Population Growth and Growth in Property Values

[rmbbrave]

This week the papers are full of stories of how average people can't afford to buy a house.

For those who think prices are going to keep going up answer this question:

Who is going to buy them?

Kids or a house - family can't have both

http://www.nzherald.co.nz/section/1/...ectid=10436022

[JBmurc]

NZ will need a steady influx of immigration to get the economy ticking over-Alot of guys I know that are in there prime of there working careers are shifting to Aus for twice or more pay than here- mostly tradies,engineers,mechincs etc(just watch the exodus of builders, plumbers etc Once building slows up here under 10%+ rates)

Nz will be the retirement capital of the world one day in the not to distant future-Great, a country full of residents moaning about how terrible NZ basic services are(much like Queenstown as rich retired residents & holiday makers moan about poor local services from the mostly transisent forgein workers on $10-$14)

[rmbbrave]

I tend to see an adult immigrating to NZ as being far cheaper for NZ INC than raising a NZ baby to an adult.

Children are consumers of Govt services - Education, health, maternaty leave for parents etc. An adult immigrant has all of these costs paid for by their home country's govt. If they can get a job they start paying taxes and become an asset for NZ INC.

[Mr_Market]

quote:Originally posted by rmbbrave

I tend to see an adult immigrating to NZ as being far cheaper for NZ INC than raising a NZ baby to an adult.

The reality is that most of them will come in with partner and probably a couple of kids, followed a year or two later by bringing in their parents too. They will buy a nice big 4/5 bedroom house, thereby driving up property prices and dislocating the poor kiwi battler.

Also, due to NZ's largely agrarian economy, these skilled immigrants are probably working in non-productive areas of the economy such as finance/banking, goverment and other services, taking nice fat salaries/commisions, therefore exacerbating our anemic productivity stats due to both their numbers and non-creation of income.

[rmbbrave]

Sunday, 29 Apr 2007

Mortgagee sales double
Real estate agents say mortgagee sales have doubled in the past year as a small but rising number of debt-laden property investors reach crisis point.

Thursday's interest rate rises, pushing floating mortgage rates to a near decade high of 10.05% and one-year fixed rates as high as 9.05%, are expected to worsen the outlook for over-committed borrowers.

"If mortgagee sales are going up, that can really only mean one thing - people are struggling," said Graham Viall, who oversees national mortgagee sales for Harcourts.

He said Harcourts' mortgagee sales had doubled from about five per month a year ago to about 10 per month now. About one-third of mortgagee listings were now investment properties.

Viall said some investors appeared to feel there would be less capital growth in the property market in future, meaning they were not fighting as hard to hang on to rental properties that were not covering interest and operating costs. Rising interest rates were "not helping".

Luxury properties are also beginning to figure in distress sales. Viall said a property in Parnell, Auckland, recently went for $1 million in a Harcourts' mortgagee sale. In Taupo, a Two Mile Bay home worth $1.2m is up for mortgagee sale.

Other agents reported similar trends. At LJ Hooker, auctioneer Keith Niederer said mortgagee sales in Auckland had more than doubled, from up to two per month a year ago to about five per month. At Ray White's in Auckland, salesman Damian Piggin said he handled two mortgagee sales in Auckland last month, the same as for the whole of last year.

Niederer said some property investors were feeling the pressure from having to refinance borrowings at higher interest rates as fixed mortgages matured.

"It's going to be interesting times, I think. Just look at the newspapers, it's mortgagee, mortgagee, mortgagee," he said.

But the biggest mortgagee sales agents in Auckland, Barfoot and Thompson, refused to comment, saying it was "sensitive" information.

At present there are 15 mortgagee sales on auction website TradeMe, up from six at the same time a year ago.

The numbers of mortgagee sales are always a small part of the market, but any rise can be an early warning sign of a downturn. Heavily negatively geared property investors are most at risk if the market cools.

An ANZ bank survey of property investors last month found almost half were running their properties at a loss, and relying on capital gains to offset the shortfall.

ANZ bank economist Cameron Bagrie refused to divulge whether his bank was experiencing a rising number of property owners in mortgage arrears, saying such information was confidential.

But he was becoming "a little bit nervous about the property market". He said a variety of economic factors meant the economy could turn, affecting confidence and the willingness of property investors to ride out any rough patches.

"I think there's going to be a little more supply coming on the market, and when the supply comes on the market I think you're going to see the prices ease.

"Confidence is a very fickle game. An awful lot of property investors out there are in it for the capital gain. And if the capital gain's not quite there, you're going to see some pockets of the property market that are going to come under a little bit of a squeeze."

http://www.stuff.co.nz/4042211a10.html

[JBmurc]

Glad I just sold my Queenstown spec home good bye 450,000 debt
Going be some major pain here from the 700,000-2mill apartments(yields 4-6%) to the 400,000-2mill jacks point sections that ain't selling (local valuator I know ,said he and others don't even value alot of there sections because of the unrealistic expectations of most vendors(had One guy who wanted to Trade his cheap $600k brought before release jacks point section for my new house,Truth is I wouldn't have traded for 300k [:0]yep going be alot of pain coming for the highly geared investors in NZ

[rmbbrave]

Well Done JB,

The yield is the key measure for what a house is really worth.

