Latest Reinz analyzed.

[McDuck]

Merry Xmas.
Just been scanning over the Reinz figures.
My take on it.

National median slightly higher. Six thousand higher in fact…
That’s the good news.

Market can not really be considered as all that energetic with the days to sell still wide at a month.
That’s going to kill the agents who work on turnover…and It’s difficult to see the extra 1000c houses that sold this month as anything other than the previous months houses discounted in order to shift them.

Still not too bad though, with only a quarter of the country reporting slight drops in price.

The overall trend is one of slowly decreasing momentum.
That’s a good thing.
I just hope the Reserve bank doesn’t get impatient, and hurry things along by upping interest rates again… they sounded pretty militant on the matter last time I checked.

Apart from that, it’s difficult to tell if your little empire of rentals have become more valuable, compared to last month.
The higher priced houses are possibly responsible for giving the impression of the slightly improved median.

McDuck out.

[whitt]

The overall trend is one of slowly decreasing momentum.
That’s a good thing.
I just hope the Reserve bank doesn’t get inpatient, and hurry things along by upping interest rates again… they sounded pretty militant on the matter last time I checked.

Thankyou Mc Duck. Nice summary.
I did notice the Banks have upped interest rates recently too. We might crack 10% floating yet. This might help.

[Glenn]

Well in our neck of the woods the demand for rentals and buying is showing good signs. Lots of for sale signs have big SOLD stickers on them and the number of listings is going down. A major change that I notice is the number of sales people is dropping and it appears to me that the age of the agents is going up. Well at least their pictures on the Real estate pages look older.

I am normally taking only a few days to let properties so that must tell some people something.
My list of properties to let is around 2% of the portfolio and the only one empty waiting for a tenant is that way because the poor tenant died.
I am getting from $20 to $50 extra rent when reletting. When I advertise at the old rent no one wants it. The good applicants do not appear to be interested in cheap properties. In some cases we have have increased the advertised rent to attract a better quality applicant.

[nzfrazer]

Rents increasing, properties selling quickly, shortage of listings, prices rising, immigration increasing, employment steady...these are not key drivers/market influencers of a slump. Anyone care to point out where we are on Kieran's property clock...I thought we were in early-mid slump but who knows what going on out there!

[cube]

Can the property clock tick backwards?

Have recently rented out two properties in West Auckland - 1 had a $15 rise (5&#37 after 15 months on the previous rent, the other was rented out at $10 more than the upper range of the rental appraisal.

Immigration data remains robust, which is a key driver of the clock.

cube

[Glenn]

At the Napier conference Kerian showed a graph with a double bump at the top. His clever prediction showed no bump. I asked him if this hi would have two bumps like the last one. He thought not.
Anyone got some tomatoe sauce to go with the hat.

[nzfrazer]

Maybe this latest rise is just a "dead cat bounce" i think this is the term Kieran uses to describe a market that appears to get a 2nd wind and then fall again...? we are now at 8 times average income - how much higher can they go - up to 10x av income? have prices ever been 10x av income anywhere before?

Q - are we in a slump?
...other day agent calls me about a house - vendor is relocating for work - he bought it in oct 06 for $387, never moved in, no work done, now on mkt for $439 - WTF? nice little earner if u can get it!

[McDuck]

Can the property clock tick backwards?
Immigration data remains robust, which is a key driver of the clock.

cube

Are the usual market drivers steering the shape of the market right now?

I doubt it very much.

Do people act rationally around purchasing these days?

….again I doubt it.

Will the natural laws of economics force people to behave rationally.

Eventually, absolutely, without question.

Do the natural laws exact a price for deflecting them, even temporarily?

Without a doubt.

[Gatekeeper]

It's easy credit that's pushing this one. The tightening is coming, albeit slowly, like Duck says, it has to happen. The drivers are international.
We are still victims of the carry trade.

So why has it taken so long? My guess is the central bankers are more concerned with the failure of the world reserve currency USD, and are forced to keep printing to prop it up to enable a slow decline, and to provide an alternative currency (EU are printing like 18% pa, growth is nothing like that!). The housing bubble is the consequence, the credit is not from NZ. At this point the USD is stumbling again, and China holds over 1 trillion of devaluing dollars.

Not all cycles run the same, the reasons for this one are quite unique and due to globalisation IMHO.

