QV says most of the property market's value growth is occurring in the regions - Auckland remains sluggish

QV says most of the property market's value growth is occurring in the regions - Auckland remains sluggish
The housing market is sluggish. Photo: theyounz. https://www.flickr.com/photos/19953402@N04/

The latest figures from Quotable Value reflect a sluggish property market, with the average value of New Zealand homes lifting by less than 0.2% in February.

According to QV, the average value of homes throughout the country was $672,645 in February, up by just 0.16% compared to the January average of $671,531.

However it was still 6.5% higher than it was in February last year.

In the Auckland region the average value of homes dropped very slightly, from $1,054,974 in January to $1,053,948 in February (-0.1%).

That means the average value of homes in Auckland is now just 1% higher than it was 12 months ago, suggesting values in the country's biggest city have largely flatlined.

"The market [in Auckland] remains sluggish with values holding for the most part, with a lack of good quality listings on the market and lower than normal sales volumes for this time of year," QV Auckland senior consultant James Steele said.

"Properties that are not well presented, have outstanding maintenance or are damp or shaded for example, are sitting on the market for longer.

"This is a change from when the market was very hot and everything was selling quickly," he said.

Average values also dropped slightly in Queenstown Lakes, which like Auckland has seen a massive increase in property values over the last few years.

However the average value on Queenstown Lakes  dipped from $1,116,673 in January to $1,114,358 in February, but that was still 7.2% higher than in February last year.

'Wellington market still seeing plenty of activity'

In the Wellington Region the average value of homes increased from $634,811 in January to $640,737 in February and was up 8.6% compared to 12 months ago.

However February's average values were down in Porirua and Wellington City compared to January.

"The Wellington market is still seeing plenty of activity although the rate of value growth has slowed a bit,"  QV Wellington senior consultant David Cornford said.

"The Hutt Valley is a bit flat but first home buyers remain active accounting for 42% of sales in Lower Hutt and 30% of all sales across the Wellington region, so they are a a big portion of the market.

"Investor activity is pretty flat at the moment and yields have increased slightly due to strong rent growth and less promise of quick capital gains," he said.

In Christchurch the average value of homes  was virtually unchanged, rising by just $104 from $494,459 in January to $494,563 in February, although it remained 0.8% below where it was in February last year.

"Properties are still selling but we're just not seeing an increase in values," QV Christchurch senior consultant Daryl Taggart said.

"So far we''ve noticed no significant changes in activity from home buyers or investors since the easing of the LVRs in January."

However values appear to be still rising in many provincial centres.

"The Hamilton and Tauranga markets have picked up in February after a sluggish start to the year while the Hawke's Bay continues to see some of the strongest value growth in the North Island," QV national spokesperson Andrea Rush said.

"Many regional areas of the South Island continue to see values rise including Nelson and Tasman, the McKenzie District, Southland and Invercargill.

"Low interest rates and the easing of the LVR restrictions has seen many more first home buyers active in areas where they can still afford to enter the market," she said.

QV House Price Index - February 2018

Territorial authority Average current value 12 month change% 3 month change %
Auckland Region           1,053,948 1.0% 0.8%
Wellington Region               640,737 8.6% 3.1%
Main Urban Areas               788,173 5.1% 1.1%
Total New Zealand               672,645 6.5% 1.2%
       
