NZ 1st homebuyers are ScReWeD...

[Halebop]

But if you had a mortgage you would have got a 9 – 10% net return for every dollar you paid off. Cashed up people have nowhere so effective to park their spare money.

So I'd "save" 10% on the small portion of loan paid off but would continue to pay 10% on the remainder, all while the underlying asset fell by 15%? Not really a compelling equation.

[minimoke]

So I'd "save" 10% on the small portion of loan paid off but would continue to pay 10% on the remainder, all while the underlying asset fell by 15%? Not really a compelling equation.
But its only a notional fall in value. The loss of value is only realised if you are forced to make a distressed sale. If your’ not selling you aren’t loosing any value. What I would suggest you are loosing though, is an ability to leverage your equity into other areas – but this is different from loosing value.

[SEC]

SEC I think you have a bone to pick with me but my story has been quite consistent. In 2005 there was still plenty of trading and a few holds in my activities. In 2006 there was trading only in lower portions and when between trades it was of course converted to cash. From Mid 2007 onwards the cash bias has been very full, with only sporadic trades in smallish portions - although given most of these have been shorts my cash position was technically topping out at around 110% less the short obligation.

I haven't been on the right side of every trade but my contrarian position on cash has so far been beneficial… despite your attempt to characterise me as disingenuous.

Halebop you've been quoting phrases since early 2005 like 'cash is the easiest option', I no longer have exposure to the sharemarket etc, perhaps coincidentally after the first correction of the 2003 - 07 bull market.

Yes cash is 'comfortable' for the moment but medium-long term it is a proven underperformer. It's where and when to put the cash into better performing investment classes that is the question. I agree with you it's definitely not property at the moment.

SEC

[George]

Here's a recent news item, question is whether they are just talking the market up or not?

"There aren't enough homes on the market to satisfy cashed up buyers, says one of the big Auckland real estate firms.

A "drought of properties" had been caused by cautious vendors adopting a "wait and see" attitude through the winter months.

The traditionally slow winter months had been made even worse by what Bayleys describes as a "lack of confidence in the housing market.

Median house prices fell by 2.15 per cent in June - from $345,000 in May to $340,000. That fall followed on from a 1.42 per cent drop the previous month.

Real Estate Institute of New Zealand national president Murray Cleland said in a release today that much of the drop in sales volume could be attributed to a severe
shortage of property 'stock' on the market - making buying choices markedly harder.

"It's certainly noticeable that there are considerably fewer 'for sale' signs up outside homes. That's a trend across New Zealand - from the larger cities through to
smaller towns." said Cleland.

Bayleys managing director Mike Bayley said many of his sales people had databases brimming with potential buyers who were struggling to find suitable properties.

"There's no shortage of buyers as far as we're concerned," said Bayley. "We have substantial numbers of buyers with money ready to get into the market, yet there
simply aren't the properties out there for them to choose from," he said.

"We're not talking about buyers without approved mortgage capabilities... these are astute home owners and investors who are highly liquid, have seen that the
market is close to bottoming out after a year of gradual declines, and are looking for somewhere to invest in now.

Bayley said the company's books were "full of these individuals" - inlcuding ex-pats who were returning home cashed up with British pounds or US dollars.
Other investors had sold out at the peak of the market and were now re-entering "at the other end of the scale". First home buyers watching "the affordability gap
close" were also in the market.

"Sales people are pulling out all the stops to encourage vendors to get into the market, but the winter malaise has set in. With the official cash rate dropping last week
and Reserve Bank governor Alan Bollard hinting at a second round of cuts in September, the conditions are certainly primed for our customary winter phase to end
in August rather than October," said Bayley."

[miner]

You would have had to come down in the last rain shower to believe that desperate load of cr#p,what spin will they come up with next ???.

Cheers
Miner

[Dr_Who]

LOL... those realty people make me laugh. What alot of crap!! They've been talking up the market and according to them the market have never dropped. It was the media that caused the property market to fall from the sky. Abit like the US blaming traders and OPEC for the oil price hike.

Time the realty firms get real and tell the truth. All the smoke screens and crying wolf can only last so long. No wonder realty agents are rated at the bottom of the most trusted list next to rats and snakes.

[duncan macgregor]

From a builders view on the market let me put you straight on a few points.
1, The cost of building is going up twice as fast as inflation due to new building specifications.
2, Nobody sells at a substantial loss unless it gets forced on them.
3, During a building slump new homes built wont keep up with demand.
4, If people find it cheaper to rent then shortage of stock leads up to higher rents plus higher house prices.
5, What happened over the last thirty years will almost certainly happen in the next thirty years with prices rents and inflation.
6, The people that delayed buying a house in the past all lived to regret, it some things never change. Macdunk

[Dr_Who]

Hey McDunk, tell that to the American banks holding onto 5 years worth of foreclosure/mortgagee supply of properties no one wants.

[duncan macgregor]

Hey McDunk, tell that to the American banks holding onto 5 years worth of foreclosure/mortgagee supply of properties no one wants. I just know that the material input and the cost of compliance is streaking far higher than the inflation rate.
The people coming in later when the storm blows over are in for one huge shock. Its all happened in the past, only this time its different because of the leaky home problem.
I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are, buy below that at any stage in the cycle, then sit back. A few little things to consider.
1, double glazing is an extra 50% which adds thousands coming in now.
2,compliance fees at least doubled in the last three years.
3, Builders gaurantees comes at extra cost.
4 Tradesmen fleeing the country in droves.
Any one foolish enough to think that after this downturn is the time to buy will miss out in a real big way as they have always done in the past.
The only difference in a down turn is you will find more bargains other than that its business as usual with the mugs missing out as they have always done. Macdunk

[CAM]

"I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are"

Hi Duncan,

Question from someone looking to buy a house in the not too distant future.....what is the current rule of thumb as to the cost of building a house?... so that I have a rough idea if I am looking at something it is below replacement costs.

thanks in advance

[minimoke]

"I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are"

Hi Duncan,

Question from someone looking to buy a house in the not too distant future.....what is the current rule of thumb as to the cost of building a house?... so that I have a rough idea if I am looking at something it is below replacement costs.

thanks in advance
If you were in Christchurch you’d be looking at around $1,500 a square meter for an average speced house.

[duncan macgregor]

If you were in Christchurch you’d be looking at around $1,500 a square meter for an average speced house. How long is a piece of string. Its like comparing two cars, one a rolls royce, the other a ford. It depends on so many variables, as to its worth. You cant say $1500 a square mtr is a good or a bad price. It might be a complete bargain, or it might be overpriced, depending on what the make up is.
It takes experiance to understand what each feature costs to build. If for instance its a colour steel roof that would cost lets say $10000 to replace, then the new roof is valued at $10000 but if its 16 years old you can value the roof at $5000. Thats how you go through a property and value each item against its new replacement cost. Macdunk

[lakedaemonian]

I think in this market, I'd be offering far below replacement cost for the home(the section is dependant on other factors).

While I do agree that building/compliance costs are exploding, that does not mean they will sell for a comparable or greater value.

I can build a widget for $1.00, but if the market/potential customers are only willing to pay $0.70c for it....either I have to have the risk profile AND CAPITAL to wait until the market accepts my higher price, or I have to be willing to accept the lower price now or when my capital runs out.

I think in the building game, where "other peoples money" is being used to finance spec construction, spec builders can only hang on so long before the carrying costs bury them.

In a REALLY tough investment environment, even airlines can become quite juicy targets for acquisition.

Back in the 1970's several US airlines with huge plane fleets were valued at less than the replacement cost of a mere handful of aircraft...pennies on the dollar in terms of long-term asset value due largely to a gigantic cash crunch and a short-term pounding........not that I would ever invest in airlines :)

In the short-term I think replacement cost is best used as an example of how you can find long-term value, but only buy purchasing at a substantial discount to replacement cost.

We just bought a beach house where I believe we paid a fair price for a substantial and private beachfront section......with a very well built and mainatained home thrown in "for free".

If we had only purchased the section AND had to have a home built to a similiar spec TODAY....we'd be out at LEAST an additional $300k.

Having a home built today is insanity.....when deals on existing homes priced far below replacement cost are just beginning to look intrigueing.......I think once the "catch a falling knife syndrome" has ended in the next 12-24 months those that have been patient will have found amazing value for dollar.......but that "value" may not present itself in cold cash for a decade.

The builders I know working in both residential and commercial have seen their work backlogs disappear......

Just my 0.02c

[CAM]

Thanks for the info people. Gives me plenty to think about. Might have to do some research into house building costs to give me a clearer idea of the components you get for the $. I am in no real rush now....have just found out child number 2 is on the way....so we will be going back to one income in 7 months time! So plenty of time to do some research and try and get the deposit as big as possible.
Also need to do some research on the various local markets we will look to buy in. Either here in the Waikato or over in the BOP. Will also go back and read this whole thread at some stage.

cheers
Cam

[duncan macgregor]

Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk

[Crypto Crude]

Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk

Good advice number 1 through 7... poor form on number 8...
Look mad dunk... when your renewal comes up, go floating and you can pay me the difference between the fixed rate and the floating rate (which is 100% likely to keep falling)...
If its a reversal, I will sign a contract with you and pay double the difference...?
A few pages back I left the web page details for me to be contacted on, or the 0800 number for you to call me on.... hahaha....
Dont pay the banks... pay me instead....
...
Man I wish I coul short houses... damn, Id short sell one right now if I could....
your mate... shrewd...
:cool:
.^sc

[minimoke]

Might have to do some research into house building costs to give me a clearer idea of the components you get for the $.
Heres a starting point for you – check out all the features used to sell a new home. http://www.stonewood.co.nz/pages/new-home-features.aspx. There’s a huge pick list in there which makes it hard to come up with a valuation as Macdunk has suggested.

Builders know about building stuff but do they know the costs associated with, say programmable timers. Many builders will send your plans to a Quantity Surveyor (often within firms like Placemakers and Carters and they will come up with a PC sum – like $15,000 for a kitchen. They will also send the plans to their subbies – a drainlayer will come up with a price for the drains - say $15,000 for stuff which is below ground which you don’t get to see. So you may end up with $350,000 to build a 230sqm home. The moment you start fiddling with the plans you can guarantee the PC Sum to go up. Small builders won’t necessarily get as sharp a price as a large building firm – but they may not be far off. The building supply firms are having to carry greater credit risk now .

So as a local rule of thumb you can build for $1,000 a SQM for a low spec house, $1500 for a well speced house and if you have $2,000 plus a sqm you will end up with something pretty special.

[foodee]

Cam
You might find this of use:-

http://www.dbh.govt.nz/bofficials-estimated-building-costs

cheers

[Dr_Who]

Man I wish I coul short houses... damn, Id short sell one right now if I could....
your mate... shrewd...
:cool:
.^sc

You can. Just short CDI, ING, KIP etc. :)

Looks like cost of construction is coming down big time. :) Maybe time to built myself a house. Na, only joking. Building a house is just a total headache, done it before and will never do it again, unless I have gone completely bonkers.

10,000 out of a job as housing slumps

Almost 10,000 construction workers have lost their jobs in the past year as the downturn in the housing market bites.

http://www.stuff.co.nz/4647505a13.html

[duncan macgregor]

The thing to remember when you say 10000 workers lost their jobs is that they either get out the trade or go overseas. A very large proportion of that number is lost to the industry never to return. when the market turns which it always does, this will inflate house prices at a much greater rate than ever before.
With all the lack of knowledge in the industry by the rule makers inflating new building costs added to this home ownership will be confined to the rich. I can see a major crisis looming with unaffordable rents and house prises resulting in a great exodus overseas by our young people who will be replaced by rich migrants. Macdunk

[lakedaemonian]

The thing to remember when you say 10000 workers lost their jobs is that they either get out the trade or go overseas. A very large proportion of that number is lost to the industry never to return. when the market turns which it always does, this will inflate house prices at a much greater rate than ever before.
With all the lack of knowledge in the industry by the rule makers inflating new building costs added to this home ownership will be confined to the rich. I can see a major crisis looming with unaffordable rents and house prises resulting in a great exodus overseas by our young people who will be replaced by rich migrants. Macdunk

I would disagree.......

I'm already seeing signs(with my eyes from my perspective so it doesn't mean I'm right) of softening rents in my area.....largely due to homes going unsold and now available to rent.

Available rentals property numbers are growing rapidly in my suburb.....in recent years there have been practically zero as most were rented before being listed.

Same goes for commercial.....in Christchurch along high profile areas like Moorehouse Avenue it was extremely rare to see a For Sale or For Lease sign until deep into 2007.....now it's a completely different story.

In my opinion, I think you are off the mark(at least in regards to Christchurch, but I think across the nation on average) and that your take is overly optimistic.

I think there will be a LOT of money made via incredibly shrewd buying in the next few years, but the profits will not be able to be realized for quite a few years....and I think the building industry is going to be further culled from the indications I'm seeing.

With few exceptions, I believe new construction in the current environment would be madness.

[minimoke]

I would disagree.......
With few exceptions, I believe new construction in the current environment would be madness.
Though interestingly Foodstuffs, Ngai Tahu and some Singaporeans are about to embark on a 20 year project building another 2500 homes in Christchurch when we already have Pegasus town (1800 homes) under way and plans for Wigram (2200 homes). And at a time when REINZ report 950 sections sold in the previous year for the whole of Canterbury and Westland.

[lakedaemonian]

Though interestingly Foodstuffs, Ngai Tahu and some Singaporeans are about to embark on a 20 year project building another 2500 homes in Christchurch when we already have Pegasus town (1800 homes) under way and plans for Wigram (2200 homes). And at a time when REINZ report 950 sections sold in the previous year for the whole of Canterbury and Westland.


It's a strange one eh?!

I have a mate/customer who did extremely well selling much of the property being developed for Pegagsus Town Village, and I have a planned/booked business event with Wigram facilities that may be impacted by the Ngai Tahu residential development.

I simple cannot fathom how these very large developments are going to be sold profitably in the short-to-medium term.

LONG term I think it will pan out......but even with Christchurch Women's Hospital pumping out babies in overdrive I just don't see the demand for such large amounts of new inventory when the net import of new property buyers has swung so low again.

It doesn't add up to me....far, far too much new inventory in the short-to-medium term.

[minimoke]

I simple cannot fathom how these very large developments are going to be sold profitably in the short-to-medium term.

Likewise – buts there’s more than one or two mugs out there. Pegasus town might sound flash but iits got a bitingly cold easterly and how many diggers are still stuck in the sand out there. As for “Marshlands” – to future buyers – theres a clue in the name!

[Jessie]

I note that Golden Homes are offering to build a new house for less than $800/m2. Given the glut of sections available, I should be able to buy a section and build a nice 200m2 house for not much more than $300K here in Rotorua. Or am I missing something? I know spec houses of this size have recently been selling here for $500K-$600K and more. Are house prices going to fall as quickly as oil prices seem to be falling - perhaps they were both artificial bubbles. Some commentators have been warning for a long time of the potential for a huge fall in property prices - eg http://sra.co.nz/pdf/housinghell.pdf. If this happens, the consequences for highly mortgaged owners and for the NZ banking system which carries this $100b+ debt could be pretty awful.

[Dr_Who]

You gotto be crazy to pay $600k for Rotorua unless it is water front.

[Jessie]

You gotto be crazy to pay $600k for Rotorua unless it is water front.

There must be some crazy people then because houses have been selling in Rotorua for $500, $600, $700K without a glimmer of a waterfront.

[Crypto Crude]

First homebuyers screwed, in one year Plus turning shrewd


My examples are for first homebuyers...
other market participants will not fit into this category.... EG, traders, fixed interest rate holders, buffs, long term holders, renovators, big cats developers, long term investors, developers, king pins in operation, multi home owner_______ etc etc etc....
(mack-a-dad-unk-)... this means you.... you big fish in a small pond......

Ok... Today I went out for lunch with my great mate... Last year near the peak he was on the brink of buying... 'I forced him out'... today he told me he bought... at first ise outraged... rampaging... lost for words... not happy... the story he told started to unfold much better than what it was even 6 months ago (when he wanted to buy)...
his circumstances were not all about money etc... family etc...
Ok... house- went for auction at 300k, 3 accepting bidders... all fell through on finance... after that, then went through on market at 270k on open home...My buddy put bid in at 230k... came back at 240k...then 233k... "sell".... I went around and seen the house and saw what potential this house held...
not good area in Christchurch... shirley.... surrounded by state owned... best house in two blocks... 3 bedroom, two double rooms... garden, newish kitchen... 300 per week for 30 years (to pay house off in that time (including interest).... rent (otherwise) half that plus two rooms rent... so perhaps my buddy scored...
Im convinced he will go floating on my advice... I will free carry him if im wrong, its just not possible (with one more rate cut this year)...
....
So, from one year onwards, first homebuyers (in particular) will become screwed turning shrewd as predicted because the market topped out, and in some circumstances houses are being sold on a forward basis of slashed prices of 10% already being factored in... ie... the sellers save the wait, while reinvesting their money at the current deposit rate and making money while market is in limbo... so factoring in further cuts in housing prices as a given with a shot of making money back through reinvestment.... (smart move)... My dad made the same tough call... valued 610k... sold 500k flat... thats almost 50k (b4 tax) next year while market likely continues to fall, or at major major major best market goes sideways....

My buddy will be worse off in the near term... much better off in the long term, perhaps indifferent if all the dots can fall into place... IE renting both rooms, interest rates continue to fall, suburb already sold down and factoring in further slashes (not like that of guns and roses) ....
I hope he is still prepared for prices to fall much further...
In general I have been learning much about shocks in the market impacting on interest rates, output of the economy, LM, and IS curves (its a given bar nothing) I will bet on it if a buff is prepared to take it up.....
EG, sell it to the grandma (off current info) type stuff...
info does change... so if you are that sure (buff) lock it in now...
next year (with further rate cuts, which are a given), it will be a great time to buy...
Minimoke reckons Im A talker... reckons I will stand by and watch the rebound... reckons all sorts............... you watch buddy...
first home, looking for 3.... and those that cant do teach, right?
With a name like that you should become maximoke...
haha... all in good notion.... good luck to all, no matter how trigger happy you are... bang bang... when are you first homebuyers going to pull the trigger????
I hope not for at least another year...!
Re-address the situation in 6 months, perhaps things will change then...?
hummm.....
bang bang...
when?
:cool:
.^sc

[minimoke]

..not good area in Christchurch... shirley.... surrounded by state owned... best house in two blocks.


Well, there’s the first two rules of real estate broken!

[minimoke]

Minimoke reckons Im A talker... reckons I will stand by and watch the rebound... reckons all sorts.... first home, looking for 3.


SC – looks like we still haven’t gotten the distinction sorted yet. You can only own one home at a time – the rest are “investment “ properties. Both two quite different things!

[minimoke]

Im convinced he will go floating on my advice... I will free carry him if im wrong, its just not possible (with one more rate cut this year)...


Hopefully you have deep pockets! Here’s why: currently ANZ rates are 10.95 floating and 8.95 for a 2 year fixed.

If your mate fixes for 2 years he’ll pay $35,800 on a $200k mortgage.

If he takes your advice he’ll pay $21,900 for the first year interest on a floating rate. And say the rates drop a whole 1% (which I don’t think they will) he’ll pay $15,900 if he fixes for 2 years in a years time. This means you’ll have him paying $37,800 over the next two years.

