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

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  • #76
    ^

    a standard volt unit was $280,000 off the plans in 2004 with a 2 year rental guarantee at $400pw

    the building was finished dec 2006? and when the 2 year rental guarantee ran out dec 2008? rents dropped to about $350pw

    buyers who bought off the plan with $5000? down and relied on the rental guarantee for the mortgage payments, were suddenly left having to find an extra $50pw

    mortgagee sales started about 2009

    203 was sold for $159,000 in 2010

    a few others at $160,000

    it wasn't until 2012 that they got back over $200,000

    2014 they finally started selling for what they had sold for

    2015 they started making money

    2016, 2017 top prices

    2018 slight fall back
    Last edited by eri; 15-04-2018, 10:21 PM.
    have you defeated them?
    your demons

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    • #77
      Documentary in April 2007 on the Irish property market - when property prices stabilised and about 12-18 months before property market collapse.


      https://www.youtube.com/watch?v=3fm9HUIcnwM


      When there are fewer active buyers in the market, and a lot of active desperate sellers listing their properties for sale, there is an imbalance in the property market, and this creates a buyers market.


      4:41: "House prices aren't just driven by raw economics, but by human emotions, like confidence. Right now, there are signs that confidence may be evaporating."

      5:15: "and once sentiment changes, it tends to go downhill very quickly"

      5:21: "what happens is people are happy. House prices aren't rising, people buy them when they need them or when they can afford them. However if house prices start falling, and you can't see any reason why - because there's a world recession on, people are losing their jobs, they feel if I go out and buy a house I could be lumbered with a house and a mortgage, and couldn't afford to pay it, so I'm going to wait until I'm certain about my job. If everybody holds back and waits, no houses are sold. What happens then? House prices fall."
      Last edited by Chris W; 22-01-2019, 10:40 PM.

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      • #78
        Originally posted by flyernzl View Post

        Thus, in any country with a rising population (and therefore a rising demand for houses) any price drop below the $(x plus a margin) level will be temporary, as then there will be no new houses built, a developing shortage, and as we all know a shortage leads to a rise in price and we are then off and away again.

        Using the logic above to an actual historical situation ...

        In 2006,
        1) Ireland had a rising population.

        2) Property developers went bankrupt, so property developers stopped building new houses.

        3) There were very few new houses completed (there were lots of partially built houses).

        4) The property price dropped below the construction cost.

        5) There was no shortage of housing as a lot of property owners couldn't service their mortgage (as they lost their jobs), then there were a lot of mortgagee sales and distressed sellers. There were a large number of properties listed for sale.

        6) There were very few active buyers in the property market (many people didn't have jobs so were unable to meet bank lending criteria for a mortgage so were no longer active buyers, others were not confident that they would continue to have a job, so they waited until their future was more certain and were no longer active buyers in the property market, others saw property prices falling so held off buying in the market and hence were no longer active property buyers).

        7) Property prices fell 50% from their peak.

        Anyone who bought at the peak was in negative equity. If they lost their job and were unable to meet their mortgage payments, they defaulted on their loan and lost their deposit and their house. Those that were able to keep paying their mortgage managed to keep their house - however if they had purchased their house after the property price crash, they could have bought their house for a much cheaper price, and had less mortgage debt.

        Some of you have mentioned that Ireland is specific to Ireland and not comparable to NZ or Australia due to cultural differences, planning laws, politics, etc. You mention that the same applies to the US property price bubble and is not directly comparable to NZ or Australia. I agree with you yet there are some things that both these have which is similar to NZ, Australia:

        1) when highly leveraged property owners get financially stressed, and become unable to pay their mortgage, they can become desperate sellers or banks can and do take possession and undertake mortgagee sales. When there are sufficiently large numbers of financially stressed sellers, this can overwhelm the number of active buyers in the market. If vendors have their properties listed on the market at their indicated price for a long period of time with little buyer interest, then the vendor may be willing to accept a lower price to sell the property.

