An article published today in the NZ Herald titled “Housing crisis lies in lack of supply, not falling prices“ is sure to provoke some healthy debate. The article by Charles Lowndes a professional real estate agent with over 30 years experience both here and abroad, provides a perspective of the outlook for the real estate market in the coming years. The limitation of the article in both print and online is the inability for comments to be made as to the support or rejection of the hypothesis, that is why this blog can provide such an environment for discussion.
The article is written by a real estate agent and this is bound to bring the predictable call of “self interested promotion of the market” – however I find this attitude surprising when one would usually tend to respect the views of a person who has dedicated their 30 year career to understanding their industry. Further commentators in the financial services industry never seem to be tarred with the same brush when they dissect their market – after all financial service companies earn commissions trading financial products
The article makes the proposition that the combination of strong immigration as a function of the global recession matched to the stalled market for the building of new homes will put pressure on the supply side of the market in NZ. Now there may not be a crisis of supply, but the reality of the market needs to be recognised.
The content of the article draws parallels with recent posts on this blog – earlier this month in the post “Emerging concern over supply of new homes as consents plummet” it was highlighted to the extent to which consents had fallen below the supply level required to meet market demand. NZ unlike the US market does not have a surplus of new homes which are unoccupied. The 80,000 homes for sale as listings on realestate.co.nz are in the majority occupied and are being sold so home owners can move on.
The post just last week “Examining facts on the state of the real estate market” spoke to the growing interest in the property market. Subsequent to this article and others written last week there has been those who have claimed that the market is not awakening, citing the year on year performance of February 2009 with 2008 (down 18%) and 2007 (down 44%). These figures are true however a perspective overlooked in all these analysis is the relative growth at this time of year. There is no doubt that due to concerns about unemployment and tighter credit from lenders the market in terms of property sales is at an all time low, but as the chart shows below the relative growth between January and February this year is far in excess of the seasonal trend.
Alistair – the chart above certainly makes it easy to understand why there was such a strong feeling in the industry that the market had improved in February compared with January – a 41% lift in volume is pretty significant.
However we should not get too excited as that February result was still the lowest February sales volume in 10 years. It will be interesting to see how March turns out now that banks are increasing long term fixed rates to 6.5% or more.
Sellers certainly have to be very realistic with regard to pricing their home in the current environment – if the expectation is too high it is unlikely that a sale will result.
I worked with Charles for several years and was impressed with his news item – of course another factor that will add to demand for homes locally will be that very few Kiwis will head overseas for work experience as their employment prospects in UK, Europe and USA are not good right now.
This article http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10561873 also indicates some strong March results have in fact been achieved.
In order to improve unemployment numbers Australia has just announced a reduction in the number of immigrants they will allow this year. From 135,000 to 115,000. How many of the 20,000 will want to come our way, and how many will be allowed in?
There are a huge number of assumptions in Charles Lowndes’ article. The most important one is that there will be a high level of immigration into New Zealand over the next few years. There is not really any evidence that this will be the case. It depends on how badly the recession effects the real economy, particularly jobs. Without new jobs for people to come to, they will come in great numbers. Even if they do come, they will either be in no position to buy a house or will soon leave again. It has to be new jobs being created, otherwise if they do get jobs, they will just be taking jobs from people already here. There certainly is no sign that there will be much job creation happening in the near future, quite the opposite in fact. So instead, there may be a decrease in net immigration as more jobless kiwis cross the Tasman in hope of better prospects. All the signs are that we have not seen the worst of this recession yet. We will see, but my opinion is that what we are seeing now is a temporary leveling off of the housing market before it resumes its downward trend over the winter months.
No surprises here, a real estate agent talking up the market.
House prices in NZ are generally accepted as being over-priced, and it was only a matter of time before prices dipped to more the more reasonable and achievable prices seen today, however i believe prices will drop further.
Forget the increase in median house prices -this is statistically irrelevant, but take note of the bankers -people who will actually lend the money for a mortgage. Are they as confident now? No.
Immigration has slowed to a trickle, the economic crisis has yet to make a full impact in NZ, and for some reason, the leaky home issue has been ignored completely -yet dodgy building practice still continues and the market is flooded with these modern but water-logged homes.
Would you want to rush in and buy a house tomorrow? Only if you were desperate.
In response to the comments from Verne and Paul.