So on your advice he’ll pay $2,000 more and he’ll be playing the interest market and wondering when to best time his move – only to find he’s miss timed it and lost a couple of K along the way.

Each month he follows your advice he’ll be paying $333 more in interest. Any drop in interest rates has to be large enough to recoup that loss – and this is without factoring the compound effect of reducing his mortgage by this amount each month in the meantime.

[Cooper]

Hopefully you have deep pockets! Here’s why: currently ANZ rates are 10.95 floating and 8.95 for a 2 year fixed.

If your mate fixes for 2 years he’ll pay $35,800 on a $200k mortgage.

If he takes your advice he’ll pay $21,900 for the first year interest on a floating rate. And say the rates drop a whole 1% (which I don’t think they will) he’ll pay $15,900 if he fixes for 2 years in a years time. This means you’ll have him paying $37,800 over the next two years.

So on your advice he’ll pay $2,000 more and he’ll be playing the interest market and wondering when to best time his move – only to find he’s miss timed it and lost a couple of K along the way.

Each month he follows your advice he’ll be paying $333 more in interest. Any drop in interest rates has to be large enough to recoup that loss – and this is without factoring the compound effect of reducing his mortgage by this amount each month in the meantime.

Yes... and you also have to factor in how much of the bank's borrowing is tied to the OCR; remembering that around 40% (from memory) is borrowed offshore, in an environment which is set to see increasing interest rates.

[Dr_Who]

There must be some crazy people then because houses have been selling in Rotorua for $500, $600, $700K without a glimmer of a waterfront.

$700k with not views in Rotorua!!??? :eek::eek: You can get a nice place in Mission Bay, Orakei, St Heliers, Remuera for $700k. :)

I think maybe it is time to start looking at property again for the long term portfolio. I cant guess the bottom of the market, but the interest rate continue downtrend should help stimulate the market.

[Crypto Crude]

minimoke...SC – looks like we still haven’t gotten the distinction sorted yet. You can only own one home at a time – the rest are “investment “ properties. Both two quite different things!
what about this example,
three homes...Live in one home, Monday through wednesday....Thursday and Friday in the 2nd home... and the weekend at the third...
:D
.^sc

[axion]

Or a normal home, a weekend 'country' home, and a holiday home ;P

[Dr_Who]

The lack of property development will have a supply crunch of new housing onto the market in the near future. I cant really see any properties being developed in this environment. Any thoughts?

[lakedaemonian]

The lack of property development will have a supply crunch of new housing onto the market in the near future. I cant really see any properties being developed in this environment. Any thoughts?

Personally, I think builders will be in limbo for a few years.

The cost of materials isn't dropping.

The cost of building labour isn't dropping.

BUT the cost of existing homes IS dropping.

I reckon quite a few builders are going to be living pretty thin off of buyers who purchase existing homes cheap and retain a builder for SOME renovations to suit.

I just don't see the immigration "tap" or overseas homesick Kiwis turning on in any level of volume that will help builders in the short-to-medium term.

And I think it's due to two reasons:

1.)a massive overbuild in new housing....with yet more to be delivered and in the planning stages....at least that's the way I see the greater Christchurch area.

2.)residential property prices reverting to the mean(and quite possibly overshooting to the underside along the way)

The property market is in the process of attempting to digest a gigantic bowling ball of both new and existing home inventory.....a bad case of indigestion is inevitable.

One thing that could help in 3+ years would be a new government turning on the immigration tap in a fairly significant way as the Kiwi drops in the toilet...I'm not condoning such a policy, but it would likely help builders still solvent in several years time.

Just my 0.02c

[Dr_Who]

I have started looking seriously into the property market again. Property is long term, who knows where it will go in the short term. It is impossible to pick the bottom. As long as the numbers work for you, then it is a good investment.

I think National govt will turn the immigration tap again to stimulate the domestic economy. Without immigration, Auckland is stuffed.. LOL

[Crypto Crude]

dr who,
Perhaps we have our first bear turning buff?

Humm... You are on the right track, I still think you are toooo early
At this stage, late next year I will buy (I have no choice until at least Jan/Feb/March when I start to have an income)....wait my friend...
You will be well rewarded if you do.The US house market is 2 year ahead of us and houses have only been falling here for 6 months... market still way overvalued...(in the near term- not in the long term)...
... if you dont mind it falling in value abit more then buy now... long term you will be up regardless...

With Technical analysis there is a simple rule.. buy when the asset is rising... sell when the asset is falling... If you wait for the asset to stop falling and start rising then you will get in on the uptrend, and you will still buy it below todays price...
theres no telling how oversold housing could become if it really got bad...
My good buddy made a bad move even though he bought at a cheap price (as per my example)... the only way to really know, is to wait and see...
all the best... later...
:cool:
.^sc

[STRAT]

dr who,
Perhaps we have our first bear turning buff?

Humm... You are on the right track, I still think you are toooo early
At this stage, late next year I will buy (I have no choice until at least Jan/Feb/March when I start to have an income)....wait my friend...
You will be well rewarded if you do.The US house market is 2 year ahead of us and houses have only been falling here for 6 months... market still way overvalued...(in the near term- not in the long term)...
... if you dont mind it falling in value abit more then buy now... long term you will be up regardless...

With Technical analysis there is a simple rule.. buy when the asset is rising... sell when the asset is falling... If you wait for the asset to stop falling and start rising then you will get in on the uptrend, and you will still buy it below todays price...
theres no telling how oversold housing could become if it really got bad...
My good buddy made a bad move even though he bought at a cheap price (as per my example)... the only way to really know, is to wait and see...
all the best... later...
:cool:
.^scWow Shrewdy you are really taking this TA thing on board. Dont let Tricha find out :D

May I ask what stats you are using for your TA analisis in the housing market?

[Crypto Crude]

strat-Wow Shrewdy you are really taking this TA thing on board. Dont let Tricha find out :D

May I ask what stats you are using for your TA analisis in the housing market?

Strat,
I am deadly serious about TA, but I have not done anything about it yet...
Im speaking pure off the top of my head and I have no stats to go from for the housing market, or any other market... im using a good dose of intuition only... it pretty much just flows straight out..
All my posts are based on this style...

It does not make sense buying a house now given that the housing market has fallen for only 6 months after the biggest bull market of all time...
The market willnot go straight down, there will be waves...
An interest rate cut, will cause some people go out an buy a house (usually the most desperate ones).... once that wave is churned through, the sell off continues until the next wave of good news with a short rally...

Im studying TA in November...
I follow pure sentiment, and intuition...
Im buying late next year, or early 2010...(at this stage, I will address the situation early next year)

any advice is greatly appreciated.. I do not accept advice such as its never a better time to buy than now...Or buy a house at any time, I am not a housing businessman....
I can time an entry into the market better than a bull can, because they are biased and are therefore short sighted....
Other advice would kindly be greatful....

What are the most important things I should look for when buying my first house?
:cool:
.^sc

[Crypto Crude]

theres absolutely no point buying a house until the US market turns...
The New Zealand market is two to three years behind the US...
we are 6 months in and people are buying...
your mad, or your a housing businessman, (and therefore you are so good you will perform at any stage of the housing market)
This is true for the local Buff... Im not taking the mickey...
at this stage of the game, a first homebuyer must take every little chance in an effort to save up to 10 years off the total loan term... once your setup running with 10 houses--> interest rates, fixed or floating, bottom of market or mid market, are neither here nor there...
it dont matter... it really really matters when your just making your first move... buffs tend not to understand idea very welll...

anyway, id appreciate any ideas for the question....
What are the most important things I should look for when buying my first house? thanks...
:cool:
.^sc

[STRAT]

theres absolutely no point buying a house until the US market turns...
The New Zealand market is two to three years behind the US...
we are 6 months in and people are buying...
your mad, or your a housing businessman, (and therefore you are so good you will perform at any stage of the housing market)
This is true for the local Buff... Im not taking the mickey...
at this stage of the game, a first homebuyer must take every little chance in an effort to save up to 10 years off the total loan term... once your setup running with 10 houses--> interest rates, fixed or floating, bottom of market or mid market, are neither here nor there...
it dont matter... it really really matters when your just making your first move... buffs tend not to understand idea very welll...

anyway, id appreciate any ideas for the question....
What are the most important things I should look for when buying my first house? thanks...
:cool:
.^scIm sure there isnt much you havent already given the once over Shrewdy except maby that you should be looking closer at the area/areas you intend to buy in. The market retrace is specific to certain areas. Some more than others some not at all. Your timing will need to reflect what is actually happening in your targeted areas. When the Market turns for the better it will be the better areas first Worst areas last.

What to look for? location location locayion LOL

Do ups can be more hassel than they are worth. They almost always come in over budget in terms of both $ and time.
Rent return and total expences. The math must add up if you wanht it to be a flexable investment. Say you decide to bugger off to China for 6 months. It needs to look after its self both financially and in terms of time input. Too many people dont include there own valuable time in assessments.

Full sections that are subdividable or in areas that may be due a zone change. You dont have to do the chop but the value will be there when you sell.

Lots of bedrooms and the worst houce in the best street you can afford.

Thats my 2c worth:D

If I were you I would be waiting awhile yet too.

[Financially dependant]

I came across this the other day, interesting data...

http://www.interest.co.nz/gallery12.asp

[Dr_Who]

FD, I think that graph has been distorted to paint a unrealistic picture.

I have some very good graphs that states the Ak area percentage change in house price index is starting to bottom out soon. It is in pdf form and I dont know how to copy and paste onto a SH post.

[STRAT]

FD, I think that graph has been distorted to paint a unrealistic picture.

I have some very good graphs that states the Ak area percentage change in house price index is starting to bottom out soon. It is in pdf form and I dont know how to copy and paste onto a SH post.Hi Doc,
I have found most housing stats all but useless. Property and Area values are just too diverse to draw any useful conclusions. The only way I have found to estract any useful data has been to beak data down into suburbs and include detailed specs on each transaction.

[STRAT]

Shrewdy, this is a good site with a few smart cookies in the Membership including Olly Newland

http://www.propertytalk.com/forum/forumdisplay.php?f=80

[minimoke]

Im sure there isnt much you havent already given the once over Shrewdy except maby that you should be looking closer at the area/areas you intend to buy in. The market retrace is specific to certain areas. Some more than others some not at all. Your timing will need to reflect what is actually happening in your targeted areas. When the Market turns for the better it will be the better areas first Worst areas last.

What to look for? location location locayion LOL

Do ups can be more hassel than they are worth. They almost always come in over budget in terms of both $ and time.
Rent return and total expences. The math must add up if you wanht it to be a flexable investment. Say you decide to bugger off to China for 6 months. It needs to look after its self both financially and in terms of time input. Too many people dont include there own valuable time in assessments.

Full sections that are subdividable or in areas that may be due a zone change. You dont have to do the chop but the value will be there when you sell.

Lots of bedrooms and the worst houce in the best street you can afford.

Thats my 2c worth:D

If I were you I would be waiting awhile yet too.
SC Probably not a lot more to add to these great suggestions.

I’d be looking closely at the size of your cash deposit and likely net income (including from flatmates) Of your deposit – cut a chink aside for incidentals. Its surprising how the lawyer fees, rate bills and immediate fixer uppers (including tools) add up quickly and cash can be a useful tool for getting a good price. Alternatively be prepared to add these costs to your mortgagee and amortise over the period of your loan.

I’m still not clear if you intend living in this place or not. If you are then you will have difficulty claiming expenses as a business expense – not impossible, but you will have to look very carefully at how you structure things.

Obviously once you know your cash position and income you’ll know the size of the mortgage. I’ve said earlier don’t worry about the term of the loan – your going to be in debt a long time if you want to get into property. Get the biggest mortgage you can safely afford – this will give you more options. But make sure you allow for the risk of your loss of income.

Now focus on good suburbs with land. A poxy 450sqm section limits your future potential. I’d be going for the older house on the larger land rather than the new house on the smaller land. You’re going to need flatmates for a while so you’ll need a place that is marketable – so it needs to be close to their workplace and amenities. You’ll find a cheap place in Kaiapoi but a $80 cab fare home after a night out isn’t going to appeal!.
And you need to get your nose out of your books and learn how to use a hammer, spanner and paintbrush. Start collecting decent tools – you’ll need them to save yourself the cost of a tradesman on the many simple jobs that will crop up.

[Crypto Crude]

Strat and Minimoke,
Thank you for your advice... I appreciate that...

Minimoke, I do intend on living in my first house...

strat, that forumn you directed me to looks diserted...
similar perhaps to the last Auckland meeting..

Dr Who, You can get in touch with me through PM and I'll post your graphs...

Financially dependant, hummm yes... some very interesting graphs and trends going on there...if anyone believes the housing market is bottoming out, then check out FD's link and look at the 2nd graph...
the 5th graph has gone off the chart... haha...
all very interesting...
:cool:
.^sc

[duncan macgregor]

It is all so obvious what is going on. First of all house construction costs are going sky high placing young couples in vulnerable financial positions with home loans. The country economy is grinding to a halt placing young couples on the financial scrap heap. The loan sharks are going under with motgagee sales on properties in ever increasing numbers.
Fanny and Freddy May in America have been bailed out by the Govt which is a short term solution to a long term problem. We in NZ are in the same boat with people over extended waiting on the next hiccup before joining the mortgagee circuit.
The very same people who understand the property market are buying up at below cost prices waiting on the market to turn in a few years, then cream the same silly punters all over again. Like i keep telling SHREWDY a bargain can be found in any market, if you keep looking. If you take all the money from everybody and give it out in equal proportions the very same people will be filthy rich or filthy poor in a few short years. Macdunk

[trackers]

Good calls Strat, Minimoke and Duncan... Pretty much agree with all of your comments.

I also think end of next year could be a target for me... Use some share profits to pick up a second... Waiting for some clear direction though (the next interest rate cut should be interesting).

[Crypto Crude]

next RBNZ decision is tomorrow...
:cool:
.^sc

[George]

Auckland house prices up although on the lowest volume in 26 years,
http://www.landlords.co.nz/read-article.php?article_id=3307
I could be worried if I was a first homebuyer but any technical analyst would
tell you that a rising share price on low volume is a sign of a possible retracement.
The prices in 9 out of 12 areas did fall though.
Interested to see how this all plays out.

[Dr_Who]

I have been attending a number of auctions and property sales this year. I am one of the lucky ones who do have plenty of free time. It is interesting to know that most of the good properties in good areas have been selling at surprisingly good prices. The not so good properties cant sell at all. Buyers are very picky, but the good ones do go for a good price in AK.

I have started buying residential properties again.

[upside_umop]

Was listening to Bollard today.
He's thinking a 15% decline in nominal terms, with us about half way through the downturn.
Thats more pessimistic than REINZ (you cant trust Murray) who said he sees it flatting end 08/early 09.
I think the RBNZ is being even being optimistic...cost of credit will stay relatively high, watch the outflow of the japanese housewives money.
Give it another 18 months, 20% nominal, 30% real and we'll be chatting.

[AJ]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10533430

Good news?

I wonder how cheap the 60 completed houses go for.

[Dr_Who]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10533430

Good news?

I wonder how cheap the 60 completed houses go for.

It will be positive for the property market in the long run if we let all the weak, highly leveraged companies go quickly. Lack of construction will mean a sudden stop of supply onto the market. Demand will pick up again once interest rates starts to come down to a level where it will make sense for people to look at investing again, which is not too far away.

[Financially dependant]

It will be positive for the property market in the long run if we let all the weak, highly leveraged companies go quickly. Lack of construction will mean a sudden stop of supply onto the market. Demand will pick up again once interest rates starts to come down to a level where it will make sense for people to look at investing again, which is not too far away.

IMHO the property market has a lot further to fall (I have literary bet my house on it). Banks are unable to pass on any RB interest rate cuts because the money is coming from overseas and is getting more expensive.

We are getting into spring and home owners that need to sell are feeling a little optimistic but the longer the summer drags on without a sale the more desperate they will get. So I think going into next winter when sellers market denial has disappeared it will be the start of bargain hunting time.

[arco]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10533430

Good news?

I wonder how cheap the 60 completed houses go for.


I live in the area and am familiar with this site.

I went to have a look at the development about 6 months ago. The houses are built so close together you would hear a cat sneeze, and I cant personally see why anyone would be interested in living in close proximity like that.

The elevated sections would have a nice panoramic sea view but the competed projects were going to cost in the million$+/- range.....

Some of the 60 houses on the ground level have been sold, so those owners will be in a terrible mess now. Unable to sell, and without the promised facilities - pools, gym, etc, etc.

This was a too ambitious scheme for Orewa IMHO.

Not sure how involved BNZ bank are, but they will be trying to get something back whatever it takes, which will only add additional distress to actual owners.

[winner69]

The ones they had on TV last night had cracks appearing on the walls already and rusty bits ..... another leaky building disaster by the looks of it

[arco]

.

I thought they were using Linea boarding...........but there may be some rendered sections which could crack. Its close to the sea breezes there, so unless its galvanized, its rusty in no time.

The local council are very worried about what will happen to the site, and its such a major development who would take it on board in this environment.

[Financially dependant]

All good stuff Dr. Morgan

http://www.stuff.co.nz/4702827a1865.html

looking for 45% correction and we are a fifth of the way there!

[Dr_Who]

We've seen this all before.

Banks fell over in 87 and 97 and the world recovered. If you bought during the period of a crash and have the holding power, then you will have done very well. 2008 is no different. This time round it is the investment banks and not the trading banks. We will recover and the world will continue to move along nicely once the dust clouds settle. Those that have picked up some cheap assets will enjoy the benefits.

[lakedaemonian]

We've seen this all before.

Banks fell over in 87 and 97 and the world recovered. If you bought during the period of a crash and have the holding power, then you will have done very well. 2008 is no different. This time round it is the investment banks and not the trading banks. We will recover and the world will continue to move along nicely once the dust clouds settle. Those that have picked up some cheap assets will enjoy the benefits.


The trading banks in NZ and OZ might be OK(I have no bias either way), but I think there's a whole bunch in the US that are likely to fall before it's over.

[Sideshow Bob]

Obviously thinks people are that dumb or touting for business:

http://www.stuff.co.nz/4712588a13.html

Good time to buy house says Pero
Mortgages are still competitive and available, but first home buyers may need a bigger deposit, mortgage broker Mike Pero says.

However, if people have enough cash it's a good time to buy.

Mr Pero told Fairfax Media that in the wake of the subprime crisis it was obvious banks in New Zealand were tightening their lending criteria.

The days of 95 to 100 percent mortgages were gone and they were rigidly back to 90 to 95 percent. All bank set criteria for getting a mortgage would now be insisted upon in every case.

People who three to six months ago could have got a mortgage will now find they have to save a bit harder first.

But Mr Pero said earlier generations of home buyers had to save for deposits before buying.

"What we've found over the last few years is that people decided on a Sunday afternoon over a latte or wine 'hey why don't we go and buy a home, we haven't got any money' (and) wonder into the bank or broker on Monday and you could do it on no deposit."

Now people would need to have a good credit record and deposit, as in earlier days.

"It used to be a lucky day when you got a loan, it wasn't just a right it was an absolute privilege and it could go back to that."

For existing home mortgage holders the current credit crisis may not have an effect, as most bank mortgages assure people of money for 15 to 20 years.

Developers with short term financing and people dealing with non-banks might find it harder.

"For the average homeowner it shouldn't be an issue," Mr Pero said.

