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

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#2743949 14-Jul-2021 10:00

tdgeek:

Yep, always was going to happen, now its happened. Those that bought at artificially low rates should be fine, they "should" have known this will occur at some point, and off course, budgeted accordingly.

They "should" have been able to get a house without taking on terrifying amounts in debt which was just a transfer from them as younger people to older people in the form of tax-free capital gains as well, but it's funny how these things never quite seem to work out that way.

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#2743951 14-Jul-2021 10:09

GV27:

tdgeek:

Yep, always was going to happen, now its happened. Those that bought at artificially low rates should be fine, they "should" have known this will occur at some point, and off course, budgeted accordingly.

They "should" have been able to get a house without taking on terrifying amounts in debt which was just a transfer from them as younger people to older people in the form of tax-free capital gains as well, but it's funny how these things never quite seem to work out that way.

House prices have always risen, and affordability has been slowly decreasing, not a lot has changed. What you say also applied in the past. Why is it an issue now? Well, QE has decreased interest rates artificially. No one wants to sell so demand is up. Those that bought should have based their budget on say 6% interest, so should be fine. Im not justifying current house prices, they are market driven, as always.

irpegg

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#2743955 14-Jul-2021 10:17

Although everyone was benchmarked at 6-7%, that benchmark takes all your outgoings and can leave you with as little as $9 a week. This was actually what the bank presented to us when offering the highest mortgage and they were totally fine with it. So those people who sat with $200 a week spare on these low-interest rates are going to get some real lifestyle creep happening very quickly.

Also, classic ASB just gouging their cash cow several months early when the official cash rate hasn't gone up yet

wellygary

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#2743959 14-Jul-2021 10:43

irpegg:

Also, classic ASB just gouging their cash cow several months early when the official cash rate hasn't gone up yet

While I'm no friend of Bank Ethics, in this case they are responding to market rises in longer term swap rates, not the OCR...

Their floating rate (which are funded off the OCR) didn't increase (yet)

GV27

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#2743979 14-Jul-2021 11:29

tdgeek:

House prices have always risen, and affordability has been slowly decreasing, not a lot has changed.

30% in a year isn't a 'slow decrease'.

rb99

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#2743980 14-Jul-2021 11:32

Daughter in process of buying first home and she gets this -

https://www.nzherald.co.nz/business/asb-blinks-first-increases-major-mortgage-rates/JNKHGGTV2O63YM5KNPS4OKHAWQ/

the first of many no doubt.

“The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” -John Kenneth Galbraith

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#2743985 14-Jul-2021 11:36

GV27:

tdgeek:

House prices have always risen, and affordability has been slowly decreasing, not a lot has changed.

30% in a year isn't a 'slow decrease'.

I said prices have always risen so the obvious context re affordability is with that timeframe. As from 2000, 1990, 1980, same deal, always risen

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#2743992 14-Jul-2021 11:42

rb99:

Daughter in process of buying first home and she gets this -

https://www.nzherald.co.nz/business/asb-blinks-first-increases-major-mortgage-rates/JNKHGGTV2O63YM5KNPS4OKHAWQ/

the first of many no doubt.

I'd say so. Low rates are a large cause of rising house prices, getting the rates back to normal is apart of stemming the prices. BUT, while that will work to stem the prices, the prices are already high, so FHB's etc will be further locked out. Thats the price of a free market where everyone was happy, make sure Govt stays out of it

GV27

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#2743995 14-Jul-2021 11:48

tdgeek:

I said prices have always risen so the obvious context re affordability is with that timeframe. As from 2000, 1990, 1980, same deal, always risen

There's a huge difference between 'have always risen' and 'shot up by 30% in 12 months' when you're trying to get a deposit together. I feel that's kind of important in terms of context as well.

And also no, after the GFC, prices walked back a little bit, but nowhere the bloodletting we saw in other countries.

tdgeek

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#2743998 14-Jul-2021 11:56

GV27:

tdgeek:

I said prices have always risen so the obvious context re affordability is with that timeframe. As from 2000, 1990, 1980, same deal, always risen

There's a huge difference between 'have always risen' and 'shot up by 30% in 12 months' when you're trying to get a deposit together. I feel that's kind of important in terms of context as well.

