NZ 1st homebuyers are ScReWeD... [Archive] - Page 8

POSSUM THE CAT

01-09-2009, 11:18 AM

George Went to an auction in better part of Ranui, Land Agents would call either Western Heights or Henderson Heights. A fairly new 5 bedroom home of roughly 150sq meters, living areas were only big enough for a family of Sardines. backed onto a Nudist Colony. House in below average condition, substantial water damage in both bathrooms & an absolute abortion of a plan with the laundry in the middle of the house. Auctioneer could not get any bids as he was making no indication of price. So decided to start it with an auctioneers bid of $430000.00 as he said you would not buy it for that. Working on QV for a five bedroom house in that area that they have never seen. Everybody walked out in disgust. My valuation = Land Value less cost of removing the abortion of a house. Yield more like 4% after you take rates and insurance off the rent let allone any maintenace, letting fees, etc to be viable investment in my opinion you would need to rent for $480.00 per week

George

01-09-2009, 11:42 AM

An agent for 'whatpriceyrhouse.com' came around and felt she
could ask 349k for our 2 bed villa which I have done up nicely.
With a cv of 315k which we bought 2 yrs ago for 312k (should have
offered 290), thought the market was holding up but am not so sure now.
She may have been just trying to get our business, as another 2 bed
up the road, newer but needs bath/kitchen upgrade, was for sale at
279k with a cv of 300k. No one is going to buy ours for anywhere near
350k when a 3 bed up the road can't get a bid for 240k.
We do have a great view though and very private for a cross lease.

minimoke

01-09-2009, 02:02 PM

.
With a cv of 315k
George - Don't get hung up on the CV Values - the only purpose they have is to set local body rates. Just to clarify - you've given 3 CV's a 3 bedroom lockwood for $295k, a 2 bedroom villa for $315 and another 2 bedroom vila for $300k. Its impossible to tell if there is any relativity between these figures because these properties aren't individually valued for CV purposes. Arguably a lockwood in a suburb of villas is going to be out of place and worth less - and perhaps therein lies why its not selling.

Where CV values is of some advantage is to try to buy a house with a low CV and save a bit on your rates.

As for agents coming around, I always get three to pop around. No point relying on one - in fact you can hardly rely on any of them. You then pick a figure that you reckon best suits your local market conditions. Bear in mind it appears you bought at the top of the property cycle and values have gone back from there - but on their way up again. Taking even a 5% drop in value over the past couple of years I'd have thought you'd be looking at a value of around $300 not $350.

minimoke

01-09-2009, 02:06 PM

A fairly new 5 bedroom home of roughly 150sq meters,

150 sqm!!! Holy F#*& someones brain wasn't engaged when that was designed. A person would have to be mad to even look at buying 5 bedrooms at that size - unless some major renovations could be done to convert it to a three bedroom.

Dr_Who

01-09-2009, 02:19 PM

150 sqm!!! Holy F#*& someones brain wasn't engaged when that was designed. A person would have to be mad to even look at buying 5 bedrooms at that size - unless some major renovations could be done to convert it to a three bedroom.

Hey, how did you know it wasn't originally designed for a Japanese family? :p:D

fungus pudding

01-09-2009, 02:48 PM

Hey, how did you know it wasn't originally designed for a Japanese family? :p:D

Couldn't be. It's too big.

POSSUM THE CAT

01-09-2009, 04:02 PM

Minimoke yes you are right bedrooms are good size but living areas were for sardines kitchen not even 3meters square combined dining room lounge about 6m x3.5m the only realistic alteration would be to knock out wall between lounge and garage as house steps down in two stages to bedrooms. Demolition would be best answer

AMR

05-09-2009, 12:45 AM

Design is everything...I'm about to build new 3 bedroom 60m2 house, and most of you wouldn't be able to tell :)

JBmurc

12-09-2009, 09:01 AM

Design is everything...I'm about to build new 3 bedroom 60m2 house, and most of you wouldn't be able to tell :)

60sqm thats small

Looking to build early next year current plans I think are garage is round 73sqm

Dr_Who

12-09-2009, 09:15 AM

60sqm thats small

Looking to build early next year current plans I think are garage is round 73sqm

73sqm garage? LOL

You gonna park your fleet of ferraris from the proceed of IRN? :D

I hate dealing with contractors, esp those that constantly complains to me about not able to do this and that and cant meet deadlines. The worst part is neighbours who complain. In the up market areas, the neighbours usually wants you to pay them to sign off the consent. Bunch of assholes..... shiat, I am starting to sound like Clint Eastwood in the movie Grand Tourino.

JBmurc

12-09-2009, 09:34 AM

73sqm garage? LOL

You gonna park your fleet of ferraris from the proceed of IRN? :D

I hate dealing with contractors, esp those that constantly complains to me about not able to do this and that and cant meet deadlines. The worst part is neighbours who complain. In the up market areas, the neighbours usually wants you to pay them to sign off the consent. Bunch of assholes..... shiat, I am starting to sound like Clint Eastwood in the movie Grand Tourino.

LOL yeah more like FPV I'm a ford man love me V8's even though I'm quite keen one day on a typhoon turbo 6--- 0-100km sub 5secs can be easy mod to eat ferraris

going off my current numbers we'll save $30pw owning are own home rather than renting here just down the road from are section.

As for dealing with contractors consents going leave that to the home builders -currently dealing with platinum & golden homes

Dr_Who

12-09-2009, 10:27 AM

Have you tried out the new Nissan GTR? 0-100km in 3.5 sec!! Supercar performance without the supercar price.

Good idea to own your own home. Renting only gives your money to the landlord. I have never rented. Have always been a home owner and a landlord. Owning a home also gives you security and a sense of wellbeing.

AMR

12-09-2009, 05:19 PM

Really? It seems like a better deal to rent and purchase an IP rather than buying an owner-occupied home at first, with all the associated tax benefits and depreciation, etc.

The GrandMaster

13-09-2009, 09:16 PM

Renting only gives your money to the landlord.

Really? So if the rental yield is 6% and interest rates are 7%, who's giving money to who?

JBmurc

13-09-2009, 10:12 PM

Really? So if the rental yield is 6% and interest rates are 7%, who's giving money to who?

-the bank-

An if home inflation on average is at 5% your average bank interest 7% owning your own home is a true wealth cost of 2% per ann so for ever 100,000 loan say a true cost of =$2,000 per ann + expenses
Now if you renting you have no hedge on that home inflation so true cost is your rent
=rough est per 100k home $100pw or $5200pa

Current we pay 500pw or $26,000pa looking forward to paying 480pw for a own property

Now I'm talking about NZ here where property is like gold in NZ'er eyes

Smart investors uses others money to make money-

The GrandMaster

14-09-2009, 09:11 AM

Current we pay 500pw or $26,000pa looking forward to paying 480pw for a own property

so are you buying the place that you are renting? if not, then your comparison is pointless.

most people that go from renting to owning typically 'downgrade', and think that they are somehow saving money.

currently I pay $520pw to rent, it would cost me a lot more to own...

JBmurc

14-09-2009, 10:15 AM

so are you buying the place that you are renting? if not, then your comparison is pointless.

most people that go from renting to owning typically 'downgrade', and think that they are somehow saving money.

currently I pay $520pw to rent, it would cost me a lot more to own...

No we'll be living in a house that will be twice as good fact is I've used the banks funds to make me money in the past so the loan will be only 50% of the value

OK my comparison isn't perfect but to think renting is some way is better long term financial rather than owning your own home(even if it isn't as good) is just plain stupid-Inflation takes care of that history is a great example here in NZ

The GrandMaster

14-09-2009, 10:56 AM

No we'll be living in a house that will be twice as good fact is I've used the banks funds to make me money in the past so the loan will be only 50% of the value

OK my comparison isn't perfect but to think renting is some way is better long term financial rather than owning your own home(even if it isn't as good) is just plain stupid-Inflation takes care of that history is a great example here in NZ

Not better, financial isn't a reason to do either. The financial benefits of owning a home over renting are consistently exaggerated in this country - based on a lot of misinformation. Of course, that is what HAS created house inflation in the past, though I wouldn't want to put my faith on that continuing.

So in your example, you are only going to be paying $20pw less in cash terms - but what about the cost of having that equity tied up?

minimoke

14-09-2009, 12:22 PM

Hi Minimoke,

Thinking of buying a few rentals in your fair garden city over the remainder of 2009.
Heres one for you.
http://www.harcourts.co.nz/listing/details.do?rul=%2Fsearch%2Fprocess.do%3Fpg%3D1%26t s%3D198504857%26qst%3DC090814&id=483919

CV is currently $188,000. But here'ss the beauty of it - its just down the road from the "House of Horrors" so this will devalue the property hugely - not a great time to sell. On the plus side you have three bedrooms - so you can get some bennies in there and start looking at a decent cash return straight away. Then you have the Council looking at demolishing the House of Horrrs and putting in a park - which, with peoples ability to move on and forget the murders, will see the property move up in value in time to come.

JBmurc

14-09-2009, 12:25 PM

Not better, financial isn't a reason to do either. The financial benefits of owning a home over renting are consistently exaggerated in this country - based on a lot of misinformation. Of course, that is what HAS created house inflation in the past, though I wouldn't want to put my faith on that continuing.

So in your example, you are only going to be paying $20pw less in cash terms - but what about the cost of having that equity tied up?

equity tied up not really the bank will loan me upto 80% of the value of the home in my case loan funds 350,000 reg value of home 1m so free cap 650,000- 80% =520,000 I could loan from the bank at current fixed rates of say 6% for what ever I what.

You have no faith on inflation continuing LOL tell that to your landlord when he hikes your rent up..

Dr_Who

14-09-2009, 01:25 PM

Heres one for you.
http://www.harcourts.co.nz/listing/details.do?rul=%2Fsearch%2Fprocess.do%3Fpg%3D1%26t s%3D198504857%26qst%3DC090814&id=483919

CV is currently $188,000. But here'ss the beauty of it - its just down the road from the "House of Horrors" so this will devalue the property hugely - not a great time to sell. On the plus side you have three bedrooms - so you can get some bennies in there and start looking at a decent cash return straight away. Then you have the Council looking at demolishing the House of Horrrs and putting in a park - which, with peoples ability to move on and forget the murders, will see the property move up in value in time to come.

The only problem I find investing in the poorer areas is that it is hard to find good tenants. They tend to treat your rental property like a pig style. Look at the mess in the backyard of the house in your link For Sale.

minimoke

14-09-2009, 01:45 PM

Look at the mess in the backyard of the house in your link For Sale.
Mess? Thats a sun lounger and a fish filleting table as a bonus. And a place for a sheltered hangi/umu - what more could your tennants ask for!

The GrandMaster

14-09-2009, 06:16 PM

You have no faith on inflation continuing LOL tell that to your landlord when he hikes your rent up..

I've been renting for nearly 15 years now, occupying 3 different places, and never have I had a rent hike. If the landlord wants to get rid of tenants as good as us, then they can roll the dice.

Meanwhile I will happily let the landlord take the bet that the value of the property will go up to offset the negative return they are making at the moment. If it pays off for them, good on them, but I've got better things to do.

JBmurc

14-09-2009, 06:51 PM

I've been renting for nearly 15 years now, occupying 3 different places, and never have I had a rent hike. If the landlord wants to get rid of tenants as good as us, then they can roll the dice.

Meanwhile I will happily let the landlord take the bet that the value of the property will go up to offset the negative return they are making at the moment. If it pays off for them, good on them, but I've got better things to do.

so you've paid 520pw for 15yrs thats some $405,600 in rent nice one keep renting for another 22yrs without any rent rises an you would have paid $1,000,000 in rent

personal I can't wait to finally have are own home next year an then to have it dept free before I'm 40 like having cash in the bank ...except you can live in it

The GrandMaster

14-09-2009, 08:51 PM

so you've paid 520pw for 15yrs thats some $405,600 in rent nice one keep renting for another 22yrs without any rent rises an you would have paid $1,000,000 in rent

personal I can't wait to finally have are own home next year an then to have it dept free before I'm 40 like having cash in the bank ...except you can live in it

"never had a rent hike"

but that's alright, I'll play your game. based on the average interest rate over the last 15 years, that would be $594,000 in interest I have not paid (or interest I have not forgone). no capital gain, but then I have made capital gain elsewhere.

as you mention, it's a personal decision, not a financial one. that's my only point. i just prefer cash I can spend rather than that I can sit in...

minimoke

22-09-2009, 01:41 PM

The only problem I find investing in the poorer areas is that it is hard to find good tenants. They tend to treat your rental property like a pig style. Look at the mess in the backyard of the house in your link For Sale.
Theres also a risk of arson - the "House of Horrors" has now been burnt down and probably adding a bit of value to the house on the previous page.

Dr_Who

01-10-2009, 01:56 PM

Anyone else here still think the property market will fall 30-40% and will not go back up for another 3-4 years?

I recall a number of posters here strongly voicing a doom and gloom for the property market a 6 months back.

miner

01-10-2009, 02:04 PM

Lots of the one's I have been watching over the years have dropped 30+%,as have said before depends where your looking,but then you guys just look at what suits what your saying.

Cheers
miner

minimoke

01-10-2009, 02:31 PM

Lots of the one's I have been watching over the years have dropped 30+%,as have said before depends where your looking,but then you guys just look at what suits what your saying.

Cheers
miner

QV says values are moving up, REINZ says values are moving up, Bollard reckons values are moving up, Bernard (I'm a Property Guru) Hickey reckons it will now only be 15% fall, Tony Alexander reckons prices are moving up, Mike Pero reckons its moving up, Treasury reckons its moving up; the Minister of housing is encouraging state tennants into ownership, - who've I missed? My views are already well canvassed on these threads.

miner

01-10-2009, 02:40 PM

Sure in some areas they may be now mini but it still doesnt change the fact that I have watched some drop 30 odd %,and you preaching on that they didnt wont change that,you guys are in love with property and as the old saying goes "love is blind".

I have made money on property before and will again but the last few years where I am have not been the time to buy as all they have been doing is sitting there not selling and dropping in price or selling for allot less than in the hyped boom.

Interesting how you guys keep denying what I have seen and showed you examples of,waste of time so leave you to it again.

Cheers
miner

minimoke

01-10-2009, 03:32 PM

but it still doesnt change the fact that I have watched some drop 30 odd %,
Miner - I'm not disputing your observations - you know best what it is you are seeing. However I respectfully suggest the sample of your observations is less than that used by QV, REINZ et al. Consequently your sample size doesn't have the same validity as the other data. Useful as it is at a micro level it doesn't reflect what is happening at a macro level. At a micro level I can prove anything I like. I might assert Red coloured houses have increased (or decreased) in value 900% by observing red houses but this doesn't add a view of the housing market as a whole.

All macro evidence points to an improving property market. There is no evidence that the market has fallen 30%. There is evidence that properties you have observed have fallen by 30%

Kees

01-10-2009, 04:57 PM

I am with you Miner I have been keeping a keen interest on comercial property and the
amount of emty buildings is increasing prices are dropping but until interest rates rise
I think property will keep tanking.
I am certainly not interest to invest until I can get a decent return ,good long term lease and no worries about the tenant until then the dough can stay were it is.

wns

01-10-2009, 07:21 PM

I can't comment on NZ, but on average, house prices rose here in Australia by 2% last month.

Here's an article from The Australian newspaper the other day...

Reserve Bank warns of housing market bubble risk

http://www.theaustralian.news.com.au/business/story/0,,25847136-36418,00.html

I don't really mind too much if housing prices go up or down.
If prices go up, my wealth goes up.
If prices go down, then I may get to purchase another investment property at a decent yield.

minimoke

02-10-2009, 08:31 AM

Ptolemy

02-10-2009, 01:59 PM

[QUOTE=Dr_Who;275618]Anyone else here still think the property market will fall 30-40% and will not go back up for another 3-4 years?
QUOTE]

I don't think we see real drops of 30% but I do think nominal drops are likely of 30% over the next 5-10% years. House prices will revert to trend. i.e flat, slight drops, small rises year by year but essentially flat for the next decade.

