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

minimoke

01-10-2009, 03:32 PM

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

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

Kees

01-10-2009, 04:57 PM

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

wns

01-10-2009, 07:21 PM

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

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

Reserve Bank warns of housing market bubble risk

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

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

minimoke

02-10-2009, 08:31 AM

Ptolemy

02-10-2009, 01:59 PM

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

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

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

We'll see.

minimoke

02-10-2009, 03:50 PM

[quote=Dr_Who;275618]A

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

loofa

02-10-2009, 08:52 PM

minimoke

03-10-2009, 10:06 AM

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

Dr_Who

04-10-2009, 05:47 PM

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

101 economics

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

fungus pudding

04-10-2009, 08:03 PM

101 economics

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

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

devito

05-10-2009, 12:09 PM

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

George

05-10-2009, 12:38 PM

Dr_Who

05-10-2009, 02:06 PM

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

Jay

05-10-2009, 04:22 PM

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

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

All auctions with more than 2 bidders

yes these are in the $800K + category

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

STRAT

06-10-2009, 09:01 AM

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

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

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

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

The GrandMaster

06-10-2009, 09:22 AM

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

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

Dr_Who

06-10-2009, 12:40 PM

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

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

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

Dreamers should go live on Fantasy Island.

minimoke

18-01-2010, 11:31 AM

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

Your original figure of $330k ...

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

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

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

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

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

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

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

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

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

loofa

19-01-2010, 07:33 PM

Three year anniversary shrewdy.

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

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

fungus pudding

19-01-2010, 08:20 PM

Three year anniversary shrewdy.

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

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

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

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

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

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

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

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

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

fungus pudding

19-01-2010, 09:03 PM

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

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

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

minimoke

20-01-2010, 08:32 AM

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

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

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

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

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

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

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

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

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

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

minimoke

20-01-2010, 08:50 AM

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

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

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

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

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

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

fungus pudding

20-01-2010, 09:15 AM

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

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

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

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

duncan macgregor

20-01-2010, 09:48 AM

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

fungus pudding

20-01-2010, 09:55 AM

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

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

minimoke

20-01-2010, 10:20 AM

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

fungus pudding

20-01-2010, 10:31 AM

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

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

Dr_Who

20-01-2010, 03:08 PM

Very well said Mcdunk.

Ptolemy

21-01-2010, 11:59 AM

Very well said Mcdunk.

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

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

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

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

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

fungus pudding

21-01-2010, 12:35 PM

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

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

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

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

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

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

duncan macgregor

21-01-2010, 01:28 PM

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

fungus pudding

21-01-2010, 01:43 PM

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

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

Arbitrage

21-01-2010, 02:12 PM

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

Dr_Who

21-01-2010, 02:40 PM

It comes down to demand and supply.

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

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

The GrandMaster

21-01-2010, 08:34 PM

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

I can assure you I would not :)

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

I can assure you I have :)

duncan macgregor

22-01-2010, 09:17 AM

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

Ptolemy

22-01-2010, 09:29 AM

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

Here let me help.

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

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

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

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

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

fungus pudding

22-01-2010, 09:54 AM

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

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

minimoke

22-01-2010, 12:41 PM

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

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

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

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

The GrandMaster

22-01-2010, 06:59 PM

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

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

Arbitrage

27-01-2010, 08:59 AM

Dr_Who

27-01-2010, 09:39 AM

Ptolemy

27-01-2010, 10:43 AM

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

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

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

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

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

Dr_Who

27-01-2010, 02:45 PM

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

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

AMR

27-01-2010, 07:53 PM

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

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

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

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

Arbitrage

28-01-2010, 08:29 AM

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

Ptolemy

28-01-2010, 10:36 AM

Arbitrage

28-01-2010, 11:23 AM

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

POSSUM THE CAT

28-01-2010, 01:50 PM

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

Ptolemy

28-01-2010, 02:32 PM

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

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

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

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

fungus pudding

28-01-2010, 03:53 PM

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

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

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

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

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

Nope - it sure doesn't.

Arbitrage

29-01-2010, 08:27 AM

fungus pudding

29-01-2010, 08:52 AM

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

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

Arbitrage

29-01-2010, 02:59 PM

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

AMR

30-01-2010, 10:43 AM

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

Dr_Who

30-01-2010, 06:21 PM

You doomsayers may have your day.

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

JBmurc

30-01-2010, 09:10 PM

You doomsayers may have your day.

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

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

coming inflation worrys?

AMR

31-01-2010, 09:20 PM

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

Dr_Who

01-02-2010, 09:14 AM

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

It is a catch 22 situation.

Finding a balance is the key.

drew

01-02-2010, 12:14 PM

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

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

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

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

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

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

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

duncan macgregor

01-02-2010, 02:14 PM

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

George

01-02-2010, 03:39 PM

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

fungus pudding

01-02-2010, 08:16 PM

From New York Times

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

beacon

02-02-2010, 08:15 AM

From New York Times

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

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

fungus pudding

02-02-2010, 03:20 PM

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

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

Arbitrage

02-02-2010, 03:37 PM

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

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

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

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

Ptolemy

03-02-2010, 03:48 PM

minimoke

03-02-2010, 04:04 PM

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

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

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

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

Dr_Who

03-02-2010, 04:11 PM

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

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

Ptolemy

03-02-2010, 04:26 PM

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

And the relevance would be?

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

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

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

fungus pudding

03-02-2010, 04:37 PM

minimoke

03-02-2010, 04:51 PM

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

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

minimoke

03-02-2010, 05:02 PM

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

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

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

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

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

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

neopoleII

03-02-2010, 06:52 PM

beacon

09-02-2010, 09:05 PM

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

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

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

fungus pudding

09-02-2010, 09:06 PM

The GrandMaster

09-02-2010, 10:06 PM

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

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

duncan macgregor

10-02-2010, 10:07 AM

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

fungus pudding

10-02-2010, 10:45 AM

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

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

duncan macgregor

10-02-2010, 11:14 AM

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

Dr_Who

10-02-2010, 11:55 AM

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

peat

17-02-2010, 06:45 AM

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

one of the interesting things in that article is :

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

Dr_Who

17-02-2010, 08:38 AM

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

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

fungus pudding

17-02-2010, 09:30 AM

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

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

beacon

17-02-2010, 02:35 PM

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

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

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

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

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

beacon

24-02-2010, 12:08 PM

fungus pudding

24-02-2010, 01:19 PM

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

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

minimoke

24-02-2010, 02:28 PM

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

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

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

beacon

25-02-2010, 09:28 AM

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

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

beacon

25-02-2010, 09:54 AM

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

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

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

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

beacon

25-02-2010, 10:03 AM

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

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

fungus pudding

25-02-2010, 10:14 AM

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

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

beacon

25-02-2010, 10:34 AM

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

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

fungus pudding

25-02-2010, 10:58 AM

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

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

minimoke

25-02-2010, 02:24 PM

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

beacon

25-02-2010, 08:57 PM

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

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

minimoke

26-02-2010, 07:46 AM

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

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

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

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

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

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

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

beacon

26-02-2010, 11:48 AM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

minimoke

26-02-2010, 01:06 PM

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

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

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

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

beacon

26-02-2010, 04:28 PM

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

beacon

01-03-2010, 09:20 AM

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

Other factors emerging to drain economy's blood.

minimoke

01-03-2010, 12:54 PM

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

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

Skol

08-03-2010, 09:43 AM

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

Dr_Who

08-03-2010, 11:50 AM

I'm afraid I don't get it.

