Olly Newland likes what he sees ahead for residential property investors, and advises first home buyers to jump in quick

Olly Newland likes what he sees ahead for residential property investors, and advises first home buyers to jump in quick

Olly Newland is convinced interest rates will stay low for the foreseeable time and it makes sense for young property buyers to borrow as much as they can to get on the property ladder.

He spoke to Bernard Hickey a few days ago and said his advice to first home buyers is to "stretch as much as possible to get into a leafy suburb".

He says "borrow till it hurts" just to get on to the property ladder "because prices are rocketing ahead".

For rental property investors, Newland said because of public policy pressures and a lack of new building, rents have been rising fast in central areas of our major cities, and "rents have a long way to go before they're anywhere near the top".

He sees house price falls as "very unlikely" - more likely in his opinion are rising prices in the 2% - 3% pa range. In fact, he thinks house prices could well double over the next ten years "in good suburbs".

He also expects interest rates to stay at their historical lows - even fall further from here - for a "very long time" in the future.

He also noted that the reason very few new houses are being built is that regulatory costs and delays have strangled that market.

Demand will flow naturally to the second-hand market, driving prices higher in the absence of new supply.

He is pessimistic that new-building will start anytime soon.

 

 

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

103 Comments

Comment Filter

Highlight new comments in the last hr(s).

http://www.zoodle.co.nz/cms/blog/mortgagee-property-sales-show-continued-pain-for-heavily-indebted-owners.html
 
"Borrow till it hurts" has to be the worst piece of advice I've ever heard.  Astonishing really.

But it's the only advice that will issue forth from those reliant on new entrants to relieve them of debt position. Rule #1 of ponzi mechanics - right?  

I can't fault Ollie's arguments ..... if you cross reference what he posits against Hugh P's blogs , you'll see a theme running through them both ......
 
....... lack of current new building / regulatory costs / strangulation of land supply by local governments ...... and of course , record low interest rates .....
 
( and we needn't mention the favourable tax treatment of investment property ,need we )
 
Where's Big Daddy for his contribution ?

Perhaps he is busy reading up on the new regulations on being a registered AFA.
 
 

Yes.  Disgusting.

In normal times ie growth its actually hard to say its rubbish....today of course looking at the financial mess everywhere that isnt the case IMHO. 
regards

When the property market goes belly up, anyone rendered homeless due to listening to Olly's reckless advice has a lifetime invitation to stay at any Olly Newland-owned property for free! Way to go Olly! You are a stand-up guy for putting your money where your mouth is!
http://www.rollingstone.com/culture/news/the-sharp-sudden-decline-of-ame...

Why do banks not own ALL houses??. They increase in value each year, so why give the privilidge away?.
Why do banks borrow.??
Why do Banks require you to have income?. The house will go up..not down.?
Why do Banks have staff who do not have multiple incomes from property, but work in Banks?.
Why do Bank staff work all their lives in Banking for money when housing is a no-brainer.?
Why do we need so many banks. One could do the job.?
Why arn't the Banks building more Houses?
Why does land cost so much, is over rated as are most shonkey New Zealand housing?
Why do banks screw LIBOR rates when dealing with each other??
Why do currencies rise and fall daily.??
Why do mummy and daddy not give the kiddies a free house, a free car, a free education, a free ride??.
Answers on a 100$ bill and post to .....
An Equiring Mind.
C/O Madoff & Associates,
Speculation Drive,
etc...
 

 

 "he thinks house prices could well double over the next ten years "in good suburbs".

 

"interest rates to stay at their historical lows - even fall further from here - for a "very long time" in the future."

 

So; borrowing to the max + high and rising asset prices AND low interest rates?

If Olly really believes you can have all three together he's not been paying attention. The RBNZ have made excess credit growth (finally) one of their key concerns. Then there is the problem of affordability, I'm sorry but 40% of the household budget for housing is tops for renters or owners. Even at  a low 5% cap rate, your million dollar "leafy suburb" home would require a $200,000 household disposable income to justify - about three times the Auckland average. 

 

Doesn't add up Olly.

Indeed,
http://www.stuff.co.nz/business/money/7200255/Price-of-progress-hurts-Kiwis
WHat makes my head hurt is trying to work out all the variables that will effect us or how it will effect others. For instance if US banks are borrowing off the Fed at 1% and lending to us at say 4% OK.....what if they exit? in a panic that seems likely as they rush back to "safety". (Lets not argue how insane that probably is).
So, I think he's right in that the OCR will stay low, and probably 1 or 2 decades. However as the banks keep saying there is no real reason to follow the OCR and they dont borrow off it as such anyway...So in a big shock (and look how likely that is now) if foreigners stop lending short term and/or insist on greatly higher returns (and Im beginning to think thats likely) then mortgage rates look to rise...and possibly very fast....
Im am looking at it as an asymetrical play....it might drop a little say 1% and save you a small amount, or it might go up several times that say +4% to 8% if only for a short spike. What sort of state does that leave ppl in? as per the stuff piece?
regards
 

Good to see a property article for the weekend Bernard!
 
I've been watching reruns of "Property Climbers" (weekdays 11.30pm on Heartland) featuring Olly Newland and his advice now seems almost prophetic.
 
One recently rerun programme involved a young single woman who already owned a rental in Mt Maunganui which had increased in value to $400k but now wanted to buy in a home in Ponsonby.  She had only about a further $300-400 to spend on an Auckland home (which in 2006 wasn't possibly in Ponsonby area).  Olly advised selling the rental and buying in Ponsonby (where she rented and wanted to buy eventually), she decided it was better to buy another rental in West Auckland for the $300-400k and continue to rent in Ponsonby.  Olly said this wasn't a good idea buying in cheaper areas because the inner desirable areas will improve more quickly.
 
