Lower house prices see Central Auckland join Papakura and Franklin as the only parts of greater Auckland where housing is considered affordable for first home buyers

By Greg Ninness

The housing market appears to be finely balanced, with lower quartile selling prices falling in exactly the same number of towns and districts as those that posted rises last month, according to interest.co.nz's Home Loan Affordability Reports for October.

The reports track the REINZ’s monthly lower quartile selling prices in 28 cities and districts throughout the country.

It shows that lower quartile prices declined in 13 areas in October compared to September, increased in another 13 and were unchanged in the remaining two.

The areas where lower quartile prices declined compared to September were: Whangarei, Central Auckland, West Auckland, Tauranga, New Plymouth, Gisborne, Kapiti Coast, Wellington City, Hutt Valley, Porirua, Nelson, Queenstown, and Invercargill.

Areas where lower quartile prices increased were Rodney, Papakura, Franklin, Hamilton, Rotorua, Napier, Hastings, Palmerston North, Whanganui, Wairarapa,  Christchurch, Timaru and Dunedin.

Lower quartile prices were unchanged on Auckland's North Shore and in South Auckland (click on the links in the box below for the reports on invdividual areas).

Separate Home Loan Affordability Reports are available for each of the following regions and cities (click to view).
Northland Region
Whangarei District
Auckland Region
Rodney District
North Shore District
Waitakere District
Central Auckland District
Manukau District
Papakura District
Franklin District
Waikato Region
Hamilton District
Bay of Plenty Region
Tauranga District
Rotorua District
Hawke's Bay Region
Napier District
Hastings District
Gisborne District
Taranaki Region
New Plymouth District
Manawatu/Whanganui Region
Palmerston North District
Whanganui District
Wellington Region
Masterton District
Kapiti District
Porirua District
Hutt Valley District
Wellington City
Nelson/Marlborough Region
Nelson City
Canterbury Region
Christchurch District
Timaru District
Otago Region
Dunedin District
Queenstown-Lakes District
Southland Region
Invercargill District
All New Zealand

The reports also track median take home pay for couples aged 25-29 working full time in each area and changes in mortgage interest rates, and calculates how much of their pay typical first home buyers would need to set aside for the mortgage payments on a lower quartile-priced home in each area.

Although the rises in take home pay were modest, that combined with static mortgage interest rates and falling or unchanged house prices in the majority of districts, saw affordability improve for first home buyers in in 15 of the 28 areas monitored last month, pushing the pendulum slightly in favour of first home buyers.

The reports consider housing to be affordable when mortgage payments take up no more than 40% of take home pay.

Using that measure housing remains affordable for first home buyers in 23 of the 28 areas monitored by the report.

The areas were housing is unaffordable for first home buyers are Queenstown and the Auckland districts of Rodney, West Auckland, North Shore and South Auckland.

Big improvement in central Auckland

The biggest improvement in affordability over the last few months has occurred in central Auckland.

These are the suburbs that previously fell within the boundaries of the former Auckland City Council, prior to the formation of the super city.

Last month the lower quartile price in central Auckland declined to $595,000 from $656,500 in September, and is now down by more than $100,000 since it peaked at $695,699 in March.

One of the contributing factors for the price fall is likely to be the emerging weakness in the apartment market, which is dominated by investors.

However the median price in central Auckland has had an even bigger fall, dropping from its March peak of $1,050,000 to $850,000 in October, a decline of exactly $200,000, suggesting the weakness in the central Auckland suburbs is not confined to the apartment market.

That means central Auckland now joins Papakura and Franklin as the only parts of greater Auckland where housing is considered affordable for first home buyers.

With listing numbers in Auckland rising ahead of the Christmas break and sales remaining sluggish, the market pendulum is probably continuing to shift slowly in buyers’ favour and that could put some downward pressure on prices over summer.

Affordability has also been improving significantly for first home buyers in Tauranga and Wellington.

In Tauranga the lower quartile price dropped for the second month in a row to $461,000 in October, from $500,000 in August and is now down by $54,000 compared to its March peak of $515,000.

There have also been substantial declines in lower quartile prices in Wellington City, Hutt Valley, Porirua and Kapiti Coast, which has seen the lower quartile price for the entire Wellington Region decline from its April peak of $405,000 (the only time it has ever been above $400,000) to $379,690 in November.

So first home buyers should not be shy in asking Santa for a place of their own in the New Year.

