I am inclined to agree. Supply and demand. Everyone seems happy. Buyers getting what they are prepared to pay for, sellers happy. How much of this is artificial? I feel asian immigrants are artificially pushing it up an amount. The wealthy ones who sent kids here, they follow or come also. I think adults need money behind them to satisfy points for PR.
But. at the end of the day, AKL is the place to be and buyers are paying. Its one thing to regulate or intervene, but if its a price change due to natural means, that can cause repercussions when artificial means are used to suppress natural desire.
I suspect people are paying way more than they otherwise would simply because they see capital gains as continuing to be insanely profitable. People feel that as long as they can cover, or at least close to cover the interest costs of the mortgage with rental income they are fine.
But if (when) interest rates rise, or economic factors change in that prices aren't rising and therefore they have a massively leveraged asset that's not making any returns (or maybe negative returns) then a lot of people are in a lot of trouble,
For sure there will be speculators. Those that are genuine kiwi buyers, who know there is a bubble, have taken a risk. If interest rates increase they will have to deal with it. If they lose equity, thats pretty much tough, its not like a bubble may not burst. Im not sure what happens if say prices dropped 15% in a bubble burst, and some go to negative equity. Can they stay in and just pay the mortgage as planned?
Unfortunately, the "bubble" doom story's been around since 2003. There are many places in the world where bubbles have burst eg Ireland, and where it doesn't, e.g. Australasian cities.
But yes if it crashes, investors will buy more, first home buyers will sell to them at a big loss. That's the way it works.
Why will first home buyers sell? Will they have to? If the bank forecloses, there is still a loss, that the purchaser has to pay back, so why can't they keep the house and pay mortgage as usual as that is paying off the house new value and the negative equity. Bank can structure the mortgage so that negative equity is paid first?
In the US homeowners could "walk away" for negative equity homes - it was the bank's problem. In NZ you need to be bankrupted. Not a very nice situation and one most people will go to extreme lengths to avoid. That has added to banks confidence in their outrageously irresponsible lending practices in NZ.
Investors will be hobbled by the same tightening in availability of finance. Only cashed-up investors will be able to profit from the coming collapse.