Auckland - Where in the property clock?

[eri]

imho

at the moment

there's quite a bit of cashing-up

local sellers funding an early retirement somewhere else

and foreign buyers locking in their gains

neither have to sell

so won't if they can't get what they want

...........

this gives breathing space for a building boom

but council aren't there yet

[Bobsyouruncle]

Correct KB, exactly as I said. No unwinding, some flattening is all. We won;t see any drop in values just a slow down in volumes.

[WINZ]

Correct KB, exactly as I said. No unwinding, some flattening is all. We won;t see any drop in values just a slow down in volumes.

Markets (all markets) generally don't operate on the principal of simply flattening out to a gentle equilibrium. This is a nice 'economists' theory but in reality they overshoot on irrational exuberance and crash on fear.

I see a decent size correction coming into play as one or more of the large global debt bubbles pop (china, sydney property, canadian property, US equities to name a few).

Caveat emptor.

[Bob Kane]

I see a decent size correction coming into play as one or more of the large global debt bubbles pop (china, sydney property, canadian property, US equities to name a few).

Caveat emptor.

We've been hearing that since 2005.
Any idea when it might happen so I can get prepared for it?

[Bobsyouruncle]

It didn't happen in the GFC Bob, it ain't gonna happen now.

[P.Bateman]

Been actively looking in the past 3 months and the market has slowed down a lot. I believe the biggest driver is forecast for higher interest rates and also lack of capital gains in the last 5 months in a market that has got used to double digit increases in the last 3 years. Investors are constrained and owner occupiers are either struggling to sell their own house or waiting for bigger discounts. We will see a flood of properties in the market post Easter with sellers wanting to avoid listing during the holidays putting their places on the market from next week.

[WINZ]

It didn't happen in the GFC Bob, it ain't gonna happen now.

I suggest you read Nicholas Taleb's 'The Black Swan', or google his article on the dilemma of the thanksgiving turkey.

Just because it didn't happen in the past 10,20,100,1000 or 10,000 days it doesn't mean it can't or won't happen going forward.

[investorak]

There is already deals out there. 10% atleast.

I think people should grab them while they can. Immigration is high, interest rates low. There is 40% lvr restrictions for investors. If you can buy wouldn't now be the best time to buy? and if not how long are you going to wait for?

If market cools down to drastically the 40% lvr restriction will be removed which will keep the prices from falling to far. People are to caught up on the 1997,2007,2017

[Anthonyacat]

Just because it didn't happen in the past 10,20,100,1000 or 10,000 days it doesn't mean it can't or won't happen going forward.

Just Googled. LOVE the Thanksgiving Turkey example. Really excellent concise illustration.

[WINZ]

There is already deals out there. 10% atleast.

I think people should grab them while they can. Immigration is high, interest rates low. There is 40% lvr restrictions for investors. If you can buy wouldn't now be the best time to buy? and if not how long are you going to wait for?

If market cools down to drastically the 40% LVR restriction will be removed which will keep the prices from falling to far. People are to caught up on the 1997,2007,2017

Do you honestly expect that investors will be piling into negatively geared properties (which were previously purchased on the expectation of future capital gains) when prices are going backwards?

How long would I wait for? Personally until a) a correction event occurs and b) til the point that I've sized up various external factors.


1997, 2007, 2017.. This isn't some back of the hand pattern. I'm looking at the markets/global economies as at this present time. Every cycle (and crash) is unique so I don't subscribe to the theory that the next one will look in any form like the last one.

All things being equal the next one should be 3-5x larger than the GFC in terms of total wealth destruction. I can't say when it will happen but the longer it takes the worse the damage.

Btw I'm not just saying all this to be some contrarian a**clown. Simply put, at no single point in human history has there ever been so much risk stacked up in the global economy.

We're starring at a very fragile/anaemic global economy which is only running on the fumes of central bank liquidity injections so I'm simply hoping people are cautious about gearing up to buy negative cash-flow assets.

