Glorious 2 bed home...

[gjm 3258]

Average income in NZ is around $1000 per week. That's average, not median. The median is lower at around $900 per week, and is a more relevant figure.

The median house price in NZ is around $420000, or pretty close to 9x the median income.

Since 1995, wages have increased by around 75%. House prices have increased by around 175%.

House prices are running away. It happened in the UK, and buyers there had stamp duty and capital gains to contend with. There's no such disincentives here.

OK - so what I've said are huge generalisations, but it paints a particularly bleak picture. Couple this with the requirement to have 20% of the purchase price of a property before the bank will give you a mortgage, and it's a wonder anyone can buy a house. Investors, of course, love it, so prices continue to rise.

[richard 384]

every country has a city that is priced high, how else does the rest the that country get a balance of where it is,price wise.

[richard 384]

Average income in NZ is around $1000 per week. That's average, not median. The median is lower at around $900 per week, and is a more relevant figure.

The median house price in NZ is around $420000, or pretty close to 9x the median income.

Since 1995, wages have increased by around 75%. House prices have increased by around 175%.

House prices are running away. It happened in the UK, and buyers there had stamp duty and capital gains to contend with. There's no such disincentives here.

OK - so what I've said are huge generalisations, but it paints a particularly bleak picture. Couple this with the requirement to have 20% of the purchase price of a property before the bank will give you a mortgage, and it's a wonder anyone can buy a house. Investors, of course, love it, so prices continue to rise.

Since 1995, wages have increased by around 75%. House prices have increased by around 175%.

So people see buying and sell a house as a way to make money because their wages have been frozen to 2% or less.

OR because the Reserve bank incresses % rates to control spending

[Driftracewake 22]

Actually, you're quite wrong. People aren't willing to pay it, developers are. Zero capital gains tax will drive prices up and people won't get a look in until the market implodes because the people can't afford the surplus of over-priced, sub-divided sh*tholes everywhere.

Developers don't build houses to sit empty, they build them to sell or rent. And they wouldn't be doing it if their wasn't demand.

There will never be a surplus of houses in your area.

Your comments are ironic given that your house (based on what you've said above) made you around $1.5million in the last 20 years. You could cash out at any point but you still live in that suburb, and whilst you say you may not pay 1.5-2 million to live there are you going to let someone give you 1.5-2million to leave?

This isn't a personal attack on you, just a different take on the market.

Edited October 9, 2014 by Driftracewake

[deeveus 81]

Makes no sense to someone from down our way. For less than that you can have this, not the best looking place but a bit of land and a house...

http://www.trademe.co.nz/property/residential-property-for-sale/auction-782107475.htm

[kingkarl 136]

Average income in NZ is around $1000 per week. That's average, not median. The median is lower at around $900 per week, and is a more relevant figure.

The median house price in NZ is around $420000, or pretty close to 9x the median income.

Since 1995, wages have increased by around 75%. House prices have increased by around 175%.

House prices are running away. It happened in the UK, and buyers there had stamp duty and capital gains to contend with. There's no such disincentives here.

OK - so what I've said are huge generalisations, but it paints a particularly bleak picture. Couple this with the requirement to have 20% of the purchase price of a property before the bank will give you a mortgage, and it's a wonder anyone can buy a house. Investors, of course, love it, so prices continue to rise.

You're missing the most important variable in that equation... interest rates

In 1995 mortgage rates were 10%+. Today its just over 6%.

The mortgage you can service on the average income has therefore increased about 67%.

[gjm 3258]

You're missing the most important variable in that equation... interest rates

In 1995 mortgage rates were 10%+. Today its just over 6%.

The mortgage you can service on the average income has therefore increased about 67%.

That'd be a fool's errand. NZ has a history (roghtly or wrongly) of high interest rates, and I anticipate that while the (frankly ludicrous) requirement for a 20% deposit will be waived, interest rates will rise. They have to - National has ~$60bn (or whatever) of debt to repay.

I think Dave may have an excellent point. Immigration isn't to NZ - it is to Auckland. And that spells disaster. Admittedly much of the business centre is in Auckland, but much of the immigration we are seeing is either unrelated to that business, or is seeing a net outflow of money from NZ as a result of work performed here. (I could stereotype about some of the immigration taking place, but let's not go there.)

But that's not property prices.

Sort the railway. A commuter service between Auckland and Wellington would open up many areas currently accessible only by car. Business would move to those areas, and so would people, easing the housing problems in densely populated regions.

Instead we have policy that will see the cramming of more and more building into smaller and smaller (and more and more expensive) areas. There's no doubt purchasing property in those areas as little as 10 years ago is now proving to be a most astute (if accidental) financial investment.