And also no, after the GFC, prices walked back a little bit, but nowhere the bloodletting we saw in other countries.

Whose fault is it they rose 30% in the last 12 months?

GV27

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#2744004 14-Jul-2021 12:02

tdgeek:

Whose fault is it they rose 30% in the last 12 months?

Not the people taking on huge debt stretches just to get their own home, that's for sure.

They're also going to be the ones who have to cut back the hardest when rates rise, and our economy is entirely reliant on people spending, probably more than they have. So the ripple effect of higher interest rates on massive mortgages we've normalised because "house prices always go up" could be huge. That will flow onto reduced spending on entertainment, hospitality, travel, etc.

Our economy is not geared for stagflation and we should have no trust in those managing the economy that they can deal with it either.

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#2744015 14-Jul-2021 12:42

GV27:

tdgeek:

Whose fault is it they rose 30% in the last 12 months?

Not the people taking on huge debt stretches just to get their own home, that's for sure.

They're also going to be the ones who have to cut back the hardest when rates rise, and our economy is entirely reliant on people spending, probably more than they have. So the ripple effect of higher interest rates on massive mortgages we've normalised because "house prices always go up" could be huge. That will flow onto reduced spending on entertainment, hospitality, travel, etc.

Our economy is not geared for stagflation and we should have no trust in those managing the economy that they can deal with it either.

You avoided the question. If you are seeking blame for the current situation you need to say who.

Here is my take:

Houses always rise, affordability has been slowly declining. Key and Clarke talked about this in 2000. But life goes on, from decadesl before 2000, to 2010 people do what they always do, save a deposit and buy a house, nothing changes. Affordability declined faster since we went from a regulated, inflation economy to a less regulated market driven economy and we went after inflation, and succeeded. That was the beginning of the end, as we still have house inflation but no wage inflation and we now enjoy a low wage based economy. Despite what Key and Clarke said, she did nothing, neither did he. Bill said we dont have a housing crisis in 2016, so I guess its ok. Covid hit in 2020, that took a not great situation and ended it, as the Covid measures boosted the economy, and house affordability (by way of reduced mortgage payments) Perfect storm is a cliche but it applies here

Managing the economy? Govts keep away from housing, no one wants them messing with it, but it seems now they do. If there was a problem, then people should have been banging on doors early 2000's but that never happened. Had Covid not got here, then no doubt things would not have escalated but that wasn't forseeable. Affordability in 2016 wasnt great either

My gripe is that all the shouting now, while justified, has come too late, perhaps a Govt would have taken housing management on if there was a public need/demand for it, but there wasn't. Now thats its hit the fan, its a bit late to want action. The current Govt is doing stuff, National will no doubt do stuff also, but the ship has already sailed. Most here say interest rates are a large cause, now they are rising which will help prices, but here we go, thats also being complained about.

You can blame both Governments, also the people for leaving it till its too late to demand action. House prices wont drop 60% and wages wont rise 60% so there is no short to medium term fix, that's the reaity

GV27

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#2744032 14-Jul-2021 13:21

tdgeek:

My gripe is that all the shouting now, while justified, has come too late, perhaps a Govt would have taken housing management on if there was a public need/demand for it, but there wasn't. Now thats its hit the fan, its a bit late to want action. The current Govt is doing stuff, National will no doubt do stuff also, but the ship has already sailed. Most here say interest rates are a large cause, now they are rising which will help prices, but here we go, thats also being complained about.

You can blame both Governments, also the people for leaving it till its too late to demand action. House prices wont drop 60% and wages wont rise 60% so there is no short to medium term fix, that's the reaity

...except people did all they can do - they voted for a government who pledged to do something meaningful about it, who then walked back from that - from two separate parties over two decades.

