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

[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.

[Nick G]

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

Over and over and over again. To the choir.

[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"

[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.

[Bob Kane]

The purpose of this thread is to learn lessons from past property bubbles from those that experienced it firsthand.

We're trying to pass on our experiences to you as we've been through several cycles.
You don't seem to like what we say.
You are even challenging that there is a shortage in Auckland.
Why have Auckland house prices stayed up?

[Davo36]

I think Chris W has made some good points, albeit in quite a long-form way.

Chris W, you're wasting your time trying to convince Bob Kane of anything, his mind is firmly closed.

December's sales figures for houses in Auckland were very low, will be interesting to see what the January figures are like.

[flyernzl]

Having been to Ireland, looked at how things panned out and spoken to some of the people involved, there is one piece of good news.

Most residential property owners and almost all residential landlords were largely unaffected by the crash. Even those who achieved negative equity came through provided they kept up the payments on the property (Banks were remarkably unkeen to foreclose, for obvious reasons)

The pain was inflicted pretty much entirely on the developers and the finance providers (and through them on savers).

So to blame buyers/investors/speculators (as politicians usually try to do) is erroneous.

So

[JBM]

Well as we know NZ hasn't had a widespread property bubble burst as of yet .. but living and dealing with property in Queenstown during 2009-10 I did see some investors and Larger developers go belly up .... People paying deposits for 300-400k sections year earlier etc to then see the values crash into the 200's (during 2010 talking with R.E agent at a wedding he stated he could get me a whole street for 175k or even less)

Apartments that sold for a 700K+ couple years earlier selling at Mortgagee auction for as low as $350k

Now of course during this time other properties in the resort town weren't as negatively affect and flatlined over the time or had slight pullbacks in bubble prices ..family homes in good areas etc

But it did show the endless growth speculation can hit a wall and affect those over-leveraged .. many big time developers went bankrupt during that time.

we are certainly heading to that place again in QT where over a short period of time values will crash on the back of overleveraged developers being forced to liquidate by the lenders

[Chris W]

Well as we know NZ hasn't had a widespread property bubble burst as of yet .. but living and dealing with property in Queenstown during 2009-10 I did see some investors and Larger developers go belly up .... People paying deposits for 300-400k sections year earlier etc to then see the values crash into the 200's (during 2010 talking with R.E agent at a wedding he stated he could get me a whole street for 175k or even less)

Apartments that sold for a 700K+ couple years earlier selling at Mortgagee auction for as low as $350k

Now of course during this time other properties in the resort town weren't as negatively affect and flatlined over the time or had slight pullbacks in bubble prices ..family homes in good areas etc

But it did show the endless growth speculation can hit a wall and affect those over-leveraged .. many big time developers went bankrupt during that time.

we are certainly heading to that place again in QT where over a short period of time values will crash on the back of overleveraged developers being forced to liquidate by the lenders

Thank you JBM for sharing your observations and thoughts.

What are the indicators / behaviours that you are currently seeing in Queenstown that make you believe that property prices in Queenstown are toppy again?

[GLin]

A recent story I heard from a friend, about an investor in Auckland.

He, nicked name Jack, was a successful businessman with two vegetable shops in Auckland that he later sold.

Jack then began buying houses, then sell 2-3 years later, making millions.

In the last two years, following advice from a prominent Auckland real estate agent, bought 7 or so off the plan apartments in Gold Coast.

Unfortunately each apartment has dropped probably $100k each... potentially $700k+ loss on his investments.

My source is from the Gold Coast real estate agent that is selling his apartments...

[Wayne]

A recent story I heard from a friend, about an investor in Auckland.

He, nicked name Jack, was a successful businessman with two vegetable shops in Auckland that he later sold.

Jack then began buying houses, then sell 2-3 years later, making millions.

In the last two years, following advice from a prominent Auckland real estate agent, bought 7 or so off the plan apartments in Gold Coast.

Unfortunately each apartment has dropped probably $100k each... potentially $700k+ loss on his investments.

My source is from the Gold Coast real estate agent that is selling his apartments...

Luck in Ak rather than skill it seems.
People often confuse luck with skill to their detriment.

[GLin]

Luck in Ak rather than skill it seems.
People often confuse luck with skill to their detriment.

When luck runs out, their lack of education, skills, and the right strategy end up costing them.

[Beano]

Luck in Ak rather than skill it seems.
People often confuse luck with skill to their detriment.

Correct
Luck in a rising market , skill in a falling market .

Jack thought he was skilled but he was just lucky he went in the market when the market was on the rise.
Eventually luck runs out and skill needs to take its place to constantly succeed

[flyernzl]

Made millions, and then (potentially?) lost $700k.

Not a totally bad outcome.

[GLin]

Made millions, and then (potentially?) lost $700k.

Not a totally bad outcome.

The apartments aren't sold yet, so the losses could be bigger.