Far North 427,406 6.9% 1.6%
Whangarei 510,409 9.1% 2.1%
Kaipara 507,906 7.9% 3.2%
Auckland - Rodney 951,356 1.5% 1.7%
Rodney - Hibiscus Coast 930,503 1.3% 1.6%
Rodney - North 973,369 1.7% 1.8%
Auckland - North Shore 1,231,179 2.9% 1.5%
North Shore - Coastal 1,412,965 3.6% 2.3%
North Shore - Onewa 972,478 1.0% -0.2%
North Shore - North Harbour 1,214,172 3.2% 2.0%
Auckland - Waitakere 825,362 -0.8% 0.5%
Auckland - City 1,239,086 1.2% -0.2%
Auckland City - Central 1,076,464 1.3% -0.9%
Auckland_City - East 1,566,834 1.7% -0.2%
Auckland City - South 1,095,706 -0.4% 0.1%
Auckland City - Islands 1,181,685 11.8% 2.3%
Auckland - Manukau 902,791 0.0% 1.3%
Manukau - East 1,155,919 -0.3% 1.0%
Manukau - Central 701,488 2.4% 2.0%
Manukau - North West 779,011 -0.8% 1.1%
Auckland - Papakura 702,318 2.3% 1.5%
Auckland - Franklin 674,114 1.6% 2.2%
Thames Coromandel 712,236 8.8% 2.4%
Hauraki 386,538 6.8% 1.6%
Waikato 471,961 4.4% 2.7%
Matamata Piako 435,109 8.6% 1.5%
Hamilton 548,417 3.1% 0.8%
Hamilton - North East 694,699 2.0% 0.7%
Hamilton - Central & North West 498,761 1.0% -0.2%
Hamilton - South East 500,468 3.9% 1.8%
Hamilton - South West 491,915 5.9% 0.5%
Waipa 533,012 7.1% 0.1%
Otorohanga 296,181 11.0% 1.7%
South Waikato 225,883 17.3% 2.8%
Waitomo 202,497 15.0% 7.9%
Taupo 466,925 9.0% 1.8%
Western BOP 622,227 7.0% -0.6%
Tauranga 706,825 4.9% 2.8%
Rotorua 417,653 8.0% 1.9%
Whakatane 418,096 7.0% 0.6%
Kawerau 190,175 9.2% -1.4%
Opotiki 310,035 22.1% 12.1%
Gisborne 301,863 10.6% 3.8%
Wairoa   N/A N/A
Hastings 451,686 13.8% 2.0%
Napier 488,236 16.5% 3.1%
Central Hawkes Bay 316,954 22.1% 8.1%
New Plymouth 439,630 4.5% 1.8%
Stratford 251,459 8.1% -2.1%
South Taranaki 218,492 10.7% 5.5%
Ruapehu 179,331 13.5% 4.4%
Whanganui 237,423 11.6% 1.6%
Rangitikei 192,867 12.6% 0.3%
Manawatu 322,942 8.6% -1.3%
Palmerston North 380,255 8.8% 1.6%
Tararua 185,059 12.0% -1.1%
Horowhenua 302,981 17.1% 2.6%
Kapiti Coast 546,371 13.9% 1.5%
Porirua 546,552 9.6% 2.1%
Upper Hutt 474,961 8.5% 1.0%
Hutt 526,659 7.7% 0.5%
Wellington 764,020 7.6% 1.9%
Wellington - Central & South 762,980 8.2% 2.7%
Wellington - East 821,985 6.2% 2.7%
Wellington - North 686,534 7.4% 1.8%
Wellington - West 879,039 8.9% 0.2%
Masterton 336,228 18.1% 2.8%
Carterton 373,391 11.9% 3.0%
South Wairarapa 463,217 23.2% 6.0%
Tasman 565,643 12.9% 2.3%
Nelson 567,767 10.5% 2.7%
Marlborough 454,127 6.8% 1.6%
Kaikoura   N/A N/A
Buller 184,869 3.9% 3.0%
Grey 211,555 2.5% 1.5%
Westland 237,232 1.7% -2.2%
Hurunui 385,645 3.1% 1.0%
Waimakariri 438,567 0.2% -0.3%
Christchurch 494,563 -0.8% 0.1%
Christchurch - East 371,826 0.0% 0.1%
Christchurch - Hills 669,770 -0.3% 1.3%
Christchurch - Central & North 583,678 -0.9% -0.3%
Christchurch - Southwest 472,482 -1.4% 0.4%
Christchurch - Banks Peninsula 511,931 0.8% -0.4%
Selwyn 549,985 0.8% 1.0%
Ashburton 350,500 1.6% 1.4%
Timaru 355,923 5.1% 1.7%
MacKenzie 535,228 23.5% 8.1%
Waimate 233,367 3.7% 4.1%
Waitaki 301,777 14.7% 7.0%
Central Otago 476,421 12.5% 1.8%
Queenstown Lakes 1,114,358 7.2% 0.8%
Dunedin 392,921 9.3% 1.7%
Dunedin - Central & North 407,170 9.2% 0.9%
Dunedin - Peninsular & Coastal 360,626 10.3% 1.6%
Dunedin - South 373,280 9.5% 1.4%
Dunedin - Taieri 408,439 8.5% 2.7%
Clutha 213,658 10.9% 6.7%
Southland 283,403 17.7% 4.9%
Gore 221,832 8.8% 1.3%
Invercargill 259,919 10.2% 3.2%

QV house price index

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132 Comments

Winter is coming!

Vendors are holding out. Will be interesting to see how things pan out over the next 12 months.

Masterton is doing good, when I bought my place last year I paid 8% more than the vendor paid 10 years prior. REA appraised it 6 months later at 10% increase in value. I don’t look it as an opportunity to capitalise on my new found equity, but more that I’ve saved myself a good amount of money by not putting off my purchase.

In 12 months time your house will be worth the same as a can of baked beans. See how smug you are then.

Hahaha. I’ll trade you if you like!

Hi HeavyG,

You write, "In 12 months time your house will be worth the same as a can of baked beans."

Would that be Heinz or Watties?

There is a difference you know.

TTP

"Budget" brand of course, watties will get you a 3 beddy in Auckland by then.

Napier up 16.5%, while Waipukurau up 22% yoy.
Now even Hawke’s Bay buyers driven out to CHB.

A little anecdotal support for you MB. Not sure if it is by chance, but within the last month I have heard of three couples moving to CHB. Young neighbours who were renting next door have just purchased their first home in Otane within last fortnight as they couldn't afford Hastings/Napier, another couple from Wanganui have just moved to Waipukurau, and a teacher new to the region (ex-Auckland) has bought FH in Waipawa and is travelling into Hastings daily.
However, it is a repeat of the same flow-on pattern as occurred in 2004. Auckland goes, then regional centres and finally the regions. I see that even Rangitikei has had a 13% increase. The only thing that is a little different is that the time lag is a longer than was in 2004-7.

Waipukurau.! I worked there for 4 months back in early 2000, rather interesting place and I came out in one piece. Who'd have thought 22%.. but t's different strokes for different folks I guess.

It's becoming a retirement town

There's no evidence of any "sizeable correction" in QV's figures - despite Auckland house prices having climbed by a whopping 94 percent in the decade 2006-2016.

Of course, the doom and gloom merchants who roost here will tell us that a crash is going to come tomorrow - but "tomorrow" is remarkably elusive.

Anyway, interesting to see what the doomsters come up with this time......... just what will the spin be??

TTP (the realist)

11
up

Hi TTP,

You wrote "the doom and gloom merchants who roost here will tell us that a crash is going to come tomorrow".

