Property bubble on the horizon

[duncan macgregor]

The share market crash has sent investors running scared to get back in to that market, and risk losing more of their savings. The property market in a downtrend, with a slow down in new construction. The dropping of interest rates, along with the raising of deposit lavels, will end up with increased rents, and a shortage of supply.
1, 1st time buyers cant raise the deposit.
2,Shortage of supply will increase demand.
3. Builders will have flown the coup.
4, people with money will buy something safe as houses to rent out.
5, that is a recipe for another property bubble in two or three years time.
The greed and corruption in the share market has destroyed the average persons faith in that market, what better place to invest than playing it safe with property.
Macdunk

[neopole]

a different point of view..........
there wont be another bubble for the next 10-15 years.
why.
all those that fuelled this bubble have or are getting burnt or a really lucking getting out in the nick of time.
how many folks have said that property prices never fall?
in the last 7 years.... virtually all the "jones" whiz kids, speculators and 30 somethings.
the older generation and normal home owners didnt care or play the game, and new home buyers in the sub 30yr group have seen the carnage and are scared to speculate.

people will look at housing for what it is........... a home,

housing in the medium term future will be void of speculation.

as housing becomes more affordable (cheaper) 1st home buyers will start buying, slowly but surely, as they "save" their deposit.... like we the 40-60yr olds did.
with the new government in place, the days of endless housing suppliment benifits for the poor will be rained in and rental property investors will find it harder to charge exorbadent rents and therefore their investment properties will also shink in value.

also with the disasters of the sharemarket and finance industry, and a business focused government in place, the sharemarket should be a safer place in the future.

the previous government didnt like business or wealth enhansement except for rampant property speculation, which has left us where we are today.
anyone who believes we are heading for another property bubble has a vested interest in speculating on property.

i wonder which bank or finance company is going to start lending willy nilly to investors and speculators to the point of creating a bubble???

and which government is going to dish out housing suppliment benifits to the point of creating a bubble??

my guess none for at least 9 years.

[Mick100]

Macdunk - if you want to preserve your wealth then buy some gold mining shares

I agree with neopole - it will be another ten yrs before there's another property bubble

[Dr_Who]

I agree with Mcdunk that the global govt's are creating another bubble with their attempt to pop up the economy by printing and pump liquidity into the economy. The US is doing exactly the same thing they did post 911, by pumping cash into the system that created this bubble in the first place.

Humans have short term memory. We tend to forget quickly about the bust days when we start seeing money in our pockets again. This is evident with Bridgecorp, Blue Chip and Hanover... etc.

I predict there will be another bubble in the not too distance future with market boom and crash with shorter cycles. The next cycle of boom and bust will be less than 10 years. Hence 1987, 1997 and 2008.

Enjoy the ride while you can.

[minimoke]

Humans have short term memory. .

Jeez – you’re right there. We’ve forgotten that its not so long ago that interest rates were going up and were more than happy to fix. Now we are hearing the bleating about break fees – all in less than a year. Property probably isn’t the best for those with short memories.

I agree with Mcdunk to a greater extent. I’m not so sure it will be quite so quick. I quite like the returns offered by Finance Companies which are government guaranteed. This might not be a bad place to park some cash rather than in property just at the moment. At some point the government will take away this motherly approach to saving (perhaps in the next 2 – 3 years) and then we’ll really see the drive into property. But those that get in before then will be well placed.

[kazza]

That is very wishfull thinking property is going to die a slow death for several reasons:

1)the property boom started in the 1990s when house prices went up with household incomes as more and more women entered the workforce and gradually increased the household income. this boom turned into a bubble in 2002 as baby boomers started realizing they were getting old and started buying rental investments to fund their looming retirements and fears that
superanuation won't be enough to live on.The 1987 sharemarket crash has put baby boomers off shares forever and made property investment the only "safe" investment. In 2002 the peak baby boomers (those born 1957) were turning 45 the kids have left home, both mum and dad were at the peak of their earning potential, a sizeable equity in the family home combined to enable them to drive prices up to record levels as they have all competed to get on the property bandwagon.


