Housing values down in Auckland and Christchurch, up in Wellington, QV says. Auckland sellers 'adjusting expectations and are more open to negotiation'

Housing values down in Auckland and Christchurch, up in Wellington, QV says. Auckland sellers 'adjusting expectations and are more open to negotiation'
Photo: commons.wikimedia:Ballofstring

Winter has not been kind to property values in many parts of the country with the national average value of residential properties now sitting at $672,504, down -1.6% compared to three months earlier, according to Quotable Value (QV).

The latest figures from QV show that the average value of homes in this country declined slowly but steadily over winter, although it remains up by 4.8% compared to a year earlier.

In the Auckland Region the average value of residential properties was $1,048,956 in August, down by -0.4% compared to three months earlier.

According to QV, average values within Auckland have declined over the last three months. In Rodney they're down (-0.5%), North Shore (-1.1%), Waitakere (-0.4%), central Auckland suburbs (-0.2%) and Manukau (-0.1%), but rose in Papakura (+0.1%) and Franklin (+0.3%).

"The fall in investor activity has opened up space for first home buyers in the entry level market," QV Auckland senior consultant James Steele said.

"We are continuing to see a high proportion of properties come to market as price by negotiation as opposed to auction.

"With less demand, sellers are adjusting expectations and are more open to negotiation in order to get their property sold.

"In general this has caused prices to soften with the biggest variation from the peak shown in properties which are poorly presented or have other issues," he said.

In Wellington City the average value declined by -0.2% over the last three months although it rose in Porirua +0.7%, Lower Hutt +1.5% and Upper Hutt +2.7%.

"As affordability constraints become increasingly relevant, we're seeing growing demand for different types of property," QV Wellington Senior Consultant David Cornford said.

"Two bedroom, semi-detached units are selling particularly well, as they provide a more affordable option for young professionals or families."

In the South Island's main centres,  average values dropped -0.2% in Christchurch and rose +1.7% in Dunedin over the last three months.

"I would anticipate sales activity to increase over the warmer months although values should stay mostly the same," QV Christchurch property consultant Daryl Taggart said.

Perhaps surprisingly, average values in Queenstown-Lakes District were down -1.0% compared to three months earlier.

QV House Price Index August 2018
Territorial authority Average current value 3 month change % 12 month change%
Auckland region  1,048,956 -0.4% 0.7%
Wellington region  656,676 0.9% 8.5%
Total New Zealand  672,504 -1.6% 4.8%
Far North 413,660 -1.8% 0.1%
Whangarei 531,418 0.8% 6.8%
Kaipara 536,222 -0.9% 4.3%
Auckland - Rodney 949,398 -0.5% 0.4%
Rodney - Hibiscus Coast 933,123 0.0% 0.2%
Rodney - North 966,967 -1.0% 0.5%
Auckland - North Shore 1,213,982 -1.1% 1.1%
North Shore - Coastal 1,389,536 -1.1% 1.1%
North Shore - Onewa 970,843 -0.3% 1.5%
North Shore - North Harbour 1,183,366 -2.2% 0.3%
Auckland - Waitakere 821,585 -0.4% 0.6%
Auckland - City 1,240,833 -0.2% 0.7%
Auckland City - Central 1,065,840 -3.3% -1.7%
Auckland_City - East 1,574,598 0.7% 2.1%
Auckland City - South 1,107,286 1.0% 0.6%
Auckland City - Islands 1,184,304 4.8% 6.1%
Auckland - Manukau 898,657 -0.1% -0.1%
Manukau - East 1,148,387 -0.7% -1.6%
Manukau - Central 699,957 0.9% 2.5%
Manukau - North West 777,534 0.3% 0.6%
Auckland - Papakura 703,125 0.1% 5.5%
Auckland - Franklin 668,987 0.3% 1.9%
Thames Coromandel 729,789 -0.9% 1.9%
Hauraki 413,501 -2.2% 4.5%
Waikato 476,307 -1.3% 5.8%
Matamata Piako 449,234 1.1% 2.9%
Hamilton 559,190 0.3% 2.7%
Hamilton - North East 714,857 1.0% 4.0%
Hamilton - Central & North West 511,562 -0.4% 1.5%
Hamilton - South East 508,015 -0.1% 2.6%
Hamilton - South West 489,675 -0.5% 1.0%
Waipa 554,519 1.6% 6.8%
Otorohanga 285,344 -1.0% 1.6%
South Waikato 215,069 -2.0% 1.1%
Waitomo 234,583 9.9% 19.0%
Taupo 478,529 -0.1% 8.5%
Western BOP 634,582 0.8% 3.5%
Tauranga 705,383 0.7% 1.6%
Rotorua 432,758 3.1% 6.2%
Whakatane 426,767 -0.9% 5.8%
Kawerau 204,179 1.6% 8.2%
Opotiki 272,108 -10.5% -6.0%
Gisborne 318,788 3.1% 8.7%
Wairoa N/A N/A N/A
Hastings 460,059 0.9% 8.1%
Napier 511,891 1.0% 11.4%
Central Hawkes Bay 347,290 5.9% 20.9%
New Plymouth 447,733 -0.3% 5.0%
Stratford 266,654 0.8% 9.3%
South Taranaki 226,722 3.6% 10.1%
Ruapehu 195,211 3.1% 15.4%
Whanganui 254,612 0.5% 10.7%
Rangitikei 215,829 5.4% 16.7%
Manawatu 346,676 2.5% 12.6%
Palmerston North 398,565 2.6% 9.9%
Tararua 207,553 5.6% 18.2%
Horowhenua 323,017 3.0% 13.1%
Kapiti Coast 561,203 0.5% 8.3%
Porirua 559,556 0.7% 7.2%
Upper Hutt 499,734 2.7% 10.5%
Hutt 541,118 1.5% 4.9%
Wellington 778,386 -0.2% 7.4%
Wellington - Central & South 776,572 0.7% 7.2%
Wellington - East 828,253 -0.7% 4.2%
Wellington - North 709,070 0.6% 10.7%
Wellington - West 889,345 -1.9% 6.2%
Masterton 356,288 4.7% 14.4%
Carterton 390,225 -0.1% 11.6%
South Wairarapa 480,338 0.8% 11.2%
Tasman 585,198 2.3% 8.7%
Nelson 588,140 2.0% 9.3%
Marlborough 461,703 -0.6% 4.9%
Kaikoura N/A N/A N/A
Buller 181,880 -3.8% -2.3%
Grey 217,691 0.8% 4.6%
Westland 243,472 -0.4% 0.0%
Hurunui 388,448 1.2% 4.4%
Waimakariri 441,941 0.4% 1.8%
Christchurch 494,476 -0.2% 0.3%
Christchurch - East 374,156 0.7% 1.0%
Christchurch - Hills 671,916 0.0% 1.5%
Christchurch - Central & North 582,536 0.0% 0.4%
Christchurch - Southwest 470,481 -0.8% -0.6%
Christchurch - Banks Peninsula 512,958 -0.2% 0.9%
Selwyn 553,288 0.8% 1.7%
Ashburton 349,935 -1.3% 0.7%
Timaru 360,496 0.9% 2.0%
MacKenzie 495,805 -4.0% 7.5%
Waimate 245,216 0.7% 10.1%
Waitaki 302,834 -0.7% 6.8%
Central Otago 503,826 2.3% 9.9%
Queenstown Lakes 1,161,159 -1.0% 5.7%
Dunedin 415,888 1.7% 10.7%
Dunedin - Central & North 438,893 2.3% 11.9%
Dunedin - Peninsular & Coastal 376,065 -0.9% 15.9%
Dunedin - South 389,610 0.4% 10.1%
Dunedin - Taieri 431,902 3.4% 8.9%
Clutha 211,700 2.3% 5.1%
Southland 274,228 -1.8% 9.4%
Gore 224,202 1.1% 4.9%
Invercargill 272,855 3.3% 13.3%
Main Urban Areas 781,941 -2.3% 4.0%

QV house price index

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Source: QV
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Source: QV


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Downward leaders are North Shore and Central Awkland. Watcher in those areas have been calling that for a while so no big suprise. Ban is inbound and overseas owner bank account/owner identification with a side of reporting to mother China is happening as well. Have to say 2019 (post ban frenzy) is the year to really see how much the 3% was effecting NZ. If its as bad as school demographic changes suggest, the closer to the next election the truth is exposed the more the Nats lies will be underlined.

