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est March 1, 2015
No one has more property news and real estate news….
Welcome to “Our latest thoughts on Property” simply designed to get you thinking. The mainstream media in our opinion follow trends – rather than delve into what might happen or might not. Here we challenge your thinking as to what is and what will happen to the New Zealand property markets. Simply our opinion of course…
The residential real estate market has finally hit the correction – we all predicted albeit later than most thought.
Here are some posting that make it clear we are in a falling market:
The things to consider when trying to predict if we will head to a sever market prediction:
- Banks have tightened up lending. Is their a Global Financial Crash coming?
- Few are borrowing more $$$ to upgrade their home
- Investors are out of the market big time
- Homeowners have little confidence in the market – thus not putting their homes on the market unless they have to: death, divorce, transfer, mortgage pressure
- Uncertain economy with the real possibility Winston Peter’s is our next PM! That will stem the immigration flow….
We have been saying for some time that the residential real estate market is due for a correction… Well we are in it, here is why:
After record national median prices in March, prices are stable and sales volumes fell across New Zealand during April as the market moved past the traditional March
2/ The number of sales for April 2017 was 5,845, a seasonally adjusted drop of 9% compared to March. Year-on-year, sales volumes declined 31% – REINZ
3/ Days to sell moving higher The number of days to sell eased by one day to 34 days from March, and eased two days compared to April 2016 – REINZ
4/ Million dollar homes show decrease in volumes Between April 2016 and April 2017, the number of homes sold for more than $1 million fell by 23% – REINZ
5/ When the Market corrects… Auckland stutters first (as we are seeing now), Christchurch and Wellington follow next and the the Regions follow last. Last on the BOOM trail – are last to feel the effects
6/ The Labour Party – has created more nervousness amongst Landlords – and this along with the 40% LVR’s for them – will have a impact on them purchasing further
7/ House price inflation has moderated further, especially in Auckland. The slowing in house price inflation partly reflects loan-to-value ratio restrictions and tighter lending conditions – RESERVE BANK
- 2017 NZ Real Estate Market Prediction – January 2017
2017…. is 8 years on from our last Real Estate Market Crash. Time for another one?
Over the year plus we have suggested that a market correction is well over due. The Auckland real estate market is “was nuts” – and that simply could not continue for a number of reasons. The reason we have yet to see a correction is:
a) LOW OCR and thus Mortgage Interest Rates
b) Positive net Migration
c) Fairly stable job market and economy
b) US FED Reserve rates not rising
2017, will see a correction in our humble opinion. Mortgage Interest rates will rise and the Banks will continue to run with LVR and income tested lending… protecting themselves. Residential real estate sales will slow and we will see a lift in Mortgagee Sales
Real-time market statistics from realestate.co.nz for the past three months (ending 30 November) show a comparative cooling in demand across the main centres – most noticeably Auckland… this will continue with sales lower in volue than they have been in the last few years
As always – One person’s opinion!
The Real Estate Market Has Turned – what is coming next?
If you talk to real estate agents in Auckland – they will tell you a few things:
1/ There is less phone/email enquiry
2/ There are less people coming to open homes
3/ Banks are requiring a higher income threshold for borrowing – so income tested borrowing is in place and reducing buyer numbers significantly
The fact is lending restrictions are starting to bite: https://propertynoise.co.nz/2016/11/01/slower-market-here-to-stay-anz/
Mortgage registrations are down 21% because of it: https://propertynoise.co.nz/2016/10/31/decline-in-new-mortgages-sign-of-cooling-property-market/
For Barfoot and Thompson the largest Real Estate Agency in Auckland…. Sales numbers in the month fell to 778, more than a quarter lower than those in September and also a quarter lower than the average for the past three months.
The last time sales numbers fell this low in an October was in 2011, when the market was still not fully recovered from the 2007 Global Financial Crisis.
So are we ready for a crisis? When it hits it can hit hard….
As always – One person’s opinion!
deja vu 2007/2008 Property Crash?
Many think that the Property Market won’t go through a correction phase. Why? Not sure – it always does and always will – and many can’t even remember back to 2007/08. When a market correction comes it can come hard!
