Residential - Boom or Bust

[Hectorplains]

Sales slump

Auckland, not quite world leading but in the running.

National recognizes the problem ... but delivers only empty jargon as a solution. 

Feb's figures:
Housing sales  = down
Housing prices = down
New house listings = down
Unsold houses = up

Nothing here to suggest the corner has been turned.

[BlackPeter]

Sales slump

Auckland, not quite world leading but in the running.

National recognizes the problem ... but delivers only empty jargon as a solution. 

Feb's figures:
Housing sales  = down
Housing prices = down
New house listings = down
Unsold houses = up

Nothing here to suggest the corner has been turned.

Hmm - who said that the corner has been turned already? All economists I heard talked about a likely recovery mid to late 2023. So, what is your point?

So far it looks to me we are well on plan. ... And remember - only when the screeming and chest beating of scare mongerers mixed with the squeeking of property speculators who bought a deal in late 2021 is at its loudest, only then we will know that we reached the bottom.

[Hectorplains]

Hmm - who said that the corner has been turned already? All economists I heard talked about a likely recovery mid to late 2023. So, what is your point?

So far it looks to me we are well on plan. ... And remember - only when the screeming and chest beating of scare mongerers mixed with the squeeking of property speculators who bought a deal in late 2021 is at its loudest, only then we will know that we reached the bottom.

The point is the thread heading is, "Residential - Boom or Bust?"  February data suggests more of the later. Any recovery this year is increasingly an optimistic guess.   I'm don't think that lower mortgage rates or the immigration gates opening would be enough to stimulate the market enough; and neither of those is a given.  My money is on this going longer and deeper. 

[Shareguy]

I'm seeing big rent increases in Auckland market. $100 a week not uncommon as owners pass on costs.

Families forced to take on borders to help with the rent.

New legislation has also resulted in some groups of people being locked out of the market as landlords and property managers become very picky.

https://www.nzherald.co.nz/bay-of-plenty-times/news/bay-of-plenty-rentals-locals-living-in-cars-garages-motorhomes/TLXZRMSIQZB5FGUZTT52YD4XHU/

[KW]

Houses prices are going back up in Australia and USA.  So I wouldnt bet on them going down further in NZ.  Of course, the economy could be really stuffed here and immigration non-existent (because everyone has gone to Australia) so who knows. But that would mean that the rest of the world is in recovery mode while NZ just collapses into a third world state.

[Buzz]

Houses prices are going back up in Australia and USA.  So I wouldnt bet on them going down further in NZ.  Of course, the economy could be really stuffed here and immigration non-existent (because everyone has gone to Australia) so who knows. But that would mean that the rest of the world is in recovery mode while NZ just collapses into a third world state.

I wouldn't "bet on it" either, and I'm sure you and other vastly experienced investors don't do "bets" either.

We're quite capable of monitoring the market and the share prices, looking for entry or accumulations. There's no doubt that REIT's are well below NTA, so purchasing precisely isn't really a perfect science anymore, the trigger as some others have said is inflation topping, CPI topping and shares pricing in the future.

Our FA says these are still successful profitable and sustainable payers of returns to shareholders, so the only real trigger to further exposure is the share prices which I am certain many have eyes on, as we may be seeing a once in a generation opportunity to buy low.

Or not quite just yet. No experienced investor is going to throw a decent wad at this on what might turn out to be a fake out, these are the times when we let the chart do the talking, and exercise some patience until it happens.

Picking the bottom price of SP's is a losers game .. buying sustained optimism is better than buying what we think is the end of pessimism, even if it costs us a few % returns in the long run.

[Basil]

https://www.oneroof.co.nz/news/43359
$930K at the peak for one of these units, lowest previous was $800K in December 2022, sold on the weekend at auction for only $641K. 

[KW]

Has the worm turned?