He was spot on.
 
The two rentals are probably worth the same or even less now, while an $800k Ponsonby property is probably worth $1.2m.
 
Episode after episode, Olly's sage advice seems to have been spot on.
 
Moral is: listen to Olly, his advice is certainly worthy of consideration.
 
Central Auckland is certainly hot right now and prices for some properties are up $100s of thousands of dollars in just months.
 
In ChCh some like for like house sales in the North West are up 30 or even 40% from pre earthquake levels 2 years ago.

There is nothing wrong with advising speculators who can afford to take a punt (with the prospect of losing money or holding) to take a punt.  But in a speculative market, which is what Auckland central is at the moment, it is absolutely the worst time for first home buyers (i.e. homeowners not speculators) to jump in by mortgaging themselves to the hilt - which is Olly's advice.  Sure, as Stephen points out, the speculators need those FHBs to keep their speculative purchases liquid - like any ponzi scheme.
 
The unindebted young in Auckland would be wise to stay unindebted as their time will come.  Meantime, if they want to stay in NZ and own a home - easy ... get outta Auckland is the best advice.  Buying into a bubble is just plain stupid unless you can afford to be a speculator.

Location, location, location....
regards
 

If they want to buy a teeny tiny tenement in Ponsonby - which is over crowded with rediculously narrow streets at silly angles, and noisy ... they deserve everything they get.

and you believe a television doco?  put together by journalists who's only interest is to entertain and to show an angle?   Betcha there are many examples which show different outcomes.

and you believe a television doco?  put together by journalists who's only interest is to entertain and to show an angle?   Betcha there are many examples which show different outcomes.

I wonder what the first home buyers in aus are thinking today....about the prices they paid for property....given the fall in values...and growing worldwide financial chaos...!

But Wolly, that's in 'stralia. Olly says stretch hard financially and a house in Ponsonby is yours. Excellent advice to a young family earning 200k a year, as most f us Aucklanders do. Property can NEVER go wrong here in NZ. NEVER!!!!

You're right Mandalay...silly of me to think this property speculators economic paradise would ever cop a facefull of the reality shite going down everywhere else in the world...must be the fabulous economic management of our govts...I shall rush in to the parasite first thing Monday and borrow to the hilt so I can splurge on the price bloated property and do my bit to prop up the farce.

I knew you'd see the Olly light and would be out tomorrow borrowing to buy a few more Auckland houses. Don't give it a second thought Wolly... She'll be right mate, what could possibly go wrong?

Newland is effectively a (previously failed) real estate agent with an agenda, caveat emptor applies. But Bernard, I do detect a volte-face on your part too in recent times. What became of "till the pips squeak"? Are you now sponsoring "borrow till it hurts"?  I Iiked you better aforetimes.
Ergophobia
 

I would welcome a volte-face in respect of Bernard's previous emphatic statements determining Dotcom's culpability after news of the botched and apparently illegal police actions leading up to the allegations.  
 
I believe Bernard abrogated his journalistic duty to act fairly. We are all meant to be innocent until proven guilty.

Ergophobia, Stephen - Bernard may once have been a journalist, but he is now a declared capitalist selling whatever returns the highest short term financial gain.

Perhaps Bernard can redeem himself by doing an article on how the NZ Police, assisted by the Crown Law Office, have Robbed Kim Dotcom. I used the term Robbed deliberately as the property was all taken by the use of force, it was an Aggravated Robbery and Home Invasion at that. 14 years max for the Robbery and I think 20 Years for the Home Invasion.
 
If you think I am being sensationalist then go back and read my comments at the time. I went to the trouble of reading the warrant application and called it for its decidedly light content at the time. I even predicted that the warrant would be the point of challenge for the Dotcom defence.

But what are jounalists' (ex or otherwise) capacities to learn from their mistakes?

I agree a turning point wrt. my opinion on BH 

Yes he was very open-shut on dot com, without considering why 80 officers + helicopters etc (at NZ taxpayers expense) were involved basically to ask one man to come down to the station to answer some FBI enquiries.

Perceived capital gain + actual inflation=......................'0' regardless of bank manipulated interest rates. That's the reality these days for those that are not 'ponzi scheme' suckers!

The sooner you buy, the sooner you can pay your house off.   Why waste your 20s & wait til you're 30 something before you face the fear and do it anyway (buy first house). 

but today isnt like any other day since say WW2......right now we have x 2 bubble, looking at a Greater Depression that will last 2 decades and see huge losses in assets....so personally taking on a mortgage today is just crazy IMHO.
regards

Every human needs shelter (especially in cold winters) and renting is expensive (regardless of the weekly comparison to mortgage payments).  Housing yourself & your family is not a discretionary item of want -  it's essential.   Therefore, even in recessions & depressions, there is still a need for shelter & homes.
If you're worried about serviceability - well, buy a simple cottage in a lower-middle class suburb.  If worrried about losing your job - well, you'll still have to pay the rent in that case. 
Sure, the capital gain may not be the same as the past -  but even then, it's interesting how general inflation, general wages increase a little, & shortage of desirable homes have moved the market price up a little even outside of Auckland city.
Low interest rates are also an advantage as you can now pay your mortgage at a 10 or 15 year term (voluntarily - e.g. take out a 30 year but pay it back as if on a 12 year) by pretending that rates are still at 7.5%.   Then you won't get a shock if rates increase - meanwhile you're  paying your house off faster despite deflation or bubble pop or whatever.  

