Is there an Auckland housing recession guess thread in place

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#1390653 20-Sep-2015 16:45

Here's some news which never quite made it to NZ media outlets - from Australian Financial Review:

"Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing's move to tighten capital controls.

Fred99

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#1390661 20-Sep-2015 16:54

gzt: That is interesting but without comparison to historical data it is meaningless. Secondly if an owner can afford to leave a house empty, they can probably afford to hang on to it in other circumstances if need be.

The comment was made in that article . "All have had significant increases in the number of unoccupied dwellings since 2001". Typical lack of investigative journalism in NZ, the data was from census data - so a figure should have been able to be put on it.

Yes - there's "inertia". It brings to my mind an image of a coming train wreck.

One of my immediate family owns an empty (for 12 months) house surplus to needs, untenanted. She's decided that the market has peaked - it will be auctioned in coming weeks. It would have been sold a year ago, but would have probably cost her 1/2 million tax-free capital gain. Free money.

mattwnz

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#1390679 20-Sep-2015 17:49

driller2000:
mattwnz:
mudguard: You wonder if the council made GV's closer to RV's whether that would cool it... Would certainly make the council some money! We've kind of given up to be honest, I don't have the time to look but there is some uncertainty over my job. Interest rates on term deposits certainly suck at the moment.
As someone mentioned, it would probably take some external force for anything actually bad to happen, prices could flatline or slow, but with the numbers migrating into Auckland from overseas and around the rest of NZ it probably won't change.

As far as I am aware, RV, GV, and CV are all the same thing...the Capital valuation... they are just called different things, as the name has changed several times of the year. Most councils seem to use QV for their valuations. They are considered the market valuation according to the QV website. . You can get an independent registered valuation done, but it may nor differ much from the CV unless the house isn't normal, or additional features. The CV also doesn't include chattels, where a registered valuation may.

Independent RV's are COMPLETELY different things - they include a physical inspection of the property - so are detailed and specific for the property for the date of the valuation

the other council based valuations mentioned (CV) are done for a given area and on an average basis and there is no site specific inspection and almost no detail - ie. land and house area + general features + age being the main criteria - they are also done over a protracted period so the date of the valuation is a fudge at best - and they can be several years out of date given the space between the valuations

this is based on my exp with actually getting 2 or 3 RV's done on the family home for finance purposes - with quite different numbers resulting between the RV and CV - especially in a market like Auckland where the rate of change is a bit crazy at the moment...

As to the original question posed by the OP...I have followed Tony Alexanders posts for several years now and he has produced some pretty good material on this subject e.g.:

http://tonyalexander.co.nz/wp-content/uploads/2015/05/Sporadic-8-May-12-2015.pdf

And the thing I like most about him is at least he admits that he and his peers are at best guessing ...and that their record e.g. re interest rates has been woeful since the GFC

I wasn't talking about independent RVs, which in that case RV would stand for 'Registered Valuation', which is a different meaning to RV. I was talking about RV (Rating Valuation) = GV (Government Valuation) = CV (Capital Valuation). I believe those 3 are all the same thing, just the name has changed over the years. Real estate agents also often confuse people as they often refer to them differently too.
The Rating Valuation is the value put on the home by the valuation company that the council employs (usually QV), to work out what you should be rated at, based on teh current market value of your property, using mesh blocks. Very complicated process apparently, and has a huge algorithm and manual. If you object to the figure QV puts on it, then they will send out QV person to inspect the property, but this is usually a reasonably brief process. Last time we had this done, they put up the propertys value by about 10%. If you hire your own company to do an RV, which in that case is a Registered Valuation, then that is only that particualr companies opinion on what the value could be, and it will often be more comprehensive. It can't however be used by councils to rate your property as it is independent if you don't use QV. As it is independent, you may get 3 different companies, and they may all value it differently. In our case, we had a registered valuation done by a couple of companies, one was 30% above the CV/RV/GV which had just been revalued, the other was only 10% above. You wouldn't want to be rated on a RV that is 30% above the CV, as you would be paying a lot more in rates. This is one reason people don't get their CV redone until they sell, as councils won't back date rates, and people can live in the house at the lower CV and pay lower rates. The problem is the new buyer end up having to pay more in rates if it goes up a lot. Luckily for some, some councils still rate on the land value, which is a far fairer way of rating, and means that land gets built on instead of being land banked. The CV system of rating is a wealth tax, as it presumes people in more expensive houses, can afford to pay more in rates, when they are using no more services than someone with an CV of 1/4 of the value, who is paying a lot less in rates and may have more people living in it.

mattwnz

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#1390691 20-Sep-2015 17:59

Fred99:
One of my immediate family owns an empty (for 12 months) house surplus to needs, untenanted. She's decided that the market has peaked - it will be auctioned in coming weeks. It would have been sold a year ago, but would have probably cost her 1/2 million tax-free capital gain. Free money.