I know many of you guys think that house prices at these levels now are the new norm and we are about to witness another boom but frankly I can't see the ingredients to start another boom. Interest rates rising, unemployment rising, fragile recovery at best being driven by housing not exports and manufacturing. Supply is up strongly in September - it will be interesting see if it is enough to meet the "pent up demand" that the RE industry continually roll out.

We'll see.

minimoke

02-10-2009, 03:50 PM

[quote=Dr_Who;275618]A

I know many of you guys think that house prices at these levels now are the new norm and we are about to witness another boom
I'm not sure there are many here (any?) picking a new boom in property. I for one aren't. I could never see a 30% drop in value as the experts were predicting - and we are now seeing how valid those predicitons were.

loofa

02-10-2009, 08:52 PM

minimoke

03-10-2009, 10:06 AM

T..the important thing is that ability to save will be important in a wavy market .
And theres a challenge. Put your money in the bank for a 5% gross return. Put your money into Finance Companies for more than 2 years for a ?? return. And there is teh stock market of course. Or you could put your money into property which has seen a 6.7% net increase in median value so far this year.

Dr_Who

04-10-2009, 05:47 PM

The present market is an unrealistic one to decide whether prices are moving and which way.
My contacts suggest that the median price is affected by the type of property which is selling. Hopefully there will be some stabilisation within a year but the important thing is that ability to save will be important in a wavy market and now there is no hurry to buy (or to sell for that matter)
It may all be decided for us if the overseas investors slow down the available cash at cheap rates.
Who knows?

101 economics

Wait till all those newly printed money with cheap interest rate flood the retail market. History repeats itself. Oh wait, they have already started flowing in. Auckland property market is heating up. Those that still say Auckland market is down are on fantasy island waiting for Tattoo to ring the bell.

fungus pudding

04-10-2009, 08:03 PM

101 economics

Wait till all those newly printed money with cheap interest rate flood the retail market. History repeats itself. Oh wait, they have already started flowing in. Auckland property market is heating up. Those that still say Auckland market is down are on fantasy island waiting for Tattoo to ring the bell.

Continuing 101 economics .............outgoings for a roof over your swede are governed by affordability.

devito

05-10-2009, 12:09 PM

Wait till the Government bring in the new "land tax" and change a few of the depreciation rules for investors.
They will sell in droves and we will then see where the "norm" is.

George

05-10-2009, 12:38 PM

Dr_Who

05-10-2009, 02:06 PM

Hey George, try going to the open homes out in Ponsonby, Grey Lynn, Mission Bay, Orakei, Mt Albert. It tells a very different story.

Jay

05-10-2009, 04:22 PM

Hey George, try going to the open homes out in Ponsonby, Grey Lynn, Mission Bay, Orakei, Mt Albert. It tells a very different story.

Properties around my way - close to one of the above have been selling inside 30 days and above GV.

All auctions with more than 2 bidders

yes these are in the $800K + category

(however I don't think I would get that for our place and i'm not shifting anyway so it is a waste if time thinking about it :confused:)

STRAT

06-10-2009, 09:01 AM

House next door in Henderson, good view, great location (some may
think that is debatable), cv of 280k, on sale for 296k.
Not one person to 6 open homes over last 3 weekends.
With a house up the road only having one offer of 230k compared
to cv of 290 it seems there are no buyers around compared to some
of the more up market suburbs.Hi George
A turn in the Market will always start in the more prosperous areas.

Looking for signs of life in the property market? Inner suburbs are where we should be looking for new spring shoots.Following that look for more activity in the domestic building industry in those areas. It then moves out like ripples in a pond after a stone has been thrown.
Out west Ranui is the last to benefit and when it does its a sign the boom is coming to an end.

North Shore is showing real signs of life now too. From one Westie to another you can take renewed activity in Avondale as a early to middle sign of things to come.

Domestic Market
Anyone looking for best entry in the upper price ranges should have been in around when the Share Market turned ( March ) or shortly after. No surprises there. Anyone looking in the mid price range should be getting their A into G and doing some serious hunting. Bottom end should be doing research and keeping their eye on the ball IMO

The GrandMaster

06-10-2009, 09:22 AM

Hey George, try going to the open homes out in Ponsonby, Grey Lynn, Mission Bay, Orakei, Mt Albert. It tells a very different story.

Really? I live in Ponsonby. Place across from us has been on the market for what must be well over 3 months now...

Dr_Who

06-10-2009, 12:40 PM

Really? I live in Ponsonby. Place across from us has been on the market for what must be well over 3 months now...

He must asking way too much for it and are unrealistic.

I have been buying and looking at property for the last 6-12 months, this includes the Ponsonby and Grey Lynn area. So I do know the area well. All the good properties in that area that are realistically price will get snapped up quickly.

Dreamers should go live on Fantasy Island.

minimoke

18-01-2010, 11:31 AM

Two year anniversary Shrewdy, so time to review your original post on buying a first home.

Your original figure of $330k ...

So now to deposit rates – you sure could have looked at buying a house on pretty much zero deposit – but not any more. You’ll now be looking at a 20% deposit.....

And interest rates. The RBNZ had a floating rate in Jan 07 of 9.5% and two year fixed was 8.2%. We know you are against fixed rates – but you would have seen floating rates increase month after month to an eventual high of 10.3% in Sept 08. Some of us who like fixed rates would have sat back on 8.2% and watched you pay 2% over the odds following your view. ... Three year anniversary shrewdy.

Remember you were looking at a $330k median property and a 9.5% floating rate back then and you didn't think it was a good time to buy.

REINZ figures out today show a median of $360,000 - the highest property values have ever been. Thats a 9% increase in value from your original question - despite all the doom and gloom and the "market will drop by 30%" and "we are due a housing fall...."

We still can't get 100% mortgages but you could get a 90% one now - but banks are probably stil going to prefer a 20% deposit.

Interst rates are at around 5.79% for a floating rate now or 7.20% for a two year fixed.

During the last few years we've seen dozens of finance companies go under and $b's in investor funds lost. A first home buyer would be in deep poo if they had parked their deposit and savings there over the last few years.

As for the equity market, not too many IPO's; a few listed companies no longer around and the NZX and back in Jan 07 teh NZX All index was at 4106 gross (1094 capital index or a market cap of $41,370m) wheras for December 09 it was at 3247 (773 cap index and market cap of $33,431m). Again if a home buyer hopeful had put their money into equities, hoping for a an imporovement in their housing postion I think they will be a bit disappointed.

So in summary we've seen property go up, deposits go down, equities go down. Perhaps back in Jan 07 first home buyers weren't screwed after all.

loofa

19-01-2010, 07:33 PM

Three year anniversary shrewdy.

mm
Since 20/20 hindsight is a marvelously generous tool, perhaps you would instead care to predict Jan 2011.
I would not deny the current position except that maybe the median price is sc(r)ewed by more liquid higher price buyers doing their thing.

http://www.interest.co.nz/ratesblog/index.php/2010/01/19/opinion-why-real-house-prices-are-25-above-their-long-term-trend/ which may explain better than many of us can how the future may pan out.
Also
http://www.interest.co.nz/ratesblog/index.php/2010/01/19/preview-tax-working-group-set-to-suggest-depreciation-changes-small-land-tax-and-an-income-tax-cut/ may have an effect.
2010 may be an interesting year

fungus pudding

19-01-2010, 08:20 PM

Three year anniversary shrewdy.

Remember you were looking at a $330k median property and a 9.5% floating rate back then and you didn't think it was a good time to buy.

REINZ figures out today show a median of $360,000 - the highest property values have ever been. Thats a 9% increase in value from your original question - despite all the doom and gloom and the "market will drop by 30%" and "we are due a housing fall...."

We still can't get 100% mortgages but you could get a 90% one now - but banks are probably stil going to prefer a 20% deposit.

Interst rates are at around 5.79% for a floating rate now or 7.20% for a two year fixed.

During the last few years we've seen dozens of finance companies go under and $b's in investor funds lost. A first home buyer would be in deep poo if they had parked their deposit and savings there over the last few years.

As for the equity market, not too many IPO's; a few listed companies no longer around and the NZX and back in Jan 07 teh NZX All index was at 4106 gross (1094 capital index or a market cap of $41,370m) wheras for December 09 it was at 3247 (773 cap index and market cap of $33,431m). Again if a home buyer hopeful had put their money into equities, hoping for a an imporovement in their housing postion I think they will be a bit disappointed.

So in summary we've seen property go up, deposits go down, equities go down. Perhaps back in Jan 07 first home buyers weren't screwed after all.

So interest on 330k at 9.5% = 31350 x 3 years = 94,050. allow rates of 4,500 at a guess.
Maintenance allow 5000 per annum (cos that's the minimum to keep value up)
Insurance $500.
Totaql outgoings over 3 years = 99550.

So as long as your rent has been 638.00 per week you have made a profit of 30,000 over 3 years. Not a good investment. If you have received less than 638 per week it's a terrible investment. That's assuming the median prices are somewhere near the market prices.

fungus pudding

19-01-2010, 09:03 PM

So interest on 330k at 9.5% = 31350 x 3 years = 94,050. allow rates of 4,500 at a guess.
Maintenance allow 5000 per annum (cos that's the minimum to keep value up)
Insurance $500.
Totaql outgoings over 3 years = 99550.

So as long as your rent has been 638.00 per week you have made a profit of 30,000 over 3 years. Not a good investment. If you have received less than 638 per week it's a terrible investment. That's assuming the median prices are somewhere near the market prices.

Sorry a bit rough with the maths there.
Should be interes 31350x3 = 94050
Rates 1500x3 = 4500
Maintenance 5000x3 = 15000
Insurance 500x3 = 1500.
Total = 115050
Weekly rental required = 737.50

minimoke

20-01-2010, 08:32 AM

Sorry a bit rough with the maths there.
Should be interes 31350x3 = 94050
Rates 1500x3 = 4500
Maintenance 5000x3 = 15000
Insurance 500x3 = 1500.
Total = 115050
Weekly rental required = 737.50
There has always been a good argument for renting. But in this scenario Shrewdy was of the view it was not a good time for first home owners to buy as values would drop.

If we go back to his original figures he had a $30k deposit with interst at 8%.

So your figures need to be:
Interest $24,000x3 = 72000
Rates 1500x3 = 4500
Maintenance 5000x3 = 15000
Insurance 500x3 = 1500.
Total = 93,000
Weekly rental required = 596.00

Now Shrewdy was a young chap then and its likely his money would have bought him a three bedroom house so he could have got a couple of flatmates in at $120 a week. That would have brought him in $37,440

Like it or not Shrwedy would have needed some where to live so lets say even if he flatted with someone, to have a roof over his head was going to cost him $120 a week - money down the gurgler some may say. Thats a $18,720 offset.

So lets take the 93,000 less the 37,440 rent income and the 18720 offset then Shrewdy needed to find 36,840. So the peace of mind of owning your first home has probably cost him $6,840 (thats the $30k in increased property values over that time less the $36,840).

Now lets go back a step. If shrwedy had a $30k deposit and a spare $36,840 thats $66,840 cash. If he had done what many NZ'ers did and invest it in a Finance Company theres a good chance he would have had none left - or SFA.

If he did (which is what he probably would have done) put it into NZ equities he would have lost 19% or $12,700 of his investment leaving him $54,140. (Thats how much the NZ Index has dropped)

That $54,140 would be a 20% deposit on his first home today - which means he could now buy himslef into a $270,700 house.

So whats it to be. Still happily in a $360k home or buying a $270,700 home. Or remain renting and hoping that properties drop 25% to get him back into the $360 home now devalued to $270K?

minimoke

20-01-2010, 08:50 AM

mm
Since 20/20 hindsight is a marvelously generous tool, perhaps you would instead care to predict Jan 2011.
I would not deny the current position except that maybe the median price is sc(r)ewed by more liquid higher price buyers doing their thing.

http://www.interest.co.nz/ratesblog/index.php/2010/01/19/opinion-why-real-house-prices-are-25-above-their-long-term-trend/ which may explain better than many of us can how the future may pan out.
Also
http://www.interest.co.nz/ratesblog/index.php/2010/01/19/preview-tax-working-group-set-to-suggest-depreciation-changes-small-land-tax-and-an-income-tax-cut/ may have an effect.
2010 may be an interesting year

Loofa, with respect, the first thing I can suggest is take more time and choose a better source of information. Bernard Hickey (interest.co.nz) is the "Houses will fall in value 30%" man. You'll see that all through this thread some of us here think that is a crock of shi#e. In that time propertys have actually moved form $330 to $360. Theres few articles I'll read of his which get me past the first paragraph - its all self marketing on the same broken record. I'll even go as far as saying that he's the current incarnation of the Doug Somers Edgar critter!.

Median values are screwed - it just depends which argument you want to listen to as to what has caused that screw. If you read throug this thread and other on these boards you'll find lots of reasons for it. And you'l see we've even had teh discussions on Median vs Average.

But these figures are being used as an Index and the Index has essentially gone up.

So my prediction for Jan 2011 is that values will be UP. Again, throughout this thread you'll see my reasons but in the short term there are several key drivers. Interest rates wil remain relatively low. Jobs will become more secure and the "skills shortage" will begin to bite later in the cycle driving some wage increase. This means people will be more comfortable buying. More demand = higher values. Our population continues to rise. The governement is spending on home improvements - especially for the Special People. Costs are going up and will contine (tradesmen are getting harder to find - and where you get a decent one from who knows?) and BRIC countries will start fuelling global demand again. The government is working at keeping the aged in their own homes which will anchor those values rather than see a glut of property come on the market - until these folks die (but thats getting harder given the drugs and care people get to keep them ticking over longer. And I don't see Bird Flu decimating the population creating a deluge of property on the market).

fungus pudding

20-01-2010, 09:15 AM

There has always been a good argument for renting. But in this scenario Shrewdy was of the view it was not a good time for first home owners to buy as values would drop.

If we go back to his original figures he had a $30k deposit with interst at 8%.

So your figures need to be:
Interest $24,000x3 = 72000
Rates 1500x3 = 4500
Maintenance 5000x3 = 15000
Insurance 500x3 = 1500.
Total = 93,000
Weekly rental required = 596.00

Fair enough if he wants a roof over his head - but these things no longer stack up as an investment. They are quite an effective compulsory savings scheme. That's all. One point though. It matters not what the deeposit is-it doesn't affect the costs. If 30k is his own cash, he's borrowed it from himself rather than the bank. So he's losing its alternative earning potential, which will be a bit less than the rate he's paying the bank, but it's still a cost. That's a point often overlooked by those purchasing small businesses. I have seen several cases where purchasers would be earning just as much by staying in bed - aka buying an income. The same often applies to residential property 'investors'. Most of them could do so much better.

duncan macgregor

20-01-2010, 09:48 AM

When the cost of an essential item exceeds the cost of replacement, then it becomes a bargain. The cost of property over the last fifty years has increased at a higher level than the average trade person renting, and supporting a family could save to buy into at retirement. The smart people learn that at an early age, and climb on the band waggon.
The real dumb ones argue the point, then get caught out in get rich quick schemes risking their future well being.
Four or five years down the track it becomes much cheaper to pay a mortgage than it is to rent in normal circumstances. The really smart people learn how to use the banks money and not their own to increase their property portfolio.
The cost to replace property or in other words build from scratch has increased at a much higher level than the medium price level.
That is the facts, like it or not, we are now in a position where property will increase in price at a much higher level than general inflation.
A few things to to think over that has happened in the last few years that some of you might be unaware off that will hit your property values shortly.
1,Septic tanks now cost four times as much to install thanks to the greenies.
2,double glazing and over the top insulation rules that pushes the price of new homes to ever higher levels.
3,Engineer reports and resource consents at every turn simply because councils are so incompetant that they now wont make decisions.
4,Plans have to be detailed down to extraordinary levels costing twice as much.
5, Developing property at reasonable prices for the future mum and dads is a thing of the past simply because of cost increases before you even start to build..
In ten years time the price of property will be more than double, just like it has always been Macdunk

fungus pudding

20-01-2010, 09:55 AM

When the cost of an essential item exceeds the cost of replacement, then it becomes a bargain.