Immigration in today’s modern world is not about finding jobs, it is more about creating jobs. It is likely that NZ will benefit from new immigrants and returning kiwi’s who not only bring assets but also networks, capabilities and businesses. These businesses can be managed from NZ as well as they can be from Sydney or London. We do not just rely as a country on manufactured industries.
As I have stated before what we are seeing in the market for property is not a resurgence in price – this component has a lagging element. we first see signs of greater liquidity, as that builds we will see at some stage a softening in the rate of price falls (still declines) and then stability of prices (dependent upon demand, access to credit and the capacity to pay = employment). No one is saying prices are going to rise.
As to economists being the most trusted source of data I would draw your attention to the opinion of Tony Alexander of the BNZ in this article today.
The assumptions which the article is based on still exist. Might happen, who knows.
Hi Alistair,
Some immigrants come with nothing in search of better jobs. Others come in search of a better lifestyle and bring with them assets, skills etc that can create jobs. For most it is a bit of both. My argument is that there is nothing to say that net immigration will increase in the near term. Remember we need a lot of immigrants just to balance the efflux of kiwis to Oz which has shown no sign of slowing. For any increase in net immigration we will have to attract more immigrants. To do this New Zealand will have to be doing better then the rest of the world economically. We certainly aren’t at the moment. How many will come with no job prospects? How many will add to the risks of running a business in these uncertain economic conditions by moving it (even if just management) to another country? How many will risk coming here to start a new business with the New Zealand and global economy in reverse? If the prospects for success aren’t better here than where they are coming from why would they come? Lack of supply may impact on the housing market in the long- or even medium-term but i don’t think it will be of any importance over the next couple of years.
I thought that the Herald article you linked to in your reply was rather poor as it seems to be trying to suggest a trend using just two house sales as data points. And the opinion of Tony Alexander is really just that, an opinion, with no data quoted other than that there is increased activity in the real estate market. All I take from that article is that the increase in market activity seen in February may be continuing into March. But according to the many graphs on your site there is always a surge in Feb/Mar. The surge this year may be bigger in percentage terms than seen recently but it was coming after a period of great economic uncertainty that put activity levels down to a very low level. When the credit crunch burst on the scene last year it really scared everyone and now some confidence is returning as people realize things are not quite as bad as all the media reports seemed to suggest (at least not yet). Many people delayed big decisions like buying houses and are now starting to get on with their lives. But the reality is that market activity is still very low even with this surge. The market was already slow enough to cause prices to decline even before the credit crunch hit and this may just be a recovery to the pre-credit crunch low levels of activity from even lower levels.
In my opinion the most important thing is that people just can’t pay high prices for houses if they don’t have the money or can’t get the finance. And there is a lot less of both around these days. There may be a lot of people looking to buy, attracted by low interest rates and talk of falling prices, but prices (or many vendor’s expectations) are still so high that they are out of many people’s reach or higher than they are willing to risk paying in these uncertain times. I think it is very premature to read anything into the recent surge in activity and am highly sceptical that any price stabilisation that may result will be anything other than temporary. It will be very interesting to see how this all plays out.
Verne,
I have no reason to disagree with your comments and I thank you for your contribution – as you neatly close, it will be very interesting to see how it all plays out.
I for one will be continuing to share insights of information and analysis on this blog for the benefit of those readers who stop by for what I hope is a useful unbiased view of NZ real estate.
I’m totally with Verne on this issue. I believe the increase of sales during feb/mar is highly due to the rock bottom interest rate which attract buyer who have been saving since mid 2008.
With temporary increase of sales compare to previous months and announcement made by some real estate agency will mislead the buyers to buy property above current market value.
We have many good news appearing on the paper but i for one will not believe new zealand will get out of reccession before US recovering from it
blah blah ‘it’s different here’ what is this Blue chip?
look around land is everywhere.
I think the important thing to understand is that vast majority of people that have been buying property – just under 9,000 properties this year so far are not individuals who are deciding to buy because of what the media says, or economists, or real estate agents.
Every day over 150 house sales occur – fact.
The fact is most people move for factors that are way outside of these factors – they move because their life has changed for one reason or other – the usual suspects are Death, Debt & Divorce.
If the property market was driven by financial decisions alone you would have volatility of the magnitude of the stock market where 100% to 1000% variances can occur.
Just because people choose to buy this month does not make them naive or poorly informed or worse mislead.
