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

[Perry]

Look at the housing shortage in Auckland, yet . . . .

Like so many such things, maybe a price range is needed. Perhaps the 46,000 shortfall is for a particular price range house?

With bank's being tight and the RBNZ deposit limits, perhaps there's more to it?

Stupid statement really, that - there always is more to it.

[Chris W]

I think he's warning against price speculation in a peak market situation.

Yes, the key question is which markets in New Zealand are currently at or near a peak situation (if any)?

Some property owners who are property professionals may know. I'm not sure if most property owners who are outside property professionals know the answer to that. My sister in law who works in a bank certainly doesn't know if the price of her house is in a property price bubble. A survey indicated that most property investors are part time property investors, who own 1-3 properties, they have full time jobs and may not have time to keep a close eye on their property market.

There are property owners who believe that property prices in Auckland will continue to double every 10 years based the extrapolation on a 50 year price history.

There are property owners who believe that continued population growth and immigration growth will lead to continuing property price increases.

There are those with vested interests in property (real estate agents, property mentors, property investors, economists, etc) all continuing to put their positive spin on property prices continuing to go upward in the mainstream media. Property owners should hear independent and different viewpoints so they can assess the merits of each and form their own opinions and viewpoints. Unlike property promoters with vested interests, those with a different viewpoint have very little to gain and mostly no financial gain from sharing their different viewpoints publicly, so they are infrequent and very often drowned out in the mainstream media by the property promoters. It is only after property prices have fallen that the mainstream media seeks out these people - but that is of little use to the leveraged house owner who has lost their home as the bank has put them under financial pressure.

There are news reports of housing shortages in Auckland and many expect property prices to continue to increase in the next 3-5 years. According to the Auckland Council there is a shortage of 46,000 residential dwellings - ""Auckland's shortfall is around 46,000 dwellings" - https://www.interest.co.nz/property/...-shortage-will

Look at the housing shortage in Auckland, yet property prices have languished over the last 2 years or so. There is a housing shortage in Auckland and yet there are over 11,000 properties in Auckland currently listed for sale on trademe.co.nz. If there is a housing shortage, why are there so many properties still listed for sale? If there is a housing shortage, why are the clearance rates at auctions so low relative to previous levels? If there is a housing shortage, why is it taking longer to sell a house? (as indicated by days to sell). If there is a housing shortage in Auckland, why are vendors cutting their asking prices in order to attract buyers? If there is a housing shortage, then why were the properties at the St James development project in Queen St and Flo apartment project in Avondale not sold out? - these projects were subsequently cancelled.

As a professional property finder, you are uniquely positioned to know if any markets are in a peak market situation and vulnerable to price falls - many of us would be very interested in your perspective.

The purpose of this thread is to learn lessons from past property bubbles from those that experienced it firsthand - "those that fail to learn from history are doomed to repeat it"

[Nick G]

I think he's warning against price speculation in a peak market situation.

Over and over and over again. To the choir.

[Bob Kane]

Bob,
The realisation of the over supply of houses in Ireland was after the property price bubble burst and houses were not selling. The demand that they projected would be there due to inward immigration, population growth, new household formation, etc proved to be incorrect, and subsequently shown to be too optimistic.
Prior to the property price bubble bursting, there were reports of a housing supply shortage.

I'm not sure what you're trying to say here.
The developers built too many houses and caused a crash.
That data was always available to those who wanted it.
Those reports of a housing shortage were false and even fraudulent.

[Chris W]

Not sure if there is a property price bubble in Australia. As recently as March 2016, there was a reported housing shortage.

NSW housing shortage at unprecedented level

Updated25 March 2016 — 10:55pmfirst published at 2:17pm

NSW could close its borders tomorrow and it would still take three years, at current construction rates, to build enough homes to fill the state's unprecedented housing shortage.

The state's housing shortage will top 100,000 homes next year for the first time.

