Comments on: Making sense of current house prices

By: Miles H-R

Miles H-R — Fri, 13 Aug 2010 04:05:17 +0000

David says we ‘want to drive prices down’. A single comment will never affect prices. We just want to know as much as we can so we can make better decisions. We also want to contribute to better understanding among all readers. Some people take just one or two influences to draw conclusions. There are many factors including the most ignored major factor being Council costs and Metropolitan Urban limits which raise house prices dramatically. Search M U L house prices.

David says ‘House prices in New Zealand in general are not higher in proportion to wages compared to other places ‘ That differs from many commentators who say that Auckland prices are over 6 times average salary whereas the world standard is 3 times average salary. Try a search for nz house prices salary. From marketsunplugged.com/new-zealand-house-prices-more-expensive.. which concludes ”Based on the House Price to Annual Average Income ratio, NZ house prices are 48% more expensive than US homes and 39% more expensive than UK homes. The USA has the most affordable housing of the 3 nations.”

By: David

David — Fri, 13 Aug 2010 00:44:21 +0000

I believe the previous commentators are simply trying to drive the market price down further. The reality is if the prices are not near where the vendors want they simply wont sell. This is one of the main reasons volumes are going down and prices are remaining relatively stable.

We will see an increase in the proportion of sales being mortgagee as the total volume reduces – again this is because there is a proportion of the market which is forced to sell.

House prices in New Zealand in general are not higher in proportion to wages compared to other places – what is different in New Zealand compared to say the UK or the US is that the bank interest rates here are much higher and principally geared towards the affordability index of the Australian wage earner – and because we are quite a bit behind that mark it seems expensive. This is what happens when the banking system is allowed to cartel – some would say even encouraged to by this government

I had a flat in Scotland – i bought it in 1985 and sold it in 2007 – the value grew by an average 11% per annum in a straight line as did much of the property in the uk – wages in the UK are not massively different from the UK – but house prices are much higher in the main centres – its the lower interest rates that drive affordability – the cost of the mortgage basically.

New Zealand home loan rates are completely out of step with everywhere else – there was no need to raise the OCR (except for the inflationary govt policies) – in fact for the good of the economy it should be sitting a 1.5% to 2% and driving down the exchange rates.

By: Alan

Alan — Fri, 13 Aug 2010 00:23:20 +0000

It is interesting to read all the comments , but I believe everyone needs a place to sleep.A house is what most people what to have- to rent or own.
The market is slow , but the press have this terrbile ability to make sweeping statements that are not correct.
The market is like a box of chocolates , some hard centre,
some soft centres so sweet centres.
I am aware of properties that can return you 7, 8 or 9% return in Auckland. If that is a result of a depressed market- bring it on!

By: Miles H-R

Miles H-R — Thu, 12 Aug 2010 22:40:02 +0000

A little back-up research shows……
RBNZ Report on STRATIFIED housing prices [McDonald and Smith April 2010] states:
‘The composition of dwelling sales may also vary through the housing cycle. The portion of sales for the lower strata increased over the 2001 to 2004 period. More recently, these strata have been declining as a share of total sales. The portion of lower valued housing sales has tended to be positively correlated with differences in QV and REINZ measures of housing price inflation.’
In other words, the QV and REINZ measures do not accurately represent higher priced properties. Again, do not rely on published house price statistics. They tell you nothing especially about higher priced properties.

By: Mike

Mike — Thu, 12 Aug 2010 22:39:59 +0000

to John
That works out to an annualised increase of approx 9.7%. That may be good or bad depending on which years were involved. ie in the 50′s and 6o’s that would be good, in the 70′s and 80′s that would be bad or mediocre.

By: Miles H-R

Miles H-R — Thu, 12 Aug 2010 22:03:26 +0000

The Landlord says ”many commentators talk of the New Zealand housing market as one big homogenous market. This is rubbish.”
I totally agree so why then go on to talk about Auckland or Hamilton as if each is just one market. It is not. Each city is divided up into strata based on price. Lower price properties collapsed near 30% about 18 months to 2 years ago in Auckland South. Higher priced properties did not collapse at that time. But now the recessions has a delay factor whereby business owners are really starting to find it hard going. And then higher priced investors bailed out. Many sold under pressure but not mortgagee sale. Now Terralink tells us that the higher priced family homes are making up the mortgagee sales. Of course higher priced homes being sold holds up the median and average and every other statistic which does not differentiate market segments. For every higher priced mortgagee sale, there will be many pressured but not bank forced sale. QV excludes mortgagee sales on the basis that they are not market sales meaning between a willing seller and a willing buyer. Rubbish. If you beat the bank to force you, your sale counts. If the bank beats you, the sales does not. What rubbish. The figures are distorted. The unknown is what will happen to the statistics when the pressured higher priced property sales run out in a year or two. Will the RE median / QV index drop like a stone as the various markets return to a normal balanced spread? Of course, that will merely show history well in the past which is now. That is the problem with statistics which purport to summarise combined markets based on short term monthly or quarterly change but do not adequately deal with the ”sub-markets”. The published statistics do not tell us anything. Do not rely on them.

By: Christopher

Christopher — Thu, 12 Aug 2010 21:59:55 +0000

Hard to believe that the very tiny increase in interest rates and the threat of further small increases are deterring prospective purchasers – it hasn’t in the past when other factors such as confidence and and the job market are strong.The diminishing confidence will further evaporate if house prices really go through the floor so let’s hope ASB is correct. Removal of the depreciation factor was not the end of the world either. Looks more like a case of batten down the hatches and ride out the storm for most of us.

By: John Cooper

John Cooper — Thu, 12 Aug 2010 21:38:38 +0000

My parents bought for $25,000 sold for $645,000 thirty five years later, this will happen again unless the whole world money capitalist system falls over. Inflation the only way any Government can pay there debt, with inflation the debt you have gets smaller. Great time to be a buyer over the next year or two unless the whole money system does fall over and if that happens who really cares we will have a lot bigger problems.

By: SteveH

SteveH — Tue, 10 Aug 2010 13:36:54 +0000

We’d better hope that home prices do indeed fall. Far too much of the country’s investable capital is wasted in overpriced housing, whilst the foreign debt banks use to fund the continuing bubble remains NZ’s greatest economic vulnerability.

By: ChrisW

ChrisW — Mon, 09 Aug 2010 20:56:34 +0000

During the period of 1996-2002 a property owned by my father increased in value by 12% in nominal terms. Of course when you account for inflation it actually lost value in that time. Fortunately he held the property for another four years to the middle of the bubble and was able to achieve an annualised return of around 4.5%. In the end he was ahead of inflation, but not ahead of the interest costs (even accounting for tax).

I think this is the situation many landlords are facing: a good 5-6 years of no capital growth. If you are holding for the very long term then you should achieve a real average return once incomes catchup, but if they don’t then interest costs (and opportunity costs of simply putting your equity in the bank) make property in general (there will always be bargains, so stay sharp!) only likely to be an average to below average investment.

Cheers, Chris W.