If they’ve been good and saved their pennies for a deposit, there’s an increasing chance their wish could come true

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135 Comments

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18

Yes Labour have done a great job so far with housing. Making it more affordable means more first home buyers can get themselves on the ladder. And Labour have only just started the process so even better times will be coming for those who missed out under National.

and all those hypocrites that claimed the only way for house prices is UP

H O, read the article before commenting on it, it is not saying that house prices are going down, it says, I quote:

"It shows that lower quartile prices declined in 13 areas in October compared to September, increased in another 13 and were unchanged in the remaining two"

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11

are you on some sort of drugs??

"It shows that lower quartile prices declined in 13 " that is what I was referring to .. remove your myopic lens

I'm not on drugs, thanks for asking.
13 regions went down and 13 regions went up, 2 are unchanged, that's what it says. Please READ before making any silly comments. And you have the nerve to say I have myopic lenses when the data is perfectly NEUTRAL and you see it as negative

H O, you obvioulsy don't like to read, so let me help you out with the first sentence of the article, you'll find it at the top of the article, just below the bold headlines.

"The housing market appears to be finely balanced"

Yvil, you quite often prove yourself ignorant with your comments, so dont presume that "I dont like to read"..

Maybe one likes to read, but only remembers reading the parts that one agrees with.

The idea that Labour is responsible for the downturn that started in the middle of this year... that is an erroneous attribution. I'm hoping that Labour does something material to increase housing affordability. Based on their previous accomplishments in this area, I'm not very confident.

The current Labour government should say the housing inflation during the Clark / Cullen government was a mistake. They could then differentiate and draw a line under it.

silly people like you shouldn't talk about silly comments

Great comment H O, insightful and constructive, supported by facts, well done ! Surely a contender for comment of the day

I wouldn't take that as a compliment, not from a Silly person like you

LOL, Labour done what exactly ??? >>> this has been brewing since March last year lol
get back to your planet Gordon, !!

..more than one wind blowing eco bird. The new govt rhetoric and policy is pretty clear ...

The new governments rhetoric is a load of hot air not a "wind". I'm also pretty sure its 50/50 if their policies will make the housing affordability better or worse.

Yup, progressives love narratives, facts are a social construct and can only be interpreted through a progressive narrative. The fact that houses are affordable must mean that Labour is doing a great job, just like that fact that house prices were rising meant National was oppressing FHB's.

Dont buy a thing ! Losing 200k value on your home since march is not a good investment. 2018 - the year of the crash.

Listen to John Wheeler, he knows, he's a Real Estate dealer

Look at the photo, the house is just about to fall off the cliff, hopefully there's no one inside... Lol

Ummm... it's not a real picture... so you can relax, no none is inside.

As a draughtsman I thought you would have picked up on that?

Lol, not a draughtsman

Thanks, corrected.

The picture says it all. FHB, the day they show the house after it lands at the bottom of the cliff - that's probably the time to buy....

Yes, don't bother reading the article

R P, we're safe, Grendel says it's not a real house, in the comment just above, phew

Hi Yvil,

Enjoy your comments!

You're a smart guy!

Cheers,

TTP

Thanks, although we should be careful about agreeing with each other, some will immediately conclude we are the same person

But we are the same person aren't we?

TTP

"The housing market appears to be finely balanced"
So what is all the fuss and crying about then ??
the market has balanced itself in only few months !!!

And, according to this article "So first home buyers should not be shy in asking Santa for a place of their own in the New Year." LOL, is Greg Ninness a REA too? ..... or is his giving misleading advice to FHB ?? -- I reckon that is a sound advice for a change >>>> Wonder who is wearing Santa this year, Maybe WP

Alternatively, Maybe FHB should follow Westpac's projection and wait another 5 years to buy houses cheaper :) .... and shaft all PT plans in selling the new Kiwi Built houses, lol -- chances are that the Gov will end up selling ALL Kiwi built to HNZ or turn itself into a huge Landlord!!

Some of us are ridiculed when we say that this market is fluid and once all the interventions and manipulations have had their course the market will balance itself, and be business as usual. >> Patience is a virtue !!

I am looking forward to read, with joy, the comments from the doomer and gloomers on this !! .. wont be surprised if they all come out and claim credit for it ...lol

Hows your prediction the market had bottomed out In August Eco??? Might put that up with Bernard Hickeys house fall of 30% quote.

Still stands Frazz, July August prices of quality homes in Auckland was bottom...and yet to be challenged .... Prices, Not indexes or averages or rate of rise ....etc

The confirmation came from ACC in its recent CVs which pins down the current prices as rateable valuation and that is your official guide for each property ( as always was) ... Actually some valuations pinned down the March 17 peak prices as CVs .... If Not, Why did the third of Auckland suburbs go over the average of $1M mark then?

