Header Ad Module

Collapse

Announcement

Collapse
No announcement yet.

a stalled housing market?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • a stalled housing market?

    I’m still trying to figure out the truth about this interesting point in the property cycle.

    I’m suspecting that the market may have slightly stalled.

    In other words, it’s not behaving according to the logical slopes of supply and demand, because sellers are wanting higher prices than the market is willing to pay.

    That would explain why the average price hasn’t dropped with the reduction in demand.

    Anyone smart enough to take some pot shots at what’s going on.

    Anyone agree or disagree that by holding the interest rates up, the reserve bank has effectively reduced the demand.
    If you cant pay for it, you are effectively out of the “demand loop” no matter how much you desire it.

    Anyone smart enough to firmly blast some holes in the Supply theories?
    Is it that there will never be any more land ..or do alternatives like building into the thin air itself (apartments) or things like “in-fill housing” or even the developments of places like “Pegasus” indicate that the supply is being magically expanded out of thin air in some cases.

    Any thoughts?

  • #2
    Originally posted by McDuck
    Anyone agree or disagree that by holding the interest rates up, the reserve bank has effectively reduced the demand.
    I've always thought people overrate the effect the reserve bank has on the property market. There is a link, granted, but it's a bit tenuous. What is taught in the classroom doesn't seem to happen in the real world.
    The reserve bank has up'd the interest rates and the property market carries on unabated. Obviously other factors are more important.
    Common sense says the rate of immigration and the construction rate of dwellings would have more impact than the interest rate.
    Personally, I'm more interested in a motivated seller than the utterings of the reserve bank governor.
    Not sure what this reveals about me.
    my 2c worth

    Comment


    • #3
      Well I have been pondering the same point for a while now and one idea just keeps coming in to the back of my mind.
      Of course there is no science behind what I am going to say, but in all the discussions I have listened to and read, there is one point that seems to get overlooked.
      And that is the effect and influence the real estate agents and in particular the real estate companies have on the market place.
      Now real estate and the buying and selling and marketing of such, has become an increasingly soffisticated business and this is in no small part due to the easy access of information that is avaliable on the net, also that NZ real estate is coming of age as are the business that operate in it.
      If I owned a real estate company I would without a doubt wish to assert my influence in the market because it is in my best interests to do so as well as in the interests of my customers.
      Of course this is all done in a competitive environment, but the competion aside, I as a owner of a real estate company know that my competion are also my best friends. Hence the saying keep your friends close but your enemies closer.
      I will gaurantee that the key directors/ owners/players and associations are talking to each other on a regular basis in some shape and form and as such I would go so far as to say that plans and strategies have been thought out at the top as to how best control and manage and even influece and manipulate the market
      now this type of plan does not need to be in writting and fromal all it needs is for people at the top to condition ther own which will filter down thru the companies this is certainly not differcult given the size of the New Zealand market place.
      As I type this in an email arrives from an agent in Blenheim telling me the market has grown 12.5% and the conditioning goes on.
      The influence of the the overseas companies will be quite big considering they are used to playing in much bigger markets.
      For those of you who think this sounds like a conspiracy theory well forget it is really nothing more than a market reality.
      I think the a good question to ask who is in the best position to drive the market out of all the players are in it.
      This is why the prices are staying high when the time to sell is longer and interest rates are rising.


      Comment


      • #4
        Originally posted by tricky
        I've always thought people overrate the effect the reserve bank has on the property market.
        That’s a good point and I agree to a large extent based on this logic.

        A person borrows 200 K at say 10%...what’s that, $385 per week interest.

        Now if the Reserve bank increases rates by a quarter percent , the borrower will only have to pay an extra $10 per week to cover the increase.

        Who cares!

        But on the other hand ..If someone borrowed 400K at 6% and it went up to 7% …they might be in hot water depending on your expenses and income.

        Comment


        • #5
          Originally posted by 500million
          I will gaurantee that the key directors/ owners/players and associations are talking to each other on a regular basis in some shape and form. .

          I like it!

          So rather than looking at the housing market as a free market with lots of individual sellers …
          You could look it as a soft Monopoly.
          Were in the end, the Real Estate Profession is the primary seller of houses and therefore is able to thwart (to a large extent ) the shapes of the natural supply and demand curves.

          Very interesting stuff.

          Comment


          • #6
            There's only so much real estate companies can do to "turn the tide" on a market. Markets have a lot of driver influences, and in the mix of things, the word of a real estate agent would probably not be considered to be a major one.

            It's a supply and demand business. If there are fewer people buying, so long as there are also fewer people wanting to sell - price will hold.

            Comment


            • #7
              In my research on what has driven historic property cycles I found that interest rates only have a short term temporary impact on property values and they do not drive the cycle through it's traditional progression.

              Therefore interest rates are what I deem 'market influencers' which I believe are the property investors best friend because they can create opportunity that would have been absent without their influence. Lets face it if interest rates go up by 2% in the next 6 months there will be bargains aplenty IF you can cope with paying a higher interest rate of course!

              The Reserve Banks attempts to 'curb' house price inflation only ever results in more volatility.

              Personally I'm not so convinced real estate companies have much influence on the market.

              And the 'conditioning' by the Real Estate Institute has a limited impact these days because many people understand the Real Estate Institutes monthly message has proven unreliable so often in the past and seems to always try to put a +ve spin on the figures! (I guess the Institute always feels the need to promote the buying of property for their members benefit)
              Kieran Trass

              Comment


              • #8
                500million

                Originally posted by McDuck
                I like it!