Me? I'd like some land, and a little peace and quiet, please!

[m325i 709]

Rent an apartment and wait for the Ireland/Detroit type crash. May take 20 years but you're an idiot if you think dirt is worth that much in a land where it's not scarce.

I'm by no way saying the fundamentals of the market are sound, but this has never worked. In fact it's the complete opposite. If you had bought at any point in history you are 'up'.

The only people in my lifetime that have lost money on property are;

• bought at peak (07) and forced to sell in 08/09
• bought at peak and forced to sell in 'Asian Crisis'
• '87 crash - forced to sell (due to borrowing too much and)
• Meth lab house
• Leakers
• Leasehold

EDIT:

Didn't you just contradict yourself there?

Force mortgagee sales are not 'arms length market transactions' and should be discarded when looking at comparable sales evidence.

Forced sale scenarios (such as marriage splits) generally would be included as evidence. But my point is that it is only if you HAD to sell at that point would you realise a loss. If you rode out those 'dips' you would have recovered, even if you bought at a previous peak.

Not being able to service your mortgage, I think, is the individuals problem, and again, if they weren't forced to sell in the 'dip' they would also have positive equity.

Meth Lab is 'bad luck' or poor management and not related to the market as such

Leakers, dito

Leasehold - I'm sorry but you have lost the second you bought

Edited October 9, 2014 by Nick G

[westy 614]

Didn't you just contradict yourself there?

[kingkarl 136]

That'd be a fool's errand. NZ has a history (roghtly or wrongly) of high interest rates, and I anticipate that while the (frankly ludicrous) requirement for a 20% deposit will be waived, interest rates will rise. They have to - National has ~$60bn (or whatever) of debt to repay.

Huh? NZ's public sector debt to GDP is one of the lowest in the developed world. If our govt debt was high (it isn't), that would be an incentive to LOWER rates. You are also overlooking the independence of the RBNZ & govt but that's another story.

Interest rates rises are mostly employed to curb inflation - in the developed world there is no inflation. Europe is actually steering down the barrel at deflation. The ECB has negative deposit rates - so charge banks to hold cash overnight. Such is the magnitude of the problem. No inflation = no interest rate rises.

The RBNZ has commented the kiwi dollar is overvalued. They put their money where their mouth is by selling half a billion NZD in the last month in order to get it lower - something they haven't done for many years. The RBNZ's commitment to lower NZD is further proof more rate rises are extremely unlikely.

I think Dave may have an excellent point. Immigration isn't to NZ - it is to Auckland. And that spells disaster. Admittedly much of the business centre is in Auckland, but much of the immigration we are seeing is either unrelated to that business, or is seeing a net outflow of money from NZ as a result of work performed here. (I could stereotype about some of the immigration taking place, but let's not go there.)

Yes, agree.

But that's not property prices.

Sort the railway. A commuter service between Auckland and Wellington would open up many areas currently accessible only by car. Business would move to those areas, and so would people, easing the housing problems in densely populated regions.

Because governments have such a successful history of intervening in the railways in this country... As a taxpayer I'd rather a solid kick in the nuts than go through that exercise again.

There are some signs of business relocating out of the CBD. Albany is an example. Tauranga and Hamilton will probably pick up a lot of the Auckland spillover in time. The cost of living (and arguably the lifestyle) in those cities is highly favorable so it makes sense for head offices to go there. Staff will take a pay cut because their mortgage repayments are halved. Therefore lower costs for the company - everybody wins.

Instead we have policy that will see the cramming of more and more building into smaller and smaller (and more and more expensive) areas. There's no doubt purchasing property in those areas as little as 10 years ago is now proving to be a most astute (if accidental) financial investment.

What's the alternative? More sprawl, more traffic, more stretched infrastructure?

[lord_jagganath 421]

Auckland is in a location that isn't suitable for a city. the isthmus is stifling growth.

[Ahmedsinc 414]

Auckland is in a location that isn't suitable for a city. the isthmus is stifling growth.

Bollocks. What it does stifle is commuting times.

Given the large amount of export that still routes through Ports of Auckland combined with Kiwis ingrained aversion to driving anything more than 30 minutes at a time there's no other place for the biggest little city in UnZud to be than where it is. Exporting to global markets ( though I struggle with the logic) is still where we make most of our dough.

What is stifling growth is the navel gazing attitude of our local town planners...... Dannemora / Botany / Flat Bush are the prime examples. Farms bought up by land bankers with an eye for an easy killing, held bare for 20 odd years then subdivided and sold at massive markups. 450m3 sections now selling for well over $350,000!!!!!!!