Alistair,
Have you noticed the number of posters who are not positive about the housing market?
That must be an important indicator. The mood certainly seems very different to a couple of years ago.
By the way, I’ve already commented in detail on that article on GHPC. IMO it is a very poor article.
Steve
“Just because people choose to buy this month does not make them naive or poorly informed or worse mislead.”
Alistair, you could have added “foolish” to your list of adjectives. Of all my colleagues who have to move for whatever reason, most are working professionals. Very few of them buy a house because they have relcoated for work. In fact, I would think many people looking to move want to do so as they “downsize” or “unlock equity”. People who move to better themselves economically (economic migrants) usually do so out of trying circumstances (not cash rich positions). A good example are the Kiwi hordes in Australia.
Steve
I think you would agree in the main if you were to take a cross section of comment writers on this blog, interest.co.nz and GHPC that you would find the sentiment is significantly negative verging on depressively negative.
Does this mean that we are all depressively negative or that the most vocal within our community are of this tendency. The question I would ask is – what is this group of people attempting to do or communicate. I may be more optimistic in nature than other people but I would have to say I do not in the course of my average day meeting people in business (I exclude from this for reasons of bias real estate people)find the same sentiments as expressed on this blog. It is for this reason that I find that again in my opinion you cannot make a statistically valid comment that the mood of the market is reflected in these blog comment writers.
Alistair,
Unfortunately, much of the critical debate is negative for the obvious reasons (those that are wrecking global finance and the associated property boom); whereas the sunshine policy is largely shallow and cliched. Charles Lowndes is guilty by association in the latter as far as I’m concerned. If you balance the naegativity and “doomsaying” with the cheerleading hoopla over the last 8 years, I think that fewer people actually buy the hype like they used to. It is good that people are thinking more “critically” instead of the tripe that is past its used by date.
J.C.
I would challenge that assumption to a certain extent as it is always easier to criticise optimistic perspectives as shallow, and argue negativity as critically assessed. I think that is a shame.
I do however agree with you that it is good that people are thinking more critically. They have greater access to information and through it I feel we are now blessed with a sense of empowerment.
Thanks, Alistair, for promoting discussion around the article I wrote for the NZ Herald and to all who have responded, including the doubters and those with differing views who make sensible comment.
My crystal ball is no brighter than many professional commentators on the real estate market and I have said the jury is still out on the strength and timing of greater net migration. Nevertheless, my commentary should not be discounted just because I am a real estate agent, and perhaps less so than the many “experts” who are neither questioned closely on their level of relevant knowledge nor their qualification to know better.
My commentary is well researched and is supported by the history of migration trends to/from New Zealand. Listing past surges in net migration, shows they have coincided with major adverse events overseas. These include:
* Post “9/11″ that kicked off the last recovery in the market in 2001-2.
* Post the “Asian Crisis” that brought the previous lift in net migration and created new suburbs.
* The 1960’s when British migration filled whole new suburbs in Auckland too, following economic decline in Britain (Harold Wilson, loss of empire, devaluation of sterling, strikes etc).
* Post World War 2 etc.
If as many forecast, the international recession is deeper than we have experienced yet and likely to be prolonged, then history tells us that just one little consequence will be a lift in NZ’s net migration.
Just a small lift in net migration at the same time as new house supply is at record lows will have a significant impact, over time, on our very small housing market (by international standards). Just a small change will amplify the shortage of housing here (whether for rental occupation or owner/occupiers) and lead to a stabilising of house prices.
Charles, if your commentary is “well researched” as you state, you should have no problem proving the significance of migration on NZ property values since 2001 relative another variable: to increased liquidity. I would also like to see how the 1997 financial crisis in Aisa (if that is what you mean by the “Asian crisis”) directly influenced migration. On the surface, it is a tenuous claim at best.
Migration and house prices may follow similar upward trends over time, but that is a non-argument in most cases. If you really believe migration and supply are the underlying cause of property values, why not put your theory to a real test against the myriad of other factors that you conveniently side-step: easy credit and unsustainable private sector borrowing. To not even acknowledge the issue in your perspective doesn’t help the validity of your argument.
JC
Thanks for the opportunity to reply to points you have raised above.
There is no dispute that a myriad of factors dictate the balance between supply and demand in the housing market. Net migration is but one, though amongst the most important factors.