[investorak]

see comments below

Do you honestly expect that investors will be piling into negatively geared properties (which were previously purchased on the expectation of future capital gains) when prices are going backwards?

Some people think long term, not in the next 2-3 years. Not saying its right or wrong but many people lose money week to week (eg $100 a week, $5200 a year), get tax benefits and will wait/gamble for the capital gain

How long would I wait for? Personally until a) a correction event occurs and b) til the point that I've sized up various external factors.

Good luck waiting, you might be right but when it does happen will it be easy enough to get finance?

1997, 2007, 2017.. This isn't some back of the hand pattern. I'm looking at the markets/global economies as at this present time. Every cycle (and crash) is unique so I don't subscribe to the theory that the next one will look in any form like the last one.

All things being equal the next one should be 3-5x larger than the GFC in terms of total wealth destruction. I can't say when it will happen but the longer it takes the worse the damage.

Where are all the people that are migrating to Auckland going to live? They need houses so there is a demand here

[Bobsyouruncle]

[WINZ]

see comments below

Some people think long term, not in the next 2-3 years. Not saying its right or wrong but many people lose money week to week (eg $100 a week, $5200 a year), get tax benefits and will wait/gamble for the capital gain

Good luck waiting, you might be right but when it does happen will it be easy enough to get finance?

Where are all the people that are migrating to Auckland going to live? They need houses so there is a demand here

I think long-term too, and there is a classic fallacy about the trade-off between short-term risk and long-term returns.

As an example, if you were seeking to buy the benchmark for US equities (the S&P 500) in 1999, many market participants would likely tell you not to worry about the extremely offensive valuation (compared to earnings) as the market only goes up in the long-term. Well those participants were right, after a sharp 45-55% correction the market did eventually go up. The only problem is you spent 10+ years with zero returns waiting to get back to break-even, and that was only if you didn't capitulate during the blood bath and sell at a loss.

A similar event occurred in 2009 however the market recovered faster. This was because central banks ran unprecedented liquidity expansion, expanding their balance sheets by $14 trillion dollars and causing almost every asset class to bubble.

It's been eight years and global growth is anaemic so another crash will come shortly (3-18 months away) however the question is can the Central banks buy themselves another paper recovery?

Take japan for instance, their central bank balance sheet (i.e. debt in the economy) is now 90% of their GDP. The US Fed is sitting at $4.5 trillion, ECB not far away. China is 320% total debt to GDP, the US is 300%+. The world simply can't tolerate much more debt and will need to deleverage in the coming years given the aging population demographics.

Will I be able to get finance? That's a good question, but I would rather be able to not get finance on a house during the dip, than get finance now and loose 20-30% of the capital value. If I can't get finance based on my current income then the entire banking system is likely in a whole in which case I wouldn't want to be a debtor.

There will always be demand for housing, this is a given and I conceded that there's likely to be positive net migration flows for years. That being said, people seem assume that migration and population dynamics are the only (or most relevant) factors of demand. They're not. The most relevant factor is availability of credit.

[WINZ]

Hey man, I'm here to provide a viewpoint based on the world as I currently see it from a 40,000 foot view.

If you only want to hear from a consensus crowd that will tell you that housing will continually go up forever on an unimpeded basis then feel free to ignore me.

Otherwise feel free to ask me any questions if want a better understand of the various global themes that are at play.

[Bobsyouruncle]

housing will continually go up forever on an unimpeded basis

No one thinks that. But 100 years of history tells me property increases in value over time at better than inflation. And on average it doubles every ten years in spite of the Great Depression, world wars and financial meltdowns.
And that's why one invests in real estate long term.
On a slight side note, I watched the story of Ray Croc with Michael Keaton about McD's last night. Michael Keaton was awesome but the key thing over all was when he was told he wasn't in the burger business but the real estate business. Changed his life.