Headwinds continue to build with for domestic and foreign speculators. Lots of debt warning signals from overseas.

Still bearish. But keen to hear reasoned bull perspective.

Slow drift down in Auckland/ Queenstown/ Hamilton/ Tauranga. But, hard to see a crash with mortgage rates about to drop into the 3s, and continued underbuilding relative to population increases. You can still get a net yield of 4-5%, for non-leaky townhouses in Mt Vic Wellington. If looking for income I would take a Mt Vic townhouse at 4-5% net yield (after all expenses) rather than 3% on term deposit. Townhouse is safer option income wise as rents rarely decline for well located property, and in a GFC type environment your townhouse won't evaporate in the midst of an OBR type event.

I can't see interest rates rising, as this tips the Western world into recession and government officials and monied interests want to avoid this like the plague, as the status quo suits them fine. The GFC has given the powers that be a playbook, print money and buy bonds and drive down interest rates, drive interest rates negative if you have to but avoid economic collapse at all costs. Data shows average LVR on NZ property is lowest has been for 20 years, and household net debt servicing is 40% lower than it was in 2007. The average NZ property owner who bought before 2016 has seen interest rates fall, and either have more disposable cash to spend as their mortgage payment has reduced, or have upped principal payments. This environment does not make for a crash, though many feel this should happen, because they feel even those on low incomes should be able to own their own home in NZs most expensive cities. This is not how the world works.

Sensible comment mja. I have tended to think that the GFC and the housing bubble bursts in other parts of the world have influenced how we play the game now. There really isn't that feeling of irrational exuberance they talk about, more a fairly cautious and methodical approach to things. People, governments and banks have generally prepared for a downturn but it hasn't arrived.

Maybe I'm seeing through the lens of my own situation. The wagons are circled and the ammunition is stockpiled and we scan the horizon for signs of trouble yet there is nothing much there. Rents rise a little, mortgage rates reduce a little. It's all a bit boring really. Something of an anti-climax.

Early 2008 we were living in Brisbane, sold up all property and bought NZ government bonds, as my spidey sense told me bad things were about to happen. Bought back into property 2010 to 2014. I don't have that bad things are about to happen feeling. Though have sold 2/3 property, as this was to lock in gains as basically means we are our of the rat race and cashed up. My outlook is property prices may fall 10%, but also may continue to grind up. I will buy my kids a house each, in next recession, be it in the next year or five years. I would rather buy in doom, when modern houses are selling for less than construction cost + 50% land value in middle class suburbs in major cities. To me thus creates a medium to long term floor, as long as the population is rising and there is some inflation.

Yes, it's actually not hard for the cautious to radically improve their resilience. A negatively geared person who has been in the game awhile can simply sell a single property to put their portfolio into positive territory.

A lot of mature folk are getting quite a bit of income from multiple sources too. Two incomes, rent, interest, shares, Kiwi Saver etc, kids left home, no mortgage on the family home, nothing much to buy, got everything one needs, a lifetime habit of frugality on top of that as well.

@mja I hope you paid your tax on those sales

“Something of an anti-climax.”

What! – Is the movie over already?!?

There is a teaser after the credits, its not really worth waiting for though, just more of the same.

I have tended to think that the GFC and the housing bubble bursts in other parts of the world have influenced how we play the game now. There really isn't that feeling of irrational exuberance they talk about, more a fairly cautious and methodical approach to things. People, governments and banks have generally prepared for a downturn but it hasn't arrived

Really? Can you illustrate this in terms of the consumer economy? According to Nielsen, NZ is leading the world for FMCG price discounting from suppliers to retailers. Do you understand why this is? Do you think it;s demand driven? Does it have something to do with approx 70% of NZ h'holds having <$10k in cash?

You keep harping on about the $10k in cash thing like its relevant. Why on earth would you keep much wealth in cash.. where it gets sod all return, when there are plenty of investments that return far more and are also very liquid?

I get annoyed at myself for leaving more than a couple thousand in cash, it means i've been slack about moving it into investments.

You keep harping on about the $10k in cash thing like its relevant. Why on earth would you keep much wealth in cash.. where it gets sod all return, when there are plenty of investments that return far more and are also very liquid?

It's extremely relevant. It signifies that most people live paycheck to paycheck. For the consumer economy, which is the foundation of the NZ economy, it means that there is very little room to move when cash savings are low; income growth is benign; and when consumer debt is prohibitvely expensive,

No, it does not signify that. I have less than 4k in cash at the moment, but can easily access a mid 5 figure sum in a couple of days with a few minutes at the keyboard.

Edit: you also fail to account for those that use revolving credit accounts as part of their mortgage. Available credit in a RCA is as good as cash for all real world purposes.

You are very much in the minority (as am I). Most people in this country have little available savings that can be accessed at short notice (the "cash" thing). Many have the majority of their net worth wrapped up in their home which has little immediate cash availability, and many more essentially live paycheck to paycheck without much savings. As soon as there is money in the bank account, another "bling" investment occurs, although bling dividends are rather hard to find... When I moved to NZ a decade ago, I was quite surprised as to the amount of people here in NZ that didn't follow a disciplined savings plan for their future.

I suspect that this is changing faster than many realise, plenty of online forums frequented by younger people talking more about finances, emergency funds and investments than a decade ago. I think kiwisaver has been a huge boon in that respect, it got people talking and having to make decisions about something other than mortgages.


Given the tenor of your post,I would say that you are anything but pragmatic. With much of my capital in the NZ stockmarket,I have enjoyed excellent returns-dividends plus growth-in recent years,but have become concerned that valuations are too high. To me,the logical response has been to significantly increase my cash weighting,in order to take advantage of better,ie lower, valuations at some point. For that,I need accessible cash and I am not concerned by the low deposit rates available. That,to me,is pragmatic.

What has that got to do with the point that not having "cash" on hand is not the same as living hand to mouth like JC is stating?

Your investing philosophy/method is yours.. mine is different, doesn't make either of us right or wrong. If there is a significant (global) correction I'll end up with a nice wad of cash to invest via other means than having cash sitting in a NZ bank earning next to nothing.

Having less than a couple of thousand in cash is risky. What if you're made redundant? Maybe you have generous redundancy provision in your contract, but most places. What if your company goes bankrupt and can't pay redundancy? Emergency medical care? Moving for a better job? Cash gives you options and a way to get out of emergencies.

The investment thing is a bit misleading. I would say most peoples assets are worth more than 10k. Even if your net worth is say 30k, it's perfectly reasonable to have 20k invested, and 10k in cash.

I note that a lot of property investors don't have 10k cash lying around, and are selling off their uninsulated rentals. Again - cash gives you options.