Which is exactly what I did in the late 90s, I let my payments climb as if to 10% and kept it there.  My point is today that we have hughely different circumstances to contend with. Looking back on historical data and experience and projecting it forward without consideration to changed circumstances is asking for it in the neck IMHO.
In terms of deflation I think a drop of at least 60% is on the cards and within 5 years....when that happens someone with a  95% mortgage is frankly screwed.....even 80%.......not only that lose a job and have to move and they cant....they are trapped in un-servicable debt so they go bankrupt....that is a huge mental shock to a person....let alone all the other problems.
It makes no sense to be servicing a debt of $400k when what you are living in is $200k. In my case a 60% drop would merely wipe out my never seen or counted gains in 15 years and yes I'll have my home which I value greatly.
regards

Mr Mortgage (or Promise to the Death) Belt.
 
The sooner you buy, the sooner part of your life is also over. The carefree part anyway. Hello indentured servitude.
 
I would rather buy later in life, after saving more, and thereby lessening the tax levied by financiers.
 
So I for one, will continue to wait. If as I suspect there are more people like me than those who are desperate to go into as much debt as they can, or have no choice, then the market will come to me.
 
In the meantime, I will continue to look at open homes and imbibe all the free champers and canapes that some of these find-a-sucker events now offer.
 
If mind-altering substances are now what is required to get us into the mood, then it looks like my 'position' is doing just fine.
 
 
 

Better to enjoy your 50s mortgage-free.     Buying your first house at 38 is like having your first baby at 40 -  you're getting too old for that caper....
Have you noticed they're still not giving houses away for free?    Despite the "Bubble".
Cold this winter?  Nice to sleep under your own warm roof - not the cold rental with no insulation.
Last 4 years  -   wasted renting (listening to the false prophets of doom) when you could've paid 1/4 of your house off under low low interest rate conditions.
 
 

LOL, yes thats me.......
but today is semi-unique....Great Depression territory...so think differently.
regards

"under low low interest rate conditions"
At the same time most houses in areas that most first time buyers go to have not seen house price increases, so there is no huge rush to buy right now, not v the risks...As Olly said rates will probably stay low for years (decades)...in which case waiting a year or 2 more costs you little and with the EU the way its going minimalises risk.
regards

idlebum, your carefree life is far more likely to be over as soon as you become enslaved in fulltime work, or engaged in professional study, or married with children!
 
And I'm not sure what open days you attend, but I've viewed literally thousands of properties over the years with plenty of those being in Remuera, Epsom, Herne Bay, Fendalton, Merivale, Kelburn, Mt Victoria and Maori Hill and I don't once recall being offered finger food or champers (or even a glass of water!) at an open day.  Hell, I've purchased about a dozen properties at auction over the years including several around a million and one just shy of one and a half and a handshake is about all you'll get from the agent!

Quattro Apartments in Grey Lynn, this Thurs night just gone. The choice 4th fl penthouse, plus nice apartment on 2nd fl which is also big at 200 sq inc its deck, are both nice spaces with views. The idea was for us to 'drink' in the pretty lights with the help of the aformentioned accoutrements. This was both apartments, separate RE companies, and with the apartment on 2nd fl, they had a busty young caterer cooking and serving with linen napkins, the whole shebang. I could be wrong, but I think a temporary firepit was set up on the deck of this one as well, to give it that toasty glow on an otherwise chilly night.
 
Maybe that these two showings were like this is fluke, but it does seem like there are higher degrees of effort being put in to win dream exit for seller.
 
Unless they will accept monopoly money from me on settlement day, the amount of 'collectible' value versus actual intrinsic value making up these prices is getting scary, esp if I then will need to collect even more to achieve my own dream exit someday down the road.
 
So I will thank Olly for the lovely opportunity max to myself out at this juncture, but am prepared to be selfless and let somebody else take it, preferring instead to remain in cash for a bit longer yet.
 
 

This is a common approach is the US higher end market, possibly starting to catch on here. 

Apartments often aim for in excess of 100% clear profit and the developer hangs onto the management? so get a nice monopoly income? all for a few drinks and a busty blonde?
Not rocket science.......
regards

I mentioned here once before in '06 I did a stint as mortgege refi guy in dusty California towns that have seen some of the most savage declines, so was really on the front line of craziness that was a collective norm at the time. And yes, they got to a point where holidays to Disneyworld were offered as prizes etc, just for showing up to open homes. This is not unlike the way desperado timeshare industry sells over there. Anyway, we all know which way it all ended up for them...
 
After listening to the 'nice' pitch and refusing to get on board, I've then suffered the ignominy of disparagingly being called passive aggressive more that a couple of times, and admit I did wonder afterwards whether I might have issues. But it turns out these people were only hoping to get me to do something to benefit themselves, which in this zero sum game, ultimately equates to a direct loss on my balance sheet.
 
I get the same feeling when I talk to pro-property types about the AKL situation now.
 
As is obvious, you need new chumps coming in to keep the game going (which in this case is to keep asset deflation at bay).
 
I doubt I am alone, so suggest that instead of all us desperately trying to chase the market, we may just decide to sit and wait, collectively, which slows down the velocity of money in that circuit. If so, what is happening around the world will eventually arrive here.
DEFLATION.
 
 
 

Let me know when you have a discussion point other than "you'd better get in".

That the pro-property types feel the need to continually prop up their positions, says to me their fears could be realised at any time.

Interesting, from interest .co.
 
These folk had a background in jourtalisn, yes? An understanding of truth, need to stick to.
 
