[UK Neil]

I read an article recently about NZ house prices begginging to slip, and that it may be worth holding out for prices to drop. I know that its not an exact science but is there a general consensus that prices are going south?

[dean1968]

No, I don't think prices will drop. IF they do, they will only plateau. I am aware of contractors who have huge backlogs and I don't see a drop off. The building industry is complaining they can't get enough people to do the work. NZ is an agricultural country and is a major export of Dairy products. There is a bull market in raw commodities which includes agriculture not just metals . Economies around the world like Australia and Canada are booming they usually last 15-20 years. It has been going since 1998.

New Zealand houses are at their least affordable in 18 years, and are at a level last seen when interest rates were as high as 15.5 per cent, according to a Massey University survey.

Average Auckland sale prices, Barfoot & Thompson
* 2000: $302,514
* 2002: $335,029
* 2004: $423,317
* 2006: $480,738
* December 2006: $523,793
Auckland's housing sector set a new record last month, with prices rising $540 a day to reach a monthly average of $523,793.
Barfoot & Thompson's average sale in November was $507,000 but December deals saw the market up by $16,793.

This has spilled over to rural areas not just the major cites of NZ. New Plymouth City recorded a remarkable 178 per cent price increase over the past five years, winning the award for best year-on-year growth. But local experts say the province has just been in catch-up mode, and the increases can't be sustained.

Robert Jones a property magnate millionaire and one of our richest New Zealander’s who made his fortune through buying property has indicated that the Labour political party is generally pretty good for the property market. First develop an historical perspective. Then judge the mood today. Do some political and social analysis. People get the politicians they deserve. Politicians tend to get re-elected with their fiscal spending promises. It is normal for voters to elect politicians who promise to spend too much. This increases the rate of inflation and is the property landlords friend.

Prime Minister Helen Clarke likes redistributing the wealth and her ideal model (economy) country is Sweden. Fiscal policies designed to spread the money around and loosen the coffers. Sweden has spent so much on social services that it will be highly problematic for them to maintain their long-term prosperity. They have one of the highest tax rates in Europe. The product of decades of high social and welfare spending There has already been a political backlash by the younger Swedish generation who don’t want to shoulder the burden of paying the high taxes to support the state and voting for politicians who are dismantling it. I’m all for it, if you can pay for it. Norway another generous social welfare spending economy can get away with it because it has oil.

NZ canonly do it because of high taxes. Generally speaking the more you tax the less you get back as people try to avoid ways to pay it. I find it interesting that many of our most successful NZ entrepreneurs
have moved offshore or their investments offshore . Can you blame them? Personal income tax 33-39% then a goods and services tax (consumption tax) 12.5 % and other hidden stealth taxes like a petrol tax etc. You are getting over 50 percent.

New Zealand's richest woman quit the country after the Government refused to relax tax rules to help her give away a big part of her fortune to charity.
Reclusive Kathmandu founder Jan Cameron has moved to Tasmania after spending more than 30 years in Christchurch, where she built a $275 million business fortune.
But under the New Zealand tax regime, all the money she gave away over an $1800 threshold would be taxed, so she opted to move to Australia, where there is no limit.
Shewan said Cameron would pay no tax on her overseas investments under new Australian tax rules.
"Australia has stolen a march on us in terms of attracting high-net-worth individuals," he said.

To get rich you have to figure out supply and demand…

“Up to 2.6 million New Zealanders could be renting soon, according to a visiting American expert who has called for city boundaries to be expanded to free land for more housing.

Wendell Cox, co-author of the Demographia Housing Affordability Survey with Christchurch developer and investor Hugh Pavletich, said renters would outstrip home owners in the next few decades.

Up to 60 per cent of the population or 2.6 million people could be lifetime tenants, priced out of the housing market, said Mr Cox, here to speak at the Resource Management Law Association conference in Auckland today.

House prices were at least six times annual incomes, making New Zealand's housing stock one of the world's most expensive, Mr Cox said.


"Around 10,000 people a year are dropping off the housing ladder in New Zealand," he said.

New Zealand was in danger of suffering the single largest home ownership rate drop of any First World country, he said, citing Census figures due out in early December which are expected to show ownership levels plunging dramatically.

People's dreams of owning a house were being shattered by disastrous planning regulations, which had strangled a plentiful supply of land surrounding cities, Mr Cox said.

An artificial land supply problem had been imposed on major cities and that had driven up house prices, a problem for Christchurch and Auckland but also worrying in Wellington.

Houses would become cheaper if the "ring fence" around Auckland was dismantled, which would restore a supply-demand balance.

Regarding property you need have to have 3 things going for you: fundamentals, technical and market tone. First, the fundamentals should suggest that there is an imbalance of supply and demand, the market should be moving in the direction that fundamentals suggest and the third reflects the right psychological tone. In a bullish euphoric market, they shrug off bearish (bad) news and respond more positively to bullish (good) news.