Which in turn have 5 bedroom 190 m3 houses squished on to them(selling for $700k+ I might add), further compounding the ultra density of the 'new' Orklund. Had our civic leaders actually listened to what they were being told 20-25 years ago the land would have been made available years ago, thereby staving off the sudden squeeze on land supply. Cost of building hasn't really changed much in real terms for years.....section prices have though.

Any old way you look at it, it's a bad time to be on a single blue collar income and want to buy a home to raise your family in.

[Ahmedsinc 414]

Wow, this has turned into a fascinating thread. First, in response to some great comments here:

But it is property prices and that's my point! I go to up to 8 auctions a weeks (Auckland) and I can assure you that immigrants are over-represented as a proportion of the Auckland population and massively, massively over-represented as a proportion of the national population. Most of them have way more money than the average punter and therefore have discretionary options - as a result they land the lucrative opportunities at about a 60-75% ratio by my assessment. A lot of the resulting profits will go offshore.

IMHO only citizens should be able to own part of New Zealand unless by special dispensation.

That's what everybody in Ireland and the US was saying in March 2008. Their tune changed dramatically a few months later. I don't want to be the harbinger of doom but it's almost economically inevitable that the same thing will happen in Auckland within the next 20 years. Properties worth over $300,000 in 2007 can't be given away for an iPhone today in some places...

You are 100% correct above but past performance does not represent future results.

My advice. If you're under 40 (or 40+ with spare cash) buy in Pukekohe and Hamilton NOW(!!) and buy lots. Look at other international cities and mark my words. Pukekohe is the next Karaka and Hamilton is the next Palo Alto. It will take 20 years but it will happen.

Trains already travel at 300km/h+ is some places... 20 years is a long time.

Agreed mate, pukekohe in particular. I have a suspicion that it might not quite become the satellite to suckland that sone believe, more a halfway hub with a focus on light industry rather than white collar. Trouble is, the flow on effects of pukes expansion are being seen further west....... brother in law just paid $400k ish for a pretty unremarkable place on a cross leaseable 1/4 acre that sold for less than $275k not quite two years ago.

It's not just a 'desireable' central city problem, it's the Auckland region in general. I really hate to think what's happening in Christchurch at the moment!!

[richard 384]

Wow, this has turned into a fascinating thread. First, in response to some great comments here:

. A lot of the resulting profits will go offshore.

What do you mean by this sentence.

Edited October 10, 2014 by rich

[gjm 3258]

Agreed mate, pukekohe in particular. I have a suspicion that it might not quite become the satellite to suckland that sone believe, more a halfway hub with a focus on light industry rather than white collar. Trouble is, the flow on effects of pukes expansion are being seen further west....... brother in law just paid $400k ish for a pretty unremarkable place on a cross leaseable 1/4 acre that sold for less than $275k not quite two years ago.

It's not just a 'desireable' central city problem, it's the Auckland region in general. I really hate to think what's happening in Christchurch at the moment!!

Pokeno is already pricing up and up, in part due to the milk factory being built there, but also because farmers know it is far more profitable to grow houses than grow crops.

This does lead to another huge problem. Water. The Waikato river is almost a single source for mains water, and it cannot sustain the growth of development we're seeing.

House prices in Waiuku are on the up. We know - we've been looking. We don't want a mansion, or a farm - 3 bedrooms and 1000sq m of land please. A Kiwi quarter-acre. There are just 3 such properties listed in the entirety of Franklin on Realestate now for under $300k, and one of them is section on the Awhitu peninsula. Bear in mind that buying any of these requires $60k as a deposit.

Essentially, if you want a family home within commuting distance (and I'm calling 1 hour commuting distance, and not accounting for the dire traffic on SH1 northbound) of Auckland central, you'd best be prepared to spend money that only a few years ago would have bought significant acreage.

But it is property prices and that's my point! I go to up to 8 auctions a weeks (Auckland) and I can assure you that immigrants are over-represented as a proportion of the Auckland population and massively, massively over-represented as a proportion of the national population. Most of them have way more money than the average punter and therefore have discretionary options - as a result they land the lucrative opportunities at about a 60-75% ratio by my assessment. A lot of the resulting profits will go offshore.

IMHO only citizens should be able to own part of New Zealand unless by special dispensation.

What do you mean by this sentence.

I could answer this in some very blunt words, but as an immigrant to NZ myself, I had best not - we're not yet citizens, just permanent residents. That said, we've been here just over two years, and will apply as soon as we meet the 'Presence in New Zealand' criteria. The requirements for this are:

"... to be present in New Zealand

i) for a minimum of 1,350 days in the five years preceding the citizenship application; and

ii) for at least 240 days in each of those five years"

This is pretty lenient - you could be out of NZ for 3 months every year (as some people I know are) and still qualify for citizenship.