So why a tout like this, at a time like this? Those wide-eyed eager target-auduience people have zero hope of paying back even a modest mortgage in even a modest time. We are in the midst of the biggest 'capital' (now there's a mis-nomer, if ever there was one) destruction phase in planetary history, and it can't stop until equilibrium is reached.
 
That includes income potential.
 
Anyone ask that question?  Why not?

I agree, a turning point for me on BHI  

In terms of eyeballs, visitors, clicks, posts, controversy, debate, opinions, Olliver Newland has to be the biggest drawcard going around here on interest.co.nz. Good for the advertising business. Wins hands down. Surprising he doesn't have a weekly guest spot.

To my mind, if you can afford the mortgage at interest rates 3-4% higher than current levels, and surivive on one income (assuming youre on two now), you might venture into the property markets - but just know that, whilst you may manage to keep your house, you probably would have had the chance to get it a hell of alot cheaper sometime in the next 5 years if you had stayed renting.
 
Slowly, one by one, the western housing markets are either sinking or plunging, I have absolutely no dount that NZ will do the same

He says "borrow till it hurts" just to get on to the property ladder "because prices are rocketing ahead".
For rental property investors, Newland said because of public policy pressures and a lack of new building, rents have been rising fast in central areas of our major cities, and "rents have a long way to go before they're anywhere near the top".
He sees house price falls as "very unlikely" - more likely in his opinion are rising prices in the 2% - 3% pa range. In fact, he thinks house prices could well double over the next ten years "in good suburbs
I both agree and disagree with Olly's assessment.
1. "Prices are rocketing ahead" - disagree. That is an absolute exaggeration.
2. Public policy pressures and lack of new buildings has been leading to rents rising fast - agree, sadly. Hopefully the Council will come up with decent rezoning in the Unitary Plan to address this
3. "rents have a long way to go before they're anywhere near the top". Again I believe that is an exaggeraiotn, although I think they will gradually climb
4. He sees house price falls as "very unlikely" - more likely in his opinion are rising prices in the 2% - 3% pa range. Agree. This is a conservative and realistic forecast from Olly for a change. But why do young buyers need to jump in so urgently if price gains are going to be so muted, and interest rates will stay low for some time?
5. In fact, he thinks house prices could well double over the next ten years "in good suburbs". Unlikely, but outside chance in maybe some very top end areas.
 
 

Re 5.  A doubling of house prices in 10 years equals a 7% per annum increase.  But the more important question is how many doublings are we away from totally and completely unaffordable.

And even if we did get a 7% pa incr. for even say 2-3 years.
How would banks respond. We all know the answer to that will be "equity mate", and the beginning of a whole new expanded credit cycle, leading to a HUGE bust.

Yes good analysis re. prices moving at essentially CPI. Olly fails to mention what downstream effect of costs associated with increasing rents are.

what downstream effect? Our government will just up the accommodation benefit, borrow more to do it, and every banker and PI and NZ will be just dandy... What could go wrong?
(sarcasm dripping onto beard)

Found this interesting read from Eric Crampton, athough its not directly about housing
http://offsettingbehaviour.blogspot.com.au/2012/06/no-transitional-gains...
- Uses the canadian dairy industry as an example. But the first bit about the rent being capatilised, dovetails precisely with what has happened with the NZ housing market, and why fixing it is politically difficult.

House prices in Auckland at least are on a strong upwards surge and the lower these interest rates go the higher the house prices will head. Olly is a bit low with the 2% to 3% pa though - more like 2% to 3% per quarter.
Low interest rates, not enough real estate for sale, very little new building happening or likely to happen over the next 5 years, Chinese buyers en masse and no other alternative investment options that are supported by banks - so its no wonder house prices are skyrocketing.

You are too bullish. Some in retail, tourism and construction have only just hung on, but are now giving it away. Big infrastructure projects in akld are past their peak. Whilst chch rebuild is going to stimulate the south island economy a bit, auckland is in for years of struggle. This is going to balance out the lack of house building

Rents increasing.  House prices increasing.  Where is the 30% decline in prices?  Better to have bought a house to live in than to continue to rent.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1081...
"He said rents would continue to rise until there was no longer a housing shortage. "People always need somewhere to live. There's a huge imperative to start building more houses.""
 

"After two weeks and around 15 viewings, Vassilas realised he will have to pay around $600 to get what he wants - an insulated apartment close to town and a train station."
$600 a week  -    dearer than a mortgage.....
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1081...
Can't be much demand for houses, eh?  Yes,  those house prices are crashing. Noone wants to live in a nice house, that can't be a strong human desire? 
After 15 years, you still need to pay rent.  15 years after buying you could be mortgage-free with free accommodation.
 

Tenant:  "Since moving in around two months ago, the kitchen has flooded thanks to a dishwasher fault, two deck boards have broken, our dog falling through one of them, and the front door lock has jammed, leaving me locked outside.
I have vowed to start saving for a home."
 
I rest my case     (confirmed by ethnographic research by the NZ Herald!)

Only one case mortgagebelt. It's a great myth that al homeowners are fantastically happy and renters are miserable bastards. A recent study from the University of Adelaide found there is in fact no difference in happiness between the two groups. One of their findings was that mortgage stress is real life stressor for many, and that many borderline property owners would be happier renting. But of course everyone should listen to olly the expert, all you youngsters mortgage up to the hilt rather than rent, you will all be so much happier!

I can see an owner of large dogs wanting to buy, but the reasoning behind that quote completely eludes me.  "I want all the stress, expense and hassle of dealing with my own broken, faulty, dangerous, rotting things and flood damage while paying a giant mortgage rather than leave it to the landlord to take care of and bugger off if he doesn't!"  Huh?

