Thoughts on 2020 Housing Market.

[Frezzinghot]

Whats everyones opinion on the housing market ATM? Media and agents are all talking about big rises this year? Scary stuff really as how much higher can NZRE go? Affordability is the real issue surely? I see sooo many subdivisions now with no construction going on so surely supply is not driving prices up, id say building costs are crippling the average Joe and I see nothing but pain coming
for developers and tradies alike!

Thoughts?

FH

[Anthonyacat]

Whats everyones opinion on the housing market ATM? Media and agents are all talking about big rises this year? Scary stuff really as how much higher can NZRE go? Affordability is the real issue surely? I see sooo many subdivisions now with no construction going on so surely supply is not driving prices up, id say building costs are crippling the average Joe and I see nothing but pain coming
for developers and tradies alike!

Thoughts?

FH

Affordability is little changed from ten years ago last I saw, isn't it? A $700k house back then you'd have borrowed $630k (90%) at 8% interest. Monthly payments $4,622. House is now worth $1.4M, you borrow $1.12M (80%) at 3.4% interest. Monthly payments $4,967 - that's only an increase of 7.5% over 10 years; well below inflation and average wage growth.

Go back 20 years before that to the late 80s and you're only paying $175k for the house, but paying interest at 24% - your monthly payments are $3,152. Difference between that and $4,622 is 47%; for 20 years inflation 1990 to 2010 inflation was 56%, and presumably wage growth higher than that.

I mean of course how people can save their deposit is another question entirely. But monthly affordability is arguably easier than it's been in a while. I absolutely see another cycle of increases coming soon.

Soon we'll have the part-buy schemes with either NFP corporations or the government, where you only buy 25% of the house and rent the rest, slowly laddering up. That increases affordability... and thereby bumps house prices up.

Eventually we'll see intergenerational mortgages; bumping out from 30 to 50 years; that drops the payments mentioned above from $4,967 to $3,885. That allows house prices to rise another 25-30% as people realise that they can afford more house.

And then you have to consider that by international standards NZ houses are still cheap. Try buying a standalone house in London anywhere within an hour's walk to the CBD. I don't think they even exist, but if they do you're talking multi-million pounds.

[Jeffa]

I wouldn't waste time trying to predict or time the market, id buy what you can afford now..then your question will be answered in 2030.

[Frezzinghot]

Affordability is little changed from ten years ago last I saw, isn't it? A $700k house back then you'd have borrowed $630k (90%) at 8% interest. Monthly payments $4,622. House is now worth $1.4M, you borrow $1.12M (80%) at 3.4% interest. Monthly payments $4,967 - that's only an increase of 7.5% over 10 years; well below inflation and average wage growth.

Go back 20 years before that to the late 80s and you're only paying $175k for the house, but paying interest at 24% - your monthly payments are $3,152. Difference between that and $4,622 is 47%; for 20 years inflation 1990 to 2010 inflation was 56%, and presumably wage growth higher than that.

I mean of course how people can save their deposit is another question entirely. But monthly affordability is arguably easier than it's been in a while. I absolutely see another cycle of increases coming soon.

Soon we'll have the part-buy schemes with either NFP corporations or the government, where you only buy 25% of the house and rent the rest, slowly laddering up. That increases affordability... and thereby bumps house prices up.

Eventually we'll see intergenerational mortgages; bumping out from 30 to 50 years; that drops the payments mentioned above from $4,967 to $3,885. That allows house prices to rise another 25-30% as people realise that they can afford more house.

And then you have to consider that by international standards NZ houses are still cheap. Try buying a standalone house in London anywhere within an hour's walk to the CBD. I don't think they even exist, but if they do you're talking multi-million pounds.

What about cost to build? How do you factor that in? 6 years ago, it cost us $1800 per SQM to build, I doubt you could get that price now, maybe $2500 per SQM is more realistic! Also our low wage growth also should be a factor, different story in Australia where their income is so much higher than ours.

[Frezzinghot]

Eventually we'll see intergenerational mortgages; bumping out from 30 to 50 years; that drops the payments mentioned above from $4,967 to $3,885. That allows house prices to rise another 25-30% as people realise that they can afford more house.

