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

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#2744229 14-Jul-2021 18:40

quickymart:

Do people agree that this is a housing bubble, or are house prices really headed for the moon?

Personally I wouldn't mind if I bought and just afterwards the price dropped (along with all other property prices) - I'd be happy just to be in my own place. Negative equity wouldn't concern me as much as getting into my own house to begin with.

Its not a bubble. A bubble is when prices far exceed the value, then people wise up and sell, aka the sharemarket. Shares. Thery are worth what they are worth, based on share price, earnings per share and asset value. And promise of growth. When the sharemarket booms, prices exceed the value, they aren't based on promise of growth, they are based on last week they rose 2%, this week before they rose 3% , maybe next week they rose 4%. Then the share price levels or drops, and people panic and sell. Meanwhile the company of the falling share price is doing vey well, but the share price tumbles and many lose their shirt and undies

Thats a bubble

mattwnz

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#2744231 14-Jul-2021 18:44

GV27:

mattwnz:

Good news for FHBs. Commentators also possibily expect interest rate rises in August. I think NZ is one of the first countries to stop money printing, and maybe the first to rise interest rates.

Low interest rates have been one of the few things in favour of accessibility for FHBS in recent months.

If we believe that houses only ever go up like some insist here, then all this is going to do is make it harder for them to pass a stress test and then service a mortgage, on the chance they might actually get one.

Rising interest rates HAVE to result in lower prices for it to work out for FHBs, but that's bad for consumer spending at a time when we are struggling to stock shelves due to technology and shipping issues.

IMO I don't think that is that case, because the lower rates vs house price rises, has increased the deposit FHBs have required. In some cases substantially, and it has resulted in the percentage of FHBs buying dropping. So many have had to use the bank of mum and dad, to pay this additional deposit amount.

Interest rates dropping vs affordability doesn't change much, because house prices are based on affordability, and what people can afford to pay based on what they can afford to service. So if interest rates drop, house prices rise, but affordability is often similar. Especially as many people are borrowing up to the limit the bank is prepared to lend to them at. Stress tests are now going to have to rise. I understand at least on financial institution was stress testing in the 5% range which sounds crazy low.

mattwnz

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#2744232 14-Jul-2021 18:47

tdgeek:

Batman: Govt doesn't prop up the housing market, but if they did print billions of dollars, people used those billions to buy houses.

Where is mine?

Is your house worth more than it was at the beginning of 2020? If so your wealth has increased as a result of all this which you can chose to benefit from by liquidating or borrowing against it. But ask anyone without a house or assets, their net wealth has not had this free boast.

tdgeek

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#2744234 14-Jul-2021 18:49

mattwnz:

About time.

Good news for FHBs. Commentators also possibily expect interest rate rises in August. I think NZ is one of the first countries to stop money printing, and maybe the first to rise interest rates.

I have already seen in the last month house prices stagnating and some falls in expectations the mood around interest rates fall. Although some houses still selling for crazy amounts, but some are cashed up buyers.

Agree. Money printing was worthwhile for the economy. House prices was unfortunate. If you go back then, the outlook was mass unemployment, recession, low tax take. The opposite happened. Unemployment now is very good, our economy is booming, no recession (although there was technical recession during Covid)

No one predicted all this.

(I will respond later to one of your earlier posts. Busyish tonight but I dont want to hash a quick post for the sake of it. While we tend to disagree in this topic, I like your posts and the stable manner that you post)

tdgeek

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#2744237 14-Jul-2021 18:57

GV27:

Low interest rates have been one of the few things in favour of accessibility for FHBS in recent months.

If we believe that houses only ever go up like some insist here, then all this is going to do is make it harder for them to pass a stress test and then service a mortgage, on the chance they might actually get one.

Rising interest rates HAVE to result in lower prices for it to work out for FHBs, but that's bad for consumer spending at a time when we are struggling to stock shelves due to technology and shipping issues.

I'll assume I am one of the "some" :-) Im aware of your background and I feel for that

Rising interest rates will reduce prices. I'll expand on this when I get time to respond to Matt.

Why is rising interest rates and lower house prices bad for consumer spending? We are struggling to stock shelves due to Covid caused import problems. Or weather if you are into food. That pushes prices up but its not a house price and interest rate issue

kingdragonfly

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#2744245 14-Jul-2021 19:21

Our dystopian future. Reminds me of Bruce Willis apartment in "the Fifth Element"

The Guardian: Rest room: tiny Vancouver ‘micro studio’ combines bedroom and toilet

...The 15 sq metre apartment’s layout means there is little differentiation between the toilet and the bedroom – they are a few steps apart, and in direct line of sight, without a door. All this for just NZ $194/week, hot water and electricity included....

HP

Shop now for HP laptops and other devices (affiliate link).

GV27

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#2744248 14-Jul-2021 19:32

mattwnz:

tdgeek:

Where is mine?

Is your house worth more than it was at the beginning of 2020? If so your wealth has increased as a result of all this which you can chose to benefit from by liquidating or borrowing against it. But ask anyone without a house or assets, their net wealth has not had this free boast.

It's a legit q. Unless you're downsizing or moving from an urban to rural part of the country, then chances are your next house has increased in price faster than the one you're currently living in.

In that case, the total amount of debt you're taking on increases, and becomes a drag on your future spending AND the RBNZ's ability to influence how you allocate your cash when they need to move interest rates in future - because you've committed that income to a mortgagee already.

mattwnz

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#2744262 14-Jul-2021 20:44

tdgeek:

quickymart:

Do people agree that this is a housing bubble, or are house prices really headed for the moon?