That's all people can do in a functional democracy. If that isn't sufficient, then the next option on the table involves tennis courts and uncomfortably close shaves for members of the landed gentry. I'm not saying it may yet come to that, but if you expect people to just be fine with inflated living costs in a country where wage growth is stagnant then we are setting ourselves up for severe social disruption that few here can imagine.

It's obvious why interest rate rises now, after such massive increases in prices with little to no action, are a problem for the economy and recent new home owners. It's like saying people shouldn't be ungrateful if you offered them treatment for a disease that killed them months ago.

I see "the ship has already sailed" as "too hard so might as well just accept it". Decades of that is exactly how we got into this situation.

tdgeek

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#2744036 14-Jul-2021 13:35

GV27:

...except people did all they can do - they voted for a government who pledged to do something meaningful about it, who then walked back from that - from two separate parties over two decades.

That's all people can do in a functional democracy. If that isn't sufficient, then the next option on the table involves tennis courts and uncomfortably close shaves for members of the landed gentry. I'm not saying it may yet come to that, but if you expect people to just be fine with inflated living costs in a country where wage growth is stagnant then we are setting ourselves up for severe social disruption that few here can imagine.

It's obvious why interest rate rises now, after such massive increases in prices with little to no action, are a problem for the economy and recent new home owners. It's like saying people shouldn't be ungrateful if you offered them treatment for a disease that killed them months ago.

I see "the ship has already sailed" as "too hard so might as well just accept it". Decades of that is exactly how we got into this situation.

The most recent Govt pledged to do something meaningful, some stuff hasn't worked, other stuff being done. What was done by both Govts 2000 to 2016? Nothing

If rising interest rates is not good, then lets keep them low?

It's not too hard? No, its the reality, pure and simple, unless you able away to take 60% off houses and add 60% to wages? If someone had started doing something 21 years ago when they first started yakking about it, it would have been a lot easier 21 years later to continue the management of houses to incomes, but it wasnt.

mattwnz

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#2744057 14-Jul-2021 13:58

tdgeek:

GV27:

Not the people taking on huge debt stretches just to get their own home, that's for sure.

They're also going to be the ones who have to cut back the hardest when rates rise, and our economy is entirely reliant on people spending, probably more than they have. So the ripple effect of higher interest rates on massive mortgages we've normalised because "house prices always go up" could be huge. That will flow onto reduced spending on entertainment, hospitality, travel, etc.

Our economy is not geared for stagflation and we should have no trust in those managing the economy that they can deal with it either.

You avoided the question. If you are seeking blame for the current situation you need to say who.

Here is my take:

Houses always rise, affordability has been slowly declining. Key and Clarke talked about this in 2000.

Key wasn't in government in 2000.

House prices over the very long term may rise, but in shorter terms they can drop or flatline. It is similar to the sharemarket, except the the volatility in the sharemarket is far more immediate and volatile. Partly because house sales take weeks to months, not seconds.The pricing of houses currently is relative to the record low interest rates and peoples wages. People seem to think the government will keep the housing market propped up, and that house prices are like a ratchet, that one they go up, they can't then unwind again. But history , even in NZ has shown house prices have dropped. PLus house prices have never risen like they have in the last year. Up over 60% in Palmerston North in just a year is beyond crazy. But if people aren't able to, or willing to spend the same.

The system seems to be setup to turn more and more people in to renters. Even banks are now buying houses to rent out in the UK, and we are seeing the professionalism of rentals over time to improve them.

I have noticed that the stats in the media are being carefully cherry picked at the moment. Prices last month seemed to flatline last month, although there is very low volume being sold. But other articles I saw stated that prices have continued to rise over the last 12 month to record high percentages. Both are likely correct, but it depends what the narrative of the story is. But I am seeing agents reducing some prices of the last month, partly because many are trying it on with very high prices to see if anyone will pay them. When someone does, it sets a precedent, and then agents expect all properties can achieve that amount, because another property did. Buyers also buy into this, which is one reason for this problem. IMO we should sell via set prices or by auction. None of this BEO or tender / deadline sales, as they help push prices even high as it sets up secret multi-offer bids.

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