Quotable Value figures show the average value of homes is declining in Auckland, Christchurch and Queenstown, and rising more slowly in other centres

The average value of homes in Auckland has declined for four months in a row according to national valuations service Quotable Value (QV).

The declines have been small but steady, with declines of one or two thousand dollars every month, from an average value of $1,054,729 in May to $1,047,415 in September.

QV's latest figures for September show that average values were lower than they were three months ago in 16 of the Auckland districts that QV breaks out individual figures for.

The only districts to record a rise were Onewa on the North Shore +0.6%, and Franklin on the city's southern flank where the average value was up 1.2%.

The average value was unchanged in Manukau Central.

Of the 13 districts that recorded falls in average dwelling values compared to three months ago, the biggest decline was in the Gulf Islands -5.4%, followed by Central suburbs -2.5% and North Harbour -2.2% (see table below for the full regional and district figures).

'A trickle-down effect'

Outside of Auckland the other major centres to record a drop in average values over the last three months were Napier -0.2%, New Plymouth, -0.3%, Christchurch -0.2% and Queenstown Lakes -0.4%.

Outside of Auckland average values continue to rise in most other centres, although the rate of increase appears to be slowing.

"The continued slowdown in the rate of value growth in our main centres continues to have a trickle-down effect on our regional centres, with many smaller provincial areas experiencing a gradual slowdown in growth," QV General Manager David Nagel said.

"In saying this, regions that offer more affordable properties or exceptional lifestyle opportunities continue to see strong value growth.

"As we move closer to summer, I'd expect to see an increase in listings and sales, although the degree to which this impacts value growth is uncertain.

"With the current low interest rates set to remain until well into 2020, it's hard to see any dramatic changes to values outside of the usual seasonal fluctuations," Nagel said.

QV House Price Index - September 2018
Territorial authority Average current value $ 12 month change% 3 month change %
Auckland Region 1,047,415 0.8% -0.7%
Wellington Region  664,418 9.6% 1.6%
Total New Zealand  676,427 4.6% -0.6%
       
Far North 418,167 2.2% 1.8%
Whangarei 534,846 6.8% 1.1%
Kaipara 543,311 5.4% 0.6%
Auckland - Rodney 949,953 1.1% -0.6%
Rodney - Hibiscus Coast 932,696 -0.5% -0.1%
Rodney - North 968,436 2.3% -1.0%
Auckland - North Shore 1,216,511 1.8% -0.8%
North Shore - Coastal 1,389,625 1.9% -0.9%
North Shore - Onewa 979,893 1.9% 0.6%
North Shore - North Harbour 1,182,468 1.3% -2.2%
Auckland - Waitakere 824,358 1.0% -0.2%
Auckland - City 1,234,458 0.7% -1.1%
Auckland City - Central 1,070,764 -0.8% -2.5%
Auckland_City - East 1,564,278 2.1% -0.3%
Auckland City - South 1,099,591 0.0% -0.5%
Auckland City - Islands 1,095,412 0.6% -5.4%
Auckland - Manukau 898,133 0.0% -0.5%
Manukau - East 1,152,518 -0.5% -0.2%
Manukau - Central 699,180 1.6% 0.0%
Manukau - North West 774,411 0.3% -0.9%
Auckland - Papakura 699,928 3.1% -0.4%
Auckland - Franklin 670,094 1.1% 1.2%
Thames Coromandel 740,456 3.0% 0.8%
Hauraki 400,424 -0.1% -6.4%
Waikato 478,200 8.2% -0.5%
Matamata Piako 457,039 4.7% 3.0%
Hamilton 572,169 4.7% 2.4%
Hamilton - North East 726,501 5.1% 2.0%
Hamilton - Central & North West 528,507 4.5% 3.0%
Hamilton - South East 515,758 4.4% 0.9%
Hamilton - South West 507,600 4.2% 4.1%
Waipa 555,703 5.6% 1.4%
Otorohanga 274,082 -5.7% -4.0%
South Waikato 230,253 9.9% 9.1%
Waitomo 226,431 13.1% 8.0%
Taupo 481,247 8.0% 1.1%
Western BOP 630,254 2.5% 1.0%
Tauranga 709,339 3.3% 1.4%
Rotorua 435,812 5.9% 2.6%
Whakatane 441,123 7.6% 1.8%
Kawerau 199,828 5.0% -5.1%
Opotiki 288,346 5.6% 6.2%
Gisborne 325,301 10.3% 5.1%
Wairoa N/A N/A N/A
Hastings 464,373 7.5% 2.6%
Napier 511,341 9.7% -0.2%
Central Hawkes Bay 337,773 18.1% -0.7%
New Plymouth 448,767 5.5% -0.3%
Stratford 262,239 3.3% -1.8%
South Taranaki 221,433 5.2% -0.5%
Ruapehu 189,709 12.7% -2.9%
Whanganui 260,872 13.4% 2.3%
Rangitikei 222,273 24.1% 8.8%
Manawatu 350,223 12.2% 3.5%
Palmerston North 406,711 11.1% 4.0%
Tararua 213,937 20.3% 8.1%
Horowhenua 320,370 11.5% 0.7%
Kapiti Coast 564,784 7.4% 1.2%
Porirua 561,797 7.8% 0.3%
Upper Hutt 498,113 8.8% 1.8%
Hutt 536,855 3.4% 0.1%
Wellington City 795,098 8.5% 1.9%
Wellington - Central & South 800,546 9.8% 3.5%
Wellington - East 834,915 2.6% 0.4%
Wellington - North 721,976 12.1% 2.3%
Wellington - West 904,963 6.6% 0.1%
Masterton 356,306 13.9% 3.0%
Carterton 380,076 10.5% -2.9%
South Wairarapa 483,175 10.7% 0.4%
Tasman 583,877 8.2% 1.1%
Nelson 587,696 7.7% 0.8%
Marlborough 464,593 6.8% 0.0%
Kaikoura N/A N/A N/A
Buller 189,956 1.6% 0.8%
Grey 219,069 4.9% 1.5%
Westland 250,922 5.7% 4.3%
Hurunui 390,427 5.8% 1.4%
Waimakariri 445,973 3.1% 1.3%
Christchurch 493,922 0.5% -0.2%
Christchurch - East 373,313 0.7% 0.3%
Christchurch - Hills 672,804 3.7% 0.1%
Christchurch - Central & North 580,585 0.1% -0.3%
Christchurch - Southwest 470,911 -0.1% -0.3%
Christchurch - Banks Peninsula 516,638 0.6% -0.9%
Selwyn 555,327 2.4% 1.4%
Ashburton 353,694 2.5% 0.3%
Timaru 358,746 1.9% -0.2%
MacKenzie 508,019 4.4% -2.2%
Waimate 244,199 9.8% -0.4%
Waitaki 304,354 5.7% 0.1%
Central Otago 506,927 8.4% 1.8%
Queenstown Lakes 1,169,834 8.3% -0.4%
Dunedin 420,127 10.4% 2.4%
Dunedin - Central & North 441,992 10.9% 2.9%
Dunedin - Peninsular & Coastal 378,220 9.7% -0.2%
Dunedin - South 397,407 11.7% 2.3%
Dunedin - Taieri 436,642 9.5% 3.3%
Clutha 223,282 8.7% 8.6%
Southland 271,384 6.8% -2.8%
Gore 227,847 5.1% 4.4%
Invercargill 277,379 13.4% 4.7%
Main Urban Areas 786,474 3.7% -1.1%

QV house price index

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Source: QV

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210 Comments

Seems to support the Core Logic data for my area (Auckland City - East). Not sure what’s going on in Auckland Central.

Good morning Ex Expat, Morning everybody

Aren't QV lovely with their numbers. Remember QV are not selling prices.

$1,047,415 Average value of houses untested in the Auckland market looks very different to the $853,000 median selling price reality. (NEARLY 200K DIFFERENCE)

Does everyone feel better? Now take a look at the recent Harcouts Auction results page 1 of the Auction list provided by interest, yes a few got close to GV but much of what actually sold has gone for 10-15% below 2017 GV's. And the clearance rates are abysmal still.