So watch the space, In this stagnated market, When all the Old, small, rundown, Do-Ups, and rubbish is sold at discounted prices you will see the shine of the real housing stock. They are mostly selling cheaper than the Kiwi built new units ATM. All quality stock is being sold at or around its asking prices which have not changed significantly.

Bernard who??

Unfortunately frazz RE's like Eco Birdy will never admit to property prices falling long term as the are now for Auckland. They'll try to disguise things as much as possible to encourage people to buy.

Property prices have got a lot further to fall yet so expect them to keep reducing well in to next year particularly for Central Auckland.

Looking at the latest figures from this article; Central Auckland has dropped significantly from March peak of $1,050,000 to $850k interest October that a $200k drop!

Hi CJ099,

To suggest that property prices will fall long-term in Auckland is utter nonsense.

Looking out long-term (say 7 years +), Auckland prices will almost certainly be very much higher than they are in November 2017.

House price increases will easily outpace apartment price increases - in my estimation.

TTP

TTP, I think CJ099 has got it pretty spot on. Borrowing and investing circles the definition of long term is 3-years or longer. Did you even read the latest Westpac report that forecasted house price falls right out to 2022?

Did you even bother to check the definition of long term before you dissed CJ099 comment?

I see you've just edited your definition of longer term to 7+ years to avoid yet another embarrassment lol!

Hi R-P,

No embarrassment to me. (It's your name that's synonymous with embarrassment.)

In much/most business literature, long-term is 7 years +. That's common.

Very short-term is less than one year.

Short-term 1-3 years.

Medium-term is 4-6 years.

But, for sure, definitions do vary - so there's an element arbitrariness.

If you're an economist, long-term is when all factors of production are variable - which avoids rigid definitions. But I wouldn't expect you to understand that.

No question that Auckland house prices are set to rise in any reasonable definition of long-term. If you don't like the prospect of that, then develop a strategy for yourself.

TTP

Call me greedy, but if I were researching a company which said it had a plan to increase profitability in 7 years+ time, I'd probably look elsewhere. What makes Auckland housing such an irresistible investment proposition?

So Google, Amazon, Xero not your cup of tea then? And no one calls you greedy, they call you a noob.

I have shares in all 3 (Xero directly, the others through funds). Note that they are all growing strongly today, not static or 'oscillating' for 7 years before promising growth.

You said profitability in your comment. Now you are talking about growth. Which is it. Also Today should be the Profitably period and 7 years ago the Growth period. So you even have that the wrong way round. I change my mind though, you are probably not a noob, I think you just need to communicate better.

Possibly sloppy language. My point is, why would I invest in Auckland housing when even optimists think a decent return is 7 years away? The yield is nothing to write home about. There's a whole world of investment opportunities out there.

Now that I do agree with.

Hi mfd,

You're rather naive.

Historically, shares in NZ (and elsewhere) have been a great deal more volatile an investment than property.

There's no guarantee that Xero shares will even be listed in 7 years time......

But property will certainly be in existence - and almost certainly a lot pricier than today.

TTP

Luckily, I hold many other shares and Xero only represents ~2% of my net worth. Nothing terrible will happen to my life if Xero go to zero. I even own property - diversity is great and yes property tends to be less volatile, and accordingly less rewarding. Even if I were looking to buy more property, Auckland seems like a terrible proposition. It also doesn't take much imagination to consider individual Auckland properties are not permanent either - the city is built on a number of volcanoes for a start.

If you want to get historical, then you might want to consider these facts:

1. shares have historically (significantly) outperformed housing
https://www.quora.com/What-is-the-historical-return-of-real-estate-vs-st...

2. housing has historically only grown in line with inflation
- https://hotelivory.wordpress.com/2010/08/29/a-very-long-view-on-house-pr...
- http://visualizingeconomics.com/blog/2011/03/23/real-vs-nominal-housing-...

You should be more worried about the recent house price rises reverting to the mean

Dp

It is also assumed they purchased their current home five years
ago for $228,000, which was the lower quartile selling price in
Palmerston North City at the time.

If they sold that home for the current lower quartile price in
Palmerston North City of $307,000, they would have equity of
$128,994 to use as a deposit on a new home.
If they purchased a home at Palmerston North City’s current
median price of $370,000 they would need a $241,006 mortgage.

The repayments on this would be would be $290.96 a week
which would be 21.5% of their weekly income.