That doen't sound like a bargain to me. I'd go for the cheaper brand new replacement one every time.

minimoke

20-01-2010, 10:20 AM

Fair enough if he wants a roof over his head - but these things no longer stack up as an investment.
But this thread wasn't an "investment" thread. It was about owning your home - which is quite a different proposition.

fungus pudding

20-01-2010, 10:31 AM

But this thread wasn't an "investment" thread. It was about owning your home - which is quite a different proposition.

True. Sorry, forgot where I was. A problem I used to have every Friday night without fail.

Dr_Who

20-01-2010, 03:08 PM

Very well said Mcdunk.

Ptolemy

21-01-2010, 11:59 AM

Very well said Mcdunk.

I always love the statements from the property bulls that property will rise faster than inflation (wages) ad finitum. Like it is just one of those things that will always happen and has no bearing on fundamentals and the the ability of people to actually afford to pay for them.

Please do the affordability figures for me on an average house based on doubling of the median house price from today $360k to $720k. Please use a long term average interst rate of 8.5% and median household income of $62k with average growth of 3% (which has been the average for the last decade).

Usually when I ask this question I get told that there are cheaper houses available than the median (true) but that is why median household income is used.

Please pick a reasonable deposit / equity for the household - say 20%.

Then can you explain how house prices are going to double again in the next ten years.

fungus pudding

21-01-2010, 12:35 PM

I always love the statements from the property bulls that property will rise faster than inflation (wages) ad finitum. Like it is just one of those things that will always happen and has no bearing on fundamentals and the the ability of people to actually afford to pay for them.

Please do the affordability figures for me on an average house based on doubling of the median house price from today $360k to $720k. Please use a long term average interst rate of 8.5% and median household income of $62k with average growth of 3% (which has been the average for the last decade).

Usually when I ask this question I get told that there are cheaper houses available than the median (true) but that is why median household income is used.

Please pick a reasonable deposit / equity for the household - say 20%.

Then can you explain how house prices are going to double again in the next ten years.

Another interesting point: imagine a house that over a 50 year period has had no maintenance expenditure or captial expenditure, still with a 50 year old bathroom, kitchen, roof needing replacing, recarpeting, complete renovation of paint, paper etc. and generally modernising. Sure as hell won't pass the 'double every ten years' test. So often the capital introduced after purchase gets swept under the carpet. Yet landlords snap them up ar yields that don't even cover interest let alone the above costs. As I said before - quite a good compulsory saving scheme, but nothing more.

duncan macgregor

21-01-2010, 01:28 PM

Another interesting point: imagine a house that over a 50 year period has had no maintenance expenditure or captial expenditure, still with a 50 year old bathroom, kitchen, roof needing replacing, recarpeting, complete renovation of paint, paper etc. and generally modernising. Sure as hell won't pass the 'double every ten years' test. So often the capital introduced after purchase gets swept under the carpet. Yet landlords snap them up ar yields that don't even cover interest let alone the above costs. As I said before - quite a good compulsory saving scheme, but nothing more.
Simple facts it seems that you want.
1, A fifty year old house cost in todays market value divided by six.
2,landlords in general make a prodit at your expence.
3,landlords pay for, or do themselves simple little tasks that you might enjoy doing yourself.
4, The fewer landlords there are because of penalties will only increase the level of rents.
5, Get into the public library and look at what you might have purchased ten years ago on ten pc deposit and what its worth today. I bet you havent saved that much in that time with that money doing anything else.
6, continue to question the reality of home ownership landlords love people that do.
7, The cost of compliance has gone up at an ever increasing level, the price of houses must rise faster than inflation in the short term.
8, It does not matter who the landlord is be it the GOVT, council, or private individual, it makes no difference to the big picture.
9The level of property is controlled by supply and demand, with the costs tied to replacement value.
10, Since the cost of replacement value has increased dramatically in the last few years the price of property must follow.
Macdunk

fungus pudding

21-01-2010, 01:43 PM

Simple facts it seems that you want.
1, A fifty year old house cost in todays market value divided by six.
2,landlords in general make a prodit at your expence.
3,landlords pay for, or do themselves simple little tasks that you might enjoy doing yourself.
4, The fewer landlords there are because of penalties will only increase the level of rents.
5, Get into the public library and look at what you might have purchased ten years ago on ten pc deposit and what its worth today. I bet you havent saved that much in that time with that money doing anything else.
6, continue to question the reality of home ownership landlords love people that do.
7, The cost of compliance has gone up at an ever increasing level, the price of houses must rise faster than inflation in the short term.
8, It does not matter who the landlord is be it the GOVT, council, or private individual, it makes no difference to the big picture.
9The level of property is controlled by supply and demand, with the costs tied to replacement value.
10, Since the cost of replacement value has increased dramatically in the last few years the price of property must follow.
Macdunk

You assume a lot. I have been a full time landlord for about forty years, although I have dabbled with a couple of minor activities occasionally. I started with residential property in the late 60s, when the fundamentals were quite different. Nowadays I do nothing other than my real estate interests, which is the same as doing nothing at all. I only have commercial roperties plus a small holding in LPTs and some proportional title stuff just for fun. I haven't bothered with residential stuff for years - and wouldn't. It's a ridiculously competitive market - hence ridiculously low yields. I know several res landlords with a large no. of properties, but still fall short of making a living from them. One associate has 21 houses and a block of flats, and seems to be rapt because he shows a loss! Ridiculous. Surely the object of investing in property is, or should be, to free yourself from the hassle of having to work for a living. I see no sense in running losses for years, just so you can die worth a few more bob on paper. With your enthusiasm and interest in property all I can say is get out of residential, collect all the equity you can and get into commercial. It's bliss in comparison - dealing with mainly sensible tenants, and only ocassinally beats the bloody riff-raff that turns up as res. tenants; not to mention the massively higher returns from day one. 8-9% compleltely net sure beats 6% with rates, insurance, maintenance etc to pay for. Plus you'' have long term leases with personal guarantees. It's just no contest.

Arbitrage

21-01-2010, 02:12 PM

I think it is difficult to compare commercial vs residential property. Vacancy risk is a major problem with commercial and having experienced it in central Auckland, I know that some commercial properties here have been vacant or only partially rented (including negotiated reduced rentals) for several years now. When the valuations come out this year here I think you will see drops in value since the last one done 2 years ago. Residential properties may have lower yields, but at least people have to live somewhere, and cashflow from rents is more steady.
If you buy in the right location and choose properties and tenants carefully, the down-sides you describe with residential property can be minimised.

Dr_Who

21-01-2010, 02:40 PM

It comes down to demand and supply.

At current rate of immigration and very little new houses being build thanks to the credit crunch and finance co collapse, demand will exceed supply. Abit like the crazy gold and copper prices lately, it defies fundamentals, but there is a huge demand out there and the price will go up.

I will always be much wealthier than my accountant, cos I have a feel for such cycle and experience. I recall my broker and my accountant warning me not to buy anything a year back, cos they did the numbers and thought the market will drop another 30-40%. Now, if I had listen to them I would be a very poor man. My property portfolio is doing very well and my equity portfolio is doing extremely well.

The GrandMaster

21-01-2010, 08:34 PM

3,landlords pay for, or do themselves simple little tasks that you might enjoy doing yourself.

I can assure you I would not :)

5, Get into the public library and look at what you might have purchased ten years ago on ten pc deposit and what its worth today. I bet you havent saved that much in that time with that money doing anything else.

I can assure you I have :)

duncan macgregor

22-01-2010, 09:17 AM

We have people here saying commercial property is better to rent out than houses. Who cares? this thread is about first home buyers and whats best for them. The average joe bloggs is a complete fool if he chooses to rent if he can afford to buy his first home regardless of the cycle. A couple of years savings tied up with an ever decreasing mortgage against paying market rent at an ever higher level for the remainder of your life.
I would simply hate the insecurity of renting in my old age hoping that my savings would hold out until i kicked the bucket. I once bought an eighteen month old house at a mortgagee auction. I rented it out to the govt with a lease who gauranteed the rent, plus any malicious damage repairs. I sold it to my daughter and her friend who never even entered the property for a twenty pc profit. They on sold it two years later at more than double what i paid for it. They only entered the property once. The rent covered the mortgage payments, the govt did everything they even had a six month working holiday to Australia during that period. Macdunk

Ptolemy

22-01-2010, 09:29 AM

Seems no-one wants to try and have a go at working out the affordability of a home in 10 years if houses double in price as they are forecast to do by some here.

Here let me help.

Median today 360k, doubled 720k
Median household income today $62k pa pre-tax. Based on average income growth of 3% (long term average) this would equate to a median pretax household income of $83k in 10 years time. Ater tax this equate to roughly $60k depending on tax rates of individuals in the household.

Assuming our householders have 20% equity or deposit (which will become increasingly difficult) then the mortgage on our median house will be $576k.

The mortgage payments on a 30 year mortgage at 8% (long term average) would equate to $1940 per fortnight of our households $2307 per fortnight income. Clearly not possible. The banks wouldn't lend on it.

Sure there are some assumptions built in here -
1) that income growth will be 3% long term. If it is more than this it will suggest that inflation has taken hold and interest rates will have to be higher to compensate.
2) that median income householders live in median households. A fair assumption one would think.
3) only a 20% deposit / equity in the house. I think there will obviously be many have more who bought earlier - this example is to illustrate how people getting into property say in the last 5 years would be able to afford a house. If there are no new buyers then there will be no new building as demand will dry up except for renting. Incidentally the rent on our median house would have to be over $1000 a week to give a landlord a fairly poor rental yield of 7.5%. Incomes will need to increase massively for people to be able to afford that.

I am interested in those here who think property is set to double in the next 10 years views on affordability. All I usually hear is that their is no supply, demand is high, property always doubles every 10 years etc etc. But never any discussion on people ability to pay for it.

fungus pudding

22-01-2010, 09:54 AM

I am interested in those here who think property is set to double in the next 10 years views on affordability. All I usually hear is that their is no supply, demand is high, property always doubles every 10 years etc etc. But never any discussion on people ability to pay for it.

It is that last point that will control the market - no matter what. The market cannot rise to a point where there are no buyers - it's impossible. The market rises and falls on it's way up. often likened to playing with a yo-yo while waking upstairs. At the moment the NZ market is too high and out of kilter with incomes. It may not fall much, but it is unlikely to rise much either. Through the early nineties price levels were too low and hadn't moved significantly for years. So it's not a smooth pattern. In my opinion there is absolutely no possibility of house prices outpacing inflation or general wage rises in the next decade. In other words they will not become less affordable.

minimoke

22-01-2010, 12:41 PM

Seems no-one wants to try and have a go at working out the affordability of a home in 10 years if houses double in price as they are forecast to do by some here.

I'm not going to cos I don't but into Duncs doubling every 10 years idea - but he's more on to it than others.

Lets look at just the last decade cos thats probably more meaningful since we were all probably around then. Its a decade thats had financial problems like the previous decade/s. These problems will continue in future decades and values will continue to rise.

10 years ago median value was $170k. Today its $360k. Average sale was $198,792 - now its $418,101. Total sale values in Dec '99 = $906m. Last month total sales were $2,072m - and there you have your answer. Despite property values being at all times high people are still finding ways of coming up with the cash to buy. Somehow today they are finding it affordable. They will do the same thing in 10 years time. Fancy modelling won't change human behaviour.

The GrandMaster

22-01-2010, 06:59 PM

If housing is still affordable in 10 years time - it will invariably come at the expense of people's disposable income and/or leisure time (as it has over the past 10 years).

If that's what is required for a good investment...you can have it.

Arbitrage

27-01-2010, 08:59 AM

Dr_Who

27-01-2010, 09:39 AM

Ptolemy

27-01-2010, 10:43 AM

NZ is like most of the developed desirable countries around the world. It will always be unaffordable to purchase on a fundamental basis. NZ is viewed as a desirable place to live and everyone wants to migrant here. There will always be demand for people wanting to immigrate to NZ. You can do as much numbers as you like, but thats the reality.

What utter rubbish, that is that the supposition that NZ real estate is somehow immune to fundamental factors. That is the sort of argument that you would hear from a real estate agent or insider in the industry.

Can I ask whether you make you share purchases on the same basis.

If you took the trouble to read the report it actually says why NZ real estate is unaffordable. It also has excellent insight into similar markets and what has happened since their markets have adjusted.

People who immigrate to NZ still have to pay from their housing out of their income. Or do you honestly believe all immigrants to NZ are cashed up millionaires who don't need to work?

Dr_Who

27-01-2010, 02:45 PM

Hey Ptolemy. I dont think anyone gives a hoots what you think about a Porsche being overvalued fundamentally compare to a Nissan GTR. My neighour just bought a Aston Martin and you wont get much change from $500k. It is all Demand and Supply.

Just open your eyes and you may actually see alot of overseas money coming into NZ property residential market. And no I am not a realty agent, but I did buy a number of properties during the financial crisis.

AMR

27-01-2010, 07:53 PM

Here is the link to the latest Demographia International Housing Affordability Survey. Makes interesting reading. http://www.demographia.com/dhi.pdf

Table 5 shows the Severely unaffordable housing markets. Auckland ranks alongside Brisbane.

Fully agree with the sentiments in that report. Auckland city does not have much land left in the isthmus however (but Waitakere, North Shore, and Manukau have plenty).

Maybe if investors were to buy in suburbs where there is no new land, this would be Auckland Central and the southern parts of the North Shore?

Arbitrage

28-01-2010, 08:29 AM

If you are looking for good investment with steady cashflow, buy within 5km of Queen Street in Auckland. With the large office worker population, and the limited transport, rental properties are always in demand.

Ptolemy

28-01-2010, 10:36 AM

Arbitrage

28-01-2010, 11:23 AM

around 5%. Rarely vacant for more than a week which retains cashflow. Good capital gains too. Tenants are mainly professionals which avoids many of the horror stories of landlords elsewhere.

POSSUM THE CAT

28-01-2010, 01:50 PM

Arbitrage how many of these professionals are "P" Lab owners or operators. They need to be able to afford the rent

Ptolemy

28-01-2010, 02:32 PM

around 5%. Rarely vacant for more than a week which retains cashflow. Good capital gains too. Tenants are mainly professionals which avoids many of the horror stories of landlords elsewhere.

So yields are about 2% below the 2 year fixed mortage before rates, maintenance, and other costs.

On a 500k house capital gains would have to average approx $15k above inflation to just break even.

Doesn't sound like a great investment but I know I am in the minority on this thread. Property always doubles every 7-10 years right? Regardless of how overpriced it is from the start point.

fungus pudding

28-01-2010, 03:53 PM

So yields are about 2% below the 2 year fixed mortage before rates, maintenance, and other costs.

On a 500k house capital gains would have to average approx $15k above inflation to just break even.

Doesn't sound like a great investment but I know I am in the minority on this thread. Property always doubles every 7-10 years right? Regardless of how overpriced it is from the start point.

Gross yields are =/- 2% below mtge rates. Rates, insurance, and the biggie that gets overlooked, maintenance wipe a fair chunk of that out.

'Property always doubles every 7-10 years right? Regardless of how overpriced it is from the start point.'

Nope - it sure doesn't.

