Which way will the property market go now?

[kiora]

Yep JB but 1 man units,3500SU?,hard to keep the cash flow going when the new Carbon tax coming?
If up NI would be planted in pine trees, sad.
All the infrastructure ,tracks, fencing water systems lost....forever??? never to be seen again with fat little wooly ones

[JBmurc]

Yep JB but 1 man units,3500SU?,hard to keep the cash flow going when the new Carbon tax coming?
If up NI would be planted in pine trees, sad.
All the infrastructure ,tracks, fencing water systems lost....forever??? never to be seen again with fat little wooly ones

Yes I guess this is the issue ...unless your completely debt free very hard to make a profit ..I just find it hard to believe how we have gone from Land values decrease since the Diary Boom days to present while RES Property just continued on flying ..

Yes Planting land in trees will be the plan going forward of the WEF Global reset ... less food less humans

[kiora]

China now Sweden
The straw that broke the camels back?
"Bloomberg
Why Sweden’s $41 Billion of Property Debt Is Alarming Europe"
https://finance.yahoo.com/news/why-sweden-41-billion-property-090403875.html

[Logen Ninefingers]

There used to be a bloke on here telling me how inflation was only transitory and NZ property was going to keep going bananas. Amazing how things change isn’t it…people adamant that something will never, ever happen….then you wake up one morning and find interest rates and inflation are the only thing ‘going bananas’.
‘A magical thinker caught up in a mass delusion’ is how I would describe that bloke who used to tell me I was in fact the one who was deluded. The cold hard reality is that The Fed in the US is set to hike by another 75 bps, and where they go we follow. Already sob stories are appearing in our media about people who bought at the peak of the market, are on modest incomes, and find themselves in negative equity. I was assured there was no ‘subprime’ situation in NZ, so how did people in this parlous situation get a mortgage? Lots of pain to come for the NZ Property Ponzi Scheme, and we are going to find out exactly how much irresponsible lending has been going on - my feeling is is that it is not going to be a pretty situation. The very worst case scenario will play out if NZ goes into a recession next year and the US doesn’t. This country will then find out exactly why you should not put all your eggs in the property basket and manufacture a bubble with its foundations built solely on an unprecedented credit binge by a populace caught up in a speculative frenzy.

[JBmurc]

There used to be a bloke on here telling me how inflation was only transitory and NZ property was going to keep going bananas. Amazing how things change isn’t it…people adamant that something will never, ever happen….then you wake up one morning and find interest rates and inflation are the only thing ‘going bananas’.
‘A magical thinker caught up in a mass delusion’ is how I would describe that bloke who used to tell me I was in fact the one who was deluded. The cold hard reality is that The Fed in the US is set to hike by another 75 bps, and where they go we follow. Already sob stories are appearing in our media about people who bought at the peak of the market, are on modest incomes, and find themselves in negative equity. I was assured there was no ‘subprime’ situation in NZ, so how did people in this parlous situation get a mortgage? Lots of pain to come for the NZ Property Ponzi Scheme, and we are going to find out exactly how much irresponsible lending has been going on - my feeling is is that it is not going to be a pretty situation. The very worst case scenario will play out if NZ goes into a recession next year and the US doesn’t. This country will then find out exactly why you should not put all your eggs in the property basket and manufacture a bubble with its foundations built solely on an unprecedented credit binge by a populace caught up in a speculative frenzy.

Yes heard much the same over the last few years ... NZ property would continue to double every 10yrs etc .... so many couldn't understand our last decades insane growth in values come about from every lower costs of lending and inflation in costs to build ..

I see over Aussie not only can you buy great properties at much better prices but lending is lower and you can still get well below 5% for 1yr fixed terms...
and higher wages for the same job ... NZ run into the ground by the socialists ..why would any nurse or any skilled worker want to move to NZ???

[Logen Ninefingers]

Yes heard much the same over the last few years ... NZ property would continue to double every 10yrs etc .... so many couldn't understand our last decades insane growth in values come about from every lower costs of lending and inflation in costs to build ..