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

mikeo

08-03-2010, 05:12 PM

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

minimoke

08-03-2010, 06:28 PM

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

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

fungus pudding

08-03-2010, 07:02 PM

Skol

09-03-2010, 07:48 AM

duncan macgregor

09-03-2010, 08:14 AM

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

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

Skol

09-03-2010, 08:32 AM

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

minimoke

09-03-2010, 09:14 AM

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

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

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

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

fungus pudding

09-03-2010, 09:35 AM

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

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

09-03-2010, 11:22 AM

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

neopoleII

09-03-2010, 07:08 PM

quote

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

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

waiting for the pop

The GrandMaster

10-03-2010, 10:57 AM

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

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

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

duncan macgregor

10-03-2010, 05:06 PM

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

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

Skol

10-03-2010, 08:15 PM

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

Arbitrage

11-03-2010, 09:29 AM

fungus pudding

11-03-2010, 09:47 AM

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

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

Skol

11-03-2010, 05:16 PM

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

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

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

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

fungus pudding

11-03-2010, 05:30 PM

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

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

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

Arbitrage

12-03-2010, 11:31 AM

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

fungus pudding

12-03-2010, 11:51 AM

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

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

Skol

12-03-2010, 12:15 PM

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

Skol

12-03-2010, 12:16 PM

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

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

Skol

13-03-2010, 12:12 PM

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

minimoke

15-03-2010, 04:35 PM

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

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

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

STRAT

17-03-2010, 07:28 AM

fungus pudding

17-03-2010, 07:49 AM

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

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

duncan macgregor

17-03-2010, 08:35 AM

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

fungus pudding

17-03-2010, 09:14 AM

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

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

duncan macgregor

17-03-2010, 10:36 AM

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

Arbitrage

17-03-2010, 11:12 AM

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

beacon

17-03-2010, 04:05 PM

fungus pudding

17-03-2010, 05:09 PM

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

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

17-03-2010, 05:16 PM

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

Skol

17-03-2010, 07:37 PM

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

duncan macgregor

17-03-2010, 09:25 PM

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

fungus pudding

17-03-2010, 10:54 PM

Arbitrage

18-03-2010, 09:22 AM

duncan macgregor

18-03-2010, 09:46 AM

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

fungus pudding

18-03-2010, 10:08 AM

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

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

Jay

18-03-2010, 01:07 PM

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

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

Definitely good for the renovators!

beacon

18-03-2010, 06:26 PM

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

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

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

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

beacon

19-03-2010, 01:58 PM

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

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

Dunne wishes to press on regardless...

Skol

28-03-2010, 04:05 PM

My thoughts exactly.

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

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

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

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

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

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

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

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

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

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

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

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

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

peat

29-03-2010, 11:09 AM

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

Arbitrage

29-03-2010, 09:34 PM

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

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

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

JBmurc

29-03-2010, 11:22 PM

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

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

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

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

AMR

30-03-2010, 10:58 AM

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

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

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

Arbitrage

30-03-2010, 02:05 PM

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

minimoke

30-03-2010, 03:41 PM

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

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

Arbitrage

31-03-2010, 08:55 AM

Exactly right MM.

beacon

31-03-2010, 12:04 PM

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

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

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

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

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

minimoke

31-03-2010, 01:20 PM

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

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

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

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

beacon

31-03-2010, 07:13 PM

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

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

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

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

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

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

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

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

Skol

31-03-2010, 07:33 PM

minimoke

01-04-2010, 12:31 PM

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

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

beacon

01-04-2010, 01:29 PM

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

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

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

upside_umop

13-02-2011, 01:01 PM

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

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

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

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

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

POSSUM THE CAT

13-02-2011, 02:52 PM

Pumice

14-02-2011, 08:15 AM

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

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

upside_umop

14-02-2011, 12:36 PM

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

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

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

Tok3n

20-03-2011, 09:40 AM

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

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

stanace

20-03-2011, 12:16 PM

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

bung5

05-09-2011, 12:55 PM

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

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

George

05-09-2011, 09:20 PM

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

Sideshow Bob

05-09-2011, 09:30 PM

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

bung5

06-09-2011, 03:13 PM

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

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

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

stanace

06-09-2011, 04:47 PM

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

bung5

06-09-2011, 05:10 PM

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

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

bung5

12-09-2011, 09:09 AM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

bung5

12-09-2011, 10:49 AM

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

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

bung5

12-09-2011, 11:43 AM

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

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

Just a quick google around the world.

bung5

12-09-2011, 11:48 AM

NZ house prices also stayed flat between 96 and 2001

bung5

12-09-2011, 02:00 PM

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

bung5

12-09-2011, 02:40 PM

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

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

George

12-09-2011, 09:04 PM

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

bung5

13-09-2011, 09:33 PM

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

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

George

14-09-2011, 06:55 AM

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

bung5

14-09-2011, 09:04 AM

POSSUM THE CAT

14-09-2011, 10:51 AM

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

fungus pudding

14-09-2011, 10:55 AM

George

14-09-2011, 03:57 PM

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

POSSUM THE CAT

14-09-2011, 07:40 PM

fungus pudding

15-09-2011, 09:12 AM

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

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

POSSUM THE CAT

15-09-2011, 10:55 AM

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

fungus pudding

15-09-2011, 01:12 PM

POSSUM THE CAT

15-09-2011, 01:56 PM

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

fungus pudding

15-09-2011, 03:50 PM

POSSUM THE CAT

15-09-2011, 07:18 PM

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

bung5

15-09-2011, 07:36 PM

George

15-09-2011, 07:51 PM

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

HIDDENGEM

15-10-2011, 06:03 PM

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

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

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

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

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

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

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

Thanks.

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

New Zealand property market 'over-valued'

Last updated 15:22 10/05/2011

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

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

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

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

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

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

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

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

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

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

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

POSSUM THE CAT

15-10-2011, 08:03 PM

HIDDENGEM you pays your money & takes your choice have a look at the 1991 property slump. Bought a nice house on the north shore of Auckland at what was owed onit plus a reduced land agents fee to allow the owners out without a debt burden. Paid $112000.00 rented it out for $250.00 per week so shop carefully

HIDDENGEM

16-10-2011, 10:17 PM

Thanks POSUM THE CAT

NeverQuestion

25-05-2016, 12:18 PM

Doubles in price every 10 years? ie about 7% per year

Thats a new one Duncan. It used to be 10% a year - ie doubles in price every 7 years.