So if you are an Auckland property owner go to QV if you want a nice day in a fools paradise...... or if you want some reality look at the real numbers at the Auction and REINZ numbers.

https://www.interest.co.nz/property/residential-auction-results

https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2018/Residen...

Ultimately you decide what type of day you want to have.. And some music to go with the reading

https://www.youtube.com/watch?v=1XmwiwQjU8E

You do know how indexes work and why they are the preferred measure to gauge movements in real estate prices ?

What is your background ? BA like your hero's Martin North and Grant Robertson ?

Lower priced property is being off-loaded (investors selling up the worse stuff that's not yielding well at present and will be more expensive to run (i.e net yield worsening) in the near future as Labour try to make life even easier for unemployed unmotivated tenants.

Both RIENZ index and QV index take into consideration the changing mix of properties sold - So gives you a better idea of how any one house has changed in price relative to the SAME house at a prior date.

Simon,
Perhaps you need to better understand indices, also.

The QV index doesn't take into consideration changing mix. It simply assesses the transaction price against the CV. It's heavily influenced by changes in mix.

The REINZ HPI is the only index that takes into consideration changing mixes, properly.
Their median and mean indices aren't mix adjusted. Even their stratified indices are pretty crap, too.

"The QV index doesn't take into consideration changing mix. It simply assesses the transaction price against the CV. It's heavily influenced by changes in mix."

contradicted yourself right there

No.
That's constant quality. Not constant mix, period on period.

Anything else you want explained?

BTW I never said "constant mix" - by looking at and taking into consideration the RV of houses sold as the QV index does, then the wild fluctuations seen in median data due to changing mix of houses sold is largely taken care of. This assumes the RV corrects for all the specific characteristics of the house which of course it doesn't but still far far better than having no idea if a region just sold 100 low value rentals or 100 executive estates

Hi Simon

The QV average is also over $100,000 more than the September average sale price for B & T of $929,757 and more than $200,000 over their September median sale price of $835,000.

I'm sure Palmy will be fine..... actually no I don't, it will be ......ed.

Re Palmy - I cant read the table on my cell phone are you able to let me know what % price moves it has had over the year, over the last 3 months (even over the last month if you could) ? Would be greatly appreciated. Thanks buddy

Say what you will about Palmerston North, but of all the in-land towns of the lower North island, it is indeed the largest.

And no one can take that way.

Yep - Palmy is a good size and great place to live.

Property values are holding very well there.

Trouble is that good sections in preferred areas (like Hokowhitu) are hard to find.

TTP

Hokowhitu is a lovely area. A gang moved in right next to the school there recently. Just adds character to the neighbourhood!

A lot of community self reliance too. Which is good as there's usually only 10-12 coppers on the beat at any given time... and of course they cover Feilding and Ashhurst too!

Totally worth dropping half a million on a thoroughly average house for the privilege of living in the lower north islands largest inland town.

Perhaps someone with more expertise than me can comment further, but I think sales data does go into the QV index.

The large difference between average and median data is likely because the data is skewed upwards by the multi-million dollar properties, inflating the average but not affecting the median significantly. It's best to stick to a single indicator and watch trends in that, rather than trying to compare apples with oranges.

Both QV and REINZ indexes (indices for alternative spelling if you want to confuse it with indices used in basic math...) will be proprietary info (trade secret) - But the basic method looks at sale price relative to the CV - so unlike what nymad said - it explicitly considers the individual property sold and then infers that change onto all others in that region. Add in many more factors and some machine learning and you can get algorithms that are pretty accurate at inferring a change in price of house A based on a sample of actual sales.

Categorically wrong again, Simon.

The REINZ HPI and QV SPAR indices are explained in great detail by Reserve Bank working papers and various measurement literature.
There is no machine learning at all - these are very simple indices. Well, the hedonic one is a bit more complex in nature, but not by modern measurement or computational methods.

it explicitly considers the individual property sold and then infers that change onto all others in that region.
Yes, it holds quality constant period on period. Not mix. There is no correction for spatial heteroscedasticity (sorry for the big word) at all so unless the conditional variances of prices wrt to geographic and characteristic factors are exactly the same period on period, it will be biased.

I'll ask again - you want anything else explained?

Yes please - Please explain why you believe a disclosure by QV on it methodologies in 2005 has bearing on methods used today (by homes.co.nz, trademe insights etc) ? And explain further why you think sale price relative to RV is not taking into account the changing mix of houses sold.

Maybe if you keep using big words people won't notice that you don't understand how using RV of properties sold does infact take into account changing mix of houses sold, here's the Rbnz on this exact issue :

"This means that the appraised value (RV) can be used to control for quality-mix changes. In particular, if a large number of high-quality properties sell in one period and a large number of low-quality properties sell the next period, the appraisal values can be used to strip out the quality changes. Changes in the composition of sales should not distort prices, so long as assessed values are able to accurately differentiate properties of different quality."

1 -
Because if they changed it they would have to disclose it to the RBNZ, who would then need to disclose it publicly. The RBNZ uses this in their main DSGE model, so I dare say it's pretty important to them to know it's reliability.

2 -
Say in one period you have 100 houses sold (for simplicity). 70% are 2 bedroom houses, and 20% are 5 bedroom houses. 25% each come from Remuera, Onehung, Albany, and Otara, respectively.
In the next period you have 100 houses sold - 25% are 1 bedroom, 55% are 2 bedroom, and the rest 4 bedroom. 50% are sold in Ellerslie and the other 50% are in Takapuna.

The SPAR simply controls for the inflation of each period based on the most recent valuation (constant quality). That is then directly compared with the next period inflation (calc'd using same method).
However...It doesn't take a rocket scientist to realise these two conditional distributions of properties sold are fundamentally different.

P.S. Stop beating around the bush. Just agree you were wrong.

Thanks for your time - always thought rbnz used REINZ index.

1 bias I've seen with the QV index method is different regions use the GC/CV from QV to calculate rates differently - So in some places you would never put your hand up after QV come out with a new CV that's on the low side (as rates calculated based on CV not based on the land value) as it would mean paying more rates.

Other regions (like PN) - everyone tries to get their CV updated if its too low and they've wacked in a shoody DIY kitchen that they recons worth 50k - Why? Because some councils only use Land Value to apportion rates, and when you ask for QV to revalue they only ever increase the 'Improvement value' , land value stays the same - so you get a higher CV without paying higher rates.

So what? Well as we know the QV index uses sale price to CV to infer changing prices across all properties in that region - If everyone tries to squeeze their CV up in one region, then the gap between sales price and CV is reduced - and overall index increase for that region is lowered.

Other regions where an increase CV (by asking for QV to redo them) means more rates paid - so less people do it - so you get more instances where a house has been reno'd and sold well above CV and has a larger impact on QV index compared to the same house being sold that had asked for their CV to be re-assessed and so the gap between sale price and CV would be smaller - leading to an overall inference that prices are up by a lesser amount.

Just come inconsistency that always annoyed me about the QV system.

Some info on QV index (uses the SPAR method to consider the changing mix of properties sold):

"Sales-Price to Appraisal Ratio (SPAR)
The SPAR methodology for producing a house price index is based on the idea that the
appraised value of a house contains useful property-specific information. This means that the
appraised value can be used to control for quality-mix changes. In particular, if a large number
of high-quality properties sell in one period and a large number of low-quality properties sell
the next period, the appraisal values can be used to strip out the quality changes. Changes in
the composition of sales should not distort prices, so long as assessed values are able to
accurately differentiate properties of different quality.
Formally, the SPAR is an arithmetic repeat index, which uses the appraisal value as the first
measure in each pair, and the sales price as the second measure in each pair (Bourassa et al,
2004).
The advantage of using official appraised values as the first measure in the pair is that
appraisals for a geographic location are typically conducted on the same date, meaning that
properties will have a common base period for comparison purposes. This simplifies the
calculation of the index because it removes the need for an estimation technique (Bourassa et
al, 2004). As such, the SPAR index is calculated directly as the mean of the ratio of sale price
to appraised value in each geographic location at each point in time.
In New Zealand, councils rely on an assessed value called the Rateable Value (RV) for local
government taxation. The database of RVs has long been used by CoreLogic (formerly
Quotable Value) to compute a SPAR index for New Zealand. The SPAR methodology is also
becoming increasingly popular overseas, and is used in Denmark, the Netherlands, and
Sweden (Eurostat, 2013)."

source: https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Analytic...