Despite a boom in apartment building in some pockets of Sydney, demand for new homes is outstripping supply, a new analysis by ANZ Bank has revealed.

Amid fears of a housing price bubble, ANZ senior economist, David Cannington, said the analysis suggested any price falls would be limited.

"The question of whether the market is in a bubble is really about whether there is significant downside risk to prices," Mr Cannington said.

"What this analysis says is there is still a lot of unsatisfied demand for housing. So even when prices do start to fall, that creates opportunities for potential households who are priced out of the market."

"This is part of the reason why house prices are able to be supported at the high level that they are at the moment."

NSW's resurgent economic fortunes are adding to demand for housing, helping to attract more migrants and stem the outflow of interstate migration.
"Even with some of that strong growth in new housing construction, population growth is still quite strong and steady," Mr Cannington said. "NSW generally tends to have a negative net interstate migration, with people coming into NSW or Sydney and then migrating elsewhere. But that outflow has actually been a lot weaker."

The ANZ analysis shows NSW is on course to build 56,000 new homes this financial year, after demolitions are taken into account. This is more than double the number of new homes added six years ago.

But underlying demand for new homes is also expected to grow, by 63,000 new homes, leaving an annual shortfall of 7,000.

There is still a lot of unsatisfied demand for housing.
ANZ senior economist David Cannington

This will add to the existing housing shortage, bringing it up to 99,137 homes this financial year, 106,424 next financial year and 114,428 the year after that.

Mr Cannington said the housing shortage was frustrating the ambitions of many young Sydneysiders to form a new household. "What it means is that there is an involuntarily high number of people per household. Where you see it is in shared rental properties and mature-aged kids staying at home longer with their parents. A lot of people say they're priced out of the market and unable to buy. While they'd like to form their own household, they can't."

NSW's shortage of housing has been growing each year for the last decade.

The last time the state's supply of housing met or exceeded demand was between 2002 and 2006. During that time home prices fell slightly.

Over the decade since, Sydney home prices have almost doubled, rising by 88 per cent. This included periods of falling prices in 2008, 2011 and currently.

A supply shortage did not mean prices could not fall, Mr Cannington said, "but it does say that the amount of downward pressure in prices will be limited by this significant under supply of houses."

Nationally, ANZ puts the housing shortage at 250,000 homes, but this is expected to ease slightly over the coming three years. For the first time in a decade, there are enough homes being built nationally to meet supply.
But the story is different in NSW.

"On current construction levels in NSW, and if there were no additions to the underlying requirement for households, then you'd still be building for three years before NSW was in balance," Mr Cannington said.

Underlying demand for new homes is calculated based on population growth, adjusted for the number of people per household. ANZ's analysis assumes about 2.2 people per household.

Economist Saul Eslake, a former chief economist at ANZ and member of the Rudd Government's National Housing Supply Council, said estimates of the exact size of the housing shortage varied, but ANZ's estimate was "reasonable".

"There's little doubt in my mind that there is a shortage of housing in Sydney," Mr Eslake said.

This was a strong argument against the suggestion that Sydney house prices are in a bubble, he said.

"In order for house prices to fall, there are two criteria that are necessary. You need to have a material volume of forced sellers and those forced sellers need to be selling into an over-supplied market."

The property bubbles that burst in the US, Ireland and Spain were not just price bubbles, but quantity bubbles.

Mr Eslake blamed "dopey" planning laws for Sydney's relative inability to build homes. "Local councils in Sydney are much more restrictive, particularly in terms of the opportunities they give for people in established areas to make time consuming and vexatious objections to development."

Source: https://www.smh.com.au/business/nsw-...25-gnr37f.html

[Chris W]

Here's another article regarding the housing shortage in Dublin as reported in January 2007.

Dublin housing shortage 'to continue'

Thu, Jan 25, 2007, 00:00

The shortfall of housing supply within the Dublin area is set to continue despite a record level of house construction in 2006, according to the latest AIB housing market report.