Having less than a couple of thousand in cash is risky. What if you're made redundant? Maybe you have generous redundancy provision in your contract, but most places. What if your company goes bankrupt and can't pay redundancy? Emergency medical care? Moving for a better job? Cash gives you options and a way to get out of emergencies.

I have a couple of credit cards with > $10k available credit on each.. pretty sure that will tide me over the week or less that it would take to get most of the money I have invested back into my bank account.

There simply aren't any major expenses that are going to pop up that I can't put on the credit card for a week or two (or a month or two if absolutely needed) while I liquidate investment positions. Shares settle on a T-2 basis, my investnow funds mostly also T-2 but one might be T-3. Other investments are less liquid, but that doesn't matter so long as I have enough liquid investments and lines of credit to cover anything that pops up in the short term.

No, wealth/money gives you options, Cash is only slightly more liquid than many investment options these days.

The more you pump...the bigger the dump.

Interest rates were forced down to pump up the un-economy.....it is called ....debt...I think........

Oh sorry...that is a four letter word to some.

Leverage is not just a one way swing. It is a slide when people want their money back....and even Banks need to "realise" that....economy is a two way street....with multiple lanes, gridlocked....when the spend thrifts......collide.

Another wonderful City by the Ocean that was a popular investment spot for the Chinese buyer until recently. A quote from our patron Mr. David Chaston

'In Vancouver, their summer holiday real estate fall-off is sharper this year. They have declined to a six-year low while prices for various housing types are weakening sharply, down by more than a third from the same August month in 2017. It is particularly tough in the inner suburbs of Vancouver.'

You’re right to be bearish but also wrong in the outcome (I mean that positively)

The only bull case that exists is that property is priced with New Zealand Dollars. Throughout the last 60-70 years of real estate cycles, it’s not property that falls, but the value of the currency used to purchase it, which supports the NZD price of the properties..

Hence the story, property only goes up in New Zealand, is true, because it’s the value of the currency that collapses.

The way property falls in Auckland from a million dollars, is that the reserve bank and the government, turn a million dollars into, well, not a lot of money anymore.

Be bearish in USD prices, not in NZD

As my name says. . More to come

More year on year gains? Yes please.

Hahaha come on BLSH you don't actually expect people to read the data do you?

They are much happier waiting for tomorrow when Labour will build everyone an "affordable" house and the market correct to punish the pragmatic.

And what if it doesn't? What if the property spruikers are right?

Have a back up plan. It's a big world out there.

When I sold in2013 I had made a little and after my OE, bought a small place in Mumbai. So I think I am ok for now.

But up 4.8% for the year across the country. Nice. And Auckland up 0.7% for the year.

Auckland down about 1% after accounting for inflation.

Inflation eats away at debt as well

This month and early next month their will be more people listing their property to take advantage of the time opportunity presented by government of 2 months and more sold sign will be seen as many non resident buyers will be rushing to buy before the ban is in place. More so in places where foreign buyers were active like central Auckland and certain area in Manukau.

Let's put things into perspective......

From March 2009 to June 2018, Auckland property values increased by 93%. [Listener, August 18, 2018]

That's a whopping increase in just over nine (9) years.

The recent declines reported are minuscule. As stated before, the Auckland housing market has proven remarkably resilient.


For a comparison, NZX50 returned well over 300% over the same time period. Housing is a somewhat lackluster investment, there are many more prudent investment choices available than ill-liquid housing, which has annoying carrying costs as well as risks.

That's an amazing return really. Shares are obviously overvalued right now.

....and houses can't be overvalued as well.

Well if something went up 100% and another thing went up 300% which is more likely to be overvalued?

I wonder if the share market in some way feeds back into the housing market though. Both sectors are likely to be healthy at the same time.

It's not a true comparison.. house price is capital gain only, nzx50 is total return. Nz50c is up about 94% over the same period.

Yep, I was kind of pulling his leg a bit. It makes sense that the returns are similar if my theory that they feed back into each other is correct.

If you bought a house with no mortgage and factored in the income from rent as well as CG would the return be far better for property?

...and I was just pointing out your logic flaw..

Why didn't you point out YanKiwi's far more serious logic flaw?

Ummm... do maths much?

The typical NZX50 dividend has a far higher % return than rent payments. The other serious flaw in your logic is that there are no carrying costs for owning shares. With housing, one has to pay for maintenance, rates, insurance, and the costs for tenanting.

The total return for shares has clearly been far higher than housing for the same time period. There is the advantage of liquidity, as well as far lower costs for buying or selling.

Your illogical justifications regarding the supposed equivalence of housing vs share market total returns demonstrates a lack of objectivity on the subject. I'd recommend doing the maths.

Housing returns does depend strongly on location. For much of the past decade, the housing market here in Hawkes Bay has been rather stagnant with gains happening only in the last three years. This is not so coincidental with the contrasting gain timing of Auckland. The total gain for Hawkes Bay for the last decade is still about half of what it was for Auckland. Maybe house prices are wildly undervalued here??? :)

The capital gain seems to be equivalent but let's face it shares are far more risky and thus should return more than housing.


It's a cautious and sensible approach to assume higher returns equal higher risk. Although watch out for high risk masquerading with low returns like some finance companies.

To move ahead we simply have to make some assumptions.

I like evaluations instead of assumptions. One can make evaluations with underlying assumptions, but assuming the outcome without evaluation isn't the safest approach.

See below for an evaluation using basic assumptions.

Lol, your mates Eco Bird and House works are going to have a problem with that, they keep going on about how property is bulletproof and higher returns than shares.

The maths are rather simple here.

Let us make a few simplifying assumptions and do some maths. Assume that the capital gains was 100% over the nine years. Next, assume the start price on the house was $500k (final price would then be $1M). A decade ago, I rented a house that was $800k value for $350/week. That was a rather good bargain, let us instead assume a rent of $500 per week, and that the 0.1% of house value per week remained fixed. This assumption has serious flaws in it as rent prices have not increased nearly as much as the capital value, but I'll use this rather conservative assumption. The next assumption is that rates are 0.5%, and insurance is 0.4% of home value. The maintenance budget is 0.3%, for a net carrying cost of 1.2% per year.

At the end of the nine years, the rent is $1000 per week, which is unrealistically high but I'm using the absolute most favorable assumptions for the property ownership case. The total rent income was $377k, the carrying costs are $73k, for a net return of $370k. So the net total return becomes 175% instead of the 100% basic capital gain return. To realize this gain, one usually pays an agent several percent of this, so the total return decreases a bit.

Even with rather conservative assumptions, the total returns are rather small in property as compared to the share market. One can cherry pick individual cases for both sides to highlight possible higher gains. To me, the data shows that the 325% gain of the NZX50 over the past nine years is considerably better than the 175% net return for the investment property, even with rather favorable assumptions for property.

I am at a loss as to how one can consider 175% to be equivalent to 325% in net return.

The only real claim was that the "capital gain" component seemed to be more or less equivalent. Everything else was just 'wondering out loud' but still, good to know. Perhaps people can now be a bit more lenient on landlords with the knowledge that the gains aren't that great.

I am certainly not anti-landlord. They are providing a service, of which I have used at various times in the past. They are just trying to make a living, just like everyone else. Some landlords find it a valid path to wealth. Others over extend at the wrong time and lose their lifes savings. It doesn't even have to be an investment, but it can happen with ones personal home. I wanted to buy a house here in Hawkes Bay, beautiful rural outlook, high quality, etc. Their initial asking price was unreasonably high, $1.3M. I thought that a fair value was around $1M, or even a bit less. We put in an offer, they countered, we countered. and they came back with a number a bit over $1M that was not a round number. It turned out that they had built the house three years earlier, was over-extended, and just wanted to get back what they paid. It was higher than what I valued the house, so I didn't buy. Not sure what they finally did, the property never showed up as sold so I think they found a way to continue paying the mortgage. It was clear that they were initially expecting to make something like 30% profit over their three years of ownership after getting the house built. Sadly, it didn't work out that way for them.

