Real estate, post level 4

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#2677034 19-Mar-2021 10:13

quickymart:

I thought so too, kind of like a why house prices in NZ are so high for dummies.

I think you said supply was the biggest thing, and I agree with you - especially the bit he talks about the big apartments in Sydney and Melbourne, which sounds like that helped a lot. Just a pity governments appear to be too scared to act on it - I can see homeowners jumping up and down if their house drops in value, but at the same time that does nothing for first home buyers.

Incentivise builds, over time that will ease demand, if prices went down slightly every year as building was the no brainer option, affordability will slowly catch up as wages rise slowly and houses decline slowly. Its probably time to get serious with tiny homes, or design smaller homes with larger and covered decks so the interior is ok for living in, but on nice days the overall house is bigger. Creative stuff like that to get more bang for the buck. But invariably, ideas usually just end up in media articles not on plots of land

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quickymart

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#2677041 19-Mar-2021 10:27

Sadly, yes.

And I can totally understand why someone who bought a house last year for, say, $500,000 would be quite unhappy if 12 months later their property is now worth $425,000 due to falling prices - but there must be some happy middle ground that works for everyone (first home buyers and existing owners), surely?

Looking at www.homes.co.nz I can see that in the past house prices have fallen and risen reasonably steadily - at least in the 1990s and 2000s, and yes, even in Auckland - but I don't remember a huge uproar and a screaming from the rooftops from then-property owners demanding prices rise immediately so they could get more return on their investment. I wonder why it didn't happen back then? Admittedly, I wasn't really following the property market during those timeframes, so I may have missed something.

tdgeek

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#2677096 19-Mar-2021 10:49

Your example $500,000, it drops to $425,000

They bought it last year, will live in it for 5 years or 10 years maybe. Drop in value doesn't matter

If they are paying the mortgage etc, the house value drop doesnt affect their lives

Say they need to move for work reasons, the house they move to is also down a similar %

They lost all their equity, again, it doesn't matter, as a new house buyer they wont be looking at buying a Porsche from their equity for a long time anyway

There will be outlier cases where they have to sell and not re purchase so they lose cash, can't help that, thats the same as the buyer that bought the same house a bit later on they had to find another 75k for the deposit, also lost cash as its the same house

Buying in a boom is very much caveat emptor

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#2677098 19-Mar-2021 11:01

Thanks for explaining that :)

tdgeek

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#2677103 19-Mar-2021 11:07

Just my thoughts, but Governments aren't keen on big house price drops as its a cause of wealth. I might decide to do a big reno, buy other retail, start a business. All from my equity. That paper money goes into the economy paying wages, the supplier chains etc. If there was major decline in house prices, that activity stops. It may cause people to be more frugal just in case, so the economy nosedives, lack of confidence. Save and don't spend. Its a tough problem

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#2677109 19-Mar-2021 11:28

tdgeek:

Your example $500,000, it drops to $425,000

They bought it last year, will live in it for 5 years or 10 years maybe. Drop in value doesn't matter

If they are paying the mortgage etc, the house value drop doesnt affect their lives

Say they need to move for work reasons, the house they move to is also down a similar %

They lost all their equity, again, it doesn't matter, as a new house buyer they wont be looking at buying a Porsche from their equity for a long time anyway

There will be outlier cases where they have to sell and not re purchase so they lose cash, can't help that, thats the same as the buyer that bought the same house a bit later on they had to find another 75k for the deposit, also lost cash as its the same house

Buying in a boom is very much caveat emptor

The biggest problem with falling house prices is that it kills domestic construction demand .... It is really hard to make a phycological step to borrow money to build something that will/might fall in value ( even it is not a valid if you stay their 5 years or more)

What happens is most clients sit on their hands and wait until the cycle reaches bottom, - and with no big build to rent corporates to pick up the slack and build through the dip, the construction sector gets hammered and all the tradies head off to OZ....

tdgeek

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#2677116 19-Mar-2021 11:42

wellygary:

The biggest problem with falling house prices is that it kills domestic construction demand .... It is really hard to make a phycological step to borrow money to build something that will/might fall in value ( even it is not a valid if you stay their 5 years or more)

What happens is most clients sit on their hands and wait until the cycle reaches bottom, - and with no big build to rent corporates to pick up the slack and build through the dip, the construction sector gets hammered and all the tradies head off to OZ....

