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  1. #41
    Join Date
    Oct 2013
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    1,708

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    Something that all this analysis of interest rates never seems to take into account, is that rates will (or should) rise slower than if they were higher.

    If interest rates are 5% and they rise 0.5%, cost of borrowing rises 10%, resulting in a moderate damper on price inflation across the economy.
    When interest rates were 9%, they'd have to rise almost 1% to get the same effect.

    So it's true that a 1% rise in rates could have a catastrophic effect on the market. And as a result, they don't need to (and shouldn't) rise as quickly.


    Then there's the entirely separate point, that if low interest rates were the only significant driver of house prices, surely we would have seen house prices rise all over the country by similar amounts.


    I don't believe there'll be a drop in prices, or even a significant stagnation. But you should always buy property as though there's about to be.
    CLIENT LIST FULL - Waitlist Available: [email protected]
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  2. #42

    Default

    It is interesting to see all these statistically backed articles, even if they are somewhat biased. They seem to pick their own cause of the problem and write their articles accordingly.

    I do look forward to reading the likes of Gary's thoughts on these recent articles.

    Surely Auckland is only going up, until 2019 (Right?). Supply out strips demand!

    interestco.nz/property/86771/auckland-housing-market-verge-losing-all-capital-gains-it-made-last-12-months

    I can't post links so we'll have to let you work out how to make this work. ^


    I am curious to see how\if this will ripple through the country.

  3. #43
    Join Date
    Dec 2015
    Posts
    297

    Default

    Quote Originally Posted by Anthonyacat View Post
    Something that all this analysis of interest rates never seems to take into account, is that rates will (or should) rise slower than if they were higher.

    If interest rates are 5% and they rise 0.5%, cost of borrowing rises 10%, resulting in a moderate damper on price inflation across the economy.
    When interest rates were 9%, they'd have to rise almost 1% to get the same effect.

    So it's true that a 1% rise in rates could have a catastrophic effect on the market. And as a result, they don't need to (and shouldn't) rise as quickly.


    Then there's the entirely separate point, that if low interest rates were the only significant driver of house prices, surely we would have seen house prices rise all over the country by similar amounts.


    I don't believe there'll be a drop in prices, or even a significant stagnation. But you should always buy property as though there's about to be.
    Some faulty logic here - a 0.5% interest rise is the same dollar amount regardless of the current starting interest rate.

    for instance on a $500,000 mortgage a 0.5% interest rebate rise is a $2,500 increase in annual interest payments, regardless of what the previous amount is.

  4. #44
    Join Date
    Apr 2016
    Posts
    2,343

    Default

    They must take turns writing something to get their name in the paper. They manage to be wrong pretty much all the time. Rodney Dickens being the exception but he doesn't work for a bank.

  5. #45
    Join Date
    Feb 2006
    Posts
    213

    Default

    Quote Originally Posted by Anthonyacat View Post
    Something that all this analysis of interest rates never seems to take into account, is that rates will (or should) rise slower than if they were higher.

    If interest rates are 5% and they rise 0.5%, cost of borrowing rises 10%, resulting in a moderate damper on price inflation across the economy.
    When interest rates were 9%, they'd have to rise almost 1% to get the same effect.

    So it's true that a 1% rise in rates could have a catastrophic effect on the market. And as a result, they don't need to (and shouldn't) rise as quickly.

    This argument might have some merit if it were the RBNZ that was driving an increase in interest rates as a means of slowing the economy (to reduce inflation) through the OCR.

    Main problem is this - when interest rates rise it is very unlikely to be driven by the RBNZ lifting the OCR (why would it - inflation isbelow the target band and has been for some time). More likely when interest rates rise it will be due to banks facing higher funding costs, most likely driven by offshore markets that don't care about a catastrophic effect on the Auckland property market.

    Also, even if we did see an inflation problem that would make the RBNZ look to raise the OCR (unlikely) I don't think they would be worried about crashing the economy as most home owners aren't paying 51% of their income in mortgage costs at the moment. i.e. Auckland first home buyers who maxed out at what looks to be the peak of the market if not the edge of the cliff would hugely struggle if interest rates rise but this is only a small proportion of the market so we wouldn't be looking at a economic meltdown in my opinion

  6. #46
    Join Date
    Oct 2013
    Posts
    1,708

    Default

    Some faulty logic here - a 0.5% interest rise is the same dollar amount regardless of the current starting interest rate.
    for instance on a $500,000 mortgage a 0.5% interest rebate rise is a $2,500 increase in annual interest payments, regardless of what the previous amount is.

    Good call, I didn't re-state the underlying assumptions that the article put forward. That house prices are already overinflated as a result of low interest rates, and people are paying a very large percentage of their incomes on loan costs. I'm comparing your 0.5% interest rise on a $500k mortgage in 2007, to a 0.5% interest rise on a $900k mortgage today.


    This argument might have some merit if it were the RBNZ that was driving an increase in interest rates as a means of slowing the economy (to reduce inflation) through the OCR.

    Agreed entirely! But again this was an assumption in the article - While ANZ expected that there would be only a gradual increase in interest rates over the next two years, in which case Auckland house prices would tread water, Bagrie said it was "game on" if inflation rose faster than expected
    CLIENT LIST FULL - Waitlist Available: [email protected]
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  7. #47
    Join Date
    Jun 2005
    Location
    Auckland
    Posts
    5,087

    Default

    Quote Originally Posted by ScottSI View Post
    4 - Trump is assinated in 2017
    I'm not quite sure what 'assinated' is, but it sounds about right!
    DFTBA

  8. #48
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    15,428

    Default

    Don't the Republicans have a mule as a mascot? Not too different to an ass.

    Mind you, USAmericans don't seem to know that an ass is an animal. They have some perverse idea that it is the human posterior, as in buttocks. So it's no wonder they don't know which way is up.
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

  9. #49
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,451

    Default

    Quote Originally Posted by Perry View Post
    Don't the Republicans have a mule as a mascot? Not too different to an ass.

    Mind you, USAmericans don't seem to know that an ass is an animal. They have some perverse idea that it is the human posterior, as in buttocks. So it's no wonder they don't know which way is up.
    No the republicans have an elephant as a mascot, the democrats have a donkey.
    Squadly dinky do!

  10. #50
    Join Date
    May 2008
    Location
    Torbay, Auckland
    Posts
    3,938

    Default

    I wonder what Ron Hoy Fong (always think of Hong Kong Fuey for some reason) is thinking the future of Auckland property market is.
    Where the boom of all booms is at, and where all that Chinese money from the 7 provinces is ?

    I guess they do look a bit similar.

    https://www.youtube.com/watch?v=SWzbYqWajOY

    Talking of predicitions here is Bernard Hickey getting it wrong again

    http://www.interest.co.nz/opinion/84...-ended-bernard
    Paul Magill B.com
    Bluekiwi Property Consulting


 

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