The auction rooms are getting busier as the weather improves

The auction rooms are getting busier as the weather improves

The recent lift in auction activity continues as the weather improves, with Barfoot and Thompson marketing 157 properties for sale by auction last week and achieving sales on 55 of them, giving a sales clearance rate of just over a third.

The stand outs of the week were the on site auctions, with sales achieved on 60% of those.

Of the major auctions where at least 10 properties were offered, sales rates ranged from 14% at the Shortland St auction on October 4, where most of the properties offered were from central or central/fringe suburbs such as Mt Eden, Epsom, Hillsborough, and Mt Roskill, to 39% at the Shortland St auction on October 3, where most of the homes offered were also in central Auckland suburbs.

The sales rate was 29% at the Manukau auction and 31% on the North Shore.

Of the 40 properties that sold and their selling prices could be matched with their rating valuations, 25 sold for above their rating valuations and 15 sold for less than their rating valuations.

Details of all the properties offered and the selling prices of most of those that sold are available on our Residential Auction Results page.

Barfoot & Thompson Auction Results 1-7  October 2018
Date Venue Sold Not Sold Total % Sold
1-7 October On site 9 6 15 60%
2 October Manukau 7 17 24 29%
2 October  B&T Shortland St, CBD. 4 5 9 44%
3 October Whangarei 2 1 3 67%
3 October B&T Shortland St, CBD. 13 20 33 39%
3 October Pukekohe 3 5 8 38%
4 October North Shore 11 25 36 31%
4 October B&T Shortland St, CBD. 2 12 14 14%
5 October B&T Shortland St, CBD. 4 11 15 27%
Total All venues 55 102 157 35%


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Scrolling down the auction results, it's still evident that a good portion of properties are selling at or above CV.

Will be interesting to see what happens after this month.

Good portion of those that sold.. would be interesting to see where those that didn't sell are in a months time.. on the market still, sold below CV, or withdrawn from sale?

Please spare a thought for the Real Estate Agents - pray for them! Barfoot and Thompson have 1700 registered agents on their books. Last month they only sold 720 properties between them. I presume that there are a few agents who will have sold more than one house, so there will be at least 1000 Barfoot Agents whose only income comes from the marketing spend from failed attempts with the Auctioneer. It's a tale of woe and misery, the bread is no longer being buttered, but being rationed after weeks and weeks of failure.

Some of them might think about selling one of their investment properties to compensste their loss of income.

Hi Fritz. Maybe we should set up a Christmas 'shoe box' appeal for all those real estate agents that are struggling to adjust to telling their clients that prices are actually falling.

We could include practical gifts like, a calculator, some advice on where to access a mortgage repayment application on their smart phones. Useful hints about how markets change when the banks reduce credit for mortgages by 20%. Some car air fresheners to hide the smell of bullshit. Shoe polish, breath freshener and a comb. Nothing too fancy but every little helps!

LOL, that's one way of looking at it...

55 / 157 were sold. If we assume the 15 / 25 ratio held true for those 55, then 33 / 157 of properties sold above CV. 21%.

The picture is pretty clear - most sellers expectations aren't matching reality. 21% still have property that's worth selling, and then a small minority bit the bullet to get out of the game.

I really hope the property investors among us aren't over-leveraged. It's not a good time to be in debt over a badly performing asset.

Keep in mind though that these are only the properties that were up for sale by auction. In a flat market I wouldn't expect auction results alone to paint an accurate picture. REINZ report in a few days will provide a better indication of what the market is doing.

Prices are holding up well because vendors won't sell for cheap unless they are forced to. With current economic conditions, sellers are unlikely to be under pressure and are more likely to pass a property in than settle for less. You say that "most sellers expectations aren't matching reality", but as far as the auctions go, I'd say the same can be said for buyers.

I'm waiting for the REINZ report as well. You're right, there's more to it than just auction room results. But auction room results have been consistently terrible for the past year.

Prices are holding up well because vendors won't sell for cheap unless they are forced to.

People sell for cheap for all sorts of reasons. Ex-Expat said he/she sold for cheap because he didn't want the hassle of a long time on the market and didn't want to deal with REAs. It's not always firesale desparation. Sometimes people may simply want - but not need - to leave auckland, and decide taking a bit of a loss on a home sale is worth it to move on with life.

Must have been someone else. I haven't sold anything.

I may have confused you with Ex Socialist...

I agree that there will always be a small proportion of vendors willing sell for less for the sake of convenience or some such reason. But my view is that you're unlikely to see a noteworthy increase in people accepting comparatively low prices (enough to make a difference in the median or HPI) unless there is a shift in economic conditions making it hard for them to service their mortgages (e.g. higher interest rates). There are obviously many other factors in the mix, but I think this is a crucial one.

And higher interest rates are on the way. The Fed is tightening USD dollar is strengthening. Everything else is noise, the US still leads the way whether we like it or not.
NZD weakness will force us to tighten, or else we won't be able to import anything. Petrol is just the first mover, and it's ridiculous that people get so wrapped up in what the government is doing when NZD has fallen against USD and oil has surged in price. This is the driver behind fuel prices and instead we are worrying about political sideshows regarding tax and petrol companies practices.
But trade wars are also going to make things more expensive. The days of deflation are receding and it seems likely we have turned the inflationary corner. Given that there is a huge amount of printed money out there a little change in the velocity will make things happen very quickly. Inflation has a habit of taking people by surprise and being very hard to get back under control once it has taken hold.
That's my view anyway.

Yes, this is a view held by quite a few. But personally, I think Adrian Orr will do with the OCR what he has clearly signalled he will do with the OCR. I also tend to believe the Westpac forecasts for OCR and inflation. For next couple of years I’m picking inflation of not much more than 2.1%. And OCR of not more than 2.25%. Keep in mind that many have been saying that NZ inflation and OCR are going to rise for years now, but have been wrong.

All fair points BLSH.
Guess we will see which of us is right over the next year or so.
Or maybe we'll both be wrong.

BLSH - There will be a lot of people who bought 15-20 years ago and therefore it doesn't really matter if the market changes, they can stomach the adjustment so as to get on with things, retire to the coast, downsize a bit (the differentials are still okay for many and better than they would have been 5 years ago), get away from the rat race of Auckland and enjoy life. It will be those sellers that set the market. More recent acquirers, who bought the bubble, or who are highly leveraged are likely to have less ability to adjust to the new market and it'll be those stomachs that are likely to become ever more irritable to the continued weakness in sales volumes and prices.

Irritable bowel syndrome could become a pandemic!


More bad news from the auction rooms.

The fundamentals are just completely out of whack. Rent to price ratio, price to income ratio, immigration slowing down, building consents rising. As I've said before, when people are going to Eketahuna or Reefton to invest in property, you know the horse has left the barn.