We are starting to see some real concerns in global markets and now here locally…
As reported here at www.propertynoise.co.nz
- Dumped apartment projects ‘groundhog day’ to GFC
- Tough lending times for investors
- Kiwi hits 2-month low as expectations of Clinton presidency stoke US rate hike bets
- Projects canned: Home ownership dreams crushed
China watchers are starting to put a price tag on what any collapse in the nation’s red-hot property market could cost banks.
All of the above are indicators that we are heading for a market correction.
We believe at some point (soon) we must. Why?
- The US Federal Reserve will lift Interest Rates soon – that will flow through to a lower NZ$ – which will encourage the RBNZ to lift the OCR here
- Once Mortgage Interest Rates lift here in NZ – there will be some significant pain for those that have borrowed a heap at record low 4 an 5% Interest Rates
- Landlords are starting to buy a lot less property – due to restrictions. Less buyer demand… will impact
- NOTE: The collapse of property developments in Auckland is “almost groundhog day” to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG’s Financial Institutions Performance Survey.
As always – One person’s opinion!
The Market Is Correcting In Australia! New Zealand – Are you Ready?
In Australia real estate agent numbers are falling as real estate professionals face ongoing pressures in tougher market conditions.
“We are definitely seeing a contraction in agent numbers across the whole industry. If the best agents are finding it tough, then the newbies are finding it very tough,” Mr McGrath said.
In February, Jonathan Tepper, founder of macroeconomic research group Variant Perception, predicted a property market crash of 30 per cent to 50 per cent.
“The 350 per cent rise in prices in Australia since 1990 eclipses the 140 per cent rise in the US before its bubble burst,” said Mr Dales.
“The 40 per cent of borrowers with interest-only loans are particularly vulnerable if rates are much higher when they have to start repaying the principal.
As we have said previously – they key will be Mortgage Interest Rate Rises… once that occurs, we suspect the real estate markets in New Zealand and Australia will go into a free fall…
As always – One person’s opinion!
What are the solutions to the so called “Housing Crisis”
Here we go! Pretty Simple we reckon.
It will take years for supply to outstrip deman and bring prices down. The government MUST act now…
1/ LIFT LVR to 50% for Property Investors (for now) They are buying the large majority of real estate in Auckland and surrounds on Interest ONLY Mortgages to speculate. Get these “Fat Cats” out of the market quick…
2/ Provide a sizeable First Home Buyers Grant and lower the Mortgage Deposit to 5%. Get these guys into the market now. Restrict their $ Purchase Amount ( various levels for various regions)
These few initiatives we can do now and will have an instant effect:
- Landlords will stop buying bringing down demand
- First home buyers will be in the market BUT will be capped thus taking pressure of price growth too!
As always – One person’s opinion!
June 15, 2016
Real Estate Market Over Inflated and Ready for a Crash?
We are the last people to be negative. But, the reality is the real estate markets are over inflated much like the New Zealand Dollar.
Why do we think that?
1/ The economy is running pretty average to be fair. So the rise in real estate prices are by no means a reflection on how well the economy is performing
The facts are, the jobless rate in New Zealand rose to 5.7 percent in the first three months of 2016 from an upwardly revised 5.4 percent in the previous quarter. Yep – we are not creating more jobs and those that are employed are not earning any more.
2/ House price rises and the Christchurch rebuild on the back of positive net migration are the only aspects fueling our economy
The facts are, net migration in New Zealand is the highest it has been since at least 1978 — and possibly ever.
More than 124,000 people arrived in New Zealand in the March 2016 year, intending to stay long-term or permanently. A During the same period, 56,450 emigrated — resulting in a net gain of 67,619 people — the highest 12 month figure for any period in at least 38 years.
We are worried and concerned:
1/ The nation is becoming one of Debt, Debt and more Debt. SEE HERE
New Zealand’s gross debt is a whopping half trillion dollars; housing now accounts for $218 billion of that.
As of April that housing debt was growing at an annualised rate of 8.3 per cent — and that rate is accelerating.
2/ Off house price rises – Car dealers are laughing all the way to the bank . People are adding the car to their Mortgage on the back on increased paper equity.
Something to think about:
1/ What happens to all those first home buyers that have borrowed $400,000/ $500.000 / $600,000/$ 700,000 to buy their first home when interest rates start rising towards 8 and 9%? Because they will…
As always – One person’s opinion!