Fully agree. As I mentioned in the last post its stops activity as free equity has dropped, uncertainty rises, sit on hands and see what happens. With your example yes that's the house crisis causing the build activity that we need to progress, freezing up. If the exact same house price decrease happened but over a number of years, its not noticed. And ironically, if someone can start building houses left right and centre, thats what would happen, supply and demand equalise. The only solution as I see it is build build build, or at least make building more favourable than buying, then it will self correct, slowly

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#2677164 19-Mar-2021 12:41

For sure, I agree with you both. For the record, I'm not wanting house prices to drop by $150k tomorrow, but any sort of reduction (or even a hold on prices - like Bernard talks about what the Australian government did) gradually over time would be a big help.

It goes the other way too - prices didn't suddenly rise (for example) from $400,000 to $550,000 overnight either - it took a number of years to get to where we are now as well.

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#2677414 19-Mar-2021 21:59

quickymart:

I thought so too, kind of like a why house prices in NZ are so high for dummies.

I think you said supply was the biggest thing, and I agree with you - especially the bit he talks about the big apartments in Sydney and Melbourne, which sounds like that helped a lot. Just a pity governments appear to be too scared to act on it - I can see homeowners jumping up and down if their house drops in value, but at the same time that does nothing for first home buyers.

But big city prices in Oz are also outrageous, despite there being much denser housing like units and apartments. The outrageous pricing is something repeated all over the western world.

Has the easy supply of money got anything to do with it?

Most of the posters in this thread are just like chimpanzees on MDMA, full of feelings of bonhomie, joy, and optimism. Fred99 8/4/21

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#2677418 19-Mar-2021 22:32

This is a very good article on how successive governments have deluded themselves, and the public, from Bernard Hickey.

This is also very scary for the stability of the market and shows how much of this is driven by speculation.

mattwnz

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#2677476 20-Mar-2021 01:11

tdgeek:

quickymart:

I thought so too, kind of like a why house prices in NZ are so high for dummies.

I think you said supply was the biggest thing, and I agree with you - especially the bit he talks about the big apartments in Sydney and Melbourne, which sounds like that helped a lot. Just a pity governments appear to be too scared to act on it - I can see homeowners jumping up and down if their house drops in value, but at the same time that does nothing for first home buyers.

Incentivise builds, over time that will ease demand, if prices went down slightly every year as building was the no brainer option, affordability will slowly catch up as wages rise slowly and houses decline slowly. Its probably time to get serious with tiny homes, or design smaller homes with larger and covered decks so the interior is ok for living in, but on nice days the overall house is bigger. Creative stuff like that to get more bang for the buck. But invariably, ideas usually just end up in media articles not on plots of land

There aren't the builders to build them at the moment, with big waiting lists and many construction companies appear to have recently hiked up their prices due to so much demand. It is ironic, because they were talking during last years lockdown how building would drop off and builders would be in need of work. But the opposite has happened.

Land also has dramatically risen in price this year, as investors , speculators and other people are buying sections en-mass and land banking. It is totally crazy out there at the moment, as there is pretty much no new land supply in my area. Most are resales by land bankers. Land that was selling in one town I am looking at was selling for 250k prior to the lockdown last year. The same land is being resold by speculators and construction companies that purchased the land, between 450-500k. All are being sold by deadline sales and auctions. Can be 8 other buyers trying to buy the same piece of land. Some developments I have seen are even being marketed towards land bankers as being a good investment.IMO it is a terrible situation that NZers treat other NZers like this to make a quick buck. When we should