As I said, composition of properties will only not distort prices in the case that the conditional distributions of the two index periods are the same. The logic here is that in an asymptotic sense the two distributions converge. That's only applicable in large sample analysis, however - hence why we only get QV indices at 3 month intervals.
To reiterate, QV make no correction for this - they simply rely on the asymptotic properties of large samples to argue that the bias doesn't exist.

Also, the valuation method is the most important aspect of the SPAR. Given that these often lack appropriate adjustment for geospatial dependence, this erodes their efficiency. Simply estimating the SPAR by TA and aggregating up from this doesn't properly correct the bias - which is one of the methods. As you also say, the assumption is that the valuation is accurate for the condition of the house, which isn't always a valid assumption.

The closest thing we have to a true constant quality and mix index is the REINZ HPI. The RBNZ did the work on this and I gave comments on the paper at the time. You can look up the paper and see the differences between the hedonic methods and the SPAR approach - they were marginally different. That difference comes from the bias from inaccurate valuation and changing transaction price distribution inherent in the SPAR method.

This is probably getting a bit complex for the thread now, however.

up
15

must be a mistake. I was told many times 'Auckland prices never go down'...

Can you direct me to any person, any time, any place that has said Auckland prices never go down?

up
19

You must be going to the wrong dinner parties/share parties - oh sorry that was '86.

I would say it is fair to say, a large percentage of Auckland home owners believe that their houses will only ever increase in value. Using language like property ladder, getting on the ladder, trading up etc etc.. Freudian
I also think a lot of Auckland home owners bank on Capital gains, Ive heard people say this when having discussions about 2 - 3% returns (even on commercial property) - "oh but that doesn't account for capital gains " - I just pick my jaw up off the floor and walk on.

Great, if it’s so common I’m sure there will be no problem in pointing me to just one single example of it. I look forward to the response.

Pretty sad that the last time you went to a party was ‘86.

It's a bit like the spruikers referencing how there are all these DGMs predicting a crash.

Most of the commentators on this website who think who prices are overvalued, and will probably fall, are predicting a moderate decrease, not Armageddon.

Spruikers "house prices never fall"
DGMs "OMG the market's gonna crash"

I'd call the two memes a draw.

OK, it's taken me all of 2 minutes to find three examples of DGMs predicting a crash. Can you please find me just one example of a spruiker claiming that property prices never fall?

by Ocelot | Thu, 17/05/2018 - 10:39 ”Hopefully the crash is decent and I can get a home at a reasonable price.” https://www.interest.co.nz/opinion/93763/john-mauldin-begins-delve-what-...

by theglc | Tue, 24/07/2018 - 08:43 “The market is heading for a crash, buyers should hold on to their cash and buy when the market has corrected.” https://www.interest.co.nz/property/94928/real-estate-industry-estimated...

by rastus | Tue, 24/07/2018 - 10:42 “Waiting for a crash is not an act of desperation. It is an inevitable outcome following money printing and ultra low interest rates.” https://www.interest.co.nz/property/94928/real-estate-industry-estimated...

Just a casual observer here, but I don't think it's been said on here much over the last couple of years, since the market flattened. Going back 3-4 years, I remember it being a pretty common sentiment. I'm not going to trawl through the site to find the quotes though, unfortunately I have work to do.

That may be the impression you have, but you won’t find such a comment now or then, on this site and probably any other. Most people labelled “spruikers” have a view something along the lines of - Auckland property prices go up and down, but the long run trend is very likely to be positive, as has been the case since records began.

I remember back in the boom attempting to get others on here to at least acknowledge the potential of a drop in prices as a possibility, and failing. The sentiment that the boom would go on indefinitely was very common on here back then. Like I said, I don't have time to trawl so we'll have to agree to disagree.

Property prices dropped as recently as 2008, everyone knows that. No one thinks property never goes down because home owners arnt children, they have literally seen it go down on a number of occasions... They think it will rise in the long term and that is all most care about.

As an independent observer living outside NZ & owning no Kiwi property I confirm that I read here on this fine site Zachary DubleGZ etc brag for years that Auckland houses in the leafy central Auckland suburbs would keep going up in value
Never was there any talk of any drastic decline in values
I know this because I wasted my time informing these two central city office workers that indeed property can drop in price regardless of the high immigration they continued to use as their argument for increasing values

BLSH, it took me three minutes to find this classic;

Posted by TTP "flip flopper", Thu, 02/03/2017 - 12:00; "-5 to -10% per annum over the next 3-4 years in Auckland's house prices would be a "soft landing". Agree with you it's not a "massive crash".

https://www.interest.co.nz/property/86271/property-pendulum-swings-more-...

Jeepers, if a 20-40% overall decline isn't a crash, here's hoping we don't have one!

"please find me just one example of a spruiker claiming that property prices never fall?"
OK.

Ashley Church, regularly and consistently, talks about the "Housing Cycle" in the following way:

"goes up for 5-6 years, it flattens off, it stays flat for a 3-4 year period, and then it goes up again"

Zero reference to underlying macro-economic drivers.
He's still running that exact line - says that the outlook is flat for "3-4 years"....
...Then "aaaahhhrr in broad terms I'd be picking that for Auckland, 2020, maybe early 2021, will be the point where we start to pick the market up again... and then it will start to do what it *always does* which is make its way up again... where prices will roughly *double in value*"

He never references credit cycles, or ever mentions downside risk to prices, the record household debt in our major trading partners (Australia & China), the record household debt in NZ.

He just extrapolates, what he sees as, the historical "cycle" (except the word 'down' doesn't feature in his cycle)
Prices will continue to outstrip incomes.
Free wheeling access to leverage will continue with no question about how this will be serviced by the productive sector of the economy.

His entire "investment" philosophy simply relies on his version of history repeating itself.

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

Very informative seminar here - you could learn a thing or two

https://www.youtube.com/watch?v=0pfbLdp1tlA&t=2006s

Very informative?

The caption says everything I just said about the guy's belief in the perpetual upward motion of the housing cycle:
"explains why we should look to the past to understand what will happen to investment property in the future..."

That, in a nutshell, is what he believes.
The ultimate investment fallacy.
"Past performance is no guarantee of future results."
He commits this fallacy time-and-time-and-time again.

If you made the same claim about any other asset class you would have the FMA hunting you down.

Learning from the past is actually a pretty good idea. Maybe this has something to do with the fact that Church is a multimillionaire CEO, while you one the other hand are a keyboard warrior (I know, pot, kettle, black).

Also, he regularly points out that property values go up and down (frequently using the analogy of the teeth of a saw). He's also correct that the market tends to plateau instead of crash, with the long run trend being positive.

I shall keep this thread to show to others to explain hindsight bias and lack of risk management understanding

up
10

You have no idea about my personal situation.

I'm an executive in one of NZ's largest companies, a Chartered Accountant, a CFA Charterholder and I own my own home.

Equally, you have no way of knowing if Ashley is a "multimillionaire" and, sure, he's a CEO of a tinpot little institute. Big deal.
Aside from his job title, he has no formal qualifications in economics or finance that make him an expert on these matters.

I didn’t make any claims about your personal situation, so spare me your life story. I simply pointed out that you are a keyboard warrior.

Don't backtrack.
You made out like Ashley's unsubstantiated wealth & title make him far more qualified than me.

You're wrong.

cmat, thumbs up to your posts!

Are you a multimillionaire CEO?

I told you what I am.

Is there a reason this is descending into ad hominem?
Presumably the fact you've run out of an argument.

You wanted an example of a brain-dead spruiker and I gave you what you asked for.

And picked up another one for free!

So the the answer is no. Ashley Church, on the other hand, is. You are a keyboard warrior as evidenced by our little exchange (again, pot, kettle, black). I’m not backtracking- I stand by my statements.

Ad hominem? You mean like calling me a “brain dead”? That’s ok, my skin is thick enough not to care. You on the other hand seem so be quite sensitive as my mild jab has upset you. I suggest you toughen up poppet.

It is interesting that they are so sensitive. I think the "always goes up" mantra should be qualified by including "over a long period of time". I know what I am talking about because I am a typewriter mechanic born in the right place and time.

should be qualified by including "over a long period of time".

