Good news Stories

[minimoke]

how far it will drop depends on the government, but the higher the debt the bigger the fall.

NeoploeII, I started this "Good News" thread as a counter to all the doom gloom storires that were happpening on the other threads. Consequently you'll only get a positive spin from me on this particular thread - and there are other threads that can be used for the misery stories.

The good news is that while we have lost a lot of our local manufactuing factories we have replaced them with call centre factories.

And just to be clear I'm comfortable picking property prices will continue upwards over the longer term - but I'm not suggesting we are about to see another bubble.

[Ptolemy]

I don't see NZ property as being "special" but there are certain things that suggest values will continue to go up where as the evidnce for a fall is slim. Not even the worse financial crisis to hit the planet since the great depression managed to but much of a dint in it.

Sorry, can't get the hang of this quote thing. Hey, it worked this time.

Hi MM,

Can you provide a list of what those certain things are? What I have seen as the main reason by posters on other blogs is that supply will continue to outstrip demand beacuse of increasing population (immigration etc). I was wondering if there were any other reasons that you think they might keep going up except that is just always has?

I agree that it is remarkable NZ has avoided the property price declines of other Western countries but I believe we both agree on why that is - or at least I think you agree based on your post.

cheers

[minimoke]

Can you provide a list of what those certain things are?

heres a few:
NZ'ers have an inter-generational love affair with owning property - it is in our blood so a basic yearning to "own" isn't going to be diluted easily. This equals "demand"

The governement (doesn't matter if it is Labour or National) have a desire to see people in their own owned homes. They provide subsidies/incentives like "Welcome Home start" and Kiwisaver = demand.

Govt regulations / spending on things like insulation. That spend will get refelcted in a higher valued home.

The "Accomodation Supplement" will keep cash in the system to keep rents up and prices up.

Population growth = demand

Relatively stable employment / wages / governement / banking = more comfort when borrowing = demand.

Aging stock which needs replacing = demand for better property along the chain. = demand

Stock not meeting demand. If building consents/construction don't keep up with demand = values up.

Where do you park your investment money. Dodgy Finance Companies, Dodgy Wild West NZ stocks, Long term deposits. NZ'ers prefer property = demand.

Aging population: moving from 4 bedroom family homes to two bedroom villas but not wanting to make a "loss" on family home will see values hold. Construction of 2 bedroom villas provides balance to market which shows value of 4 bedroom keeping prices up.

No Capital Gains Tax or Duty on property transaction = easy investment option = demand (and when these do come in the acountants will get creative on ways to avoid paying)

Land - you can't grow more of it (yeah I know - don't comment!) but the resource consent and compliance costs of developing new land will keep new building costs up which need to be reflected in the value.

Nesters will eventually move out of home and want their own and dumb parents will help finance the dream (well they helped finance the lazy kids by keeping them at home) which will see cash keeping flowing in this sector.

NZ$ makes ownership by foreigners attractive ( I can't see the current rates staying high for the long term) = demand

Inflation through trades - people not wanting to get their hands dirty or do "hard labour" (go to universitry to be an accountant or IT specialist) will see less skilled trades = higher wages for those trades = higher values.

Inflation - it will be back.

Gloabal warming / Terrorism / Bird Flu - whatever. NZ looks a pretty attractive place = demand.

Technology / time zones. means northern hemisphere companies can get people to move to NZ and use their brain power locally = demand.

People need a roof over their head - means that they either own or they rent from someone who owns = demand

Now if we get all these things happening at once we can expect a bubble. But it only takes a few of these things to offset any negatives to still see property values increasing over the long term.

[Ptolemy]

Thanks MM. That is a pretty useful list to chew through.

I could try and refute most of them but won't. Some of them I even agree with.

My main argument against prices going up materially from here has always been affordability (which I know we have discussed on another thread)

On another blog site there has been much debate about property prices. One of the pro property bloggers had a home grown formula which showed that home affordability had reached a level where it was at levels not seen since the late 90s. His formula was based on interest rates, prices, average wages and average wages per households. The average wages per household figure was at 1.6 from memory and had been steadily been rising since the early 80s when it was close to 1. The debate centred around whether prices were causal in the numbers of workers per household rising or because of lifestyle and intergenartional changes. The question I pose is what happens when it gets to 2? Send the kids to work, two families per household etc.