He was "pleasantly surprised" banks were still competing with competitive rates to attract good customers.

While house values were dropping, the New Zealand banks were acting responsibly and not panicking with fire-sales. Mortgagee sales were up but there was no rush.

Property values in places were down by up to 30 percent but "sadly that's life" and there was no actual loss unless somebody tried to sell their house.

Existing home owners, if not planning to move, were unaffected.

"If your house value drops $100,000 over the last few months, you will probably pick it up and it will all come out in the wash over the next few years.

"If you are a first home buyer now is a good time to buy."

Mr Pero said the US subprime system was reckless and irresponsible and would never have happened in New Zealand.

"It's a shame New Zealand is going to suffer as a result because I think across the board here it was generally good lending."

[upside_umop]

Mr Pero is inconsistent.

'If your a first home buyer, now is a good time.'

To me, its obvious to expect first home buyers would be the most vunerable to adverse conditions.

Then Mr Pero says:

'It's a shame New Zealand is going to suffer as a result because I think across the board here it was generally good lending.'

First, New Zealand is going to suffer..hes predicting NZers are going to suffer financially, but yet advocating first home buyers to buy! Crazy. Yes first home buyers are less settled have less work experience and usually first to flicked out of a job.

Second, Didnt he just say banks were lending at 100%? Is that a good lending practice at the top of the business cycle?! Some banks (as MacDunk will tell you) were lending 105%. Ok I'll tell you....it was Westpac.

I guess if it all goes bad for those first home buyers on his advice, Mr Pero will say 'Sadly, that's life.'


Also, I love it how we (the young) always get generalised into the 'can't wait, must have' catergory. It's through the work of our elder generation from which this has been possible. Ie. Easy credit. Its also through the work of our elder generation which has lead to this housing bubble, and essentially passing on the debt to the younger generation of New Zealanders.

Here are some things to remember:

-You got paid to go to university

-House prices were in muliples of 2-3 times your income

What a rant.

[moimoi]

ASB is as of today restricting all home lending for new customers to a maximum of 80%.

[lakedaemonian]

Asteron is bailing out of the home mortgage business........no new customers.......but will continue to service existing ones

[minimoke]

ASB is as of today restricting all home lending for new customers to a maximum of 80%.
So Shrewd Crude may have lost his opportunity. It looks like by the time he is ready to buy he’ll need to scrape up a larger cash deposit than envisaged at the start of this thread. The drop in property values won’t make up for this. A $300k house he might have needed a 10% / $30k deposit. If this house drops in value to $250k he’ll now need a 20% / $50k deposit. It might have been easier to ride out a $50k loss in property value than find an extra $20 in cold hard cash!

[moimoi]

Asteron is bailing out of the home mortgage business........no new customers.......but will continue to service existing ones

Asteron has a loan book of 85 home loans. Doubt anyone will be shaking in their boots over this news. :-)

cheers
Moi

[Yossarian]

Also, I love it how we (the young) always get generalised into the 'can't wait, must have' catergory. It's through the work of our elder generation from which this has been possible. Ie. Easy credit. Its also through the work of our elder generation which has lead to this housing bubble, and essentially passing on the debt to the younger generation of New Zealanders.


Totally agree. I also despise the way our generation is always characterised as flaky and spendthrift... note Pero's reference to lattes and wines. that really pisses me off.

[Sid]

So Shrewd Crude may have lost his opportunity. It looks like by the time he is ready to buy he’ll need to scrape up a larger cash deposit than envisaged at the start of this thread. The drop in property values won’t make up for this. A $300k house he might have needed a 10% / $30k deposit. If this house drops in value to $250k he’ll now need a 20% / $50k deposit. It might have been easier to ride out a $50k loss in property value than find an extra $20 in cold hard cash!

I think anyone would take finding an extra $20k of cash over a $50k loss anytime. If more buyers have to put down a decent deposit before buying, the more chance that house prices will continue to fall.

[Yossarian]

ASB is as of today restricting all home lending for new customers to a maximum of 80%.

Where did you get this info from? Very interesting.

If all banks go back to capping leverage at 80% this will take a large number of potential buyers out of the market all together. Surely that would have a further negative impact on prices.

[Tok3n]

Saving for 20% deposit isn't hard even with high house prices these days.

I think they should make it 30%..covers the potential fall :)

[CAM]

re ASB

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10535536

[Crypto Crude]

Thanks for that Cam...

decision last week by GE Money Home loans to pull its 2 and 3 year fixed mortgages.

Humm... I wonder why....
Credit is going to get a whole lot cheaper...;)


minimoke-So Shrewd Crude may have lost his opportunity. It looks like by the time he is ready to buy he’ll need to scrape up a larger cash deposit than envisaged at the start of this thread. The drop in property values won’t make up for this. A $300k house he might have needed a 10% / $30k deposit. If this house drops in value to $250k he’ll now need a 20% / $50k deposit. It might have been easier to ride out a $50k loss in property value than find an extra $20 in cold hard cash!

Hey mini...
The only lost opportunity was buying any time after I started this thread... Theres still lost opportunity through going out and buying now...
Still a good year to go before urgency is required...
A larger deposit is neither here nor there for me...
Ive got my 30k, and I will be full time working next year so add 10k...
and then performance on the sharemarket.. At very worst under extreme circumstances my portfolio could go sideways... I doubt it....
DOW could fall through 8500 points...
Oil could hit 70 bucks... doesnt matter....

House prices are falling all through the Western World...
As Foreigners make up a part of our housing market---> when overseas prices fall, those foreigners would sell New Zealand Assets to buy cheaper ones overseas...
This will continue to put downward pressure on NZ homes, compounding to the current state of the NZ housing market...
The US market has been falling for years and we have only been falling for 9-10 months...
exciting times ahead for those that wait...
everything is on track mini... dont worry about me...
hey look... dow down 350... yeah harrrggghhhh...
:cool:
.^sc

[duncan macgregor]

SHREWDY, The only thing you have to consider in a long term house investment is construction cost. Buy a house like i have recently done at below construction cost, and sleep easy. Construction costs seem to keep rising along with rents. The markets will crash, or inflation goes sky high, or we head into a depression, your house will always hold its value. The only thing worth anything in the end are essential material assets that are held long term. YOUGOTTAHAVEAHOMESHREWDY even a bird builds a nest before it starts a family. Money is a promise written on a bit of paper that can blow away in the wind. bricks and morter my good man are a much safer bet. Macdunk

[Dr_Who]

I agree with Mcdunky. Buy below construction cost in a good area. In a good area there will always be demand and it is easy to rent rent out. I am now looking and buying. Why? cos everyone says it is a bad time to buy and the fear factor will sell me good cheap property below construction cost. :)

Hey Mcdunk, how much will it cost to build a decent 3 bedroom house these days in Epsom, Remuera etc?

[Crypto Crude]

mackdunk-
1)SHREWDY, The only thing you have to consider in a long term house investment is construction cost.
2)Buy a house like i have recently done at below construction cost, and sleep easy.
3)Construction costs seem to keep rising along with rents.
4)The markets will crash, or inflation goes sky high, or we head into a depression, your house will always hold its value.
5)The only thing worth anything in the end are essential material assets that are held long term.
6)YOUGOTTAHAVEAHOMESHREWDY even a bird builds a nest before it starts a family.
7)Money is a promise written on a bit of paper that can blow away in the wind.
8)bricks and morter my good man are a much safer bet. Macdunk

1) The only thing I care about is current sentiment and where prices are headed over the next 3 years to time entry at the lowest price so I can hold for the long term...
2) I sleep very easy... yeah haarrrghhh... "buy an asset below future earnings and sleep easy"
3) refer number 1)... will input prices such as wood, brick, Steel and all that not fall in a recession? what have these prices been doing in the recession? are costs RIGHT NOW rising or falling?
4)Will that house hold its value? what about this year?
that inflation you are talking about is erroding away at your house value..
inflation pressures are falling...
5) refer 1) and 3)... ITS NOT ABOUT LONG TERM, ITS ABOUT CURRENT SENTIMENT... I suggest you add fruit loops and soy milk with your breakfast...
6) yes, and birds also regurgitate food to their young...
Ive explained this all before... Your $100.. (or what Im currently paying $80) per week goes down the drain.... YES.....BUT, its what you can do with the money you did not put into the house deposit, that you can use to work for you...
If you bought that house then the money you have goes into the deposit... So not only are your returns in housing currently getting erroded by falling prices, your returns are getting erroded by your opportunity cost, (and inflation)... its what you could do with that deposit had you not bought the house... For example... if your deposit is $30,000... and you can return 10% after tax per year... then you return $3000 dollar per year, or 60 bucks a week making renting subsidised by your returns...
rent is effectively free for me right? perhaps not in the last 2 months...
those high interest rates are a killer for the Fixed termers eah!
then theres all the other costs...
there will be a time to buy housing (for the average punter)... there will be time for the average punter to return in housing and the sharemarket... They both wont perform in either now...
7) true...
8) maybe so... but I can afford to take risks in an attempt to cut that loan term in half and evade the mid life crisis...

Mackdunk,
we face the same recession even though we are in different asset classes... Dont tell me that its good for housing and not good for shares...
Dont tell me that its good for you and not for me...
Housing has been dump trucked this year... The Sharemarket has been dump trucked this year... So you have performed this year in house, and So have I on the markets... AKK, WHN, LMPO, LMP, RPM biggie... all profitable... ...VPEO sideways for me....
losing on CUE, CTP, CTPOA, TEXO... last three are all small positions....
and then theres 07, 06...
CUE done well considering when I got in and how much the DOW and Oil has fallen since... down around 16% on that...
Yeah you can find special investments... I can too...
Gotta shoot... catch you up...
:cool:
.^sc

[neopole]

i see that the tele had a 2005 re-run of location location location on again this morning.

is this to drive up the market, or a bit of nostelga about the hey days of speculation?

[Crypto Crude]

Mackdunk,
I have not finished with your brain yet... :D...I see you posting elsewhere!...
You say construction costs keep rising, BUT Whats happening to those costs this year? and more importantly RIGHT NOW?
And have you implemented Fruit loops into your diet as I suggested?...ITS a good source of fibre, so im told...

what are construction costs such as steel, wood, commodity prices going to do over the next year?
And with less projects on the offering, what are builders going to start doing to get projects?
Please come back...
http://www.aussiestockforums.com/forums/images/smilies/charley.gifAerrhrhrhjjjjggghhhhh ititssss ssscccaarrryyyy iiiinnnn hheheheererereeeee..... where have my shades gone?...OH
just found em....
:cool:
.^sc

[duncan macgregor]

SHREWDY, I will give you the low down on building costs from todays costings to the costings of say thirty years ago. Forty years ago i could cut on the site and construct a 3brm family home with a boy in six weeks from a simple plan and specifications without nail guns,and other expensive machinery. Today the plans and specifications are right down to the last tiny detail and get sent back time after time until they do. The plans consents and specifications take a huge part of the budget in comparrison. Yesteryear galvanised brackets were the norm unlike today where its stainless steel every thing. Todays house in comparison is much more expensive and time consuming to build even with all the modern equipment but no better than they were fifty years ago. You never heard of leaky homes in those days. the builders knew that untreated timber must breathe unlike today where the powers that be are a bunch of jumpted up idiots. To buy a house where costs are escalating is a wise decision at any stage in the market.
I hate to think how many times i argued with building inspectors about leaky homes long before it was a known problem. To buy a house under construction cost is a sound investment for the future at any stage in the cycle. If you are in the market never ever buy a spanish plaster type house unless it has an external air cavity to allow it to breathe otherwise its a leaky home. Watch out you dont miss the market you will never catch up. Macdunk

[Crypto Crude]

mackdunk,
thanks for post replying... It was not the answer I was looking for... It was not even close to the question that I asked...I read the first line "I will give you the low down on building costs from todays costings to the costings of say thirty years ago", and was thinking about not reading the rest....... Come on buddy... I dont give a cock a hoot about 30-40 years ago...30 years ago had nothing to do with the point im trying to make... You say construction costs only ever increase... Im saying you are wrong (over the next few years)...you surely know what construction costs are doing this year dont you?... you dont need me to spell it out for you... Do you?
You just cant admit it... You never give an inch on anything that remotely conflicts with your point of view...
Just admit it... I would have made the biggest mistake of you life had I bought at the beginning of this year when you said those famous words...
:cool:
.^sc

[Crypto Crude]

here were the questions...

You say construction costs keep rising, BUT Whats happening to those costs this year? and more importantly RIGHT NOW?
what are construction costs such as steel, wood, commodity prices going to do over the next year?
:cool:
.^sc

[duncan macgregor]

here were the questions...

You say construction costs keep rising, BUT Whats happening to those costs this year? and more importantly RIGHT NOW?
what are construction costs such as steel, wood, commodity prices going to do over the next year?
:cool:
.^sc Shrewdy let me simplify it for you. Construction costs regardless of material costs have gone right through the roof. Your builders are all leaving town the market is in a downtrend. The only people left selling in the market are the over extended or builders getting out the game. It all comes back to bite you on the bum. Trades people get paid twice as much in Australia. In 1967 I left NZ in a big downturn in the building game and got paid exactly three times as much in northwest Australia. I got back in 1972 and could name my own price in the NZ market. History repeats Shrewdy watch out you dont get to smart and miss the boat. The sharemarket is dogs tucker the best bet is picking up a real house bargain right now. If we have a real depression which looks highly likely the only thing worth having after your share market plummets is material assets. Macdunk

[ynot]

In a "real depression" would house prices not also go down in value?

[lakedaemonian]

Shrewdy let me simplify it for you. Construction costs regardless of material costs have gone right through the roof. Your builders are all leaving town the market is in a downtrend. The only people left selling in the market are the over extended or builders getting out the game. It all comes back to bite you on the bum. Trades people get paid twice as much in Australia. In 1967 I left NZ in a big downturn in the building game and got paid exactly three times as much in northwest Australia. I got back in 1972 and could name my own price in the NZ market. History repeats Shrewdy watch out you dont get to smart and miss the boat. The sharemarket is dogs tucker the best bet is picking up a real house bargain right now. If we have a real depression which looks highly likely the only thing worth having after your share market plummets is material assets. Macdunk

In a major deflationary or disinflationary event.....which we are conceivably in for the moment....anything requiring credit would be under pressure to drop in price according to my logic.

I do agree that critical "stuff" will hold it's value, or increase in value against paper currency once we've found bottom and inflation kicks in again.

But I think real estate re-inflating will be harder and slower than other tangible assets especially those that do not require credit.

Everyone needs a place to live, but I think a purchased home will not be viewed as much of an investment in the short-to-medium term.....I think we are a long way off from seeing residential property prices even begin to trend upwards.

In terms of capital gains, we could arguably be dead for YEARS until the dust settles.

Our old home isn't moving, even with a VERY sharp price :( oh well.......always a place to put up the in-laws :)

Funnily enough our last remaining commercial property is receiving CRAZY interest...two more offers due tomorrow and a meeting with one buyer's group........still silly low yields being offered in quality commercial......we realistically expect to be out of commercial completely in a month.

[George]

If I was a potential home buyer I would be nervous about the current situation.
But it would be vital to save AS IF one did have a huge mortgage, that is to
save the difference between the rent and what would be required to service a
typical mortgage plus insurances, maintenance etc. Do the hard yards involved in
house hunting and pick your spot - this could be some time away I feel.
Who is going to buy all those houses where the developers went bust, surely prices
must drop, possibly quite a lot and for some years to come.
However, our house which has a latest valuation of 315k is now 'valued' at 340k
according to QV. I can't believe that we could get that in today's market and
wonder if they serve any useful purpose as a valuer. It means our 20% deposit has
grown to 33% and by next June will be 42% but if the 'value' goes up even more
we could be down to 50% - fantastic, but perhaps unrealistic at the moment.
If values drop however, that equity instead would decrease to possibly 10-15%.
But as long term holders we can only pay down the mortgage as fast as possible
while enjoying the intangible benefits of home ownership.
The worst that can happen, apart from both losing jobs, is that we will look back
with the benefit of hindsight and see we paid too much and could have driven a
harder bargain.
George

[minimoke]

....... I can't believe that we could get that in today's market and wonder if they serve any useful purpose as a valuer....
The only thing you can use your QV valuation for is to get an assessment of your share of the rates your council wants to charge. My QV is 50% off current market value but I’m not complaining as it keeps my rates bill down.

[minimoke]

here were the questions...

You say construction costs keep rising, BUT Whats happening to those costs this year? and more importantly RIGHT NOW?
what are construction costs such as steel, wood, commodity prices going to do over the next year?
:cool:
.^sc
For the March 2008 quarter the Producers Price Index (PPI) for inputs measuring the production cost for residential construction increased 5.1 percent, and labour costs (as measured by the labour cost index - salary and wage rates) increased 3.4 percent for building trade workers over the year.

Other statistics show that prices for the purchase of new housing increased 1.1 percent in the June 2008 quarter, following increases of 0.9 percent and 1.3 percent in the March 2008 and December 2007 quarters, respectively. 93 percent of respondents cited higher prices for construction components as a contributing factor to the increase.

[Mick100]

not sure why your haggling about construction costs
I expect that soon enough you will be able to buy a house well below the section and constuction costs - why do people assume that the minimum price of a house is construction cost?
When someone is forced to sell a house they'll have to take what the market is prepared to pay - that's hasn't got much to do with construction costs.
.

[George]

Minimoke, you say that your QV value is 50% off - do you
mean less than market value? If so, how do you know what
your market value is?
Our QV for rating is 315k while the 2004 value was 235k,
yet our rates only went up $140 for each year.
The 340k value was based on their latest report, which I
frankly find laughable.
George

[duncan macgregor]

not sure why your haggling about construction costs
I expect that soon enough you will be able to buy a house well below the section and constuction costs - why do people assume that the minimum price of a house is construction cost?
When someone is forced to sell a house they'll have to take what the market is prepared to pay - that's hasn't got much to do with construction costs.
. MICK, Property is a long term investment for most people. When the price drops below construction cost, construction stops. The tradesmen are left with the choice of going overseas, or working for nothing, or changing occupations.
This is always followed by huge increases in property values when the market rights its self. Its happened to me more times than i care to think about. To buy below construction cost at any stage in the cycle ensures that your buy will go up in value at a higher rate than whatever the mortgage rate is, at that particular time. To place a large enough deposit on a property so that rent and other expences are covered, then refinance every three years to get your own money back you can sit back to the dumboes way to riches. Its a bit like shares buy when the market is low, sell when its high but dont be stupid enough to think you will ever pick the market at its extremities accurately. Macdunk

[duncan macgregor]

Minimoke, you say that your QV value is 50% off - do you
mean less than market value? If so, how do you know what
your market value is?
Our QV for rating is 315k while the 2004 value was 235k,
yet our rates only went up $140 for each year.
The 340k value was based on their latest report, which I
frankly find laughable.
George QV, is a value taken from an office desk using a set formula which in most cases is well off the mark. To get a realistic value your property must be valued by a person qualified to compare your property with other similar recently sold properties after a rigorous inspection. The value of anything is in the eye of the beholder. Macdunk

[minimoke]

Minimoke, you say that your QV value is 50% off - do you
mean less than market value? If so, how do you know what
your market value is?