Those Aussie who bought in at the peak on "you'd better get in" and are now down ~5% would disagree with you. Thats a lot of 'rent money'
P.S.  Holy hell, relying on 'ethnographic research by the NZ Herald' - lots of laughs.
I agree with the comments above, tell the LL to sort it, or rent will be renegotiated and/or move out. Some tenants don't actually realise the power they have in such a situation.

said like a true spruker.
poor artical and bad advice from a biased opinion (conflict of interest).
what is going to push property prices up - Income or borrowing? one wonders if the government will be able to bail the banks out again and continue to prop up a non productive speculation market.
A few people can afford to pay silly prices reported in the news, majority can not.
the necessity of shelter will force socioty to create affordable housing in order for people to invest in the community and economy to grow.
prediction - properties will become affordable like cheap electronics, buildings well be central, sustainable and energy green, with well designed landscaped common/public spaces. skilled people well be upwardly mobile and move to where employment is.
so please dont buy smething one cant afford, be stuck with a mill stone around ones neck and make the baby boomers rich from buying some 20 plus years ago; as bias wolly spruker would have the comming generations do (cause hes got the majority of his and his inheritors wealth tied up in un flexible property)

The 'pinning back of the ears' is to allow the parasite manager to get a look see thru the space between the ears and so determine just how utterly stupid the peasant really is......will the mindless gorm sign up to twice what he can afford...can we fob off one of those useless investments we ended up owning like a vineyard or two.

The real property bulls on here defeat their case with their own words. If low interest rates are one of the contributing factors in why property prices will go up to the extent they're forecasting (and I've no doubt from seeing people around me that it is a big motivating factor for some who haven't previously been able to afford a house), and the RBNZ as recently as the last MPS stated that the NZ economy is now unable to have non-inflationary growth above 1.5% GPD growth p.a. then interest rates will rise by much more than is currently priced into markets, and into peoples assumptions
 
Many of these borrowers seem to be funding themselves floating because even a 50bps higher fixed rate is tough for them, then what will happen ? One, as rates rise the flow of people into the markest will slow and hence so will the price rises, and two, many many will be forced to sell, hence either a stop in price rises, or my bet, the start of the real fall in NZ property prices.
 
Unfortunately, I think its a case of the last few being sucked into the market on the back of lower interest rates (forgetting that there's a reason for why they're low - the world is in trouble and jobs aren't safe), and an assumption that supply/demand can't break down for good periods of time in a crisis. I'm afraid for them as many of them are young and most vunerable, and entering something that could set them back in life 10-15 years

Yeah it's basically a mechanism for inter-generational wealth transfer from young to old. There is no real 'wealth' created.

Olly Newland has specific predictions which others seem to criticize like its a new sport, but there seems to be a real shortage of specific predictions that disagree with him, and for good reason.  
Its easy to be a critic but its hard to make a public prediction.  For the naysayers, how about you be specific about what you see happening to Auckland prices in 1 year, 5 years and 10 years?
Then we can see who was full of it and who was right.  So far, Olly has all the points and the critics 0.
My question for Olly and others, is Newtown Wellington a leafy suburb (walking distance to downtown) or slummy?

Newtown is a good suburb - as is any neighbourhood near to a hospital - as that's one type of employment that will survive any recession, so a ready market for within walking or biking distance housing.  To test the hospital theory, check out the Local Insight facility on Zoodle for various hospital neighbourhoods.  Here's the summary for Newtown;
 
http://www.zoodle.co.nz/community/wellington/wellington-city/newtown
 
But I wouldn't rely on capital gains - as you can see the seesaw effect clearly - but at least the housing asset in a hospital area is more liquid than in most places during an economic downturn.  But note those folks that bought in 2007/08 ... they're a long way from being able to resell without a loss at the dizzy heights of the boom buying.
 
 
 
 

No one can predict what will happen next, not Olly nor any of his critics... unfortunately it sits in the inept hands of the political powers-that-be who continually meddle in the markets to prevent any sort of pain being realised (heaven for bid they aren't re-elected!).  Who knows what they will come up with next in order to extend the farce?
 
There's no doubt that had we not seen the gigantic bailouts happen around the World that the financial landscape would be very different today.  Had the bailouts not occured, then how much pain do you think NZ would have faced?
 
Looking forward, there are generally two camps... those that believe pumping the system full of paper/electronic funny-money has the capability of solving the World's problems and we've nowhere go to but up, or those that believe printing has only compounded the problem and kicked the can down the road.  
 
We know which camp Olly is in, the question is - where would you like to pitch your tent?

My prediction is hyperinflation accompanied by deflation in assets that are in a bubble, like housing. It is explained by this equation (M.V)+e=P.Q. 
 
However money flight will continue to put pressure in central city areas and this will continue to show gains. They will of course go into reverse equally fast when deflation and depression really kicks in.

Olly Newlands advice is bang on but he got the year wrong. It should be 1970!
Right now the world is heading into another great depression.  The domestic property bubble that has been  inflating since the WWII is bursting and property values are on the way down. How do I know?
Check out the researched based new world economics of Professor Steve Keen  and his like minded contemporaries.
In December 2005, drawing heavily on his 1995 theoretical paper and convinced that a financial crisis was fast approaching, Keen went high-profile public with his analysis and predictions. He registered the webpage www.debtdeflation.com dedicated to analyzing the “global debt bubble”, which soon attracted a large international audience.
Keen, Roubini and Baker have been voted to be, more than all others, the three economists who if the powers of the world had listened to, the Global Financial Collapse could have been avoided.
That nice capital profit you are living in (your house/s) may completely disappear in the next year or so.
House prices in Japan dropped 70% during their two decades of stagflation. That is where we are heading lets hope it’s not that bad here.
All New Zealanders should read Keen .  He has some constructive ideas on getting us out of this mess.
Keen predicts another ten or so years of depression if the current austerity and bank bailout approach continues!
Of course if you can’t face reality you can join Olly in the 1970s.