Arbitrage

29-01-2010, 08:27 AM

fungus pudding

29-01-2010, 08:52 AM

You can argue the theory as long as you like. I have been implementing my strategy of leveraged property investment since 1985 with amazing results. I have the numbers on paper in front of me and am starting to look at buying another property in the same radius (5km from Queen St) in the next 6 months.

I'm not arguing anything. All I know is that of my acquaintances who have a good stock of residential property, the vast majority have to have a job to provide a living.

Arbitrage

29-01-2010, 02:59 PM

Their objectives may be capital growth rather than an independent income.

AMR

30-01-2010, 10:43 AM

Hi Arbitrage are you looking specifically at houses or considering apartments now?

Dr_Who

30-01-2010, 06:21 PM

You doomsayers may have your day.

The tax uncertainty and tightening by China to cool their property market may have an effect on the NZ property market.

JBmurc

30-01-2010, 09:10 PM

You doomsayers may have your day.

The tax uncertainty and tightening by China to cool their property market may have an effect on the NZ property market.

The likely increase in interest rates will be kick in the guts for many in dept property owners 9%-10% will soon put a lid on growth

coming inflation worrys?

AMR

31-01-2010, 09:20 PM

I can't see why inflation is such a bad thing. If anything, I believe a period of elevated inflation (5%+) would be good for wiping out the mess the US housing bubble created.

Dr_Who

01-02-2010, 09:14 AM

I can't see why inflation is such a bad thing. If anything, I believe a period of elevated inflation (5%+) would be good for wiping out the mess the US housing bubble created.

It is a catch 22 situation.

Finding a balance is the key.

drew

01-02-2010, 12:14 PM

A few things to to think over that has happened in the last few years that some of you might be unaware off that will hit your property values shortly.
1,Septic tanks now cost four times as much to install thanks to the greenies.
2,double glazing and over the top insulation rules that pushes the price of new homes to ever higher levels.
3,Engineer reports and resource consents at every turn simply because councils are so incompetant that they now wont make decisions.
4,Plans have to be detailed down to extraordinary levels costing twice as much.
5, Developing property at reasonable prices for the future mum and dads is a thing of the past simply because of cost increases before you even start to build..
In ten years time the price of property will be more than double, just like it has always been Macdunk

Great points you make there duncan. You are definitely on to something. A few years ago I was convinced that property prices would be hit hard but they have hardly moved at all to my surprise.

We can all see that houses have been expensive for a long time now compared to typical measures of median income, rental yields etc. But that is just looking at the demand side.

The supply side of the equation is being ignored in most cases and will not get fixed until something is done about govt and local council policies. It just makes no sense that we have no oversupply of houses when there is so much land available including urban areas. We should have created an oversupply during the boom years because prices were high and kept going up so there were plenty of incentives for investors to build more houses.

But the only oversupply we have is of apartments, which have been supplied by the market as a cheaper substitute. In the US residential property prices crashed because there was an oversupply of homes, but we dont have that problem here.

Now govt intends to tax property and land owners? Thats just crazy. They should be encouraging prices to go up because that is the only way more houses will be built. Unless of course govt and councils stop telling us how to build houses and remove all of the additional costs they impose on home builders.

I would have thought after the leaky homes scandal councils would be trying to remove themselves from setting and enforcing standards and stop telling people how to build houses.

duncan macgregor

01-02-2010, 02:14 PM

Inflation is good for some and bad for others. In my own particular experience in the past inflation was my best friend. I bought property, paid through the nose for a couple of years then found the mortgage was at very low levels due to inflation. most working people in my era had long term mortgages at much lower rates than inflation. People got rich with the banks money at least the smart ones did. Similar opportunities today my friends with similar doomsayers bleating the opposite. Inflation is on the way up take long term mortgages today and sit back and pray for it.
Macdunk

George

01-02-2010, 03:39 PM

Don't know if this should be part of the equation, but from 2012
you won't be able to use your open fire or older firebox.
Waitakere council have a $560 permit fee for a new box and much more
for an older one to check it complies. We will be up for $3000 for a basic
model, 20% of that in council fees - it's legal robbery.
Thought about getting a pot belly but they are only legal in rural
areas and, according to one retailer, council will use planes to fly over
and measure with infra-red if anyone is not compliant, so there goes my
do-it-yrself plan to outwit council.
George

fungus pudding

01-02-2010, 08:16 PM

From New York Times

http://www.nytimes.com/2007/09/06/world/asia/06iht-renz.1.7390288.html?_r=1

beacon

02-02-2010, 08:15 AM

From New York Times

http://www.nytimes.com/2007/09/06/world/asia/06iht-renz.1.7390288.html?_r=1

That link leads to a 2007 article fungus. Is that what you were referring to?

fungus pudding

02-02-2010, 03:20 PM

That link leads to a 2007 article fungus. Is that what you were referring to?

I was referring to whatever that link leads to. Could be 2007. There was quite a few things written that year that I haven't caught up with yet.

Arbitrage

02-02-2010, 03:37 PM

Hi Arbitrage are you looking specifically at houses or considering apartments now?

Possibly apartments in the urban fringe (Parnell, Mt Eden, Epsom, Herne Bay, Ponsonby etc) i.e outside the Auckland cbd.

While perhaps not getting the capital gains of houses, my reasons are they are affordable, rentable, easily maintained, while still close enough to the central city for my target tenant (professionals). In the future they can be incrementally sold down to reduce debt.

If they are a few years old, they will have a track record in the Body Corporate minutes which will show up any defects (such as leaks) as well.

Ptolemy

03-02-2010, 03:48 PM

minimoke

03-02-2010, 04:04 PM

Interesting blog by Mish Shedlock on mortgage stress amongst first home buyers in Australia.

http://globaleconomicanalysis.blogspot.com/2010/02/pool-of-greater-housing-fools-in.html

The research is interesting. I know most of you think this couldn't happen here, my question would be why not?
Ah - good old Bernard Hickey yesterday saying Oz interest rates were rising and NZ'ers should be looking at depositing in Oz rather than NZ (with a bit of FX risk). Spot on as per usual BH - not!

A couple of differences between here an Oz. Our market wasn't fuelled by a $14 - $21,000 govt cash grant for first home owners. Nor is stamp duty part of our property valuations.

Dr_Who

03-02-2010, 04:11 PM

Ah - good old Bernard Hickey yesterday saying Oz interest rates were rising and NZ'ers should be looking at depositing in Oz rather than NZ (with a bit of FX risk). Spot on as per usual BH - not!

I recall this geezer and others predicting a 30-40% drop in property prices during the financial crisis. I did the opposite and started buying during the crisis.

Ptolemy

03-02-2010, 04:26 PM

Ah - good old Bernard Hickey yesterday saying Oz interest rates were rising and NZ'ers should be looking at depositing in Oz rather than NZ (with a bit of FX risk). Spot on as per usual BH - not!

And the relevance would be?

BH would be in the overall majority in picking Australian rates to rise - in fact it appears no prominent economists (not that BH is one) picked it correctly did you?

And why do you suppose the RBA left rates on hold - did you read Mish's post - it suggests why?

I would suggest the same forces are in place in NZ yet we actually have no tightening here (yet).

fungus pudding

03-02-2010, 04:37 PM

minimoke

03-02-2010, 04:51 PM

BH would be in the overall majority in picking Australian rates to rise - in fact it appears no prominent economists (not that BH is one) picked it correctly did you?

I didn't hold a view on the Oz rates. Often better to remain silent and be thought a fool rather than open ones mouth and remove all doubt. I did however pick that housing would not drop 30% - unlike Hickey!

minimoke

03-02-2010, 05:02 PM

Looking at the NZ market, particularly in the bigger cities, average incomes, average house price, and average mortgages, it's not just that it might happen here - it must!
I'm inclined to agree - but with a proviso.

Some peopel are still up for pain - but there is always some pain in real estate no matter the stage of a cycle.

These are the first home owner people lulled into housing by 90 - 100% mortgages on two incomes. Over the next few years they are up for having families and rising interst rates which will impact on their ability to pay. The stress will be hampered by a lack of saving ethic and a "must have now" approach to life - where they will also have maxxed out credit cards and HP's to buy flash things for their new house.

We also have yet to see a bit more stress from the "rental" market where people bought late into the surging market to have it fall away and with income stress they are going to realise that the rental market isn't as easy money as they thought. They'll be stressed because they also bought the new car or boat or overseas holiday and some will have the holiday home by the sea which isn't creating the income necessary to cover the cost of the debt.

So there will still be bargains to be had in pockets of the market - but the whole market will not be affected long term.

A big chunk of home owners are long timers who have coped with the ups and downs of economic cycles and will survive the next bout of hard times.

neopoleII

03-02-2010, 06:52 PM

beacon

09-02-2010, 09:05 PM

quote"" Our market wasn't fuelled by a $14 - $21,000 govt cash grant for first home owners""
true........ we just have housing suppliments and working for families, and numerous other benefits that get transfered to landlords who's tenants receive the benefits.
which of course keeps the price of these investments high.
not with standing the "favourable" way they are taxed.

lets see what or if the new tax reform will do to property prices.

Watch the rents rise now ...
Weep, if you are a renter. Weep if you are an overstretched investor. And weep if you are a tax payer, as more of your tax will go where you least wanted it to go ...

fungus pudding

09-02-2010, 09:06 PM

The GrandMaster

09-02-2010, 10:06 PM

Rents are set by supply and demand. Nothing will change.

or they'll just go from 'real cheap' to 'just cheap'...

duncan macgregor

10-02-2010, 10:07 AM

Watch the rents rise now ...
Weep, if you are a renter. Weep if you are an overstretched investor. And weep if you are a tax payer, as more of your tax will go where you least wanted it to go ... Beakon you are dead right there. What will happen is landlords will flee the market which will lower house prices in the short term, and raise rents simply because of the supply and demand factor. The Govt will lose out long term with higher rent subsides with a greater poverty gap on lower income homeless families.
Lets face the facts.
1, Supply and demand rules prices in this market.
2, Hitting supply only increases demand which ends up in price rises.
3, Some one must own the house in the big picture it dous not matter who.
4, The money shortage in the productive sector is due soley by the public perception of the rip off merchants who feed from the trough while fleecing them from their hard earned savings.
5, This was the safest way the little man in a menial task job could end up rich with limited risk.
6,NZ will end up with the GOVT being forced to build state houses to house the masses then tax the living daylights out of the business sector to support it.
Thats what i think will happen guys its down hill all the way from here on in.
Any educated self respecting Kiwi will end up in Australia where they have a much higher life style so for me it looks like good bye Grand kids hope to visit you occasionaly. Macdunk

fungus pudding

10-02-2010, 10:45 AM

Beakon you are dead right there. What will happen is landlords will flee the market which will lower house prices in the short term, and raise rents simply because of the supply and demand factor. The Govt will lose out long term with higher rent subsides with a greater poverty gap on lower income homeless families.
Lets face the facts.
1, Supply and demand rules prices in this market.
2, Hitting supply only increases demand which ends up in price rises.
3, Some one must own the house in the big picture it dous not matter who.
4, The money shortage in the productive sector is due soley by the public perception of the rip off merchants who feed from the trough while fleecing them from their hard earned savings.
5, This was the safest way the little man in a menial task job could end up rich with limited risk.
6,NZ will end up with the GOVT being forced to build state houses to house the masses then tax the living daylights out of the business sector to support it.
Thats what i think will happen guys its down hill all the way from here on in.
Any educated self respecting Kiwi will end up in Australia where they have a much higher life style so for me it looks like good bye Grand kids hope to visit you occasionaly. Macdunk

The houses will still exist. The demand will therefore not increase. All that may happen is a small % of properties might revert to owner occupiers. And every time that happens there is one rental property removed from the pool - and one tenant also. No change to suppply or demand.

duncan macgregor

10-02-2010, 11:14 AM

I dont agree on that. What will happen landlords wont build new properties to rent out creating a shortage which in turn will raise the prices due to demand. Supply and demand is controled by new properties coming into the market to an increasing population. if however more people flee the country than come into the country then the demand and prices drop to meet the market. Great blocks of flats to rent out simply wont be built rents will rise the Govt will have to subsidize the needy with you and I my friend footing the bill.
The wisest and best leave leaving the dregs of society behind its natures way of improving the species. I should know coming from Scotland which is about as far away as one can get. Macdunk

Dr_Who

10-02-2010, 11:55 AM

Just have to look at Aussie to see what may happen to the NZ property market.

peat

17-02-2010, 06:45 AM

relevant article to the discussions going on in this thread
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10626604

one of the interesting things in that article is :

Shamubeel Eaqub, NZIER principal economist, criticised forecasts saying more houses were needed.
"There is no chronic undersupply of housing. If there was, rents would rise sharply. In the year to December, average rents fell by 0.5 per cent or -2.5 per cent in real terms," he said.
People claiming New Zealand had a severe housing shortage usually relied on declining numbers of people in houses.
But Eaqub said household size had increased in the past year "as usually happens in recessions".

Dr_Who

17-02-2010, 08:38 AM

Rents have risen much higher in the Ponsonby Grey Lynn areas.

In the less desirable areas, the rents are still the same.

fungus pudding

17-02-2010, 09:30 AM

I dont agree on that. What will happen landlords wont build new properties to rent out creating a shortage which in turn will raise the prices due to demand. Supply and demand is controled by new properties coming into the market to an increasing population. if however more people flee the country than come into the country then the demand and prices drop to meet the market. Great blocks of flats to rent out simply wont be built rents will rise the Govt will have to subsidize the needy with you and I my friend footing the bill.

Are you suggesting that if the govt. doesn't subsidize the needy that houses and flats will just remian vacant? It's an interesting theory, but I've never seen a market work that way. Mind you, I've never seen a subsidy hit its intended target anyway.

beacon

17-02-2010, 02:35 PM

Rents have risen much higher in the Ponsonby Grey Lynn areas.

In the less desirable areas, the rents are still the same.

Listings up 20% now in waitakere since the beginning of this year, 10% in manukau. Empty and for sale houses now beginning to push rents higher. I hope the Government takes notice that a tsunami is building. It is still not to late to reconsider ...

For landlords who were overstretched but kept ploughing in more cash - living in hope that things will get better, the loss in property is just beginning to be crystallised. And this dollar of equity released, if any, is not going to go into the capital markets, as the beaureaucracy expects. Though industry is the wealth creation engine, property provided a temporary store of wealth while industry continued to blunder along. Given the immediate track record of wealth destruction in the capital markets for the uninformed, cash will be used simply to delever unless the Government has a magic wand that will turn Mr. and Mrs. Ordinary into Mr. and Mrs. Capital market gurus overnight ...

Also the impoverishment effect which will emanate from stagnating (at best, or falling) property markets will ripple through to the capital markets. As a nation, we begin our trek backwards, unless the Government stops and takes heed. If it doesn't as is sadly the case most times, the stretched landlord will be left with no option but do what he/she can't postpone/budget for any longer. Hope the Government has a damage control plan, as in a budget for increasing accomodation supplements or for constructing new social housing. Maybe they could help the chronically unemployed with this latter project ...

beacon

24-02-2010, 12:08 PM

fungus pudding

24-02-2010, 01:19 PM

Listings up 20% now in waitakere since the beginning of this year, 10% in manukau. Empty and for sale houses now beginning to push rents higher.

Economics 101. First day - before lunch. Empty houses and an abundance of listings reflect an oversupply, which will lead to falling rents; not rising. Landlords don't sit back and leave properties vacant for long waiting for rents to rise. They meet the market - and quickly. Most of them have such skinny profit margins (if any profit margin at all) that they can hardly just sit and wait even if they are silly enough to want to.

minimoke

24-02-2010, 02:28 PM

listings in Waitakere since jan 09 up 20% now
listings in Waitakere since jan 09 up 35% now (M&D and small landlords)
listings in Manukau since jan 09 up 11% now
listings in Manukau since jan 09 up 25% now (M&D and small landlords)

Rents to follow up ... watching this space ... hope the powers that be are noticing the pain and desperation ...
When a willing buyer meets a willing seller you'll also have migration TO these asset classes.