Mortgage payments are considered affordable when they take up
no more than 40% of take home pay.

On that basis it would be affordable for the couple in this example
to move up to next rung of the property ladder and buy a home
at Palmerston North City’s median price.

Yes, it's good to see.

Personally, and based on recent visits to Palmerston North, I've been enormously impressed with what this attractive, garden city has to offer.

Anyone who's struggling with budget in Wellington/Auckland would do well to consider Palmy. Certainly, there are good employment opportunities there.

TTP

I agree Palmerston North is great. We bought our first home this year in Masterton, which is also extremely affordable with access to rail into Wellington most days of the year.

I actually agree with you this time TTP. Finding employment opportunities in Palmy is actually surprisingly easy to obtain on a decent salary, especially when compared to the relatively cheap house prices. Although house prices have been creeping up quite fast over the past 18 months to become almost unaffordable. Palmy has a bubble unfortunately and it won't last either.

290 a week mortgage payments in palmy is certainly not in bubble territory, the recent growth is just catch up. Mortgage payments at just 20% income; prices in palmy could double from here and still be considered 'affordable' compared to Auckland, Wellington.

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22

More affordable ...........yes

Still unaffordable ..........yes.

Yes, when I see 1970-1980's 3 bedroom houses selling in the Cloverlea suburb for $350-$370K that is classed as ridiculous and yes unaffordable! Cloverlea is traditionally a market for FHB's and middle income families and retirees wanting to downsize!

On 600+ sqm of land I bet. And cost to replace the house at around that price alone (use sum insured calcs), so you are still getting a free section (or 2 sections) at 350k levels - and all for $290 a week, when average rent for a 3 bed in cloverlea is around the 350/week mark

Am I seeing things, is that a 19% drop in medium price from the peak in central Akl? Apartments skewing the figures or not, that's an alarming & massive drop in values over a 7 month period. Be interesting to see what the next few months produce. If this is a trend it's going to get messy as values approach the price levels from a few years back by say mid next year. Should never have been allowed to spiral out of control.

National allowed the market to spiral out of control, and now properties are so overvalued that a huge correction needs to happen and so it begins...

I think that NZ will suffer from this very weak, disorganized, disoriented, aimless, and inefficient government.

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13

I dont agree with your opinion, but time will tell.

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18

have we not already had nine years of that type of goverment.
the do nothing, deny, what do the polls say to do type, ok put on a band aid for now and leave for tomorrow

This article is based purely on figures collected before the new Government took power. What is the relevance of your comment? Do you have any specific predictions?

Yes, they're delivering on their stated intentions.

we survived the previous 9 years :)

Yes but many more haven't survived. They in fact have been displaced by others.

Sounds like something a blue dragon would say.

.

@xingmowang, might make more sense if you change "will suffer" to "suffered"

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10

Finely balanced property market for investors in the Mercury zone was so last year. Tide turned Dec.'16. Many Investor properties bought for 1M plus have failed to reach their reserves at auction. November '17 they are struggling to achieve their reserve price by negotiation. Those investors are now looking at losses of $200,000 plus. New RV's become their new reserves at auction. The now unbalanced investment property market is heading to the downside faster than the banks care to concede.

If these investors have bought a $800k property for $1M in the heat of the market rush, then they have no one but themselves to blame - markets do not protect fools !
On the other hand, if the real value of the property is $1M today, then these reserves will not change( if they Do Not have or forced to sell ).... and that is mostly why only a third of Auctions are successful ATM.

For once I agree with you

I'd like to add "or want a lifestyle change" to "( if they Do Not have or forced to sell )"

Although a few years down the track they might have wished they did

Maybe they would, but going by history everyone who sold early in similar events wished they Didn't after few years. GFC period is a live example.

Hi Eco Bird,

Agree with you.

And remember, if you don't sell then you lose nothing.

In a property downturn, the great majority of people will hold on and ride it out. (Sales volumes typically fall.)

TTP

Always hard to judge the "real value" of a property (more so than other assets due to asymmetric information, illiquid market etc).
In the end you may believe your property is worth 1mill but if the market considers it 800K, who is right (or are they both wrong)?
Mr Market tends to over-swing between Optimism & Despair, I'm hoping for more of the 2nd one before i jump back in for additional investments.

Yep the fear of missing out or the fear of losing out which will happen.

At least the fear of missing out is on hold.

Same things happened to my house in Surrey, the market was moving fast, and people were jumping in, but now it has stalled. Still good, and no big drops like NZ. But at least people I know dont have the fear of missing out, they are taking their time to buy a house they like for the best price.