Fair enough - but that never features in Ashley Church's version of the cycle.
It goes something like this:

3-4yrs Flat
5-6yrs Value Doubles
Repeat.

Demonstrably false - 05:03 "it's a bit like a serrated sword, its going up and down, but the general trend is upward" (Ashley Church)

https://youtu.be/qTHdEwszJiY?t=304

OK, stand by your statements that Ashley is a genius for being CEO of a tinpot institute that has 6 employees and a cat.

I was talking about Ashley's arguments on the housing cycle being brain-dead.
Not you...
Unless you are, in fact, Ashley - then your arguments are brain-dead.

I didn't call him a genius.

I asked for an example of a spruiker saying that property prices never go down. Ashley Church certainly has not said that property prices never go down. He has said that they go up and down like the teeth of a saw, but the long run trend has been up, and this is very likely to be the case in the long run, which is true.

https://youtu.be/qTHdEwszJiY?t=304

And sorry to break it to you buddy, but I’m not impressed that you’re an accountant (I see you edited your comment after the fact to include that). You say that as if it has the prestige of a heart surgeon and makes you some sort of expert on the housing market. You’re obviously very proud though.

BLSH, cmat knows his/her stuff. You clearly struggle when commentators rob you of sound responses. Take it on the chin and move on :)

Is taking it on the chin still part of Labour policy?

I'm more proud of my CFA Charter (which is the finance equivalent of a heart surgeon).

But meh, didnt expect you to appreciate that.

This is the most interesting data in this presentation

https://youtu.be/0pfbLdp1tlA?t=27m22s

Occupants per dwelling over time for NZ.
It has fallen from 3.29 to 2.87 - it has reduced by roughly 13% from 1986 to 2013.
This should change based on the affordability of housing to rent and to own.

If the cost of renting or ownership is too high, then the occupants per dwelling would likely increase. This could happen if there was a significant economic downturn in NZ. When there is significant unemployment, the number of people per dwelling can be expected to increase, as these people group together to reduce their housing costs - this happened in the US during the GFC.

Housing shortages are based on an assumed occupants per dwelling and the smallest change in this assumption can lead to what is a shortage of housing to an excess.

For example, as at 2018, in Auckland there is a population of 1,656,600 and residential dwellings of 554,100, which is 2.99 occupants per dwelling. Refer https://www.aucklandcouncil.govt.nz/plans-projects-policies-reports-byla...

Now it is reported that Auckland has a shortfall of 44,738 residential dwellings. Refer https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119...

So that would mean a total of 598,838 residential dwellings. (44,738 + 554,100 above). Given the population of 1,656,600, this would imply occupants per dwelling of 2.77.

What is the right number of occupants per dwelling? If that number is changed to 3.14 (a 5% change from current levels, and near 1991 levels), then that would mean Auckland has a surplus in residential dwellings by over 26,000.

Regardless of whether there is a shortage or surplus of residential dwellings in Auckland (you can make your own assumption on the number of occupants per dwelling in the above calculation), there is a real shortage of affordable housing in Auckland.

Housing shortages are based on an assumed occupants per dwelling and the smallest change in this assumption can lead to what is a shortage of housing to an excess.

Indeed, and I do wonder if the people screaming that we are XX,000 houses short have accounted for the difference in attitudes of the immigrants that have arrived. It is far more common for people from some of the cultures that have arrived in great numbers to have multiple generations living in one house, and this increases the occupancy numbers rather significantly.

As an Example, my neighbours. The daughter, Mum, Dad, 2 grandparents, and a Homestay student or two (varies) in what the council website believes is a 4 bedroom home. Would this change significantly if they were owners as opposed to renters? I don't think so, the homestay students might go, but the family itself would probably stay together in the one house.

As opposed to myself and my partner in a 3 bedroom home, also renting. It would take a serious change in our financial position for us to share the house with anyone, family or not, we like our space, and in European NZ culture, there is certainly a bit of a stigma associated with being post tertiary age and still living with family.

The crisis is mostly affordability, although with the shear amount of immigration there may in fact be some shortage of houses.

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My other favourite he repeats endlessly is "if an investor sells, that's one less house available for a tenant".

It's a whole new level of stupid. Everyone knows if a house is sold it's either to another investor (no change) or an owner occupier (renter becomes owner). He lives in a universe where if an investor sells the property moves into another dimension where it can no longer be lived in.

This is a complete misrepresentation of his point. The number of occupants per dwelling is lower, on average, for owner occupant houses than it is for rentals. So, a landlord selling to an owner occupier represents a net reduction in the availability of rooms to rent.

If you look at the simple stats then sure. Housing demographics are not that simple though, there's a thing called stages in life.

How many people aged 18 - 24 who are just joining the workforce or starting tertiary study are ready to buy a house?
How many people aged 25+ who may be in a long term relationship and planning on starting a family want to fill all the rooms in their rental with flatmates?

It's not a net reduction at all, the rooms aren't going anywhere!!!! The Owner Occupier could have been that couple in a long term relationship, renting a 3 bedroom place with 2 empty bedrooms while they muster up a deposit for their house purchase. Not every renter is obliged to fill every single bedroom in the property.

... could have been that couple in a long term relationship, renting a 3 bedroom place with 2 empty bedrooms while they muster up a deposit for their house purchase. Not every renter is obliged to fill every single bedroom in the property.

*raises hand*

Don't bother Dan, its one of the legs of his worldview that property can't lose, it's not in his interest to understand that the reason owner occupier properties have less overall occupancy is the number of empty nesters floating around in the 3 or 4 bedroom family home long after the kids have gone, and like my grandmother, even after the other partner has departed. 22 years of living alone in a 3 bedroom home after my grandfather passed away. She's not leaving that house unless its horizontally, and at 94 she's still got a few years in her by the looks of it.
Meanwhile young couples in their thirties don't change the figures much as they move from living as a couple with or without kids in a rented house to a place they buy. In my experience there are only a few that move from living as a couple in a shared flatting situation directly to owner occupier living by themselves, and I can't recall a single instance of a couple with kids living in shared flatting situation. Once kids are on the scene they always seem to want a house of their own.. whether renting or buying.

The rooms aren’t going anywhere, but the data shows that any given room in an owner occupied house is more likely to be vacant than if it were a rental, because occupancy rates are simply lower for owner occupied houses on average.

An average 2.1 people live in owner occupied housing in New Zealand, but there is an average 3.9 people per rental property. Every time a rental property is sold to an owner occupier, on average 1.8 tenants still need a home to rent.

Sweet, now I have a thread as an example of sample bias

OK, maybe come to the table with some evidence next time and I'll give you the time of day, sunshine.

NZ Population - 4,693,000
Private Dwelling Estimates - 1,849,000

Durr there's 2.5 people per house.

http://archive.stats.govt.nz/browse_for_stats/population/estimates_and_p...

The overall occupancy rate for all houses is the average of owner occupied houses (lower than average) and rentals (higher than average). This works out to something in the middle - in the order of 2.5 - 2.7.

Feel free to cite some sources, otherwise I feel like you're just making stuff up as you go along.

How's about this article where the 10 years to 2016 has shown a sharp increase in the number of people renting. I don't think there was an issue in 2006 with proportionately more Owner Occupiers displacing renters, was there?

https://www.interest.co.nz/property/80957/numbers-households-renting-25-...

Dude, I'm beginning to think you're totally missing what I'm saying here.

It is census and other survey data, but here are a couple of sources that comment on it (I hate The Spinoff) -

See section 3.1.2 - https://www.branz.co.nz/cms_show_download.php?id=a1efff0a2fd9885ecf878ce...

https://thespinoff.co.nz/business/01-03-2018/pushing-landlords-out-will-...

It's cool, i get it, I've seen the 2013 Census data on the stats.govt.nz page. Was toying with you because earlier you suggested someone provide evidence and i hadn't seen you cite your sources.

Anyway, the problem with the data is it's aggregate, there's not enough detail. Even providing data on owner occupier vs renters ages would provide a clearer picture.

So how and why specifically would you expect the renter households being displaced and new owner occupiers that replace them to deviate from the average occupancy? Just seems like clutching at straws to me.

