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Will NZ housing remain one of the most overpriced markets in the world?

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  • Will NZ housing remain one of the most overpriced markets in the world?

    It will be very interesting to see if New Zealand can remain one of the most unaffordable housing markets in the world out of all of this. It really comes down to whether NZ can continue to enlarge & service it’s already very high levels of private debt, sourced offshore, to continue to pump in to housing like it has for the last decade. Personally I really doubt it.
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10487926
    Even with the small drop NZ has had so far houses are very expensive by international standards. It’s interesting to compare for example what you can buy in Houston for $375K US (The average pay there is 56K US) vs what ½ a Million will get you in Auckland (Average pay 67K)
    http://search.har.com/engine/dispSearch.cfm?mlnum=59945901&backButton=Y&Address =6607%20Kirston%20Dr
    http://www.trademe.co.nz/Trade-Me-Property/Residential-Property/Houses-for-sale/auction-183067768.htm

    The US & UK are now both down around 20-30% and were both never as overpriced as the New Zealand market.
    Interesting to note NZ house prices are now down 10% from their peak:
    http://www.youtube.com/watch?v=ovFWpWJcByE
    realestate.co.nz listings are also down 21% on last month and 34% down on the same month last year:
    http://www.stuff.co.nz/business/2379814/4000-land-agents-lose-jobs
    Mortgagee sales in Auckland are also up 400%:
    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10568722
    And 60,000 more Kiwi’s are forecast to lose their jobs by the end of this year:
    http://www.stuff.co.nz/business/industries/2318891/60-000-more-jobs-to-go

    With the NZ market so over priced, job losses mounting and foreign markets less willing to lend to NZ I certainly can’t see prices going up in any hurry, despite what various realestate agents and other vested interests might say.

  • #2
    Why do you think it's overpriced?

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    • #3
      Try keeping up.
      Does Houston have earthquakes and rain and wind? Er no. So a straw hut will suffice. Well yes.

      Auckland housing holding up


      By ADRIAN CHANG - BusinessDay Last updated 13:15 05/05/2009


      Fairfax Media
      NOT SO BAD: Auckland's property market has maintained its recent strong run through April, defying the traditional sales slump seen at this time according to Barfoot and Thompson.



      Auckland's property market has maintained its recent strong run through April, defying the traditional sales slump seen at this time according to Barfoot and Thompson.
      The real estate agency, which sells around 40 percent of homes in Auckland said the average price for a home sold during the month was $502,726, up 2.2 percent from March, but still 3.4 percent down from the same time last year where the average sale price was $520,380.
      Sales were unusually strong in April, with 809 houses sold by Barfoot, up 79 percent from the same month last year.
      Barfoot managing director Peter Thompson said April sales traditionally fall away markedly compared to March due to the change in seasons and the reversal of that trend was good news.
      "It demonstrates the housing market has found strength at its present level, and with confidence returning an increasing number of people are prepared to make buy and sell decisions," said Thompson.
      House sales data from March suggested an uptick in investors stepping back into the market looking for bargains, and this activity appears to have continued into April.
      Thompson said he anticipates the number of homes sold in coming months would follow the traditional seasonal pattern and decline through winter before increasing in spring.

      Comment


      • #4
        the rationale of the OP is UNDENIABLE!...historically the average mortgage was apx 3 times the average annual wage,its still well over 6 times!...somethings got to give...eventually.

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        • #5
          Originally posted by Sinical Cyd View Post
          the rationale of the OP is UNDENIABLE!...historically the average mortgage was apx 3 times the average annual wage,its still well over 6 times!...somethings got to give...eventually.
          Indeed fantasy based on illusion's will give way to reality.

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          • #6
            I would be interested to see what % of sales are to first owners in comparison with previous years.
            I can't quite understand why sales are occuring much at all. Since they are occuring I gather it's a re-shuffle of old money. In this economy surely it's certainly not a fundamental shift or a change of generational buyers.
            Buyers are paying the old price minus 10-15%. Perhaps they see the discounted price in comparison with the previous few years, so buy.
            Whether that is prudent or not I do not know.
            Next year might bring an immigration wave. Maybe 20k int. free loans. Maybe not though. Perhaps unemployment will reduce sales. So, it will be merely old money recirculating that props up the market.

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            • #7
              How many countries in the world have just two major cities?

              The USA and UK have many urban options for their populations - we don't. If you want to live in a city here, you don't have many options, so scarcity pushes prices up.

              Add into that equation the fact that we have cash-rich immigrants from southeast asia, for whom the prospect of a standalone house with a garden costs a measly half a mill...

              For those who think NZers should be able to buy qualit houses for $120k, where do you think the cost cuts should start? Land prices? Labour costs? Council fees?
              two ears and just one mouth.. for good reason.

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              • #8
                Originally posted by Sinical Cyd View Post
                the rationale of the OP is UNDENIABLE!...historically the average mortgage was apx 3 times the average annual wage,its still well over 6 times!...somethings got to give...eventually.
                Why? Is there a particular reason that it has to be 3x average wage?
                In the last few years people have gladly paid 6x or more, so isn't it just a matter of supply and demand?
                These days having the 'right' house with the 'right' designer kitchen etc is an important social statement for many - something they are clearly willing to pay for. And that translates to higher house prices on average. I doubt that was the case previously, at least not on the same scale.
                High resolution Fractal Art on quality canvas: www.FractalArt.co.nz

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                • #9
                  Originally posted by Rolf View Post
                  Why? Is there a particular reason that it has to be 3x average wage?
                  In the last few years people have gladly paid 6x or more, so isn't it just a matter of supply and demand?
                  These days having the 'right' house with the 'right' designer kitchen etc is an important social statement for many - something they are clearly willing to pay for. And that translates to higher house prices on average. I doubt that was the case previously, at least not on the same scale.
                  That's precisely the cause Rolf. Supply and demand.