Some of those buyers may be existing renters - which means they will leave their rental which means one more rental vacancy which may lead to a decrease in rents.

beacon

25-02-2010, 09:28 AM

Wake up fp. Your first half at Economics 101 education shows your mind has been wandering. The listings I talk about are "For Sale". Two extra "For Sale" correlates with approx one less house available "For Rent". rents will rise, though prices may stagnate or fall.

you did pick up their skinny margin. So you were paying attention for some time (friendly smile, I can't seem to find emoticons)

beacon

25-02-2010, 09:54 AM

When a willing buyer meets a willing seller you'll also have migration TO these asset classes.

Some of those buyers may be existing renters - which means they will leave their rental which means one more rental vacancy which may lead to a decrease in rents.

In normal conditions, yes. The conditions are not normal. We have a naescent recovery, if at all, and it is reportedly anemic. Credit conditions remain tight. You have increased sellers, but where are the buyers? The market remained robust earlier due to lack of listings, as people held out. For unreasonable expectations, some say. I suspect most of it was due to an understandable lethargy to crystalize loss (regardless of whether the loss of equity was notional or real). Meanwhile, the council rates went up, insurance went up, even fixed term mortgages have been climbing. Repair costs have risen, and will rise post GST increase. Rent arrears have been climbing, and judgements remain unenforcable (Justice delayed is generally Justice denied). More people are living with extended families and rents have been falling in real terms. Then you have the last straw - the cashflow crunch that will be caused by removal of depreciation deductibility.

So I see more "For Sale" houses, meaning maybe more choice for first Home Buyers and a slight improvement in affordability for them.
I see restrained investor buying activity until credit conditions improve, meaning a property market that stagnates or falls, with repurcussions for capital markets.
I see rents rising unless conditions change...

beacon

25-02-2010, 10:03 AM

Economics 101. First day - before lunch. Empty houses and an abundance of listings reflect an oversupply, which will lead to falling rents; not rising. Landlords don't sit back and leave properties vacant for long waiting for rents to rise. They meet the market - and quickly. Most of them have such skinny profit margins (if any profit margin at all) that they can hardly just sit and wait even if they are silly enough to want to.

You did pick up on their skinny margins. So you were paying attention for some time (friendly smile, I can't seem to find emoticons)

fungus pudding

25-02-2010, 10:14 AM

You did pick up on their skinny margins. So you were paying attention for some time (friendly smile, I can't seem to find emoticons)

Your computer is faulty. Mine's gottem! :cool::cool::cool:

beacon

25-02-2010, 10:34 AM

Your computer is faulty. Mine's gottem! :cool::cool::cool:

Bugger! Computer is latest state of the art, not that I know much about these baffling wonders. Must be something to do with our security settings ...
Let's try this :cool:

fungus pudding

25-02-2010, 10:58 AM

Bugger! Computer is latest state of the art, not that I know much about these baffling wonders. Must be something to do with our security settings ...
Let's try this :cool:

Bugger! I was hoping you'd rush out and buy an even newer even more state of the art (whatever that weird slogan means) more wondrous, more baffling and most of all, more expensive baffling wonder only to discover it too could not produce emoticons. :cool::cool:

minimoke

25-02-2010, 02:24 PM

but where are the buyers?
They haven't disappeared. There were only 40 less sales this january compared with last January - and January is typically pretty slow.But those buyers were buying - time on market was less this Jan (43 days) compared with last Jan (59 days) and they were paying 7.7% more than a year ago.

beacon

25-02-2010, 08:57 PM

There were only 40 less sales this january compared with last January - and January is typically pretty slow.But those buyers were buying - time on market was less this Jan (43 days) compared with last Jan (59 days) and they were paying 7.7% more than a year ago.

Thanks for the data update minimoke. Both - sales as well as time on market - vindicate my point that the market has held up well so far. Sales and Time on market are lagging indicators, listings are a leading indicator. Its safer driving looking in the windshield than in the rear view mirrors. Hence, my thesis that we may be looking at an upcoming market that while easier on first home buyers may be hard on M&D sellers, smaller investor vendors as well as renters. I see no investor buyer activity because of tight credit.

minimoke

26-02-2010, 07:46 AM

Thanks for the data update minimoke. Both - sales as well as time on market - vindicate my point that the market has held up well so far. Sales and Time on market are lagging indicators, listings are a leading indicator. Its safer driving looking in the windshield than in the rear view mirrors. Hence, my thesis that we may be looking at an upcoming market that while easier on first home buyers may be hard on M&D sellers, smaller investor vendors as well as renters. I see no investor buyer activity because of tight credit.
Looking for lead indicators is a fine idea as long as your windshield is clear and you don't have double vision.

If you are looking at listings as a lead indicator you may be seeing several things.

For a start the statistics may not be clearly showing the number of agent multi-listings - hence you may have a bit of double vision.

And like cardboard policemen on the side of the road - are the listings for real or are they a bit of a mirage. As the economy comes out of recession people will start to have a bit more confidence about their jobs. As they gain more confidence they are more likely to consider their debt position - and part of this might include trading houses. There may be listings out there that are people just giving it a shot to see what happens. If the price is right they'll sell. If its not then they'll hold until there is movement.

What you might want to look out for on the road ahead is the road kill. You might see some Minor birds on the road which you reckon are bound to end up dead - but they are canny bastards and they will be fine. Will changes in depreciation rules create distressed sellers like possums on the road at night. Sure there will be a few of these - there always were - there always will be. What we have to hope for is that the changes don't impact heavily on government and local body housing stock - that would be like sending a cow out on the road as it creates a risk of bringing you down as well (through increased personal taxes and rates to cover the extra costs). And of course the depreciation rules are unlikely to hit that big 16 wheel semi coming towards you - they are in and out your vision before you know it.

When you are looking out your windscreen can you see clearly down to the end of your driveway? One thing’s for sure - you can't see clearly what is two miles down the road. I'm waiting for the government to actually announce its changes to residential investments to give me clarity.

Meanwhile back to credit. This week we've seen Westpac lower two of their rates so that their 5.65% floating is the lowest in the market.

beacon

26-02-2010, 11:48 AM

For a start the statistics may not be clearly showing the number of agent multi-listings - hence you may have a bit of double vision.

Weren't they there before? Surely, they haven't just started doubling after Government's stated intention to tweak residential property legislation ...

trading houses. There may be listings out there that are people just giving it a shot to see what happens.
If the price is right they'll sell. If its not then they'll hold until there is movement.

We can speculate on motives and eventual possible outcomes till the cows come home. The fact remains that the number of listings has increased. I'll let the facts speak for themselves ...

Minor birds on the road which you reckon are bound to end up dead - but they are canny bastards and they will be fine. Will changes in depreciation rules create distressed sellers like possums on the road at night. Sure there will be a few of these - there always were - there always will be.

These are real people we are talking about - the very "taxpayers" who've sweated and toiled blood and tears, who've saved and sacrificed to build wealth. These are the worker bees who saved and metamorphosed into investors. We guarantee and protect the savers but write off investors as being "greedy", "opportunistic", "canny bastards". Are they really? Who would you nurture instead?

Maybe they are canny, and maybe they are not. The issue is equanimity. Why single them out for punishment? Simply because they are too unorganised as a lobby?

What we have to hope for is that the changes don't impact heavily on government and local body housing stock

Will hope suffice? We are driving towards an incoming train and hoping there'll be very little damage - literal or collateral. Appropriate timely action has a better chance at averting disaster. Sure, there'll still be private landlords. But they will have to pass on an increasingly bigger portion of their increased costs onto ... tenants. As more private landlords quit this industry, guess who has to pick up the mantle? Was this outcome intended or foreseen by the government planners? Or will it be philosophically written off as minor collateral damage... If so, to what end?

In the hope that capital will migrate to creating national economic wealth. Without building the necessary ground for it? What groundwork has the Government completed to facilitate this? What eductaion has been imparted? Is the NZX now better at communicating company disclosures? Are the property trusts not still charging fees on assets under management and regardless of their mismanagement of assets versus taking their fair share from profit? Are our companies now fairly valued or better managed? Have we put any while collar criminals behind bars yet?Yeah right. And pigs will fly. At best, we will just create an industry that engages in speculation or enforce a transfer of wealth to a fund management industry that's badly let the nation down.

When you are looking out your windscreen can you see clearly down to the end of your driveway? One thing’s for sure - you can't see clearly what is two miles down the road. I'm waiting for the government to actually announce its changes to residential investments to give me clarity.

Pardon the vanity, but I am beacon. I am expected to be miles ahead - to look ahead. I profess no special powers or privilege to see clearly what is two miles down the road, but being ahead of some I do see what's ahead a bit earlier than them. I am happy to be a lone voice. (Readers - exercise your own judgement before taking any action based on anybody's expressed views)

Meanwhile back to credit. This week we've seen Westpac lower two of their rates so that their 5.65% floating is the lowest in the market.

You're looking in the wrong place again brother. Forget the headline teasers. Go look at what's happening with LVRs. You'll have a better understanding of what I'm on about.

minimoke

26-02-2010, 01:06 PM

You'll have a better understanding of what I'm on about.
I'm trying to keep up. To recap: you think that potential tax changes, yet to be made by government, on rental properties held by Mums and Dads will lead to an increase in rent. A side effect is that house values will drop making them more affordable for first home owners. The rental issue probbably belongs on another thread.

As for the tax changes making it easier for first home buyers I'm not so sure. Too much rental stock is held by central and local government - they won't quit that stock on the back of tax changes. A pile of other stock is held by long term investors who will see this part of doing business, they'll adjust and continue holding their stock. So on the whole there won't be more stock coming to market from rentals causing values to drop.

This leaves a few mum and dads who might be on the edge - and tax changes may create more distress. They will have to decide to either take an ongoing few grand annual knock from a lack of cash / tax beifits. Or alternatively do they take a one-off hit and sell at a discount. Some will certainly take this option - but enough to drive values down over the long term I'm not so sure.

If you are right and rents do go up - then this will make it harder for first home owners to save their depsoit - which will leave them out of a market for longer. During which time I reckon there is a risk of property values increasing - even if only a little.

beacon

26-02-2010, 04:28 PM

Sound argument again, as usual minimoke. Rents will have to rise for the property market to rise, long term. In the near term, there are few positives that I can see ...
Keep writing. I appreciate your thoughts.

beacon

01-03-2010, 09:20 AM

http://www.stuff.co.nz/business/3387850/Wage-gap-with-Australia-set-to-widen

Other factors emerging to drain economy's blood.

minimoke

01-03-2010, 12:54 PM

http://www.stuff.co.nz/business/3387850/Wage-gap-with-Australia-set-to-widen

Other factors emerging to drain economy's blood.
Despite that more people prefer to come to NZ than prefer to leave. In todays news:
"New Zealand recorded the highest annual immigration in more than five years as fewer Kiwis headed overseas, providing added stimulus to the housing market and underpinning consumer demand.
The number of permanent arrivals exceeded departures by 22,588 in the 12 months ended January 31, according to Statistics New Zealand. That’s the highest since May 2004."

Skol

08-03-2010, 09:43 AM

The residential property prices in NZ just don't add up if you do the numbers, I think they're due for a big hit. I travel a lot and in the USA and parts of Europe the carnage is extraordinary. In Las Vegas for example 70% of all residential property is in negative equity, and prices in parts of Florida and California are down over 70%.
The equity markets are still down 30/40% from 18 months ago, we are on the verge of increasing interest rates, but residential property in NZ seems to have recovered and I read is worth more in some places than before the meltdown. I'm afraid I don't get it.

Dr_Who

08-03-2010, 11:50 AM

I'm afraid I don't get it.

You can thank increase numbers in net migration of people coming into NZ and wanting permanent accommodation. This is exasperated by the lack of finance to build new houses. So demand exceeds supply for the short term. I tend to agree that the numbers dont stack up and we may see a plateau in prices from here. Watch China and Aust to give directions of our market.

mikeo

08-03-2010, 05:12 PM

Along with near-record immigration we also have apparently HUGE underinvestment in residential building contruction - value of consents issued sit around half the long term average, residential building construction need to grow 50% to return to 'normal' levels. Surely this will put pressure on supply in the med term?
And when you consider the cost of building is probably STILL higher than the value of the finished house I don't see this changing any time soon.
Bottom line I wouldn't be brave enough to pick any further increase in house prices but I think it would be an even bigger (or ill informed) call to to pick any decrease in house prices over the med-long term.

minimoke

08-03-2010, 06:28 PM

T.... I travel a lot and in the USA and parts of Europe the carnage is extraordinary. In Las Vegas for example 70% of all residential property is in negative equity, and prices in parts of Florida and California are down over 70%.

But 9 Calfornia markets, in the latest Housing Affordability survey, are "severly Unaffordable" - and thats out of 11 in the whole of the USA. If if we look at housing affordability parts of NZ rates well. Bournemouth in the UK is at no 6, San Fransico is at 16th position. Its not till we get to 20th spot do we see Tauranga and then at 22 is Auckland. Australia is a whole lot more unaffordable than NZ - and that will help drive values in NZ. Nationals "closing the gap" rhetoric has to work at several levels.

fungus pudding

08-03-2010, 07:02 PM

Skol

09-03-2010, 07:48 AM

duncan macgregor

09-03-2010, 08:14 AM

If you do a few calculations, the gross return on a rental in Auckland for example, is about 5%. After rates, insurance, water, and maintenance (no management fees included) the return is about 3.5%. You can get over 5% at the bank. (All before tax)

Doesn't stack up. ONe of 2 things has to happen, a fall in house prices, or a long period of stagnation as rents catch up. You seem to think that house prices remain constant doing your sums. House prices double every ten years at least during my life time thats what happened. By placing a deposit large enough so that return equals out going you use the banks money as the fools way to riches. Landlord little empires have been built up with little or no money after the first property is up and running with a similar ammount of fools saying it cant be done. Macdunk

Skol

09-03-2010, 08:32 AM

Yep I know it can be done. A woman in Saturdays Herald had 53 houses, did have 65 but sold a few off. I know what you mean about house prices doubling, I've done well out of it myself, but rents haven't caught up. There has to be a day of reckoning, don't know how many land agents, farmers, and other punters have said to me over the years not to worry about anything else but capital gain.
A farmer recently told me the same thing, numbers don't add up. His farm was worth over $2 million but last year after a few bad things happened the net profit was $5000.

minimoke

09-03-2010, 09:14 AM

Had a look around Chicago lately? Or for a real bargain pop over to Detroit.
Dead right there. Detroit rated as the No 1 most affordable place in the States with a median house coming in at $81,600 - indeed its the No 1 most affordabale place in the States, NZ, Aus, UK, Canada and Ireland. There is one wee drawback - and thats unemployment which is arund 30% with those who are jobless closer to 50%. So while houses are cheap you may not have a job to pay the mortgage.

Chicago though is a different story with median values there coming in at $210,000. On the affordability rankings it drops to 118 in the States and 128 internationally out of 272 markets. Thats closest to Palmerston North which came in at 188 internationally.

What I'm still trying to figure is why do Kiwis head to the east Coast of Oz when this neck of the woods is the worst amongst surveyed countries for affordability. The Gold Coast is pretty much the most unaffordable anywhere. Closely followed by the Sunshine Coast, Sydney and Melbourne.

First home owners might find it hard here - but if they think they can head to Oz for their dream home they have another thought coming.

fungus pudding

09-03-2010, 09:35 AM

What I'm still trying to figure is why do Kiwis head to the east Coast of Oz when this neck of the woods is the worst amongst surveyed countries for affordability. The Gold Coast is pretty much the most unaffordable anywhere. Closely followed by the Sunshine Coast, Sydney and Melbourne.