Anyway, only time will tell. I will leave you with one thought. If the average Auckland house doubles in the next 10 years (general RE rule of thumb) and wages only grow by 50% (unlikely to be so high unless the economy really kicks on), the average house price will be approx $1 million and the average wage will be approx $68k. Even with two workers per household there is no way they could raise the deposit let alone the service a mortage at long term average interest rates.

[minimoke]

Anyway, only time will tell. I will leave you with one thought. If the average Auckland house doubles in the next 10 years (general RE rule of thumb) and wages only grow by 50% (unlikely to be so high unless the economy really kicks on), the average house price will be approx $1 million and the average wage will be approx $68k. Even with two workers per household there is no way they could raise the deposit let alone the service a mortage at long term average interest rates.

My crystal ball gets a bit fuzzy bute heres what I reckon might happen.

Firstly banks will increase the term of the mortgage. Rember it wasn't so many years ago the max term was 25 years. Its now out to 30 as a norm.

Banks products will include "interest Only" - rather than the current and predominant interest principal arrangments.

Banks wil also introduce "Buy back" type schemes. So they claw back the principle on the sale of the property or on your death from the estate.

It is in the banks intersts to see property prices increase becasue this gives them exposure to the lucrative mortgage business. If there is any doubt on the powers banks have you only need to look at the GFC to see how governements are more than happy to prop up this dodgy sector and here in NZ financial institutions (like Kiwisaver) are just handed money hand over fist with no effort at all. Money lending has been around since Moses could grasp a Shekel - I don't see anything changing that except they will just get cleverer at getting the loot to an instatiable demand.

[minimoke]

And the good news keeps rolling in (Ptolomy and Neopole I appreciate this is only good news for those with investments in property)

REINZ figures out and what do we have.
Median Prices for the month UP 0.9%
Median Prices from January UP 13%

Average Prices for month UP 2.3%
Average Prices from January UP 11.6%

Values now ($350,000) down ONLY 0.57% from Nov 07 "High" ($352,000 - Bernard - what happened to 30%)

Values now up to pretty much historic high levels.

No. of properties Sold UP
Days on market DOWN

No of sections sold UP (highest level in 21 months)
Average price per section UP

[George]

None of this applies to our area out West Ak, but as QV say,
some areas are stagnant. Just as well we don't have to sell.
Not one person to the 2 open homes next door again and Sunday
was a beaut day.

[minimoke]

None of this applies to our area out West Ak, but as QV say,
some areas are stagnant. Just as well we don't have to sell.
Not one person to the 2 open homes next door again and Sunday
was a beaut day.

Strange?? Henderson (for example) is up from January.
jan = $355k, Sept = $360. No of props sold - Jan = 75 Sept = 197. Days on market. Jan = 57, Sept = 27

There simply isn't enough data for the Waitakeres but if you want good news Median has moved from $470k to $557k in the past month. A couple of sales a month suggests there just isn't the demand for people to go out there. I don't know this area, but based on sales people either don't want to be there or they dont want to sell.

I'm a happy camper because my area has lifted 24% since January (average up 15%) with sales numbers doubling and time on market down to 26 days from 68 days.

[minimoke]

On another blog site there has been much debate about property prices. One of the pro property bloggers had a home grown formula which showed that home affordability had reached a level where it was at levels not seen since the late 90s. His formula was based on interest rates, prices, average wages and average wages per households. The average wages per household figure was at 1.6 from memory and had been steadily been rising since the early 80s when it was close to 1. The debate centred around whether prices were causal in the numbers of workers per household rising or because of lifestyle and intergenartional changes. The question I pose is what happens when it gets to 2? Send the kids to work, two families per household etc.

I've no idea what that foumula is or how valid and reliable it is. The question I'd be asking though is did he build in Working For Families "income" into his net income figures. Looking at "wages" doesn't tell teh whole picture on income.

If someone has WFF then this could just about pay the mortgage on its own without any other income. Take a family with 3 kids and an income of $50,000. Thats $215 a week WFF. Which means the Tax Payer is going to give your person the ability to fund a $165,000 loan. Heres a 3 bedroom house in Manukau for $175,000. http://www.trademe.co.nz/Trade-me-pr...-241357122.htm Negotiate hard and you might get it for $165 - all on WFF! Thats affordable and thats good news!

[beacon]

heres a few:
NZ'ers have an inter-generational love affair with owning property - it is in our blood so a basic yearning to "own" isn't going to be diluted easily. This equals "demand"

...

Now if we get all these things happening at once we can expect a bubble. But it only takes a few of these things to offset any negatives to still see property values increasing over the long term.

Thoughtful argument. Ditto that