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People need to stop worrying about economists and if and worry about when, what can you do to minimise risk.
Global economics dont look good.
NZ has the most inflated house prices in the world imo, along with factually the highest price to income ratio along with a minimum personal debt 150% of our megre GDP.
So it wouldnt take a lot to create and Ireland GFC like crash imo. And this time unlike the GFC we cant just print money to buffer the property market and economy (which IMO was a dumb move but obviously smart politically, should have taken the full hit).
Nobody has percentages, and I find it laughable people want to know how much it will go down and how. Nobody knows. What makes it all much mystical is the saying "Its never happened before", yeah and interest rates have never been above 18%, oh wait..... 87 or 88?
In my humble opinion, if we draw a line from 2000 to now at 8% which was the old going capital gains rate of doubling your money every 10 years, which I really miss the predictability of, then we are 30-40% over inflated. Im not saying we will crash 40% but Im sure Ireland didnt think that either. If there was a major correction in global lending and China put the squeeze on, I can see us dropping 30% and a 10yr plateua. That is purely a guess. I did Economics at Uni but Im not a crystal ball reader. But that would make sense and leave us in a relatively good place to recover from.
Or it might just be a Germany like rate of below inflation plateau for the next 20 years.
Its all just guessing. But some people who have guessed the crashes and effects to NZ before do not give a great outcome.
We will just have to wait and see.
One thing I am seeing is houses and apartments in my area (Orakei/Parnell) are reallly taking a lot lot longer to sell now compared to 2017.
I agree OTM. It appears to me we are slowing in house sales in the BOP also.
I agree OTM. It appears to me we are slowing in house sales in the BOP also.
You agree we are heading for a Ireland like crash?
Generally speaking, in NZ we don't have an excess of houses (like Ireland did).
If prices drop people just won't sell - unless they have to.
So if they can continue to pay the mortgage (owner occupied) then will just do that.
So prices standing still is much more likely than prices precipitously dropping.
Link not working for some readers depending on their individual settings. I scrolled through the thread and I think you are referring to this post on 31 July 2015?
Whichever city you visit anywhere in the world the newspaper headlines tend to be the same, usually featuring the local politicians acting out a staged show of reluctance as they accept their latest pay rises, the lawyer caught with his hand in the till, and the chattering classes complaining bitterly about the high cost of housing.
Here in Dublin it is no different. The Celtic Tiger rolled over and died in the mid-2000s and many of the locals have had to live through hard economic times ever since. The Irish banks were rescued with taxpayer money after they had lent millions to developers of commercial and residential property - the Anglo Irish Bank alone posting a loss of €12.7billion in one 15 month period around 2009. After that rescue they have taken every opportunity to gouge as much profit as possible from their captive residential mortgagee clients. Although the crisis did not originate from within the residental investment sector, property investors were very badly affected. Floating interest rates in particular are being deliberatly held higher than the EU average with the Irish Government resisting strong public pressure to force the banks to move.
From what I see here, after some years of struggle parts of the Irish economy appear to be recovering. Unemployment figures are dropping and some sectors of the property market are once again buoyant. However, as I travel through the Irish countryside there are obvious signs of rural poverty and, like rural New Zealand, most of the smaller towns feature many derelict buildings and failed shops.
Back in Dublin, the drift to the city has lead to much the same problems as we see in Auckland. Dublin's traffic jams are a wonder to behold and are made much worse by the current works that will eventually join one half of the existing tram system to the other. Both residential rents and property prices have risen steeply and the wailing of those affected echoes throughout the media. As in Auckland, there are many theories, each more extreme than the last, as to the reasons why. There seems to be some agreement that property investors and landlords are to blame, and therefore should be heavily punished. Where have we heard that before?
In order to make the situation worse the Irish Goverment has recently created an entity called Irish Water. This company will be responsible for the supply of metered water to all residential properties in the country and, for the first time, the Irish will pay directly by volume for the water they consume. Although every house has to enrol with the water company, it is made quite clear that, for residential rentals, the tenant is the water company's customer and carries the responsibility for the water payments. Also, the water bills arrive just four times a year and are capped at a maximum of €65 for a normal family. Watercare, are you listening? If the sons of Erin can do it, why can't you?
