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

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  • donna
    replied
    Wow I wonder how many of the 2000 had less than a 20% deposit and paid top $$?

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  • Chris W
    replied
    Originally posted by Chris W View Post

    More than 8500 first-home buyers who bought their homes during the market peak have properties that are worth less than they paid for them - and in a significant number of cases, that could be adding to the squeeze on their budgets.

    CoreLogic data shows that 81 percent of homes bought by first-home buyers between October 2021 and March 2022 have dropped in value from the time of purchase.

    About 18 percent, or 2000 first-home buyers, now have properties that are worth more than 20 percent less than they were bought for, indicating that any equity they had in the deal would probably have been wiped out.

    Of those that are worth less than they were purchased for, 42 percent are in Auckland, which made up 36 percent of all sales over that period, and 10.8 percent in Wellington.

    Of those that are still more than 20 percent below their purchase price, two-thirds are in Auckland and 18.8 percent in Wellington

    https://www.rnz.co.nz/news/business/...sits-wiped-out


    Update:

    Report on Newshub:





    1) At time of purchase Nov 2021:

    Price paid: $743,000 (purchased price was a 13.6% discount to valuation of $860,000)
    20% deposit: $148,600
    Mortgage: 80% LVR: $594,400

    2) current situation:

    Current market value: $560,000
    Mortgage: $594,400 (assumed to be interest only for ease of comparison)
    Equity value: NEGATIVE $34,400 (123% loss of equity deposit)

    Equity deposit and potential life time savings evaporated in less than 3 years

    Note that they borrowed from family for the initial deposit to purchase the property, and emptied their KiwiSaver accounts




    When Jessie Moss and her family bought their first home, it seemed like a bargain - but now the drop in the market has wiped out their deposit.

    They are among about 2000 first-home buyers whose equity has been erased by falling house prices.

    Moss and her family bought a three-bedroom, former state house in Waiwhetū, Lower Hutt in November 2021, at what turned out to be the peak of the housing market.

    It was valued at $860,000, but they paid $743,000 with a 20 percent deposit pulled from their savings, KiwiSaver accounts and borrowed from family.

    "At the time people were buying similar houses in Lower Hutt for as much as $900,000 in places like Naenae and Taitā."

    But then the market started to slow.

    A year later, the house was worth $560,000 - and they were due to refix their mortgage as interest rates rose.

    "We are now in a situation where the house is worth 19.9 percent less than we paid for it, putting us among the 2000 first-home buyers who have no deposit and no choices but to pay through the roof for a house that is hardly worth it.

    "We are stuck. We have no plans to move, however we cannot afford to maintain the house beyond things like getting blinds. We are just managing the weekly repayments which have gone up by 30 percent from $675 to $888 weekly, plus insurance and rates is $1000 weekly."

    Last edited by Chris W; 15-06-2024, 10:47 PM.

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  • Chris W
    replied

    For the record:

    Gareth Kiernan, chief forecaster at Infometrics, said he expected house prices to be at 2023 levels in mid-2026.

    “Our forecast horizon is mid-2029 and we still think house prices will be below the 2021 peak at that point

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  • Chris W
    replied


    More than 8500 first-home buyers who bought their homes during the market peak have properties that are worth less than they paid for them - and in a significant number of cases, that could be adding to the squeeze on their budgets.

    CoreLogic data shows that 81 percent of homes bought by first-home buyers between October 2021 and March 2022 have dropped in value from the time of purchase.

    About 18 percent, or 2000 first-home buyers, now have properties that are worth more than 20 percent less than they were bought for, indicating that any equity they had in the deal would probably have been wiped out.

    Of those that are worth less than they were purchased for, 42 percent are in Auckland, which made up 36 percent of all sales over that period, and 10.8 percent in Wellington.

    Of those that are still more than 20 percent below their purchase price, two-thirds are in Auckland and 18.8 percent in Wellington

    https://www.rnz.co.nz/news/business/...sits-wiped-out


    Update:

    Report on Newshub:



    Last edited by Chris W; 13-06-2024, 09:26 PM.

