"it will take 30 years to recover"

[Orkibi]

Bernard Hickey say in his new Video blog that it might take 30 years for property prices to get back to the Pike $ of 2007.

he is the biggest scaremonger in the country...

http://www.interest.co.nz/ratesblog/...on-back-to-74/

[SuperDad]

he is the biggest scaremonger in the country...

I read the blog today.

I guess we will know in 30 years time.

Paul.

[Gatekeeper]

Property cycle?



Surely this graph of real house prices shows that the supposed property cycles people seem to believe turned full circle in 87 and again in the early nineties were nothing more than blips. I certainly don't remember them as great events, although I did buy at the bottom of these blips.

The true turn of property cycle goes back to the 70's IMHO.

Hickey's commentary makes sense to me.

[whitt]

If you allow for a dip in graph shown above then project values forward. I guess his comment does have some merit.
But it fails to allow for other influences on the property cycle. Immigration etc.

[Gatekeeper]

Because it's a monetary phenomenon, not caused by, only influenced by immigration amongst other influences.

[Orkibi]

this graph show that property values in the 70s were almost the same as in Early 2000.

definitely contradict the theory that P.I values duple every 10 years.

say a property was worth 50k in 1975, and 100k in 1985, 200k in 1995.

am I missing something?

[SuperDad]

this graph show that property values in the 70s were almost the same as in Early 2000.

definitely contradict the theory that P.I values duple every 10 years.

say a property was worth 50k in 1975, and 100k in 1985, 200k in 1995.

am I missing something?

Yes.

You are missing the distinction between nominal and real values.

Paul.

[Orkibi]

Yep got it ,

thanks paul.

[Orkibi]

so talking on buying power for your $, 25 years in the graph and you are at the same place.

thats why counter cycle investing is so important,if one buy at the low value phase and ride the way up he gets a bigger bang for the buck and increase his REAL buying power.
thats common sense.

Considering the graph the "REAL"(to get to the same buying power level) cycle is 25-30 years.??

[kieran]

Gatekeeper,

Your graph is simply the property price INDEX level (not the actual % growth of values) so it does not clearly reveal the actual cycles that occured. It also only shows REAL value growth (excludes inflation i.e. NOT the ACTUAL value dollar growth in property values but the $ value after deducting the rate of inflation from their ACTUAL $ values!) rather than NOMINAL value dollar growth (which includes inflation i.e. the ACTUAL $ value of a property).

Real value growth is purely academic and not a true reflection of property values because they do increase by the rate of inflation in actual $ terms which is historically proven. Yes we may be thrown a liferaft in the form of high inflation through the current slump which will translate into supporting ACTUAL house prices to some degree!

Cyclical growth and retractions occur in each cycle as those who have owned property over several cycles have experienced 1st hand. We did have a boom slump and recovery phase within each of the 4 cycles since 1970.

[Austrokiwi]

Gatekeeper,



Real value growth is purely academic and not a true reflection of property values because they do increase by the rate of inflation in actual $ terms which is historically proven. Yes we may be thrown a liferaft in the form of high inflation through the current slump which will translate into supporting ACTUAL house prices to some degree!

Cyclical growth and retractions occur in each cycle as those who have owned property over several cycles have experienced 1st hand. We did have a boom slump and recovery phase within each of the 4 cycles since 1970.

Sorry Kieran but you lost me completely! Real growth is purely academic? I think this is a matter of perception (If I have understood you)!! NZ officially gave up a Specie based currency in 1967, sinece that time we have been living with play money and inflation. I thought real growth was a realistic way of showing the real change in value by taking inflation out of the loop!


You are making your money using property so the nominal value makes more sense for you. Step outside of that frame work and look at the salary/wage earner who is looking to buy a home. Back in 2000 that person was looking at a commitment of 4 times the average annual income.......... now it is hovering around 7 times. That matchs the real growth graph better in my mind................ The issue is housing is a market commodity......... if the consumer can't buy ( or rent) either salaries must go up or property prices/rents must come down. I therefore think the real growth graph provides substantive information, but acknowledge it may not be useful to you from your perspective.

Perhaps I haven't understood you, so some further education would be appreciated

[Gatekeeper]

Thanks AK, you've said it well.
What's the point of a graph that doesn't show the value of the measurement, ie: dollar value which changes as much as the house price!
The more debt created with funny money, the more the anomolies.

A chart with the house price measurement based on oil or gold (or cheese) would be even more enlightening in these times.

Kieran I do appreciate that the blips were there, but a bigger credit cycle overlays your "property cycle".

The credit contraction currently in play is a build up from the engineered "low inflation" experiment of the 70's onward and will bite hard. I firmly believe we will have new rules to play by in the coming decades.

[67910241]

Real = Academic, Nominal = Real

Sorry Kieran but you lost me completely! Real growth is purely academic?

I didn't expect something like that to come from KT.

Actually, it surprised me more than his cross-promotion with the Richmastery folk did.

"The existing elephant measuring methodology isn't working well. So the elephant observed here is definitely irrelevant and possibly nonexistent"

[exnzpat]

I didn't expect something like that to come from KT.

Actually, it surprised me more than his cross-promotion with the Richmastery folk did.

"The existing elephant measuring methodology isn't working well. So the elephant observed here is definitely irrelevant and possibly nonexistent"

Could someone please explain this Richmastery stuff to me? I checked out their web-site and the thread here at propertytalk and I just don’t see the controversy. What am I missing?

[Gatekeeper]

Yes we may be thrown a liferaft in the form of high inflation through the current slump which will translate into supporting ACTUAL house prices to some degree!

I don't see your liferaft in this current case of inflation in any degree.
How will skyrocketing energy and food prices, our basic resources (which are the cause of most of our CP inflation) keep property prices up.

Monetary inflation is in retreat, so where is your catalyst.

If you are looking back to the 70's, then you have no comparisons.
We didn't have the real shortages, they were political only.