Tweet
Hi all,
I've been mulling this over in my head and would be interested in some thoughts / feedback.
My wife and I have recently been looking at moving home from a larger section with smaller house to a larger nicer house with smaller section. This got me thinking about the potential risk exposure for the two different situations if the market was to drop. I'm not interested in having a debate about whether it will happen or not just assessing/debating the risk exposure - (for reference we're based in Christchurch).
It would appear to me that if you believe that there is a housing bubble much of this bubble is based around the land values, Auckland being the prime example where you see news items about people buying barely inhabitable old shacks for crazy amounts. Granted land/housing supply issues vary significantly between Auckland and Christchurch, I believe Christchurch lift in values have been a combo of availability, and build costs where Auckland is probably more availability driven (at least on a % basis). To be fair an element of the house price increases has come through increasing regulation around building new homes but a housing crash isn't likely to significantly alter the cost of building a new home (granted the reduction in demand will likely reduce labour and some materials costs but it's not going to reduce insulation requirements etc...).
Taking the above into account it would then lead me to believe that if we were to move from a situation with a 50/50 improvement to land value split to a 75/25 improvement to land value split we would be less exposed to market fluctuations at least in the general case.
Love to hear any thoughts & advanced apologies if this is a stupid question.
I've been mulling this over in my head and would be interested in some thoughts / feedback.
My wife and I have recently been looking at moving home from a larger section with smaller house to a larger nicer house with smaller section. This got me thinking about the potential risk exposure for the two different situations if the market was to drop. I'm not interested in having a debate about whether it will happen or not just assessing/debating the risk exposure - (for reference we're based in Christchurch).
It would appear to me that if you believe that there is a housing bubble much of this bubble is based around the land values, Auckland being the prime example where you see news items about people buying barely inhabitable old shacks for crazy amounts. Granted land/housing supply issues vary significantly between Auckland and Christchurch, I believe Christchurch lift in values have been a combo of availability, and build costs where Auckland is probably more availability driven (at least on a % basis). To be fair an element of the house price increases has come through increasing regulation around building new homes but a housing crash isn't likely to significantly alter the cost of building a new home (granted the reduction in demand will likely reduce labour and some materials costs but it's not going to reduce insulation requirements etc...).
Taking the above into account it would then lead me to believe that if we were to move from a situation with a 50/50 improvement to land value split to a 75/25 improvement to land value split we would be less exposed to market fluctuations at least in the general case.
Love to hear any thoughts & advanced apologies if this is a stupid question.
Comment