Not clutching at anything. I guess nobody should be first home buyers because tenants will be on the street.

My personal anecdote we bought a rental with 1 person in it and now we have 3 in an owner occupied property. That surely cannot be!!!

And also control for other confounding variables like age, income and location to give a true picture. The burden of proof lies with the maker of the claim.

The average isn't necessarily relevant as it's not an average renter turning into an average owner-occupier. It's the marginal renter who can afford to buy, and the marginal owner-occupier who has just bought their first house that you want to compare.

I don't have the data and I'm not sure it exists, my suspicion is that the answer is somewhere in the middle - it will have an impact on housing availability but not as much as the raw averages suggest.

Similar to our earlier discussion, we’ll have to agree to disagree unless you can show me some sort of evidence to back this claim up.

That is a profoundly stupid statement.

Almost as stupid as the forecasts made by the person at the center of this argument's argument; Ashley Church.

Care to elaborate on why it is a profoundly stupid statement?

As for Ashley Church's predictions - he (with the assistance of his colleges at the Property Institute) published a number of predictions at the beginning of 2017. Turns out 100% were correct.

http://www.scoop.co.nz/stories/BU1712/S00681/property-institute-hits-100...

Although technically correct, it's a stupid thing to base your argument on.

Because...Rental and ownership markets are two separate things and it ignores the distribution of the occupancies of the those two accommodation types.

From your link...
"1. The Prediction: Longer term mortgage interest rates will rise"
Is that one still true?

"2. The Prediction: House prices will keep rising"
Well, again, that one is pretty debatable given the numbers...

"5. The Prediction: The cost of renting will start to rise"
They use their own 'survey' data to validate this one - why wouldn't they use MPI data?

"technically correct" - my favorite kind of correct.

As in it is technically correct for a 5th form high school stats exam.
If that's the level you aspire to, good for you.

FYI, Ashley Church believes that property prices in Auckland will "roughly double in value" ...

https://youtu.be/qTHdEwszJiY?t=4m27s

He is looking at historical prices since 1980, so a period of 38 years or so.

The issue is that Auckland house prices are currently a function of a super cycle of credit which occurs over a 60-100 year period where there is potential for a massive deleveraging.

The other issue is not taking into account the background inflation over those years compared with today.

Wasn't it, if you bought a house in 1970 by 1979 it's effectively doubled in value along with average wages. We don't often hear about it because everyone's so vocal about 10% interest rates on their mortgages.

Hi CN

I believe that Mr Ashley Church starts his predictions from 1980 because if he goes back to 1975 he has to include a 38% crash in New Zealand House Prices that took place between 1975 and 1980....... it doesn't fit the narrative for brainwashing!

Nic

https://youtu.be/0pfbLdp1tlA?t=1341

He actually mentions it quite often...

Note that the drop he refers to is in inflation adjusted terms (aka "real" house price). This is due to inflation being much higher than house price increases. So much for the commonly used argument that house prices keep up with inflation.

They didn't drop at all in nominal price terms.

Refer Fig 3 & 4 of the RBNZ study
https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletin...

CMAT
Absolutely correct the spruikers here along with the people who think they are clever never talk about the consequences of the next GFC or GFC2 or the fact that so much of Auckland is now owned by Chinese bank lenders who can squeeze their clients to pay more interest or simply sell up.
This is the first Auckland property boom that the Chinese played a large part in and continue to play a large part in the action.
This is not like anything before at all

Fish are biting this morning.

I think Tony Alexander has been close enough to say they and won't go down. At least not meaningfully

It's oscillating, stabilising and taking a breather.

So does that mean it's floundering in the washing machine and gasping for breath before it goes under again weighed down by all the overleveraged?

Auckland House Price Change: March 2009 - June 2018 = + 93.0%

Auckland House Price Change: June 2018 - September 2018 = - 0.7%

A 3 month fall of 0.7% is tiny compared with the 93% gain over the preceding 9.25 years......

That's further evidence of the resilience of the Auckland housing market.

Finally, note the last paragraph of the commentary, which reads:

"With the current low interest rates set to remain until well into 2020, it's hard to see any dramatic changes to values outside of the usual seasonal fluctuations."

That's my view too.

TTP

Well that shows how your brain functions doesn't it.

When the market starts reversing, it is no longer resilient.

4 months of declines in a row is certainly more than a blip and is starting to be a trend.

The much talked about tanking Australian market has only been in decline for 12 months.

As for the last paragraph, it will mean nothing if inventories keep rising and sales stay as low as they have been.

Sure for those who bought in 2009 have nothing to panic about however there were a fair chunk of people who have purchased since 2016 who may be feeling slightly different

Agreed. There is a house for sale (price by neg.) that was bought for $1.2 mill in early 2017. The RV is $1.1mil. Not going to be easy for them to get their money back as they paid WAY TOO MUCH for a 3 bed 1 bath in Howick.

I've seen a few others with the same issue.

Hi thegic,

"4 months of declines in a row is certainly more than a blip and is starting to be a trend."

What utter nonsense......

For a start, did you just conveniently forget that those 4 months happened to be the winter months?

And a fall of 0.7% is minuscule - often within the margin of error.

Sorry thegic - but you won't get far trying to pull the wool over my eyes......

TTP

Three more weeks!

Pulling the wool over your eyes would be of little use, as you are blinded by your own beliefs.

BTW there is only 3 months in winter, but feel free to keep the excuses coming!

Keep trying thegic......

Most people are well aware that the data covers the winter months - and that there are seasonal differences in the housing market.

You need to lift your game........

TTP

I would ask you for evidence but I know you wouldn't be able to supply any.

So the last time the 3 winter months has consecutive declines was ......

2002!!!!!

It seems 4 consecutive declines even including winter months is somewhat of a rarity

You're welcome !!!!

Hi thegic,

Sorry - but you mislead.

A decline of - 0.7% is trifling. Only a midguided person would read much into it (especially when the year-on-year figure remains positive). Further, the latest REINZ statistics show growth in Auckland prices.

TTP

To you 0.7% may seem minuscule!

Auckland property market is values at $469 Billion

A drop of 0.7% is just $3.28 Billion shave off without even noticing

Its only just begun too, once is passes 10% it will be $47 Billion and into negative equity for many, will you brush that off too?

Hi thegic,

You write, "A drop of 0.7% is just $3.28 Billion shave off without even noticing"

That means $465.72 BILLION remains intact.

Suggest you do a course in basic numeracy.

By the way, we could be in for an early summer.....

TTP

Add: continuing very high - albeit slowing - levels of immigration by historic standards to that as further support for the Auckland market.

As this data is for a three month period, the 0.7 drop will include an element of the seasonal variation mentioned.

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A friendly tip on statistics, which you may or may not be aware of TTP. A percentage point increase isn't the same dollar amount as a percentage point decrease (at least compared to the base they are usually measured off).

Example:

Houses initially cost $500k and following a 100% increase in value now cost $1,000k. Then, houses experience a 20% fall in value, and are now worth $800k. Prices have gone down by a fifth, but the house owner has lost two fifths of their gain.

Putting it simply, if houses go up 100%, they need to lose 50% to be back where they started.

You might already be aware of this but it could be misleading for someone who isn't.

Zombie, please don't confuse poor tothepoint. He is having enough trouble getting his head around the difference between up and down.

Really highlights the absurdity of not taxing capital gains over that period and dropping income taxes to match, doesn't it? All that free money off the back of government-boosted housing supply from the 1950s-90s.

Think of how much incredibly valuable infrastructure, schools and hospitals a cgt over that period could have funded

Tothepointed
My home went up 150% from 2006 to 2015 over 9 yrs but do not expect that result to be an ongoing reoccurrence
Another rental I owned from 1989 to 2000 over 11 yrs only increased in value by 66%
The Chinese speculation added to local speculation with extended period of low mortgage rates along with exceptionally high multi year immigration levels are the factors that have conspired to create the bubble this time. If the economy slides expect lots of failures including in the property market

God giveth, Greg taketh.

Auckland up 0.8% year on year. Flat as a slightly wonky pancake.

The market is flat as I predicted. Will be for a couple of years. The first sign of any falls gets the DGM's all excited but its still up on YTD. Has to be one of the wettest winters ever, was horrible to try and sell your house. All it will take is a decent summer and its business as usual. Sorry nothing to see here folks.