I see over Aussie not only can you buy great properties at much better prices but lending is lower and you can still get well below 5% for 1yr fixed terms...
and higher wages for the same job ... NZ run into the ground by the socialists ..why would any nurse or any skilled worker want to move to NZ???

The problem NZ has is that although NZ house prices are falling and interest rates are rising, house prices here are still far too high, along with rents. We therefore have a deep structural problem which will see badly needed skilled workers and younger people going elsewhere. The only way to correct this imbalance is via further steep falls in house prices. And these falls must be very steep indeed at this point.

[fungus pudding]

The problem NZ has is that although NZ house prices are falling and interest rates are rising, house prices here are still far too high, along with rents. We therefore have a deep structural problem which will see badly needed skilled workers and younger people going elsewhere. The only way to correct this imbalance is via further steep falls in house prices. And these falls must be very steep indeed at this point.

...and there are only two things that can bring that about ,,,lower demand, or increased supply.

[Logen Ninefingers]

...and there are only two things that can bring that about ,,,lower demand, or increased supply.

And both if those are happening.

[fungus pudding]

And both if those are happening.

What does that mean? Both what?

[LEMON]

"What does that mean? Both what?"

Increased supply of homes and less people wanting to buy lol

[RTM]

The problem NZ has is that although NZ house prices are falling and interest rates are rising, house prices here are still far too high, along with rents. We therefore have a deep structural problem which will see badly needed skilled workers and younger people going elsewhere. The only way to correct this imbalance is via further steep falls in house prices. And these falls must be very steep indeed at this point.

Yes....either that or multiple years of high inflation and flat house prices.....
Not sure it's going to be politically acceptable to either/any party to let the price collapse.
Our financial structure that has let house prices gains enjoy more or less tax free capital gains over the years is coming home to roost.
Interesting times ahead.

[JBmurc]

Yes....either that or multiple years of high inflation and flat house prices.....
Not sure it's going to be politically acceptable to either/any party to let the price collapse.
Our financial structure that has let house prices gains enjoy more or less tax free capital gains over the years is coming home to roost.
Interesting times ahead.

Yes we had low inflation for years while we seen out of control property inflation in values so makes sense the inverse can happen ...and we could see flat to minor increase in property values for the rest of the decade...

[Aaron]

A question was put to me by a couple in their 70s. Based on the current market value of their rental property the yield is less than what they can get at the bank.

So they are thinking of selling the rental and avoid the hassle of tenants etc yet still maintain an income off the money.

For an older couple this seems to make sense but you have to assume Adrian does not debase the currency further in the next downturn or continue to suppress interest rates and at current inflation rates your real yield is negative.

Does anyone have an opinion. Is it a good idea to sell the rental to invest in fixed interest(probably bank term deposits)? You might be investing into a new trend of falling asset prices as retirees cash out.

This also could be a sign that a predicted downturn in financial markets is arriving as older people sell down their investments to enjoy their remaining years. This has not been the case to date, but it sounds like a reasonable argument to be bearish on financial markets at current valuations. But like anything in investing today a lot will depend on the central banks. Currency and fixed interest is OK as long as you are getting a return on your capital and it is not being inflated away.

[fungus pudding]

A question was put to me by a couple in their 70s. Based on the current market value of their rental property the yield is less than what they can get at the bank.

So they are thinking of selling the rental and avoid the hassle of tenants etc yet still maintain an income off the money.

For an older couple this seems to make sense but you have to assume Adrian does not debase the currency further in the next downturn or continue to suppress interest rates and at current inflation rates your real yield is negative.

Does anyone have an opinion. Is it a good idea to sell the rental to invest in fixed interest(probably bank term deposits)? You might be investing into a new trend of falling asset prices as retirees cash out.

This also could be a sign that a predicted downturn in financial markets is arriving as older people sell down their investments to enjoy their remaining years. This has not been the case to date, but it sounds like a reasonable argument to be bearish on financial markets at current valuations. But like anything in investing today a lot will depend on the central banks. Currency and fixed interest is OK as long as you are getting a return on your capital and it is not being inflated away.

