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  1. #11
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    Quote Originally Posted by SBQ View Post
    Japan's problem of high debt to GDP is due to inflation in the 70s and 80s. They Yen got too strong due to high productivity that it rendered their country uncompetitive. 20 years later and they still struggle with getting their debt down to be comparable around the world.



    Not a strong believer in this statement. You need to look at inflation figures for which IMO, inflation in NZ has been way to high for the past 30 or 40 years (notably caused by excessive high housing prices). The Keynesian move to adjust interest rates won't apply anymore with record low central bank interest rates. Look for the unemployment indicators from this COVID crisis ; if we were to hit 30% unemployment, watch out! the NZ gov't can not borrow indefinitely to keep the banks holding long. Pretty much ALL banks in NZ (except Kiwi Bank) are foreign owned and they hold the mortgages. When mortgagee sales start flooding, it doesn't matter what level interest rates are.
    Using round figures, $500,000 at 8% costs the same as $1,000,000 at 4%. Second hand house prices will always settle around the median weekly affordable figure. Therefore doubling the interest rate will over-time, halve house prices. Halving rates will double prices.*
    *Principle repayments will mean this is not strictly accurate - but it's a good rule of thumb.

  2. #12
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    Quote Originally Posted by fungus pudding View Post
    Using round figures, $500,000 at 8% costs the same as $1,000,000 at 4%. Second hand house prices will always settle around the median weekly affordable figure. Therefore doubling the interest rate will over-time, halve house prices. Halving rates will double prices.*
    *Principle repayments will mean this is not strictly accurate - but it's a good rule of thumb
    .
    Not too long ago in 2008 & 2007 mortgage rates were double digits. How come houses have not come down in price? Have you not considered the basic principle of "Time Value of Money" ? When you factor cumulative inflation over the years, houses in NZ have still become unaffordable.

    The key reason money is kept in the NZ housing market is the tax free capital gains investors enjoy.

  3. #13
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    Quote Originally Posted by SBQ View Post
    Not too long ago in 2008 & 2007 mortgage rates were double digits. How come houses have not come down in price?
    Because, interest rates have come down. As one falls, the other will rise. 'The opposite ends of a see-saw'. Read what I wrote in the example I gave.

    Assuming the median affordability is 800 per week, then houses will be rise in price to that level. i.e 500,000 at 8% or at 4% - 1,000,000
    Look with envy on those who moaned and groaned about having to pay 20 to 24% or more. They were the lucky ones.
    Last edited by fungus pudding; 26-03-2020 at 05:08 PM.

  4. #14
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    IMHO no ones knows what is ahead in all markets, property included, so , "hope for the best but budget for the worst " !!

  5. #15
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    Quote Originally Posted by fungus pudding View Post
    Because, interest rates have come down. As one falls, the other will rise. 'The opposite ends of a see-saw'. Read what I wrote in the example I gave.

    Assuming the median affordability is 800 per week, then houses will be rise in price to that level. i.e 500,000 at 8% or at 4% - 1,000,000
    Look with envy on those who moaned and groaned about having to pay 20 to 24% or more. They were the lucky ones.
    No, what's happened in real terms here in NZ is the standard of living in houses has eroded. New families are buying old houses that are 19th century performance whereas overseas, for the same amount of $ would get you in a modern McMansion size house.

    I don't understand your interest rate example where housing prices are tied to swings in interest rates. Any common sense shows inflation causes prices to go higher. NZ has not experienced deflation so houses never did go down when mortgage rates went high.

  6. #16
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    Quote Originally Posted by SBQ View Post
    No, what's happened in real terms here in NZ is the standard of living in houses has eroded. New families are buying old houses that are 19th century performance whereas overseas, for the same amount of $ would get you in a modern McMansion size house.

    I don't understand your interest rate example where housing prices are tied to swings in interest rates. Any common sense shows inflation causes prices to go higher. NZ has not experienced deflation so houses never did go down when mortgage rates went high.
    Look at the difference between real and nominal. If you can be bothered researching it you will find a couple of long periods where house prices remained quite flat, while all around other prices, groceries, petrol, daily living costs etc, were screaming up. that equates to falling prices in real terms. Look at those rocky industrial years with never ending strikes resulting in higher wages all round, yet real estate was flat.

    I can assure you if interest rates jumped to, say, 12% tomorrow, you'd quickly see what I'm talking about,
    Last edited by fungus pudding; 26-03-2020 at 06:20 PM.

  7. #17
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    Quote Originally Posted by fungus pudding View Post
    Low interest rates = high real estate prices
    High interest rates = low house prices.
    That is why the best time to buy real estate, or assets in general, is when interest rates are high..
    That's a pretty loose theory...
    When interest rates are high inflation is high which is prices going up....
    Higher interest rates are higher loan costs which is less money loaned..people are more willing to take on loans when interest rates are low
    cc
    BITCOIN certified rat poop. NSA created, Expensive to send, slow, can only trade on cex, no autonomy, spaghetti code, has been hacked, accidental Backdoor brc20s whoops, no one building on it, alienated all cryptos against it, volume is fake, few whales control large supply... it will perform though

  8. #18
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    Quote Originally Posted by Crypto Crude View Post
    That's a pretty loose theory...
    When interest rates are high inflation is high which is prices going up....
    Higher interest rates are higher loan costs which is less money loaned..people are more willing to take on loans when interest rates are low
    cc
    and how come no one else is mentioning about unemployment figures? It does not matter where interest rates are, if people lose their jobs, so will mortgages going into default. You know the gov't can not keep forcing banks to extend mortgage payments. It's safe to say this crisis is nothing like the 2008 GFC. Rich or poor, everyone is affected and this goes to housing prices. While in 2008, quantity easing was the answer - unfortunately the virus does not discriminate between rich or poor.

  9. #19
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    Quote Originally Posted by SBQ View Post
    and how come no one else is mentioning about unemployment figures? It does not matter where interest rates are, if people lose their jobs, so will mortgages going into default. You know the gov't can not keep forcing banks to extend mortgage payments. It's safe to say this crisis is nothing like the 2008 GFC. Rich or poor, everyone is affected and this goes to housing prices. While in 2008, quantity easing was the answer - unfortunately the virus does not discriminate between rich or poor.
    What many people aren't pricing in is the contagion affect

    Commercial esp. tourism commercial is going to get hammered an those holding will just about always hold Res property ... guess whats going be able to be sold to give liquidly..

    Total annual NZ tourism expenditure is $40.9 billion $112 million per day....thats going to be crushed next 12-months

    Down here in Central Otago =Tourism hotspot we have over 1000 Res. properties on the market for sale if you include all the apartments etc (For stupidly high values Vs local av. incomes) this will increase once we come out of lockdown >>last population I seen for the area came to 57,000-60,000p. Now compare that to Otago largest city that has a population more than double of Central Otago that has less than 300 properties on the market

    properties include res sections advertised etc
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." Carlos Slim Helu

  10. #20
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    Makes sense that tourist destinations will have an excess of accommodation, short term and long term. For a few years anyway. But let's not forget #8 wire. There will be other opportunities such as retirement communities, families looking for lifestyle options. Tech firms working remotely. And maybe like Sleepyhead and its community setting up in Ohinewai.

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