Who are these roosting merchants you speak of? Eco bird?
When have they said there will be a "crash tomorrow"?
If that happened why would that be doom or gloom?
Whats the going spot price for doom from these merchants?

BL (the omnipotent)

Hi BL

The doom and gloom merchants (henceforth DGMs) are at the moment consolidating and planning to oscillate for the foreseeable future.
I predict that following that the spot price for DGMs will experience modest gains.

THERE IS NO TIME BETTER THAN NOW TO BUY A DGM IF YOU ARE A FIRST TIME DGM BUYER.
Anyone who didn't buy any will regret it in 5 years time when the price of DGMs has doubled.

You will find that omnipotence is imperative in pyramid ponzis.

TTP

Did nymad just sign out as TTP?

And everyone was pointing at DGZ and ZS as being the same person

Hi Nymad,

Signing yourself in another person's name is as unscrupulous as I've ever come across here.

TTP

Hi tothepoint,
That's the joke.

TTP

Going back to last year, there were a lot of commenters predicting (hoping) for a large a crash.

I think it is fair to say that as it stands. We are not witnessing a "Crash", a stabilisation possibly, maybe even a slight decline, but definitely not a "Crash". Even calling the current prices a correction is overstating it.

We could have Auction Clearance Rates of 5%, a growing backlog of inventory and yet still have average sales prices at or above 2017 RV. By your definition that's still a stabilization, not indicative of any problems?

I am not saying there aren't problems. Only that the much heralded "Crash" has not yet occurred.

Your perception of "doom and gloom merchant" is very narrow.
If you are a first home buyer, or a landlord looking to increase their portfolio, then any price correction is going to be anything but "doom and gloom".

Seems like a pretty good result to me, prices are falling in real terms but slowly enough to allow people to adapt. Lets hope we see houses continue to become more affordable - falling prices while wages rise is good for the country.

edit: referring to the Auckland market as it's the largest and one of the most unaffordable.

Looking at these figures we are seeing anything but a crash. I think people should apologize to TTP as his predictions were right on the money.
Ha, I actually posted this before I read TTP's comment above.

20
up

Zachary and TTP, honestly - you're coming across as the desperate lonely couple trying to sell rotten fruit. Of course it's not crashing or in a significant correction - who said it was?

FHB wait - don't touch the fruit!

Conjoined twins

We are Siamese twins

TTP (the almighty)

Initially I discredited people who said they were REAs, but now I am convinced they are indeed..

The really smart money is gone - was getting out late 2016 early 2017

lol, lol ,lol ....peddling back so fast RP ?.... rotten fruit eh? .....

Sluggish? ..... is 6.5% increase overall sluggish?

Auckland Region 1,053,948 1.0% 0.8%
Wellington Region 640,737 8.6% 3.1%
Main Urban Areas 788,173 5.1% 1.1%
Total New Zealand 672,645 6.5% 1.2%

I can understand that DGMs are stunned and shocked every time undisputable new figures are published ...that is why the are losing common sense and talk rubbish

need some new clues? .... Ok, in addition to the known fundamentals about Supply , Demand, and so far useful Gov actions read these links and tell me why the property market wouldn't go down anytime soon ?

http://www.sharechat.co.nz/article/70aa31cc/nz-govt-s-7-month-operating-...
http://www.sharechat.co.nz/article/8ab52e64/nz-industrial-accommodation-...
http://www.sharechat.co.nz/article/62f6179a/nz-wholesale-trade-value-ris...

Eco Bird, current annual inflation rate is 1.6%. Housing is gradually revealing itself as an underperforming and (overvalued) asset class. Baring a substantial shock, (now increasingly likely), it will now underperform for many years to come. The leveraged Landlord cm speculators (like yourself) are becoming increasingly impatient. It's all then a self fulfilling prophecy of the speculators own creation - continued selling/declines. House prices in Auckland's lower quartile are coming under increasing price pressure. It's only getting started and this weakness is spreading.

lol, ..... as you know, losers alway resort to insult when bankrupt ..
(updated) ..I see that you have changed your comment - that is much more civil RP

look at the graph again RP. ....Where are we today from July 2017 ?? ....

But hey, Keep your hopes up RP, Don't give up !! ... the crash surely cannot be that far away now , winter is round the corner , surely prices will crash down .... (•◡•)

Why are you so concerned with how landlords are leveraged - or are you just looking for an angle to prove a point ...lol

Oh, weakness is also appearing in Waikato - Hamilton too. Increased listings and houses are harder to shift. So much for portfolio diversification.

lol.... I suspect that you know much about that too RP. stabbing in the dark is useless , as you know.

I gave you an example about my Hamilton property diversification , so in addition to the 90%+ appreciation in value in the last 4 years, here we have another 5.6% in the last 12 months , and these have been positively geared investments since day one ....
I know for fact that Corelogic and Home.co.nz are showing values of twice what I paid for in 2013 for these properties .....

so I can't really see what you are talking about ... ! (•◡•) ..try something else.

Eco Bird, no harm can come from building in contingencies. If your finances will emerge unscathed from an extreme scenario of -75% then all is on sound foundations;

http://www.stuff.co.nz/business/property/85960352/blowing-bubbles-that-t...

All the the paper gains you allege are not banked and could easily be wiped out plus some more. The higher the leverage (born from drowned debt junkies) the more drawn out the recovery will be. Central Banks are stuck for weapons to help next time around.

Your boastfulness is your weakness. It's a byproduct from years of folly.

Well, thank you RP ... really appreciate the advice.

