Header Ad Module

Collapse

Announcement

Collapse
No announcement yet.

$60b wiped from house values

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

  • $60b wiped from house values

    $60b wiped from house values

    4:00AM Tuesday May 19, 2009
    By Anne Gibson

    Kieran Trass said the downturn was the worst on record. Photo / Glenn Jeffrey


    The property downturn wiped $60 billion off the value of our national housing stock and $25 billion from Auckland last year, says an industry commentator.
    Kieran Trass, an Auckland property investor and analyst, yesterday released a report citing QV numbers showing the downturn resulted in Auckland house prices declining by an average of $50,000.
    QV said last week that national prices had dropped 9.2 per cent in the three months to April compared to the same period last year.
    Mr Trass said some parts of the country suffered more than others, and cited a 16 per cent drop in Mt Roskill house prices last year.
    The slump was New Zealand's worst since records began in 1961, he said.
    BNZ chief economist Tony Alexander checked the figures and said Mr Trass was correct.
    The Reserve Bank's monetary policy statement showed the national value of housing stock was $568 billion by the last quarter of 2008, well down on the $614 billion in the last quarter of December 2007.
    Mr Alexander said house prices dropped dramatically during the 1970s, but inflation was high then, too, so one factor offset the other.
    "Real house prices fell away in the 1970s but nominal house prices would not have decreased as much as they did last year.
    "During the 1960s, there was no nominal annual house price fall, nor during the 1970s and 1980s, but in 1991 there was a nominal fall of 3 per cent and in 1999 a fall of 4 per cent.
    "So in nominal terms, Mr Trass is right on the mark, no worries," Mr Alexander said.
    But he discouraged New Zealanders from becoming overly concerned because most people were not real estate investors and their financial wellbeing did not depend on short-term capital gains.
    "For most people, it's not a worry, but it would be if this continued at the annual rate because people would lose so much of their wealth they would decide it's better to take bankruptcy, walk away from the mortgage and the house," Mr Alexander said.
    The economic outlook indicated a recovery and he said house price drops of more than 9 per cent were highly unlikely to be recorded for this year.
    Real Estate Institute president Mike Elford also said Mr Trass's figures made some sense.
    He said that with a median price of $350,000, the country's 1.4 million houses could be worth more than $500 million. So a $60 billion drop based on last year's 9 per cent QV value fall was not unrealistic.
    Mr Elford encouraged people not to focus on any losses.
    He said the feedback he was getting from real estate agents nationally confirmed his belief that prices would rise again soon.
    "It appears to me that we are at the bottom of the market."


    http://www.nzherald.co.nz/nz/news/ar...ectid=10573123
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    BNZ chief economist Tony Alexander checked the figures and said Mr Trass was correct
    So in nominal terms, Mr Trass is right on the mark, no worries," Mr Alexander said
    I found this funny that they need Mr Alexanders confirmation for Kierans view/ Research.
    New Zealand's #1 Marketplace for Property Investors & Sellers!
    FREE Access to HOT Property Deals
    CLICK HERE FOR MORE INFO.

    Comment


    • #3
      Originally posted by muppet View Post
      $60b wiped from house values

      The property downturn wiped $60 billion off the value of our national housing stock and $25 billion from Auckland last year, says an industry commentator....

      ....BNZ chief economist Tony Alexander checked the figures and said Mr Trass was correct

      The Reserve Bank's monetary policy statement showed the national value of housing stock was $568 billion by the last quarter of 2008, well down on the $614 billion in the last quarter of December 2007

      $614 billion - $568 billion = $46 billion all day, every day on my planet. Am I missing something? Can anyone explain?

      (I hope it's possible to ask for this clarification without starting a fight.)
      Peter Aranyi
      Blog: www.ThePaepae.com

      Comment


      • #4
        I agree. I remember Trass calling the bust well before any post-event specialists like Alexander.

        Comment


        • #5
          The free report reads more like an advertorial for Kieran's business. There's nothing wrong with that but I can't see the general public understanding the drivers of property in any depth by reading it. Furthermore, the fundamental supply problem is not directly addressed by the report so it can easily be dismissed by any property bull.