I'm now a property bear. Not a large one. Not a grizzly bear by any stretch of the imagination. Not even a black bear, or malaysian sun bear. More like a koala bear. But still a bear.

Rent to price and income to price are weak metrics because they dont account for interest rates. For example if rates are 1% then a 3% yield is amazing, but if rates are 5% then a 3% yield is weak, the rent to price doesn't actually tell you much in terms of how good the yield is. Its the same with income to price metrics, really what you want to know if how affordable a property is, and that means it is servicing compared to income and not price compared to income that matters most.
Further it is not immigration so much as it is supply and demand.
So to summarize you have two key metrics, affordability and supply:

Affordability - Stretched but improving
Supply - Constrained but improving

totally agree with u laminar..

I don't get your point. Would you describe the dividend yield of a stock or the yield on a bond as weak metrics because they don't account for interest rates?
Admittedly rent to price or income to price aren't as complete as an affordability measure that has more factors, but surely they are weak because of that not because they don't account for interest rates?
How do you see affordability improving? Wages are still pretty constrained, we are importing more and more inflation off the back of the weak dollar and median prices have barely budged.
Supply is improving but this housing bubble, like all bubbles has never been about supply it is about cheap credit.
The case still look bearish to me. And when Italy blows up ensuing storm may well tip the gentle decreases to big ones. A 60% drop from top to bottom still looks reasonable to me.

He's confusing net profit with gross yield.

As for your 60% price drop prediction, I agree as long as the zombie apocalypse and Mars invasion happen in the same quarter.

@heavyG, Thats not the case. Im pointing out the post confused a stock for a flow.
When you buy a property the stock (your capital) is often $0. So in fact what you are wanting to measure is the flow of funds, that means you compare the yield (net of costs if you want) to the interest cost.
Now for home owners its slightly different in that they tend to have more skin in the game but a study by the RBNZ found that house prices most closely correlate to the metric 'affordability'.This confirmed that the main factor that defines the prices of a majority of property is the balance of flows. Thus it is income to costs and not income to price that is most crucial in understanding prices.

Interesting Laminar.
But if you are buying and your stock is 0 then are you really buying anything? I am assuming you mean your stock is 0 because you have borrowed all the money? Or is that not correct?
Surely if you put a deposit in that becomes your stock no?
If you are buying a house with 100% credit then you aren't buying anything, you are just renting money from the bank and hoping for....I am unsure.

Thats correct, when i say stock = 0 i mean you borrowed 100%, in effect you are incurring an opportunity cost in return for an exposure to some asset class.
It works out the same regardless of the deposit though as when you buy property you are buying whats called 'total return' as opposed to say buying bonds, in which cash you are simply buying a yield.
When your business buys total return assets you are in effect asking what is the opportunity cost in order to obtain a certain amount of exposure. To model that you can use the cost of debt funding, but often you will swap out debt funding for some minimum acceptable return.
Bond funds are asking the question, how much capital will it cost us to obtain X income.
These are different questions and they get answered by using different products.

Thanks for clarifying laminar.
But if you are borrowing 100% are you incurring an opportunity cost? You have expended no capital so you can use that unexpended capital to pursue other opportunities surely? Unless you are measuring the opportunity cost of using up your credit availability? Which I guess is valid although I have not come a cross opportunity cost described in those terms before.
But with bonds you don't just buy a yield. If the yield drops the price goes up, so you can make capital appreciation on bonds as well and many people do. Unless you are talking about swaps, but then buying a swap is not the same as buying the whole bond....and I doubt anyone we know is doing that, unless you know some banksters on trading desks.

@denature Yes, everyone is ultimately limited by equity, you can not borrow infinite amounts. Each purchase you make consumes a part of the theoretical max lend. Also some purchases eat up your cash flow and that too is a limiting factor.
Consider 1 million in cash. I can put that in to bonds say at 5.5%, but if a i buy a commercial property instead then i cant buy the bonds, so you could consider the opportunity cost to be 5.5%. However if i borrow then my opportunity cost in a sense drops to the cost of interest at about 4.0%, as i still have most of my capacity to invest in those bonds.
In detail the rate you would apply is a minimum acceptable level of return, but in practice for small companies the debt funding cost is usually pretty close.
Your statements about bonds are related to bond traders, its not the principal function of bonds. Bond funds are buying income and then hold them to maturity for a majority of cases. That is why it is called the fixed income market.

Thanks Laminar.
However I don't think the principal function of bonds is to provide fixed income it is to issue debt. The coupon is a by product of that surely.
Just as the principal function of a house is not to provide income, it is to provide a place to live. We are ultimately we are talking about the derivitivisation of....well anything the financial industry can. That is certainly retarded.

I enjoy a bit of word play so touche.

@denature Because a bond is usually purchased with cash its yield to price is the main factor. I assure you if you buy a bond using debt youl be focused on its yield compared to its interest cost, rather than its price.

Affordability is improving for 3 reasons:
Wages - slightly up
Interest cost - slightly down
House prices - slightly down

The bubble as you put it is built on two factors, supply constraint and a drop in interest rates. Most of the price gain is due to interest rate drops. Its a bubble if those rates need to rise, but there is little evidence to support a thesis that rates will materially rise.

a 60% drop is unlikely to put it mildly.

You assumed that all real property purchases had borrowed funds and therefore the interest costs would always be a factor in determining yield when dealing with real property. That's just wrong as there are cash buyers. Denature called you on it. He's right.

I did not assume that. This has been proven from a number of approaches. First the RBNZ in an extensive study found that property prices are most tightly correlated to a metric called 'affordability'. Second, investment property purchases are always calculated using a flow in order to capture the opportunity cost. So even if you buy a commercial property with 100% cash you would still be comparing its lease income to either the theoretical debt cost or some other opportunity cost figure like a minimum acceptable return or such.
Both owner occupied dwellings and investment property prices are primarily driven by flows.

Certainly 60% is out there and I can understand that people find it unlikely.
However I believe a big part of that is swayed by consensus forecasting. Most people focus on what the "experts" say. And for a professional forecaster it is much safer to be wrong like everyone else then wildly wrong (or exactly right). It's not worth the risk to put your neck out like that better just to say "well everyone else got it wrong as well". So all the forecasts fit around a tight little bell, extrapolated from a straight line.
I believe houses are between 40 and 50% overvalued depending on ones favourite metric and compared to historical moves.
I regard the movement of the last 10 years as bubble territory, and largely credit related. The reasons given regarding supply constraints are wobbly at best. Mostly it seems to revolve around immigration, but at the same time everyone seems to point out that we are importing unskilled cheap labour, which seems to be mostly true especially given the low wage growth. How does this labor afford a house in Auckland? And if it's all renting and houses are in short supply why have rents not moved even roughly in line with capital appreciation?
In any case if I accept houses are over valued by 40% and are in a bubble then mean reversion, which ALWAYS happens eventually implies a 40% drop. Given that crashes typically move past the mean by 10 - 15%, that gives you anything from a 50% correction to a 65% correction. So that's where my 60% comes from. No wonk economics there or complicated mathematical modelling. Just what has happened in almost every other large crash in history. Humans are no less flawed now than in the last bubble.
The Nasdaq fell around 66% from top to bottom. I don't remember a lot of people making that call beforehand although certainly there were people who thought it was overvalued. I'm sure if I had said that then many people would have said my call was very unlikely as well. That doesn't make me right, but certainly my call is not at all unusual in the history of bear markets.