Happyfunball - easy to make predictions on here when your anonymous, that's why I respect the likes of the economists, who have to make them really public in writing unlike posters on here, and Olly who has a repuation to consider. But my guess, based upon no banking implosion (which is required for Graeme's armageddon scenario above, which is always possible), but severe recessions in Europe and probably the US over a long period; the next 12 months Akld prices up another 2-3%, then 1-5 years down at least 20-30% from there, then 5-10 years probably not much recovery and settle there - that will get affordability levels back to something reasonable which will happen somehow.
 
The problem is that many people just can't envisage that scenario in any circumstance because its never really happened....just like it had never really happened in the US, and yes, I admit that the US situation is different, but then I don't think we've found a bottom there yet either. They're down 35% currently on average and still falling, but suggest 40-50% may take to find that bottom. The problem is with many of these things, ones who see it least, generally are those closest to it.

I don't see any predictions from Olly in this article.
I do see an article authored by Mr Chaston, who spoke to Mr Hickey, who apparently spoke to Mr Newland.  Any more degrees of seperation and we would have Mr Bacon commenting as well.  But hey, your so smart, you must be right Mr A.

the spruikers spruik low interest rates as a reason that house prices will increase strongly, without stopping to think that the reason the interest rates are so low is that the economy is so weak!!!!!
the days of full employment, regularly increasing salaries, big bonuses are over. Yes lethargic housing supply will place upwards pressure on prices, but this inflationary pressure will be balanced by restrained demand side pressures

Matt it's getting tough for a whole bunch of people here in NZ, in particular Auckland. I just cannot see how all of a sudden there are going to be first time home buyers flocking to auctions as this property-go-round supposedly gathers momentum.

http://i.stuff.co.nz/business/money/7200255/Kiwi-families-trapped-by-debt

Borrow till ye drop...pass the buck, do not pass GO....do not collect ..
Blue Chip advice...
Have I gotta deal for you...

The unitary plan may be the end of house building in Auckland.
 
Council have a dream for the future of the city where everyone lives in houses that would cost $600K+ to construct surrounded by top notch first world infrastructure.  I hear that they are planning on letting nothing get built unless it matches this dream scenario - even if it means there's no development for 50 years.  This dream will never happen 'cos there will never be enough people rich enough to fund it - quite the opposite.  

I vaguely remember Len Brown Luthers I have a dream speech, that Aucklanders will not be judged on the content of their character, but by the size of their mortgage.

As a prospective first home buyer I am keeping my money in high dividend blue chip shares while I wait patiently for the market correction that must surely come.
My prediction (which is surely as valid as Olly's) is that the Chinese economy will go bang due to either political unrest or spectacular mal-investment. Demand for our products will drop, business will retrench, people will be laid off and those with large mortgages will default. The banks will hold off as long as they can before panicking and mortgagee sales will become very common.

So based on that why would you be holding shares ? If the Chinese economy goes bang the damage wont just be limited to housing.......

For sure, but some are companies with near-monopolies and domestic focus. The key is diversification. Buy a house and all of your eggs are in one basket. Debt amplifies the gains and the losses.
I'm not absolutely convinced that China will go bang in the near future but there is a possibility. There are other potential disruptive scenarios too, e.g. debt contagion as Euro banks start falling over. In theory the Aussie banks are insulated but I wouldn't bet my house (if I had one) on it.

Interest rates are now locked in low for a long time  .....  any increase in interest rates will indeed cause mortgagee sales & mortgage-stress.  Therefore the banks hands are tied.
The entire economy is holding on by a very thin thread  -  and so the banks now cannot raise interest rates even if they wanted to: their assets would devalue very quickly (property) and they don't want mortgagee sales to rise rapidly. 
So, these are great times for paying off a mortgage with cheap money.  Just make sure you keep your job or icome stream.
Keep floating .... don't lose your nerve or listen to the bank economists threatening off-shore funding increases.... You don't want to be fixed as rates keep dropping.......

I think you are not considering a snowball effect...
The banks cant or wont lose money....they have borrowed short term and lent long so if those short term borrowers run for "safe havens" then the banks will have to pay more, thats the backdrop.  Even if they try and absorb that (probably will for a while) once house prices start to drop consider their leverage.  You are right the banks will have a number of their assets ie houses (and farms?) having 95% mortgages that will go negative and with their leverage the reserve requirements go bye bye, the banks then have to go out and borrow at high rates to stay solvent...
This for me is the bigger worry, our banks shut their doors, depositors lose their savings and it goes badly from there.
I really dont think the banks care about the economy as such.....they are there for their shareholders.......and the big 4 are oz owned, do you really think OZ would hold the line for NZ's sake?  I dont think so somehow....
Keep floating, well consider an asymmetrical trade....small chance that bank rates will go slightly lower and save you a little money v chance they could spike...and cost you a lot.....its really crystal ball stuff IMHO....I have such a small mortgage now that for me even 30% interest makes no odds directly anyway....but Im not alone in the economy we are all in this. So many ppl have mind bogglingly huge mortgages around me 10x and 80%+ seems very common....and then there are the not so few with one rental offestting their tax....or the BBs whos home is debt free but have some rentals that are not.... A juicy target for the banks that debt free home.
regards

I really dont think the banks care about the economy as such.....they are there for their shareholders
If banks are only there for their shareholders then the last thing they want is for their bank to go belly up and lose all their shareholders funds (Capital) which is the Billions of $$$.
So they will mis-manage their investments  and be first in the line to lose (like any business or personal asset equity is the first to be lost) I don't think so.