Add: You did make the claim that the overall returns were similar a bit further above. My analysis shows the lack of truth to this assessment. In order for the net returns to be the same, the rent would have had to start at $1500/week for a $500k house, and finish at $3000/week for the house when it reached $1M valuation. This is rather unlikely! :)

It is very rare to come out with equity if commission build of own high end home, rather than starter home. The property being worth less than 25% than all up cost would be rather standard if had to sell within a year or two. So not really a valid comparison. Just need to watch a few episodes of grand designs to see this.

Hi Zachary,

Indeed, shares are far more risky than housing investments. And it's a risk that many investors are happy to steer well clear of.

For a start, shares are far more liquid and, thus, more volatile than land and buildings. Notably, housing transactions take far longer to execute than buying/selling shares - because, in practical terms, people need time to change their living arrangements.

To my personal dismay (and near ruin), I have found that share certificates do have another use. Following company failure, they can be used as wallpaper. That doesn't happen with property.

The point is that even if there was a property slump, the underlying value of land/buildings is sustained. You just have to hold on - and wait for the next upswing. Of course, seasoned property investors are well aware of that.


Sometimes not being able to dump a position with the push of a key has it's benefits. I remember people making fun of the accidental landlords in Auckland with the GFC. Bought a new family home, couldn't sell the old family home so rented it out rather than taking a hit. Worked out very well for them.

But houses are not less risky, where do you get this from?
Certainly shares are more volatile, but volatility is not risk.
Risk is the chance that you lose some or all of your money. Volatility is how much the price bounces around. It is lazy thinking from mainstream economics and the financial press that has presented the two as the same. They absolutely are not.
Property prices are quite capable of having drops of 30% or 40%. It is not unusual historically, it just has not happened for awhile. But with leverage you don't need a drop like that to hurt or to wipe out your money.
The leverage aspect of property makes them far more risky and something you did not explore.
Sure if you buy a million dollar house with a million dollars then it is virtually impossible for you to loose all that money. But nobody does that. They use a deposit of 100k and borrow the rest. If the house falls by 10% then they are already wiped out and we are talking purely in capital here, not accounting for carrying costs. If the house falls by 10% and you have to replace the roof and it costs 50k then you are now -50k. And it is unlikely you can sell because no one wants to buy your depreciating house. If you had bought 100k worth of shares and lost all your money then you will only ever have lost 100k. And if they fall by 10% you have only lost 10k. You can't lose more than the 100k you originally fronted. And if you buy a diversified portfolio of large and small caps across different industries (and don't put everything into pets.com) the chance that you will lose everything is in any case also very small.
Leverage is great on the upside and deadly on the down side and makes property every bit as risky as shares.
Ultimately it is timing. Buy the right house at the right time, in the right place and you can make a lot of money. And that is no different with shares. But timing markets is nigh on impossible. Ultimately you have to buy any asset when you believe it is cheap and unloved and then be prepared to wait out volatility (in the case of shares) or carrying costs (in the case of property) until everyone sees what you have already seen. Then you make your money. Over 20 or 30 or 40 years that should always work regardless of the asset class.....unless you got your valuation wrong and it wasn't really cheap to begin with.
Ultimately I think property and shares are not cheap and buying now will ensure I lose money over the long term, which is why I sit on cash. I may well be wrong. And I may well be wrong for a long time. But if this feels like the bottom (or even the middle) to anyone I would love to see some valuation justifications to support that.
People like to feel better about a tangible asset they can touch and feel, but that is showing their human frailty, it is not an argument for the value of one investment over another.

"Certainly shares are more volatile, but volatility is not risk."

Volatility isn't risk?
I think an elementary finance class is in order...

Please enlighten me.
How does the price of something moving up and down have anything to do with it's risk?
It is risky to buy a house in Syria. It is also risky to buy a share in most Syrian companies.
What has that to do with price volatility? Where does the risk of losing your money in Syria now, as opposed to 20 years ago have anything to do with price volatility?
If volatility is risk, then how come the industry that measures risk (insurance) doesn't measure it? Your car insurer asks how old you are to asses the risk of insuring you. They do not measure how much the price of your car is going up and down when measuring the risk.
Congratulations your understanding of risk seems roughly equivalent to that of Moodys or Fitch.

"How does the price of something moving up and down have anything to do with it's risk?"

You are trolling, right?

I don't troll I use my sense instead of just following the same claptrap the financial industry pushes out.
If I buy a share at 50 and hold it for 10 years and sell it for 100 dollars then what does it matter what the price has done in between? Whether it goes up slowly or quickly or right at the start or all at the end of my time frame it doesn't matter. The price only matters when I buy or sell. My risk is set by the price at the beginning of the transaction. The movement of that price does not affect my risk.
My risk is ALWAYS that I lose my money. That I pay 50 and only get 45, or 40 or nothing at the end. But that risk involves all manner of things in my control and out of my control. But whether the price goes to 70 and down to 30 in between my buying and selling how does that affect my risk?
You might say if the price bounces around then what happens if I am forced to sell when the price is less then 50. But the risk is that I am forced to sell. It has nothing to do with what the price is when I sell. If you are buying an investment and you cannot afford to hold it through thick and thin then that is your risk. Not the price movement.
Seriously nymad are you going to tell me markets are efficient next? That would be a funny one as well.
But hey what do I know don't believe me ask google "are volatility and risk the same things" and maybe you will believe what those guys say. Especially the first guy that comes up I think he has a pretty good track record on understanding investing and risk.
It is this basic misunderstanding of risk, that is widely repeated on this thread that leads people to foolishly believe property is safer then shares. As I said it is not. It is also a big factor in what lead to the GFC.


There are various types of risks associated with any investment. Nymad and you are talking at cross purposes about two different types of risk:

1) market price risk (this is what Nymad is referring to when using historical price volatility as a risk measure) - this is typically used by many financial market participants with financial market securities as market price risk is a key risk that they face, when they buy financial securities such as shares, bonds, etc. For example, price volatility matters if these market participants are heavily leveraged with the use of margin debt (and the loan is callable immediately depending on the price action of the underlying financial security). Or for those who engage in short selling of financial securities, who may face the risk of a margin call in the event of an adverse market price movement. Or those market participants who are involved in the option market, historical price volatility is used in the calculation of option fair values that are listed in the option market. These financial market participants want to know how much a share price can move in a short time, because if the historical share price volatility is high, then they should reduce the amount of debt they should take on to finance the purchase of that financial security or face the risk of getting a sudden margin call with an unexpected sharp share price move. If the historical price volatility of a financial security is lower, then financial market participants feel that they can take on more debt to finance the purchase, without the market price going adversely against them. Occasionally, this can go horribly wrong - look at the case of Long Term Capital Management (LTCM) ... Or even more recently with foreign exchange where historical volatility is normally low, so many participants in this market use high levels of debt, then they get a surprise price move and get wiped out - recent large one day FX moves include Turkish Lira, Argentinean Peso, South African Rand. A few years ago, even the Swiss France had a large unexpected one day price move.

