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  1. #1
    Join Date
    Apr 2005
    Posts
    787

    Default A timely reminder of where we're at?

    Auckland house prices overtake Australia's big cities!!

    http://www.nzherald.co.nz/section/8/...447536&ref=rss

  2. #2
    Join Date
    May 2007
    Location
    Wellington
    Posts
    1,520

    Default

    Great article, thanks.

    A timely reminder for people to box with extreme caution at the moment. A buy, do up and sell is a very dangerous proposition in the current market as we are almost at tipping point.

    Good luck everyone, we are about to see 'who has been swimming against the tide'.

  3. #3
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,739

    Question

    And a new international housing affordability
    survey describes Auckland, Wellington and Christchurch
    as "severely unaffordable". Of 157 international locations,
    Auckland ranks 21st least affordable city in which to buy
    a home, with its median price almost seven times the
    median household income.
    I'm interested to hear, succinctly, what other PTrs
    consider to be the prime reasons for this 'phenomenon.'

    You can interpret that to mean, "who's to blame?" if you
    wish. But, the reasons are perhaps more important than
    the perpetrators or their motives.

  4. #4
    Join Date
    Feb 2004
    Location
    Newcastle-under-Lyme
    Posts
    3,066

    Default

    Greed & fear.
    Greed because people want to be wealthy in a quick fashion.
    Fear because they feel they are missing out if they don't buy now.

    I think the market has in the last few years been driven by rampant speculation, mostly based on the fallacious assumption that recent past performance will predict future performance. Certain property 'educators' have done nothing to help in this regard.

    Cheers
    David

  5. #5
    Join Date
    Feb 2004
    Location
    Welly-town
    Posts
    1,095

    Default

    Something like 34% of people live in rented accomodation, therefore I can assume approx 34% of properties are owned by investors. That's big enough to have a pretty significant impact on the market, but the number hasn't changed wildly in the last 5 years.

    It's moved by a few percentage points since the last census but so I'm not sure that all the new investors are really having that much impact. Perhaps a lot of people get enthusiastic about investing but never make it a reality.

    I don't see that home owners are rampantly speculating - afterall it's a home to live in and prices generally move relative to each other so there's no scramble to the next level up.

    There is however still very strong employment (so more people have more money to spend), there are more people entering the country than leaving, and there seems to be real issues getting new land on stream. All of this comes back to government policy. Be ready for a big shakeup when National win the next election.

    Gerrard

  6. #6
    Join Date
    Jan 2005
    Location
    Auckland
    Posts
    1,530

    Default

    I agree it's a good time to tread cautiously.
    Julian
    Gimme $20k. You will receive some well packaged generic advice that will put you on the road to riches beyond your wildest dreams ...yeah right!

  7. #7
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,739

    Default

    In her book, What Your Accountant Doesn't Tell You,
    Fiona Clayton-Law has this sentence in the second
    paragraph of Chapter One:

    The government tells you to save as much as
    you can - I will show you why saving money in
    the bank for your retirement and paying off your
    mortgage is a sure-fire recipe for financial disaster.
    Have enough people actually grasped that notion?

    From my view, I see people buying houses for the sorts
    of reasons Fiona may have had in mind. Succinctly,
    a hedge against inflation and government duplicity.

  8. #8
    Join Date
    Apr 2007
    Posts
    493

    Default Golden Years

    Hi Perry,

    Perhaps, in a world of fiat curencies, property is seen as comparable to the Gold Standard of times gone by...

    Regards,
    *poormastery*
    Last edited by poormastery; 01-07-2007 at 08:35 AM.

  9. #9
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,739

    Angry The Malfeasant Monsters

    Quote Originally Posted by poormastery View Post
    Perhaps, in a world of fiat curencies, property is seen as
    comparable to the Gold Standard of times gone by. . .
    I think you have it nailed. If, as GK reports, the NZ
    government is printing 'new' money at 16% annually,
    while GDP moves (slumbers along) @ circa 3%, then
    the NZ government is deflating the buying power of its
    citizens' money at a rate of something like 13% per
    annum; certainly more than 10%.

    If my general observation is accurate, I could not write
    here what I think of said W'gton woodenheads and their
    acts of monstrous malfeasance. As someone once observed:
    such actions defy reasoned comprehension, so the only
    explanation must be profound ignorance or thoroughly
    well-informed self-interest. Neither possibility makes me
    feel at all sanguine.

  10. #10
    Join Date
    Apr 2007
    Posts
    493

    Default Demographics

    Hi Perry,

    Curiously, poormastery used to post on property forums in Britain for many years, some of which I was virtually the only bull. Most bears were generally deflationists. The humble poormastery’s basic argument was that under a system of global fiat currencies, deflation is very unlikely.

    Anyway, one of the greatest economists of the 20th Century was undoubtedly Professor Milton Friedman. He famously revived the Quantity Theory of Money from the Classical economists. Ceterus paribas, it says that a doubling of the money supply will cause a doubling of the price level. In other words, the money supply is neutral.

    I suppose a question could be that if Mr Friedman believed the money supply was neutral, why was he so anti-inflation? I think that the answer to the riddle is that Mr Friedman realised that inflation is essentially redistributive.

    A good hedge fund trader is more interested in movements in relative prices (and valuations) than in figures which are essentially aggregations, such as the overall inflation rate. After all, it is identifying relative mispricing and anticipating future relative price movements where the money is to be made.

    The general rule is that the young and the old tend to get hammered by high overall inflation – the people in the middle ages usually do rather better in inflationary times. The first group of people often have fixed incomes, whilst the second group more often do not. Pensioners often have high savings, but middle aged people often have the highest debts (big mortgages). Inflation hurts savers and helps borrowers.

    In this respect, poormastery would not necessarily blame the government for the monetary phenomenon we see – perhaps the government and the reserve bank are simply reflecting the demographics of the country?

    Regards,
    *poormastery*


 

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