Real estate, post COVID-19 level 4 (since 2020)

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#2585991 15-Oct-2020 17:11

tdgeek:

I could say that its one house per person, sorted, easy as. Spare houses everywhere. But where are the rentals? There are none now. We want people to buy extra houses as rentals, rentals are needed for a variety of reasons. But we have more people wanting houses than we have houses. Thats ok, I will pay want 15k more for this place because they are flocking to me to buy. But if we had a glut of houses, the prices drop because there are so many houses out there competing with mine. Interest rates dont help but in fact they allow more people to graduate to be FHB's, thats a good thing.

We need more houses built

Many people don't want to be bothered dealing with tenants, as there are a lot of potential problems when dealing with tenants. Also many of those houses that are rentals, tend to be poor quality or old and dated, and rundown. People don't want to rent out a new house to tenants, because they may trash the place. Or just not take care of it. People who are landlords will therefore pick and choose the best people. But I have noticed quite of lot of rentals appearing at the moment, guessing some are airBNBs

The problem at the moment, is that a house makes more money sitting empty, than many people make working. If the house is damaged when rented out, that could wipe away any profits. Plus the costs of renting out, including extra insurance, maintenance costs, property management etc can be high. Plus all the incoming compliance costs etc.

tdgeek

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#2586016 15-Oct-2020 18:42

mattwnz:

You are kidding aren't you? The New Zealand housing bubble even has it's own wikipedia page. https://en.wikipedia.org/wiki/New_Zealand_property_bubble

The question is whether it will pop, or be allowed to pop, or if it has been allowed to get too big to pop. Many people also didn't think finance companies could fail prior to 2007, or the stock market crsah in 87. There is a lot of greed and FOMO.

Here is an article today about the bubble. Even the reserve bank expected a -8.9% fall by March 2021, according to their monetary policy statement in August

Stimulating a housing bubble

https://www.interest.co.nz/opinion/107532/much-huge-financial-stimulus-being-pumped-economy-seems-though-it-being-pumped

Its not a bubble. Houses always increase. Allow 100% increase every 10 years. Non linear. Back then, inflation was high, wage increase were high, so broadly it didn't matter.

These days interest rates are low, they will stay low. Thats why there is very very high demand right now. its very clear that many are buying, so in one respect they are affordable. Prices are up, sales volume is up. No buyer cares about the house prices its ONLY about what mortgage they can afford. Who cares if a house you;ld be 350k or 550k, its about what mortgage can be afforded.

House prices always rise. Go back in the day, how many people on low incomes had 50k (in todays money) in the bank? NONE. Today, how many low income people have 50k in the bank? HEAPS thanks to Kiwisaver.

Today the demand well exceeds supply. The expected downturn was due to many losing jobs over Covid. Its happening, but not at the devastating effect that was predicted.

Until supply catches up, demand will exceed supply, and despite Covid, there appears to be plenty of people who can afford (look at the interest rates now) and many existing home owners can obviously afford to trade up or downsize.

To reduce this, you need to be adding housing stock, only then will supply and demand equalise, easing pressure. LVR, interest rates, they only make a slight difference, supply vs demand is the problem. That would take years to catch up, and if it does prices will gradually ease, not a bubble burst.

If RBNZ increased to OCR to 8% tomorrow, that is your bubble burst, that won't happen.

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#2586019 15-Oct-2020 18:44

mattwnz:

Many people don't want to be bothered dealing with tenants, as there are a lot of potential problems when dealing with tenants. Also many of those houses that are rentals, tend to be poor quality or old and dated, and rundown. People don't want to rent out a new house to tenants, because they may trash the place. Or just not take care of it. People who are landlords will therefore pick and choose the best people. But I have noticed quite of lot of rentals appearing at the moment, guessing some are airBNBs

The problem at the moment, is that a house makes more money sitting empty, than many people make working. If the house is damaged when rented out, that could wipe away any profits. Plus the costs of renting out, including extra insurance, maintenance costs, property management etc can be high. Plus all the incoming compliance costs etc.

You have expired why rents are high.

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#2586020 15-Oct-2020 18:45

Matt, what do you think is needed to combat high house prices and low affordability?

mattwnz

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#2586021 15-Oct-2020 19:00

tdgeek:

Matt, what do you think is needed to combat high house prices and low affordability?

There are so many things. But there is no political will to do too much, as anyone who owns a house has a vested interest in house prices rising, and those people are both National and Labour voters. Any big change could cause a big correction, which could then cause banks to become distress.

But releasing land, and not allowing developers to drip feed it into the market would be a start. NZ has plenty of land. Tax people who have empty houses for more than a year. We have to remember that this is a housing crisis.

Increasing interest rates would also affect house prices. If we have inflation then we may end up with rising rates anyway. 8% interest rate is historically still very low.

quickymart

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#2589522 20-Oct-2020 20:43

https://www.oneroof.co.nz/news/38551

2. KiwiBuild is dead

While the name KiwiBuild may survive as the branding for a government programme, the original purpose of the programme, which was to build 100,000 new homes in ten years to make up for the supposed deficit in housing stock, will disappear. The comprehensive failure of this programme in the last term of this Government, a big increase in private sector building activity, and serious doubts over whether the housing shortage ever actually existed mean that this policy will probably be permanently shelved.