2) investment risk - you are referring to this type of risk. This is the risk that an investor can lose their capital invested. As a subset to investment risk is political risk (this is the example you use with an investment in Syria). Other subsets of investment risk include foreign currency risk (say you own an investment overseas), credit risk, business risks, etc. With respect to housing, one subset of investment risks are construction risk (such as leaky home, unconsented dwellings / additions, untreated timber, etc). Another one is natural disaster risk (such as risk to earthquake, flooding, hurricanes, volcanic eruptions, etc). Another risk is environmental risk - such as proximity to an underground mine (e.g Waihi gold mining, etc), being downstream from a hydroelectric power plant, proximity to a nuclear power plant (e.g Fukushima).

So when talking about risks, we just need to clarify which type of risk we are referring to.

Hi denature,

Nymad and I don't often agree and, in fact, have been known to have some quite sordid exchanges here!

But Nymad (the old son of a gun) is absolutely correct on this occasion.......

Volatilty goes hand-in-hand with risk. In fact, many people have lost their shirts because of investment volatility.

Even school kids learning economics, accountancy etc know about that.

As Nymad suggests, denature ought to enrol for an elementary finance class. That's very sensible advice.......


Hi TTP thanks for your comment.
Like Nymad you provide no actual example of how price volatility affects risk, whereas I give many examples of how it does not. You simply say it is so because a bunch of other people who also do not understand risk say it is so.
As a school kid I learned about how markets were efficient. How the market new everything about the price so you can never beat the market. But people do, and not just Warren Buffet but plenty of others.
I ask you again how does volatility affect risk? What is your example?
One of the arguments given here is that houses are less risky, because the price is less volatile. But this is ridiculous. The price only matters when you buy or sell. And at that point of purchase the price affects your risk, only in how it affects your ability to hold whatever you are buying. The price action is not relevant to your risk.
House might burn down. Risk. Earthquake. Risk. People stop wanting what a company makes. Risk. Someone different starts making something better then the incumbent. Risk. That tomorrow the price of your asset might be 1% more and the next day 1% less. Not a risk. Unless you have to sell on those days. And then the risk is the thing that makes you have to sell (a margin call or whatever) not the change in the price. I honestly don't know how I could make this any clearer.
If there is a lot of volatility in a market that can tell you something is going on. There is uncertainty perhaps or fear. But what has that to do with risk? There is no more risk, the fundamentals of the investment remain the same. You may not have measured them properly, you may not have thought of everything and managed your risk correctly but that is not any function of the volatility.
As I said to nymad if you cannot understand, what I believe are some very simple logical arguments, if you have heard the same incorrect dogma repeated so many times that you take it for fact then google it. See what Warren Buffet says about volatility and risk. Certainly he has a lot more credibility in understanding risk then I do, particularly given that he made most of his money on insurance, which is very much concerned about risk.

Hi denature,

You write: "Like Nymad you provide no actual example of how price volatility affects risk......."

The root mechanism is uncertainty. Wherever there is volatility, uncertainty is inevitable. And wherever uncertainty is created, risk can't be avoided. (In financial terms that might be thought of as the probability that an actual return on an investment will be lower than the expected return.)

The above logic not only applies to financial/investment analysis and decision making but can be applied to a host of other things as well - ranging from weather forecasting to horse racing to terrorism.

Go read up about risk assessment/management and learn about risk matrices - frequency and severity ratings, priority mappings and so forth.


But uncertainty is not the same as volatility. I don't know what is going to happen tomorrow, and I understand there is risk in that is simply not the same as looking at historical price action (in relative terms not even absolute terms which is what Vix is) and saying that somehow reflects your risk.
I readily understand that uncertainty is risk but we are not talking about uncertainty we are talking about historical price action, in relative terms and that has nothing to do with uncertainty. Knowing that prices are varying around a point does not tell you anything about the risk associated with the price or the underlying security. It doesn't even tell you the direction of price movement. It tells you things are choppy. That's all.
I have read plenty about risk management and assessment. Remember Fitch and Moodys and how they told us all those CDO's were safe and AIG was AAA. That is the value of your risk matrices, ratings agencies used all the same models you are talking about and then told us things that even a cursory investigation with common sense, instead of blindly following a dogma, would have told us were bollicks. And many people said that, they just weren't listened to.
You must have read black swan. You know, proper science that reflects the universe as we observe it. And weather prediction as your supporting evidence. Really?!!? They can't predict the weather with any sort of accuracy outside three days....that's supposed to impress me somehow.
Maybe you should read a little physics and chaos theory and understand why all those supposedly predictive models remain worthless.

Mathematics isn't dogma, denature.
I know this must be embarassing for you. Because. Well, this is quite possibly one of the most categorically incorrect statements (and set of arguments) I have read on this site.

As TTP noted, elegantly.
Every expected value is an estimate. We don't invest retrospectively, so every (expected) investment return is a function of an array of determinant factors. Given you cannot possibly perfectly model the true data generating process of that, there is a non negligible element of variance associated with your expected return. As this increases, the risk that you will not return your estimate also grows.
Hence, risk is variance, is volatility.

Well it's a shame you can't follow a simple logical discourse nymad.
I feel no embarrassment I am comfortable arguing against the herd.
We are talking about volatility. This is a measure of historic price action. We don't invest retrospectively but the only information we have is retrospective because we can't predict the future.
You seem to be saying that if I predict price a will be price c in 3 years that as the price moves further from c that my risk increases. That as prices go up and down my risk goes up and down as well. This is plainly nonsense. It changes none of the fundamentals of my assumptions whether they are wrong or right. My risk is locked at the moment I purchase. My risk can change but only if something about my fundamentals or the securities fundamentals change. Either I have made the right assumptions and I make money or I have made the wrong ones and I lose money. The price activity, historical or otherwise does not change this.
We run some numbers make some assumptions and bet on something. That is investing. But if we say we are taking less of a risk because the historical price action is less bumpy in investment x, than in investment y, rather than say measuring CAPE, or the ability of an entity to cover it's debt, or the growth of it's sales, or it's reputation or the demand in it's product then we are being pretty stupid.
Which is exactly what the ratings agencies did and still do.
Mathematics is a type of dogma actually, but I was not referring to that. I was referring to the dogma that volatility measures risk. It plainly does not. It has somehow become dogma and it is incorrect. As it is incorrect to say houses are safer than shares because their price action displays less volatility. It is irrelevant to the risk assessment of the investment.
I hope you don't manage anyone's money as you clearly do not understand the difference between risk and historical price action because for some reason you keep trying to link the two.

Hi denature,

You're all over the place!

You need to develop disciplined thinking. Long unwieldy paragraphs - one after another - provide an obvious clue that you're a muddled thinker.

Remember, conciseness/brevity are hallmarks of clear thinking.


Shares are riskier than property? The financial illiteracy in this country is staggering..

Totally agree.
There is an unhealthy obsession with housing as an investment in this country.
And it's choking us. It's why we are so unproductive and why the only way we could pretend to grow was to import cheap labour and spend all of our future earnings.
Houses are non productive, they do not create jobs or real wealth. You get wealthy from working hard, taking some risks and saving. Not from doing things inefficiently and borrowing against your house, to fund your lifestyle......and to buy yet more houses, with more credit.
But people like them over shares because you can "touch them", as opposed to "piece of paper" or because if the price plummets you still have something.
Well I'm sorry people but that piece of paper that represents all that money you are renting off the bank to buy your house, that is different how?
I rent my house. You rent money off the bank to live in your house. Whats the difference?

Hi denature,

You write: "Houses are non productive, they do not create jobs or real wealth."

So how about the architects, builders, plumbers, electricians, plasterers, painters, roofers and bricklayers who build, renovate, repair and maintain houses - and the local authority people who issue consents and inspect construction work to make sure it is up to standard?? Are these not examples of jobs created and capital/wealth generated??