People thought the market had peaked a year ago though. The thing is when a lot of people think the market has peaked, then you may end up with a glut of houses on the market, which then satisfies supply, and it then becomes a buyers market. For every winner in this situation in Auckland, they are loser. But certainly many people have done very well out of houses, with free tax free capital gains, which have probably surpassed what they could earn at a job. But this type of thing isn't great for the economy, as it isn't productive, and people who need houses can't afford them and end up being lifetime renters in poor quality houses.

Handle9

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#1390729 20-Sep-2015 19:19

Fred99:
gzt: That is interesting but without comparison to historical data it is meaningless. Secondly if an owner can afford to leave a house empty, they can probably afford to hang on to it in other circumstances if need be.

The comment was made in that article . "All have had significant increases in the number of unoccupied dwellings since 2001". Typical lack of investigative journalism in NZ, the data was from census data - so a figure should have been able to be put on it.

Yes - there's "inertia". It brings to my mind an image of a coming train wreck.

One of my immediate family owns an empty (for 12 months) house surplus to needs, untenanted. She's decided that the market has peaked - it will be auctioned in coming weeks. It would have been sold a year ago, but would have probably cost her 1/2 million tax-free capital gain. Free money.

If you search for the census data you see that there are 30 more unoccupied houses in Auckland from the 2006 data, however with over 30,000 new houses. In other words % occupancy has grown, which is what you would expect. To suggest that constrained supply isn't a factor is a silly.

When we bought our first house 10 years ago) there were generally approximately 90 houses in our Auckland suburb on trade me. Now there are approximately 35, which has been pretty steady for the last 3-4 years.

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#1390801 20-Sep-2015 22:30

TeaLeaf: Just to add to what Fred said about income.

Income is a major factor in affordability. No wonder Auckland is listed as one of the most unfortable cities in the world to live. Our incomes are stagnant. My Mrs got 1% but RE went up 50% and she has 8 years full time education at top universities in the world, PHDs, and earns what I would call a junior wage in IT.

So, these immigrants. What are they going to do for jobs to afford $1m minimum housing? On a combined income of $200k Id personally not borrow $800k, let alone a minimum wage income. Who is going to stay in a city they cant afford and do all the low income necessary jobs? Its just a massive infrastructure melt down waiting.

And even if these immigrant to Auck stats are true. My guess is they will leave Auckland and that in itself will assist in the collapse of the market.

The only answer I see is a MASSIVE reduction in house pricing in line with historical figures of 8% per annum. Thats going to hurt some people, but some people is better than everybody.

Just add it all up and google recession. I personally dont want to sound a pessimist but I consider this a reality.

Obviously the people living in AKL cannot afford to buy the houses (20% deposit = 100k in the bank), so I don't believe they are the ones buying the houses.

I believe the people buying them are investors (who may or may not be rich, but certainly knows how to get loans), and immigrants (if you lives in London and sold your apartment for 500k pounds ....., or in Sydney and sold your shed for 1.4mil Aussie ...........) who are cashed up - who says they are taking up loans.

THe future? Depends on immigration. If your ex pats keep coming back from London, well ... there is no bubble

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#1390802 20-Sep-2015 22:38

Fred99: Here's some news which never quite made it to NZ media outlets - from Australian Financial Review:

"Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing's move to tighten capital controls.

difficult to know the truth. i found this http://www.domain.com.au/apm/Research/AuctionResults/

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Trade NZ and US shares and funds with Sharesies (affiliate link).

mattwnz

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#1390832 21-Sep-2015 00:46

joker97:
TeaLeaf: Just to add to what Fred said about income.

Income is a major factor in affordability. No wonder Auckland is listed as one of the most unfortable cities in the world to live. Our incomes are stagnant. My Mrs got 1% but RE went up 50% and she has 8 years full time education at top universities in the world, PHDs, and earns what I would call a junior wage in IT.

So, these immigrants. What are they going to do for jobs to afford $1m minimum housing? On a combined income of $200k Id personally not borrow $800k, let alone a minimum wage income. Who is going to stay in a city they cant afford and do all the low income necessary jobs? Its just a massive infrastructure melt down waiting.

And even if these immigrant to Auck stats are true. My guess is they will leave Auckland and that in itself will assist in the collapse of the market.

The only answer I see is a MASSIVE reduction in house pricing in line with historical figures of 8% per annum. Thats going to hurt some people, but some people is better than everybody.

Just add it all up and google recession. I personally dont want to sound a pessimist but I consider this a reality.

Obviously the people living in AKL cannot afford to buy the houses (20% deposit = 100k in the bank), so I don't believe they are the ones buying the houses.

I believe the people buying them are investors (who may or may not be rich, but certainly knows how to get loans), and immigrants (if you lives in London and sold your apartment for 500k pounds ....., or in Sydney and sold your shed for 1.4mil Aussie ...........) who are cashed up - who says they are taking up loans.

