MikeB4: Homeless are not just found in parks and streets. They are found in night shelters, garages, caravans, cars, lounges, overcrowded housing.......

Yes, but what I'm suggesting is that the unfortunate homeless people are not joined by the masses due to a lack of housing. 

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

Not me.

But

For long term owners, if the prices slid say 10% or so, that wont really affect us. Because we haven't bought with a view to selling up and pocketing a profit.

Say they did drop 10 to 20% and home owners were looking to downsize or upgrade. Downsizers would be a bit worse off, upsizers would gain.

If those who bought in this heated market saw their house value drop, well, they can't really be shocked. It was a risk to buy in heated market. A drop could happen, or at least a correction.

I don't really buy into a crash causing major economic issues in NZ. Equity is lost. Ok, but the mortgage payments are the same. Negative equity, the mortgage payments are the same. Banks would be exposed, but there is no need to foreclose on everyone. I imagine the Govt would step in and underwrite negative equity. Thats has a zero cost. And as mortgage payments reman the same, there is no need for owners to quit the property, but if they did, they wear it.

tdgeek:

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

Not me.

But

For long term owners, if the prices slid say 10% or so, that wont really affect us. Because we haven't bought with a view to selling up and pocketing a profit.

Say they did drop 10 to 20% and home owners were looking to downsize or upgrade. Downsizers would be a bit worse off, upsizers would gain.

If those who bought in this heated market saw their house value drop, well, they can't really be shocked. It was a risk to buy in heated market. A drop could happen, or at least a correction.

I don't really buy into a crash causing major economic issues in NZ. Equity is lost. Ok, but the mortgage payments are the same. Negative equity, the mortgage payments are the same. Banks would be exposed, but there is no need to foreclose on everyone. I imagine the Govt would step in and underwrite negative equity. Thats has a zero cost. And as mortgage payments reman the same, there is no need for owners to quit the property, but if they did, they wear it.

tdgeek:

 

 

 

 

 

If those who bought in this heated market saw their house value drop, well, they can't really be shocked. It was a risk to buy in heated market. A drop could happen, or at least a correction.

 

They can be and would be if that drop was caused by a political interference outside of the scope when they bought that house.  Kind of like adding a law to all holders of shares they will have to pay a 15% government fee for having shares annually.  There is a reason neither of the big two political parties think house prices should go down, just that they should be more affordable.

MikeB4:

tdgeek:

 

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

 

 

 

Not me.

 

 

 

But

 

 

 

For long term owners, if the prices slid say 10% or so, that wont really affect us. Because we haven't bought with a view to selling up and pocketing a profit.

 

 

 

Say they did drop 10 to 20% and home owners were looking to downsize or upgrade. Downsizers would be a bit worse off, upsizers would gain.

 

 

 

If those who bought in this heated market saw their house value drop, well, they can't really be shocked. It was a risk to buy in heated market. A drop could happen, or at least a correction.

 

 

 

I don't really buy into a crash causing major economic issues in NZ. Equity is lost. Ok, but the mortgage payments are the same. Negative equity, the mortgage payments are the same. Banks would be exposed, but there is no need to foreclose on everyone. I imagine the Govt would step in and underwrite negative equity. Thats has a zero cost. And as mortgage payments reman the same, there is no need for owners to quit the property, but if they did, they wear it.

 

Remember what happened in the US with low and negative equity mortgages? How would the Government fund underwriting and paying out delinquent mortgages? Borrowing which will push up taxes. All this depresses the economy and you end up in a spiral of rising taxes, government debt, rising unemployment increasing company failures, etc etc etc.
In other words a financial crisis.

I don't agree. Americans live in credit, bankruptcy is popular, they walk away from houses. Its not like that here. Real losses only happen when you sell. If house prices dropped a lot here, and 20% is a lot. 10% is seen by many as a crash, there is no money changing hands. Mortgages get paid and so on. Now if interest rates rose to 9% over two years that is a financial crisis as it sucks money out of the economy and it forces sales, that creates a spiral effect. With interest rates being low, the only issue is equity. And thats less an issue for real home owners than it is for investors. If Govt underwrites equity losses, and there is no reason for forced sales, life goes on. There isn't any borrowing. If investors lose real money, that's tough, that the game they play

itxtme:

 

tdgeek:

 

 

 

 

 

If those who bought in this heated market saw their house value drop, well, they can't really be shocked. It was a risk to buy in heated market. A drop could happen, or at least a correction.

