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duncan macgregor
09-12-2008, 04:02 PM
The share market crash has sent investors running scared to get back in to that market, and risk losing more of their savings. The property market in a downtrend, with a slow down in new construction. The dropping of interest rates, along with the raising of deposit lavels, will end up with increased rents, and a shortage of supply.
1, 1st time buyers cant raise the deposit.
2,Shortage of supply will increase demand.
3. Builders will have flown the coup.
4, people with money will buy something safe as houses to rent out.
5, that is a recipe for another property bubble in two or three years time.
The greed and corruption in the share market has destroyed the average persons faith in that market, what better place to invest than playing it safe with property.
Macdunk

neopole
09-12-2008, 05:52 PM
a different point of view..........
there wont be another bubble for the next 10-15 years.
why.
all those that fuelled this bubble have or are getting burnt or a really lucking getting out in the nick of time.
how many folks have said that property prices never fall?
in the last 7 years.... virtually all the "jones" whiz kids, speculators and 30 somethings.
the older generation and normal home owners didnt care or play the game, and new home buyers in the sub 30yr group have seen the carnage and are scared to speculate.

people will look at housing for what it is........... a home,

housing in the medium term future will be void of speculation.

as housing becomes more affordable (cheaper) 1st home buyers will start buying, slowly but surely, as they "save" their deposit.... like we the 40-60yr olds did.
with the new government in place, the days of endless housing suppliment benifits for the poor will be rained in and rental property investors will find it harder to charge exorbadent rents and therefore their investment properties will also shink in value.

also with the disasters of the sharemarket and finance industry, and a business focused government in place, the sharemarket should be a safer place in the future.

the previous government didnt like business or wealth enhansement except for rampant property speculation, which has left us where we are today.
anyone who believes we are heading for another property bubble has a vested interest in speculating on property.

i wonder which bank or finance company is going to start lending willy nilly to investors and speculators to the point of creating a bubble???

and which government is going to dish out housing suppliment benifits to the point of creating a bubble??

my guess none for at least 9 years.

Mick100
09-12-2008, 06:29 PM
Macdunk - if you want to preserve your wealth then buy some gold mining shares :D

I agree with neopole - it will be another ten yrs before there's another property bubble

Dr_Who
09-12-2008, 06:55 PM
I agree with Mcdunk that the global govt's are creating another bubble with their attempt to pop up the economy by printing and pump liquidity into the economy. The US is doing exactly the same thing they did post 911, by pumping cash into the system that created this bubble in the first place.

Humans have short term memory. We tend to forget quickly about the bust days when we start seeing money in our pockets again. This is evident with Bridgecorp, Blue Chip and Hanover... etc.

I predict there will be another bubble in the not too distance future with market boom and crash with shorter cycles. The next cycle of boom and bust will be less than 10 years. Hence 1987, 1997 and 2008.

Enjoy the ride while you can.

minimoke
09-12-2008, 07:48 PM
Humans have short term memory. .
Jeez – you’re right there. We’ve forgotten that its not so long ago that interest rates were going up and were more than happy to fix. Now we are hearing the bleating about break fees – all in less than a year. Property probably isn’t the best for those with short memories.

I agree with Mcdunk to a greater extent. I’m not so sure it will be quite so quick. I quite like the returns offered by Finance Companies which are government guaranteed. This might not be a bad place to park some cash rather than in property just at the moment. At some point the government will take away this motherly approach to saving (perhaps in the next 2 – 3 years) and then we’ll really see the drive into property. But those that get in before then will be well placed.

kazza
10-12-2008, 01:33 PM
That is very wishfull thinking property is going to die a slow death for several reasons:

1)the property boom started in the 1990s when house prices went up with household incomes as more and more women entered the workforce and gradually increased the household income. this boom turned into a bubble in 2002 as baby boomers started realizing they were getting old and started buying rental investments to fund their looming retirements and fears that
superanuation won't be enough to live on.The 1987 sharemarket crash has put baby boomers off shares forever and made property investment the only "safe" investment. In 2002 the peak baby boomers (those born 1957) were turning 45 the kids have left home, both mum and dad were at the peak of their earning potential, a sizeable equity in the family home combined to enable them to drive prices up to record levels as they have all competed to get on the property bandwagon.