My advice to you still stands: Stop digging for dark news and examples from the past in countries we do not relate to in any shape or form - that is very depressing, open the curtains, get out and feel the sun, and ask around as I suggested earlier and learn what is really going on around you ...Not in old news and other countries.

We will not progress if we all act like chicken little .... would we?

.....an answer from someone who says history's most valuable lessons offer him nothing of value.

Cringe

Gosh, that one had hubris written all over it.....I think the Gods took notice of that

As per below:

"This bubble has been building for 10 years. No one is expecting it to deflate overnight. But fundamentals are a long long way down from where prices are now. And the mood music has definitely changed. Sales are way down and auction clearance rates are dismal. Prices in the key market have stalled or are falling. Let’s just wait and see, shall we?"

it is only 5 months or so since the market started to turn. The changes in tone re the market since then have been quite pronounced. So I suggest it is too early to come to your conclusions, lets just see where we go from here. Certainly there are indicators (esp clearance rates and inventory) that are flashing red.

The 70% of Vendors that aren't succeeding at Auction might readjust their expectations and meet the market? These things don't tend to happen overnight, I don't think sellers are going to hurry into a Dutch Auction after 5 years of massive gains.

You said it RP, you said the property market will cash by 40% in 2018, it seems you had a convenient lapse of memory

Yvil, thats complete lies. I said nothing of the kind. Even yourself, a Real Estate Agent, knows in a crash scenario it can take a number of years to sink by that much. I stand by my prediction that by years end that Nationwide values will fall -2%, Auckland by -5%. See as follows;

https://www.interest.co.nz/news/91515/year-ahead-year-big-changes-calami...

Grow up.

So at 3 comments per day, you'll find something different to say in each of the coming 900 odd comments until that happens or will it be daily whack-a-mole?

Ex Expat, point taken. Its starting to look a bit like that aye ;-)

Hi Yvil,

Retired-Poppy is well known for his duplicity.

In fact, duplicity is R-P’s hallmark.

TTP

A real estate agent's greatest (only?) skill is talking s***. Basic numeracy is not required.

Gosh, I don’t reminder that.

Have you been into the sherry?

13
up

My my, that’s a lovely straw man you just built there.

This bubble has been building for 10 years. No one is expecting it to deflate overnight. But fundamentals are a long long way down from where prices are now. And the mood music has definitely changed. Sales are way down and auction clearance rates are dismal. Prices in the key market have stalled or are falling. Let’s just wait and see, shall we?

Let’s just wait and see, shall we?

Sounds like you want a ceasefire. We will only accept unconditional surrender!

Zachary & ttp, Look we all know that NZ property values are now mostly bloated beyond First Time Buyers reach when you take in to account current wages. Hence why Labour are about to enforce the Foreign Buyers ban. Once that fully kicks in then you'll see a significant property value adjustment.

As long as Banks are willing to lend and people can show deposit (from local or overseas source), as long as rents don't crash, as long as migration does not decline, as long as big sports events keep happening in Auckland and as long as employment remains healthy, Auckland house prices won't crash.
The proposed Foreign buyer ban is being attacked on the media by many influential people and who knows may be diluted very much when it is imposed.
The government is not acting that fast to execute its promised policies (extension of capital gains period, etc).
Not looking to be a great hope for a considerable price decline within a year or two, I think.

@Smokey, I suggest you listen to this BBC article since NZ is very much in the spotlight in regards to the Foreign Buyers ban.

BBC article Living in a Box
http://www.bbc.co.uk/programmes/w3csw848

Discussing property with the spruikers is like a Monty Python Holy Grail scenario..."tis but a flesh wound!"......"tis but a scratch!"...

Indeed Zachary,

It seems that a few of the usual suspects are now distancing themselves from "crash" mentality.

Interesting.......

TTP

TTP, it seems you've predictably distanced yourself from the "Auckland house prices will resume rising early in the New Year". Lower quartile house prices have fallen -5% or more since you made the prediction!

First home buyers are steadily gaining financial traction by ignoring your advice. This is a welcome development.

Again, for the leveraged up and drifting (particularly Auckland) market to crash, there has to be a trigger. Risks of this trigger have never been greater than right now.

Hi R-P,

As you well know, my position for many months has been that the market will remain relatively flat for the foreseeable future.

I have stated on a number of occasions that nominal house prices will fluctuate/oscillate around their current level - and that is EXACTLY what has been happening.

TTP

I am one who has stated that the Auckland house prices are over valued in terms of income and rental yield. However, I have never claimed that a crash is imminent rather that there will be some price correction.
When will that be? The key drivers for sustained high prices appears to be demand driven by cheap interest rates, a housing shortage, and lack of available land for development. When and what is likely to change those factors; increased interest rates, a downturn in the economy and emigration, either private or government investment in new homes, changes in planning regulations, or any of a raft of national or international factors. Anybody's guess.
TTP I note for a number of posts that you really feel that there will be sustained house price increases. You commented the other day that those who think differently are sad cases who have never owned property; in my case that is incorrect as one who has owned my own home for over 45 yeas and have had a number of rental properties over the past 20 years. I have seen price corrections at times on my properties as illustrated by changes of -10% in rateable values.
TTP, I suspect that you - or at least others of the same view as you - probably have only owned a home for something like the past ten years and have experienced what is historically a period of exceptional growth in prices especially related to income and other investments. Do not think that will be the unchanging norm.

I partially agree with you, I owned my own for the 18 and invested in property in the last 20 years .... we might be in a boom economic housing market. however, there is nothing that indicates that this situation is going to change very soon ...

