Crazy property prices in Auckland....

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#1450359 14-Dec-2015 21:20

simon14: Overall, house prices in NZ double in value every 10 years. Their may be ups and downs in between, but overall, on average, that's the rule.

correct

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#1450383 14-Dec-2015 21:33

alasta:
simon14: Overall, house prices in NZ double in value every 10 years. Their may be ups and downs in between, but overall, on average, that's the rule.

That can't be sustained forever because rents and incomes don't double every ten years.

But it has. The multiplier between average income and house prices has risen a great deal, but still they are being bought.

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#1450388 14-Dec-2015 21:42

JimmyH:
Linuxluver:

We haven't had a crash like '87 as it lead to most people avoiding the scam that is the NZ stock exchange. Pump and ump is the rule of the day for most listings that haven't been around for a while...and the ones that have been around for a while tend to be a handful of local monopolies.

Indeed. The NZ sharemarket in the 80s was a classic speculative bubble. People were paying anything at an offering, not necessarily because they believed in a company or thought it had underlying earnings prospects that justified the price, but simply because they were confident that prices would keep going up and there would always be a "bigger fool" who would pay them even more than they had paid in a few months.

Other examples include tulipmania in the 1600s, the South Sea bubble in the 1700s, and the US railroad bubble in the 1800s.

Actually, all of these kind of remind me of the Auckland property market now, and there is a good chance there will be a lot of financially devastated people if/when that bubble bursts too.....

I disagree. I played on the market. You could opt for short term L+M Oil, 2c rises to 4c, or medium or longer term. Its an investment. If a company does well, you do well via dividends, and capital gain, the latter which is fair enough. If the P/E ratio rises from average to premium, the investment in shares reflects that. In any endeavour, you will get speculators, they aren't the major influence on shares or the property market. or futures.

Now, when there is a crash, that doesnt mean your $2-50 shares in TDGEEK Corp, drop 90%. They might drop over days or weeks by 30%. maybe more. The ones that lose everything are the ones that use leverage. reverse buy. The smart ones say, bugger, damn, its a good company this is a sharemarket issue, i'll not sell (and take a loss), i'll hold, it will recover, which it always does. Smarter ones buy cheap, to reduce the average price per share of their portfolio. In property, many new owners are highly leveraged. Low deposit, or paying a high ratio of earnings in payments. If you buy or have bought in todays AKL market, you are aware of the risk. If the priority drops 30%, bugger, I can still pay the same mortgage, no prob. Except the bank has a prob!

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#1450424 14-Dec-2015 23:29

simon14: Overall, house prices in NZ double in value every 10 years. Their may be ups and downs in between, but overall, on average, that's the rule.

Where did you get that rule from? Sure it may occur after 10 years, but as proeprty is in cycles, you may buy in a bad cycle (eg at the top of the market) and there may not be any rise for the next 10 years. eg Look at housing prices in parts of NZ apart from Auckland. In my area, house prices havn't changed since 2007. So if I had brought 8 years ago at the top of the market at the time, I would be selling at the same price I purchased the house for, which is effectively a loss due to inflation.
I believe the sharemarket has outperformed housing over the long term. Housing you also have to build in costs such as maintenance (1-4% a year), rates and insurance, which are all direct costs of owning a house which you can't really save on. Also potential upgrading of the house over time. People need to understand that the house they live in, may not be an investment, but a liability.

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#1450430 14-Dec-2015 23:54

Looks like property prices in Auckland are now dropping, having reached their peak in July. http://www.stuff.co.nz/business/money/75083069/auckland-housing-downturn-more-severe-than-expected-westpac-economist Probably a very good thing too, although it is a bit worrying that the drops are quite large. I would have expected more of price freeze. I guess people who are selling are more willing to not make their extra margin, to secure the sale, possibly because they are worried that their could be a big drop coming..

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#1450542 15-Dec-2015 08:51

Yes - A significant drop in housing prices could destroy the equity of those who have recently purchased. That's one aspect that many of those that were calling for significant drop in prices need to think about more.

A stay in prices would be better for all concerned, but selling pressure could very well mount due to panic.

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#1450556 15-Dec-2015 09:18

that's a very interesting point. No govt. is going to get re-elected by promising to remove equity from homeowners

its going to be interesting to see how all this ends up. Its a bit sad that older generation will watch their kids/grand kids grow up over Skype because they had to leave NZ and move to a higher wage economy/cheaper housing

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Send money globally for less with Wise - one free transfer up to NZ$900 (affiliate link).

tdgeek

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#1450620 15-Dec-2015 10:01

mattwnz: Looks like property prices in Auckland are now dropping, having reached their peak in July. http://www.stuff.co.nz/business/money/75083069/auckland-housing-downturn-more-severe-than-expected-westpac-economist Probably a very good thing too, although it is a bit worrying that the drops are quite large. I would have expected more of price freeze. I guess people who are selling are more willing to not make their extra margin, to secure the sale, possibly because they are worried that their could be a big drop coming..