 

 

They can be and would be if that drop was caused by a political interference outside of the scope when they bought that house.  Kind of like adding a law to all holders of shares they will have to pay a 15% government fee for having shares annually.  There is a reason neither of the big two political parties think house prices should go down, just that they should be more affordable.

 

Sure, if the Govt decreed that house prices drop massively by passing laws that suffocate demand. If measures are introduced that temper house prices, maybe they drop 10%, thats life as far as I am concerned. We have a situation where non residents have inflated prices by artificial demand, if that was blocked, house prices would probably drop quickly, then back to BAU. 

Political interference? yes. You could also say that by not doing anything to stop artificial demand is also political interference. By lack of action in a market that was previously behaving itself under supply and demand.

MikeB4:

Remember what happened in the US with low and negative equity mortgages? How would the Government fund underwriting and paying out delinquent mortgages? Borrowing which will push up taxes. All this depresses the economy and you end up in a spiral of rising taxes, government debt, rising unemployment increasing company failures, etc etc etc.
In other words a financial crisis.

And we have a completely different situation here - so much commentary has already been written in this regard - but the situation we have re - supply and demand / banking sector stability and regulation / private and government levels of debt / employment rates - are different to the oft quoted US / Greek / Irish collapses during the GFC.

Does that mean there will never be a correction her? No of course not - prices/values change over time both up and down.

But so many commentators (and wishful thinkers) have predicted collapses in the AKL housing market market post GFC - Hickey et al - and they have often referenced the US / Greece / Ireland etc - and they have been wrong time and time again.

Why? Because they have not appreciated the mechanics that led to these collapses - and the fact we had - and continue to have a different set of circumstances here.

When supply eventually exceeds demand - the price will change

When interest rates go up - the price will change.

Should we get shocks to the economy which lead to significant changes in the employment market - the price will change.

Should we get a massive event like foot and mouth flattening our dairy industry - the price will change.

etc

But until these things happen - prices will continue to rise...

PS: I have referenced Tony Alexander in the past and have found his commentaries on this subject worth a read for those so inclined...and yes I am parroting a lot of the material of his I have read over the last few years in the post above.

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

Personally, I don't care, until I come to sell the house of course. Which is at least 5 years, and more like 20 years, away.

So, if houses are currently over-priced and prices will inevitably correct some time in the next 20 years, a correction today would be fine.

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

Do you mean drop from what they paid for the house, or drop from the current inflated prices? Noone want to lose money on a house, although that is possible if you paid to much for it to begin with. But a house is where you live so even if you do lose a bit from what you paid for it, it should be less than what you would have paid in rent. If you buy at the top of a peak, hen you will likely lose money. Exactly the same thing applies to shares. This is why if you are buying for investment, you buy when prices are low, and sell when they are high. So bubbles are great to sell in, but terrible to buy in unless you are buying and selling in the same market, then you should break even. Most people who own houses wouldn't have purchased in the peak, so even if house prices did drop 30%, they would have still made a significant tax free capital gain.

But as most National voters are likely to be home owners, the government doesn't want to do anything that they could be seen as causing a loss in value. Also it will cause stresses on banks, but apparently stress tests have shown they can cope with a drop of 40%.  This is why they don't really have any idea what they can do at the moment. The oppositions policies don't really look any better.

But really with the Auckland market, we are talking about a problem with a high number of investors buying. eg 50% at least apparently are buying them. This is partly becuase interest rates are so low, you mum and dad investors have become accidental landlords, because they need some decent returns on their savings.

Whatever the government do, they are goin gto annoy some people. They are looking for solutions that will annoy the least number of voters.

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.

Exactly. Although it will affect those upgrading or downsizing. eg Baby boomers moving into retirement units want to free up capital.

With values dropping, people need to understand that with all investments you get highs and lows. House prices are not like a rachhet, and will only go up, and not down. Over a long period of time, it should trend upwards. You also only get the loss occurring if you sell. But those who use their house in order to feel rich, and use it to borrow more money againest their house for tvs and travel, could get burnt. But banks should be prudent with their lending, so they aren't lending more than the house is worth in the case of a crash. You would hope they have been, but I am not sure.

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.

frankv:

 

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

 

Personally, I don't care, until I come to sell the house of course. Which is at least 5 years, and more like 20 years, away.

 

So, if houses are currently over-priced and prices will inevitably correct some time in the next 20 years, a correction today would be fine.

 

 

 

If when you sell and upgrade/downgrade its mainly equal. Higher/lower selling price and same for buying price. That if you sell/buy in the same market. Theoretically the house prices could triple or halve and you more or less the same