Housing prices....

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#1639973 24-Sep-2016 19:17

gzt: The thing about low/lower house prices is that a house is very likely to be the same value in relation to other houses. Buying a different house with the proceeds of an existing house is not a problem.

Nailed it. Those who bought 30 years ago are still laughing, maybe not as much. Those that bought 3 months ago, well they know its a heated market, they took the punt. No issues there.

If you want to upgrade, downsize, just sell/buy in the same market to hedge it

tdgeek

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#1639976 24-Sep-2016 19:22

dejadeadnz:

MikeB4: Hands up here all current home owners who want to see their market valuation drop by 10, 20, 30, 40 %

I for one couldn't give a stuff if my properties dropped 20% in book value. We currently rent where we live and own a couple of rentals (and behave like responsible tenants and landlords). Our leveraging is low and the rentals were bought as genuine investments, rather than speculating for capital gain. Sensible people can easily ride out drops of 20% or more. And I am sure the country overall will benefit from some price sanity in the long term. Not everyone focuses only on the tip of their nose every second.

Yep. Shares, there is a sharemarket downturn. The soundness of the stock is unchanged. Its not like a share price downturn , or crash, means that and every other company is rubbish. Its actually time to buy. My house value drops 20%, doesn't affect me. It rises 20%, also doesnt affects me.

As has been stated previously, the GFC hard a fat lower effect here. Being small we are very exposed to global issues, but this country was low affected by the GFC as we are not in boots and all in the global financial system

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#1639981 24-Sep-2016 19:33

tdgeek:

dejadeadnz:

MikeB4: Hands up here all current home owners who want to see their market valuation drop by 10, 20, 30, 40 %

I for one couldn't give a stuff if my properties dropped 20% in book value. We currently rent where we live and own a couple of rentals (and behave like responsible tenants and landlords). Our leveraging is low and the rentals were bought as genuine investments, rather than speculating for capital gain. Sensible people can easily ride out drops of 20% or more. And I am sure the country overall will benefit from some price sanity in the long term. Not everyone focuses only on the tip of their nose every second.

Yep. Shares, there is a sharemarket downturn. The soundness of the stock is unchanged. Its not like a share price downturn , or crash, means that and every other company is rubbish. Its actually time to buy. My house value drops 20%, doesn't affect me. It rises 20%, also doesnt affects me.

As has been stated previously, the GFC hard a fat lower effect here. Being small we are very exposed to global issues, but this country was low affected by the GFC as we are not in boots and all in the global financial system

Although try telling all the people who lost money in finance companies that. Hundred of millions of dollars of savings , of mostly retired people were lost. Many lost it due to incorrect information in the prospectuses, so it was outside of their control . There wasn't enough regulation back then, it is always the ambulance at the bottom of the cliff in NZ for this type of thing. This time around many of the greys have put their money into houses, because they don't trust the sharemarket (after the 80's crash), or our financial markets

Shares are far more volatile than houses because you can buy and sell shares instantly, which means panic buying and selling can occur. Whereas houses take weeks to buy and sell. So the price swings are a lot slower, and there is less panic buying and selling. But external conditions outside of NZ could affect it, if cheap credit dried up, or overseas buyers weren't allowed to buy NZ homes.

tdgeek

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#1640009 24-Sep-2016 19:49

mattwnz:

tdgeek:

dejadeadnz:

MikeB4: Hands up here all current home owners who want to see their market valuation drop by 10, 20, 30, 40 %

I for one couldn't give a stuff if my properties dropped 20% in book value. We currently rent where we live and own a couple of rentals (and behave like responsible tenants and landlords). Our leveraging is low and the rentals were bought as genuine investments, rather than speculating for capital gain. Sensible people can easily ride out drops of 20% or more. And I am sure the country overall will benefit from some price sanity in the long term. Not everyone focuses only on the tip of their nose every second.

Yep. Shares, there is a sharemarket downturn. The soundness of the stock is unchanged. Its not like a share price downturn , or crash, means that and every other company is rubbish. Its actually time to buy. My house value drops 20%, doesn't affect me. It rises 20%, also doesnt affects me.

As has been stated previously, the GFC hard a fat lower effect here. Being small we are very exposed to global issues, but this country was low affected by the GFC as we are not in boots and all in the global financial system

Although try telling all the people who lost money in finance companies that. Hundred of millions of dollars of savings , of mostly retired people were lost. Many lost it due to incorrect information in the prospectuses, so it was outside of their control . There wasn't enough regulation back then, it is always the ambulance at the bottom of the cliff in NZ for this type of thing. This time around many of the greys have put their money into houses, because they don't trust the sharemarket (after the 80's crash), or our financial markets

Shares are far more volatile than houses because you can buy and sell shares instantly, which means panic buying and selling can occur. Whereas houses take weeks to buy and sell. So the price swings are a lot slower, and there is less panic buying and selling. But external conditions outside of NZ could affect it, if cheap credit dried up, or overseas buyers weren't allowed to buy NZ homes.