It's known as 'The grass is greener' syndrome.

09-03-2010, 11:22 AM

There is one wee drawback - and thats unemployment which is arund 30% with those who are jobless closer to 50%. I would have thought unemployment amoung the jobless was closer to 100%???

neopoleII

09-03-2010, 07:08 PM

quote

""House prices double every ten years at least during my life time thats what happened.""

and the public and private debt, borrowings and credit has done what?.............

waiting for the pop

The GrandMaster

10-03-2010, 10:57 AM

""House prices double every ten years at least during my life time thats what happened.""

I'm a bit tired of this statement myself. This is based on what - the last 5 decades. So the sample size is five. Anyone using this sort of statistics to predict the future direction of house prices is just foolish. Obviously NZ property has been significantly undervalued in the past, and this has gone through a significant realignment over the course of the past 50 years, of which many people have benefited (at the expense of others, I will add - this is no win/win game).

So lets stop this "property doubles in value every 10 years" drivel...

duncan macgregor

10-03-2010, 05:06 PM

I'm a bit tired of this statement myself. This is based on what - the last 5 decades. So the sample size is five. Anyone using this sort of statistics to predict the future direction of house prices is just foolish. Obviously NZ property has been significantly undervalued in the past, and this has gone through a significant realignment over the course of the past 50 years, of which many people have benefited (at the expense of others, I will add - this is no win/win game).

So lets stop this "property doubles in value every 10 years" drivel... It only becomes drivel when it ceases to happen. Take it back further if you like, history repeats as every wised up investor should be aware off. Property costs are much higher to replace due to the extra unrelated burden of consent and related costs sky rocketing out of control which ends up sooner or later in a steeper increase than the past. Macdunk

Skol

10-03-2010, 08:15 PM

Even if the cost of construction is more than it was a while back it's defying gravity. There will be a day of reckoning, but what will bring it about is anyone's guess. 3.5% return? Residential landlords must be out their minds, the risk/return equation doesn't stack up. Might not be capital gain, might be capital loss.

Arbitrage

11-03-2010, 09:29 AM

fungus pudding

11-03-2010, 09:47 AM

So Skol, are you saying that in 10 years time, with Auckland's population heading towards 2 million, that house prices could be less than what they are now?

The point is if they have risen only 30% or less in the next ten years, have they been a good investment? Giiven the high maintenance nad management costs of residential, I'd say they would have been a dead loss. So investing in residential real estate has become a gamble on a mix of real and nominal capital gain (inflation). With so many easier opportunities around it beats me why anyone bothers, especially given the 'quality' of some of ther prospective tenants around. It's that last point that finally got me to see the light in res. investment.

Skol

11-03-2010, 05:16 PM

So Skol, are you saying that in 10 years time, with Auckland's population heading towards 2 million, that house prices could be less than what they are now?

Residential property is a great long term investment. Sure the cash flow returns may vary but at least they are steady (those rental payments every fortnight are great - even through the recession). The media love the short term changes in capital values to create headlines to sell newspapers. Take out the noise and the upward trend in values, especially in Auckland, have created wealth for many canny (eg Duncan) long term investors.

If house prices double every 10 years that's 10% a year. Do wages and salaries go up 10% a year-no. Eventually either the rents would be exorbitant and unaffordable or the yield will drop to 3% then 2.5% and so on. That's assuming 100% tenancy. When you can get 5%+ at the bank and housing yields are less, something will happen eventually. Who can afford $1000 (after tax) a week rent, because that's what you'd need to make the numbers stack up?

One of 2 things will happen-house prices will drop to their real value or there'll be years of stagnation.

fungus pudding

11-03-2010, 05:30 PM

If house prices double every 10 years that's 10% a year. Do wages and salaries go up 10% a year-no. Eventually either the rents would be exorbitant and unaffordable or the yield will drop to 3% then 2.5% and so on. That's assuming 100% tenancy. When you can get 5%+ at the bank and housing yields are less, something will happen eventually. Who can afford $1000 (after tax) a week rent, because that's what you'd need to make the numbers stack up?

One of 2 things will happen-house prices will drop to their real value or there'll be years of stagnation.

Fauty mathematics there. Remember the rule of 72. If house prices increase 10% per annum thay will double in 7.2 years, and if they increase 7.2% a year they will double in 10 years.
Not that it matters 'cos it won't happen like that. Existing housing stock will not double in value in the next ten years. Technological advances etc may see replacement costs rise quite a bit - but that might just leave existing stock looking a bit tired and obsolete. In the next ten years existing houses will rise less than inflation, which is unlikely to average 7.2% per annum.

Arbitrage

12-03-2010, 11:31 AM

How come house prices have doubled in inner Auckland suburbs since 2001 during a period of low inflation?

fungus pudding

12-03-2010, 11:51 AM

How come house prices have doubled in inner Auckland suburbs since 2001 during a period of low inflation?

They have never travelled exactly in paralell. And aside from that some areas will fall outside the maximum or minimum performance. Looking at a small section of the market tells you little.

Skol

12-03-2010, 12:15 PM

Fauty mathematics there. Remember the rule of 72. If house prices increase 10% per annum thay will double in 7.2 years, and if they increase 7.2% a year they will double in 10 years.
Correct, I forgot about the power of compound interest.

Skol

12-03-2010, 12:16 PM

How come house prices have doubled in inner Auckland suburbs since 2001 during a period of low inflation?

It's called herd instinct and many families are now paying the price.

Skol

13-03-2010, 12:12 PM

Maybe the chickens are coming home to roost. An article in today's Herald says the market is awash with unsold properties and it could take a year to clear the backlog.

minimoke

15-03-2010, 04:35 PM

Maybe the chickens are coming home to roost. An article in today's Herald says the market is awash with unsold properties and it could take a year to clear the backlog.
The issue isn't so much "unsold" as it is "vacant". If these unsold properties have people living in them then theres no problem. Indeed it seems even though there might be loads of properties on the market there were loads of sales. In Feb sales were up on January. If we compare this Feb with last the total number of sales were down a tad but time on market was a lot less. Median price is up and the average price is up.

The only way the "backlog" will clear is if more purchasers come to market. More purchasers = driving higher values.

If we want to see the backlog cleared with lower values we need to see more vacant posessions - thus giving buyers more choice and more leverage. We would probably also need to see evidence of people "trading down" - but even then these people need somewhere to live (in a more-in-demand lower priced house: which others are chasing thus keeping values up) or into rental accomodation - which again is a supply demand thing.

STRAT

17-03-2010, 07:28 AM

fungus pudding

17-03-2010, 07:49 AM

Hi Skol. You have forgotten leverage. RE is the one place where historicly Joe Average is able to get some serious leverage on his investment and that changes the numbers quite a bit.

If Skol's assumptions are correct, leveraging will make an investor even worse off.

duncan macgregor

17-03-2010, 08:35 AM

If Skol's assumptions are correct, leveraging will make an investor even worse off. Leverage is what makes the numbers stack up. Lets presume mortgage at 8pc inflation at 3pc with a 10pc rise in prices like it has been for as long as I can remember. Tie in $200000 dollars in a mortgage which reduces in value each year due to inflation at 8pc and you are on to a winner regardless of house prices. Macdunk

fungus pudding

17-03-2010, 09:14 AM

Leverage is what makes the numbers stack up. Lets presume mortgage at 8pc inflation at 3pc with a 10pc rise in prices like it has been for as long as I can remember. Tie in $200000 dollars in a mortgage which reduces in value each year due to inflation at 8pc and you are on to a winner regardless of house prices. Macdunk

The whole point is that to be a winner the capital gain must exceed the losses. Buying at current low returns, and factoring in management, interest, rates, insurance, vacancies and the real biggie, maintenance, then it is difficult to see a profit over the next ten years. It's not difficult to see losses. I'm not against residential investment having made a living at it for many years along with sufficient $$$$ to move onto better things - but there is a time to jump - and a time to stand back. It's a good start for those with low capital - but only when everything stacks up. At the moment things look disastrous to me.

duncan macgregor

17-03-2010, 10:36 AM

Lets forget the numbers and concentrate on demand. Auckland at this moment is increasing its population by fifty people each week. It matters very little in the wide scheme of things who owns the extra homes that this extra demand requires. whats the difference between private ownership to Govt ownership, the money required still gets drawn away from the productive sector regardless. It is much safer for individuals to invest in property than get ripped off by the swill at the trough company directors in the share market, that the average Joe Blow has little understanding off. The increased cost of building has increased at a higher level than the increase in the average company share price. The average developer pays extortionate levies and fees compared to even ten years ago before he even gets a nail driven in. Macdunk

Arbitrage

17-03-2010, 11:12 AM

The levies and fees you refer to are small in relation to the margins potentially achieved by developers. You will find that these fees still do not cover the true capital costs of providing infrastructure (eg roading upgrades, sewers and water) to new developments. The long suffering rate payer will continue to subsidise developers, even the "average" ones you describe.

beacon

17-03-2010, 04:05 PM

fungus pudding

17-03-2010, 05:09 PM

Waitakere listings continue increasing, especially in the economic ranges, outpacing increase in listings everywhere else in Auckland. Hope the Government is taking notice that disallowing depreciation is already begining to impact on rents, ala they have begun their rise. Is the extra funding for accomodation supplements ready? Within two years, they'd be needing an extra $50 per week per tenanted household at the very minimum - more because of the flow on effects of GST. This will impact the capital markets adversely too.

Rents are not linked to what the landlord pays in tax. They are set by supply and demand. So unless the owners burn their houses down because they don't like the change there's no reason that the possible tax changes (if any) will affect rents. And what is 'an economic range'?

17-03-2010, 05:16 PM

Rents are not linked to what the landlord pays in tax. They are set by supply and demand. So unless the owners burn their houses down because they don't like the change there's no reason that the possible tax changes (if any) will affect rents. NZ needs 1,000s of new houses a year. Even if they aren't built as investment properties, investors do buy the house the new builds are upgrading from. They therefore do have an effect on supply. The BNZ (?) modeled that any tax impact would be shared 1/3 increased rents and 2/3 reduced prices. I am not saying they are correct but I do expect some increase in rents, even if it isn't 100% as some suggest.

Skol

17-03-2010, 07:37 PM

Herd instinct seems to be alive and well on this thread. Supply and demand is all it amounts to and even if there are 50 immigrants a week moving to Auckland, how will they afford the rent?
Besides, I read just recently that emigration from NZ to Aust. is up again, heaps of jobs for skilled people, vacating homes in NZ.
There seems to be some assumption that rents have to rise because of tax changes, maintenance or whatever, but that's got bugger all to do with what punters will pay for rent.

duncan macgregor

17-03-2010, 09:25 PM

Skol, What renters pay for rent is topped up by the Govt otherwise we have people living in garages or tents.
When people cant pay the Govt of the day pay either in subsidized rents or in grants to allow them to pay the market price. Nz will atract rich retiring investors and get rid of upskilled young people simply because of the way things are at this moment in time.
To change this trend in the short term seems unlikely so we must look at the likely outcome of what looks like the general trend. The general trend looks like young educated people leaving with rich retirees taking their place simply because of life style. Very few young highly skilled people will remain to buy first homes leaving behind the residue for the Govt of the day to house. That is how I see it the Govt of the day will advertize the lifestyle to attract rich retirees who will subsidize the residue that remains behind. To look at housing as an investment remains keeping an unbiased view point on the reality of what is likely to happen. Macdunk

fungus pudding

17-03-2010, 10:54 PM

Arbitrage

18-03-2010, 09:22 AM

duncan macgregor

18-03-2010, 09:46 AM

When people can't pay the market rent falls. That is why it is called 'the market rent'. The market rent gets propped up by the GOVT making it a subsidized market rent which you and I pay for. The market rent then is not fixed by a supply and demand level that in normal circumstances would dictate. The number of solo mothers living in high class areas paying high rents with no earned income or savings might surprize you. Macdunk

fungus pudding

18-03-2010, 10:08 AM

The market rent gets propped up by the GOVT making it a subsidized market rent which you and I pay for. The market rent then is not fixed by a supply and demand level that in normal circumstances would dictate. The number of solo mothers living in high class areas paying high rents with no earned income or savings might surprize you. Macdunk

Social welfare assistance does not make the market. The vast majority of tenants pay rent from their earnings - and at present it's screwing many of the mto death, and you can't get much rent out of dead tenants. The govt. won't ever run a charity for landlords.
I think I've posted this url before but it's a classic illusrration of house prices over a lnog period.
http://www.youtube.com/watch?v=kUldGc06S3U

Jay

18-03-2010, 01:07 PM

Interesting to note that the Herald reported to day that in 2008, 15000 of Aucklands 20000 population increase in 2008 was "natural", i.e. babies. Maybe we don't need more houses, just an extra bedroom?

Totally agree, among acquaintances and work colleagues I now there has been a population explosion from around 2007, and another appears to be forming from the number of pregnant looking women you see around

Definitely good for the renovators!

beacon

18-03-2010, 06:26 PM

Rents are not linked to what the landlord pays in tax. They are set by supply and demand. So unless the owners burn their houses down because they don't like the change there's no reason that the possible tax changes (if any) will affect rents. And what is 'an economic range'?

Only time will tell fungus. By economic range, I meant 3 bedroom houses less than 300,000.

Meanwhile, looks like the Government has been alerted. http://www.landlords.co.nz/read-article.php?article_id=3675

Will they still press on regardless of collateral damage, postpone changes or abort tinkering with property. There is no shame in recognising a wrong move. Courage and wisdom ... here's to hoping.

beacon

19-03-2010, 01:58 PM

Meanwhile, looks like the Government has been alerted. http://www.landlords.co.nz/read-article.php?article_id=3675

Will they still press on regardless of collateral damage, postpone changes or abort tinkering with property. There is no shame in recognising a wrong move. Courage and wisdom ... here's to hoping.

Dunne wishes to press on regardless...

Skol

28-03-2010, 04:05 PM

My thoughts exactly.

Add By Martin Hawes 4:00 AM Sunday Mar 28, 2010

Housing is not a good investment currently. At present, houses make lousy investments. I am referring to the very low yield houses provide someone buying a rental property.

Yield - the cash that you can take from an investment compared to what you pay for it - is the arbiter of investment value. Yield determines how much wise investors would pay for their investments.

Yield is always calculated as if the purchaser did not borrow. This allows us to compare one investment with others (bonds, shares, bank deposits) without the distortion of different amounts of debt.

It is also done before any capital gain is taken into account - smart investors always make sure their investments stack up solely on the income that they provide and capital growth is regarded as an extra.

So, what is the yield from a typical house? To make this calculation, I have used the same method as I did in this column last year: I have taken the median house price of $350,000 (as provided by REINZ for January) and the median rental for a three-bedroom house of $325 a week (as provided by Department of Building and Housing).

A weekly rent of $325 translates to annual rent of $16,900. I then deduct the investor's costs for rates, insurance and maintenance ($3000) and also assume two weeks' vacancy. This would give a net annual rental income to the investor of $13,250 a year.

Now let's look at this as a percentage to give us the yield:

This yield is worse than when I did this last year using December 2008 figures. At that time, the yield for residential property was 3.95 per cent - rents are now a little higher but values are much higher.

This yield is far too low to give a decent investment return. To properly compensate an investor for the risk and work of owning investment property, the net yield needs to be around 7 per cent.

That means that either rents have to rise or values fall. I suspect both may happen to some degree as yields gradually come into line with what they should be but this will take some years.

It is true that these figures will not be a precise reflection of the market but if they are used consistently they give a fair indication of the direction of yields.