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10

Good point re the banks Tkore. Is anyone worried about the Aussie banks exposure to the ANZ property markets? Both markets are turning and highly leveraged.

"60 per cent exposure to mortgage debt in Australia's banks was extremely high"
http://www.abc.net.au/news/2017-08-21/how-lending-culture-is-leaving-aus...

The Australians call it like it is, there's more clarity with the market commentary & stats. Here we seem to bury our heads in the sand at all levels or simply "have no data" ie foreign ownership. For those interested keep an eye on happenings across the ditch. Particularly Brisbane at this point.

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11

Totally, this is not the market to be borrowing up large to get into. I believe the declines have only just begun. Its an encouraging step in the right direction but still think it's early days given the rising risks.

Except perhaps if the RBNZ hints at lifting the LVR constraints next year, in that case perhaps sales might simply stall until that time, when the party might start over with banks once again keen to lend after the recent slow spell.

Yes, I am very worried about our indirect exposure to the Aussie property market via our common banks. I can see no good outcome for this ridiculous Australian credit bubble. It really is our banking sectors Achilles heel.

Hi Bobster,

If there's a banking failure and people lose money, they'll never get it back.

But if property prices slip a bit, one need only wait until the next upswing to be compensated.

That's a reason why I reckon property's a good investment.

TTP

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10

See this graph of UK prices - from the peak in 1989, prices only returned to that level in 2002.
http://monevator.monevator.netdna-cdn.com/wp-content/uploads/2011/12/rea...

This is nationally, there were many who waited 20 years to see a profit. But don't worry, couldn't happen here after the biggest price runup of all time.

TTP, says if there's a banking failure and people lose money, they'll never get it back.

That's just complete rubbish. Stop making comments without first doing some basic research. RBNZ, Open Bank Resolution explained here:

https://www.rbnz.govt.nz/regulation-and-supervision/banks/open-bank-reso...

Think again, R-P,

Your comment above is misleading and deceptive. Banks are NOT 100% safe/guaranteed in NZ.

Government (and RBNZ) is not obliged to bail out any bank. There's no law/regulation mandating that.

People may end up taking a "haircut" in the event of a bank failure. A depositor could lose a significant chunk of their money and NEVER be able to recover it.

Tough - but people need to understand the reality.

TTP

Oh TTP - the following is taken from the RBNZ website. - all you had to do was click on the link so you could yourself learn more about OBR by clicking OBR FAQ at the bottom of the page!

All locally incorporated banks with over $1 billion dollars of retail deposits are being required to participate in the scheme. This means that these banks will have to put in place the necessary systems to allow the OBR to be carried out within the necessary timescales. This is referred to as pre-positioning. All other registered banks have the option to opt-in to the scheme voluntarily if they wish to do so.

I suggest, if you are fortunate enough to have savings, spread them amongst several banks so that in the event of a crisis it greatly reduces your chances of loss. A small haircut is entirely possible but by no means a certainty. If a bank does fail according to the RBNZ, under OBR unfrozen funds come under Government guarantee, frozen portion is released once the bank is back to health.

Personally, if a situation such as this arose I think it's a case of those who lose least win most. Many will be trapped in property, in negative equity situations, worthless share portfolios and rendered insolvent. Not pretty.

Now, when TTP, says if there's a banking failure and people lose money, they'll never get it back, that's just rubbish.

Hi R-P,

You write, "a small haircut is entirely possible".......

You need to understand that a LARGE haircut is also entirely possible. It depends on the magnitude/scope of the bank failure.

Banking failures can and do happen. And NZ cannot boast complete immunity.

At the end of the day, bank creditors/depositors and owners may well have to foot the losses - AND NEVER GET THEIR MONEY BACK. That's commercial reality when things go belly-up.

Nobody should be in any doubt about it. (R-P's comments are wrong and very irresponsible.)

TTP

TTP, all you or anyone else needs to know about OBR is right here: https://www.rbnz.govt.nz/regulation-and-supervision/banks/open-bank-reso...

I do my utmost to make posts based on facts - links are added. It's never been my intention to make misleading or responsible posts like you accuse me of doing.

I think it's the height of arrogance when people do such things and it's just appalling. Get a life.

