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  1. #1291
    Legend minimoke's Avatar
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    Quote Originally Posted by George View Post
    Another question I now add to the ones above re inflation and interest rates (which no-one
    seems game to answer) - what about DEflation???
    OK, Ill give it a shot – but if you want three more answers find three economists.

    We are heading towards our recent historic interest rate lows of 5.65% in the mid sixties. While there is a political and economic will to see rates drop further, there isn’t an indication that there is will to see them drop below historic levels. My pick – perhaps as low as 6.5% by mid 2009 but after that the oldies will be screaming too loud about their retirement savings. After that rates will stabilise and then start heading back up. Who knows what the catalyst will be – but we do know rates go up and they go down; that’s the nature of life.

    Amongst all the data that always fluctuates there is only one trend that stay constant – that is that the worlds population continues to increase. This keeps pressure on the demand side of inflation. This being just one ingredient – I don’t see us getting into deflation. Its the mid 1930’s since we were last there – times have changed.

    We already have inflation –its at around 5% - the highest rate since the early 90’s. So inflation will come down. Lets say it gets to 3% - this isn’t really inflation as we might know it. Not like when we had 15% in the 70’s and 80’s. But it is inflation all the same – and this will flow into property.

    Property values are also on a cycle – currently they are in a downwards part of the cycle but since we also have had inflation, and probably always will property values will turn around and head back up. Our housing stock will change: the old villas will have passed their economic life and be pulled down with new homes being built; the oldies will quit their big homes but demand for self contained old folks amenities will increase (see why Rymnan are doing so well) and those that can’t afford to buy (and there will be more of them) will go to rental housing; cheap apartment blocks will start crumbling and the ghettos of the future will push people back into traditional stock; birth rates are increasing (meaning the wee dears are going to need an education and where are the schools?) - all putting positive pressure on property values.

  2. #1292
    slow learner
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    imho I do not see deflation as an issue, in fact I see high inflation next year.

    The US$ has started it's fall, printing money, bail outs etc. etc... The price of oil moves in the opposite direction, the price of oil effects the price of all staples including food which are all very inflationary... US$ down = inflation up!

    Property is in for a +30% drop in value but half of that might be through high inflation.

    my 2c

  3. #1293
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    Quote Originally Posted by Financially dependant View Post
    imho I do not see deflation as an issue, in fact I see high inflation next year.

    The US$ has started it's fall, printing money, bail outs etc. etc... The price of oil moves in the opposite direction, the price of oil effects the price of all staples including food which are all very inflationary... US$ down = inflation up!

    Property is in for a +30% drop in value but half of that might be through high inflation.

    my 2c
    http://www.cbsnews.com/stories/2008/...n4666112.shtml

  4. #1294
    Legend minimoke's Avatar
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    Quote Originally Posted by funguspudding View Post
    The ALT-A’s and AMR’s presumably paid some interest at the time the loan was set and probably at a time when the Fed had their rates at 4%ish. With the Fed now setting the rates effectively at 0% these reset rates won’t look as bad as they might have been – so the impact might not be as bad as the Author anticipates.

  5. #1295
    Senior Member upside_umop's Avatar
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    Theres been many things I could have posted in the last 2 weeks...but have chosen not to.

    But these are pretty good if people want to get into a bit of light reading with their spare time.

    http://www.nationalbank.co.nz/econom...s/default.aspx

    Note Minimoke, that in the December issue, that under building consents, they have very similar views to me in construction costs.

    http://www.stuff.co.nz/4799888a13.html

    I'm sure many have already read the above article. Fancy pumping that out before Christmas...

    My sister and brother in law bought a house 2.5 years ago and did multiple renovations including, kwelia deck, revamp garden (major), interior design etc. They have just had a valuation and the agent gave an appraisal of less than they originally paid for it. This is in the booming region of Blenheim.

    Sorry to be negative around this festive season, but there is worse to come.
    By the way - it's upside_down, not upside_umop

  6. #1296
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    Bernard Hickey says in http://www.nzherald.co.nz/business/n...ectid=10549103
    that even if the OCR drops to 4%, longer term mortgages will still be around 7% because of the cost
    of overseas borrowing.
    With high break fees now it seems risky to change to a lower rate, but a 30% drop in housing would
    be a worry. Also, by adding several thousand to the mortgage to pay the break fee will temporarily
    lower ones equity and that also, temporarily, would be a worry.

    Another article http://www.nzherald.co.nz/business/n...ectid=10549106
    shows opposing viewpoints about how much banks should share the pain with customers.

    I can see this thread going for years, it will be interesting to see how this all plays out and
    who was right - first home buyers in a couple of years or existing owners now.

    George

  7. #1297
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    Quote Originally Posted by upside_umop View Post

    http://www.stuff.co.nz/4799888a13.html

    I'm sure many have already read the above article. Fancy pumping that out before Christmas...

    My sister and brother in law bought a house 2.5 years ago and did multiple renovations including, kwelia deck, revamp garden (major), interior design etc. They have just had a valuation and the agent gave an appraisal of less than they originally paid for it. This is in the booming region of Blenheim.
    I thought that was a lazy piece of reporting of a shabby piece of research. I’d have expected something more robust from a university – perhaps it was the work of a first year student supervised by a Professor who is about to publish a book – just like the Canterbury bloke did on the 1918 epidemic at the height of bird flu.