It depends on the couple and their situation. They may want to unload the hasssle of being a landlord, and have sufficient assetts to last them the rest of their days. CU+SU. (cash up and spend up) Do they have family or friends they would like to bequeath things to? It's such an individual thing. I've heard it said that wise planning is to aim to have your last cheque bounce - but sadly the demise of the cheque book beat my own demise. Pity.

[Aaron]

It depends on the couple and their situation. They may want to unload the hasssle of being a landlord, and have sufficient assetts to last them the rest of their days. CU+SU. (cash up and spend up) Do they have family or friends they would like to bequeath things to? It's such an individual thing. I've heard it said that wise planning is to aim to have your last cheque bounce - but sadly the demise of the cheque book beat my own demise. Pity.

I guess for their situation it makes sense. It would only be a bad idea if inflation stays elevated for a long time while interest rates stay low but even then I guess the capital would last long enough to see them out although their kids might be unhappy. To know for sure what is the best decision you would need to see into the future.

[JBmurc]

A question was put to me by a couple in their 70s. Based on the current market value of their rental property the yield is less than what they can get at the bank.

So they are thinking of selling the rental and avoid the hassle of tenants etc yet still maintain an income off the money.

For an older couple this seems to make sense but you have to assume Adrian does not debase the currency further in the next downturn or continue to suppress interest rates and at current inflation rates your real yield is negative.

Does anyone have an opinion. Is it a good idea to sell the rental to invest in fixed interest(probably bank term deposits)? You might be investing into a new trend of falling asset prices as retirees cash out.

This also could be a sign that a predicted downturn in financial markets is arriving as older people sell down their investments to enjoy their remaining years. This has not been the case to date, but it sounds like a reasonable argument to be bearish on financial markets at current valuations. But like anything in investing today a lot will depend on the central banks. Currency and fixed interest is OK as long as you are getting a return on your capital and it is not being inflated away.

Depending on what they paid for the property prob walk away with 100-200% Cap gain as well ... why wouldn't you take the cash and spread the risk ..IMHO I'll say to any older couple why not put the funds across say three Yield investments plays .... third in Zagga get 8-9% return short term 1-2yr peer to peer lending ... third Bank term dep 5% ... and third in say shares that say average 6% yield ....

then you have great flexibility- de -risk from holding one asset that could be burnt flood Earthquake .. tenant destruction

[SBQ]

A question was put to me by a couple in their 70s. Based on the current market value of their rental property the yield is less than what they can get at the bank.

So they are thinking of selling the rental and avoid the hassle of tenants etc yet still maintain an income off the money.

For an older couple this seems to make sense but you have to assume Adrian does not debase the currency further in the next downturn or continue to suppress interest rates and at current inflation rates your real yield is negative.

Does anyone have an opinion. Is it a good idea to sell the rental to invest in fixed interest(probably bank term deposits)? You might be investing into a new trend of falling asset prices as retirees cash out.

This also could be a sign that a predicted downturn in financial markets is arriving as older people sell down their investments to enjoy their remaining years. This has not been the case to date, but it sounds like a reasonable argument to be bearish on financial markets at current valuations. But like anything in investing today a lot will depend on the central banks. Currency and fixed interest is OK as long as you are getting a return on your capital and it is not being inflated away.

You've left out the tax issue that the 70s aged couple would face by not holding real estate. The rental house will grow in capital gains 100% tax free... while anything in the fixed income asset class has RWT rates. Yes it is a hassle to deal with tenants when you're in senior age, but so is paying a large portion of the gain in taxes if that investment approach was done abroad (ie Aus, Canada, US - all that have CGT). With the recession talk coming down hard, it would be hard to believe NZ listed companies would be in good position where owning such shares would be a better return for the level of risk?

