Property wave…the big picture.

[McDuck]

From the latest RIENZ data…it looks like the wave is over.

Generally speaking the average New Zealander did very well in 2004 when they made 40k on their home.

It all started in 2002, when they made 30k on their homes after a very flat stretch in the years leading up to that point.

Projecting to the end of this year, it looks like we are going back into hibernation.. a 30 k gain expected ..which is not that good as a percentage, considering the higher cost of houses and higher costs loaned money to buy houses.

Any other takes on the data?

[NZGEMS]

Depends where your house is I say, if it is in Invercargill and you have gained $30k in 2002 and in 2004 $40k more and this year another $30k looks pretty good to me, and it is better than negative which happened some years ago and probably will even now at some stage.

I purchased a town house in Hamilton in 2004 and i am just looking at purchasing the one next door so I have the two of them as they are joined so it makes sense, it is going to cost me almost twice as much as the first one cost and the worse thing is the rent will still be the same, $315 a week each, the other one when I purchased it was $300 so it went up $15 at the beginning of last year but my rental managers tell me I may even struggle to get that as there is an oversupply of appartments.

Our houses in Hamilton have increased way above the average you speak about but I do realize it is just an average, if it is averaging over the whole country i guess it still isnt too bad as some houses back in 2002 werent even worth $30k now you really struggle to pick one up for anywhere near that and if you do it really should be bulldozed. it is only land value.

[McDuck]

exactly...

If your house was only worth 180k and it inflated 40 K...thems big potatoes.

but when the same thing happens to a 380K home.. yawn.

I take you point of geographic variance in the wave timing...

That was why I called it a wave...with the centre of the kerplunk being the main centres and expanding outward with a time delay.

What is important is to view the wave as percentages... of weekly wages...and interest rates.

McDuck out.

[Paul34]

I think the interesting thing with with the way QV data works is that it is all retrospective to the point of being actually indicative of a different stage in the property cycle then people think. For example, looking at the REALENZ data the market has been flat this calender year, give or take. Year on year it may be 10% but watch the drop by Feb. In reality this is not a real drop as the stability in the market actually occurred a year prior (hence the reason year on year growth will be realtively stable).

What this means of course that any move in the market will not be picked up well and truly until a year AFTER the actual movement. This of course is too late and hence the need to act counterintutively such that one buys at the tail end of the flatness and not during a recorded market recovery which will actually be indicating movements not now but a year ago given market momentum.

[McDuck]

Yes I agree totally Paul, the retrospective nature of the housing data …(well, all types of statistical data now that you mention it)..is most useful in telling us where we have been, and much less precise in telling us where we might go next.

And in the case that you mention (the tail end buying strategy)…at least you can look back and get a rough idea how long the tail normally is… and when the end might be coming up.

Purchasing non productive assets during a flat period can chew up any gains made in the manic times.

[Edinburgh]

In Tauranga the market is poised for a move backwards in my opinion. There is a gap between vendors and buyers on price and whilst many vendors will simply give up because they don't have to move, those that do will come down in price to meet the market.

Heard of a townhouse with great sea views on the market for less than the vendors paid for it 18 months ago and in Tauranga's best area. And this is their opening price - not as if they have been conditioned by months on the market.

Worst hit will be those with new townhouses coming on the market.

But it is not all doom and gloom. The key thing is that people are still buying, the market is far from dead - we are experiencing a soft landing. So if you find something well under value you can still make money.

Trade for profit and use that to make another good buy a cash neutral investment. That is my advice.

[FreezingandHot]

Totally agree that is why trading for me is so important at present, brings up my cashflow to do buy & holds.

FH.