Mortgage Belt - dangerous if you work on that basis because banks don't, and never have,  been the deciding factor as to whether rates go up or down. They can move their margins up or down, but that is literally at the margin and doesn't have much impact. It used to be that central banks dictated that movement, more lately its the extent of the banks liquidity margins that they're having to pay for funds both onshore and offshore that is the major influence - and that has little or no infuence on it from what the central bank does. And guess what, the offshore market doesn't give a damn if the NZ housing market can't stand higher rates.
 
What drives interest rates is inflation, and the percieved credit risk of the banks in the global market place. If an banking implosion occurs, it will be a case of not being able to get credit at any price, and what will be available will likely be at such huge margins that  probably even a cut in the OCR to zero might not be enough to stop rates going higher. And if we manage to avoid that, think for a moment about those of us who say, whilst inflation isn't a risk currently for at least the next year, money printing has longer-term inflationary consequences globally if you do enough of it (and they have and will be forced to continue to in my book) - and a house purchase is normally a long-term decision isn't it ?
 
By the way, why do you say, "don't listen to those who threaten off-shore fundings increases" ?- those funding costs have already gone up 1.5% in the last couple of years, and is the reason why the OCR's that extra bit lower.  Are you magically calling a top in the whole global crisis ?...good to hear, I'll sleep better at night 
 

Yes CBs are going to print money regardless it is all they know at this point.

They have or will have no other option and I think its pretty soon.....however they will be printing into a black hole, ie the private and home sectors will re-trench so fast that they wont stop a Depression IMHO.
regards

At least Olly has an opinion. Many of the rest if you just criticize and contribute nothing. Olly never claims that he is always right. In today's news it has just been announced that listings are the lowest for years making it harder for first home buyers. Prices must rise under these circumstances and olly's opinions will prove more correct than ever . Some of you whiners

can never admit that were wrong the whole time .

Um this thread is full of opinion, just lots with a different opinion to yours and Olly's. Stop whining and get out there and buy property with your ears pinned ! Property waits for no man and house prices have gone up by .008% in the time it took you to moan about us whiners!

...
Why do mummy and daddy not give the kiddies a free house, a free car, a free education, a free ride??.
Answers on a 100$ bill and post to .....
An Equiring Mind.
C/O Madoff & Associates,
Speculation Drive,
etc...
 
@ Alter Ego. Your questions may have some tongue-in-check, but when I see ads in commercial property for sale section looking for buyers of (say) prominent bank branch somewhere, with its main selling point being that the bank has the long term lease, I do seriously ask the question; Why doesn't the bank own the land its own branches are on?
 
On the surface it would seem a no-brainer... Cost is its own deposit rates. This is versus lending those funds to an investor at higher lending rates, having that investor work in his own margin, then lease right back to the bank.
 
The bank continues their operations, but at a much higher cost than otherwise. So, I may reveal my true naivety, but what am I missing?
http://www.trademe.co.nz/property/commercial-property/for-sale/auction-4...
 

Because Banks get a better return on their capital  by lending out money rather than being a landlord.  Same reason many businesses choose not to be landlords and lease their premises. There is nothing unusual here.
 
In the past many bank buildings were owned by staff superannuation schemes but many of these have since been wound up.

Don't Listen to the Prperty Spruikers
Do not buy a house as an investment. Do not listen to the property spruikers in the New Zealand press.

Olly Newland and his ilk are dangerous. One statement he made has no credibility.

"Borrow till it hurts". Now let's think about that, Olly didn't, but let us do the thinking for him. Without the vested interests. This statement is based on the presumption that, "Prices are rocketing ahead?"

OK, prices are increasing, but they are not rocketing ahead. More importantly, NOT going up in value. Look at the latest figures of housing as against gold. Ponder this, since mid-2005, house prices have decreased back to where they were valued in 1991, the start of the current housing 'boom' (read credit boom).

There is much scope left on the downside as there is much scope left for credit expansion going forward. Does anyone believe the Keynesian Central Bankers will stop printing and let this crisis get worse?

Let us also look at these salient statements from Stuff yesterday.

"The rampant cost of living means two-income families are increasingly worse off than single-income families were a generation ago – and it is threatening to put them under. "

"It is increasingly clear that two incomes have trapped many families under a mountain of long-term financial commitments," said economist Gareth Morgan.

"Borrowing in order to purchase an investment [didn't mention housing] can be a positive approach to wealth creation," said a recent Families Commission report. "Where debt is difficult to service and hampers family functioning, however, it can become problematic."

"What has buried so many families is the level of household debt. In 1980, it accounted for 47 per cent of a family's disposable income. Today, the debt mountain is equivalent to 143 per cent of disposable income."

Buried; now that is a dramatic word and one which the spruikers should be morally aware of. New Zealanders fell into the worldview that housing is an investment as house prices 'always' go up. NZers borrowed more and then believed the second lie. Leave the old house and get something bigger and better. It makes you look and feel wealthy, does it not?

Debt is a trap, the housing investors associations want to lead you into the snare with all the honey talking swankyness of a fox juicing a chicken.

With mortgagee sales on a steep curve upwards and interest rates likely to balloon soon (does Olly really think our debt is going to be this attractive to overseas buyers for the 'long term'?), buying a house will bury you.

Sure, you may get lucky, but please do not let these spruikers get an advantage from your financial death.

Typical of someone who doesn't understand property.
 
