Crazy property prices in Auckland....

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Reply # 1449704 13-Dec-2015 16:18

driller2000: Have followed Tony Alexander's posts for several years now and find his commentary informative and pretty balanced:

http://tonyalexander.co.nz/

He has also provided some useful commentary on the housing market and reasons why it is the way it is - esp in Auckland, which is worth a read:

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

Importantly he is also the first to point out that neither he nor any other economist has predicted rate rises very well at all since the gfc - so he doesn't pretend to know it all:

"When will the rate go up? Don’t bother asking. There is not a single forecaster any of us can point to and say they have got their predictions on interest rates generally right since 2007. We have all proven that as yet in the post-GFC environment we have not regained the ability to predict sustained interest rate changes. The chances are that low interest rates will be around for a large number of years."

And finally in his last commentary - nor have any of those predicting 40% crashes in the last 30 years as a result of affordability been right either:

http://tonyalexander.co.nz/wp-content/uploads/2015/12/WO-December-10-2015.pdf

Good read.

Fred99

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Reply # 1449724 13-Dec-2015 16:57

driller2000:

Importantly he is also the first to point out that neither he nor any other economist has predicted rate rises very well at all since the gfc - so he doesn't pretend to know it all:

"When will the rate go up? Don’t bother asking. There is not a single forecaster any of us can point to and say they have got their predictions on interest rates generally right since 2007. We have all proven that as yet in the post-GFC environment we have not regained the ability to predict sustained interest rate changes. The chances are that low interest rates will be around for a large number of years."

You do realise that what he's said above is that predictions / forecasts made by economists are BS, then goes on to make a prediction that "low interest rates will be around for a large number of years."

He's a bank economist. That's what he would say.

gzt

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Reply # 1449732 13-Dec-2015 17:18

roobarb:
gzt: If there is a buyer then it is not madness. Just economics at work.

Economics isn't called the dismal science for no reason, it's "Nobel prize" isn't even a real one, they all just pretend it is. The invisible hand will quite happily bitch-slap you, unless you are too big to fail and get bailed out.

The basics of supply and demand are well established. It may be a dismal science but it is preferable to a belief in an invisible hand ; ).

driller2000

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Reply # 1449752 13-Dec-2015 18:23

Fred99:
driller2000:

Importantly he is also the first to point out that neither he nor any other economist has predicted rate rises very well at all since the gfc - so he doesn't pretend to know it all:

"When will the rate go up? Don’t bother asking. There is not a single forecaster any of us can point to and say they have got their predictions on interest rates generally right since 2007. We have all proven that as yet in the post-GFC environment we have not regained the ability to predict sustained interest rate changes. The chances are that low interest rates will be around for a large number of years."

You do realise that what he's said above is that predictions / forecasts made by economists are BS, then goes on to make a prediction that "low interest rates will be around for a large number of years."

He's a bank economist. That's what he would say.

Yep I did notice that - the difference is he acknowledges he's guessing ie. "the chances are" - and it's ultimately up to you who's guess / forecast you believe and decide from there.

And if someone made an investment decision solely on a single bank economists forecast - without any further due diligence or sensitivity analysis - well they deserve all that follows...

BarTender

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Reply # 1449880 13-Dec-2015 21:58

He is a crazy idea.. if a political party lead on minimum standards on rentals, high taxes on vacant property and rent increases. If they captured the missing million the whole rental market would get turned on its head.
Wouldn't work here as they wouldn't ever get traction in the mass media.

It's interesting to consider how that would change things.

JimmyH

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Reply # 1449901 13-Dec-2015 22:19

roobarb:
gzt: If there is a buyer then it is not madness. Just economics at work.

Economics isn't called the dismal science for no reason, it's "Nobel prize" isn't even a real one, they all just pretend it is. The invisible hand will quite happily bitch-slap you, unless you are too big to fail and get bailed out.