          He makes a good point though: NZD 46-60 billion of private "wealth" has been wiped off one asset class. Obviously, that's perceived wealth that we cannot borrow against anymore. That's important as a factor because it actually limits credit creation from our banks causing further further downward pressure on property prices.

          If Kieran had expanded on the previous point, I think report would have greater value to the general public (if they could be bothered to get their heads around it).
          Last edited by tanmedia1; 19-05-2009, 11:21 AM. Reason: Addition

          Comment


          • #6
            Market Commentators Misleading to Investors

            Originally posted by tanmedia1 View Post
            He makes a good point though: NZD 46-60 billion of private "wealth" has been wiped off one asset class. Obviously, that's perceived wealth that we cannot borrow against anymore. That's important as a factor because it actually limits credit creation from our banks causing further further downward pressure on property prices.

            If Kieran had expanded on the previous point, I think report would have greater value to the general public (if they could be bothered to get their heads around it).
            Maybe. 46-60 billion of private wealth may have been wiped out with a 10% drop in prices. However, these same people have seen a massive increase prior to this (2003 to 2007). Personally I think issues like uncertainty over job security may be more of a major driver as people are going to play it safe for the next 12-18 months.

            Aside from that I am hesitant to put much stock on market commentators talking at a high level about the property market. Mainly because the vast majority of the property market is driven by home owners and not investors. The decisions they make and the perceived value that they place on a property is totally different.

            For example, you could get the scenario that home values at a suburb/regional level are dropping because home owners/buyers are sitting on the fence due to job security etc But investment properties values in your portfolio may go up as more people are renting because they cant afford to buy thus lifting demand and therefore rents.

            Interested to hear peoples thoughts on how you use region based tools like Kieran's as property investors. And how much importance you place on market commentators views via the media.

            Personally I would consider paying for mentoring by Kieran or investors like Olly. It may be more expensive than the region based tools or market commentary but it will be better value as you could solely focus on investment properties and remove the above confusion.

            Jono

            Comment


            • #7
              Originally posted by jporteous View Post
              Maybe. 46-60 billion of private wealth may have been wiped out with a 10% drop in prices. However, these same people have seen a massive increase prior to this (2003 to 2007). Personally I think issues like uncertainty over job security may be more of a major driver as people are going to play it safe for the next 12-18 months.

              Aside from that I am hesitant to put much stock on market commentators talking at a high level about the property market. Mainly because the vast majority of the property market is driven by home owners and not investors. The decisions they make and the perceived value that they place on a property is totally different.

              For example, you could get the scenario that home values at a suburb/regional level are dropping because home owners/buyers are sitting on the fence due to job security etc But investment properties values in your portfolio may go up as more people are renting because they cant afford to buy thus lifting demand and therefore rents.

              Interested to hear peoples thoughts on how you use region based tools like Kieran's as property investors. And how much importance you place on market commentators views via the media.

              Personally I would consider paying for mentoring by Kieran or investors like Olly. It may be more expensive than the region based tools or market commentary but it will be better value as you could solely focus on investment properties and remove the above confusion.

              Jono
              Jono, I don't think you can seperate investment property and private property when you are talking about how falling and rising prices affect the ability to borrow. The fact that prices rose substantially on the back of a credit bubble reasserts my point (as opposed to softening the blow).

              Even though I think that Kieran's report is rather meaningless to me, I still think he (and others such as Olly) offer superb advice, insights and outlooks on investment. However, I'm not convinced that even they fully appreciate the extent to which deleveraging will affect the market given tjat there is no historical precedent to work from.

