Population Growth and Growth in Property Values

[JBmurc]

[quote]Originally posted by rmbbrave

"The baby boomers are getting ready to retire and the biggest boom in NZ's history is around the corner"

Most people argue the opposite Dean.

Retirees don't have as much income as workers and so they sell assets (property shares) to make up the difference causing a drop in property and share prices.

Most argue that more retirees leads to a slowdown not a boom.

I'd like to hear why you think...

"The baby boomers are getting ready to retire and [this will cause] the biggest boom in NZ's history ..."


---Yeah have to say I agree
-IMHO with floating interest rates going over 10% soon, property which is also been booming for the last 5yrs+ is going to slow down in a hurry.(I've been spec building 4 the last 5yrs and very glad to have sold my last spec house with no more planned)
-With yields returns on property going down well below property costs
wouldn't baby boomers be selling out of the investment propertys and taking there 100%+ Cap growth Tax free funds forwarding funds into safe bank deposits returning 8%+ or Blue chip high yeild ASX stocks.
-Also as the baby boomers retire alot downsize there property forming a glut on the higher priced property's as they release more funds.

-Buying an investment property at top of the property cycle on a 10% floating or 9% fixed return with a est. 6%-7%max rent return +insurance+rates+envor rates+on going repaires+Rent Managerment costs

-Property Boom not likley more like doom

-JBmurc only holding sections going back renting

[srotherh]

Dean
Good to see you still are following the property investment forum
Do not agree with you but Keep adding your input
Gives a bit of balance

[trackers]

They believe, rightly or wrongly, that among other things, NZ will need a steady influx of immigration to get the economy ticking over - that, and that there are large numbers of people waiting for the baby boomers to retire, before purchasing a home. The cashing up theory is valid, but keep in mind that only 1% of NZ'ers own 3 or more property's

Also, if you believe in cycles, around 2010 is when the next boom is due. Dean et al chat about it quite a bit over at www.propertytalk.com

[rmbbrave]

Fixation with property not quite true
The Dominion Post | Tuesday, 17 April 2007

By MARY HOLM

New Zealanders are not as property mad – or as mortgage mad – as we've been led to believe, recent research shows.

Among the findings:

We are no more heavily into property than people in many other countries.

Almost half of home-owning households have no mortgage.

The average mortgage is less than $80,000.

Fewer than than 8 per cent of households own rental property.

Fewer than 3 per cent of households own holiday homes.

Despite some baches being worth millions, their median value is less than $170,000.
This does not mean that New Zealanders would not benefit from spreading their savings across other types of assets, such as shares, share funds and bonds. Many people are scarily undiversified, and would be hit hard if property values were to slump. The research does suggest, though, that interest rate rises are good news – not bad news – for the huge number of mortgage-free home owners who hold term deposits or bonds. That number is bigger if we add renters.

The research also suggests – dare I say it – that if the Government enforced laws more strictly, and taxed the gains of landlords who clearly bought properties with the purpose of making gains, the change might not anger all that many people. Non-landlords – the vast majority – might applaud such a change if they realised it could mean lower taxes elsewhere.

The research, by Treasury officials, found that our home ownership rates across age groups tended to be slightly lower than in Australia, Canada, Finland, Italy, Sweden and the United States. The exception was people 75 and older. In that age group, we have among the highest home ownership rates.

Turning to investment property – which includes rentals, holiday homes, timeshares and other non- residential property – our ownership rate is similar to Australia's, except that Australians under 25 are more likely to own investment property than Kiwis.

Americans, on the other hand, are much less likely – except in the 75-plus age group. Generally, Americans are more heavily into shares, bonds and other financial assets – giving them good diversification.

On mortgages, not many of us are heavy borrowers. Of those New Zealanders who do have loans, fewer than 21 per cent have a mortgage more than half the value of their property, and fewer than 6 per cent have a mortgage of more than three-quarters of the value.

Predictably, there is a strong tendency for younger people to have big mortgages. Only 8 per cent of property owners over 65 have a mortgage, and their loans average less than $30,000.

Rental property ownership is highest among those aged 45 to 64, but even then only about 12 per cent own rentals. Not many hold their rental properties on into retirement. Of 65-74-year-olds, only 5 per cent are landlords, and from 75 on, only 2 per cent are landlords.

"Apparently, investment in rental property is liquidated once the household head reaches 65," the report says.

Though in many ways it is good to learn that New Zealanders are not as obsessed with property as we are sometimes told, it is comforting to know that:


Almost half of households in the bottom 20 per cent by income own their own homes – not hugely different from about two-thirds of those in the top 20 per cent by income.

About three-quarters of households headed by someone over 65 own their homes. That rises to nearly 80 per cent when the household is headed by someone over 75.

http://www.stuff.co.nz/4029286a1865.html

[rmbbrave]

Falling migration might hold rates

Migration is sinking like a stone and along with a high Kiwi dollar and mortgage rates could prove to be the leading edge of a domestic slowdown and a reason to hold interest rates, according to one economist.

