Why is everyone so gloomy!
Hi Dimebag, I am involved in residential property sales in Wellington, and I am convinced you are correct that most property has dropped a lot further than the statistics indicate. The QV stats shows wellington as being nearly neutral growth, this is rubbish, there are very few homes in Wellington that would get the same price as early last year and I have seen people already realise losses.
My guess is that higher priced homes are making up more of the volume and skewing the stats. My experience has been that desirable second homes (i.e. $500k - $800,000k - family demographic) are selling faster (relatively!), whereas cheaper first homes and small apartments are not moving. The reason for this seems to be that First home buyers are so worried about declining prices they need a HUGE margin of safety before they will take the leap (wise of course) whereas families with more equity and family type needs who are buying and selling in the same market are less concerned.
I think you could be right about a 30% drop and if I had to guess I think we are half way there already - as always some locations will do better than others and id rather be owning in NZ rather than in the US right now. I doubt we will have too many ghost towns and tent cities. I have been told that in the US there are approx 2,000,000 more homes than are needed to house everyone in the country. At least we don't have a supply issue like that here.
I can't tell you how many people I have met in the last 8 years since I began selling property who had the view that property never falls in value. Peoples memories are so short. Historically property fell in value for 5 years after the first oil shock of 1974 among many other periods and it is pretty damn easy to find this stuff out even if you werent around then!
It will be fascinating to see what happens in the commercial property sector. My feeling is that it will take longer for rot to really sink into commercial but it will happen. The real bargains in commercial property after 87 did not appear until the early 90's. For different reasons than 87 I am sure commercial property is set to take a big bath.
I also predict things will be worse and for longer than people expect . Just like the boom was bigger and longer than everyone thought. These things snowball and feed on themselves. Not to mention that one of the fundamental issue we are facing is credit, the lifeblood of economies - This is some scarily endemic stuff that is not going away in a hurry with or without a trillion dollar cheque.
I have to admit to finding current world events immensely exciting. It's a guilty excitement because I know a lot of people are going to be hurting and I do feel for them. However it's fact that we are watching a historic once in a life-time world event unfold and one that will present huge opportunities for the patient. I find it weird more people do not seem to be enjoying this as much as me! Perhaps it is because I am a young net saver so I have the most to be happy about...
Quote:
Originally Posted by
Dimebag
The official QV statistics now show house prices have fallen 7% from their peak, which, for any property investor using say 75% leverage, would have wiped our 28% of the relevant investor's equity. Furthermore, anecdotal evidence seems to suggest conditions are much worse than the official statistics would suggest - particularly in areas where speculative activity has been most concentrated (such has holiday homes in Queenstown and beach-homes in places such as the Coromandel), where some prices have reportedly fallen more than 50%.
Even in central suburbs in Auckland, I have heard of asking prices being cut up to 30% from last year's asking prices, and these homes are still struggling to attract buyers. My feeling is that the lack of transactional activity (i.e. sellers holding out for yesterday's prices) has resulted in the official statistics still understating the full extent of the price adjustment that has already occurred, and is ongoing.