nzer57

Govt told tread carefully over house prices.


http://www.stuff.co.nz/4046936a10.html

Leighlou

[QUOTE=nzer57;4732915]Govt told tread carefully over house prices.


Interesting story. Surprised to read the suggestion of favourable interest rates as one possible reason for such increases in house prices. My thoughts were that the interests rates were so much higher than else where that this should be dampening the market. Does anyone have any more informed opinions (more than me anyway which is not hard!) on this?

Are the immigrants with their big pots of equity effecting prices and causing resentment as a result?

AlbieLittle

[QUOTE=Leighlou;4734804] Yes, course. Look at the primo land being bought by rich brits and yanks - who then , in some cases have the audacity to restrict beach access.

On the whole, no getting away from it, kiwi's are poorly paid, work long hours and have no way of getting on the property ladder.

A women in auckland last week claimed her combined total income was 90K a year and there was no way she could afford to buy in Auckland.

nzer57

[quote=AlbieLittle;4735128] That's too simplistic a view of current economies and especially property markets. The general theme worldwide is escalating property prices and NZ has not been immune to this.

My first property in NZ was in 1985 and my mortgage was $47K. That was roughly 1.5 times my income. If you look at property markets around the world they had similar characteristics. Today that figure is more like 10 times that.

It's also a combination of depressed incomes.

In 85 the average working class wage was about $25k. I had 2 jobs and made about $50k.

Today I would have to earn around $200k. The average wage today is more like $40 - 50k

Factors influencing property prices;

increased immigration - that's complicated by govt policy that has moved to more skilled, better paid and more cashed up immigrants coming in with higher buying power with the higher value currencies.

too much money chasing too few assets.

insanely easy to obtain credit.

cashed up baby boomers moving from their old style housing into large modern housing.

baby boomer's kids who are now married, more professionally orientated (higher income average) and with combined incomes more buying power.

In 85 I could afford a nice house with a reasonable mortgage and run all this on one income and still save about 20% of household income. Within 5 years things had changed considerably. Mortgages were now bigger and it required at least 1.5 average incomes just to keep your head above water with the same lifestyle.

On top of that we have become avid consumerists.

AlbieLittle

[QUOTE=nzer57;4735184] I like to keep it simple. Can the average Kiwi afford to buy a house? No. Home ownership for a huge proportion of people is a distant dream. The Kiwi quarter acre is history.

Here in kiwi land, i was surprised, not in a good way, how houses are crammed onto any spare plot of land. Check the number of properties with 2 houses where before it used to be 1.

But then Brisbane is like that as well. Having your neighbours inches away from your house seems the norm.

nzer57

First home owners are always going to find the market difficult to get into. When I bought my first place I was 28 and if it hadn't been for the govts "Home Ownership" scheme I couldn't have bought my first house. That was 22 years ago I actually refused pay increases to keep myself in the low income bracket to qualify for state housing loans at the time. I built in a new upmarket subdivision as well.

The big hurdle for most first home owners is low comparative incomes rather than price.

I left Christchurch 8 years and the wages have hardly increased at all.


Has been for over 30 years now

Infill housing. That trend is over 30 years old. People stopped growing their veges and lifestyle changes meant people wanted more time doing anything rather than mowing lawns and maintaining their properties

I've lived in Sydney the past 8 years until recently. It always baffles me why a country as big as Oz with soooo much available land had to jam everyone into little terrace houses. Hell I was out at Lithgow several years ago and here's a little bunch of terrace houses stuck on a small hill out in the middle of nowhere. Completely baffles me

Andrew Cross

Ive been asked by quite a few Kiwi's did i come out with a pot of money...
The answer is no, when I tell them I have a bloody big mortgage the same as them it seems to cheer them up. It is obviously something that they believe - that every Brit that comes over, does so with vast amounts of cash and live in a luxury lifestyle....I wish

nzer57

The real story is that Kiwis understand Brits get a fairly hefty advantage on the exchange rate front and that their perception of house prices is that they are low compared to the UK. They haggle less.

A fair chunk of Brits coming out are usually med to highly skilled on fairly good incomes compared to the average Kiwi. That reinforces their perceptions.

justinthyme

Just being doing a check of mortgage versus rents for 4 beds around Auckland.

Seems that I can rent a $650,000 4 bed property for $2100 a month that would cost $4200 a month in mortgage payments.
Am I missleading myself with these figures or is it, at this moment, wiser to rent?

AlbieLittle

Depends how long you want to stay. Any property you buy will go up in value over 20 years if you can meet the payments.

I personally would rent for the next few years, wait until the property market becomes as cold as a dead fish, which it will do. At the moment it's a sellers market. When it bottoms out in the next five years there will be some fantastic mortgee sales going...

invest in other things, like stocks and shares. Then swoop like a capitalist vulture and reap the rewards.

(Nb - no culpability whatsoever to poster ! )

ex_exile

Lots of things driving the market and there is precious little that Cullan and Bollard can do with interest rates to halt it. The only possible effect is to restrict the entry of first time buyers into the market but w/ unemployment non existent banks are willing to take long term punts so even that isnt really working.

In wellington the council has just effectivly underpinned the market by flagging an intention to severly restict subdivision and infill housing. They ain't building any more land! especially down WGTN way.

Friend just sold up and made 200K in 3 years (sold on trademe if you can belive it)

To Juntintyme: IF you save and invest the additional $2100 per month you may over the long term make as much as by buying a house, maybe..

nzer57

At an interest rate of 7.6% you'll pay in interest $70k/100k (plus $20k in principle) of mortgage over the first 10 years and $46k/100k (plus $43k in principle) over the next 10 years (based on a 25 yr table mortgage)

Over that time (25yrs) you will have paid $123k interest for every 100k you borrowed.

If average property growth was 6% then $100k would be worth $430k in 25 years

They're rough figures - normal disclaimer

nzer57

Probably not but;

$2100 x 12 = 24 600/yr invested every year for 25 yrs at 6% gives

$1,430,647

brussels_sprout

Interest rates have been lowered to very low levels worldwide, due to Sept 11th and the deflationary effect of China. Consequently, Mortgages have recently been very very cheap historically throughout the western world and so the price of houses has soared as a result.

But my cousin who is a builder, pointed out that a house price has 2 components, the price of the land and the price of building the house, the building price is more or less fixed, it is the land price that has been going up in the last few years.

4 million standing people only occupy an area of 60-70 rugby pitches, no more, it is the release of land that is the problem, ie the supply. NZ , despite what you may think, is a very urban country compared to other countries, there are only a small number of towns and cities where people live packed in fairly densely. Between these population centres , there are great unpopulated areas.
Land for house building is not being released at the required rate , that is why house prices have soared !

P2L

We live in Marlborough where land available to build has competition with the vines, so land prices (if there is any!) and house prices are rising rapidly. And yes us expats have probably helped to drive the price up because we are supposedly 'cash rich', because of a favourable exchange rate generally especially compared to a country like South Africa. I also think that cash rich returning Kiwis have helped drive prices and building standards up.

We're living in arental at the moment that is owned by a NZ couple who actually live in the U.K and they have bought this purely as a rental investment, whilst they continue to earn the £

Many Kiwis view their property and land as their nest egg because many of them have no pensions and are therefore happy to burden themselves with a larger mortgage when they are younger.

It will be very interesting to see how prices move once the new building standards are introduced

In the mean time we are looking for property or land but certainly wont be mortgage free; 3 kids and the fact we spent it whilst in the UK has put paid to that!!!!

Auckland is unique IMO because of the amount of people choosing to settle there, and one day soon they will run out of room.