You dont get to pick your favorite metric in order to decide how house prices will move.
Credit has been the main driver in prices but you underplay scarcity. Scarcity can be shown through total number of new dwellings built compared to the total number required. Occupants per house start to rise as rents rise, and this constrains the rate at which rent can increase.
Cost of credit has been the main factor driving maximum prices, thats mathematics, but scarcity is a big factor as well. If there was no scarcity then prices would not rise much even with cheap credit.
In order to suppose a large drop in prices you must first demonstrate that interest rates will rise significantly.
Looking back through history will show that some times it repeats, other times it rhymes and yet other times it is completely different. 'this time is different' and 'history repeats' are both incomplete statements.
If you want to argue a big drop then you need to argue a big rise in rates.
A lower currency has been a stated goal of the RBNZ and some inflation is viewed as a positive by them. They will not be very concerned with currency related CPI inflation, so long as credit related CPI inflation remains subdued.

There are thousands of metrics. And everyone picks the ones they think are most accurate. So of course you pick your favorite. Or the one you think is correct. The metric you believe is the best is not neccesarily the best and may well only be the best for you and your world view.
Rates are already rising but we have had this argument before.
The Fed is tightening and NZD is falling against USD. Those are inflationary forces. The only thing that our central bank can do is raise rates to protect the dollar. That is what will happen or else we won't be able to afford to import anything. It's already happening with fuel. Fuel is always the first because of it's importance, but it will flow to other things.
It does not have to be a large rise. But large or small rates are historically extremely low. The chances and impact of them going lower are getting less and less with each cut.
It does not matter what the stated goal of the reserve bank is. We are hostage to larger forces and the central bank will have to react to those, not to what is happening here. Do you really believe we can resist the fed raising rates? USD climbing another 5 or 10% against NZD? What does our reserve bank do about that? When the carry trade was running strong they talked a big game about weakening the dollar than....and how did that go? Pretty piss poorly as I recall. Where does all your faith in central banks come from?
Inflation is inflation and it affects people outlooks. The person at the pump doesn't give a crap whether the inflation is currency or credit related. They will start baying for blood either way.....and if they own a business they will pass costs on and if they work for someone they will start asking for pay rises. What the reserve bank thinks about these things is irrelevant.

Rates are in fact falling and have been falling since the end of 2017.
As the NZD falls our exporters will start to become more profitable and this is desired to balance our trade deficit.
The RBNZ wont panic just because prices rise off the back of a weaker currency, thats expected and desirable, but its a false economy to tighten interest rates in order to cheapen fuel because you are simply robbing Peter to pay Paul.
Youd need to argue our currency will fall a lot in order to provoke a response from the RBNZ, and i dont see any numbers from you, or anyone else, that would indicate a substantial fall is possible at this time.
Remember that while the fed is tightening the US govt is aggressively stimulating. NZ is not aggressively stimulating so there is less credit pressure on our reserve to raise rates than there is on the US Fed.
The person at the pump cares more about his home loan than he does about his petrol tank as his home loan is on average a much larger cost to him.
If the USD rises another 5% or 10% i expect everyone at the RBNZ to toast a great victory.
My faith in reserve banks? I have minimal faith in them. I just understand what they do and why they do it.

Yes but our export industry does not employ that many people, because it does not produce very high value products.
Why would a teacher, or a chef, or a baker, or a person working in the warehouse, living in Auckland, care if farmers are doing better or about the trade deficit? They get no income from farming, they do not service the farming industry and in fact many of the things they purchase are imported. The warehouse alone employs 12000 people and they are basically dependent on cheap imports. That says nothing of the tens of thousands of small businesses and self employed few of whom are involved in exporting.
And if they pay more at the pump then they have less to pay for their home loan. The two are very much related.
5% is a massive fall in currency terms. NZD has fallen about 12% against USD since April. I don't know how much you follow currencies but these are already very large moves in very short times. And we are already feeling the results.
If the US is aggressively stimulating then they are going to get (hoping to get) inflation. So fed tightens, so NZD weakens relatively. This puts more pressure on import prices.
I understand very well what central banks try to do. I just recognise they do it ineptly. Not becasue they are bad or stupid, but because they don't understand the processes they are interfering with because nobody does. They are trying to conduct microsurgery, blindfolded, with a chainsaw and a spade.

The reason that the factory worker in NZ is happy is because the thing that he makes now costs more to import and so his product is more competitive internally. It is good for the nation as a whole because you expand exports and contract imports.
A 5% drop in the NZD is not massive at all. The trading range for the NZD is huge. A 5% drop is desirable.
The USA already has inflation, that is why it is tightening and that is my point. The USA needs to tighten as it has real inflation. NZ does not have inflation outside of currency revaluation. Simply put NZ is not overheating while the USA is starting to show signs of overheating.
NZ must run a lower currency because we must turn our economy around. Building a nation based on imports is retarded and the RBNZ knows it. They desire a lower NZD, we are living beyond our means and the only polite way out of it is to build a bigger export base.

Thanks Laminar, but on these points I do not agree at all.
The factory worker in New Zealand barely exists. And he/she does not make computers, smart phones, vacuum cleaners, clothing, cars, toys, or anything much else. We at least used to make washing machines up until around 5 years ago right............
The US only has inflation at 2.5 and given their debt pile they would happily have it higher. They are tightening to put gunpowder back in the barrel when things go wrong again. Of course real inflation is much higher because CPI is massaged up the wazoo but that is a separate issue.
The idea that we flog our currency and that will make our exports better seems to me to be very limited thinking. Currency movements are largely irrelevant to the decision of a person to set up a business, that may at some stage export a product. These are things that take many years, IF the business goes well.
If you are already an exporting nation (like Germany) than sure a cheaper currency will make things look better. But this is all a 0 sum game, Germany has supplied countries with it's products on credit. It has made itself richer, but others more indebted and poorer (like us). This is causing it problems elsewhere. Do we think the German people would be expected or willing (not that they are all that willing) to take a million migrants if they didn't have so much wealth? Or prop up all of Southern Europe? Certainly the poorer parts of Southern Europe are not happy about migrants at all.
Certainly we need to balance our books and our trade. Certainly we are living well beyond our means. But this is about credit creation not about currency moves. We need to work harder, more efficiently and we need to save. That is the only path to wealth. Tinkering with the currency will not address that, and will create as many problems as it supposedly solves. The world is a very complex place, and the levers the reserve bank uses are very, very clumsy and cause a massive amount of unforseen and unwanted consequences.