Pretty sure there is a shortage, bucko. Otherwise you think house prices have just increased for the fun of it?
Seriously, where does this bloke get his material from? He's probably sitting on his 10 investment properties and doesn't see any issue with the housing market at all.

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dejadeadnz

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#2589583 20-Oct-2020 21:38

Ashley Church is IMO an uninformed raver but you also need to be realistic with your expectations around housing/price increases. Auckland is clearly a very desirable city to many and there's been a kinds of political and economic stimuli in favour of the housing market. Also whilst I agree that it's not generally socially desirable that house prices are this high, it really doesn't mean that they are unaffordable for everybody. People who can't afford to buy in Auckland need to be prepared to seriously consider other plans. Because sitting around and somehow hoping for a miracle isn't going to get you further ahead.

Again, I am not saying this is a good thing but it is what it is.

quickymart

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#2590764 23-Oct-2020 14:03

https://thespinoff.co.nz/business/22-10-2020/low-interest-rates-are-turning-the-home-ownership-goal-into-an-absurd-fantasy/

Never looked at it this way before. I thought low interest rates were a good thing.

heavenlywild

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#2590815 23-Oct-2020 14:19

It's nuts right now in Auckland. In the area I am in prices have gone up 50-80k in just 4 weeks for brand new homes. I. kid. you. not.

It's not an exaggeration either.

There's definitely panic buying. I've held off for 12-18 months and because of the clear shortage of houses for sale vs buyers, I've panic-ed too and bought an investment property. I really can't see prices falling for a long, long time. When you consider land prices are going up all the time - say, a 450m2 section will be 30k more than the previous stage of release, even if the market stalls, prices will keep going to due land costs.

wellygary

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#2590819 23-Oct-2020 14:35

heavenlywild:

When you consider land prices are going up all the time - say, a 450m2 section will be 30k more than the previous stage of release, even if the market stalls, prices will keep going to due land costs.

And that's the rub, councils need to make it easier to build houses, either by allowing 1) more land into supply, or 2) freeing up options to densify....

The problem is that the main Metro councils are so far down the "density done well" path, that option 1 doesn't get a look in... and option 2) gets hamstrung by local planning objections.....that drag out many projects making them too expensive...

mattwnz

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#2590822 23-Oct-2020 14:37

I have noticed that In satellite cities in the Wellington region, new 750 k houses about a yes ago are currently on the market for 950k plus. Who wants to pay a million for a pretty average house. Someone is making s lot of money. Cheap money and panic buying and FOMO seems to be the main reason due to Covid. It is madness with the FOMO buyers. Some of those are older retired people who are now getting nothing at the bank due to the drop in interest rates

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mattwnz

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#2590824 23-Oct-2020 14:40

wellygary:
heavenlywild:

When you consider land prices are going up all the time - say, a 450m2 section will be 30k more than the previous stage of release, even if the market stalls, prices will keep going to due land costs.

And that's the rub, councils need to make it easier to build houses, either by allowing 1) more land into supply, or 2) freeing up options to densify....

The problem is that the main Metro councils are so far down the "density done well" path, that option 1 doesn't get a look in... and option 2) gets hamstrung by local planning objections.....that drag out many projects making them too expensive...

land is only drip fed and controlled. This keeps demand high and reduces choice and keeps prices highe. Imo they should force developers to sell them, or tax them to the hilt as it is a crisis.

Their is no political will to change things dramatically because house prices rising makes their voters feel richer.

heavenlywild

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#2590828 23-Oct-2020 14:50

When interest rates for deposits are so low, it's no surprise people with savings decide to put it towards a property to get more gains.

Agree with the above, land is drip fed which leads to demand. I don't think its developers wanting to land bank, they are desperate for land to open up to sell to FOMO buyers like myself. I don't want to pay 50k ot 100k more in 12 months so I bit the bullet.

heavenlywild

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#2590842 23-Oct-2020 15:11

mattwnz: Their is no political will to change things dramatically because house prices rising makes their voters feel richer.

That's exactly right. Neither major party during the election wanted house prices to fall, rather, their preferences are to "keep price increases manageable". After hearing that, the sad truth for those wanting to get into the market is, it will get harder and harder by the week. However, for investors, it's a sure sign to get on with buying more.

Edit: Typo.

mattwnz

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#2590869 23-Oct-2020 15:53

heavenlywild:
mattwnz: Their is no political will to change things dramatically because house prices rising makes their voters feel richer.

That's exactly right. Neither major party during the election wanted house prices to fall, rather, their preferences are to "keep price increases manageable". After hearing that, the sad truth for those wanting to get into the market is, it will get harder and harder by the week. However, for investors, it's a sure sign to get on with buying more.

Edit: Typo.

IMO it could hinge on how the economy goes. Both Labour and National both said that Nz is for some tough years with the economy. So how will this affect demand for housing, and what people will then pay. If it turns into a buyers market things could change . The problem with people buying houses as an investment is that they will need to rent them out and it seems like the number of listing for houses for rent seem really high at the moment.

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