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Editorial in yesterday's Hawkes Bay Today newspaper:
Regards
Editorial in yesterday's Hawkes Bay Today newspaper:
EDITORIAL: Home buyers hold pin to pop balloon
12.07.2005
PAUL TAGGART
So where is the pin to burst the property bubble?
For months the end of the boom in house prices has been predicted, yet the growth in the value of Napier's property market for the year ending June was 13.6 percent and 19.2 percent in Hastings.
And would a drop in prices be a good thing or not? It obviously depends if one is an existing owner or a potential buyer.
For buyers the only good news is that Hawke's Bay prices are now slightly below a national average rise of 14.2 percent. However, with wages climbing by somewhere between two and five per cent, the possibility of home ownership is becoming less likely for many young couples.
Even those with existing properties wishing to trade-up find the widening gaps between the different categories of homes mean they have to borrow additional cash, stretching their budgets.
But the phenomenon has been world-wide, with low interest rates and a loss of faith in sharemarkets being seen as responsible for the "the biggest bubble in history".
Although there are occasional calls for State intervention, by way of Government assistance with deposits and low-interest loans - and assistance is sometimes given - such help only serves to fuel the rises.
The housing market is too big even for the Government to pull into line, especially as it no longer directly regulates interest rates.
The only comfort for those watching prices climb way beyond their reach is that on the international stage such events are cyclic and prices do fall. However, picking when prices are at the top and at the bottom can only be done accurately with the benefit of hindsight.
For example, who can pick if the Napier average house price of $308,344 or the average Hastings sale price of $266,837 are the top of their respective markets? We will only know when the next few months' figures are released.
In this week's figures, Nelson actually dropped (down 1.3 percent), but Queenstown residential properties grew 8.9 percent - after falling to 2 percent growth earlier in the year, which gave a false impression that the ski town's rising prices had slowed.
Therefore buyers are left with a dilemma. Only when they collectively believe that properties are overpriced, and stop buying will the wind start gushing out of the property balloon.
12.07.2005
PAUL TAGGART
So where is the pin to burst the property bubble?
For months the end of the boom in house prices has been predicted, yet the growth in the value of Napier's property market for the year ending June was 13.6 percent and 19.2 percent in Hastings.
And would a drop in prices be a good thing or not? It obviously depends if one is an existing owner or a potential buyer.
For buyers the only good news is that Hawke's Bay prices are now slightly below a national average rise of 14.2 percent. However, with wages climbing by somewhere between two and five per cent, the possibility of home ownership is becoming less likely for many young couples.
Even those with existing properties wishing to trade-up find the widening gaps between the different categories of homes mean they have to borrow additional cash, stretching their budgets.
But the phenomenon has been world-wide, with low interest rates and a loss of faith in sharemarkets being seen as responsible for the "the biggest bubble in history".
Although there are occasional calls for State intervention, by way of Government assistance with deposits and low-interest loans - and assistance is sometimes given - such help only serves to fuel the rises.
The housing market is too big even for the Government to pull into line, especially as it no longer directly regulates interest rates.
The only comfort for those watching prices climb way beyond their reach is that on the international stage such events are cyclic and prices do fall. However, picking when prices are at the top and at the bottom can only be done accurately with the benefit of hindsight.
For example, who can pick if the Napier average house price of $308,344 or the average Hastings sale price of $266,837 are the top of their respective markets? We will only know when the next few months' figures are released.
In this week's figures, Nelson actually dropped (down 1.3 percent), but Queenstown residential properties grew 8.9 percent - after falling to 2 percent growth earlier in the year, which gave a false impression that the ski town's rising prices had slowed.
Therefore buyers are left with a dilemma. Only when they collectively believe that properties are overpriced, and stop buying will the wind start gushing out of the property balloon.
Regards