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Has anyone witnessed firsthand a property price bubble? What does it look like?

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  • Chris W
    replied
    Originally posted by Chris W View Post
    Video from Opes Partners

    For reference for the above video discussion

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  • Perry
    replied
    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.

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  • Chris W
    replied
    Originally posted by Chris W View Post
    From 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."

    https://www.oneroof.co.nz/news/ashle...nt-crash-41212

    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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  • Chris W
    replied

    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

    REINZ Housing Price Update (May 2022) Prices month on month (since peak): - National -1.6% (-8.8%) - National (ex-Auckland) -1.6% (-5.0%) - Auckland -1.6% (-11.7%) - Wellington -2.9% (-13.5%) https://pbs.twimg.com/media/FVsKchuaQAIPPpM?format=jpg&name=large


    2) Reasons to buy

    Tax change. (Unconfirmed rumor). Interest can no longer be offset against income from your day job. Who's affected and how? Short term cashflow ok.. rent still comes in. Long term asset accumulation ok ...Capital gain still happens. Who's on the line, and by how much ?


    3) Investment calculations

    Looks like the actual numbers now support the claim that houses prices are starting to fall in many areas. And that the trend is spreading throughout the country. Even areas that were ok last month, are now in decline. The general global consensus is that prices could do with a 10% haircut, but as that will be insignificant




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  • Chris W
    replied

    Vendor sells house in Auckland for 43% below their purchase price.


    "A four-bedroom home in South Auckland that was bought just over a year ago for $2.3 million sold yesterday for $1.305m - representing a near-$1m loss for the vendors."





    If the vendor had an 80% LVR mortgage to finance their purchase price of 2.3mn, then they would be in negative equity and still owe money to their lender after the sale proceeds.

    A) Purchase
    Purchase price: 2,300,000
    80% mortgage: 1,840,000
    Equity: 460,000

    B) Sale
    Sales price: 1,305,000
    Net sales proceeds after 3% sales commission: 1,265,850
    Mortgage: 1,840,000
    Equity: NEGATIVE 574,150

    $ change in equity value: LOSS of 1,034,150
    % change in equity value: NEGATIVE 224%

    Invest: 460,000
    Return: still owe 574,150 to lender.
    Last edited by Chris W; 25-02-2023, 03:19 PM.

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  • Chris W
    replied
    Originally posted by Chris W View Post
    From 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."

    https://www.oneroof.co.nz/news/ashle...nt-crash-41212

    A) Some areas that have had their median sales price fall 20% or more

    1) Auckland region
    i) Waitakere
    ii) Central suburbs
    iii) Papakura

    2) Wellington region
    i) Lower Hutt


    B) Almost meet the above threshold of 20% fall
    1) Hastings
    2) Porirua



    REINZ Median Selling Price
    Change from November 2021 to November 2022
    District November 2021 November 2022 $ Change % Change
    Northland $750,000 $729,500 -$20,500 -2.7%
    Rodney $1,315,000 $1,225,000 -$90,000 -6.8%
    North Shore $1,550,000 $1,290,070 -$259,930 -16.8%
    Waitakere $1,190,000 $920,000 -$270,000 -22.7%
    Central suburbs $1,540,000 $1,190,000 -$350,000 -22.7%
    Manukau $1,230,000 $1,050,000 -$180,000 -14.6%
    Papakura $1,130,000 $850,000 -$280,000 -24.8%
    Franklin $973,000 $900,000 -$73,000 -7.5%
    Auckland Region $1,300,000 $1,065,000 -$235,000 -18.1%
    Hamilton $881,000 $790,000 -$91,000 -10.3%
    Tauranga $1,000,000 $902,000 -$98,000 -9.8%
    Rotorua $680,000 $685,000 $5,000 0.7%
    Taupo $790,000 $823,500 $33,500 4.2%
    Gisborne $685,000 $660,000 -$25,000 -3.6%
    Napier $830,000 $723,000 -$107,000 -12.9%
    Hastings $870,000 $700,000 -$170,000 -19.5%
    New Plymouth $720,000 $650,000 -$70,000 -9.7%
    Whanganui $542,500 $450,000 -$92,500 -17.1%
    Palmerston North $720,000 $625,000 -$95,000 -13.2%
    Kapiti Coast $910,000 $840,000 -$70,000 -7.7%
    Porirua $1,013,000 $815,000 -$198,000 -19.5%
    Upper Hutt $920,143 $762,500 -$157,643 -17.1%
    Lower Hutt $920,000 $675,000 -$245,000 -26.6%
    Wellington City $1,099,000 $920,000 -$179,000 -16.3%
    Wellington Region $962,500 $795,000 -$167,500 -17.4%
    Nelson $736,000 $700,000 -$36,000 -4.9%
    Marlborough $705,000 $700,000 -$5,000 -0.7%
    Tasman $870,000 $869,500 -$500 -0.1%
    West Coast $350,000 $420,000 $70,000 20.0%
    Christchurch $700,500 $680,000 -$20,500 -2.9%
    Selwyn $870,000 $790,000 -$80,000 -9.2%
    Timaru $445,000 $460,000 $15,000 3.4%
    Canterbury $690,000 $668,000 -$22,000 -3.2%
    Central Otago $760,000 $730,000 -$30,000 -3.9%
    Queenstown-Lakes $1,230,000 $1,350,000 $120,000 9.8%
    Dunedin $650,000 $600,000 -$50,000 -7.7%
    Otago $730,000 $685,000 -$45,000 -6.2%
    Invercargill $462,000 $485,000 $23,000 5.0%
    All of Aotearoa $925,000 $810,000 -$115,000 -12.4%

