Property: Buy now or wait? (Andrew King and Dean Letfus)

[Tucker]

I'm sure Kieran Trass using immigration as one of his key indicators for housing.

[Bluekiwi]

Nice try...

REPLY TO SD:

But tell that to the New Zealanders in East Coast Bays or Chowick who were bidding in 1996 to buy their own home at auction.

Do you really think it took an Ex-pat to be at the auction to make the price go higher.

Is South African or Asian money not as good as an ex-pats.

The research is simply flawed.

You will find "NO" economist who backs it.

[tricky]

You are saying the huge flood of Immigration had nothing to do with the property boom ?

Supply and Demand dont determine market price ?

I used to believe that our property boom (2002-2007) was pushed along by immigration. Supply and demand...
Then the immigrant numbers slowed down (2005?) and the house prices continued up. Hmmm....
Then GK pointed out that the South Island had no change in population and yet their house prices had doubled. Oh dear, something's wrong.
Immigration hasn't been the strongest driver in our latest property boom.
So what was?
Back to GK - I think she's right when she says cheap finance has been the main driver.
You could learn a lot from her.

[67910241]

Very good points Tricky & GK

Back to GK - I think she's right when she says cheap finance has been the main driver.
You could learn a lot from her.

I'd add "easily available" in the sense that a lot of people who'd struggle to qualify for any mortgage a couple of decades ago got one, and a whole lot of people who shouldn't have been able to borrow more than 80% borrowed up to 100%. That created a new source of unsustainable and unjustified demand.

Back in lateish 2006 at least two major Australian owned banks offered us, a DINK couple in their early 30s, to borrow up to 100% of house value and allowed our regular repayments to climb up to 66% (two thirds!) of our combined aftertax income. Until then we always thought that anything more than 40-45% is serious danger zone.

The practice this example exhibits was obviously reckless and completely unsustainable, and as such was the first warning singal to us that NZ lending was out of control (perhaps not as bad as US lending, but out of control nonetheless) and that there could have well been quite a poppable bubble that it had created.

[muppet]

As regards to rapidly rising house prices, 3 points

1. A large number of Australians realized there were cheap properties available in NZ.

2. A number of spruikers got their acts together and started pushing how easy it was for mums and dads to make money from property.

3. A large number of immigrants required to be housed.

And so a large demand for housing kept pushing prices up.

[Austrokiwi]

You are saying the huge flood of Immigration had nothing to do with the property boom ?

Supply and Demand dont determine market price ?

A plane crash is often attributed to one cause, however it is more than likely a combination of factors that really caused the crash. Remove any single one factor and the crash may not have occurred. Yes the huge flood of immigration had something to do with the property boom. But it was not the sole driver. Other drivers included:

• Baby boomers gearing up- for retirement and entering PI.
• Cheap credit
• herd instinct.
• The demographics of immigration

Now some will disagree with me but I think the baby boomer effect on NZ is over the next effect of baby boomer's may actually be to drive down property prices!! As I pointed out in the last few years many baby boomers have already sorted out their retirement home in NZ!

Cheap credit...................going going opps gone!!!!!!! Check out Tonys Alexanders weekly report. last week he reiterated that NZ banks are having great difficulty soursing the funds for fixed rate mortgages. Its already getting worse with the Northern Rock like collapse of Indymac and the crisis being faced by freddymac and fannymac. The credit crunch is not over!!!!!!


Herd instinct: look at NZers attitude to shares, that attitude was shaped by 1987, now what is going to be the perception of the non-PI in NZ after the dust settles, I suspect the Zietgiest will change to one of risk aversion and this will act against any immediate property boom.

The demographics of immigration: Look at who actually moves to NZ and the capital they have, it is far less the professional and rich and more often those who are looking to a better life with only a small nest egg. NZ does not attract the immigrants you were alluding to.


Final point in some areas of the property market is over supplied, new developments, seaside resorts are two examples. Look at that collapsed development in Queens town, am I correct it was planed for several thousands!!!! now where is the economic infrastructure (wealth creation) in that area to support such a large population?

[Austrokiwi]

Immigration

Immigration can drive property prices. It is just I think the situation in NZ has radically changed. One place I can assure you that immigration was the sole driver of property and rental increases is Amman ( capital city of Jordan). over the last three years property prices and rents have doubled. the reason a huge influx of very rich; relative to the economy, immigrants. The immigrants are Iraqi and a large number seem to be very "cashed up" The numbers were such that over the last three years the infra structure in Amman has been pushed severely, the traffic now is horrific!!!!! and the water supply is very streached!