Do you still reckon propert has doubled every 10 years from 1066 to 2006 and will do so from 2006 to 2056?

Year average house price
2006....400k
2016....800k
2026....1.6 m
2036....3.2 m
2046....6.4m
2056....12.8m

A house is considered expensive if it is 7 times the average wage.

What are the chances of the average wage being $229,000 (1.6m/7 = 229k) in 2026?

Pretty slim I'd say.

If house prices keep doubling every 10 years no one will be able to afford to buy them.

Looks like your preduction is spot on and even a little under the actualy amount now as far as Auckland is concerned :(

kelfy

09-08-2016, 04:41 PM

This is the first article of this thread which is written on 2007. I bought a unit at the end of 2006 which cost $300k. Now is year 2016 and the value of return is great. It wasn't ScReWeD at all.

New Zealand is at the beginning of a first homebuyers crisis...
lets assume NZ median house price is $330,000 .... and you pay a piddley deposit of $30,000
-also assume interest rates are 8%
-number of years to pay the loan off are 30 years
-loan amount is $300,000, after deposit is paid

you therefore get....
Year 1 2 3 4 5 6
Beginning principal bal 300,000 297,352 294,492 291,403 288,067 284,464
payment 26,648 26,648 26,648 26,648 26,648 26,648
interest component 24,000 23,788 23,559 23,312 23,045 22,757
principal component 2,648 2,860 3,089 3,336 3,603 3,891

-and so on, for 30 years
-in the first year you are paying $24,000 in interest only... wow... and only $2,648 is coming off the loan balance at the end of the first year...
-so, your house value has to increase 8% in the first year... (24,000/300000) just to break even and cancel out payment for interest only (8%)
-year 2 opening balance is year 1 beginning principal balance less principal component
and so on...
-so for 30 years you are paying $26,648 per year or $512 per week, every week.....
-total amount paid to the bank after 30 years is $799,440 ...[:0](26,648 * 30)
-the above example doesnot include the benefits of what you save in rent by having your own house

I have only ever been told to buy a house, by parents, friends, every single person I have gone to, to ask for advice has told me to buy a house... The housing success stories are all to common for people who are 5plus years older than me and beyond...

but yet, I look at the above loan amortization table... and cannot see a path...
I am 22, student, without a house (of course)... and cannot allow myself to be a 52yr old man, and have a house only... so I looked for another means... I spent two years just looking at shares, and the last 2 years playing high risk shares, with much success I add... I applied a simple strategy where I invested in high upside, low downside... trouble is finding a share with these characteristics... any way....
It is always a goal of mine to have a house... but It will have to be paid largely in cash...

Or I will need a combination of a few events happening...
-house price falls dramatically
-interest rates to drop, (not likely in the next year) but interest rates will drop in the medium term
-rental rates to increase dramatically, so house buying becomes more attractive
-wages to go up massively (yeah right)
-large govt incentives...

we are due for a housing fall... If you are a first time house buyer, dont be fooled into housing by others... let the numbers speak for themselves...the only way to make house buying attractive is large front end payment, or up weekly payments.up $500, yeah right...
any more than 15years spent to pay for a house is far toooooo long!...(for me)

at $500 per week for 6 weeks equals 3 thousand, a nice sized share parcel... we are going to be a generation of renting property, or inheritance... I want neither...

they say there are risks in buying a house... no theres not... theres no risk in doing what everyone else is doing, because at the end of the day everyone will be in the same boat... and either all better off, or all worse off... there aint no risk in that...
to get ahead in life you have to take risks....

I have heard that many property buffs are changing their views on apartments... I heard of apartments selling recently as low as 55k in auckland...
if you are pondering a first home, then all the best, wheather you buy a house or not, it will still be the largest decision you will ever have to make
Thank you for taking the time to reading the above...

ari

11-08-2016, 08:33 AM

With all the land being released by Govt, why not take the land issue out of new build equasion and Govt lease the land to new home owners.

G on

11-08-2016, 09:03 AM

Govt leasing would be modeled on maximising return on investment and would be like having a mortgage that would never end. Would only work if all land was owned by govt since Treaty where there was no other option, IMO. It would need a benevolent govt tho.

fungus pudding

11-08-2016, 09:10 AM

With all the land being released by Govt, why not take the land issue out of new build equation and Govt lease the land to new home owners.

No benefit unless land lease is less than interest on capital required to purchase. Wouldn't make sense for either lessee or lessor in current economic environment. Besides the prime lender, usually a bank, will often view leasehold tenure as a less attractive security than freehold.

Sgt Pepper

14-08-2016, 02:25 PM

No benefit unless land lease is less than interest on capital required to purchase. Wouldn't make sense for either lessee or lessor in current economic environment. Besides the prime lender, usually a bank, will often view leasehold tenure as a less attractive security than freehold.

Just thinking about the comparison to the most febrile property market in the world London. Significant chunks of prime residential real estate is and always has been leasehold. Doesn't seem to stop Barclays, HSBC from advancing mortgage finance to eager buyers.

Bjauck

19-08-2016, 03:14 PM

Just thinking about the comparison to the most febrile property market in the world London. Significant chunks of prime residential real estate is and always has been leasehold. Doesn't seem to stop Barclays, HSBC from advancing mortgage finance to eager buyers. DYOR but I think it depends on the terms of the lease and the differences between English and NZ law - frequecy of ground rent reviews, how they are calculated etc? I think some ground rents are at near peppercorn rates and other terms enable them to be treated a though the land were freehold.

I think St Johns and Cornwall Park ground rents in Auckland range from 5-7% of the land values fixed for about 7 to 21 years. So they are expensive, although less so towards the end of the period (depending on the intervening land price inflation.)

JBmurc

03-09-2016, 06:25 PM

NZ DEBT BINGE

http://www.stuff.co.nz/business/opinion-analysis/83855592/shamubeel-eaqub-debt-binge-now-bigger-than-before-the-global-finance-crisis

Bjauck

04-09-2016, 08:39 AM

It's not only first home buyers who are being pushed out of the market now. It seems that owner occupiers who are wanting to upgrade/move into a bigger property are being muscled out of the Auckland (& elsewhere?) market by investors.

John key recently said that Akl first home buyers should settle for buying an apartment (as he said they do in Sydney & Melbourne) and then upgrade later into bigger homes when they have a family etc. Well, it looks increasingly like investor demand is pricing that "plan" out of reach of many, so families will increasingly remain in flats and rental accommodation. Time for further action to address unaffordability for NZ residents and owner occupiers Mr Prime Minister?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11703301

Aaron

04-09-2016, 10:04 AM

NZ DEBT BINGE

http://www.stuff.co.nz/business/opinion-analysis/83855592/shamubeel-eaqub-debt-binge-now-bigger-than-before-the-global-finance-crisis
I wonder why he doesn't think inflation will eventuate to help out the borrowers?