2)households can only afford to spend so much on housing (the limit historically is considered 30% of gross houshold income) household incomes have now hit their maximum level as the workforce participation of women is at its maximum peak. The first Baby boomers (those born 1946) have now started retiring aged 62 going from high incomes onto retirement incomes. This will increase at a massive rate from now on and will hit its peak in 2015. the effect of baby boomers retiring means they will no longer be in the property market. It will also slowly but surely deflate median household incomes.

3)as property investors slowly realise there is no massive capital gains to be had anymore they will exit the market

4) with current rental yields around 4-5% and negative capital gains the return on property just doesn't stack up compared to government backed deposit rates.

5) the introduction of kiwisaver and all its government and tax benifits has now given a "safe" retirement alternative to the last of the baby boomers (now aged 45-50) who could of potentially kept the bubble going a bit longer.

6)the difference between renting and owning a home is too great with median rent at $300 a week (at 26% of median income and incomes dropping unlikely to increase) Mortgage interest at current median house prices is $450 week ($335,000 x 7%) the median price would have to come down to $225,000 before it was a viable alternative to renting and this doesn't take into account council rates, insurance, maintenance costs.

7)the current economic recession and rising unemployment is going to put even more downward pressure on household incomes

8)mortgage criteria is much stricter as the banks realize the property bubble has burst all over the world.

The time has come to realise that property is never going to recover, its all downhill from here. Once the current recession is over the effects of baby boomers retiring/dying will increase and it will be generation X,Y who will be calling the shots and buying the family homes off the boomers at much cheaper prices than they are now then inheriting the rest.

[miner]

Some of you boys sound like the guy who bought the share xyz at the height of it's ramped up unrealistic price and are now left holding the baby after the music has stopped.

And you are now busy trying to convince yourself and everybody else who will listen that xyz is a good investment and we should all buy it even though it is heading south.

Cheers
Miner

[kazza]

2,Shortage of supply will increase demand.
3. Builders will have flown the coup.

Arbritage you also say "Auckland City is growing by around 40,000 people per year at the moment and Forget the bubble, look at supply and demand. I am holding on to my property portfolio thanks."

here are some of the statistics relating to supply and demand:

People in the 30-60 year age bracket are net buyers of housing while people in the 60-90 age bracket are net sellers of property. The older age bracket is getting bigger while the middle age bracket is staying constant so there will be increasing supply of properties on the market with no increasing demand from buyers.

Natural population growth is decreasing as the number of births stay constant but the number of deaths increase. Last year there were 65,000 births and 29,000 deaths, a net increase of 36,000 nationwide

Average net migration since 1967 has been around 10,000 per year, last year net migration was 4000, so a total population increase of 40,000. With competition for new migrants increasing in much larger and more wealthy countries such as America, Japan, Europe and Australia. Chances of net migration increasing above historical averages is very low and may even decrease.

In 2006 there were 1,651,542 dwellings (1,515,642 in 2001) for a population of 4,027,947 That’s 2.44 people per dwelling this number is projected to decrease to 2.1 (it used to be 3). Last year there were 22,000 new dwellings built (down from the average of 27,000) In order to support the current population increase of 40,000 at 2.4 people per dwelling there only needs to be 17,000 new dwellings built to accommodate current population growth.

In 2015 population is expected to increase by only 30,000 (an optimistic 10,000 net migration and 20,000 net births) at 2.1 per dwelling this means only 14,000 new dwellings need to be built. So unless the number of new dwellings decreases over time there will be an over supply of roughly 50,000 (this has happened in the USA already)

It is the same in Australia, Europe, USA, Japan, Canada so I am not sure where all the builders and other tradesmen are going to fly the coup to except maybe China or India. My guess is they will have to retire early

[Arbitrage]

Well the recent "property bubble" has burst and prices are down 5-10%. The sharemarket has a "correction" and drops 30%. So are we saying to get out of property?

[fungus pudding]

Well the recent "property bubble" has burst and prices are down 5-10%. The sharemarket has a "correction" and drops 30%. So are we saying to get out of property?

The property bubble hasn't burst yet. It will though.