    For a start the headline did not reflect the evidence. The evidence suggested house values had dropped 10% - but on the other hand mortgages were 75% or more. There’s a big hole in the data right there. Also home owners tend to hang onto their homes, on average for around 7 years. Taking homes bought and mortgaged in one year cannot be extrapolated to all mortgage holders.

    The data was based on first sales in 06/07 – right at the peak of the trend. Most posters here consistently said buying at/near the peak with minimal deposit was foolhardy. Westpack was rightly hauled over the coals for offering 110% during this time – you’ll find the response in these threads somewhere.

    Then there is the sample size. There were around 8,000 homes sold in Christchurch in that period. This is about 6% of the total housing stock (which suggest many are holding their property for a lot longer than 7 years in Christchurch)

    Of these 8,000 – how many were resold in that research period – maybe 500. Anyone buying a home and then having to sell within a year is generally one of two people. Either a speculator hoping to flick on at a higher value during boom times – well that person lucked out. Or the person is a distressed seller. Maybe the family has split, the job is redundant or on transfer or there is a death. Whatever, being a distressed seller is not a good place to be to get top dollar for your home – you can expect to be screwed under those circumstances, regardless of the market.

    There is a cavernous difference between “being at risk of negative equity” and “1 in 5 owes bank more than house is worth” so that article is worth less than tomorrows chip wrapper and would be insulting to loo paper to suggest an alternative use.

    Oh – and a clue for your rellies. A valuation and an appraisal are two different things. Anyone who takes the word of a real estate agent needs their head read. I’m not sure you can have “booming Area” and “Dropping property values” in the same context – but agents will spin any kind of yarn.

  8. #1298
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    Default Bernard Turkey

    George, don't listen to Hickey, how can you fly with eagles when you run with turkeys? What is his agenda to instill fear into the market like that? Does Bernard own a house? My prediction is for general prices to flatten out and for some areas to head south by another 10%.

    I'm not an economist, but these economists don't seem to know f**k all in the current climate.

    As for refixing your mortgage – we can't complain about breakfees, when the option is available to take a floating rate, or a shorter term.

    The hysteria around this housing problem is ridiculous, most first home buyers will stay put in their properties and as long as they keep their job they'll be fine. The crazy days of flipping your house every year has gone, now is time to knuckle down and get on with it. I also strongly disagree with the skewed picture we get in the media about 'average' houses. If you're a first home buyer you won't be in the 'average' house category, you'll be in the small, unit or 2 bedroom townhouse category. Or you should be. Plus Bernie mentions that in the good old days a 30K deposit could have got your $600k, well if you did that you're a turkey just like Bernie. If you've got a good combined income $30k should get you $300k. Plus there is this garbage about 'home affordability as compared to your household income' They say the average house would take 80% of the average wage, well that sounds stupid to me, all these stats depend on the inputs that go into them, they seem to take no account of the real world, the academics who operate these models are so far out of touch.

    Upside, your brother who rennovated his house obviously over capitalised on his rennovations didn't he? If he's fine with staying there, what's the problem? He should have got a valuation before he embarked on his renno.

    A message to all those sitting on their hands, if you need somewhere to live and you find something you like then buy it, you'll be there for a while. There is never a good time or a bad time to be in the market.

    Thats my rant for Monday.

    Mr D.

  9. #1299
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    Quote Originally Posted by upside_umop View Post

    http://www.nationalbank.co.nz/econom...s/default.aspx

    Note Minimoke, that in the December issue, that under building consents, they have very similar views to me in construction costs.
    Have they been reading our posts – pretty much as I’ve been saying – but lets here it from the bank:“The key indicator we monitor - the median number of days to sell - improved to 47 days (in seasonally adjusted terms) and has fallen over consecutive months after peaking at a record high of 57 days in July. The median house price has stabilised, and has in fact risen over the past three months to $337,500, although is still down 4.1 percent on a year ago.”

    The comment on construction costs reflects downward pressure (fair enough) but it does not say construction costs will, for example, next year be less than this year. Construction costs will continue to go up.

    Nor do they talk about the risks associated around construction – did you see the article on “Squeaky buildings” – where parts of the the industry in Auckland have attempted to drive down costs is using sub-standard timber. So builders are charging less – but the new owner is getting less!
    Last edited by minimoke; 22-12-2008 at 08:49 AM.

  10. #1300
    Legend minimoke's Avatar
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    Quote Originally Posted by George View Post
    I can see this thread going for years, it will be interesting to see how this all plays out and
    who was right - first home buyers in a couple of years or existing owners now.

    George
    George, usefully we will have Shrewdies reference point of $330,000 house in January 07 (which was pretty much the median price at the time) with a 9.5% floating interest rate (edit - on a really low deposit 5% would have done it - or take Westpaks 110% mortgage). My pick is that in Jan 09, 10, 11 and on some of us will have been right and others will have missed some great opportunities – but time will tell.
    Last edited by minimoke; 22-12-2008 at 08:47 AM.

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