A few investors are speculating on price increases but any astute investor will know that there is little or no value in residential investing.

peat

29-03-2010, 11:09 AM

just to be devils advocate here( because I dont really disagree) , by the same single criteria i.e yield, gold and silver are terrible investments as well and yet gold will have performed well for people over recent years.... by that single criteria Telecom is a brilliant investment now as well.
I think this article is a little simplistic though probably still relatively good advice.

Arbitrage

29-03-2010, 09:34 PM

As I have said before, Martin is a value investor. He would not define buying and selling gold as an investment but as speculation. Therefore to be avoided.

Based on his advice everyone should stop investing in property and sell now. But hang on a minute, haven't house prices gone up over the past 12 months? Therefore the astute investors value has gone up a few percentage points which on a $500k property isn't to be sniffed at, especially if leveraged against a deposit. Plus rental income, it is not looking too bad, even in a tough year.

Another point, he calculates rental income over 12 months to be 52 times the weekly rent. Perhaps someone can recalculate this for me as the rent is paid weekly and invested at say 3%, the actual rental related cashflow income is slightly higher even of a mortgage takes away some of this each month... Any mathematicians out there?

JBmurc

29-03-2010, 11:22 PM

No Martin wouldn't buy silver or gold neither would 99% of the western world population but that doesn't mean It won't be a great investment with the massive inflation of fiat currencies
Can't see property returning much capital growth over the next decade unless NZ's average income increases alot-we have the 2nd highest household debt to income in the western world.
can't say I'd want to take on a 400k mortgage 100k dep on a 500k property with week costs on a 30yr payback 700pw-750pw while rates are low +insure+rates+maintenance say another
$50+pw now going off local rents-- we rent a house at the moment here worth 600k it costs us $500pw so going of the above numbers an at low rates the investor would have to pay on average $400pw+

in 30yrs your'd have a paid off home worth $$$,$$$
But in 30yrs silver mines will have to be mining under the sea with massive costs in turn meaning silver will be worth many mutiables of todays prices

Now whos going be the valued investor the 1 guy in a thousand that held real silver a precious metals with very few m,iners but million's of uses

Or the guy that followed the crowd an ticked up a investment property because in the past few years they went up.

AMR

30-03-2010, 10:58 AM

I would not invest in any "average" houses right now unless there was a twist to the property which allowed the investor to add value or it is at a massive discount.

Rumours are the mortgagee sale situation is a lot worse than the bank is letting on and they are stockpiling sales.

Now, this has already happened to the CBD apartment sector so that gives me a little bit of comfort.

Arbitrage

30-03-2010, 02:05 PM

Interesting comment about the mortgagee sale situation AMR. It wouldn't surprise me at all. There are a lot of properties that have been withdran from the market because vendors haven't been able to sell them. I am sure that the banks would also hold their unsold properties if they were going to have to take a major loss.

minimoke

30-03-2010, 03:41 PM

I would not invest .... unless there was a twist to the property which allowed the investor to add value or it is at a massive discount.

Those are pretty much a couple of my "Golden Rules" regardless of what stage in a property cycle we are in.

Arbitrage

31-03-2010, 08:55 AM

Exactly right MM.

beacon

31-03-2010, 12:04 PM

listings in Waitakere since jan 09 up 20% now
listings in Waitakere since jan 09 up 35% now (M&D and small landlords)
listings in Manukau since jan 09 up 11% now
listings in Manukau since jan 09 up 25% now (M&D and small landlords)

Rents to follow up ... watching this space ... hope the powers that be are noticing the pain and desperation ...

here is an update:
listings in Waitakere since jan 09 up 27% now
listings in Waitakere since jan 09 up a whopping 52% now (M&D and small landlords)
listings in Manukau since jan 09 up 15% now
listings in Manukau since jan 09 up 30% now (M&D and small landlords)

Be interesting to see, how much of this migrates to NZ capital markets (excluding NZ Super + Kiwisaver) ...

PS Please note these posts have a typo. data is since jan 10. haven't altered original posts...

minimoke

31-03-2010, 01:20 PM

here is an update:
listings in Waitakere since jan 09 up 27% now
listings in Waitakere since jan 09 up a whopping 52% now (M&D and small landlords)
listings in Manukau since jan 09 up 15% now
listings in Manukau since jan 09 up 30% now (M&D and small landlords)

Be interesting to see, how much of this migrates to NZ capital markets (excluding NZ Super + Kiwisaver) ...

PS Please note these posts have a typo. data is since jan 10. haven't altered original posts...
I'm not sure I undersatnd the comparrisons. But the M&D part of the figures are interseting though irrelvant - they have to live somewhere so while they may be selling they are also in the market to buy. While people say they will "trade down" once they have the cash in hand they invariably don't.

As for the small landlords I wouldn't expect any migration to NZ Capital markets. I suspect these people are so heavily geared that here is an insignificant amount of capital at stake.

beacon

31-03-2010, 07:13 PM

M&D part of the figures are interseting though irrelvant .

Maybe not for you minimoke, but are they as irrelevant to National? These M&D landlords constitute part of National's core vote bank, and they are bleeding. Especially as credit remains so tight. I list only Waitakere and Manukau figures, as some earlier posters on this thread asserted minimal impact on relatively lower socio-economic demographic areas. Here is data that they are welcome to use, as their speculative statements about the aftermath of this legislation seemed to me to be without any grounding to facts or rationale ...

they have to live somewhere so while they may be selling they are also in the market to buy.

Aren't you speculating too now? The data shows selling intentions. Where do you get the buying or "trading down" intention from ?

As for the small landlords I wouldn't expect any migration to NZ Capital markets. I suspect these people are so heavily geared that here is an insignificant amount of capital at stake.

If potential Equity released on sale of these negatively geared properties is really considered that insignificant, then why is the Govt bothering with this segment in the first place? When first world countries are trying to support their property market with first home loans, principal and interest writeoff on mortgages and securitisation reopening efforts, NZ has declared intentions to do exactly the opposite, especially when impending GST and interest rate increases are bound to have an adverse impact on economy, property market and struggling households anyway.

Wasn't National and some posters here wishing NZ to rebalance capital allocation by "picking on residential landlords". If depreciation is to be disallowed, why pick on one sub sector. Apply it with equanimity to all sectors. But no, the backlash would be uncontrollable. So pick on the small guys. And by Government's own admission, the rewards of this tinkering are minute.

With the NZ capital markets suffering from erectile dysfunction despite consistent stimulation provided by Kiwisaver and NZ super, I can't see that "capital allocation to more productive uses"
happening by squeezing this bone dry skeleton of an industry in the immediate economic environment. I only see exacerbation of the already precipitous state of residential property markets, and reduction of "feel good" factors with adverse flow on effects on NZ Capital markets as well as employment intentions, emigration intentions, investment intentions, saving intentions and on economy in general. What will the Government have achieved, I wonder?

Skol

31-03-2010, 07:33 PM

minimoke

01-04-2010, 12:31 PM

....These M&D landlords constitute part of National's core vote bank,

Oops - looks like I mis read your post. I thought your reference to M&D was to people just selling their family home. But if you mean M&D's that are a lanlord then thats a different matter - I'll just put thme in the same category as the Small Landlord.

beacon

01-04-2010, 01:29 PM

I've got a mate who's a debt collector, gave me a call today. Says he's got heaps of work especially in the residential landlord sector, probably the the least who can afford it. Says he has a number of cases where the outstanding amount is $10,000+.

And with nary a hope of collecting. Meanwhile, the lending banks are not giving any quarter. In many situations and after jumping a lot of legal hoops, if landlords bothered jumping them at all in the first place, creditor landlords will get instalment payments that won't even cover the cost of interest. I have heard a landlord say recently that after chasing their tenant for 8 months, they had the Tenancy tribunal Adjudicator just write off their case because "You're running a business, you can claim it as a loss. This guy just hasn't got the money. As far as damages are concerned, you really need to bring photos and records of the damaged places to show they were not damaged before the tenancy started". The fact that no damages were recorded on the Tenancy agreement meant nothing. The Adjudicator didn't even ask the tenant if they had done the damages or not. The vandal tenant walked out of the Tribunal scot-free. He had under the table income while collecting dole, and now nothing to pay for damaging somebody's retirement asset. As a landlord, try saying the same things to the lender and see how far that gets...

The point is things are already tough in this sector. The urgency to "even the playing field" seems to me to be just a show that the Government is doing something...

upside_umop

13-02-2011, 01:01 PM

Still falling, but for how much longer? Rentals are becoming short from what I have heard. Perhaps, yields will catch up and therefore make rental properties more attractive again.

This latest article "House prices hit low as prices snag" (http://www.stuff.co.nz/national/4649032/House-prices-hit-low-as-prices-snag) shows that prices are now down 7.7% from the peak in November 2007. That is taking into account that many first home buyers are infact out of the market, so the median is skewed to the higher end of the market.

Combine this with the fact that consumer prices are up 10.9% since third quarter 2007, prices are down in real terms:

( 1.077 * 1.109 ) - 1 * 100% = 19.43%.

I expect this to continue to decline as first home buyers enter the market, skewing median prices downwards. The actual number should be further downwards, given the CPI basket is majorly made up of housing. I will find out some more, and adjust it. I would expect housing to be down in the early 20% taking this into account.

POSSUM THE CAT

13-02-2011, 02:52 PM

Pumice

14-02-2011, 08:15 AM

Upside umop to make rentals a reasonable business to be in Rents have to double or house prices halve IE $400000 house interest on $400,000 term deposit 5-25%=$21,000 rates, insurance & maintenance $5.000 total =$26,000.
Rent At $400 per week 52 weeks $20,800 even if you payed no management fees why would you bother. You have to either buy house for $200,000 or rent for $800.00 per week

This is exactly how I see it. many of the younger generations arent looking at LAQC's or any other schemes. they just want the investment to stand as is. Given that the median income is far below $800 after tax, I can only conclude house prices will drop further as apposed to rents increasing. In Wellington I recently had my rent dropped, the landlord seemed pretty desperate for cash.

upside_umop

14-02-2011, 12:36 PM

I agree, yields are low. There will be a crunch somewhere along the way, whether it's a decline in prices or an increase in rents or both.

There is the potential for shortages in housing stock given the lack of consents in the last few years. This will support prices a little in future (when, I don't know - I think housing is relatively flexible. I.e. stay with the parents a little longer or downsize your house/rent the spare room). I don't see a mass amount of new houses being built given the financial situation and the amount labourers charge (Chch earthquake didn't help!).

With the constant increase in monetary supply, and efficencies still driving through (multiplying factor doesn't occur overnight)...this relationship translates long term through to house prices a lot more consistently than it will to gold. Although, watch for basel III requirements.

Tok3n

20-03-2011, 09:40 AM

What's the verdict so far now in 2011, still difficult for 1st home buyers? interest rates have gone down and looks like the banks are more relax towards lending e.g. 90% lending is back (though with more conditions)

I am a 1st home buyer in my early 30s, seems like every open home I go is basically full of baby boomers or slightly younger.

stanace

20-03-2011, 12:16 PM

Slightly off topic. If you are renting in a quality property on a periodic tenancy, particularly in Auckland, I suggest that you convert to a fixed tenancy asap, as you may shortly get a 90 day notice to vacate, as the World Cup is soon to be on us. Rents are about to be raised, 60 day notices, as the shortage hits Auckland. I spoke to a Building Manager last week, and he is turning away 10 requests a day, there are few spare quality rentals available, and it is about to get a lot worse. How this will affect the price of housing in the short term is anyones guess.

bung5

05-09-2011, 12:55 PM

I was nervous about buying a house last July so I allowed for that by
locking in the certainty of 8.3% for 5 years. I am paranoid about paying
off the lump sum principal each year as in 5 years if interest rates go
to say, 15%, I want to have as much equity as possible. How can anyone
know what rates will be, I remember 21.5% in 1988.
George

Back from 2008... Geroge you still paying 8.3% or how much you pay to break that?

George

05-09-2011, 09:20 PM

Hi bung
Yep, still 8.3. Had a 2 week window abt november 08 I think to go to 6 month fixed for no charge but by the time we got back to them it had gone to $3000 break fee, eventually as high as 8 grand so not worth it we felt. Hindsight shows I was wrong. Floating rates actually went as high as 10% late 07 so for a while we were laughing.
We have 10 months to go at 8.3 (2,600 to break it now) but will have paid off the house by Dec 2013 all going well. So less than 7 years to pay back 250 grand with 5 of those years at 8.3%. And for most of that time our combined income was less than 100 grand.
Younger couples may not want to sacrifice to that extent but this was our last chance to get on the property ladder after having got off it (foolishly). Just bad luck the greatest property boom in history happened at the same time and we had to buy near the top. Wonder how other previous posters view the current property scene now.
George

Sideshow Bob

05-09-2011, 09:30 PM

George, you have to be congratulated to pay back that much that quickly!! The challenge now will be to continue on with that, in a perhaps slightly more relaxed manner.......

bung5

06-09-2011, 03:13 PM

Property is never over valued, or under valued for long. The cost of building is the yardstick that sways the price pendulum back to a realistick cost price level. To pick the eyes out of the property market, requires you to understand the replacement cost structure value.
When the market shuts down with builders out of work, they simply leave the industry, or the country, which creates a shortage of builders, who in turn create a higher than should be price structure.
The Bricklayers in my area are undercutting each other simply to stay in work, the best brickies are now gone. Building red tape costs with compliance to keep up with the stupidity are still in a steep uptrend. The end result my friends is very obvious the price of property in the future will rise higher than the ten pc average in the last thirty years, unless the population flees to greener pastures. Macdunk

The drivle you come out with . How can property prices sustain 10% growth for another 30 years. You think wages will increase so much to support mortgage payements on an average house price of 6million in 30 years??
If wages grew at 4% per annum then the averave wage would be about 150k per year in 30 years, so 40 times the average wage to buy an average house...
You are blinded by your past success. House prices will most likley be stagnant for years.

You can keep raving on about house prices being good buying under the construction cost but you fail to factor in that the land value underneath can drop. Unless of course you are assuming the land has no value in which case property has a long way to fall before it reaches that scenario.

stanace

06-09-2011, 04:47 PM

Well property has increased at about 8% for the past 30 years, so on that note your average house will cost about $3,000,000 in another 30 years. However 30 years ago the majority of homes bought were paid for by one wage earner, this has now changed, so that is why the prices can continue to rise, because they are "affordable".

bung5

06-09-2011, 05:10 PM

More drivle... they can't continue to rise when we are at a point of two incomes stuggling to afford the house with 30 year loans .

You can't even justify 3 million doller average house in 30 years.

bung5

12-09-2011, 09:09 AM

http://smh.domain.com.au/tsunami-to-hit-australian-real-estate-20110911-1k413.html

Starting in Europe, the downturn will spread to the US, China and eventually Australia, he said.

At the centre of the coming debt crisis is real estate, the forecaster says.

"People in places like Sydney or Tokyo or Miami say, 'Hey, real estate can never go down here, we're a great place, everyone wants to move here, there's not much land for development', and what I say is that is exactly the kind of place that bubbles," Mr Dent said.

"Outside Hong Kong and Shanghai, Australia is the most expensive real estate market in the world compared to income."

Mr Dent said Australia's house prices would return to late 1990s or early 2000 levels.

Driving all these changes is simple demographics, specifically the peak of the baby boomers' spending, Mr Dent said.

"We predicted this (current) downturn in the US 20 years ago," he said.

"We said that in 2007 the peak number of baby boomers will reach their peak spending. They would have bought all their homes and then they will start saving for retirement ... and that you are going to see this downturn."

The drop-off in spending will affect everyone, even mighty China, Mr Dent said.

To survive the incoming "economic tsunami", Mr Dent said investors should sell their excess real estate and buy up assets in US dollars.

"Gold and silver are going to crash, they're a bubble," he said.