Ummm... No, it's not called the dismal science for that reason. It's called the dismal science after Thomas Malthus, who predicted that food production grew arithmetically whereas population grew geometrically, so mass starvation was inevitable and the natural condition of humanity. Of course, birth control and the green revolution came along, and things didn't work out that way. But it has nothing to do with the invisible hand or corporate bailouts.

tdgeek

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Reply # 1449905 13-Dec-2015 22:32

JimmyH:
roobarb:
gzt: If there is a buyer then it is not madness. Just economics at work.

Economics isn't called the dismal science for no reason, it's "Nobel prize" isn't even a real one, they all just pretend it is. The invisible hand will quite happily bitch-slap you, unless you are too big to fail and get bailed out.

Ummm... No, it's not called the dismal science for that reason. It's called the dismal science after Thomas Malthus, who predicted that food production grew arithmetically whereas population grew geometrically, so mass starvation was inevitable and the natural condition of humanity. Of course, birth control and the green revolution came along, and things didn't work out that way. But it has nothing to do with the invisible hand or corporate bailouts.

Ironically, supply and demand. Demand for food will create supply.

Linuxluver

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Reply # 1449917 13-Dec-2015 23:13

wsnz: After the 87 crash I remember my father and a friend driving around Remuera, Epson etc. looking at all the for sale/mortgagee auctions. Houses once worth a whooping $100K were selling for less than half that. If you were cashed up - but most weren't - then that was a prime time to purchase property. Many doubt we'll see a massive fall in prices, but anything can happen.

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.

____________________________________________________
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mattwnz

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Reply # 1449921 13-Dec-2015 23:45

Linuxluver:
wsnz: After the 87 crash I remember my father and a friend driving around Remuera, Epson etc. looking at all the for sale/mortgagee auctions. Houses once worth a whooping $100K were selling for less than half that. If you were cashed up - but most weren't - then that was a prime time to purchase property. Many doubt we'll see a massive fall in prices, but anything can happen.

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.

The finance company collapse during the financial crisis in 07 / 08 were on the same type of scale as the 87 crash for many investors. Just occurred in a different sector. Heaps of people lost a lot of their money, and it ended up killing a few of them due to the stress. I personally know someone who pretty much died from the stress of it and losing most of their money. I believe we were also quite close to there being a run on the banks here, which is why they introduced the banking deposit guarantee in a rush, which also meant that some finance companies were also covered, and we all know what happened then, with taxpayers having to bail some out, but that was the lessor of two evils. As a result of the finance company collapses, people put their money in banks and property, which were seen as a safer investment. But as what has happened in Ireland, Spain, the US, etc property bubbles can pop. Unlike most other countries that experienced the booms, we haven't had a major bust of property prices.
These things go in cycles.

mattwnz

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Reply # 1449922 13-Dec-2015 23:47

Linuxluver:
wsnz: After the 87 crash I remember my father and a friend driving around Remuera, Epson etc. looking at all the for sale/mortgagee auctions. Houses once worth a whooping $100K were selling for less than half that. If you were cashed up - but most weren't - then that was a prime time to purchase property. Many doubt we'll see a massive fall in prices, but anything can happen.

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.

Are you saying that is the case back in the 80's or now?

JimmyH

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Reply # 1450287 14-Dec-2015 18:52

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.....

Geese

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Reply # 1450327 14-Dec-2015 20:34

JimmyH: 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.....

Looks like its already got a slow leak?

http://www.stuff.co.nz/business/money/75083069/auckland-housing-downturn-more-severe-than-expected-westpac-economist

"According to the bank's figures, which it seasonally adjusted from Real Estate Institute data, house sales fell 13 per cent in Auckland in November, following a 17 per cent drop in October.

House prices fell 1.9 per cent in November after a 4.4 per cent fall in October, taking them below July levels."

gzt

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Reply # 1450334 14-Dec-2015 20:48

Not a great story without a historical graph. Imo there have been similar slowdowns before here and there. One data point is not enough to identify a 'thump' landing.