The QV is less than market value – with market value being my estimation of the value. My valuation is based on keeping an eye on the local real estate market which involves checking listing prices, sale time and sale price relative to the property offering. I’m one of the nosey parkers that turns up to open homes to check things out. I know the sale price of pretty much every property within a 1 ½ - 2 km radius of my place and I’ll look as far out as 5 kms for similarly valued properties to see what else a buyer could get with the same money and adjust my valuation accordingly. My latest QV is double what it was the previous time around and this is without a valuer stepping foot on the property – and they are still miles from value. Having already taken a hit on my rates I’m in no hurry to encourage them back again.

[Crypto Crude]

Mackdunk,
this is the first market crash ive been through and Im loving it...
I take it that you are far more experienced and have seen them all by now...
what was it like for you in the 1929 market crash?
were your houses falling in value then?
or maybe you came in for the sweep a few years after to pick up the road kill...?
not such a bad day on the market...
:cool:
.^sc

[lakedaemonian]

not sure why your haggling about construction costs
I expect that soon enough you will be able to buy a house well below the section and constuction costs - why do people assume that the minimum price of a house is construction cost?
When someone is forced to sell a house they'll have to take what the market is prepared to pay - that's hasn't got much to do with construction costs.
.

Absolutely!

When people run out of rope, they swing from the neck until dead.

The same rule applies to any manufacturing or value added work......if inventory piles up, you burn through carrying costs, you drop your pants on price, or you do both....

[Dr_Who]

Property investments are usually long term.

IF one was to do the numbers for a long term property investment, then one would use construction cost as the model. If you can buy a house for below construction cost, in the long run you will have done very well and bought yourself a cheap under valued asset. Buy and hold. In a few years you will be laughing all the way to the bank cashing in on your capital gains once the market stablised and starts to pick up again.

[upside_umop]

Thats fair enough Dr, but the stock market is long term also and is usually a leading indicator of economic recovery, thus the housing market still hasnt seen the bottom yet.

As MickMinus100 says houses can and most likely will drop below construction costs. Stocks do this too...they tend to 'overshoot' what they're really worth...

MacDunk when you say 'below construction costs,' are you incorporating land costs aswell? Things dont look rosy for sections. Also, what kind of houses do you mean? If its a 1970's house, sure it wont suffer from leaky building but it wont have modern fixtures, so you would expect to pay less than construction costs?

[AMR]

Thats fair enough Dr, but the stock market is long term also and is usually a leading indicator of economic recovery, thus the housing market still hasnt seen the bottom yet.



Yes that's true, but a few of the LPTs on the NZX seem to have bottomed and stopped falling.

[upside_umop]

Isn't that because the LPT's are at nearly 50% discounts already?
The Dr is talking about residential property I think..Dr?

[George]

A fellow I know in Wanganui said their house price hardly rose
in 20 YEARS up to about 2000 then nearly tripled. Went from 50k to 140k
so it must have been under construction cost for all that time!
Any reason why Auckland's house prices can't stay flat for
say, 10 yrs??
George

[duncan macgregor]

A fellow I know in Wanganui said their house price hardly rose
in 20 YEARS up to about 2000 then nearly tripled. Went from 50k to 140k
so it must have been under construction cost for all that time!
Any reason why Auckland's house prices can't stay flat for
say, 10 yrs??
George It depends how long the local economy stays flat. Its a supply and demand situation, like your friend found out in Wanganui. When the demand is there the price has to play catch up with building costs, which have increased at a higher rate than material cost.
Material cost is slightly higher than general inflation due to the increase in stainless steel and other imported products now demanded by the powers that be. When this latest crash ends people will still demand bigger and better homes making the bargains of today into real bargains. I always advise people to buy what they really want first, then worry about the price second. The house might be over priced today, the right price next year, and a bargain the following year. Construction cost should be your yardstick,buy below that, and have yourself a bargain at any stage in the cycle. Macdunk

[lakedaemonian]

It depends how long the local economy stays flat. Its a supply and demand situation, like your friend found out in Wanganui. When the demand is there the price has to play catch up with building costs, which have increased at a higher rate than material cost.
Material cost is slightly higher than general inflation due to the increase in stainless steel and other imported products now demanded by the powers that be. When this latest crash ends people will still demand bigger and better homes making the bargains of today into real bargains. I always advise people to buy what they really want first, then worry about the price second. The house might be over priced today, the right price next year, and a bargain the following year. Construction cost should be your yardstick,buy below that, and have yourself a bargain at any stage in the cycle. Macdunk

No offense, but I disagree.

I think your suggestion of construction cost as the yardstick is too simplistic.

The massive unwinding of availability and accessibility to credit is going to have huge ramifications for the RE market.

In regards to "yardsticks" we are still far, far above the mean of X multiples of the average wage to purchase the average house.

Unless we see so much liquidity reinjected into the market as to make us look like the South Pacific version of Zimbabwe, I think we are heading back towards a more reasonable X multiple of average wage for the average house.

In times of long-term financial stability I think your yardstick carries some weight, but we are potentially dealing with a black swan type of event that could destroy the foundation of your argument.

If in times of financial stability it may only take X years for your construction cost yardstick to ring true, in times of extreme financial turmoil it may take 5X years for your yarstick to measure correctly.......will the vast majority of people be able to wait that long before a different direction in life DEMANDS that they sell their property?

Net migration flows, tax policy, and existing residential investment inventory(or changes to them) all also play a significant role in how accurate or inaccurate your yardstick may be.


If we see Zimbabwean economic policies implemented TOO successfully, then I think your idea will work.

But if real estate deflation and credit contraction continues unabated and we return to more sensible, conservative, and strict credit availability and access....then RE could be dead for quite some time as in George's Wanganui example.

[Tok3n]

So 1 year one

Whats the verdict, is the property market falling or not?

To me, doesn't like it, if you compare it to all other markets e.g. the sharemarket

[Financially dependant]

So 1 year one

Whats the verdict, is the property market falling or not?

To me, doesn't like it, if you compare it to all other markets e.g. the sharemarket

IMO It is falling and with gather speed through out the year, if is just in a different part of a slower cycle.

[Crypto Crude]

tok3n,
Theres much much more house price falling to come...
some will go on and on about construction costs, but they know that its about sentiment...
They just choose to ignore the main argumennts of why house prices are falling, and go off on a tangent as they wont give an inch on the truth...
They perform in any cycle, so thats all good if you are an outlier (performer) in the property market...
theres no point preaching that stuff to the general population as most of us are not outliers... :)
:cool:
.^sc

[duncan macgregor]

tok3n,
Theres much much more house price falling to come...
some will go on and on about construction costs, but they know that its about sentiment...
They just choose to ignore the main argumennts of why house prices are falling, and go off on a tangent as they wont give an inch on the truth...
They perform in any cycle, so thats all good if you are an outlier (performer) in the property market...
theres no point preaching that stuff to the general population as most of us are not outliers... :)
:cool:
.^sc SHREWDY, look at this another way. Your Cue fell from your buy price of 21.6c to 14.5c in about three weeks. Lets presume your CUE is a house on the market.
You will always find someone to sell you the house at 14.5c or lower at any stage in the market unlike shares. To say that house prices are dropping is to generalize. The average might drop making it harder to sell and easier to buy thats all. Your oil stocks have plummeted the average house price has only gone down. If the house prices didnt rise and fall it would not be worth investing in them. The bigger the drop the better i like it. Macdunk

[Crypto Crude]

Hey underdog,

No, lemons with lemons... haha...
or rotten eggs with rotten eggs... haha...

this new kid on the housing block will show these buffs how its done...
1.5 to two year wait is required for ultimate strutting...
a walk with a slight lean, in perhaps one year...
crump-> 2 years min... whats it to be buff?

im sure the RBNZ is meeting on the 23rd... be prepared for two interest rate cuts, to rub it into the fixed termers...

underdog-->I will deal with that shady character when I get back...:D
later all... yeaaarrgghhhh hhharrrggghhh...
:cool:
.^sc

[minimoke]

... be prepared for two interest rate cuts, to rub it into the fixed termers...

Fixed termers won’t be concerned. They understand that their fixed term rides out the ups as well as the downs. They have security in knowing what their regular repayments are without the wild fluctuations that occur over the term. But what some may find is that if rates drop low enough it will worth their while breaking their loan and paying the penalty and refixing at the new low rate. You can do that with a property as equity. I’m not sure the bank would be so keen if they’d secured a loan with a share portfolio – in fact I suspect if you remind them of your security they may be looking at calling in some more cash.

[Dr_Who]

Please do stay out of the porperty market and hold cash, so that supply exceeds demands. This will only make me buy these properties cheaper. With cash unconditional offers, I am KING and can neg a good price to buy. :)

[lakedaemonian]

You can lead a horse to water, but you can't make it drink

You can lead a bank to credit, but you can't make it lend

While you may have bought a bargain or three relative to prices from 12-18 months ago....it could take quite some time to see much if any capital gain again.

I reckon I'm still a good couple of years away from investing in residential property and even longer until I invest in commercial property again.

[Stranger_Danger]

I agree. I own no property of any type at this time You'd have to have rocks in your head to invest in property now.

For the last 12 months cash has been king. For the next five years acquiring assets that produce the most distributable (not capital intensive, not building castles in the sky) cash will be king.

Property only works with gearing. Ever heard of anyone getting rich in a career consisting only of buying property with cash, no gearing ever? Doubt it.

Dr_who - Property didn't crash with shares in the 1987 crash. In fact there wasn't really much of a ripple till 89-early 90's when everything ground to a halt. Hell, I remember that and I was a kid basically.

And the 1987 "crash" was a pimple in comparison - for a start, most households had mild or no debt levels in comparison to today.

I have severe doubts that in 2 years time todays property "bargain hunters" will have bought bargains.

It is currently possible to walk past a string of shops and see 40%, 50% then 70% off as they top each other.

Buying a fixed, illiquid asset, using leverage, at prices 10% lower than last years dodgy valuations? Insanity.

[Dr_Who]

Property only works with gearing. Ever heard of anyone getting rich in a career consisting only of buying property with cash, no gearing ever? Doubt it.



I bought with cash and have holding power, so bring on the cheap assets. I am a long term investor so short term fluctuations dont concern me.

Housing shortage forecast

By LIZ MCDONALD - The Press | Thursday, 16 October 2008

http://www.stuff.co.nz/4728571a13.html

[lakedaemonian]

I bought with cash and have holding power, so bring on the cheap assets. I am a long term investor so short term fluctuations dont concern me.

Housing shortage forecast

By LIZ MCDONALD - The Press | Thursday, 16 October 2008

http://www.stuff.co.nz/4728571a13.html

Yeah I read that article...and while I was thinking about it I was also thinking about how high a % of total revenue the property industry is for media.....and as it shrinks so too does the media bottom line.

Just a fortnight ago I had a well known Christchurch region media outlet trying to sell me ad space.

Our team was keen on an ad spend deal but conditional on some positive editorial interest being included in the package.

We were told editorial is not for sale and we told them we were not interested in advertising.

They responded by effectively telling us editorial is now for sale :)

This isn't anything businesses that purchase large volumes of ad space wouldn't already know on the quiet....but it was a first time meet and greet.

Ad spend has slowed considerably in print, radio, and TV...we are getting the best deals ever......surely media are under enormous pressure to put a positive spin on things.....especially if things don't turn for the better redundancies may not be far away for some.

[Tok3n]

If that report is true, we need to tell our MPs that NZ need a massive stimulus package that includes building lots of new houses and apartments.

[Stranger_Danger]

The report is bogus but lakedaemonian's is not - I've experienced precisely the same thing.

A lot of "special offers", "one off opportunties" and "last minute cancellations" in ad land, along with very kind offers to commit to 12 months or more on advantageous terms - for your benefit, of course!

If you want more anecdotal evidence about how things are out there, try advertising $14 an hour entry level (but fulltime and stable) positions and see how many current or former real estate agents apply. Seriously.

[spook]

This is fascinating discussion - it's such a complex subject it's great to hear all the different opinions, and there are a lot of different possible outcomes. If I subscribed to the "Hell in a handbasket" view of the current economic crisis then I would sell everything immediately because it will all be worth squat next year - houses, equities the lot.

This theory doesn't suit me because it suggests my personal situation will be so grim for the next ten years I may as well go and find a piece of rope with my name on it.

So what do I do? Assume things are close to bottom and could pick up in a year or two. A Simple fact with housing - if interest rates are low and prices are low there's no need for negative gearing, so property will sustain itself for the forseeable future. With the upcoming OCR review, if 2 yr rates drop to 7%, a mortgage of $250k will cost $336 a week in interest, with a tax saving (39%) of $131 leaving $205 nett. Fund that over 20 yrs and you only need to nett $316 pw in rent to pay off your mortgage. Your other fixed costs can be covered by your depreciation rebate.

How does this affect house prices? A well set up investor will snap up a buy, whether the price will be lower next year is irrelevant if it's self-sustaining. Lots of investors buying will support the market.

McDunk's right, get the good buys now, but make sure there's money left in case there's better bargains next year.

[Tok3n]

Wonder what % of NZ'ers would not be able to invest in property if you couldn't negative gear your tax losses etc.

[spook]

I don't believe in negative gearing for tax loss, but it does get a lot of people into the rental/investment market. Take that away and watch property values drop. Labour messed with commercial property rebates in the 70s and created a property recession (Just ask Bob Jones - I 'm too young to remember:)).

In Bob's opinion the Labour politicians back then were jealous of property tycoons making millions for nothing. I'll post the title of his book when I can find it.
"JONES ON PROPERTY (the property game for fun and profit) 1977

[arco]

JONES ON PROPERTY (the property game for fun and profit) 1977

I picked that up at a book sale a few years ago (for 20c).......a very good read.

This hard back book of 250 pages, " Jones on Property " ( The Property Game For Fun & Profit ) was written by Bob Jones and published by Fourth Estate Books Ltd in 1978. Good condition (watchers offered reserve)

" As a successful capitalist, outspoken political critic and radio talkback host, Bob Jones is a household name in New Zealand. He is also a practical authority on commercial property development and ownership. "

" In the early 1960s, when he started to make sizable sums of money, Bob Jones carefully analysed investment opportunities, including the sharemarket and 'various property investment alternatives.' He found his answer in commercial property. ' Everything swings for the property investors, ' he says. " And commercial property in particular stands our clearly as the best form of property investment. "

" This book is a distillation of practical advice about how to tackle the property field, and the pitfalls to avoid, based on his own hugely successful career. There are also, in his brightly written text, typically pungent swipes at the things he doesn't like. The list is a long one and includes Labour politicians, intellectuals, public servants, insurance salesmen ... "

He has another book written much later and called 'My Property World' which I borrowed from the library - again very good read.

[spook]

I agree - it's a great read. He does talk about residential rentals as being fine for beginners on the property ladder, and for a small investor like myself I would hate to be exposed to commercial real estate during hard times.

At least with residential, it's always possible to find a tenant if you bought well. The biggest risk with commercial is not being able to let your property when you've got $2000 PW going out in interest. However for a switched on investor he points out a number of ways to turn a dead duck property into gold.

[Brut]

Macdunk, I remember you saying on this thread back on 24/07/08 that you should "always get a fixed three year loan." At the time the OCR was 8.25% now it is 6.5% & still may go lower.

I hope not too many people took your advice.

Brut

[duncan macgregor]

Macdunk, I remember you saying on this thread back on 24/07/08 that you should "always get a fixed three year loan." At the time the OCR was 8.25% now it is 6.5% & still may go lower.

I hope not too many people took your advice.

Brut BRUT, What a short term risk taker you are. When you take the risk out of it you wont go broke when it goes the wrong way. To have peace of mind in a volatile market is worth any little that you might or might not lose. Inflation and interest rates my friend are very unpredictable. I would hate to risk all on a gamble of what might happen in the next three years. macdunk

[duncan macgregor]

Underdog. If ever i get it wrong i feel sure you will be the first to show me where. Last year i was invested in a nickel mining company that boasted about selling only at market rates, with nothing being hedged. This year now that nickel is selling at half that price the company is scratching to show a profit. Interest rates along with inflation is in the lap of the gods, always keep the numbers in control. Remove as much risk in business as you can, get the basics to an understandable level in this wild west market place. If you want a good case study of risk free expansion, just study MHI against RBD about how to expand, and in the RBD case what not to do. Macdunk

[George]

We are fixed at 8.3 for 5 years and with over 3.5 yrs to go
were in two minds about the recent lowering of interest rates.
So today rang our bank about the penalty imposed - either a fixed
charge or a percentage for changing to a lower rate.
The guy went away for a while then said that there would be NO CHARGE
to fix at the lower rates.
This puzzled me as surely they would have to at least charge
for doing paperwork etc. but evidently there is still a
lot of competition and one may be able to negotiate a good deal.
So fixed originally to lock in certainty if rates went up
but with the benefit of now being able to adjust downwards FOR FREE.
Will check this out next week in case the guy was mistaken.
George.

[Sideshow Bob]

Which bank was this at? Would be interested to know the results, as we are in a similar situation.......


Cheers
SSB

[spook]

BRUT, What a short term risk taker you are. When you take the risk out of it you wont go broke when it goes the wrong way. To have peace of mind in a volatile market is worth any little that you might or might not lose. Inflation and interest rates my friend are very unpredictable. I would hate to risk all on a gamble of what might happen in the next three years. macdunk


Gotta back you up here MacDunk. If you do a fundamental analysis on the property investment at purchase time, and the figures stack up, it makes sense to lock those figures in for as long as possible.

It's all about insuring your investment. Sometimes it's better to insure against higher interest rates and risk missing profit if the rates go down.

[George]

Bob
Bank is BNZ. Rang them today and can do a 'restructure' for
no charge. However, their only lower rate is the 7.99% fixed
for 1 year so there's no point. The 5 yr is 8.89 so still ahead there.
If rates do drop as in the US etc. possibly to 5% or less, then
we will obviously change, they simply post the documents, we sign and
send them back. Perhaps there may be a silver lining on this black
cloud - as long as we can keep working of course. If things get so bad
they have to drop rates (is 1% possible?) there may be a lot of jobs lost
with people unable to pay their mortgage principal, let alone interest.
George

[George]

This out today, family charged 15 grand for ending a 5 yr fixed.
They are selling up and moving to Aus. Perhaps there's more to
this than meets the eye and one should double check that there is
indeed no charges if 'restructuring'.
http://www.stuff.co.nz/4741009a13.html

[Sideshow Bob]

Bob
Bank is BNZ. Rang them today and can do a 'restructure' for
no charge. However, their only lower rate is the 7.99% fixed
for 1 year so there's no point. The 5 yr is 8.89 so still ahead there.
If rates do drop as in the US etc. possibly to 5% or less, then
we will obviously change, they simply post the documents, we sign and
send them back. Perhaps there may be a silver lining on this black
cloud - as long as we can keep working of course. If things get so bad
they have to drop rates (is 1% possible?) there may be a lot of jobs lost
with people unable to pay their mortgage principal, let alone interest.
George

Thanks George. We are with BNZ, although don't know the rules/contract (I wasn't involved in the original mortgage - long story!!). Will check it out.

Looking at the Sunday paper, BNZ appear to be about 0.4-0.5% more than other major banks.


Cheers
SSB

[Dr_Who]

Currently Kiwibank has the best rates and freebies. My bank managers all give me rebate on legal fees and no bank fees charges. Just shop around and negotiate the best rates. :)

With interest rates coming down and house prices coming back to more realistic levels, people will start to put their money back into properties again.