2)households can only afford to spend so much on housing (the limit historically is considered 30% of gross houshold income) household incomes have now hit their maximum level as the workforce participation of women is at its maximum peak. The first Baby boomers (those born 1946) have now started retiring aged 62 going from high incomes onto retirement incomes. This will increase at a massive rate from now on and will hit its peak in 2015. the effect of baby boomers retiring means they will no longer be in the property market. It will also slowly but surely deflate median household incomes.

3)as property investors slowly realise there is no massive capital gains to be had anymore they will exit the market

4) with current rental yields around 4-5% and negative capital gains the return on property just doesn't stack up compared to government backed deposit rates.

5) the introduction of kiwisaver and all its government and tax benifits has now given a "safe" retirement alternative to the last of the baby boomers (now aged 45-50) who could of potentially kept the bubble going a bit longer.

6)the difference between renting and owning a home is too great with median rent at $300 a week (at 26% of median income and incomes dropping unlikely to increase) Mortgage interest at current median house prices is $450 week ($335,000 x 7%) the median price would have to come down to $225,000 before it was a viable alternative to renting and this doesn't take into account council rates, insurance, maintenance costs.

7)the current economic recession and rising unemployment is going to put even more downward pressure on household incomes

8)mortgage criteria is much stricter as the banks realize the property bubble has burst all over the world.

The time has come to realise that property is never going to recover, its all downhill from here. Once the current recession is over the effects of baby boomers retiring/dying will increase and it will be generation X,Y who will be calling the shots and buying the family homes off the boomers at much cheaper prices than they are now then inheriting the rest.

miner
10-12-2008, 03:56 PM
Some of you boys sound like the guy who bought the share xyz at the height of it's ramped up unrealistic price and are now left holding the baby after the music has stopped.

And you are now busy trying to convince yourself and everybody else who will listen that xyz is a good investment and we should all buy it even though it is heading south.

Cheers
Miner

Serpie
10-12-2008, 04:00 PM
Impressive first post Kazza.

Put me down for number 3.

Arbitrage
10-12-2008, 07:55 PM
Let us do a little bit of rational thinking here.
Auckland City is growing by around 40,000 people per year at the moment. This is in a time of relatively low immigration.
Where are they going to live?
In houses of course.
There isn't much room for new greenfields housing subdivisions (Stonefields in Mt Wellington can only house a few thousand people).
So what happens?
Intensification such as cross leasing, building townhouses and apartments.
Plus the value of the existing house stock/land increases.
Forget the bubble, look at supply and demand. I am holding on to my property portfolio thanks.

Financially dependant
10-12-2008, 08:37 PM
Good post Kazza (welcome aboard), I tend to agree..

IMHO Property will bottom out when there is a decent yield back in property investment and that might take a bit of time.

Baby boomers moving into retirement villages creates higher density living that Arbitrage was talking about and will keep some supply in market.

I don't think Immigrants will invest in a dropping market, I have spoke to a few in this position they are like first time buyers waiting it out and getting a better house by renting.

A combination of inflation and falling prices will peg back property for a while until the yield returns.

my 2 cents...

minimoke
10-12-2008, 09:39 PM
There isn't much room for new greenfields housing subdivisions (Stonefields in Mt Wellington can only house a few thousand people).
So what happens?

Had a chance to go through wellington the other day by bus for a change – not a new house in sight. Just miles of aged stock. At some point this rotting, uninsulated noisy property will be pulled down and replaced with more expensive stock – driving values up. I’d forgotten how tightly packed these 90 year old places were!

SEC
11-12-2008, 12:28 AM
Totally agree Kazza and will add net migration to the mix. Property price increases are justified on fundamentals if there is significant net migration. Yet NZ has virtually zero net migration - well qualified young people leaving in record numbers to Australia being replaced by Indians and Phillipinos that simply cannot afford property. Therefore there is significant negative net migration of people who can afford property.

A good indicator of fundamental value for property is the rental PE ratio. This was relatively constant for decades (10 - 15) then rocketed to record highs in this property bubble (20+). This has to come back to long term averages before property an be considered worthwhile for investment purposes.

SEC

minimoke
11-12-2008, 06:36 AM
...well qualified young people leaving in record numbers to Australia being replaced by Indians and Phillipinos that simply cannot afford property.