The US certainly does not want inflation much above 2% simply because it does not want its economy to borrow a ton. High inflation of the sort the US is worrying about is a result of credit expansion.
Yes inflation is massaged so yes it is higher.
If you flog your currency then price pressures will in theory lead to more business exporting and more companies producing onshore. You can believe it or not but the RBNZ does believe it and so they want our currency lower.
You dont get rich by saving lol, you get rich by producing. A lower currency will boost production and make our country richer. At the very least this is what the RBNZ thinks and so you should understand that and then you can understand their motivations.

Laminar, thats an interesting way of looking at the world. Savings don't matter, really. Production does but in a globalised world that requires low costs and low wages. Lower currency makes us all poorer it's a pay cut in a country that is so dependent on imports.
If I was in the States I'd be worried about inflation at -2.6%

Yeah - one thing is for sure that for few years to come property market is dead - It may or may not fall but one thing is for sure that is not going up in near future (Though all indication are that will fall and one has to wait and watch the percentage - Only percentage of fall could be argued).

FHB have already missed the current party - should now wait and watch.


Like this bear?

Good to see your teeth and claws coming out today!


Well we are almost half way through spring and the auction clearance rate are still dismal.

Cant blame the weather.....

Same headline as the last report on B&T auctions.

Except that this time, there were fewer offered and fewer sold.

The clearance % was up a bit, though.

Overall, the market is still very flat.

No need to rush out and buy.

I guess - % is high were foreign buyers are as have to buy now or never for them.

Will have clear idea in next few months.

Yep. Still a standoff between sellers and buyers. Add to OBB inbound, discretionary spending/saving taking a hit with the exchange rate/inflation trade off, and business confidence well down meaning employers will be looking closely at staff numbers. Is this the time to go large on debt or sigh in relief that you have spent the last five years reducing/eliminating debt. I would suggest the latter

With sky high petrol prices the "affordable" outer suburbs will decline at a rapid rate, while the richer inner suburbs will hold steady or even improve.
Not only have oil prices increased but a plethora of new taxes has made petrol a luxury item that ordinary Kiwis wil have to live without but with few, if any afforable alternatives .

Even more reason to stay away from the kiiwbuild dogboxes at Papakura. They were supposed to have been balloted by now, I wonder when we get the final figures on how many were chasing them.

Hi BigDaddy,

Agree with you.

As far as Auckland is concerned, the smart money is on the suburbs closest to the CBU.

These areas are often walk-to-work and, in any case, nearly all have excellent public transport.

Petrol price hikes, while further increasing the desirability of the central areas, might well bugger the nation at large.


Hi TTP - I live in a suburb very close to the CBD and the public transport is rubbish.

Hi Yesyesyes,

Hard luck my friend.


Yeah. It's an overly simplistic view. Some outer suburban locations are on quite good train services.
In any extent, the fuel price rises are exaggerated, unless you have an absolute fuel guzzler of a vehicle. And different habits can minimise the impact. Our family has one small car, and we are paying about $5 extra per week on fuel than we were a year ago.

Ranui isn’t close to the CBD

The assumption here is everyone who lives in the CBD works in the CBD.

Heres my take on that - Bollocks they do. There is a rush out of Grey Lynn, Ponsonby etc etc every morning. Major industry is no where near the central city.
To own a big house in Herne bay you need to drive to Manukau to whip your minimum wage factory slaves.

BigDaddy, good point regards petrol. Being that you manage a large portfolio of rentals, I guess passing on costs associated with removal of letting fees is a no go despite your comment to the contrary only days ago........

Time will tell with regards to the buoyancy of inner city prices post foreign buyers ban.

Hey Nic – my tongue in cheek reply to you yesterday:

“by custard | Tue, 09/10/2018 - 22:24
Busy, a lot of interest and a 35% success rate....”

It was as if you'd read the tea leaves, but to be fair even the 'FOES' must be struggling to be bullish by now...... 13 days to the FBB ban so it'll either be extremely busy or the rush has already happened (which wasn't much of a rush).

The Christmas sales start on the 24th October this year and there are big discounts predicted for the Auckland property market! Shall we call it the start of the 'Black Wednesday Sale!'

How could you possibly predict that?!

Obviously you haven't been listening to TTP - Auction clearance rates have been steadily increasing since the start of the year!

Hi nomad,

Sorry - but you misrepresent what I have stated.

Auction clearance rates for Auckland were relatively low at the start of 2018.

They increased markedly around June 2018 - which is what I have said here on numerous occasions.


TTP, yes, I also recall that apartment auction whereas 2/4 sold giving a 50% clearance rate! Oh yes, they've improved markedly - lol!

Prices will still hold. New Zealand is a strange country when it comes to house turnover. People here move just for the sake of it in 5 years or less. Other countries there are more people staying in their house a lifetime. Of course it does help if your not building crap houses that don't actually last a lifetime. I would give your typical Kiwi house a 30 year life expectancy.

lol 30 years... That means all the houses built in 1990 will vanish in 2 years...

Yep and many have gone already that were leaky and built from 1996 onward. It may still be standing but you wouldn't want to buy it, so yeah its effectively "Vanished" . The banks are also no longer lending money on anything monoclad so that is a huge number of homes. Plenty of crap house built for a 15 year period and I would still argue we are still building crap houses.

It costs $30-50k to sell, buy and move in Auckland. People don't do it on a whim.

Professional landlords that have been in the property investment industry for awhile and have bought well will have a field day at the moment.
Interest rates are low and rental property are easily filled in Chch but you have to be careful selecting tenants.
There are a lot out there that you wouldn’t want at any cost but with systems in place it is not that hard generally to weed these less than desireable ones out.
Investors that are in it for the long term don’t worry too much about capital gain as that takes care of itself, as long as you are positively geared the. What is the problem.
The Bears can go off with excitement as much as they want on here, the reality is that if they aren’t in the market now, they never will be, as Banks toughen up!!!

You're right that the bears not in the market now will likely never be. When the market is flat they claim the crash is imminent. When the market is rising they claim it is unsustainable and only a fool would buy. When the market is falling they claim they don't want to "catch a falling knife".

As far as carefully selecting tenants goes - this is going to become even more important if the government does away with no cause evictions. Given that this would only apply to periodic tenancies, I'd be keeping all mine on fixed term agreements to avoid the possibility of being stuck the nightmare tenants.