Personally I wouldn't mind if I bought and just afterwards the price dropped (along with all other property prices) - I'd be happy just to be in my own place. Negative equity wouldn't concern me as much as getting into my own house to begin with.

Its not a bubble. A bubble is when prices far exceed the value, then people wise up and sell, aka the sharemarket. Shares. Thery are worth what they are worth, based on share price, earnings per share and asset value. And promise of growth. When the sharemarket booms, prices exceed the value, they aren't based on promise of growth, they are based on last week they rose 2%, this week before they rose 3% , maybe next week they rose 4%. Then the share price levels or drops, and people panic and sell. Meanwhile the company of the falling share price is doing vey well, but the share price tumbles and many lose their shirt and undies

Thats a bubble

I think we are already there in places. If you look at rentals, if interest rates rise, then the return vs other investments, could look bad. Some rents are actually quite cheap when compared to the estimated value of the house. Also if our houses were considered good value, wouldn't investment companies be buying them up, like they are in the US and the UK ATM?

But houses we own to live in are not investments, so not comparable to investments. So if they go down in 'estimated value' it won't affect most people.

Batman

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#2744308 14-Jul-2021 23:04

tdgeek:

Batman: Govt doesn't prop up the housing market, but if they did print billions of dollars, people used those billions to buy houses.

Where is mine?

i'm sorry you missed out

tdgeek

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#2744331 15-Jul-2021 07:11

mattwnz:

tdgeek:

Where is mine?

Is your house worth more than it was at the beginning of 2020? If so your wealth has increased as a result of all this which you can chose to benefit from by liquidating or borrowing against it. But ask anyone without a house or assets, their net wealth has not had this free boast.

If you are a recent purchaser, your equity has increased, but you are likely to be servicing a large mortgage, so no drawdown, can't afford it

If you have owned for a good few years, you already had equity to drawdown, irregardless of recent increases, similarly if you have near or 100% equity

tdgeek

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#2744334 15-Jul-2021 07:19

Batman: Govt doesn't prop up the housing market, but if they did print billions of dollars, people used those billions to buy houses.

i'm sorry you missed out

Thanks!

I could fill my large back yard with Tesla's using my equity. Given recent years I could make room for 3 more. So while I have gained, where is it? I dont have any Tesla's in my back yard. If I relocated I swap my over valued house for another overvalued house. The point is, printing money hasnt seen my letterbox overflowing with cash. And as per my previous post, anyone who can draw down on their equity (and support the economy) already had equity anyway, so that isnt a new benefit

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kingdragonfly

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#2744371 15-Jul-2021 09:08

tdgeek: I could fill my large back yard with Tesla's using my equity. Given recent years I could make room for 3 more. So while I have gained, where is it? I dont have any Tesla's in my back yard. If I relocated I swap my over valued house for another overvalued house. The point is, printing money hasnt seen my letterbox overflowing with cash. And as per my previous post, anyone who can draw down on their equity (and support the economy) already had equity anyway, so that isnt a new benefit

Usually when someone talks about caring for elderly parents, you may hear "you can't eat your house."

Often followed by a discussion of reverse mortgages

quickymart

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#2744601 15-Jul-2021 14:17

Almost two months old now, but...

https://www.newshub.co.nz/home/money/2021/05/time-for-house-price-growth-to-come-to-a-grinding-halt-reserve-bank-governor-adrian-orr.html

mattwnz

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#2744605 15-Jul-2021 14:31

tdgeek:

Batman: Govt doesn't prop up the housing market, but if they did print billions of dollars, people used those billions to buy houses.

i'm sorry you missed out

Thanks!

I could fill my large back yard with Tesla's using my equity. Given recent years I could make room for 3 more. So while I have gained, where is it? I dont have any Tesla's in my back yard. If I relocated I swap my over valued house for another overvalued house. The point is, printing money hasnt seen my letterbox overflowing with cash. And as per my previous post, anyone who can draw down on their equity (and support the economy) already had equity anyway, so that isnt a new benefit

Based on all the Teslas I have seen driving aroud Wellington in the last year, I wouldn't be surprised if some people have used that free increased equity to shout themselves one as a bit of a reward. Plus they now also get the free rebate. Although yes you are buying and selling in the same market, your equity percentage has increased if you have a mortgage, and potentially more leverage and borrowing potential from your house, due to that free equity boast to your house value from the QE. So the effects of covid has helped some people increase their wealth a lot. I know of someone who is borrowing money against their house from the bank, which is called 'wealth builder', to then buy ETFs and shares. IMO it all sounds a bit risky though, but I guess banks are looking at new ways to lend. They are already getting into buying rentals in some countries like the UK

mattwnz

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#2744606 15-Jul-2021 14:36

kingdragonfly:
tdgeek: I could fill my large back yard with Tesla's using my equity. Given recent years I could make room for 3 more. So while I have gained, where is it? I dont have any Tesla's in my back yard. If I relocated I swap my over valued house for another overvalued house. The point is, printing money hasnt seen my letterbox overflowing with cash. And as per my previous post, anyone who can draw down on their equity (and support the economy) already had equity anyway, so that isnt a new benefit

Usually when someone talks about caring for elderly parents, you may hear "you can't eat your house."

Often followed by a discussion of reverse mortgages

And this is why there are now a lot of TV ads for this service appearing on TV. As inflation increases, many of these older people could struggle. Especially as things like rates are increasing in many areas by far more than inflation. But it seems central banks around the world see inflation as short term. But how many times has NZs central bank been wrong rently?

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