April 12, 2016
2016 Market Prediction Continued – Have we reached the peak ? Is this 2007/08 all over again?
March 2016 saw the highest levels of sales since March 2007. Based on that as a key indicator and other factors our 2016 Real Estate Market Pedictions still stay the same in that:
1/ The market will head into a correction cycle – but not yet as Mortgage Interest Rates will continue to stay low for some time – perhaps rest of the year until they move upwards
2/ If you look at the CLOCK above we are sitting at 10/11 – so not far until we see a correction
3/ We expect Mortgagee Sales to start kicking in late 2017/ early 2018- as interest rates rise and those that borrowed at 4% can no longer sustain the pain of increased rates
The KEY factor is Mortgage Interest Rates – once they start rising rather than falling as they have been – that is when we will see the shift to the 12 o’clock position on the Property Cycle Clock.
REINZ March figures released today show…
• 9,527 dwellings sold in New Zealand in March 2016, up 30.7% on February and up 8.2% on March 2015. This is the highest number of sales in March since 2007.
• On a seasonally adjusted basis the number of dwellings sold rose by 5.5% compared to February • National median price of $495,000, up $20,000 (+4.2%) on March 2015 and up 10.0% on February
• New record national median prices across New Zealand, New Zealand excluding Auckland, Auckland, Waikato/Bay of Plenty, Wellington, Nelson/Marlborough, Canterbury/Westland and Central Otago Lakes
• A 27% rise in the number of sales over $1 million between March 2016 and March 2015 – from 1,023 to 1,301 • 20,180 dwellings sold by auction in the 12 months to March 2016, representing 22.0% of all sales, an increase of 38% in the number sold by auction in the 12 months to March 2015
• Excluding the impact of the Auckland region, the national median price rose $35,000 to $385,000 compared to March 2015.
As always – One person’s opinion!
February 21, 2016
2016 Market Prediction
The latest REINZ statistics will show the market (residential housing) is still growing in general terms..
• 5,048 dwellings sold in New Zealand in January 2016, up 4.3% on January 2015 and down 31% on December, although on a seasonally adjusted basis the number of dwelling sold rose by 9.7% compared to January 2015, and fell 5.1% compared to December.
We know regional markets are on the improve too…
So where to for 2016?
- Mortgage Interest rates will continue to drop now …. due continual low inflation
- This drop will simply delay the market correction, ourselves and many predicted in 2016. It will come though…
- Auckland’s volumes of sale will show continual decline in regards to month on month sales
- The regions will see the benefit and continue to grow in price… not sure if the listing volumes will be available to see sale volumes lift to much though
One person’s opinion!
November 29, 2015
2016 Residential Housing Market Prediction
A recent article featured here at Property Noise NZ reported that the New Zealand property market is at risk.
READ HERE: Market faces sharp correction risk
New Zealand housing is over-valued and facing a downturn, warns a new report.
The report acknowledges there are fundamental economic factors – including Auckland’s supply shortage and low interest rates – which have underpinned recent house price growth.
However, its analysis suggests the rapid recent growth in prices, especially in Auckland, has left them at a level where there is increased risk of a sharp correction.
NZ Property Institute chief executive Ashley Church doesn’t believe a sharp market correction, particularly in Auckland is likely – I think that is simply blind optimism. What goes up must come down . Market Cycles – what makes Auckland immune to the cyclical nature of the property market?
Yep – positive net migration is up massively BUT…. here are the factors (as we have reported previously – see posts below) that will ensure there is a market correction.
1/ Chinese investment – is longer at the frantic heights that it was. The Government requirement for ALL buyers to be registered has been a major influence here. Were the Chinese laundering money here? Probably. Now they have to be registered – their $$$ is not filtering through as much.
2/ Mortgage Interest Rates will rise. Amazing they haven’t already but outside the Auckland Property Market the economy is pretty shite….. 6% plus unemployment and a big unknown regrading Global Dairy Prices – has put the Reserve Bank of New Zealand in an awkward position. They can’t put interest rates (via a OCR lift) up …..but they want to – to control the rampant Auckland residential property market. In the meantime Auckland Property owners (if they are trading out of Auckland) are massive winners and so are Tauranga sellers 🙂
3/ Less buyers. As prices go up and up – many buyers get alienated by the rising market and the Banks simply won’t loan $800.000 plus to first home buyers any more.