You're right that the bears not in the market now will likely never be.

Don't Nic and Retired Poppy already own their own home? I'm obviously planning to enter the market, just not this one because it's not worth it. Which of the bears actually desperately wants an NZ house but doesn't have one?

Yes, I understand Nic and Retired Poppy already own their own homes - but the comment above was specifically about bears that aren't already in the market. And the fact that you, a Koala bear, say above that you won't be entering this market because it's not worth it just bolsters this point.

Pragmatist, Houses Overpriced, Property Prices 2 Fall

Right, but THEM AN 2 is trying to insinuate that we're not in the market because we're waiting for real estate prices to collapse, and we're just bears out of jealousness and hopefulness. IE, if we wish hard enough the market will do what we want.


Pragmatist is a weird dude. Him and some other guy spent ages trying to get me to reveal whether I was single or not in another thread. I almost suspect they were thirsty for me.

Houses Overpriced, Property Prices 2 Fall

Are they confirmed as non-home owners?

Lol, I never enquired whether you were single, that was the other guy.

Didn't you call me an incel or something? I suppose that's not really an inquiry, more an accusation

I said what you posted looked a lot like the shit that Incels post trying to justify why they are incels. So not quite.

Yep, that was me calling him out. When I hear sexist crap being spouted by some clown I hit them up whether online or in person. Your call that he sounds like an incel is spot on.

He has a smidgen of pride left so he cannot invent a girlfriend but he is also so fragile he cannot concede he is a very lonely chappy with no romance in sight (whether male or female or other, I don't judge).

I wait with bated breath for the excuses he will roll out below for keeping his relationship status secret.


Do you even realize how stupid you sound?

First weak attempt to deflect down, I wait now for the inevitable double down on your chicken shitidness.


Strike two. Keep on digging your hole.

Yeah well my dad could beat up your dad.

We've had this discussion before Nzdan, you need to stand on your own two feet a get off your daddies' titty. I suppose if you like living on your knees its not my business.

Yeah I do recall that one time you tried projecting your homoerotic fantasies onto me, I'm not interested dude.

The old "your gay" comeback... weak Nzdan [shakes head], weak and sad.


[Yawns...] Faux outrage, c'mon guys, this all you got?

Yeah, that is all I've got. It's creepy dude. Stop making graphic sexual comments on a financial discussion board.

It's gotten a bit ridiculous, and I've just encouraged you. I'll just report your comments and move on. There's better things to talk about.

Stop deleting your posts, how are people supposed to know what a nob you are?


You have found your soul mate saving4AUhouse. Your a misogynistic creep, Nzdan's homophobic. You can be the Alpha and Nzdan the Beta (I understand the terms are bear and cub which will fit with your whole sky is falling bear club thing).

Be sure to send a wedding invite.

Property Prices 2 fall has a place in Mumbai, not NZ. Houses Overpriced I'm 95% sure but not certain.

Good memory dude

Bzzt, wrong, don't "desperately want to buy a home". Might buy when prices correct. Far better off renting at the moment.

Binng, correct.

See my comment above - you fall into Category A - "the market is flat, but a correction/crash is imminent so I'm going to wait". If prices do start to "correct" you'll transition into Category C and be too scared to catch a falling knife.

Wrong again. I think the market (in Auckland) is going to be flat or slightly declining for years, unless something from outside screws our economy, so the "correction" is already happening. And no, I wont catch a falling knife.. That is stupid you buy at the bottom, not on the way down.

Trying to time the market? That's not very... pragmatic.

Or value investing.. and not seeing any value in residential property at teh moment, so i'll keep my capital invested in better returning options.

Pragmatist has $150K. He doesn't listen to BLSH and invests in shares, which return 9% per anum, $13,500. He retires without a house. At least he is happy that they now means-test superannuation as he gets his but BLSH does not.

Pragmatist has $150K. He listens to BLSH and invests in a 750K, reasonably well-located terraced unit in Auckland, which returns 1% per anum ($7500) until 2021, and upwards of 5% per anum post 2022, $37,500. He lives happily ever after and stops jealously advocating for the bicycle and boat wealth tax.

Wow, the maths gets so much more compelling when you ignore half the equation doesn't it? Is your official advice that Pragmatist get a 0% interest rate mortgage and avoid paying rates?

Relax, this was some light-hearted commentary, not serious advice.

My mistake - I'm so used to seeing half-arsed arguments for home ownership that your joke fitted neatly into the pack.

MFD, just ignore him. He linked to a rent vs buy calculator the other day that did its calcs based on interest only loan for buying a house. He's a debt stacker and will no doubt end up right next to TM2 if interest rates spike.

I only want you to live a happy, successful life Pragmatist. I feel sorry for you and just wish you would listen to my wise words of advice.

"and upwards of 5% per anum post 2022, $37,500" where the heck did you get that 5% from? And what about the mortgage cost, it could be 8-9% in 2022... so that $37500 could be -$37500

8-9% interest rates by 2022?! If you think this is on the cards your economic acumen leaves much to be desired. Do some reading on what the experts and RBNZ are forecasting.

That was pretty funny, full credit to you. But 9% for shares!? Where are you getting that from?

Probably from a comment I made the other day. I'm getting about 9% after tax from some of my investments. Not specifically from shares alone. And last week was a bit rough in some markets, so probably down a bit the last few weeks. It'll catch back up soon.

Saving 4 - there are still a few dividend yielding shares.

Vodafone is currently a fairly high yielding share, with a yield of 8.32% at current prices with dividends expected to be maintained next year. They do have quite a bit of debt, which has largely been for acquisition and just invested several billion in 5G licenses for Italy. Shares have also taken a hit this year since their CEO decided to step down after 10 years. But for an NZ investor, the yield is attractive and there is the added benefit of dividends being paid in Euro's rather than NZ peso's, so the current NZ peso deprecation is a double boost to the yield. Price has fallen from 238p to 150p over the last 6 months... One to watch..

NB (I have bought a few over the last month, just to be transparent on my position and I am not a financial advisor). There will be some good overseas stocks to look at though if the expectation is that the NZ dollar will continue it's decline.

I could improve your life immeasurably if you'd only listen to my advice.

No, really, you couldn't.

Are you planning to buy BLSH? And if so where?

I like Wellington, Christchurch, Tauranga, Dunedin and well-located suburbs in Auckland.

Ah come on. Why not Queensland? We could be neighbours! Like the show 'neighbours'.

The Bears can go off with excitement as much as they want on here, the reality is that if they aren’t in the market now, they never will be, as Banks toughen up!!!

I have the cash to get into the market now if I wanted to. I could even buy a place in the Thriving Metropolis (his words, not mine) of Christchurch. I was never going to buy anything with a 10% deposit at a weekly rate I could barely afford. But I have an actual career. It's financial suicide for me to buy in a place where the salary ceiling is so low.