Wettest winter ever really ?
Must’ve been fun on congested roads

versus inflation of 2.0%

Wrong - inflation is 1.5% currently. And inflation eats away at debt, so great.

Regardless, house prices are going backwards relative to the cost of money. You would be better off investing elsewhere as the many new listings are proving.

Like the nzx50, up around 17% yoy. Not quite as tax advantageous though. . .

.

In context what's been amazing isn't house price growth or it's rate, which are historically normal. Growth seems extraordinary because that growth has taken place at a time of very low inflation rates and stagnant wages.

Even if nominal prices are flat, the appropriate background context is long term wage growth.

good comment... I'd add that the "appropriate background context" is longterm wage growth + interest rates.
av. med wage in 2008 was $730 vs $997 in 2018... thats a 32% increase
Mortgage rate in 2008 9.5% (2yr fixed) and in 2018 4.7%..

All this is reflected in this chart... ( just this chart , alone, suggests there is NO crash coming , in my view )
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt

Roelof, in the context of things happening locally, there is no crash imminent. With eyes wide open, can you say the same thing in the wider global context to which we are connected? I doubt it.

RP... In the wider global context... who knows...??? I think a crash and meltdown is improbable ... just yet.
I base that comment on my observation that the 2 most powerful economic forces are Central Banks + Govt..
Any hint of a downturn or trouble and they will open the floodgates.. The GFC is still to fresh in our memories and there is now a mandate for unconventional Monetary policy.. and also Govt deficit spending and accommodative tax ( fiscal policy ).
I can see a mild global recession coming.... but not , just yet, the Global meltdown we are all expecting...??

This is all just my ..."best guessing"... to be changed in an instant as life unfolds...

Oh what a relief
I’ll inform the CFO tomorrow Roelof thinks the central banks will “Open the floodgates” with more of the same
Will not work in economy’s already swamped with cheap money
Up here we have over $1 Trillion just in student loan debt with much of it in arrears and that’s just one debt bubble
The Federal Reserve is taking a cautious approach increasing rates but there is no agreed consensus on what will work when the dam breaks this time around
Old saying Prepare for the worst

Roelef try buying a home on the median wage,anywhere in New Zealand , let alone the urban areas.

Cowpat.... I now perceive the econ0my as being 2 levels... Top 40% and bottom 60%.
Aggregate statistics are now less meaningful , unless one considers a 2 level economy.

Like Dalio, I believe this has become the social issue of our lifetime.... and might well lead to social unrest/tensions... violence...etc..
I agree with what u are alluding too about affordable house prices,... However , the reality is that the top 40% are earning good money and can afford to purchase assets... in my view..

https://www.linkedin.com/pulse/our-biggest-economic-social-political-iss...

As predicted by those with their eyes open, the "leafy" are falling in spring. Foreign based buyers ban rush also a non event. The spruikers here are looking foolish.

Auckland City up 0.7% for the year. Without the valiant efforts of the spruikers we could be staring in the face of a 5-10% decline. Auckland City is under siege yet we have held our ground. We have made it through the dark winter months relatively unscathed, now it is spring, which usually works in our favour.

Ha-ha-ha-ha! Zachary, if spruikers efforts is all that's holding it together, God help us.....

Dr Smith and BHSL on the front line, DGZ mortally wounded and captured by the enemy. Stay tuned!

Not necessarily, Retired Poppy [i.e. Nic Johnson].

HOUSES in the "leafy" areas are actually holding their prices well.

BUT, the data combines houses with apartments.

Separate the houses from the apartments and the message is that house prices are holding firmer than apartment prices. Thus, apartments have the effect of pulling back the average price (of apartments and houses combined).

Retired Poppy - you ought to know better than to take everything at face value. You've been coming here long enough - yet you've been caught out on this before.

TTP

TTP's getting impatient as hes now cornered by his own predictions.....Again, thanks for the compliment :) Keep em com'n!

"Separate the houses from the apartments and the message is that house prices are holding firmer than apartment prices"

Any evidence to support that statement?

TTP,
Search for all the listed properties in leafy areas (say St. heliers, Glendowie, etc.) with asking price and compare that with their CVs, you'd get an idea. Just for an example, 100K or 200K below is CV is pretty normal. A recent sale: 2/19A Waimerie Street: CV is 1020K, sold for 900K after six months on the market :)

Investors are selling to cash up and be ready to strike when market bottoms out, which would be about a year or two from now.

Cheers.

I don't think that house is a very typical example. Pretty good price really.

https://www.barfoot.co.nz/754972

Rather than relitigate the same debates I will say simply - this time its different.

If I was a property investor I’d sell up or prepare to hold on for 10 years. As long as you do one of those you’ll be ok. But if you get caught in the middle things will get dark.

It's a global trend. Now there is a crackdown in money laundering in the developed countries the dirty money has dried up. When is NZ going to introduce "Unexplained Wealth Orders" and start freezing the assets of all the shonkey money that is sitting in NZ property?

This is worth a read. Needs to happen over here...

https://www.bbc.com/news/world-44954587

Makes sense. Houses in Auckland might still make sense as an investment, but as a family home for a FHB that wants a good career? They're terrible value.

After inflation is taken into account, it looks like house prices are flat, maybe slightly declining. Certainly nothing to get excited/panicked about.

How I work it out is like this:
Base value should return 4% (similar to term deposit but with tax advantages)
So a house that cost 575k should earn around 24k in rent (460 a week)
However there is a premium on top of that because it is better to own than rent.
The value of that premium could be 100k. What someone is more than willing to pay for security of tenure.
So a house in West Auckland, for example, that returns 460 a week in rent could be "worth" 675k
That 100k premium is what gains in value.

I see value in that approach.

However, how many West Auckland Properties are $575k? They are mostly $800k+, which means gross rent needs to be $615 p/w and that's forgetting rates, insurance, maintenance, any down period.

While security of tenure may well have a dollar figure attached to it, the point of tenancy law changes is to aid security of tenure, because secure safe housing is a human need. Of course, I understand that non-professional landlords (those who just got one property for capital gains) balk at this, but it does seem fair to protect tenants in the same way employment law largely protects employees, given the balance of power. Of course, there should be stricter recourse on damage done. But I digress.

While we're on it, if there is a premium added to the value because owning is better, there should also be a premium added to term deposits, because being able to pull some of the money out with ease is also better than having to sell a house. Plus, when you sell said house, the exit costs (REA etc) are reasonably high. You'd pay 5% of the price, which in Auckland right now would put recent buyers in a hole.

There are numerous two bedroom places for under 600k. Here is a three bedroom listed for 629k:

https://www.trademe.co.nz/property/residential-property-for-sale/auction...

There's also these things called "index funds", which are similarly high risk/high reward and require no maintenance, tenants, or real estate agents.

Head in the sand stuff. Politicians have now realised they won't get re-elected if house prices continue to spiral out of control as it creates inequality and leads to populism.

Jacinda said (and then backtracked) she wanted house prices to halve. Over time they want house prices back towards 5× earnings but will do it over many years. Needs to be mean reversion.
We are in a new era and some people need to get their head round that.

We are not in a "new era".
Politicians will say anything to get elected.

Wait and see. The glory years have gone and investment needs to be encouraged in industry( tourism in particular) not houses.

First off, there's no 'should return' with volatile assets like shares or housing. The Auckland housing boom of the past 10 years was much higher than that. And who knows what a crash could be.

Second off 24k in rent... then there's maintenance, vetting tenants, inspections, organising repairs, periods of vacancy, advertising... and worst case scenario tenancy tribunals, and badly damaged property.

Let's be generous and call that 12k after all is said and done. Unless your time has little monetary value and you are on a fairly mediocre salary/wage - that's nothing impressive.

So, it makes sense if you're on a bad salary, have family money (so you can afford an investment property on your salary), and you're optimistic about the market (and able to weather the storms). Best case scenarios.

For everyone else? Doesn't make much sense.

saving4AUhouse, how much do you think a house should cost that returned 24k gross a year?

The example you gave was a price-to-rent ratio of almost 24. 16-20 is usually considered the sane area (though still preferable to rent). So about 385K would be considered the border line between better to buy and better to rent.