I'm not waiting until i'm 70 to find out what I should have done decades ago. Wise words from Warren Buffet says one always beats inflation by investing into productive assets (fixed term bank TD interest returns are not really productive assets). After all, he lives in a modest home and has 99% of his wealth in equities or businesses. That approach regardless of how old you are has worked better in the long term than any mix 40/60 that so many financial advisers always tell their clients (a la Kiwi Saver approach). Own businesses that can weather inflation, and enjoy living anywhere in the world without a worry about rental properties is my game.

[Logen Ninefingers]

Interest rates have gone up again today. :)

[Logen Ninefingers]

‘Reserve Bank Governor Adrian Orr is calling on banks to lift deposit rates as much as they have lifted mortgage rates, saying their tardiness is boosting their profits and preventing the benefits of the higher Official Cash Rate (OCR) flowing to savers.’

[Bjauck]

‘Reserve Bank Governor Adrian Orr is calling on banks to lift deposit rates as much as they have lifted mortgage rates, saying their tardiness is boosting their profits and preventing the benefits of the higher Official Cash Rate (OCR) flowing to savers.’ That's not how it usually works in NZ. Property owners get their leveraged capital gains, Australian shareholders get their fat dividends from NZ, and NZ depositors go backwards after tax and after inflation. A real benefit to savers would be to only tax real interest earned from deposits.

[Logen Ninefingers]

Banks are offering sneaky deeply discounted home loan rates ostensibly via ‘mortgage brokers’ - but now the cat is out of the bag every man and his dog is asking for them. This makes a mockery of the Reserve Bank and its attempts to tighten. What is extra sneaky is that the retail banks were making out that they were complying, while thumbing their nose at the Governor via these heavily discounted rates. Added to this, the banks Term Deposit and On-Call Savings rates are nowhere near as attractive as they should be, resulting in the Reserve Bank having to call them out on this as well. It seems that retail banks have clear ideas as to where Kiwi’s should be putting their money, and residential property is still the place they are to be herded towards. Ultimately it may be that banks need more regulation to get them to comply with the overall thrust of monetary policy. Needless to say, they are a very important part of the financial system but seem to want to ‘go rogue’ while maintaining a veneer of compliance with the Reserve Bank.

[Joshuatree]

Have deposit rates lifted a bit since?
Differing opinions ATM.Some cite the increasing immigration,the big builders build rates for residential slowing right down ,the property stock for sale at a low and the cost of new builds going up so much. For these reasons some think we are near a bottom in property prices.Interest rate increases near a top another point.

Opposing views are inflation,recession,mortgage resets leading to stress and mortgagee sales,poor sentiments and fear.Thoughts?

[SBQ]

Have deposit rates lifted a bit since?
Differing opinions ATM.Some cite the increasing immigration,the big builders build rates for residential slowing right down ,the property stock for sale at a low and the cost of new builds going up so much. For these reasons some think we are near a bottom in property prices.Interest rate increases near a top another point.

Opposing views are inflation,recession,mortgage resets leading to stress and mortgagee sales,poor sentiments and fear.Thoughts?

The big problem is mortgage resets into the new higher rates. Unlike in N. America, you can't get a 30 or 40 year mortgage fixed term rate in NZ. Typically max is 5 years and all those that mortgage 2 - 5 years ago will be in for a rude awakening if they were mortgaged to the max.

I prefer to use the street level barometer on house price sales. Down my street there's been a house gone for sale over ; first listed 2 months ago and went for auction after another auction. It's clear the listing was passed and sellers in today's market are refusing to sell for less. Likewise in the past year i've seen more and more houses being 'passed' in as they don't meet the reserve price. Interestingly QV valuations sent in the mail has placed our neighbourhood as a whopping +54% increase in the past 3 years. If next year or so houses continue to lose their ground, then i would be quick at filing for a reassessment as a way to lower the rates bill.

[stoploss]

The big problem is mortgage resets into the new higher rates. Unlike in N. America, you can't get a 30 or 40 year mortgage fixed term rate in NZ. Typically max is 5 years and all those that mortgage 2 - 5 years ago will be in for a rude awakening if they were mortgaged to the max.