I wouldn't read too much into THE MAN's comment. He believes anyone who thinks house prices will drop has so called "property envy" because such sentiment is a direct attack on his speculator psychosis.

I really feel like he takes it personally, which makes me think he's in a fairly precarious financial situation despite his boasting.

He's also constantly trying to drum up support for the (flat) Christchurch real estate market. I'm not kidding, he literally called it a thriving metropolis.


Precarious financial situation?
Yeah of course I am totally in the crap financially.

That's what not precarious means

Real Estate figures
The stock of unsold property available across New Zealand continues to climb and now stands at 34,665. A sharp rise from the total of 33,488 (29th September) (a significant rise of 3.4% in 11 days). These numbers are rising far faster than previous predictions (admittedly by me) of 35,000 unsold houses by mid November and 36,000 by Christmas. It is possible that we could see 35,000 before the end of this week?
Auckland's unsold listings now stand at 13,054. (the pace having slowed a touch as the FBB deadline gets closer) but still on an upward trajectory.

NB. These figures don't account for withdrawals which (B&T figures currently running at around 33% since February).

Some interesting observations about the residential real estate market on Waiheke Island here.


If that information about Waiheke Island is accurate then the market is truly knackered. even if it's half accurate, the market in Waiheke Island is knackered.

Those sales rates for the last 3 months (two sales), if true, mean that a complete collapse in the upper end of the market is already under way.

Waiheke island has always been stupidly overpriced. My parents looked at a section there in the 70's and it was like $4000. Now they probably want $1M for it. Never seen the attraction of the place, was great to visit when we were sailing for fish and chips on the beach but wouldn't want to live there.

Waiheke Island used to be like a retirement colony for gangsters, and for all I know still is. Laundered money's been going into Waiheke land for at least 30 years, and that always inflates the numbers.

Trademe Rentals for Auckland are also on the rise.
5th October there were 4013 homes listed to rent
10th October there are now 4110 homes listed to rent
A rise of 2.4% in available rental stock in 5 days!

But Nic, there is a shortage of housing remember?!
Yeah right.

Hi denature,

The press seem to talking about a 'shortage' of housing when what they should be talking about is the opportunities to 'short' housing. Westpac and Commonwealth bank would be targets and probably ANZ too - for those with a bit of play money these may be a good 6-12 month bet, profits are likely to get hit by tighter margins on lending, regardless of how far the housing market collapses in Aus and NZ. I think even Mr Key alluded to rising defaults (albeit from a very low base).

An interesting article about living in touched on about housing, salary and cost of living etc.. read the comments.

Enormous interest in the Auckland housing market is certainly evident here........

Over one hundred comments in less than 8 hours in response to today’s run-of-the-mill headline!

How could there be so much interest in Auckland property? It’s amazing!



Maybe commentators are sensing that if there is a collapse in the Auckland market that the impact will subsequently be felt throughout the regions. If say the Auckland median price were to fall to $668k, just a 20% decline from the current median of $835K , it would make sense that the regions would have to have a similar adjustment, or else look a bit out of whack to reality. I can't see many people upping sticks to retire to Tauranga, Hamilton, Hawkes Bay etc if there is no differential for them to do so.

That's probably why commentators are so interested, because where Auckland leads the rest will follow as it has always been.

Hi Nic Poppy / Retired Johnson,

"IF there is a collapse"

"IF say the Auckland median price were to fall.....20%"

It's always "IF"...... IF, IF, IF and more IF's......

But what if "IF" never comes to be?

It's now just on two years since the Auckland housing market peaked (October 2016). People like you said at the time that a crash was imminent........

But I stated here on numerous occasions that house prices would be "far more resilient than many people here dared contemplate" - in a word, "sticky-down". And despite all the determined efforts of people like you to talk prices down - and all the government strategies - that's exactly what's transpired.


Shall I clear it up for you TTP.. I have been a commentator here for 5 months, everything I have said so far has been correct.

The conditions are now all in place and Auckland house prices will fall 20% between now and Christmas 2019. And that will be just the start of it.

Sit back, relax and watch it happen before your eyes.

Hi Johnson / Poppy,

I've been studying property markets for closer to 5 decades than 5 months.

My observation is that people are keen on property in NZ - and most want more of it than less of it......

Further, it hasn't gone unnoticed that there's a scarcity of accommodation here - and it ain't going to get better anytime soon.



I said I've been commenting here for 5 months, my experience however is substantial.

The reason the crash will be greater than 20% is exactly because New Zealanders have an obsession with property, it has bordered addiction and left unchecked with an open cheque book, it unfortunately got ridiculous. Australia has been no different and are several months ahead of us at this point.

Whilst you may have been sensible in your previous dealings, a great number of market participants have not and it is their recklessness/stupidity/herd behaviour that will create the conditions that set the market declines moving forward.

Let's just say that the fundamentals have all changed, sentiment has changed and the weakening economy will magnify the extensive credit issues that are surfacing in the debt markets - I don't expect you to understand these risks and nor do I have the inclination to try and explain.

In future though please refer to me by my name, or not at all. I do at least extend you the courtesy of using your name.

You have to question the value that those 5 decades of study has given you,

It seems like you have invested a lot of time for a very little return!


I respect your experience in studying property markets for nearly 5 decades. Over those 5 decades, when you have purchased all your properties, have you been a cash buyer every time and not used any debt whatsoever? (If so, you would be in the minority of house buyers.)

That is the key - financing, and most buyers require financing. This is the linkage that most property market fundamentalists overlook - the cumulative borrowing of NZ households, which has grown at a rate faster than household incomes, has reached record high levels, and may be nearing its limits.

Over the 50 years or so that you have been studying the property markets and property market fundamentals, bank lending for house mortgages in New Zealand as a whole has grown larger and larger. Lending standards by the banks have come more lenient, especially in recent years with record low interest rates, and banks have enabled house buyers to pay ever rising house prices in Auckland.

It is interesting how the banks have "enabled" a buyers affordability to increase from the levels in 1990's. Firstly the banks previously used 25% of income as debt servicing, which was increased to 33%. They previously only applied 25% of income to debt servicing to the main household income, now they apply it to both household incomes. Then the banks increased the term of the average mortgage from 20 years to 30 years which results in higher loan amounts at same monthly repayment levels.

Then finally they also allowed borrowers to go from P&I mortgages to interest only loans (especially for many property investors). The two other drivers for larger loan sizes are higher household income due to wage inflation, and lower mortgage interest rates from 14.8% in 1990's to 4.5% level currently.