You listed a bundle of reasons before as to why the appreciation ( whether slow or fast) would continue ...So, unless we have a Bolshevik Revolution and turn the tables upside down , not much will change as long as we have a free market responding well to S&D and outside pressure introduced by several regulatory actions....

Yes, |I have seen -5 to -10% decline on spot values during the GFC, but we are no traders ...Like yourself perhaps , we are property investors which is our business and our future ....shares dropped by 50 -80% too .. only desperate and naive people sold at depressed prices and the wise have actually bought ... In this business, the fear of loss has always been beaten with patience. ... The only people who suffer most are those who are swimming naked.

Yes, you have had the good luck to have invested in property during the biggest credit bubble in NZ’s history, by a country mile. If you are truly a long term investor, then over the whole of the property and credit cycle when income and rent ratios return towards their long term averages you would be looking at a loss in real terms of 30-50%. Vs long term averages of income and rent, current price are 60-100% overvalued. I appreciate you can say well “this time is different” and “historic ratios don’t matter anymore”, but......really!? Seems a high risk approach. We don’t need a a Bolshevik Revolution or an alien invasion, a simple reversion to mean will mean.....not pretty

I mean, I see your arguments about why there are no short term factors they will cause prices to fall, but long term is completely different story. If you were to project a permanent divergence from historic means then that’s really taking a big punt that’s not rational, with all due respect it’s verging on the hubris of an investor who got lucky.....

Maybe we are lucky buying at the right time, decade or cycle, and maybe people buying today will be more fortunate than we were in 10 years ... maybe we are contrarians ... but we never know until years later if we made the right move ..or not.
I bought properties in 2003 when the chicken littles were crying blue murder were all over the place, and I was late then .... same in 2013, and was a bit late again, should have moved sooner ...

We do not bank percentages or any theoretical value ( including paper values) ...

We all bank dollars to live on and spend - whether these dollars come from rent, wages, or sold properties doesn't make any difference ... you don't spend today's dollar yesterday, you spend it in today's market at today's buying power ...and we use today's power to invest in the future's market ( property, bonds, and shares)

Here is what actually matters : When your personal buying power improves YoY and you can actually bank , save, and spend more, then any talk about assumed paper values, credit bubbles, disasters elsewhere, inflation, and real term values becomes just jawboning and useless lip service.

Over or under valuation is beside the point if you are not buying or selling ... so when a transaction is to be made it will then be made at the current value de jour ( give and take few bucks) ...not last year's, and not next decade's price ... the dollars accrued will carry today's purchasing power ( hence all prices are adjusted accordingly) ....

you can only look after yourself , leave the bubble to sort itself out as you can do nothing but make an informed guess (decision) and take a calculated risk.

Sure, but if you are a long term investor you have to take a view on long term value, it’s the reason you invest. So what view have you taken on whether or not residential real estate will revert to its long term ratios to income and rent? Do you expect convergence over the long term, or do you think these ratios are no longer relevant?

While I have often commented about houses in Auckland been overvalued in terms of income and rental yields and therefore likely of some price correction, I still have a nagging doubt that maybe we could be experiencing a new economic/social period in which in the long held value of the individual Kiwi owning their own home may be a thing of the past. For the young and future generations I hope that this is no so and rather there will be some price correction and stability. I fear a house price crash as there would be widespread bloodshed; however I don't think that the banks, RB, and government would stand by to allow that to happen.

Right, so I’ll mark you down in the “this time is different” column

NO, it's not different ...this time is just like other times and 2018-2020 is like 2000-2002 and like 2010 -2012.

I am not interested in pursuing you or others in any particular direction - every person has enough grey matter to resolve what is best for his/her circumstances. and there is not one size fit all ...

People who are now ahead of others are because they have invested in some sort of asset be that shares or property - that is a matter of risk appetite and age. But those who have invested in property , whether their own home or rental, have done better because of the leverage available by the lenders against a real estate collateral.

I second what printer8 just said about the big boys support for property market

12
up

How about we open a “give a little” fund in favour of the poor old investors in Christchurch. Man it just gets worse by the month.

.

Gordon, give it a rest
Investors in Christchurch are doing a helluva lot better than most other parts of NZ.
Prices are extremely stable and opportunities for positively geared properties are around.
Average price I wouldnt be worried about as the AsiS where is property sales distort the average.
Financially far better off as our interest costs have dropped by over 20% due to many fixed rate loans dropping by that much.
You need to forget about worrying about “The Man” Gordon, as it is an obsession with you!
Our personal financial is just fine Gordon unless you want to make take up the challenge Gordon!
I note you never mention my challenge to you because you know that I am telling the truth!

Congratulations to the investors in Dunedin , The Lakes and Southland. Your returns are amazing. You certainly are a very intelligent lot.

I'm still wondering where you get this idea that as is where is properties are continuing to drag down property prices. This only makes sense if the proportion of all houses sold in Chch which are as-is-where-is has increased over the last year (or longer). If the proportion were dropping, the year-on-year average price would be driven up.

Do you really think that 7 years on from the quakes the proportion of as-is-where-is houses being sold is still rising?

MFD, the As is where is property no.s being sold this last year has been huge, and therefore the true average of a home in a Chch is actually far higher.

The reality is that there have been a huge no. Of cheap and small homes built by a couple of well,known builders as well and that has encouraged a large no. Of FHB to buy.