Others expect the Reserve Bank to lift interest rates twice more this year, because of the strength of the economy. But the Reserve Bank governor Alan Bollard is expected to be cautious and not move rates next week.

Westpac Bank said the economy was in a vulnerable and unsustainable position, with a high current account deficit and high debt levels.

"At some point, the final 25 basis point of monetary tightening is going to send the housing market over a tipping point," Westpac said. When house prices stopped rising, the economic correction would be sharp.

Official figures out yesterday showed about 1000 more people left the country permanently in March than arrived, with a jump in the numbers moving to Australia. It was the first negative figure for the economy for weeks.

Strong migration has been a factor in rapidly rising house prices in recent years, with a wave of tens of thousands of new migrants since 2001.

On a seasonally adjusted basis, Statistics New Zealand said there was a net inflow of just 600 in March. Arrival numbers had troughed, but more and more people were leaving the country. The three-month annualised figure sank "like a stone" from 16,000 a year in December, to just 6400, annualised in March, according to one economist. That was half the Reserve Bank's target level for this calendar year, according to Citigroup economist Annette Beacher.

It was hard to predict a pickup in housing, retail sales and the work force unless migration picked up too, she said. The combination of lower migration, a higher dollar and high mortgage rates gave the Reserve Bank time to wait.

http://www.stuff.co.nz/4032946a13.html

[duncan macgregor]

The next property boom is tied like every thing else to the strength of the dollar. Watch the overseas guys move in and buy up when the dollar crashes. Nz will be the retirement capital of the world one day in the not to distant future. All your young people will bugger off, make their money and come home to retire. Lets face reality, you would have to be the village idiot to invest in fishing, farming, forestry, or manufacturing companies at this time in the cycle. Its only a matter of time your dollar will plummet, property in this country will be a real cheap investment for overseas retirees creating the only worth while investment left. All my money is invested in Australia prefer to live in NZ on my property.Macdunk

[lakedaemonian]

I wonder if Japan has the potential to be New Zealand's "canary in a coalmine".

It's my understanding Japan is ahead of NZ(and most other western nations) on the demographic curve by about 15ish years.

PLUS, Japan experienced the peak of it's very heady real estate bubble 15+ years ago.

Combine that with the pending ramp up in NZ super savings to begin to close the gap between average NZ and Japanese savings rates is that enough to recognize potential challenges/opportunities?

I'm not one to worry about sudden/sharp economic crisis...I'm thinking we're more likely to see an extended slow downward spiral like what has been found in Japan..particularly in regards to real estate and the high rising, but hallowed out NZX?

EDIT: one key difference I DO see between NZ and Japan of 15 years ago that may have significant impact is our option to turn on/off the immigration tap...an option Japan has decided not to exploit.

[patsy]

quote:Originally posted by lakedaemonian



EDIT: one key difference I DO see between NZ and Japan of 15 years ago that may have significant impact is our option to turn on/off the immigration tap...an option Japan has decided not to exploit.

Yes, Japan is some 15 years ahead as far as the demographic bubble is concerned. Looking at Japan's evolution of their macro-economic factors can give good insights of what not only NZ but the West may experience as the baby boomer bubble passes through.

However, although manipulating immigration could have an effect in moderating a Japanese-style deflation, we have to keep in mind that the same holds true for most Western countries. This means that NZ may be trying to attract skilled immigration (mainly from Asia) to tamper deflation at the SAME time as other Western countries.

Despite the fact that we want to fool ourselves about NZ's "great" lifestyle, most skilled Asians would not put NZ as their first choice, neither would they consider NZ's employment opportunities and remuneration comparable to first world countries. If NZ's cannot attract skilled immigration to tamper the demographic bubble, then the two only choices are (1) face deflation or (2) take the usual approach of attracting the bottom of the immigration pile, which yet again would serve only as a source of increase consumer demand, not brains.

[boatie]

From rmbrave...re NZ....

(2) take the usual approach of attracting the bottom of the immigration pile,

NZ Herald today reports that 4,500 Tongans have registered to pick fruit in NZ as "temporary" workers.

Not counting other countries.

mmmmmmmm

Where will they live ?
Who will do their jobs while away from Tonga ?
Do they get their jobs back on return ?
What return ?
Pregnant women allowed ?
Health checks ??
Mathematics....Duration of stay to pick fruit multiplied by income rate less PAYE (is there tax on temporary workers ???)less accomodation and costs equals ?????. How much to take home
And what is duration of permit ?
What is duration of picking season ??
Number of Tongan overstayers now ??
Extra resources hired by Immigration to ensure return when the fruit is picked ??

Number of NZers on welfare benefits well able to pick fruit ???

Practical response : Buy cheap rental properties in Hastings and Blenheim.

[rmbbrave]

I think the growers usually provid some sort of accomodation.

Circus tents, shiping containers, portaloos - that sort of thing.