Is there an Auckland housing recession guess thread in place

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Mad Scientist
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#1391010 21-Sep-2015 10:01

They can happen, of course anything can. But nobody knows if/when. I'm only following Sydney/Melbourne. They are my yardstick to mirror what happens to Auckland with a 1-2 year lag usually.

Fred99

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#1391050 21-Sep-2015 10:50

joker97: They can happen, of course anything can. But nobody knows if/when. I'm only following Sydney/Melbourne. They are my yardstick to mirror what happens to Auckland with a 1-2 year lag usually.

We bought in Sydney in the '80s. Impulse move after a trip back to NZ where interest rates were nudging 20% (vs "only" 14% in Aus) yet you could buy in Sydney - a city 4-5x the size of Auckland - at about the same price - perhaps even lower.
There was a simple reason for this - "investors". Until 1987, Aus property investors could not offset interest payment against income for tax purposes. Investment in rental development was stagnant - despite high yields. (The rental accommodation shortage in Sydney in the mid-'80s was truly extreme - and a political hot potato as core support for the Labor Hawke federal government and Wran state government was nominally working-class - renters) Keating was the instigator of financial reforms - now they didn't get whacked as hard as NZ by the crash of '87, as those reforms lagged those of NZ's Lange/Douglas commencing in '84. Keating's reforms kicked in during '87, and included an incentive to property investment introducing "negative gearing" (allowing interest to be offset as a cost), but simultaneously introducing a CGT ("family home" excluded unless sold within 12 months). That started a boom of astronomical scale - the market went completely nuts, values doubling (and more) in 12 months. Keating made the cover of Time Magazine as "world's greatest treasurer" and the rest is history. So much for CGT - doesn't work even when at introduction it was almost inescapable, then punched through with so many loopholes by subsequent governments, lured by the popularity of the concept held by the electorate that an endless supply of "free money" from the property market was going to be good for everyone.
Payback time is coming - there and here. When and how is something I can't guess.

Batman

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#1391055 21-Sep-2015 10:58

You could be right. How much do houses and apartments cost in Singapore, Hong Kong, New York, London? What does that mean for Sydney/Melbourne/Auckland? (I don'tknow the answer, just a question I've always had)

Fred99

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#1391102 21-Sep-2015 11:38

joker97: You could be right. How much do houses and apartments cost in Singapore, Hong Kong, New York, London? What does that mean for Sydney/Melbourne/Auckland? (I don'tknow the answer, just a question I've always had)

I don't know about Singapore or Hong Kong.

London prices are absolutely and ungodly astronomical. City 3x the population of Sydney though. NY - hmmm. Good friends of mine live in NJ work in NYC, she works on Wall St and commutes no problem. They live in a nice home in a leafy picture-book neighbourhood. The RE ads for the area they live show asking price, and finance offer based on 10% deposit - bit of an insight there, $40k down and about $400 week repayments, and you're into a pretty reasonable house on a decent plot of land (ie 1/3 acre) - something that would be well over $1m anywhere in Akl). More confirmation to me about how truly nuts the Akl market is - it's a country town when compared to those cities.
Of course if you want a nice apartment with views over Central Park, then a NZ lotto jackpot is only going to be a deposit.

MikeAqua

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#1391111 21-Sep-2015 11:57

Realistically, there will be no government (Red or Blue) solution to the Auckland housing issue. Who really wants to be the politician that slashes the value of a whole lot of people's houses?

Personally, I think Auckland's problem is a transport one. In other major cities around the world, people in low to middle income jobs who work in high rent areas generally live in cheaper (often outlying) areas of a city and train/bus in.

Auckland doesn't really have that option at the moment. The train system is pretty minimal, and buses run on the same congested roads as the cars, with minimal bus only lanes. As an example, it is significantly slower (and not that much cheaper) to take the bus Airport-CBD return than to hire a small car.

Mike

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#1391211 21-Sep-2015 12:53

If you start educating general public and property investors (foreign and domestic) that Auckland houses are made from "cheap matches and wet cardboard" then perhaps prices will drop.
Many Auckland houses are like "Hollywood Decorations" built for only one purpose - to be sold ASAP. I refer to thousands of leaky houses in Auckland which are still continued to being built.... leaky. Overpriced 60%? No, I would say 85%!
Of course there will always be people who will believe in what they see on photos and trust real estate agents (local and overseas) promoting "safe heaven" investment in Auckland property.
One Branch Managers of B&T told me - buyers from PRC are not even looking at what they are buying - they've being told - "prices will never go down".

Prices must go down. Only future will tell.

tdgeek

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#1391212 21-Sep-2015 12:54

I dont see it as a general supply and demand problem. I don't see tens of thousands of people homeless. What I do see is sales going to our foreigner friends, who will pay what it takes. Whereas most Kiwis will pay a bit above the value of the house if they like it. Foreigners will just pay big, done. Thats the precedent. Homes are bought by foreogners, for their kids to live in, while the educate here. Thats now turned ionto a money making bonus if and when they sell up.

