Which way will the property market go now?

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Originally Posted by alokdhir

When public chat hosts starts thinking they know the best way forward then God bless our world ...lol

Interest rates are not and will not be decided on the basis of house prices alone ...These rates actually effect real economy activity in more ways then not ...rates determine how small and large businesses are profitable or not ...they determine levels of NZD which helps or hinders exporters working for the economy and many more important sectors .

The only reason Govt has chosen to try tax side roadblocks for property prices as all other sectors are struggling in most difficult covid induced environment ...they had no choice but to target only property prices as no other sector can take anymore burden of higher rates

NZ economy will collapse if Mike 's suggestions are put to place and RBNZ starts raising rates for controlling property prices ...

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I don't think he was suggesting raising interest rates, especially as he was buying more property.

He appreciates why house prices are high and sounds like he is making the most of cheap money. Basically he is pointing out the FACT that house prices are high due to low interest rates and easy access to credit.

As FP says possibly the worst time to buy a house except as time goes on and debt increases there will be no foreseeable time when interest rates will rise again. In fact inflation and low interest rates might prove now to be a good time to buy.

No sane person with capital to invest in a company or in a first home buyer would accept the current returns being offered. Creditism is the name of the game. How it plays out is anyones guess, talk show host or economist anyone who suggests with 100% confidence what the future will bring is full of s*it.

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Originally Posted by fungus pudding

The same could be said for many economists.
What is undoubtedly true is the old Fungus oft-repeated adadge ........................'Interest rates and assett prices are the opposite ends of a see-saw.' That is why the best time to buy real estate is when interest rates are sky-high, and the worst time is when they are very low.

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So FP when the baby boomers tell younger generations how hard they had it with high interest rates they are talking s*it as it would have been the best time to buy property???

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Originally Posted by SBQ

In that 40min speech by Jacinda when she made the announcement some weeks ago, her gov't WAS CONSULTED by these very same ECONOMISTS that the NZ housing market was about to see a slight correct or drop. I understand exactly what she was saying that during that time, their gov't was not in the position to place any new further tax issues.

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I didn't name the economists. What makes you think they're the same ones? They do come in several types/styles/forms with differing opinions or philosophies.

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Originally Posted by Aaron

So FP when the baby boomers tell younger generations how hard they had it with high interest rates they are talking s*it as it would have been the best time to buy property???

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Yes of course. Hard at the time but look how well they've done. (The first rental property I bought, circa 1970, cost me $3100) High interest rates will mean a lower capital price or debt, and when the pendulum swings - the owner now has low outgoings, with a relatively small capital debt on an assett that now has a higher nominal value. Conversley a purchaser who enters the market when interest rates are low will be paying a higher price, and when the pendulum inevitably swings again the borrower will be paying a higher interest on an assett that has fallen - or at best - stopped rising.

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Originally Posted by Aaron

No sane person with capital to invest in a company or in a first home buyer would accept the current returns being offered. Creditism is the name of the game. How it plays out is anyones guess, talk show host or economist anyone who suggests with 100% confidence what the future will bring is full of s*it.

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Why should residential homes be viewed as an investment for return? The 1st home owner should not look at it that way. But it still doesn't fix the problem. 10 year time frame to wait where CG are tax free? Investors in NZ are not looking at annual returns - it's the cumulative capital gains that matters.

By the way the CPI factors rental costs in their inflation figures. If rent prices go sky high (which I highly doubt), this should be reflected as inflation. But long gone are the days double digit central bank inflation. There is no foreseeable reason why rates will go that high, not when places like in the EU you have negative rates.

Cheap $ also depends on the amount borrowed. Just because the interest rates are low does not mean 'cheap money'. It's the chicken or the egg example? Don't blame the central banks for adjusting rates lower... blame the behaviour of the greedy 1% & landlords that can leverage to buying multiple residential properties. Canada has done this very at curbing that kind of behaviour out of the housing market.

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@fungus_pudding: I didn't name the economists. What makes you think they're the same ones? They do come in several types/styles/forms with differing opinions or philosophies.

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None of them are any good. As Warren Buffet famously said if these 'economists' knew anything, then they themselves would be rich.. and I mean REAL rich. Yet they're still stuck teaching at uni.

I also don't buy the low or high interest rate argument when to buy a house. They should not be viewed as an investment. But 40+ years of NZ's neglect on the housing issue has let the open free market turn houses here into a profit making commodity.

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Originally Posted by SBQ

Why should residential homes be viewed as an investment for return? The 1st home owner should not look at it that way. But it still doesn't fix the problem. 10 year time frame to wait where CG are tax free? Investors in NZ are not looking at annual returns - it's the cumulative capital gains that matters.

By the way the CPI factors rental costs in their inflation figures. If rent prices go sky high (which I highly doubt), this should be reflected as inflation. But long gone are the days double digit central bank inflation. There is no foreseeable reason why rates will go that high, not when places like in the EU you have negative rates.