As is the case in Auckland, this move has led to much argument, dispute and outright revolt, with newly installed watermeters being forceably removed and some Irish Water staff assaulted. Of course the tax rates that used to pay for the water supply have not been reduced, so many see the change simply as a Government move to increase the overall tax take and thus pay off the Irish EU debts at a faster rate. The latest estimates say that current Greek EU bailout will cost each and every one of the two million Irish taxpayers €500, and the Irish public sentiment is that the Greeks should also have to live through tough times in order to pay off their own debts.
I see that under the Irish Residental Tenancies Act, a landlord can terminate the tenancy at any time within the first six months of the tenancy with 28 days notice without giving any reason. Once this first six months expires the tenancy then converts into a fixed term agreement with a further three and a half years to run, thus giving a total tenancy term of four years. If the landlord wants to terminate the tenancy within the balance of that four year period he can only do so when there is a breach of the tenancy agreement, if the property is sold, or for a small number of other specific reasons. At the end of the four year term, if both parties want the tenancy to continue, a new tenancy agreement must be drawn up. During the tenancy the tenant may terminate at any time, but is required to give adequate notice. This notice period increases with the length of occupation, reaching 56 days after two years.
I imagine that this type of legislation is what the supporters of 'greater certainty and security for New Zealand tenants' have in mind.
Landlords may set the rent at any level they desire but, as in NZ, tenants may appeal if the rent level is substantially above the going market rate for similar properties. Unlike New Zealand, the rent may only be increasd annually, but the landlord need only give the tenant 28 days notice of the increase.
Obviously I cannot become an expert on the Irish RTA after just a few weeks, but I have looked around enough to see that the Irish Republic is experiencing many of the same tenancy and population drift problems as we have in New Zealand. Both nations have about the same number of people, and both have the ability to export their unemployment to their neighbours when times get tough only to have them return when the economic pendulum swings the other way. It is certainly interesting to observe the cause and effect discussions from a different viewpoint, and to see how different legislative approaches have not, so far, solved the problem.
Meanwhile, in the upper echelons of Irish society, life has largely returned to normal. Once again, wealth is good. The Audi factor is seemingly high in Dublin, Waterford and Galway while the trophy wives have again departed for their summer holidays in Majorca and Tenariffe where they pass the time in long liquid lunches while the au pair looks after little Tarquin and Emily. The Irish weather, you understand, is quite unreliable.
I looked at the Irish house price crash first hand -in Ireland
The prime cause was too many houses.
That is an observation made after the property prices had fallen significantly.
Living in real time, at the time of the peak property prices, economists did not believe that there were too many houses. Many economists cite housing shortages leading up to the property price peak - look at Sydney, and Melbourne before their property prices started falling. (Refer
1) Sydney / NSW https://www.smh.com.au/business/nsw-...25-gnr37f.html
2) Melbourne / Victoria - https://www.abc.net.au/news/2017-08-...growth/8830596)
Here is an interview with an Irish economist in April 2007, stating that property prices were in line with fundamentals at the time.
No I'm not saying i agree with an Irish type crash. Not sure of that probability here. I am saying I agree with Waynes view of slowing property sales in NZ.
No. They need to stop listening to or heeding econ-o-mists.
They are nothing more than latter-day soothsayers, after the fact.
This forum is be-sprinkled with their failed predictions.
FYI, here are a couple of economist's forecasts that most people believe are useful in developing their future expectations of house prices -
1) "Auckland's shortfall is around 46,000 dwellings."
https://www.interest.co.nz/property/...-shortage-will
2) Kiwibank chief economist Jarrod Kerr and senior economist Jeremy Couchman said their estimates showed that at this time last year there was a shortage of 100,000 homes across New Zealand. As of right now, they now estimate the shortage has grown to 130,000. "Our population growth has outstripped housing supply, again," they say.
Kiwibank economists say despite the residential construction boom the country is still falling short of what it needs to build; further short term weakness seen in Auckland house prices, however
I have owned investment property in Auckland since 1991.
Yes there is an economic cycle, yes there has been times when property prices have stayed static (or even dropped a bit) over those years.
Yes I am still alive, warm and breathing.
For almost all owner-occupiers and residential landlords it is just a matter of sitting out those periods with a good book and a glass of wine. There are always a few unfortunate or careless souls who get caught at the margins, but as someone has already said, the overwhelming majority of people don't actually have to sell.