For sure, we’ve experienced an unstainable asset bubble resulting from easy money sourced offshore and marketed most strenuously by local banks. It could not last and the degree to which lax scrutiny of financial products based on lax home lending policies in the US has reverberated globally has produced significant falls in house values here too.
Many real estate professionals disagree with Dr Bollard, Tony Alexander et al that the market has fallen as little as they state. Most of us know that in Auckland prices have already corrected back to 2004/5 levels in many cases.
Presently, we have three significant factors occuring in the market, but they do not sit comfortably together, so change is inevitable. We have (1) falling prices; (2) falling demand and (3) falling interest rates that may not have reached their lowest levels yet.
Also in the mix, we have a market overhang of distressed sales and potentially or actually rotting homes. Distressed sales are being taken up by investors and first home owners and this will continue, but that part of the overhang has a finite ending. For monolithic clad structures, the fix is less certain, though indications are that this Government will come to the party to a greater degree.
An increase in net migration will see fewer houses coming on the market as fewer depart for the uncertainties overseas.
Bayleys research resulting from running 4 annual NZ Migration Expos in the UK from our London office has, this year, shown an increasing intention to migrate to NZ, but from the 6,600 prospective migrants we met 3 months ago at Expos in London and Manchester, a different trend has emerged.
In past years, over 80% of intending migrants expected to buy a house shortly after arrival in NZ. This year, most have told us they cannot buy until they have sold in the UK, so will rent here upon arrival.
I conclude that demand for decent standard rental properties will see local investors respond to market signals, taking advantage of low mortgage rates and distressed sales, whilst returns from cash deposits and the share market are at exceptionally poor levels. I expect this factor to lead in the stabilisation of house prices locally.
The degree to which net migration improves and its timing will be in response to international events as consequences of the recession become ever clearer during 2009.
It is a brave commentator that comes out with statements such as have been heard from Dr Bollard that the market will fall 18% from its peak in 2007. Others have predicted 42% and at the bottom of the scale we have Tony Alexander (BNZ economist) telling us that the market has fallen just 5% and has a maximum of 5% still to go. How do they know? How can they be certain about their precise numbers during a global economic event of great moment, the depth and consequences of which remain speculative.
A tentatively improving trend in sales volumes and greater open home attendances together with likely net migration improvement over time indicates house price stabilisation this year. Significant price rises may not occur for many years, so it is no market for the speculative trader who must pre-judge the timing precisely to profit.
But for the long term investor, for first home buyers who must make a start somewhere/sometime/somehow and for those responding to natural increase/decrease in family numbers and wish to house themselves appropriately for their changing needs, then current market circumstances are perhaps at a level where their participation in the market will begin to gather pace again.
The small improvement in volumes and competition between buyers we are now seeing is mainly at lower price levels, whilst the upper end remains quite sticky. If this trend continues, expect average house price inices put out by the Real Estate Institute and Quotable Value to show prices declining, whilst actually they may have stabilised! That is because medians and averages take no account of changes in the value mix of sales. Reliance upon those statistics has mislead most commentators for more than a year to date, or at least the great majority of commentators who are not engaged at the coal face of house sales.
Charles, thanks for the extended explanation. Even you will admit that there is much “uncertainty” in your own opinion. Nobody is at odds that migration drives demand for property (which is actually at odds with most large Asian cities, most particularly Shanghai, and the U.K.), but to focus on it as a primary cause for putting a floor under property prices is pure fluff.
No fluff, JC!
Charles, you claim that the Asian financial crisis spurred migration to NZ. A quick check on NZ Statistics web site shows that migration was negative fell for the three years following 1997. As for 2001, migration did increase significantly. However, half of those entering NZ were from India and China and it is unclear whether or not those figures include international students!
This is an interesting article that arived at work today. Published in the Otago University Economics magazine titled, Does immigration raise house prices? A question of correlation and causation
http://www.business.otago.ac.nz/ECON/econz/2009/econz_issue_22.pdf
“If we separate population growth into the four sources described above (new immigrants, previous immigrants,returning New Zealanders, and local New Zealanders),a more interesting picture emerges. Population increases from three of these groups, including both immigrant groups, again show no significant link with house price
increases – and some appear to be slightly negatively correlated. However, population increases attributed to returning New Zealanders are strongly correlated with house prices: a 1 percent population increase from returning New Zealanders is associated with a 9.1 percent increase in house prices. (This figure drops slightly to 7.6 percent if we control for demographic changes as before.)