Pretty much agree. Shares are a lot like houses. They will appreciate over time, so ignore the bear and bull markets. When house prices are flat, i.e. not rising, shares and term deposits are good, as typically interest rates are higher. If your a share investor, its good to have negative drama, the market reacts downwards, yet the companies you invest in are often unaffected, time to buy, to reduce the average portfolio price per share. Its a funny and weird phenomena, as once a person becomes a shareholder, they become, well a share holder. Yet the panic, buoyancy of the market perception often overrides reality. Like property, don't go in for the short term. But you might male a tidy short term return if you are lucky

tdgeek

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#1640011 24-Sep-2016 19:52

The finance company issue was a great pity, thats the Govts fault 100%. Allowing freedom, or at least lack of monitoring/regulation that allowed excessive leverage. Leverage is awesome, until it bites.

JimmyH

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#1640020 24-Sep-2016 20:25

tdgeek:

The finance company issue was a great pity, thats the Govts fault 100%. Allowing freedom, or at least lack of monitoring/regulation that allowed excessive leverage. Leverage is awesome, until it bites.

It's not the government's job to regulate the soundness of someones investment decisions.

The Crown regulates the banking sector because of systemic risk issues - there are hurdles and regulatory barriers in return for being allowed to call yourself a bank, and benefits as well. If you put your money in a bank you can have some confidence that they are being monitored (and implicitly supported, to at least a degree) by the central bank. If you put you money with a finance company you passed on the benefit of having it as closely regulated as a bank, and explicitly took on more risk, in return for a higher interest rate.

If finance company investors wanted less risk they should have deposited their money in a bank. If they wanted basically none, they should have bought government bonds. Instead they deliberately took on more risk to try and make more money. For many years that worked for them and they did better than being in a bank, until the risk materialised. Not the government's fault (either Labour when the crash started, or National's later on) at all.

Investors took a risk, and lost money when it didn't turn out for them. Move along .... nothing to see here.

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#1640027 24-Sep-2016 21:02

JimmyH:

tdgeek:

The finance company issue was a great pity, thats the Govts fault 100%. Allowing freedom, or at least lack of monitoring/regulation that allowed excessive leverage. Leverage is awesome, until it bites.

It's not the government's job to regulate the soundness of someones investment decisions.

The Crown regulates the banking sector because of systemic risk issues - there are hurdles and regulatory barriers in return for being allowed to call yourself a bank, and benefits as well. If you put your money in a bank you can have some confidence that they are being monitored (and implicitly supported, to at least a degree) by the central bank. If you put you money with a finance company you passed on the benefit of having it as closely regulated as a bank, and explicitly took on more risk, in return for a higher interest rate.

If finance company investors wanted less risk they should have deposited their money in a bank. If they wanted basically none, they should have bought government bonds. Instead they deliberately took on more risk to try and make more money. For many years that worked for them and they did better than being in a bank, until the risk materialised. Not the government's fault (either Labour when the crash started, or National's later on) at all.

Investors took a risk, and lost money when it didn't turn out for them. Move along .... nothing to see here.

Not quite correct.

Non bank financial institutions are regulated, and were regulated before the small handful of inept and illicit finance companies folded. In 2007 regulations that existed were enhanced, and in a rush, to improve this situation.

So it it is the case that it is the Govts job to regulate investment decisions, that has been the case for non banks for a long time. Little different to many parts pf our lives where Govt regulatory behaviour exists.

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#1640216 25-Sep-2016 13:48

tdgeek:

Pretty much agree. Shares are a lot like houses. They will appreciate over time, so ignore the bear and bull markets. When house prices are flat, i.e. not rising, shares and term deposits are good, as typically interest rates are higher.

Shares collectivity grow (slowly in NZ) over time. A single stock can rapidly collapse and never rebound. Plenty of once great companies have gone to the wall. Plenty of people lost almost everything in 1987 and in the GFC.

Shares are OK if you have the skills to manage a portfolio. Most people don't. I certainly don't and I really have no interest in learning.

So many shares are based on intangible assets that can vanish overnight. Companies with significant market capitalisation that own very little in the way of real assets. BS and jelly beans.

My Kiwisaver is my investment in shares and everything else I don't understand how to trade. I only have that because it gets me contributions from employers and govt.

Mike

Fred99

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#1640247 25-Sep-2016 14:16

MikeAqua:

tdgeek:

Pretty much agree. Shares are a lot like houses. They will appreciate over time, so ignore the bear and bull markets. When house prices are flat, i.e. not rising, shares and term deposits are good, as typically interest rates are higher.

Shares collectivity grow (slowly in NZ) over time. A single stock can rapidly collapse and never rebound. Plenty of once great companies have gone to the wall. Plenty of people lost almost everything in 1987 and in the GFC.

Shares are OK if you have the skills to manage a portfolio. Most people don't. I certainly don't and I really have no interest in learning.

So many shares are based on intangible assets that can vanish overnight. Companies with significant market capitalisation that own very little in the way of real assets. BS and jelly beans.

My Kiwisaver is my investment in shares and everything else I don't understand how to trade. I only have that because it gets me contributions from employers and govt.

There's actually a big difference missed here.

