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

[Chris W]

Calculations of those buyers at or near the peak

https://www.stuff.co.nz/money/350206543/rising-mortgage-stress-sees-more-homes-sale

[donna]

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

[Chris W]

https://www.1news.co.nz/2024/03/05/number-of-kiwis-behind-on-mortgage-highest-since-before-covid/

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".

[Frezzinghot]

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.

[Sanya]

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.

rental income covers out goings for investment properties,

Your investment properties don’t produce a significant profit?

[Jeffa]

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

Fk I hate doing taxes...

[Jeffa]

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...

[donna]

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

[donna]

It's been 2 years since this initial calculation was done. An update.

https://www.propertytalk.com/forum/forum/property-investment-forums/new-zealand/property-investment-nz/730084-april-2022-house-prices-falling-numbers-now-show#post730103

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

[Chris W]

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.

[Chris W]

https://www.newshub.co.nz/home/money/2024/02/cost-of-living-crisis-high-interest-rates-forcing-kiwi-homeowners-to-sell-up-take-second-job-or-move-to-australia.html

[Perry]

But I live off a couple of platinum Visa credit cards

One not enough?

[Chris W]

But for PIs with little or no debt, any pain will be insignificant.

A comment on interest.co.nz

On an inflation adjusted basis, price change from the peak REINZ median house price in the following areas:

1) South Waikato: -40.6%
2) Porirua: -43.0%
3) Kawerau: -43.8%
4) Central suburbs of Auckland: -45.0%
4) Buller: -47.0%
6) South Wairarapa: -48.8%

Remember, this is before the impact of leverage.

[Chris W]

For me , a property bubble crash would probably represent a 50% decline in value and recovery take a decade to realise growth from the peak market or bottom , scenarios for this is usually war, sharemarkets tend to recover relatively fast these days ,

A comment on interest.co.nz

On an inflation adjusted basis, price change from the peak REINZ median house price in the following areas:

1) South Waikato: -40.6%
2) Porirua: -43.0%
3) Kawerau: -43.8%
4) Central suburbs of Auckland: -45.0%
4) Buller: -47.0%
6) South Wairarapa: -48.8%

Remember, this is before the impact of leverage.

[Jeffa]

^^ Your numbers assume the homeowners sold in this time frame or 24 months, which would be a very low percentage of homeowners selling in this market with listings so low, for now .

Losses are only realized by selling


Investors leverage their deposit , so recycling equity isn't earned income, more capital gains from previous investment, not to mention those losses can be claimed as tax losses.

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

My millions are only realized by selling my assets