                  The problem is that the high prices vs income are not limited to the topographically challenged Wellington and fast growing Auckland.

                  Artificially restricted and overpriced supply esp. thanks to the red tape, high subdivision costs and growth restrictions, as well as poor long term planning. An undersized supply.

                  Way too much accrued pro-property hype in the last 9 years or so, and a property-friendly, alternative lacking investment market - an oversized demand.

                  4.3 million in a country well above the EU median is absolutely nothing. Practically a desert. Some countries around Sahara have much stronger population densities.

                  No reason NZ shouldn't be able to house 10 or 20 million people, and still be less well populated than any country in the EU.

                  Of which many, by the way, have far more frequent and destructive earthquakes, and have had a higher building standard for well over a hundred years.

                  6 times income?

                  Ok, some lack of efficiencies of scale, quite typical for a small population base and isolated market, but 6 times higher?

                  Not really that well justified in the long term.

                  Very inefficient and lazy supply, with both the councils and the private sector not doing that much to help, but the former obviously being the worst culprits by far. Possibly with land availability curbed intentionally here and there. It's not in almost anyone's interest for everyone's speculative asset base to collapse once the market is supplied sufficiently.

                  A bit of a banana property republic really.
                  Last edited by 67910241; 06-05-2009, 01:52 PM.

                  Comment


                  • #10
                    there is no 'particular' reason...however the availability of funding that fuelled the stratospheric rise in prices ,no longer prevails.The banks have no desire to see prices fall dramatically,and obviously nor do investors. There still is however plenty of land in NZ to build houses on,and I also suspect renting will become ever more popular.The cap gains taken for granted in the past will just not happen given the current pricing levels imo.When interest rates start rising,we may see a downward correction in prices.Lets hope so!

                    Comment


                    • #11
                      Originally posted by SwissKiwi View Post
                      Why do you think it's overpriced?
                      Cos NZ isn't nearly as convenient, accessible, posh, long term war-free, growing poor population substratum (a few token Albanians and Turks don't really count, will be fully assimilated in a 100 years or so) free, high-income earning, laundered, mafia, war plundered & dodgy privatisation money friendly or well endowed with infrastructure as the old Schweiz. And Suisse isn't that bad a looker either so can't reasonably say Aotearoa is much, much prettier.

                      So, everything taken into account, NZ should be way, way cheaper than Switzerland. At least 2-3 of times in nominal terms everything else being as it is (that's very, very far from equal).

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                      • #12
                        Originally posted by 67910241 View Post
                        That's precisely the cause Rolf. Supply and demand.
                        ...
                        6 times income?
                        Ok, some lack of efficiencies of scale, quite typical for a small population base and isolated market, but 6 times higher?
                        Not really that well justified in the long term.
                        I just think this "6x average wage" argument pops up very often, like it is some scientific fact. But compared to what? Recent history shows that people are willing to pay 6x, isn't that just the result of supply and demand? I personally think houses are cheap in NZ, others may think the opposite, it all depends.

                        Originally posted by Sinical Cyd View Post
                        there is no 'particular' reason...however the availability of funding that fuelled the stratospheric rise in prices ,no longer prevails.
                        Surely if the necessary funding dries up then that will affect prices and so on but that's talking about what may or may not happen in the future, which is anybody's guess, and a different discussion I think.

                        The original argument was that for some reason house prices just can not be 6x the average salary when it used to be 3x - but I don't see why not if people are willing to pay that?
                        It is merely supply and demand and people nowadays are simply willing to pay more for housing than previously - priorities change.

                        One can go on and on about whether current house prices can be justified, but the fact is that current house (sale) prices obviously reflect the current demand - so by definition they must be justified and to argue that house prices can not be be 6x the average salary simply doesn't make sense IMHO.
                        High resolution Fractal Art on quality canvas: www.FractalArt.co.nz

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                        • #13
                          well you can disregard comparisons with other western nations,disregard historical comparisons,disregard the previous 4/5 years of financial institutions boosting property investment by their now abandoned policies of treating debt as an asset...put your car,your holiday on the house....!I regard todays prices as an aberration...you regard them as a reflection of supply and demand.One of us will be proven wrong.

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                          • #14
                            Originally posted by Sinical Cyd View Post
                            well you can disregard comparisons with other western nations,disregard historical comparisons,disregard the previous 4/5 years of financial institutions boosting property investment by their now abandoned policies of treating debt as an asset...put your car,your holiday on the house....!I regard todays prices as an aberration...you regard them as a reflection of supply and demand.One of us will be proven wrong.
                            You are saying something else now, which we of course may or may not agree on.
                            But it was what you said first that I disagree with - namely that house prices can not be 6x the average wage, as if it was a physical impossibility. Which it is not.

                            A sale price must necessarily be a reflection of supply and demand - a willing seller and buyer has exchanged goods at an agreed price. I don't think that can be regarded in any other way. So current prices certainly reflect the current demand, as they always will.
                            High resolution Fractal Art on quality canvas: www.FractalArt.co.nz

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                            • #15
                              where do I say house prices CANNOT be 6x the ave wage...!?They ARE now!

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