JBmurc

04-09-2016, 11:58 PM

I can't see how we will get much inflation anytime soon outside the ongoing misallocation of cheap/foreign funds into the safe haven of property chasing the ongoing capital gain.... advances in technology for energy / food .... influx of cheap labour to western nations ..negative rates spreading ,,,,the whole monetary system is broken..

Thanks to corrupt Governments across the world have given the power to create money to the private corporations that we know as banks. Today, over 97% of all of the money used by people and businesses is created by banks when they make loans....as we know the most important Central Bank FED RESERVE is owned by the biggest international banks

And as we seen from the GFC even when the banks lose they win ....(thanks Gov's)

And as we see from the biggest markets ....they demand low rates now ...higher rates even just 1% would crash the DOW ,S&P and force the FED to turn tail .......

Its Broken ...needs reset .....a fix ....otherwise IMHO we go down the same road as JAPAN but on a Global scale and after a mother of all property Spikes -and nasty Crash end up in a Zombie nil growth high DEBT to GDP

And years from now see negative rates as quite normal .....along with very tough restrictions on lending...

basically Communism of the masses

NeverQuestion

13-10-2016, 04:12 PM

NeverQuestion

18-10-2016, 02:22 PM

Perhaps I should just give up on the first home dream

By the time I have the funds its all over

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11728241

http://www.nzherald.co.nz/monetary-policy/news/article.cfm?c_id=201&objectid=11723911

:t_down:

Given the Economic Climate and the fact that rates have slid so much I'm thinking this is the new norm

http://www.bloomberg.com/news/articles/2016-10-17/what-bubble-china-s-home-prices-driven-by-demand-investment-mismatch

Which means the crash that we are all expecting (Those without property) wont come and investors will keep reissuing capital for more and more properties

Lewylewylewy

23-10-2016, 10:54 PM

I was chatting to someone who works in housing policy, they were saying that they believe prices may keep going up for a few more years in NZ.

JBmurc

24-10-2016, 04:02 PM

I was chatting to someone who works in housing policy, they were saying that they believe prices may keep going up for a few more years in NZ.

Only if the banks lend the money are from what I've heard the banks here are getting much tougher on leverage to income ...think at best we will have low growth for the next couple of years thanks to lower lending rates ...worst case GFC2 ...I'm sure we will see many home owners / investment properties owners finding it much harder to re-finance loans ....

3-4 years ago I had a mid sized loan with ASB during that time I also had another smaller loan in the Sharemarket ...now at the time I had taken a good hit on the share portfolio(and my personal income was down 10% etc)

Now I was looking to re-finance with ASB at the better rate + cash etc ...but to my surprise they didn't want to give me the new loan pretty much bye bye go elsewhere .... which I did ...now the property I owned was only 50% LVR so I was shocked ... but at the time without really pushing it (prob paying a higher rate etc) I had to go elsewhere...

Now how many with much higher LVR will be in the same place come re-finance time ... could well see 2nd tier lending at much higher rates fill the unwanted higher risk market .....

stoploss

24-10-2016, 04:17 PM

Only if the banks lend the money are from what I've heard the banks here are getting much tougher on leverage to income ...think at best we will have low growth for the next couple of years thanks to lower lending rates ...worst case GFC2 ...I'm sure we will see many home owners / investment properties owners finding it much harder to re-finance loans ....

3-4 years ago I had a mid sized loan with ASB during that time I also had another smaller loan in the Sharemarket ...now at the time I had taken a good hit on the share portfolio(and my personal income was down 10% etc)

Now I was looking to re-finance with ASB at the better rate + cash etc ...but to my surprise they didn't want to give me the new loan pretty much bye bye go elsewhere .... which I did ...now the property I owned was only 50% LVR so I was shocked ... but at the time without really pushing it (prob paying a higher rate etc) I had to go elsewhere...

Now how many with much higher LVR will be in the same place come re-finance time ... could well see 2nd tier lending at much higher rates fill the unwanted higher risk market .....

Hi JB ,
could do , currently second tier lenders have been swamped ......
Seems everyone currently wants to become a property investor .Anyone looking at moving desperately trying to hold onto current home and buy another .
Depending upon the lender this has become a lot more difficult if you take the 40 % deposit for investment property and 20 % for the new .Note they can do 10 % of their lending below the 20 % but can pick and choose . ( There are a lot of variables around this between lenders)
So currently things are a lot tighter , especially if you don't have 20 % deposit .
Also due to the responsible lending code , the serviceability criteria has tightened up a lot .
This is before the potential income to debt criteria that may come in ..........

NeverQuestion

28-10-2016, 09:42 AM

Hi JB ,
could do , currently second tier lenders have been swamped ......
Seems everyone currently wants to become a property investor .Anyone looking at moving desperately trying to hold onto current home and buy another .
Depending upon the lender this has become a lot more difficult if you take the 40 % deposit for investment property and 20 % for the new .Note they can do 10 % of their lending below the 20 % but can pick and choose . ( There are a lot of variables around this between lenders)
So currently things are a lot tighter , especially if you don't have 20 % deposit .
Also due to the responsible lending code , the serviceability criteria has tightened up a lot .
This is before the potential income to debt criteria that may come in ..........

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11737196

Love it!

Lewylewylewy

15-11-2016, 10:47 PM

NeverQuestion

18-11-2016, 03:50 PM

I've said it before, but about 40% of people who's name is on a deed of title, have their name on more than 1 title. Source: Land Information NZ's database. I work in an industry with access to the figures

When housing is the main investment in this country it is not hard to see why... Given the massive returns in the last few years you would be hard pressed to find a better investment.

The problem is that you now have a generation forced to borrow for higher education and facing the fallout of the GFC which has meant that high paying jobs and wage increases each year are no longer a thing.

I'm 29 and have seen only 3 wage increases in the last 7 years.. I work long hours and have clocked over 40 hours overtime this month alone!

But because of my Student loan the government takes a considerable percentage of my overtime and regular pay that never arrives in my bank account...

On top of that If I try to take a weeks pay in the hand then again a considerable percentage of that is immediately taken for my Student loan.

Easy to dismiss this with the "I remember the mortgage on my first house ..." .. How about start with 40K in debt and a housing market that forces you to pay $550,000 for your first house

Now start on 40K a year and have no support from your parents who also rent and struggling to make ends meet..

On top of that now throw in the huge threat of Interest rate hikes on a $550,000 mortgage you paid for a house falling apart.

This is what screwed means for the current generation (I'm not asking for a handout just a chance in my own country to own a home) .

"Oh but it has always been hard" whatever, go back 4 years and your see places in Auckland for 350 K.