This is presumably your Shrewd Crude demographic. He can’t afford a house either so really there is no difference if these people leave and Indians arrive. Except they still need somewhere to live which is rental property. NZ population will expand over time – increasing demand for housing.

MrDevine
11-12-2008, 07:07 AM
The media keeps banging on about people 'leaving in droves' to Australia. Well I was in Sydney last week and talked to 2 or 3 at a party who were unemployed or in unsatisfactory jobs. So I wonder when all these punters will come back to Noo Zealand? Those who leave to Australia thinking they'll escape the recession have rocks in their head, the recession was top of mind in Sydney, I did see a few empty shops too.

I say to these guys I'll stay here and contribute to the economy that you'll then want to participate in when you come back. New Zealanders need to get stuck in and get on with it, not bleat on about how you get paid more in Australia (it has 26 million people! New Zealand is smaller population than Sydney!), because in some professions you get paid the same or less, and you pay more tax, more for booze, more for lots of things.

SO, barring an economic depression which pushes unemployment to 15%+ (like Bruce Sheppard likes to speculate about, will set up another thread to rant about this lunatic, why the **** do the media give this nutter so much air time?) then no property bubble for 10 years. My prediction is for market to head south another 5% and bounce around for some time to come. Focus for punters should be for holding onto jobs, spending money (that they own) in the shops and paying down the mortgage as quickly as possible via lower interest rates that allow them to increase capital repayments. Property speculation should be for the smart or stupid.

Thats my rant for the morning, I just get pissed off when I see people bagging New Zealand, only way to make it better is by engaging in what we have here.

Mr D..

arco
11-12-2008, 02:12 PM
You probably cant reply on Indian immigrants to take up any slack. They live many more to a house that we do. I've seen how they live in London - amazing how many they can cram in per dwelling.

The average size of an Indian house is 494 sq ft in rural areas — or 103 sq ft per person — and 504 sq ft in urban areas, or 117 sq ft per person.

39% of rural houses are 312 sq ft or less. Given the average household strength of 4.8 persons, that works out to 65 sq ft per person.

minimoke
11-12-2008, 02:26 PM
You probably cant reply on Indian immigrants to take up any slack. They live many more to a house that we do. I've seen how they live in London - amazing how many they can cram in per dwelling.

The average size of an Indian house is 494 sq ft in rural areas — or 103 sq ft per person — and 504 sq ft in urban areas, or 117 sq ft per person.

39% of rural houses are 312 sq ft or less. Given the average household strength of 4.8 persons, that works out to 65 sq ft per person.
Well, there’s the glut of the Auckland shoe box apartments sorted!

arco
11-12-2008, 03:04 PM
.

So @ 65 sq ft per person the basic 1200 sq ft Kiwi house could accommodate 18 persons.

Mum, Dad, 6 kids, granny, granddad, uncle, auntie and 6 lodgers

(or maybe 12 lodgers if 6 are on day shift and 6 others on night shift) :D

kazza
13-12-2008, 11:32 AM
2,Shortage of supply will increase demand.
3. Builders will have flown the coup.


Arbritage you also say "Auckland City is growing by around 40,000 people per year at the moment and Forget the bubble, look at supply and demand. I am holding on to my property portfolio thanks."

here are some of the statistics relating to supply and demand:

People in the 30-60 year age bracket are net buyers of housing while people in the 60-90 age bracket are net sellers of property. The older age bracket is getting bigger while the middle age bracket is staying constant so there will be increasing supply of properties on the market with no increasing demand from buyers.

Natural population growth is decreasing as the number of births stay constant but the number of deaths increase. Last year there were 65,000 births and 29,000 deaths, a net increase of 36,000 nationwide

Average net migration since 1967 has been around 10,000 per year, last year net migration was 4000, so a total population increase of 40,000. With competition for new migrants increasing in much larger and more wealthy countries such as America, Japan, Europe and Australia. Chances of net migration increasing above historical averages is very low and may even decrease.

In 2006 there were 1,651,542 dwellings (1,515,642 in 2001) for a population of 4,027,947 That’s 2.44 people per dwelling this number is projected to decrease to 2.1 (it used to be 3). Last year there were 22,000 new dwellings built (down from the average of 27,000) In order to support the current population increase of 40,000 at 2.4 people per dwelling there only needs to be 17,000 new dwellings built to accommodate current population growth.

