Financial Armageddon!!

[Bob Kane]

The banks are smarter these days. in 2007-2009 when things were tough, they just gave people mortgage holidays, rolled over mortgages, transferred from P&I to interest only and so on.

And I think they did that precisely so property prices wouldn't fall. Because they didn't want to lower prices with their own actions leading to them losing more money in a downwards spiral.

....

Nowadays, the RBNZ and government will step in and 'save the day' i.e. kick the can down the road. The indebted will be rewarded and the savers will be punished. Again.

That's how it works.
Given a choice, the government will always save the day.
Some time ago people were surprised that most home owners had no mortgage or only a very small mortgage.
Not sure about the current situation but I expect that hasn't changed.
This means most people can withstand a downturn.
In fact, I'd say we are better placed today to withstand a downturn than ever before.
Take that, Financial Armageddon!

[Nick G]

I’m still buying. Let ya’ll know when the world ends.

[Chris W]

It is possible to think up these scenarios.

This is the sequence of events that actually occurred in many property markets where property prices fell significantly.

Having personally witnessed and experienced a property market where the property prices fell over 65% and heard stories of many bankruptcies which resulted from the property price fall, there are long term effects on many households. The financial aftermath caused many mental health issues as well as loss of financial well-being for many families. In some instances there were suicides. In some cases there are owner occupiers who bought when property prices peaked who are burdened with a high debt load, yet continue to service the debt - their financial security at retirement looks bleak as property prices may take a very long time (potentially decades) to return to the house price levels that they purchased at.

A property price collapse hurts most residents as this is the most widely owned asset class. The house is also the largest asset for most households, and this is financed by debt. Also the wider effects can impact economic activity and it can take a while until the economic activity recovers to its former level.

Different areas have different levels of price vulnerability. Different property investors have different levels of financial vulnerability.

The most vulnerable areas in New Zealand are those with low rental yields - that would be most suburbs in Auckland. Those property investors in these areas that have high LVR's and where many property investors are on negative gearing and interest only mortgages are most at risk of potential financial stress.

The least vulnerable areas are those with properties that have high rental yields. Where property investors have low LVR's and positively geared investment properties, on P&I mortgages they will most likely be able to ride out any potential ripple effects should property prices in Auckland experience a significant price fall.

The best outcome for the economy as a whole would be flat property prices in Auckland, until incomes catch up with house prices. However in free markets, expect the unexpected.

[Nick G]

Meanwhile in Niu Zillund... http://www.nzherald.co.nz/business/n...ectid=11949430

I think prices will drift back a bit, particulalry relative to inflation, at the top end, but not collapse. The med and bottom, particulalry rentals with reasonable cashflow (also top end with good cashflow), should continue to be supported by immigration and interest rates. If we continue as we are I'm picking a 25% increase in rents under this government and that should counter value drops for the most part. Rising rents and really low interest rates will help a lot get through the next patch.

Of course there might be a shock that causes lending to dry up and things to get tight. But that argument can always be made. Last year there might have been a shock, the year before there might have been a shock. There wasn't. But hey, 2018... it could be the year.

[Perry]

Tis said that if folks do not know their history, they are condemned to repeat any mistakes of history.

With that in mind, it seems prudent that we should have due regard to history. But a problem with that is that circumstances change. I.e. The same event of (say) 50 years ago recurring may have a quite different result, in the new changed circumstances environment.

And the rate of change these days is almost bewildering.

[Boom]

Auckland property can only go one way - up. I predict house values will plateau at around average of $1 billion dollar per 3 bedroom house on 600sq m land. Anyone who complains about this, has had plenty of foresight to get into the market.

[eri]

The OECD warned Australia on its debt levels in March.
The IMF warned.... in October.
Now the Bank of International Settlements has flipped on the alarms.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11956582

this seems to the grouping mentioned in the report

unfortunately NZ seems too small to have been included

https://www.bis.org/publ/qtrpdf/r_qt1712f.htm

but it seems likely we would be similar to aust.

and anyway if our biggest trade partner tanked

we would feel the effects

[Viking]

Meanwhile in Niu Zillund... http://www.nzherald.co.nz/business/n...ectid=11949430

I think prices will drift back a bit, particulalry relative to inflation, at the top end, but not collapse. The med and bottom, particulalry rentals with reasonable cashflow (also top end with good cashflow), should continue to be supported by immigration and interest rates. If we continue as we are I'm picking a 25% increase in rents under this government and that should counter value drops for the most part. Rising rents and really low interest rates will help a lot get through the next patch.

Of course there might be a shock that causes lending to dry up and things to get tight. But that argument can always be made. Last year there might have been a shock, the year before there might have been a shock. There wasn't. But hey, 2018... it could be the year.

================================================== ============================================

A big helper for us is the move of houses to Airnb. So more tourists please as that will fill more houses and cause rentals to rise.
Twyford is a twit if he thinks rental owners won't make other decisions around his formula for beating us up.

Can't wait. Got a couple of spare sections waiting for a second hand house when things tighten up and I can get a builder.

[Don't believe the Hype]

Can't wait. Got a couple of spare sections waiting for a second hand house when things tighten up and I can get a builder.

Done just that this year.

Finalizing the last 2 (hopefully) before Xmas. We have people lining up to rent them despite them being the highest price rentals in the suburb by a long shot. Final valuations have also come in 20% above what we planned and budgeted our spending against back when we planned a year ago, the local market is up 10% so that accounts for half the increase.

I suspect that the rental squeeze will get worse and in 2018 our focus will be on upgrades to our stock and pricing accordingly. I think we can achieve a 30% weekly rent increase with these upgrades and ROFI around 15-20%

The labor policies will definitely result in better standards of housing, which is great for tenants if that is indeed what they're after, but they didn't think there would be a jump in rents as a result... this is what happens when you let dreamers run the operation.

[Perry]

Loonies In Charge

Twyford is a twit if he thinks rental owners won't make other decisions around his formula for beating us up.

Labour policies will definitely result in better standards of housing, which is great for tenants if that is indeed what they're after. But they didn't think there would be a jump in rents as a result. This is what happens when you let dreamers run the operation.

And let equally as vacuous dreamers vote for them!

As I see it, it's the aggregate that counts. I.e. The number of residential dwellings and the number of people that want one. It matters not if it's a rental or owner-occupied or social housing. It's simply a houses for people ratio situation.

Of course, after 9 years of not being 'in power,' and with few experienced among the fresh of woodenheads, Labour will dash headlong into a minefield of actions (and reactions) which will have serious unintended consequences. If they're lucky, Comrade Commissar Cullen might temper some of their worst excesses, but that remains to be seen.

And yes, if Twyford had one brain cell, it would be lonely. But that never stopped politicians from sticking their foot (or several feet) in their mouths as they shoot from the lip, like Nash did, then need to be 'corrected,' / reined in.

If ever there was a time when LLs need to be unified, vocal and persuasive, this is starting to look like it.

[Nzdan]

Nice speech Perry. Maybe all the landlords should go on strike if they’re so hard done by?

[Perry]

It's more a matter of looking ahead and pondering the likely consequences of a raft of woolly ideas and daft notions - no matter how well intended they seemed / seem to be.

E.g. Already, horticulturalists are worried about a clamp down on imported labour. All the while, the work-capable-dole-bludger-Labour-voters sit at home.

Keep working hard and long, Nzdan, many tens of thousands on welfare are depending on you.

[Perry]

September 2008 this thread started.

Are we having a crash, yet?

[Bluecoat]

Pus 10 = 2018.

[eri]

everything bubble article in herald

from oz

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11974827