For starters, gold has no income, Auckland houses do!  Hence comparison of house values in ounces of gold is irrelevant.
 
Invest in gold, or put your money in the bank, but whatever you do you won't be better off than investing in property.
 
 

Sorry Chris, struggle to understand your point - basically youre saying that something that doesn't have an income has out-performed housing in recent years, yet you're a property bull ?
 

Grant you misread my comment!  I said you can invest in gold or put your money in the bank if you want to, but you won't be better off than putting it in good property.

.

Understanding property is a nonsense if you don't understand where the tenant income comes from, and if it will continue.
 
It won't.
 
Which means the bets of those who think it wil (or who just ignore the possibility) are off - and by a long way.
 
We're looking at the biggest vanising of 'capital' the planet has ever seen - it will continue until the spendable equals the underwrite. Good luck ChrisJ - seems to me you're collecting deckchair-tickets on the assumption you haven't hit an iceberg   ;)

Don't Listen to the Property Spruikers
Do not buy a house as an investment. Do not listen to the property spruikers in the New Zealand press.

Olly Newland and his ilk are dangerous. One statement he made has no credibility.

"Borrow till it hurts". Now let's think about that, Olly didn't, but let us do the thinking for him. Without the vested interests. This statement is based on the presumption that, "Prices are rocketing ahead?"

OK, prices are increasing, but they are not rocketing ahead. More importantly, NOT going up in value. Look at the latest figures of housing as against gold. Ponder this, since mid-2005, house prices have decreased back to where they were valued in 1991, the start of the current housing 'boom' (read credit boom).

There is much scope left on the downside as there is much scope left for credit expansion going forward. Does anyone believe the Keynesian Central Bankers will stop printing and let this crisis get worse?

Let us also look at these salient statements from Stuff yesterday.

"The rampant cost of living means two-income families are increasingly worse off than single-income families were a generation ago – and it is threatening to put them under. "

"It is increasingly clear that two incomes have trapped many families under a mountain of long-term financial commitments," said economist Gareth Morgan.

"Borrowing in order to purchase an investment [didn't mention housing] can be a positive approach to wealth creation," said a recent Families Commission report. "Where debt is difficult to service and hampers family functioning, however, it can become problematic."

"What has buried so many families is the level of household debt. In 1980, it accounted for 47 per cent of a family's disposable income. Today, the debt mountain is equivalent to 143 per cent of disposable income."

Buried; now that is a dramatic word and one which the spruikers should be morally aware of. New Zealanders fell into the worldview that housing is an investment as house prices 'always' go up. NZers borrowed more and then believed the second lie. Leave the old house and get something bigger and better. It makes you look and feel wealthy, does it not?

Debt is a trap, the housing investors associations want to lead you into the snare with all the honey talking swankyness of a fox juicing a chicken.

With mortgagee sales on a steep curve upwards and interest rates likely to balloon soon (does Olly really think our debt is going to be this attractive to overseas buyers for the 'long term'?), buying a house will bury you.

Sure, you may get lucky, but please do not let these spruikers get an advantage from your financial death.

Heard you the first time, but well said.
This pseudo property boom is a bit like other booms.They all eventually go BOOM!
 
Boom, boom
Basel

As someone who's been looking to buy a first home in Auckland the last 6-8 months with a sizeable deposit (I was saving lots as I missed the last property boom) things have gone from a bit silly to utterly crazy in the wider Auckland region. Spill-over into the outlying suburbs is now well underway with demand and prices up with bugger all choice on the market.
As such I've decided to put my wallet in my pocket. I will probably buy a house in the next year or so but it'll be out of Auckland. The price of living up here has gone utterly above and beyond what someone can bear even on a decent salary, and a decent quality of life and decent grpwth prospects are only really available if you're double-income-no-kids or have substantial inherited ealth.
I'm currently trying to see where else I'd like to live and where I can move my business to. Two of my colleagues (mid-'30s, also looking to buy their first homes) are thinking exactly the same. Don't be fooled into thinking that demand is going up and up with no signs of slowing. Quite the contrary. The outflow of people from Auckland is only going to increase as it represents ever decreasing value. A correction, and a large one at that, is inevitable and impending. Inside of two years I see the Auckland property landscape in freefall, people quitting the market in droves and moderately higher interest rates causing a tidal wave of mortgagee sales.

Graeme, very good. A 1970 timewarp! I agree there will be no pretty ending to this debt saga. There are many forces at work here and not all just economic- a perfect(self inflicted) storm. A big worry is how Oceania will treat us Proles that have real wealth, once all the hubble and bubble of current financial alchemy has failed, exhausted.
Regards,Ergophobia   

Renters have missed out again:    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10816995
Can you make $256,000 renting? In 1 year?    Or maybe take a risk, renovate & take the capital gain.... ? 
Nah,,,,,   that takes initiative & risk.

I could be wrong, but when I read that article, it seemed to be talking about one example. Are you suggesting we should all look forward to this? Every year? And if I follow your advice and buy, any chance I can get you to underwrite me then? Of course not. To suggest that we can all enjoy such gains is like saying we should all ensure we are in the top 50%; not mathematically possible.
It was in the news BECAUSE of its craziness.
I want to see a bust, so I want as many people as possible to buy at these levels, all nursing the belief that they too deserve the same result.

Ok I understand Chris, you're looking further ahead. Smitho's right about the recent past though, having sat on my gold for the past 5 years I can buy lot more house today than I could before which means gold has been the better investment in that period. Ongoing ? Depends upon you're preception of a global banking collapse or not. If we get one, then gold will far out-perform housing by a country mile, if we don't, I think it will just be a smaller gain.