As an illustration, if you adjust mortgage loan sizes for only wage inflation and interest rates, then mortgage loan sizes today would be 4.7x that of the 1990's. After you adjust for the increase in debt service as a percentage of income from 25% to 33%, extension of mortgage term from 20 years to 30 years, then mortgage loan sizes are 7.7x that of levels in the 1990. Then if you adjust for allowing interest only loans from P&I loans, then the mortgage loan size is 10.6x than of 1990 levels.

So as a result of banks changing the terms and making debt servicing payments more affordable for borrowers (i.e. increasing the debt servicing as percentage of income, extending loan maturity terms and from P&I to interest only), bank mortgage loan sizes are 65% to 125% larger of what they would be, had all these terms remained unchanged.

What more can be done by banks to "enable" borrowers to purchase houses in Auckland at current valuation levels and in the current environment of record low interest rates? Well, they could extend the loan maximum term from 30 years to 40 years. That is certainly possible but a low probability event in my opinion. Given that the banks would want to be fully repaid by the time that the owner occupier is retired at 67, then the maximum term would apply to an owner occupier who is younger than 27 (67 years less 40 year mortgage). How many 27 year olds would be able to put down a 20% deposit for an owner-occupier house in Auckland (without any financial assistance from their parents?)

Over the 50 years that you have been studying property market fundamentals, house financing standards have become more lenient. There is little more that banks can do do continue providing financing for house buyers. Some households are already paying 40-50% of their household incomes on debt service payments. When banks stop lending to house buyers as they are unable to meet financing criteria (particularly on debt servicing metrics), then there are even fewer potential marginal buyers who can afford to purchase.

You say that most people want to buy more property, yet the real question is can they finance the purchase at current house valuations in Auckland? More and more borrowers are moving to non bank lenders, however they are unlikely to replace banks as the main source for house financing.

You also say that most people don't want less property - you are right. But when owners want liquidity and need to sell they may not be able to sell at their desired price. In a weak market (aka buyers market), there are low ball offers by savvy investors, so any owner who is desperate and time constrained for liquidity will accept the low ball offer which then impacts the benchmark for other comparable transactions in the area. For example what happens when a leveraged property owner is unable to refinance an interest only loan and is forced to go on P&I payments? These higher payments may cause financial strain on the leveraged house owner.

Bear in mind, that these debt servicing calculations have been made in a strong economy with low levels of unemployment, and low mortgage interest rates. Given that many mortgages in Auckland are calculated using both household incomes, a job loss in the household might make the debt service unaffordable, and potentially put financial stress on the household. Many households in Auckland are financially stretched that they have insufficient financial flexibility to weather an economic downturn and hence are vulnerable.

There is a very low probability that Auckland property prices will continue to double every 10 years in light of the current inflation targets of the RBNZ, current Auckland house valuation levels, and current household debt levels. There is the possibility of property prices in Auckland remaining flat for the next 10-15 years (which would make for an unattractive investment relative to other investment opportunities available). There is also the possibility of property prices falling (which would make property an unattractive investment relative to other investment opportunities available). The extent of a property price change is dependent upon what would the banks do with financially stressed borrowers - would they extend and pretend or would they play hardball.


I could read your insights all day... The 100 word limit is a genuine injustice to your intelligence. I've kept my praise short to avoid the limit, but genuinely smart commentators are now being handcuffed here too. When you dilute information to 100 words of click-bait, you attract minnows to your net..... Is this realy what interest? want or does it differentiate from just HERALDING the STUFFing - nonsense of the rest of NZ's press?

Even that was tight!


Thank you for your comment. Just trying to bring an independent viewpoint to the discussion. I'm open-minded to understanding the merits of each viewpoint.

The key motivations are:
1) understand how the world works in reality and not in theory
2) given the elevated risks of residential property prices in Auckland, highlight those potential risks to highly leveraged owner-occupiers and potentially highly leveraged owner-occupiers who may be financially vulnerable. I have known too many hard-working people (one of which was a family member) who have worked hard, made lifestyle sacrifices in order to save a deposit to buy a house. They were inexperienced in investing and ended up being collateral damage in a property price bubble - these families lost their financial security, and suffered from psychological and emotional stress. In the worst case, this stress culminated in suicide and further emotional stress for the surviving family members.

For the sake of full disclosure:
At this time, I have no financial interest in property prices in Auckland rising or falling. Nor do I have a financial interest in promoting transaction volume in Auckland residential property (unlike mortgage brokers, property mentors, real estate agents, etc)

Leverage is not normally available to the average punter, housing is unique, there is nothing else out there like it. There will be no other market you can use leverage.

There are certainly ways of holding a levered position in equities and futures, and they aren't hard to access.

the down side is severe and you need to put up capital?

Downside is indeed severe, and yes, I believe you'll need some capital to get started on tying your own noose.


I think we share a similar position of no interest, but a genuine desire to highlight the risks to the unsuspecting/inexperienced. It is always them that end up being the last into the game just as the rules change. Owning a home is a wonderful thing for family stability, but too often the price paid (debt) breaks the family apart as couples drift apart under the burden, I too have seen enough of this first hand. Sadly most peoples' financial acumen extends to where the next pay check gets spent, rather than thinking about the consequences of a 30 year decision, how much work is required to pay it back and also the pressure that gets added when starting a family. Hopefully we'll educate a few here, but the competing voices are very loud unfortunately and the media hype is phenomenal. I can't say I've seen such pushing of debt and obsession with property anywhere else in the World, some of the bank adverts are downright scaremongering and should be banned.

Keep posting..

Excerpt from Kindleberger's Manias, Panics and Crashes ...

"Causa remota of the crisis is speculation and extended credit; cause proxima is some incident that snaps the confidence of the system, makes people think of the dangers of failure, and leads them to move from commodities, stocks, real estate, bills of exchange, promissory notes, foreign exchange - whatever it may be - back into cash.

In itself, causa proxima may be trivial: a bankruptcy, a suicide, a flight, a revelation, a refusal of credit to some borrower, some change of view that leads a significant actor to unload. Prices fall. Expectations are reversed. The movement picks up speed. To the extent that speculators are leveraged with borrowed money, the decline in prices leads to further calls on them for margin or cash and to further liquidation. As prices fall further, bank loans turn sour, and one or more mercantile houses, banks, discount houses or brokerages fail. The credit system itself appears shaky, and the race for liquidity is on."

Great comment!!!


Why is it always IF?

The credit environment in New Zealand is contingent upon international investors which is inherently unpredictable.

The credit environment for borrowers in New Zealand is dependent upon the ability and willingness of the banks in NZ to lend. The banks in New Zealand get a portion of their financing from international capital markets, so if international investors are unwilling to lend to NZ banks (or lend to NZ banks at a higher cost), the NZ banks may be unable or unwilling to lend NZ borrowers - it's a follow on effect. Imagine an interest only borrower who expects to be able to refinance into another interest only loan when suddenly the bank says no - that will cause financial stress.