Also there are some cultural clash's for example after the successful treatment of a mothers illness in Amman Her son and his family had to sacrifice to thank God for her recovery, His Jordanian neighbours ( in the apartment building) were really put out as he sacrificed and cooked the lamb on his apartments balcony, the white stone is now stained with blood and burn marks much to the annoyance of both Muslim and Christian household in that building!

[Xav]

Bluekiwi, do you believe that the property market follows a pattern such that the average growth over the long term can be estimated as a percentage value (whatever that may be), or do you believe that it is sufficiently governed by random events such as 9/11 that it cannot be predicted with any certainty?

[OllyN]

What has Dean to say about this?

One-in-100 year' slump across Tasman
5:00AM Monday July 14, 2008
John Edwards of Residex


SYDNEY - Plummeting property values have prompted warnings Australia is heading for a one-in-a-100-year slump.

New figures from property analyst Residex showed house and unit prices in nearly every city and rural centre fell in June.

The last time all states fell at the same time was just before the Great Depression. The slump is affecting the top end of the market as well as the lower end.

Residex chief executive John Edwards is quoted as saying: "It looks like we're moving into a one-in-100-year event."

"It points to a situation where unless the Government and Reserve Bank take action Australia could move into a recession. The only other times this has ever occurred were before we have moved into severe recessions."

Official figures released last week showed housing construction fell for a fourth consecutive month and demand for loans declined by a quarter in the four months to the end of May.

Higher petrol prices and interest rates, and the share market slump also saw consumer confidence drop 51 per cent to its lowest level since 1992, when the economy was recovering from recession.
ertisement

- AAP

[Bluekiwi]

Bluekiwi, do you believe that the property market follows a pattern such that the average growth over the long term can be estimated as a percentage value (whatever that may be), or do you believe that it is sufficiently governed by random events such as 9/11 that it cannot be predicted with any certainty?

Come back to me when you have something to say that makes sense Xav

p.s. Not Xavier Rush by any chance ?

[Bluekiwi]

One-in-100 year' slump across Tasman
5:00AM Monday July 14, 2008
John Edwards of Residex


SYDNEY - Plummeting property values have prompted warnings Australia is heading for a one-in-a-100-year slump.

New figures from property analyst Residex showed house and unit prices in nearly every city and rural centre fell in June.

The last time all states fell at the same time was just before the Great Depression. The slump is affecting the top end of the market as well as the lower end.

Residex chief executive John Edwards is quoted as saying: "It looks like we're moving into a one-in-100-year event."

"It points to a situation where unless the Government and Reserve Bank take action Australia could move into a recession. The only other times this has ever occurred were before we have moved into severe recessions."

Official figures released last week showed housing construction fell for a fourth consecutive month and demand for loans declined by a quarter in the four months to the end of May.

Higher petrol prices and interest rates, and the share market slump also saw consumer confidence drop 51 per cent to its lowest level since 1992, when the economy was recovering from recession.
ertisement

- AAP

The winds of change are blowing, something is in the air, these are troubled times.
I think the wait and see approach at least in the next 8 months is probably my best bet at the moment.

[Xav]

Come back to me when you have something to say that makes sense Xav

Sorry Bluekiwi, I thought that was pretty clear. I will try and dumb it down.

You said:

But we have to look what was behind the last boom and what was behind the Immigration boom, it was in fact September 11.

We are entering a new technological age of terrorism so far only seen in the movies.

Their will be some great event, as their always is, that will send ex-pats and the dis-enchanted scurrying back to good old safe bottom of the world NZ.

Thats why long-term PI in NZ will be a safe bet.

It seems from the above that you think the property market is driven by one off events such as 9/11, rather than following a predictable cycle as many believe.

Is that what you think?

[whitt]

Now some will disagree with me but I think the baby boomer effect on NZ is over the next effect of baby boomer's may actually be to drive down property prices!! As I pointed out in the last few years many baby boomer's have already sorted out their retirement home in NZ!

Join the club. Looks like only a few of us on PT disagree with the flawed boomer theory so far. I guess in years to come others may change there minds.

[Bluekiwi]

Sorry Bluekiwi, I thought that was pretty clear. I will try and dumb it down.

You said:



It seems from the above that you think the property market is driven by one off events such as 9/11, rather than following a predictable cycle as many believe.

Is that what you think?

Its dumb enough Xav

p.s. no I dont and I didnt.

[Monid]

Join the club. Looks like only a few of us on PT disagree with the flawed boomer theory so far. I guess in years to come others may change there minds.

I'll add my voice of dissent from the "magic immigrant" theory... Makes no sense at all.