Cheap $ also depends on the amount borrowed. Just because the interest rates are low does not mean 'cheap money'. It's the chicken or the egg example? Don't blame the central banks for adjusting rates lower... blame the behaviour of the greedy 1% & landlords that can leverage to buying multiple residential properties. Canada has done this very at curbing that kind of behaviour out of the housing market.



None of them are any good. As Warren Buffet famously said if these 'economists' knew anything, then they themselves would be rich.. and I mean REAL rich. Yet they're still stuck teaching at uni.

I also don't buy the low or high interest rate argument when to buy a house. They should not be viewed as an investment. But 40+ years of NZ's neglect on the housing issue has let the open free market turn houses here into a profit making commodity.

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Hi SBQ, rental prices are in the CPI however the weighting is imo not right . A lot of families spend 50 % of their take home weekly pay on the rent. The weighting should be higher ....

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Originally Posted by stoploss

Hi SBQ, rental prices are in the CPI however the weighting is imo not right . A lot of families spend 50 % of their take home weekly pay on the rent. The weighting should be higher ....

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I fully agree!!! but somehow the people in 'that camp' who own the houses (multiple houses to make a profit), express every 'other' excuse on why houses costs so much in NZ. You know, blame the banks, blame the central banks with low interest rates, blame the supply issue, blame every other reason except.... They themselves are part of the cause for making prices go so high in the first place. Remember since 1991 (if I recall correctly) NZ home ownership has been on the decline. Why? Because that decline has been taken over by the profit element of the wealthy buying more and more houses. Listen to the first 3 minutes of Ms Ardern's 40 min speech. Some real shocking stats on how many houses were sold to those that already owned 4 or more houses.

Can we really blame this kind of behaviour? You know, their children and next generation after will never have to worry about buying a house so the playing field is like, a "1st come 1st serve or better get it before there's no way you'll afford to own one type of deal".

The CPI has been unrealistic since the start. You can't say CPI of 2% inflation is total inflation each year when houses have doubled in 5 years? The gov'ts don't care and the economists don't care. What I see is the common person getting screwed in every way and what is left of society when the next generation can't afford to buy their 1st home? It's the same kind of thing I see with NZ education; you have the rich or the families that scrape just enough $ to send their children to private school because they think public education is crap. I mean I can understand the difference if say maybe 1% would end up at private schooling but not when there's like 30% of all schools in the major cities in NZ are private schooling. Something is not right here with this segregation shift in society.

few monthss of this should sjow the way forward.

https://www.interest.co.nz/property/...ber-properties

The Reserve Bank has clearly thrown the responsibility for tackling high rents and First Home Buyers being priced out of NZ housing on to the Government.

“[T]he house price level may be sustainable in a market sense, even though rents may be high and deposits unaffordable for prospective first-home buyers.
“In this case, there are social costs that go beyond the implications of house prices for the Bank’s financial stability mandate and these call for a broader public policy response,” the report said"
https://www.stuff.co.nz/national/pol...fordable-house

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Originally Posted by Bjauck

The Reserve Bank has clearly thrown the responsibility for tackling high rents and First Home Buyers being priced out of NZ housing on to the Government.

“[T]he house price level may be sustainable in a market sense, even though rents may be high and deposits unaffordable for prospective first-home buyers.
“In this case, there are social costs that go beyond the implications of house prices for the Bank’s financial stability mandate and these call for a broader public policy response,” the report said"
https://www.stuff.co.nz/national/pol...fordable-house

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There's a lot of waffle in that report and it fails the key reasons why property investors in NZ take on such a high leverage positions (likewise with 1st home owners). Personally I don't believe the central or reserve bank should be held accountable for the housing problem as their primary goal is monetary policy. This whole consultation and assessment process will go down no different to when Jacinda issued that Tax Working Group inquiry (WASTE OF TIME). You can not differentiate lending between those that want to buy their 1st home vs those that are buying for rental investments because they are not mutually exclusive situations (as they are buying the SAME asset).

The key problem for investment behaviours is not that interest rates are low but rather in NZ, the #1 the best game in town is still owning houses. Why has the gov't and the reserve bank not pointed out this key issue? Because it seems so elementary that if you want to cool things down, you tackle the INCENTIVES of why people are getting rich off houses. The framework is entirely wrong. Now if it was the case of owning shares in a company; no one cares but the investors themselves if the share price rockets up or crashes as not everyone own shares as investments.

Take away the tax advantage by owning houses. It's that simple. Canada has done well in this aspect and for the past decade (and particularly in the past few years), home ownership has increased. Yes there are hots spots like Vancouver and Toronto but they do not add up to the same proportions we see in NZ where if you take the largest density populations (Alk/Wgt/Chc and Tauranga etc) that 'may' account for like say 80 or 90% of NZ's population that is under the unaffordable housing situation.

Again, NZ is not a unique case as there are plenty of OECD small nations that manage home ownership a lot better and deter investment away (leaving their population to invest in more productive assets).

It's all down to bad gov't policy.