THe future? Depends on immigration. If your ex pats keep coming back from London, well ... there is no bubble

If they are mum and dad investors, who are moving their moeny out of the bank due to the low interest rates, I suspect it will be quite high risk for them. Many people are buying houses in Auckland for reasons of greed, because they have seen others do well in a short period, and think they can make a killing too. But with any investment like that, prices can go up or down. When prices drop, financial experts will call it a market correction that people have been predicting for years. It happens quite a lot historically in the sharemarket for example. But as houses are such a big investment, people putting all their eggs onto one basket, eg their house, when buying in a property bubble is pretty risky IMO. It is fine if you plan on living int eh house for the next 20 years, and can service the mortgage, then you can possibly rideout the bubble bursting, or very little capital gain over the next decade.

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#1390855 21-Sep-2015 05:37

How do you know people are buying houses in Auckland due to greed? No one has ant data to show it.

And if they have 100k sitting in the bank the market can afford to correct 20%.

I still think it's bought by people with serious cash. Ie non Aucklanders. Or recent immigrants - I'm not being racist, it could well be your ex pats coming home, Americans, Russians, who knows, no one has any data.

Fred99

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#1390895 21-Sep-2015 08:27

Handle9:
Fred99:
gzt:

The comment was made in that article . "All have had significant increases in the number of unoccupied dwellings since 2001". Typical lack of investigative journalism in NZ, the data was from census data - so a figure should have been able to be put on it.

If you search for the census data you see that there are 30 more unoccupied houses in Auckland from the 2006 data, however with over 30,000 new houses. In other words % occupancy has grown, which is what you would expect. To suggest that constrained supply isn't a factor is a silly.

I read the article, then your comment suggesting the opposite, and something is obviously wrong. You're correct - I looked at the census data. The Metro article is a load of garbage - shame on them.
But I still do not believe constrained demand is a main driver - just a contributing factor (or should I say a symptom rather than cause). Population still grows in when house prices are falling or static - CPI adjusted prices were static/falling during the 90s, when Auckland population growth was as high as 3.6%, vs 1.2% 2006-2013, 2.4% 2014.

gsr

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#1390903 21-Sep-2015 08:37

If migrants are responsible for the demand & the NZD just went down by ~20%, why has the bubble not doubled?

Fred99

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#1390905 21-Sep-2015 08:38

joker97:
Fred99: Here's some news which never quite made it to NZ media outlets - from Australian Financial Review:

"Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing's move to tighten capital controls.

difficult to know the truth. i found this http://www.domain.com.au/apm/Research/AuctionResults/

Amazing that 72% clearance rate is actually a big drop - from 90% this time last year.
Listings are also up by ~50%, and reporters are suggesting that real estate agents are telling them there's a sharp drop (75%) in open home viewings.
Sydney/Aust market has some significant differences though, rules for non resident investors (can build new - not buy existing), bank regulations, and a CGT introduced in the late '80s - but subsequently rendered toothless by governments who recognised that there were more political points to be made by encouraging the concept of free-money, than by sustainable policy.

TeaLeaf

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#1390957 21-Sep-2015 09:22

I found australias preoperty rules and CGT to be extremely fair when I lived there. Like I said, why should I pay tax on BUYING a Soda and NONE on making $1m investing (which is income) on a house?

So let me get this straight

We still dont have CGT in NZ?
We have no cap on foreign investors?

So 50% of the market as a ficticious number could be foreign investors, just investing?

And the government wants a referendum on kiwiana looking flags that dont look remotely like flags?

And then the baby boomers got lucky with 150% property rise on their $2m house and boom we are off to live in a nice part of nz and live off the Pension and $300kpa interest from out properties.

Wasnt the idea to get migrants to help fund the baby boomers who didnt save for their retirement?They didnt want to work to 70 but quite happy with the property boom Im sure.

I think there is a shambles going on here somewhere :-)

TeaLeaf

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#1390959 21-Sep-2015 09:24

What happens when said 50% foreign investors pull out and said baby boomers sell up their $3m houses? (Semi Rhetorical)

surfisup1000

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#1390966 21-Sep-2015 09:32

People who don't think a big drop in auck house prices can happen are in la-la land .

The irish never thought it would happen to them -- they had a lot of immigration from europe, rising prices, demand -- no one thought it could happen until dublin prices fell 60%.

The average salary earner cannot afford the average house which means either investors or foreign income earners are keeping the prices high.

It is pretty bad just now , auckland infrastructure is borked, salaries are exceptionally low compared to house prices. So people will be in severe financial stress and need to work a lot just to keep afloat.

Problem is, the best jobs are in auck so it attracts people like moths to a flame.

Auckland is not even a great city to live so I don't get it myself.

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