.......
regards
You bash renters, but aren't renters the ones paying your bills? Including "your" rates? I guess you didn't think your response out too well.
While considered second class citizens now, the pendulum swings both ways. They are your customers. And I've owned a lot of property. My analysis concludes renting to be a far better deal for some time now. I have plenty of time to be proven right. 4 years is not a long enough time line. It might take longer, but the scales are beginning to tip, and it will be harrowing once the buyers really disappear.
There is way too much debt- by people, banks, and even countries, to provide the impetus for much higher prices. It doesn't mean that the market doesn't get more stupid-er, in the meantime. I'll sit this one out, thank you.
Yes, like Vancouver, or OZ, the prices could go higher, yet. Doesn't mean it will stay that way. The downfall will be EPIC. It's already started.
Why would I buy now when I can buy 5 years from now for the same price, or even less? In the meantime, I can live for almost half the cost of "owning" and re-invest the difference in something safer, and have no debt.
I have a family, by the way. Yes, my wife doesn't like renting, however, I console her with spending on other goodies.
Maybe you should consider why interest rates will drop. The classic answer is to fight a recession/depression, I know of no other actually. In such a situation ppl lose jobs so cant pay rent or mortgages, I saw that in the early 1990s in London, no work and the Irish etc went back home. Landlords incomes collapsed and one I knew lost his 11 houses in his portfolio that he had had being growing for decades....in less weeks. In addition I had the baillifs appear at my gf's place and they simply got the police to eject tenants and their property was literally put on the pavement...I had to collect it and take it to my place for some days...
The thing about debt reduction is you can come out any time and borrow more....at the moment coming out into a grossly overvalued market isnt my cup of tea.....Once into debt to the hilt you are stuck when the illquid market appears....which is very likely.....now when we get to the bottom of this event, then property will be something I will seriously think about....but taht depends on what the bottom looks like.
Bob Jones made money in a bull market, good on him....I wonder if he'll be around in 10 years....but then I think he's bright enough to get out while the canon fodder such as yourself take the fall.
regards
Bob Jones showed how to make money in any market , boom or gloom ....... the key is to use leverage wisely , and to have quality cashflow streams ......
..... hence his preference for commercial property , rather than residential . And even within the commercial sector , he focused on office space within major city CBDs , and avoided retail property .
" Location " is paramount , so I am informed .
Enough ppl of caliber consider the present recession like no other, indeed if correct the Great Austerity will be worse than the 1930s, before Bob Jones's time. Really any other recession in 80 odd years has just been a short term thing so you just hang on....but I will atch how he does....
regards
Gummy Bear Hero (GBH), what do you make of the dariy farms you see around you in NZ. We have been thinking about debt and wondering its wise use too over here :
http://www.interest.co.nz/news/59209/rbnz-sees-rebound-bank-profits-200…
1. Have you any observations from Australia? I remember they use to (90's) lend like crazy to grape gowers (but that was on the back of fixed price contracts), but the same OZ banks aren't so big dairy wise there as here..
2. What would Bob Jones be thinking now. His book (NZ the way I want it) described it as a career for masochists. And that a farmer is firstly a property investor and secondly an agricultural producer (page 107).
As property investors how are we doing....
As property investors, what should we do next (or have we done enough) ...
What will the banks do ...
..... " by the law of averages " ........ which I take as " reversion to mean " ..... although many poo-poo this concept , it does have validity in investment markets ( " trees don't grow to the sky ", as they say )
House prices in NZ have always overshot on the uptrend , followed by years of plodding along a plateau ..... going sideways , frustrating everyone . And then you reach the point when the Charles Draces of the world theorise that property is dead as an investment , never to soar again ....
...... that is the signal that the market has hit rock bottom , it is the time to buy ......
[ by-the-by , currently the gloomsters are having a field day saying that shares are dead , along with capitalism , never to rise again , forever below the long term trend , that cash is king ...... now what does that spell out for the contrarian ? ]
So as an investment manager I like to read says you make money by jumping between asset classes at the right time.
Also those with one string to their bow (property) run the risk and impacts of being a mono-culture.
History is no indication of future returns....interesting thing if you look at data from the Great Depression until today apparantly bonds have done as well as shares.......
The cash holders are at present contarian....so you are trying to say you are a contarian's contarian. A classic contarian is Hugh Hendry, interesting thing he now thinks the US will see a resurgence due to shale plays ie energy, I dont agree I think shale will flop so I guess that indeed makes me a contarian's contrian......I will go with Foss.
Cash is only King while going into a recession/depression and while hard assets drop in price....Im not aware of anything/one that says cash is king for decades.
So I'll map out say the next two decades.....