[minimoke]

Currently Kiwibank has the best rates and freebies. My bank managers all give me rebate on legal fees and no bank fees charges. Just shop around and negotiate the best rates. :)


Great advice – I’d only add that you need to look carefully at the out clauses. If you are looking for a bit of flexibility it may cost you a bit more. The more business you give your bank the sharper the deal you will get but NEVER give your rental property security mortgage business to the same bank that has your personal home mortgage.

[George]

Any shrewd first home buyers are going to have to have at least a
20% deposit unless they have a higher income than average plus possibly
paying extra costs such as regd valuation, lenders insurance,
application and low equity fees etc.
This underlines my previous opinion that while renting and waiting,
it's crucial to be saving as if one was paying off a hefty mortgage.
So one needs discipline and focus which renting may not always encourage,
while a mortgage certainly does.
George

[Dr_Who]

For 1st home buyers, live with your parents, get free board and food and save up as much capital as possible for your first home. Or ask your parents to lend you your 20% interest free. :D That's what parents are for.

[Financially dependant]

Houses are only getting cheaper, patients will be rewarded and time to save more of a deposit.

Harcourts figures are already down 30%....

http://www.interest.co.nz/ratesblog/index.php/2008/10/30/harcourts-figures-show-prices-already-down-30/

[fungus pudding]

Any shrewd first home buyers are going to have to have at least a
20% deposit unless they have a higher income than average plus possibly
paying extra costs such as regd valuation, lenders insurance,
application and low equity fees etc.
This underlines my previous opinion that while renting and waiting,
it's crucial to be saving as if one was paying off a hefty mortgage.
So one needs discipline and focus which renting may not always encourage,
while a mortgage certainly does.
George


The size of the deposit is far less relevant than affordability. e.g. A 200k property with a 5% deposit may well be more sensible than a 300k property with a 20% deposit. It's impossible to generalise. While renting and waiting, it's crucial to be searcing for a bargain - far more to be gained than by saving which is also important.

[minimoke]

Houses are only getting cheaper, patients will be rewarded and time to save more of a deposit.

Harcourts figures are already down 30%....

http://www.interest.co.nz/ratesblog/index.php/2008/10/30/harcourts-figures-show-prices-already-down-30/

Ah the joy of statistics. On one hand you have Harcourts using an average and REINZ using the median. To confuse matters I presume the Harcourt’s sales figures feed into the REINZ figures. Which would then suggest there have to be sales well above average / median to counter the major drag caused by the Harcourt’s figures.

[Dr_Who]

The government valuation in my area reflects an increase in house prices. :eek:

[Stranger_Danger]

Yeah and people buy water they can get for free, people on Working For Families don't know they're beneficiaries and people complained more loudly about losing their right to beat their kids than they did about losing access to unrestricted political free speech.

No one ever said everything or everyone was sane.

You believe it cos a piece of paper arrived from the Government telling you which way the wind was blowing 6 months ago?

House prices are falling. My cat could tell you that.

[minimoke]

Houses are only getting cheaper, patients will be rewarded and time to save more of a deposit.

Harcourts figures are already down 30%....

Yet we have a competitor to Harcourt’s, Barfoot and Thompson coming out with different figures. They recorded 503 sales in October, down from 796 in October last year. The average sale price increased from $495,873 in September to $520,039 in October but was down from $546,679 in October last year. So thats less than 5% drop. Perhaps its more that Harcourts have lost some key accounts and are now bottom dwelling with low rent properties on their books.

[fungus pudding]

Yet we have a competitor to Harcourt’s, Barfoot and Thompson coming out with different figures. They recorded 503 sales in October, down from 796 in October last year. The average sale price increased from $495,873 in September to $520,039 in October but was down from $546,679 in October last year. So thats less than 5% drop. Perhaps its more that Harcourts have lost some key accounts and are now bottom dwelling with low rent properties on their books.


But they had a run of multi-million dollar sales, which plays havoc with the average. That's why the REINZ use the median rather than the average.

[minimoke]

But they had a run of multi-million dollar sales, which plays havoc with the average. That's why the REINZ use the median rather than the average.
Harcourt’s down here like to think they can play with the big boys – perhaps they have a load of successful agents in Otara.

[lakedaemonian]

We've FINALLY had some good news with our last home.........offer we have accepted is a mere 1.5% under asking price(which was realistic to begin with)......so we've been quite fortunate....although we did need to show some patience.

But to be fair....we still have a short wait until we go unconditional......but none of the common all encompassing "out" clauses.

[Crypto Crude]

mackdunk-BRUT, What a short term risk taker you are. When you take the risk out of it you wont go broke when it goes the wrong way. To have peace of mind in a volatile market is worth any little that you might or might not lose. Inflation and interest rates my friend are very unpredictable. I would hate to risk all on a gamble of what might happen in the next three years. macdunk

Good point Brut..
oh mackdunk...
I warned you... we have gone over and over this point, so there is really not much use hammering it again...
I did say words like 'sure thing'... ohhh...

in bold- no what a short term risk taker you are...

underlined- your absolutely kidding right?...The RBNZ is one of the most open and fully disclosed Central Banks in the entire World... hands down...
The New Period of Monetary Policy (starting in the 1990's) is all about being open and informing the market... you see my friend, our history of econ policy has been a conflict with sub par policy (monetary policy targets) and a closed economy, which has increased risk of speculators attacking our markets...
by being open and fully disclosed speculators have been removed from the picture...
let us read the last announcement from the RBNZ which was made a few weeks ago with our interest rates were slahded one whole percent...



The Reserve Bank today reduced the Official Cash Rate (OCR) from 7.5 percent to 6.5 percent.
Reserve Bank Governor Alan Bollard commented that “ongoing financial market turmoil and a deteriorating outlook for global growth have played a large role in shaping today’s decision.
“Economic activity in New Zealand will be further constrained, relative to the outlook presented in our September Monetary Policy Statement, by these international developments. New Zealand can expect to face lower demand for exports and credit is likely to be less readily available. In this environment consumers and businesses are likely to be more cautious and curtail spending.
“The reduction in domestic spending will be partly offset by the depreciation of the New Zealand dollar over the past few months, falling oil prices and the recent loosening of fiscal policy.
“With weaker short-term growth and sharply lower oil prices we now expect that annual CPI inflation will return to the target band of 1 to 3 percent around the middle of 2009. However, we still have concerns that domestically generated inflation (particularly in labour costs, local body rates, electricity prices and construction costs) is remaining stubbornly high.
“Consistent with the Policy Targets Agreement, the Bank’s focus will remain on medium-term inflation. Should the outlook for inflation evolve as projected we would expect to lower the OCR further. However, the timing and extent of OCR reductions over the coming months will depend on evidence of actual reductions in domestic cost pressures as well as how the global financial developments play out.”

can you read this... its a sure sure thing... one hundred percent in the bag as I said... I will continue to say get out of fixed term loans until I see fit that interest rates have bottomed out... at that point it would be appropriate to fix the loan for as long as you can... we are still a good 6 months off that...
I will explain future interest rates more in the NZ-market overview and outlook thread...

I will quickly sum a few things up...
New Zealand Currently has an inverted yield curve the last time I looked. ----> as Short term interest rates are above long term interest rates, we would clearly expect short term interest rates to be cut.
an inverted yield curve is rare.
It onyl happens because the market expects interest rates to be cut further. People bid up long term interest rates to lock in those high rates. this drives down there yields. resulting in an inverted yield curve.
You can laugh all the way to the bank on this...
you can open the paper up and draw the yield curve from the data..
I will explain all fully in the 2009 outlook...
cheers...
:cool:
.^sc

[Crypto Crude]

congratulations Lakedaemonian...


New Zealand has a love affair with housing, it will be interesting to see what eventuates with prices.
:cool:
.^sc

[Crypto Crude]

28k...
thats a heap of money dude...
It would probably be worth paying up, on where interest rates are headed...
I offered mackdunk the opportunity of retrieving his fixed loan and me paying the difference/having a slice of the profits.....
poor fella turned me down...
:cool:
.^sc

[minimoke]

my floating rate now 7.09% maca

my fixed mates are pulling their hair out at 9.5% or coughing up to $28k to get out in 1 case.

Your mates shouldn’t be pulling their hair out – they obviously liked the rate at the time they got their mortgage. No doubt there were times when rates went a bit higher and they would have been happy – so why the bleating now. The $28k doesn’t mean much. I presume they have a large mortgage fixed for a long time at the peak of the rates for a break fee like that. Regardless of the detail they made the call, agreed to a contract with their banker, wanted the bank to carry the risk and now they are unhappy. Tough –that’s the way it is. You can’t have it both ways!.

My floating is coming down to 9.5 from 10.5. I’m still fixed at 8.25 for another 8 months and not worried at all – I will have had two years of not even thinking about interest rates – just paying the interest bill each week it comes in. I'm happy to pay a premium for the flexibility the floating loan gives me. A small price to pay for what I can do with this finance option.

[The Great Gold Guru]

I got out of two 5Yr 8.75% fixed rates the day before to last RB 1% cut. Cost to switch to floating was $100 each as the bank's ( SBS ) 5Yr rate at the time was 8.90%. I have 4 other mortgages on 2Yr fixed rates which roll-off in May09 , they are at rates between 8.5% and 8.75%. I have been funding a shortfall of $1600/mth on these 6 rental properties for the last 18mths. I have worked out that if I can fix all 6 on a 6.85% rate at some point in the next few months I will then have a cash neutral position monthly. Any lower than that and I will be in a cashflow positive position. All 6 properties ahve been let every day since purchase ... 4 in Wanganui and 2 in Blenheim. I am looking to buy 6 more properties in the next 12mths ... falling rates are GREAT news for all LONG TERM property investors , it will be a great time to buy late summer next year ... desperate vendors facing a long unpleasant winter will capitulate to some very low offers .... that's the plan anyway !

[Financially dependant]

. Any lower than that and I will be in a cashflow positive position. All 6 properties ahve been let every day since purchase ... 4 in Wanganui and 2 in Blenheim. I am looking to buy 6 more properties in the next 12mths ... falling rates are GREAT news for all LONG TERM property investors , it will be a great time to buy late summer next year ... desperate vendors facing a long unpleasant winter will capitulate to some very low offers .... that's the plan anyway !

This follows my logic, when yields are higher then interest rates we should see a bottom to the residential market and end of next summer sounds as good a time as any!

[Jay]

Can't see fixed rates being that low in the next few months - maybe by end of March.
They would need to fall by a nother 1% or so.
Talk around the traps is that any reduction in the OCR won't necessarily be fully matched by a drop in fixed rates due to cost of funds for the Banks.

[POSSUM THE CAT]

As Govt guaranteed finance companies are now offering 9.9% debentures are the banks going to have to increase their deposit rates or have a huge cash outflow. So no money to provide mortgages

[minimoke]

SC has quite the criteria for buying his first home. He wants:
- low interest rates (now down to around 7.9% from 10.5% - but he is still looking for lower rates)
- buying at the bottom of the market
- Paying the loan off in less than 15 years
- paying less than $500 a week in repayments

- coming in with a sizeable deposit (he’s got $20,000 at the moment).

This is a bit like waiting for the stars to align. On these numbers he could buy a $250,000 home.

Except – he now needs a 20% deposit with Kiwibank so his $20k isn’t enough – he’s $30k shy. His income is probably a bit shy as well. With a back end ratio of 36% he’ll need to be grossing $72,000 for this loan. Lets look to the banks tightening this ratio even more. Unemployment on the increase, more redundancies, employers not hiring – is $72,000 likely?

Obviously the stars aren’t aligning so some of his criteria have to give. A greater deposit means less repayments so that might work. Oops he’s delayed buying and had $40,000 but its down to $20k. He could wait for the banks deposit ratio to change. Opps it has from 110% mortgage down to 80% mortgages. Interest rates could come down – well they have dropped over 30% already so a bit more could do the trick – except he’s not into Fixed Interest rates which would get him a loan at Kiwibank at 7.29%. Or he can wait for property values to drop – hm $250k will get him http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-188525667.htm but not much room for flatmates (to boost his income) or $220k could be an option for this one http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-171760247.htm. Could he look at a 30 year loan – but perhaps now isn’t the time to explore how far forward Gen Y’ers look.

So could it be that SC’s opportunity to buy his first home is less likely now than in the peak of the market back in ’07? Is there any sign that the stars are aligning or were they the closest they were going to get 2 years ago? Perhaps Macdunks advice that anytime is a good time to buy might not be so bad after all – provided you have flexibility in your criteria and you buy carefully.

[peat]

yeh I think McDunks argument is that in property and especially land (not undeveloped land, but property that contains a good chunk of dirt as such) that IF you never sell you will always be worth more if your time frame is long enough.
I mean how many conversations have you had with people that go along the line of ' I bought that place for X (where X = ridiculously low number) and sold it Y years later for Z where Z = 3 or 4 or even 5 or 6 times X. And now its worth 20 x Z.

If you never get into a position of having to sell property always wins. So if you can apply money management principles well enough eg not too much leverage and your base your purchase on your ability to produce income to service the debt (and you dont have any huge setbacks with this ) then its pretty much an absolute certainty that over the long run you win.

As has been pointed out the stock market is not quite like this in that there are complete belly-ups

[corran]

I mean how many conversations have you had with people that go along the line of ' I bought that place for X (where X = ridiculously low number) and sold it Y years later for Z where Z = 3 or 4 or even 5 or 6 times X. And now its worth 20 x Z.

...

As has been pointed out the stock market is not quite like this in that there are complete belly-ups

What I think a lot of people fail to grasp is that, over the last 8 years or so, the rise in house prices has turned into the biggest global financial bubble in history.

Many people have done well out of property but to look at the recent past and extrapolate that into the future is naive in my opinion.

What we're now seeing in countries the world over is the bursting of that bubble. 2009 is shaping up to be a year of global economic hardship.

For sure I'm staying on the sidelines for the time being, saving my pennies and watching the carnage.

I've got a sizeable deposit saved up but I expect house prices (at least in Europe where I'm living) to drop by 15% next year. A property buff may still be able to find a bargin but I'm not a property buff... I just want a nice home to raise my kids in and to protect our wealth.

And in my opinion, the best way to do that at the moment is to keep renting and step into the market in 2010 or 2011.

It will be interesting to see how things pan out over the next year or two...

[Dr_Who]

Dont wait too long, you are gonna miss out on some cheap assets. ;):cool:

[Crypto Crude]

hey minimoke...
boy... I dont really know where to begin...
I dont want to bore all you cats to tears...

trust me buddy, last year the outlook was so bad, that all these signals (interest rates et all) would have to fall into my court, and then some, just to halt a crashing market...
The truth is, housing has fallen so much that I could buy a house for 150k when this is over...
also, im expecting my shares to perform... and I will get a job, and add money... ive got no problems mini...
all will happen, it will only happen on my terms... I will call the shots and make that entry when ever I see fit, so as to get myself the best deal, and I still have a good Solid year (realistically 2 years plus), but time to readdress the situation next year...
goal---> houses...
but yah never know... If I get the right business opportunity, then I might scrap housing all together...
luck to yah
:cool:
.^sc

[Crypto Crude]

yeh I think McDunks argument is that in property and especially land (not undeveloped land, but property that contains a good chunk of dirt as such) that IF you never sell you will always be worth more if your time frame is long enough.

exactly...
long term its a no brainer...
its the difference of getting positioned at say 21cents... or 14.5c for example...
if its going to 40cents, then you will make money either way...
its just the leverage that can bankrupt you in housing when times are bad for the newbie...
Id say the long termer will be relatively unscathed by all of this...
they will box on...
would a newbie?
Id say a newbie would not last a few rounds in a market like this, expecially if they were getting positioned at the peak...
:cool:
.^sc

[minimoke]

The truth is, housing has fallen so much that I could buy a house for 150k when this is over...

I hope so cos this is what $150k will buy you today, assuming you can find another $10k as a deposit:
http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-182564592.htm (http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-182564592.htm). A one bedroom 40sqm floor area unit in North Brighton.

Remember back in May there was a wee three bedroom, 683square section, close to golf, parks and schools. Sky installed, plenty off street parking, 10-15 minutes to CBD, quiet street for $189K. You could have probably have bought that property back then with your $40k (or even 20k) deposit. A couple of flatmates at $90 a room and you’d be looking sweet now.

Well another place has come up for this money. This time “the property has good bones (summerhill stone with aluminium joinery) and enjoys an excellent outdoor area at both front and rear. From the north facing deck step into the enormous sunny lounge, flowing through to the spacious kitchen/dining area with separate laundry attached, and then down the hall to the 3 double bedrooms (all with wardrobes) and bathroom with separate shower and bath, and separate toilet. The entire property is tidy and well maintained but modernisation would certainly give it a lift.

Rented fixed term to tidy tenants for $270pw, and with median rental in the area at $285pw, this property has plenty of room for improvement in order to increase the yield and value” Check it out at http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-189778098.htm

So what has changed in the market – Your $189k buys you roughly comparable properties (each with a few different pros and cons – but you get the idea) but your deposit doesn’t get you a look in now. If you had bought in May your flatmates would now be paying off your mortgage now. If you were worried about loosing on the property value any loss (which by the looks of it would have been minimal, if any at all) would be offset by the flatmates contributions against lower interest rates.

[Dr_Who]

Interesting article

Housing heads for a soft landing

http://business.smh.com.au/business/housing-heads-for-a-soft-landing-20081125-6hf0.html?page=1

[duncan macgregor]

I hope so cos this is what $150k will buy you today, assuming you can find another $10k as a deposit:
http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-182564592.htm (http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-182564592.htm). A one bedroom 40sqm floor area unit in North Brighton.

Remember back in May there was a wee three bedroom, 683square section, close to golf, parks and schools. Sky installed, plenty off street parking, 10-15 minutes to CBD, quiet street for $189K. You could have probably have bought that property back then with your $40k (or even 20k) deposit. A couple of flatmates at $90 a room and you’d be looking sweet now.
So what has changed in the market – Your $189k buys you roughly comparable properties (each with a few different pros and cons – but you get the idea) but your deposit doesn’t get you a look in now. If you had bought in May your flatmates would now be paying off your mortgage now. If you were worried about loosing on the property value any loss (which by the looks of it would have been minimal, if any at all) would be offset by the flatmates contributions against lower interest rates. In a few years time he will realise that he missed his window of opportunity when he could do it. Now deposits have gone up its pointless bleating on about waiting on the market to fall.
I tell everyone the price comes second to what you want. Today the price is to high next year its right then after that it becomes a bargain. Always buy for the future dont buy a property on price alone. Macdunk

[minimoke]

Check it out at http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-189778098.htm

Looked a bit more closely at the property and some potential there – but that’s another story. What really brasses me off the damn slack and lazy real-estate agents. Dear agent: get off your fat lazy bum and close the toilet seat and get rid of the jandals when you are taking photos and get your clients to mow the lawns. You couldn’t even be bothered dropping the curtain off the range hood you lazy tub of lard! Jeez – these agents get up my nose!