For an investor, providing the rent is still be paid and he is still making at least $1 per week he just waits patiently for the (entirely expected) winter storms to pass and then spring invariably arrives.
I have owned investment property in Auckland since 1991.
Yes there is an economic cycle, yes there has been times when property prices have stayed static (or even dropped a bit) over those years.
Yes I am still alive, warm and breathing.
For almost all owner-occupiers and residential landlords it is just a matter of sitting out those periods with a good book and a glass of wine. There are always a few unfortunate or careless souls who get caught at the margins, but as someone has already said, the overwhelming majority of people don't actually have to sell.
For an investor, providing the rent is still be paid and he is still making at least $1 per week he just waits patiently for the (entirely expected) winter storms to pass and then spring invariably arrives.
Hardly ever is the sky actually falling in.
Yes, you are right, but, markets elseware have turned south in the past and i would never say NZ or anywhere else is ever exempt from this type of event. I have seen market sentiment turn quickly first hand. No problem if you can ride it out.
Timing such an event can also be financially rewarding as we have seen in this country recently.
Most anyone with a valid connection to stats could come up with such numbers.
Here were forecasts for the future Auckland population from 2017 (which are used to determine how many residential dwellings are required). Note that there are assumptions made.
"Our latest projections for Auckland indicate a population growing from 1.6 million in 2016 to 1.9–2.1 million in 2028 and to 2.0–2.6 million in 2043. These projections are based on assumptions about the three basic components of population change – births (fertility), deaths (mortality), and migration."
From page 6 - "What this might mean for Auckland's housing demand. Auckland had an average of about 2.9 people per household (private dwelling) in 2001, 2006, and 2013. Applying this simple ratio to the population projections indicates how many more dwellings need to be built to accommodate the population (figure 3)".
1) At the current house price level in Auckland and current interest rate levels, how many people per household should there be? Should it still be 2.9? Or should it be lower or higher at current house price levels?
2) Also how does this number change with higher house price levels? (As prices rise faster than household income, fewer people can afford to buy, assuming interest rates remain unchanged, so does the number of people per household increase as more people live in fewer dwellings? and by how much?) How does this number change with lower price levels?
3) Also how does this number change with changes in interest rates? As interest rates rise, fewer households are able to afford higher mortgage payments, assuming house prices remain unchanged, so does the number of people per household increase as more people live in fewer dwellings? and by how much?) As interest rates fall, are more households are able to afford to purchase (and so the people per household falls) or are they constrained by the inability to put down a 20% deposit? How does the people per household number change with changing deposits required by owner occupiers as mandated by the RBNZ (e.g 5%, 10%, 20%)
If you change the underlying assumption for people per household in Auckland, there could be a housing surplus in Auckland.
For example using the 1,571,718 population for Auckland in 2018, and an assumption of people per dwelling of 2.95, results in a required number of dwellings of 532,786. That would be less than the current 538,182 dwellings. So that would mean that there is a SURPLUS of dwellings in Auckland by 5,396.
At 2.9, the required number of dwellings in Auckland would be 541,972. That would mean a SHORTAGE of dwellings in Auckland by 3,789 (compared to the 538,182 dwellings from the 2018 census.
Also note that the number of dwellings in the 2018 census for Auckland does not include the dwellings under construction in Auckland. How many dwellings are currently under construction and to be completed in the next few years? Will this take the number of dwellings in Auckland to a surplus or will Auckland be in a housing shortage?
The 2018 Census shows 191,646 homes (10.3%) throughout the country were unoccupied but in Auckland just 7.3% were unoccupied
If you adjust the number of dwellings for those that were unoccupied in Auckland, then the number of actual people per household is 3.12.
Also note, (not sure how many will stay in Auckland)
The latest figures from Statistics NZ show an estimated net gain (the excess of long term arrivals over long term departures) of 50,541 in the 12 months to the end of May, up by 1.2% compared to the the net gain of 49,903 in the 12 months to May last year. https://www.interest.co.nz/property/...hree-years-ago
That there was an oversupply of houses in Ireland.
The subsequent crash confirmed the oversupply.
He knew economic stuff but didn't know about property.
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