No one cares about our generation and it will come back to bite them when we find our voice.... :t_down:

JBmurc

18-11-2016, 04:23 PM

When housing is the main investment in this country it is not hard to see why... Given the massive returns in the last few years you would be hard pressed to find a better investment.

The problem is that you now have a generation forced to borrow for higher education and facing the fallout of the GFC which has meant that high paying jobs and wage increases each year are no longer a thing.

I'm 29 and have seen only 3 wage increases in the last 7 years.. I work long hours and have clocked over 40 hours overtime this month alone!

But because of my Student loan the government takes a considerable percentage of my overtime and regular pay that never arrives in my bank account...

On top of that If I try to take a weeks pay in the hand then again a considerable percentage of that is immediately taken for my Student loan.

Easy to dismiss this with the "I remember the mortgage on my first house ..." .. How about start with 40K in debt and a housing market that forces you to pay $550,000 for your first house

Now start on 40K a year and have no support from your parents who also rent and struggling to make ends meet..

On top of that now throw in the huge threat of Interest rate hikes on a $550,000 mortgage you paid for a house falling apart.

This is what screwed means for the current generation (I'm not asking for a handout just a chance in my own country to own a home) .

"Oh but it has always been hard" whatever, go back 4 years and your see places in Auckland for 350 K.

No one cares about our generation and it will come back to bite them when we find our voice.... :t_down:

I Agree ...at 38 I've been lucky enough to have been able to buy property much cheaper when I was in my early 20's as I never got a Uni loan as I left school at 17 and started full time employment ....IMHO gave me a great headstart on mates that spent many years at Uni to come away with huge debts (my wife still has a small amount to go).... still I don't have the Qualifications so moving away from my hard labour job as I get older isn't going be as easy to get a good paying white collar job >>>

You can really see the divide going to spread from the richer families to the average-lower incomes struggling ...as large inheritances pass downwards to smaller families(than the past) .... I know of many very wealthy families with just one kid ....!!!

Bjauck

14-01-2017, 02:51 PM

JBmurc

14-01-2017, 03:32 PM

I see from the NZ Herald that NZ residential property value has hit One trillion dollars, whilst the NZ share market capitalisation is at $116 billion. I don't know how this compares to the countries with which we like to compare ourselves (Aus, UK Canada USA) but I suspect their sharemarkets are valued at a higher proportion of their residential housing. NZ residential housing is the go-to investment and in my opinion, the NZ government could do more to encourage financial and business share and equity investments. With the current trends, NZers will end up being a land of mostly tenants being employed by foreign owned businesses and living in houses owned by wealthy local and foreign landowners.

See http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11781028

Yes outside those employed in the property sector our love affair with local property looks problematic ....

-Huge debt to household income (the debt which is mostly held by foreign nationals , NZ very poor savers)

-low investment in new NZ businesses..... IPO's etc..

-Huge earthquake risks to our million dollar pads .....Again Insurance costs to foreign balance sheets (ongoing increase premiums)

Really when you look at NZ are so called Rock star economy is heavily biassed on other countries though TOURISM # 1
and Debt fueled property market ... we have is a low income economy + High living costs .. add in are aging population
+ muti year property bubble ....

thinking we will have some much tougher years ahead as a nation

fundamentally on the wrong road........ incomes Vs Debt

Aaron

12-04-2019, 08:29 AM

This is the closest thread I could find re Auckland House prices.
https://www.cnbc.com/2019/04/11/world-bank-president-david-malpass-says-china-has-too-much-debt.html

Good on the world bank for stating the blatantly obvious.

I wonder how much of the Chinese funny money pumped up Auckland house prices. Labour stopping foreigners buying houses in NZ was a good move imo.

Property experts in the papers prior to the ban were saying how little overseas buyers affect the market. Real estate agents aren't saying this anymore.

I think QE is more likely than QT so I don't see how debt will reduce unless something forces a change.

artemis

12-04-2019, 02:43 PM

The monthly analysis reports at the below link are useful. Auckland very different from much of the rest of the country. Data is asking prices, not actual, but based on high listing volumes, and include 'eyeballs'. They do a rental analysis as well.

https://property.trademe.co.nz/market-insights/

Crypto Crude

07-03-2020, 04:40 AM

Bjauck

07-03-2020, 08:35 AM

Update on the nz first homebuyers are screwed...
Well, how wrong was I about my predictions...!!
In saying that for myself I wouldn't have done anything different...for me I was never going to lock into a lifetime mortgage...not being locked into the mortgage trap has allowed me to do business and become self employed...
I'm actually looking to purchase my first house very soon...I'm in my mid 30s now and will be clearing that mortgage very fast...
:cool:
.^sc
Good luck with that SC. You must have joined Sharetrader at a very young age.

Buying a first house in today's market with so much uncertainty around takes cojones.

The latest Demographia survey places NZ as the most unaffordable house market (by quite a big margin) compared to the countries we like to compare ourselves with (Australia, Canada, USA, UK.)

So the NZGovt faces considerable pressure to increase development and investment settings to make our housing sufficient for the demand from a growing population and affordable

artemis

07-03-2020, 09:29 AM

....
So the NZGovt faces considerable pressure to increase development and investment settings to make our housing sufficient for the demand from a growing population and affordable

The public sector - central and local - could help by stepping back from onerous and expensive interventions. Like - rural / urban boundaries, ever increasing costs and compliance on rental owners, inconsistent and sometimes loopy rules both within and across local authorities and MBIE.

A while back Rodney Hide suggested a trial scheme within a tightly bounded area where people could build what they wanted and needed at their own risk. I doubt whether he expected it to actually happen but it could work.

And about affordable - half of all NZ sales in January were below $615,000. Some well below. All very well to say median (or average) price is unaffordable for those on median household income but nobody has a gun to their head to stop them buying below median.

And FHBs seem to be doing OK - Reserve Bank residential bank lending to FHBs is more than twice what it was 2 years ago.

SBQ

07-03-2020, 09:56 AM

Good luck with that SC. You must have joined Sharetrader at a very young age.

Buying a first house in today's market with so much uncertainty around takes cojones.

The latest Demographia survey places NZ as the most unaffordable house market (by quite a big margin) compared to the countries we like to compare ourselves with (Australia, Canada, USA, UK.)

So the NZGovt faces considerable pressure to increase development and investment settings to make our housing sufficient for the demand from a growing population and affordable

Shewd Crude is fortunate to be on the path for getting into a home. I myself didn't own my 1st home until I was around the same age. With interests rates going lower and lower (soon to be negative), there's all the incentive for people to own their 1st home.

