So I'd "save" 10% on the small portion of loan paid off but would continue to pay 10% on the remainder, all while the underlying asset fell by 15%? Not really a compelling equation.
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But its only a notional fall in value. The loss of value is only realised if you are forced to make a distressed sale. If your’ not selling you aren’t loosing any value. What I would suggest you are loosing though, is an ability to leverage your equity into other areas – but this is different from loosing value.
Halebop you've been quoting phrases since early 2005 like 'cash is the easiest option', I no longer have exposure to the sharemarket etc, perhaps coincidentally after the first correction of the 2003 - 07 bull market.
Yes cash is 'comfortable' for the moment but medium-long term it is a proven underperformer. It's where and when to put the cash into better performing investment classes that is the question. I agree with you it's definitely not property at the moment.
SEC
Here's a recent news item, question is whether they are just talking the market up or not?
"There aren't enough homes on the market to satisfy cashed up buyers, says one of the big Auckland real estate firms.
A "drought of properties" had been caused by cautious vendors adopting a "wait and see" attitude through the winter months.
The traditionally slow winter months had been made even worse by what Bayleys describes as a "lack of confidence in the housing market.
Median house prices fell by 2.15 per cent in June - from $345,000 in May to $340,000. That fall followed on from a 1.42 per cent drop the previous month.
Real Estate Institute of New Zealand national president Murray Cleland said in a release today that much of the drop in sales volume could be attributed to a severe
shortage of property 'stock' on the market - making buying choices markedly harder.
"It's certainly noticeable that there are considerably fewer 'for sale' signs up outside homes. That's a trend across New Zealand - from the larger cities through to
smaller towns." said Cleland.
Bayleys managing director Mike Bayley said many of his sales people had databases brimming with potential buyers who were struggling to find suitable properties.
"There's no shortage of buyers as far as we're concerned," said Bayley. "We have substantial numbers of buyers with money ready to get into the market, yet there
simply aren't the properties out there for them to choose from," he said.
"We're not talking about buyers without approved mortgage capabilities... these are astute home owners and investors who are highly liquid, have seen that the
market is close to bottoming out after a year of gradual declines, and are looking for somewhere to invest in now.
Bayley said the company's books were "full of these individuals" - inlcuding ex-pats who were returning home cashed up with British pounds or US dollars.
Other investors had sold out at the peak of the market and were now re-entering "at the other end of the scale". First home buyers watching "the affordability gap
close" were also in the market.
"Sales people are pulling out all the stops to encourage vendors to get into the market, but the winter malaise has set in. With the official cash rate dropping last week
and Reserve Bank governor Alan Bollard hinting at a second round of cuts in September, the conditions are certainly primed for our customary winter phase to end
in August rather than October," said Bayley."
You would have had to come down in the last rain shower to believe that desperate load of cr#p,what spin will they come up with next ???.
Cheers
Miner
LOL... those realty people make me laugh. What alot of crap!! They've been talking up the market and according to them the market have never dropped. It was the media that caused the property market to fall from the sky. Abit like the US blaming traders and OPEC for the oil price hike.
Time the realty firms get real and tell the truth. All the smoke screens and crying wolf can only last so long. No wonder realty agents are rated at the bottom of the most trusted list next to rats and snakes.
From a builders view on the market let me put you straight on a few points.
1, The cost of building is going up twice as fast as inflation due to new building specifications.
2, Nobody sells at a substantial loss unless it gets forced on them.
3, During a building slump new homes built wont keep up with demand.
4, If people find it cheaper to rent then shortage of stock leads up to higher rents plus higher house prices.
5, What happened over the last thirty years will almost certainly happen in the next thirty years with prices rents and inflation.
6, The people that delayed buying a house in the past all lived to regret, it some things never change. Macdunk
Hey McDunk, tell that to the American banks holding onto 5 years worth of foreclosure/mortgagee supply of properties no one wants.
I just know that the material input and the cost of compliance is streaking far higher than the inflation rate.
The people coming in later when the storm blows over are in for one huge shock. Its all happened in the past, only this time its different because of the leaky home problem.
I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are, buy below that at any stage in the cycle, then sit back. A few little things to consider.
1, double glazing is an extra 50% which adds thousands coming in now.
2,compliance fees at least doubled in the last three years.
3, Builders gaurantees comes at extra cost.
4 Tradesmen fleeing the country in droves.
Any one foolish enough to think that after this downturn is the time to buy will miss out in a real big way as they have always done in the past.
The only difference in a down turn is you will find more bargains other than that its business as usual with the mugs missing out as they have always done. Macdunk
"I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are"
Hi Duncan,
Question from someone looking to buy a house in the not too distant future.....what is the current rule of thumb as to the cost of building a house?... so that I have a rough idea if I am looking at something it is below replacement costs.
thanks in advance
How long is a piece of string. Its like comparing two cars, one a rolls royce, the other a ford. It depends on so many variables, as to its worth. You cant say $1500 a square mtr is a good or a bad price. It might be a complete bargain, or it might be overpriced, depending on what the make up is.