Be in cash now no debt IMHO.....we will see a 5 or 6 year drop of 10% min per annum....so property could easily be worth 25~40% of today's prices.....so a $400k houce == $150k house....the only Q is when does that panic start as Hugh Hendry says its single digits (years). The risk is banks collapsing and big time taking out "cash" given everything is leveraged to the hilt and a bubble safety seems almost moot.
Once on the bottom Govn's will be broke, banks that have not gone out of business will be desperate to claw income, time to hide/commit that cash, a few years of that....so at that point you want to leave cash and move into something hard such as property that as you said Bob Jones said is cash flow positive.
The final chapter is the most...um.....interesting....will we see inflation? that precludes a recovery....a saw tooth effect is most likely, but a downward trend folowing oil output decline.
Yes Ive sold my shares and they have dropped 15~20% since then. Seems I sold at a decent point in time, though a year earlier would have seen 10% more cash return.
Trends as a guide are history, Peak oil will see to that its a paradgym shift .....so being liquid and having no debt and protecting yourself from Govn's et al "stealing it" will prove challenging.
Yes capitalism is finished, global capitalism scale anyway....
regards
steven, same question (as GBH) to you,
can we interest you in a dairy farm, and syndiacte share, and equity jv, a property to be converted, a property for dairy grazing, a listed unit in a trust that owns a share in fonterra, NZX dairy futures, etc. etc....
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…
I guess I should say that I've had the advantage of living & investing for more time in Australia , than in NZ , over the past quarter of a century ........
...... and the regulations of the ASX are much more rigourous than those of the NZ ....... there's the little matter of 20 times as many companies listed , too .....
Happy Renter's point is well made , when the populence are 100 % convinced of their strategy ( in NZ's case , property as an investment ) then it time to adopt a contrary position ..... or at least , to set in buffers , to backstock against the market crumbling .
..... shares reward you with money , no questions asked ; you don't have to be a high I.Q. to be successful ( Exhibit " D " , queue the Gummster , front & centre ) ; they don't need feeding nor tending as ferrets & ostrichs do ; they don't rot in the rain or need repainting ; and if you lose your security statement , the registry will send you a new one ; shares don't care what your age is , your sexual orientation , skin colour , or whether you suffer from halitosis or fungal infections , they still reward you equally ....
"they don't need feeding nor tending as ferrets & ostrichs do ; they don't rot in the rain or need repainting ; and if you lose your security statement , the registry will send you a new one ; shares don't care what your age is , your sexual orientation , skin colour , or whether you suffer from halitosis or fungal infections , they still reward you equally ..."
very true........ditto bonds....
regards
With few notable exceptions I have found real estate agents capable of lieing and screwing you over without blinking...so here we have the lowest form of salesppl who live on commission saying something...frankly its always going to be positive no matter what...so you learn nothing of value by listening.
regards
"The days of 5 per cent deposits for homes could soon be over as the Reserve Bank contemplates enforcing strict lending criteria.
The changes could require first-home buyers to save larger deposits, and restrict the ability of existing homeowners to increase their mortgages to buy more expensive properties, or to top them up to use the money for other purposes.
Reserve Bank deputy governor Grant Spencer has said the bank is considering introducing limits on the loan-to-value ratios banks use." sunday star
About B.....time!
Somehow I doubt the RBNZ will be allowed to do this ..the control that the parasites have over the RBNZ is almost total and this measure will bite into parasite profits while also deflating values.
Along with the limits to LVR, which will be manipulated by the parasites because there will be no punnishments for fraud by banks...the non govt has to cut a hole in the mortgage parasite safety net...a change in the law to limit the mortgage registration protection...stop the parasites from being able to claw back lost equity....link the mortgage to market value at the time of sale....if the LVR was 90%, then on foreclosure sale day the bank can only claim 90% of the sale price and no more.
But wait there's more:
... Mike Pero said he would be "surprised" and "disappointed" if the Reserve Bank put a limit on mortgages.
"If it did happen it would have a significant impact on home loans, and especially first-home buyers."
He said the move would also impact property values. "Coming out of a financial crisis, where banks continued to lend to 95 per cent, I'd be disappointed to see that change."
If 80 per cent limits were imposed, average homes would become unaffordable for many. "You would need $80,000 for a $400,000 home, and most would struggle to find it."
No they wouldn't Pero....the $400K home would fall to $360K...and you would miss out...not the first home buyer...
Better yet...once the useless RBNZ woke up to the idiocy..they could reduce the LVR max to 60%....and drive home ownership cost lower still...more pain for Pero...hahahahahaaaa
That $360k could be lower still Wolly, if residential property investors had to have say twice, thrice the kind of deposit as owner occupiers. This might level the playing field given owner occupiers can't expense interest. End result, more young FHBs able to afford their own home.