The report said that the late 1990s saw a marked downturn in the percentage of total housing completions in the Dublin area compared to the proportion of the total population that resides in the area.

Although there has been a record level of housing completions in 2006 - estimated by the Department of the Environment at 93,419, this "has done little to rectify this situation," it said .

The report notes that completions within the Dublin area increased by 8 per cent last year compared to the 15.4 per cent increase for the country as a whole.

So less than 20 per cent of completions were in the Dublin area while, according to census data, some 28 per cent of the population lived in Dublin at April 2006.

AIB predicts the level of completions to fall back to 85,000 this year, with a further decline in output to 78,000 units in 2008.

It observes commencement notices were issued for 65,517 housing units in the first ten months of 2006, a decline of 2.4 per cent compared to the same period in 2005.

AIB also said the decline in output is further illustrated by data from the Central Statistic Offices that indicate that the number of planning permissions granted peaked in the first half of 2005.

But given the apparent buildup of a Dublin supply shortfall, the downturn in housebuilding envisaged over the next couple of years is more likely to take place outside the Dublin region, the report said.


Source: https://www.irishtimes.com/news/dubl...tinue-1.802299

[Chris W]

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.

Bob,

The realisation of the over supply of houses in Ireland was after the property price bubble burst and houses were not selling. The demand that they projected would be there due to inward immigration, population growth, new household formation, etc proved to be incorrect, and subsequently shown to be too optimistic.

Prior to the property price bubble bursting, there were reports of a housing supply shortage.

Here are the relevant excerpts of a news article in May 2006

The estate agents forecast demand for new homes nationally to rise from 92,000 units in 2006 to 101,000 in 2008.

But the report warns that supply is failing to meet the required demand.

"A serious supply crisis is developing in Dublin caused by planning difficulties at local authority and An Bord Pleanála levels," the report said.

"During 2005 the number of units granted planning permission in Dublin dropped by a massive 45 per cent, from 24,196 in 2004 to just 13,233 last year, and the number of new home starts/registrations fell by 16 per cent. The biggest shortfalls are in Dublin city centre and south Dublin."

Hooke & MacDonald estimate there is only enough land in Dublin city centre, between the canals, for another six years' housing supply based on current planning policies.

Full article from May 2006

Estate agent sees 13% property hike in 2006

Property prices will continue to see sustained growth for the foreseeable future driven by record employment, a thriving economy…

Tue, May 16, 2006, 01:00

Property prices will continue to see sustained growth for the foreseeable future driven by record employment, a thriving economy and population expansion, according to a new report released today.

Estate agents Hooke & MacDonald forecast 13 per cent house price growh nationally and 14 per cent in Dublin in 2006. This will be followed 9 per cent growth nationally in 2007 and 7 per cent in 2008, as well as growth of 10 per cent and 8 per cent in the same years in Dublin, the report forecasts.

The increased numbers of migrant workers arriving in Ireland is underpinning demand for rental accommodation, while foreign nationals will account for an increasing proportion of buyers in the coming years, the report added.

First-time buyers account for 48 per cent of purchasers, followed by other owner-occupiers (24 per cent) and investors (28 per cent).

The estate agents forecast demand for new homes nationally to rise from 92,000 units in 2006 to 101,000 in 2008.

But the report warns that supply is failing to meet the required demand.

"A serious supply crisis is developing in Dublin caused by planning difficulties at local authority and An Bord Pleanála levels," the report said.

"During 2005 the number of units granted planning permission in Dublin dropped by a massive 45 per cent, from 24,196 in 2004 to just 13,233 last year, and the number of new home starts/registrations fell by 16 per cent. The biggest shortfalls are in Dublin city centre and south Dublin."

Hooke & MacDonald estimate there is only enough land in Dublin city centre, between the canals, for another six years' housing supply based on current planning policies.