[Mick100]

In a few years time he will realise that he missed his window of opportunity when he could do it. Now deposits have gone up its pointless bleating on about waiting on the market to fall.
I tell everyone the price comes second to what you want. Today the price is to high next year its right then after that it becomes a bargain. Always buy for the future dont buy a property on price alone. Macdunk

Question for macdunk
Which would you rather do? - pay a 10% deposit on a $400,000 home a couple of months ago or pay a 20% deposit on the same home which will be selling for $300,000 this time next yr

mini moke - if I could buy a modern 3 bd home for $190,000, where I live, I would jump at it

[Dr_Who]

Looked a bit more closely at the property and some potential there – but that’s another story. What really brasses me off the damn slack and lazy real-estate agents. Dear agent: get off your fat lazy bum and close the toilet seat and get rid of the jandals when you are taking photos and get your clients to mow the lawns. You couldn’t even be bothered dropping the curtain off the range hood you lazy tub of lard! Jeez – these agents get up my nose!

Yep, I hear you mate.

The problem with these agents is that they have had it good for far too long. With the current credit crunch and the property downturn, most agents still treat their customers with content. Realty agents have only themselves to blame. A change in the industry can only be good.

[minimoke]

Question for macdunk
Which would you rather do? - pay a 10% deposit on a $400,000 home a couple of months ago or pay a 20% deposit on the same home which will be selling for $300,000 this time next yr

Question for mick100. Why would you be selling you home in a years time?

Assuming you were selling because you can’t keep up with the mortgage repayments – then you shouldn’t have bought in the first place. Interest rates now are getting pretty low. This scenario suggests a sucker who over paid in the first place.

If you are selling because you want to trade down in a year the $300k house today would presumably be worth 230k in a years time – you’re buying/selling in the same market so no worse off.

If you are selling because you are off overseas - - then why don’t you rent it out. Or just sit on it for while until the market turns – as it inevitably will.

And who’s to say it will drop that much. I’ve given SC a couple of examples which shows no drop in the market. Incidentally they aren’t cherry picked examples – they are a quick scan of trade me.

[Mick100]

mini moke
I'm looking at the situation from a buyers point of view
I can asure you there will be houses for sale next yr for one reason or another

[duncan macgregor]

mini moke
I'm looking at the situation from a buyers point of view
I can asure you there will be houses for sale next yr for one reason or anotherMICK, There are two kinds of buyer one is a first time buyer forced to buy on a low deposit. The other is a buyer and seller in the same market, where timing is not a concern. Shrewdy missed his low deposit opportunity in may then went on to lose a bundle by buying CUE with 60% of his worth. He now comes and says look at the money he saved in falling property prices, when he should be saying i now cant afford the increased deposit. Property bargains can be found at any stage in the cycle, low deposits cant. The sooner he realizes his mistake and learn from it the better. He says he only loses money if he sells CUE then contradicts that with his falling property statements. Macdunk

[fungus pudding]

anyone saying prices are not falling is dreaming...

"The current economic climate is resulting in continuing buyer and seller uncertainty, according to QV.

Prices fell again in October with Auckland down 7.7% compared with the same time last year, Wellington down 6.1% and Christchurch sliding 7.8%. "




interesting link on best value spots in NZ

http://www.iwantahome.co.nz/article/article/2210/0/category/featured/topspots-new-zealand's-most-affordable-places/top-5-articles.html


The big price drop will come next year.

[George]

I took advantage of QV's free report in September. Our house
which was valued at 315k in the late 07 Council/QV valuation
was, 9 months later, worth 340k or a rise of 8%.
Other houses had similar rises
2 months later prices are supposed to be down 7.7% from that exact period???
That means we have gone from 340k to 290k in 2 months.
Haven't checked their latest report as I have no wish to pay
for such a 'service'.
George

[upside_umop]

Moke and Macdunk...you guys are wrong.

I see it the other way. simple...I thought you would have thought about it.

Increased deposits is the same as 'tightening credit.' There will be less 'supply' of people buying and therefore further downward pressure.

On the flipside, you dont 'need' that 20% deposit. My brother just bought a house with 10% deposit and could have been as low as 5%. You just have to have a low equity fee ($4000 or something which was only 1% of the average house price and now they have fallen average 8% so still saving 7%)..or you have to have a slightly higher interest rate.

Look at the facts before posting.

Many home buyers are now putting off because of future expectations of housing drops.

Macdunk, you say house prices cant fall much further because of construction costs. Well...construction costs are coming down and sections are also coming down. Paying $200 k for a section is just ridiculous! Plenty of downside left....

My pick is prices wont 'crash', but the RB will make them stay stagnant for a long time till they are inline with long term averages. A crash would jeopardize our financial system...and it will be avoided as we have had foresight with whats gone on in the states and rapidly falling house prices.

Increased deposits will also become part of the norm for borrowing...and so it should. I almost expect it to be put into regulation.

UD glad we finally agree on something. Maybe PPP also?

[Crypto Crude]

Moke and Macdunk...you guys are wrong.

I see it the other way. simple...I thought you would have thought about it.

Increased deposits is the same as 'tightening credit.' There will be less 'supply' of people buying and therefore further downward pressure.

On the flipside, you dont 'need' that 20% deposit. My brother just bought a house with 10% deposit and could have been as low as 5%. You just have to have a low equity fee ($4000 or something which was only 1% of the average house price and now they have fallen average 8% so still saving 7%)..or you have to have a slightly higher interest rate.

Look at the facts before posting.

Many home buyers are now putting off because of future expectations of housing drops.

Macdunk, you say house prices cant fall much further because of construction costs. Well...construction costs are coming down and sections are also coming down. Paying $200 k for a section is just ridiculous! Plenty of downside left....

My pick is prices wont 'crash', but the RB will make them stay stagnant for a long time till they are inline with long term averages. A crash would jeopardize our financial system...and it will be avoided as we have had foresight with whats gone on in the states and rapidly falling house prices.

Increased deposits will also become part of the norm for borrowing...and so it should. I almost expect it to be put into regulation.

UD glad we finally agree on something. Maybe PPP also?
:cool:
.^sc

[STRAT]

hey minimoke...
boy... I dont really know where to begin...
I dont want to bore all you cats to tears...

trust me buddy, last year the outlook was so bad, that all these signals (interest rates et all) would have to fall into my court, and then some, just to halt a crashing market...
The truth is, housing has fallen so much that I could buy a house for 150k when this is over...
also, im expecting my shares to perform... and I will get a job, and add money... ive got no problems mini...
all will happen, it will only happen on my terms... I will call the shots and make that entry when ever I see fit, so as to get myself the best deal, and I still have a good Solid year (realistically 2 years plus), but time to readdress the situation next year...
goal---> houses...
but yah never know... If I get the right business opportunity, then I might scrap housing all together...
luck to yah
:cool:
.^scGudday Shrewdy.
I have been in Maccas team on this one but the math is lookin better and better as time passes for you. I think assuming you werent/arent intending to buy a rental you have probably made the right decision as long as you can beg steal or borrow a deposit.
One thing stands out in your post though. Regarding your share portfolio performing and house prices continuing to plummet. Its unlikely you will get both. More likely one or the other.

[minimoke]

Its an ownership flat in Linwood, damn ugly at that

You won’t find anything in Fendalton for $189k

[Serpie]

You won’t find anything in Fendalton for $189k

Not so Minimoke

http://yahooxtra.realestate.co.nz/902525?max_price=200000

What? It's in Fendalton!

[STRAT]

Not so Minimoke

http://yahooxtra.realestate.co.nz/902525?max_price=200000

What? It's in Fendalton!So many agents are idiots. The add below says make make an offer for $500.00 :D

About the property

Pick up this character home with good bones before it gets demolished. Does need some TLC. Vendor needs a clear section. House only for Removal.

[minimoke]

Not so Minimoke

http://yahooxtra.realestate.co.nz/902525?max_price=200000

What? It's in Fendalton!

Well done Serpi. There’s SC’s deposit gone now and it looks like ideal student accommodation. Just need to find him a nice plot of land and a BIG truck to shift the home of his dreams!!

[Serpie]

Or just leave it on the truck and save on the land?

[minimoke]

Moke and Macdunk...you guys are wrong.

....
Look at the facts before posting.

Macdunk, you say house prices cant fall much further because of construction costs. Well...construction costs are coming down ...
.^sc Actually they are not. The cost of building a small home in Canterbury is $1755 a SQM as at July 08, up from $1,736 in January. Construction costs have consistently risen in every period for the past 10 years, even back in ‘99 when inflation was as close to Zero as we’ve been in recent history. Construction costs have not come down once in that period – and here we are with the CPI at 5.1% in Q3 of "08 ( the highest since Q3 in 1990) and we are expected to believe construction costs are coming down. I can't see any evidence of that.

[Dr_Who]

Question for macdunk
Which would you rather do? - pay a 10% deposit on a $400,000 home a couple of months ago or pay a 20% deposit on the same home which will be selling for $300,000 this time next yr

mini moke - if I could buy a modern 3 bd home for $190,000, where I live, I would jump at it

Hey Mick, you have a house to sell? I may buy it at the right price. LOL :D

With rates at these levels and continue to go down you may not buy it back cheaper next year or so. :eek:

[Serpie]

we are expected to believe construction costs are coming down. I can't see any evidence of that.

True MM, but those figures are historic, and there is plenty of anecdotal evidence around in the buliding industry at present (at least in Canterbury) that suggests that the real problems are starting to kick in.
It's a very different landscape out there at the moment than it was even in July 08. Look at all of the home building companies offering discounts and incentives at the moment.

[POSSUM THE CAT]

MiniMoke are Cantabrians mugs Some building companies advertising $1400 a square meter to build in Auckland wich is supposed to be the most expensive place to build in the country. This also seems to reduce if building is over 250 square meters

[minimoke]

MiniMoke are Cantabrians mugs Some building companies advertising $1400 a square meter to build in Auckland wich is supposed to be the most expensive place to build in the country. This also seems to reduce if building is over 250 square meters
Well Auckland (the most expensive region) is at $1,790 a sqm for a small house (145 sqm) and $1,512 for a large house (202sqm house). The data comes from construction cost consultants (not anecdotal urban chit chat) and is relied upon as a guide by govt agencies. They are estimated average costs taken off a set of plans (which provide reliability to the bi-annual movements) so you will of course find cheaper – and if you want an architecturally designed home, more expensive. Costs are for materials and labour as well as contractor overheads and margins. They include internal and external finishes to meet the Building Code and standard appliances – but don’t include carpet.

[minimoke]

True MM, but those figures are historic, and there is plenty of anecdotal evidence around in the buliding industry at present (at least in Canterbury) that suggests that the real problems are starting to kick in.
It's a very different landscape out there at the moment than it was even in July 08. Look at all of the home building companies offering discounts and incentives at the moment.

If you dig a little deeper I think you’ll find the building industry saying that they aren’t building as many homes at the moment as they were say a year ago, and that they aren’t seeing as many plans going through for consent. But it is unlikely they will be saying overall construction costs are going down. Sure – they might be discounting their labour but you still have to pay the same council increasing fees and material costs are still going up. Perhaps not as dramatically as they might have been but with a CPI currently at 5.1% costs have to be going up across the board. They might even be scrimping on building quality and materials to drive a lower price but that is purely supposition.
The Housing and Household Goods CPI went UP. In fact prices for new housing went UP 1.3% in the September quarter (UP!!! Not down). These are put down in part to changes in the Building Act – driving quality (and cost) UP. New House prices are UP 4.6% on last years September quarter.

Facts are telling us that prices are going up but gossip over the tea cups tells us prices are going down. If you hang on long enough you might be able to point to a decrease but at the moment the evidence is that costs are UP.

[duncan macgregor]

First home buyers are now facing a huge hike in required deposit. Average cheap home in Christchurch requires $62000 deposit according to the news tonight. All the smart people in that group would have bought by now, the rest will have to keep saving hoping to catch up. More people renting higher rents in the end leading to increased poverty. Decrease in building will only inflate the property prices eventually those not in the market might never save enough to get on the ladder. That was the first thing i told my kids buy a house and take your deposit back out after three years, and buy another house.
The window of first opportunity to get into property is now closed, so pointless talking about prices. Macdunk

[Crypto Crude]

hey mack dunky,
do you not realise that increased required deposit will also put downward pressure on house prices...

add in existing downward pressure...

man... its that simple...
Serpie was right last year... I did not have to look at a house in chch over 250k... effectively I only needed 200k, that will now roll out into the gutter for 150k maybe 140k when this is over....

are you saying mackdunk, that I should have been prepared to buy a house for 200k when its only worth 150k just so I can get a mortgage for it...
hehehehe.... come on mackdunk...I can buy a house whenever I like...
when I first posted I said 5 years wait to buy...well we are 11 months into the downturn... Ive readdressed the situation and reckon ive got another 1.5-2 years... enough time to save for two deposits, including the money Ive already got on the market... and then the chance that my investments perform for cream on the top.....
Dont tell me It cant be done... tell me how it can be done...
isnt that what our mate joeking told us...
"Dont find reasons why you cant invest, find reasons why you can"...
quote unquote... I rest my case for the moment...
:cool:
.^sc

[POSSUM THE CAT]

Mini Moke just read the Auckland Papers and advertisements of actual prices are more accurate than averages And the company getting the home builder of the year award is one of the cheapest. Of course it is a standard design home This Is a GJ GARDNER HOME a Sunshine home gets down to $1300 a square meter over approx 210 SQM. So if you prefer your consultants to actual prices So Be It but I am only interested in the price that is on the actual contract. And real estate do not like it when I tell them a used home is over priced. And they say you could not build it for the price. And I show them advertisements for land at full asking price and builders prices in the papers for standard homes and they are usually $50000.00 cheaper than the run down dumps they are trying to flog off.

[minimoke]

SC – The higher deposit rates will only have a major impact on first home buyers at the bottom end of the market. First home buyer will always struggle to buy that brand new home or villa in Fendalton – they are for the third or more home buyers – those that have been in the market for a while. This is good news for investors as there may be more opportunity to increase your portfolio without having to compete with the first timers.

Possum. A couple of things about your post. Firstly the construction costs I have quoted are to build a single home off a predetermined set of plans. Its not an average – just the cost to build. If you took the same plans to a quantity surveyor or Carters they would come up with roughly the same cost. The construction costs are not a reflection of the build cost for building companies who build 10 – or 20 homes at a time and get the discounts connected with bulk buying.

You will also see the building companies advertise their off-the-plans- homes at say $1300 a sqm. But the moment you fiddle with the plan in the slightest expect the non-advertised price to begin heading for the sky.

And here’s some bad news. Housing building companies build 10 – 20 homes at a time. In the recent past they have managed to get extended credit lines from their suppliers (like Carter or Placemakers / ITM) these suppliers are tightening up their credit so unless the builder has a large amount of cash they may only end up being able to build two or three homes on credit – and not get such a discount on materials. What will happen – building company houses will go up in price. Alternatively the company will go bust (like another one in Christchurch last week) and their finished homes will get flicked off for a song – but you don’t see the misery of those who have already paid their deposits up front (and there’s another lesson!)

The other thing building companies were very good at doing in the good times was getting quotes for 10 houses to build, not charging the client the full discount price ( the builder keeping a bit aside) so the builder could end up building 11 houses with 10 new home owners paying for it. We are probably seeing this practice starting to be wound back with the builders passing on the full discount to secure the business so on the face of it the house will appear cheaper. This is purely cyclical and the discount homes will fall out of the cycle relatively quickly with new homes coming on stream at the new higher prices.

[Serpie]

SC – The higher deposit rates will only have a major impact on first home buyers at the bottom end of the market.

I'm hoping that will not necessarily be the case MM, as I have a few properties on the market at the moment that are suitable for first home buyers.

The government is (or should that be "was"?) keen to assist first home buyers into homes at the lower end of the market, and their "welcome home loan" exists to assist those entering the bottom end of the market.

Have a look at http://www.welcomehomeloan.co.nz/ . It's still pretty easy to get a big chunk of change if you have a decent income.

ANZ and National have officially declared their 20% standard, and my discussions with the BNZ lead me to believe that they have unofficially done the same, but perhaps this will just increase Kiwibank's and other participant's market share in this sector?

Perhaps those that will be hardest hit will be those who are trying to take advantage of the falling market by leveraging themselves up to the hilt to grab cheap rental properties?

[Serpie]

I'll sell you a house Shrewdy. Mates rates. Here you go:

http://www.harcourts.co.nz/listing/details.do?rul=%2Fsearch%2Fprocess.do%3Fpg%3D1%26t s%3D173437016%26con%3Ds_ghuata&id=449039

I'll even throw in some MRX and GBM shares for nothing!

[minimoke]

I'm hoping that will not necessarily be the case MM, as I have a few properties on the market at the moment that are suitable for first home buyers.

Yes – the govt has a few options to help people into homes – and KiwiSaver is coming up as well. I’m a bit uncomfortable with the scheme in that the Welcome Home, for example is for people who may not meet standard lending practices – and this sounds a bit like a Sub-Prime to me. But they will get charged a 1% premium for the pleasure – so this puts their repayment commitments up. Philosophically, I also think people should be able to come up with a decent deposit – it shows a saving behaviour which can be translated to a loan repayment behaviour. If you can’t save, then you may not be able to repay a loan. All well and good except a Welcome Home provider is Kiwibank – so once again the tax payer is expected to underwrite the high risk behaviours of others.

[minimoke]

I'll sell you a house Shrewdy. Mates rates. Here you go:

http://www.harcourts.co.nz/listing/details.do?rul=%2Fsearch%2Fprocess.do%3Fpg%3D1%26t s%3D173437016%26con%3Ds_ghuata&id=449039

I'll even throw in some MRX and GBM shares for nothing!
Look at the fine print in the Agreement with the Agent. You might find that if you sell to Shrewdy (great deal – I’ll even throw in some RLV’s since I know nothing about holes in the ground in Chile) the Agent will still want a commission.

[POSSUM THE CAT]

Minimoke you are right if you change plans but if you have a look at the companies I mentioned. I would bet that they are not buying off the any of the wholesalers you mentioned. In fact i would be very suprised if much other than the concrete is purchased in this country. And I have some experience with some of the messes Fletcher Homes have built. I have owned a G J Gardener home in another country and it was one of the best finished I have seen. It was about 5 years old when I bought it. They are built to order of specific standard plans (definately alterations are expensive) but do not set out to build 20 or so houses in a specific area. Not like Fletcher homes and others.

[Serpie]

You're right MM - it's in the agent's hands now. Although if I introduce a buyer I'd want a pretty good discount on the commission.

And I couldn't agree more with your thoughts regarding developing a saving mentaility, and also a sacrifice mentality, in order to buy your first home. It should be a major commitment, and you should have to demonstrate to the lender that you have the discipline and maturity to service such a large loan.

But on the other hand I suppose it's also a role of central government to assist with housing, and the more people they can get into a situation where they're paying their own way and reducing dependancy on others then the better the country will be. I leave the finer details of how they do that to the politicians. As long as they err on the side of caution then it's all good.

[Dr_Who]

I'll sell you a house Shrewdy. Mates rates. Here you go:

http://www.harcourts.co.nz/listing/details.do?rul=%2Fsearch%2Fprocess.do%3Fpg%3D1%26t s%3D173437016%26con%3Ds_ghuata&id=449039

I'll even throw in some MRX and GBM shares for nothing!

If that house was in Auckland at $210k I would buy it. As long as it is not in Otara it is cheap. Can you also throw in some BNB shares?

[Serpie]

[QUOTE=Dr_Who;235166]If that house was in Auckland at $210k I would buy it. [QUOTE]

It's been on the website for 3 hours and the agent already has 4 groups to show through it. School zones are everything in ChCh, so the Shirley Boys / Avonside Girls combo is worth something on it's own.