4/ Unemployment – will get worse before it gets better in my opinion. The graph below is turning in the wrong direction. There is no real reason or initiatives to help it get better. To be fair we don’t hear too much about it – the media have been hooked line and sinkered by the Flag Referendum instead, a clever John Key initiative to mask the the media/public concerning themselves with the real issues…
New Zealand unemployment rate edged up to 6 percent in the three months to September, from 5.9 percent in the previous period. It was the highest rate since the first quarter of 2014
5/ As per all of the above the Supply and Demand curve will change – not through more supply – that is far too slow coming on but by simply less demand.
One person’s opinion!
September 10, 2015
What happens when Mortgage Interest Rates Rise?
Look at the above graph and tell me mortgage interest rates will stay at 4% forever. They won’t of course… with the way the international economy is we could see another cut to the OCR (which was cut today to 2.75%), which means even lower mortgage interest rates to come I suspect.
The poor Reserve Bank… they have to lower the OCR but all that does is artificially inflate the Auckland Residential Property Market and now some regional markets i.e Tauranga.
Some seem to think the GFC (Global Financial Crisis) was a one off – that something like that will never happen again. Wrong! Those who care to remember know they happen all the time. Look at the US graph below:
So mortgage interest rates will rise and then guess what? Those with mortgages will be paying more for their mortgage:
1/ Less money circulating in the economy – less jobs
2/ Banks will tighten their reigns and lend less money
3/ Homeowners will not be able to borrow more for renovations/extensions to their mortgage etc.
4/ Mortgagee sales will feature big time as they did 2007/08. Remember… in 2007, 41.5 per cent of mortgagee sales were in Auckland, simply because they have bigger mortgages and thus higher payments when interest rates rise
- March 2015 Reserve Bank figures show mortgage debt topped $200b for the first time in January, up from just over $100b at the same time in 2005.
- A typical first-home buyer in Auckland – a working couple in their late twenties – is likely to be spending over half their income on mortgage repayments according to a new report.
- A leap in Auckland’s lower quartile housing price in March 2015 from $554,600 to $587,200 means weekly mortgage repayments would total $778.77, or half of the couple’s total income. Imagine what happens to that when Mortgage rates go to 10%
5/ House prices will fall as per the graph below. Remember 2007/08?
One person’s opinion!
August 21, 2015
The future of NZ Property – not looking good.
If we look into the future New Zealand (let’s say 50 years) – what will the property scene look like?
The year is 2065, and I will be in my nineties hopefully with a heap of grandchildren and great grandchildren.
This is what I see:
1/ A one city dominant real estate market – Auckland. No surprise there. It is now let alone in 50 years time. Shear population growth will see Auckland become what major cities already have to their respective countries overseas – dominant in size and growth.
2/ The regions/provincial areas are in massive decline. The likes of Palmerston North, New Plymouth, Gisborne, Rotorua etc. in the North Island as examples will be a sad comparison to how they stand today. Simply they will decline in population over the next 50 years in percentage comparison. We only have so much rural land to be the ole “food basket to the world” . Fonterra is already developing their farming operations word wide . Being a supplier of food to the world is not going to be the saviour of the provinces. It hasn’t yet – it has simply kept them on life support. Oil has saved New Plymouth – but where Oil heads as a commodity, I am not sure.
3/ Queenstown & Taupo will be on fire via International Tourism and foreign purchase. These two destinations are WORLD CLASS, and a hell of a lot of people will want to live and play there.
4/ Wellington as the Prime Minister John key said is dying…
Apart from Peter Jackson & the Beehive full of overpaid suits – Wellington is a bit lame. Auckland eats it alive as a big happening city.
Don’t get me wrong, I personally think Wellington is an amazing city and I can’t stand Auckland – but if you were putting your investment $$ into a city – where is it going to grow folks?
If I was investing in real estate today. It would be in:
Hamilton – the new South Auckland
Queenstown & Taupo.
One person ‘s opinion!
July 14, 2015
When will the government see sense and restrict overseas investment in our real estate? PART 2
WOW, there has been a huge amount of media coverage about this in relation to Chinese Buyers. Points to consider:
1/ It is not Racist for New Zealanders to wish to protect their housing stock from being picked off by Chinese for future generations. I think Labour are onto it… National are playing along with the game… will cost them votes otherwise?
