Residential - Boom or Bust

[KW]

Meanwhile, in Australia immigration is going gangbusters.  They have processed over 3M visas
https://minister.homeaffairs.gov.au/AndrewGiles/Pages/3-million-visas-processed-backlog-down-to-755000.aspx#

International students are at record levels.

The University of Melbourne reported its international student applications were up 17 per cent this year from last and 25 per cent from 2019, the last academic year before the pandemic.
The University of New South Wales said international student applications had increased by 25 per cent from before the pandemic...
The University of Wollongong was also anticipating a strong year of enrolments, recording a 40 per cent increase in overseas applications from 2019...
The University of Queensland has also seen interest from international students increase by 27 per cent since pre-pandemic levels...

They are processing working holiday visas in 24 hours
https://www.theaustralian.com.au/nation/backpackers-in-priority-lane-as-numbers-near-precovid-levels/news-story/e48d904e49834302dd287d97977acfb9
"Working holiday visas are being rushed through within an average of 24 hours, lifting backpacker numbers closer to their pre-Covid levels as the government faces calls to raise the eligibility age to 50 to plug critical labour shortages and attract more skilled professionals.
Immigration Minister Andrew Giles said the number of backpackers working in the country had bounced back from lows of just 20,000 during the pandemic to about 120,000 as of last week."

Better pay, better weather, better beaches, cheaper cost of living, why wouldn't you pick Australia over NZ?  Better fix it fast, or NZ is just going to see a net outflow of Kiwi's to Australia again, like under the last Labour Govt when people like myself all left for Australia and the UK. 

[BlackPeter]

Meanwhile, in Australia immigration is going gangbusters.  They have processed over 3M visas
https://minister.homeaffairs.gov.au/AndrewGiles/Pages/3-million-visas-processed-backlog-down-to-755000.aspx#

International students are at record levels.
They are processing working holiday visas in 24 hours
https://www.theaustralian.com.au/nation/backpackers-in-priority-lane-as-numbers-near-precovid-levels/news-story/e48d904e49834302dd287d97977acfb9
"Working holiday visas are being rushed through within an average of 24 hours, lifting backpacker numbers closer to their pre-Covid levels as the government faces calls to raise the eligibility age to 50 to plug critical labour shortages and attract more skilled professionals.
Immigration Minister Andrew Giles said the number of backpackers working in the country had bounced back from lows of just 20,000 during the pandemic to about 120,000 as of last week."

Better pay, better weather, better beaches, cheaper cost of living, why wouldn't you pick Australia over NZ?  Better fix it fast, or NZ is just going to see a net outflow of Kiwi's to Australia again, like under the last Labour Govt when people like myself all left for Australia and the UK. 

And don't forget - NZ has an extremely xenophobe government which just recently screwed a lot of visa holders and harassed the reminder. Why would anybody want to go there if there are so much better options available?

[KW]

And don't forget - NZ has an extremely xenophobe government which just recently screwed a lot of visa holders and harassed the reminder. Why would anybody want to go there if there are so much better options available?

Meanwhile the Labour Govt is scratching its head and wondering why only one person has applied for residency under its "rich person visa" after doing this 
https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audio/hamish-rutherford-herald-wellington-business-editor-on-inland-revenues-letter-to-the-ultra-rich/

Honestly, you couldnt make this  up!

[Basil]

Latest IRD disclosure requirements for family trusts are a gigantic drag net fishing exercise too.

[Ferg]

Meanwhile the Labour Govt is scratching its head and wondering why only one person has applied for residency under its "rich person visa"

And at the same time, it is now taking 55 months to process applications for retired parents of citizens, who must have at least $1.5m cash plus to invest, which cannot be spent on a home in NZ. It's now 18 months since we lodged an application for a parent. We are yet to have our application assigned to someone in Immigration and there is no one you can talk to. Absolutely hopeless department and even worse Government. I'm aware there are hundreds of such applicants in the same boat. Do they care these applicants are aging? No. Worst Government ever, even worse than Muldoon and his lot.

Edit: for clarity, this immigration category requires investing $1m locally (but not in a home) plus having $500k to fund expenses. In addition historic earnings most exceed a 60-70k threshold. The applicant will move in with us so there is zero pressure added to the housing market, which is what I believe this Government is ideologically focused on. Hence the reason they are purposefully dragging the chain with Immigration applications. When we applied the duration was 20 months; it is now a 55 month process.

[Popeye]

You must be pulling your hair out.  Given the simplicity of the criteria, you have to wonder whether there is internal guidance or deliberate underresourcing to achieve unwritten policy goals (such as slowing immigration).  Like when Housing NZ was miraculously stopped turfing out any misbehaving tenants (clients?) without any change in written policy.