It takes experiance to understand what each feature costs to build. If for instance its a colour steel roof that would cost lets say $10000 to replace, then the new roof is valued at $10000 but if its 16 years old you can value the roof at $5000. Thats how you go through a property and value each item against its new replacement cost. Macdunk
I think in this market, I'd be offering far below replacement cost for the home(the section is dependant on other factors).
While I do agree that building/compliance costs are exploding, that does not mean they will sell for a comparable or greater value.
I can build a widget for $1.00, but if the market/potential customers are only willing to pay $0.70c for it....either I have to have the risk profile AND CAPITAL to wait until the market accepts my higher price, or I have to be willing to accept the lower price now or when my capital runs out.
I think in the building game, where "other peoples money" is being used to finance spec construction, spec builders can only hang on so long before the carrying costs bury them.
In a REALLY tough investment environment, even airlines can become quite juicy targets for acquisition.
Back in the 1970's several US airlines with huge plane fleets were valued at less than the replacement cost of a mere handful of aircraft...pennies on the dollar in terms of long-term asset value due largely to a gigantic cash crunch and a short-term pounding........not that I would ever invest in airlines :)
In the short-term I think replacement cost is best used as an example of how you can find long-term value, but only buy purchasing at a substantial discount to replacement cost.
We just bought a beach house where I believe we paid a fair price for a substantial and private beachfront section......with a very well built and mainatained home thrown in "for free".
If we had only purchased the section AND had to have a home built to a similiar spec TODAY....we'd be out at LEAST an additional $300k.
Having a home built today is insanity.....when deals on existing homes priced far below replacement cost are just beginning to look intrigueing.......I think once the "catch a falling knife syndrome" has ended in the next 12-24 months those that have been patient will have found amazing value for dollar.......but that "value" may not present itself in cold cash for a decade.
The builders I know working in both residential and commercial have seen their work backlogs disappear......
Just my 0.02c
Thanks for the info people. Gives me plenty to think about. Might have to do some research into house building costs to give me a clearer idea of the components you get for the $. I am in no real rush now....have just found out child number 2 is on the way....so we will be going back to one income in 7 months time! So plenty of time to do some research and try and get the deposit as big as possible.
Also need to do some research on the various local markets we will look to buy in. Either here in the Waikato or over in the BOP. Will also go back and read this whole thread at some stage.
cheers
Cam
Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk
Good advice number 1 through 7... poor form on number 8...Quote:
Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk
Look mad dunk... when your renewal comes up, go floating and you can pay me the difference between the fixed rate and the floating rate (which is 100% likely to keep falling)...
If its a reversal, I will sign a contract with you and pay double the difference...?
A few pages back I left the web page details for me to be contacted on, or the 0800 number for you to call me on.... hahaha....
Dont pay the banks... pay me instead....
...
Man I wish I coul short houses... damn, Id short sell one right now if I could....
your mate... shrewd...
:cool:
.^sc
Heres a starting point for you – check out all the features used to sell a new home. http://www.stonewood.co.nz/pages/new-home-features.aspx. There’s a huge pick list in there which makes it hard to come up with a valuation as Macdunk has suggested.
Builders know about building stuff but do they know the costs associated with, say programmable timers. Many builders will send your plans to a Quantity Surveyor (often within firms like Placemakers and Carters and they will come up with a PC sum – like $15,000 for a kitchen. They will also send the plans to their subbies – a drainlayer will come up with a price for the drains - say $15,000 for stuff which is below ground which you don’t get to see. So you may end up with $350,000 to build a 230sqm home. The moment you start fiddling with the plans you can guarantee the PC Sum to go up. Small builders won’t necessarily get as sharp a price as a large building firm – but they may not be far off. The building supply firms are having to carry greater credit risk now .
So as a local rule of thumb you can build for $1,000 a SQM for a low spec house, $1500 for a well speced house and if you have $2,000 plus a sqm you will end up with something pretty special.
Cam
You might find this of use:-
http://www.dbh.govt.nz/bofficials-es...building-costs
cheers
You can. Just short CDI, ING, KIP etc. :)
Looks like cost of construction is coming down big time. :) Maybe time to built myself a house. Na, only joking. Building a house is just a total headache, done it before and will never do it again, unless I have gone completely bonkers.
10,000 out of a job as housing slumps
Almost 10,000 construction workers have lost their jobs in the past year as the downturn in the housing market bites.
http://www.stuff.co.nz/4647505a13.html
The thing to remember when you say 10000 workers lost their jobs is that they either get out the trade or go overseas. A very large proportion of that number is lost to the industry never to return. when the market turns which it always does, this will inflate house prices at a much greater rate than ever before.
With all the lack of knowledge in the industry by the rule makers inflating new building costs added to this home ownership will be confined to the rich. I can see a major crisis looming with unaffordable rents and house prises resulting in a great exodus overseas by our young people who will be replaced by rich migrants. Macdunk