In 2015 population is expected to increase by only 30,000 (an optimistic 10,000 net migration and 20,000 net births) at 2.1 per dwelling this means only 14,000 new dwellings need to be built. So unless the number of new dwellings decreases over time there will be an over supply of roughly 50,000 (this has happened in the USA already)

It is the same in Australia, Europe, USA, Japan, Canada so I am not sure where all the builders and other tradesmen are going to fly the coup to except maybe China or India. My guess is they will have to retire early

Arbitrage
13-12-2008, 01:45 PM
Well the recent "property bubble" has burst and prices are down 5-10%. The sharemarket has a "correction" and drops 30%. So are we saying to get out of property?

fungus pudding
13-12-2008, 03:59 PM
Well the recent "property bubble" has burst and prices are down 5-10%. The sharemarket has a "correction" and drops 30%. So are we saying to get out of property?


The property bubble hasn't burst yet. It will though.

kazza
13-12-2008, 04:17 PM
Shares are more liquid so they have probably hit their lows already, however property still has a long way to go yet. Property is much more leveraged so even a small loss is magnified and the prevailing thought is "property never goes down" so they aren't selling in the hope the market will recover. It will probably be a few years before most realize its not. I am not putting my money in either at the moment.

mistymountain
13-12-2008, 11:56 PM
NZ Residential Property has got to be the most overpriced asset around now.

How can a first home in Chch cost a quarter of a million when ones wage is a sixth of that...??

All those greedy investors making money out of property speculation deserve to feel the pain once the worm turns.

Good to see them feeling the pain of 30 - 50% asset depreciation, mortgagee sales, busted personal lives rather than those that have been made to struggle over the last few years.

Bring on the great unemployment leveller!

duncan macgregor
14-12-2008, 08:12 AM
NZ Residential Property has got to be the most overpriced asset around now.

How can a first home in Chch cost a quarter of a million when ones wage is a sixth of that...??

All those greedy investors making money out of property speculation deserve to feel the pain once the worm turns.

Good to see them feeling the pain of 30 - 50% asset depreciation, mortgagee sales, busted personal lives rather than those that have been made to struggle over the last few years.

Bring on the great unemployment leveller! What a load of old cobblers you preach. The price of houses has nothing at all to do with greedy speculators.
The number of building speculators that go bankrupt is about double the business average for starters. Let me explain the reason for the rising costs to the home buyer.
1,Thousands of dollars in compliance costs before you even start.
2, The plans cost about three times as much to get drawn with every little detail shown that we all used to take for granted.
3, To develop now requires you in all probability to donate large pieces of it for parks and reserves plus roading and drainage costs far beyond your boundaries.
4, The building standards are much higher beyond all reason, its like building a rolls royce at the expected price of a mini minor. Insulation, stainless steel everything. Building inspections at every turn, that cost the earth where common sense has flown out the window being replaced by petty costly officialdom.
The price of houses is about to sky rocket in the future when you have succeeded in chasing your builders and developers overseas so dont say you were not warned. Macdunk
.

kazza
14-12-2008, 08:50 AM
I agree the cost of building a house has increased with all the ridiculous compliance costs, red tape etc.. hopefully the new government will get rid of some of these costs with changes to the resource management act. Property is made of the land value + house value and its the land value that's falling so the costs of building a new house don't make any difference even if they are increasing, section prices were $80,000 in 2002 they are $180,000 now. You can't say compliance/development costs have gone up $100,000 in 6 years? the drop in house values is going to come from the land value not the capital improvements.

duncan macgregor
15-12-2008, 09:55 AM
KASSA, The price of land for developement is ruled by roading costs plus how much you have to buy to donate back for parks and reserves. You cant just stick dwellings on land you get lumbered with all types of unseen over the top costs that a few years ago were unheard of. You go out and try to buy a block of land to stick a few houses on it then come back and tell me you didnt get taken to the cleaners in all sorts of unexpected ways.
The people not in the game live in fantasy land when they think its money for nothing. Macdunk

minimoke
15-12-2008, 11:25 AM
Good to see them feeling the pain ....mortgagee sales, ....
I wonder how many of those properties are subject to a Property Law Act notice – or is it just the latest marketing word to drag buyers to the market. Here’s a clue. Check out all the Mortgagee sales on Trade Me and the listing date. A property listed months ago is unlikely to be a mortgagee sale – the bank would have wanted their money by now.

minimoke
15-12-2008, 11:28 AM
I agree the cost of building a house has increased with all the ridiculous compliance costs, red tape etc..
I couldn’t tell you how many inspections I’ve had on my latest build because I’ve lost count. But the council did want to see on the plans, before they were approved, where the microwave was going in the kitchen. How that adds to the integrity of the build I don’t know but I am happy knowing my fees are keeping another council worker employed and off the streets.