[minimoke]

I would bet that they are not buying off the any of the wholesalers you mentioned.
You’re on – my wine cellar is a bit depleted at the moment. How about this form GJ Gardeners website for a case of Pegasus Bay of our choice: “Product Performance
Our G.J. Gardner Homes franchises use only high quality, proven construction materials and products from New Zealand's most reputable manufacturers and suppliers. Products used in your home will provide dependable performance.”

[minimoke]

[quote=Dr_Who;235166]If that house was in Auckland at $210k I would buy it. [quote]

It's been on the website for 3 hours and the agent already has 4 groups to show through it. School zones are everything in ChCh, so the Shirley Boys / Avonside Girls combo is worth something on it's own.
Here’s another tip for the newbies – don’t try to buy in “good” school zones at this time of year. Enrolments have closed, spaces are limited and parents after a “better” education who have missed on the ballot are now looking for in-zone so the wee dears get a decent bit of learning.

[POSSUM THE CAT]

MiniMoke does not say they are bought in NZ though

[minimoke]

MiniMoke does not say they are bought in NZ though
Oh – is that a knock at the door . Must be the delivery person with the Maestro. Possum, I think you’ll find Methven Taps more expensive if they are purchased offshore and freighted back to NZ or laser frame or pre nailed trusses made locally shipped away and then sent back here. We could argue the semantics over an open bottle but I think its fair to assume that if a supplier is in New Zealand then the product is purchased in NZ. If its manufactured in NZ, you’d have to give credit to the supply line if they can ship it off shore and back again at a price cheaper than going direct to the local manufacturer – unless of course you wanted to pay a higher price. Granted, its not beyond the realms of possibility but pretty unlikely for all materials that go into a build.

[neopole]

in my life time i have build 6 houses by myself with the only outside labour being electrics and plumbing, and my build costs were around $300 sqm finished excluding my personal time
my current home is a removal home and cost $40000 sited and ready to move in plus land.
in the future, i will only ever consider a removal house.
but then....... im happy with a 20year old kitchen and bathroom.

its not that hard to get into the property game even with a low deposit.

there are several houses on trade me for sub 40k sited and many sections or rural blocks for sub 100k.
once the package is complete its always worth more than the 2 sums.
but.........

some folks just want the best or the easiest way.
some folks just need to impress
and a few out there do what they have to do to get a home.

i strongly recomend a removal home as an option to a first time home buyer.

and yes.......... banks will lend on the project if you present it right.

[POSSUM THE CAT]

Minimoke Just a question why is a lot of Carters timber advertised as Australian. In the 1990s I was buying Australian retaining timber from Carter Holt for approximately 60% of comparable NZ retaining timber. But of course Australia does not grow trees and none of companies mentioned have Australian operations and G J Gardener and Hallmark homes are just little twobit operators that have no buying power. And some of the premium NZ brands mentioned are consider very low class by Australian Standards

[minimoke]

Minimoke Just a question why is a lot of Carters timber advertised as Australian.
I have no answer to that. Perhaps we export our logs, the Ozzies add value send them back as rough sawn and dressed and we pay a premium. CHH have loads of timber mills locally so I woudl have thought they would chop a pine down in NZ for sale in NZ

[upside_umop]

House prices wont come down so much?

Some things that might bring down new home costs:

*Excess labour
*Declining commodity prices
*Loosening of red tape including RMA

Then again...first home buyers arent always looking for a 'new' house, are they?!

Another thing that will bring first home buyers house prices down:

*Section prices.

I can't believe how expensive sections are...peoples price expectations are way beyond reasonable.

*Properties (sections only) fetching over $200 k in mediocre areas in Christchurch. Not even large sections. Is this reasonable?

When land prices tank further, first homes will also become cheaper. Theres plenty of scope for that.

Although interest rates are falling (OCR) watch for banks rates to halt as around 60% of overseas funding is renewed in the next 6 months! Ouch! Around half of the banks financing in NZ (excluding kiwibank, sbs) are from overseas sources. Given international funding has dried up, and higher deposits have been installed watch for even further downside. Unemployment will rise, confidence will be lost further and watch the slide ;)

My friend is in real estate...hes finding it reasonably tough at the moment. He sold a property but failed on finance. Listen to this - the bank valuer went to property and failed it because it had a powerline going over top and said that it wasnt worth what it had sold for! Incredible....this is what banks are doing now, tightening right up. Gives us first buyers lurking plenty of time.

Heres an interesting article....read the last line.

"Tougher lending has silver lining for home-buyers"

http://www.stuff.co.nz/4777688a13.html

[minimoke]

I can't believe how expensive sections are...peoples price expectations are way beyond reasonable.

Well, you don’t just get a piece of land and stick a house on it. Firstly you have to buy the land and the land seller has an expectation that there is reasonable value in it. The value generally has to be higher than its previous use like market gardening or light stocking. The council has its hand up early for subdivision consent fees and here you will have to tame the RMA. Then you have to put in roads, footpaths, sewerage , street lighting, water, phone, sometimes reticulated gas. Council charges for this might be add up as it does for storm water. Also leave a bit aside for community reserves or other community services which can’t be on-sold. Add in some earth works - a subdivision down the road from me was build on an old land fill and they spent a couple of years working the land – still not nearly long enough for me to want to buy into it. But even then earthworks will be need to get the subdivision looking reasonable and of course surveyor and engineer fees. If you are being a bit flash like Pegasus town you need to build a lake and associated pumping costs, wave generator and sand importation. They are also planting 15,000 trees. Add in legal fees for getting titles sorted and then don’t forget a marketing budget and then real estate agent fees. Somewhere in there will be financing costs. Add a margin for risk and for profit which is then balanced against supply/demand to work out a final sale price.

That’s all for just buying a section in a new subdivision.

If you want to buy a section in an established suburb you have to pay for all this value but also a premium for knowing what you are buying into. For example if you buy a section in Fendalton you are buying into a reputation of “Blue ribbon, Leafy suburb” with “nice” neighbours. If you are buying into Aidenfield it has a current reputation which I suspect will evolve into Christchurch’s version of Coronation Street. You know the houses value of your neighbours in an established subdivision but look at how the covenants change over time for new subdivisions which aren’t selling sections.

[minimoke]

My friend is in real estate...hes finding it reasonably tough at the moment. He sold a property but failed on finance. Listen to this - the bank valuer went to property and failed it because it had a powerline going over top and said that it wasnt worth what it had sold for!
No surprise there. Even if I was a first home buyer there is no way I would buy under those high voltage lines at any price. They might be OK to live under (but that’s questionable) but at some point you’ll have all sorts of challenges with the resale – as experienced by the current owners. A useful lesson for your friend as well- he might find that there are easier properties to sell that he can put his time into.

[fungus pudding]

House prices wont come down so much?



My friend is in real estate...hes finding it reasonably tough at the moment. He sold a property but failed on finance. Listen to this - the bank valuer went to property and failed it because it had a powerline going over top and said that it wasnt worth what it had sold for! Incredible....this is what banks are doing now, tightening right up. Gives us first buyers lurking plenty of time.



A valuer doesn't pass or fail a property. He values it. If the purchaser has contracted subject to finance only, it doesn't really matter what the valuer says. As long as the valuation is sufficient to allow the borrower to complete the purchase, then he must do so. e.g if a purchaser with 150k of his own enters a contract to purchase for 400k, and the valuer assesses the property at 300k, the buyer must complete the purchase at 400k because normally he can still borrow the 250k shortfall. (Although in practise, many weasel out on a low valuation, and the costs of enforcing the contract often mean he gets away with it.) It's a daqngerous game, because even if the bank declines the loan, the vendor can leave money owing as a second mortgage which the buyer can't reject provided the vendor's terms are no more harsh than the purchasers intended intended lender. So it's necessary to have a finance clause properly drafted, and if you are relying on anything else other than simply 'can I raise the money' then your special clauses should stipulate exactly what those requirements are.

[Financially dependant]

Will the value of property drop as much as the States??

http://www.interest.co.nz/ratesblog/index.php/2008/11/27/video-median-house-price-221k-by-feb-2011/

looks like it!

[minimoke]

Will the value of property drop as much as the States??

http://www.interest.co.nz/ratesblog/index.php/2008/11/27/video-median-house-price-221k-by-feb-2011/

looks like it!
Bernard is a real doomsayer “House prices will drop by 30%” is his mantra. Earlier this year he was saying this is what we could expect to loose this year. He is beginning to remind me of Charles Drace / Drake(can’t remember his last name) who was a supposed property expert who banged on for years about house price dropping – during a time when prices just continued to escalate.

What Bernard is doing is creating a perception that prices will drop and this will become his reality – because somewhere he will find evidence to support his view. Unfortunately that evidence hasn’t come to light and that’s why he is having to do a presentation which compares apples (NZ prices) with a bag of vegetables (US over supply, non recourse loans and housing affordability ) – all packaged up with nice graphs that are forward projected over different timeframes. He’s really trying to conjure something up. And he’s shifted his view to the end of 2009.

So to Bernard’s key points. Do we have a housing over supply. In some sectors like apartments and destination lifestyles perhaps. Other wise no. We might actually end up with an undersupply if all the expats come home. Do we have dodgy subprime loans – no, but Westpac was getting close with its 110% loans. And banks are tightening up their loan ratios, insisting on valuations and we’ll soon see income ratios looked at. Do we have housing unaffordability – yes, but lets look at the impact of significantly dropping interest rates.

[upside_umop]

Well, you don’t just get a piece of land and stick a house on it. Firstly you have to buy the land and the land seller has an expectation that there is reasonable value in it. The value generally has to be higher than its previous use like market gardening or light stocking. The council has its hand up early for subdivision consent fees and here you will have to tame the RMA. Then you have to put in roads, footpaths, sewerage , street lighting, water, phone, sometimes reticulated gas. Council charges for this might be add up as it does for storm water. Also leave a bit aside for community reserves or other community services which can’t be on-sold. Add in some earth works - a subdivision down the road from me was build on an old land fill and they spent a couple of years working the land – still not nearly long enough for me to want to buy into it. But even then earthworks will be need to get the subdivision looking reasonable and of course surveyor and engineer fees. If you are being a bit flash like Pegasus town you need to build a lake and associated pumping costs, wave generator and sand importation. They are also planting 15,000 trees. Add in legal fees for getting titles sorted and then don’t forget a marketing budget and then real estate agent fees. Somewhere in there will be financing costs. Add a margin for risk and for profit which is then balanced against supply/demand to work out a final sale price.

That’s all for just buying a section in a new subdivision.

If you want to buy a section in an established suburb you have to pay for all this value but also a premium for knowing what you are buying into. For example if you buy a section in Fendalton you are buying into a reputation of “Blue ribbon, Leafy suburb” with “nice” neighbours. If you are buying into Aidenfield it has a current reputation which I suspect will evolve into Christchurch’s version of Coronation Street. You know the houses value of your neighbours in an established subdivision but look at how the covenants change over time for new subdivisions which aren’t selling sections.

You certainly make it sound like a lot.

Sections sold in Cromwell in 1995-1997 for between $10,000 - $15,000.

So whats changed? Land supply obviously has dried up a little, regulation, and the most important is like you say...expectations.

People expect to get $200k for a section when in reality 10 years ago, they were selling for less than 1/10th that price.

Thsi is ridiculous and it won't 'continue..' There will be cheaper sections and then underlying cheaper houses :)

[upside_umop]

A valuer doesn't pass or fail a property. He values it. If the purchaser has contracted subject to finance only, it doesn't really matter what the valuer says. As long as the valuation is sufficient to allow the borrower to complete the purchase, then he must do so. e.g if a purchaser with 150k of his own enters a contract to purchase for 400k, and the valuer assesses the property at 300k, the buyer must complete the purchase at 400k because normally he can still borrow the 250k shortfall. (Although in practise, many weasel out on a low valuation, and the costs of enforcing the contract often mean he gets away with it.) It's a daqngerous game, because even if the bank declines the loan, the vendor can leave money owing as a second mortgage which the buyer can't reject provided the vendor's terms are no more harsh than the purchasers intended intended lender. So it's necessary to have a finance clause properly drafted, and if you are relying on anything else other than simply 'can I raise the money' then your special clauses should stipulate exactly what those requirements are.

Now your getting nit picky. All i said was the bank failed them on finance because their valuer disagreed with the purchasing price. Im not even bothering to read after your first sentence because you obviously misinterpreted what I had said.

[minimoke]

Sections sold in Cromwell in 1995-1997 for between $10,000 - $15,000.

So whats changed?
Since the Clyde was commissioned in 1992 I guess they aren’t building huge great dams and flooding the town any more for a start. Places in Tekapo also went for a song once the canals were finished but you can’t get much for your money there now – except you might get some bargains in that odd airport development.

[upside_umop]

Thats also true....land settlements were done well before then anyway and there was an oversupply of sections (a lot of the 'new' Cromwell houses went on to Twizel).

Anybody know what national average prices were around then? This might be more representative.

I am of the opinion that land values will drop, but the immediate drop wont be large...it will be over time as inflation eats away at the nominal price. The RBNZ doesnt want its own financial crisis here in NZ.

Maybe we should run some friendly bets? SC is always keen, eh Shrewdy :D

[Crypto Crude]

How about we bet on if RBNZ cuts OCR on Thursday...
I bet you one hundred dollars that the OCR will be cut on Thursday, 5 to 1 odds...
how about that one upsee down?

Fixed termers, this could be the mother of all cuts... make sure you got a fresh pair of gruds handy.......... some are calling for a cut of 2% (unlikely)... could be .5-1% cut...
:cool:
.^sc

[fungus pudding]

Now your getting nit picky. All i said was the bank failed them on finance because their valuer disagreed with the purchasing price. Im not even bothering to read after your first sentence because you obviously misinterpreted what I had said.


No. You said valuer went to the property and failed it because of a power line. The property was not worth what it had sold for (conditionally I presume). All of which is irrelevant. A purchaser cannot walk away from a contract which is subject to finance because of a low valuation. He can only avoid the contract if he can't raise finance. Nothing picky about that. It is the law.

[minimoke]

Fixed termers, this could be the mother of all cuts... make sure you got a fresh pair of gruds handy
You keep missing the point SC. Fixed termers aren’t worried about changes in the OCR they are locked in and that is just fine. They ride out the increase in rates the same way they’ll ride out the decreases. Its the people on the floating rates that are keen – they want to know what Christmas bonus they will be getting – and wondering if the floating is going to get below past but current fixed rates. Some of us have both a fixed and floating debt. As the rates come down I’ll be paying more off the floating debt – which is all part of the plan!

[minimoke]

The property was not worth what it had sold for (conditionally I presume).
If we are being picky – a property is worth exactly what it sold for. In this case it sounds like the bank wasn’t prepared to lend on their ratios at that sale value – it would no doubt have lent a lesser amount had they been asked.

[upside_umop]

If we are being picky – a property is worth exactly what it sold for. In this case it sounds like the bank wasn’t prepared to lend on their ratios at that sale value – it would no doubt have lent a lesser amount had they been asked.

Exactly....

[fungus pudding]

Exactly....

The important point is that many purchasers sign an offer conditional on finance, and treat it as an option that they can walk away from if the valuation is substantially lower than the asking price. They can't.

[upside_umop]

Yes they can. :)

Ask some agents how many deals in the last 12 months have fallen on finance and not gone through.

Maybe in 'law' they cannot walk away, but a provision in a contract is just that - a provision. And if its proviso is finance, and it has fallen through you cannot make them pay.

Most people if they had the money wouldn't be having the clause subject to finance.

First home buyers don't have the funds to be held liable to purchase.

Thats what this thread is about...first home buyers.

[minimoke]

Thats what this thread is about...first home buyers.
When SC started this thread banks weren’t so worried about complex sale / purchase agreements – they just wanted to know a person could repay the loan. So other doors are now closing for the first home buyer – banks want higher deposits, and they want proper valuations. First home owners are getting screwed – but not by a rising market!

[upside_umop]

You can look at it that way...

I look at it as opportunity. It wont hold me out. It will lower prices further as there will be less support (where will the first home buyers be to buy and support the market bottom?) There will be some...and I'll be one, but I'll buy when the time is right.

Banks are getting shaky on lending and thats fine by me...I'd rather house prices fall than go up while I'm saving.

Another 10% fall next year will fine by me.

[fungus pudding]

[QUOTE=upside_umop;235512]Yes they can. :)

Ask some agents how many deals in the last 12 months have fallen on finance and not gone through.

Maybe in 'law' they cannot walk away, but a provision in a contract is just that - a provision. And if its proviso is finance, and it has fallen through you cannot make them pay.


Oh yes you can. If finance is the only condition you can arrange the finance for them, which they must accept if its at prevailing terms, or even lend them the money as a vendor mortgage, first, second, third or whatever. Granted - a lot walk away, but not always; have a look at some case law. A subject to finance clause is far more binding than many realise.

QUOTE]

[upside_umop]

Ask around.

[minimoke]

[quote=upside_umop;235512]
Ask some agents how many deals in the last 12 months have fallen on finance and not gone through.

Any agent should be looking to make sure the “buyer” had a pre-approval doc from the bank indicating the borrowing power. It would be a mug agent who would enter into a negotiation process without knowing the real position of the parties.

[upside_umop]

Aren't all agents mug agents? haha

I would think an agent would be a mug if they organised finance for the buyer which was potentially unfavourable..

Back to what you were saying, some agents would rather show them properties, get the potential buyers excited and then worry about finance, instead of scaring them away telling them they need pre-approved?

US in recession woo hoo...

[Dr_Who]

[quote=funguspudding;235533]
Any agent should be looking to make sure the “buyer” had a pre-approval doc from the bank indicating the borrowing power. It would be a mug agent who would enter into a negotiation process without knowing the real position of the parties.

Ive been in this property game for a long time. Both owning and managing residential and commercial. I can assure you that any agent asking me for a pre approve bank lending doc will be met with a quick response to F off. There are a number of people out there who dont need finance and are cashed up.

You can usually tell the BS artist that have no cash. They are the ones that usually wear all the designer cloths and a flashy watch and flashy car. All their wealth is carried around with them and no cash in the bank.

[minimoke]

... some agents would rather show them properties, get the potential buyers excited and then worry about finance,

Yes, I guess this is what the dumber agents do. Except there is no point committing to paying an Agent an exorbitant commission if all they are going to do is get a buyer excited about a property (actually the buyer does that themselves in the first five minutes) if the Agent doesn’t know a buyer is in a position to complete the deal. Agents like this no doubt wonder why they can’t earn a decent living. And they waste their clients time in the meantime – which potentially devalues the property as it lingers on the market for longer. And don’t get me started on those dumb agents that stick up “Under Offer” signs on the front gate sign.

[minimoke]

[quote=minimoke;235544]

I can assure you that any agent asking me for a pre approve bank lending doc will be met with a quick response to F off. There are a number of people out there who dont need finance and are cashed up.

Granted – but the Agent needs the skill to sort out the real buyer from the non-hoper. Their experience can do just as well as a pre-approval doc. And I don’t think this experience comes from someone in the trade for 12 months in a buoyant market.

[upside_umop]

Thats pretty much what I was getting at Minimoke...

Things have changed from the last 5 years. No longer can real estate agents 'expect' finance will be approved because a lot of buyers are now being counted out.

