Financial Armageddon!!

[Bob Kane]

The report is saying that there is a higher probability than previously of property prices crashing given current conditions. The report is not saying that there is a 100% chance of property prices crashing or a 0% chance of property prices crashing.

Some people comment as if there is a 100% chance of property prices crashing
Some people comment as if there is a 0% chance of property prices crashing.

In reality the probability of property prices crashing is somewhere between those two extremes.

In summary: something may happen, maybe.
Jeez, that really helps.
Thanks

Every week we see reports about "the sky is falling, maybe".
After a while you see a pattern emerging.

[flyernzl]

OnTheMove,

Whitianga holiday apartments price dropped from 600k to 150k? Wow - that is a massive 75% drop.
Any other large price drops that you're aware of?

I am aware that the price of coastal sections in the far north (more than two hours drive from Auckland) tanked completely in the last crash.

[Chris W]

In summary: something may happen, maybe.
Jeez, that really helps.
Thanks

If you believe the risk warning is irrelevant or unlikely to affect you due to your circumstances, then feel free to ignore it.

If you live on the West Coast or at 200-300m above sea level, then a tsunami warning resulting from an earthquake in the Pacific Ocean may be irrelevant to you.

If on the other hand, you live in low lying beach front property on the east coast of the north island where a tsunami might hit, then you might want to take notice and act or you may choose to ignore the warning altogether. It is your choice, but you don't get to choose the consequences of your choice.

[Bob Kane]

If you believe the risk warning is irrelevant or unlikely to affect you due to your circumstances, then feel free to ignore it.

Thank you.

[OnTheMove]

OnTheMove,

Whitianga holiday apartments price dropped from 600k to 150k? Wow - that is a massive 75% drop.
Any other large price drops that you're aware of?

That was a special situation if I recall correctly, was off the plan and had taken a while to build. If you google you will find though.

This is why old timers always say buy land not the house, houses depreciate, its the land the goes up in value. But Im not a buy and hold person. But even with massive drops if a portofolio is spread over 30 years it should come out on top. 20% PA is obviously not sunstainable, not matter who is writing the article, imo if you read that kind of hype you know immediately it is propaganda. The facts are what they are about the NZ Economy. Our debt to GDP ratio is horrible and our income to housing debt ratio is terrible. It doesnt take a rocket scientist to realise even if we produced another 40k houses and somehow got quality immingration, Aucklanders cannot afford the mortgages and to a large degree ow the rents being asked.

Why are we not doing what Gareth Morgan suggests and fix the problem by assett testing Pensions?

On one extreme you have guys like Morgan who find multi milliionaires claiming a Pension a disgrace and on the other one vary famous (forgot the guys name he means that much to me haha) laughing about how he earns near 7 figure income from his asset profit but he is laughing at how funny it is he can claim a pension and does so. Sickening.

If we assett test the Pension, then it is putting the onous back on the baby boomers to largely fun their own retirement. Because the next generation will have to that is becoming obvious.

The answer is not building more houses and watering down the employment market with immigrants who cant afford the housing anyway. Its just dumb politics, something Id expect from Labour not to be able to handle.

We need to be increasing our GDP and milk is not the answer, there is a lot of kick backs in recent documentaries on Milk and now they are on mainstream netflix, NZ needs to start to become a smart GDP, finance, technology and media including movie production needs to be sold more hard core, we have the infrastructure in place and the guys with the experience to do it, Jackson, Sam Neil etc. Id say Crowe but he is never sure if hes a kiwi or Aussie :-)

[Perry]

Next Sophistry

If only [the dream that] asset testing National Superannuation would fix all (even most of) our problems, I might accept the notion.

one vary famous [person] laughing about how he earns near 7 figure income from his asset profit but he is laughing at how funny it is he can claim a pension and does so. Sickening.

I wonder how much tax said sickening person pays and how many times his/her national superannuation is paid back.

[flyernzl]

Asset testing or means testing pensions sounds great, but the reality is quite different.

It could not be just a one-off test at 65 (or whatever age you choose).

The difficulty is that a person who passes the asset/means test on Friday may well win Lotto on Saturday or inherit heaps after rich Uncle Fred dies on Monday.

Someone else may well be affluent on Friday and discover that their money pile in Ross Asset Management (or whatever) is a mirage on Monday.

People's financial statues is never static

Thus you would need to repeat the test at distressingly frequent intervals.

I can imagine that the cost of that, say at every six months, in staff office computers paper ink and so on may well outweigh the savings involved.

Also, realize that the pension is part of the recipients taxable income.
Thus those who still have have substantial other incomes usually end up paying more in income tax that they get in the pension - in effect, they are self-funding their own pension payment.

Those who say "Shock - horror -look at the outrageous cost of the pension!!" are invariably looking at the gross amount, not the net after-tax figure.

[nick000]

There seems to be a similar story every day for the last several years. Everyone has been waiting in anticipation since 2017 for some form of crash

[Perry]

Topical Given Exnzpat's Reappearance, Today.

From 24 August 2013.

Red type is my emphasis.

Original post here.