Volumes dropped by a large amount, prices, not as much, but are down. I'd take this as the prices are still very high but are stalled due to being too high to afford. This was the cap. Demand is there but at these prices, nah, can't afford it. Houses arent as liquid as shares, and for genuine buyers, they will pay the mortgage as planned. If they dropped another 10% I don't see many banks stepping in, but they might for some

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#1450640 15-Dec-2015 10:29

tdgeek:
simon14: Overall, house prices in NZ double in value every 10 years. Their may be ups and downs in between, but overall, on average, that's the rule.

correct

Certainly there are exceptions. Our house has not increased in value at all in 8 years. In fact, RV is $50,000 lower now than it was when we bought it.

Geese

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#1450672 15-Dec-2015 11:04

tdgeek: Volumes dropped by a large amount, prices, not as much, but are down. I'd take this as the prices are still very high but are stalled due to being too high to afford. This was the cap. Demand is there but at these prices, nah, can't afford it.

Must be gutting to be a first home buyer struggling away for years to save up a 20% deposit, to nearly get there, and then overnight (October 1) be many tens of thousands short now it has increased to 30% deposit.

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#1450701 15-Dec-2015 11:43

alasta:
simon14: Overall, house prices in NZ double in value every 10 years. Their may be ups and downs in between, but overall, on average, that's the rule.

That can't be sustained forever because rents and incomes don't double every ten years.

Rent is only part of the financial gain of owning rental property.

House buyers are a subset of all income earners. That subset has a higher average income than the national average.

Not all people buy houses from salary/wages.

Mike

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#1450706 15-Dec-2015 11:46

wsnz: Yes - A significant drop in housing prices could destroy the equity of those who have recently purchased. That's one aspect that many of those that were calling for significant drop in prices need to think about more.

A stay in prices would be better for all concerned, but selling pressure could very well mount due to panic.

If that occurred, then they paid to much for the house to begin with, and the values and banks miscalculation it's value. A drop in value though is only bad if you are buying and selling in different regions or cashing up. If you are buying and selling in the same region, then the other houses you are buying will also have dropped. I think many people have known for several years that Auckland market was a big bubble, but that didn't stop people buying, or banks lending. But bubbles burst or deflate, it's not if, but when. It will be a learning experience for many.

mattwnz

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#1450708 15-Dec-2015 11:49

Geese:
tdgeek: Volumes dropped by a large amount, prices, not as much, but are down. I'd take this as the prices are still very high but are stalled due to being too high to afford. This was the cap. Demand is there but at these prices, nah, can't afford it.

Must be gutting to be a first home buyer struggling away for years to save up a 20% deposit, to nearly get there, and then overnight (October 1) be many tens of thousands short now it has increased to 30% deposit.

That's life. I don't think a higher deposit is the answer though because was many will borrow the difference from family., as an early inheritance.

mattwnz

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#1450713 15-Dec-2015 11:54

tdgeek:
mattwnz: Looks like property prices in Auckland are now dropping, having reached their peak in July. http://www.stuff.co.nz/business/money/75083069/auckland-housing-downturn-more-severe-than-expected-westpac-economist Probably a very good thing too, although it is a bit worrying that the drops are quite large. I would have expected more of price freeze. I guess people who are selling are more willing to not make their extra margin, to secure the sale, possibly because they are worried that their could be a big drop coming..

Volumes dropped by a large amount, prices, not as much, but are down. I'd take this as the prices are still very high but are stalled due to being too high to afford. This was the cap. Demand is there but at these prices, nah, can't afford it. Houses arent as liquid as shares, and for genuine buyers, they will pay the mortgage as planned. If they dropped another 10% I don't see many banks stepping in, but they might for some

I would say the majority of people won't want to sell for less than they paid, unless they get into major financial stress. Yet we do it all the time when you buy shares. I don't think it is a case of being able to afford it for some, but not wanting to pay so much for it, which means a significant proportion of a two wage families income is being paid to the bank each month. A generation ago, many houses were purchased on a single wage family. Now it takes two wages to afford to buy a house. It had pretty much hit a wall, unless incomes rise significantly. Overseas buyers were also pushing up prices significantly higher, but that tap too has trickled off.

mattwnz

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#1450721 15-Dec-2015 12:11

Geektastic:
tdgeek:
simon14: Overall, house prices in NZ double in value every 10 years. Their may be ups and downs in between, but overall, on average, that's the rule.

correct

Certainly there are exceptions. Our house has not increased in value at all in 8 years. In fact, RV is $50,000 lower now than it was when we bought it.

there are a lot regions in the same position. The worst tend to be the ones which were small fashionable towns to be in, in rural areas, but then became unfashionable. I have seen some really nicely built houses in these types of regions which have literally been on the market for years. They aren't badly priced, but I suspect people are holding on, as they don't want to make a loss, as many people purchased at the top of the market during 2005-2008

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