Dr_Who
15-12-2008, 02:38 PM
Funny how there are so much red tape with huge compliance cost and yet our new residential houses are leaking and rotting. A complete joke.

kazza
15-12-2008, 08:29 PM
KASSA, The price of land for developement is ruled by roading costs plus how much you have to buy to donate back for parks and reserves. You cant just stick dwellings on land you get lumbered with all types of unseen over the top costs that a few years ago were unheard of. You go out and try to buy a block of land to stick a few houses on it then come back and tell me you didnt get taken to the cleaners in all sorts of unexpected ways.
The people not in the game live in fantasy land when they think its money for nothing. Macdunk

I wouldn't buy an empty block of land at the moment for nuts.. Property developers are going bankrupt because they are in debt up to their eyeballs with sections they can't sell. a few years ago they would have made a killing but the tide has turned on property and low tide is a long way off yet. If I owned property now I would be selling at whatever price I could get before the loss gets even bigger. I sold my house In 2005 and it won't be long before prices are the same as then. anybody would have their head in the sand to buy into a falling market, every news story points in the same direction (except the few with vested interest trying to put on a brave face) the economy is in dire straits because of property speculators and their mortgage debt. Are you trying to say the property bubble was caused by compliance costs?... speculators and investors had nothing to do with it?

Aussie
15-12-2008, 11:18 PM
IMVHO, I think the NZ property market will churn sideways for quite a while and possibly crash hard in certain areas depending on future employment levels. Luckily we don't have the massive inventories of empty houses like they do in the US, Spain, Ireland and other European markets which will be supportive.

What is bad in NZ is the amount of borrowing that people have had to do to "get into" their homes over the past 5 years. There are plenty of folks in AKL and elsewhere that are servicing 95% mortgages on houses that have dropped pretty substantially in value. So they are upside-down. There are many others who have soaked so much equity out of their homes during the good times that they are in a similar position, except now they are tapped out financially and are drastically reducing their spending.

All it will take for the NZ property market to find a whole new level of pain is for there to be some serious unemployment. A lot of people are totally reliant on two incomes to pay that huge mortgage. The RBNZ and the banks are helping with their interest rates cuts, but for many folks if one or the other loses their job it's all over, and after doing some hard sums, that mortgage will be the biggest expense to go. Multiply that by several tens of thousands or more and you have the makings of real estate rout as people compete to unload properties that they can no longer afford. This is what the government is quite afraid of.

I hope to be a buyer of some investment properties in the future, but I still see it as being quite a ways off - there is much more to occur financially here and especially overseas before I will be interested in buying. The blood has not come close to starting to run yet and there are so many other great opportunities coming up that property can and will wait.

MrDevine
16-12-2008, 06:41 AM
Aussie I think you're right. If unemployment goes rampant next year – say 10% + – the property market is going to get blown to bits. In my situation if my wife or I lose our jobs then the mortgage starts to look tenuous, no worries though, its a house, we can move on, save another deposit.

Everybody seems to be comparing New Zealand to the US. What isn't mentioned often enough is that in the states if you default on your mortgage, or mail the keys back and walk away, you don't owe the bank the difference. This I believe is the root cause of their problems over there. In New Zealand there is incentive to muddle through it as you sure as hell owe the bank the difference. People also need to live somewhere – I worked out that lower interest rates (when I can refix in Jan 2010) will halve the term of my mortgage if we keep paying the same monthly amount.

If you want to buy a house, if you need somewhere to live then buy one. My prediction is this market going sideways for the medium term, WITH CAVEATS: Kazza you might get your bargain in selected areas as unemployment levels get smashed. However those buying when the market gets that bad better have a huge deposit or cash outright, I heard from someone at a local bank they could get back to approving only 3 mortgages a week. That brings me onto the nuclear option, if it does get that bad, the banks will turn into suicide bombers dialing margin calls to existing serviced loans and blowing them up – then all the DOOMSAYERS like Bernard Hickey and Bruce Sheppard will have their Great Depression, sweet!