Of course, you know "economic disaster ahead" has been my mantra all along. And slowly the pundits are catching up with me, citing things like income to home price parity, rising NZ dollar or any of the host of other things I’ve suggested here on this board over the years. But no one listens. They hear only what they want to hear--and that's fine. I've come to grips with it.

Finally, I’ve got hard evidence the fact. And so, despite what you may think, here it comes…. So hold on to your hats. The money train is about to grind to a lumbering halt in New Zealand (something it should have done in 2008 or 2009, in my opinion), so it’s long overdue.

I expect a mass exodus of the population to find work. I expect to see mass default on mortgages and a crash in the New Zealand dollar. Also, I expect interest rates fall (which will be good for those of us who have hung-in there all this time). Dogs will bark in empty streets and babies will cry. Tumbleweeds will tumble, testament to the terrible times ahead...

Interest rates are certainly down.

But the terrible times are where?

[eri]

A model developed by the Federal Reserve Bank of New York puts the odds that a recession might begin within the next 12 months at over 37%.

https://www.economist.com/graphic-de...on-the-economy

[eri]

ASB says there is a "30 per cent" chance the economy may have shrunk during the three months to the end of June and has cut its growth forecast for the remainder of the year.


The assessment released by senior economist Jane Turner is significantly more downbeat than one released by the bank's chief economist Nick Tuffley just four weeks ago in which he said the economy was not headed for recession.

https://www.stuff.co.nz/business/115...ld-have-shrunk

[Perry]

Econ-o-mists.
Modern-day soothsayers - after the fact.
Whether senior, chief, junior, apprentice, or novice is in their undeserved title . . .
Don't believe a word they say.

[OnTheMove]

Asset testing or means testing pensions sounds great, but the reality is quite different.


Thus those who still have have substantial other incomes usually end up paying more in income tax that they get in the pension - in effect, they are self-funding their own pension payment.

Those who say "Shock - horror -look at the outrageous cost of the pension!!" are invariably looking at the gross amount, not the net after-tax figure.

Yep I hear ya on everything you said.

But it is the only feasible answer.

Who was that really rich guy gloating how he claims his $350 on top of his $300k or whatever per week? That level of income SHOULD be self funded retirement. There should be no pension. We are miles behind Aus Super with Kiwi Saver. But thats the only way forward for the next gens coming up after X.

Pensions IMO need to be scrapped as an entitlement after retirement. Not popular view but if we arent going to assett test then its the only answer. Now Im not saying people who are in NEED would not have access to retirement funds. But it puts it back in the "as needed basis" rather than just handing it out.

If people would only listen to Gareth Morgan a bit more. Sure his policies are controversial. But that are on point and would work. The biggest one was the no Cats. I cant stand people who dont get the destruction of Cats on our native Fauna, even our Fauna living in our suburbs. Just so somebody can have a furball that kills endangered birds and lizards etc (double doctorate in this field of biology).

Now if you look passed the cat issue, which we shouldnt, but if we do, his policies all made logical sense and would actually make a positive difference, vs Labour and Nats whose policies are trying to solve issues in the hardest ways possible. Its almost like they are deliberately working harder not smarter.

For what its worth Million Dollar mouse would not have eradicated mice eating live Albatross from the Islands without Gareth Morgans money, so not only is he putting his money where his mouth his, he is also not claiming the pension. Unlike a lot of others who just want to leave nothing for the next generation, that is also after not having a $100k student loand debt like Gen X and all the other perks. Fair go.

[OnTheMove]

People need to stop worrying about economists and if and worry about when, what can you do to minimise risk.

Global economics dont look good.

NZ has the most inflated house prices in the world imo, along with factually the highest price to income ratio along with a minimum personal debt 150% of our megre GDP.

So it wouldnt take a lot to create and Ireland GFC like crash imo. And this time unlike the GFC we cant just print money to buffer the property market and economy (which IMO was a dumb move but obviously smart politically, should have taken the full hit).

Nobody has percentages, and I find it laughable people want to know how much it will go down and how. Nobody knows. What makes it all much mystical is the saying "Its never happened before", yeah and interest rates have never been above 18%, oh wait..... 87 or 88?

In my humble opinion, if we draw a line from 2000 to now at 8% which was the old going capital gains rate of doubling your money every 10 years, which I really miss the predictability of, then we are 30-40% over inflated. Im not saying we will crash 40% but Im sure Ireland didnt think that either. If there was a major correction in global lending and China put the squeeze on, I can see us dropping 30% and a 10yr plateua. That is purely a guess. I did Economics at Uni but Im not a crystal ball reader. But that would make sense and leave us in a relatively good place to recover from.

Or it might just be a Germany like rate of below inflation plateau for the next 20 years.

Its all just guessing. But some people who have guessed the crashes and effects to NZ before do not give a great outcome.

We will just have to wait and see.

One thing I am seeing is houses and apartments in my area (Orakei/Parnell) are reallly taking a lot lot longer to sell now compared to 2017.

[flyernzl]

I looked at the Irish house price crash first hand -in Ireland
(see:https://www.propertytalk.com/forum/s...andlord/page58)

The prime cause was too many houses. Thus developers could not find buyers, so could not repay their loans, and away they went.

How long here before we have a housing surplus?