There are 4 million people. Demographics suggest that in the next 50 years NZ has going to have an aging population and a population shortfall. This would have a negative impact on property and the economy of NZ.I don’t believe it for a minute.

Some of the factors that are in favour for the property booom. 1) Supply and Demand) 2) More migrants are another driving force.

3) I know of anecdotal evidence where home builders and other contractors have large backlogs

4) First home buyers can't get in and what to buy. 5

5) Buyers sitting on the market waiting for a drop like a year and then paying dearly higher prices to get back in. 6) There has been a resurgence in the natural birthrate in Nz which has been the highest ever in 30 years - this is another driving force ( families having children usually want to buy and get on the property ladder 6) jobless rate market the lowest in 30 -40 years something like 4-5 percent
6) Large pent up demand, market - fundamentals described above wanting to get in and buy property
7) Doom merchants keep saying market will drop. In contraian terms, that is a good sign. I don't like to see the opposite. In a euphoric market, everyone says the market will continue to go up.

The last sign is when the jobless rate starts moving up that could indicate the market topping. When unemployemt goes up there is more insecurity about taking on a mortgage. this will slow the property market down.

8) Monetary policy is suppose to control booms and busts. IF they high up interest rates which is suppose to slow the property market down, they risk increasing the exchange rate which hurts exporters. The Reserve bank stuck between a rock and ahard place. Can't do it. Policitians won;t let them do it.

The other stats suggest elderly would sell down their properties and move into retirement villages or smaller houses. In places like Germany and Australia they found elderly don't want to sell down. They like living where they are. I think it will be the same in NZ. They are suppose to make way for the younger familes with children to move in which hasn't happen.

Also another interesting demographic in the 1960's it was taboo to divorce and you almost treated as an outcast. More familes today split up. There is a increase in the number of one parent families. Former husband and wife living separately which only helps the property market as they now live in two houses.

Politicians will do anything and everything to be elected and keep the spiegot (economy) running (humming along) that includes opening up the floodgates to migration. NZ could easily accommodate more migrants and double the size of the population to 8-12 million people easily.

[dean1968]

The Reserve left New Zealand's official interest rate unchanged at 7.25 per cent, today 25/1/07 but the bank's Governor Alan Bollard has again warned that higher rates could be on the way. (He has got to say that, what else can he do, to try put a lid on inflation)

'The Reserve Bank was particularly concerned that its assumptions about the housing market and consumer demand – that they would resume a slowing trend during 2007 and 2008 – were looking more uncertain.'
'That was particularly the case if further fiscal expansion happened,' Governor Alan Bollard has said.

[Bailers]

That's what my in-laws and friends said when we arrived early last year. I'm glad we ignored their advise and bought pretty much straight away. There doesn't seem to be any sign that the housing market is on a downturn, just the usual holiday blip. "They" said the same thing in the UK before we bought 8 years ago.

http://www.nzherald.co.nz/search/story.cfm?storyid=0008124A-9317-15B0-9FAC83027AF1010E

Mark

[bob_the_engineer]

I read an article recently about NZ house prices begginging to slip, and that it may be worth holding out for prices to drop. I know that its not an exact science but is there a general consensus that prices are going south?


I read an article like that in NZ too,

Initially it made me laugh particularly since they were using a median average in a region where houses are really diverse and sell in the range $200k to $1.5M additionally the sample period was a month (and December at that!) all the same it was front page news.

After a little thought I decided it wasn’t so funny, in the UK I recall a friend reading similar stories and deciding to rent for a while. She was a very nearly priced out of the market only two years later.

This move cost her around £25,000 that’s around $65,000 to me and you. :(

Bob

[jess]

They have been saying "downturn" for I guess about a year, but so far the house prices keep going up.

From last Saturday's NZ Herald:Home prices bubble on despite the holiday chill

Last month's unseasonably chilly temperatures did little to cool the housing market, leading some economists to warn of an interest rate hike next week.

The Real Estate Institute's December figures out yesterday showed a static national median of $330,000 and sales volumes falling from 9990 in November to 8245. But it still took just 29 days to sell a property on average and the volume of sales was greater than in December 2003 and 2004.

Institute president Murray Cleland said the holidays always brought a slight market downturn but last month's data ignored that trend to remain strong. A third of homes sold for $400,000-plus and prices rose in half the regions.

He thought although interest rates might rise this year and make people a little more cautious about buying, strong migration would offset any impact on the housing market...

The full article is online here (http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10420015).

[pieeater]

No sign of a downturn up here can't see it happening either.You've got to book a builder and there was a 12 month wait last time I asked.Property market pretty hot right now.