I prefer to use the street level barometer on house price sales. Down my street there's been a house gone for sale over ; first listed 2 months ago and went for auction after another auction. It's clear the listing was passed and sellers in today's market are refusing to sell for less. Likewise in the past year i've seen more and more houses being 'passed' in as they don't meet the reserve price. Interestingly QV valuations sent in the mail has placed our neighbourhood as a whopping +54% increase in the past 3 years. If next year or so houses continue to lose their ground, then i would be quick at filing for a reassessment as a way to lower the rates bill.
Just because your house value goes down , doesn’t mean your rates will .

[Baa_Baa]

Just because your house value goes down , doesn’t mean your rates will .

Maybe, if you are passive and don't do anything about it. Suggest, that you challenge the minion on the spreadsheet at the Council who's plugging in the numbers from who knows where, and calculating what Rates they think you are liable for. I can assure you that their blunt instruments are unlikely to be close to the truth.

Go after them, it's perfectly within your rights to do so. If the capital valuation of your 'improvements' or your 'land value' have gone down, it's quite legitimate to challenge the Council that your Rates should go down as well. Contest the valuation that your Rates are calculated on, insist on a real-person valuation from them (maybe back it up with an independent valuation) and challenge your Rates assessment.

You can also challenge their assessment that your valuations have gone up, hence Rates gone up as well. Can you be bothered doing these challenges is the only question, you'll have to abide by their assessment if you do nothing, or you can influence their assessment if you do something.

Done it a few times, it always worked in my favour. Passive Rates payers get screwed, whereas active challengers get the concessions that reflect reality on their capital land and improvements valuations. Five minutes on a phone call to Council and chaperoning a valuer on your property, makes a big differences to your rates payable.

Try it. Passive loses, active wins.

[JBmurc]

The big problem is mortgage resets into the new higher rates. Unlike in N. America, you can't get a 30 or 40 year mortgage fixed term rate in NZ. Typically max is 5 years and all those that mortgage 2 - 5 years ago will be in for a rude awakening if they were mortgaged to the max.

I prefer to use the street level barometer on house price sales. Down my street there's been a house gone for sale over ; first listed 2 months ago and went for auction after another auction. It's clear the listing was passed and sellers in today's market are refusing to sell for less. Likewise in the past year i've seen more and more houses being 'passed' in as they don't meet the reserve price. Interestingly QV valuations sent in the mail has placed our neighbourhood as a whopping +54% increase in the past 3 years. If next year or so houses continue to lose their ground, then i would be quick at filing for a reassessment as a way to lower the rates bill.

BNZ does do a 7yr fixed term but was also very expensive many percent more than 5yr back when we see sub 3% in the 5yr ..the 7yr was like 5.99% etc ...

[Sideshow Bob]

BNZ does do a 7yr fixed term but was also very expensive many percent more than 5yr back when we see sub 3% in the 5yr ..the 7yr was like 5.99% etc ...

One of the banks stopped offering the 7 year mortgage last year (I had thought it was BNZ but maybe not).

Price/rate was probably an issue. It wasn't just that they hadn't had anyone take it up, but they hadn't had anyone even inquire about it!!

[Joshuatree]

Cheers guys.The thread title does have me wondering whether it's time to start averaging in (nearer a bottom) to property stocks here and Aus and maybe an etf.

[thegreatestben]

RBNZ throwing borrowers a bone, got to keep the market alive while prices are being bled.

"The Reserve Bank of New Zealand – Te Pūtea Matua is proposing to ease mortgage loan-to-value ratio (LVR) restrictions."
https://www.interest.co.nz/property/120921/rbnz-says-risks-financial-stability-posed-high-lvr-lending-have-reduced-level-where

[thegreatestben]

Homes.co.nz put their estimated values on my houses all went up for the first time in about 18 months. Obviously not a trend but perhaps first signs of life.
Anyone else?