Enough said

Retired-Poppy,

I'm afraid you are quite wrong when you say that depositors(creditors under OBR) will definitely get their frozen deposits back when the failed bank recovers. They MAY get all or part of it,but that is not guaranteed and that is made clear in the the link you supply. Nor are you right in saying that the haircut could not be substantial.
I have taken an interest in this subject for some years and have had correspondence with the RB on some aspects of OBR. I accept that the risk of a bank failure is small,but being conservatively minded,I have spread my deposits over several banks and in Kiwibonds.

Hi Linklater01,

You are absolutely correct in your comments above. Indeed, the link provided by Retired-Poppy makes the matter clear to the public.

The link clarifies that THE COST OF A BANK FAILURE WOULD FALL PRIMARILY ON THE BANK'S CREDITORS (i.e. DEPOSITORS) AND SHAREHOLDERS RATHER THAN THE TAXPAYER.

Retired-Poppy is wrong and he is being arrogantly irresponsible in his comments above.

TTP

TTP, please provide supporting links to illustrate the degree of cataclysmic losses placed on depositors, you envision is possible and how that supports your claim that property is the preferred investment in such dire times. I think we are in for difficult times sure but I'm not DOOMSDAY PREPPING.

Remember, all locally incorporated banks with over $1 billion dollars of retail deposits are required to participate in the OBR scheme.

Under OBR intervention Banks will recover simply because the economy will - right?. I understand all depositors claims remain legally valid throughout the process and eventually the frozen portion of savings returned to customers:

What happens to depositors money under OBR also explained here: http://www.stuff.co.nz/business/76699289/What-happens-to-your-money-if-y...

Again, when TTP, says Government (and RBNZ) is not obliged to bail out any bank, there's no law/regulation mandating that and if there's a banking failure and people lose money, they'll never get it back - that's just complete rubbish.

Now let's keep this positive!

So for example - you'd prefer to hold an asset that is now worth 40% less than you paid for it, than have a savings account that loses 20% in an OBR event?

Do you think that's a sensible position?

Oh dear, you have completely missed the point.

Over the last few years the household debt to income ratio has soared to 170% and house prices have exploded. That's not a coincidence, all that mortgage credit has been tipped into the housing market. If the credit of the banks is impaired such that they cannot sustain that level of credit then house prices will fall accordingly. If the Aussie banks (ie our banks) were to suffer a significant credit impairment then the housing market (which is really the mortgage credit market) would collapse like a soufflé. If there's a banking failure the major and immediate consequence of that will be the failure of the housing market.

.....that will be the failure of the housing market, with all its tentacles touching basically every aspect of our perceived financial and economic wealth.

If it should come to that - it will make '87 look like a picnic - and all will wonder how the whole country was allowed to, and then so willingly, took itself to the brink.

$200 grand in central Auckland ouch. Now will central Auckland spill over to the suburbs, time will tell.

Bluff, as at Sept 2017, in the NZ regulated banking system, there were approx 273bn loans relating to property (238bn in housing loans, 35bn in commercial property loans) - https://www.rbnz.govt.nz/statistics/s31-banks-assets-loans-by-purpose

The 273bn represents:
1) 65% of total loans in the regulated banking system in NZ,
2) 53% of total assets of the regulated banking system in NZ
3) 739% of total equity of the regulated banking system in NZ -

https://www.rbnz.govt.nz/statistics/s10-banks-balance-sheet

The total banking system has a total assets to total equity ratio of 13.9x

Note - if the banks lose 13.5% of the value of their property loans (after allowing for recovery of loans from sale of the underlying property given as security), then that will reduce equity to zero. I have no idea of the probability of this but the banks have adequate amounts of risk weighted capital, well above the minimum required level. That is assuming that the bank's internal calculations are correct (note the Westpac and ASB capital calculation review by the RBNZ recently), and assumes that the risk weighting on various property loans accurately reflects the risk of losses in these loans. (note in Europe that Greek sovereign debt had a risk weight of zero percent - and then the Greek government defaulted - those losses on those zero risk weighted assets impacted the capital of the Greek banks and Cypriot banks) Not sure how bad the economic environment would need to get to before there was a major dent in the bank's capital to absorb loan losses before new capital by existing shareholders would be necessary (assuming that they have the cash to do so) or we reach the open bank resolution stage.

It's a start.

Vendors can start by stop wasting money on real estate agents and sell privately...
https://www.linkedin.com/pulse/what-i-learned-from-selling-my-house-priv...

Problem solved with housing.
Len Brown x Mayor lives in Papakura so why cant first home buyers?

No thanks, lived in Papakura from 1996-2003. It turned into a social benefit overflow for Otara. With Brown there even better living in Greenhithe.