In most cases shares are paid for by private investors using (surplus) saved cash, in most cases property is purchased using borrowed money.

As an "investment" therefore, as most property "investors" are highly geared - which is great when you're enjoying an upturn in the market - but you're also exposed to a much larger downside when the market heads South. Share market investors are therefore much less likely to be in a position where they're forced to sell in a downturn - at least these days they are. The '87 crash was a little different, as in that case a lot of shares were owned by private investors - and many had borrowed heavily to invest - they took a bath.

I don't think the statement "they will appreciate over time" is correct. They have, on average, appreciated over time - you're relying on faith alone if you're a believer that past trends will continue.

surfisup1000

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#1640298 25-Sep-2016 18:05

I feel for my kids, their future is bleaker than mine.

I don't see how they will ever afford the 2 million plus it will cost to own a house in Auckland when they get older.

If wages kept up with house price growth we'd have an average salary of 500k a year.

I bought my first house easy. If anything , i think my generation were able to fritter away money and still afford a house, the latest younger generation of house buying age have to live with their parents, shack up with a partner, or get into multi-generational loan type deals.

The important question to me, is when will interest rates rise.

mattwnz

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#1640308 25-Sep-2016 18:25

surfisup1000:

I feel for my kids, their future is bleaker than mine.

I don't see how they will ever afford the 2 million plus it will cost to own a house in Auckland when they get older.

If wages kept up with house price growth we'd have an average salary of 500k a year.

I bought my first house easy. If anything , i think my generation were able to fritter away money and still afford a house, the latest younger generation of house buying age have to live with their parents, shack up with a partner, or get into multi-generational loan type deals.

The important question to me, is when will interest rates rise.

That is one of the byproducts for wanting to grow our population so much and quickly. But I get the impression that government are doing this as a way to make the economy look far better than it actually is.I do fear for the next generation, that we are going to have a shortage of resources for healthcare and education, as well as huge infrastructure costs are going to be needed. There will be housing, but it will be higher density townhouse and apartment living. If people don't want that, they should vote out political parties that are for such policies. Personally I think we are heading down a track where we are changing what make NZ such a special place to live in. We have some really cheap and nasty developments being built. We are also destroying our environment, which is our number 1 resource.

MikeAqua

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#1640309 25-Sep-2016 18:26

A decrease in property value does not force a sale. It doesn't effect your ability to service the debt.

As long as the debt is serviced, the bank don't care

A decrease in net cash-flow position can effect cash flow and therefore force a sale, examples might be: -

Increased interest, decreased rental income, decreased other income (e.g. salary).

Mike

mattwnz

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#1640316 25-Sep-2016 18:42

MikeAqua:

A decrease in property value does not force a sale. It doesn't effect your ability to service the debt.

As long as the debt is serviced, the bank don't care

A decrease in net cash-flow position can effect cash flow and therefore force a sale, examples might be: -

Increased interest, decreased rental income, decreased other income (e.g. salary).

Banks though do get very uneasy when a property is worth less than the amount they have lent out to a home buyer.

tdgeek

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#1640340 25-Sep-2016 20:14

mattwnz:

MikeAqua:

A decrease in property value does not force a sale. It doesn't effect your ability to service the debt.

As long as the debt is serviced, the bank don't care

A decrease in net cash-flow position can effect cash flow and therefore force a sale, examples might be: -

Increased interest, decreased rental income, decreased other income (e.g. salary).

Banks though do get very uneasy when a property is worth less than the amount they have lent out to a home buyer.

If thats was 8 years ago, no prob. If it was 8 months ago, thats the banks problem. The heated market is not lost on anyone especially the bank.

tdgeek

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#1640342 25-Sep-2016 20:19

mattwnz:

surfisup1000:

I feel for my kids, their future is bleaker than mine.

I don't see how they will ever afford the 2 million plus it will cost to own a house in Auckland when they get older.

If wages kept up with house price growth we'd have an average salary of 500k a year.

I bought my first house easy. If anything , i think my generation were able to fritter away money and still afford a house, the latest younger generation of house buying age have to live with their parents, shack up with a partner, or get into multi-generational loan type deals.

The important question to me, is when will interest rates rise.

That is one of the byproducts for wanting to grow our population so much and quickly. But I get the impression that government are doing this as a way to make the economy look far better than it actually is.I do fear for the next generation, that we are going to have a shortage of resources for healthcare and education, as well as huge infrastructure costs are going to be needed. There will be housing, but it will be higher density townhouse and apartment living. If people don't want that, they should vote out political parties that are for such policies. Personally I think we are heading down a track where we are changing what make NZ such a special place to live in. We have some really cheap and nasty developments being built. We are also destroying our environment, which is our number 1 resource.

Im not aware of any party gong down that track. If they did, fine, Ill still buy my large house and large section. How great is NZ? Its remote, thats a good thing. We have scenery, so does everyone else, if not better. But being small and remote is what I like. If we grow our population we will always be insignificant, which to me is great.

Every now and then we beat Oz in cricket, every 8 minutes we beat them in rugger, whats not to like?? :-)

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