Thus less demand for housing stock... woo hoo another win for first home buyers

[minimoke]

Thus less demand for housing stock... woo hoo another win for first home buyers
Except over the past three months to October, we’ve seen figures which show there are increasing numbers of sales; the time on market is reducing and the median price appears to have bottomed out and is on the slight increase. Too early to suggest a trend, and some of this may be seasonal, but it does indicate no rapid bottoming out of the market. Add to this reduced interest rates and improved housing affordability there to stoke demand, summer encouraging buyers to the market and school zone / job transfers over the new year may all lead to higher sales values. Not a good place for the first time buyer.

Since Shrewd Crude is looking a few years out it might be worth pointing out that the market is not a lot different to where it was two years ago. Back in Jan 07 when he first posted the median price was $327,000, at Oct 08 its $335,000, He would be a lot better off now than then as he still has increased value in his property, he would have paid two years worth of principal off (not much – but it helps) and his interest rates will have dropped a third giving him a pile of extra cash in his hand. Instead he’s lost 50% in the share market, now needs a bigger deposit and he has to find more cash to pay a Valuer.

Two years ago is when first time buyers should have been saying “woo hoo”!

[miner]

"Two years ago is when first time buyers should have been saying “woo hoo”!"


Mate who's mother is an agent was telling me of 3 places that have sold lately for half what they did two years ago,not sure if they were going woohoo as they just lost between 100-300k.

The US had been going down and had been for a while while we were still going up,they are still going down,we lag behind and have only been going down for two odd years.

Each to there own but no rush for me,sit on hands watch and wait,more to go yet.

Cheers
Miner

[outspoken]

If you are on a fixed rate with Westpac, National, ANZ then you only have tomorrow to act.

If you don't break tomorrow, then after the OCR drops you will pretty much lose out.

The reason is: The above mentioned banks charge the difference between the rate that you are on now and THE WHOLESALE RATE that they get x the loan amount x the time left on the loan.
Therefore when the OCR drops Thursday, your break costs get higher.

This is obviously only an issue IF long term retail rates are going to get lower (almost certain) and you have a fair amount of time left on your fixed rate, And you are on a fixed rate of around 9%.

The other banks such as ASB BNZ Kiwi charge the difference between the rate you're on and the retail rate they offer at the time.

IMO, the first mentioned banks are gouging, as they will still borrow at OCR and lend at retail. If it was me personally experiencing this I would lodge an official complaint with the banking ombudsman.

Not sure if this has been discussed, but in case it hasn't Heads up Guys & Gals

[minimoke]

Mate who's mother is an agent was telling me of 3 places that have sold lately for half what they did two years ago,not sure if they were going woohoo as they just lost between 100-300k.

Well, what can you say. Market peaked in Nov 07 (only a year ago) with a mean value of $352,000. This suggests to me that when they were buyers they paid way over the odds and that they are now severely distressed sellers. Or the Real estate agent is telling porkies. I don’t think anyone (not even Bernard Hickey – the biggest doomsayer around at the moment) is saying the market has dropped well over 50% (yet). Who knows – the agents sales data will feed into the November stats and we’ll see if this is part of an overall trend. Perhaps its a measure of your mates mums competence – or she is doing one of those dodgy deals where the agent buys low and flicks off at market rates.

[upside_umop]

Except over the past three months to October, we’ve seen figures which show there are increasing numbers of sales; the time on market is reducing and the median price appears to have bottomed out and is on the slight increase. Too early to suggest a trend, and some of this may be seasonal, but it does indicate no rapid bottoming out of the market.

Except last three months prices have fallen and peoples expectations of future prices are for them to continue to fall. So yes your right, too early to suggest a turn around in trend! I will go with further falls..


Add to this reduced interest rates and improved housing affordability there to stoke demand, summer encouraging buyers to the market and school zone / job transfers over the new year may all lead to higher sales values.

Add to this 60-70% of overseas debt being rolled over in the next 4-6 months which banks rely on for 50% of their funding combined with a 'frozen' credit market and you will see interest rates rapidly stop falling.

Summer stoking demand? How about worries of and increased unemployment stoking fears of not being able to maintain a mortgage. How about extremely low net migration, how about lower costs of materials and downward pressure on construction costs....the list goes on.

Check the RBNZ statements for their view on construction costs...the flow on effects from commodity crash will occur its just a matter of time.


Not a good place for the first time buyer.

If you look at SC and my profile you will see we have time on our side. I'm looking for entry between 1 and 3 years away...depending on what the outlook is at the time, but at the moment 1-3 years seems safe to plan around. Because I'm a student it wouldn't be prudent to put myself into a situation of buying house with no fixed income! We haven't got 10% yields like historically, but that may be coming back for certain properties with a few value adding activities. So yes, not a good place right now for first home buyers, maybe in 1-3 years it will look much better...when prices drop - which they will do.


Since Shrewd Crude is looking a few years out it might be worth pointing out that the market is not a lot different to where it was two years ago. Back in Jan 07 when he first posted the median price was $327,000, at Oct 08 its $335,000, He would be a lot better off now than then as he still has increased value in his property, he would have paid two years worth of principal off (not much – but it helps) and his interest rates will have dropped a third giving him a pile of extra cash in his hand. Instead he’s lost 50% in the share market, now needs a bigger deposit and he has to find more cash to pay a Valuer.

Thats rubbish. Why would you wish yourself to have bought one of the most illiquid assets with what we know today of the financial crisis. If you want to offload that asset (house) quickly for personal reasons you would be stuffed. You would lose big time. Those figures are skewed, as you know. House sales have declined massively, being down over 50% while higher priced sales have faired better, thus the median hasn't dropped to the same extent as whats being shown...

Even going by your logic, the average house price was $327,000, you would have locked in at a rate of 8%, you would have paid $5000 for rates, you would have only been getting a 4% return if you rented out your other rooms, you would essentially be cash flow negative over the last 2 years to the tune of $31000, and thats excluding any repairs/maintainance and value adding activities you may have performed to get it to where you want.

And thats if, and only if you rent your rooms out...you may not get occupants, you may get shafted, you may only guess what might happen in your own home. But then it wouldnt be your own home would it? It would be just like having a flat, and you wouldn't quite have all those 'intangible benefits' of owning your own home that you talk about if you rent it out to make ends meet...and you would ask yourself 'why didn't I just continue paying $80 a week for a room and saved myself over $20,000 rather than waste it when it was so obvious I could enter at a cheaper price and better time...'

I think you'll also find that SC has doubled his money on the market from 2006 till today, even after the events of this year. So...he's really $30,000 better off and has luxury of picking when its ripe...because house prices will get riper! Even if they stand still for 2 years, inflation will eat away at it somewhat.


Two years ago is when first time buyers should have been saying “woo hoo”!

So given that what I've said...I'm still saying 'woo hoo' as I know I've got a competitive advantage against other first home buyers and can time my entry when its right for me...which coincidently will be around the bottom of the market! 'woo hoo' I say again!

[outspoken]

I am seeing 10-15% yields in the market on a daily basis now. No doubt about the fact that prices have dropped in certain areas but why buy a 10% yield when it may have further to fall and tennants may not have jobs?

The deflationary spiral?

[minimoke]

If you are on a fixed rate with Westpac, National, ANZ then you only have tomorrow to act.

If you don't break tomorrow, then after the OCR drops you will pretty much lose out.


Interesting post – expect NZ banks are net offshore borrowers and subject to foreign interest rates. The OCR will influence interest paid in NZ based overnight settlement accounts.
Some of us on fixed rates just sit back and let all this kerfuffle float over us – that’s part of the deal with being on a fixed rate.

[outspoken]

Interesting post – expect NZ banks are net offshore borrowers and subject to foreign interest rates. The OCR will influence interest paid in NZ based overnight settlement accounts.
Some of us on fixed rates just sit back and let all this kerfuffle float over us – that’s part of the deal with being on a fixed rate.

Yes, of course, I should have said. For those whose cashflow is good and are not overly highly geared, you're right.

For struggling investors and over leveraged 1st home buyers it's a different story. Strategies like I've posted may make a difference.

As for being offshore borrowers, not so much at the moment. Banks are flush with cash due to the flight to TD's and Govt Guarantees. What they are doing is maintaining the margin & fees to recapatalise the pounding they take from settling offshore debt.

[miner]

Well, what can you say. Market peaked in Nov 07 (only a year ago) with a mean value of $352,000. This suggests to me that when they were buyers they paid way over the odds and that they are now severely distressed sellers. Or the Real estate agent is telling porkies. I don’t think anyone (not even Bernard Hickey – the biggest doomsayer around at the moment) is saying the market has dropped well over 50% (yet). Who knows – the agents sales data will feed into the November stats and we’ll see if this is part of an overall trend. Perhaps its a measure of your mates mums competence – or she is doing one of those dodgy deals where the agent buys low and flicks off at market rates.

No Mini they just bought at or near the top of the bubble(like you have just said people should have been woohooing about) and are now paying the price.

As for those property's I knew it already as I keep and date(as the cunning buggers don't) all the realties rags,so I can look back and see what has been bought-sold and at what price(asking that is),or what is just dropping and not selling.

One of the above sold for 350k couple of years back,just went to auction,highest bid was 150k.

Had a wee laugh the other day as one of them has started putting "listed at" on the few they have sold,but then we all no that means zip ay ?,as what you ask and what you get are often two different things especially at the moment,I read it as where not selling Fall maybe this will suck a few buyers in.

As say each to there own,but I have a VERY long list of property's that have dropped substantially in price in the last few years, you usually just end up with cut bleeding hands when you try to catch falling knifes.

Cheers
Miner

[upside_umop]

As for being offshore borrowers, not so much at the moment. Banks are flush with cash due to the flight to TD's and Govt Guarantees. What they are doing is maintaining the margin & fees to recapatalise the pounding they take from settling offshore debt.

No...the flight has been to finance companies as they are now essentially risk free. The Govt Guarantees have not added any extra funds to the market, only confidence, and infact probably harmed banks more, but only minutely as the flight has been away from them to Finance Companies paying higher rates. Overseas debt still remains. We have run current account deficits for the last umpteen years and have one of the highest amounts of public debt of GDP per capita in the world. That debt has to be financed from somewhere right? Where did you hear that banks have closed their overseas positions?

That's where the margin has come from over these fine, fine years for borrowing. Margins were high from low cost overseas debt. Margins will now be squeezed...I haven't looked at banks balance sheets but I would be guessing they would have had some sort of interest rate swaps arranged to hedge against the 'poundings' that have taken place. That is why the squeeze will be on when this funding rolls over...

[Crypto Crude]

wheres mackdunk gone? wheres joeking?
its just Minimoke holding the fort up now...;)

Hey mini... Id reply but Im

1)tired of being warn down, when the truth is different

2)sick of saying the same thing over and over.... so instead I will quietly agree with others

3)sick of being told we cant get mortgages when we can... we are not dumb so dont treat us as if we are...

4) Im sick of us being told (by the king pins) "to find reasons to invest, to not find excuses"
And now being told the exact opposite ...ie..."here are reasons why you can not invest"... (big change in what buffs recommended to us early on on this thead)..

5) im sick of us being right, and others being wrong

6) im sick of others not admitting their wrong calls, and recommendations to first homebuyers....

7)im sick of interest rate cuts after cuts after cuts (and cuts expected into 2009)...
and fixed terms still saying they are right and we are wrong...

7) And most importantly, im sick of seeing house prices fall and others telling me that it is not the case...

what am im learning?... absolutely nothing....
okokok.... im learning how to argue;)...

If you are a first homebuyer, then please do not listen to long term house investors because their view is biased and blurred because of their
historical performance... For us newbies, entry is critical... All the factors around entry price are critical... interest rates are critical...
timing is critical...

The only time to invest is when prices are rising...

This is what Technical analysis experts have told us for years,
why the change all of a sudden?

Im out... I wont return until I have an update on my position as to
when first homebuyers should make a purchase...
see you all in 2009 when I readdress entry point into housing...
Im now no longer here to argue with others... I am here to support my best view on entry into housing for a first homebuyer...

lastly, It is time for buffs to step up and tell us that they were wrong...
Dont wait until 2010 to tell us where you went wrong...
tell us now...
It only gets deeper as time passes... save yourself now and take our side because we wont be wrong...
it gets deeper on Thursday OCR decision...

Im out of here...
Peace out...
whats the point any more?

Thank you... peace out...
:cool:
.^sc

[outspoken]

Where did you hear that banks have closed their overseas positions?

I haven't. I bow to your superior knowledge.

The point still remains, banks still have cash to lend & what finance companies are left in NZ that YOU would put your money in?

Are you also implying retail rates won't go lower towards middle of next year?

I understand if you are, just interested in your opinion

[upside_umop]

I haven't. I bow to your superior knowledge.

The point still remains, banks still have cash to lend & what finance companies are left in NZ that YOU would put your money in?

Are you also implying retail rates won't go lower towards middle of next year?

I understand if you are, just interested in your opinion

Banks do indeed still have money to lend...its just getting a lot harder for people to get their hands on it! :D

I would invest in any finance company that has the G.G. in place on the funds...its essentially risk free, right? So thats FPA finance, CBS, UDC etc any of those to me are fine..I prefer to have my money in more liquid places ie On call.

I think rates will go lower, yes, but not to the extent that everyone thinks. They don't follow the OCR % drop for % drop.

In the USA, the average 1 year ARM is 5.99% whereas the FED target rate is only 1%....The OCR is our equivalent of the FED target rate. So it is entirely possible that mortgage rates might not decrease as some might think, it all depends on how deep a 'freeze' will take place here in NZ. Either way..things will still get worse for housing in NZ.

[outspoken]

Either way..things will still get worse for housing in NZ.

I agree, I went to a conference last week where an AMP Capital Fund manager gave a presentation showing that US house prices needed to drop between 65-75% in some locations to return to the long term trend. He showed that some places in NZ had to drop 30-35% which I related to Bernard Hickeys predictions earlier in the year. Even Bernard has softened on that stance but the fact remains it's a falling knife situation.

But I guess you'd agree, it's not ALL about housing right? Right now and the foreseeable future it's about energy and sustainability?

I understand the retail rate doesn't follow % for % drop in OCR that's how the banks will recapitalise after the budgeted losses (writeoffs) they "leak" to the public. But if they didn't write them off, instead sold them for cents on the $ they might not need the socialist bail outs us taxpayers give them?

Can't find my link sorry, but $30 Trillion is what has been wiped off World Financial markets to date! Scary!

[miner]

The farmer has ten cows in a paddock,there is lots of grass in the paddock so they pig out grow fat and multiply,choice goes the farmer more cows,but then they start to run out of grass so the farmer has to buy in hay,choice go the cows,they multiply some more.

All is going well despite that there is very little if any grass left in the paddock as the farmer can afford the hay and the cows are multiplying until one day the farmer gets a visit from his bank manager who informs him that he has no money left for hay.

All not so good as the farmer now has a heap of cows dependant on hay that he can no longer buy,so his cows start dying and by years end they have gone from 100 back to less than what they started at.

Getting better as there are now only five skinny cows and the grass has a chance to grow again so they start to put on weight again and multiply,the farmer thinks choice.............

ONLY a few of OUR cows have died and there are ALLOT more to go before the grass starts to grow again.

Hope you liked your bedtime story,night.

Cheers
Miner

[minimoke]

Except last three months prices have fallen and peoples expectations of future prices are for them to continue to fall. So yes your right, too early to suggest a turn around in trend! I will go with further falls..

They have only fallen from a high of a year ago – they are the same rates as two years ago. We all should know that property , like everything else is cyclical. And its a long term thing, unlike interest rates which have economist getting all excited about how many basis points it will be this time around.

This is an own-your own home thread – so I’m thinking in context of your own home – not the apartments bought off the plans nor the flash lakeside holiday home or the spec built in the new subdivision. I appreciate its hard to make comparrisoign in such a diverse market – but the first home owners need to look at their situation and not be tainted by the speculators.

If you bought a year ago and have to sell now (without reburying in the same market) you may well be licking a 4.5% wound. If you were speculating on an ever increasing market and trading on the ups – I have no sympathy at all – that’s what risk is all about. If you can’t bear the heat stay out. Nor do I have sympathy for first home buyers who were so highly leveraged that they now have to quit their property – **** happens and theres a lesson there about getting a decent deposit and not being sucked in by banks wanting to lend 110%. We stay in our homes an average of something like seven years – so stick it out. If you are having to off load your house in unforeseen circumstance hopefully you will rebuy in the same market. If the circumstance were forseen – like a redundancy in an sunset industry – well whose fault is that. Bad call, learn from it and move on.

I do have some sympathy for those that have bought on the basis of the hype created by Cullen and Labour and who were not very financially literate. It didn’t help having a government extolling the virtues of your own home – and you will see in previous posts my criticisms of a government pushing people in this direction. There are pros and cons associated with owning your own home. Jeez its the biggest purchase a person will make – you’d think they would give it some decent thoughtand not be sucked in by the governemnt.

[minimoke]

The farmer has ten cows in a paddockr
Um – miner. I think the farmer would run an electric fence and limit the feed – and if he got desperate he’d keep the bull out of the paddock! He’d sell the fat cows to the mug who thinks dairying is the way to go – and make heaps on that sale. Buying feed is just a natural part of farming – if you got cows you just know you are going to have to buy some in at some stage – thats life!

[minimoke]

I think rates will go lower, yes, but not to the extent that everyone thinks. They don't follow the OCR % drop for % drop.

And some banks may already have lowered their rates in anticipation of the drop but t step up the competition. Kiwibank is less than 7% now.

[miner]

Um – miner. I think the farmer would run an electric fence and limit the feed – and if he got desperate he’d keep the bull out of the paddock! He’d sell the fat cows to the mug who thinks dairying is the way to go – and make heaps on that sale. Buying feed is just a natural part of farming – if you got cows you just know you are going to have to buy some in at some stage – thats life!

Maybe I should have used an analogy of pigs at the trough and then you might have got it ?,but then I suppose that's why you are talking the way you are,leave you to it,good luck.

Cheers
Miner

[upside_umop]

And some banks may already have lowered their rates in anticipation of the drop but t step up the competition. Kiwibank is less than 7% now.

This is nothing new, its all about expectations and the forward yield curve.

What I was saying was, if the OCR gets to 0% you wouldnt neccersarily see Kiwibanks rates at 0.75%.

[minimoke]

... a conference last week where an AMP Capital Fund manager gave a presentation showing that US house prices needed to drop between 65-75% in some locations to return to the long term trend. He showed that some places in NZ had to drop 30-35% which I related to Bernard Hickeys predictions earlier in the year.
Does anyone else think its strange how we are comparing the NZ market with the US market (which is apples and oranges anyway) but we didn’t hear a peep from these “experts” on how big our gains would be here in NZ on the back of the rapidly rising US market?

These experts gain market / public credibility from spouting a message that everyone wants to hear. We want to hear about dropping markets in the same way we want to know our grand kids have a very dire life because of global warming and a few people died in a plane crash. Negative news is fantastic media fodder and these “expert” will dress whatever they can up to get in front of people. Bernard Hickey for example is a career journalist – his job is to create a story in such a way that sells his papers (or drives people to his website) He spent most of his time outside New Zealand and his main interests were in digital media. And now he’s the property and interest rate guru whose got slots on radio and TV. Go figure!