Typical First home buyer wanting to live in top locations like Greenhithe or complain to the Herald.

Papakura is very nice and if the Mayor of Auckland can live there!

First home buyers have no excuses and the media and political parties hold them in high regard? Why?

Greenhithe used to be a backwater suburb that nobody ever heard of.

just like mangere is now the Ponsonby of the south

https://www.donhaprojects.co.nz/article/avenue-apartments

this development backs onto the southern motorway and is next to a HC area, no wonder its gated with CCTV and security at the max
typical RE speak, bad location, over priced , but its a gold mine

I really dont have time to dispute this report, but had a quick look at the North Shore one (which I know well) ... all i can say that there are a lot of assumptions based of average lower quartile houses sold and that is not true or no longer true --- assuming that a young couple with net pay $1614 pw want to buy an $850K house .... Why? that price is for a large 3 bdrm stand alone House in a very good area on the shore !! - Why should they borrow 764K when they can buy a 2 bdrm terrace houses in Albany @ $520K ( few advertised in the property press) less than the proposed Kiwibuilt prices --- how is this realistic? >> the difference in affordability is HUGE .... the report lead us to believe that people have very little choice and that is untrue.
This is why averages and assumptions are deceiving !!

Update: I read through that report again and it is really full of assumption and making choices that people with these sorts of incomes would not practically make - it is more that a Wish List house buying than actual - Hence the affordability percentages are only Good for a headline than actual indicators...

200k drop in value for a Auckland home !!!!!!! Thats Crazy, Auckland is becoming like Toronto , just like I said it would. I sure would hate to be a Real Estate Agent , just think of all those people that think there homes are worth 200k more due to that new rates valuation ! But wait , I have a plan, you need a special type of agent that is a master manipulator, an agent that will say and do anything to fulfil his own personal agenda, an agent that vomits out more SPIN than a TURBO !!! He is so amazing that he even keeps adding new names to himself, let me introduce the most incredible : ECO BIRD, TOTHEPOINT, ZACHARY SMITH YVIL, DOUBLE-GZ, ROBERT REDFORD.

I am just one person and I dont know who the other people are. I understand it is not easy out there but it never has been. I wish I could buy my Dads first house for $8000 as he did in 1970 but times have changed. He said he paid too much back then with buyers remorse.

What I did to buy my first house it was a real dump in Massey near pylons. I worked everyday including the weekend to save for a deposit. We got in flat mates to help pay the mortgage. Im not sure if those flat mates are still alive today because of the radiation. But Im still alive and got on the ladder.

Glad to hear you managed to get on the property ladder, I'm sure it's made your life more stable and enjoyable. I'm sure you would be happy to see prices come down a little to allow the same pleasure to be made available to more families.

Sure the houses have come back a bit for first home buyers and that is good. They need to start at the bottom and in suburbs like Papakura or South Auckland and do a bit of renovation later when they can afford it. Not to live close to their parents who have been on the ladder for decades.

Then first home buyers can look back on their journey and have a story to tell of hardship to justify their climb on the ladder.

How'd things go with the lovely 5 bedroom house on the shore that you were trying to sell for a while, and had on Air BnB?

Good on you, Robert Redford!

You're a success story - a winner.

Better that, than a loser. )-;

TTP

LOL, chill Wheeler, you might blow a vein ...or something !! lol

Don't say that Eco Bird, wind him up. I want to see what happens =)

John Wheeler, R E dealer

Better than being an out of work draughtsman Yvil.

Yvil, the hypocrite... how informative is your comment

You have absolutely made my day.

FYI, read that the median Auckland city central property prices were heavily influenced by the large proportion of apartment sales. Of particular note was the newly completed apartments at 56 Airedale St, (The Airedale apartments) - there were 79 sales completed in October 2017 as the sales went unconditional, yet the pre-sales were done in October 2016.

Hi CN, I'm sorry logic and facts are not welcome here at the moment. Currently its all about the Bears getting their kicks in while the market softens. They have been waiting a while so this might take some time.

Next 3 yrs prices will stay flat or even decline a small % but in 3 yrs time (2020) we will be seeing another upsurge in prices. Thats been going on for years and each time there is a downturn people think that prices will continue to decline. Not so! Look up "property Cycle" and then see the growth figures since 1991!

Dreams are free!

So is posting on this forum. It shows.

Yes dreams are free but failing to dream is very costly

Hi Yvil,

You're magic with your rebuttals!