And also, if it gets that bad, you'll get your bargain, but the country and the world will be a dark dark basket case, in the Great Depression I don't think private property rights were worth that much eh?

Dimebag
27-12-2008, 01:45 PM
Thanks to all for the interesting discussion,

I too believe NZ's property bubble is still a long way from being fully deflated. Whether it plays out from here as a continuation of the rapid price falls we have seen in 2008 and culminates in a cataclysmic bust in 2009-10 as unemployment peaks and the economy goes into a tailspin, or whether it gradually deflates over 5-10 years as lower interest rates provide a temporary (1-2 year) but artificial support for the market, I believe is quite irrelevant. Either way, the risk/return profile of property ownership is completely out of whack, as there are significant downside risks and little in the way of commensuate upside.

Predicting the exact future is difficult. However, history has shown that when assets become very expensive (high PERs, low rental yields etc), the odds become extremely unfavourable for an investor. Potential upside is capped and if anything goes wrong there is substantial downside. That is exactly the current situation with property, and exactly the situation an investor should avoid like the plague. Despite the obvious logic, people are often seduced by fond memories of boom-time returns, and are conditioned emotionally to expect a quick return of those conditions. As a result, people don't analyse the situation rationally, and by the time they make the necessary mental adjustment, asset prices have invariably fallen substantially (at which point a sale is contemplated also precisely at the wrong time!)

The game has changed. Spiralling property values can only occur when there is rapid increases in debt accumulation, as this is what drives rising demand. Very real catalysts are underway that are reversing this trend: a global tightening in credit (falling LVR levels), less collateral to borrow against (from falling values), and falling incomes (with NZ's recession/rising unemployment). Where is all the money going to come from to drive property values higher? Buyers can't come racing out of the woodwork to swoop on "bargains" unless they have investible funds, but these are quickly disappearing. It's analogous to the stock market - asset prices get very cheap at market bottoms often because nobody has any available funds to purchase them (due to margin calls and fund managers satisfying redemptions).

Lower interst rates might help support the market temporarily, but this is a short term solution. NZ's economy has become extremely unbalanced. We are not producing enough to support our standard of living (look at our current account deficit), and the party can only continue so long as we are expanding our stock of debt. This cannot occur indefinitely. Lower interest rates will only support property prices if it results in a new round of debt accumulation, and will simply defer the necessary readjustment, and in my view, whether the correction takes place now or in a few years is quite irrelevant. It will occur (that is a certainty), and when it does NZ's property market is going to get very cheap and old relationships to income and rents will be re-established. Why buy an asset that is 30-40% overvalued when you know with certainty you will sooner-or-later have the opportunity to buy it below its fair value?

People talk about high construction/compliance-related costs etc. Logically these should be reflected in current rental levels. It's not an argument for why those rental rates should be capitalised at 50-100% more than historically. An argument that long term there will be an underbuild (which as kazza points out can be disputed) is really an argument that future rental rates will rise faster than historically. That might or might not be the case, but a 50-100% increase has already been priced in! And in the short term, prospects are bleak given the dire state of the economy (rents are falling).

Bubbles can pop even if the underlying long term "fundamentals" are solid. The world is facing the very real prospect of a oil shortage, but it hasn't stopped oil falling from US$147/bbl to US$40/bbl. Continuing growth in the internet didn't stop dot-com PERs collapsing and the nasdaq falling 80%, or hong kong property falling 50% or Japanese property 70% despite a shortage of land. When prices get bid to unsustainable levels, driven by speculative demand, they fall sharply in any case. Why? Because the fundamentals didn't drive prices up that high in the first place - rather it was speculative demand. And when that speculative demand vanishes, prices fall, and fall rapidly. The long term fundamentals are irrelevant to these dynamics. And history shows that when a bubble bursts, they usually don't reflate for a long, long time.

I keep an eye on a variety of property forums to get a sense of prevailing sentiment, and there is definitely a sea-change occurring, but as usual, very slowly. Very gradually, inexperienced property investors who have not studied history are gradually seeing their expectations for future capital appreciation moderate, but expectations are still way too high, and, just as importantly, assessments of risk way underdone. The market cannot and will not truly bottom until property investors form a more realistic view of the real risk/return profile of property, and we are still a long way from this point.