I've mentioned before that the NZ gov't isn't serious about making houses affordable. It never has and never will while places like Canada has make homes more affordable (and at least addressed the issue). Perhaps it's due to the MMP election system we have that puts gov't in a no-win situation ; ie. the issue of CGT being squashed down by NZ 1st. Then you have the supply issue where local councils are not playing ball with Parliament. Crown land not being released into public hands (as local Iwi getting 1st pick - and lots of Iwi's are slow at development). We have the Christchurch council too slow at releasing land for development and Wellington says we're not going to give you transfer funding for the rebuilt ; then the council puts the burden on the rate payers ; last I hear Ecan wants rates to go from 8% to 13% rise for next year. Yes taxation is a key determinant - I mean what else would you expect??? You have an asset class in residential property that is pretty much goes exempt from any capital gains tax, while the NZ gov't pushes the low and middle class into Kiwi Saver, for which that asset class is taxed and much higher levels (ie FIF tax on years of paper negative returns). I know of no where else in the OECD that has such a huge disparity of taxation than NZ.

Bjauck

07-03-2020, 11:40 AM

Shewd Crude is fortunate to be on the path for getting into a home. I myself didn't own my 1st home until I was around the same age. With interests rates going lower and lower (soon to be negative), there's all the incentive for people to own their 1st home. ....
Sure negative rates will be great if you manage to keep your current amount of income all through the upcoming months of Corona Virus uncertainty. You just have to hope you are not in an industry bearing the brunt.

True, you will have to rely on the NZ government keeping on the same course of ensuring NZers investments remain mainly planted in inflating residential land values.

Bjauck

07-03-2020, 11:47 AM

The public sector - central and local - could help by stepping back from onerous and expensive interventions. Like - rural / urban boundaries, ever increasing costs and compliance on rental owners, inconsistent and sometimes loopy rules both within and across local authorities and MBIE.

A while back Rodney Hide suggested a trial scheme within a tightly bounded area where people could build what they wanted and needed at their own risk. I doubt whether he expected it to actually happen but it could work.

And about affordable - half of all NZ sales in January were below $615,000. Some well below. All very well to say median (or average) price is unaffordable for those on median household income but nobody has a gun to their head to stop them buying below median.

And FHBs seem to be doing OK - Reserve Bank residential bank lending to FHBs is more than twice what it was 2 years ago. How the goal posts have changed over the years in getting those necessary deposits! Now being able to afford a first deposit in your 30's is seen as doing well. It used to be in your early 20's.

fungus pudding

07-03-2020, 12:10 PM

How the goal posts have changed over the years in getting those necessary deposits! Now being able to afford a first deposit in your 30's is seen as doing well. It used to be in your early 20's.

Your comparing just the right front leg of a centipede with one of the other 99. I bought my first house in 1970, having just completed my apprenticeship - a full 5 years in those days, on nowhere near adult wages until being fully qualified. I had my full time job, and worked two part-time jobs as well. I managed to buy an old dump, but what a struggle. Borrowing a first and second mtge. through my solicitor, which was the only option, but I got there. Banks weren't an option then. Not many of my friends bought homes at that age. I'd never been out of the country - no young people had. Even if we wanted to, we weren't allowed to take any money beyond just enough to live on - very basically. Houses of that era had pathetic bathrooms and kitchens by today's standards (even brand new houses). University education was beyond most of us. I could write a book, but I'll spare you - suffice to say life wasn't all chocolates and jelly-beans at all. It was hardly like the same planet. Rear vision-mirrors are highly prone to fogging-up.

Bjauck

07-03-2020, 12:31 PM

Your comparing just the right front leg of a centipede with one of the other 99. ....It was hardly like the same planet. Rear vision-mirrors are highly prone to fogging-up. Things do change. I am sure that no-one is suggesting that first home buyers should make do with long-drop toilets and no electricity.

I guess to compare by how much house price inflation has surpassed income inflation we should just compare the inflation in the land value for a property. Of course today's older urban first home buyer will have to settle for a significantly smaller slice of land - goes without saying?

Crypto Crude

07-03-2020, 01:28 PM

Thank you,
Christchurch property market is still very very cheap ... we have a brand new city now and can still pick up not bad properties at all for around $300,000... I'm looking around $350-400k for a real decent place and have solid 100k plus deposit...
Yeah if I knew what I knew back in my 20s I'd be retired now lol ....
Oh well been a super fun ride and enjoying life and my lifestyle so onwards and upwards...
For me the most important thing is not being locked into a lifetime loan so if I couldn't finance the loan to pay down faster then I still just wouldn't be doing it...
:cool:
.^sc

fungus pudding

07-03-2020, 02:09 PM

Things do change. I am sure that no-one is suggesting that first home buyers should make do with long-drop toilets and no electricity.

I guess to compare by how much house price inflation has surpassed income inflation we should just compare the inflation in the land value for a property. Of course today's older urban first home buyer will have to settle for a significantly smaller slice of land - goes without saying?

And don't overlook the main cause of house price increases - i.e. interest rates at about 20% of previous levels.

Bjauck

07-03-2020, 03:19 PM

And don't overlook the main cause of house price increases - i.e. interest rates at about 20% of previous levels. True. If you can raise the deposit, you may be able to afford a stonking great mortgage for a much smaller section with dwelling. Who knows what will happen if negative interest rates come along. Just make sure your livelihood is not in an industry exposed to less benign resolutions to the CV situation though. NZ may not be immune from negative equity situations.

ShrewdC with a good sized deposit, has a greater protection against any housing market downturn than many first home buyers.

SBQ

07-03-2020, 05:00 PM

True. If you can raise the deposit, you may be able to afford a stonking great mortgage for a much smaller section with dwelling. Who knows what will happen if negative interest rates come along. Just make sure your livelihood is not in an industry exposed to less benign resolutions to the CV situation though. NZ may not be immune from negative equity situations.

ShrewdC with a good sized deposit, has a greater protection against any housing market downturn than many first home buyers.

With such a decent down payment, I would not stop at buying ONE house, he should look to leverage more because low interest rates are going to stay around for a very long time. If we go negative rates, then the banks will be forced to charge interest to cash deposit holders which IMO is a very bad scenario.

Negative interest rates are already causing problems in the EU. NZ gov't has already imposed laws similar to the EU in the area of AML, FMA, & CRS because the word is the EU has already experienced their 'flight of capital'. The wealthy moving their liquid cash to America where the investing environment is more favourable. I speak from experience under AML where my bank manager made queries and I spoke with my accountant and the issue of IRD, and all around the AML issues for sending funds abroad. The US is going the other way in terms of regulations, on the other hand NZ is following the ways of the EU model by restriction people on what they can do with their $. One thing that is certain, with negative interest rates you're basically saying as a whole country, 'we would like to borrow $ but don't want to pay interest on it'. So the only thing that goes unscathed is... owing the hard assets like real estate. But if there's an exodus of NZ leaving the country, then that would be the only driving factor to cause housing prices to stay long for the long run.