12k is a garbage yield for a 575k investment. Had you put that all in the NZX50, your yield would have been close to 100k over the last year. And that's without doing any work at all.

Auckland is linked to the international market and property prices are falling in Melbourne, Sydney, New York, London and even Hong Kong looks to be falling.
I expect very dull returns from property over the next decade.

If house prices start to fall than lower interest rates will create a floor in the market....see lenders lowering rates. Money in the bank is hopeless. All asset classes have gone up too quickly and hopefully there won't be a credit crunch anytime soon....hang on as storm clouds are brewing.

Ship of fools. Find a way to hold your rental millstones on s ten year fixed mortgage. Budget it very carefully. Interest rates are only going one way longterm.
https://www.forbes.com/sites/johnkosar/2018/10/01/get-ready-for-a-big-in...

Someone please explain to me how the FED rate impacts on our OCR? I'm a bit simple with this stuff. Why would the OCR go up if the FED is going up?

Likewise, this stuff is a bit above me, but i believe it goes something like this:

Fed raises rates, investors can get a better return on US investments, so people sell NZD to buy USD to invest in US. This pushes value of NZD down, which pushes up inflation, to counter that RB raises our interest rates.

If thats wrong someone will be along shortly to correct it.

You've got it right there.

NZ is reliant upon foreign investors, so foreign investors in NZ will flock to areas where there are higher returns and hence sell NZD to buy USD. The key areas areas of hot / vulnerable money flows are to buy NZD denominated assets, particularly portfolio investments which are bonds (government, corporate), shares, money market securities, bank deposits, etc. (Foreign direct investment aka "FDI" into residential real estate, commercial real estate, businesses, etc are stickier)

If NZ was not reliant upon foreign investors, then this would have a decreased impact.

If you take a look at the balance of payments, foreign investors have funded NZ's current account deficit (where NZ'ers as a whole spend more USD than they do earn - hence the deficit) for many years. The short fall in USD is made up from foreign investors putting money into NZ.

It's to do with the banks funding. When a bank lends you money for a mortgage they have to also borrow money to give you the money. Historically the local banks have had to go to the international markets to get this. Dependence on this has dropped over the years but is still a factor.
In Australia the mortgage rates have gone up because the the USD interest rate going up-despite their base rates staying the same.

The cost of borrowing is going up globally and it will eventually feed through to NZ. Probably in about a 9-12 months time.
It is a global financial market.

This potentially impacts bank mortgage rates, but not the OCR.

Yeah i get that part, but if the banks only source about 16% of their funding from overseas then the impact should be fairly minimal. Let's say it adds 2% to their cost of borrowing, it's only really 0.3% across the board.

I guess the weakening NZ Dollar will compound this though, e.g. a 1% rise in wholesale rates coupled with a 10% drop in the NZD.

"Market" means a little more than "prices."
It means buying and selling too.
Sales in Auckland are 40% below 2004 and 28% below 2013, on an annualised basis.
Section sales and apartment sales in last 2.5 months especially have held up the market in sales terms.
OBB will stop that.
OBB will show up with disappointing sale sin Spring quarter, as forward buying form future sales has finished.
Auckland "market" in house price terms is distorted cf rest of country by wealth distribution selected in multi-house ownership, and multi-rented out ownership.
This in turn is reflected in fact that 74% of all housing tenures sold are subsequently rented out.
Lending by banks in last 12 months is flat compared to previous 12 months acc to RBNZ.
That is why banks are cutting rates, not because the fatuous 10 year rate and market funding costs are down.
Crash doe snot mean one quarter, it refers to a 3-4 year reduction in prices and sales and prices follow down on drop in demand, which has already been existent sine top in sales and price rises in September 2016.
All of this coincided with push in Chinese overseas capital flows and low petrol prices and high immigration. All 3 are now reversing. Add OBB and you have your answer to where cycle is.
Prices in Aukland, for median 3 bed and median 4 bed, outside of Rodney HC, will continue to fall for another year at least and finish 20% below top of 2016.
If developers in Rodney expansion get burned and start fire sales, you can add another unknown quotient to that.

We are in Rodney and the prices are stable. You kind of forgot to mention the new motorway extension so when that is complete in 2 years expect prices to start rising again. The housing spread North will continue for those that want a better lifestyle out of the burbs.

There are 100's of thousands of hectares of undeveloped cheap land available in Rodney. Prices are set by cost of building, why would they rise?

Auckland Council is pushing for lots of new housing to be built in Rodney and a large number of new jobs. The value of housing in Rodney is likely to be more resilient than most, because Auckland City is subsidising large scale development of the area.

Mate whens the last time you tried to buy land up here ? I can tell you that it is not cheap. Same price as the burbs but you get a bigger bit of land that you can still only put one house on. You also have to put your own septic system in, your own water system in and now a couple of extra tanks for the fire department not to mention long driveways and long power cable runs. Its a lifestyle choice but for those who want fast travel to Albany, the motorway will be the key.

This is not a fall at this stage but can say that the market is stabilizing BEFORE the actual fall.

The only thing that can be argued is the percentage of fall.

These falls are nothing compared to Sydney and Melbourne. The worst hit areas are a 9% and 6.5% fall respectively.

I believe the difference is that the credit tightening in Australia is more severe and there is a lot of supply with the apartment market being hit hard.

I'm also not so worried about the size of the fall here but far more interested in the rate of fall and how long this will carry on for.

Isnt it wonderful that all foreign buyers will be pushed into the new apartment market. I suspect the upcoming oversupply of apartments, financed by foreign buyers, will make Australia's apartment boom look tame. Also a shame that foreign buyers usually leave these apartments empty, so it won't do anything to alleviate the rental shortage for locals either.

REINZ median price data has both Auckland City and North Shore Auckland falling 5% over last 2 years (least squares linear fit). That is definitely long enough and large enough to be a significant trend.

How on earth did you manage to pull those figures off the graph ? You need to go to SpecSavers.

It's not data from this article.

Yeah. The median is much better than average prices as a measure

Just having a browse of San Fransisco apartment prices: https://www.zillow.com/homes/for_sale/San-Francisco-CA/pmf,pf_pt/condo_t...

And here's a two bedroom apartment in Albany: https://www.trademe.co.nz/property/residential-property-for-sale/auction...

Something seems slightly out of kilter.

Edit: How about a nice 72sqm apartment in Manukau for $750k, vs similarly priced places in central SF. https://www.trademe.co.nz/property/residential-property-for-sale/auction..., or $725k in Manhattan: https://www.zillow.com/homedetails/1175-York-Avenue-1b-1B-New-York-NY-10...

Looks like you can get a reasonable apartment in San Francisco and a high paying job. Everyone complains about the high cost of housing and living costs, yet it doesn't look that bad.

Prices don't seem too different.

The prices are quite high relative to the rest of the US. Yet they have also had very low interest rates in the 2-3% region.

Depends what value you put on the NZD - Try 1NZD buying 0.50USD and see how their prices look; 50c is a more 'normal' range than 70c especially with US rising rates while we hold and have a good chance of going lower before higher.

Regardless of that

Albany

San Francisco

See the yawning gap there.

Blasphemy! What edifice in silicon valley can compare to the westfield mall and albany lake reserve?

They don't even have Skycity in San Fran.

5 year moving average is 72.76, pretty far from your mythical 50c

0.54 is the lowest I can remember and thats going back to like 2003 from memory. 0.69 is pretty typical so not surprised the average is 0.72.

I went there in 1980 and got $1.10 for every kiwi. Those were the days

lots of things must be mythical to the struggling millennial generation

- Try early 2000s, try many time prior - you might not have been born then but the world still existed

And US dollar salaries too, with some pretty good salaries available in SF.

Comparing apples with apples.

Yeap. I work in IT. I could double my salary there.

An apartment in central city SF vs. an outer Auckland suburb. That the prices don't seem too different is what should be concerning. It makes the value of Albany apartments look pretty bad, especially if you also compare square footage.

NZ - land of the long white rip off! Low wages, astronomical housing, high fuel prices, expensive supermarket shopping. But,oh, it's a beautiful place....

I'm reliably informed that NZ is the only place on earth that has oceans, mountains and farmland.