The fact is that Chch has got a great housing market at the moment which should be the envy of every city.
Affordable good quality homes, that everyone has the opportunity to buy.
The city was devastated by the quakes but the population is growing, jobs are here and the quality,of life is second to none.
ChCh is going to be the no. One city of choice in the future as it is growing by the day.

Until another quake hits?? The thought of going through that again scares people off. Everyone excepts "the man"

Two headlines
“National average dwelling values rose 0.2% in February but declined in Auckland” Interest.co.nz
“QV residential property values continue to climb across the country” New Zealand Herald
Same QV report, same data. Same spin within the headlines?
An increase of 0.2% to me is at best a very gentle slope rather than the Herald’s “climb” especially after gains of over 10% around the country in the past year.

I have noticed an uptick in mortgagee auctions/tenders/sales since the beginning of this year. Realestate.co.nz has 27, and trade me has 14.

This is a start but the ideal case would be that if the trend continued for the forseeable future. It's really the only way that equity can shift into really productive sectors such as innovation and technology.

Wasnt this summer meant to see prices & sales numbers rebound in Auckland.????

It seems not and now its autumn

Ive long predicted a 20 -25% correction in Auckland and stand by that. Could be 6 months, could be 18 months but with all the fundamentals as they stand right now it is not a matter of if it will happen but when it will happen.

The only thing that can stop it is the return of Chinese cash in large amounts and i cant see that happening with this Labour Government's policies.

The simple truth is that the Auckland median prices are totally out of reach from the median incomes

Time will tell

It sure did not go bananas!!! And now is the year of the dog... what's going to be this time I wonder???
Arghh wooooooo????

Advice for Auckland FHB waiting and seeing? With a sizeable nest egg in cash it is tempting to jump right in and have the agony over with. But my head tells me to buy now would be at what is still essentially the peak of the bubble.

10
up

Firsthomecryer...The emotional desire to buy a home will always be strong, and FOMO rears its ugly head at every stage of the cycle except when prices are notably declining (which is when FOMO goes in reverse and eats itself)

Last year, someone on here, gave me advise on timing the housing market, to help you identify when the market has started heating up again (timing the absolute bottom is almost impossible, you can only time the moment that it just begins heating up again but that is near as dammit price wise);

Look for;

3 months of Time-On-Market stats decreasing
3 months of Auction clearance rates increasing
3 months of inventory decreasing according to seasonal norms

Obviously, you should also be watching where prices are moving, online sales with "discount", "reduced" and mortagee sales in the title too ....as part of your overall observations.

The advise to wait 3 months is because there are factors like the "dead cat bounce", the "double dip" etc that can catch those who move too soon out. Markets are not neat and linear, they bounce about so you need to give yourself time to observe a trend rather than taking one or two data points.

If you look at the 2017 Auckland housing market, that is exactly what you see. The overall trend is a cooling market. Overall sales decreased, inventory increased on a seasonal basis, auctions rates decreased, but there were a few months here and there that bucked that trend.

Ignore the arguments on here and just look at the data. Emotions on here run high, the are the enemy of objectivity. Buying a house should be as objective as possible.

If you can afford your rent, and can continue renting without too much suffering, then you have nothing to lose in watching the market trend going forward. If the market starts heating up again, and the above data has shown this for at least 3 months or more, that might be a good time to put in low ball offers on a house. The average vendor is not watching these particular data sets in general, and if the housing market has been cool, they will be tempted and relieved by any offer. At some point, if the current trend continues, psychology will kick in and there is a very good chance vendor sentiment will turn from greed to fear. This happens over and over and over in every market ever. It's human nature. The market may not crash like Ireland in the GFC, that would be a n outlying possibility, but if the market is cool, and the sentiment negative, some vendors will accept cheeky offers.

Finally, interest.co.uk provides much of the data you need to be watching so you are in the right place. Just don't take any of the highly emotive comments here to heart.

Well put! Finally some sounds advice on here rather then the usual Mega Bull vs Giant Bear comments we normally get.
Thumbs up.

House prices are not keeping up with inflation so are dropping in real terms.

As has been described ad nauseum, housing market declines are not predictable. Sometimes they crash, sometimes they plateau for yonks, which ultimately allows wage inflation to return prices to healthy affordability measures and sometimes both happen in fits and starts. Either way, what's important is that the bubble deflates, house prices return to economically normal and healthy DTI's.

Then of course the whole stupid credit cycle will start again at a mystery date in the future. Round and round we go.

If the market continues to deflate slowly and gently like this, that is the best possible outcome for the economy longer term, so I for one am very relieved to see this kind of data. We need house prices to return to earth, we need houses to be a less attractive investment to foreign and domestic buyers alike (please go and spend your money on something that would encourage productivity please) and other than that, we still don't know what the next 48 months will do.

word.

Yes, all the speculation as to whether the house prices will continue on their long term trend, or reduce, is entirely a speculation on whether the RBNZ will continue on its lax regulation of banks (capital and underwriting standards). If they continue to be slack then house prices will continue on up, but if they actually regulate for financial stability then house prices necessarily adjust downwards. The RBNZ's performance over the last 25 years suggests they will not do their job, and reckless lending will continue.

Ginger ninja, please advise me and everyone what we can spend money on that encourages productivity!
Do investors that own property not spend money on product and services that produces productivity?

The key element is that they are not investing in productivity and innovation.

17
up

THE MAN 2

Yes, shares, corporate bonds (companies that are innovating, creating jobs etc), even government bonds (because governments use it for infrastructure, creating jobs etc). There are also ways of investing in property that are more productive. For instance, becoming a property developer, investing in property development or indeed investing in companies that are innovating in that sector.