Cork is set for a period of rapid expansion, according to the report, with a record 10,000 new homes built in the city and county this year, while completions will reach 5,000 in Galway and 3,000 in Limerick.

[GLin]

I was told that the next apartment development at Conrad Properties is selling for $35k per square metre.

Now that is a bubble.

[Don't believe the Hype]

Thanks Chris - my take on this is that tenants who’s circumstances change quickly - either fast evicition to fix a leaky building or being made redundant results in people finding whatever a con they can. The example in the article shows what people do when a move is needed fast, what it doesn’t cover is what happens when they hvr to move fast AND their income has been cut.

In the event of job losses it may be voluntarily moving to lower cost rentals.

[Bob Kane]

With respect to the current situation in the Auckland residential property market, just so I understand you correctly and we are on the same page

1) regarding the housing "shortage" in Auckland - what is the number of new houses / residential dwellings that needs to be built to meet demand?
2) can you tell me how is that number calculated?

It's been reported in the media extensively over the last few years.
Tony Alexander (BNZ economist) often quotes the figures needed and the actual figures and comments on the shortage.
Why don't you do some google searches?

https://www.interest.co.nz/property/...-start-decline
https://www.radionz.co.nz/news/busin...t-to-get-worse

You're welcome.

[eri]

what amazes me about that story is that the building

looks like 1 of the dodgy pair of 21 + 23 hargreaves st, st mary's bay

should have been on every auckland real estate investors radar for about 4 years

so how can someone like "real estate agent Dusan Valenta"

http://raywhite.co.nz/Agent/Ray_White_Cityapartments/Dusan_Valenta

have not known that they were renting a leaker that needed fixing?

this stuff is all in the BC minutes which all of the REA have, plus you can generally see cracks + fillers around window corners etc that SHOULD NOT BE THERE in such new buildings...

"don't put down to malice which can adequately be explained by incompetence"

but really if real estate agents can't, or choose not to, connect the dots in real estate

why the hell would you trust them to manage the biggest financial decision of your life?

and the same goes for the companies that either employ these liars or incompetents

even ray white has for years been trumpeting the chaos

big trouble means opportunity 2017
https://rwcityapartments.co.nz/prope...rtment/1721331

Yes, the building may have weather tightness issues and there may be a huge remedial cost occurring for the units in the building in the future
sold august?2018,
https://nz.raywhite.com/auckland-city/auckland-central/1721331/

23 Hargreaves Street
This large-scale remediation project involves the refurbishment of 33 apartments at Hargreaves Street in one of Auckland’s premier CBD locations.
Spread over seven levels including two basement levels, the scope of works includes
the removal of existing roofs, cladding, windows, doors and balconies,
followed by rebuilding the roofs and the majority of the top two floors
STARTED January, 2019
COMPLETED July, 2020
http://www.brosnan.co.nz/projects/49...reaves-street/

[Chris W]

In these examples you cite, where do all these newly unemployed or ex home owners live?

A story of displaced occupants of an apartment complex. This would be similar situation when a landlord sells their investment property to owner occupier buyer. Here is where they went

Renters given seven days' notice to move out of an Auckland apartment complex say they've been through "hell" with some even forced to move into caravan parks or back in with their parents.

Others found places to rent



Full article for future reference

Renters given seven days' notice to move out of an Auckland apartment complex say they've been through "hell" with some even forced to move into caravan parks or back in with their parents.


Deemed a leaky building, the tenants were ordered out of The Ridge apartment complex in St Marys Bay because its power and fire alarm were due to be turned off to allow workers to fix weathertightness issues.

But while the High Court last year ordered landlords to give their tenants 90 days' notice, some tenants say they did not get that.

Instead, tenants, like real estate agent Dusan Valenta and his three flatmates, only received seven days' notice last week.


Valenta said he had been through "hell" and many sleepless nights since then trying to find a new rental.
"We started panicking and ... I physically had to stop working that day," he said.