Bjauck

07-03-2020, 09:37 PM

With such a decent down payment, I would not stop at buying ONE house, he should look to leverage more because low interest rates are going to stay around for a very long time...... If the negative interest rates are caused by recession, you would have to hope that you would keep your source of income to keep servicing the mortgage as there will be large amounts of capital requiring repayment.

SBQ

07-03-2020, 10:59 PM

If the negative interest rates are caused by recession, you would have to hope that you would keep your source of income to keep servicing the mortgage as there will be large amounts of capital requiring repayment.

Depends on which school of thought. In my view, the western nations are using MMT (Modern Monetary Theory) in macro economics. The rules use to be that interest rates were used to control inflation but that no longer applies because from time to time, recessions continued to occur as we've seen a gradual lowering of interest rates in the past 40+ years. In the mid 70s, mortgage rates were in the 20s. In the past 20 or 30 years, mortgage rates didn't hit double digit and this kinda applies for both in Canada / Aus / and NZ. Under MMT, we are going to see that no matter how much interest rates drop or go negative, the controls to stimulate economic output (to avoid a major recession) is not going to work like it use to. Why? Because low interest rates have already depressed the value of money. All significant funds of large size have moved abroad to places where economic returns are higher with far lower risk (hence, the US economy). Why? Because those with the money base their investment decisions on the prospects of growth and NOT on the cost of money (ie US businesses instead of NZ business). It will come to a point here in NZ that if you want the country to prosper and avoid recession, it would ultimately be dependent on how much fiscal spending the NZ gov't does - yep, the NZ gov't will just dial in a figure and spend it. Debt doesn't matter under MMT (and on most part, debt didn't matter before MMT as deficit spending always occurred or simply... just print $$$). We already have a banking system that creates $ out of thin air though issuing loans. With negative interest rates, the banks (and central banks) will have the ability to 'double dip'. Instead of paying interest on cash savers, they will charge them interest while at the same time, issue more mortgages. One would think why doesn't the bank pay people interest to their clients with mortgage loans? Well because banks are greedy or in the EU, the banks there need the extra profit so will simply pocket that interest difference under a negative interest rate environment. Deutsche Bank is not going to go bankrupt.

So if the economy does dip into a recession and people lose their jobs which they may lose their home.. this would not be a long term situation as the gov't will always... ALWAYS save the day by spending and creating $ out of thin air and stimulate the economy regardless. After all... look how high Auckland prices have risen in the past 40 years? A time when you had to see a solicitor to get a loan to buy a house (and the solicitor was responsible for making the loan deal arrangement with the mortgage lender... to today.. the banks are screaming they want to lend you money at 2.8% interest).

The US 10 year treasury bond is sitting at 0.77% pa. Only fools are the ones that don't borrow which is why I tell others to don't stop buying their 1st home, go on to their next one.

Bjauck

08-03-2020, 09:29 AM

SBQ. You say some interesting things. With respect, your posts would be easier to read if they were divided into more paragraphs. My apologies if this seems nitpickish!

SBQ

08-03-2020, 07:31 PM

SBQ. You say some interesting things. With respect, your posts would be easier to read if they were divided into more paragraphs. My apologies if this seems nitpickish!

No offense taken. Yeh sometimes there so much in my mind that I find it hard to put it all down in an orderly fashion. I agree grammatical errors are my shortfall ; I recall at uni I missed out getting an A+ because of a few written mistakes as our prof told us, we all had done great research for our papers and had to resort to grammar to separate the As from the Bs.

Bjauck

09-03-2020, 09:14 AM

No offense taken. Yeh sometimes there so much in my mind that I find it hard to put it all down in an orderly fashion. I agree grammatical errors are my shortfall ; I recall at uni I missed out getting an A+ because of a few written mistakes as our prof told us, we all had done great research for our papers and had to resort to grammar to separate the As from the Bs. That must have been galling. However I guess good communication is important. I am not sure if Morecambe and Wise made it to Canada. I saw my parents old video of a skit they did which is sort of on this point! The relevant bit is at 1:49

https://www.youtube.com/watch?v=uMPEUcVyJsc

jr1973

15-06-2020, 08:22 PM

SBQ

16-06-2020, 09:48 PM

I feel for you. Move to Australia and skip the debt maybe? Tertiary education has become largely a joke in terms of cost for benefit. Australian Uni's are in a real mess with its asian oriented degree factories. If they were not tax payer funded profit oriented I wouldn't have an issue. For my 2 pennies worth... find some way to create value that you enjoy and charge a reasonable amount for it. People will always pay for value.

What makes a country great is by it's reputation and I applaud the people of NZ for not having this culture of 'skipping to another country to evade debt'. Unfortunately, my elders have told me the Aussies have conned and ripped NZ off far too many times.

As for the pay for value ; I do believe NZ will still buy Made in China.

If you asked me about going to Uni in the 1990s, I would say it had a clear advantage. Nowadays, the price of tuition has skyrocketed and students going into massive debt ; earning a degree for most part, has no real application or relevancy to the NZ economy (obtaining a job in that field of study). How does this make sense? Are the Asian families wrong for wanting to send their students to earn their degrees as it seems there's no shortage of that trend changing, despite their job outcome is a lot less today than it was 20 or 30 years ago.

I'm often confused on the over-emphasis of education in NZ. I know people paying $26K a year for their CHILD going to some ritzy private primary school, while the NZ gov't pours huge amounts of $ into the public schools. What value am I missing here? Add up the cost from pre-school -> finishing university and you could end up owning a house (not an Auckland house but if the same sums were invested wisely over the same period, enough for the mean average cost of a house in NZ). Just another way how the rich are creating a divide in society (old boys club).

NeverQuestion

08-07-2020, 08:20 PM

SBQ

08-07-2020, 09:11 PM

So here is where this gets Scary...

Who has the most to loose during a property downturn?

Those with low equity.

Who would that most likely impact?

First Home Buyers

How many will be hit?

Those who bought in the last 3 years... Maybe more

There is no escaping the mess that is the Property Market.. This has been let to run for too long... I really do think that Central Banks have realized this mistake.. Hence the desire for QE... Next stop?! Hyperinflation.. Only way to get out of this now..

All those 3 points are irrelevant as long as the person can make the mortgage payment. Don't forget, mortgage rates are at record lows meaning it's never been cheaper for a 1st time owner to buy. The banks are literally screaming for people to take their money, for just as long as they have a paying job.

What mistake are you implying that the central banks have done? Oh you mean they should do nothing and let the ship sink?

Please show me data that we are heading for 'hyperinflation' - i'm sick of this claim with unfounded evidence. The QE during the 2008 GFC had resulted in no negligible rise in inflation whatsoever! The amount of deflation from COVID would of amounted to record levels never seen before if the central banks did nothing. Back in April we saw the oil price collapse - is that not deflation? It would be if the gov'ts and central banks did nothing; making it a permanent state.

