Which way will the property market go now?

[kiora]

NZ has the highest priced residential market in the world.

How many people listened to RNZ today at about 1515 hrs today.

House price appreciation in NZ has "been stupid".

BTW in my humble opinion re interest rates/home prices are they connected.

Off course they are.I could be wrong but surely high interest rates implies high inflation ?

I used to love high inflation because it killed debt.

What would be interesting is some disclosure from fungus araon kiora as to their exposure to the Res mkt.

Me over 4 decades...

I've been a home owner for over 40 years but it is not my core investment
Investing in financial markets is more my thing
Of course supply/demand is more important than interest rates !

Look at the decline in house prices in small rural towns of Europe

https://www.dw.com/en/dirt-cheap-eur...tch/a-69554199

[Aaron]

Of course supply/demand is more important than interest rates !

Look at the decline in house prices in small rural towns of Europe

https://www.dw.com/en/dirt-cheap-eur...tch/a-69554199

Good point I guess that is more due to demand weakening as people move to the city and supply remaining constant or declining slightly as houses deteriorate. In this case demand is more important than supply or interest rates.

Japan also has had near zero interest rates and a declining real estate market for many decades, although I think in its heyday before the 1990 crash, debt may have played a bigger part in pumping up prices than a lack of supply. At least I have never heard anyone discuss supply in relation to the japanese real estate bubble and crash, but I have heard about the expansion of debt in the run up of prices.

[kiora]

From Simply Wallstreet
"�� Housing accounted for 70% of US consumer inflation over the last 12 months (Bankrate)

What’s our take?
High interest rates won’t solve a housing shortage.
Consumer price inflation fell to 2.5% in August, the lowest level since February 2021. The bad news was that the shelter component of the index rose during the month, and shows the cost of housing rising 5.2% in the US over the last year. That means 70% of the rise in prices over 12 months can be explained by shelter. There are two slightly absurd aspects to this:
Firstly, a major component of shelter prices is Owners’ Equivalent Rent (OER). This is an estimate of the amount a homeowner would pay if they were renting the property they own and live in. This component of inflation is based on estimates rather than actual data.
Secondly, central banks use higher interest rates to combat inflation by reducing demand. That makes sense when it comes to discretionary purchases. It doesn’t make a lot of sense when rising accommodation costs are the result of a shortage of accommodation. Maybe central bankers should add home building to their arsenal of tools"

[Aaron]

From Simply Wallstreet
"�� Housing accounted for 70% of US consumer inflation over the last 12 months (Bankrate)

What’s our take?
High interest rates won’t solve a housing shortage.
Consumer price inflation fell to 2.5% in August, the lowest level since February 2021. The bad news was that the shelter component of the index rose during the month, and shows the cost of housing rising 5.2% in the US over the last year. That means 70% of the rise in prices over 12 months can be explained by shelter. There are two slightly absurd aspects to this:
Firstly, a major component of shelter prices is Owners’ Equivalent Rent (OER). This is an estimate of the amount a homeowner would pay if they were renting the property they own and live in. This component of inflation is based on estimates rather than actual data.
Secondly, central banks use higher interest rates to combat inflation by reducing demand. That makes sense when it comes to discretionary purchases. It doesn’t make a lot of sense when rising accommodation costs are the result of a shortage of accommodation. Maybe central bankers should add home building to their arsenal of tools"

Not sure about the USA's housing stocks or owners equivalent rent as a measure of inflation in the USA.

In NZ I think we have way more immigrants coming compared to houses or infrastructure being built. I do not have the facts but I have seen articles about consents and immigration numbers can be found at stats NZ. So yes we may have a housing shortage. Despite this house prices have been dropping.

In NZ house purchase and construction costs only make up a small amount of the CPI so we can have big swings in the price of housing without much change in our inflation measure. In fact CPI does not really include asset price inflation and asset prices are usually the inverse of interest rates. I imagine DuVal would continue to build more houses if money was free, i.e. interest rates are 0%. Funnily enough when interest rates were near zero we had a massive building boom and there were shortages of building materials (think gib board) and suppliers were increasing their prices monthly and labour was going up regularly. So supply was increasing along with prices as there was enough debt to fund it all and it was cheap. The houses being built in my area were not cheap affordable first homes but much larger flasher houses for the already well off. Which is why we get wealthy people coming up with a retarded argument that interest rates do not matter and it is just a supply problem.

I assume you are still arguing it is all about supply and not interest rates or demand or the availability of credit (think funding for lending).

[Aaron]

Weird, they are suggesting in this article that house prices in NZ have been falling due to rising interest rates. I don't know if Macrobusiness is a legitimate news site but their reporters obviously need to read more from Sebastion Ferrando who can explain that the price decline is just a supply issue. We have built a lot of houses lately so maybe Sebastion is right... or maybe the price of houses are affected by a number of factors and he is full of s*it.

https://www.macrobusiness.com.au/202...back-to-earth/