An effect on house prices from returning New Zealanders
fits with the demographic characteristics of this group, though the large size of the effect is surprising. Returning New Zealanders are more likely than other groups to own their own homes and more likely to be aged 25-64 (a prime age bracket for purchasing your own home)..They are also ore likely to work full time.
Unfortunately as mentioned here http://www.interest.co.nz/ratesblog/index.php/2009/03/20/inward-migration-surges-827-to-5-year-high-in-february-but-tourism-slumps-85/#more-3025 “Most of the inward migration is of less cashed-up Philippine and Indian workers.”
Alistair,
No I wouldn’t agree. I disagree with the term “doom and gloomers” too.
It’s called realism. And that doesn’t mean being depressed because with knowledge comes opportunity. The opportunity to position yourself better. That is a positive thing.
Are these posters representative? No, for many reasons.
1. A significant percentage of people are ignorant of economics. They have no interest in it, or simply don’t want to know about anything bad. Heads in the sand. They want things to just carry on as it is, to be able to carry on their lives, and to feel they have control over their future. Of course they do not.
2. Many have fallen for the housing bubble mania, thinking that prices will always go up, that they have found an investment that they can make money from forever.
And they did this in ignorance of how debt-based bubbles behave. Having got into that mindset they fight tooth and nail to avoid the truth.
3. You ask “what is this group of people attempting to do or communicate?”.
First it is not a group, in the sense that they are a collective. They are independent separate individuals.
From my perspective this is why they post:
1. Many have been warning of this massive global bubble for years. And many were derided as lunatics when they did.
They were faced with a media that only talked about prices going up. A real estate industry, with its vested interest, happy and eager to prosper from the mania, many of whom also fell for the mania themselves.
2. Many of those posters are far more informed than those in the mania. They randomly found some clue of a potential problem, and then followed the trail, gaining a better and better picture of what was happening. Many wanted to discuss what they had found with others who had also found some clues.
Some months ago I listened to a chap from the UK (Steve Cook), who was interviewed by the BBC about his experiences in the last housing crash in the UK. He described how he had fallen for the mania then, and how much he had suffered from it, financially and emotionally.
My view is that many of these posters are shouting out as loud as they can because for years they have had no voice, with no media taking any notice of them. They are shouting “watch out, can’t you see what’s coming?”.
But most did not listen or hear.
And now they are trying to get their voice heard and to balance the ridiculous media so called expert articles. Articles from those who did not see this coming. Those who participated in the mania. Those who really should accept that they were and are not qualified by knowledge or past performance to claim to be experts.
Interestingly there were warning from the Reserve Bank. If you read the stability reports you can see there clearly written warning of this. But of course very few actually read them, or wanted to listen.
I don’t know how many of these posters are trying to offer sensible suggestions for this situation. I have done quite a bit of research and have only found one plausible proposal, which I sent to John Key. I am hoping he will listen because in my view, if he does not, things will only get worse, very very much worse.
You see Alistair, many are focused on the housing market. But the real issues are far far bigger than that. A worldwide severe depression is not just about the housing market, it’s about jobs, and survival. It’s about the real possibility of war, brought on by economic conflict between countries.
This proposal could be the difference between a repeat of WW II and peace:
White Paper on All the Options for Managing a Systemic Bank Crisis by Bernard Lietaer
Center for Sustainable Resources,
University of California at Berkeley
http://www.lietaer.com/images/White_Paper_on_Systemic_Banking_Crises_final.pdf
IMO instead of discussing whether prices will go up or down, whether this is a good indicator or not, we should be looking for positive solutions to re-build a sustainable economy. Anyone who still thinks these are normal times should just read a bit of news coming from the US. These are far from normal times.
A year or two ago I compared our prospects with the Great Depression. My view was criticised as absurd.
As time has gone by we have got closer and closer to that. It no longer looks absurd.
The world’s largest economy is in free-fall. The world’s main reserve currency is in peril. The once Great Britain is a basket case. These are perilous times. What we need is leaders who will think outside the box.
Steve
Charles Lowndes,
My comments on your article:
It is questionable whether the population is growing, but the population is not the only factor determining demand numbers. Cohabitation numbers are also significant. In times of financial stress more people share accommodation. That lowers demand.