I wouldn't touch a house yielding 5% as an investment with a barge pole.

[rmbbrave]

... Other competitive pressures will emerge as we slip further behind Australia. The New Zealand Institute's number-crunchers released a graphic report at last week's Australia New Zealand Leadership Forum in Sydney.

Australia's GDP per capita (A$47,181) is about 30 per cent higher than New Zealand's (A$33,682), with NZ well below the OECD average. NZ's figure is now lower than all Australian states, including Tasmania.

Top performers are resource-rich Northern Territory (A$59,649) and Western Australia (A$58,688). The lowest is Tasmania at A$35,253 - but even that state heads off New Zealand on A$33,682.

Those low incomes are driven off the low wages are paid here, which have acted as an incentive to keep manufacturing exporters here.

But there's problems ahead. Each week, about 700 Kiwis join the exodus to Australia.

If companies want to stay here and develop high-growth technologically advanced industries to replace the departing manufacturing base, they will be hard-pressed to compete for highly-skilled labour.

Other figures presented to the forum suggest that a million New Zealanders now live offshore - roughly 20 per cent of our population.

Australia, with a population of 20 million, has just 800,000 offshore.

While Australia turns to our highly-skilled people to fill gaps, New Zealand's ethnic mix is changing as we turn to the rest of the world to cover shortages. The business implications from this are profound.

http://www.nzherald.co.nz/section/3/...ectid=10436710

[rmbbrave]

Property prices have gone up a lot but rents have gone up only a little. Therefore the yields have gone down.

Barfoot & Thompson's average weekly rent remained almost static last year, moving from $348 a week in January to $359 at the end of the year.

Auckland property management firm Crockers said average median rents for three-bedroom houses had risen nationally from $252 a week in 2003 to $295 last year. Auckland rents rose in line with the national trend in the three-year period. Ponsonby rents rose from $549 to $555, Papakura $264 to $298, Mission Bay/St Heliers from $496 to $516 and Takapuna from $410 to $452.

http://www.nzherald.co.nz/section/3/...ectid=10436857

[rmbbrave]

After the property goldrush

Property has become the no-lose investment. That's what they thought in Sydney, too - before their property prices crashed. Ruth Laugesen reports.

Tony Mattiuzzo has seen the carnage of a property crash first-hand. As a real estate agent in Sydney's western suburbs, he has to give vendors the gut-wrenching news that they must swallow huge financial losses if they want to sell the home they spent every last dollar on.

"I have seen price drops of $50-$60,000, in some cases up to $100,000, because the prices were over-inflated when they purchased the property two years before," he says.

In one notorious example, a three-bedroom brick-veneer house in the suburb of St Clair sold for just $260,000 last year - down about 42 per cent from its last sale at $450,000 in 2003.

The house was worth less than the $405,000 mortgage.

In New Zealand, property mania is pushing prices to dizzying new highs. Many buyers here seem convinced property is the no-lose investment where prices can only go up.

But just across the Tasman is evidence not only of how painful it can be when property prices fall to earth, but also of what the warning signs are of a dangerously over-heated market.

Like New Zealand today, Sydney had a red-hot property market in which price gain followed price gain. Prices rose one-third from 2002 to 2004.

But in the long slump that followed, prices across the city fell an average of 10 per cent and up to 40 per cent in some areas. Across the whole of New South Wales, residential prices have fallen by an average of 10 per cent since 2004.

Even now, signs of recovery in the market have been followed by more retrenchment. In the latest quarter, prices in Sydney have fallen an average of a further 1 per cent across the city.

Observers say before the crash, prices had lost all touch with reality. Suburban mum and dad investors were taking on staggering debts in order to buy multiple rental properties to ride the property rollercoaster.

The market had begun to slow in early 2004. Then the New South Wales government announced a 2.2 per cent property vendor tax aimed at taking the heat out of the property market.

Doubts about the Sydney property market crystallised. The bubble burst. When the government lifted the tax again within a year, it was too late. Investors fled to other states, where prices have continued to boom.

Property consultant and investor Olly Newland, who has ridden out 40 years of property price fluctuations in New Zealand, says there are lessons for Kiwis in the Sydney crash.

He believes the property market here is so overheated that it may take only a single event for a rush to the exits here too. That event could be anything from an interest rate rise, to a change in the tax treatment of investment properties, to a sudden drop in migration, or a downturn in the economy.

In Sydney, bankruptcy advisory Geoff McDonald of consultancy Hall Chadwick says ordinary couples from the western and southern suburbs have been among those who have gone broke in the price crash.

"These are mums and dads who got caught up in the excitement of a very buoyant property market," he says.

Many fell victim to peer pressure, and borrowed against the rising value of their own home. Those who fell hardest had bought multiple rental properties, all running at a loss in order to gain tax advantages.

Once property values fell, some investors were left holding properties with mortgages that were 40 per cent higher than the value of the property.

"They just didn't have the cash to keep paying the highly geared loans," said McDonald.

Price falls have been worst in the working class and middle class suburbs where the mum and dad investors lived, because they tended to buy in their own neighbourhoods. And when they came to sell their rental properties, that helped push prices down further.

"It had become so pricey, that in one or two years, people had doubled their money," says Mattiuzzo. "People that purchased right at the tail