There are a huge number of people entering NZ each year who do not speak English as a first language (or in some cases, at all) and who have no intention of ever becoming naturalised Kiwis. It'd be tough on us (my family) but a ruling saying only those people holding citizenship are eligible to buy property here would make a huge difference to the housing market.

There would be endless cries of 'I've lost money on my house', but typically only those who bought as an investment would actually lose out. Most other people would simply not make as much profit as they had hoped.

Anyone finding themselves in a position where they have to move (within NZ) for work may be adversely affected, of course. I don't pretend to have all the answers.

On a related note - NZ has been described as 'a lot like Britain 30 (or 40, 50) years ago. If that's the case, why is NZ seemingly hell-bent on making the same mistakes Britain did/is? Doing the same thing more than once and expecting a different result is a sure sign of madness!

[gjm 3258]

I'd be prepared to relax my "property for citizens only" criteria above based on subsequent comments to this:

If you're a non-citizen buying property in NZ you're liable for capital gains tax on that property if you subsequently sell it and you're not a citizen at the time of sale. Trusts can not be used to evade or avoid this tax.

That'll fix the problem overnight I reckon. And it seems eminently fair to all people that consider NZ their home.

Yup. At the very least, it'd mean some of the money earned here and spent on rent (here) stays in NZ, even if only in the hands of the government.

At present, NZ is a buyers market for property. Buy now, rent, make money, sell, make money, and minimal tax implications for someone domiciled offshore. Even those people working here and sending their earnings 'home' are, or should be, paying tax.

And I agree about immigration. Aside from the families coming in on the back of 'my son/daughter/father/mother/etc' lives there, there is a significant influx of very capable individuals from all walks of life. (I like to count myself among this second group of people.)

[richard 384]

Lets look at the first post of this thread , property sold for $1.07 mil

real estate agent makes money

demo company makes money

draughtsman makes money

builders makes money

sub trades makes money

etc etc.

why can't the owner make some money .

people who own more than 1 property takes the risk.

overseas people that buy lots of houses in AK/NZ must see some form of potential.

Maybe house prices have been soooo under valued in NZ it looks like a bargain.

Banks make a profit that go overseas

even Mc Donalds make a profit that go overseas

[richard 384]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11341096

just to add some fuel

[richard 384]

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11341097

and still more

[gjm 3258]

There's what I would consider some 'funny money' being paid for properties... Still, the buyers obviously consider it worthwhile.

I saw this - Investors move in as first-home buyers fold - and chuckled at the quote from the Property Investors organisation. If investors can make a big enough dent in the properties available at the lower end of the market, they will be able to make a quick killing when the deposit restrictions are lifted. Of course, that means first time buyers will have to borrow more than before, and so the cycle starts again.

[richard 384]

http://asia.nikkei.com/Features/Hong-Kong-Showdown/Hong-Kong-s-real-estate-market-could-be-heading-for-a-reckoning

wheather i like it or not change is coming . Take a look at this article, note the size , price and how many condos/ unit in each building.

this is what i mean when i say NZ looks like a bargain.

[gjm 3258]

http://asia.nikkei.com/Features/Hong-Kong-Showdown/Hong-Kong-s-real-estate-market-could-be-heading-for-a-reckoning

wheather i like it or not change is coming . Take a look at this article, note the size , price and how many condos/ unit in each building.

this is what i mean when i say NZ looks like a bargain.

Internationally, yes, NZ looks like a bargain. Hence the foreign investors buying up property.

To those people living here on median wage, property is rapidly becoming an unobtainable dream.

I'll risk sounding like Winston Peters, but NZ should be about Kiwis first. Not foreign investment.

[yng_750 247]

Some consideration i think must be given that 20-30 years ago when men were men a young could might happily look at a cheaper run down place and do it up diy. He can fix the house and she does gardens etc.

Now first home buyers want a renovated house in good order ready for them to turn up and plug in the coffee machine. something thats never been that affordable really.

If you arent handy the cost of builders is too high these days to get a crap house tip top.

Bring back proper education in schools i say.

[gjm 3258]

Bring back proper education in schools i say.

Stop teaching kids how to work in a call centre and give them some useful skills.

[Gaz 1061]

Stop teaching kids how to work in a call centre and give them some useful skills.

What about us who work in a call centre, earn good coin, and also can throw around a spanner or two? Can't I have it all?

Edited October 13, 2014 by Gaz