              Comment


              • #8
                So if I understand it right a couple of years of perecieved gain has disappeared. There has been no actual loss of $60billion at all, unless everyone in the country decides to sell each property they own tomorrow.
                This is being unrealistic and to put it frankly simplistic silly and ridiculous.
                As that is I think we can say safely that its 99.99% (or to be conservative 98.4 % ) unlikely to happen, so its just a percieved loss, a paper one, not real and as such largely irrelevent as a couple of years gain can be gained back in a couple of years, inflation will take care of that.
                One could say 10% of who purchased intended to sell (I am taking a random number out of the air as that seems to be the norm in these kind of hyper-exaggerated headlines so being fair I am doing the same) then we could say $6 billion has been lost, of course, out of that $6billion it could be argued that perhaps 50% are actually making a profit on the sale of their property so lets say the loss is $3 billion.
                Now that $3 billion loss is a concern or it would be if they sellers were then not able to buy properties at $ 3 billion less than they would have paid a year previously, this is of course a theory that they would all buy again (much the same as the theory that all properties would be sold to get the $60billion loss) and so the perceived loss would be $0.
                I now feel like expatnz in that I have got the numbers to work in my arguements favour.
                Last edited by WBuffett; 19-05-2009, 02:47 PM.

                Comment


                • #9
                  Originally posted by tanmedia1 View Post
                  Jono, I don't think you can seperate investment property and private property when you are talking about how falling and rising prices affect the ability to borrow. The fact that prices rose substantially on the back of a credit bubble reasserts my point (as opposed to softening the blow).
                  I agree that in regards to your borrowing ability you cant split the two. My apologies. I should have split my posts. I was just suggesting that people who have owned property since 2003-04 would have seen huge gains in property values (40-50%). For these people equity may not be the main issue. Other factors such as job security may be a bigger concern...

                  Originally posted by tanmedia1 View Post
                  Even though I think that Kieran's report is rather meaningless to me, I still think he (and others such as Olly) offer superb advice, insights and outlooks on investment.
                  I have a lot of respect for both Kieran and especially Olly. My point was that when they comment in the media about the residential property market in general you need to be aware that they are bundling homes (majority / 95%) with investment properties (minority / 5%). As an investor this can be misleading.

                  As I mentioned at the bottom of my post I am considering paying someone like Olly mentoring fees as you get around this issue by getting them to focus their advise just to investment properties.

                  Jono

                  Comment


                  • #10
                    "Self styled" expert rebutted

                    Housing down, but don't panic
                    By ADRIAN CHANG - BusinessDay
                    Last updated 15:25 19/05/2009

                    The housing market might be weak and property wealth may have dropped, but there's no need to panic according to economists.

                    Quotable Value figures released this month showed property values sank 9.2 percent in the year to April - a slight improvement on the 9.3 percent fall seen in the year to March.

                    Real Estate Institute of New Zealand data for April showed the national median sale price for a home was $340,000, 1.44 percent down year-on-year.

                    The Reserve Bank, which tracks total housing value as a measure of national wealth, calculated that the total value of the nation's housing stock at the end of 2008 was worth $568 billion compared to $614 billion at the end of 2007. By the Reserve Bank's calculations, the value of the nation's housing stock has therefore contracted by $46 billion - a 7.5 percent drop.

                    Yesterday self-styled property expert Kieran Trass released a report claiming $60 billion had been wiped off national property prices, with $25 billion of that from Auckland homes.

                    Trass calculated his value by taking 10 percent off $600 billion and $250 billion - his estimate of the value of national and Auckland housing stock respectively.

                    Whatever the exact number may be, BNZ chief economist Cameron Bagrie said any weakness in the housing market had to be kept in perspective of the massive price rises over recent years.

                    "House prices at the moment are down 10 percent - but they increased in value over the preceding six years [by] about 80 percent, so the drop needs to be kept in perspective given that big rise," said Bagrie.

                    Westpac research economist Dominick Stevens agreed, saying falling house values weren't necessarily all bad news.

                    "Given that nearly all housing transactions are simply transfers between New Zealanders, it doesn't really affect our overall wealth as a nation," said Stevens.

                    "Rising house prices mean older people are better off and younger people are worse off generally, and the reverse is also true. There's no real reason to presume one house price is necessarily better for the economy than another," he added.

                    He said the value quoted by Trass is nothing to be alarmed about since there has been no actual destruction of physical property.