One thing certain, if the asset prices of houses collapse, so will the banks fall ; meaning, central banks can not afford to let that happen. Likewise with the stock market.

stoploss

08-07-2020, 09:41 PM

All those 3 points are irrelevant as long as the person can make the mortgage payment. Don't forget, mortgage rates are at record lows meaning it's never been cheaper for a 1st time owner to buy. The banks are literally screaming for people to take their money, for just as long as they have a paying job.

What mistake are you implying that the central banks have done? Oh you mean they should do nothing and let the ship sink?

Please show me data that we are heading for 'hyperinflation' - i'm sick of this claim with unfounded evidence. The QE during the 2008 GFC had resulted in no negligible rise in inflation whatsoever! The amount of deflation from COVID would of amounted to record levels never seen before if the central banks did nothing. Back in April we saw the oil price collapse - is that not deflation? It would be if the gov'ts and central banks did nothing; making it a permanent state.

One thing certain, if the asset prices of houses collapse, so will the banks fall ; meaning, central banks can not afford to let that happen. Likewise with the stock market.
SBQ , It is not true that the banks are screaming for people to take their money .It might never have been cheaper interest rate wise for a 1 st home buyer , but currently with servicing requirements it's not easy . The banks have tightened up servicing requirements dramatically . Very little lending under 20 % LVR.......
Current numbers and the wage subsidy is still going ... ( note Australia has extended mortgage deferrals )
66870 customers on reduced payments , ( Min or interest only) $ 21 Bio of lending , 55406 customers on deferred mortgage $ 19.5 Bio lending ouch ....
https://www.stuff.co.nz/business/money/122072860/reserve-bank-considers-extending-home-loan-holiday-lifeline

SBQ

09-07-2020, 08:59 PM

SBQ , It is not true that the banks are screaming for people to take their money .It might never have been cheaper interest rate wise for a 1 st home buyer , but currently with servicing requirements it's not easy . The banks have tightened up servicing requirements dramatically . Very little lending under 20 % LVR.......
Current numbers and the wage subsidy is still going ... ( note Australia has extended mortgage deferrals )
66870 customers on reduced payments , ( Min or interest only) $ 21 Bio of lending , 55406 customers on deferred mortgage $ 19.5 Bio lending ouch ....
https://www.stuff.co.nz/business/money/122072860/reserve-bank-considers-extending-home-loan-holiday-lifeline

Notwithstanding the LVR ratio, show me another time in the past where banks were more eager at lending? The banks are in the business at lending and the reason for their screaming? I agree the COVID situation has put many out of work - but that's a different story to those looking for their 1st home. As far as i'm concerned, if you can prove you have steady income, stable job in these tough times, and have the 20% down payment deposit ; I can't see why a bank won't say 'yes' ?

Again, banks make no money when they can't lend and they stand to lose a lot when the market collapses with record foreclosures. This means, the lending by banks needs to ease up even more.

stoploss

09-07-2020, 09:29 PM

Notwithstanding the LVR ratio, show me another time in the past where banks were more eager at lending? The banks are in the business at lending and the reason for their screaming? I agree the COVID situation has put many out of work - but that's a different story to those looking for their 1st home. As far as i'm concerned, if you can prove you have steady income, stable job in these tough times, and have the 20% down payment deposit ; I can't see why a bank won't say 'yes' ?

Again, banks make no money when they can't lend and they stand to lose a lot when the market collapses with record foreclosures. This means, the lending by banks needs to ease up even more.

SBQ ,If you have the 20 % deposit and can service a loan at 6.65 % , and also have about $ 700 spare on top of all your expenses a month yes you can get a mortgage.But call a mortgage adviser locally and ask how easy it is at the moment I think you will find it verifies what I'm saying .....
They have battened down the hatches , come back in 6 months see how things are travelling by and large .
In regards when was it easier definitely 6 months ago , But for sure , in the 1990's when you could get a 95 % loan-banks didn't have to "lend responsibly" Ie: check all your outgoings etc.
The banks don't want to ease up on their criteria when they can see how many mortgages aren't getting paid right now ,it would be good money after bad.
https://tmmonline.nz/article/976517088/survey-reveals-lending-concerns

SBQ

09-07-2020, 10:18 PM

SBQ ,If you have the 20 % deposit and can service a loan at 6.65 % , and also have about $ 700 spare on top of all your expenses a month yes you can get a mortgage.But call a mortgage adviser locally and ask how easy it is at the moment I think you will find it verifies what I'm saying .....
They have battened down the hatches , come back in 6 months see how things are travelling by and large .
In regards when was it easier definitely 6 months ago , But for sure , in the 1990's when you could get a 95 % loan-banks didn't have to "lend responsibly" Ie: check all your outgoings etc.
The banks don't want to ease up on their criteria when they can see how many mortgages aren't getting paid right now ,it would be good money after bad.
https://tmmonline.nz/article/976517088/survey-reveals-lending-concerns

Last time I engaged in a mortgage specialist was about 2 years ago and what a complete waste of time (and these brokers want their cut). This was for lending on bridge financing for a construction project - corporate loan as it was far easier to deal direct with the bank. In fact some major banks won't deal with mortgage brokers. The lady I engaged with had a different view of the mortgage market vs what the bank manager had told us ; well if the bank manager gets you the better deal, why bother with a mortgage broker?

https://www.bnz.co.nz/personal-banking/home-loans/compare-bnz-home-loan-rates

I'm not seeing where you get the 6.65% figure. I'm seeing fixed rates all the way up to 5 years at under 3% in the above BNZ link.

I'll reiterate with interest rates so low, the 1st time home owner SHOULD be looking to get their first home.

stoploss

09-07-2020, 10:34 PM

Last time I engaged in a mortgage specialist was about 2 years ago and what a complete waste of time (and these brokers want their cut). This was for lending on bridge financing for a construction project - corporate loan as it was far easier to deal direct with the bank. In fact some major banks won't deal with mortgage brokers. The lady I engaged with had a different view of the mortgage market vs what the bank manager had told us ; well if the bank manager gets you the better deal, why bother with a mortgage broker?

https://www.bnz.co.nz/personal-banking/home-loans/compare-bnz-home-loan-rates

I'm not seeing where you get the 6.65% figure. I'm seeing fixed rates all the way up to 5 years at under 3% in the above BNZ link.

I'll reiterate with interest rates so low, the 1st time home owner SHOULD be looking to get their first home.

I think you will find all the major banks deal with mortgage advisers . The 6.65% ( and higher is the banks test rate ) So they are generally lending for 30 years, under the responsible lending code they use a "test' rate to make sure you can service the loan if rates go higher .
So its all very well to say I can borrow X and at 2.55 % and it will cost me $ 2200 a month . However the bank is assessing you at more than double that so you need to be able to service payments at the test rate .
Whats the average house price in Auck $ 1 mio, not too many 1st home buyers with 200 K sitting around able to service an 800 K loan ......