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What were people saying and thinking at the peak of house prices before the recent house price falls in NZ?
Here are some observations:
1) Property market commentators
2) Reasons to buy
3) Investment calculations
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What were people saying and thinking at the peak of house prices before the recent house price falls in NZ?
Here are some observations:
1) Property market commentators
2) Reasons to buy
3) Investment calculations
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Originally posted by Chris W View Post
Geographical regions where the median price has fallen 20% and met Ashley's criteria of 20% from market peak:
1) Wellington
2) Auckland
3) Hawkes Bay
Other areas which are near the 20% threshold:
1) Nelson
2) Manawatu
Source:
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Really - isn't that just so many numbers? My perspective would be the number of foreclosure sales indicating serious problems with payments affordability. And possibly nervous banks.Comment
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Can a property price fall more than 70%?
Sept 2021: Buyer purchased for $2,400,000
Feb 2023: Owner sells for $705,000
In 17 months, that is a price drop of over 70%.
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Originally posted by Chris W View PostFrom Ashley Church
"But what constitutes a housing market crash? ...... I define a property market crash as a 20% drop in the median sales price from market peak, and which lasts for more than 12 months."
REINZ October 2023 median house price review.
Locations where median house prices are down 20% or more from their peak:
1) Auckland: -20.0%
2) Gisbourne: -20.3%
3) Wellington: -20.5%
4) Tasman: -21.6%
5) West Coast: -21.4%
Some areas have now met Ashley's definition of a property market crash.
Last edited by Chris W; 12-12-2023, 12:06 PM.Comment
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REINZ median house price update - Nov 2023Originally posted by Chris W View PostFrom Ashley Church
"But what constitutes a housing market crash? ...... I define a property market crash as a 20% drop in the median sales price from market peak, and which lasts for more than 12 months."
Some areas below have now met Ashley's definition of a property market crash.
Locations where median house prices are down 20% or more from their peak:- Franklin: -21.4%
- North Shore: -20.3%
- Papakura: -29.8%
- Waitakere: -21.1%
- Hauraki: -20.7%
- Otorohanga: -37.1%
- South Waikato: -21.2%
- Thames - Coromandel: -28.0%
- Opotiki: :-21.8%
- Rotorua: -24.0%
- Tauranga City:-20.5%
- Whakatane: -22.6%
- Gisborne: -21.7%
- Central Hawkes Bay: -27.6%
- Hastings: -23.2%
- Horowhenua: -24.3%
- Rangiteki: -29.4%
- Ruapehu: -32.3%
- Whanganui: -23.1%
- Kapiti Coast: -20.6%
- Lower Hutt: -25.5%
- South Wairarapa: -51.5%
- Upper Hutt: -22.5%
- Wellington City: -24.2%
- Nelson: -21.7%
- Buller: -33.7%
- Westland: -33.4%
- Hurunui: -22.3%
- Clutha: -35.3%
- Southland district: -25.4%
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"I've never seen house prices in Auckland fall 20%. That's a bubble" - high profile property investor, property developer in NZ.Comment
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Thoughts on a property bubble
Lets look at the euphoria in 2021
It lasted give or take about 1 year?
Did you sell at the top of the market? Congrats, unlikely many people did but nevertheless many people made good money over this period
Did you buy at the top of the market? And watch the value of your property fall 20% It’s likely down 13% today and will recover in the next year or so to what you paid for and finally start making capital growth
For me , a property bubble crash would probably represent a 50% decline in value and recovery take a decade to realise growth from the peak market or bottom , scenarios for this is usually war, sharemarkets tend to recover relatively fast these days ,
So as for me
No I have not witnessed a price bubble, because it needs to pop, not leak then get repaired by lowering rates off shore and printing more money.Comment
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Just to clarify your definition. Is that based onOriginally posted by Jeffa View Post
1) nominal prices or
2) inflation adjusted prices
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I haven't seen any real correction on my street or right across Central Otago(all these Dorklanders moving down LOL) ... 2021 260sqm near new home across the street sold for more than asking some $1.4mill ..Originally posted by Jeffa View Post
just last week after just one week on the market a much older 290sqm home down a ROW behind us just did the same sold for just over $1.4mill much more than asking ...
we paid $550k for our 280sqm house with far superior views than both of them .. early 2016 !!
In our area any weakness hasn't be noticed with these higher rates .. homes sections certainly getting smaller ..I now see sections only 270sqm for sale $300kComment
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Meanwhile in shitty old south Auckland rich Asian buying up this place.
Last edited by Frezzinghot; 15-02-2024, 02:18 PM."DEBT BECOMES IRRELEVANT WITH INFLATION".Comment
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It's been 2 years since this initial calculation was done. An update.
A) Jan 2022
The owner occupier proceeds with a house purchase in early 2022 using an 80% mortgage. We will assume that the house is purchased at the median house price in January 2022
i) REINZ median property price in Auckland: $1,200,000
https://www.interest.co.nz/.../real.../median-price-reinz
ii) Mortgage @ 80% LVR - $960,000 (assumed to be interest only to avoid the effects of loan principal payments distorting the comparison of equity growth from initial equity below)
iii) Equity value saved and used to buy the house - $240,000
B) Jan 2024
1) Nominal prices
i) REINZ median property price in Auckland: $975,000 (-18.75%)
ii) Mortgage as above: $960,000 ( assumed to be interest only to avoid the effects of loan principal payments distorting the comparison of equity growth from initial equity below)
LVR is now 98.5%
iii) Equity: $15,000 (-93.75%)
2) Inflation adjusted prices assuming 7.0% p.a inflation for 2 years (adjustment factor of 1.14).
i) Median house price in Auckland: $851,603 ($975,000 / 1.14), -29.0% in purchasing power.
ii) Mortgage: $851,603 ($960,000 / 1.14), -12.7% in purchasing power - erosion by inflation)
iii) Equity: $13,102 (-94.5% in purchasing power)
Will be interesting to see how this develops over the next 8 years until 2032.
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^^ Your numbers assume the homeowners sold in this time frame or 24 months, which would be a very low percentage of homeowners selling in this market with listings so low, for now .
Losses are only realized by selling
Investors leverage their deposit , so recycling equity isn't earned income, more capital gains from previous investment, not to mention those losses can be claimed as tax losses.Comment
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