Housing - a bear trap

Interesting perspectives on the NZ housing scene esp from an affordability point of view.

Looks like many will wake up one day in a few years time and find they have been caught in a bear trap

http://www.sra.co.nz/pdf/HousingAffordabilitySep12.pdf

Hi Winner69
I read that also and I agree with the thesis.
It was a good analysis and view in my opinion.
Regards,
Sauce

The question is When?

At the moment the single largest 5 year demographic is aged 50 to 55 which when combined with low interest rates explains why Central Auckland property is so hot. Age 55 is the economic / spending power peak in demographic terms and these guys are the tail end of the baby boom - most of the baby boomers who can afford the best real estate have already beaten them to it. NZ's demographic bulge then begins deflating, bottoming out at the 30 to 35 age group (family home demographics and almost 25% numerically smaller than the 50 to 55 year group) before inflating again with the children of baby boomers - aka Gen Y / Echo Boomers. Any correction in real estate prices would likely occur within this demographic slump and probably just requires a trigger event.

The oldest kids of Baby Boomers are already in the first home buying demographic so we won't necessarily see an even market. Growing counts of younger demographics will help boost starter homes. Allow for older boomers downsizing and there might be stiff competition for small homes & units. The larger / pricey / better located homes being bid up right now will probably be the ones that become relatively less popular.

Great read.

I have recommended the article to a few friends.

Property is a long term investment by the majority who simply buy for basic family security reasons.The only people who ever regret buying, are the people who borrow beyond their means if the income structure, or interest changes leaving them in dire straits. Very few if any regret buying a house to live in, if they do their home work in a conservative manner. Most people buying property at a young age will end up at retirement age in a much superior position than a person gambling on the stock market, or risking all in business ventures. The people in my circle who bought property young are now well to do people, where the others who did not are mostly struggling. Property comes first, business second, followed by the share market third. Every thing runs in cycles property might lose value for a short time but always keeps ahead of inflation. The share market will crash sooner or later losing fortunes in the process. Businesses will come and go, and unlike property unless your time is completely devoted to it, it will founder. Property is and always will be the safest surest way to riches regardless of your business skills, or mental attributes. The great advantage of property is the borrowing cost of money towards other business ventures. Property is the cheapest way to borrow money. Macdunk

I see Aussies dropped there rates and looks likely to drop it much further ...we will have to follow or end up watching are dollar go up much further and in-turn hurt explorers .....plan to fix 50% of our loans 5yrs+ once it comes under 5% (paying 4.99% 1yr currently)

Agree with much that you have to say Macdunk..

Having been into your stages 123 of investment.. plus 321.. and tried 213.. and..132.. and 231.. and 312. etc.. etc..

Have found the hard way.. Those situations always rely on other peoples input..

Plus ones own determination to get every cent out of the ( frequently bad ) situation..

Property ties you down... Not for me.. But there again I am a Pre-Baby boomer.. A forgotten few in the equation..