TTP

There's no bank guarantee on nz deposits as there is in oz which is $200k. Not saying it'll happen but how confident with a deposit sitting in the bank should we be. Is kiwibank a safer bet for deposit holders sitting on the sideline? The Oz reserve bank is worried, most over leveraged housing economy in the world. Housing crises might be coined a banking crises if a steady hand on the tiller slips.

HSBC would probably be the safest I would think. They are considerably more diversified globally than small fry Oz and Kiwi banks.

Napier Council Sept 2017 RV valuations released online today, up 35% on average on the 2014 RVs.

I feel sorry for those Napier Real estate agents. It will be the same story as the Auckland agents. Prices havent crashed 200k like Auckland yet but it will follow as it always does. Just imagine having to try to tell the Vendors that there home is not worth the amount the Council says it is. People will think that those Real Estate Agents are just trying to List at a low price to get a quick sale. Now would they do a thing like that ???

Current sale prices seem to be in the zone or even marginally above the new RVs.
Lack of listings, Aucklanders moving in, buoyant local economy/jobs, prices holding especially in desirable suburbs.
Don’t see the decline quite yet.

800K in 2010 to 2.5 million in 2016. Common story for a lot of Auckland houses. By my calculations that's 23.3 years of compounding house price appreciation at 5%pa that occurred in 6 years. So we could be looking at ~17 years of flat house prices in Auckland for wages and incomes to catch up, that's assuming a wildly optimistically growth rate of 5% pa. (51 years of flat prices if you plug 2% growth into the equation)

Now that's some perspective.

2.5 million is cheap everyone can afford it, so it should just keep rising. The cleaner at work is buying his 5th 2.5 million property, he says work hard and you can do it to. Just give up avocados.

Ive done some structural and fundamental analysis, Ive discredited bloomberg articles and economist, by just the will of my forum personality. What I say goes and will happen so I dont need to show proof. Its just the lefty losers that dont agree with me. Its just illogical to think that house prices will come in line with long term averages and household incomes. People just want to live in New Zealand its the center of the world. Cheap flights everywhere and short travel times.

Overall the market appears to be performing somewhat rationally – lowering of prices will start to draw in more demand that is now willing and able to purchase.
At that point a new level of active turnover will once again be found until meaningful shifts in demand and supply again swing the pricing / sales activity pendulum one way or another.
These remain relatively short term market adjustments and merrily assume the continued non-appearance of longer term impacts consisting of variously shaded swans and other such curious phenomena
Nothing to get too excited about – the market is simply going about its business.

People on these forums laugh at millennials not being able to buy houses – but we are just sane, rational people. Fuck the ponzi!

The millenials will get the last laugh. Keep saving and you wil be able to buy at heavily discounted prices over the next 2-3 years.

What I dont get, will the bank lend money to people willingly if they are overexposed on housing in NZ and Australia. If their economist are forecasting lower house prices. They will think that the houses that their portfolios are secured on will drop and theorectically if things go tits up, it wont be good for business, as they could be sitting on a house of cards.

Wouldnt they want to be a bit more cautious in this type on environment. These are just musings and I have absolutely no idea.

Found my answer from Bobster so I thought I would re-post his.

"Over the last few years the household debt to income ratio has soared to 170% and house prices have exploded. That's not a coincidence, all that mortgage credit has been tipped into the housing market. If the credit of the banks is impaired such that they cannot sustain that level of credit then house prices will fall accordingly. If the Aussie banks (ie our banks) were to suffer a significant credit impairment then the housing market (which is really the mortgage credit market) would collapse like a soufflé. If there's a banking failure the major and immediate consequence of that will be the failure of the housing market."

The banks aren't that asleep as to current market realities.
So what happens when a property investor with a portfolio of mortgages locked with any particular bank looks to dispose of a property and positions themselves to enjoy the free equity subsequently released.
I am of the understanding that the bank may well decide that these funds would best be put to work in bringing down the risk profile of the remaining portfolio - and are thus withheld and offset against any remaining debt obligations.
Result = LVR's now looking much better from the banks perspective.
And if need be we can do this all the way down.

You are quite right. In fact banks are already doing this on the quiet, when a highly leveraged investor sells a property, they are keeping the funds and reducing their risk against the remaining portfolio. The banks are legally doing this within the terms of the loan docs that was signed by the customer/investor.

Expecting the LVR's to come off very soon as the property market has now sorted itself out apparently. Expect house prices to start increasing again because of it. Fact is you cannot control this market and you certainly cannot control anyone when it comes to money. Also it appears there is a shortage of rental property now so its just a cycle, we go round and round in circles but property just keeps going up and up.