[willsken]

I was talking to someone the other day and they said that Helen Clark wants to increase the population by 2 million. If that is the case then I can't the property prices going down. Builders can't keep up with the demand already.

[dean1968]

Interesting article about the property boom. This is nothing to get excited about. If you observe a lot of high rise contruction / cranes in the middle of the city this is a warning. This has happened before in places like Germany and China. You could be at the tail end of a prolong property boom and the market inevitably collapsed. The property market is so over heated. I did raed another well researched report and they still saw demand and a big backlog of NZ commercial property. Get this... most of it was related to government projects (read my earlier comment about fiscal spending above by govt) for hospitals, and new government departments. For example $300 million upgrade (believe me the cost will blow out (escalate) in an heated market with labour and construction costs) airmarked for that stadium in Auckland for the world cup. They indicated residential was more price sensitive to construction costs but saw no real drop off.

Thousands of people are flocking to construction and work sites as general labouring becomes the fastest-growing category of work this decade.

Workers are abandoning factories and office secretarial pools, as some job categories head for extinction.

Bernard Salt, a partner and director at KPMG in Melbourne, has studied New Zealand's job changes and found thousands more people classify themselves as labourers.

But those who pump petrol or take shorthand are finding decreasing demand for their skills.

Mr Salt took figures from Census 2001 and compared them to Census 2006 to identify changes in workforce trends.

Nationally, the workforce has grown fast. Mr Salt said an extra 258,510 people were employed between 2001 and 2006 - a 15 per cent increase. The 2001 Census found that there were 1,727,268 jobs in New Zealand. That had increased to 1,985,778 last year.

In the single fastest-growing category, 15,828 more people called themselves "general labourers" in last year's Census compared to 2001.

"This is connected to the property boom," he said.

Technical representatives recorded the second-fastest rate of growth, increasing by 14,781. Technical representatives showed others how to install or operate a piece of technical equipment, Mr Salt said, and were not hi-tech IT workers. Their numbers were growing because people needed more help to cope with technology, he said, whether with a plasma or LCD television or other hi-tech equipment.

Third-fastest growing job was administration manager - up by 12,693, followed by sales or marketing manager, up 9531, builder (including contractor), up 8625, sales assistant, up 8310, general manager, up 7878, machine tool operator, up 6471, computer applications engineer, up 5997, caregiver, up 5988.

"Technology, globalisation and construction are all driving job growth in New Zealand," said Mr Salt. "These jobs are being influenced by changes coming out of China or California."

The Department of Statistics said unemployment was just 3.7 per cent in the December quarter.

[Super_BQ]

This kind of analysis sounds very 'perpetual'. You can bet that the NZ politicians are in real estate as much as any local real estate tycoon.

Picture the NZ gov't as a faucet tap for controlling the flow of immigration (or foreign investment?) in NZ. If they sense a major drop in the housing market, they'll just open the tap a little bit more....

Less we forget, over time is it the banks or the people of NZ that are getting richer?

BQ

[David with a dream]

Population of NZ going up by 2million, blimey the earth is really gonna have to move big time!

[real_sunfire]

Nobody knows what the housing market will do but sooner or later there will be a correction in terms of a drop in prices or a rise in wages - the question is when?

Most people here do not want to get rid of the green belt round Auckland - we know all that will happen is that crappy house estates with ugly houses with no shops, schools, hospitals, bars, or restauranats will be built just like what is currently happening in Albany - drive up and have a look - you will be shocked. The US has gone down this rouad and most people there are now realising it is a nightmare.

Closer to home I am earn a very good income (above $80K) and we will have a very large deposit when we sell our UK home - probably about $200K but we still wan't be even be able to afford the mortgage on a half decent property in a half decent area in Auckland without paying far far more than we do in rent.

Rather than mortgaging ourselves to the hilt we are going to sit back and rent - if we have to rent long term so be it. I for one don't want to be another mug punter.

Rgds.,
Nick.

[Super_BQ]

I think you're trying to compete among the wealthy new migrants living in Auckland. Mega millionares that won't think twice about buying a vacation place in NZ or perhaps those that want to meet the new $2 million investment requirement for immigration under "investment criteria". Eitherway as a wage or salary earner in Auckland, you're no better off now than you were say 10 years ago in Auckland.

BQ

[StevieD]

Who'd want to live in Auckland anyway? LOL

Out of the frying pan into the fire?.....

[real_sunfire]

True - not everyone likes Auckland I certainly didn't when I first visited but it has grown on me. Unfortunately due to my line of work I am pretty much limited to Auckland or Wellington.
Like London Auckland is a city of contrasts - nice area, bad areas, so so areas. I like the area we live in - compared to where I would have to live in the UK to work it is very very nice.

Rgds.,
Nick.