NZX & The Big Housing Bubble

[MAC]

Crumbs, all these NZ real estate companies now flooding into China to entice all 1.4 billion Chinese to buy houses in Auckland, I’m not sure they will all get one each, but certainly the ones that do seem willing to pay a whatever price.

Other countries have a foreign ownership registers and restrictions on ownership, but New Zealand it seems is totally wide open for business, speculation and an uncontrolled boom, and apparently it’s just the beginning, but what happens when they all want to go, can't put those houses on a boat.

The councils are opening up land for a flood of supply, the RMA is being modified for a flood of supply, house hold debt levels linger close to all-time highs, there is an ever increasing culture of wanting to “get on the property ladder” with 5% mortgages, and mortgage rates are presently in a dip but may snap back steeply soon enough.

Then there is the mater of the baby boomers with 73% their savings in property. This is a much much bigger issue in NZ because of the local historical obsession with real estate investment. New Zealand boomers pumped more cash into it than any other country, and from here on forward they will now suck it out as income.

It’s a recipe that’s looking like more fun than the kid’s bubble bath, might even be a more interesting watch than a Dutch tulip action ?

So which NZX companies are most at risk ?

Retirement villages RYM, SUM, MET with up to 45% of their annual income presently derived from fair value movement in investment properties ?

The ARG, DNZ, GMT, KPG, PCT, PFI and VHP type property investment companies ?

Other companies with significant land holdings perhaps AIA, MELCO etc ?

[Hoop]

Crumbs, all these NZ real estate companies now flooding into China to entice all 1.4 billion Chinese to buy houses in Auckland, I’m not sure they will all get one each, but certainly the ones that do seem willing to pay a whatever price.

Other countries have a foreign ownership registers and restrictions on ownership, but New Zealand it seems is totally wide open for business, speculation and an uncontrolled boom, and apparently it’s just the beginning, but what happens when they all want to go, can't put those houses on a boat.

The councils are opening up land for a flood of supply, the RMA is being modified for a flood of supply, house hold debt levels linger close to all-time highs, there is an ever increasing culture of wanting to “get on the property ladder” with 5% mortgages, and mortgage rates are presently in a dip but may snap back steeply soon enough.

Then there is the mater of the baby boomers with 73% their savings in property. This is a much much bigger issue in NZ because of the local historical obsession with real estate investment. New Zealand boomers pumped more cash into it than any other country, and from here on forward they will now suck it out as income.

It’s a recipe that’s looking like more fun than the kid’s bubble bath, might even be a more interesting watch than a Dutch tulip action ?

So which NZX companies are most at risk ?

Retirement villages RYM, SUM, MET with up to 45% of their annual income presently derived from fair value movement in investment properties ?

The ARG, DNZ, GMT, KPG, PCT, PFI and VHP type property investment companies ?

Other companies with significant land holdings perhaps AIA, MELCO etc ?

As all markets businesses and Govt rely on available money...if NZ money evaporates due to a NZ crises (e.g Property), there is no place to hide in NZ, everything and everybody will be affected...the rich will get poorer and the poor stay poor ....The headlines will read "the rich and greedy finally get what they deserve".....but there is a trickle down lag effect, and eventually it will reach the "Ha Ha, it won't effect me" group, the lazy, the bludgers, the poor, the beneficiaries, the eldery, the chronic indebtor, and all other groups with no assets...They will be the hardest hit group ..re austerity affect e.g Greece..

Equity Markets are a leading indicator..so this area will recover first approximately 2/3rds through a recession/depression period, about the same time as the lag effect reaches that "Ha Ha, it wont effect me" group above...the headlines will read "the rich get richer and the poor get poorer, where's the justice?"..

[easy money]

Crumbs, all these NZ real estate companies now flooding into China to entice all 1.4 billion Chinese to buy houses in Auckland, I’m not sure they will all get one each, but certainly the ones that do seem willing to pay a whatever price.

Other countries have a foreign ownership registers and restrictions on ownership, but New Zealand it seems is totally wide open for business, speculation and an uncontrolled boom, and apparently it’s just the beginning, but what happens when they all want to go, can't put those houses on a boat.

The councils are opening up land for a flood of supply, the RMA is being modified for a flood of supply, house hold debt levels linger close to all-time highs, there is an ever increasing culture of wanting to “get on the property ladder” with 5% mortgages, and mortgage rates are presently in a dip but may snap back steeply soon enough.

Then there is the mater of the baby boomers with 73% their savings in property. This is a much much bigger issue in NZ because of the local historical obsession with real estate investment. New Zealand boomers pumped more cash into it than any other country, and from here on forward they will now suck it out as income.

It’s a recipe that’s looking like more fun than the kid’s bubble bath, might even be a more interesting watch than a Dutch tulip action ?

So which NZX companies are most at risk ?

Retirement villages RYM, SUM, MET with up to 45% of their annual income presently derived from fair value movement in investment properties ?

