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

[Chris W]

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."


https://www.oneroof.co.nz/news/43109


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.

[Chris W]

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%

[Chris W]

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

[Perry]

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."

[JBM]

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 ...

[Perry]

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!

[Perry]

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?

[Chris W]

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."

[Chris W]

Video from Opes Partners

https://youtu.be/VNXt4GdLi6Q

[Perry]

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.

[Chris W]

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.

[Perry]

Well, Chris, according to some - yes. 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.

Straight for the horse's mouth. Or maybe straight out of the other end of said horse?

Really, who's kidding who? Or trying to?

Idiots of the world, unite and march to ANZ (NZ) where employment opportunities are boundless for people with your qualifications.

[Chris W]

Many say that one of the early signs of a property price bubble is that too many houses have been built resulting in an oversupply of housing.

1) has there been any area in NZ where too many houses have been built?

2) are there any areas in NZ with an oversupply of houses currently?

3) are there any areas in NZ with a potential oversupply of houses in the next few years?

[Chris W]

Continuation of insane rising prices ..all across the areas I follow ...I'm now based in Cromwell and its been as bad here if not worst ... places like Oamaru ...Invercargill ...very simply if you want a nice basic family home with Double Glazing etc ... in the last 5yrs they have DOUBLED in value ...

My seasonal export based job has gone up max 5% over the same time ...how much longer can this bubble grow ?? well IMHO another major rate increase could well break the camels back .. we see lowest lending rates in the low 4's % all these large Morgs + living costs spiking ....Oil Bull market back driving Energy costs higher(that affects everything!!)

And what does are Govt do >>>https://www.newshub.co.nz/home/polit...ge-growth.html

Jacinda and team are doing their best to implode this countries credit rating..we are heading to a major Slow-down ...House Supply will meet and surpass demand as how many FHB can continue to soak up one of the most expensive housing markets in the world

>> When the boarders open net Young skilled Kiwis will leave in droves ...

1 in 10 Kiwis are employed in the Property sector(any slowdown will hurt) ... Tourism decimated rebuild will be slow..

the Govt + Kiwis have spent like never before ....day of reckoning is coming

Jacinda and team blew 55.7billion of the FED's money in just over 12months ?? what dod we get again for this outlay ...Lockdowns>> and BS

JBM, thank you for your update.

[Chris W]

I suppose it's sort-of obvious in one way; and not at all in another.

But if it goes on and on and on, then what? Just a trend . . . ?

In light of current market conditions, this seems to be a very common perspective at the moment.