2/ Without doubt there should be a foreign ownership register – isn’t the Government doing this is some form with IRD numbers required to purchase shortly?
3/ OIC (Overseas Investment Commission) is in place to protect large holdings of rural land surely the ACT can be amended to let these guys to govern other forms of ownership approval?
4/ There are over a billion Chinese and billions of others worldwide that love NZ …. we are only starting to see the start of foreign investment in our real estate. We must ACT NOW!
5/ If we are going to restrict foreign investment in NZ – what are the rules?
No ownership unless you are a NZ Citizen… or perhaps just a resident?
6/ It is an issue and those that don’t see it as one – are happy to ride the gravy train called the UP & UP of the Auckland housing market.
There is a bigger Question HERE!
What do you want NZ to look like in 20 years. Full of Chinese and off – shore landlords?
One person’s opinion!
June 25, 2015
When will the government see sense and restrict overseas investment in our real estate? PART 1
To be honest I have been a National Party supporter and voter since I was old enough to vote. Last election though I voted NZ First. Why? Because Winnie (Winston Peters) actually makes sense when it comes to our immigration policies for a whole lot of reasons.
For the first time annual net migration topped 50,000 in a single year in 2014, and far exceeds the previous peak in migration seen in 2003, when it hit more than 42,000. A decade ago, the migration boom was a factor in rapidly rising house prices and rents, especially in Auckland and we know it is all happening again.. Hey that’s cool – but if we don’t have the infrastructure from a housing perspective to cope than we are simply putting massive stress on the demand and supply of New Zealand Housing.
This has a couple of massive effects:
1/ Unsustainable house price growth. What goes up must come down?
2/ Increase rental costs – not tied in to wage growth or standard CPI
……….. so New Zealanders are getting punished for an Immigration Policy that is out of step of its adverse effects.
Now the National Party government love all this “FREE MARKET” stuff don’t they. They don’t like intervening and still won’t with the crisis that is happening in Auckland.
That’s right I forget…….they have made two (2) attempts to cool the Auckland market
1/ Lift the LVR’s across the whole country
2/ Place some restrictions on lending percentages on landlords
…………. and how is that working out Bill English?
Now to get to my original point. Chinese CASH is awash in Auckland residential real estate. Money laundering? – maybe. Chinese foreign nationals investing in a stable society and great place to live with a great future – absolutely! Why? Because House Prices rising in Auckland give those owners a false sense of wealth? Absolutely!
NOTE: New Zealand is just one of three countries in the Asia-Pacific region that does not have any restrictions on foreign property ownership.
……. to be continued
One person’s opinion!
May 15, 2015
No one wants to use the C word when it comes to property at the moment – but can’t you see a CRASH coming?
REINZ statistics out a few days ago show:
- 7,234 dwellings sold in April 2015, up 27.6% on April 2014 and down 17.8% on March 2015
- National median price of $455,000, up $22,750 on April 2014 and down $20,000 on March 2015
- A rise of 5.3% in the national median price in the 12 months to April 2015
- The national median price, excluding Auckland, up $3,000 compared to April 2014 and March 2015
- A rise of 18% in Auckland’s median price, from $611,500 to $720,000, between April 2014 and April 2015
- So we are seeing the regional markets lift a bit… (that took a while), even with the LVR rule in place perhaps first home buyers are starting to accept it and find ways to work with it? Good on them.
Auckland is going nuts and with nuts crazy things happen. What happens when interest rates go up? They will … not yet, they look like they are about to go down first – go figure. But Mortgage Interest rates will go up.. as sure as the sun will come up tomorrow and with that comes pain plus more money is taking out of the economy into mortgages… dead money as the word/meaning mortgage implies. That money does not filter through the economy like spending money on your family does.
Now I am the last person that wants to be negative… but I am not buying the media frenzy around the Auckland Property Market as if it is natural. Demand and supply .. yeah, yeah… we all know that graph from high school economics, but remember what goes up must come down too and if immigration buttons off, if Mortgage Interest rates go up, when property rates go up again in Auckland, when there are less Landlords buying.. then we will see a “correction” – a far better word that that other C word CRASH. I hope it will be that just a CORRECTION as the worst case scenario.
We have been here before. Remember 2008?