        2) when property prices start falling, some previously active buyers start to get anxious, and decide to wait until property prices stabilise. If property price falls are large, then more previously active buyers get anxious and more people sit on the sidelines and wait. Others are unable to get financing as banks tighten lending criteria. Others lose their jobs and are no longer actively looking to purchase property. All of these variables decreases the number of active property buyers in the market.
        Last edited by Chris W; 23-01-2019, 10:31 AM.

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        • #79
          Chris - you talk of prices and provide lots of well thought out opinions. In these examples you cite, where do all these newly unemployed or ex home owners live? What is the impact on rental market?

          In the event of losing a job or having a home foreclosed on these people need to live somewhere so I imaging the rental market in these example remains buoyant - there might be an issue with ability to pay rent but the demand for rental can only go up in these situations.
          Last edited by Perry; 23-01-2019, 01:34 PM. Reason: fixed typo

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          • #80
            Originally posted by Don't believe the Hype View Post
            Chris - you talk of prices and provide lots of well thought out opinions. In these examples you cite, where do all these newly unemployed or ex home owners live?
            They live with family and friends - or cars and tents.
            Last edited by Perry; 23-01-2019, 01:35 PM. Reason: fixed typo, etc.

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            • #81
              Originally posted by Wayne View Post
              They live with family and friends - or cars and tents.
              When I was considering a move that had the potential to impact my income I preempted this by reducing my costs where I could. The highest cost to me was the rent I was paying in a affluent suburb in Melbourne that was close to my office. I traded this high cost rental for a bit of a drive that reduced my costs by more than 50%.

              If people think rationally they more to a lower cost accommodation - maybe some move in with friends and sleep in their cars as you point out but the majority won't have that option - I would think the majority would lower their expectation of the home they live in resulting in increased demand for rentals in the lower end of the market.
              Last edited by Perry; 23-01-2019, 01:35 PM. Reason: fixed typo quote

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              • #82
                Originally posted by Don't believe the Hype View Post

                When I was considering a move that had the potential to impact my income I preempted this by reducing my costs where I could. The highest cost to me was the rent I was paying in a affluent suburb in Melbourne that was close to my office. I traded this high cost rental for a bit of a drive that reduced my costs by more than 50%.

                If people think rationally they more to a lower cost accommodation - maybe some move in with friends and sleep in their cars as you point out but the majority won't have that option - I would think the majority would lower their expectation of the home they live in resulting in increased demand for rentals in the lower end of the market.

                When people have lower incomes or little or no income, they adapt accordingly. The options are many and varied depending on their personal circumstances.

                - some families will move to lower cost suburbs (to either rent or buy) -
                - some families will move in with family (think adult children who move back with their parents)
                - some families will move in with friends,
                - some couples may choose to flat share instead of have a house
                - some single adult children will move back with their parents
                - some people may choose to live in camping grounds
                - some individuals become homeless

                - some will move to a new city where job prospects are better - recall families from Christchurch moving out of Christchurch to other cities in NZ after the Christchurch earthquake.

                - many many other options.

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                • #83
                  Originally posted by Don't believe the Hype View Post
                  Chris - you talk of prices and provide lots of well thought out opinions. In these examples you cite, where do all these newly unemployed or ex home owners live? What is the impact on rental market?

                  In the event of losing a job or having a home foreclosed on these people need to live somewhere so I imaging the rental market in these example remains buoyant - there might be an issue with ability to pay rent but the demand for rental can only go up in these situations.
                  They leave for Aussie mate.

                  Remember before National got in last time Key was promising to reverse the 30,000 people p.a. we were losing overseas? That could easily happen again.

                  It certainly happened in Ireland, people simply bailed.

                  From Wikipedia: https://en.wikipedia.org/wiki/Post-2...nomic_downturn


                  Emigration[edit]

                  The Central Statistics Office estimated that 34,500 people left the country from April 2009 – 2010, the largest net emigration since 1989. However, only 27,700 of these are Irish nationals, an increase of 12,400 since 2006. It's also notable that more people went somewhere other than the UK, EU or US, traditional destinations for Irish emigrants.[33]
                  Squadly dinky do!