Witness the title of this thread - D/M is an archetypal example. I remember debating with him a few years ago why his assertion that property prices were going to rise 10% a year indefinitely was ridiculous. He has probably lowered his expectations since but he is still way too optimistic, and is expecting/hoping for another boom. The game has changed and most property investors of yesteryear still don't get it.

The reality is very simple. Property prices are vastly overpriced, and until prices return to historic multiples of income and rents, should be avoided. When the correction takes place is difficult to predict, but it is a certainty that it will eventually occur.

Crypto Crude
28-12-2008, 02:38 PM
mr devine-
Aussie I think you're right. If unemployment goes rampant next year – say 10% + – the property market is going to get blown to bits. In my situation if my wife or I lose our jobs then the mortgage starts to look tenuous, no worries though, its a house, we can move on, save another deposit.



good point mr devine,
when unemployment rises, people fail to service their loans...
houses get repossessed by the banks...
then dumped onto the market... the downwards cycle continues...

smart cookies can survive this as they would have diversified revenue streams... 95% of the population will fail as they have jobs only...
hummm....
luck to yah all...

There is no rush to buy a house...
:cool:
.^sc

SEC
29-12-2008, 08:52 PM
The reality is very simple. Property prices are vastly overpriced, and until prices return to historic multiples of income and rents, should be avoided. When the correction takes place is difficult to predict, but it is a certainty that it will eventually occur.

Well said.

The only reason why NZ property prices are still being propped up is because potential sellers not realising their price simply withdraw from the market, hence the huge drop in sales the past few months. This trend could theoretically continue in a fully employed economy, but as the unemployment rises the optional sellers become forced sellers and further falls in property values are inevitable.

With the dairy bubble recently burst I think increasing unemployment will come sooner rather than later and hence the property price correction back to historic multiples may come sooner than people think.

SEC

OutToLunch
07-01-2009, 02:44 PM
We've chosen to keep on renting for the time being. I get the impression that late this summer we might see sellers finally throw in the towel and start accepting low offers, just to avoid holding on through the winter season when real estate sales slow down anyway. It's tempting to go out in say 6 months time and lob in a few cheeky low-ball cash offers just to see who bites, but then again, the way things are going I'm now also feeling that any time this year is still too early as far as waiting for a bargain goes. Perhaps March-April 2010.... by then NZ's recession should be well-established and we'd be coming to the end of another summer selling season, perhaps complete with some very unhappy vendors who might be willing to cut and run at very attractive prices. No hurry...

lissica
07-01-2009, 11:45 PM
The media keeps banging on about people 'leaving in droves' to Australia. Well I was in Sydney last week and talked to 2 or 3 at a party who were unemployed or in unsatisfactory jobs. So I wonder when all these punters will come back to Noo Zealand? Those who leave to Australia thinking they'll escape the recession have rocks in their head, the recession was top of mind in Sydney, I did see a few empty shops too.

I say to these guys I'll stay here and contribute to the economy that you'll then want to participate in when you come back. New Zealanders need to get stuck in and get on with it, not bleat on about how you get paid more in Australia (it has 26 million people! New Zealand is smaller population than Sydney!), because in some professions you get paid the same or less, and you pay more tax, more for booze, more for lots of things.

SO, barring an economic depression which pushes unemployment to 15%+ (like Bruce Sheppard likes to speculate about, will set up another thread to rant about this lunatic, why the **** do the media give this nutter so much air time?) then no property bubble for 10 years. My prediction is for market to head south another 5% and bounce around for some time to come. Focus for punters should be for holding onto jobs, spending money (that they own) in the shops and paying down the mortgage as quickly as possible via lower interest rates that allow them to increase capital repayments. Property speculation should be for the smart or stupid.

Thats my rant for the morning, I just get pissed off when I see people bagging New Zealand, only way to make it better is by engaging in what we have here.

Mr D..

I've been working in Australia for the last year and a half. I'd much prefer working in Oz than NZ, but there is no way I would live in Aussie long term. NZ has so much more stuff to do. Over here, I can't even find a decent cycle trail anywhere, no hills, and it's too hot to do anything until late in the evening.

Having said that it's easy enough to commute to work in Australia and still live in NZ.