I’m sorry but I think this is badly written.
Fewer sales do not occur when supply exceeds demand. Sales go down when demand falls !
Price is affected by the demand/supply balance.
There is currently an oversupply of land. Just look at all the sections for sale at a reduced price. There is no lack of land.
The only lag if the demand picks up (when), is the time to get consents. There will be plenty of out of work builders ready to start.
There is also an oversupply of houses. Just look at the number for sale which will takes many months to reduce at normal sales rates.
Is that the real reason?
No, the real reason is that there is a lack of buyers. No buyer means it is madness to build. Builders are still trying to get rid of their oversupply.
The main increase in house building costs has been the cost of land. That is and will fall. Just look around at all the sections for sale specially in large developments.
Labour will also fall. On materials. Hmm, lets wait and see.
I agree. Because demand is so low. Supply will grow to match the demand, when that eventually picks up.
I refer to you Mark Weldon and Alan Bollard, who have both dismissed this view.
I went to the trouble of writing a transcript for both:
Mark Weldon:
From: http://www.radiolive.co.nz/AudioArchive/AudioOnDemand/tabid/344/language/en-NZ/Default.aspx
and selecting Sunday Mar 15th 12:30. From 10:48:00
Alan Bollard:
http://podcast.radionz.co.nz/ntn/ntn-20090313-0910-RBNZ_on_Official_cash_reserve_announcement-048.mp3
Alistair, maybe another reason people post is to counter articles like this one.
Steve
Further comments:
Is that even possible? How many houses are currently for sale? What’s the record number of houses sold in a year?
No, if sales/year go back to a more normal level, then we simply have a more normal market.
But prices will be determined by ability and willingness to pay. An inability to get 100% mortgages has a huge effect. Even cutting from 95% to 90% has a far bigger effect on affordability than most would expect.
Of course it helps to have a job to be able to buy a house.
Also with many people having bought with high leverage, after the price drops their equity will have been reduced or destroyed, reducing their ability to buy another property.
This article certainly “talks the market up”. But has it addressed every angle? Hardly. It has not addressed ONE negative issue. This is in no way an unbiased article addressing all issues.
This can only be called one-sided, finding reasons to predict the outcome you want.
No wonder there are so many posters out there who want to reply to articles like this.
The final verdict will be available in a year or two when I will come back to this article and compare it with reality. That should be very interesting.
Steve
Steve
No article can address all causations of such a complex market. I feel the negatives have been expresed all to often without any balance as to positives. My article intends to correct the stream of pure negativity by offering an additional perspective.
In two replies above, I have discussed further features of this complex market, including several of the negatives.
Today’s NZ Herald reveals that February statistics show a marked improvement in net migration.
There were 25,000 rioters up to no good in France yesterday – and its only the beginning of the protest season as Spring is barely with them yet.
“JC” above comments correctly that many new migrants are from Asia and India, many of whom do not buy houses. So what? They need to be housed somehow, so investors will buy rental properties to house them.
Andrew Burns (above) makes an interesting point with the huge correlation between returning ex-pats and house price rises. Ex-pats were the first through Mangere after “9/11″, home to stay or to buy “security blankets”. My phone started ringing on 18 September – one week later with ex-pats keen to buy anything available. They started the boom for sure and my phone kept ringing with buyers all the way through to mid 2007 without a break.
Sure, the market became a bubble of huge proportion, but it did not start out that way and I do not anticipate seeing such a bubble again during my career.
Well said Steve.
Who on earth has the money, either in real terms or forcast earnings, to pay for these over-inflated prices?
As stated earlier, prices still have a way to come down yet so that average wage earners can afford mortgages.
Put simply, greed is the cause of the meteoric rise in property prices during the past 7 years (and incidentally the current economic recession). It couldnt go on forever and now we are seeing the flip side, not just economically, but social changes too.
Time for all interested parties to deal with the reality that things have changed and ignore the hype and unbridled, unfounded optimism of this article.
I thought this collum was called “Unconditional” An inpartial voice of the industry, but most articles are similar to the pap served up by other media who rely on real estate advertising bucks.
I think Charles’ opinion is not completely without merit, even though some simple fact checking is important for credibility. How that opinion made a major newspaper, one can only imagine.