You see this is the catch, banks are wanting this rise to continue so that we are slaves to the mortgage! What i am trying to say is when will the sheep wake up and realise that we are being conned into this pyramid scheme, Im all for growth but to be honest this willingness to keep extending the mortgage term is just ludicrous, so by extending your mortgage 20years, you have absolutely no way of paying this off in your lifetime, why 50yrs, why not 100, 1000, why stop there? May as well rent as you will NEVER own the house.

[Frezzinghot]

And then you have to consider that by international standards NZ houses are still cheap. Try buying a standalone house in London anywhere within an hour's walk to the CBD. I don't think they even exist, but if they do you're talking multi-million pounds.

Its all relevant isn't it? I doubt the income levels in London are equal to Auckland! Also central Auckland is not cheap, Asian money has made sure of that, its a ripple effect, big money flows into Auckland central, good school zones etc (again asians) and old money gets pushed out to the suburbs, no longer can kiwis afford to live there.

So for me affordability and immigration are the REAL issues, no longer can the born and bred kiwi compete with the increases brought on by foreign money.

[Frezzinghot]

I wouldn't waste time trying to predict or time the market, id buy what you can afford now..then your question will be answered in 2030.

Thats the difficulty atm, what I can afford is not very nice so trying to pick the time for me is crucial, of coarse I'm still looking but hey.

[Jeffa]

By reading your comments mr or mrs freezing hot,it sounds like you don't want to buy a house..you just keep making excuses not too...that's fine..remember to pay my rent on Thursday. Have a full and wonderful life.

[Perry]

A secondary question might be: what is the supply like, compared to availability?

Both places to buy or to rent. And how does it differ from one part of NZ to another?

Seasonal factors (mainly apples) seem to have put extreme pressure on rentals in the Napier / Hastings area.

[chook]

I wouldn't waste time trying to predict or time the market, id buy what you can afford now..then your question will be answered in 2030.

Very bad advice, now is NOT the time to be buying trust me!

[Frezzinghot]

By reading your comments mr or mrs freezing hot,it sounds like you don't want to buy a house..you just keep making excuses not too...that's fine..remember to pay my rent on Thursday. Have a full and wonderful life.

What ever gave you that impression? All I am stating is it a very good time to buy, you seem to think so and that is your paradigm. Good on you.

[Frezzinghot]

Very bad advice, now is NOT the time to be buying trust me!

Thats what I thought! I see some crazy money being offered for dumps! You know the world is mad when that starts to happen. FOMO is a powerful weapon the REA faithful use to get you into crap!

[Jeffa]

Thats what I thought! I see some crazy money being offered for dumps! You know the world is mad when that starts to happen. FOMO is a powerful weapon the REA faithful use to get you into crap!

Maybe if you wait until this time next year you will get a 30%discount ?(I doubt it)Let me explain ...and you don't need a Bachelor's degree in Business and Commerce to understand it...HOUSE PRICES DON'T RISE!! Its THE VALUE OF YOUR DOLLAR THAT IS DECREASING...what you buy for $1.00today will be $1.10 next year...Why do you think a professional working in Wellington CBD on a wage of 130k can't buy a house in Wellington central?because the value of his dollar is DECREASING..if we need more money the Federal reserve can print some more, Adrian Orr can lower interest rates..I can buy another rental and guess whos going to pay for it..you.So like I said in my earlier post,buy what you can now ...Im going to sleep.

[Perry]

Well, Jeffa - welcome to the exclusive club that knows the difference between cost, price, value, numbers, inflation and [pseudo] capital gains.

Want Adrian Orr's job?

I'll be a referee.

[Frezzinghot]

Maybe if you wait until this time next year you will get a 30%discount ?(I doubt it)Let me explain ...and you don't need a Bachelor's degree in Business and Commerce to understand it...HOUSE PRICES DON'T RISE!! Its THE VALUE OF YOUR DOLLAR THAT IS DECREASING...what you buy for $1.00today will be $1.10 next year...Why do you think a professional working in Wellington CBD on a wage of 130k can't buy a house in Wellington central?because the value of his dollar is DECREASING..if we need more money the Federal reserve can print some more, Adrian Orr can lower interest rates..I can buy another rental and guess whos going to pay for it..you.So like I said in my earlier post,buy what you can now ...Im going to sleep.

Your forgetting 1 big thing, your assuming house prices are not over inflated which they clearly are! Why would I be paying for it? I already own property!