[Perry]

Not all cycles run the same, the reasons for this
one are quite unique and due to globalisation IMHO.

Can you expand on that, some more, please?
I.e. the globalisation correlation.

[Marcus]

Maybe this latest rise is just a "dead cat bounce" i think this is the term Kieran uses to describe a market that appears to get a 2nd wind and then fall again...?

Reading through the thread I was initially thinking the same thing. However, doesn't the "Dead cat bounce" theory involve sale prices falling significantly triggering a large influx of new buyers to the scene (momentarily driving sale prices back up again)?
I have yet to see a real drop in average house sales.

It's easy credit that's pushing this one. The tightening is coming, albeit slowly, like Duck says, it has to happen.

I remember hearing or reading a few years back (it may have been DDR) that the property market is a very slow rolling beast. I often remind myself of this.

More recently, I have all but given up guessing what’s happening next or when the slump is going to arrive as it can (for me) detract from my focusing on the here and now.

It will however be interesting to see how it all unfolds.

[Paul34]

The macro economic threads on this site are great. The issue of each cycle being different is what I think many people are missing. What is driving this is, as people have said, liquidity in the market. This is also coming as baby boomers cash up and look for investments. Immigration will also keep this up especially if migrants need high cash levels to get in.


The market is high but all markets are (e.g. stocks) so the issue is where do people park their money? Rates will come back from here. The market is always delayed and everyone was waiting for Sept stats. Xmas consumer spending will see the end of the good times and we will get into reality. However, the ratios are still not so out of whack to get a decent drop. So long as there is demand prices wll hold. But against inflation the market has already stopped.

I think the market is becoming far more rationale than people think. There is far more education now and this has led to a very stable market. People did not go overboard on housing debt (1-3 houses), they did not buy Auckland flats, and understand the fundamenatls of PI. This too will control the market. This is also why I would not be wanting to hold flats on strict IP unless it was the whole land as its value must now be set by investor sentiment that is clearly levelling. With auckland rents only slowly going up and rates high the 9% yeild doesn't seem so attractive!

Now the first home buyers that is a different story!

[McDuck]

Can you expand on that, some more, please?
I.e. the globalisation correlation.

Can I have ago at expanding on that?

It’s such a big topic.. where to start.???

After the second world war, the need to rebuild bomb smashed countries, caused a couple of truly global financial institutions to come into being.

That seed, to shift money around the globe with ease, has been increasingly understood (and manipulated?) by many financial institutions these days.

The internet cemented the process.

For example, I can now lend my money anywhere, and hedge it anyway…and get second by second data on it’s progress.

Scary.

I think I may buy some real estate on the moon just so I can start to talk about galaxerization.

Merry Xmas everyone ..don’t overspend on those credit cards.. and remember…children like the boxes more than the presents,…so just get them a good box.

Righto!

[Gatekeeper]

Thanks McDuck, that sums it up nicely (such a big subject).
I quite like this piece http://www.okusi.net/garydean/works/Globalisation.html but it is dated.

The RBNZ no longer has a lot of control on the money streams because of financial globalisation. A lot of this debt we are taking on from overseas is headed for the unproductive category, and we still have to pay it back yet. This includes PI, which is mainly just shuffling existing houses, not creating anything to sustain the country into the future.

Some claim the Great Depression was the result of a Financial Globalisation experiment, so maybe this cycle is not so unique.

[Paul34]

Interesting article in the sunday star times today. It compares now to Xmas 1986 (one year before the crash). The interesting thing is the differences. Now the only scary thing is our credit card debt levels. Despite all the concerns inflation is under control. Stocks are growing well and PE ratios are no where near so out of whack as then also listing of crap companies is down. Even our acct deficit is similar. I think we are better set for the softest of landings, the odd shuffle of people or companies that have taken on to much silly debt.

As for housing it will be steady as she goes. Dont expect the big rises as the catch up period of the last few years levels off but a crash (anything over a 10% drop) seems very far fetched under these conditions.

My view is economies continually move towards stability (this is the whole purpose of the RBA) and maybe over tme we are seeing this such that swings should become more mild as people wise up. Only concern is the wash up of debt and the retiring effect but once that is doen the 2040 period look great

Rememebre also baby boomers were burnt in 1987 (as teh article alludes to) and are unlikely to put their money back into the markets. Hmm what does that leave as an investment of choice??