Need to have sales only to residents, and CGT. Houses are for living in, not speculating on.

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TeaLeaf

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#1391224 21-Sep-2015 12:55

But WHY do we want Auckland to become a Sydney "wannabe"?

We have so many small hubs that actually produce things. I know Immigration gives bonus points for going elsewhere but it should be, you cannot settle here.

I do agree its nuts we havnt built a train system in Auckland. It doesnt even have to be a good one, just one people can link to.

The RE bubble is a separate issue which I think will sort out when baby boomers and foreign investors sell, and perhaps we may see and ireland like correction.

My personal perspective is 8-10% pa is a good return, double your capital worth every 8-10 years. id like to get a graph and draw a line from the 80s until now at 10% and that would be what I personally perceive the value to be, probably close to government valuation.

By the way is there a site to show the RE curve over the last 5 decades?

Thats lats line TDGeek, well said re houses for living in not speculating.

TeaLeaf

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#1391234 21-Sep-2015 13:11

Looking at a graph now.

It took 10 years from 92 to 2002 to increase prices (double) what looks like 6 months (hard to tell by graph) this year. PMSL.

In 5 years house prices have nearly trebled.

Again, we have all these immigrants coming to pay for baby boomers retirement via tax because they didnt want to keep working, yet a large percentage of them are making a ship load more in pre retirement RE, TAX FREE, than what you get on a pention 15-20 years. Just seems wrong to me. Injust.

Batman

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#1391289 21-Sep-2015 13:57

No government had done anything about it.

I don't blame those making big bucks. If we put anyone in that position to make free money i dare say the majority will have no qualms about doing so, completely legally.

TeaLeaf

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#1391323 21-Sep-2015 14:45

Same I got no issue with people getting ahead. but how does need reform. as does a correction on foreign investing and taxation on non principal housing.

i did a quick line from early 90s, i think a correction of around 40% would put the market back on track to its historical trend prior to the last 13 years.

Batman

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#1391329 21-Sep-2015 14:48

TeaLeaf: Same I got no issue with people getting ahead. but how does need reform. as does a correction on foreign investing and taxation on non principal housing.

i did a quick line from early 90s, i think a correction of around 40% would put the market back on track to its historical trend prior to the last 13 years.

Again, you have to super impose that line on major world cities. Perth, New York, Vancouver, London, Singapore, etc etc

gzt

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#1391355 21-Sep-2015 15:18

tdgeek: I dont see it as a general supply and demand problem. I don't see tens of thousands of people homeless. What I do see is sales going to our foreigner friends, who will pay what it takes. Whereas most Kiwis will pay a bit above the value of the house if they like it. Foreigners will just pay big, done. Thats the precedent. Homes are bought by foreogners, for their kids to live in, while the educate here. Thats now turned ionto a money making bonus if and when they sell up.

Need to have sales only to residents, and CGT. Houses are for living in, not speculating on.

You dont see that because people will avoid that at all costs. What you can see is a rise in occupancy. Ie; more people per dwelling than previously.

It is a problem of underinvestment in new housing. Imo buying existing houses for capital gain and or rent hardly qualifies as investment and maybe it should not. High quality residential development requires huge amounts of capital and there are multiple risks. That is investment.

gzt

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#1391358 21-Sep-2015 15:22

The comments about immigrants here are really silly. Migrants are and should be able to buy their own house/apartment just like anyone else.

mattwnz

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#1391363 21-Sep-2015 15:27

tdgeek: I dont see it as a general supply and demand problem. I don't see tens of thousands of people homeless. What I do see is sales going to our foreigner friends, who will pay what it takes. Whereas most Kiwis will pay a bit above the value of the house if they like it. Foreigners will just pay big, done. Thats the precedent. Homes are bought by foreogners, for their kids to live in, while the educate here. Thats now turned ionto a money making bonus if and when they sell up.

Need to have sales only to residents, and CGT. Houses are for living in, not speculating on.

You may not see people homeless, but you do see large numbers of people living at a single dwelling in AUckland. You do now get generations of familes living in a house, and children staying at home into their late 20's , and longer (I believe the new average age of children leaving home is around 25), because they can't afford to buy their own home. Unless you are in a couple it would be almost impossible unless you were making a huge salary. Our housing policies are very favorable to foreign buyers, whereas overseas, it is a lot harder, which is one reason they come to NZ. So if they make them as hard as they are in states in Oz, such as requiring overseas people build new homes rather than buying existing housing stock, it will kill two birds with one stone. The problem is that for some reason the media turned it into a race issue, but it has absolutely nothing to do with that, if you treat all overseas buyers the same. The problem with CGT, is that it is a new tax, and new taxes are a slippery slope. Look at GST, it was palatable at 10%, then 12.5, now 15%. It is likely only a matter of time that it goes to 17.5%, as it is a quick and easy way to raise revenue for the government,

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