The problem with everyone ploughing into property investing is that it causes a two fold credit black hole that sucks money *away* from any productive sectors. A disproportionate amount of the credit within the NZ economy has been spent on existing houses, and houses that by every measure are overpriced too. This means that banks have lent *less* money to businesses , start ups, entrepreneurs and innovators because housing has become the overwhelmingly preferred investment. At the same time, the individual investor has also done the same thing as the banks. All the eggs are in one basket statistically and it's a basket that not only doesn't encourage productivity, it actually discourages it.

New Zealand has had a productivity problem since the 60s on and off, so the two recent housing booms (pre-2007 and 2014-2016) have taken away productivity potential from an already low productivity base.

And let's not forget that a credit cycle is always a credit cycle. NZ households have 168% debt to income, that debt has been overwhelmingly spent on housing and consumer goods. However, that debt must be paid back, so will be a drag on the economy going into the future, that debt is money taken from the future economy. Obviously spending on consumer goods and houses itself is not a problem, it's only a serious problem when the spending is predominantly debt fuelled, when the purchases are beyond all reasonable valuation and when wages are not inflating quickly enough to keep up with the debt. Debt inflation has been outpacing wage inflation for a goodly while now.

Obviously not everyone can or wants to buy a home, there are stages in life when you want to rent somewhere, so we do need landlords. The fact that landlords exist is not a problem at all, it's the proportion of houses that are being bought for investment and proportion of NZ's wealth that is stored in this market that has become a serious problem for the future well being of the NZ economy and NZ productivity.

I approve this message.

Seconded!

Me three

Someone will come back shortly with the usual response: Investment properties will ease the accommodation pressure on our govt, it will keep trades people employed, and keeping people in the banks working too

Good post, I'd also add in crowd funding if you're willing to take some risks on startup companies. I don't think the list of offers is up to date, but there's a list of crowdfunding sites here:

https://www.interest.co.nz/saving/crowdfunding

Great writeup. I've noticed that many people who purely invest in property are patting each other on the back and re-assuring to each other that pushing the country in this direction has no issues.

They fail to realize that there are so many sectors for investment which would be significantly more productive. Imagine if we were a country which poured out innovative startups, with some selling to foreign investors.

We should also remember speculation on housing has kept interest rates higher than other countries, which in turn has kept our dollar overvalued, which has meant export incomes, such as agriculture and specialist manufacturing, have been less.

If people are interested in what is happening in the Aussie mortgage market I recommend this guy. He seems quite thoughtful and not obviously a lunatic. I think people should keep a close eye on whats happening with (to) the Aussie banks

https://www.youtube.com/watch?v=bjLIj34ZuAw

Every time I look at the Aussie mortgage market it frighten the bejesus out of me. it has all the indications of the disaster waiting to happen. Liar loans, broker fraud, crazy valuations, terrible yields, lots of negative gearing, lots of interest only loans about to go P&I.....you name it, it's got it

Bobster, an interesting watch. Martin reminds me a little of Nigel Latta. That said, I think now's a good time for Nigel to present an in depth analysis on NZ banks and their lending standards (interest only loans). Sadly, we might have to wait till after it all implodes....

Yeah, I really struggle to accept our underwriting standards are as bad as they are in aus, but I don’t know either way. But the important point is, it doesn’t matter if standards here are better, if (when) the Aussie banks get into trouble there will be direct contamination of our banking sector and the bubble here will well and truly unwind.

Interestingly, Living in Brisbane and I bought few houses over the years - not one of them asked me for a private valuation.

dp

Hi R-P,

Helpful if you would play the argument - and not the person.

TTP

Ginger ninja, a lot of words there and some of it is fact but other not so.
Why do Banks lend on housing rather than the so-called productive industry?
Because housing is safe lending for them as they do not lose money on residential housing due to their margins.

InVesting in shares is not helping a company expand as they do not get the funds. It is Just people gambling in the fact that they want people to keep paying more for shares than what they did.
Whereas housing is bought for people to live in, so share buyers are far worse and speculative than housing buyers.

Isn't that further confirming the earlier point though? Housing is considered a safe investment, hence bank lending. That doesn't mean as a country we should incentivize or push for housing as a means to wealth generation in the future.

What we want to grow is GDP per capita, and that's only really possible by increasing investment into innovation. The question is, what would it take to reduce the attractiveness of property as an investment and vice-versa for innovative sectors?

What do you mean share buying is 'worse' than house buying? Sure, it's more speculative to to invest in a company than an already existing house. That's why share market returns tend to be better. It's people taking risks that drive society forwards. I've given money directly to a number of companies over the last few years through IPOs, rights issues, share placements, crowd funding - plenty of opportunities out there if you want to put your money into businesses you like the look of. Or, you can stick with your single asset class and put everything else in the too hard basket.

I'm not an expert in bank lending, but as I understand it they have to hold less equity/capital for an amount of mortgages vs the same amount of business lending, which incentivizes them to put money into mortgages. Whether this is valid or a good thing for society can be debated, but the banks are just following the incentive system that has been setup for them.

If you believe that mortgages are a safe asset class, perhaps cast your mind back to the sub-prime mortgage crisis which brought the world's financial system to its knees a decade ago and lead to several banks collapsing. This was caused by housing lending. Here's a list of approx. 60 banks which needed bailing out or collapsed as a result.

https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bankrupted_durin...

