ASB Housing Confidence Survey shows a net 12% of respondents expect Auckland house prices to decline; most respondents see now as neither a good time nor a bad time to buy a house

Because people buy investments predominately on price expectations. Price expectation in Auckland is a slow decline hence the CGT decision is irrelevant. Why would you buy with the trend and expectation of a falling Auckland market ?

Will likely be minimal. There is no change in CGT, it's the same as it was. Plus it seems more people are coming around to thinking there'll not be any capital gains for the next few years in the property market. This could be a reason the govt decided not to implement CGT, apart from Winston. The property market is just such a big part of the NZ economy (which is not a great thing). No CGT and lower rates could help the market not drop so dramatically, but seems unlikely to give it much in the way of capital gains right now.

How about c) the RBNZ have deliberately turned a blind eye to maintain plausible deniability while hoping against hope that the credit injected into the market can offset enough of the exiting investors leaving the market to avoid a catastrophic collapse...?

"willing to pay"

You spelt borrow wrong.

or 'able to pay'

Hi Fritz,

Have a look at house prices in Auckland's inner-city suburbs.......

The reasons why Auckland inner-city house prices are relatively high is because there's a huge demand for them - but not too many listings. That means there's a shortage of houses there.

By the way, a net 12% of respondents to the survey expecting Auckland house prices to fall is a relatively small percentage. And remember that expectations-type surveys are notoriously volatile.......

Further, the "net 12%" figure says nothing about the magnitude of any house price fall. In fact, Auckland house prices may rise.

TTP

Victoria has maintained a higher rate of building than NSW for most of the last decade.

https://www.abc.net.au/news/2019-01-09/building-approvals-plunge-novemb…

Ouch.. the spruikers' spruiker is going bearish. That can't be a good sign.

Tony Alexander is a doom and gloomer. Find someone less depressing who will say that property only ever goes up in price, despite evidence to the contrary.

Hi theglc.

I wonder if we’ll see class action suits by investors that were listening to Mr Alexander’s speeches in 2017 and remortgaged the family home to jump in... this one from the Tony Alexander archives is a ‘doozy’ - a masterclass in debt salesmanship! Published in July 2017.

https://youtu.be/A-psmZvMT3M

No quite, I'm glass fully full : )

Yep. It's all coming back to the fact that prices are simply too high.
They are too high for many potential FHBs (both in terms of deposit requirements, and repayments).
And they are too high for many investors, in terms of deposit requirements and yield.
The banks are being more cautious, and interest rates can't drop much more.
The Ponzi has simply run out of steam.
The only think that could restart it would be if mortgage rates dropped below 2.75% - unlikely.
Or another unlikely kick-starter - bigger hand outs from the government for FHBs (I wouldn't put it past them though. They are pretty daft. And with Kiwiflop they need to regain some political capital with fHBs). Is this a potential Budget bolter?

Although difficult to quantify effective demand has also fallen due to:

1) foreign buyer ban restrictions
2) anti money laundering rule implementation
3) property prices in Auckland have stopped increasing - this has reduced the amount of buying from property investors using equity release / deposit recycling financing techniques (i.e buy house, add value, get it revalued upwards, extract equity to max out LVR on higher asset valuation via borrowings, use these borrowings for equity deposit on next house purchase). It looks like this financing technique is still being used in other locations around New Zealand where property prices are rising and attracting property investors.

How you can have a housing shortage and a fall in property prices at the same time.

The calculation of underlying demand is used for the purposes of long term town planning, and infrastructure needs (such as sewerage, parks, roads, schools, etc) due to an increasing population. Underlying demand is not useful for estimating future property market prices.

For example, the housing shortage number calculated for underlying demand would remain unchanged in the following 2 extreme situations, (assuming current household incomes, current population, current population growth & the number of residents per dwelling of 3.0).

1) if the current median house price in Auckland was $10,000. In this case there would likely be a huge increase in the number of active property buyers which would increase effective demand (and would be above underlying demand). People who were not owner occupiers would buy at this price. A large number of people who are already owner occupiers would also become active buyers and buy at this price - buy a house for their children, grandchildren, parents, holiday homes for out of towners, etc as they are cheap. People who could afford it from all over New Zealand and abroad (such as Australians and Singaporeans who are exempt from the foreign buying rules, and New Zealanders living overseas), are likely to become active buyers in the market. The underlying demand calculation does not incorporate this.

2) if the current median house price in Auckland was $10,000,000. In this case, there would likely be fewer active property buyers in the market. The number of effective demand would be fewer than that for underlying demand. The underlying demand as calculated above would remain unchanged - after all there is no change to population estimates or the assumption of the number of people living in each house. There would still be a "housing shortage" as calculated by economists using the population numbers, but in reality there would be few buyers active in the market if the median house price in Auckland was $10,000,000. Very few would have the deposit necessary to buy, and very few would meet the bank lending criteria particularly on debt servicing.

This is the reason why the underlying housing shortage is a misleading number (as calculated by economists, etc, and quoted by mainstream media, politicians, property market commentators, etc) as a justification for future house prices to continue rising. It is used as a convenient justification by those in the real estate industry to persuade those to enter the residential real estate market.

Economists in their calculations of the underlying housing shortage, and talking about future property market prices, have failed to incorporate the fact that:
1) as prices rise, effective demand falls
2) as prices fall, effective demand rises.

This is introductory economics and the basics of demand. Underlying demand is unchanged, yet effective demand changes. This is how there can be a housing shortage (due to underlying demand), yet property prices fall (due to an imbalance between effective supply and effective demand).

So when talking about a housing shortage, there are two numbers to understand for their own specific purposes:

1) Level one supply and demand - this is underlying supply and demand - this is the most commonly referred to and discussed by most property market commentators, media, politicians, etc. This is useful for long term town planning purposes for local councils to determine infrastructure needs.
2) Level two supply and demand - this is effective supply and demand - and this is the key determinant of property market prices - and this is how property markets can go from being a buyers market to a sellers market (and vice versa).

link to PDF report - https://www.mbie.govt.nz/dmsdocument/1087-nz-housing-report-2009-2010-s…

Read Chapter 2: Demand
2.2: Underlying demand
2.3: Effective demand

Yes that's why we need the results of our 2018 census, to show how many empty home there are out there. I'm pretty sure it will be a lot more that 33,000 empty homes for Auckland which was taken for the 2013 census not even at the height of the Overseas Investor spending spree that went on until late 2017. Wouldn't be surprised if it was at least 50,000+ empty homes now.

Yep, in Hong Kong and Singapore it's the same ~ mainland buyers don't tend to rent out their vacant property. If you look at the newer blocks in the CBD its certainly the case that the majority of units are not occupied.

Two words - Air BnB

I would be worried .... if you weren't so utterly wrong. TA did not say that prices in the regions will be down hahaha

Sadly the link doesn't seem to work. Very interested to look at that data though, most interesting.

Another interesting one to look at is the barfoots auctions, a day or two before they go up for auction the Particulars and Conditions are posted, and you can see who the seller is. Eg, of the 5 properties listed at tomorrows barfoots 1.30pm city auctions, only one property is held in a trust. You could also take a (very rough) guess as to the ethnicity of the seller by their names.

I do wonder who's going to buy all these townhouses in far flung locations like Milldale, at 'affordable' price points (of 800K plus).
Seems like a bust waiting to happen:

https://www.trademe.co.nz/property/new-homes/house-land/auction-2164818…