How will the renters pay?
Ive had 3 years of no pay inceases....so Im 6% behind the inflation curve and Im lucky I suspect....by and large just how you think ppl will get more money to pay you mystifies me.
The only way I can think of is the accomodation suppliment keeps increasing to pay the amount you think its worth....cant see it.
regards
... that seems to me to be the crux of the debate : Affordability !
Unless the government extends their pork-barrel politics to bribe a wedge of voters with increased rental supplements ( or with some newly invented " package " to take from " the rich " to give to " the poor " ) , rentals will reach a ceiling .......
..... witness Canberra , dubbed the most unaffordable city in Australia for renters .... families living in rented garages and sleepouts ....... do we wish that to become widespread across NZ , more than it is already .
Queue Hugh P & the " wake up the fecking useless local councils " brigade !
G'day Rog - so these "rich" and "poor" you are on about, can you tell me who owns the rentals, the rich or the poor? Agree with your general line of thinking though, not all "rich" own rentals, just a good many that count, it would seem .... Also see my comment to Wolly above. A little tug on as many of the causes as possible would not only see the play field rebalance for young FHBs, but also the economy in general. Time for that land tax mate, whack in Hugh and co's ideas and hey presto - we can get on with GROWTH, again.
Just teasing, Steven, PDK your debate isn't lost on me, so when I say GROWTH take it as growth in capability and diversity, then we might have more chance when peak oil, peak energy, peak fruit-fly, peak whatever, really comes a knocking.
Les : " rich " and " poor " as arbitrarily defined by some minister of the crown . Michael Cullen thought $ 60 000 p.a. income was the line where " rich prick " began ..... hence the 39 % marginal tax rate , he introduced .
...... you'll see from our budget here in Australia that once again the Labour government has totally ignored business , and is throwing " lollies " out to " the battlers on Struggle Street "..
Not a hint nor a nod towards productive industry ....... nought for manufacturing .....
[ ... I have been stirring PDK & steven lately about natural gas , Les . Your thoughts ? Gas in Oz is still 85 % cheaper than prior to the GFC . When will manufacturers wake up to this cheap energy source ; the UK , France , USA are sitting atop $ trillions worth of the stuff . The Bowland Basin in Yorkshire has reserves enough to 100 % supply the UK in nat-gas for 56 years .. ]
I wouldn't want to pay money to live in a garage GBH, especially with all the fire and brimstone(floods) that the good lord is heaping upon the lucky country.
But what are your thoughts on Henry_Tulls posts above? I recall you been effusive about the prospects of dairy due to the food shortages and starvation confronting the world when conversing with Casual Observer, who pointed you in the direction of NZX alternative exchange (industrial stock?).
Actually , fewer people ( as a % of the world's population ) face " starvation " now , than at any time in human history .
..... and the annual growth world-wide in demand for dairy products is as great as NZ's total dairy industry . Much of that increased demand coming from developing countrys not so far from us . Nations with balance of payments surpluses and cash in the bank .
[ ..I personally know of a family living in a sleepout in Christchurch ( from before the earthquakes ! ) , and a family here in Oz living in a lady's garage ( power on , but no inside plumbing ! ) ......]
Thanks for pointing that out GBH, mainstream media, shapes the way I interpret the world, that being facing starvation.
My wife is from Chile (Cauquenes), her family was hit hard in the earthquake. I was their this time last year and people living in shelters erected from particle board courtesy of U.S.A aid, god bless North America (Latins hate it when you refer to North America as America). Chile is highly regarded by those wishing to further exploit the southern cone. However after that quake shops were being looted because people didn't have food. I think you'd appreciate the majority don't have houses with ladders full to the gunnels like my Mums and others in NZ and Australia. I'm sure they would like to try milk with their coffee, but despite healthy government balance sheets, pueblo still relatively poor, and I wonder if they have the money to pay for it. Still live day by day to a degree, I suspect like India, Pakistan, Africa and China. However if the governements have healthy balance sheets, there must be money somewhere.
Interesting link provided by Henry_Tull awhile back regarding the state of those developing economies and their dairy industries. http://www.grain.org/article/entries/4259-the-great-milk-robbery-how-corporations-are-stealing-livelihoods-and-a-vital-source-of-nutrition-from-the-poor
..... my theory was that constant gloomsterising , the " peak oil " mantra , had seeped into his subconscious ..... and turned him grumpy & cynical ........
Meebee your theory has more merit , that he's bitter & twisted about what others have ( pay rises ! ) ...... and not grateful for the fact that someone can endure him , and that he still has a job at all .......
regards
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