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Has anyone witnessed firsthand a property price bubble? What does it look like?
^^ Your numbers assume the homeowners sold in this time frame or 24 months, which would be a very low percentage of homeowners selling in this market with listings so low, for now .
Losses are only realized by selling
Investors leverage their deposit , so recycling equity isn't earned income, more capital gains from previous investment, not to mention those losses can be claimed as tax losses.
I'm worth millions
But I live off a couple of platinum Visa credit cards
My millions are only realized by selling my assets
For me , a property bubble crash would probably represent a 50% decline in value and recovery take a decade to realise growth from the peak market or bottom , scenarios for this is usually war, sharemarkets tend to recover relatively fast these days ,
A comment on interest.co.nz
On an inflation adjusted basis, price change from the peak REINZ median house price in the following areas:
1) South Waikato: -40.6%
2) Porirua: -43.0%
3) Kawerau: -43.8%
4) Central suburbs of Auckland: -45.0%
4) Buller: -47.0%
6) South Wairarapa: -48.8%
Remember, this is before the impact of leverage.
The plight of heavily indebted PIs or home-owners will likely be very painful, as inflation increases.
Seeing more anger by the highly indebted property investors. This anger being directed at someone else (a policy maker), rather than facing the fact that the person solely responsible for their current position and circumstances is the person they see when they look in the mirror - that person is solely responsible for taking on the debt.
Looks like the actual numbers now support the claim that houses prices are starting to fall in many areas.
And that the trend is spreading throughout the country.
Even areas that were ok last month, are now in decline.
The general global consensus is that prices could do with a 10% haircut,
but as that will be insignificant
A) Jan 2022
The owner occupier proceeds with a house purchase in early 2022 using an 80% mortgage. We will assume that the house is purchased at the median house price in January 2022
ii) Mortgage @ 80% LVR - $960,000 (assumed to be interest only to avoid the effects of loan principal payments distorting the comparison of equity growth from initial equity below)
iii) Equity value saved and used to buy the house - $240,000
B) Jan 2024
1) Nominal prices
i) REINZ median property price in Auckland: $975,000 (-18.75%)
ii) Mortgage as above: $960,000 ( assumed to be interest only to avoid the effects of loan principal payments distorting the comparison of equity growth from initial equity below)
LVR is now 98.5%
iii) Equity: $15,000 (-93.75%)
2) Inflation adjusted prices assuming 7.0% p.a inflation for 2 years (adjustment factor of 1.14).
i) Median house price in Auckland: $851,603 ($975,000 / 1.14), -29.0% in purchasing power.
ii) Mortgage: $851,603 ($960,000 / 1.14), -12.7% in purchasing power - erosion by inflation)
iii) Equity: $13,102 (-94.5% in purchasing power)
Will be interesting to see how this develops over the next 8 years until 2032.
It so will - not looking to flash right now and who’d be able to hang on - lender may tap on shoulder demanding a top up to fix LVR - that would surely be the nail in the coffin.
Jeffa, I thought you lived off the interest off your leveraged investments (share market). e.g. borrow $1m - live off 10% net return = $100K.
regards
Donna
Correct, as well as revolving credit on my properties although I rarely use those unless I need some major work done.
It pays my credit cards off each month , credit cards are used for outgoings and living expenses, much of my cash is left in my US trading account in US dollars and some NZD which I reinvest in bear markets or leave to earn some interest
I then use credit cards rewards for airline travel when my wife decides to drag herself away from her tax slave job several times a year, which seems like a waste of time to me but she enjoys her work.
Cash in a NZ bank is becoming a foreign concept to me, Any money in New Zealand banks are in and out almost instantly to where it needs to go, usually once a month
Excuse my ignorance but I thought much of the gentry class lived like this?
It's how billionaires live, Elon Musk has a credit card with 80million dollars on it for living expenses leveraged against his Tesla shares or used to, I also remember Warren Buffett saying he only had a few hundred dollars in his wallet or something like that?
I studied how the wealthy lived, not listening to a broke university lecturer
So technically I am living off my credit cards and leveraging my investments to pay them off, rental income covers out goings for investment properties,
Obviously I'm not a billionaire, but a multi millionaire, so it depends on your lifestyle,
These days as I get closer to 50, time becomes the currency because in the end none of this matters...
Provisional tax sux big time, still paying off a little as well atm. But as I hold through this flat market, I wait until it starts to pick up and that’s not far away imho.
"This equates to over 21,800 mortgage accounts past due, up 16% year-on-year," Centrix said.
The number of Kiwis with mortgage arrears has risen to its highest level since before the Covid-19 pandemic, new numbers show.
In Centrix's latest credit indicator report, the number of homeowners behind on their mortgage payments climbed to 1.47% in January, up from from 1.40% in December 2023.
"This equates to over 21,800 mortgage accounts past due, up 16% year-on-year," the report said.
In January, mortgage inquiries were up 4% year-on-year, which Centrix suggested could signal a "warming" of the housing market.
Overall, the number of Kiwis with arrears reached a "seven year high" — hitting 9.6% year-on-year "reflecting seasonality following the festive season and summer holiday break".
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