THR

Many analysts say that the value of property in Australia, at least in the main cities, is way over-rated and the bubble will have to burst some time in the near future. The most pessimistic views are saying that Australia will go down the same path as Ireland is today but without the help of any surrounding nations. Whether that is true or not remains to be seen.

However, is there any chance of property-markets heating up in NZ? After all, if you don't mind me saying so, NZ is a bit off the world markets, it is considered a periphery, therefore all the malign features of today's markets should keep some distance to it.

Or is the NZ economy too tightly knited to the Australian one that if Australia goes under then does NZ as well?

Charismatic

I'm not an expert in any way but Australia has continued to grow through exploitation of mineral assets. As long as that continues people will have the ability to pay ever higher mortgages so a collapse would seem unlikely.

However in the long term house prices cannot continue to rise faster than the rate of personal income grows. People can't pay mortgages with money they are not earning.

Can anyone find more recent houseprice to income ratios for Australia?

Genesis

I have heard that the Oz housing market is due for a correction. I have also heard that kiwi houses still have a 20, maybe 30% to come down. No bad thing methinks and it only will be a pain for those who have a number of houses (do we care about them??) or those with very big mortgages who bought at the top and thus will be in negative equity. Houses are stupidly priced and I don't care much what they are worth as I have no intention of removing myself from the property market. We are all familiar with what goes up must come down and that is very sage advice re houses. When you factor in what I have spent on my shed it has not increased in value one cent in 5 years. Ho hum. Bothered?

chocolate cake

NZ property prices are still at historically high levels compared to incomes, and have not fallen as much as other countries, difficult to think why as the recession as effected NZ equally as much.

I'd guess there's more correction to come, but who knows?

jennifer45

Guess we paid over [610] but it's what we wanted at the time and we have no intention of moving again of our own choice/volition. So any 'perceived/actual loss', will be felt by my 'benefactors' and they aught to be darned grateful I haven't mortgaged and gone on a permanent cruise with the proceeds.
Hope I still have the energy to open the bottle before they put me in a home. Not tablets!! Wassocks!
Bottle of WINE!!

Genesis

I paid well over the odds too..bothered? A house is a home 1st and an investment a big 2nd. A house is only ever worth what someone is prepared to pay for it. If you want something now you have to go for it. If the prices consequently fall so be it. There are no guarantees in life except for mortality and taxes.

janeyk

well said both of you! Uk house prices are still high in some areas and people are buying
a house is like a car if you plan to change quickly you loose lots if you don't you gain!!!!

Fooferfish

5 year cycle, thats the term an ex pat who has been here 40 years told me, he recons there has always been a 5 year cycle, they stay level and then they go up, he recons hes not seen many years where they go down ! But with the world wide recession, then they are bound to go down. We have been through negitive equity in UK in late 80s , and it will come here, especially for those poor buggers who bought at top end and in and around JAFA land and some posh areas of Welly and CHCH and even Dunners.

theduke

House prices in NZ cannot sustain their value as people here cannot afford them, therefore prices will have to meet the market, just like anything else in that position.

I have been asking this very question since we arrived here 5years ago, how can someone earning what they say is top 5% salary say $100k and still not be able to afford a mid tier home, the country cannot sustain that, initially I was told it was the asians coming in with their big money but that has changed and they are not coming in their droves anymore, I predicted a drop 5yrs ago and again I predict another more to do with local markets than worldwide, say 10-20% drop is needed.

Consider the 3 x ratio on joint salaries average wage is $50k say, between 2 income earners say $100k, therefore the average house price should be around $350k, borrow $300ishk. High interest rates also.

Whatever way you look at it at the moment it is not working and needs an adjustment.

THR

I feel so sorry for the Irish as the ordinary people have to pay for the incompetence and greed of politicians and bankers. You there in NZ can expect a lot of immigrants from Ireland to move to your country.

Charismatic

I lived in Ireland for 11 years from ’92 and my last visit was '03 (IRRC). When I first moved to Ireland it was an absolute backwater, people moved their cattle along public roads and everyone cheated on paying taxes (the law was in Dublin after all ).

Throughout the ‘90’s Ireland transformed itself with EU money attracting foreign investment, setting up free economic zones and set about improving the countries infrastructure. Real jobs to retain skilled people who would normally have went abroad.

By my last visit in 2003 those foreign companies that has sustained Irish growth where leaving or had left. Ireland had become bent on fuelling a property boom and as you see that is now in the final stages of play.

My point is that Ireland wasn’t a house of cards, they worked hard and did great things but they forgot what was really making them money. People are much better off there now than they were during the early 1990’s and in that respect Ireland is very much a success story. Just now they might need to look outside of industries based around building houses no one needs .

londonescapee

Spot on Genesis and Jennifer. Me old mum (as she would refer to herself somewhat unfairly) cautioned us with the same thing when we bought our box in Streatham. Buy it because you need a home/want to make a life there and that house/flat/unit/section/blah blah is exactly what you want, not because you want to sell it in 3 years for a tidy profit.

So long as you can pay your way and not overstrech yourself financially, then price is kind of irrelevant. That said, it is uber expensive to buy here. I don't think we'd be looking at it for a few years yet. Which is annoying as I want to pay off my mortgage early

RobClubley

That graph's kinda scary. The average house costs 5x the average salary?
That can't be good.

Our house is worth about 25k more than we paid for it 5 years ago and I reckon we've spent at least 75k on it bringing it up to 20th century standards. (Yes I'm aware it's now the 21st )
But apparently insulation and double glazing don't increase the value

No intention of moving though, so current value is not relevant.

I don't understand the whole Kiwi attitude of buying a house, fully intending to move in 3 years, with the expectation of a large profit.
What's that about?

londonescapee

For us this was in the UK - there were loads of people a few years ago jumping on the property bandwagon buying houses and selling them off in relatively short time periods (ie 18 months) making huge profits. Not much of that going on now thank goodness I am sure I read about something similar happening in NZ but not sure.

OH has a property he bought 8 years ago in Christchurch as an investment and he's looking at it as part of his retirement pot. It's gone up in value quite considerably over the years, even with the current tough times down there.

In my admittedly very limited experience property as an investment is a really long term game. And I wouldn't buy a house right next to the sea either for fear of it falling off a cliff at some point in the near future

Hopefully one day it will make a difference as people appreciate the beauty of having both!

AndyR

House prices in NZ compared to salary is just stupid.

We never planned to come to NZ, originally planned Oz but while there circumstances changed and we hopped over to NZ. We do love it here but the house prices for first time buyers is a joke.

Currently my wife and I (combined salary of $100K) rent at $400 per week in a nice 2 bed apartment. If we wanted to buy an average house in Auckland say at $400k, we would need a $80,000 deposit (20%) or we get stung with a low deposit charge of anything up to 3% ($13,000). Barking mad that is. Our weekly payments would then go up from $400 to nearly $700 for something the same size, just for the privilage of owing!

We are going to stay renting, quite happy to do that now. Can pay waaaay less per week, save plenty and after a good few years when we have built up more of a deposit, look at it again.

Spoke to lots of people, both expats and kiwis in the same position. More than able to afford repayments, but screwed over the deposit issue.

Weird.