IMO land bankers in this situation are not much different to ticket scalpers, who are hoping to resell the land for a quick easy profit without doing any work. A piece of land in a new estate I am interested in buying, sold in November last year for about 300k. It is being resold by that buyer and the agent is expecting high 400k and wouldn't be surprised if it surpassed 500k. Agents are also pumping up the prices and giving seller high expectations, based on a few previous high sales. But the problem is a few outlier high prices become the new normal price, and each money they just keep rising. But NZ has plenty of undeveloped land, and towns are often surrounded by farmland which is perfectly suitable for housing. But it seems that councils don't want to enlarge the area of the town. It seems some people really want land supply restricted to keep prices high.

mattwnz

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#2677477 20-Mar-2021 01:18

quickymart:

It goes the other way too - prices didn't suddenly rise (for example) from $400,000 to $550,000 overnight either - it took a number of years to get to where we are now as well.

Actually they took less than a year to rise by this sort of amount in some areas in 2020-21. In some cases, just months.

mattwnz

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#2677478 20-Mar-2021 01:22

Handle9:

This is a very good article on how successive governments have deluded themselves, and the public, from Bernard Hickey.

This is also very scary for the stability of the market and shows how much of this is driven by speculation.

I think 2021 is going to be the year that Labour could get hammered by this. They can't wait until the next election before they do something major about it. I get the feeling they expected to just coast through this next term, being voted in on their Covid response, and their promise of no new taxes, or property taxes etc, resulting in many National voters switching sides. I expect we will see a new Prime minster before the end of this term, before some serious changes are made, as the problems caused by the increased inequity, largely driven by the housing crisis and the knock on effects, are too big to ignore anymore. Someone I was speaking to on this expects a new Prime Minster before the end of the year.

I still remember the Prime Minister last year saying that these huge property price rises can't continue. Yet they have only gotten significantly worse since she said this.

mattwnz

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#2677479 20-Mar-2021 01:36

quickymart:

I thought so too, kind of like a why house prices in NZ are so high for dummies.

I think you said supply was the biggest thing, and I agree with you - especially the bit he talks about the big apartments in Sydney and Melbourne, which sounds like that helped a lot. Just a pity governments appear to be too scared to act on it - I can see homeowners jumping up and down if their house drops in value, but at the same time that does nothing for first home buyers.

House values dropped in the early 90's over a number of years and also in the 2000's, and I don't think people with a house jumped up and down about it. People re buying and selling in the same market, so it shouldn't really affect people unless they go into negative equity due to overpaying. But anyone who purchased soon before a drop, are likely going to be worst affected, and that is why it is important to not pay too much for a house. The vast majority of house owners should not be affected by a significant drop, especially as house prices have risen more than 20% in just a year. Too many people are getting carried away at the moment due to FOMO and frustration, and there has been no warnings from the government on paying too much, nor have I read anything in the media. I mean what happens if there is a global financial crisis and the bubble pops? Or is NZ different?. Just because someone buys a house for 800k in 2020, when the new 2020 RV maybe 600k, doesn't magically make the house worth 800k in the future. It may drop back down based on other properties in the area.

The government s aren't scared, there is just no political motivation to do anything, and too many vested interests IMO

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#2677487 20-Mar-2021 07:41

mattwnz:
Handle9:

This is a very good article on how successive governments have deluded themselves, and the public, from Bernard Hickey.

This is also very scary for the stability of the market and shows how much of this is driven by speculation.

I think 2021 is going to be the year that Labour could get hammered by this. They can't wait until the next election before they do something major about it. I get the feeling they expected to just coast through this next term, being voted in on their Covid response, and their promise of no new taxes, or property taxes etc, resulting in many National voters switching sides. I expect we will see a new Prime minster before the end of this term, before some serious changes are made, as the problems caused by the increased inequity, largely driven by the housing crisis and the knock on effects, are too big to ignore anymore. Someone I was speaking to on this expects a new Prime Minster before the end of the year.

I still remember the Prime Minister last year saying that these huge property price rises can't continue. Yet they have only gotten significantly worse since she said this.

I am apolitical, I don't like or dislike any party but as neutral as I am I think you guys are living in a parallel universe. PM replaced? I can't see any indication of that but it's possible I'm also blind :)

People like the leader and the party too much - I can't say why cos it's not a political thread and don't want to get banned

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