                    Bagrie agreed, saying it was easy to "throw big numbers around".

                    "Yes we know the market is weak, yes we know its creating some pretty significant economic consequences, but once again we need to put this overall correction in the scheme of things," he added.

                    Bagrie believes the current weakness in the residential housing market will be sustained for a number of years, but that did not mean prices had to fall further.

                    He said house prices can correct through prices staying flat over a number of years combined with some wage growth meaning over time, the percentage of income spent on housing falls back towards "more sustainable levels".
                    OllyN [email protected]
                    Independent Property Consultant
                    Residential and Commercial Solutions

                    Comment


                    • #11
                      Olly, "rebutted" might be the wrong word for Chang to choose. Stevens and Bagrie may well say that "it doesn't affect our wealth as a nation," but the huge gains in house prices were partly made on bank lending backed by asset valuations that only knew one direction. Therefore, for Stevens and Bagrie to imply that rising asset values driven by debt is a balancing bar is a bit disingenuous. However, their objectivity is always going to be skewed when they have to represent the banks.
                      Last edited by tanmedia1; 19-05-2009, 08:59 PM. Reason: edit

                      Comment


                      • #12
                        Really, who cares. Its all of little consequence unless someone wishes to sell or borrow or who is struggling to make the next pay day. Time will fix it like it always has and with the rapidly declining build rate and the increasing number of people in NZ it will come right again. For real investors it really doesn't matter. If you want to trade it does but then you are not an investor but a trader.
                        Trass is using this to recover from last years interest rate marketing disaster.

                        Comment


                        • #13
                          Originally posted by Viking View Post
                          Really, who cares. Its all of little consequence unless someone wishes to sell or borrow or who is struggling to make the next pay day. Time will fix it like it always has and with the rapidly declining build rate and the increasing number of people in NZ it will come right again. For real investors it really doesn't matter. If you want to trade it does but then you are not an investor but a trader.
                          Trass is using this to recover from last years interest rate marketing disaster.
                          You're right Kingi, it really is of little relevance unless you're struggling to make pay day. At this stage, selling is not an option for me but I won't be banking on property assets to boost my ability to borrow.

                          Kieran is looking at this like it's "wealth destruction," whereas my take is somewhat different: "capacity-to-borrow contraction."

                          Comment


                          • #14
                            Historically during (the many) recessions in NZ, people don't get wage growth. Growth stays stagnant for years. Then policies come in to try to keep costs way down. Remember the Employment Contracts Act and how that immediately meant low wages for a great many NZers? That was introduced during the gloom. Remember 18% interest rates in the Muldoon era of economic stagnation?
                            Why should this stagnant and recessive period be any different from the other years? Is there some magical spirit healing NZ this time around?
                            I think it is a lot more than a mere 'correction.'
                            I think people are in absolute denial about this recession. I don't believe it has even started yet. Give it a few more years to start sinking in.

                            Comment


                            • #15
                              Originally posted by AndyB View Post
                              Historically during (the many) recessions in NZ, people don't get wage growth. Growth stays stagnant for years. Then policies come in to try to keep costs way down. Remember the Employment Contracts Act and how that immediately meant low wages for a great many NZers? That was introduced during the gloom. Remember 18% interest rates in the Muldoon era of economic stagnation?
                              Why should this stagnant and recessive period be any different from the other years? Is there some magical spirit healing NZ this time around?
                              I think it is a lot more than a mere 'correction.'
                              I think people are in absolute denial about this recession. I don't believe it has even started yet. Give it a few more years to start sinking in.
                              I agree that the magnitude and complexity of this recession is understood by very few of us. Everyone is trying to use historical precedent to explain what could happen, but if you talk about the Great D, you're written off as a nutter. Personally I think we're somewhere in between the South Pole of the GD and 1970s recession (even though that is really a stab in the dark).

                              My client is one of the world's great manufacturers of fast moving consumer goods. I always find their behaviour a good barometer of really how tough it is out there and what we should be doing. Based on that, retrenchment and consolidation is the order of the day.

                              Comment

                              Working...
                              X