"Barfoot & Thompson sold 86 per cent more residential properties last month than in February in a pattern its boss says is a sign of a recovery. "
https://www.nzherald.co.nz/business/barfoot-thompsons-monthly-residential-sales-up-86-home-buyer-confidence-back/WRRIK5YWIRFCLFKF4JL7JWLVTI/

"Thursday's auctions helped top off a record month for Harcourts Papanui which achieved the highest number of sales written on the board ever – even slightly above the peak of the Christchurch property market mid-last year."
https://www.oneroof.co.nz/news/vendor-stunned-as-quake-damaged-home-sells-for-143m-200k-above-the-reserve-43332

[Basil]

Depends who is writing the headline covering the same information.
https://www.interest.co.nz/property/120649/barfoot-thompsons-march-sales-down-third-compared-year-ago
I think there's still another 10-20% fall in this market to play itself out and the RBNZ's move last week is supportive of that downtrend continuing.  Such a fall as I am suggesting only gets us back to pre covid level's when houses were already very expensive with the national median at ~ $600K.

[BlackPeter]

Depends who is writing the headline covering the same information.
https://www.interest.co.nz/property/120649/barfoot-thompsons-march-sales-down-third-compared-year-ago
I think there's still another 10-20% fall in this market to play itself out and the RBNZ's move last week is supportive of that downtrend continuing.  Such a fall as I am suggesting only gets us back to pre covid level's when houses were already very expensive with the national median at ~ $600K.

We should not forget though that $600k in 2024 is not the same value as $600k in 2019 used to represent. Which means - if house prices fall in 2024 back to pre-Covid prices, they will be (compared to the prices of other goods, but as well compared to the average wage) much cheaper to buy than they used to be in 2019.

[Basil]

Good point.  The National median price was $762K in February 2023 so another 20% down from there, if that happens, would take it down to $609K which would indeed be materially lower in real inflation adjusted terms that prior to Covid in February 2020.
file:///C:/Users/user/Downloads/REINZ%20Monthly%20Property%20Report_February%202023%20(1).pdf 
REINZ stat's for March should be out later this week or early next week and will be an interesting read.
Last weeks extremely hawkish move by the RBNZ caught most people off guard and I understand banks are now stress testing mortgage applicants at 8.5 - 9.0%  !

[Shareguy]

Could see this coming.


https://www.nzherald.co.nz/nz/politics/cost-of-living-number-of-households-spending-over-two-years-in-emergency-housing-doubles-in-past-year/ZT67M7EZ6NDGPD3RRHIDR24QEA/

[Basil]

We should not forget though that $600k in 2024 is not the same value as $600k in 2019 used to represent. Which means - if house prices fall in 2024 back to pre-Covid prices, they will be (compared to the prices of other goods, but as well compared to the average wage) much cheaper to buy than they used to be in 2019.

Much cheaper yes but vastly more expensive to afford the mortgage with interest rates where they are now compared to 2019.
Article the other day in the Herald saying on a per capita basis where interest rates are now housing In Auckland is the 7th dearest of any city in the world.
If people can't afford them and huge supply keeps coming to the market the price, logically, can only go one way.
https://www.interest.co.nz/property/120803/high-numbers-new-homes-are-being-completed-auckland-and-theyre-taking-less-time

[KW]

Not sure if this has been reported in NZ Media or not

https://www.afr.com/property/residential/mortgage-defaults-jump-in-housing-bellwether-new-zealand-20230418-p5d19j
"Signs of stress are emerging in New Zealand's housing market, with the number of people behind on loan repayments jumping as soaring interest rates bite.
Mortgages in arrears rose 23 per cent in February from a year earlier to 18,900, Auckland-based credit bureau Centrix said on Tuesday. That equates to 1.29 per cent of overall mortgages, the highest since March 2020.
"Our latest data show mortgage arrears climbing for the seventh consecutive month, which could point to many being unable to service these higher mortgage rates – a difficult situation for anyone to be in," said Centrix managing director Keith McLaughlin. "We are really starting to see some hardship."

[Shareguy]

Great news for landlords. Neighbours  next to a troublesome property will be happy.

https://www.nzherald.co.nz/nz/national-will-reinstate-no-cause-evictions-says-regulations-hurting-landlords-and-driving-up-rental-prices/5MCMPXX7XNFIPP2HUPMW4SN5J4/