Oh for goodness sake, just make the country more expensive to live why not!
Aug 11th 2013, 11:37 am
#61
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Joined: Jan 2011
Location: New Zealand
Posts: 455
Re: Oh for goodness sake, just make the country more expensive to live why not!
Great chart! I'd say we are in the "return to normal" stage. A lot of buyers are now starting to hold back. The question is what will cause the 'Fear' and the fall in prices? Rising interest rates which will result in mortgagee sales? A currency crisis (Fonterra). A lending or banking crisis?
I think it will need to be some type of external shock such as a currency crisis. Just my opinion.....
I think it will need to be some type of external shock such as a currency crisis. Just my opinion.....
Aug 11th 2013, 4:49 pm
#62
Forum Regular
Joined: Apr 2013
Posts: 197
Re: Oh for goodness sake, just make the country more expensive to live why not!
It is, isn't it?! Found it while reading about the recent history of gold prices for something I was researching. You could apply it to almost any bubble.
Two things would make me very wary about the NZ housing market at the moment. The first is a quote from an article written in 2006, predicting the imminent collapse of the US housing market:
First, remember that things get overheated when the general public begins to spend money on investment vehicles with the idea of quickly doubling their money. When enough people get into speculation, it is a sure sign of a bubble. When people aren't buying a house for a place to live or as a long-term investment vehicle to rent out, you know the market is overheated. When you hear a lot of people talking about "making money on their house", then you know there's a big bubble. So, that's one interesting sign. It's not very scientific, but there are far more scientific signs to be seen.
Normally, when you buy a house as a landlord, the rent that the renter pays you covers your mortgage costs, plus a little bit more. That's what happens in a normal, healthy economy. Let's say you go out and buy a home valued at $200,000 and you rent it out for $1,500 a month. That $1,500 a month should cover your mortgage payment, plus a little bit more for maintenance. This is what happens in a normal market. But in a bubble economy, or a bubble housing market, there are so many people buying houses for speculative purposes that this is an oversupply of houses available for rent. Therefore, the demand from renters stays the same, but the supply of houses available for renting expands. This glut of houses for rent becomes unusually large because all these investors have bought houses and condos with the expectation of making money on the speculation. It's not just houses, either; it could be condos or apartments as well. I'm just using "houses" in a generic sense. How do you know when there is a glut of houses for rent on the market? You know because rent prices begin to fall relative to the price of buying a place to live.
Normally, when you buy a house as a landlord, the rent that the renter pays you covers your mortgage costs, plus a little bit more. That's what happens in a normal, healthy economy. Let's say you go out and buy a home valued at $200,000 and you rent it out for $1,500 a month. That $1,500 a month should cover your mortgage payment, plus a little bit more for maintenance. This is what happens in a normal market. But in a bubble economy, or a bubble housing market, there are so many people buying houses for speculative purposes that this is an oversupply of houses available for rent. Therefore, the demand from renters stays the same, but the supply of houses available for renting expands. This glut of houses for rent becomes unusually large because all these investors have bought houses and condos with the expectation of making money on the speculation. It's not just houses, either; it could be condos or apartments as well. I'm just using "houses" in a generic sense. How do you know when there is a glut of houses for rent on the market? You know because rent prices begin to fall relative to the price of buying a place to live.
He then goes on to write about how creative banks were getting at lending money... and this was about two years before the collapse of Lehman.
The second was a recent news video clip that someone once posted here, I think, about the Auckland housing market and in it, a woman, a Navy officer, had ten houses on the go, millions of dollars in debt all bought to let... and thought that was reasonable. Many people aren't great at maths; they have problems with calculating the tips on restaurant bills. To me — but I'm often wrong — there's a sense of inevitable tears before bedtime about much of what is going on right now.
Aug 11th 2013, 6:39 pm
#63
Looking for my marbles.
Joined: Jul 2013
Location: durham, durham, England
Posts: 730
Re: Oh for goodness sake, just make the country more expensive to live why not!
It is, isn't it?! Found it while reading about the recent history of gold prices for something I was researching. You could apply it to almost any bubble.
Two things would make me very wary about the NZ housing market at the moment. The first is a quote from an article written in 2006, predicting the imminent collapse of the US housing market:
He then goes on to write about how creative banks were getting at lending money... and this was about two years before the collapse of Lehman.
The second was a recent news video clip that someone once posted here, I think, about the Auckland housing market and in it, a woman, a Navy officer, had ten houses on the go, millions of dollars in debt all bought to let... and thought that was reasonable. Many people aren't great at maths; they have problems with calculating the tips on restaurant bills. To me — but I'm often wrong — there's a sense of inevitable tears before bedtime about much of what is going on right now.
Two things would make me very wary about the NZ housing market at the moment. The first is a quote from an article written in 2006, predicting the imminent collapse of the US housing market:
He then goes on to write about how creative banks were getting at lending money... and this was about two years before the collapse of Lehman.
The second was a recent news video clip that someone once posted here, I think, about the Auckland housing market and in it, a woman, a Navy officer, had ten houses on the go, millions of dollars in debt all bought to let... and thought that was reasonable. Many people aren't great at maths; they have problems with calculating the tips on restaurant bills. To me — but I'm often wrong — there's a sense of inevitable tears before bedtime about much of what is going on right now.
Hi purrball,
I totally agree with you. I experienced a crash in the housing market in England a few years ago. The banks began by giving people 100% mortgages requiring no deposits. People could borrow 5 times their annual salaries. Houses were being bid on regularly and this is rare in England (well the part of England that I came from).
The house prices nearly doubled within 2 years. I knew people who owned quite a few houses and re-mortgaged them all at the peak of the housing market. The government said there wouldn't be a crash. What happened
the bubble burst. People were in negative equity who had bought at the peak, those who had re-mortgaged numerous properties went bankrupt. I know people now who are still in negative equity. If I could afford to buy a house here in NZ I would not buy one at present. (I cannot afford it). That still does not stop me from being concerned about others who are buying now.You just have to look at Ireland. The government built more houses to relieve the demand and now there are 'ghost estates' everywhere where no one lives. Empty houses. Americas housing market slumped too. England still has not fully recovered and will take along time to do so.
The bubble has to burst here.... But when..no-one knows
Aug 12th 2013, 9:36 pm
#64
BE Enthusiast
Joined: Nov 2010
Location: Was Auckland-NZ, Now Wales
Posts: 685
Re: Oh for goodness sake, just make the country more expensive to live why not!
I really hope it does soon, someone needs to teach these head in the sand idiots what negative equity is all about. I can't stand these horrible property tutor people, people just love greed. something is very very wrong with this country.
Sorry for the rant, I was just reading about the governments kiwi saver changes. again they penalise those who work hard and have studied hard. they have reduced the income threshold to 80k from 85k for a single earner application. they have increased the limit to 120k for joint applicants. guess what, my partner and I are both skilled workers so as jointly we take home more than that we can't use kiwisaver towards a house. YET another nail in the coffin on staying here.
Sorry for the rant, I was just reading about the governments kiwi saver changes. again they penalise those who work hard and have studied hard. they have reduced the income threshold to 80k from 85k for a single earner application. they have increased the limit to 120k for joint applicants. guess what, my partner and I are both skilled workers so as jointly we take home more than that we can't use kiwisaver towards a house. YET another nail in the coffin on staying here.
Last edited by davros1984; Aug 12th 2013 at 10:05 pm.