The strong correlation between returning NZers and house prices is interesting. However, I just can’t see cash rich ex-pats returning in sufficient numbers over the next few years to cushion a fall in house prices.
Anyone who bought a house in the UK in 2005 might just get back their deposit if they are lucky. Anyone who bought in 2006 on a 10% deposit is probably already in negative equity. As global house prices continue to slide the number of people who are not able to sell their homes is going to grow and this will gradually choke off the flow of cash rich emigrants to NZ. Quite simply anyone with a large mortgage will not be able to move at all let alone emigrate while those able to sell up and move to NZ will have much less money than in previous years. The recent upswing in net migration may be just those who are making their move now with at least some of their wealth intact.
Although NZ didn’t have the irresponsible lending that fuelled the house price bubbles in the US and the UK, the wealth created by those bubbles has been a key factor in stoking NZ house prices. However, to think that that NZ won’t be adversely affected as these bubbles burst seems like wishful thinking.
Quite right N.S.
A correlation between two events does not require that one causes the other. In this instance, an alternative explanation for parallel increases in migration and house prices at a national level is that both events are influenced by a third factor, the business cycle.
Can someone explain how 93,000 listings(on trade-me today- not all agents list on this site)take away 30% for sections,is an undersupply of houses!!
Thank you Paul
This article reminded me of something I read a while ago.
It took me a while, but then it came to me. It was “The Housing Shortage Myth“.
A little search revealed this article:
The UK housing shortage – busting the myth
http://ukhousebubble.blogspot.com/2008/01/uk-housing-shortage-busting-myth.html
With this quote:
That is about the UK. I have more for the US & Australia.
So, have rents in NZ gone up to reflect a housing shortage?
I think you now know the truth.
Steve
Ian
A cautionary note – the figure quoted by Trade me is the total number of listings under the category of the site called Property. The breakdown of the 93,000 is as follows (these are approximate figures):
Homes for sale – listed by agents : 37,000
Homes for sale – listed by owners : 6,000
Sections for sale : 14,000
Homes for rent listed by agents and owners : 12,500
Commercial property for sale or lease : 19,500
Rural property & farms : 4,000
By comparison these are the figures for listings on realestate.co.nz
Homes for sale – listed by agents : 58,546
Homes for sale – listed by owners : None
Sections for sale : 17,877
Homes for rent listed by agents: 6,761
Commercial property for sale or lease : 22,157
Rural property & farms : 7,883
This clearly demonstrates the comprehensive content that is featured on realestate.co.nz. Trade me certainly provides private landlords and vendors with listings, but when it comes to real estate agents the majority of the industry unanimously support realestate.co.nz with many companies not utilising trade me .
Alistair,
So 58,546 dwellings at the current rate of 5,228/month is 11.2 months stock for sale. More if you assume that you haven’t got all dwellings for sale on your site.
I hope somebody is going to answer my Shortage Myth quote about rent prices, because I’ve been told it’s unanswerable. So there’s a challenge for all the property experts out there.
Steve,
We have 93% of all office subscribing to the site which I believe represents around 95% of all listings (licensed real estate agent listings) – so that means there are around 61,627 listings out there. Now the other issue is multiple agency listings – some properties are multiple listed with more than one agency.
My examination of the database show that 61,627 listings represents just over 53,000 properties on the market. I would rather work on the average sale per month over the past 12 months = 4,460 sales per month which means almost exactly 12 months inventory.
As to your article on housing shortage – as you suggest I think it is best to leave this to the others out there who have better experience of this matter.
Thanks Alistair, that’s very helpful
As a matter of interest, do you have traffic details for this blog? I just wondered what % of visits to this site are for the blog. ie is this blog attracting significant interest.
Naturally I have all the stats for the site in total and all the component sections. Taking the last 2 months as a measure total traffic to the site as measured by Nielsen was around 360,000 unique browsers for the blog it averaged 10,000 unique browsers per month.
By comparison propertytalk.com gets around 16,000 and landlords.co.nz around 12,500 unique browsers per month.
Wow Alistair, you’re doing really well
I think you deserve congratulations for that.
It’s amazing that this blog gets so much traffic compared with PT.
Steve
Thanks – not quite at the Property Talk yet, but we are still growing and are only 15 months old – just coming up to blog post #200! – time flys!
Alistair,
Think yourself lucky, my posting number is challenging the US debt counter !!!!
23,065 on my old forum. Yikes !