THE MAN 2... some of my words were not fact? Could you please tell me which ones?

Also, I wrongly assumed you wouldn't need to be spoon fed Investing:101., alas...

Regarding shares; a company initially offers shares at an IPO (a Initial Public Offering) and this helps them raise capital, in order to expand, innovate etc etc. This is how shares can invest in productivity. My bad for assuming you would know this. After this, yes shares are traded and this is often speculative. Although increased share value (often owners of the company are majority share holders) can also create expansion and innovation opportunity for companies, allowing them to attract the best staff with stock options and being a more appealing proposition to banks in terms of lending.

Whether housing is safe lending for a banks is not relevant to the discussion because banks have lent on houses for 100's of years, over that time they have continued to also invest in start ups, new business and innovation. Currently, investment in housing is disproportionately incentivised both for banks and for individuals, which is certainly a huge factor in the problem but banks lending on housing is not a new feature to the last few decades, very low productivity and reduced lending to productive business is.

However, your underlying assumption that housing is safer also requires challenging. There are times when lending on houses is incredibly safe (high earners, low LVR, good credit history) and times when it is extremely unsafe, (during a housing bubble, high LVR, liar loans, high DTI etc etc). We have seen stock market crashes sink economies and we have seen housing market bubbles sink economies. So lets not have silly tit for tat battles about which market is safer. Human beings demonstrate a shocking capacity for poor risk assessment, short sightedness and greed when it comes to all classes of investments at times. Financial armageddon can occur to whichever market people decide to become overly exuberant about but that's hardly the point....You asked about how you could invest in NZ's productivity and I answered.

TM2, the banks are just picking the low hanging fruits that's all. They are only interest in easy profit, nothing else.

Oh for God’s sake, ok I have to reply, go have a look at the capital requirements placed upon banks for housing lending compared to a business - the regulators are incentivising lending to housing effectively because it is less “risky” - but whether that assessment is right or wrong (and throughout history it is correct) that is the incentive put upon the banks and they respond to it.

Very interesting article.

Grant A, who are you replying to with this comment?

Look at Basel I which is now historical

https://www.investopedia.com/terms/b/basel_i.asp

Basel III are the current guidelines

https://www.investopedia.com/terms/b/basell-iii.asp

Gingerninja when I read your excellent comment I did not think he would understand what you were saying and he has not let me down. He attacks shares as always but does not try to discuss bonds or investing in startups. What do you expect for an RE agent.

Gordon, understand every bit of it!
Been out helping out someone who,is,in financial trouble, but then you wouldn’t want to help anyone!
Yes I helped them financially.
More to,life than reading about people,moaning about how,they are jealous of property investors!

This is the whole thing you either challenge people (handbags at dawn) or accuse them of being jealous - is this the best you can come up with - can't you actually argue the point. Have you ever thought you may actually not know what you are talking about....

When I saw the length of his comment and its contents I knew you would not be able to respond to it in full. All you could do was attack equities which is something you should also have in your war chest along with your poor performing as is where is properties in poor old Christchurch , the only area of NZ that QV says went backwards during the last 12 months. I will ask gingerninja to write shorter comments and to use simple english in them.

Even small percentage increases are no longer "Sluggish" when your looking at average prices in Auckland over $1M. The North Shore still has 2% which is like 4% back when the house was $500K. I don't think any property owners are going to care less if it plateaus or they get very low increases in value.

In terms of gains its now area specific, good houses in good areas are still going up.

Yeah, but it’s return on current equity that matters, not initial equity. How else can you determine the opportunity cost of keeping your equity in a property.

What about not so great houses in good areas? Asking for a friend.

Zachary, you do make me chuckle.

Hi Gingerninja,

Agree with your comment above: Zachary is an all-round good bloke!

This blog is fortunate in having the benefit of his intellect - and wise counsel.

TTP

This here highlights the pertinence of Cipolla's laws.

Nymad, Surely there are only a few people on this site who underestimate TTP's stupidity? And then some of them, I believe, recognise his stupidity but then pretend not to, for other their own reasons. #trolllolz

Good point, ginger.
Luckily it's likely not an issue on this site. We can be grateful for that.

Hi Gingerninja,

Be cautious about having warm fuzzies with nymad........

Nymad is not only stupid - but dishonest as well.

He will even stoop to signing himself out in another person's name. (See above.)

TTP

Here is your quote from above

"Helpful if you would play the argument - and not the person."

Hi Bad Robot,

On this occasion, I am more than happy (and fully justified) in defending myself against Nymad’s slight on me (above).

TTP

Surely it was a compliment, TTP.
Women love dangerous men.

Selling 50k under CV - is this the sign of things to come Zachary?
https://www.trademe.co.nz/property/residential-property-for-sale/auction...

Haha. 86 Esperance sold for $15k under CV today, it’s the crash in slow motion! The agent has sold 5 houses in 5 days. Houses are moving for him at least.

Practically giving it away!

Hi DGZ,

That Remuera residence isn’t one of your places by chance?

TTP

Does it look like it is mine TTP? It is a very average house asking for close to $4M...do you see the kitchen? I'm shocked!

Yeah you don't want to miss out on those money launders DGZ. Get those ill gotten gains whilst there hot!!

Did you know that each year about $1.35 billion from the proceeds of fraud and illegal drugs is laundered through everyday New Zealand businesses, most of it goes in to real estate.

Keep gloating on that we all love to hear it!

Apologies DGZ,

I can see now that it’s not nearly up to your standard.

TTP