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  • Chris W
    replied
    From 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."


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  • Perry
    replied
    I agree with all you've observed, except for the mass delusion aspect. It is possible that some kiwis are delusional, but please, present company excepted, at least. Oh, I suggest squander would be a better word in place of your "splurge."
    Last edited by Perry; 21-04-2022, 08:40 PM.

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  • JBM
    replied
    Kiwis have mass delusions around Property ... as too why I can't find anything decent to buy that returns a yield worth the risks... looking forward to the Crash thats got to happen even though I'm sure the Commies will do their best to stop it happening and wouldn't be surprised if we see UBI talk come to the forefront in as floating rates blow past 7%... Cindy will blame Russians .... evil overseas oil barons , climate change , ageing population ,moon cycles ,the rich ,the national party , overseas influences on NZ productivity ,a Bad Flu ... COVID 23 , the Aussies , China , etc etc

    Anything but the actual Government thats pushed taxes and endless rules regs , lockdowns , massive overseas lending to spurge on green projects and working groups ...
    Last edited by JBM; 21-04-2022, 03:42 PM.

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  • Perry
    replied
    Addendum

    The plight of heavily indebted PIs or home-owners will likely be very painful, as inflation increases. But for PIs with little or no debt, any pain will be insignificant.

    As another PT thread avows, almost everything a Labour / Watermelon Party govt. does to ostensibly help tenants makes everything more difficult or expensive for tenants. Or both. Often a double-edged sword. (E.g. Higher rents and fewer rentals.)

    Both a Labour / Watermelon Party govt. are ever-incapable of learning from past mistakes or obvious o'seas examples of failure. They always think they'll be OK, because everyone else "did it wrong" and so they will do it right! This time!





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  • Perry
    replied
    Tell us, Chris, does everyone have the same definitions?
    Especially the word bubble.
    Other words come to mind, like value.

    Much of what I see is just an inflationary change-in-numbers.

    E.g. The numbers on my insurance valuation certificate have increased.
    Is that a change of value, in any true sense?
    Consequence for me: a $2k premium increase.

    With CPI inflation running at the un-surprising number it is, I don't see anything cheerful ahead.
    Especially give comrade commissar RobUsome's hundreds of billions of gummint bond issues / borrowings.

    As I see it, he - for one - would welcome and find inflation a great thing.
    (Not that he'd ever admit that, of course.)
    In theory, it makes the pay-back look less forbidding.
    Nothing so nice as inflating debt away, eh?

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  • Chris W
    replied
    Warren Buffett on the housing bubble in the US:

    1) "the entire American public, eventually, was caught up in a belief that housing prices couldn't fall dramatically."

    2) "very very few people could appreciate the bubble. That's the nature of bubbles. They become mass delusions of sorts."


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  • Chris W
    replied

    Video from Opes Partners


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  • Perry
    replied
    Sorry. I should've checked. Tech fatigue. Tech's great when it works as we hope / want. With luck and a sprinkle of skill, I've fixed the glitch, now.

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  • Chris W
    replied
    Originally posted by Perry View Post
    See my PT post, here, in which the ANZ's airheads and drongoes aver that current housing supply growth was “far outstripping” new demand, describing population growth as “anaemic” with the border closed.
    The link isn't working.
    Last edited by Perry; 19-12-2021, 05:57 PM.

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