                So rather than looking at the housing market as a free market with lots of individual sellers …
                You could look it as a soft Monopoly.
                Were in the end, the Real Estate Profession is the primary seller of houses and therefore is able to thwart (to a large extent ) the shapes of the natural supply and demand curves.

                Very interesting stuff.
                Absolutely, every player in the market is playing for a bigger piece of the pie but at the same time what the big players are interseted in is the size of there bottom line and working closely with the competition ensures at the worst that market share is not going to be lost and the large profits will be around for as long as they can be. In a slump who has the most to loose out of the players.
                To have an influence in a market the size of NZ is not differcult if you are at the top.
                I won't go so far as to say thwart the market but they are certainly in a powerful postion to have a big influence on the prices and how the market reacts. Agents have direct contact with sellers and will put out what ever the heirachy wants them to hence the conditioning of vendors to hold out for a higher price.


                Comment


                • #9
                  Fair enough.
                  Say we agree that agents have a upward effect on prices.. the extent of that influence is still open.

                  And say that The Reserve bank also has influence downward on prices …by knocking buyers out of the demand cycle…how many …needs more investigation.

                  But what is it that caused people to be more or less uninterested in real estate in the seven or so years leading up to 2001.
                  And more importantly, what caused the sudden surge in public fascination with buying and selling homes after that point.

                  Because that will tell you what sort of curve to apply to the product.

                  Comment


                  • #10
                    Personally I'm not so convinced real estate companies have much influence on the market.

                    And the 'conditioning' by the Real Estate Institute has a limited impact these days because many people understand the Real Estate Institutes monthly message has proven unreliable so often in the past and seems to always try to put a +ve spin on the figures! (I guess the Institute always feels the need to promote the buying of property for their members benefit)[/quote]

                    Hi Keiran,

                    Could you expand on your statement

                    Personally I'm not so convinced real estate companies have much influence on the market.

                    I don't think the REI have very sharp teeth but if I look at the inforamtion they put out it is definitly biased toward keeping the market up and is in the favour of the sellers and the real estate companies and that is exactly what the real estate companies want and pay for, to keep talking the market up.
                    Of course I agree that the real estate companies and the REI are two segments in the game but combined have alot of influence, way beyond what any other player has other than the reserve bank thru the control of interest rates.

                    So in summary, It is clear that real easte companies are by no means the sole influencers in the market but they carry far more weight than has been considered before to my knowledge


                    Comment


                    • #11
                      How about looking at Australia...Many of our estate companies are active both sides of the Tasman.

                      Have they been able to bolster up the market there?

                      what about focusing on the times of change in the market.

                      Real estate agents became internet savvy...and for the first time you could watch their figures like watching stock prices at a stock exchange.

                      could that have contributed to speculative buying for example?

                      Or what for example did the first America’s cup challenge have on say the public warming to the idea of apartments…

                      Comment


                      • #12
                        Originally posted by McDuck
                        But what is it that caused people to be more or less uninterested in real estate in the seven or so years leading up to 2001.
                        And more importantly, what caused the sudden surge in public fascination with buying and selling homes after that point.
                        Following "the herd" no doubt A lot of money has been made in the last 5 years, any idiot could make money fast, and it's very appealing.

                        The last two pi's I bought were in 1999. Both keepers.
                        Since then I just haven't been interested. Until I'm happy we are at the end of the next slump I'll sit. It's still coming, could be a long slow one, with inflation doing it's work, rather than properties actually falling in nominal terms. Until then I'll just observe. I LOVE observing sentiment! So interesting.
                        Find The Trend Whose Premise Is False - Then Bet Against It

                        Comment


                        • #13
                          [QUOTE=Gatekeeper]Following "the herd" no doubt A lot of money has been made in the last 5 years, any idiot could make money fast, and it's very appealing.
                          QUOTE]

                          So Would you classify houses at that point as a Veblen good?
                          That is one where demand increases as the price goes up.
                          That’s unusual…because Veblen goods are thought of as purely theoretical.
                          Normally you expect to see demand reduce with an increase in price.


                          I have listened to buyers reasoning …Greed and Fear seemed to play their part.
                          “I better buy now or I will never be able to afford one”…or “I can make so much profit by getting into housing”.


                          Ahh…but there’s the rub….the main economic theorists assume logical rather than emotional motivators in economic equations.

                          Comment


                          • #14
                            I'll go with the greed and fear, and I'll add the "pushers" (if you like ), pushing the greed and fear and steering the herd (hopefully not to the cliff)!

                            I'm the stray watching from the crags.

                            Veblen!!!! Crikey, I had to look that one up - LOL
                            Find The Trend Whose Premise Is False - Then Bet Against It

                            Comment


                            • #15
                              That’s very true.
                              You cant underestimate heard behavior.
                              The power of “the Bandwagon effect” is well know.

                              There is a Chinese proverb called “three men make a tiger”.
                              Something about a king believing the reports of the impossible situation of a tiger roaming about the marketplace, simply because three separate people reported it.
                              (you would have expected a tiger to make a bit more of an impact than just three sightings)

                              In our situation…the REINZ website site could have enhanced that effect.

                              Comment

                              Working...
                              X