"I then made about 20 calls to property managers trying to find a suitable property for us, which was pretty much a logistical nightmare."


Court documents indicate that tenants, including families, in as many as 19 of the complex's 33 apartments may have been affected by the short-notice eviction.


And while Valenta believes he has since found a new rental, others are have not been so lucky after being turfed out at the busiest time of the year when rental companies are inundated with hundreds of enquiries and applications.


One of Valenta's flatmates has been forced to move in with her parents, while another couple have been spending nights in campgrounds and caravan parks while they hunt for another property.


Valenta and another affected tenant Scott Ruddock said they were still waiting for their bonds despite facing moving costs and expected compensation.


THE LANDLORDS
Landlord Brian Hudson did not wish to comment.


However William Maxwell-Steele — the director of trusts that own 12 apartments in the complex, including those where Valenta and Ruddock live — said he felt "awful" for the tenants.
Maxwell-Steele said he had no financial interest in the apartments and had only been acting as a director of the trusts to help his long-time friend Hudson.
As a trustee director, he said he had been helping the tenants as best he could and had "advocated" on their behalf to the owner Hudson.
He said he had also lodged an application to the Tenancy Tribunal to "address whether any compensation should be payable given the difficult circumstances around this matter."
Hudson also lived in the apartment complex and had to now find his own alternative place to stay as well, he said.
"This is an awful situation for everyone involved," Maxwell-Steele said.


"It is causing me enormous stress, so I can only imagine the stress that is it is causing for the innocent tenants."
The tenants have been caught up in a court battle between owners of the apartments over which company should be contracted to complete weathertightness repairs.
The impasse was resolved with the court appointment of an administrator, who then proceded with repair arrangements.
As a result some tenants late last year were given 90 days' notice. However not all owners agreed with the appointment, and did not issue notice to their tenants. It is these tenants who have now been given seven days' notice.
However, administrator Anthony McCullagh said the High Court had given clear directions to the owners to give 90 days' notice.
He said repair work had been due to start in the complex yesterday, but a grace period had been granted over this weekend for those tenants still in their apartments.
Yet - with his contractors "twiddling their thumbs and costing us penalty rates as every day goes by" - the complex's power would definitely be cut on Tuesday, he said.


TENANTS IN DISARRAY
Tenants say the situation has left them in disarray.
One tenant, who didn't want to be named, claimed he wasn't even told by his landlord that he had to leave the building. He instead heard it through other tenants.
Another tenant said she worked in hospitality from 10am-to-midnight and hadn't had time to look for another place. Instead, she was moving to her parents home on the North Shore and had been forced to give away most of her furniture.
She said she was now going to have to pay for taxi rides home each night from her workplace in the Viaduct.
Valenta's neighbour Ruddock said he had always known the complex had leaky building issues and that they would have to move out eventually.
But he said he had been repeatedly assured they would get 90 days' notice when it happened.
He said he may have found a new apartment for himself and his four flatmates, but they were facing a $300 per week rent increase and more than $8000 in moving costs.
He also said some of his flatmates and been forced to ask their families to wire them money.
Valenta was also facing a rent rise and more than $4000 in moving costs after finding he also thinks he has found a new rental. "We've had to go through hell," he said.

The couple said they had been to house viewings where up to 30 people have queued to get in the door.

Source: https://www.nzherald.co.nz/nz/news/a...ectid=12195626

[Davo36]

You worked with DB at Bayleys?
I thought the listing agent was Young from bayleys ?

No, small firm in South Auckland.

[Perry]

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)?

I don't know why and - as you can guess - I did not complain.

I was absent from the area, at the time, but do vaguely recall the Council's newsletters mentioning significant spending cuts, because of the economic effects of that time.

[Beano]

I was thinking that! Had a listing on that building at one point when I was an agent.

You worked with DB at Bayleys?
I thought the listing agent was Young from bayleys ?