And then there are landlords and property managers who spend time administering tenancies and servicing properties to make sure those in need are housed. Is that not productive output??

I think you are rather mistaken. And somewhat naive.......


Building houses is productive, trading them back and forth is not.

Thank you pragmatist, that was what I meant. Admittedly I did not make that clear so my apologies to TTP for that.

Oh, he's been told that many times before, but it's not in his interest to admit it. He's just a landlord that thinks he provides a valuable, nay, essential service to the world and we should bow and doff our hats to him for it.


I am primarily a stockmarket investor with just one rental property and I too think that many shares are beyond fair value. However, that also apples-in spades-to the Auckland property market. With the median price to income on a multiple of around 10,that is unsustainable over the long-term.
If and when there is a substantial stockmarket correction-over 20% to be considered a true bear market,will property prices be unaffected? I think not.

For a fair comparison would need to add net rental yield to property returns. As the NZX headline index is a gross not capital index (they cumulatively add dividends and imputation credits to the market cap of the constituent companies). They changed the methodology about 20 years ago as the NZ sharemarket was a serial underperformer.

The NXZ has been bolstered by the weekly flow of Kiwisaver monies into growth portfolios, that mandates the blind purchasing of NZ shares, irrespective of valuation metrics. At the first sign of a recession with a subsequent sharemarket correction, many NZers will revert to type and switch their funds to cash/ conservative . This switch will trigger a wave of forced selling of NZ shares by fund managers, that I would expect to trigger a crash, and will feed on itself with the selling, triggering more panic and more selling of shares. The wave of funds into cash/ conservative funds will drive down term deposit rates and subsequently mortgage rates independent of Reserve Bank cash rate moves.

The mandated purchasing of NZX shares via Kiwisaver fund managers, is great on the upside, but at some time mandated selling will feed on itself and we will likely be looking an at 1987 type event. But we have all this ahead of us.

Agreed, there is a strong possibility of a rather strong correction with the attendant over-shoot as compared to "value". At present with interest rates so low, the rather high dividend yield suggests that the share market is still fairly valued when looking at the risk to reward.

The risk of a strong correction also exists in the housing market, with a similar wave of panic selling as well as forced selling (mortgagee sales when the bank comes calling and the over-extended mortgage owner HAS to sell). The NZ stock market has few players with margin accounts, so the forced selling in the share market of individual share owners will be small. The Kiwisaver aspect, more so. Also note that some of the shares that Kiwisaver plans own are REITs. When the shift conservative happens, consider also what will happen when there is a liquidation of those shares. A hint: it will not be positive for property values.

And of course as we all know, only shares can become over-valued than have a sharp correction. Property is completely immune. On an unrelated note, seen any nice million dollar sheds in suburban Auckland recently?

@Yankiwi Stocks out perform housing on a cash basis, thats been known for a century. However geared housing beats un-geared stocks and even geared stocks (assuming 60% gearing for stocks and 80% for housing)
Both housing and stocks are extremely good investments, obvious enough.

Agreed, leverage increases the potential for outsized gains, as well as outsized losses. Leverage allows some to win the proverbial lotto, and others to get completely wiped out. Leverage increases risk, in both directions as it can increase losses just as it can increase gains. There are a few excellent examples of this in the links and comments above and below.


I would like to see the evidence for the out performance of geared property. It would have to account for rates,insurance and maintenance to be at all realistic. i have never yet seen figures that take these factors into account.

Yep, which is why it now has to take a break while wage inflation catches up, it's run its course and would be due for bust about now if there wasn't a housing shortage in Auckland

Auckland City - Central statistics are interesting with a -3.3% in 3 months. This is likely to be apartments causing this I would think. With Auckland East increasing it stands to reason that the leafy suburbs of Central are similarly increasing.

That’s what Core Logic is telling me and I figure they analyse relevant sales for my area.

Edit: sorry I am Auckland East not Central so Core Logic confirms these figures that my area is up and it’s not hard to work out why - location. If you want an easy commuting life, take the Tamaki link bus and be in the CBD in 22 minutes for $3.30 per trip. No paying Goofs fuel tax, directly. That will never change and each single house site subdivided is gone forever. That’s what drives the prices.

Certainly Kohi is very nice – and I enjoyed living there – although this was some time ago.

You mention commuting – which I did into the CBD – driving. One thing that irked though was the time it could take to get onto the motorway – which for various reasons I needed to do quite often, mainly on the weekend – and that started to become a draw-back.

When I was working in the CBD, I initially drove, but construction work disrupted flows and switched to the bus. Far easier and in many cases less time taken.

Motorway access is a two-edged sword. I travel to Henderson with refuse via the North Western and South via Mount Wellington. Both are 15 mins until motorway access. I'll happily do that if it limits people's propensity to travel into our hood. It's already beyond a joke on weekends.

Good to see the highly leveraged are out in force this morning, all whispering comfort to one another.

Trademe availability continued its upward march overnight to 30,767 as if someone pressed the panic button in the last 2 weeks (and if barfoot listings to sale ratio this year is anything to go by then up to 40% of those sellers could be left disappointed).

What do you do? Take the gains now? Wait for removal of negative gearing to be introduced which will also create a few sellers? Worry about whether interest only mortgages will be rescinded like our banks are doing in Australia? Wait for the impact of foreign buyer removal to really hit the market? Worry about the Aussie banks tightening credit further as bad loans magnify over the ditch? Reducing immigration? Increasing migration of the wealthy? Will the Reserve bank get the go ahead to introduce DTI's (they wanted that option under the Nats, will they get it now?) Decreased spending in the real economy and impact on jobs? Increased regulation of rental property. There are many things to consider? Key bailed out of the market, Hoskings too, do they know more than you?

Or you can just get on with life, and not worry about things that may not come to pass.

Indeed mja... but it is fun stirring the pot.

A big secret to financial success is to look forward and evaluate various possible outcomes, both positive and negative. The absolute worst position to have is to be forced to sell during a temporary downturn due to liquidity issues. One needs to do enough planning (aka worrying about possible negative outcomes) so as to prevent this from happening. Ideally, one should be able to take advantage of the opportunities of any temporary downturns, which suggests that excessive leverage may not be healthy in the long term.

Properties around Auckland's water front like MB, Kohi, st Helier. House price there will always go up and up

You omitted the /sarc tag.

Owners seem to buy based on equity in previous house sales so the overall market is still a determinant to budget, but as it's god's waiting room sellers are less motivated in down turns unless it's off to the rest home or cemetery i.e. it goes quiet rather than markedly drops.

Hi Ex Expat

Guess it depends on how many of the Boomers are approaching retirement with debt. Apparently there are some pretty big mortgages in Auckland for those in their late 50's and 60's. Many will have planned an escape to the country for retirement as a way of removing the mortgage, question is how many of them will need to sell in a much softer market and will there be the equity left to satisfy those dreams? 4 in 10 Barfoot sellers have had struggles this year, so I guess we'll see. Found this little article that may effect some of your Kohimarama neighbours over the next few years.


I recall reading that 78% of Kohimarama dwellings are owner occupied and based on my observations I’d be surprised if the average age is much below mine at 57. I personally have one house, no debt and enough savings to make it through my older years, if frugal. I have no idea what my neighbours are up to financially. I know many have a bach (ironic considering we live next to a beach) because the street is empty over Christmas and I also know most have been here a long time. I suppose they could be leveraged to the hilt, but who knows? My neighbour did mention that his deck repair cost more than he paid for his house more than 30 years ago, so I expect there’s a fair amount of equity there. If the tide goes out, then we’ll find out. Been waiting a long time for that.