A combination of a government who have learned to replace overt written policy with a nudge and a wink, and Wellington bureaucrats who are remote robots who carry out whatever running brief they are given no matter how foolish (or heartless). 

[Ferg]

Exactly Popeye. Nothing official as you say. But actions speak louder than words. Very frustrating.

[Hectorplains]

https://www.stuff.co.nz/opinion/130936458/dileepa-fonseka-australia-takes-over-from-new-zealand-as-the-canarys-canary-for-plummeting-house-prices

I think Dileepa is seriously over selling the situation in Australia, prices were ripe for a correction - as the chart shows.  So far the drop is 8.4% (between May 2022 and January 2023.)   A correction is generally agreed to be a 10% to 20% drop in value from a recent peak.   

[Hectorplains]

Tony Alexander's 2 cents he reckons it all comes down to interest rates...

"There is no rush of people to sell property and the overwhelming market dynamic remains a lack of buyers. If you're going to make a personal pick for when house prices stop falling, you need to therefore take a view on when the buyers return. Stronger than expected net migration inflows will help, as will high job security and rapidly improving affordability in terms of house prices versus income. But the key is interest rates. You will need to make a prediction for when they start falling.

My view is that we are at the peaks for fixed rates of two years and beyond while floating rates are set to rise up to another 1.25% and the one-year rate could creep higher by 0.25% or so. But with most people fixing just one year and the Reserve Bank clearly needing to see inflation solidly trending down, it doesn't seem reasonable to believe yet that people will be thinking in terms of buying then riding a coming trail of falling interest rates downward until the middle of the year at the earliest."

That's a lot of words to say: house prices will edge lower until the middle of the year.   So he remains relatively optimistic.

Then again, he previously predicted housing prices to flatten out but not to fall.

[Shareguy]

Interesting article


https://www.abc.net.au/news/2023-01-11/rents-increase-record-cost-of-living/101840454

[Hectorplains]

Property stories coming thick and fast in MSM -

Today in Stuff alone:

https://www.stuff.co.nz/business/130950990/window-to-sell-closing-for-investors-who-cant-afford-to-keep-properties

https://www.stuff.co.nz/business/130959225/townhouses-apartments-drive-building-consent-growth

https://www.stuff.co.nz/business/money/300770250/new-years-bootcamp-get-your-mortgage-sorted

Suddenly everyone you talk to has an opinion on the property market.  Maybe, there is more life left in it yet?

[Basil]

Many people have done so well out of residential property they will ride this storm out even if it lasts for years.  Others will think they can ride the storm out because it will be short and all they have known is a rising market and they think it will revert to that quite quickly.

It's the simple rules of supply and demand that will prevail meaning its highly likely prices continue to fall and when vast numbers of people no longer qualify for mortgage finance at these sort of interest rates.  It's inevitable there will be a lack of demand for the foreseeable future.  Watch the number of forced sellers grow as the year goes on...the decline is just getting started.

[KW]

Starting to look pretty ugly now.  Although one has to remember the ridiculous gains in the first place for some perspective.  Not great for those who bought over the last 2 years though 

https://blog.homes.co.nz/property-homeowners/monthly-property-report/getting-your-home-sale-ready/You cannot view this attachment.

[Basil]

Another 25% to come out of this market bubble to get back to where we were before this all got pumped up with the rocket fuel of one in a 100 year low interest rates.  A further 25% fall will just take us back to just before the Covid fueled madness began but then we need to consider what shape the economy will be in, where interest rates and tax policy will be next year and how many distressed sellers are left.
I reckon 2023 and 2024 are highly likely to both be incredibly tough years for property investors.

There's going to be a lot of tears from young people who bought close to the peak, locked in large mortgages on ultra low interest rates for a couple of years and then have to face the brutal reality when their interest rate resets, they can't afford to keep their home.  All their dreams and the equity they saved so hard to get for so many years...turned into the worst nightmare of their lives.

At one point as I understand it banks were lending at under 2.5% and stress testing in the mid 4% range. Those people have no hope at 7%.

[KW]

There's going to be a lot of tears from young people who bought close to the peak, locked in large mortgages on ultra low interest rates for a couple of years and then have to face the brutal reality when their interest rate resets, they can't afford to keep their home.  All their dreams and the equity they saved so hard to get for so many years...turned into the worst nightmare of their lives.

At one point as I understand it banks were lending at under 2.5% and stress testing in the mid 4% range. Those people have no hope at 7%.

Don't forget they also cleaned out their Kiwisaver accounts to buy that home, so will have no home and no retirement savings.  Basically starting from scratch all over again.