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  • Chris W
    replied

    Calculations of those buyers at or near the peak


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  • donna
    replied
    ^^ I wonder what % of mortgagees with arrears are FHBs.

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  • Chris W
    replied





    The number of Kiwis with mortgage arrears has risen to its highest level since before the Covid-19 pandemic, new numbers show.



    In Centrix's latest credit indicator report, the number of homeowners behind on their mortgage payments climbed to 1.47% in January, up from from 1.40% in December 2023.



    "This equates to over 21,800 mortgage accounts past due, up 16% year-on-year," the report said.



    In January, mortgage inquiries were up 4% year-on-year, which Centrix suggested could signal a "warming" of the housing market.



    Overall, the number of Kiwis with arrears reached a "seven year high" — hitting 9.6% year-on-year "reflecting seasonality following the festive season and summer holiday break".
    Last edited by Chris W; 05-03-2024, 09:48 PM.

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  • Frezzinghot
    replied
    Provisional tax sux big time, still paying off a little as well atm. But as I hold through this flat market, I wait until it starts to pick up and that’s not far away imho.

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  • Sanya
    replied
    Originally posted by Jeffa View Post
    Fk I hate doing taxes...
    Don’t we all – especially after finding out provisional tax hasn’t been sufficient and thus there’s a fat terminal tax bill.


    Originally posted by Jeffa View Post
    rental income covers out goings for investment properties,
    Your investment properties don’t produce a significant profit?

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  • Jeffa
    replied
    This reminds me ...TAX time around the corner <(._. )>

    Fk I hate doing taxes...

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  • Jeffa
    replied
    Originally posted by donna View Post

    Jeffa, I thought you lived off the interest off your leveraged investments (share market). e.g. borrow $1m - live off 10% net return = $100K.

    regards
    Donna
    Correct, as well as revolving credit on my properties although I rarely use those unless I need some major work done.

    It pays my credit cards off each month , credit cards are used for outgoings and living expenses, much of my cash is left in my US trading account in US dollars and some NZD which I reinvest in bear markets or leave to earn some interest

    I then use credit cards rewards for airline travel when my wife decides to drag herself away from her tax slave job several times a year, which seems like a waste of time to me but she enjoys her work.

    Cash in a NZ bank is becoming a foreign concept to me, Any money in New Zealand banks are in and out almost instantly to where it needs to go, usually once a month

    Excuse my ignorance but I thought much of the gentry class lived like this?

    It's how billionaires live, Elon Musk has a credit card with 80million dollars on it for living expenses leveraged against his Tesla shares or used to, I also remember Warren Buffett saying he only had a few hundred dollars in his wallet or something like that?

    I studied how the wealthy lived, not listening to a broke university lecturer

    So technically I am living off my credit cards and leveraging my investments to pay them off, rental income covers out goings for investment properties,

    Obviously I'm not a billionaire, but a multi millionaire, so it depends on your lifestyle,


    These days as I get closer to 50, time becomes the currency because in the end none of this matters...
    Last edited by Jeffa; 02-03-2024, 09:19 PM.

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  • donna
    replied
    Originally posted by Jeffa View Post

    I'm worth millions
    But I live off a couple of platinum Visa credit cards

    My millions are only realized by selling my assets
    Jeffa, I thought you lived off the interest off your leveraged investments (share market). e.g. borrow $1m - live off 10% net return = $100K.

    regards
    Donna

    Leave a comment:


  • donna
    replied
    Originally posted by Chris W View Post
    It's been 2 years since this initial calculation was done. An update.


    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


    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.



    It so will - not looking to flash right now and who’d be able to hang on - lender may tap on shoulder demanding a top up to fix LVR - that would surely be the nail in the coffin.

    regards
    Donna

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  • Chris W
    replied
    Originally posted by Perry View Post

    The plight of heavily indebted PIs or home-owners will likely be very painful, as inflation increases.
    Seeing more anger by the highly indebted property investors. This anger being directed at someone else (a policy maker), rather than facing the fact that the person solely responsible for their current position and circumstances is the person they see when they look in the mirror - that person is solely responsible for taking on the debt.
    Last edited by Chris W; 25-02-2024, 05:10 PM.

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  • Chris W
    replied


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