Dr_Who
08-01-2009, 07:02 AM
Watch the global central banks printing press. It will work over time to make sure we have another bubble in the near future. Property will again benefit from this and history will repeat itself. Just look at the commodity markets recent rally to see what can happen in the future.

arco
08-01-2009, 02:31 PM
Aussie New home sales slide


January 7, 2009
New home sales slumped in November, suggesting deep interest rate cuts and a government stimulus may take time to lure buyers back into the market. Queensland reported the biggest dive.


More........................http://business.smh.com.au/business/new-home-sales-slide-20090107-7bjo.html

arco
08-01-2009, 02:42 PM
I've been working in Australia for the last year and a half. I'd much prefer working in Oz than NZ, but there is no way I would live in Aussie long term. NZ has so much more stuff to do. Over here, I can't even find a decent cycle trail anywhere, no hills, and it's too hot to do anything until late in the evening.

Having said that it's easy enough to commute to work in Australia and still live in NZ.

For us it a case of adapting to the conditions of each country.

At times we live in Aus (QLD), where we go to bed early and get up around 4.30am. Biking/Jogging/Walking is great at that time.

We find reasonable cycle ways/paths on the Sunshine Coast, theres plenty or variety, but if you want hills, you have to head into the hinterland.

NZ summer on the Hibiscus Coast is great, but in our winter I prefer the East Coast Aussie weather.

.

peat
08-01-2009, 07:01 PM
But lets be careful of tarring all with the same brush.


in reply to a post about Indians

lol

http://farm4.static.flickr.com/3134/2913816641_4f8435f164.jpg

kazza
16-01-2009, 10:44 AM
I was in Nelson over the holidays and had a interesting discussion with my brother who is a registered surveyor about the state of the property market he said there are a couple of large new subdivisions there that are only partially completed and doing nothing because the finance companies won’t lend the borrowers the money to finish them until they have more forward sales of sections, but the problem is sections aren’t selling at the asking prices.
I asked him about land development costs over the last 6-7 years and he said they haven’t really changed much and it is still between $60,000-$80,000 per section. But he has noticed that there has been a big change in local government thinking against urban sprawl and a promotion for intensification. Local Council have made it easier and cheaper to subdivide within existing city boundries and relaxed the rules governing how many units can be built on a section. So you can now buy a large section split it into lots of smaller sections and build as many units as you can on it and the development costs are much lower at around $30-50,000 less regulations and more profitable compared to large scale subdivisions on rezoned land in the outskirtes which councils are discouraging with higher development levies and stricter regulations. There are a few building companies/developers that have cottoned onto this and they are doing ok. but others who are involved in the other subdivisions are struggling.

minimoke
16-01-2009, 10:53 AM
]IThere are a few building companies/developers that have cottoned onto this and they are doing ok. but others who are involved in the other subdivisions are struggling.
But we can spend outr money in Queenstown if we want From yesterdays news:
[/SIZE] The development company behind Queenstown’s award-winning Commonage Close is delighted to announce the launch of its next exclusive multi-million dollar villa development.

Wayne Foley of Queenstown company villasqueenstown.com and business partner Bert Govan from Christchurch are launching Killarney Way, an enclave of eight luxury villas in a dress circle location on Queenstown Hill.


The first stage of five villas, all located on a ridgeline adjacent to Commonage Close with secure lake and mountain views, are being offered for sale at prices starting from $2.795million inclusive of GST.

Sideshow Bob
16-01-2009, 09:45 PM
In one of the local rags in Qtown today, stated that the median house price there had gone from $550,000 in December 2007 to $450,000 now - ouchie!!

fungus pudding
17-01-2009, 04:43 AM
In one of the local rags in Qtown today, stated that the median house price there had gone from $550,000 in December 2007 to $450,000 now - ouchie!!


Don't read too much into median, or even avarage price figures over one month. It tells you nothing.

arco
23-01-2009, 08:32 PM
4:00AM Friday Jan 23, 2009
By Anne Gibson (http://www.nzherald.co.nz/anne-gibson/news/headlines.cfm?a_id=39)


HSBC has called for a mortgagee sale of a large slice of the troubled Gulf Harbour luxury housing and golfing estate north of Auckland.
The bank has demanded the fire sale on sections owned by once-active developer Jamie Peters of Gulf Corporation.


The sections were selling for $545,000 to $1.3 million originally and HSBC wants 26 sections sold.


http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10553129