In a severe financially stressed environment, bank depositors in NZ, may shift their funds to Australian banks in Australia. Why? There is a bank deposit guarantee in Australia to the value of A$250,000 whilst there is no bank deposit guarantee in New Zealand, so depositors move their funds to avoid any potential loss. Who could move their funds? NZ companies, and individuals with large cash balances take their cash balances offshore and place in a bank which has its deposits guaranteed. That could mean even further funding stress for the banks in NZ, leading to even tighter bank liquidity and tighter overall credit conditions for borrowers.

Credit lines get reduced or pulled. Maturing bullet payment loans (such as interest only loans, revolving credit lines, etc) are unable to be refinanced. Businesses face financing issues then reduce costs (such as staff layoffs) and may shut down due to inability to repay the loan, households have difficulty making mortgage payments as job losses mount. Highly leveraged property investors may face financing or refinancing difficulties in this environment and may look to sell their property portfolio to repay banks and non bank lenders - if there is a race for liquidity by desperate highly leveraged property owners who own large property portfolios, then this is likely to put downward pressure on property prices as property markets are illiquid at market price levels - property vendors have to discount their price to get the property sold. Remember, over 40% of mortgage debt is owed by 8% of borrowers - we don't know how leveraged they are, but it is likely that some are overleveraged. (FYI, I just read about a property owner who was desperate and sold their property for 30% below market value)

This is all contingent upon the willingness of international investors to continue financing the bank. That is inherently unpredictable, but banks and borrowers should be aware of these risks and have sufficient financial flexibility to deal with such an environment. Many borrowers are highly indebted, may not have sufficient financial flexibility and may be unprepared for such an environment. With the capital flows recently out of Turkey, Argentina and other emerging markets by international investors, and the US interest rates expecting to rise further, this risk has risen globally - you have seen this in New Zealand with the impact of weakening of the NZD exchange rate.

Recall what happened in 2008 / 2009 when the finance companies were unable to renew their financing. As they could not get financing, they could no longer lend to borrowers, and their borrowers had to repay loans, which caused financial stress. Finance companies couldn't raise funds to repay maturing deposit holders and hence many deposit holders of finance companies (many retirees looking for higher interest rates on their cash savings) lost their money.

Hi CN. The bank deposit guarantee in Australia isn't worth the paper it's written on. The banks have an over-ride in the Ts and C's of their deposit agreements, the money is theirs if needed for a bail-in. Lot of questions about this being asked across the ditch.

" I just read about a property owner who was desperate and sold their property for 30% below market value"
Whatever that property owner sold their property for WAS market value. It doesn't matter to whom; or why or when. Whenever a transaction goes through that creates the new 'market value'. And.....all the other properties in the vicinity will now be tarred with the same valuation brush...
(NB: That works in both directions. When the market is being 'ramped up ' with 'above market' sales, it likewise inflates the surrounding properties. why it is done!)

More on IF ...

During the GFC in 2008 / 2009, IF the RBNZ or government hadn't acted or had been too slow to act, property price falls would have been much more substantial than they were. In the perspective of Nasim Taleb, this was a possible alternative outcome which just because it did not eventuate, was forgotten about. Just because an outcome didn't occur doesn't mean it wasn't a possibility.

Property prices are the result of a number of variables including economic and financial conditions. Those explicitly predicting the future direction of property prices, are making implicit assumptions surrounding these variables in their predictions - an incorrect assumption or projection in any one single variable could result in a different outcome and it may be difficult to isolate the reason for the different outcome.

It is more worthwhile monitoring any changes in key variables.

There was an international credit crunch during the GFC in 2008 / 2009. The banks in NZ had difficulties getting financing from international investors. The government had to provide guarantees to investors in order to restore confidence for international investors to lend to the banks in NZ. Furthermore bank depositors were taking their money out of banks. Remember this was in an environment where the Australian banks had guarantees from the Australian government so they could maintain adequate liquidity so depositors and international investors might have preferred placing their funds there instead of NZ to lower their risk of loss.

So in order to ensure the banks in New Zealand had adequate liquidity (so that they could continue to lend and refinance maturing loans from borrowers) the following actions were undertaken:
1) government retail deposit guarantee - so depositors did not remove their money from banks
2) government guarantee on bank debt (on an issue by issue basis) - so international investors continue to fund the banks and banks could refinance maturing debt.
3) term auction liquidity facility - so in the event that depositors took out their money and international investors reduced their financing of the NZ banks, the banks could get liquidity from the RBNZ. The RBNZ would take mortgages as collateral for the loans.

IF these actions were not made, the banks in NZ would have had significantly reduced liquidity and would most likely have reduced lending as more credit lines were pulled, maturing bullet loans were not renewed, etc. With a credit crunch of this magnitude, there would have been a much deeper economic downturn, more business closures, and a higher rate of unemployment. As banks tighten lending even further, fewer buyers of property can get finance to buy, and when combined with more financially distressed property owners, property prices would likely have fallen further.

Many who are outside of financial markets are unaware of the financial linkages of conditions of international capital markets, with local bank credit availability. These factors impact the ability and willingness of banks to provide credit and ultimately financing for property purchases.

For those involved in the residential property leasing business, the first signs are often when they're unable to get financing for their property purchase and / or changes in lending criteria by the banks. If those who require financing for their property purchases are aware of the above linkages, then they might be able to detect changes in the credit environment earlier, and respond in a more timely manner, rather than get surprised when they get declined by the bank for credit, when credit conditions have changed. People who deal with banks regularly (such as mortgages brokers) might become aware of credit environment changes more quickly, whilst those who deal with banks infrequently (such as owner occupiers and buy and hold property investors who aren't actively buying frequently) may be slower to detect credit environment changes.

Frequently borrowers assume credit conditions remain unchanged whereas is reality it can change suddenly and unexpectedly. One example of assuming unchanged credit conditions is many property investors who borrowed on interest only terms 5 years ago assumed that they can refinance on interest only at the end of the interest only term - some property investors are now getting caught out and potentially getting financially stressed.



FYI, check out current events in Italian banking system, capital market conditions and liquidity of Italian banks

For those who are highly leveraged and highly dependent upon bank credit, note that Italy's sovereign debt is much larger than Greece in the Eurozone, so it is worth your while monitoring this situation . This is what former a RBNZ governor had to say about the Greek government default.

"Could a Greek default spark another round of financial freezes and harm currencies, banks and governments as far away as New Zealand? We were hopeful not."

Still going for the flat line scenario myself, but the big IF is what happens on the world stage that then affects us and you can never rule that out. I don't see anything on a local level that would indicate change. Its not in this governments interest for the market to crash, it has too many flow on effects they will see them out of a job. Sorry but its just human nature, everyone looks after their own self interest first.