Thank-you for this information.

Lots of love, The Burglars

You would have to be a dumb burglar to target Kohimarama.

Have you been to a typical Baby Boomer's house? It's full of old stuff that has no resale value.

Wealthier Boomers are no different. It might have cost a lot when brand new but that 50 inch plasma with no HDMI inputs is junk value. Wardrobes full of Osti frocks, Rodd & Gunn polo shirts, Boat shoes. Golf clubs from the '90s. Why steal what even their children wouldn't be seen dead with?

Except the ones that literally fall off a cliff.

A reminder of what can happen to those that are over leveraged.

- https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=107...

When an average house in Dunedin costs over $ 400 000 , then you know that the bug is still hurtling towards the windscreen ...

.... interest rates are rising across the world .... our banks are finding cheap funding harder to locate ....

Sooner or later , we'll be buggered ..... SPLAT !!!

its all about USA money printing and nothing to do with NZ. when they stop printing because there grandchildrens lives must now be sacrificed to pay it back may finally offend some people. Little NZ will crash along with every one else. very simple. Solution print more money i dont think so!!! see Argentina, Turkey etc
The talk today on here about THIS AND THAT been relavant is nothing short of complete insanity. So many smart people talking absolute BS due to the fact the own assets that a were rising. -35% is previous NZ record fall i think? so it could be worse than that. we will have open the door to the rich fleeing the crash to prop up the "market" here.

Bit over the top sacrificing grandchildren's lives, sounds a bit old testamant. Maybe they print enough cash to suppress interest rates, while inflation works it's magic and wages slowly grind up, compounding every year. At the end of the day the USA effectively controls worldwide interest rates, via adjusting liquidity. And given the US government owes $21 trillion, they may decide they like low interest rates. If I owed $21 trillion, and could suppress interest rates if I so desired, I would take the low interest rate path. Not rocket science, just common sense.

The end result with this, is the debasement of ones currency. Some will put forward Japan as a counter to this. Japan has been strongly export positive, so had significant positive cashflow that was used to reduce interest rates. The interesting aspect of this was that the combination of very low interest rates and positive trade balance resulted in Japan being at the center of carry trade which helped prop up the currency. The US, well... not so positive trade balance so the result of increasing liquidity/driving down interest rates is debasement of currency value. Hence the reduction in real wage rates over the past decades in the US. This path has hollowed out the middle class in the US, not an ideal path to follow as increasing inequity is not a positive outcome.

"Australia (and NZ in my opinion!) is becoming a test case of whether regulators can manage a soft landing, rather than a disorderly crash....."I got pre-approval for a mortgage last year but couldn't find a house we could afford before it lapsed. Prices are falling but now my bank will only agree a mortgage worth $170,000 less than the level agreed last year. So we are stuck.".... property markets from London to Toronto are seeing price declines as central banks begin to unwind record-low interest rates, consumers balk at paying record high prices and regulators or banks impose tougher lending criteria on consumers."
(AFR - today)

It's called nose diving.

I prefer the term 'soft crashing' where people don't realise its happening, but nothing is really selling so the reality is masked by nice comforting asking prices.. for a while

MJA Please its been 11 years ! while inflation takes care of it (debt)? Really you belive that? you must raise rates to combat inflation as well so crash!! wages slowly rising(not) real wages are falling in the USA for years. suppressing interest rates is what has led to these bubble house prices we are talking about. 21 trillion for you the grand kids to pay off. I am sure they wont mind.

God there is some BS written on here by people who don’t know what they are talking about.
Most investors are sitting more than Comfortably at the moment and if they aren’t there has been a stuff up by the Banks.
Most of the time the “mortgagee sales” are caused by business’s that go under, that are secured by the house.
Going back in time Property investment has always been the safest and will be into the future.
Wife has a lot of inherited shares etc. with a financial advisor thru inheritance and I can tell you that they are a helluva lot more risk than housing.

I couldn't agree more. I am willing to wager that very few successful people post comments celebrating falling house prices. They are akin to problem gamblers who may win occasionally, but ultimately always lose. More interesting is the debate of property vs NZ Stock Exchange as the better long term investment. Either could win depending on selection criteria. Stocks just have too much idiosynchratic risk for me, for every Xero there are more CBLs

How would you define successful?

Well since this is a finance journal, let's put spirituality and inner contentment to one side. I don't know, net worth maybe? How about a NAV of <$2.5m?

And from a behavioural finance perspective where we understand the our emotional state influences our decision making as well as our personal happiness? (based upon NZ's mental health and suicide stats/trends, you'd really think that our recent mode of operation isn't working....whats the point in being successful if it means you end up on medication or worse you want to end it all?)

Is there a verifiable fact anywhere in this missive.

You're making statements that are impossible to verify as true. Such as 'property investment has always been the safest and will be into the future'. There could be significant earth quakes that rock the country in 10seconds time, destroying many homes and the perceived value of investment in that asset class. Result being a destroyed real estate industry in NZ.

As such one could also draw the conclusion that you don't know what you're talking about and also post a significant amount of BS on this site....just saying...

Love it

Double love it.

"Property investment has always been the safest and will be into the future" ....

Some people who might disagree with you on that ...

1) https://www.stuff.co.nz/business/money/100789055/15-years-of-leaky-homes...

2) https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118...

3) https://www.stuff.co.nz/business/money/64093828/Forced-home-sale-bankrup...

4) https://www.stuff.co.nz/life-style/homed/latest/104833494/no-code-compli...

5) https://www.stuff.co.nz/bay-of-plenty/103189572/Unprecedented-21-Bella-V...

6) https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=120...

7) https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=107...

8) not sure what happened to property here, but likely to be unliveable in some parts - https://en.wikipedia.org/wiki/Radiation_effects_from_the_Fukushima_Daiic...

9) numerous cases in US during the GFC where homeowners lost their homes

10) numerous cases in Ireland during GFC where homeowners lost their homes

11) numerous cases in Spain during GFC where homeowners lost their homes

It might be the safest but the pathetic returns you make on it especially in Christchurch reflects the risk. Equities are where the real money is made. Just go ask Warren Buffett. To be seriously involved in equities you need some money and you need some intellectual ability. The Boy obviously does not have the ability to manage his wife's so called portfolio because if he did he would be smiling from the amazing results from equities since the GFC. They make his negative returns on Christchurch housing look silly.

So, does it make sense to mortgage yourself to the max and then invest that money in shares? Is anyone doing that?

If the returns are so great a lot of people should be pestering the bank to lend them more so that they can buy shares. Perhaps the banks should pay counter staff commissions to encourage customers to raise mortgages to fund share purchases? Why are the banks not taking advantage of this great opportunity?

Mortgage brokers should be encouraging customers to give that rental property a miss and buy shares instead.

Some certainly are. And I intend to if interest rates stay low. Once we have a reasonable level of equity in a property we will refinance and invest that money in shares since mortgage rates are lower than margin lending and can avoid margin calls. Won't be mortgaging myself to the max, excessive leverage is always stupid.

And banks do take advantage of this, https://www.asb.co.nz/asb-securities/margin-lending.html
Pretty sure margin lending doesn't have the same benefits for the banks as mortgage lending in terms of risk weighting.

Once we have a reasonable level of equity in a property we will refinance and invest that money in shares...

From what people have been claiming in this thread about how lucrative shares can be this would appear to make sense. You can raise money on the equity in your home at the most reasonable rate commercially possible.