The ARG, DNZ, GMT, KPG, PCT, PFI and VHP type property investment companies ?

Other companies with significant land holdings perhaps AIA, MELCO etc ?

Hi Mac..do you think the Chinese would be interested in Seabed mining..

[MAC]

lol, you should probably write to Chris, he'd probably be on a plane tomorrow :)

[babymonster]

I m sure Chinese would love to mine it's seabed.
Anyway, looking forward to the housing bubble burst. So I can get a couple more investment. I don't have property shares.

[Baa_Baa]

Perhaps this should say AK & CH Big Housing Bubble?

[Bjauck]

as per the last shock, the listed property dropped a bit but they were not too badly hit as they are conservatively geared as opposed to retail rental home owners or speculators , Most also only pay 90% of net income, DNZ KPG so also have a little buffer.
I think when the correction comes in Auckland and its only Auckland as the rest of the country is ok they will be fine

Kiwi Income was $1.65 in March 2007; it was $0.97 in March 2009. I had a small investment in it. It was my worst performing investment over the period and saw a much greater fall than residential housing. Even today it (now KPG) is only $1.34

[Sgt Pepper]

lol, you should probably write to Chris, he'd probably be on a plane tomorrow :)

mac
Its interesting when engaging in discussion about property market the deep seated denial that many have. I believe we are on the edge of an economic precipice regarding the Auckland property market. Property crashes, slumps, corrections, however you describe it, have severe economic consequences. Unlike sharemarket corrections they last longer and have far reaching consequences as more people are exposed to it. I well remember my first mortgage application. It was 1981. The house I was interested in buying cost $28000 and I had a deposit of $10000. I was employed, regular income, no other debts, good credit history etc. I was declined after waiting two weeks , as , according to the manager of the Otago Savings Bank, the government had reduced the amount banks could lend. Contrast that to today. My local branch of Westpac looks more like a real lestate branch. They are always encouraging you to borrow more. How will this all end? Who knows, but I for one am very concerned.

[MAC]

I think you may be right Sgt, and maybe it’s not a bad thing to have a secular bear market in housing for a couple of decades anyway, things don't go up forever.

I’m told there is poverty in Auckland, I don’t really like that word much as it just implies Africa to me, and things really aren’t quite as bad as Ethiopia, but even so a lot of folk are being squeezed because of the cost of dwellings.

But, if over time land valuations stabilise or even better drop, there will be very many better off, wealthier too, perhaps better motivated to put retained savings to more constructive work in retirement funds or as investments in small business, rather than just inflating land prices which helps nobody much really over the long run, all that trapped cash under ones feet doing nothing productive.

[Bjauck]

I think the NZG need to introduce a non-retirement investment scheme with tax advantages (similar to Uk and US schemes) to persuade NZers to invest in equity investments rather than housing. Similarly they need to boost kiwisaver tax advantages to encourage people to boost their investment beyond the minimum needed to get the current full tax credit. Otherwise the ease of being able to leverage your investment in housing and other advantages will mean the preference for housing investment will remain.

[craic]

Doesn't all this belong on the Off Market thread?

[MAC]

Further signs of a bubblicious market for commercial property companies.

http://www.nbr.co.nz/article/offshore-money-search-good-home-168842

[Joshuatree]

Got the below from John Ryders newsletter.Happening globally? With the possibility of interest rates going negative(some countries are now) Investors dont want to be holding cash, property and shares are the bubble beneficiaries.

Landlords.co.nz 13/10/20:


It’s official: New Zealand’s housing market is going crazy – and the skyrocketing prices have left economists revising their forecasts and worried it heralds a new bubble.
The latest REINZ data reveals that 8,377 properties sold nationwide in September – which was a 37.1% year-on-year increase. That’s the highest number of properties sold in a month since March 2017 and the highest number of properties sold in a September month for 14 years.
At the same time, median house prices nationwide increased by 14.7% year-on-year to a new record high of $685,000 in September. Additionally, the REINZ data shows that days to sell were down, auctions levels are going up and the total inventory of properties for sale is now at the lowest level since records began.




Stuff.co.nz 12/10/20:
Since first home-buying hit a dismal low in April, first home buyers have flocked to the market, figures from the Reserve Bank of New Zealand show.
In April, first-home buyers took out $484 million of home loans to buy places. May saw that leap to $801m. In June home loans to first home buyers edged over the billion-dollar mark with $1.09b of new home loans issued.
And in July, and then again in August, first home buyers took out $1.34b of home loans, a level not seen before.

[artemis]

So that's who is buying. But who is selling? And why?

[Ggcc]

So that's who is buying. But who is selling? And why?
I am looking at buying a second dwelling to deversify away from 1 house and 100% in shares and cash. At these interest rates being so low if the price is right is a no brainer. Prices are high in Hawke’s bay, but cash buyers with low amount of conditions still can buy better than those with more conditions offering higher amounts of money.

I am keeping on my realistic hat and if prices are insane will evaluate. Accordingly