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                  • #84
                    Originally posted by Chris W View Post
                    Using the logic above to an actual historical situation ...

                    In 2006,
                    1) Ireland had a rising population.

                    2) Property developers went bankrupt, so property developers stopped building new houses.

                    3) There were very few new houses completed (there were lots of partially built houses).
                    I think you've failed to mention the important bit.
                    As I understand it, the developers went crazy and built and sold huge numbers of houses which flooded the market.
                    Finance was readily available to everyone.
                    When finance was turned off, everything turned to custard because of the over supply.
                    The outcome was predictable.
                    The Irish problem was the over supply of houses.
                    Does that sound like Auckland or NZ?

                    Comment


                    • #85
                      Originally posted by Courham View Post
                      1970-75 was a major dip!
                      Re your comment
                      I am not certain which city you are referring to but In the city (Wgton) I lived in 1970 to 75 was a major increase ..over 100pc increase
                      (residential) biggest increase I have ever seen in my lifetime

                      Back to topic
                      1987 to 1991 saw many large drops (commercial ) 75% decreases
                      2006 to 2008 some of my commercial properties dropped 50pc in value
                      These are based on actual properties that I owned or placed offers on.
                      Last edited by Beano; 23-01-2019, 11:15 PM.

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                      • #86
                        Yes I can agree with that.
                        A friend of mine at the time and his wife owned a sizeable commercial printing business in Hobson Street, Auckland.
                        When the landlord put the building on the market they seized that chance and bought it.

                        A few years later - 1987 approx - the value dropped and the bank who held the mortgage made a repayment call.

                        They had to to sell their house to pay off that demand, and ended up living in the basement of the commercial building in order to survive.

                        So it can happen.

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                        • #87
                          Originally posted by flyernzl View Post
                          Yes I can agree with that.
                          A friend of mine at the time and his wife owned a sizeable commercial printing business in Hobson Street, Auckland.
                          When the landlord put the building on the market they seized that chance and bought it.

                          A few years later - 1987 approx - the value dropped and the bank who held the mortgage made a repayment call.

                          They had to to sell their house to pay off that demand, and ended up living in the basement of the commercial building in order to survive.

                          So it can happen.
                          Was it 222 Hobson st ?

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                          • #88
                            Originally posted by flyernzl View Post
                            Yes I can agree with that.
                            A friend of mine at the time and his wife owned a sizeable commercial printing business in Hobson Street, Auckland.
                            When the landlord put the building on the market they seized that chance and bought it.

                            A few years later - 1987 approx - the value dropped and the bank who held the mortgage made a repayment call.

                            They had to to sell their house to pay off that demand, and ended up living in the basement of the commercial building in order to survive.

                            So it can happen.
                            These are approx numbers but it is an actual situation
                            1: builder builds building 12 story high 1987
                            2: cost overrun completed at approx $16m
                            3: builder goes broke
                            4: purchaser cannot complete purchase
                            5: banker takes over building for Mortgage value approx $12m
                            6: banker (national bank {black horse}) tries to sell for $10m
                            7: we tender $2.8m {break even} bank sells for $3.3m {1991}
                            8: years later it resells for $3.8m {1993}
                            9: investor fills the building
                            10:{1999} later resells $6.3m
                            11: today the CV is $12.4m
                            So possible value today is less than 1987
                            Last edited by Perry; 24-01-2019, 07:57 AM. Reason: disabled smilies

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                            • #89
                              Ahh, yes. 1987. I remember with astonished delight, the Rates going down with the drop in RV.
                              Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

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                              • #90
                                Originally posted by Perry View Post
                                Ahh, yes. 1987. I remember with astonished delight, the Rates going down with the drop in RV.
                                Just as rates don't go up because of RV change why would they go down (assuming that your change is the average for the city)?

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