Yet isn't this what TM2 has been saying all along and being derided for? Money's potential, locked up in your home, is being wasted and should be invested elsewhere. TM2 recommends positive return real estate and you recommend shares - there isn't much difference, philosophically, really.

So if you have a mortgage free home worth $1M should you go to the bank and raise a mortgage to invest elsewhere? Being very conservative, let's say 500k. That's only about $400 interest a week currently, much less than a typical week's rent. Sort of what the mortgage free house is providing you as a return.

Theoretically if invested in the NZX50 that 500k should return 4% in dividends just about covering the mortgage cost. Can the mortgage interest be claimed as a business expense?

Over the last decade the NZX50 has gone up on average 9% per year. If that continues as every year goes by that 500k's value will compound. The first year will give you 45k in gain,

Seems like a no-brainer? I dunno I could be wrong with my figures but is the above fundamentally the concept?

The interesting thing will be when you go to the bank to raise that 500k and present them with a 'business plan' revealing that you intend to invest in the NZX50. How will they react? I should try it. Will they be okay with you leaving money in term deposits as well? You don't want to invest your own money, you want to use the bank's money I guess

Also: Once we have a reasonable level of equity in a property

How will that happen? By paying down capital from salary or gaining more equity through capital gain? If salary, why not feed it straight into shares? If property capital gain, why rely on a supposedly poorer investment vehicle to fund a better one?

We'll be buying a house primarily as a place to live, not as a financial vehicle, so yes, paying down the mortgage from salary and whatever capital gains that may also happen to give us equity.

Such a "terrible investment" though. From the above comments it seemed like purchasing a house was a crucial part of the financial plan.

In a financial sense I agree, but the lifestyle factors for us outweigh the financial.

Edit since you've edited your post: no buying the house actually gets in the way of the investment plan, but on the plus side once we have equity we get access to better Interest rates and terms (for nzx/asx stocks anyway)

No, houses and shares are very different investments. Liquidity, diversification and truely passive income from shares. Rental property is not passive, has significant carrying costs (rates, insurance, maintenance etc), not liquid and unless you go multiple city and multiple countries you really have next to no diversification.

I wasn't comparing them though. Really just looking for some feedback about what I outlined above. Are the details more or less correct and Is it a sensible approach to take?

What would you do if you owned a mortgage free home that was worth one million dollars?

I'm not your financial advisor, you may have to open your wallet and pay for personal financial advice that factors in all your personal circumstances and goals.

Yes, if I currently had a million dollar mortgage free property I would free up some of that equity and invest it in various stocks and bonds. But that's me, in my position, with my goals, and with my financial targets.

So sorry Pragmatist I thought this was a forum where such things could be discussed, where ideas could be exchanged, where questions could be asked about investments such as these. I'm actually being quite genuine about this. Just making sure I am on the right track here.
Not trying to entrap you or get up to any of the usual ZS shenanigans.

Can anyone else answer my questions?

Edit: Also I didn't get to where I am today by paying people to tell me obvious things when I can get it free on the Internet. Money in my wallet is like my lifeblood. Anyway I trust you guys more than I trust them anyway. I want to talk to the players not the advisers.

Edited my previous post.

Without full understanding of your goals and position how can you get decent personalised advice?

One thing that's true, having all your eggs in one basket is rarely a good idea. If the nz housing market crashes hard because of stupid govt policies, having investments that are in other asset classes will sheild you from that. Diversification is usually a good thing.


Perhaps it's my Scottish upbringing,but I would never consider borrowing to buy shares-and i have been a stockmarket investor for over 40 years. Indeed,I have never borrowed for anything other than the property I and my family lived in. That includes the small rental I have in Mt. Maunganui.
Of course,I realise that under NZ's skewed tax system,it has made 'sense' for higher-rate taxpayers to borrow for investment property purchase,much to the detriment of the country.


Do you really borrow on your home equity to buy shares? If so,I wish you well,but I think you're crazy.

Almost everybody has to borrow to buy a home,but I would NEVER consider borrowing to buy into the stockmarket.

Haven't bought a home yet, but yes, I probably will. But bear in mind that by the time e we buy and build enough equity for me to be comfortable doing this the stock market will probably have corrected and be at better P,/E ratios etc.

Logic would suggest if you have a good job you buy a house and live in it and also invest in shares with any surplus money. It is totally pointless to rent a house and put all your money into shares. What seems difficult for many people to comprehend is the non financial benefits to owning your own property. At the end of the day its not all about the dollars and cents and your only on this planet for a short time so there is no point living your life waiting for the day you retire before your life is "Great" because by then, even if you won Lotto its too late.

Is putting the surplus money into shares better than paying down the mortgage though?

What if you had a 400k mortgage on the home you are living in and you had a windfall of 100k, would it be better to invest that money in the NZX50 rather than reducing the mortgage to 300k?

If you put spare cash into shares while still having a mortgage you are effectively borrowing to buy shares. A little bit different if the mortgage is on a rental.

The fact that no one has really come in and said yes, "totally would invest in shares", tells me that it's kind of 50/50, if not better off to go for the sure thing which is paying down mortgage.

The only advantage would be diversification or when there are extra benefits like going into KiwiSaver.

From a strictly financial point of view.. if the mortgage rate is something like 4.3% like many are now, and you can reasonably expect the investment to earn more than that after fees and taxes, then yes, you are better off investing than paying down the mortgage.

And if its a liquid investment like most shares then the day you get the letter from the bank saying the mortgage rates are going up to the point you no longer expect the returns from the investment to be more than the interest you can sell the shares and paydown the mortgage instead.

Back in the '80s when we bought our first house, we went with the idea that paying down the mortgage as the best plan. First we had to pay off the 'rents that "gifted" us part of our down payment. We ended up paying off the mortgage in seven years. The very next week after we paid off the mortgage we took out a new mortgage (80% LTV), and put it all in the stock market as all indications suggested that was a much better use of our equity, especially as in the US, one gets to write off mortgage interest, so that .gov is somewhat subsidizing the carrying cost. That ended up being a very good decision. We did go to cash three times in the following two decades timing the market, and all three times our market timing worked out extremely well, allowing us to sell high and buy lower each time.

My criteria currently would be to look at the dividend returns, and compare to the mortgage rates. If the dividend returns are significantly higher than the mortgage interest, then I would cheerfully put my money in the share market instead of paying down the mortgage. I would look at the dividend returns assuming my marginal tax rate for this comparison.

Thanks for the feedback Yankiwi and Pragmatist.
I will have to do some more research into dividends and fees etc.


It's basic commonsense to pay down a mortgage with spare capital-unless it's paying off higher interest debt like credit cards. It's basic economics;paying off mortgage debt gives you a Guaranteed after-tax return equivalent to the mortgage rate being paid. Investing the capital in say,the stockmarket provides no guaranteed return and i say that as a long-term stockmarket investor. When I first had excess capital at 53,I first thing I did was pay off my mortgage and I would certainly advise anyone to do the same.

i would have agreed with you before 2008, but we are in a different world now where banks are falling over each other to create debt on housing and interest rates are only headed one way, down.
as long as you DYOR and understand what you are doing you can easily make + 10% return per year as share prices are being pumped up by the same debt creation.
the key will be to get out QUICK when you need too to preserve your gains and pay off your mortgage.
so yes it can be a quicker way to get ahead but there is a risk and we are due for a major correction worldwide so the best times may be behind us.

It depends what you want in life. The non-financial benefits of NOT owning a house are more valuable to some. The ability to up stick and relocate in 6 weeks can be a really good thing for some people.

That why you need to set your goals and evaluate what you want and how to best achieve it.