Comments on: Double digit house price rises not the norm

By: JohnD

JohnD — Mon, 06 Jul 2009 01:06:26 +0000

Property markets react more slowly to external economic conditions than shares (think heavy flywheel compared to light flywheel). People can’t sell/buy houses in a matter of seconds like they can shares, and most home owners use the media as there form of economic guidance so normally don’t have any great sense of what is happening as media is in the business of selling stories not producing accurate objective information for the purpose of informed decision making.

The result is U shaped recoveries not V shaped recoveries for housing markets (ref. historical house price indices). Property in N.Z will continue to decline slowly and or remain flat for a couple of years yet, and is not a good place to have several hundred thousand $$ that could be earning solid interest in other forms of investment.

By: Hamish

Hamish — Wed, 27 May 2009 11:17:11 +0000

I think there will be some other bubble next, maybe gold.

By: Simon

Simon — Mon, 25 May 2009 03:06:15 +0000

Only when nett yields are more attractive than other less riskier investments will the property market rise again. Those investing in the property market at current levels are not doing the simple math – just coz something is cheaper than before does not make it a good deal.

By: david

david — Sun, 17 May 2009 20:39:53 +0000

An interesting theory on double digit returns.
Risk and Reward – Your comment that “The risks of rental property investing aren’t high enough to justify double-digit numbers”. Risk is an interesting concept and can be very subjective and it all about perception of risk. Some investments that have not been seen as a risk eg. finance company term investments, have turned out to be far more risky than the 2-3% return premium they promised.
In terms of property, I agree with you that property investment doesn’t justify double digit returns BUT I would suggest that a majority of the NZ public who have funds to invest would disagree. What does this mean?
It means that double digit returns ARE available in property currently even though you could argue that this kind of return is unjustified.
Where else would you put your money in this time in the financial cycle unless you like the smell of musty money under your matress

By: Seraj

Seraj — Sat, 16 May 2009 05:21:50 +0000

Totally agree with Brendon!! This property investing magazine is no different to every other business out that preys on the uneducated. Wishful thinking plus reading a glossy magazine like this is what probably pushed the speculating bubble even further!

Try the reserve bank websites and do some real research for yourself online for free, which would be at least x1000 times better than reading these ridiculous emails and magazine!

Seraj

By: Evie

Evie — Sat, 16 May 2009 02:23:00 +0000

Hi there, looking forward to reading more points of view on this topic (newbie —> learning, observing and all the good stuff). Thanks!!

By: marilyn

marilyn — Fri, 15 May 2009 19:23:36 +0000

Arthur, not a truer word said – good comments.

By: Jim

Jim — Fri, 15 May 2009 10:40:42 +0000

Is this just another example of wishful thinking? People need to have money to pay for the excessive price of current housing (the result of the double digit growth mentioned. As the majority of householders are already seriously in debt, interest rates are relevant. But for the next 20 or 30 years. Do you really believe that with the quantitative easing (money printing) all over the world that interest rates are not going to resemble the 1970′s. Astute property buyers consider all the facts, not just those that suit a particular view.

By: Arthur

Arthur — Fri, 15 May 2009 09:34:04 +0000

Hello

I think real estate prices have not yet had the full correction downwards that must happen.

The low OCR is a distortion and interventionist. The current rates cannot be sustained past the short term. The relief for borrowers is temporary.

Property investors (and others) have borrowed way to much money from overseas lenders for our little economy to repay. The assets are largely of sub prime grade as the upward price movements were completely out sync with incomes.

It would be different if the cheap money had been channeled into business that sold goods overseas and earned income for NZ, but the cheap money funded real estate growth and speculation that has been largely outside the tax net. One would think rents would be lower as a result of the lowest OCR in history, but from what I know landlords obviously see the current OCR as a windfall.

Remember that many many savers have had their incomes savaged by the RBNZ OCR reviews, effectively the RBNZ is stealing money from savers as the current value RBNZ places on borrowed money is well below true market value. It would be like RBNZ intervening and legislating landlords rental incomes to 25% of current returns.

Savers are taking their money out of system and putting it into business bonds at 8 to 10 %, the true value of borrowings in NZ. Those funds are locked in, well past October when the Government Guarantee scheme finishes which is diminishing the money supply. Someone above quoted the supply and demand cycle.

The Government on behalf of NZ now needs to borrow overseas to fund infrastructure projects brought forward to keep Kiwis and all the immigrants we have imported in work. That is so they can keep repaying their individual debts to the overseas lenders. That means the value we receive for the tax we pay is eroded as a portion of every dollar pays interest, directly related to individuals borrowings.

It is a pity Helen Clarke and Dr Cullen could not count. No wonder Helen was so keen to get out.

Arthur

By: Miles

Miles — Fri, 15 May 2009 08:49:23 +0000

305 years is 3.5 years