"Once we write down all these crazy debts, we are going to destroy a lot of dollars that were created in the boom and that makes the (US) dollar a lot more valuable."

Mr Dent is in Australia to promote his book, The Great Crash Ahead - How to Prosper in the Debt Crisis of 2010-2012, and will be speaking at the Secure the Future conference in Sydney and Brisbane in October.

belgarion

12-09-2011, 10:39 AM

There's many other touting the same stuff. The problem is that Mr Dent and other 'forecasters' are in un-charted territory and they're all guessing what will happen as the bamby boomers start to retire. My view is that there will be a small few that will want to move to non-property assets but the majority will not budge.

Case in point, my retired mum has a number of residential and semi-commerical investment properties held in a trust which pays her a pretty good annual income. Her focus is income. The ROI from these properties which were bought 20-30 years ago is only about 5.5% when taken over the lifetime of the investment. However, she doesn't look at that way and only focuses on the amount of money being recieved now which allows her to live well and make 2-3 overseas trips per year. She has no intention of selling her properties as she's of a 'generation' that that is convinced properties are as safe as houses.

When she passes on, the trust may liquidate the properties in a managed way which is likely to be holding and selling only at the top of the property cycle. There is also talk amoung the the benficiaries that they'd be happy to keep the properties and get a portion of the income while using the assets as an emergency fund and/or as a 'family bank' which can undercut bank rates. In this case, they may indeed be 'sold' but it'd be a paper transaction between one entity to another and probably not at market value but at bank accepted valuation which are lower as they're far more conservative.

Another point, what about the billions of BRIC emerging middle class? Even if just a few of these decide that living in more westernised countries is a goal worth aspriing too then demand is actually likely to increase as oposed to decrease! This trend, by the way, is well recognised and documented and predicted, based on past history, to increase rather then decrease.

Good luck with this doomsday prediction, Mr Dent et al. I suspect that like many soothsayer's predicting the end of the world as we know it, you'll be wrong too.

bung5

12-09-2011, 10:49 AM

I don't think most are predecting the end of the world belgarion more so a correction which is healhty and normal in any market. A 20 -30% drop would not be out of ordinary and has happenend plenty of times in the past and everthing is pointing to one. If not a drop will be the equilvent of one by the way of flat prices and inflation doing the same thing over some years.
Of course it could go anyway but this is my arm rest chair opinion :P .... only the people with property portfolios disagree ;)

I'm not against property investment but will not invest at the top of the cycle.

belgarion

12-09-2011, 11:12 AM

A 20 -30% drop would not be out of ordinary and has happenend plenty of times in the past and everything is pointing to one. If not a drop will be the equilvent of one by the way of flat prices and inflation doing the same thing over some years.

Hi Bung,

Any chance you could dredge up some evidence to support your assertion that "everything is pointing to one"? Feel free to use any examples of "plenty of times" if you feel they support your assertion. :)

bung5

12-09-2011, 11:43 AM

http://en.wikipedia.org/wiki/United_States_housing_bubble

http://www.marketoracle.co.uk/Article9297.html

Just a quick google around the world.

bung5

12-09-2011, 11:48 AM

NZ house prices also stayed flat between 96 and 2001

belgarion

12-09-2011, 01:38 PM

Thanks for the links bung.

Unfortunately they do not support any correlation between baby boomers and an ensuing crash in property prices. In fact, the graph from wikipedia showing US new home sales suggests we're about back to the normal trend line (and, I hasten to add, The US population just keeps growing and with it the demand for housing, see second graph). As I've pointed out elsewhere - if US polititian stop squabbling and get people back to work (as they should have done 2 years ago!) the "over-supply of housing will dry up very fast indeed.

http://upload.wikimedia.org/wikipedia/commons/1/1f/Median_and_Average_Sales_Prices_of_New_Homes_Sold_ in_the_US_1963-2010_Monthly.png
http://upload.wikimedia.org/wikipedia/commons/6/6c/Shiller_IE2_Fig_2-1.png

bung5

12-09-2011, 02:00 PM

For the same reasons you have rebutted my point most of your argument is flawed. Getting a bit side tracked on the US housing market which is for a separate thread anyway. I'm not to sure where they are going but the point is it did crash and statistics can be misleading because in many areas houses were down below 40%. It may well bounce back up but the point is there was the opportunity to buy houses a lot cheaper.
The property market in Wellington city is already under a lot of selling pressure with the probability of 150 houses coming up for mortgagee sale shortly with the collapse of a property "investor"/developer here. (I’m not sure if he should have the honour of even been called an investor with his business plan). That will be the start and knock on effect of when these over leveraged investors start to lose a bit more equity they are going to need to sell some to pay back some debt as most are not cash flow positive and subsiding their "investment" with their wage.

belgarion

12-09-2011, 02:33 PM

Criticism

Dent makes heavy use of charts, cycles, and trends, apart from his demographic theories in predicting short and intermediate term economic and stock cycles. His work is based primarily on the assumption that most long term stock market performance can be explained by long-term trends and charts from the past. His critics question the assumption that clues to all major stock market events can be found in the relatively short history of well functioning stock markets in the world. His work has been criticized also for heavy use of data dredging- where it is easy to find patterns in past data and assign predictive powers to them when many such patterns occur in every data collection purely by chance. Dent has been criticized also by many economists for being downright wrong in several of his predictions. In fact, www.maxfunds.com, a financial reporting site awarded him the The "Ultimate Charlatan"[2] Award. They write: "The worst investing advice usually arrives near the top and bottom of stock market cycles. Demographic trends guru Harry S. Dent is making the rounds again, and touting his latest book, The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History ...." In his 2006 work, Dent predicted, “The Dow hitting 40,000 by the end of the decade, the NASDAQ['s] advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009 … The Great Boom['s] resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010.” Of course, those who read The Roaring 2000s, Dent's 1999 masterpiece, should soon be buying each of us a turkey with all the fixin's. According to the book, only a year remains before the Dow breaks 40,000 and the Nasdaq hits 20,000, at which time we'll simply amplify our fortunes by shorting stocks in the coming depression. We can’t underestimate how big this final move up will be before the depression kicks in, since The Dow and Nasdaq are currently quite a bit lower than they were back in 1999 when The Roaring 2000s was published."
from ... http://en.wikipedia.org/wiki/Harry_Dent

Oddly bung, I'm finishing building three properties at the moment and have just recieved building consent for another and expect one for another in about 2 week.

bung5

12-09-2011, 02:40 PM

Oddly bung, I'm finishing building three properties at the moment and have just recieved building consent for another and expect one for another in about 2 week.

I'm guessing you have a lot more capital than most , and after the additions of these to your portfolio you have more then 20% equity ?

George

12-09-2011, 09:04 PM

Re property rising by 8% a year. Using our modest 2 bdrm villa in Henderson as an example, the cv in 2004 was 235,000. In 2007 just after we bought it was 315,000, altho I had to do it up a lot and had the cv raised to 325k which is about an 8% rise per yr from 04.
But an 8% rise to this year will mean our property will be valued about 435,000????? I don't see any similar houses selling for anywhere near that. At best we may hold our value from 07 but that would mean (I think) that it's the first period in Auckland's history without a reasonable percentage rise in values, bearing in mind that Waitakere has had a 4 yr wait since last valuation.

bung5

13-09-2011, 09:33 PM

QV’s Residential Price Index for August shows that property values in the Wellington region are 2.4% lower than the same time last year. Values in the region continue to decrease.

where have property prices gone the last 5 years?? shrewd crude was right. Was better to save more and wait.....

George

14-09-2011, 06:55 AM

But, also according to QV, parts of Auckland were above their maximum 2007 values with Waitakere just 0.3% below. Our September valuation was 345k which was 30k higher than when we bought so be interesting to see what the new valuations next month will show.
Bung, I don't know if we are better off but we can't be worse off. We now have about 200k equity after 4 years - doubt if we could have saved that amount, but even if we had, we perhaps would now have more choices rather than cheaper prices.

bung5

14-09-2011, 09:04 AM

POSSUM THE CAT

14-09-2011, 10:51 AM

George I live in Waitakere & look at Real Estate out of curiosity. QV Valutions in Waitakere are done by dreamers. Places with QV of between $350000 & $380000 and most of them need $100000 spent on them to bring them up to the standard needed for the Valuation. In some cases a realistic valuation. Would be land value less the cost of removing the mess of a building that is on it.

fungus pudding

14-09-2011, 10:55 AM

George

14-09-2011, 03:57 PM

Bung, 20% or 60k deposit and initial fortnight payments of $1000 but with a max of 1800, this was to be about a 16 yr term.
But with a tailored home loan we were able to pay a lump sum of 5% a yr or 12500, which we have been able to do. We also upped the payments each yr and are now up to 2000 a fortnight. It helped that we each had a gradual increase in income over the period so were able to increase payments as required. Don't forget we are many thousands down compared to fixing for a shorter period than the initial 5 years.

POSSUM THE CAT

14-09-2011, 07:40 PM

fungus pudding

15-09-2011, 09:12 AM

Fungus Pudding they are mostly not selling as vendors are dreaming about getting QV but house need huge amount of money spent on them to bring them up to the standard they should be in. Some are so bad it would be cheaper to demolish & start again than renovate. I am not a carpenter but the faults are so glaring. Than an EX Motor Mechanic can pick it up. SAW some Ex blue Chip rentals about a year old up for mortgagee auction even these needed over $50000.00 spent on them at retail prices to bring them up to standard

Qv looks at what has been happening in the market, not at what will happen. So if, as you say, properties all have quotable values of $100,000 more than market value, or more than they are selling for, the next qv will reflect that. But your comments seem to be a huge generalisation. The qv will generally reflect somewhere close to the figure the property will sell for. Not what the property will sell for minus cost of deferred maintenance.

POSSUM THE CAT

15-09-2011, 10:55 AM

Fungus Pudding these same houses have been on the market at least six times in the last 2.5 years & they still think they will get close to QV. Nice Houses selling at around QV gives all the rubbish of the same size 7 locality a totally erroneous QV because they do not even look at the houses. If you go to look at house the real estate agent hands you a copy of the QV. I have even had a registered valuer. Value A property that I had a beneficial interest at $100000.00 over its worth because he did not do the required research of the building. I even asked the Public Trustee to ask the inept valuer to refund his exorbitant fee. As in my opinion he should not be allowed to value a matchbox. So a lot of the blame attaches to the Real Estate agents that in trying to get listing give Vendors an unrealistic idea that they will get close to QV. I can even go back over 35 years when in a provincial area where houses in Maori State & Private housing in mixed blocks were given exorbitant GVs as they were in those days as apolitical expediancy.

fungus pudding

15-09-2011, 01:12 PM

POSSUM THE CAT

15-09-2011, 01:56 PM

Fungus Pudding To long ago to put actual figures on it But industrial land house built in 1905 of brick he valued the land plus so much from the sale of the house for removal. It is hard enough to shift a Brick Veneer house so even if it had been a Brick Veneer House his valuation would have been crazy. But since they did not build Brick Veneer houses in 1905 so he did not even have to visit the site to get his facts right. Spent some years in Australia & rather friendly with a Real Estate agent. who said valuers doing valuation for the banks used to Telephone them to ask what the house was like. Her Firm was very good to deal with because if they thought they could not get within 5% of the aking price they would not list it. Even when other agencies were taking listings as much as $80000.00 in some cases over their valuation & were still on the market 18months later. There were NO offers for the Public Trust Property as the whole town knew the price was ridiculous. I have been to property auctions where the property has been passed in after 5 vendors bids each higher than the last. So why make more than one vendors bid if nobody made a bid after the first

fungus pudding

15-09-2011, 03:50 PM

POSSUM THE CAT

15-09-2011, 07:18 PM

Fungus Pudding What I am saying is people are asking QV and the buyers are not buying because the owners are dreaming about getting QV for their dilapidated houses. Those at realistic prices are selling some above QV. QV is not worth the paper it is written on. I did not say they were selling for $100000.00 below QV but that is all you would want to pay for them.

bung5

15-09-2011, 07:36 PM

George

15-09-2011, 07:51 PM

This is what seems to be happening ie. quality, well-presented properties are selling. A few years ago crap would sell, we know because we couldn't find anything decent (early 2007) and this little 2 bedder needed a lot of work which I was able to do myself, now we love it and with flowers, gardens, trees, a great view, fairly private from neighbours, close to everything, we would be disappointed if it was valued below what we bought it for.

HIDDENGEM

15-10-2011, 06:03 PM

Analysts were divided on housing market after the peak in2007. Some top investors are very cautious now.

We know property prices plummeted in USA, Some Europeancountries and DUBAI.

Fortunately both New Zealand and Australia escaped from residential housing market crash.

In New Zealand some Finance companies went intoreceiverships due to investment in overheated real estate markets by propertydevelopers.

I had to forget my first investment in stocks in a financialcompany in New Zealand.

Do you think is it safe to buy first home now or wait until 2012? I have some sort of worry about housing market in New Zealand andAustralia.

Even IMF said New Zealand residential market is over valuedcompare with income level.

Thanks.

http://www.stuff.co.nz/business/money/4984743/New-Zealand-property-market-over-valued (http://www.stuff.co.nz/business/money/4984743/New-Zealand-property-market-over-valued)

New Zealand property market 'over-valued'

Last updated 15:22 10/05/2011

New Zealand's house prices are over-valued by around 15 to 25 per centcompared to the average over the past 20 years, according to the InternationalMonetary Fund.
In its latest country report on New Zealand the IMF said there was someuncertainty though around the estimate which was based on the OECD's house priceto income ratio as at September last year.

That uses a combination of simple metrics and models and fails to take intoaccount Statistics New Zealand's recent upward revision to household income.
Under the OECD model real house prices rose by 150 per cent in the 15 yearsto 2007, the report said, making it one of the strongest increases amongadvanced countries.
Since then though, house prices have fallen by more than 10 per cent.

Alternative models show varying rates of over-valuation but in the sameballpark as that of the OECD.

A new model developed recently that takes account of income, demographicsand interest rates, suggests house prices here are over-valued by 20 to 25 percent, the IMF said.
Yet another alternative model that includes demographics, mortgage interestrates and the terms of trade instead of future income, indicates house pricesare overvalued by 15 to 20 per cent.
That model is sensitive though to terms of trade and interest ratemovements, for example, a 10 per cent fall in the terms of trade could resultin an 8 per cent fall in houses prices over the medium term.

When it comes to residential rents, the OECD's price-to-rent ratio shows amuch higher over-valuation of 43 per cent relative to the past 20 years.

''However, the measures includes government subsidised rents which haspushed up the ratio over time as subsidised rents decreased, most noticeably in2001''.
If you take subsidised housing out of the picture, the rent overvaluationdrops to about 15 to 27 per cent when compared to the historical averages.

http://www.bloomberg.com/news/2010-10-06/imf-sees-risk-in-mild-overvaluation-of-australian-housing-market-gains.html

IMF Sees Risk in `Mild Overvaluation' ofAustralian Housing Market Gains

By Michael Heath - Oct 7, 2010 1:06 AM GMT+1300Wed Oct 0612:06:49 GMT 2010

The International Monetary Fund cautioned that housing inAustralia may be overvalued and a reversal in prices (http://www.bloomberg.com/apps/quote?ticker=AUEHYOY:IND)could hurt consumers in one of the few advanced economies to skirt last year’sglobal recession. “Given assessed mild overvaluation, a potential correction inhouse” prices “could hit household wealth and consumerconfidence (http://www.bloomberg.com/apps/quote?ticker=AULFUNEM:IND),” the Washington-based IMF said today in its World EconomicOutlook. Housing in many other parts of the world remains a “drag on growth”and a risk to lenders, the fund said.

Myopinions are not intended as financial advice. Any hyper-links are not anendorsement & no responsibility is taken for their content. Please do yourown homework.