Just had a conversation with a Santa Cruz business owner. He can’t get staff as they can’t afford to live on Service wages. I find it hard to believe SF is better. Local papers have stories on housing crisis in California. Sorry if it doesn’t fit your view of the world but there is no nirvana in California, at least.

Exex, what's going on?

This is not a holding up of some nirvana, this is a basic comparison of apartments in SF and Auckland. What you get for your money. Neither of these would be purchasable by service workers in either country. These are clearly aimed at professionals with a decent income. We know service workers will be squeezed - heck, even look at the teacher shortage in Auckland now that supply and demand is coming into play with small wage packets relative to living costs.

This is a straight comparison of what $800k gets you in central San Fransisco vs. an outer suburb of Auckland. All it's pointing out is that a 72sqm apartment in Albany for $860k looks not great in comparison with a 100sqm apartment (proven over time to not be leaky) with a very short commute to central SF. And SF is one of the worst markets for affordability in the USA.

How's that saying it's nirvana? The link is there for you to browse SF apartments and compare.

The cheap ones have stuff like this written on them:

Must be 1st-time homebuyer & income eligible. Maximum income for 1 person =$66,300; 2 people=$75,750; 3 people=85,250.

Sadly enough many in NZ would call them high salaries lol

At least there's a provision for polyamorous relationships provided everyone works as a Walmart greeter.

Interesting looking at an $799k example: https://www.zillow.com/homedetails/1487-Guerrero-St-San-Francisco-CA-941...

99sqm in SF, compared to an 86sqm 2 bedroom in Albany for $860k. Seems like a nicer place in SF, and a better location. And SF is supposed to be one of the worst locations in the USA for buyers.

More than 110 years old and more than tripled in price since 2010. I'm not sure it is that useful comparing places with other parts of the world. The price of a house is very dependent on prices in the local area and how likely it is to retain its value.

Prices are compared across the globe all the time. E.g. Affordability, measured on such bases as incomes in the area, multiples of income etc. This is simply highlighting that even a place in the USA that's regarded as one of the worst markets for buyers still seems to offer more for their money than for Auckland does for young people.

SF is often cited as unaffordable for young workers...but you still get less in Albany than in downtown SF, while you can - as a skilled young person - earn more in SF.

Closer to home the obvious example that leads to emigration is Australia. E.g. Brisbane, with higher wages and more affordable house prices, and lower costs of living.

It's merely highlighting that Auckland's situation could be problematic.

Yes exactly.

All that is happening by comparing SF with Alk, is fighting over which Cluster&%#$ is not as bad as the other, and the only comparison on a like for like basis is one rotten apple to another rotten apple.

Remember that Goff continually has made comparisons to Akl being as 'livable' as SF, Vancouver etc. The reason they want to be associated with these similar places is that they are in the same type of unaffordable housing hole ie 'misery loves company, but only other miserable company.'

If they truly cared about how people live they would look to make sure it was their discretionary income that was increased as it is the relatively that is important.

But there is little point increasing wages when due to the monopoly on how land is developed, any increase in wages only gets capitalized back into increasing land and housing costs, end result you are worse of.

Anyone that is truly interested in looking to make housing more affordable should look at those jurisdictions that have succeeded in making housing affordable, as they obviously have the solution to that problem.

It makes no sense to look at places like SF, Vancouver, UK etc for solutions, as if they had one they wouldn't be in the same mess as we are.

3 weeks and then you'll need a 4WD to avoid crashing. .

I don't think people on here are giving enough significance to what's happening across the Tasman right now, in relation to NZ. Slightly different circumstances, but really it's part of the same wider bubble (and same banks of course). Sydney has dropped nearly 8% over the past year now, and no end in sight. We can put our blinkers on and maintain that NZ will just remain flat, or just go down a little, but I don't think that'll be the case. It'll be contagious, just as the bubble was on the way up. It was the same rhetoric in Oz: it's not a bubble, it's all normal, it'll be a soft landing or plateau, and there are always a million reasons why the inflated prices are justified, until they are not.

Yes I agree, people are thinking much too locally here. It's only a matter of time before the bubble starts to deflate here as well, especially considering prices in Auckland were essentially on par with Melbourne and Sydney despite much lower incomes.
The question is whether it's going to be like Japan in the 80s or Ireland in the mid 2000s. Or something different altogether?

My pet theory - Auckland house prices have the blessing/curse of an under supply of housing.

Which I think means there is a small blessing in a bust phase as the house price declines in Auckland are likely to be smaller than in Melbourne or Sydney or Brisbane or Tauranga or Hamilton. As there are likely to be relatively larger rental returns available in Auckland.

Then in the recovery phase the same shortage becomes a big curse as a lack of accommodation and office space forces new business activity to relocate away from Auckland to Melbourne or Sydney or Brisbane or Tauranga or Hamilton. Auckland might be headed to 20 years of stagnation relative to the rest of Australasia.

You're in fantasy land if you think the provinces will decline more than Auckland! The nominal value matters and 1.5 million in Auckland is a very different number to 600K in Hamilton or Tauranga.

Some non-mainstream economists, such as Prof Steve Keen (one of the few economists who accurately predicted the GFC), say Oz after the property crash will become a "debt zombie" like Japan.
Whatever happens, I saw this which seems to be poignant at this time:
Banks lent recklessly in the US, house prices crashed. Banks lent recklessly in Ireland, house prices crashed. Banks lent recklessly in the Australia, house prices will muddle a ong for a few years and then pick up? Meanwhile, Sydney is currently experiencing record breaking price falls..
Have banks also lent recklessly in NZ?

If you are a homeowner in Auckland who voted for Labour or NZ First at the last election, How much lower do house prices need to go before your confidence shifts enough that you consider changing your vote next time round in 2020. When that level is reached (they poll constantly). Then the government will start throwing the levers to get the property engine started again. Haven't been around that long. But have seen it happen often enough to know it's inevitable. Principles be dammed. Power is the mother of all drugs.

For me, house prices going down wouldn't change my vote. It's way too far along the line to stop it in my opinion. The bubble has been building for years, due to cheap credit for too long and irresponsible lending, not just in NZ. They might be able to delay it a bit by pumping it up further, but we'll have to bite the bullet eventually. The damage has already been done during the past decade.
For those who were able to ride the bubble and sell/downsize at the top, like John Key as it happens, it'll be ok. We repositioned in 2016. Could not see how it could go on for much longer, after a few years of double digit gains. For those with huge mortgages and not much equity, it'll be awful.

Which levers will the govt pull exactly?

OCR and LVR levers are in the hands of the RBNZ, not the elected lot in the beehive.

The reserve bank will soon be ruled by committee with new monetary policy objectives. Guess who gets to appoint the committee. Plus the new student visa immigration rules that have been proposed have holes big enough to fly a multitude of 777's direct from Mumbai through.

the OCR decision is still made be the RB Governor, not the Monetary Policy Committee

The Monetary Policy Committee (MPC) is a group of senior Bank officials that meets weekly to advise the Governor on issues relating to the formulation and implementation of monetary policy. The MPC has no basis in legislation, and is expressly not a decision-making committee. MPC members do not vote and minutes are not published. Rather, the intent of MPC discussions is to ensure that the Governor is exposed in a systematic way to alternative views and a broad sweep of opinion throughout the policy assessment process.

No not that committee. This yet to be appointed one. https://treasury.govt.nz/sites/default/files/2018-04/rbnz-rev-cabinet-pa... . External (political) appointees will have four year minimum terms. So will have influence beyond the next election. Even if the current government loses.

Hmmm, 2 out of 7 wouldn't be too bad. Recommended by the RBNZ in the first place, so not a bunch of incompetents, and only two out of five or seven would be external. Not quite having the elected govt of the day pulling the levers.

Goffam city a place of high costs, traffic congestion, bad weather, falling house prices and no Batman to save the people.

buy some good yielding NZ property while you still can - if we follow Singapore could soon be needing over 50% deposit for investment properties as well as stamp duty! ouch

https://www.icompareloan.com/resources/new-property-cooling-measures/

Mostly sad threads of childish, self-rightous comments. Disappointing.

....so says Yvil, the fountain of insight.

There you go... perfect example.

might as well be Parliament ..