Just one person’s opinion 🙂
April 12, 2015
What is really happening with the real estate market?
The real estate statistics via REINZ for February 2015 report:
• 6,898 dwellings sold in February 2015, up 12.6% on February 2014 and up 42.5% on January
• National median price of $430,000, up $15,000 on February 2014 and up $4,000 on January
• A rise of 3.6% in the national median price in the 12 months to February 2015.
• A rise of 14.0% in Auckland’s median price, from $592,000 to $675,000, in the same period.
• A national median price, excluding the effect of Auckland sales, flat at $350,000 compared to February 2014.
• 1,272 dwellings sold by auction in February, 207 more than for February 2014.
with them stating… “The data also shows that there has been no increase in the median price for New Zealand, excluding Auckland, between February last year and February just gone. This underlines again the view that there are two distinct real estate markets in New Zealand – Auckland and the rest of the country.
Nothing new here right? Right. It is a shame that the Media don’t spend more time of looking what is happening in the rest of the country… as that is where most of us live.
I can always tell how “healthy” OR should I say… positive the NZ real estate market is by what I call the TAUPO factor..
If the market is on fire or on the improve in the North Island in particular… so is Taupo.
Mary- Louise from Harcourts in Taupo visit.. http://marylouise.harcourts.co.nz/ does a great job on reporting on the market. Click the link to see her website and report.
Taupo is certainly not on fire but as Marie – Louise states there maybe a start of a shift from a buyers market to a sellers market. I am not so sure on that exactly … I think we are simply seeing:
1/ Buyers picking up property that is real cheap in Taupo. You can buy a brick home cheaper in Taupo than you can in Palmerston North! Go figure!
2/ Other buyers (not just Aucklanders) are back in the Taupo market… including investors. ROR is better due to lower prices in Taupo than previous and most other markets in the country.
Banks are wanting to sell more money and many have more confidence in borrowing such.. so the lake home is now more an option than it has been for a long time.. since 2007 really. A sign perhaps the real estate market (nationally) is perhaps finding its own confidence… not just suffering in the shadow of Auckland.
One person’s opinion!
March 11, 2015
Is the Reserve Bank setting up Auckland for a property crash?
Historically low interest rates mean people borrow more and this is the case whether it be getting into a first property or upgrading in Auckland.
The reality is Auckland is booming with the unemployment rate down under 6%, business confidence on a high and net migration positive. It seems many commentators have thrown out the Property Cycle as it “won’t happen this time”. It always happens – and I think many should give thought to only a few years ago 2008 – when NZ House Prices fell dramatically. Yes I know if was the GFC etc… but all it was, was a drop in demand and the banks got scared of lending out money… this will happen again.
What goes up and up and up, must come down and be corrected. Has the Auckland market peaked? Would you buy a $700,000 first home in Auckland on a 20% deposit of $140k at the moment (many are)?
So coming back to the heading Is the Reserve Bank setting up Auckland for a property crash?, the RBNZ are somewhat hand tied and because of that are letting the Auckland Residential Real Estate Market get away too quick.
Inflation is under control…. so they have no real mandate to lift the OCR, which in turn mean mortgage interest rates will not rise. They have curbed first home buyers with 20% lending (as a majority)… but they haven’t ring fenced Auckland, and thus the regions volume and prices are suffering because of it. They are thinking of tagging investors… but is that really going to curb the Auckland market? I think not.
I think the RBNZ haven’t got a clue of what to do and when they do something of significance… it will be too late.
There will be a significant correction in the Auckland market.
One person’s opinion. I hope I am wrong!
March 1, 2015
What will the 2015 Residential Real Estate Market bring ….
The NZ property market as most are aware at present – has two markets. Auckland/Christchuch and the rest. The sad reality is that the majority of the population are not benefiting from any capital growth rates with their property.
Our Predictions for 2015
- Mortgage Interest rates will rise to 6 plus %. At some point inflation will kick in and force RBNZ’s hand to lift the rates
- Auckland and Christchurch will continue its growth due to pure economics. Demand & Supply.
- RBNZ will impose some lending restrictions on residential property investors and look at loosening the burden they have imposed on first home buyers
- The provinces will continue to suffer more on volume of sales and possible negative capital growth. They will see a slight increase in volume versus 2014
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